tls-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________

FORM 10-Q


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended: September 30, 2021


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 001-08443

TELOS CORPORATION

(Exact name of registrant as specified in its charter)


Maryland						52-0880974
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

19886 Ashburn Road, Ashburn, Virginia						20147-2358
(Address of principal executive offices)						(Zip Code)

(703) 724-3800

(Registrant’s telephone number, including area code)

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


Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, $0.001 par value per share	TLS	The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of November 8, 2021, the registrant had outstanding 66,755,230 shares of common stock.

Table of Contents

TELOS CORPORATION

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION


		Page
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2021 and 2020	4
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	5
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	6
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2021 and 2020	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	34
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
SIGNATURES		37

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

TELOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(amounts in thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue
Services	$	63,690	$	44,166	$	163,366	$	124,210
Products	6,376		3,274		15,017		10,819
	70,066		47,440		178,383		135,029
Costs and expenses
Cost of sales - Services	40,031		28,619		109,134		82,862
Cost of sales - Products	3,967		2,259		8,266		5,790
	43,998		30,878		117,400		88,652
Selling, general and administrative expenses
Sales and marketing	5,363		1,491		14,233		4,556
Research and development	5,396		3,598		14,783		11,070
General and administrative	20,562		6,960		69,271		20,769
	31,321		12,049		98,287		36,395
Operating (loss) income	(5,253)		4,513		(37,304)		9,982
Other income (expense)
Other income (expense)	20		2		(1,001)		14
Interest expense	(195)		(2,013)		(583)		(6,026)
(Loss) income before income taxes	(5,428)		2,502		(38,888)		3,970
Benefit from (provision for) income taxes	41		(8)		(6)		136
Net (loss) income	(5,387)		2,494		(38,894)		4,106
Less: Net income attributable to non-controlling interest	—		(2,694)		—		(6,284)
Net loss attributable to Telos Corporation	$	(5,387)	$	(200)	$	(38,894)	$	(2,178)
Net loss per share attributable to Telos Corporation, basic	$	(0.08)	$	(0.01)	$	(0.59)	$	(0.06)
Net loss per share attributable to Telos Corporation, diluted	$	(0.08)	$	(0.01)	$	(0.59)	$	(0.06)
Weighted-average shares of common stock outstanding, basic	66,755		39,002		65,999		38,554
Weighted-average shares of common stock outstanding, diluted	66,755		39,002		65,999		38,554

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

Table of Contents

TELOS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(amounts in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net (loss) income	$	(5,387)	$	2,494	$	(38,894)	$	4,106
Other comprehensive loss, net of tax:
Foreign currency translation adjustments	(13)		(2)		(40)		(1)
Less: Comprehensive income attributable to non-controlling interest	—		(2,694)		—		(6,284)
Comprehensive loss attributable to Telos Corporation	$	(5,400)	$	(202)	$	(38,934)	$	(2,179)

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

Table of Contents

TELOS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except shares and par value data)


	September 30, 2021		December 31, 2020
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	134,135	$	106,045
Accounts receivable, net of reserve of $116 and $308, respectively	49,759		30,913
Inventories, net of obsolescence reserve of $849 and $851, respectively	2,025		3,311
Prepaid expenses	5,440		3,059
Other current assets	941		786
Total current assets	192,300		144,114
Property and equipment, net of accumulated depreciation and amortization of $33,805 and $32,057, respectively	14,363		14,977
Operating lease right-of-use assets	1,004		1,464
Goodwill	16,642		14,916
Intangible assets, net	17,102		7,420
Other assets	1,256		926
Total assets	$	242,667	$	183,817
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and other accrued liabilities	$	35,102	$	20,899
Accrued compensation and benefits	7,955		8,474
Contract liabilities	7,232		5,654
Finance lease obligations – short-term	1,430		1,339
Operating lease obligations – short-term	602		677
Other current liabilities	2,089		1,903
Total current liabilities	54,410

SEC Form 10-Q filed by Telos Corporation