As filed with the Securities and Exchange Commission on July 26, 2010

Registration No. 333-167608

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Pre-Effective Amendment No. 1 to
Form S-1

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

The KEYW Holding Corporation

(Exact Name of Registrant as specified in Its Charter)

Maryland		7373		27-1594952
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

1334 Ashton Road, Suite A
Hanover, MD 21076
(443) 270-5300

(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)

Leonard E. Moodispaw
1334 Ashton Road, Suite A
Hanover, MD 21076
(443) 270-5300

(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)

Copies to:

A. Lynne Puckett Hogan Lovells US LLP Harbor East 100 International Drive, Suite 2000 Baltimore, Maryland 21202 Telephone: (410) 659-2700 Telecopy: (410) 659-2701		Michael J. Volkovitsch Cleary Gottlieb Steen & Hamilton LLP One Liberty Plaza New York, New York 10006 Telephone: (212) 225-2000 Telecopy: (212) 225-3999

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date hereof.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o

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

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

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered		Proposed maximum aggregate offering price (1)				Amount of Registration Fee (2)
Common Stock, $0.001 par value per share		$	100,000,000			$	7,130

(1)

Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)

Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price; $7,130, previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

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The information in this prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject To Completion, Dated July 26, 2010

PROSPECTUS

    Shares

The KEYW Holding Corporation

Common Stock

 

This is our initial public offering. The total number of shares of common stock being offered by us and the selling stockholders is       . We are selling       shares of common stock and the selling stockholders identified in this prospectus are selling an additional       shares. See “The Offering” on page 6 of this prospectus. We will not receive any proceeds from the sale of shares by the selling stockholders.

We expect the public offering price to be between $     and $     per share. Currently, no public market exists for the shares. After pricing of the offering, we expect that the shares will trade on the NASDAQ Global Market under the symbol “KEYW.”

Investing in our common stock involves risks that are described in the “Risk Factors” section beginning on page 14 of this prospectus.

 

		Per Share				Total
Public offering price		$				$
Underwriting discount		$				$
Proceeds, before expenses, to The KEYW Holding Corporation		$				$
Proceeds, before expenses, to the selling stockholders		$				$

We have granted the underwriters an option to purchase up to an additional       shares of common stock, less the underwriting discount, within 30 days from the date of this prospectus to cover overallotments.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The underwriters expect to deliver the shares against payment in New York, New York on       , 2010.

 

BofA Merrill Lynch  Morgan Stanley  Stifel Nicolaus Weisel

 

Merriman Curhan Ford    Noble Financial Capital Markets

The date of this prospectus is       , 2010

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SUMMARY			1
THE OFFERING			6
SUMMARY CONSOLIDATED FINANCIAL DATA			8
RISK FACTORS			14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			31
USE OF PROCEEDS			32
DIVIDEND POLICY			32
CAPITALIZATION			33
DILUTION			34
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA			36
UNAUDITED PRO FORMA FINANCIAL INFORMATION			39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			42
BUSINESS			61
MANAGEMENT			75
EXECUTIVE COMPENSATION			84
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			105
PRINCIPAL AND SELLING STOCKHOLDERS			108
DESCRIPTION OF CAPITAL STOCK			111
SHARES OF COMMON STOCK ELIGIBLE FOR FUTURE SALE			116
UNDERWRITING			118
CONFLICTS OF INTEREST			121
LEGAL MATTERS			123
EXPERTS			123
WHERE YOU CAN FIND MORE INFORMATION			124
INDEX TO FINANCIAL STATEMENTS			F-1

 

You should rely only on the information contained in this prospectus. We, the selling stockholders and the underwriters have not authorized any other person to provide you with different information. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

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areas within government intelligence and national defense. In 2009, 86% of our revenue was derived from contracts with the NSA. For 2009, on a pro forma basis, approximately 41% of our revenue was derived from contracts with the NSA, approximately 41% of our revenue was derived from contracts with U.S. Air Force Intelligence, and the approximate remaining 18% of revenue was derived from another major intelligence agency and other intelligence, defense, homeland security and law enforcement organizations. As of March 31, 2010, KEYW has approximately 400 employees. Over 350 of our employees hold government security clearances, 300 of which hold Top Secret/Sensitive Compartmented Information clearances, or TS/SCI clearances, the highest U.S. Government security clearance level.

For 2008 and 2009, we generated revenue reflecting that of KEYW and our acquisitions, from the date of acquisition, of $9 million and $39 million, respectively, on an actual basis. Our 2009 pro forma revenue was approximately $116 million. Our 2009 pro forma revenue is derived from over 75 contracts (including a combination of prime contracts and subcontracts), the ten largest contracts of which account for approximately 40% of our 2009 pro forma revenue, and no one contract accounts for greater than 10% of our 2009 pro forma revenue. The majority of our contracts provide for a total contract period of five years, with an initial contract period of one year and the balance in one-year option periods. Historically, option exercise rates have been in excess of 95%.

Our History

KEYW began operations on August 4, 2008 with the former leadership team of Essex Corporation, which was acquired by Northrop Grumman Corporation in January 2007. Under an agreement between KEYW and Northrop Grumman Corporation, KEYW acquired a core set of capabilities (including the hiring of over 60 employees) and fixed assets from Northrop Grumman Corporation. Since its founding, KEYW has assembled, through a series of highly selective strategic acquisitions, a single distinct platform that provides the high quality and complementary cybersecurity, cyber superiority and intelligence capabilities, solutions and products our customers require.

In 2008, we acquired Integrated Computer Concepts, Incorporated, or ICCI, our predecessor for accounting purposes, and S&H Enterprises of Central Maryland, Inc., or S&H. Both companies are known for their innovations and capabilities in support of the Intelligence Community. The acquisition of ICCI brought KEYW approximately 80 employees working on key NSA programs. ICCI provided a highly regarded software engineering team that has been involved on a wide range of programs and contracts over many years. S&H provided strong program management and systems engineering capabilities on a large mission-critical program.

In 2009, we acquired certain assets of Embedded Systems Design, Inc., or Embedded Systems, Leading Edge Design & Systems, Inc., or LEDS, and the Systems Engineering and Technical Assistance (SETA) team of General Dynamics Advanced Information Systems Inc., or GDAIS team, which team supports a large intelligence agency. Both Embedded Systems and LEDS have provided high performance solutions to the Intelligence Community. The addition of Embedded Systems contributed a hardware systems engineering capability, while LEDS expanded our hardware engineering capabilities, as well as the depth of activity on a large program with our largest customer, the NSA.

In February 2010 we acquired The Analysis Group, LLC, or TAG, and in March 2010 we acquired Insight Information Technology, LLC, or IIT. TAG expanded our customer base to include Air Force Intelligence and TAG’s long-term customer relationship and contracts with this customer, particularly in the area of complex program management requirements. IIT further expanded our program management and systems engineering capabilities, and expanded our activity on a large program with our largest customer.

Our Market Opportunity

Our market opportunity is defined by the pervasive expanse of cyberspace and the urgent need for the United States to achieve cyber superiority or mastery of this domain. In a document entitled the National Military Strategy for Cyberspace Operations, the Department of Defense officially defined cyberspace as “a domain characterized by the use of electronics and electromagnetic spectrum to store, modify and exchange data via networked systems and associated physical infrastructures.”

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According to the Director of National Intelligence (DNI) in his 2010 Annual Threat Assessment, “the national security of the United States, our economic prosperity, and the daily functioning of our government are dependent on a dynamic public and private information infrastructure, which includes telecommunications, computer networks and systems, and the information residing within. The critical infrastructure is severely threatened.” In this same document, he states, “the Intelligence Community plays a vital role in protecting and preserving our nation’s cyber interests and the continued free flow of information in cyberspace.” His strategy is to create “an integrated and agile intelligence team to help deploy a defensive strategy that is both effective and respectful of American freedoms and values. We are integrating cybersecurity with counterintelligence and improving our ability to understand, detect, attribute, and counter the full range of threats.”

The market opportunity for cyber superiority/cybersecurity was further defined when, in 2009, Defense Secretary Gates directed the establishment of U.S. Cyber Command, a military sub-command focused on cybersecurity, to be based at Fort Meade, MD, which also houses the National Security Agency. According to Secretary Gates, “Cyber Command will bring together more than a half a dozen intelligence and military organizations in support of three overlapping categories of cyber operations,” to protect dense computer networks, coordinate all defense computer operations and provide full-spectrum support for all military and counterterrorism missions, and stand by to support civil authorities and industry partners on an as-needed basis. According to Deputy Defense Secretary Lynn in January 2010, “combining offensive and defensive capabilities under a single roof and bringing those together with the intelligence we need to anticipate attacks will make our cyber operations more effective.”

These decisions put the National Security Agency and Cyber Command, both at Fort Meade, MD, and near our headquarters, at the center of U.S. strategy for cyber superiority and cybersecurity. KEYW’s leadership and the platform of companies and capabilities it has strategically assembled have been involved with these customers and programs for many years as this strategy has been developed and deployed.

An additional element of the DNI’s strategy for the Intelligence Community, and an important element that helps define this market opportunity is the need for agility. Agility was identified by DNI in the 2009 National Intelligence Strategy as one of the characteristics essential to the IC’s effectiveness. The DNI defined an agile organization as “an enterprise with an adaptive, diverse, continually learning, and mission-driven intelligence workforce that embraces innovation and takes initiative.” In addition, the National Intelligence Strategy identified enhancing cybersecurity as one of six mission objectives that must be accomplished by the Intelligence Community: “Understand, detect, and counter adversary cyber threats to enable protection of the Nation’s information infrastructure.” The DNI, in his Vision 2015 document, published in August 2008, put forward a strategy for transforming the focus and operation of the Intelligence Community into cyber age operations. He challenged the Intelligence Community to “adopt modern business practices that will make us more effective, efficient, nimble, and accountable.”

