Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2009.

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

FOR THE TRANSITION PERIOD FROM TO .

COMMISSION FILE NUMBER: 0-51552

ATS CORPORATION

(Exact name of registrant as specified in its charter)

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

7925 Jones Branch Drive

McLean, Virginia 22102

(Address of principal executive offices)

(571) 766-2400

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

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

Large accelerated filer ¨		Accelerated filer ¨

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

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

Yes ¨ No x

The number of shares of the issuer’s common stock, $0.0001 par value, outstanding as of August 7, 2009 was 22,740,110.

ATS CORPORATION

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of June 30, 2009 (unaudited) and as of December 31, 2008 (audited)	3

	Consolidated Statements of Income (unaudited) for the three and six-month periods ended June 30, 2009 and June 30, 2008	4

	Consolidated Statements of Cash Flows (unaudited) for the three and six-month periods ended June 30, 2009 and June 30, 2008	5

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	18

Item 4.	Controls and Procedures	18

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	19

Item 1A.	Risk Factors	19

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 3.	Defaults upon Senior Securities	19

Item 4.	Submission of Matters to a Vote of Security Holders	20

Item 5.	Other Information	20

Item 6.	Exhibits	21

SIGNATURES		22

ATS CORPORATION

PART I — FINANCIAL INFORMATION

ITEM 1. — FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2009			2008
	(unaudited)			(audited)

ASSETS
Current assets
Cash	$	7,839		$	364,822
Accounts receivable, net		24,466,246			29,268,647
Other receivable - escrow		3,793,771			—
Prepaid expenses		607,618			537,974
Income taxes receivable, net		608,598			—
Other current assets		10,502			22,771
Deferred income taxes, current		988,727			1,321,890

Total current assets		30,483,301			31,516,104

Property and equipment, net		3,349,076			3,712,340
Goodwill		55,370,010			59,128,648
Intangible assets, net		7,204,080			8,304,686
Restricted cash		1,322,597			1,316,530
Other assets		332,144			387,897
Deferred income taxes		2,005,883			2,003,348

Total assets	$	100,067,091		$	106,369,553
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	27,343,150		$	2,583,333
Capital leases – current portion		44,705			86,334
Accounts payable and accrued expenses		9,807,944			10,224,266
Accrued salaries and related taxes		3,671,643			2,999,576
Accrued vacation		2,640,774			2,220,865
Income taxes payable, net		—			600,121
Deferred revenue		2,373,403			1,745,352
Deferred rent – current portion		385,493			379,520

Total current liabilities		46,267,112			20,839,367

Long-term debt – net of current portion		810,214			34,492,558
Capital leases – net of current portion		—			745
Deferred rent – net of current portion		2,742,163			2,842,171
Other long-term liabilities (at fair value)		1,869,329			2,283,256

Total liabilities		51,688,818			60,458,097
Shareholders’ equity:
Preferred stock $0.0001 par value, 1,000,000 shares authorized, and no shares issued and outstanding		—			—
Common stock $0.0001 par value, 100,000,000 shares authorized, 31,082,865 and 30,867,304 shares issued, respectively, and 22,740,110 and 22,524,549 shares outstanding, respectively		3,108			3,087
Additional paid-in capital		131,274,763			130,767,038
Treasury stock, at cost, 8,342,755 shares held		(30,272,007	)		(30,272,007	)
Accumulated deficit		(51,593,445	)		(53,190,822	)
Accumulated other comprehensive loss (net of tax benefit of $651,778 and $887,416, respectively)		(1,034,146	)		(1,395,840	)

Total shareholders’ equity		48,378,273			45,911,456

Total liabilities and shareholders’ equity	$	100,067,091		$	106,369,553

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

ATS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended June 30,						Six Months Ended June 30,
	2009 (unaudited)			2008 (unaudited)			2009 (unaudited)			2008 (unaudited)

Revenue	$	30,266,809		$	33,788,772		$	57,423,323		$	68,662,297

Operating costs and expenses
Direct costs		20,451,932			22,964,775			38,647,669			45,233,416
Selling, general and administrative expenses		6,326,616			7,764,830			12,819,131			17,214,511
Depreciation and amortization		767,616			2,034,302			1,551,743			4,076,910
Total operating costs and expenses		27,546,164			32,763,907			53,018,543			66,524,837

Operating income		2,720,645			1,024,865			4,404,780			2,137,460

Other (expense) income
Interest, net		(792,604	)		(944,729	)		(1,566,684	)		(1,749,136	)
Other (loss) income		—			(4,705	)		—			66,172

Income before income taxes		1,928,041			75,431			2,838,096			454,496

Income tax expense		756,253			8,579			1,240,719			112,615

Net income	$	1,171,788		$	66,852		$	1,597,377		$	341,881

Weighted average number of shares outstanding
—basic		22,660,767			20,410,516			22,601,811			19,706,731
—diluted		22,660,767			20,465,439			22,601,811			19,734,193

Net income per share
—basic	$	0.05		$	0.00		$	0.07		$	0.02
—diluted	$	0.05		$	0.00		$	0.07		$	0.02

