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) |
Large accelerated filer ☐ | Accelerated filer | ☐ |
Non-accelerated filer☒ | Smaller reporting company | ☐ |
Emerging growth company | ☐ |
Page | ||
Item 1. | ||
3 | ||
4 | ||
5-6 | ||
7 | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II - OTHER INFORMATION | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2018 | 2017 | |||||||||||||||||||
Revenue | ||||||||||||||||||||||||
Services | $ | 19,149 | $ | 43,473 | $ | 57,246 | $ | 91,275 | $ | 28,787 | $ | 19,695 | ||||||||||||
Products | 9,094 | 11,467 | 15,204 | 17,542 | 3,614 | 3,415 | ||||||||||||||||||
28,243 | 54,940 | 72,450 | 108,817 | 32,401 | 23,110 | |||||||||||||||||||
Costs and expenses | ||||||||||||||||||||||||
Cost of sales - Services | 12,206 | 33,454 | 37,219 | 63,718 | 20,523 | 13,021 | ||||||||||||||||||
Cost of sales - Products | 6,775 | 6,948 | 10,134 | 10,526 | 1,646 | 1,646 | ||||||||||||||||||
18,981 | 40,402 | 47,353 | 74,244 | 22,169 | 14,667 | |||||||||||||||||||
Selling, general and administrative expenses | 9,296 | 11,670 | 27,684 | 30,408 | 10,254 | 9,643 | ||||||||||||||||||
Operating (loss) income | (34 | ) | 2,868 | (2,587 | ) | 4,165 | ||||||||||||||||||
Operating loss | (22 | ) | (1,200 | ) | ||||||||||||||||||||
Other income (expense) | ||||||||||||||||||||||||
Other income | 1 | 1 | 7 | 13 | 4 | 4 | ||||||||||||||||||
Interest expense | (1,722 | ) | (1,366 | ) | (4,993 | ) | (4,147 | ) | (1,675 | ) | (1,611 | ) | ||||||||||||
(Loss) income before income taxes | (1,755 | ) | 1,503 | (7,573 | ) | 31 | ||||||||||||||||||
Loss before income taxes | (1,693 | ) | (2,807 | ) | ||||||||||||||||||||
Provision for income taxes (Note 7) | (211 | ) | (158 | ) | (529 | ) | (181 | ) | (59 | ) | (179 | ) | ||||||||||||
Net (loss) income | (1,966 | ) | 1,345 | (8,102 | ) | (150 | ) | |||||||||||||||||
Net loss | (1,752 | ) | (2,986 | ) | ||||||||||||||||||||
Less: Net income attributable to non-controlling interest (Note 2) | (1,078 | ) | (1,436 | ) | (1,430 | ) | (2,721 | ) | (234 | ) | (113 | ) | ||||||||||||
Net loss attributable to Telos Corporation | $ | (3,044 | ) | $ | (91 | ) | $ | (9,532 | ) | $ | (2,871 | ) | $ | (1,986 | ) | $ | (3,099 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net (loss) income | $ | (1,966 | ) | $ | 1,345 | $ | (8,102 | ) | $ | (150 | ) | |||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation adjustments | 7 | (3 | ) | 7 | (2 | ) | ||||||||||
Total other comprehensive income (loss), net of tax | 7 | (3 | ) | 7 | (2 | ) | ||||||||||
Less: Comprehensive income attributable to non-controlling interest | (1,078 | ) | (1,436 | ) | (1,430 | ) | (2,721 | ) | ||||||||
Comprehensive loss attributable to Telos Corporation | $ | (3,037 | ) | $ | (94 | ) | $ | (9,525 | ) | $ | (2,873 | ) |
Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
Net loss | $ | (1,752 | ) | $ | (2,986 | ) | ||
Other comprehensive (loss) income: | ||||||||
Foreign currency translation adjustments | (2 | ) | 8 | |||||
Total other comprehensive (loss) income, net of tax | (2 | ) | 8 | |||||
Less: Comprehensive income attributable to non-controlling interest | (234 | ) | (113 | ) | ||||
Comprehensive loss attributable to Telos Corporation | $ | (1,988 | ) | $ | (3,091 | ) |
September 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
ASSETS | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 253 | $ | 659 | $ | 47 | $ | 600 | ||||||||