For national security reasons, there is limited detailed information published on intelligence spending or the amount of intelligence spending dedicated for cyber warfare. The Director of National Intelligence disclosed that the 2009 National Intelligence Program budget was $49.8 billion. The budget for U.S. Air Force Intelligence is not separately reported within the overall Air Force budget, which was $160.5 billion for fiscal year 2010. According to the White House Office of Management and Budget, the fiscal year 2009 budget for information technology, or IT, security spending was approximately $7.3 billion, which represents a 9.8% increase over fiscal year 2008 IT security spending. According to INPUT, a provider of market information for U.S. Government business, the federal cybersecurity market is expected to achieve an 8.1% annual growth rate through 2014.

As a result of these decisions and actions, our customers have clearly defined agility, cyber superiority, and cybersecurity as a critical market opportunity. We believe that KEYW is strongly positioned based on its capabilities, competitive strengths, and strategy, to be a leader in this well funded and critical market.

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Our Competitive Strengths

We believe the following competitive strengths will allow us to take advantage of the trends in our industry:

Cyber superiority and intelligence focused .  We are a company that is entirely focused on delivering cyber superiority and intelligence support for our customers. We accomplish this by delivering a full range of cyber engineering services and solutions, as well as cyber intelligence products. Mastering cyberspace and thereby attaining cyber superiority is a core mission of the Intelligence Community. KEYW is building a platform of capabilities, culture, and technologies that is tailored to meeting this mission. This focus gives our customers faster and more innovative solutions than those offered by our competitors.

Agile intelligence, cybersecurity and cyber age operations expertise .  We have significant experience in building signal and information processing solutions and cybersecurity and cyber superiority solutions, using agile methodologies for the Intelligence Community to support mission critical activities and complex national security problems. The KEYW team has established a strong reputation for responding quickly to customer requirements, and working as a partner with our customers to identify and define these requirements. The changes in the threat environment that have occurred since 2001 have put enormous pressure on the Intelligence Community to respond more quickly and in a more integrated way than ever before. KEYW has a culture of innovation and agility that allows us to respond more quickly and with greater impact than large organizations.

Management’s Intelligence Community experience and relationships .  Our management has significant expertise in the Intelligence Community and a lengthy track record across all members of the Intelligence Community. Our insight into the Intelligence Community’s needs and our mission focus allow us to articulate and support our customers’ needs as they emerge, placing us at the forefront of solutions being offered. The senior members of KEYW’s leadership and technology teams have a record of supporting the Intelligence Community’s programs over a period of 20-30 years. These long-term relationships establish a basis of trust that is required to understand and support mission-critical requirements. During this period, our executives have gained access to the highest levels of the Intelligence Community and provided thought leadership in the transformation of the intelligence process to respond to challenges of cyber age operations and a rapidly changing asymmetrical global threat environment.

Skilled employees with high-level security clearances .  As of March 31, 2010, 88% of our employees have government security clearances, with 76% of our employees holding TS/SCI clearances. This concentration of highly-skilled and cleared engineers allows us to respond quickly to customer requirements and gives us on-going insight into our customers’ toughest national security problems. The requirement for these clearances and the time and process required to attain them are significant barriers to entering this market.

Established contract relationships .  We have a mix of prime contract and subcontract relationships with a long legacy of strong performance. An increasing number of our contracts are sole-source contracts, which are awarded without competitive bidding, based on innovation, distinct capabilities, and urgent and compelling needs.

Our Strategy

Our objective is to continue to grow our business as a provider of advanced solutions, including services, products, and fully integrated cyber platforms, for cyber intelligence to U. S. Government customers and to leverage our capabilities and innovations in this field to government intelligence, defense, civilian customers and the commercial market. Key elements of our strategy to accomplish our continued growth objective include:

Leveraging our distinct culture, which we describe as “Agile DNA”, products and solutions to expand U.S. Government business .  We intend to leverage our high technology capabilities and services, products and solutions to further penetrate the intelligence and defense communities and to expand our participation in other cyber intelligence growth areas of the U.S. Government in the homeland security and civilian sectors. We believe this will allow us to apply powerful cyber superiority solutions to the .gov community in a manner that is transparent and respectful of privacy in the civilian and commercial environments.

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Pursuing strategic, capability-enhancing acquisitions .  We will continue to pursue selective strategic acquisitions that expand our cyber intelligence platform of capabilities and solutions. This will include companies that are leaders in supporting the U.S. intelligence and defense community, as well as technologies and solutions in cybersecurity and other areas of innovation that are critical to the transformation of the Intelligence Community into cyber age operations.

Fully integrating and accelerating our business development efforts .  As a company that is growing quickly through integrating multiple strategic acquisitions, we plan to capitalize and leverage investments that each of our platform companies have made in the business development function. We intend to capitalize on the collective capabilities, relationships and facilities of our acquisitions to expand the number and scope of our prime contracts, as well as increase the number of sole-source contracts where our agility and innovation can create new solutions to our customers’ toughest problems.

Building and leveraging our research and development efforts .  We intend to continue utilizing company and customer funded research and development to develop technologies, products and solutions that have significant potential for near-term, as well as long-term value in both the government and commercial markets. We will continue to use intellectual property that we license from other companies and create at KEYW in the areas of network traffic intelligence, cybersecurity, and cyber intelligence to build products and solutions to further penetrate the intelligence and defense market for cyber superiority.

Corporate Information

We are a holding company and conduct our operations through The KEYW Corporation and its subsidiaries. We were incorporated in Maryland in December 2009. The KEYW Corporation was incorporated in Maryland in May 2008 and became our wholly-owned subsidiary in December 2009 as part of a corporate restructuring. We acquired our predecessor, Integrated Computer Concepts, Incorporated or ICCI, in September 2008.

The address of our principal executive office is 1334 Ashton Road, Suite A, Hanover, Maryland 21076 and our general telephone number is (443) 270-5300. Our web site address is www.keywcorp.com . The information on, or that can be accessed through, our web site is not part of this prospectus.

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Unless otherwise noted, all information in this prospectus:

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		Predecessor								Successor								Pro Forma (4) Combined				Successor
		Year ended December 31, 2007				Period from January 1 through September 29, 2008				Period from July 31 (inception) through December 31, 2008				Year ended December 31, 2009				Year ended December 31, 2009				Three months ended March 31
																						2009				2010
																		unaudited				unaudited
		(in thousands, except per share data)
Statement of Operations Data:
Revenues
Services		$	15,410			$	14,563			$	9,045			$	32,743			$	109,924			$	6,959			$	18,865
Products			—				—				—				6,294				6,294				1,471				2,878
Total			15,410				14,563				9,045				39,037				116,218				8,430				21,743
Cost of revenues
Services			10,263				9,351				4,825				23,475				84,789				5,075				13,453
Products			—				—				—				4,443				4,443				806				1,788
Total			10,263				9,351				4,825				27,918				89,232				5,881				15,241
Gross profit
Services			5,147				5,212				4,220				9,268				25,135				1,884				5,412
Products			—				—				—				1,851				1,851				665				1,090
Total			5,147				5,212				4,220				11,119				26,986				2,549				6,502
Operating expenses			2,847				4,104				3,573				11,373				19,718				1,969				5,091
Intangible amortization expense			—				—				612				2,055				6,670	(1)			470				855
Net operating income (loss)			2,300				1,108				35				(2,309	)			598				110				556
Non-operating (income) expense, net			(38	)			67				2,080				783				3,035	(2)			332				(33	)
Income (loss) before income taxes			2,338				1,041				(2,045	)			(3,092	)			(2,437	)			(222	)			589
Income tax (expense) benefit, net			—				—				(21	)			979				979				(88	)			(156	)
Net income (loss)		$	2,338			$	1,041			$	(2,066	)		$	(2,113	)		$	(1,458	)		$	(310	)		$	433
Earnings (loss) per share
Basic			n/a				n/a			$	(0.32	)		$	(0.18	)		$	(0.10	)		$	(0.04	)		$	0.03
Diluted			n/a				n/a			$	(0.32	)		$	(0.18	)		$	(0.10	)		$	(0.04	)		$	0.02
Weighted average common shares outstanding
Basic			n/a				n/a				6,474,028				12,062,930				15,312,930	(3)			8,626,750				14,311,869
Diluted			n/a				n/a				6,474,028				12,062,930				15,312,930				8,626,750				21,021,448

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		Successor				2009 Acquisitions				TAG (4)				IIT				Pro Forma Combined
		Year ended December 31, 2009				Year ended December 31, 2009				Year ended December 31, 2009				Year ended December 31, 2009				Year ended December 31, 2009
						unaudited												unaudited
		(in thousands, except per share data)
Statement of Operations Data:
Revenues
Services		$	32,743			$	24,229			$	47,692			$	5,260			$	109,925
Products			6,294				—				—				—				6,294
Total			39,037				24,229				47,692				5,260				116,219
Cost of revenues
Services			23,475				17,806				39,702				3,806				84,789
Products			4,443				—				—				—				4,443
Total			27,918				17,806				39,702				3,806				89,232
Gross profit
Services			9,268				6,423				7,990				1,454				25,135
Products			1,851				—				—				—				1,851
Total			11,119				6,423				7,990				1,454				26,986
Operating expenses			11,373				3,822				3,648				875				19,718
Intangible amortization expense			2,055				—				—				—				6,670	(1)
Net operating income (loss)			(2,309	)			2,601				4,342				579				598
Non-operating (income) expense, net			783				27				(353	)			78				3,035	(2)
Income (loss) before income taxes			(3,092	)			2,574				4,695				501				(2,427	)
Income tax (expense) benefit, net			979				—				—				—				979
Net income (loss)		$	(2,113	)		$	2,574			$	4,695			$	501			$	(1,458	)
Earnings (loss) per share
Basic		$	(0.18	)			n/a				n/a				n/a			$	(0.10	)
Diluted		$	(0.18	)			n/a				n/a				n/a			$	(0.10	)
Weighted average common shares outstanding
Basic			12,062,930				n/a				n/a				n/a				15,312,930	(3)
Diluted			12,062,930				n/a				n/a				n/a				15,312,930