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

ATS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2009			2008
	(unaudited)			(unaudited)
Cash flows from operating activities
Net income	$	1,597,377		$	341,881
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		1,551,743			4,076,910
Stock-based compensation		381,318			765,266
Deferred income taxes		208,221			(1,507,705	)
Deferred rent		(94,036	)		(40,990	)
Gain on disposal of equipment		—			(16,638	)
Provision for bad debt		276,262			92,780
Changes in assets and liabilities, net of adjustments related to other comprehensive loss:
Accounts receivable		4,491,003			(5,159,974	)
Prepaid expenses and other current assets		(69,644	)		(12,794	)
Restricted cash		(6,067	)		(21,999	)
Other assets		66,803			(731,669	)
Accounts payable and other accrued expenses		(426,282	)		(1,037,300	)
Accrued salaries and related taxes		672,066			(1,392,197	)
Accrued vacation		419,908			394,542
Accrued interest		193,365			264,287
Income taxes payable and receivable		(1,321,944	)		879,118
Other current liabilities		628,051			(347,088	)
Other long-term liabilities		—			(45,976	)

Net cash provided by (used in) operating activities		8,568,144			(3,499,546	)

Cash flows from investing activities
Purchase of property and equipment		(86,654	)		(57,574	)
Proceeds from disposals of equipment		—			21,103
Payment on acquired businesses		—			(45,779	)

Net cash used in investing activities		(86,654	)		(82,250	)

Cash flows from financing activities
Borrowings on line of credit		29,405,026			30,451,556
Payments on line of credit		(37,200,267	)		(27,708,307	)
Payments on notes payable		(1,127,286	)		(1,441,667	)
Payments on capital leases		(42,374	)		(54,279	)
Proceeds from stock issued pursuant to Employee Stock Purchase Plan		126,428			211,813
Proceeds from exchange of stock for warrants, net of expense		—			234,477

Net cash (used in) provided by financing activities		(8,838,473	)		1,693,593

Net decrease in cash		(356,983	)		(1,888,203	)

Cash, beginning of period		364,822			1,901,977

Cash, end of period	$	7,839		$	13,774

Supplemental disclosures:
Cash paid or received during the period for:
Income taxes paid	$	2,352,483		$	2,401,682
Income tax refunds		4,924			1,350,000
Interest paid		1,373,319			1,484,849
Interest received		46,406			34,160
Non-cash investing and financing activities and adjustment to other comprehensive loss:
Unrealized other comprehensive income (loss) on interest rate swap, net of tax		361,694			(88,664	)

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 ¾ BASIS OF PRESENTATION

Principles of Consolidation - The consolidated financial statements include the accounts of ATS Corporation (“ATSC”) and its subsidiary Advanced Technology Systems, Inc. (“ATSI”) (collectively, the “Company”). All material intercompany accounts, transactions, and profits are eliminated in consolidation.

The accompanying consolidated financial statements of the Company have been prepared by management in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission. These statements include all adjustments considered necessary by management to present a fair statement of the consolidated balance sheets, results of operations, and cash flows. Certain information and note disclosures normally included in the annual financial statements have been condensed or omitted pursuant to those instructions, although the Company believes that the disclosures made are adequate to make the information presented not misleading. Therefore, these financial statements should be read in conjunction with the audited consolidated financial statements, including the notes thereto, contained in the Company’s 2008 Annual Report on Form 10-K. The results reported in these financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year.

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

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

NOTE 2 ¾ RECENT ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Standards

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

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

SFAS No. 162 — In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). SFAS 162 identifies a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with GAAP for nongovernmental entities (the “Hierarchy”). The Hierarchy within SFAS 162 is consistent with that previously defined in the American Institute of Certified Public Accountants (“AICPA”) Statement on Auditing Standards No. 69, The Meaning of “Present Fairly in Conformity With Generally Accepted Accounting Principles” (“SAS 69”). SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to the AICPA’s Auditing section No. 411, The Meaning of “Present Fairly in Conformity With Generally Accepted Accounting Principles.” SFAS 162 did not have a material effect because we utilize the guidance within SAS 69.

The SEC issued a final rule (RIN 3235-AJ71 Interactive Data to Improve Financial Reporting) requiring companies to provide financial statement information in a form that is intended to improve its usefulness to investors. This final rule applies to public companies and foreign private issuers that prepare their financial statements in accordance with generally accepted accounting principles (GAAP) and foreign private issuers that prepare their financial statements using International Financial Reporting Standards (IFRS). Companies will provide their financial statements to the SEC and on their corporate website in interactive data format using eXtensible Business Reporting Language (XBRL). The interactive data will be provided as an exhibit to periodic and current reports and registration statements, as well as to transition reports for a change in fiscal year. We will be required to submit an interactive data file for our June 30, 2010 quarterly report on Form 10-Q.

In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (FSP 107-1), which amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” (SFAS No. 107) and APB 28-1, “Interim Financial Reporting.” FSP 107-1 expands the fair value disclosures required for all financial instruments within the scope of SFAS No. 107 to interim periods. FSP 107-1 also requires entities to disclose in interim periods the methods and significant assumptions used to estimate the fair value of financial instruments. FSP 107-1 is effective for interim reporting periods ending after June 15, 2009. The adoption of FSP 107-1 has not had a material impact on our financial position, results of operations or cash flows.

In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165"). SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim or annual periods ending after June 15, 2009. The Company has adopted the requirements of this pronouncement. The Company has evaluated its operations through August 7, 2009, which is the date that the interim financial statements for the six-month period ended June 30, 2009 are to be issued and concluded that there have been no recognizable subsequent events. The adoption of SFAS 165 has not had a material impact on our financial position, results of operations or cash flows.

