Maryland | | | 7373 | | | 52-0880974 |
(State or other jurisdiction of incorporation or organization) | | | (Primary Standard Industrial Classification Code Number) | | | (I.R.S. Employer Identification Number) |
Christopher R. Johnson Scott R. Wilson Miles & Stockbridge P.C. 100 Light Street Baltimore, Maryland 21202 (410) 727-6464 | | | Jefferson V. Wright Executive Vice President and General Counsel 19866 Ashburn Road Ashburn, Virginia 20147 (703) 726-2704 | | | Jonathan H. Talcott Gary M. Brown E. Peter Strand Nelson Mullins Riley & Scarborough LLP 101 Constitution Avenue, NW Suite 900 Washington, D.C. 20001 (202) 689-2800 |
Large accelerated filer ☐ | | | Accelerated filer ☐ |
Non-accelerated filer ☒ | | | Smaller reporting company ☐ |
| | Emerging growth company ☒ |
Title of Each Class of Securities to be Registered | | | Proposed Maximum Aggregate Offering Price(1)(2) | | | Amount of Registration Fee | | | Amount to be Registered(1) | | | Proposed Maximum Offering Price Per Share | | | Proposed Maximum Aggregate Offering Price(2) | | | Amount of Registration Fee(3) |
Common Stock, par value $0.001 per share | | | $241,500,000 | | | $26,348 | | | 14,205,883 | | | $18.00 | | | $255,705,894 | | | $27,897.51 |
(1) | Includes shares of Common Stock issuable upon the exercise of the underwriters’ option to purchase additional shares. See “Underwriting.” |
(2) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule |
(3) | The Registrant previously paid $26,348 of this amount in connection with the prior filing of this registration statement. |
| | Per Share | | | Total | |
Initial public offering price | | | $ | | | $ |
Underwriting discounts and commissions(1) | | | $ | | | $ |
Proceeds, before expenses, to us | | | $ | | | $ |
(1) | We refer you to the section titled “Underwriting” beginning on page |
B. Riley Securities | | | BMO Capital Markets | | | Needham & Company |
Colliers Securities LLC | | | D.A. Davidson & Co. | | | Northland Capital Markets | | | Wedbush Securities | | | MKM Partners |
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○ | Telos Ghost: a virtual obfuscation network-as-a-service with encryption and managed attribution capabilities to ensure the safety and privacy of people, information, and resources on the network. Telos Ghost seeks to eliminate cyber-attack surfaces by obfuscating and encrypting data, masking user identity and location, and hiding network resources. It provides the additional layers of security and privacy needed for intelligence gathering, cyber threat protection, securing critical infrastructure, and protecting communications and applications when operations, property, and even lives can be jeopardized by a single error in security. |
○ | Telos Automated Message Handling System (“AMHS”): web-based organizational message distribution and management for mission-critical communications; the recognized gold standard for organizational messaging in the U.S. government. Telos AMHS is used by military field operatives for critical communications on the battlefield and is the only web-based solution for assured messaging and directory services using the Defense Information System Agency’s (“DISA”) Organizational Messaging Service and its specialized communications protocols. |
• | COVID-19 may adversely affect our future operations, financial condition and our ability to execute on business or contract opportunities, including the TSA PreCheckTM enrollment program. |
1 | Subject to approval by the Compensation Committee (and, in the case of members of our Board of Directors, the Company’s Audit Committee), we expect to issue equity awards for up to 2.4 million shares of common stock to employees, which could include members of our senior management, and members of our board of directors under our 2016 Omnibus Long-Term Incentive Plan during the fourth quarter of 2020 or the first quarter of 2021. |
| | Year Ended December 31, | | Six Months Ended June 30, (Unaudited) | | | Year Ended December 31, | | Six Months Ended June 30, (Unaudited) | |||||||||||||||||||||
| | 2017 | | 2018 | | 2019 | | 2019 | | 2020 | | | 2017 | | 2018 | | 2019 | | 2019 | | 2020 | |||||||||
| | (in thousands, except per share data) | | | (in thousands, except earnings per share data) | |||||||||||||||||||||||||
Consolidated Statement of Operations Data: | | | | | | | | | | | ||||||||||||||||||||
Revenue | | $107,727 | | $138,016 | | $159,218 | | $67,214 | | $87,589 | | $107,727 | | $138,016 | | $159,218 | | $67,214 | | $87,589 | ||||||||||
Cost of sales | | 67,161 | | 84,954 | | 106,874 | | 48,223 | | 57,774 | | 67,161 | | 84,954 | | 106,874 | | 48,223 | | 57,774 | ||||||||||
Gross profit | | 40,566 | | 53,062 | | 52,344 | | 18,991 | | 29,815 | | 40,566 | | 53,062 | | 52,344 | | 18,991 | | 29,815 | ||||||||||
Selling, general and administrative expenses | | 40,152 | | 44,048 | | 47,319 | | 20,795 | | 24,346 | | 40,152 | | 44,048 | | 47,319 | | 20,795 | | 24,346 | ||||||||||
Operating income (loss) | | 414 | | 9,014 | | 5,025 | | (1,804) | | 5,469 | | 414 | | 9,014 | | 5,025 | | (1,804) | | 5,469 | ||||||||||
Other income | | 11 | | 12 | | 201 | | 193 | | 12 | | 11 | | 12 | | 201 | | 193 | | 12 | ||||||||||
Interest expense | | (6,690) | | (7,258) | | (7,467) | | (3,500) | | (4,013) | | (6,690) | | (7,258) | | (7,467) | | (3,500) | | (4,013) | ||||||||||
Income (loss) before minority interest and income taxes | | (6,265) | | 1,768 | | (2,241) | | (5,111) | | 1,468 | | (6,265) | | 1,768 | | (2,241) | | (5,111) | | 1,468 | ||||||||||
Income tax benefit (provision) | | 2,767 | | (31) | | 104 | | 177 | | 144 | | 2,767 | | (31) | | 104 | | 177 | | 144 | ||||||||||
Net income (loss) | | $(3,498) | | $1,737 | | $(2,137) | | $(4,934) | | $1,612 | | $(3,498) | | $1,737 | | $(2,137) | | $(4,934) | | $1,612 | ||||||||||
Less: Income attributable to non-controlling interest | | (2,335) | | (3,377) | | (4,264) | | (220) | | (3,590) | | (2,335) | | (3,377) | | (4,264) | | (220) | | (3,590) | ||||||||||
Net income (loss) attributable to Telos | | $(5,833) | | $(1,640) | | $(6,401) | | $(5,154) | | $(1,978) | | $(5,833) | | $(1,640) | | $(6,401) | | $(5,154) | | $(1,978) | ||||||||||
Per Share Data: | | | | | | | | | | | ||||||||||||||||||||
Net loss per share attributable to Telos, basic and diluted | | $(0.13) | | $(0.04) | | $(0.13) | | $(0.11) | | $(0.04) | | $(0.13) | | $(0.04) | | $(0.13) | | $(0.11) | | $(0.04) | ||||||||||
Weighted-average shares of common stock outstanding, basic and diluted | | 45,079 | | 46,323 | | 47,542 | | 47,102 | | 48,297 | | 45,079 | | 46,323 | | 47,542 | | 47,102 | | 48,297 | ||||||||||
Pro forma net loss per share, basic and diluted(1) | | | | | | |||||||||||||||||||||||||
Pro forma weighted-average shares of common stock outstanding, basic and diluted | | | | | | |||||||||||||||||||||||||
Other Financial Data (Unaudited): | | | | | | | | | | | ||||||||||||||||||||
Free Cash Flow(2) | | $(2,820) | | $2,154 | | $5,284 | | $2,229 | | $(2,652) | ||||||||||||||||||||
Adjusted EBITDA(3) | | $139 | | $8,677 | | $5,934 | | $510 | | $4,625 | ||||||||||||||||||||
Pro Forma net loss per share, basic and diluted, as adjusted(4) | | | | | | |||||||||||||||||||||||||
Free Cash Flow(1) | | $(2,820) | | $2,154 | | $5,284 | | $2,229 | | $(2,652) | ||||||||||||||||||||
Adjusted EBITDA(2) | | $139 | | $8,677 | | $5,934 | | $510 | | $4,625 | ||||||||||||||||||||
Pro Forma net earnings per share, basic(3) | | | | $0.08 | | | $0.09 | |||||||||||||||||||||||
Pro Forma net earnings per share, diluted(3) | | | | $0.07 | | | $0.09 |
(1) |
We define Free Cash Flow as net cash provided by operating activities less cash used for purchases of property and equipment and capitalized software development costs. A reconciliation to net cash provided by operating activities is set forth below. See “Non-GAAP Financial Measures” below. |
We define Adjusted EBITDA as net income (loss), adjusted for interest expense, loss on extinguishment of debt, (benefit) provision for income taxes, depreciation and amortization, stock-based compensation expense, acquisition related expense and other (income) expense, net. A reconciliation to net loss is set forth below. |
The pro forma basic and diluted net loss per share as adjusted has been computed in the following table to give effect to (a) |
| | Year Ended December31, 2019 (unaudited) | | | Six Months Ended June30, 2020 (unaudited) | |
Net loss attributable to Telos | | | $(6,401) | | | $(1,978) |
Pro forma adjustment to remove the dividends from preferred stock recorded as interest expense | | | 3,823 | | | 1,911 |
Pro forma adjustment to remove the interest expense related to the offering proceeds used to repay debt(1) | | | 2,542 | | | 1,680 |
| | Year Ended December31, 2019 (unaudited) | | | Six Months Ended June30, 2020 (unaudited) | |
Pro forma adjustment to reflect the purchase of the non-controlling interest of Telos ID | | | 4,264 | | | 3,590 |
Pro forma net income | | | $4,228 | | | $5,203 |
Pro forma adjustment to give effect to the conversion of our outstanding Class A and Class B common shares into shares of common stock on a 1 for 1 basis | | | 37,730 | | | 38,328 |
Pro forma adjustment to reflect the issuance of common stock in connection with the ERPS Conversion(2) | | | 1,105 | | | 1,121 |
Pro forma adjustment to reflect common stock equivalent of the cash paid for shares in the ERPS Conversion(2) | | | 6,264 | | | 6,350 |
Pro forma adjustment to reflect the shares issued in connection with the Telos ID Purchase(3) | | | 7,300 | | | 7,300 |
Pro forma adjustment to reflect common stock equivalent of the cash paid for shares in the Telos ID purchase(3) | | | 1,765 | | | 1,765 |
Pro forma adjustment to reflect common stock equivalent of the cash paid to extinguish debt(1) | | | 1,219 | | | 1,223 |
Pro forma weighted-average shares outstanding used in computing pro forma net loss per share, basic | | | 55,383 | | | 56,087 |
Pro forma weighted-average shares outstanding used in computing pro forma net loss per share, diluted | | | 57,230 | | | 57,048 |
Pro forma net earnings per share, basic | | | $0.08 | | | $0.09 |
Pro forma net earnings per share, diluted | | | $0.07 | | | $0.09 |
(2) |
(3) | Approximately $30.0 million cash from the proceeds raised in this offering and approximately 7.3 million shares of common stock will be issued as consideration in the purchase of Telos ID. Computed as the number of shares of our common stock equal to |
| | Year Ended December 31, | | | June 30, 2020 | | Pro Forma June 30, 2020(1) | | | Year Ended December 31, | | | June 30, 2020 | | Pro Forma June 30, 2020(1) | | As Adjusted June 30, 2020(2) (Unaudited) | ||||||||||||||||
| | 2017 | | 2018 | | 2019 | | | | 2017 | | 2018 | | 2019 | | ||||||||||||||||||
| (in thousands) | | (in thousands) | | |||||||||||||||||||||||||||||
Consolidated Balance Sheet Data: | | | | | | | | | | | | ||||||||||||||||||||||
Cash and cash equivalents | | $600 | | $72 | | $6,751 | | $2,405 | | | $600 | | $72 | | $6,751 | | $2,405 | | $2,405 | | $37,451 | ||||||||||||
Working Capital | | (4,075) | | 2,129 | | 2,942 | | (12,762) | | | (4,075) | | 2,129 | | 2,942 | | (12,762) | | 3,926 | | 38,972 | ||||||||||||
Total Assets | | 74,421 | | 74,489 | | 77,692 | | 85,390 | | | 74,421 | | 74,489 | | 77,692 | | 85,390 | | 85,390 | | 120,436 | ||||||||||||
Contract Liabilities (Deferred Revenue) | | 10,073 | | 5,232 | | 6,337 | | 6,682 | | | 10,073 | | 5,232 | | 6,337 | | 6,682 | | 6,682 | | 6,682 | ||||||||||||
Senior term loan, net of unamortized discount and issuance costs, including current portion | | 10,786 | | 10,984 | | 16,335 | | 16,688 | | | 10,786 | | 10,984 | | 16,335 | | 16,688 | | — | | — | ||||||||||||
Subordinated Debt | | 2,289 | | 2,597 | | 2,927 | | 3,102 | | | 2,289 | | 2,597 | | 2,927 | | 3,102 | | — | | — | ||||||||||||
Total stockholders’ equity (deficit) | | (136,037) | | (132,103) | | (136,662) | | (136,009) | | | (136,037) | | (132,103) | | (136,662) | | (136,009) | | 24,902 | | 59,948 |
(1) | Gives effect to |
(2) | Gives effect to (a) net proceeds to us from this offering of $37.8 million from the sale of 2.2 million shares of common stock to be used for general corporate purposes. Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the estimated offering price range set forth on the cover page of this prospectus), would increase (decrease) the pro forma as adjusted amount of cash and cash equivalents, working capital excluding deferred revenue, total assets and total stockholders’ equity by $11.5 million, 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 estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of one million shares in the number of shares |
(3) | We define working capital as current assets less current liabilities. |
| | Year Ended December 31, | | | Six Months Ended June 30, | ||||||||||
| | 2017 | | | 2018 | | | 2019 | | | 2019 | | | 2020 | |
| | (in thousands) | |||||||||||||
Net cash provided by (used in) operating activities | | | $(591) | | | $6,268 | | | $11,816 | | | $5,926 | | | $839 |
Less: | | | | | | | | | | | |||||
Purchases of property and equipment | | | (748) | | | (2,465) | | | (4,090) | | | (2,410) | | | (332) |
Capitalized software development costs | | | (1,481) | | | (1,649) | | | (2,442) | | | (1,287) | | | (3,159) |
Free Cash Flow | | | $(2,820) | | | $2,154 | | | $5,284 | | | $2,229 | | | $(2,652) |
Net cash used in investing activities | | | $(2,229) | | | $(4,114) | | | $(6,532) | | | $(3,697) | | | $(3,491) |
Net cash provided by (used in) financing activities | | | $2,761 | | | $(2,682) | | | $1,395 | | | $(1,525) | | | $(1,694) |
Cash paid for interest | | | $(2,395) | | | $(2,483) | | | $(3,299) | | | $(1,428) | | | $(1,474) |
| | Year Ended December 31, | | | Six Months Ended June 30, | ||||||||||
| | 2017 | | | 2018 | | | 2019 | | | 2019 | | | 2020 | |
| | (in thousands) | |||||||||||||
Net income (loss) attributable to Telos Corporation | | | $(5,833) | | | $(1,640) | | | $(6,401) | | | $(5,154) | | | $(1,978) |
Interest expense | | | 6,690 | | | 7,258 | | | 7,467 | | | 3,500 | | | 4,013 |
(Benefit) provision for income taxes | | | (2,767) | | | 31 | | | (104) | | | (177) | | | (144) |
Depreciation and amortization | | | 1,999 | | | 3,028 | | | 4,972 | | | 2,341 | | | 2,734 |
Stock-based compensation expense | | | 50 | | | — | | | — | | | — | | | — |
Adjusted EBITDA | | | $139 | | | $8,677 | | | $5,934 | | | $510 | | | $4,625 |
○ | Telos Ghost: a virtual obfuscation network-as-a-service with encryption and managed attribution capabilities to ensure the safety and privacy of people, information, and resources on the network. Telos Ghost seeks to eliminate cyber-attack surfaces by obfuscating and encrypting data, masking user identity and location, and hiding network resources. It provides the additional layers of security and privacy needed for intelligence gathering, cyber threat protection, securing critical infrastructure, and protecting communications and applications when operations, property, and even lives can be jeopardized by a single error in security. |
