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, 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 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 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 June 30, 2008, we generated approximately 36% of our revenue from federal civilian agencies, 40% from defense and homeland security agencies, 21% from commercial customers, including government-sponsored enterprises, and 3% from state and local customers. Our largest clients in the quarter ended June 30, 2008 were the U.S. Department of Housing and Urban Development ("HUD"), the U.S. Coast Guard, and Fannie Mae, representing approximately 15%, 12% and 10%, 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, fixed-price contracts and cost-type contracts. During the six months ended June 30, 2008, revenue from time and materials and fixed-price contracts were approximately 66% and 34% 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. We recognize revenue from cost-type contracts to the extent of costs incurred plus a proportionate amount of the 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 six months ended June 30, 2008, we derived approximately 19% of our revenue 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 June 30, 2008, we had 619 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 corporate costs.

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 of June 30, 2008 was approximately $187.1 million, of which $77.1 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 tendered in the cashless exercise, the holder could also exercise one additional warrant by paying a reduced cash exercise price of $2.25 for one share of common stock.

The offer commenced on April 8, 2008, and was extended on May 2, 2008 until May 16, 2008. Under the tender offer, a total of 33,400,020 warrants were exercised (approximately 92% of the 36,380,195 publicly traded warrants issued in the initial public offering of our predecessor, Federal Services Acquisition Corporation). This consisted of 33,073,703 warrants tendered for cashless exercise in exchange for 2,645,887 shares of common stock (on the basis of 12.5 warrants for 1 share of common stock), and 326,317 warrants exercised by payment of a reduced cash price of $2.25 per share. As a result of the exercise of warrants, 2,972,204 new shares of common stock were issued. Cash received by the Company was $734,192 and expenses were $499,715. The warrants that were not exercised during the tender offer had their original terms reinstituted and will expire on October 19, 2009, unless earlier exercised in accordance with their original terms.

Change Of Address Of Corporate Headquarters

On February 11, 2008, the Company executed a new lease, with West*Group Properties, LLC, at 7925 Jones Branch Drive, McLean, Virginia, with the intent of relocating its principal executive offices from 7915 Jones Branch Drive, McLean, Virginia. The details of this new lease and a copy thereof were filed as a part of a Form 8-K dated February 11, 2008. On June 1, 2008, the Company officially relocated, in effect terminating the prior lease at the 7915 Jones Branch Drive location.

The new lease agreement included provisions for a build-out allowance of approximately $3,200,000. Of this amount, approximately $2,175,000 was used to prepare the building for occupancy and $1,025,000 was used to purchase additional capital assets, including a telephone system, for the Company's use. In accordance with generally accepted accounting principles, these amounts will be capitalized and depreciated over their expected useful lives. The Company will amortize leasehold improvements over the shorter of their estimated useful lives or the initial term of the lease.

In accordance with Financial Accounting Standards Board Technical Bulletin No. 85-3, Accounting for Operating Leases with Scheduled Rent Increases, the Company includes the build-out period in the calculations of rent expense and construction allowance amortization. Additionally, in accordance with Financial Accounting Standards Board Technical Bulletin No. 88-1, Issues Relating to Accounting for Leases, the Company classifies construction allowances on its Consolidated Financial Statements as deferred credits, which are amortized as a reduction to rent expense. Construction allowances are presented within operating activities on our Consolidated Statements of Cash Flows as supplemental disclosures.

Results of Operations (unaudited)

Results of operations for the three and six months ended June 30, 2008 compared with the three and six months ended June 30, 2007 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,
                           2008          %           2007          %          2008         %          2007          %

Revenue               $    33,788,772           $    26,247,681           $  68,662,297           $  49,725,401

Operating costs and
expenses
Direct costs               22,964,775   68.0 %       18,705,377   71.3 %     45,233,416   65.9 %     35,169,594    70.7 %
Selling, general
and administrative
expenses                    7,764,830   23.0 %        6,179,367   23.5 %     17,214,511   25.1 %     12,155,875    24.4 %
Depreciation and
amortization                2,034,302    6.0 %        1,083,404    4.1 %      4,076,910    5.9 %      2,004,040     4.0 %