The summary balance sheet data as of March 31, 2010 is presented:

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		KEYW Three Months Ended March 31, 2010 (unaudited))				TAG Three Months Ended March 31, 2010 (unaudited))				IIT Three Months Ended March 31, 2010 (unaudited))				Pro Forma Adjustments Three Months Ended March 31, 2010 (unaudited))				Pro Forma Combined Three Months Ended March 31, 2010 (unaudited))
		(in thousands, except per share data)
Revenue
Services		$	18,865			$	3,854			$	1,207			$	—			$	23,926
Products			2,878				—				—				—				2,878
Total			21,743				3,854				1,207				—				26,804
Cost of Revenue
Services			13,453				3,227				904				—				17,584
Products			1,788				—				—				—				1,788
Total			15,241				3,227				904				—				19,372
Gross Profit
Services			5,412				627				303				—				6,342
Products			1,090				—				—				—				1,090
Total			6,502				627				303				—				7,4 32
Operating Expense			5,091				720				288				—				6,099
Intangible Amortization Expense			855				—				—				315	(1)			1,170
Net Operating Income (Loss)			556				(93)				15				(315)				163
Non-operating expense (income), net			(33	)			(5	)			—				—				(38	)
Income (loss) before income taxes			589				(88	)			15				(315	)			201
Income tax benefit (expense)			(156	)			—				—				90	(2)			(66	)
Net Income (loss)		$	433			$	(88	)		$	15			$	(225	)		$	135
Earnings per share
Basic		$	0.03				n/a				n/a				n/a			$	0.01
Diluted		$	0.02				n/a				n/a				n/a			$	0.01
Weighted Average common shares outstanding
Basic			14,311,869				n/a				n/a				197,222	(3) (4)			14,509,091
Diluted			21,021,448				n/a				n/a				197,222	(3) (4)			21,218,670

		As of March 31, 2010
		Actual (unaudited)				As Adjusted
		(in thousands)
Balance Sheet Data
Cash and cash equivalents		$	2,013			$
Working capital (1)			(6,985	)
Total assets			145,097
Long-term liabilities			36,873
Total stockholders’ equity			70,426

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		Predecessor								Successor
		Year ended December 31, 2007				Period from January 1 through September 29, 2008				Period from July 31 (inception) through December 31, 2008				Year ended December 31, 2009				Three months ended March 31
																		2009				2010
		(in thousands)																unaudited
Other Data
Adjusted EBITDA (1)		$	2,293			$	2,702			$	694			$	2,302			$	646			$	2,199

Adjusted EBITDA is a financial measure that is not calculated in accordance with accounting principles generally accepted in the United States of America, or US GAAP. The table below provides a reconciliation of this non-US GAAP financial measure to net income (loss), the most directly comparable financial measure calculated and presented in accordance with US GAAP. Adjusted EBITDA should not be considered as an alternative to net income (loss), operating income (loss) or any other measure of financial performance calculated and presented in accordance with US GAAP. Our adjusted EBITDA may not be comparable to similarly titled measures of other companies because other companies may not calculate adjusted EBITDA or similarly titled measures in the same manner as we do. We prepare adjusted EBITDA to eliminate the impact of items that we do not consider indicative of our core operating performance. We encourage you to evaluate these adjustments and the reasons we consider them appropriate.

We believe adjusted EBITDA is useful to investors in evaluating our operating performance for the following reasons:

Our board of directors and management use adjusted EBITDA:

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Although adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results of operations as reported under US GAAP. Some of these limitations are:

The following table presents a reconciliation of adjusted EBITDA to net income (loss), the most comparable US GAAP measure, for each of the periods indicated:

		Predecessor								Successor
		Year ended December 31, 2007				Period from January 1 through September 29, 2008				Period from July 31 (inception) through December 31, 2008				Year ended December 31, 2009				Three months ended March 31
																		2009				2010
		(in thousands)																unaudited
Net income (loss)		$	2,338			$	1,041			$	(2,066	)		$	(2,113	)		$	(310	)		$	433
Depreciation			11				9				24				310				55				135
Amortization			—				—				612				2,055				470				855
Interest (income) expense			(56	)			(22	)			—				(118	)			(18	)			162
Tax expense (benefit)			—				—				21				(979	)			88				156
Warrant expense (1)			—				—				2,103				690				361				—
Other non-recurring items			—				1,674	(2)			—				2,457	(3)			—				458	(4)
Adjusted EBITDA		$	2,293			$	2,702			$	694			$	2,302			$	646			$	2,199

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We depend on U.S. Government contract awards that are only partially funded and which depend upon annual budget appropriations. A delay in the completion of the U.S. Government’s budget process could delay procurement of the services and solutions we provide and have an adverse effect on our future revenue.

Budget decisions made by the U.S. Government are outside of our control and have significant consequences for our business. Funding for U.S. Government contract awards is subject to Congressional appropriations. Although multi-year awards may be planned or authorized in connection with major procurements, Congress generally appropriates funds on a fiscal year basis even though a program may be expected to continue for several years. Consequently, awards often initially receive only partial funding, and additional funds are committed only as Congress makes further appropriations. The termination of funding for any of our U.S. Government prime contracts or subcontracts would result in a loss of anticipated future revenue attributable to that program and a reduction in our cash flows and would have an adverse impact on our operating results.

In years when the U.S. Government does not complete its budget process before the end of its fiscal year on September 30, government operations are typically funded pursuant to a “continuing resolution” that authorizes agencies of the U.S. Government to continue to operate, but does not authorize new spending initiatives. When the U.S. Government operates under a continuing resolution, delays can occur in the procurement of the services and solutions that we provide. When supplemental budgets are required to operate the U.S. Government and passage of legislation needed to approve any supplemental budget is delayed, the overall funding environment for our business could be adversely affected.

The U.S. Government may modify, curtail or terminate our contracts at any time prior to their completion and, if we do not replace them, we may be unable to sustain our revenue growth and may suffer a decline in revenue.

Many of the U.S. Government programs in which we participate as a contractor or subcontractor may extend for several years. These programs are normally funded on an incremental basis. Under our contracts, the U.S. Government generally has the right not to exercise options to extend or expand our contracts and may modify, curtail or terminate the contracts and subcontracts at its convenience.

If the U.S. Government terminates a contract for convenience, we may recover only our incurred or committed costs, settlement expenses and profit on work completed prior to the termination. We cannot recover anticipated future profits on terminated work. If the U.S. Government terminates a contract for default, we may not recover each of those types of costs, and instead may be liable for excess costs incurred by the U.S. Government in procuring undelivered items and services from another source.

Any decision by the U.S. Government not to exercise contract options or to modify, curtail or terminate our major programs or contracts would adversely affect our revenue and revenue growth.

We may not realize as revenue the full amounts reflected in our backlog, which could adversely affect our future revenue and growth prospects.

As of March 31, 2010, our total backlog was $179.0 million, which included $114.8 million in unfunded backlog. The U.S. Government’s ability not to exercise contract options or to modify, curtail or terminate our major programs or contracts makes the calculation of backlog subject to numerous uncertainties. Due to the uncertain nature of our contracts with the U.S. Government, we may never realize revenue from some of the engagements that are included in our backlog. Our unfunded backlog, in particular, contains amounts that we may never realize as revenue because the maximum contract value specified under a U.S. Government contract or task order awarded to us is not necessarily indicative of the revenue that we will realize under that contract. If we fail to realize as revenue amounts included in our backlog, our future revenue and growth prospects may be adversely affected. For additional information on our backlog, see “Business — U.S. Federal Government Contracts — Backlog.”

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If we fail to comply with complex procurement laws and regulations, we could lose business and be liable for various penalties or sanctions.

We must comply with laws and regulations relating to the formation, administration and performance of federal government contracts. These laws and regulations affect how we conduct business with our federal government customers. In complying with these laws and regulations, we may incur significant costs, and the U.S. Government may impose additional fines and penalties, including contractual damages, in the event of our non-compliance. Among the more significant laws and regulations affecting our business are the following:

Our contracting agency customers periodically review our performance under and compliance with the terms of our federal government contracts. If we fail to comply with these control regimes or if a government review or investigation uncovers improper or illegal activities, we may be subject to civil or criminal penalties or administrative sanctions, including:

Additionally, the False Claims Act provides for potentially substantial civil penalties where, for example, a contractor presents a false or fraudulent claim to the government for payment or approval. Actions under the False Claims Act may be brought by the government or by other persons on behalf of the government (who may then share a portion of any recovery).

Because substantially all of our revenue is dependent on our selection, performance and payment under our U.S. Government contracts, the loss of one or more large contracts or any suspension or debarment from doing business with U.S. Government agencies would result in a loss of anticipated future revenue from U.S. Government contracts and a reduction in cash flows and would have a material adverse effect on our operating results.

U.S. Government contracts contain other provisions that may be unfavorable to contractors.