○ | Telos Automated Message Handling System (“AMHS”): web-based organizational message distribution and management for mission-critical communications; the recognized gold standard for organizational messaging in the U.S. government. Telos AMHS is used by military field operatives for critical communications on the battlefield and is the only web-based solution for assured messaging and directory services using the Defense Information System Agency’s (“DISA”) Organizational Messaging Service and its specialized communications protocols. |
• | COVID-19 may adversely affect our future operations, financial condition and our ability to execute on business or contract opportunities, including the TSA PreCheckTM enrollment program. |
1 | Subject to approval by the Compensation Committee (and, in the case of members of our Board of Directors, the Company’s Audit Committee), we expect to issue equity awards for up to 2.4 million shares of common stock to employees, which could include members of our senior management, and members of our board of directors under our 2016 Omnibus Long-Term Incentive Plan during the fourth quarter of 2020 or the first quarter of 2021. |
| | Shares Purchased | | | Total Consideration | | | Average Price | |||||||
| | Number | | | Percent | | | Amount | | | Percent | | | Per Share | |
Existing shareholders | | | | | % | | | $ | | | % | | | $ | |
New investors | | | | | % | | | | | % | | | |||
Total | | | | | 100.0% | | | $ | | | 100.0% | | | $ |
| | Year Ended December 31, | | | Six Months Ended June 30, (Unaudited) | ||||||||||
| | 2017 | | | 2018 | | | 2019 | | | 2019 | | | 2020 | |
| | (in thousands, except earnings per share data) | |||||||||||||
Consolidated Statement of Operations Data: | | | | | | | | | | | |||||
Revenue | | | $107,727 | | | $138,016 | | | $159,218 | | | $67,214 | | | $87,589 |
Cost of sales | | | 67,161 | | | 84,954 | | | 106,874 | | | 48,223 | | | 57,774 |
Gross profit | | | 40,566 | | | 53,062 | | | 52,344 | | | 18,991 | | | 29,815 |
Selling, general and administrative expenses | | | 40,152 | | | 44,048 | | | 47,319 | | | 20,795 | | | 24,346 |
Operating income (loss) | | | 414 | | | 9,014 | | | 5,025 | | | (1,804) | | | 5,469 |
Other income | | | 11 | | | 12 | | | 201 | | | 193 | | | 12 |
Interest expense | | | (6,690) | | | (7,258) | | | (7,467) | | | (3,500) | | | (4,013) |
Income (loss) before minority interest and income taxes | | | (6,265) | | | 1,768 | | | (2,241) | | | (5,111) | | | 1,468 |
Income tax benefit (provision) | | | 2,767 | | | (31) | | | 104 | | | 177 | | | 144 |
Net income (loss) | | | $(3,498) | | | $1,737 | | | $(2,137) | | | $(4,934) | | | $1,612 |
Less: Income attributable to non-controlling interest | | | (2,335) | | | (3,377) | | | (4,264) | | | (220) | | | (3,590) |
Net income (loss) attributable to Telos | | | $(5,833) | | | $(1,640) | | | $(6,401) | | | $(5,154) | | | $(1,978) |
Per Share Data: | | | | | | | | | | | |||||
Net loss per share attributable to Telos, basic and diluted | | | $(0.13) | | | $(0.04) | | | $(0.13) | | | $(0.11) | | | $(0.04) |
Weighted-average shares of common stock outstanding, basic and diluted | | | 45,079 | | | 46,323 | | | 47,542 | | | 47,102 | | | 48,297 |
Other Financial Data (Unaudited): | | | | | | | | | | | |||||
Free Cash Flow(1) | | | $(2,820) | | | $2,154 | | | $5,284 | | | $2,229 | | | $(2,652) |
Adjusted EBITDA(2) | | | $139 | | | $8,677 | | | $5,934 | | | $510 | | | $4,625 |
Pro Forma net earnings per share, basic(3) | | | | | | | $0.08 | | | | | $0.09 | |||
Pro Forma net earnings per share, diluted(3) | | | | | | | $0.07 | | | | | $0.09 |
(1) | We define Free Cash Flow as net cash provided by operating activities less cash used for purchases of property and equipment and capitalized software development costs. A reconciliation to net cash provided by operating activities is set forth below. See “Non-GAAP Financial Measures” below. |
(2) | We define Adjusted EBITDA as net income (loss), adjusted for interest expense, loss on extinguishment of debt, (benefit) provision for income taxes, depreciation and amortization, stock-based compensation expense, acquisition related expense and other (income) expense, net. A reconciliation to net loss is set forth below. |
(3) | The pro forma basic and diluted net loss per share as adjusted has been computed in the following table to give effect to (a) proceeds raised in this offering of $109.1 million to be paid, and 1.1 million shares of common stock issued, to the holders of Exchangeable Redeemable Preferred Stock in connection with the ERPS Conversion, (b) proceeds raised in this offering of $30.0 million to be paid, and 7.3 million shares of common stock issued, to Hoya in connection with the Telos ID Purchase, and (c) approximately $20.8 million of proceeds raised in this offering to be used for the repayment of outstanding senior and subordinated debt. The use of the proceeds raised assumes an offering price of $17 per share, the midpoint of the price range listed on the cover page of this prospectus. |
| | Year Ended December31, 2019 (unaudited) | | | Six Months Ended June30, 2020 (unaudited) | |
Net loss attributable to Telos | | | $(6,401) | | | $(1,978) |
Pro forma adjustment to remove the dividends from preferred stock recorded as interest expense | | | 3,823 | | | 1,911 |
Pro forma adjustment to remove the interest expense related to the offering proceeds used to repay debt(1) | | | 2,542 | | | 1,680 |
| | Year Ended December31, 2019 (unaudited) | | | Six Months Ended June30, 2020 (unaudited) | |
Pro forma adjustment to reflect the purchase of the non-controlling interest of Telos ID | | | 4,264 | | | 3,590 |
Pro forma net income | | | $4,228 | | | $5,203 |
Pro forma adjustment to give effect to the conversion of our outstanding Class A and Class B common shares into shares of common stock on a 1 for 1 basis | | | 37,730 | | | 38,328 |
Pro forma adjustment to reflect the issuance of common stock in connection with the ERPS Conversion(2) | | | 1,105 | | | 1,121 |
Pro forma adjustment to reflect common stock equivalent of the cash paid for shares in the ERPS Conversion(2) | | | 6,264 | | | 6,350 |
Pro forma adjustment to reflect the shares issued in connection with the Telos ID Purchase(3) | | | 7,300 | | | 7,300 |
Pro forma adjustment to reflect common stock equivalent of the cash paid for shares in the Telos ID purchase(3) | | | 1,765 | | | 1,765 |
Pro forma adjustment to reflect common stock equivalent of the cash paid to extinguish debt(1) | | | 1,219 | | | 1,223 |
Pro forma weighted-average shares outstanding used in computing pro forma net loss per share, basic | | | 55,383 | | | 56,087 |
Pro forma weighted-average shares outstanding used in computing pro forma net loss per share, diluted | | | 57,230 | | | 57,048 |
Pro forma net earnings per share, basic | | | $0.08 | | | $0.09 |
Pro forma net earnings per share, diluted | | | $0.07 | | | $0.09 |
(1) | Represents the interest expense recognized on our outstanding senior term loan and subordinated debt which will be repaid using proceeds from the offering. We intend to use approximately $20.8 million of the offering proceeds to repay our outstanding senior term loan and subordinated debt. |
(2) | Exchangeable Redeemable Preferred Stock will convert into approximately 1.1 million shares of common stock and holders will receive $109.1 million, both in the aggregate, upon consummation of this offering. The cash payment is computed as the number of shares of common stock (valued at the initial offering price to the public) equal to the ERPS Liquidation Value, multiplied by 0.90, multiplied by 0.15. See “Exchangeable Redeemable Preferred Stock Conversion.” |
(3) | Approximately $30.0 million cash from the proceeds raised in this offering and approximately 7.3 million shares of common stock will be issued as consideration in the purchase of Telos ID. Computed as the number of shares of our common stock equal to twelve percent (12%) of the total estimated number of shares of common stock that are issued and outstanding following (i) the issuance of such shares of common stock to Hoya or its members and (ii) the closing of the offering described in this prospectus. |
| | Year Ended December 31, | | | June 30, 2020 | | | Pro Forma June 30, 2020(1) | | | As Adjusted June 30, 2020(2) (Unaudited) | |||||||
| | 2017 | | | 2018 | | | 2019 | | |||||||||
| | (in thousands) | | |||||||||||||||
Consolidated Balance Sheet Data: | | | | | | | | | | | | | ||||||
Cash and cash equivalents | | | $600 | | | $72 | | | $6,751 | | | $2,405 | | | $2,405 | | | $37,451 |
Working Capital(3) | | | (4,075) | | | 2,129 | | | 2,942 | | | (12,762) | | | 3,926 | | | 38,972 |
Total Assets | | | 74,421 | | | 74,489 | | | 77,692 | | | 85,390 | | | 85,390 | | | 120,436 |
Contract Liabilities (Deferred Revenue) | | | 10,073 | | | 5,232 | | | 6,337 | | | 6,682 | | | 6,682 | | | 6,682 |
Senior term loan, net of unamortized discount and issuance costs, including current portion | | | 10,786 | | | 10,984 | | | 16,335 | | | 16,688 | | | — | | | — |
Subordinated Debt | | | 2,289 | | | 2,597 | | | 2,927 | | | 3,102 | | | — | | | — |
Total stockholders’ equity (deficit) | | | (136,037) | | | (132,103) | | | (136,662) | | | (136,009) | | | 24,902 | | | 59,948 |
(1) | Gives effect to proceeds received from this offering of $159.9 million from the sale of 9.4 million shares of common stock to be used as follows: (a) $109.1 million paid, and 1.1 million shares of common stock issued, to the holders of Exchangeable Redeemable Preferred Stock in connection with the ERPS Conversion, and the estimated $14.1 million gain resulting from the ERPS Conversion, (b) $30.0 million paid, and 7.3 million shares of common stock issued, to Hoya in connection with the Telos ID Purchase, and (c) approximately $20.8 million for the repayment of outstanding senior and subordinated debt. |
(2) | Gives effect to (a) net proceeds to us from this offering of $37.8 million from the sale of 2.2 million shares of common stock to be used for general corporate purposes. Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the estimated offering price range set forth on the cover page of this prospectus), would increase (decrease) the pro forma as adjusted amount of cash and cash equivalents, working capital excluding deferred revenue, total assets and total stockholders’ equity by $11.5 million, 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 estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of one million shares in the number of shares |
(3) | We define working capital as current assets less current liabilities. |
| | Year Ended December 31, | | | Six Months Ended June 30, | ||||||||||
| | 2017 | | | 2018 | | | 2019 | | | 2019 | | | 2020 | |
| | (in thousands) | |||||||||||||
Net cash provided by (used in) operating activities | | | $(591) | | | $6,268 | | | $11,816 | | | $5,926 | | | $839 |
Less: | | | | | | | | | | | |||||
Purchases of property and equipment | | | (748) | | | (2,465) | | | (4,090) | | | (2,410) | | | (332) |
Capitalized software development costs | | | (1,481) | | | (1,649) | | | (2,442) | | | (1,287) | | | (3,159) |
Free Cash Flow | | | $(2,820) | | | $2,154 | | | $5,284 | | | $2,229 | | | $(2,652) |
Net cash used in investing activities | | | $(2,229) | | | $(4,114) | | | $(6,532) | | | $(3,697) | | | $(3,491) |
Net cash provided by (used in) financing activities | | | $2,761 | | | $(2,682) | | | $1,395 | | | $(1,525) | | | $(1,694) |
Cash paid for interest | | | $(2,395) | | | $(2,483) | | | $(3,299) | | | $(1,428) | | | $(1,474) |
| | Year Ended December 31, | | | Six Months Ended June 30, | ||||||||||
| | 2017 | | | 2018 | | | 2019 | | | 2019 | | | 2020 | |
| | (in thousands) | |||||||||||||
Net income (loss) attributable to Telos Corporation | | | $(5,833) | | | $(1,640) | | | $(6,401) | | | $(5,154) | | | $(1,978) |
Interest expense | | | 6,690 | | | 7,258 | | | 7,467 | | | 3,500 | | | 4,013 |
(Benefit) provision for income taxes | | | (2,767) | | | 31 | | | (104) | | | (177) | | | (144) |
Depreciation and amortization | | | 1,999 | | | 3,028 | | | 4,972 | | | 2,341 | | | 2,734 |
Stock-based compensation expense | | | 50 | | | — | | | — | | | — | | | — |
Adjusted EBITDA | | | $139 | | | $8,677 | | | $5,934 | | | $510 | | | $4,625 |
○ | Telos Ghost: a virtual obfuscation network-as-a-service with encryption and managed attribution capabilities to ensure the safety and privacy of people, information, and resources on the network. Telos Ghost seeks to eliminate cyber-attack surfaces by obfuscating and encrypting data, masking user identity and location, and hiding network resources. It provides the additional layers of security and privacy needed for intelligence gathering, cyber threat protection, securing critical infrastructure, and protecting communications and applications when operations, property, and even lives can be jeopardized by a single error in security. |
○ | Telos Automated Message Handling System (“AMHS”): web-based organizational message distribution and management for mission-critical communications; the recognized gold standard for organizational messaging in the U.S. government. Telos AMHS is used by military field operatives for critical communications on the battlefield and is the only web-based solution for assured messaging and directory services using the Defense Information System Agency’s (“DISA”) Organizational Messaging Service and its specialized communications protocols. |
• | COVID-19 may adversely affect our future operations, financial condition and our ability to execute on business or contract opportunities, including the TSA PreCheckTM enrollment program. |
1 | Subject to approval by the Compensation Committee (and, in the case of members of our Board of Directors, the Company’s Audit Committee), we expect to issue equity awards for up to 2.4 million shares of common stock to employees, which could include members of our senior management, and members of our board of directors under our 2016 Omnibus Long-Term Incentive Plan during the fourth quarter of 2020 or the first quarter of 2021. |
| | Year Ended December 31, | | | Six Months Ended June 30, (Unaudited) | ||||||||||
| | 2017 | | | 2018 | | | 2019 | | | 2019 | | | 2020 | |
| | (in thousands, except earnings per share data) | |||||||||||||
Consolidated Statement of Operations Data: | | | | | | | | | | | |||||
Revenue | | | $107,727 | | | $138,016 | | | $159,218 | | | $67,214 | | | $87,589 |
Cost of sales | | | 67,161 | | | 84,954 | | | 106,874 | | | 48,223 | | | 57,774 |
Gross profit | | | 40,566 | | | 53,062 | | | 52,344 | | | 18,991 | | | 29,815 |
Selling, general and administrative expenses | | | 40,152 | | | 44,048 | | | 47,319 | | | 20,795 | | | 24,346 |
Operating income (loss) | | | 414 | | | 9,014 | | | 5,025 | | | (1,804) | | | 5,469 |
Other income | | | 11 | | | 12 | | | 201 | | | 193 | | | 12 |
Interest expense | | | (6,690) | | | (7,258) | | | (7,467) | | | (3,500) | | | (4,013) |
Income (loss) before minority interest and income taxes | | | (6,265) | | | 1,768 | | | (2,241) | | | (5,111) | | | 1,468 |
Income tax benefit (provision) | | | 2,767 | | | (31) | | | 104 | | | 177 | | | 144 |
Net income (loss) | | | $(3,498) | | | $1,737 | | | $(2,137) | | | $(4,934) | | | $1,612 |
Less: Income attributable to non-controlling interest | | | (2,335) | | | (3,377) | | | (4,264) | | | (220) | | | (3,590) |