NOTE 3 ¾ RESTRICTED CASH

The Company is required to maintain $1.2 million on deposit with a financial institution to support a bonding requirement for one of the ATSI state contracts. This amount, and accumulated interest of $122,597 and $116,530 earned thereon as of June 30, 2009 and December 31, 2008, respectively, is reflected in restricted cash in the accompanying consolidated balance sheets.

NOTE 4 ¾ FAIR VALUE OF FINANCIAL INSTRUMENTS

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

The Company accounts for its interest rate swap agreement as a cash flow hedge under the provisions of SFAS No. 133. The Company has determined that the swap is 90.2% effective for the variable rate debt. Accordingly, the fair value of the interest rate swap agreement of $1,869,000 and $2,283,000 is included in other long-term liabilities, as of June 30, 2009 and December 31, 2008, respectively. This valuation method, which is consistent with the second highest level of the valuation hierarchy described in SFAS No. 157, Fair Value Measurements, is based upon an extrapolation of forward rates for the remaining term of the interest rate swap. A change in fair value of $414,000 for this derivative, net of a tax benefit of $165,000, was recorded in other comprehensive loss for the six months ended June 30, 2009. Hedge ineffectiveness of $128,000 and $183,000 was recognized for the three and six-month periods ended June 30, 2009 as a portion of the notional amount exceeds expected borrowings in the Company’s variable rate debt.

NOTE 5 ¾ STOCK PLANS AND STOCK-BASED COMPENSATION

Under the fair value recognition provisions of SFAS No. 123(R), Share Based Payment, the Company recognizes stock-based compensation based upon the fair value of the stock-based awards taking into account the effects of the employees’ expected exercise and post-vesting employment termination behavior. A summary of the components of the stock-based compensation expense recognized during the three and six-month periods ended June 30, 2009 and 2008 is as follows:

Compensation Related to Options and Restricted Stock	Three Months Ended June 30, 2009			Three Months Ended June 30, 2008		Six Months Ended June 30, 2009			Six Months Ended June 30, 2008
Non-qualified stock options	$	—		$	—	$	—		$	—
Incentive stock options		45,000			48,000		82,000			90,000
Restricted stock		124,000			213,000		198,000			495,000
Stock grants to Directors in lieu of cash		114,000			180,000		114,000			180,000
Forfeitures in excess of estimate		(7,000	)		—		(13,000	)		—
Total stock-based compensation expense	$	276,000		$	441,000	$	381,000		$	765,000

Stock Options - The Company estimates the fair value of options as of the date of grant using the Black-Scholes option pricing model. A total of 202,000 and 312,000 options were granted during the three and six-month periods ended June 30, 2009, respectively. A total of 178,500 options were granted during the three and six-month periods ended June 30, 2008. The fair value of options granted during the six-month period ended June 30, 2009 have been estimated as of the date of grant using the Black-Scholes option pricing model with the following assumptions:

	Options Granted January 2, 2009			Options Granted April 30, 2009			Options Granted May 5, 2009
Expected dividend yield		—	%		—	%		—	%
Expected volatility		55.3	%		71.6	%		71.6	%
Risk free interest rate		2.9	%		0.5	%		0.5	%
Expected life of options	6.3 years			6.3 years			6.3 years
Forfeiture rate		4.25	%		4.25	%		4.25	%

The average fair value per option granted during the six months ended June 30, 2009 was $0.89. As of June 30, 2009, there was $634,071 of unrecognized compensation expense related to unvested options. This cost is expected to be recognized over a weighted-average period of 3.2 years. The table below provides stock option information for the six months ended June 30, 2009:

	Number of Shares			Weighted Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life in Years		Aggregate Intrinsic Value of In-the- Money Options

Options outstanding at January 1, 2009		394,500		$	3.16		9.0	$	—	(1)
Options granted		312,000			1.46		9.7		195,080	(2)
Options expired		—			—		—		—
Options forfeited		(26,000	)		2.44		8.7		—
Options outstanding at June 30, 2009		680,500		$	2.41		9.0	$	195,080	(2)
Options exercisable at June 30, 2009		110,875		$	3.47		8.3	$	—	(2)

(1) Intrinsic value represents the excess of the closing stock price on the last trading day of the preceding period, which was $1.40 as of December 31, 2008, over the exercise price, multiplied by the number of options.

(2) Intrinsic value represents the excess of the closing stock price on the last trading day of the period, which was $2.09 as of June 30, 2009, over the exercise price, multiplied by the number of options.