Beyond the right to terminate a contract for convenience or decline to exercise an option to renew, U.S. Government contracts contain provisions and are subject to laws and regulations that give the U.S. Government rights and remedies not typically found in commercial contracts. These provisions, laws and regulations permit the U.S. Government to do the following:

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If the U.S. Government exercises its rights under any of these provisions, our ability to operate or our competitive advantage could be hindered, and our revenue and net income could decline.

Further, U.S. Government contracts and certain laws and regulations contain provisions that may restrict our ability to provide our products and services to third parties. These restrictions may prevent us from leveraging our products, services, intellectual property, know-how or other revenue-generating aspects of our business or our acquisitions to the fullest extent in the commercial sector.

The U.S. Government may revise its procurement or other practices in a manner adverse to us.

The U.S. Government may revise its procurement practices or adopt new contracting rules and regulations, such as cost accounting standards. It could also adopt new contracting methods relating to General Services Administration (GSA) contracts, or other government-wide acquisition contracts (GWACs), or adopt new standards for contract awards intended to achieve certain social or other policy objectives. In addition, the U.S. Government may face restrictions from new legislation or regulations, as well as pressure from government employees and their unions, on the nature and amount of services the U.S. Government may obtain from private contractors. These changes could impair our ability to obtain new contracts or to continue to retain contracts under which we currently perform when and if those contracts are put up for renewed competitive bidding. Any new contracting methods could be costly or administratively difficult for us to implement, and, as a result, could harm our operating results.

Audits by U.S. Government agencies could result in unfavorable audit results that could subject us to a variety of penalties and sanctions, and could harm our reputation and relationships with our customers.

U.S. Government agencies, including the Defense Contract Audit Agency (DCAA) and others, routinely audit and review contractors’ performance on contracts, cost structure, pricing practices and compliance with applicable laws, regulations and standards. They also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s accounting, billing, cost, purchasing, property, estimating, compensation, management information system and other systems. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded. Adverse findings in a DCAA audit could materially affect our competitive position and result in a substantial adjustment to our revenue and net income.

If a U.S. Government audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of net income, suspension of payments, fines and suspension or debarment from doing business with U.S. Government agencies. In addition, we could suffer serious harm to our reputation and competitive position if allegations of impropriety were made against us, whether true or not. If our reputation or relationship with U.S. Government agencies were impaired, or if the U.S. Government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our revenue and net income would decline.

A significant portion of our revenue and net income is derived from a few key contracts. The loss of any one or more of these contracts could cause a material decline in our operating results.

For the year ended December 31, 2009, on an actual basis, we had 3 contracts that each accounted for over 10% of our revenue, for a total of $12.8 million, or 32.7% of our total revenue. For the same period, our 10 largest contracts accounted for a total of $24.5 million, or 62.6% of our total revenue. Although we have been successful in continuing work on most of our large contracts in the past, there is no assurance that we will be able to do so in the future. The revenue stream from one or more of these contracts could end for a number of reasons, including the completion of the customer’s requirements, the completion or early termination of our current contract, the consolidation of our work into another contract where we are not a contractor under that contract, or the loss of a competitive bid for the follow-on work related to our current contract. If any of these events were to occur, we could experience an unexpected, significant reduction in revenue and net income.

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We derive significant revenue from contracts awarded through a competitive bidding process involving substantial costs and risks. Due to this competitive pressure, we may be unable to sustain our revenue growth and profitability.

We expect a significant portion of the business that we will seek in the foreseeable future will be awarded through competitive bidding. The competitive bidding process involves substantial costs and a number of risks, including the significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us and our failure to accurately estimate the resources and costs that will be required to fulfill any contract we win. In addition, following a contract award, we may encounter significant expense, delay or contract modifications as a result of our competitors protesting or challenging contracts awarded to us in competitive bidding. In addition, multi-award contracts require that we make sustained post-award efforts to obtain task orders under the contract. We may not be able to obtain task orders or recognize revenue under these multi-award contracts. Our failure to compete effectively in this procurement environment would adversely affect our revenue and/or profitability.

We face intense competition from many competitors that, among other things, have greater resources than we do.

We operate in highly competitive markets and generally encounter intense competition to win contracts and task orders. We compete with many other firms, ranging from small, specialized firms to mid-tier technology firms and large, diversified firms, many of which have substantially greater financial, management and marketing resources than we do. Significant competitors include divisions of large defense contractors such as Lockheed Martin Corporation, The Boeing Company and Northrop Grumman Corporation. We also face competition from a number of large, well-established government contractors such as SAIC, Inc., CACI International Inc. and others. Our competitors may be able to provide our customers with different or greater capabilities or benefits than we can in areas such as technical qualifications, past contract performance, geographic presence, price and the availability of qualified professional personnel. Our failure to compete effectively because of any of these or other factors could cause our revenue and operating profits to decline. In addition, our competitors also have established or may establish relationships among themselves or with third parties to increase their ability to address our customers’ needs. Accordingly, it is possible that new competitors or alliances among competitors may emerge that would compete with us more effectively than they do currently.

Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to accurately estimate and manage costs, time and resources.

We generate revenue under various types of contracts, which include time and materials (T&M), fixed-price-level-of-effort, firm-fixed-price (FFP), and cost reimbursement contracts. For the year ended December 31, 2009, we derived revenue from such contracts on an actual basis, and on a pro forma basis, as follows:

		Year ended December 31, 2009
		Actual								Pro forma (unaudited)
Contract Type		(in millions)				(%)				(in millions)				(%)
Time & Materials		$	20.6				53%			$	80.5				69%
Fixed-Price-Level-of-Effort		$	11.2				28%			$	19.6				17%
Firm-Fixed-Price		$	5.7				15%			$	11.0				10%
Cost Reimbursement		$	1.5				4%			$	5.1				4%

Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenue derived from each type of contract, the nature of services or products provided, as well as the achievement of performance objectives and the stage of performance at which the right to receive fees, particularly under incentive and award fee contracts, is finally determined. Cost reimbursement and T&M contracts generally have lower profitability than FFP contracts. Our operating results in any period may be affected, positively or negatively, by variable purchasing patterns by our customers of our more profitable border, port and mobile security products.

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To varying degrees, there is a risk that we could underestimate the costs and resources necessary to fulfill each of our contract types. While FFP contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns. When making proposals on these types of contracts, we rely heavily on our estimates of costs and timing for completing the associated projects, as well as on assumptions regarding technical issues. In each case, our failure to accurately estimate costs or the resources and technology needed to perform our contracts or to effectively manage and control our costs during the performance of our work could result, and in some instances has resulted, in reduced profits or in losses. More generally, any increased or unexpected costs or unanticipated delays in connection with the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control, could make our contracts less profitable or unprofitable.

We have a limited operating history, which may not provide an adequate basis for projection of our future prospects and results of operations.

Our limited operating history and method of initial growth may not provide a meaningful basis on which to evaluate our business. Since our founding in 2008, we have undertaken multiple acquisitions that have provided the basis of our business and revenue. Although our revenues have grown significantly since our formation, we have only recently become profitable and we may not be able to maintain our profitability and may incur net losses in the future. The lack of long term historical financial results as an operating entity may make it difficult to project our revenues and profitability. Further, we are subject to the risks inherent in the ownership and operation of a company with a limited operating history, such as setbacks and delays in integration of acquired companies, fluctuations in expenses, and competition from competitors that have a more extensive operating history and track record. Any failure to address these risks could seriously harm our business and prospects. We will continue to encounter risks and challenges frequently experienced by companies at a similar stage of development, including:

Acquisitions have formed a significant part of our growth strategy in the past and we expect to continue this strategy in the future. If we are unable to identify suitable acquisition candidates, integrate the businesses we acquire or realize the intended benefits, this aspect of our growth strategy may not succeed. Acquisitions involve numerous risks, including risks related to integration and undisclosed or underestimated liabilities.

Historically, our growth strategy has relied on acquisitions. We expect to derive a significant portion of our growth by acquiring businesses and integrating those businesses into our existing operations. We intend to seek acquisition opportunities both to expand into new markets and to enhance our position in our existing markets. However, our ability to do so will depend on a number of steps, including our ability to:

If we fail to achieve any of these steps, our growth strategy may not be successful.

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In addition, acquisitions involve numerous risks, including difficulties in the assimilation of the operations accounting systems, technologies, services and products of the acquired company, the potential loss of key employees of the acquired company and the diversion of our management’s attention from other business concerns. This is the case particularly in the fiscal quarters immediately following the completion of an acquisition to the extent the operations of the acquired business are integrated into the acquiring businesses’ operations during this period. We cannot be sure that we will accurately anticipate all of the changing demands that any future acquisition may impose on our management, our operational and management information systems, and our financial systems.

We may underestimate or fail to discover liabilities relating to a future acquisition during the due diligence investigation and we, as the successor owner, might be responsible for any such liabilities. Although we seek to minimize the impact of underestimated or potential undiscovered liabilities by structuring acquisitions to minimize liabilities and obtaining indemnities and warranties from the selling party, these methods may not fully protect us from the impact of undiscovered liabilities. Indemnities or warranties are often limited in scope, amount or duration, and may not fully cover the liabilities for which they were intended. The liabilities that are not covered by the limited indemnities or warranties could have a material adverse effect on our business and financial condition. In addition, acquisitions can raise potential Organizational Conflict of Interest (OCI) issues that can impact the nature and timing of the acquisition or the acquiring entity’s ability to compete for future contracts where the acquired entity may have been involved.

We have a substantial investment in recorded goodwill as a result of our acquisitions, and changes in future business conditions could cause these investments to become impaired, requiring substantial write-downs that could reduce our net income or increase our net loss.