Total operating
costs and expenses         32,763,907   97.0 %       25,968,148   98.9 %     66,524,837   96.9 %     49,329,509    99.2 %

Operating income            1,024,865    3.0 %          279,553    1.1 %      2,137,460    3.1 %        395,892     0.8 %

Other (expense)
income
Interest Income
(Expense), net               (944,729 ) (2.8 )%           7,537    0.0 %     (1,749,136 ) (2.5 )%       150,988     0.3 %
Loss on warrant
liabilities                         -      -                  -      -                -      -       (6,930,000 ) (13.9 )%
Other income                   (4,705 ) (0.0 )%           9,019    0.0           66,172    0.1 %          9,754     0.0 %

Income (loss)
before income taxes            75,431    0.2 %          296,089    1.1 %        454,496    0.7 %     (6,373,366 ) (12.8 )%

Income tax expense              8,579    0.2 %          171,461    0.7 %        112,615    0.2 %        274,172     0.6 %

Net Income (loss)     $        66,852    0.0 %  $       124,628    0.5 %  $     341,881    0.4 %  $  (6,647,538 ) (13.4 )%

Weighted average
number of shares
outstanding
-basic                     20,410,516                18,133,828              19,706,731              19,214,534
-diluted                   20,465,439                18,440,030              19,734,193              19,214,534

Net income (loss)
per share
-basic                $          0.00           $          0.01           $        0.02           $       (0.35 )
-diluted              $          0.00           $          0.01           $        0.02           $       (0.35 )

Comparison of the three months ended June 30, 2008 to the three months ended June 30, 2007.

Revenue- Revenue increased by $7.5 million, or 29%, to $33.8 million for the three months ended June 30, 2008. Comparisons to prior periods are strongly affected by the acquisitions in 2007, which added to our revenue base. Revenue from commercial contracts increased $0.7 million to $7.2 million, or 11%. This increase was driven primarily by increased revenue from existing customers, as well as new sources such as IBM, CareFirst and Blue Cross Blue Shield. Revenue from the civilian and defense customers increased $6.1 million to $26.6 million, or 30%. Growth with existing customers such as HUD and the Department of Education combined with revenue from new sources such as the United States Air Force and the United States Coast Guard have driven this increase.

Direct costs - Direct costs were 68.0% and 71.3% of revenue for the three month periods ended June 30, 2008 and 2007 respectively, an improvement of 3.3%. 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 $11.0 million and $9.9 million for the three month periods ended June 30, 2008 and 2007, respectively. Overall margins for the second quarter 2008 improved 3.3% over 2007 to 32.0% from 28.7% This is partly attributable to higher margins associated with commercial business acquired in 2007. Also, several HUD contracts have successfully transitioned from the development phase to on-going maintenance and support, which is more profitable. Increased business with the U.S. Coast Guard has generated higher margins as well.

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 23.0% and 23.5% for the three month periods ended June 30, 2008 and 2007, respectively. Reduced spending on legal and accounting fees, as well as a reduction in indirect labor costs, have contributed to this improvement.

Depreciation and amortization - Amortization expense increased to 6.0% of revenue for the three months ended June 30, 2008 compared to 4.1% for the three month period ended June 30, 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 month period ended June 30, 2008 compared with the three month period ended June 30, 2007. This is a result of borrowings to finance acquisitions made in 2007, as well as interest on notes with the former owners of the acquired companies.

Income taxes - For the three months ended June 30, 2008 and 2007, the Company reported income tax expense of $8.6 thousand and $171.5 thousand, respectively. Income tax expense was higher for the three months ended June 30, 2007 due to higher pre-tax net income.

Comparison of the six months ended June 30, 2008 to the six months ended June 30, 2007.

Revenue- Revenue increased by $18.9 million, or 38%, to $68.7 million for the six months ended June 30, 2008. Comparisons to prior periods are strongly affected by the acquisitions in 2007, which added to our revenue base. Revenue from commercial contracts increased $3.0 million to $15.6 million, or 23.7%. This increase was driven primarily by increased revenue from existing customers, as well as new sources such as IBM, CareFirst and Blue Cross Blue Shield. Revenue from the civilian and defense customers increased $15.2 million to $53.1 million, or 40.2%. Growth with existing customers such as HUD and the Department of Education combined with revenue from new sources such as the United States Air Force and the United States Coast Guard have driven this increase.