The following table summarizes information about stock options outstanding at June 30, 2009:

		Options Outstanding					Options Exercisable
				Weighted-
				average	Weighted-			Weighted-
				Remaining	average			average
	Exercise	Number		Life in	Exercise		Number	Exercise
	Prices	Outstanding		Years	Price		Exercisable	Price
$	1.40		110,000	9.5	$	1.40	—	$	—
	1.50		202,000	9.8		1.50	—		—
	2.15		149,000	8.9		2.15	37,250		2.15
	3.40		80,000	8.5		3.40	20,000		3.40
	3.50		30,000	8.4		3.50	7,500		3.50
	3.67		30,000	8.3		3.67	7,500		3.67
	3.75		4,500	8.0		3.75	1,125		3.75
	4.32		15,000	7.7		4.32	7,500		4.32
	4.88		60,000	7.7		4.88	30,000		4.88
			680,500	9.0	$	2.41	110,875	$	2.65

Restricted Shares – Pursuant to the 2006 Omnibus Incentive Compensation Plan, during the six-month period ended June 30, 2009, the Company granted 142,000 restricted shares valued at $199,000. Such shares vest ratably over a five-year period. The table below provides additional restricted share information for the six months ended June 30, 2009:

	Six months Ended June 30, 2009
	No. of Shares			Weighted Average Grant Date Fair Value

Unvested at January 1, 2009		407,865			$	3.38
Granted		263,142				1.49
Vested		(42,145	)			3.31
Forfeited		(24,260	)			3.17
Unvested at June 30, 2009		604,602			$	2.57

NOTE 6 ¾ EMPLOYEE STOCK PURCHASE PLAN

The Company adopted the 2007 Employee Stock Purchase Plan (the “Plan”) in July 2007. The Plan was subsequently approved by Company stockholders in May 2008. The Plan provides employees and management with an opportunity to acquire or increase their ownership interest in the Company through the purchase of shares of the Company’s common stock at periodic intervals, namely four month offering periods during which payroll deductions are made and shares are subsequently purchased at a discount. The Company initially reserved an aggregate of 150,000 shares of Common Stock exclusively for issuance under the Plan. Additionally, the Company may automatically increase the shares registered under this Plan on an annual basis pursuant to the Plan’s “evergreen” provision. This provision allows the Company to annually increase its registered Plan shares by the lesser of the following: (i) 100,000 shares, (ii) 1% of the Company’s outstanding shares on January 1 of such year, or (iii) a lesser amount as determined by the Board. Accordingly, in the first quarter of 2009, the Company registered an additional 100,000 shares under the Plan.

The Plan is a qualified plan under Section 423 of the Internal Revenue Code and, for financial reporting purposes, is considered non-compensatory under SFAS No. 123R Share Based Payment. Accordingly, there is no stock-based compensation expense associated with shares acquired under the Plan for the three and six-month periods ended June 30, 2009. During the six-month period ended June 30, 2009, participants have purchased 99,943 shares under the Plan at a weighted average price per share of $1.26. During the three months ended June 30, 2009, 49,971 shares were purchased at a price per share of $1.33.

NOTE 7 ¾ EARNINGS (LOSS) PER SHARE

Basic and diluted earnings per share information is presented in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per share is calculated by dividing the net income/ (loss) attributable to common stockholders by the weighted-average common shares outstanding during the period. Diluted earnings per share is calculated by dividing net income attributable to common stockholders by the weighted average common shares outstanding which includes common stock equivalents. The Company’s common stock equivalents include stock options, restricted stock, and warrants.

The weighted average shares outstanding for the three months ended June 30, 2009 and 2008 excludes unvested restricted shares and excludes an aggregate of approximately 4,205,066 and 3,507,752 warrants and stock options to purchase shares, respectively, because such common stock equivalents have an exercise price in excess of the average market price of the Company’s common stock during the period, or would be anti-dilutive. The weighted average shares outstanding for the six months ended June 30, 2009 and 2008 excludes unvested restricted shares and excludes an aggregate of approximately 4,212,587 and 3,535,213 warrants and stock options to purchase shares, respectively, because such common stock equivalents have an exercise price in excess of the average market price of the Company’s common stock during the period, or would be anti-dilutive.

NOTE 8 ¾ SEGMENT ACCOUNTING

The Company reviewed its services by unit to determine if any unit of the business is subject to management appraisal that are different than those of other units in the Company. Based on this review, the Company has determined that all units of the Company are providing comparable services to its clients, and the Company has only one reportable segment.

NOTE 9 ¾ WARRANTS

On June 30, 2009, the Company had 2,980,175 outstanding warrants that will expire on October 19, 2009, unless earlier exercised.

NOTE 10 ¾ GOODWILL VALUATION

Goodwill represents the excess of purchase price over the fair value of net assets acquired because of various business acquisitions. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill must be recorded at the reporting unit level. Reporting units are defined as one level below an operating segment. We have identified one reporting unit and one operating segment. SFAS No. 142 prohibits the amortization of goodwill, but requires that it be tested for impairment at least annually (at any time during the year, but at the same time each year), or more frequently if events or circumstances change, such as adverse changes in the business climate, that would more likely than not reduce the reporting unit’s fair value below its carrying amount.

The Company evaluates goodwill for impairment annually in the third fiscal quarter or more frequently depending on specific events or when evidence of potential impairment exists. The annual impairment test is based on several factors requiring judgment. Principally, a significant decrease in expected cash flows or changes in general market conditions may indicate potential impairment of recorded goodwill. Management has concluded that there were no triggering events that would indicate an impairment during the quarter ended June 30, 2009. The Company will continue to monitor the recoverability of the carrying value of its goodwill and other long-lived assets.

As of June 30, 2009 and December 31, 2008, goodwill was $55.4 million and $59.1 million, respectively. As of June 30, 2009 and December 31, 2008, our net basis in intangible assets was $7.2 million and $8.3 million, respectively. The decrease in the goodwill is the result of the award of $3.8 million to ATSI relating to claims against the former owners for a net working capital deficit from what was required to be delivered by the sellers and amounts related to accounting method tax escrows.