Net income (loss) attributable to Telos | | | $(5,833) | | | $(1,640) | | | $(6,401) | | | $(5,154) | | | $(1,978) |
Per Share Data: | | | | | | | | | | | |||||
Net loss per share attributable to Telos, basic and diluted | | | $(0.13) | | | $(0.04) | | | $(0.13) | | | $(0.11) | | | $(0.04) |
Weighted-average shares of common stock outstanding, basic and diluted | | | 45,079 | | | 46,323 | | | 47,542 | | | 47,102 | | | 48,297 |
Other Financial Data (Unaudited): | | | | | | | | | | | |||||
Free Cash Flow(1) | | | $(2,820) | | | $2,154 | | | $5,284 | | | $2,229 | | | $(2,652) |
Adjusted EBITDA(2) | | | $139 | | | $8,677 | | | $5,934 | | | $510 | | | $4,625 |
Pro Forma net earnings per share, basic(3) | | | | | | | $0.08 | | | | | $0.09 | |||
Pro Forma net earnings per share, diluted(3) | | | | | | | $0.07 | | | | | $0.09 |
(1) | We define Free Cash Flow as net cash provided by operating activities less cash used for purchases of property and equipment and capitalized software development costs. A reconciliation to net cash provided by operating activities is set forth below. See “Non-GAAP Financial Measures” below. |
(2) | We define Adjusted EBITDA as net income (loss), adjusted for interest expense, loss on extinguishment of debt, (benefit) provision for income taxes, depreciation and amortization, stock-based compensation expense, acquisition related expense and other (income) expense, net. A reconciliation to net loss is set forth below. |
(3) | The pro forma basic and diluted net loss per share as adjusted has been computed in the following table to give effect to (a) proceeds raised in this offering of $109.1 million to be paid, and 1.1 million shares of common stock issued, to the holders of Exchangeable Redeemable Preferred Stock in connection with the ERPS Conversion, (b) proceeds raised in this offering of $30.0 million to be paid, and 7.3 million shares of common stock issued, to Hoya in connection with the Telos ID Purchase, and (c) approximately $20.8 million of proceeds raised in this offering to be used for the repayment of outstanding senior and subordinated debt. The use of the proceeds raised assumes an offering price of $17 per share, the midpoint of the price range listed on the cover page of this prospectus. |
| | Year Ended December31, 2019 (unaudited) | | | Six Months Ended June30, 2020 (unaudited) | |
Net loss attributable to Telos | | | $(6,401) | | | $(1,978) |
Pro forma adjustment to remove the dividends from preferred stock recorded as interest expense | | | 3,823 | | | 1,911 |
Pro forma adjustment to remove the interest expense related to the offering proceeds used to repay debt(1) | | | 2,542 | | | 1,680 |
| | Year Ended December31, 2019 (unaudited) | | | Six Months Ended June30, 2020 (unaudited) | |
Pro forma adjustment to reflect the purchase of the non-controlling interest of Telos ID | | | 4,264 | | | 3,590 |
Pro forma net income | | | $4,228 | | | $5,203 |
Pro forma adjustment to give effect to the conversion of our outstanding Class A and Class B common shares into shares of common stock on a 1 for 1 basis | | | 37,730 | | | 38,328 |
Pro forma adjustment to reflect the issuance of common stock in connection with the ERPS Conversion(2) | | | 1,105 | | | 1,121 |
Pro forma adjustment to reflect common stock equivalent of the cash paid for shares in the ERPS Conversion(2) | | | 6,264 | | | 6,350 |
Pro forma adjustment to reflect the shares issued in connection with the Telos ID Purchase(3) | | | 7,300 | | | 7,300 |
Pro forma adjustment to reflect common stock equivalent of the cash paid for shares in the Telos ID purchase(3) | | | 1,765 | | | 1,765 |
Pro forma adjustment to reflect common stock equivalent of the cash paid to extinguish debt(1) | | | 1,219 | | | 1,223 |
Pro forma weighted-average shares outstanding used in computing pro forma net loss per share, basic | | | 55,383 | | | 56,087 |
Pro forma weighted-average shares outstanding used in computing pro forma net loss per share, diluted | | | 57,230 | | | 57,048 |
Pro forma net earnings per share, basic | | | $0.08 | | | $0.09 |
Pro forma net earnings per share, diluted | | | $0.07 | | | $0.09 |
(1) | Represents the interest expense recognized on our outstanding senior term loan and subordinated debt which will be repaid using proceeds from the offering. We intend to use approximately $20.8 million of the offering proceeds to repay our outstanding senior term loan and subordinated debt. |
(2) | Exchangeable Redeemable Preferred Stock will convert into approximately 1.1 million shares of common stock and holders will receive $109.1 million, both in the aggregate, upon consummation of this offering. The cash payment is computed as the number of shares of common stock (valued at the initial offering price to the public) equal to the ERPS Liquidation Value, multiplied by 0.90, multiplied by 0.15. See “Exchangeable Redeemable Preferred Stock Conversion.” |
(3) | Approximately $30.0 million cash from the proceeds raised in this offering and approximately 7.3 million shares of common stock will be issued as consideration in the purchase of Telos ID. Computed as the number of shares of our common stock equal to twelve percent (12%) of the total estimated number of shares of common stock that are issued and outstanding following (i) the issuance of such shares of common stock to Hoya or its members and (ii) the closing of the offering described in this prospectus. |
| | Year Ended December 31, | | | June 30, 2020 | | | Pro Forma June 30, 2020(1) | | | As Adjusted June 30, 2020(2) (Unaudited) | |||||||
| | 2017 | | | 2018 | | | 2019 | | |||||||||
| | (in thousands) | | |||||||||||||||
Consolidated Balance Sheet Data: | | | | | | | | | | | | | ||||||
Cash and cash equivalents | | | $600 | | | $72 | | | $6,751 | | | $2,405 | | | $2,405 | | | $37,451 |
Working Capital(3) | | | (4,075) | | | 2,129 | | | 2,942 | | | (12,762) | | | 3,926 | | | 38,972 |
Total Assets | | | 74,421 | | | 74,489 | | | 77,692 | | | 85,390 | | | 85,390 | | | 120,436 |
Contract Liabilities (Deferred Revenue) | | | 10,073 | | | 5,232 | | | 6,337 | | | 6,682 | | | 6,682 | | | 6,682 |
Senior term loan, net of unamortized discount and issuance costs, including current portion | | | 10,786 | | | 10,984 | | | 16,335 | | | 16,688 | | | — | | | — |
Subordinated Debt | | | 2,289 | | | 2,597 | | | 2,927 | | | 3,102 | | | — | | | — |
Total stockholders’ equity (deficit) | | | (136,037) | | | (132,103) | | | (136,662) | | | (136,009) | | | 24,902 | | | 59,948 |
(1) | Gives effect to proceeds received from this offering of $159.9 million from the sale of 9.4 million shares of common stock to be used as follows: (a) $109.1 million paid, and 1.1 million shares of common stock issued, to the holders of Exchangeable Redeemable Preferred Stock in connection with the ERPS Conversion, and the estimated $14.1 million gain resulting from the ERPS Conversion, (b) $30.0 million paid, and 7.3 million shares of common stock issued, to Hoya in connection with the Telos ID Purchase, and (c) approximately $20.8 million for the repayment of outstanding senior and subordinated debt. |
(2) | Gives effect to (a) net proceeds to us from this offering of $37.8 million from the sale of 2.2 million shares of common stock to be used for general corporate purposes. Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the estimated offering price range set forth on the cover page of this prospectus), would increase (decrease) the pro forma as adjusted amount of cash and cash equivalents, working capital excluding deferred revenue, total assets and total stockholders’ equity by $11.5 million, 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 estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of one million shares in the number of shares |
(3) | We define working capital as current assets less current liabilities. |
| | Year Ended December 31, | | | Six Months Ended June 30, | ||||||||||
| | 2017 | | | 2018 | | | 2019 | | | 2019 | | | 2020 | |
| | (in thousands) | |||||||||||||
Net cash provided by (used in) operating activities | | | $(591) | | | $6,268 | | | $11,816 | | | $5,926 | | | $839 |
Less: | | | | | | | | | | | |||||
Purchases of property and equipment | | | (748) | | | (2,465) | | | (4,090) | | | (2,410) | | | (332) |
Capitalized software development costs | | | (1,481) | | | (1,649) | | | (2,442) | | | (1,287) | | | (3,159) |
Free Cash Flow | | | $(2,820) | | | $2,154 | | | $5,284 | | | $2,229 | | | $(2,652) |
Net cash used in investing activities | | | $(2,229) | | | $(4,114) | | | $(6,532) | | | $(3,697) | | | $(3,491) |
Net cash provided by (used in) financing activities | | | $2,761 | | | $(2,682) | | | $1,395 | | | $(1,525) | | | $(1,694) |
Cash paid for interest | | | $(2,395) | | | $(2,483) | | | $(3,299) | | | $(1,428) | | | $(1,474) |
| | Year Ended December 31, | | | Six Months Ended June 30, | ||||||||||
| | 2017 | | | 2018 | | | 2019 | | | 2019 | | | 2020 | |
| | (in thousands) | |||||||||||||
Net income (loss) attributable to Telos Corporation | | | $(5,833) | | | $(1,640) | | | $(6,401) | | | $(5,154) | | | $(1,978) |
Interest expense | | | 6,690 | | | 7,258 | | | 7,467 | | | 3,500 | | | 4,013 |
(Benefit) provision for income taxes | | | (2,767) | | | 31 | | | (104) | | | (177) | | | (144) |
Depreciation and amortization | | | 1,999 | | | 3,028 | | | 4,972 | | | 2,341 | | | 2,734 |
Stock-based compensation expense | | | 50 | | | — | | | — | | | — | | | — |
Adjusted EBITDA | | | $139 | | | $8,677 | | | $5,934 | | | $510 | | | $4,625 |
| | As of June 30, 2020 | |||||||
| | Actual (Unaudited) | | | Pro Forma(1) | | | Pro Forma as Adjusted(2) | |
| | (in thousands) | |||||||
Cash and cash equivalents | | | $2,405 | | | $2,405 | | | $37,451 |
Senior term loan, net of unamortized discount and issuance costs | | | 16,688 | | | — | | | — |
Subordinated debt | | | 3,102 | | | — | | | — |
Public preferred stock | | | 141,121 | | | — | | | — |
Common stock | | | 78 | | | 96 | | | 99 |
Additional paid-in capital | | | 4,310 | | | 306,198 | | | 194,245 |
Accumulated other comprehensive income | | | 7 | | | 7 | | | 7 |
Accumulated deficit | | | (147,508) | | | (147,508) | | | (134,403) |
Total Telos stockholders’ deficit | | | (143,113) | | | 158,793 | | | 59,948 |
Non-controlling interest in subsidiary | | | 7,104 | | | — | | | — |
Total stockholders’ deficit | | | (136,009) | | | 158,793 | | | 59,948 |
Total capitalization | | | $24,902 | | | 158,793 | | | 59,948 |
(1) | Gives effect to (a) $109.1 million paid, and 1.1 million shares of common stock issued, to the holders of Exchangeable Redeemable Preferred Stock in connection with the ERPS Conversion, (b) $30 million paid, and 7.3 million shares of common stock issued, to Hoya in connection with the Telos ID Purchase, and (c) approximately $20.8 million for the repayment of outstanding senior and subordinated debt. |
(2) | Gives effect to (a) net proceeds to us from this offering of $197.7 million from the sale of approximately 12.35 million shares of common stock, and (b) a $14.1 million gain resulting from the ERPS Conversion. Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share (the midpoint of the estimated offering price range set forth on the cover page of this prospectus), would increase (decrease) the pro forma as adjusted amount of cash and cash equivalents, working capital excluding deferred revenue, total assets and total stockholders’ equity by $11.5 million, 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 estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of one million shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, working capital, excluding deferred revenue, total assets and total stockholders’ equity by $16.1 million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Excludes 7,459,915 shares of common stock reserved for issuance under the 2016 Plan and assumes no exercise by the underwriters of their overallotment option. |
Assumed initial public offering price per share | | | | | $17.00 | |
Pro forma net tangible book value per share as of June 30, 2020 | | | $0.21 | | | |
Increase in pro forma net tangible book value per share attributable to new investors in this offering | | | $0.53 | | | |
Pro forma as adjusted net tangible book value per share after this offering | | | | | $0.74 | |
Dilution in net tangible book value per share to new investors in this offering | | | | | $16.26 |
○ | Telos Ghost: a virtual obfuscation network-as-a-service with encryption and managed attribution capabilities to ensure the safety and privacy of people, information, and resources on the network. |
○ | Telos Automated Message Handling System (“AMHS”): web-based organizational message distribution and management for mission-critical communications; the recognized gold standard for organizational messaging in the U.S. government. |
Name | | | Age | | | Position(s) |
Executive Officers: | | | | | ||
John B. Wood | | | 57 | | | President, Chief Executive Officer, Director |
Michele Nakazawa | | | 63 | | | Executive Vice President, Chief Financial Officer |
Edward L. Williams | | | 60 | | | Executive Vice President, Chief Operating Officer |
Jefferson V. Wright | | | 65 | | | Executive Vice President, General Counsel |
Emmett J. Wood | | | 49 | | | Executive Vice President, Marketing & Strategy |
Brendan D. Malloy | | | 54 | | | Senior Vice President, General Manager, Information Assurance/Xacta |
Richard P. Tracy | | | 59 | | | Senior Vice President, Chief Security Officer |
Kenneth F. Fagan, Jr. | | | 66 | | | Vice President, Secure Communications |
Rinaldi Pisani | | | 51 | | | Senior Vice President, Sales & Alliance |
David S. Easley | | | 49 | | | Vice President, Finance and Controller |
Mark Griffin | | | 60 | | | President, General Manager, Telos ID |
| | | | |||
Non-Employee Directors: | | | | | ||
Bernard C. Bailey | | | 67 | | | Director |
David Borland | | | 72 | | | Director |
Bonnie Carroll | | | 63 | | | Director |
| | | | Director | ||
Major General John W. Maluda (USAF, Ret.) | | | 66 | | | Director |
Robert J. Marino(1) | | | 83 | | | Director |
| | | | |||
Class D Directors | | | | | ||
William H. Alderman | | | 57 | | | Director |
Andrew R. Siegel | | | 51 | | | Director |
(1) | Robert J. Marino will resign from his position on the Board of Directors effective upon the closing of the offering described in this prospectus. |
(2) | Upon the completion of the offering described in this prospectus and the conversion of the Exchangeable Redeemable Preferred Stock into the right to receive shares of common stock and cash, William H. Alderman and Andrew R. Siegel will be automatically removed from the Board of Directors and from their positions as Class D Directors, and the |
Executive Officer | | | Base Salary |
John B. Wood | | | $700,000 |
Edward L. Williams | | | $450,000 |
Michele Nakazawa | | | $410,000 |
Jefferson V. Wright | | | $385,000 |
Brendan D. Malloy | | | $340,000 |
| | Shares of Common Stock Beneficially Owned | | | Percentage of Shares Outstanding | ||||
| | Before Offering | | | After Offering | ||||
5% or Greater Stockholders: | | | | | | | |||