As of March 31, 2010, goodwill accounted for $92.0 million, or 63% of our recorded total assets on an actual basis. We review our goodwill for impairment annually and when events or changes in circumstances indicate the carrying value may not be recoverable. The annual impairment test is based on several factors requiring judgment. Principally, a decrease in expected reporting unit cash flows or changes in market conditions may indicate potential impairment of recorded goodwill. If goodwill became impaired, we could record a significant charge to earnings in our financial statements during the period in which impairment of our goodwill is determined, which could significantly reduce or eliminate our net income.

Obligations associated with outstanding indebtedness on notes we have issued in connection with acquisitions may adversely affect our business.

At March 31, 2010, indebtedness on outstanding notes issued by us as financing for the acquisition of TAG and IIT totaled $33.1 million in aggregate principal amount, $3.4 million of which is currently held in escrow in conjunction with our acquisition of TAG. Our indebtedness and repayment obligations for these notes could have important negative consequences, including:

We have significant contingent earn-out obligations related to the acquisition of TAG that may adversely affect our liquidity and financial condition, results of operations and stock price. We may also pursue acquisitions in the future that include earn-out provisions.

Our recent acquisition of TAG contains a contingent earn-out provision that may require us to make additional payments in the future. Under this earn-out arrangement, our maximum aggregate potential contingent payment obligation at March 31, 2010 was up to 3,000,000 shares of our common stock and the

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payment of additional cash if TAG exceeds certain target revenue and gross margin levels. Though this contingent earn-out will only be paid if TAG exceeds a minimum revenue level of $90 million in aggregate revenue in 2010 and 2011, and additional cash will only be paid should TAG exceed $135 million of aggregate revenue subject to achieving gross margins of 20% or greater, the issuance of any additional stock or payment of any additional cash made pursuant to this earn-out provision may adversely affect our liquidity and financial condition, results of operations and stock price. Our existing earn-out obligation for the TAG Acquisition will expire on December 31, 2011. However, we may enter into acquisition agreements in the future, the terms of which may include earn-out provisions. These contingent obligations could adversely affect our liquidity and financial condition, results of operations and stock price.

We may require additional capital to finance our growth. If the terms on which the additional capital is available are unsatisfactory, if the additional capital is not available at all or we are not able to fully access our existing credit facility, we may not be able to pursue our growth strategy.

Our growth strategy will require additional capital investment to complete acquisitions, integrate any completed acquisitions into our existing operations, and to expand into new markets.

To the extent that we do not generate sufficient cash internally to provide the capital we require to fund our growth strategy and future operations, we will require additional debt or equity financing. We cannot be sure that this additional financing will be available or, if available, will be on terms acceptable to us. Further, high volatility in the equity markets may make it difficult for us to access the equity markets for additional capital at attractive prices, if at all. If we are unable to obtain sufficient additional capital in the future, it will limit our ability to implement our business strategy. Continued issues resulting from the current global financial crisis and economic downturn involving liquidity and capital adequacy affecting lenders could affect our ability to fully access our existing credit facilities. In addition, even if future debt financing is available, it may result in (1) increased interest expense, (2) increased term loan payments, (3) increased leverage, and (4) decreased income available to fund further acquisitions and expansion. It may also limit our ability to withstand competitive pressures and make us more vulnerable to economic downturns. If future equity financing is available, it may dilute the equity interests of our existing stockholders.

If we are unable to manage our growth, our business could be adversely affected.

Achieving our plans for growth will place significant demands on our management, as well as on our administrative, operational, and financial resources. For us to successfully manage our growth, we must continue to improve our operational, financial and management information systems and expand, motivate and manage our workforce. If we are unable to successfully manage our growth without compromising the quality of our services and products, our business, prospects, financial condition or operating results could be adversely affected.

We are dependent on the continued services and performance of our senior management, the loss of any of whom could adversely affect our business, operating results and financial condition.

We believe that our future performance depends on the continued services and continuing contributions of our senior management to execute our business plan, and to identify and pursue new opportunities successfully. In addition, the relationships and reputation that many members of our senior management team have established and maintain with federal government personnel contribute to our ability to maintain strong customer relationships. Therefore, the loss of services of senior management could significantly delay or prevent the achievement of our development and strategic objectives.

Our failure to attract, train and retain skilled employees with (or who can obtain) appropriate security clearances would adversely affect our ability to execute our strategy.

Our business involves the development of tailored solutions for our customers, a process that relies heavily upon the expertise and services of our employees. Our continued success depends on our ability to recruit and retain sufficient numbers of highly qualified individuals who have advanced engineering and information technology skills, specialized knowledge of customer missions and appropriate security clearances, and who work well with our government customers. Due to our growth and increased competition for experienced personnel, particularly in highly specialized areas, it has become more difficult for us to meet our

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needs for these employees in a timely manner and this may affect our growth in the current fiscal year and in future years. Although we intend to continue to devote significant resources to recruit, train and retain qualified employees, we may not be able to attract and retain these employees. Any failure to do so could impair our ability to perform our contractual obligations efficiently and timely meet our customers’ needs and win new business, which could adversely affect our future results. Our employee attrition rate in 2009, on an actual basis, was 9.6%.

In addition, the relationships and reputation that many members of our senior management team have established and maintain with government personnel contribute to our ability to maintain good customer relationships and to identify new business opportunities. The loss of key personnel may impair our ability to obtain new U.S. Government awards or adequately perform under our current U.S. Government contracts. We also rely on the skills and expertise of our senior technical development personnel, the loss of any of whom could prevent us from completing current development projects and restrict new development projects. We currently do not maintain “key person” insurance on any of our executives or key employees.

Our business depends upon obtaining and maintaining required security clearances.

Many of our federal government contracts require our employees to maintain various levels of security clearances, and we are required to maintain certain facility security clearances complying with Department of Defense and Intelligence Community requirements. Obtaining and maintaining security clearances for employees involves lengthy processes, and it is difficult to identify, recruit and retain employees who already hold security clearances. If our employees are unable to obtain or retain security clearances or if our employees who hold security clearances terminate employment with us and we are unable to find replacements with equivalent security clearances, we may be unable to perform our obligations to customers whose work requires cleared employees, or such customers could terminate their contracts or decide not to renew them upon their expiration. In addition, we expect that many of the contracts on which we will bid will require us to demonstrate our ability to obtain facility security clearances and perform work with employees who hold specified types of security clearances. To the extent we are not able to obtain or retain facility security clearances or engage employees with the required security clearances for a particular contract, we may not be able to bid on or win new contracts, or effectively re-bid on expiring contracts.

Employee misconduct, including security breaches, could cause us to lose customers or our ability to contract with the U.S. Government.

Misconduct, fraud or other improper activities by our employees could have a significant adverse impact on our business and reputation, particularly because we are a U.S. Government contractor. Such misconduct could include the failure to comply with U.S. Government procurement regulations, regulations regarding the protection of classified information, legislation regarding the pricing of labor and other costs in U.S. Government contracts, and any other applicable laws or regulations. Employee or former employee misconduct involving data security lapses or breaches of confidentiality resulting in the compromise of our or our customer’s sensitive or classified information could result in remediation costs, in regulatory sanctions against us and in serious harm to our reputation. The precautions we take to prevent and detect these activities may not be effective, and we could face unknown risks or losses. Our failure to comply with applicable laws or regulations or misconduct by any of our employees could subject us to fines and penalties, loss of security clearances and suspension or debarment from contracting with the U.S. Government, any of which would adversely affect our business and reputation.

Our quarterly operating results are likely to vary significantly and be unpredictable, which could cause the trading price of our stock to decline.

Our operating results have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control, including:

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Any one of the factors above or the cumulative effect of some of the factors referred to above may result in significant fluctuations in our quarterly operating results. This variability and unpredictability could result in our failing to meet our revenue or operating results expectations or those of securities analysts or investors for any period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our shares could fall substantially.

    Our credit facility contains financial and operating covenants that limit our operations and could lead to adverse consequences if we fail to comply.

Our credit facility contains financial and operating covenants that, among other things, require us to maintain or satisfy specified financial ratios (including debt to adjusted EBITDA ratios and fixed charge coverage ratios as further described under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Credit Facility and Other Debt Obligations”), limit our ability to incur indebtedness, pay dividends or engage in certain significant business transactions, and require us to comply with a number of other affirmative and negative operating covenants. Failure to meet these financial and operating covenants could result from, among other things, changes in our results of operations, our incurrence of debt or changes in general economic conditions. These covenants may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our stockholders, which could harm our business and operations. In addition, our credit facility contains several other material covenants, including a lien against our assets (including receivables), limitations on additional debt, pre-approval of any acquisitions, a prohibition of dividends, and restrictions on the sale, lease, or disposal of any substantial part of our assets, other than in the normal course of business.

    We have only a limited ability to protect and enforce our intellectual property rights, which we consider important to our success. Failure to adequately protect or enforce our intellectual property rights could adversely affect our competitive position and cause us to incur significant expense.

We believe that our success depends, in part, upon our ability to protect our proprietary information and other intellectual property. We rely principally on trade secrets to protect much of our intellectual property where we do not believe that patent protection is appropriate or obtainable. However, trade secrets are difficult to protect and to enforce against third parties. Although we believe that we have adopted reasonable practices to ensure that our employees are subject to appropriate confidentiality obligations and to ensure that we obtain appropriate ownership rights in intellectual property developed by our employees (or by the employees of companies that we have acquired), our practices in this regard may be insufficient, which could result in the misappropriation or disclosure of our confidential information or disputes regarding (or the loss of rights to) certain of our intellectual property. In addition, we may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights. Failure to obtain or maintain trade secret protection could adversely affect our competitive business position. The protections that we receive for our trade secrets and other intellectual property rights may not be sufficient to prevent our competitors from copying, infringing, or misappropriating our products and services. Similarly, there is no guarantee that when we do apply for intellectual property protection the applications will result in registrations sufficient to protect our rights. In addition, we cannot be certain that others will not independently develop, design around or otherwise acquire equivalent or superior technology or intellectual property rights.