NOTE 11 ¾ LEGAL PROCEEDINGS

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

We are a defendant in Maximus, Inc. vs. Advanced Technology Systems, Inc., pending in the Connecticut Superior Court, Complex Litigation Docket. The lawsuit asserts breach of contract and other claims related to a subcontract between Maximus and ATSI associated with a prime contract between Maximus and the State of Connecticut. Based on the complaint filed in the suit, Maximus seeks damages in excess of $3.5 million. The case was filed in August 2007.

We have answered the complaint denying Maximus’ claims and have asserted counterclaims. In January of 2009, the case was consolidated for discovery purposes with an action brought by the State of Connecticut against Maximus relating to the prime contract. Discovery has commenced, although at a hearing conducted on March 9, 2009, further depositions were delayed until September 4, 2009 in order to give the State of Connecticut sufficient time to review documents received from Maximus. Trial, which had been scheduled for July 2010, is now scheduled to commence in April 2011. Based on the claims asserted in the lawsuit, we have made an indemnification demand against the former principal owners of ATSI under the stock purchase agreement governing the transaction in which the Company (then Federal Services Acquisition Corporation) acquired ATSI.

Following the indemnification demand, the former principal owners of ATSI brought an arbitration against us with the American Arbitration Association claiming that the former owners do not owe us any indemnification obligations for the Maximus lawsuit or the Maximus subcontract. At our request, the arbitration was stayed pending the outcome of the Maximus lawsuit described above.

We had also asserted other claims against the former principal owners of ATSI based on the stock purchase agreement governing the transaction, and the former ATSI owners asserted certain counterclaims against us. A final award was issued by the arbitrator on June 26, 2009, under which the Company was to receive $3.8 million. This award is recorded as “Other receivable – escrow” on the June 30, 2009 balance sheet. The Company received these funds on July 1, 2009.

NOTE 12 ¾ EMPLOYMENT AGREEMENTS

On May 5, 2009, the Company and Dr. Edward H. Bersoff, the Company’s Chairman, President and Chief Executive Officer, amended Dr. Bersoff’s employment agreement, extending his employment term as Chief Executive Officer through December 31, 2011. The Company originally entered into an employment agreement with Dr. Bersoff on March 19, 2007, who had been serving in that capacity since January 16, 2007.

NOTE 13 ¾ LONG TERM DEBT

Long term debt consisted of the following:

	June 30, 2009			December 31, 2008
Bank Financing	$	24,759,817		$	32,555,058
Notes payable		3,393,547			4,520,833
Total debt	$	28,153,364		$	37,075,891
Less current portion		(27,343,150	)		(2,583,333	)
Long-term debt	$	810,214		$	34,492,558

At June 30, 2009, the aggregate maturities of long-term debt were as follows:

Twelve-months Ending June 30,
2010	$	27,343,150
2011		810,214
Total long-term debt	$	28,153,364

Bank Financing

The Company has a credit facility with Bank of America, N.A. (the “Facility”) which provides for borrowing up to $50 million. The Facility is a three-year, secured facility that permits continuously renewable borrowings of up to $50.0 million, with an expiration date of June 4, 2010. The Company pays a fee in the amount of .20% to .375% on the unused portion of the Facility, based on its consolidated leverage ratio, as defined in the credit agreement documentation. Any outstanding balances under the Facility are due in full June 4, 2010.

Borrowings under the Facility bear interest at rates based on 30 day LIBOR plus applicable margins based on the leverage ratio as determined quarterly. As of June 30, 2009, the effective interest rate, excluding the effect of amortization of debt financing costs, for the outstanding borrowings under the Facility was 3.82%.

The Company entered into a forward interest rate swap agreement in November 2007 under which it exchanged floating-rate interest payments for fixed-rate interest payments. The agreement has a notional amount of $35.0 million and provides for swap payments through December 1, 2010 with such swaps being settled on a monthly basis. The fixed interest rate provided by the swap agreement is 4.47%.

As of June 30, 2009, the Company’s aggregate outstanding debt balance was $24.8 million. As discussed in Note 4, the Company accounts for the interest rate swap agreement as a cash flow hedge with the change in the fair value of the effective portion of the swap being recorded in other comprehensive income (loss) and any ineffectiveness is recorded to earnings. It continues to be probable that the Company will be exposed to rate variance associated with future LIBOR based or fixed rate debt which has embedded LIBOR based risk and the Company maintains its hedge with a counterparty that has the financial strength to honor the hedge obligation, Bank of America.

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

FORWARD-LOOKING STATEMENTS

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

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

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

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

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

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

Additional factors that may affect our results are discussed in our Annual Report on Form 10-K for the year ended December 31, 2008 under “Item 1A. Risk Factors.” Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update these forward-looking statements, even if our situation changes in the future.

The terms “we” and “our” as used throughout this Quarterly Report on Form 10-Q refer to ATS Corporation and Advanced Technology Systems, Inc., the wholly-owned subsidiary of ATSC, unless otherwise indicated.