Toxford Corporation Place de Saint Gervais 1 1211 Geneva, Switzerland | | | 12,540,436(A) | | | 31.4% | | | 20.7% |
| | | | | | ||||
Named Executive Officers and Directors: | | | | | | | |||
John B. Wood | | | 5,573,344(B) | | | 14.0% | | | 9.2% |
Edward L. Williams | | | 1,819,747(B) | | | 4.6% | | | 3.0% |
Michele Nakazawa | | | 1,467,303(B) | | | 3.7% | | | 2.4% |
Brendan D. Malloy | | | 1,027,583(B) | | | 2.6% | | | 1.7% |
Jefferson V. Wright | | | 992,243(B) | | | 2.5% | | | 1.6% |
Robert J. Marino | | | 469,340 | | | 1.2% | | | 0.8% |
Barnard C. Bailey | | | 79,361 | | | 0.2% | | | 0.1% |
David Borland | | | 95,233 | | | 0.2% | | | 0.2% |
John W. Maluda | | | 0.1 | | | 0.2% | | | 0.1% |
Bonnie Carroll | | | 0 | | | 0% | | | 0% |
Fredrick Schaufeld | | | 0 | | | 0% | | | 0% |
All executive officers and directors as a group (17 persons) | | | 14,111,952(C) | | | 35.4% | | | 23.2% |
(A) | Includes |
(B) | Includes |
(C) | Includes |
Underwriters | | | Number of Shares |
B. Riley Securities, Inc. | | | |
BMO Capital Markets Corp. | | | |
Needham & Company, LLC | | | |
Colliers Securities LLC | | | |
D.A. Davidson & Co. | | | |
Northland Securities, Inc. | | | |
Wedbush Securities Inc. | | | |
MKM Partners LLC | | | |
Total | | |
| | Per Share | | | Total Without Over- Allotment | | | With Over-Allotment | |
Underwriting discounts and commissions paid by us | | | $ | | | $ | | | $ |
Proceeds, before expenses, to us | | | $ | | | $ | | | $ |
• | our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (including information specifically incorporated by reference from our Definitive Proxy Statement on Schedule 14A filed with the SEC on April 20, 2020) (SEC File No. 001-08443) filed with the SEC on April 13, 2020; |
• | our Amendment No. 1 on Form 10-K/A for the fiscal year ended December 31, 2019 (SEC File No. 001-08443) filed with the SEC on May 12, 2020; |
• | our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020 (SEC File No. 001-08443) filed with the SEC on May 15, 2020; |
• | our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2020 (SEC File No. 001-08443) filed with the SEC on August 13, 2020; |
• | our definitive proxy statement on Schedule 14A (SEC File No. 001-08443) filed with the SEC on April 20, 2020; |
• |
• | our Current Reports on Form 8-K dated March 30, 2020, May 13, 2020, September 20, 2020, October 6, 2020 and October |
| | Page | |
Financial Statements for the Years Ended December 31, 2019, and 2018 | | | |
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Unaudited Interim Financial Statements for the Three and Six Months Ended June 30, 2020, and 2019 | | | |
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| | Years Ended December 31, | | | Years Ended December 31, | |||||||||||||
| 2019 | | 2018 | | 2017 | | 2019 | | 2018 | | 2017 | |||||||
Revenue (Note 5) | | | | | | | ||||||||||||
Services | | $143,581 | | $120,990 | | $81,606 | | $143,581 | | $120,990 | | $81,606 | ||||||
Products | | 15,637 | | 17,026 | | 26,121 | | 15,637 | | 17,026 | | 26,121 | ||||||
| 159,218 | | 138,016 | | 107,727 | | 159,218 | | 138,016 | | 107,727 | |||||||
Costs and expenses | | | | | | | ||||||||||||
Cost of sales – Services | | 98,772 | | 76,857 | | 49,965 | | 98,772 | | 76,857 | | 49,965 | ||||||
Cost of sales – Products | | 8,102 | | 8,097 | | 17,196 | | 8,102 | | 8,097 | | 17,196 | ||||||
| 106,874 | | 84,954 | | 67,161 | | 106,874 | | 84,954 | | 67,161 | |||||||
Selling, general and administrative expenses | | 47,319 | | 44,048 | | 40,152 | | 47,319 | | 44,048 | | 40,152 | ||||||
| | | | | | |||||||||||||
Operating income | | 5,025 | | 9,014 | | 414 | | 5,025 | | 9,014 | | 414 | ||||||
Other income (expenses) | | | | | | | ||||||||||||
Non-operating income | | 201 | | 12 | | 11 | | 201 | | 12 | | 11 | ||||||
Interest expense | | (7,467) | | (7,258) | | (6,690) | | (7,467) | | (7,258) | | (6,690) | ||||||
(Loss) income before income taxes | | (2,241) | | 1,768 | | (6,265) | | (2,241) | | 1,768 | | (6,265) | ||||||
Benefit (provision) for income taxes (Note 9) | | 104 | | (31) | | 2,767 | | 104 | | (31) | | 2,767 | ||||||
Net (loss) income | | (2,137) | | 1,737 | | (3,498) | | (2,137) | | 1,737 | | (3,498) | ||||||
Less: Net income attributable to non-controlling interest (Note 2) | | (4,264) | | (3,377) | | (2,335) | | (4,264) | | (3,377) | | (2,335) | ||||||
Net loss attributable to Telos Corporation | | $(6,401) | | $(1,640) | | $(5,833) | | $(6,401) | | $(1,640) | | $(5,833) | ||||||
Net loss per share attributable to Telos Corporation, Common A, basic and diluted | | $(0.13) | | $(0.04) | | $(0.13) | | $(0.13) | | $(0.04) | | $(0.13) | ||||||
Net loss per share attributable to Telos Corporation, Common B, basic and diluted | | $(0.13) | | $(0.04) | | $(0.13) | | $(0.13) | | $(0.04) | | $(0.13) | ||||||
Weighted-average shares of Common A stock outstanding, basic and diluted | | 43,504 | | 42,285 | | 41,041 | | 43,504 | | 42,285 | | 41,041 | ||||||
Weighted-average shares of Common B stock outstanding, basic and diluted | | 4,038 | | 4,038 | | 4,038 | | 4,038 | | 4,038 | | 4,038 | ||||||
Pro forma net earnings (loss) per share attributable to Telos Corporation, basic and diluted (unaudited) | | | | |||||||||||||||
Pro forma weighted-average shares of common stock outstanding, basic and diluted (unaudited) | | | |
| | Years Ended December 31, | |||||||
| | 2019 | | | 2018 | | | 2017 | |
Net (loss) income | | | $(2,137) | | | $1,737 | | | $(3,498) |
Other comprehensive (loss) income, net of tax: | | | | | | | |||
Foreign currency translation adjustments | | | (11) | | | (15) | | | 7 |
Comprehensive income attributable to non-controlling interest | | | (4,264) | | | (3,377) | | | (2,335) |
Comprehensive loss attributable to Telos Corporation | | | $(6,412) | | | $(1,655) | | | $(5,826) |
| | December 31, | ||||
| | 2019 | | | 2018 | |
Current assets | | | | | ||
Cash and cash equivalents | | | $6,751 | | | $72 |
Accounts receivable, net of reserve of $720 and $306, respectively (Note 5) | | | 27,942 | | | 34,542 |
Inventories, net of obsolescence reserve of $860 and $520, respectively (Note 1) | | | 1,965 | | | 4,389 |
Deferred program expenses | | | 673 | | | 244 |
Other current assets | | | 2,914 | | | 1,985 |
Total current assets | | | 40,245 | | | 41,232 |
| | | | |||
Property and equipment (Note 1) | | | | | ||
Furniture and equipment | | | 18,709 | | | 12,756 |
Leasehold improvements | | | 2,536 | | | 2,503 |
Property and equipment under finance leases | | | 30,792 | | | 30,832 |
| | 52,037 | | | 46,091 | |
Accumulated depreciation and amortization | | | (32,470) | | | (28,665) |
| | 19,567 | | | 17,426 | |
| | | | |||
Operating lease right-of-use assets | | | 1,979 | | | — |
Goodwill (Note 3) | | | 14,916 | | | 14,916 |
Other assets | | | 985 | | | 915 |
Total assets | | | $77,692 | | | $74,489 |
| | December 31, | ||||
| | 2019 | | | 2018 | |
Current liabilities | | | | | ||
Accounts payable and other accrued liabilities (Note 6) | | | $15,050 | | | $21,779 |
Accrued compensation and benefits | | | 12,187 | | | 9,082 |
Contract liabilities | | | 6,337 | | | 5,232 |
Finance lease obligations – short-term (Note 10) | | | 1,224 | | | 1,115 |
Other current liabilities | | | 2,505 | | | 1,895 |
Total current liabilities | | | 37,303 | | | 39,103 |
Senior term loan, net of unamortized discount and issuance costs (Note 6) | | | 16,335 | | | 10,984 |
Subordinated debt (Note 6) | | | 2,927 | | | 2,597 |
Finance lease obligations – long-term (Note 10) | | | 15,641 | | | 16,865 |
Operating lease obligations – long-term (Note 10) | | | 1,553 | | | — |
Deferred income taxes (Note 9) | | | 621 | | | 818 |
Public preferred stock (Note 7) | | | 139,210 | | | 135,387 |
Other liabilities (Note 9) | | | 724 | | | 838 |
Total liabilities | | | 214,314 | | | 206,592 |
Commitments and contingencies (Notes 10 and 13) | | | — | | | — |
| | | | |||
Stockholders’ deficit (Note 8) | | | | | ||
Telos stockholders’ deficit | | | | | ||
Class A common stock, no par value, 50,000,000 shares authorized, 45,143,460 shares and 45,158,460 shares issued and outstanding, respectively | | | 65 | | | 65 |
Class B common stock, no par value, 5,000,000 shares authorized, 4,037,628 shares issued and outstanding | | | 13 | | | 13 |
Additional paid-in capital | | | 4,310 | | | 4,310 |
Accumulated other comprehensive income | | | 6 | | | 17 |
Accumulated deficit | | | (145,530) | | | (139,129) |
Total Telos stockholders’ deficit | | | (141,136) | | | (134,724) |
| | | | |||
Non-controlling interest in subsidiary (Note 2) | | | 4,514 | | | 2,621 |
Total stockholders’ deficit | | | (136,622) | | | (132,103) |
Total liabilities, redeemable preferred stock, and stockholders’ deficit | | | $77,692 | | | $74,489 |
| | Years Ended December 31, | |||||||
| | 2019 | | | 2018 | | | 2017 | |
Operating activities: | | | | | | | |||
Net (loss) income | | | $(2,137) | | | $1,737 | | | $(3,498) |
Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities: | | | | | | | |||
Stock-based compensation | | | — | | | — | | | 50 |
Dividends from preferred stock recorded as interest expense | | | 3,823 | | | 3,822 | | | 3,843 |
Depreciation and amortization | | | 4,972 | | | 3,028 | | | 1,999 |
Provision for inventory obsolescence | | | 376 | | | 30 | | | 73 |
Provision (benefit) for doubtful accounts receivable | | | 414 | | | (105) | | | (18) |
Amortization of debt issuance costs | | | 461 | | | 198 | | | 160 |
Deferred income tax (benefit) provision | | | (197) | | | 77 | | | (2,710) |
Loss on disposal of fixed assets | | | 15 | | | 3 | | | 4 |
Changes in assets and liabilities: | | | | | | | |||
Decrease (increase) in accounts receivable | | | 6,186 | | | (9,917) | | | (5,415) |
Decrease (increase) in inventories | | | 2,048 | | | 9,101 | | | (10,041) |
(Increase) decrease in deferred program expenses | | | (429) | | | 1,828 | | | (1,886) |
(Increase) decrease in other current assets and other assets | | | (3,576) | | | (465) | | | 1,086 |
(Decrease) increase in accounts payable and other accrued payables | | | (6,730) | | | (3,914) | | | 10,376 |
Increase (decrease) in accrued compensation and benefits | | | 3,105 | | | 1,626 | | | (615) |
Increase (decrease) in contract liabilities | | | 1,106 | | | (960) | | | 5,173 |
Increase in other current liabilities and other liabilities | | | 2,379 | ��� | | 179 | | | 828 |
Cash provided by (used in) operating activities | | | 11,816 | | | 6,268 | | | (591) |
Investing activities: | | | | | | | |||
Capitalized software development costs | | | (2,442) | | | (1,649) | | | (1,481) |
Purchases of property and equipment | | | (4,090) | | | (2,465) | | | (748) |
Cash used in investing activities | | | (6,532) | | | (4,114) | | | (2,229) |
Financing activities: | | | | | | | |||
Proceeds from senior term loan | | | 4,881 | | | — | | | 9,439 |
Redemption of senior preferred stock | | | — | | | — | | | (2,112) |
Payments under finance lease obligations | | | (1,115) | | | (1,013) | | | (915) |
Distributions to Telos ID Class B member – non-controlling interest | | | (2,371) | | | (1,669) | | | (3,651) |
Cash provided by (used in) financing activities | | | 1,395 | | | (2,682) | | | 2,761 |
Increase (decrease) in cash and cash equivalents | | | 6,679 | | | (528) | | | (59) |
Cash and cash equivalents, beginning of the year | | | 72 | | | 600 | | | 659 |
Cash and cash equivalents, end of year | | | $6,751 | | | $72 | | | $600 |
| | | | | | ||||
Supplemental disclosures of cash flow information: | | | | | | | |||
Cash paid during the year for: | | | | | | | |||
Interest | | | $3,299 | | | $2,483 | | | $2,395 |
Income taxes | | | $40 | | | $19 | | | $26 |
| | | | | | ||||
Noncash: | | | | | | | |||
Dividends from preferred stock recorded as interest expense | | | $3,823 | | | $3,822 | | | $3,843 |
Debt issuance costs and prepayment of interest on senior term loan | | | $119 | | | $— | | | $1,561 |
Gain on extinguishment of subordinated debt | | | $— | | | $— | | | $1,031 |
| | Telos Corporation | | | | | |||||||||||||||
| | Class A Common Stock | | | Class B Common Stock | | | Additional Paid-in Capital | | | Accumulated Other Comprehen-sive Income | | | Accumulated Deficit | | | Non- Controlling Interest | | | Total Stockholders’ Deficit | |
Balance December 31, 2016 | | | $65 | | | $13 | | | $3,229 | | | $25 | | | $(135,537) | | | $2,229 | | | $(129,976) |
Net (loss) income | | | — | | | — | | | — | | | — | | | (5,833) | | | 2,335 | | | (3,498) |
Gain on extinguishment of subordinated debt | | | — | | | — | | | 1,031 | | | — | | | — | | | — | | | 1,031 |
Stock-based compensation | | | — | | | — | | | 50 | | | — | | | — | | | — | | | 50 |
Foreign currency translation gain | | | — | | | — | | | — | | | 7 | | | — | | | — | | | 7 |
Distributions | | | — | | | — | | | — | | | — | | | — | | | (3,651) | | | (3,651) |
Balance December 31, 2017 | | | $65 | | | $13 | | | $4,310 | | | $32 | | | $(141,370) | | | $913 | | | $(136,037) |
Net (loss) income | | | — | | | — | | | — | | | — | | | (1,640) | | | 3,377 | | | 1,737 |
Cumulative effect adjustment due to change in accounting policy | | | — | | | — | | | — | | | — | | | 3,881 | | | — | | | 3,881 |
Foreign currency translation loss | | | — | | | — | | | — | | | (15) | | | — | | | — | | | (15) |
Distributions | | | — | | | — | | | — | | | — | | | — | | | (1,669) | | | (1,669) |
Balance December 31, 2018 | | | $65 | | | $13 | | | $4,310 | | | $17 | | | $(139,129) | | | $2,621 | | | $(132,103) |
Net (loss) income | | | — | | | — | | | — | | | — | | | (6,401) | | | 4,264 | | | (2,137) |
Foreign currency translation loss | | | — | | | — | | | — | | | (11) | | | — | | | — | | | (11) |
Distributions | | | — | | | — | | | — | | | — | | | — | | | (2,371) | | | (2,371) |
Balance December 31, 2019 | | | $65 | | | $13 | | | $4,310 | | | $6 | | | $(145,530) | | | $4,514 | | | $(136,622) |
| | 2019 | | | 2018 | | | 2017 | |
Federal | | | $149,257 | | | $129,279 | | | $101,519 |
State & Local, and Commercial | | | 9,961 | | | 8,737 | | | 6,208 |
Total | | | $159,218 | | | $138,016 | | | $107,727 |
| | 2019 | | | 2018 | | | 2017 | |
Firm fixed-price | | | $131,629 | | | $103,454 | | | $89,516 |
Time-and-materials | | | 14,569 | | | 16,795 | | | 10,222 |
Cost plus fixed fee | | | 13,020 | | | 17,767 | | | 7,989 |
Total | | | $159,218 | | | $138,016 | | | $107,727 |
| | December 31, | ||||
| | 2019 | | | 2018 | |
Billed accounts receivable | | | $11,917 | | | $18,848 |
Unbilled receivables | | | 16,745 | | | 16,000 |
Allowance for doubtful accounts | | | (720) | | | (306) |
Receivables – net | | | $27,942 | | | $34,542 |
| | December 31, | ||||
| | 2019 | | | 2018 | |
Contract liabilities | | | $6,337 | | | $5,232 |
| | Balance Beginning of Year | | | Additions Charge to Costs and Expense | | | Recoveries | | | Balance End of Year | |
Year Ended December 31, 2019 | | | $520 | | | $376 | | | $(36) | | | $860 |
Year Ended December 31, 2018 | | | $1,484 | | | $30 | | | $(994) | | | $520 |
Year Ended December 31, 2017 | | | $1,672 | | | $73 | | | $(261) | | | $1,484 |
Furniture and equipment | | | 3-5 Years |
Leasehold improvements | | | Lesser of life of lease or useful life of asset |
Property and equipment under finance leases | | | Lesser of life of lease or useful life of asset |
| | 2019 | | | 2018 | | | 2017 | |