From time to time, we may seek to enforce our intellectual property rights against third parties. The fact that we have intellectual property rights may not guarantee success in our attempts to enforce these rights against third parties. If we are unable to prevent third parties from infringing or misappropriating our trade secrets or other intellectual property rights, our competitive position could be adversely affected. Our ability and potential success in enforcing our rights is also subject to general litigation risks, as well as uncertainty as to the enforceability of our intellectual property rights. When we seek to enforce our rights, we may be subject to claims that our intellectual property rights are invalid, otherwise unenforceable, or are licensed to the party against whom we are asserting the claim. In addition, our assertions of intellectual property rights

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may result in the other party seeking to assert various claims against us, including its own alleged intellectual property rights, claims of unfair competition, or others. In the course of conducting our business, we may also inadvertently infringe the intellectual property rights of others, resulting in claims against us or our customers. Our contracts generally indemnify our customers for third-party claims for intellectual property infringement by the services and products we provide. The expense of defending these claims may adversely affect our financial results.

Our acquisitions frequently include the hiring of employees from the acquired entity. These employees may be subject to confidentiality provisions that are not related to the acquisition and may have been exposed to third party confidential information and intellectual property that we do not have the rights to use. During the course of their employment in our business, there is always a risk that employees may inadvertently breach confidentiality obligations or inadvertently infringe third party intellectual property rights based on their prior employment, which could adversely affect our business.

In addition, we conduct research and development under projects with the U.S. Government. In general, our rights to technologies we develop under those projects are subject to the U.S. Government’s non-exclusive, non-royalty bearing, world-wide license to use those technologies. Under certain circumstances, the U.S. Government could also claim rights in our intellectual property that could make it difficult to prevent disclosure to, licensing to, or use by third parties, which could adversely affect our competitive position and business.

    We may become involved in intellectual property disputes, which could subject us to significant liability, divert the time and attention of our management and prevent us from selling our products.

We, or our customers, may be a party to litigation in the future to protect our intellectual property or be required to respond to allegations that we infringe on others’ intellectual property. If any parties assert that our products infringe upon their proprietary rights, we would be forced to defend ourselves, and possibly our customers, against the alleged infringement, or to negotiate and possibly enter into settlement agreements that could adversely affect our intellectual property rights or the operation of our business. If we are unsuccessful in any intellectual property litigation or enter into any dispute-related settlement, we could be subject to significant liability and loss of our proprietary rights. Intellectual property litigation, regardless of its success, would likely be time consuming and expensive to resolve and would divert management’s time and attention. In addition, we could be forced to do one or more of the following:

If we are forced to take any of these actions, our business could be seriously harmed.

    We rely on the availability of third-party licenses.

Certain of our products include software or other intellectual property licensed from third parties. It may be necessary in the future to renew licenses relating to various aspects of these products or to seek new licenses for existing or new products. There can be no assurance that the necessary licenses would be available on equivalent terms to those currently available, on other terms acceptable to us, or at all. The inability to obtain certain licenses or other rights or to obtain such licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could result in delays in product releases until equivalent technology can be identified, licensed or developed, if at all, and integrated into our products and may have a material adverse effect on our business, operating results, and financial condition. Moreover, the inclusion in our products of software or other intellectual property licensed from third parties on a nonexclusive basis could limit our ability to differentiate our products from those of our competitors.

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    Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise or are dependent upon factors not wholly within our control. Failure to meet these obligations could adversely affect our profitability and future prospects.

We design, develop and manufacture technologically advanced and innovative products and services applied by our customers in a variety of environments. Problems and delays in development or delivery as a result of issues with respect to design, technology, licensing and patent rights, labor, learning curve assumptions or materials and components could prevent us from achieving contractual requirements.

In addition, our products cannot be tested and proven in all situations and are otherwise subject to unforeseen problems. Examples of unforeseen problems that could negatively affect revenue and profitability include premature failure of products that cannot be accessed for repair or replacement, problems with quality, country of origin, delivery of subcontractor components or services and unplanned degradation of product performance. Among the factors that may affect revenue and profits could be unforeseen costs and expenses not covered by insurance or indemnification from the customer, diversion of management focus in responding to unforeseen problems, loss of follow-on work, and, in the case of certain contracts, repayment to the government customer of contract cost and fee payments we previously received.

    Business disruptions could reduce our expected revenue, increase our expenses, and damage our reputation.

We rely to a large extent upon sophisticated technology systems and infrastructure. We take reasonable steps to protect them, including the implementation and use of certain security precautions. However they are potentially vulnerable to breakdown, malicious intrusion, natural disaster, and random attack. A disruption to our systems or infrastructure could damage our reputation and cause us to lose customers and revenue. This could require us to expend significant efforts and resources or incur significant expense to eliminate these problems and address related security concerns.

Risks Relating to Our Common Stock and this Offering

    We will incur increased costs and demands upon management as a result of efforts to comply with the laws and regulations affecting public companies, which could adversely affect our operating results.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with the Sarbanes-Oxley Act as well as other rules implemented by the SEC, and the applicable stock exchange. The expenses incurred by public companies for reporting and corporate governance purposes are significant. We expect these rules and regulations to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. The increased costs associated with operating as a public company will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations.

    No market currently exists for our common stock, and an active trading market for our common stock may not develop.

Prior to this offering, there has been no public market for shares of our common stock. We have filed an application to list our common stock for trading on the NASDAQ Global Market. However, we cannot assure you that our common stock will be approved for listing on the NASDAQ Global Market, or if approved, that an active trading market for our common stock will develop on that exchange, or elsewhere, or if developed, that any trading market will continue. The initial public offering price for the shares of our common stock will be determined by negotiation between us and the underwriters and may not be indicative of prices that will prevail in the open market following this offering.

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    If our stock price fluctuates after this offering, you could lose a significant part, or all, of your investment.

The market price of our common stock may be reduced by many factors, some of which are beyond our control, including those described above under “Risks Related to Our Business” and one or more of the following:

As a result of the existence of one or more of these factors, investors in our common stock may not be able to resell their shares at or above the initial public offering price.

    If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If we do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

    Concentration of ownership among our existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.

Upon completion of this offering, our executive officers, directors and their affiliates will beneficially own, in the aggregate, approximately     % of our outstanding common stock. As a result, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our articles of incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without the support of these stockholders. See “Principal and Selling Stockholders” for additional detail about the shareholdings of these persons.

    Future sales of shares by existing stockholders could cause our stock price to decline.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline. Based on shares of common stock outstanding as of March 31, 2010, upon completion of this offering, we will have outstanding a total of    million shares of common stock. Of these shares, only the        shares of common stock sold in this offering by us and the selling stockholders will be freely tradable, without restriction, in the public market immediately following

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this offering. Of our outstanding shares of common stock,    are subject to contractual lock-up agreements with our underwriters. Our underwriters for this offering, however, may, in their sole discretion, permit our officers, directors and other stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements, subject to compliance with applicable law.

We expect that the lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus (subject to extension upon the occurrence of specified events). After the lock-up agreements expire, up to an additional        shares of common stock will be eligible for sale in the public market,        of which shares are held by directors, executive officers and other affiliates and the sale of which will be subject to volume and other limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act. In addition, as of March 31, 2010, 4,808,806 shares of common stock were subject to outstanding warrants, 1,212,250 shares of common stock were subject to outstanding options issued under our employee benefit plans and a total of 12% of the outstanding common shares, with 402,250 options having been issued, were reserved for future issuance under our employee benefit plans and will become eligible for sale in the public market to the extent permitted by the provisions of the applicable agreements and plans relating to such securities the lock-up agreements and Rule 144 and Rule 701 under the Securities Act. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

    We have previously issued common stock as a portion of the consideration paid for certain acquisitions. Our current stockholders may experience dilution in their holdings if we issue additional shares of common stock as a result of the TAG Acquisition, or in future acquisitions where we use our stock.

In connection with the acquisitions of S&H and ICCI in 2008, we issued 600,000 and 1,292,000 shares of our common stock, respectively, as consideration for these acquisitions. The acquisition of the assets of Embedded Systems in 2009 included 135,052 shares of common stock that we issued as consideration. Further, in connection with the TAG Acquisition, we have agreed to issue up to 3,000,000 shares of our common stock pursuant to a contingent earn-out provision, and we issued 250,000 shares of our common stock as part of the consideration for the IIT Acquisition. If we issue additional shares of common stock as a result of this earn-out provision, or if we otherwise issue stock in connection with future acquisitions, you may suffer dilution of your ownership interest in our company.

    Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our outstanding common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur immediate dilution of $       in the net tangible book value per share from the price you paid, based on the public offering price. In addition, following this offering, purchasers in the offering will have contributed     % of the total consideration paid by our stockholders to purchase shares of common stock, in exchange for acquiring approximately     % of our total outstanding shares as of       , 2010 after giving effect to this offering. The exercise of outstanding stock options and warrants will result in further dilution. For a further description of the dilution that you will experience immediately after this offering, see “Dilution.”

    Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

Our management will have broad discretion over the use of our net proceeds from this offering. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We expect to use approximately $33 million of the net proceeds to fund the repayment of debt we incurred to finance the acquisition of TAG and IIT, including $11 million of notes issued to the sellers of TAG, $8 million of unsecured debt owed to certain of our stockholders, and a $5 million unsecured term note we issued to Bank of America, N.A., and we intend to use approximately $9 million of the net proceeds to pay down a portion of outstanding indebtedness under an asset backed credit facility with Bank of America, N.A. We expect to use the balance of the net proceeds for working capital, capital expenditures and other general

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corporate purposes, including working capital and capital expenditures, which may in the future include investments in, or acquisitions of businesses, services or technologies that management deems to likely be complementary or synergistic. We might not be able to yield a significant return, if any, on any investment of these net proceeds.