Overview

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

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

Our diverse customer base consists primarily of U.S. government agencies. For the six months ended June 30, 2009, we generated approximately 48% of our revenue from federal civilian agencies, 34% from defense and homeland security agencies, and 18% from commercial customers, including government-sponsored enterprises. Our largest clients in the six months ended June 30, 2009 were the U.S. Department of Housing and Urban Development (“HUD”), the Undersecretary of Defense, Fannie Mae, and the Pension Benefit Guarantee Corporation, representing approximately 19%, 9%, 8% and 7%, respectively, of total revenue.

We derive substantially all of our revenues from fees for consulting services. We generate these fees from contracts with various payment arrangements, including time and materials contracts and fixed-price contracts. During the six months ended June 30, 2009, revenue from time and materials and fixed-price contracts were approximately 70% and 30% respectively, of total revenue. We typically issue monthly invoices to our clients for services rendered. We recognize revenue on time and materials contracts based on actual hours delivered at the contracted billable hourly rate plus the cost of materials incurred. We recognize revenue on fixed-price contracts using the percentage-of-completion method based on costs we incurred in relation to total estimated cost. However, if the contract is primarily for services, we recognize revenue on a straight-line basis over the term of the contract.

On occasion, we enter into contracts that include the delivery of a combination of two or more of our service offerings. Typically, such multiple-element arrangements incorporate the design, development, or modification of systems and an ongoing obligation to manage, staff, maintain, host, or otherwise run solutions and systems provided to the client. Such contracts are divided into separate units of accounting, and the total fee arrangement is allocated to each unit based on its relative fair value. In accordance with our revenue recognition policy, revenue is recognized separately for each element. If evidence of the fair value of each element does not exist, all revenue must be deferred until such evidence exists, or all elements have been delivered, or evidence of fair value exists for the undelivered elements.

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

In the six months ended June 30, 2009, we derived approximately 78% of our revenue from contracts for which we were the prime contractor and 22% of our revenue as subcontractors to other prime contractors, who contract directly with the end-client and subcontract with us.

Our most significant expense is direct cost, which consists primarily of project personnel salaries and benefits, and direct expenses incurred to complete projects. The number of consulting personnel assigned to a project will vary according to the size, complexity, duration, and demands of the project. As of June 30, 2009, we had 525 personnel who worked on our contracts.

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

Goodwill Valuation

The Company evaluates goodwill for impairment annually in the third fiscal quarter or more frequently depending on specific events or when evidence of potential impairment exists. The annual impairment test is based on several factors requiring judgment. Principally, a significant decrease in expected cash flows or changes in general market conditions may indicate potential impairment of recorded goodwill. Management has concluded there were no triggering events that would indicate an impairment during the quarter ended June 30, 2009. The Company will continue to monitor the recoverability of the carrying value of its goodwill and other long-lived assets.

As of June 30, 2009 and December 31, 2008, goodwill was $55.4 million and 59.1 million, respectively. As of June 30, 2009 and December 31, 2008, our net basis in intangible assets was $7.2 million and $8.3 million, respectively. The change in the goodwill is the result of the award of $3.8 million to ATSI relating to claims against the former owners for a net working capital deficit from what was required to be delivered by the sellers and amounts related to accounting method tax escrows.

Contract Backlog

We define backlog as the future revenue we expect to receive from our existing contracts and other current engagements. We generally include in backlog the estimated revenue represented by contract options that have been priced, though not exercised. We do not include any estimate of revenue relating to potential future delivery orders that may be awarded under our General Services Administration Multiple Award Schedule contracts, other Indefinite Delivery/Indefinite Quantity (“IDIQ”) contracts, or other contract vehicles that are also held by a large number of firms, an order under which potential future delivery orders or task orders may be issued by any of a large number of different agencies and are likely to be subject to a competitive bidding process. Our backlog as of June 30, 2009, was approximately $156.1 million, of which $49.5 million was funded.

Recent Events

The Company has evaluated its operations through August 7, 2009, which is the date that the interim financial statements for the six-month period ended June 30, 2009 are to be issued and concluded that there have been no recognizable subsequent events.

Results of Operations (unaudited)

Results of operations for the three and six-month periods ended June 30, 2009 compared with the three and six-month periods ended June 30, 2008 are presented below.

The following table sets forth certain financial data as dollars and as a percentage of revenue.

	For the Three			%			For the Three			%			For the Six			%			For the Six			%
	Months Ended						Months Ended						Months Ended						Months Ended
	June 30,						June 30,						June 30,						June 30,
	2009						2008						2009						2008

Revenue	$	30,266,809					$	33,788,772					$	57,423,323					$	68,662,297

Operating costs and expenses
Direct costs		20,451,932			67.6	%		22,964,775			68.0	%		38,647,669			67.3	%		45,233,416			65.9	%
Selling, general and administrative expenses		6,326,616			20.9	%		7,764,830			23.0	%		12,819,131			22.3	%		17,214,511			25.1	%
Depreciation and amortization		767,616			2.5	%		2,034,302			6.0	%		1,551,743			2.7	%		4,076,910			5.9	%

Total operating costs and expenses		27,546,164			91.0	%		32,763,907			97.0	%		53,018,543			92.3	%		66,524,837			96.9	%

Operating income		2,720,645			9.0	%		1,024,865			3.0	%		4,404,780			7.7	%		2,137,460			3.1	%

Other (expense) income
Interest (expense) income, net		(792,604	)		(2.6	)%		(944,729	)		(2.8	)%		(1,566,684	)		(2.7	)%		(1,749,136	)		(2.5	)%
Other (expense) income		—			0.0	%		(4,705	)		(0.0	)%		—			0.0	%		66,172			0.1	%