Accounts receivable, net of reserve of $412 and $429, respectively | 22,725 | 19,087 | ||||||||||||||
Inventories, net of obsolescence reserve of $1,599 and $1,672, respectively | 10,780 | 3,552 | ||||||||||||||
Accounts receivable, net of reserve of $407 and $411, respectively (Note 1) | 30,030 | 24,520 | ||||||||||||||
Inventories, net of obsolescence reserve of $1,441 and $1,484, respectively (Note 1) | 4,903 | 13,520 | ||||||||||||||
Deferred program expenses | 235 | 186 | 3,981 | 2,071 | ||||||||||||
Other current assets | 1,020 | 1,521 | 1,440 | 1,439 | ||||||||||||
Total current assets | 35,013 | 25,005 | 40,401 | 42,150 | ||||||||||||
Property and equipment, net of accumulated depreciation of $25,401 and $24,023, respectively | 16,255 | 16,117 | ||||||||||||||
Property and equipment, net of accumulated depreciation of $26,447 and $25,841, respectively | 16,814 | 16,344 | ||||||||||||||
Goodwill (Note 3) | 14,916 | 14,916 | 14,916 | 14,916 | ||||||||||||
Other assets | 912 | 761 | 989 | 1,011 | ||||||||||||
Total assets | $ | 67,096 | $ | 56,799 | $ | 73,120 | $ | 74,421 |
September 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
LIABILITIES, REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS' DEFICIT | ||||||||||||||||
Current liabilities | ||||||||||||||||
Accounts payable and other accrued payables (Note 5) | $ | 22,568 | $ | 15,317 | $ | 27,540 | $ | 25,693 | ||||||||
Accrued compensation and benefits | 5,439 | 8,071 | 7,127 | 7,456 | ||||||||||||
Deferred revenue | 9,647 | 4,900 | ||||||||||||||
Subordinated debt – short-term (Note 5) | -- | 3,029 | ||||||||||||||
Contract liabilities (Note 5) | 4,576 | 10,073 | ||||||||||||||
Capital lease obligations – short-term | 988 | 918 | 1,038 | 1,013 | ||||||||||||
Other current liabilities | 1,767 | 1,406 | 1,688 | 1,990 | ||||||||||||
Total current liabilities | 40,409 | 33,641 | 41,969 | 46,225 | ||||||||||||
Senior term loan, net of unamortized discount and issuance costs (Note 5) | 10,741 | -- | 10,833 | 10,786 | ||||||||||||
Subordinated debt (Note 5) | 2,216 | -- | 2,364 | 2,289 | ||||||||||||
Capital lease obligations | 18,240 | 18,990 | 17,713 | 17,980 | ||||||||||||
Deferred income taxes (Note 7) | 3,580 | 3,391 | 754 | 741 | ||||||||||||
Senior redeemable preferred stock (Note 6) | -- | 2,092 | ||||||||||||||
Public preferred stock (Note 6) | 130,609 | 127,742 | 132,520 | 131,565 | ||||||||||||
Other liabilities (Note 7) | 864 | 919 | 877 | 872 | ||||||||||||
Total liabilities | 206,659 | 186,775 | 207,030 | 210,458 | ||||||||||||
Commitments and contingencies (Note 8) | -- | -- | -- | -- | ||||||||||||
Stockholders' deficit | ||||||||||||||||
Telos stockholders' deficit | ||||||||||||||||
Common stock | 78 | 78 | 78 | 78 | ||||||||||||
Additional paid-in capital | 4,310 | 3,229 | 4,310 | 4,310 | ||||||||||||
Accumulated other comprehensive income | 32 | 25 | 30 | 32 | ||||||||||||
Accumulated deficit | (145,069 | ) | (135,537 | ) | (139,475 | ) | (141,370 | ) | ||||||||
Total Telos stockholders' deficit | (140,649 | ) | (132,205 | ) | (135,057 | ) | (136,950 | ) | ||||||||
Non-controlling interest in subsidiary (Note 2) | 1,086 | 2,229 | 1,147 | 913 | ||||||||||||
Total stockholders' deficit | (139,563 | ) | (129,976 | ) | (133,910 | ) | (136,037 | ) | ||||||||
Total liabilities, redeemable preferred stock, and stockholders' deficit | $ | 67,096 | $ | 56,799 | $ | 73,120 | $ | 74,421 |
Nine Months Ended September 30, | Three Months Ended March 31, | |||||||||||||||