Unvested restricted stock | | | 1,191 | | | 2,428 | | | 3,724 |
Common Stock Warrants, exercisable at $1.321/share | | | 1,135 | | | 1,135 | | | 1,135 |
Total | | | 2,326 | | | 3,563 | | | 4,859 |
| | 2019 | | | 2018 | | | 2017 | |
Non-controlling interest, beginning of period | | | $2,621 | | | $913 | | | $2,229 |
Net income | | | 4,264 | | | 3,377 | | | 2,335 |
Distributions | | | (2,371) | | | (1,669) | | | (3,651) |
Non-controlling interest, end of period | | | $4,514 | | | $2,621 | | | $913 |
| | December 31, | ||||
| | 2019 | | | 2018 | |
Billed accounts receivable | | | $11,917 | | | $18,848 |
Unbilled receivables | | | 16,745 | | | 16,000 |
Allowance for doubtful accounts | | | (720) | | | (306) |
Total | | | $27,942 | | | $34,542 |
| | Balance Beginning of Year | | | Bad Debt Expenses(1) | | | Recoveries(2) | | | Balance End of Year | |
Year ended December 31, 2019 | | | $306 | | | $414 | | | $— | | | $720 |
Year ended December 31, 2018 | | | $411 | | | $(105) | | | $— | | | $306 |
Year ended December 31, 2017 | | | $429 | | | $(18) | | | $— | | | $411 |
(1) | Accounts receivable reserves and reversal of allowance for subsequent collections, net |
(2) | Accounts receivable written-off and subsequent recoveries, net |
| | 2019 | | | 2018 | | | 2017 | ||||||||||
| | (dollar amounts in thousands) | ||||||||||||||||
Federal | | | $149,257 | | | 93.7% | | | $129,279 | | | 93.7% | | | $101,519 | | | 94.2% |
State & Local, and Commercial | | | 9,961 | | | 6.3% | | | 8,737 | | | 6.3% | | | 6,208 | | | 5.8% |
Total | | | $159,218 | | | 100.0% | | | $138,016 | | | 100.0% | | | $107,727 | | | 100.0% |
| | December 31, | ||||
| | 2019 | | | 2018 | |
Senior term loan principal, including exit fee | | | $17,200 | | | $11,825 |
Less: Unamortized discount, debt issuance costs, and lender fees | | | (865) | | | (841) |
Senior term loan, net | | | $16,335 | | | $10,984 |
| | December 31, | |||||||
| | 2019 | | | 2018 | | | 2017 | |
| | (number of shares) | |||||||
Outstanding at beginning of year | | | 4,920,000 | | | 4,975,000 | | | — |
Granted | | | — | | | — | | | 5,005,000 |
Forfeited | | | (15,000) | | | (55,000) | | | (30,000) |
Outstanding at end of year | | | 4,905,000 | | | 4,920,000 | | | 4,975,000 |
| | For the Years Ended December 31, | |||||||
| | 2019 | | | 2018 | | | 2017 | |
Current provision (benefit) | | | | | | | |||
Federal | | | $25 | | | $(29) | | | $(86) |
State | | | 68 | | | (17) | | | 29 |
Total current | | | 93 | | | (46) | | | (57) |
| | | | | |
| | For the Years Ended December 31, | | | For the Years Ended December 31, | |||||||||||||
| | 2019 | | 2018 | | 2017 | ||||||||||||
Current provision (benefit) | | | | |||||||||||||||
Federal | | $25 | | $(29) | | $(86) | ||||||||||||
State | | 68 | | (17) | | 29 | ||||||||||||
Total current | | 93 | | (46) | | (57) | ||||||||||||
| | 2019 | | 2018 | | 2017 | | | | |||||||||
Deferred (benefit) provision | | | | | | | ||||||||||||
Federal | | 88 | | 15 | | (2,622) | | 88 | | 15 | | (2,622) | ||||||
State | | (285) | | 62 | | (88) | | (285) | | 62 | | (88) | ||||||
Total deferred | | (197) | | 77 | | (2,710) | | (197) | | 77 | | (2,710) | ||||||
Total (benefit) provision | | $(104) | | $31 | | $(2,767) | | $(104) | | $31 | | $(2,767) |
| | For the Years Ended December 31, | |||||||
| | 2019 | | | 2018 | | | 2017 | |
Computed expected income tax provision | | | 21.0% | | | 21.0% | | | 34.0% |
State income taxes, net of federal income tax benefit | | | (0.2) | | | (20.9) | | | 0.9 |
Change in valuation allowance for deferred tax assets | | | (8.5) | | | 47.7 | | | (26.9) |
Cumulative deferred adjustments | | | (0.4) | | | — | | | — |
Provision to return adjustments | | | 0.5 | | | 1.8 | | | — |
Other permanent differences | | | (3.7) | | | (12.2) | | | (1.3) |
Dividend and accretion on preferred stock | | | (12.3) | | | (49.9) | | | (15.2) |
FIN 48 liability | | | (1.3) | | | (4.6) | | | (0.9) |
R&D credit | | | 6.5 | | | 27.7 | | | 4.6 |
Impact of Tax Act | | | — | | | (12.5) | | | 35.5 |
Other | | | — | | | — | | | 1.5 |
| | 1.6% | | | (1.9)% | | | 32.2% |
| | December 31, | | | December 31, | |||||||
| | 2019 | | 2018 | | | 2019 | | 2018 | |||
Deferred tax assets: | | | | | ||||||||
Accounts receivable, principally due to allowance for doubtful accounts | | $185 | | $79 | | $185 | | $79 | ||||
Allowance for inventory obsolescence and amortization | | 316 | | 281 | | 316 | | 281 | ||||
Accrued liabilities not currently deductible | | 1,649 | | 1,634 | | 1,649 | | 1,634 | ||||
Accrued compensation | | 1,655 | | 1,206 | | 1,655 | | 1,206 | ||||
Deferred rent | | 4,808 | | 4,750 | | 4,808 | | 4,750 | ||||
Section 163(j) interest limitation | | 804 | | 246 | | 804 | | 246 | ||||
Net operating loss carryforwards - federal | | 2,583 | | 1,956 | | 2,583 | | 1,956 | ||||
Net operating loss carryforwards - state | | 796 | | 653 | | 796 | | 653 | ||||
Federal tax credit | | 1,326 | | 983 | | 1,326 | | 983 | ||||
Total gross deferred tax assets | | 14,122 | | 11,788 | | 14,122 | | 11,788 | ||||
Less valuation allowance | | (7,206) | | (6,652) | | (7,206) | | (6,652) | ||||
Total deferred tax assets, net of valuation allowance | | 6,916 | | 5,136 | | 6,916 | | 5,136 | ||||
| | |||||||||||
Deferred tax liabilities: | | | ||||||||||
Amortization and depreciation | | (2,623) | | (2,237) | ||||||||
Unbilled accounts receivable, deferred for tax purposes | | (1,611) | | (955) | ||||||||
Goodwill basis adjustment and amortization | | (2,886) | | (2,713) | ||||||||
Telos ID basis difference | | (417) | | (49) | ||||||||
Total deferred tax liabilities | | (7,537) | | (5,954) | ||||||||
Net deferred tax liabilities | | $(621) | | $(818) |
| | December 31, | ||||
| | 2019 | | | 2018 | |
| | | | |||
Deferred tax liabilities: | | | | | ||
Amortization and depreciation | | | (2,623) | | | (2,237) |
Unbilled accounts receivable, deferred for tax purposes | | | (1,611) | | | (955) |
Goodwill basis adjustment and amortization | | | (2,886) | | | (2,713) |
Telos ID basis difference | | | (417) | | | (49) |
Total deferred tax liabilities | | | (7,537) | | | (5,954) |
Net deferred tax liabilities | | | $(621) | | | $(818) |
| | Balance Beginning of Period | | | Additions | | | Recoveries | | | Balance End of Period | |
| | | | | | | | |||||
December 31, 2019 | | | $6,652 | | | $554 | | | $— | | | $7,206 |
December 31, 2018 | | | $7,219 | | | $— | | | $(567) | | | $6,652 |
December 31, 2017 | | | $10,499 | | | $— | | | $(3,280) | | | $7,219 |
| | 2019 | | | 2018 | | | 2017 | |
Unrecognized tax benefits, beginning of period | | | $648 | | | $677 | | | $762 |
Gross decreases — tax positions in prior period | | | (39) | | | (63) | | | (127) |
Gross increases — tax positions in current period | | | 101 | | | 92 | | | 77 |
Settlements | | | (37) | | | (58) | | | (35) |
Unrecognized tax benefits, end of period | | | $673 | | | $648 | | | $677 |
| | Operating Leases | | | Finance Leases | |
2020 | | | $710 | | | $2,046 |
2021 | | | 715 | | | 2,097 |
2022 | | | 564 | | | 2,149 |
2023 | | | 368 | | | 2,203 |
2024 | | | 28 | | | 2,258 |
After 2024 | | | — | | | 10,658 |
Total minimum lease payments | | | 2,385 | | | 21,411 |
Less imputed interest | | | (230) | | | (4,546) |
Net present value of minimum lease payments | | | 2,155 | | | 16,865 |
Less current portion | | | (602) | | | (1,224) |
Long-term lease obligations at December 31, 2019 | | | $1,553 | | | $15,641 |
| | Year Ended December 31, 2019 | |
Operating lease cost | | | $597 |
Short-term lease cost(1) | | | 147 |
Finance lease cost | | | |
Amortization of finance lease assets | | | 1,221 |
Interest on finance lease liabilities | | | 881 |
Total finance lease cost | | | 2,102 |
Total lease costs | | | $2,846 |
(1) | Leases that have terms of 12 months or less. |
| | Year Ended December 31, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | | | |
Cash flows from operating activities - operating leases | | | $604 |
Cash flows from operating activities - finance leases | | | $1,995 |
Operating lease right-of-use assets obtained in exchange for operating lease liabilities | | | $488 |
| | Balance Beginning of Year | | | Accruals | | | Warranty Expenses | | | Balance End of Year | |
| | (amount in thousands) | ||||||||||
| | | | | | | | |||||
Year Ended December 31, 2019 | | | $30 | | | $— | | | $— | | | $30 |
Year Ended December 31, 2018 | | | $30 | | | $— | | | $— | | | $30 |
Year Ended December 31, 2017 | | | $51 | | | $— | | | $(21) | | | $30 |
| | Quarters Ended | ||||||||||
| | March 31 | | | June 30 | | | Sept. 30 | | | Dec. 31 | |
2019 | | | | | | | | | ||||
Revenue | | | $31,166 | | | $36,048 | | | $45,531 | | | $46,473 |
Gross profit | | | 8,976 | | | 10,015 | | | 16,313 | | | 17,040 |
(Loss) income before income taxes and non-controlling interest | | | (3,137) | | | (1,974) | | | 3,708 | | | (838) |
Net (loss) income attributable to Telos Corporation(1)(2) | | | (3,413) | | | (1,741) | | | 2,233 | | | (3,480) |
Weighted Average Common Shares Outstanding, Class A, Basic | | | 42,731 | | | 43,394 | | | 43,937 | | | 43,937 |
Weighted Average Common Shares Outstanding, Class B, Basic | | | 4,038 | | | 4,038 | | | 4,038 | | | 4,038 |
Weighted Average Common Shares Outstanding, Class A, Diluted | | | 42,731 | | | 43,394 | | | 46,279 | | | 43,937 |
Weighted Average Common Shares Outstanding, Class B, Diluted | | | 4,038 | | | 4,038 | | | 4,038 | | | 4,038 |
Earnings per Share, Class A - Basic | | | (0.07) | | | (0.04) | | | 0.05 | | | (0.07) |
Earnings per Share, Class B - Basic | | | (0.07) | | | (0.04) | | | 0.05 | | | (0.07) |
Earnings per Share, Class A - Diluted | | | (0.07) | | | (0.04) | | | 0.04 | | | (0.07) |
Earnings per Share, Class B - Diluted | | | (0.07) | | | (0.04) | | | 0.04 | | | (0.07) |
| | | | | | | | |||||
2018 | | | | | | | | | ||||
Revenue | | | $32,401 | | | $34,943 | | | $34,695 | | | $35,977 |
Gross profit | | | 10,232 | | | 12,078 | | | 16,287 | | | 14,465 |
(Loss) income before income taxes and non-controlling interest | | | (1,693) | | | 450 | | | 4,722 | | | (1,711) |
Net (loss) income attributable to Telos Corporation(1)(3) | | | (1,986) | | | (87) | | | 4,113 | | | (3,680) |
Net income (loss) attributable to Telos | | | (1,986) | | | (87) | | | 4,113 | | | (3,680) |
Weighted Average Common Shares Outstanding, Class A, Basic | | | 41,490 | | | 42,172 | | | 42,731 | | | 42,731 |
Weighted Average Common Shares Outstanding, Class B, Basic | | | 4,038 | | | 4,038 | | | 4,038 | | | 4,038 |
Weighted Average Common Shares Outstanding, Class A, Diluted | | | 41,490 | | | 42,172 | | | 46,310 | | | 42,731 |
Weighted Average Common Shares Outstanding, Class B, Diluted | | | 4,038 | | | 4,038 | | | 4,038 | | | 4,038 |
Earnings per Share, Class A - Basic | | | (0.04) | | | (0.00) | | | 0.09 | | | (0.08) |
Earnings per Share, Class B - Basic | | | (0.04) | | | (0.00) | | | 0.09 | | | (0.08) |
Earnings per Share, Class A - Diluted | | | (0.04) | | | (0.00) | | | 0.08 | | | (0.08) |
Earnings per Share, Class B - Diluted | | | (0.04) | | | (0.00) | | | 0.08 | | | (0.08) |
(1) | Changes in net income are the result of several factors, including seasonality of the government year-end buying season, as well as the nature and timing of other deliverables. |
(2) | Net income for the third quarter of 2019 is attributable to $2.6 million in proprietary software sales which carry lower cost of sales. |
(3) | Net income for the third quarter of 2018 included $5.6 million of revenue accruals for multiple contracts as a result of several years of cumulative indirect rate adjustments which did not include direct costs in Secure Mobility and Network Management/Defense Enterprise Solutions deliverables. |
| | Three Months Ended June 30, | | Six Months Ended June 30, | | | Three Months Ended June 30, | | Six Months Ended June 30, | |||||||||||||||
| | 2020 | | 2019 | | 2020 | | 2019 | | | 2020 | | 2019 | | 2020 | | 2019 | |||||||
Revenue | | | | | | | | | ||||||||||||||||
Services | | $45,486 | | $34,377 | | $80,044 | | $62,414 | | $45,486 | | $34,377 | | $80,044 | | $62,414 | ||||||||
Products | | 3,124 | | 1,671 | | 7,545 | | 4,800 | | 3,124 | | 1,671 | | 7,545 | | 4,800 | ||||||||
| 48,610 | | 36,048 | | 87,589 | | 67,214 | | 48,610 | | 36,048 | | 87,589 | | 67,214 | |||||||||
Costs and expenses | | | | | | | | | ||||||||||||||||
Cost of sales - Services | | 29,378 | | 25,203 | | 54,243 | | 45,394 | | 29,378 | | 25,203 | | 54,243 | | 45,394 | ||||||||
Cost of sales - Products | | 1,659 | | 830 | | 3,531 | | 2,829 | | 1,659 | | 830 | | 3,531 | | 2,829 | ||||||||
| 31,037 | | 26,033 | | 57,774 | | 48,223 | | 31,037 | | 26,033 | | 57,774 | | 48,223 | |||||||||
Selling, general and administrative expenses | | 12,507 | | 10,437 | | 24,346 | | 20,795 | | 12,507 | | 10,437 | | 24,346 | | 20,795 | ||||||||
Operating income (loss) | | 5,066 | | (422) | | 5,469 | | (1,804) | | 5,066 | | (422) | | 5,469 | | (1,804) | ||||||||
Other income (expense) | | | | | | | | | ||||||||||||||||
Other income | | 4 | | 188 | | 12 | | 193 | | 4 | | 188 | | 12 | | 193 | ||||||||
Interest expense | | (1,996) | | (1,740) | | (4,013) | | (3,500) | | (1,996) | | (1,740) | | (4,013) | | (3,500) | ||||||||
Income (loss) before income taxes | | 3,074 | | (1,974) | | 1,468 | | (5,111) | | 3,074 | | (1,974) | | 1,468 | | (5,111) | ||||||||
(Provision for) benefit from income taxes (Note 7) | | (2) | | (20) | | 144 | | 177 | | (2) | | (20) | | 144 | | 177 | ||||||||
Net income (loss) | | 3,072 | | (1,994) | | 1,612 | | (4,934) | | 3,072 | | (1,994) | | 1,612 | | (4,934) | ||||||||
Less: Net (income) loss attributable to non-controlling interest (Note 2) | | (2,806) | | 253 | | (3,590) | | (220) | | (2,806) | | 253 | | (3,590) | | (220) | ||||||||
Net income (loss) attributable to Telos Corporation | | $266 | | $(1,741) | | $(1,978) | | $(5,154) | | $266 | | $(1,741) | | $(1,978) | | $(5,154) | ||||||||
Net earnings (loss) per share attributable to Telos Corporation, Common A, basic | | $0.01 | | $(0.04) | | $(0.04) | | $(0.11) | | $0.01 | | $(0.04) | | $(0.04) | | $(0.11) | ||||||||
Net earnings (loss) per share attributable to Telos Corporation, Common B, basic | | $0.01 | | $(0.04) | | $(0.04) | | $(0.11) | | $0.01 | | $(0.04) | | $(0.04) | | $(0.11) | ||||||||
Net earnings (loss) per share attributable to Telos Corporation, Common A, diluted | | $0.01 | | $(0.04) | | $(0.04) | | $(0.11) | | $0.01 | | $(0.04) | | $(0.04) | | $(0.11) | ||||||||
Net earnings (loss) per share attributable to Telos Corporation, Common B, diluted | | $0.01 | | $(0.04) | | $(0.04) | | $(0.11) | | $0.01 | | $(0.04) | | $(0.04) | | $(0.11) | ||||||||
Weighted-average shares of stock outstanding, Common A, basic | | 44,580 | | 43,394 | | 44,259 | | 43,064 | | 44,580 | | 43,394 | | 44,259 | | 43,064 | ||||||||
Weighted-average shares of stock outstanding, Common B, basic | | 4,038 | | 4,038 | | 4,038 | | 4,038 | | 4,038 | | 4,038 | | 4,038 | | 4,038 | ||||||||
Weighted-average shares of stock outstanding, Common A, diluted | | 46,279 | | 43,394 | | 44,259 | | 43,064 | | 46,279 | | 43,394 | | 44,259 | | 43,064 | ||||||||
Weighted-average shares of stock outstanding, Common B, diluted | | 4,038 | | 4,038 | | 4,038 | | 4,038 | | 4,038 | | 4,038 | | 4,038 | | 4,038 | ||||||||