Income (loss) before income taxes		1,928,041			6.4	%		75,431			0.2	%		2,838,096			4.9	%		454,496			0.7	%

Income tax expense (benefit)		756,253			2.5	%		8,579			0.0	%		1,240,719			2.2	%		112,615			0.2	%

Net Income (loss)	$	1,171,788			3.9	%	$	66,852			0.2	%	$	1,597,377			2.8	%	$	341,881			0.4	%

Weighted average number of shares outstanding
—basic		22,660,767						20,410,516						22,601,811						19,706,731
—diluted		22,660,767						20,465,439						22,601,811						19,734,193

Net income (loss) per share
—basic	$	0.05					$	0.00					$	0.07					$	0.02
—diluted	$	0.05					$	0.00					$	0.07					$	0.02

Comparison of the three months ended June 30, 2009 to the three months ended June 30, 2008.

Revenue - Revenue decreased by $3.5 million, or 10.4%, to $30.3 million for the three months ended June 30, 2009 compared to the three months ended June 30, 2008. Revenue from commercial contracts decreased by $1.2 million, or 16.8%, to $6.0 million. This decline resulted from the down-turn in the business climate that began in the fourth quarter of 2008 and continued into 2009. Although Fannie Mae showed significant decreases from the second quarter 2008, these are expected to be temporary reductions. Revenue from civilian and defense customers decreased $2.6 million to $24.7 million, or 9.7% of this amount. The most significant reduction was with the US Coast Guard, which decreased revenue by $2.2 million as a result of a large contract being converted to a small-business set-aside.

Direct costs - Direct costs were 67.6% and 68.0% of revenue for the three-month periods ended June 30, 2009 and 2008 respectively, a decrease of 0.4%. Direct costs are comprised of direct labor, fringe on this labor, subcontract labor costs and material and other direct costs (“ODCs”). Material and ODCs are incurred in response to specific client tasks and may vary from period to period. The single largest component of direct costs, direct labor, was $9.8 million and $11.0 million for the three-month periods ended June 30, 2009 and 2008, respectively, which corresponds to the reduction in revenue. Overall margins for the second quarter 2009 remained at 32.4%.

Selling, general and administrative (“SG&A”) expenses – The components of SG&A are marketing, bid and proposal costs, indirect labor and the associated fringe benefits, facilities costs and other discretionary expenses. As a percentage of revenue, SG&A expenses were 20.9% and 23.0% for the three-month periods ended June 30, 2009 and 2008, respectively. Reduced spending in the second quarter of 2009 is attributable to cost reduction efforts that began in the second half of 2008 and continue into this calendar year. As a result of these efforts, SG&A expenses decreased $1.4 million to $6.3 million, or 18.5%. Reduction in the second quarter 2009 for building rent and utilities expense associated with the relocation of the Company’s headquarters was the primary factor impacting this decrease.

Depreciation and amortization - Depreciation and amortization expense decreased $1.4 million to $0.8 million or 2.5% of revenue for the three months ended June 30, 2009 compared to 6.0% for the three-month period ended June 30, 2008. This decrease is primarily related to a reduction of amortization resulting from the intangible asset impairment valuation taken during September 2008.

Interest, net - The net interest expense decreased to $0.8 million for the three-month period ended June 30, 2009, compared to $0.9 million the three-month period ended June 30, 2008, primarily due to significant decreases to our long-term debt balance made possible by our positive operating cash flows. However, our interest expense decreased to a lesser degree due to the higher interest rates on the LIBOR monthly floating rate plus applicable rates based on our consolidated leverage ratio and also $0.1 million charged to earnings for swap ineffectiveness.

Income taxes - The Company reported an income tax expense of $0.8 million and $8.6 thousand for the three-month periods ended June 30, 2009 and 2008, respectively. The effective tax rates were 39.2% and 11.4% for the three-month periods ended June 30, 2009 and 2008, respectively. The effective rate for the three-month period ended June 30, 2008 was affected by non-recurring variances in book-tax differences relative to pre-tax book income which decreased the effective rate and which were not present during the three-month period ended June 30, 2009.

Comparison of the six months ended June 30, 2009 to the six months ended June 30, 2008.

Revenue - Revenue decreased by $11.2 million, or 16.4%, to $57.4 million for the six months ended June 30, 2009. Revenue from commercial contracts decreased by $5.1 million to $10.5 million, or 33.7%. This decline resulted from the down-turn in the business climate that began in the fourth quarter of 2008 and continued into the second quarter of 2009. Fannie Mae showed significant decreases in the six months of 2009, although these are expected to be temporary reductions. Revenue from civilian and defense customers decreased $6.1 million to $46.9 million, or 11.5%. Of this amount, the most significant reduction was with the US Coast Guard, which decreased revenue by $4.1 million as a result of a large contract being converted to a small-business set-aside.

Direct costs - Direct costs were 67.3% and 65.9% of revenue for the six-month periods ended June 30, 2009 and 2008 respectively, an increase of 1.8%. Direct costs are comprised of direct labor, fringe on this labor, subcontract labor costs and material and other direct costs (“ODCs”). Material and ODCs are incurred in response to specific client tasks and may vary from period to period. The single largest component of direct costs, direct labor, was $19.2 million and $22.7 million for the six-month periods ended June 30, 2009 and 2008, respectively. Overall margins for the first two quarters of 2009 decreased 1.4% to 32.7%. This is primarily caused by a loss provision during the six-month period ended June 30, 2009 on a fixed price contract and reduced margins on our commercial contracts.