2017 | 2016 | 2018 | 2017 | |||||||||||||
Operating activities: | ||||||||||||||||
Net loss | $ | (8,102 | ) | $ | (150 | ) | $ | (1,752 | ) | $ | (2,986 | ) | ||||
Adjustments to reconcile net loss to cash (used in) provided by operating activities: | ||||||||||||||||
Adjustments to reconcile net loss to cash provided by (used in) operating activities: | ||||||||||||||||
Dividends of preferred stock as interest expense | 2,887 | 2,917 | 955 | 972 | ||||||||||||
Depreciation and amortization | 1,414 | 2,460 | 657 | 440 | ||||||||||||
Amortization of debt issuance costs | 115 | 65 | 47 | 29 | ||||||||||||
Deferred income tax provision | 189 | 189 | 13 | 63 | ||||||||||||
Other noncash items | (2 | ) | 31 | 5 | 16 | |||||||||||
Changes in other operating assets and liabilities | 575 | 8,708 | 894 | (4,762 | ) | |||||||||||
Cash (used in) provided by operating activities | (2,924 | ) | 14,220 | |||||||||||||
Cash provided by (used in) operating activities | 819 | (6,228 | ) | |||||||||||||
Investing activities: | ||||||||||||||||
Capitalization of software development costs | (1,111 | ) | -- | |||||||||||||
Capitalized software development costs | (357 | ) | -- | |||||||||||||
Purchases of property and equipment | (445 | ) | (371 | ) | (773 | ) | (116 | ) | ||||||||
Cash used in investing activities | (1,556 | ) | (371 | ) | (1,130 | ) | (116 | ) | ||||||||
Financing activities: | ||||||||||||||||
Proceeds from senior credit facilities | -- | 69,032 | ||||||||||||||
Repayments of senior credit facilities | -- | (74,427 | ) | |||||||||||||
Decrease in book overdrafts | -- | (1,083 | ) | |||||||||||||
Proceeds from senior term loan | 9,439 | -- | -- | 9,439 | ||||||||||||
Repayments of term loan | -- | (3,200 | ) | |||||||||||||
Redemption of senior preferred stock | (2,112 | ) | -- | |||||||||||||
Payments under capital lease obligations | (680 | ) | (611 | ) | (242 | ) | (219 | ) | ||||||||
Distributions to Telos ID Class B member - non-controlling interest | (2,573 | ) | (1,337 | ) | -- | (1,436 | ) | |||||||||
Cash provided by (used in) financing activities | 4,074 | (11,626 | ) | |||||||||||||
Cash (used in) provided by financing activities | (242 | ) | 7,784 | |||||||||||||
(Decrease) increase in cash and cash equivalents | (406 | ) | 2,223 | (553 | ) | 1,440 | ||||||||||
Cash and cash equivalents, beginning of period | 659 | 58 | 600 | 659 | ||||||||||||
Cash and cash equivalents, end of period | $ | 253 | $ | 2,281 | $ | 47 | $ | 2,099 | ||||||||
Supplemental disclosures of cash flow information: | ||||||||||||||||
Cash paid during the period for: | ||||||||||||||||
Interest | $ | 1,773 | $ | 1,049 | $ | 599 | $ | 536 | ||||||||
Income taxes | $ | 25 | $ | 58 | ||||||||||||
Noncash: | ||||||||||||||||
Dividends of preferred stock as interest expense | $ | 2,887 | $ | 2,917 | $ | 955 | $ | 972 | ||||||||
Debt issuance costs and prepayment of interest on senior term loan | $ | 1,561 | $ | -- | $ | -- | $ | 1,561 | ||||||||
Gain on extinguishment of subordinated debt | $ | 1,031 | $ | -- |
Three Months Ended March 31, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Federal | $ | 29,711 | 91.7 | % | $ | 22,008 | 95.2 | % | ||||||||
State & Local, and Commercial | 2,690 | 58.3 | % | 1,102 | 4.8 | % | ||||||||||
Total | $ | 32,401 | 100.0 | % | $ | 23,110 | 100.0 | % |
Three Months Ended March 31, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Firm fixed-price | $ | 24,921 | 76.9 | % | $ | 18,696 | 80.9 | % | ||||||||