    Provisions in our organizational documents and in Maryland law may inhibit potential acquisition bids that our stockholders may consider favorable, and the market price of our common stock may be lower as a result.

Our charter and bylaws, as in effect upon closing of this offering, will contain provisions that may have an anti-takeover effect and inhibit a change in our board of directors and management. These provisions include the following:

In addition, Maryland law provides protection for Maryland corporations against unsolicited takeovers by limiting, among other things, the duties of the directors in unsolicited takeover situations. The duties of directors of Maryland corporations do not require them to:

Maryland law also contains a statutory presumption that an act of a director of a Maryland corporation satisfies the applicable standards of conduct for directors under Maryland law.

Any one or more of these provisions, singularly or together, may have an anti-takeover effect that discourages potential acquisition bids that our stockholders may consider favorable.

    We do not intend to pay dividends.

We intend to retain our earnings, if any, for general corporate purposes, and we do not anticipate paying cash dividends on our stock in the foreseeable future. Our dividend policy may make our stock look less attractive to investors.

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    Section 404 of the Sarbanes-Oxley Act of 2002 will require us to document and test our internal control over financial reporting for 2011 and beyond and will require an independent registered public accounting firm to report on the effectiveness of these controls. Any delays or difficulty in satisfying these requirements could adversely affect our future results of operations and our stock price.

Section 404 of the Sarbanes-Oxley Act of 2002 will require us to document and test the effectiveness of our internal control over financial reporting in accordance with an established internal control framework and to report on our conclusions as to the effectiveness of our internal controls. It will also require an independent registered public accounting firm to test our internal control over financial reporting and report on the effectiveness of such controls for the year ending December 31, 2011 and subsequent years. In addition, upon completion of this offering, we will be required under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, to maintain disclosure controls and procedures and internal control over financial reporting.

In addition, we may in the future discover areas of our internal controls that need improvement, particularly with respect to businesses that we may acquire. If so, we cannot be certain that any remedial measures we take will ensure that we have adequate internal controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal control over financial reporting, or if our independent registered public accounting firm is unable to provide us with an unqualified report regarding the effectiveness of our internal control over financial reporting as of December 31, 2011 and in future periods, investors could lose confidence in the reliability of our financial statements. This could result in a decrease in the value of our common stock. Failure to comply with Section 404 could potentially subject us to sanctions or investigations by the SEC, the NASDAQ Global Market or other regulatory authorities.

    Operational risks such as material weaknesses and other deficiencies in internal control over financial reporting could result in errors, potentially requiring restatements of our historical financial data, leading investors to lose confidence in our reported results.

There are a number of factors that may impede our efforts to establish and maintain effective internal controls and a sound accounting infrastructure, including our recent history of acquisitions (including acquisitions of companies audited by auditors other than our own), our own change of auditors, our rapid pace of growth, and general uncertainty regarding the operating effectiveness and sustainability of controls. Controls and procedures, no matter how well designed and operated, provide only reasonable assurance that material errors in our financial statements will be prevented or detected on a timely basis. Any failure to establish and maintain effective internal controls over financial reporting increases the risk of material error and/or delay in our financial reporting. Depending on the nature of a failure and any required remediation, ineffective controls could have a material adverse effect on our business and potentially result in restatements of our historical financial results. Financial restatements or other issues arising from ineffective controls could also cause investors to lose confidence in our reported financial information, which would have an adverse effect on the trading price of our securities. Delays in meeting our financial reporting obligations could affect our ability to maintain the listing of our securities. Although we seek to reduce these risks though active efforts relating to properly documented processes, adequate systems, risk culture, compliance with regulations, corporate governance and other factors supporting internal controls, such procedures may not be effective in limiting each of the operational risks.

    We have never operated as a public company, and fulfilling our obligations incident to being a public company will be expensive and time consuming.

As a private company, we have maintained a relatively small finance and accounting staff. We currently do not have an internal audit group, and we have not been required to establish and maintain disclosure controls and procedures and internal control over financial reporting as required by the federal securities law for public companies. As a public company, the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, as well as the rules of the NASDAQ Global Market, will require us to implement additional corporate governance practices and adhere to a variety of reporting requirements and complex accounting rules. Compliance with these public company obligations will require us to devote significant

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management time and will place significant additional demands on our finance and accounting staff and on our financial, accounting and information systems. We expect to hire additional accounting and financial staff with appropriate public company reporting experience and technical accounting knowledge. Other expenses associated with being a public company include increased auditing, accounting and legal fees and expenses, investor relations expenses, increased directors’ fees and director and officer liability insurance costs, registrar and transfer agent fees, listing fees, as well as other expenses. We cannot accurately predict the amount of additional costs that we may incur or the timing of such costs, but we have estimated that such costs may exceed $1 million during our first 12 months of being a public company.

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CAPITALIZATION

The following table shows, as of March 31, 2010, our cash and cash equivalents and our capitalization:

•

on an actual basis; and

•

on an as adjusted basis, to give effect to (1) the sale of common stock by us in this offering at an assumed public offering price of $    per share, the midpoint of our price range set forth on the cover page of this prospectus after the deduction of the estimated underwriting discount and offering expenses payable by us, (2) the application of the net proceeds of this offering in the manner described under “Use of Proceeds”, and (3) the filing of our amended and restated articles of incorporation immediately before the completion of this offering.

The share data in the table below are based on shares outstanding as of March 31, 2010. The number of outstanding shares on that date excludes:

•

1,212,250 shares of common stock issuable upon the exercise of outstanding stock options as of March 31, 2010, at a weighted average exercise price of $5.67;

•

4,808,806 shares of common stock issuable upon the exercise of outstanding warrants as of March 31, 2010, at a weighted average exercise price of $4.98; and

•

1,456,280 shares of common stock available for future grant under our 2009 Stock Incentive Plan as of March 31, 2010.

You should read this table in conjunction with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus.

		As of March 31, 2010 unaudited
		Actual				As Adjusted
		(in thousands)
Cash and cash equivalents		$	2,013			$
Total debt, including current portion			32,562
Stockholders’ equity (deficit):
Preferred stock, undesignated, $0.001 par value per share; 5,000,000 shares authorized actual and as adjusted; 0 and 0 shares issued and outstanding actual and as adjusted			0
Common stock, $0.001 par value per share; 100,000,000 shares authorized actual and as adjusted; 15,487,748 and     shares issued and outstanding actual and as adjusted			15
Additional paid-in capital			74,157
Retained earnings (deficit)			(3,746	)
Accumulated other comprehensive loss			0
Total stockholders’ equity (deficit)			70,426
Total capitalization		$	102,988			$

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DILUTION

Purchasers of the common stock in the offering will suffer an immediate and substantial dilution in net tangible book value per share. Dilution is the amount by which the initial public offering price paid by purchasers of shares of our common stock exceeds the net tangible book value per share of our common stock after the offering. Net tangible book value represents the amount of our total tangible assets reduced by our total liabilities. Tangible assets equal our total assets less goodwill and intangible assets. Net tangible book value per share represents our net tangible book value divided by the number of shares of common stock outstanding. As of March 31, 2010, our net tangible book value was $35.3 million and our net tangible book value per share was $2.47.

After giving effect to the sale of      shares of common stock in the offering at an initial public offering price of $    per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and the application of the estimated net proceeds of this offering in the manner described under “Use of Proceeds”, our adjusted net tangible book value as of March 31, 2010, would have been $    million, or $    per share. This represents an immediate accretion in net tangible book value of $    per share to existing stockholders and an immediate dilution of $    per share to new investors purchasing shares in the offering. The following table illustrates this per share dilution:

Assumed initial public offering price per share						$
Net tangible book value per share as of March 31, 2010		$
Increase in combined net tangible book value per share attributable to new investors
Adjusted net tangible book value per share after this offering
Dilution per share to new investors						$

A $1.00 increase (decrease) in the assumed initial public offering price of $    per share would increase (decrease) our adjusted net tangible book value after the offering by approximately $    million and dilution per share to new investors by approximately $      , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions.

If the underwriters exercise in full their option to purchase additional shares, the adjusted net tangible book value per share after the offering would be $    per share, the increase in net tangible book value per share to existing stockholders would be $    per share and the dilution to new investors would be $    per share.

The following table illustrates on the as adjusted basis described above as of March 31, 2010, the number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid, or to be paid, by existing stockholders (including the selling stockholders) and by new investors purchasing common stock in this offering. The calculation below is based on an assumed initial public offering price of $    per share, which is the midpoint of the price range listed in the cover page of the prospectus:

		Shares Purchased								Total Consideration								Average Price Per Share
		Number				Percent				Amount				Percent
Existing stockholders			15,487,748				%			$	74,159,000				%			$	2.35
New investors																		$
Total							100	%		$					100	%

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The share data in the table above are based on shares outstanding as of March 31, 2010. The number of outstanding shares at that date excludes:

A $1.00 increase (decrease) in the assumed initial public offering price of $    per share would increase (decrease) the total consideration paid by new investors by $    million and increase (decrease) the percentage of total consideration paid by new investors by approximately    %, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.

If the underwriters exercise in full their option to purchase additional shares, the percentage of shares of common stock held by existing stockholders will decrease to approximately    % of the total number of shares of our common stock outstanding after this offering and will increase the number of shares held by new investors to      , or    % of the total number of shares of our common stock outstanding after this offering.