Pro forma net earnings (loss) per share attributable to Telos Corporation, basic (unaudited) | | | | | ||||||||||||||||||||
Pro forma weighted-average shares of common stock outstanding, basic (unaudited) | | | | | ||||||||||||||||||||
Pro forma net earnings (loss) per share attributable to Telos Corporation, diluted (unaudited) | | | | | ||||||||||||||||||||
Pro forma weighted-average shares of common stock outstanding, diluted (unaudited) | | | | |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Net income (loss) | | | $3,072 | | | $(1,994) | | | $1,612 | | | $(4,934) |
Other comprehensive income, net of tax: | | | | | | | | | ||||
Foreign currency translation adjustments | | | 2 | | | — | | | 1 | | | 2 |
Less: Comprehensive (income) loss attributable to non-controlling interest | | | (2,806) | | | 253 | | | (3,590) | | | (220) |
Comprehensive income (loss) attributable to Telos Corporation | | | $268 | | | $(1,741) | | | $(1,977) | | | $(5,152) |
| | Pro Forma June 30, 2020 | | June 30, 2020 | | December 31, 2019 | | | June 30, 2020 | | December 31, 2019 | ||||
ASSETS | | (Unaudited) | | (Unaudited) | | | (Unaudited) | | |||||||
Current assets | | | | | | ||||||||||
Cash and cash equivalents | | $— | | $2,405 | | $6,751 | | $2,405 | | $6,751 | |||||
Accounts receivable, net of reserve of $738 and $720, respectively (Note 1) | | — | | 38,371 | | 27,942 | | 38,371 | | 27,942 | |||||
Inventories, net of obsolescence reserve of $861 and $860, respectively (Note 1) | | — | | 3,336 | | 1,965 | | 3,336 | | 1,965 | |||||
Deferred program expenses | | — | | 250 | | 673 | | 250 | | 673 | |||||
Other current assets | | — | | 2,586 | | 2,914 | | 2,586 | | 2,914 | |||||
Total current assets | | — | | 46,948 | | 40,245 | | 46,948 | | 40,245 | |||||
Property and equipment, net of accumulated depreciation of $34,673 and $32,470, respectively | | — | | 20,683 | | 19,567 | | 20,683 | | 19,567 | |||||
Operating lease right-of-use assets (Note 10) | | — | | 1,777 | | 1,979 | | 1,777 | | 1,979 | |||||
Goodwill (Note 3) | | — | | 14,916 | | 14,916 | | 14,916 | | 14,916 | |||||
Other assets | | — | | 1,066 | | 985 | | 1,066 | | 985 | |||||
Total assets | | $— | | $85,390 | | $77,692 | | $85,390 | | $77,692 | |||||
| | | | | |||||||||||
LIABILITIES, REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT | | | | | | ||||||||||
Current liabilities | | | | | | ||||||||||
Senior term loan, net of unamortized discount and issuance costs – short-term (Note 5) | | $— | | $16,688 | | $— | | $16,688 | | $— | |||||
Accounts payable and other accrued liabilities (Note 5) | | — | | 19,638 | | 15,050 | | 19,638 | | 15,050 | |||||
Accrued compensation and benefits | | — | | 12,275 | | 12,187 | | 12,275 | | 12,187 | |||||
Contract liabilities (Note 1 and 5) | | — | | 6,682 | | 6,337 | | 6,682 | | 6,337 | |||||
Finance lease obligations – short-term (Note 10) | | — | | 1,281 | | 1,224 | | 1,281 | | 1,224 | |||||
Other current liabilities (Note 10) | | — | | 3,146 | | 2,505 | | 3,146 | | 2,505 | |||||
Total current liabilities | | — | | 59,710 | | 37,303 | | 59,710 | | 37,303 | |||||
| | | | | |||||||||||
Senior term loan, net of unamortized discount and issuance costs (Note 5) | | — | | — | | 16,335 | | 0 | | 16,335 | |||||
Subordinated debt (Note 5) | | — | | 3,102 | | 2,927 | | 3,102 | | 2,927 | |||||
Finance lease obligations – long-term (Note 10) | | — | | 14,990 | | 15,641 | | 14,990 | | 15,641 | |||||
Operating lease liabilities – long-term (Note 10) | | — | | 1,274 | | 1,553 | | 1,274 | | 1,553 | |||||
Deferred income taxes (Note 7) | | — | | 640 | | 621 | | 640 | | 621 | |||||
Public preferred stock (Note 6) | | — | | 141,121 | | 139,210 | | 141,121 | | 139,210 | |||||
Other liabilities (Note 7) | | — | | 562 | | 724 | | 562 | | 724 | |||||
Total liabilities | | — | | 221,399 | | 214,314 | | 221,399 | | 214,314 | |||||
| | | | | |||||||||||
Commitments and contingencies (Note 8) | | — | | — | | — | | — | | — | |||||
| | | | | |||||||||||
Stockholders’ deficit | | | | | | ||||||||||
Telos stockholders’ deficit | | | | | | ||||||||||
Common stock | | — | | 78 | | 78 | | 78 | | 78 | |||||
Additional paid-in capital | | — | | 4,310 | | 4,310 | | 4,310 | | 4,310 | |||||
Accumulated other comprehensive income | | — | | 7 | | 6 | | 7 | | 6 | |||||
Accumulated deficit | | — | | (147,508) | | (145,530) | | (147,508) | | (145,530) | |||||
Total Telos stockholders’ deficit | | — | | (143,113) | | (141,136) | | (143,113) | | (141,136) | |||||
Non-controlling interest in subsidiary (Note 2) | | — | | 7,104 | | 4,514 | | 7,104 | | 4,514 | |||||
Total stockholders’ deficit | | — | | (136,009) | | (136,622) | | (136,009) | | (136,622) | |||||
Total liabilities, redeemable preferred stock, and stockholders’ deficit | | $— | | $85,390 | | $77,692 | | $85,390 | | $77,692 |
| | Six Months Ended June 30, | ||||
| | 2020 | | | 2019 | |
Operating activities: | | | | | ||
Net income (loss) | | | $1,612 | | | $(4,934) |
Adjustments to reconcile net income (loss) to cash provided by operating activities: | | | | | ||
Dividends from preferred stock recorded as interest expense | | | 1,911 | | | 1,912 |
Depreciation and amortization | | | 2,734 | | | 2,341 |
Amortization of debt issuance costs | | | 453 | | | 111 |
Deferred income tax provision (benefit) | | | 19 | | | (215) |
Other noncash items | | | (17) | | | — |
Changes in other operating assets and liabilities | | | (5,873) | | | 6,711 |
Cash provided by operating activities | | | 839 | | | 5,926 |
| | | | |||
Investing activities: | | | | | ||
Capitalized software development costs | | | (3,159) | | | (1,287) |
Purchases of property and equipment | | | (332) | | | (2,410) |
Cash used in investing activities | | | (3,491) | | | (3,697) |
| | | | |||
Financing activities: | | | | | ||
Payments under finance lease obligations | | | (594) | | | (541) |
Amendment fee paid to lender | | | (100) | | | — |
Distributions to Telos ID Class B member – non-controlling interest | | | (1,000) | | | (984) |
Cash used in financing activities | | | (1,694) | | | (1,525) |
(Decrease) increase in cash and cash equivalents | | | (4,346) | | | 704 |
Cash and cash equivalents, beginning of period | | | 6,751 | | | 72 |
Cash and cash equivalents, end of period | | | $2,405 | | | $776 |
Supplemental disclosures of cash flow information: | | | | | ||
Cash paid during the period for: | | | | | ||
Interest | | | $1,474 | | | $1,428 |
Income taxes | | | $50 | | | $39 |
| | | | |||
Noncash: | | | | | ||
Dividends from preferred stock recorded as interest expense | | | $1,911 | | | $1,912 |
| | Telos Corporation | | | | | ||||||||||||
| | Common Stock | | | Additional Paid-in Capital | | | Accumulated Other Comprehen- sive Income | | | Accumulated Deficit | | | Non- Controlling Interest | | | Total Stockholders’ Deficit | |
For the Three Months Ended June 30, 2020 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $5 | | | $(147,774) | | | $5,298 | | | $(138,083) |
Net income | | | — | | | — | | | — | | | 266 | | | 2,806 | | | 3,072 |
Foreign currency translation gain | | | — | | | — | | | 2 | | | — | | | — | | | 2 |
Distributions | | | — | | | — | | | — | | | — | | | (1,000) | | | (1,000) |
Ending balance | | | $78 | | | $4,310 | | | $7 | | | $(147,508) | | | $7,104 | | | $(136,009) |
| | | | | | | | | | | | |||||||
For the Three Months Ended June 30, 2019 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $19 | | | $(142,542) | | | $2,378 | | | $(135,757) |
Net loss | | | — | | | — | | | — | | | (1,741) | | | (253) | | | (1,994) |
Distributions | | | — | | | — | | | — | | | — | | | (268) | | | (268) |
Ending balance | | | $78 | | | $4,310 | | | $19 | | | $(144,283) | | | $1,857 | | | $(138,019) |
| | | | | | | | | | | | |||||||
For the Six Months Ended June 30, 2020 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $6 | | | $(145,530) | | | $4,514 | | | $(136,622) |
Net (loss) income | | | — | | | — | | | — | | | (1,978) | | | 3,590 | | | 1,612 |
Foreign currency translation gain | | | — | | | — | | | 1 | | | — | | | — | | | 1 |
Distributions | | | — | | | — | | | — | | | — | | | (1,000) | | | (1,000) |
Ending balance | | | $78 | | | $4,310 | | | $7 | | | $(147,508) | | | $7,104 | | | $(136,009) |
| | | | | | | | | | | | |||||||
For the Six Months Ended June 30, 2019 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $17 | | | $(139,129) | | | $2,621 | | | $(132,103) |
Net (loss) income | | | — | | | — | | | — | | | (5,154) | | | 220 | | | (4,934) |
Foreign currency translation gain | | | — | | | — | | | 2 | | | — | | | — | | | 2 |
Distributions | | | — | | | — | | | — | | | — | | | (984) | | | (984) |
Ending balance | | | $78 | | | $4,310 | | | $19 | | | $(144,283) | | | $1,857 | | | $(138,019) |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Federal | | | $46,877 | | | $33,774 | | | $82,968 | | | $62,757 |
State & Local, and Commercial | | | 1,733 | | | 2,274 | | | 4,621 | | | 4,457 |
Total | | | $48,610 | | | $36,048 | | | $87,589 | | | $67,214 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Firm fixed-price | | | $41,935 | | | $28,857 | | | $73,596 | | | $53,787 |
Time-and-materials | | | 3,637 | | | 3,691 | | | 7,462 | | | 7,620 |
Cost plus fixed fee | | | 3,038 | | | 3,500 | | | 6,531 | | | 5,807 |
Total | | | $48,610 | | | $36,048 | | | $87,589 | | | $67,214 |
| | June 30, 2020 | | | December 31, 2019 | |
Billed accounts receivable | | | $18,420 | | | $11,917 |
Unbilled receivables | | | 20,689 | | | 16,745 |
Allowance for doubtful accounts | | | (738) | | | (720) |
Receivables – net | | | $38,371 | | | $27,942 |
| | June 30, 2020 | | | December 31, 2019 | |
Contract liabilities | | | $6,682 | | | $6,337 |
| | Six Months Ended June 30, | ||||
| | 2020 | | | 2019 | |
Non-controlling interest, beginning of period | | | 75 | | | 1,206 |
Common Stock Warrants, exercisable at $1.321/share | | | 1,135 | | | 1,135 |
Total | | | 1,210 | | | 2,341 |
| | June 30, 2020 | | | December 31, 2019 | |
Cumulative foreign currency translation loss | | | $(100) | | | $(101) |
Cumulative actuarial gain on pension liability adjustment | | | 107 | | | 107 |
Accumulated other comprehensive income | | | $7 | | | $6 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Non-controlling interest, beginning of period | | | $5,298 | | | $2,378 | | | $4,514 | | | $2,621 |
Net income (loss) | | | 2,806 | | | (253) | | | 3,590 | | | 220 |
Distributions | | | (1,000) | | | (268) | | | (1,000) | | | (984) |
Non-controlling interest, end of period | | | $7,104 | | | $1,857 | | | $7,104 | | | $1,857 |
| | June 30, 2020 | | | December 31, 2019 | |
Senior term loan principal, including exit fee | | | $17,200 | | | $17,200 |
Less: Unamortized discount, debt issuance costs, and lender fees | | | (512) | | | (865) |
Senior term loan, net | | | $16,688 | | | $16,335 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Revenue | | | | | | | | | ||||
Services | | | $45,486 | | | $34,377 | | | $80,044 | | | $62,414 |
Products | | | 3,124 | | | 1,671 | | | 7,545 | | | 4,800 |
| | 48,610 | | | 36,048 | | | 87,589 | | | 67,214 | |
Costs and expenses | | | | | | | | | ||||
Cost of sales - Services | | | 29,378 | | | 25,203 | | | 54,243 | | | 45,394 |
Cost of sales - Products | | | 1,659 | | | 830 | | | 3,531 | | | 2,829 |
| | 31,037 | | | 26,033 | | | 57,774 | | | 48,223 | |
Selling, general and administrative expenses | | | 12,507 | | | 10,437 | | | 24,346 | | | 20,795 |
Operating income (loss) | | | 5,066 | | | (422) | | | 5,469 | | | (1,804) |
Other income (expense) | | | | | | | | | ||||
Other income | | | 4 | | | 188 | | | 12 | | | 193 |
Interest expense | | | (1,996) | | | (1,740) | | | (4,013) | | | (3,500) |
Income (loss) before income taxes | | | 3,074 | | | (1,974) | | | 1,468 | | | (5,111) |
(Provision for) benefit from income taxes (Note 7) | | | (2) | | | (20) | | | 144 | | | 177 |
Net income (loss) | | | 3,072 | | | (1,994) | | | 1,612 | | | (4,934) |
Less: Net (income) loss attributable to non-controlling interest (Note 2) | | | (2,806) | | | 253 | | | (3,590) | | | (220) |
Net income (loss) attributable to Telos Corporation | | | $266 | | | $(1,741) | | | $(1,978) | | | $(5,154) |
Net earnings (loss) per share attributable to Telos Corporation, Common A, basic | | | $0.01 | | | $(0.04) | | | $(0.04) | | | $(0.11) |
Net earnings (loss) per share attributable to Telos Corporation, Common B, basic | | | $0.01 | | | $(0.04) | | | $(0.04) | | | $(0.11) |
Net earnings (loss) per share attributable to Telos Corporation, Common A, diluted | | | $0.01 | | | $(0.04) | | | $(0.04) | | | $(0.11) |
Net earnings (loss) per share attributable to Telos Corporation, Common B, diluted | | | $0.01 | | | $(0.04) | | | $(0.04) | | | $(0.11) |
Weighted-average shares of stock outstanding, Common A, basic | | | 44,580 | | | 43,394 | | | 44,259 | | | 43,064 |
Weighted-average shares of stock outstanding, Common B, basic | | | 4,038 | | | 4,038 | | | 4,038 | | | 4,038 |
Weighted-average shares of stock outstanding, Common A, diluted | | | 46,279 | | | 43,394 | | | 44,259 | | | 43,064 |
Weighted-average shares of stock outstanding, Common B, diluted | | | 4,038 | | | 4,038 | | | 4,038 | | | 4,038 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Net income (loss) | | | $3,072 | | | $(1,994) | | | $1,612 | | | $(4,934) |
Other comprehensive income, net of tax: | | | | | | | | | ||||
Foreign currency translation adjustments | | | 2 | | | — | | | 1 | | | 2 |
Less: Comprehensive (income) loss attributable to non-controlling interest | | | (2,806) | | | 253 | | | (3,590) | | | (220) |
Comprehensive income (loss) attributable to Telos Corporation | | | $268 | | | $(1,741) | | | $(1,977) | | | $(5,152) |
| | June 30, 2020 | | | December 31, 2019 | |
ASSETS | | | (Unaudited) | | | |
Current assets | | | | | ||
Cash and cash equivalents | | | $2,405 | | | $6,751 |
Accounts receivable, net of reserve of $738 and $720, respectively (Note 1) | | | 38,371 | | | 27,942 |
Inventories, net of obsolescence reserve of $861 and $860, respectively (Note 1) | | | 3,336 | | | 1,965 |
Deferred program expenses | | | 250 | | | 673 |
Other current assets | | | 2,586 | | | 2,914 |
Total current assets | | | 46,948 | | | 40,245 |
Property and equipment, net of accumulated depreciation of $34,673 and $32,470, respectively | | | 20,683 | | | 19,567 |
Operating lease right-of-use assets (Note 10) | | | 1,777 | | | 1,979 |
Goodwill (Note 3) | | | 14,916 | | | 14,916 |
Other assets | | | 1,066 | | | 985 |
Total assets | | | $85,390 | | | $77,692 |
| | | | |||
LIABILITIES, REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT | | | | | ||
Current liabilities | | | | | ||
Senior term loan, net of unamortized discount and issuance costs – short-term (Note 5) | | | $16,688 | | | $— |
Accounts payable and other accrued liabilities (Note 5) | | | 19,638 | | | 15,050 |
Accrued compensation and benefits | | | 12,275 | | | 12,187 |
Contract liabilities (Note 1 and 5) | | | 6,682 | | | 6,337 |
Finance lease obligations – short-term (Note 10) | | | 1,281 | | | 1,224 |
Other current liabilities (Note 10) | | | 3,146 | | | 2,505 |
Total current liabilities | | | 59,710 | | | 37,303 |
| | | | |||
Senior term loan, net of unamortized discount and issuance costs (Note 5) | | | 0 | | | 16,335 |