“SG&A” expenses – The components of SG&A are marketing, bid and proposal costs, indirect labor and the associated fringe benefits, facilities costs and other discretionary expenses. As a percentage of revenue, SG&A expenses were 22.3% and 25.1% for the six-month periods ended June 30, 2009 and 2008, respectively. Reduced spending in the first half of 2009 is attributable to cost reduction efforts that began in the second half of 2008 and continue into this calendar year. As a result of these efforts, SG&A expenses decreased $4.4 million to $12.8 million, or 25.5%. The following major cost categories show the following reductions in the first half of 2009 as compared with first half of 2008: salaries and related fringe benefits of $2.7 million and building rent and utilities’ expenses of $1.3 million due to the relocation of the Company’s headquarters.

Depreciation and amortization - Depreciation and amortization expense decreased $2.5 million to $1.6 million or 2.7% of revenue for the six months ended June 30, 2009 compared to 5.9% for the six-month period ended June 30, 2008. This decrease is primarily related to a reduction of amortization resulting from the intangible asset impairment valuation taken during September 2008.

Interest, net - The net interest expense decreased to $1.6 million for the six-month period ended June 30, 2009 compared to $1.7 million for the six-month period ended June 30, 2008, primarily due to significant decreases to our long-term debt balance made possible by our positive operating cash flows. Average bank debt for the six months ended June 30, 2009 was $27.8 million, a decrease of 34% or $14.4 million from an average balance of $42.2 million for the six months ended June 30, 2008. However, our interest expense decreased to a lesser degree due to the higher interest rates on the LIBOR monthly floating rate plus applicable rate based on our consolidated leverage ratio and also $0.2 million charged to earnings for swap ineffectiveness.

Income taxes - The Company reported an income tax expense of $1.2 million and $0.1 million for the six-month periods ended June 30, 2009 and 2008, respectively. The effective tax rates were 43.7% and 24.8% for the six-month periods ended June 30, 2009 and 2008, respectively. The effective rate for the six-month period ended June 30, 2008 was affected by non-recurring variances in book-tax differences relative to pre-tax book income which decreased the effective rate and which were not present during the six-month period ended June 30, 2009.

Financial Condition, Liquidity and Capital Resources

Financial Condition. Total assets decreased to $100.0 million as of June 30, 2009 from $106.4 million as of December 31, 2008. This decrease was primarily driven by a $1.0 million decrease in our accounts receivable related to increased collection efforts and the resulting decrease in days sales outstanding, as well as a decrease in overall revenues for the quarter. Additionally, goodwill and net intangible assets decreased by $4.9 million.

Our total liabilities decreased $8.8 million to $51.7 million as of June 30, 2009 from $60.5 million as of December 31, 2008. The decrease in total liabilities was primarily attributable to the decrease in notes payable and the revolving credit facility of $8.9 million due to favorable cash collections.

Liquidity and Capital Resources. Our primary liquidity needs are to fund the debt, finance the costs of operations, acquire capital assets and to make selective strategic acquisitions. We expect to meet our short-term requirements through funds generated from operations and from our $50 million line of credit facility. As of June 30, 2009, we had an outstanding balance of $24.8 million on our credit facility. As noted above, the Company has elected to curtail this outstanding debt given our positive cash flows from operations. The credit facility is considered adequate to meet the operations liquidity and capital requirements. As of June 30, 2009, the Company could borrow an additional $2.2 million while remaining within our loan covenant agreements.

Net cash generated by operating activities was $8.6 million for the six months ended June 30, 2009, compared to cash used in operating activities of $3.5 million for the same period in 2008. Cash generated by operating activities was primarily driven by ongoing operations, specifically collecting receivables, which were utilized to pay down the balance on our line of credit facility as discussed above, as well as income taxes payable and accrued expenses. Depreciation and amortization were also lower due to the effect of the asset impairment recorded in September of 2008.

Net cash used in investing activities remained less than $0.1 million for the six months ended June 30, 2009, just as it did for the same period in 2008.

Net cash used in financing activities was $8.8 million for the six months ended June 30, 2009, compared to cash provided by financing activities of $1.7 million in the same period in 2008. The cash was primarily used to pay down the credit facility and the notes payable from acquisitions in 2007.

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

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

Off-Balance Sheet Arrangements

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

Contractual Obligations

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

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

Recent Accounting Pronouncements

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

Standards Issued But Not Yet Effective

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

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

Item 4. Controls and Procedures.

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

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

Changes in Internal Control Over Financial Reporting

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

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

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

Item 2. Recent Sales of Unregistered Securities.

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

Purchases of Equity Securities by Issuer

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

Item 3. Defaults upon Senior Securities.

Not applicable.

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

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

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

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

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

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

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

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

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number		Description

10.1		Amended and Restated Employment Agreement by and Between Edward H. Bersoff and ATS Corporation

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

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, President and
		Chief Executive Officer

	By:	/s/ Pamela A. Little
		Executive Vice President and Chief Financial Officer
Date: August 7, 2009