Direct costs - Direct costs were 65.9% and 70.7% of revenue for the six month periods ended June 30, 2008 and 2007, an improvement of 4.8%. 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 $22.4 million and $15.6 million for the six month periods ended June 30, 2008 and 2007, respectively. Overall margins for the first half of improved 3.4% over 2007 to 31.3% from 27.9% This is attributable to higher margins associated with commercial business acquired in 2007, as well as several HUD contracts having successfully transitioned from the lower-margin development phase to the higher-margin on-going maintenance and support phase. Higher margins in the defense division, 33.6% in 2008 versus 29.6% in 2007, are also driving this margin improvement. Much of this increase is due to a higher percentage of business with the U.S. Coast Guard which has higher margins.

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 25.1% and 24.4% for the periods ended June 30, 2008 and 2007, respectively. This increase was primarily driven by an enhanced business development function needed 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 six months ended June 30, 2008 compared to 4.0% for the six month period ended June 30, 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 $1.9 million for the six months ended June 30, 2008 compared with the six months ended June 30, 2007. This is a result of borrowings to finance acquisitions made in 2007, as well as interest on notes with the former owners of the acquired companies.

Income taxes - For the six months ended June 30, 2008 and 2007, the Company reported income tax expense of $112.6 thousand and $274.2 thousand, respectively. Income tax expense was higher for the six months ending June 30, 2007 due to higher pre-tax net income without consideration of the losses on warrants which were not tax deductible.

Financial Condition, Liquidity and Capital Resources

Financial Condition. Total assets remained steady at $170.95 million as of June 30, 2008 compared to $170.95 million as of December 31, 2007. Although aggregate movement was small, several components of total assets changed significantly; net trade accounts receivable increased by $5.1 million while income taxes receivable decreased by $2.6 million. The increase in trade accounts receivable was partly due to an increase in revenue of $3.3 million in the three month period ended June 30, 2008 over the three month period ended December 31, 2007 and partly due to delayed payments of $2.9 million on a Federal contract caused by a change in the government payments office. The delayed Federal payment issue has been resolved and $1.6 million of the delayed payment has been received as of July 31, 2008.

Our total liabilities showed a slight decrease of $1.5 million to $74.1 million as of June 30, 2008 from $75.6 million as of December 31, 2007. Although the aggregate movement was small, significant changes within total liabilities were:
increased borrowings under our lines of credit of $1.3 million, an increase in deferred rent expense of $3.1 million and decreases in accounts payable and accrued expenses of $1.9 million and taxes payable and deferred taxes of $3.8 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 June 30, 2008, we had an outstanding balance of $43.8 million on our credit facility. As noted above, there was a large increase in accounts receivable in the first six months of the fiscal year. The balance is expected to decline due to increased collection efforts, thus reducing the outstanding balance on the credit facility. The credit facility is considered adequate to meet the operations liquidity and capital requirements.

Net cash used by operating activities was $3.5 million for the six months ended June 30, 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 six months ended June 30, 2008.

Net cash provided by financing activities was $1.7 million for the six months ended June 30, 2008. This was used to fund working capital growth during the first six months of the fiscal year.

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.

On May 12, 2008, ATSC and its lenders amended 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 on the expiration date. 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 completed during the second quarter.

Off-Balance Sheet Arrangements

For the six months ended June 30, 2008, we did not have any off-balance sheet arrangements.

Contractual Obligations



The following table summarizes our contractual obligations as of June 30, 2008
that require us to make future cash payments.



                              Less than     One to Three     Three to Five     More than
                              One Year         Years             Years        Five Years      Total
                                                          (in thousands)
Long-Term Debt Obligations   $     2,670   $       47,057   $             -   $         -   $  49,727
Capital Leases                        95               48                 -             -         143
Operating Leases                   2,553            6,042             5,435         5,672      19,702
Total                        $     5,318           53,147   $         5,435   $     5,672   $  69,572

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 . . .