Subordinated debt (Note 5) | | | 3,102 | | | 2,927 |
Finance lease obligations – long-term (Note 10) | | | 14,990 | | | 15,641 |
Operating lease liabilities – long-term (Note 10) | | | 1,274 | | | 1,553 |
Deferred income taxes (Note 7) | | | 640 | | | 621 |
Public preferred stock (Note 6) | | | 141,121 | | | 139,210 |
Other liabilities (Note 7) | | | 562 | | | 724 |
Total liabilities | | | 221,399 | | | 214,314 |
| | | | |||
Commitments and contingencies (Note 8) | | | — | | | — |
| | | | |||
Stockholders’ deficit | | | | | ||
Telos stockholders’ deficit | | | | | ||
Common stock | | | 78 | | | 78 |
Additional paid-in capital | | | 4,310 | | | 4,310 |
Accumulated other comprehensive income | | | 7 | | | 6 |
Accumulated deficit | | | (147,508) | | | (145,530) |
Total Telos stockholders’ deficit | | | (143,113) | | | (141,136) |
Non-controlling interest in subsidiary (Note 2) | | | 7,104 | | | 4,514 |
Total stockholders’ deficit | | | (136,009) | | | (136,622) |
Total liabilities, redeemable preferred stock, and stockholders’ deficit | | | $85,390 | | | $77,692 |
| | Six Months Ended June 30, | ||||
| | 2020 | | | 2019 | |
Operating activities: | | | | | ||
Net income (loss) | | | $1,612 | | | $(4,934) |
Adjustments to reconcile net income (loss) to cash provided by operating activities: | | | | | ||
Dividends from preferred stock recorded as interest expense | | | 1,911 | | | 1,912 |
Depreciation and amortization | | | 2,734 | | | 2,341 |
Amortization of debt issuance costs | | | 453 | | | 111 |
Deferred income tax provision (benefit) | | | 19 | | | (215) |
Other noncash items | | | (17) | | | — |
Changes in other operating assets and liabilities | | | (5,873) | | | 6,711 |
Cash provided by operating activities | | | 839 | | | 5,926 |
| | | | |||
Investing activities: | | | | | ||
Capitalized software development costs | | | (3,159) | | | (1,287) |
Purchases of property and equipment | | | (332) | | | (2,410) |
Cash used in investing activities | | | (3,491) | | | (3,697) |
| | | | |||
Financing activities: | | | | | ||
Payments under finance lease obligations | | | (594) | | | (541) |
Amendment fee paid to lender | | | (100) | | | — |
Distributions to Telos ID Class B member – non-controlling interest | | | (1,000) | | | (984) |
Cash used in financing activities | | | (1,694) | | | (1,525) |
(Decrease) increase in cash and cash equivalents | | | (4,346) | | | 704 |
Cash and cash equivalents, beginning of period | | | 6,751 | | | 72 |
Cash and cash equivalents, end of period | | | $2,405 | | | $776 |
Supplemental disclosures of cash flow information: | | | | | ||
Cash paid during the period for: | | | | | ||
Interest | | | $1,474 | | | $1,428 |
Income taxes | | | $50 | | | $39 |
| | | | |||
Noncash: | | | | | ||
Dividends from preferred stock recorded as interest expense | | | $1,911 | | | $1,912 |
| | Telos Corporation | | | | | ||||||||||||
| | Common Stock | | | Additional Paid-in Capital | | | Accumulated Other Comprehen- sive Income | | | Accumulated Deficit | | | Non- Controlling Interest | | | Total Stockholders’ Deficit | |
For the Three Months Ended June 30, 2020 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $5 | | | $(147,774) | | | $5,298 | | | $(138,083) |
Net income | | | — | | | — | | | — | | | 266 | | | 2,806 | | | 3,072 |
Foreign currency translation gain | | | — | | | — | | | 2 | | | — | | | — | | | 2 |
Distributions | | | — | | | — | | | — | | | — | | | (1,000) | | | (1,000) |
Ending balance | | | $78 | | | $4,310 | | | $7 | | | $(147,508) | | | $7,104 | | | $(136,009) |
| | | | | | | | | | | | |||||||
For the Three Months Ended June 30, 2019 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $19 | | | $(142,542) | | | $2,378 | | | $(135,757) |
Net loss | | | — | | | — | | | — | | | (1,741) | | | (253) | | | (1,994) |
Distributions | | | — | | | — | | | — | | | — | | | (268) | | | (268) |
Ending balance | | | $78 | | | $4,310 | | | $19 | | | $(144,283) | | | $1,857 | | | $(138,019) |
| | | | | | | | | | | | |||||||
For the Six Months Ended June 30, 2020 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $6 | | | $(145,530) | | | $4,514 | | | $(136,622) |
Net (loss) income | | | — | | | — | | | — | | | (1,978) | | | 3,590 | | | 1,612 |
Foreign currency translation gain | | | — | | | — | | | 1 | | | — | | | — | | | 1 |
Distributions | | | — | | | — | | | — | | | — | | | (1,000) | | | (1,000) |
Ending balance | | | $78 | | | $4,310 | | | $7 | | | $(147,508) | | | $7,104 | | | $(136,009) |
| | | | | | | | | | | | |||||||
For the Six Months Ended June 30, 2019 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $17 | | | $(139,129) | | | $2,621 | | | $(132,103) |
Net (loss) income | | | — | | | — | | | — | | | (5,154) | | | 220 | | | (4,934) |
Foreign currency translation gain | | | — | | | — | | | 2 | | | — | | | — | | | 2 |
Distributions | | | — | | | — | | | — | | | — | | | (984) | | | (984) |
Ending balance | | | $78 | | | $4,310 | | | $19 | | | $(144,283) | | | $1,857 | | | $(138,019) |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Revenue | | | | | | | | | ||||
Services | | | $45,486 | | | $34,377 | | | $80,044 | | | $62,414 |
Products | | | 3,124 | | | 1,671 | | | 7,545 | | | 4,800 |
| | 48,610 | | | 36,048 | | | 87,589 | | | 67,214 | |
Costs and expenses | | | | | | | | | ||||
Cost of sales - Services | | | 29,378 | | | 25,203 | | | 54,243 | | | 45,394 |
Cost of sales - Products | | | 1,659 | | | 830 | | | 3,531 | | | 2,829 |
| | 31,037 | | | 26,033 | | | 57,774 | | | 48,223 | |
Selling, general and administrative expenses | | | 12,507 | | | 10,437 | | | 24,346 | | | 20,795 |
Operating income (loss) | | | 5,066 | | | (422) | | | 5,469 | | | (1,804) |
Other income (expense) | | | | | | | | | ||||
Other income | | | 4 | | | 188 | | | 12 | | | 193 |
Interest expense | | | (1,996) | | | (1,740) | | | (4,013) | | | (3,500) |
Income (loss) before income taxes | | | 3,074 | | | (1,974) | | | 1,468 | | | (5,111) |
(Provision for) benefit from income taxes (Note 7) | | | (2) | | | (20) | | | 144 | | | 177 |
Net income (loss) | | | 3,072 | | | (1,994) | | | 1,612 | | | (4,934) |
Less: Net (income) loss attributable to non-controlling interest (Note 2) | | | (2,806) | | | 253 | | | (3,590) | | | (220) |
Net income (loss) attributable to Telos Corporation | | | $266 | | | $(1,741) | | | $(1,978) | | | $(5,154) |
Net earnings (loss) per share attributable to Telos Corporation, Common A, basic | | | $0.01 | | | $(0.04) | | | $(0.04) | | | $(0.11) |
Net earnings (loss) per share attributable to Telos Corporation, Common B, basic | | | $0.01 | | | $(0.04) | | | $(0.04) | | | $(0.11) |
Net earnings (loss) per share attributable to Telos Corporation, Common A, diluted | | | $0.01 | | | $(0.04) | | | $(0.04) | | | $(0.11) |
Net earnings (loss) per share attributable to Telos Corporation, Common B, diluted | | | $0.01 | | | $(0.04) | | | $(0.04) | | | $(0.11) |
Weighted-average shares of stock outstanding, Common A, basic | | | 44,580 | | | 43,394 | | | 44,259 | | | 43,064 |
Weighted-average shares of stock outstanding, Common B, basic | | | 4,038 | | | 4,038 | | | 4,038 | | | 4,038 |
Weighted-average shares of stock outstanding, Common A, diluted | | | 46,279 | | | 43,394 | | | 44,259 | | | 43,064 |
Weighted-average shares of stock outstanding, Common B, diluted | | | 4,038 | | | 4,038 | | | 4,038 | | | 4,038 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Net income (loss) | | | $3,072 | | | $(1,994) | | | $1,612 | | | $(4,934) |
Other comprehensive income, net of tax: | | | | | | | | | ||||
Foreign currency translation adjustments | | | 2 | | | — | | | 1 | | | 2 |
Less: Comprehensive (income) loss attributable to non-controlling interest | | | (2,806) | | | 253 | | | (3,590) | | | (220) |
Comprehensive income (loss) attributable to Telos Corporation | | | $268 | | | $(1,741) | | | $(1,977) | | | $(5,152) |
| | June 30, 2020 | | | December 31, 2019 | |
ASSETS | | | (Unaudited) | | | |
Current assets | | | | | ||
Cash and cash equivalents | | | $2,405 | | | $6,751 |
Accounts receivable, net of reserve of $738 and $720, respectively (Note 1) | | | 38,371 | | | 27,942 |
Inventories, net of obsolescence reserve of $861 and $860, respectively (Note 1) | | | 3,336 | | | 1,965 |
Deferred program expenses | | | 250 | | | 673 |
Other current assets | | | 2,586 | | | 2,914 |
Total current assets | | | 46,948 | | | 40,245 |
Property and equipment, net of accumulated depreciation of $34,673 and $32,470, respectively | | | 20,683 | | | 19,567 |
Operating lease right-of-use assets (Note 10) | | | 1,777 | | | 1,979 |
Goodwill (Note 3) | | | 14,916 | | | 14,916 |
Other assets | | | 1,066 | | | 985 |
Total assets | | | $85,390 | | | $77,692 |
| | | | |||
LIABILITIES, REDEEMABLE PREFERRED STOCK, AND STOCKHOLDERS’ DEFICIT | | | | | ||
Current liabilities | | | | | ||
Senior term loan, net of unamortized discount and issuance costs – short-term (Note 5) | | | $16,688 | | | $— |
Accounts payable and other accrued liabilities (Note 5) | | | 19,638 | | | 15,050 |
Accrued compensation and benefits | | | 12,275 | | | 12,187 |
Contract liabilities (Note 1 and 5) | | | 6,682 | | | 6,337 |
Finance lease obligations – short-term (Note 10) | | | 1,281 | | | 1,224 |
Other current liabilities (Note 10) | | | 3,146 | | | 2,505 |
Total current liabilities | | | 59,710 | | | 37,303 |
| | | | |||
Senior term loan, net of unamortized discount and issuance costs (Note 5) | | | 0 | | | 16,335 |
Subordinated debt (Note 5) | | | 3,102 | | | 2,927 |
Finance lease obligations – long-term (Note 10) | | | 14,990 | | | 15,641 |
Operating lease liabilities – long-term (Note 10) | | | 1,274 | | | 1,553 |
Deferred income taxes (Note 7) | | | 640 | | | 621 |
Public preferred stock (Note 6) | | | 141,121 | | | 139,210 |
Other liabilities (Note 7) | | | 562 | | | 724 |
Total liabilities | | | 221,399 | | | 214,314 |
| | | | |||
Commitments and contingencies (Note 8) | | | — | | | — |
| | | | |||
Stockholders’ deficit | | | | | ||
Telos stockholders’ deficit | | | | | ||
Common stock | | | 78 | | | 78 |
Additional paid-in capital | | | 4,310 | | | 4,310 |
Accumulated other comprehensive income | | | 7 | | | 6 |
Accumulated deficit | | | (147,508) | | | (145,530) |
Total Telos stockholders’ deficit | | | (143,113) | | | (141,136) |
Non-controlling interest in subsidiary (Note 2) | | | 7,104 | | | 4,514 |
Total stockholders’ deficit | | | (136,009) | | | (136,622) |
Total liabilities, redeemable preferred stock, and stockholders’ deficit | | | $85,390 | | | $77,692 |
| | Six Months Ended June 30, | ||||
| | 2020 | | | 2019 | |
Operating activities: | | | | | ||
Net income (loss) | | | $1,612 | | | $(4,934) |
Adjustments to reconcile net income (loss) to cash provided by operating activities: | | | | | ||
Dividends from preferred stock recorded as interest expense | | | 1,911 | | | 1,912 |
Depreciation and amortization | | | 2,734 | | | 2,341 |
Amortization of debt issuance costs | | | 453 | | | 111 |
Deferred income tax provision (benefit) | | | 19 | | | (215) |
Other noncash items | | | (17) | | | — |
Changes in other operating assets and liabilities | | | (5,873) | | | 6,711 |
Cash provided by operating activities | | | 839 | | | 5,926 |
| | | | |||
Investing activities: | | | | | ||
Capitalized software development costs | | | (3,159) | | | (1,287) |
Purchases of property and equipment | | | (332) | | | (2,410) |
Cash used in investing activities | | | (3,491) | | | (3,697) |
| | | | |||
Financing activities: | | | | | ||
Payments under finance lease obligations | | | (594) | | | (541) |
Amendment fee paid to lender | | | (100) | | | — |
Distributions to Telos ID Class B member – non-controlling interest | | | (1,000) | | | (984) |
Cash used in financing activities | | | (1,694) | | | (1,525) |
(Decrease) increase in cash and cash equivalents | | | (4,346) | | | 704 |
Cash and cash equivalents, beginning of period | | | 6,751 | | | 72 |
Cash and cash equivalents, end of period | | | $2,405 | | | $776 |
Supplemental disclosures of cash flow information: | | | | | ||
Cash paid during the period for: | | | | | ||
Interest | | | $1,474 | | | $1,428 |
Income taxes | | | $50 | | | $39 |
| | | | |||
Noncash: | | | | | ||
Dividends from preferred stock recorded as interest expense | | | $1,911 | | | $1,912 |
| | Telos Corporation | | | | | ||||||||||||
| | Common Stock | | | Additional Paid-in Capital | | | Accumulated Other Comprehen- sive Income | | | Accumulated Deficit | | | Non- Controlling Interest | | | Total Stockholders’ Deficit | |
For the Three Months Ended June 30, 2020 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $5 | | | $(147,774) | | | $5,298 | | | $(138,083) |
Net income | | | — | | | — | | | — | | | 266 | | | 2,806 | | | 3,072 |
Foreign currency translation gain | | | — | | | — | | | 2 | | | — | | | — | | | 2 |
Distributions | | | — | | | — | | | — | | | — | | | (1,000) | | | (1,000) |
Ending balance | | | $78 | | | $4,310 | | | $7 | | | $(147,508) | | | $7,104 | | | $(136,009) |
| | | | | | | | | | | | |||||||
For the Three Months Ended June 30, 2019 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $19 | | | $(142,542) | | | $2,378 | | | $(135,757) |
Net loss | | | — | | | — | | | — | | | (1,741) | | | (253) | | | (1,994) |
Distributions | | | — | | | — | | | — | | | — | | | (268) | | | (268) |
Ending balance | | | $78 | | | $4,310 | | | $19 | | | $(144,283) | | | $1,857 | | | $(138,019) |
| | | | | | | | | | | | |||||||
For the Six Months Ended June 30, 2020 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $6 | | | $(145,530) | | | $4,514 | | | $(136,622) |
Net (loss) income | | | — | | | — | | | — | | | (1,978) | | | 3,590 | | | 1,612 |
Foreign currency translation gain | | | — | | | — | | | 1 | | | — | | | — | | | 1 |
Distributions | | | — | | | — | | | — | | | — | | | (1,000) | | | (1,000) |
Ending balance | | | $78 | | | $4,310 | | | $7 | | | $(147,508) | | | $7,104 | | | $(136,009) |
| | | | | | | | | | | | |||||||
For the Six Months Ended June 30, 2019 | ||||||||||||||||||
Beginning balance | | | $78 | | | $4,310 | | | $17 | | | $(139,129) | | | $2,621 | | | $(132,103) |
Net (loss) income | | | — | | | — | | | — | | | (5,154) | | | 220 | | | (4,934) |
Foreign currency translation gain | | | — | | | — | | | 2 | | | — | | | — | | | 2 |
Distributions | | | — | | | — | | | — | | | — | | | (984) | | | (984) |
Ending balance | | | $78 | | | $4,310 | | | $19 | | | $(144,283) | | | $1,857 | | | $(138,019) |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Federal | | | $46,877 | | | $33,774 | | | $82,968 | | | $62,757 |
State & Local, and Commercial | | | 1,733 | | | 2,274 | | | 4,621 | | | 4,457 |
Total | | | $48,610 | | | $36,048 | | | $87,589 | | | $67,214 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Firm fixed-price | | | $41,935 | | | $28,857 | | | $73,596 | | | $53,787 |
Time-and-materials | | | 3,637 | | | 3,691 | | | 7,462 | | | 7,620 |
Cost plus fixed fee | | | 3,038 | | | 3,500 | | | 6,531 | | | 5,807 |
Total | | | $48,610 | | | $36,048 | | | $87,589 | | | $67,214 |
| | June 30, 2020 | | | December 31, 2019 | |
Billed accounts receivable | | | $18,420 | | | $11,917 |
Unbilled receivables | | | 20,689 | | | 16,745 |