Time-and-materials | 3,767 | 11.6 | % | 2,467 | 10.7 | % | ||||||||||
Cost plus fixed fee | 3,713 | 11.5 | % | 1,947 | 8.4 | % | ||||||||||
Total | $ | 32,401 | 100.0 | % | $ | 23,110 | 100.0 | % |
March 31, 2018 | January 1, 2018 | December 31, 2017 | ||||||||||
Billed accounts receivable | $ | 18,152 | $ | 11,736 | $ | 11,736 | ||||||
Unbilled receivables | 12,285 | 13,195 | 13,195 | |||||||||
Allowance for doubtful accounts | (407 | ) | (411 | ) | (411 | ) | ||||||
Receivables – net | $ | 30,030 | $ | 24,520 | $ | 24,520 |
March 31, 2018 | January 1, 2018 | December 31, 2017 | ||||||||||
Contract liabilities | $ | 4,576 | $ | 10,073 | $ | 10,073 |
September 30, 2017 | December 31, 2016 | March 31, 2018 | December 31, 2017 | |||||||||||||
Cumulative foreign currency translation loss | $ | (75 | ) | $ | (82 | ) | $ | (77 | ) | $ | (75 | ) | ||||
Cumulative actuarial gain on pension liability adjustment | 107 | 107 | 107 | 107 | ||||||||||||
Accumulated other comprehensive income | $ | 32 | $ | 25 | $ | 30 | $ | 32 |
● | Upon the occurrence of a change in control of the Class A member (as defined in the Operating Agreement, a "Change in Control"), the Class A member has the option to purchase the entire membership interest of the Class B member. |
● | Upon the occurrence of the following events: (i) the involuntary termination of John B. Wood as CEO and chairman of the Class A member; (ii) the bankruptcy of the Class A member; or (iii) unless the Class A member exercises its option to acquire the entire membership interest of the Class B member upon a Change in Control of the Class A member, the transfer or issuance of more than fifty-one percent (51%) of the outstanding voting securities of the Class A member to a third party, the Class B member has the option to purchase the membership interest of the Class A member; provided, however, that in the event that the Class B member exercises the foregoing option, the Class A Member may then choose to purchase the entire interest of the Class B member. |
● | In the event that more than fifty percent (50%) of the ownership interests in the Class B member are transferred to persons or individuals (other than members of the immediate family of the initial owners of the Class B member) without the consent of Telos ID, the Class A member has the option to purchase the entire membership interest of the Class B member. |
● | The Class B member has the option to sell its interest to the Class A member at any time if there is not a letter of intent to sell Telos ID, a binding contract to sell all of the assets or membership interests in Telos ID, or a standstill for due diligence with respect to a sale of Telos ID. Notwithstanding the foregoing, the Class A member will not be obligated to purchase the interest of the Class B member if that purchase would constitute a violation of any existing line of credit available to the Company after giving effect to that purchase and the applicable lender refuses to consent to that purchase or to waive such violation. |
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | 2018 | 2017 | |||||||||||||||||||
Non-controlling interest, beginning of period | $ | 235 | $ | 1,293 | $ | 2,229 | $ | 635 | $ | 913 | $ | 2,229 | ||||||||||||
Net income | 1,078 | 1,436 | 1,430 | 2,721 | 234 | 113 | ||||||||||||||||||
Distributions | (227 | ) | (710 | ) | (2,573 | ) | (1,337 | ) | -- | (1,436 | ) | |||||||||||||