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		Predecessor																Successor
		Year ended December 31, 2005 (unaudited)				Year ended December 31, 2006 (unaudited)				Year ended December 31, 2007				Period from January 1, through September 29, 2008				July 31, (inception) through December 31, 2008				Year ended December 31, 2009				Three months ended March 31
																										2009				2010
																										(unaudited)
		(in thousands, except per share data)
Statement of Operations Data
Revenues
Services		$	10,789			$	12,497			$	15,410			$	14,563			$	9,045			$	32,743			$	6,959			$	18,865
Products			—				—				—				—				—				6,294				1,471				2,878
Total			10,789				12,497				15,410				14,563				9,045				39,037				8,430				21,743
Cost of revenues
Services			7,298				8,641				10,263				9,351				4,825				23,475				5,075				13,453
Products			—				—				—				—				—				4,443				806				1,788
Total			7,298				8,641				10,263				9,351				4,825				27,918				5,881				15,241
Gross profit
Services			3,491				3,856				5,147				5,212				4,220				9,268				1,884				5,412
Products			—				—				—				—				—				1,851				665				1,090
Total			3,491				3,856				5,147				5,212				4,220				11,119				2,549				6,502
Operating expenses			1,308				1,669				2,847				4,104				3,573				11,373				1,969				5,091
Intangible amortization expense			—				—				—				—				612				2,055				470				855
Net operating income (loss)			2,183				2,187				2,300				1,108				35				(2,309	)			110				556
Non-operating expense (income), net			—				(22	)			(38	)			67				2,080				783				332				(33	)
Income (loss) before income taxes			2,183				2,209				2,338				1,041				(2,045	)			(3,092	)			(222	)			589
Income tax expenses (benefit), net			—				—				—				—				(21	)			979				(88	)			(156	)
Net income (loss)		$	2,183			$	2,209			$	2,338			$	1,041			$	(2,066	)		$	(2,113	)		$	(310	)		$	433
Earnings (loss) per share
Basic			n/a				n/a				n/a				n/a			$	(0.32	)		$	(0.18	)		$	(0.04	)		$	0.03
Diluted			n/a				n/a				n/a				n/a			$	(0.32	)		$	(0.18	)		$	(0.04	)		$	0.02
Weighted average common shares outstanding
Basic			n/a				n/a				n/a				n/a				6,474,028				12,062,930				8,626,750				14,311,869
Diluted			n/a				n/a				n/a				n/a				6,474,028				12,062,930				8,626,750				21,021,448

		Predecessor												Successor
		As of December 31												As of December 31								As of March 31, 2010
		2005				2006				2007				2008				2009
		(unaudited)				(unaudited)																(unaudited)
		(in thousands)
Balance Sheet Data
Cash and cash equivalents		$	236			$	834			$	842			$	5,397			$	7,333			$	2,013
Working capital (1)			1,831				2,618				3,250				9,312				19,365				(6,985	)
Total assets			1,946				2,827				3,735				35,885				67,130				145,097
Long-term liabilities			—				—				—				7,494				1,617				36,873
Total stockholders’ equity			1,834				2,644				3,273				26,288				62,339				70,426

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The company intends to pay down or retire approximately $____ of debt with proceeds from this offering. Based on an estimated share price of $____, this would result in attributing approximately _____ shares sold in this offering to pay this debt. The table below shows the pro forma impact as if these shares had been issued January 1, 2010:

		Three Months Ended March 31, 2010
Net income			_______
Interest expense not incurred without debt			_______
Adjusted net income			_______
Unaudited pro forma net income per share			_______
Basic			_______
Diluted			_______
Adjusted basic weighted average shares outstanding			_______
Adjusted fully diluted weighted average shares outstanding			_______

Note that the Company had no debt prior to the 2010 acquisitions.

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UNAUDITED PRO FORMA FINANCIAL INFORMATION

The unaudited pro forma consolidated financial information set forth below is presented to illustrate the effects of the following transactions on our financial condition and results of operations:

These data are subject, and give effect, to the assumptions and adjustments described in the notes accompanying the unaudited pro forma financial information included elsewhere in this prospectus.

We have derived the historical financial data of our company for the year ended December 31, 2009 from the audited financial statements and related notes included elsewhere in this prospectus. The historical financial data for our company as of March 31, 2010 and for the three months ended March 31, 2010 have been derived from our unaudited financial statements that are included elsewhere in this prospectus.

We have derived the historical financial data for the 2009 acquisitions from the audited financials for LEDS and GDAIS as included in the Financial Statements found elsewhere in this prospectus and for Embedded Systems from their internally generated unaudited financial statements.

The historical consolidated financial data for TAG for the year ended December 31, 2009 combines the audited historical consolidated financial data of TAG for the period from January 1, 2009 through October 31, 2009, included elsewhere in this prospectus, with the unaudited historical consolidated financial data of TAG for the period from November 1, 2009 through December 31, 2009, which is not included in this prospectus. We have derived the historical consolidated financial data of IIT for the year ended December 31, 2009 from the audited consolidated financial data of IIT included elsewhere in this prospectus.

The unaudited pro forma consolidated statements of operations for the year ended December 31, 2009 assume that the TAG Acquisition, the IIT Acquisition and the 2009 acquisitions took place as of January 1, 2009. The unaudited pro forma consolidated balance sheet as of December 31, 2009 assumes that the TAG Acquisition and IIT Acquisition took place as of December 31, 2009.

You should read this information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes appearing elsewhere in this prospectus.

The summary unaudited pro forma statement of operations is presented for informational purposes only and should not be considered indicative of actual results of operations that would have been achieved had the acquisitions been achieved on the dates indicated.

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		KEYW				2009 Acquisitions (5) (unaudited)				TAG (4) (unaudited)				IIT				Pro Forma Adjustments (unaudited)				Pro Forma Combined (unaudited)
		Year ended December 31, 2009
		(in thousands, except per share data)
Statement of Operations Data:
Revenues
Services		$	32,743			$	24,229			$	47,692			$	5,260			$	—			$	109,924
Product			6,294				—				—				—				—				6,294
Total			39,037				24,229				47,692				5,260				—				116,218
Cost of revenues
Services			23,475				17,806				39,702				3,806				—				84,789
Products			4,443				—				—				—				—				4,443
Total			27,918				17,806				39,702				3,806				—				89,232
Gross profit
Services			9,268				6,423				7,990				1,454				—				25,135
Products			1,851				—				—				—				—				1,851
Total			11,119				6,423				7,990				1,454				—				26,986
Operating expenses			11,373				3,822				3,648				875				—				19,718
Intangible amortization expense			2,055				—				—				—				4,615	(1)			6,670
Net operating income (loss)			(2,309	)			2,601				4,342				579				(4,615	)			598
Non-operating expense (income), net			783				27				(353	)			78				2,500	(2)			3,035
Income (loss) before income taxes			(3,092	)			2,574				4,695				501				(7,115	)			(2,437	)
Income tax benefit (expense), net			979				—				—				—				—				979
Net income (loss)		$	(2,113	)		$	2,574			$	4,695			$	501			$	(7,115	)		$	(1,458	)
Earnings (loss) per share
Basic		$	(0.18	)			n/a				n/a				n/a				n/a			$	(0.10	)
Diluted		$	(0.18	)			n/a				n/a				n/a				n/a			$	(0.10	)
Weighted average common shares outstanding
Basic			12,062,930				n/a				n/a				n/a				3,250,000	(3)			15,312,930
Diluted			12,062,930				n/a				n/a				n/a				3,250,000				15,312,930

TABLE OF CONTENTS

The table below provides the pro forma consolidated combined balance sheet for the Company as if the Company and its acquisitions had been combined as of December 31, 2009.

Consolidated Combined Balance Sheet

		KEYW				TAG				IIT				Pro Forma Adjustments (unaudited)				Pro Forma Combined (unaudited)
		(in thousands)
Cash		$	7,333			$	5,853			$	900			$	(8,000	) (2)		$	6,086
Accounts receivable			9,409				7,139				736				(7,967	) (3)			9,317
Inventory			4,334				—				—				—				4,334
Prepaids			1,240				118				53				—				1,411
Deferred tax			223				—				—				—				223
Current assets			22,539				13,110				1,689				(15,967	)			21,371
Property, plant, & equipment			1,430				20				59				—				1,509
Goodwill			34,927				—				—				54,047	(2)			88,974
Intangibles			6,314				—				—				12,354	(2)			18,668
Deferred tax			1,892				—				—				—				1,892
Other assets			28				8				—				—				36
Total assets		$	67,130			$	13,138			$	1,748			$	50,434			$	132,450
Accounts payable		$	442			$	2,083			$	13			$	—			$	2,538
Debt			—				—				—				34,000	(2)			34,000
Accrued expense			435				234				128				—				797
Accrued compensation			2,214				400				246				—				2,860
Other current liabilities			83				452	(1)			—				—				535
Current liabilities			3,174				3,169				387				34,000				40,730
Other non-current liabilities			53				14				—				—				67
Non-current deferred tax			1,564				—				—				—				1,564
Accrued earnout			—				—				—				27,750	(2)			27,750
Total liabilities			4,791				3,183				387				61,750				70,111
Common stock			14				—				—				—				14
Members equity			—				9,955	(1)			1,361				(11,316	) (4)			—
Additional paid-in capital			66,504				—				—				—				66,504
Accumulated deficit			(4,179	)			—				—				—				(4,179	)
Total equity			62,339				9,955				1,361				(11,316	)			62,339
Total liabilities and equity		$	67,130			$	13,138			$	1,748			$	50,434			$	132,450