Allowance for doubtful accounts | | | (738) | | | (720) |
Receivables – net | | | $38,371 | | | $27,942 |
| | June 30, 2020 | | | December 31, 2019 | |
Contract liabilities | | | $6,682 | | | $6,337 |
| | Six Months Ended June 30, | ||||
| | 2020 | | | 2019 | |
Unvested Restricted Stock | | | 75 | | | 1,206 |
Common Stock Warrants, exercisable at $1.321/share | | | 1,135 | | | 1,135 |
Total | | | 1,210 | | | 2,341 |
| | June 30, 2020 | | | December 31, 2019 | |
Cumulative foreign currency translation loss | | | $(100) | | | $(101) |
Cumulative actuarial gain on pension liability adjustment | | | 107 | | | 107 |
Accumulated other comprehensive income | | | $7 | | | $6 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Non-controlling interest, beginning of period | | | $5,298 | | | $2,378 | | | $4,514 | | | $2,621 |
Net income (loss) | | | 2,806 | | | (253) | | | 3,590 | | | 220 |
Distributions | | | (1,000) | | | (268) | | | (1,000) | | | (984) |
Non-controlling interest, end of period | | | $7,104 | | | $1,857 | | | $7,104 | | | $1,857 |
| | June 30, 2020 | | | December 31, 2019 | |
Senior term loan principal, including exit fee | | | $17,200 | | | $17,200 |
Less: Unamortized discount, debt issuance costs, and lender fees | | | (512) | | | (865) |
Senior term loan, net | | | $16,688 | | | $16,335 |
Year ending December 31, | | | Operating Leases | | | Finance Leases |
2020 (excluding the six months ended June 30, 2020) | | | $371 | | | $1,033 |
2021 | | | 752 | | | 2,097 |
2022 | | | 592 | | | 2,149 |
2023 | | | 373 | | | 2,203 |
2024 | | | 27 | | | 2,258 |
After 2024 | | | — | | | 10,658 |
Total lease payments | | | 2,115 | | | 20,398 |
Less imputed interest | | | (178) | | | (4,127) |
Total | | | $1,937 | | | $16,271 |
| | Three Months Ended June 30, | | | Six Months Ended June 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Operating lease cost | | | $182 | | | $147 | | | $360 | | | $294 |
Short-term lease cost(1) | | | 30 | | | 42 | | | 57 | | | 84 |
Finance lease cost | | | | | | | | | ||||
Amortization of right-of-use assets | | | 305 | | | 305 | | | 610 | | | 610 |
Interest on lease liabilities | | | 208 | | | 222 | | | 419 | | | 447 |
Total finance lease cost | | | 513 | | | 527 | | | 1,029 | | | 1,057 |
Total lease costs | | | $725 | | | $716 | | | $1,446 | | | $1,435 |
(1) | Leases that have terms of 12 months or less |
| | Six Months Ended June 30, | ||||
| | 2020 | | | 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | ||
Cash flows from operating activities - operating leases | | | $375 | | | $279 |
Cash flows from operating activities - finance leases | | | 1,012 | | | 987 |
Operating lease right-of-use assets obtained in exchange for operating lease liabilities | | | 300 | | | 245 |
B. Riley Securities | | | BMO Capital Markets | | | Needham & Company |
Colliers Securities LLC | | | D.A. Davidson & Co. | | | Northland Capital Markets | | | Wedbush Securities | | | MKM Partners |
Item 13. | Other Expenses of Issuance and Distribution |
| | Amount to be Paid | |
SEC registration fee | | | $ |
FINRA filing fee | | | $ |
Nasdaq listing fee | | | $ |
Printing expenses | | | $ |
Legal fees and expenses | | | $ |
Accounting fees and expenses | | | $ |
Transfer agent and registrar expenses | | | $30,000 |
Underwriters’ fees and expenses | | | $ |
| |||
Miscellaneous expenses | | | $ |
Total | | | $ |
Item 14. | Indemnification of Directors and Officers |
Item 15. | Recent Sales of Unregistered Securities |
Item 16. | Exhibits and Financial Statement Schedules |
Exhibit Number | | | Description |
| | Form of Underwriting Agreement | |
| | ||
| | Articles of Amendment of C3, Inc. dated April 13, 1995 (Incorporated by reference to Exhibit 3.6 filed with the Company’s Form 10-K report for the year ended December 31, 2011) | |
| | ||
| | Amended and Restated Bylaws of the Company, as amended on October 3, 2007 (Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed on October 5, 2007) | |
| | ||
| | Credit Agreement, dated January 25, 2017, among Telos Corporation, Xacta Corporation, ubIQuity.com, Inc., Teloworks, Inc., Enlightenment Capital Solutions Fund II, L.P., and the lenders party thereto (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on January 31, 2017) | |
| | ||
| | First Amendment to Credit Agreement, effective as of February 23, 2017, among the Company, Xacta Corporation, ubIQuity.com, Inc., Teloworks, Inc., Enlightenment Capital Solutions Fund II, L.P., and the lenders party thereto (Incorporated by reference to Exhibit 4.2 filed with the Company’s Form 10-K report for the year ended December 31, 2016) | |
| | ||
| | Second Amendment to Credit Agreement, dated April 18, 2017, among the Company, Xacta Corporation, ubIQuity.com, Inc., Teloworks, Inc., Enlightenment Capital Solutions Fund II, L.P., and the lenders party thereto (Incorporated by reference to Exhibit 4.1 filed with the Company’s Current Report on Form 8-K on April 24, 2017) | |
| | ||
| | Subordination and Intercreditor Agreement, dated April 18, 2017, among JP Charitable Foundation, the Company, Xacta Corporation, ubIQuity.com, Inc., Teloworks, Inc., and Enlightenment Capital Solutions Fund II, L.P. (Incorporated by reference to Exhibit 4.2 filed with the Company’s Current Report on Form 8-K on April 24, 2017) | |
| | ||
| | Subordination and Intercreditor Agreement, dated April 18, 2017, among Porter Foundation Switzerland, the Company, Xacta Corporation, ubIQuity.com, Inc., Teloworks, Inc., and Enlightenment Capital Solutions Fund II, L.P. (Incorporated by reference to Exhibit 4.3 filed with the Company’s Current Report on Form 8-K on April 24, 2017) | |
| |
Exhibit Number | | | Description |
| | First Amendment to Subordinated Loan Agreement, dated April 18, 2017, between the Company and JP Charitable Foundation (Incorporated by reference to Exhibit 4.4 filed with the Company’s Current Report on Form 8-K on April 24, 2017) | |
| | ||
| | First Amendment to Subordinated Loan Agreement, dated April 18, 2017, between the Company and Porter Foundation Switzerland (Incorporated by reference to Exhibit 4.5 filed with the Company’s Current Report on Form 8-K on April 24, 2017) | |
| | ||
| | Amended and Restated Subordinated Promissory Note, dated April 18, 2017, by the Company in favor of JP Charitable Foundation (Incorporated by reference to Exhibit 4.6 filed with the Company’s Current Report on Form 8-K on April 24, 2017) | |
| | ||
| | Amended and Restated Subordinated Promissory Note, dated April 18, 2017, by the Company in favor of Porter Foundation Switzerland (Incorporated by reference to Exhibit 4.7 filed with the Company’s Current Report on Form 8-K on April 24, 2017) | |
| | ||
| | Third Amendment to Credit Agreement and Waiver, dated March 30, 2018, among the Company, Xacta Corporation, ubIQuity.com, Inc., Teloworks, Inc., Enlightenment Capital Solutions Fund II, L.P., and the lenders party thereto (Incorporated by reference to Exhibit 4.10 filed with the Company’s Form 10-K report for the year ended December 31, 2017) | |
| | ||
| | Fourth Amendment to Credit Agreement and Waiver; First Amendment to Fee Letter between the Company and Enlightenment Capital Solutions Fund II, L.P., dated July 19, 2019 (Incorporated by reference to Exhibit 99.1 filed with the Company’s Current Report on Form 8-K on July 23, 2019) | |
| | ||
| | Fifth Amendment to Credit Agreement and Second Amendment to Fee Letter between the Company and Enlightenment Capital Solutions Fund II, L.P., dated March 26, 2020 (Incorporated by reference to Exhibit 99.1 filed with the Company’s Current Report on Form 8-K on March 30, 2020) | |
| | ||
| | Opinion of Miles & Stockbridge P.C. | |
| | ||
| | The Company’s 2008 Omnibus Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.21 filed with the Company’s Form 10-K report for the year ended December 31, 2007) | |
| | ||
| | Second Amended Employment Agreement, dated as of November 12, 2012, between the Company and John B. Wood (Incorporated by reference to Exhibit 10.1 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2012) | |
| | ||
| | Second Amended Employment Agreement, dated as of November 12, 2012, between the Company and Edward L. Williams (Incorporated by reference to Exhibit 10.2 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2012) | |
| | ||
| | Second Amended Employment Agreement, dated as of November 12, 2012, between the Company and Michele Nakazawa (Incorporated by reference to Exhibit 10.3 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2012) | |
| | ||
| | Amendment to Employment Agreement, dated as of November 12, 2012, between the Company and Brendan D. Malloy (Incorporated by reference to Exhibit 10.4 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2012) |
Exhibit Number | | | Description |
| | Form of Employment Agreement between the Company and six of its executive officers (Incorporated by reference to Exhibit 10.5 filed with the Company’s Form 10-Q report for the quarter ended September 30, 2012) | |
| | ||
| | Telos Corporation 2013 Omnibus Long-Term Incentive Plan (Incorporated by reference to Appendix A filed with the Company’s Definitive Proxy Statement on Schedule 14A on April 16, 2013) | |
| | ||
| | Form Restricted Stock Agreement (Incorporated by reference to Exhibit 99.2 filed with the Company’s Current Report on Form 8-K on May 15, 2013) | |
| | ||
| | Employment Agreement, dated as of January 4, 2013, between the Company and Jefferson V. Wright (Incorporated by reference to Exhibit 10.29 filed with the Company’s Form 10-K report for the year ended December 31, 2013) | |
| | ||
| | Second Amended and Restated Operating Agreement of Telos Identity Management Solutions , LLC, dated December 24, 2014 (Incorporated by reference to Exhibit 99.2 filed with the Company’s Current Report on Form 8-K on December 31, 2014) | |
| | ||
| | Subordinated Loan Agreement between the Company and Porter Foundation Switzerland dated March 31, 2015 (Incorporated by reference to Exhibit 10.37 filed with the Company’s Form 10-K/A report for the year ended December 31, 2014) | |
| | ||
| | Subordinated Promissory Note between the Company and Porter Foundation Switzerland dated March 31, 2015 (Incorporated by reference to Exhibit 10.38 filed with the Company’s Form 10-K/A report for the year ended December 31, 2014) | |
| | ||
| | Subordinated Loan Agreement between the Company and JP Charitable Foundation Switzerland dated March 31, 2015 (Incorporated by reference to Exhibit 10.39 filed with the Company’s Form 10-K/A report for the year ended December 31, 2014) | |
| | ||
| | Subordinated Promissory Note between the Company and JP Charitable Foundation Switzerland dated March 31, 2015 (Incorporated by reference to Exhibit 10.40 filed with the Company’s Form 10-K/A report for the year ended December 31, 2014) | |
| | ||
| | Accounts Receivable Purchase Agreement between the Company and Republic Capital Access, LLC dated July 15, 2016 (Incorporated by reference to Exhibit 99.1 filed with the Company’s Current Report on Form 8-K on July 21, 2016) | |
| | ||
| | Financing and Security Agreement between the Company and Action Capital Corporation, dated July 15, 2016 (Incorporated by reference to Exhibit 99.2 filed with the Company’s Current Report on Form 8-K on July 21, 2016) | |
| | ||
| | Telos Corporation 2016 Omnibus Long-Term Incentive Plan (Incorporated by reference to Exhibit 10.3 filed with the Company’s Form 10-Q report for the quarter ended June 30, 2016) | |
| | ||
| | Notice of Grant of Restricted Stock (Incorporated by reference to Exhibit 10.4 filed with the Company’s Form 10-Q report for the quarter ended June 30, 2016) | |
| |
Exhibit Number | | | Description |
| | Amendment to Financing and Security Agreement Between the Company and Action Capital Corporation dated September 6, 2016 (Incorporated by reference to Exhibit 99.1 filed with the Company’s Current Report on Form 8-K on September 9, 2016) | |
| | ||
| | Telos ID Sale Bonus Plan (Incorporated by reference to Exhibit 10.48 filed with the Company’s Form 10-K report for the year ended December 31, 2016) | |
| | ||
| | First Amendment to Accounts Receivable Purchase Agreement between the Company and Republic Capital Access, LLC dated March 2, 2018 (Incorporated by reference to Exhibit 10.48 filed with the Company’s Form 10-K report for the year ended December 31, 2017) | |
| | ||
| | Telos Corporation Senior Officer Incentive Program, Adopted as Revised March 29, 2018 (Incorporated by reference to Exhibit 10.49 filed with the Company’s Form 10-K report for the year ended December 31, 2017) | |
| | ||
| | Amendment to Financing and Security Agreement, dated August 13, 2018, between the Company and Action Capital Corporation (Incorporated by reference to Exhibit 10.1 filed with the Company’s Form 10-Q report for the quarter ended June 30, 2018) | |
| | ||
| | Second Amendment to Accounts Receivable Purchase Agreement, dated November 15, 2019, between the Company and Republic Capital Access, LLC (Incorporated by reference to Exhibit 10.24 filed with the Company’s Form 10-K report for the year ended December 31, 2019) | |
| | ||
| | List of subsidiaries of Telos Corporation (Incorporated by reference to Exhibit 21+ filed with the Company’s Annual Report on Form 10-K on April 13, 2020) | |
| | ||
| | Consent of BDO USA, LLP, independent registered accounting firm for the Company | |
| | ||
| | Consent of Miles & Stockbridge P.C. (included in Exhibit 5.1) | |
| | ||
| | Power of Attorney | |
| | ||
101.INS** | | | XBLR Instance Document |
| | ||
101.SCH** | | | XBRL Taxonomy Extension Schema |
| | ||
101.CAL** | | | 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 |
* | To be filed by amendment. |
** | Filed herewith. |
+ | Constitutes a management contract or compensatory plan or arrangement. |
Item 17. | Undertakings |
(1) | For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
(2) | For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| | TELOS CORPORATION | ||||
| | | | |||
| | By: | | | /s/ John B. Wood | |
| | | | Name: John B. Wood | ||
| | | | Title: Chief Executive Officer and Chairman of the Board (Principal Executive Officer) |
Signature | | | Title | | | Date |
/s/ John B. Wood* | | | Chief Executive Officer and Chairman of the Board (Principal Executive Officer) | | | |
John B. Wood | | |||||
| | | | |||
/s/ Michele Nakazawa* | | | Chief Financial Officer (Principal Financial and Accounting Officer) | | | |
Michele Nakazawa | | |||||
| | | | |||
/s/ Bernard C. Bailey* | | | Director | | | |
Bernard C. Bailey | | |||||
| | | | |||
/s/ David Borland* | | | Director | | | |
David Borland | ||||||
| ||||||
| | | | |||
/s/ John W. Maluda* | | | Director | | | |
Major General John W. Maluda (USAF, Ret.) | | |||||
| | | | |||
/s/ Robert J. Marino* | | | Director | | | |
Robert J. Marino | | |||||
| | | | |||
| | Director | | | ||
Bonnie Carroll | | |||||
| | | | |||
| | Director | | | ||
Fredrick Schaufeld | | |||||
| | | | |||
| | Director | | | November 10, 2020 | |
Andrew R. Siegel | | |||||
| | | | |||
/s/ William H. Alderman* | | | Director | | | |
William H. Alderman | |
* | Indicates that such individual signed their name pursuant to the power of attorney previously filed |