Non-controlling interest, end of period | $ | 1,086 | $ | 2,019 | $ | 1,086 | $ | 2,019 | $ | 1,147 | $ | 906 |
September 30, 2017 | March 31, 2018 | December 31, 2017 | ||||||||||
Senior term loan, including exit fee | $ | 11,825 | $ | 11,825 | $ | 11,825 | ||||||
Less: Unamortized discount, debt issuance costs, and lender fees | (1,084 | ) | (992 | ) | (1,039 | ) | ||||||
Senior term loan, net | $ | 10,741 | $ | 10,833 | $ | 10,786 |
● | Cyber Operations and Defense: |
o | Cyber Security – Solutions and services that assure the security of our customers' information, systems, and networks, including the Xacta |
o | Secure Mobility – Design, engineering and delivery of secure solutions that empower the mobile and deployed workforce in business and government. Our solutions protect sensitive communication while delivering voice, data, and video at the point of work in classified and unclassified environments. |
● | Identity Management – Solutions that establish trusted identities in order to ensure authenticated physical access to offices, workstations, and other facilities; secure digital access to databases, host systems, and other IT resources; and protect people and organizations against insider threats. |
● | IT and Enterprise Solutions – We have the experience with solution development and global integration to meet the requirements of business and government enterprises with secure IT solutions, from organizational messaging and data visualization to network construction and management. |
(unaudited) | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2017 | 2016 | 2017 | 2016 | ||||
Revenue | 100.0% | 100.0% | 100.0% | 100.0% | |||
Cost of sales | 67.2 | 73.6 | 65.4 | 68.2 | |||
Selling, general, and administrative expenses | 32.9 | 21.2 | 38.2 | 28.0 | |||
Operating (loss) income | (0.1) | 5.2 | (3.6) | 3.8 | |||
Other income | ---- | ---- | ---- | ---- | |||
Interest expense | (6.1) | (2.5) | (6.9) | (3.8) | |||
(Loss) income before income taxes | (6.2) | 2.7 | (10.5) | -- | |||
Provision for income taxes | (0.7) | (0.3) | (0.7) | (0.2) | |||
Net (loss) income | (6.9) | 2.4 | (11.2) | (0.2) | |||
Less: Net income attributable to non-controlling interest | (3.8) | (2.6) | (2.0) | (2.5) | |||
Net loss attributable to Telos Corporation | (10.7)% | (0.2)% | (13.2)% | (2.7)% |
Three Months Ended March 31, | |||
2018 | 2017 | ||
(unaudited) | |||
Revenue | 100.0% | 100.0% | |
Cost of sales | 68.4 | 63.5 | |
Selling, general and administrative expenses | 31.6 | 41.7 | |
Operating loss | -- | (5.2) | |
Interest expense, net | (5.2) | (6.9) | |
Loss before income taxes | (5.2) | (12.1) | |
Provision for income taxes | (0.2) | (0.8) | |
Net loss | (5.4) | (12.9) | |
Less: Net income attributable to non-controlling interest | (0.7) | (0.5) | |
Net loss attributable to Telos Corporation | (6.1)% | (13.4)% |
Exhibit Number | Description of Exhibit | |
31.1* | ||
31.2* | ||
32* | ||
101.INS** | XBRL Instance Document | |
101.SCH** | XBRL Taxonomy Extension Schema | |
101.CAL** | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF** | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB** | XBRL Taxonomy Extension Label Linkbase | |
101.PRE** | XBRL Taxonomy Extension Presentation Linkbase |
Date: | TELOS CORPORATION | |
/s/ John B. Wood | ||
John B. Wood Chief Executive Officer (Principal Executive Officer) |
/s/ Michele Nakazawa | ||
Michele Nakazawa Chief Financial Officer (Principal Financial and Accounting Officer) |