Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Jun. 30, 2017 | |
Entity Information [Line Items] | ||
Entity Registrant Name | TELOS CORP | |
Entity Central Index Key | 320,121 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Public Float | $ 0 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | FY | |
Document Type | 10-K | |
Amendment Flag | false | |
Document Period End Date | Dec. 31, 2017 | |
Class A Common Stock [Member] | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 45,213,461 | |
Class B Common Stock [Member] | ||
Entity Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 4,037,628 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Revenue (Note 5) | |||
Services | $ 81,606 | $ 112,881 | $ 97,659 |
Products | 26,121 | 21,987 | 22,975 |
Total Revenue | 107,727 | 134,868 | 120,634 |
Costs and expenses | |||
Cost of sales - Services | 49,965 | 77,578 | 73,079 |
Cost of sales - Products | 17,196 | 13,844 | 16,882 |
Total costs and expenses | 67,161 | 91,422 | 89,961 |
Selling, general and administrative expenses | 40,152 | 41,334 | 34,290 |
Operating income (loss) | 414 | 2,112 | (3,617) |
Other income (expenses) | |||
Non-operating income | 11 | 18 | 19 |
Interest expense | (6,690) | (5,465) | (5,639) |
Loss before income taxes | (6,265) | (3,335) | (9,237) |
Benefit (provision) for income taxes (Note 9) | 2,767 | (334) | (4,265) |
Net loss | (3,498) | (3,669) | (13,502) |
Less: Net income attributable to non-controlling interest (Note 2) | (2,335) | (3,506) | (2,438) |
Net loss attributable to Telos Corporation | $ (5,833) | $ (7,175) | $ (15,940) |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) [Abstract] | |||
Net loss | $ (3,498) | $ (3,669) | $ (13,502) |
Other comprehensive income (loss): | |||
Foreign currency translation adjustments | 7 | (12) | (6) |
Actuarial loss on pension liability adjustments, net of tax | 0 | 0 | (2) |
Total other comprehensive income (loss), net of tax | 7 | (12) | (8) |
Less: Comprehensive income attributable to non-controlling interest | (2,335) | (3,506) | (2,438) |
Comprehensive loss attributable to Telos Corporation | $ (5,826) | $ (7,187) | $ (15,948) |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets | ||
Cash and cash equivalents | $ 600 | $ 659 |
Accounts receivable, net of reserve of $411 and $429, respectively (Note 5) | 24,520 | 19,087 |
Inventories, net of obsolescence reserve of $1,484 and $1,672, respectively (Note 1) | 13,520 | 3,552 |
Deferred program expenses | 2,071 | 186 |
Other current assets | 1,439 | 1,521 |
Total current assets | 42,150 | 25,005 |
Property and equipment (Note 1) | ||
Furniture and equipment | 8,964 | 6,912 |
Leasehold improvements | 2,389 | 2,399 |
Property and equipment under capital leases | 30,832 | 30,829 |
Property and equipment, gross | 42,185 | 40,140 |
Accumulated depreciation and amortization | (25,841) | (24,023) |
Property and equipment, net | 16,344 | 16,117 |
Goodwill (Note 3) | 14,916 | 14,916 |
Other assets | 1,011 | 761 |
Total assets | 74,421 | 56,799 |
Current liabilities | ||
Accounts payable and other accrued payables (Note 6) | 25,693 | 15,317 |
Accrued compensation and benefits | 7,456 | 8,071 |
Deferred revenue | 10,073 | 4,900 |
Subordinated debt - short-term (Note 6) | 0 | 3,029 |
Capital lease obligations - short-term | 1,013 | 918 |
Other current liabilities | 1,990 | 1,406 |
Total current liabilities | 46,225 | 33,641 |
Senior term loan, net of unamortized discount and issuance costs (Note 6) | 10,786 | 0 |
Subordinated debt (Note 6) | 2,289 | 0 |
Capital lease obligations (Note 10) | 17,980 | 18,990 |
Deferred income taxes (Note 9) | 741 | 3,391 |
Senior redeemable preferred stock (Note 7) | 0 | 2,092 |
Public preferred stock (Note 7) | 131,565 | 127,742 |
Other liabilities (Note 9) | 872 | 919 |
Total liabilities | 210,458 | 186,775 |
Commitments, contingencies and subsequent events (Notes 10 and 13) | 0 | 0 |
Telos stockholders' deficit | ||
Additional paid-in capital | 4,310 | 3,229 |
Accumulated other comprehensive income | 32 | 25 |
Accumulated deficit | (141,370) | (135,537) |
Total Telos stockholders' deficit | (136,950) | (132,205) |
Non-controlling interest in subsidiary (Note 2) | 913 | 2,229 |
Total stockholders' deficit | (136,037) | (129,976) |
Total liabilities, redeemable preferred stock, and stockholders' deficit | 74,421 | 56,799 |
Class A Common Stock [Member] | ||
Telos stockholders' deficit | ||
Common stock | 65 | 65 |
Total stockholders' deficit | 65 | 65 |
Class B Common Stock [Member] | ||
Telos stockholders' deficit | ||
Common stock | 13 | 13 |
Total stockholders' deficit | $ 13 | $ 13 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets | ||
Accounts receivable, reserve | $ 411 | $ 429 |
Inventories, obsolescence reserve | $ 1,484 | $ 1,672 |
Class A Common Stock [Member] | ||
Telos stockholders' deficit | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 45,213,461 | 40,238,461 |
Common stock, shares outstanding (in shares) | 45,213,461 | 40,238,461 |
Class B Common Stock [Member] | ||
Telos stockholders' deficit | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Common stock, shares issued (in shares) | 4,037,628 | 4,037,628 |
Common stock, shares outstanding (in shares) | 4,037,628 | 4,037,628 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Operating activities: | |||
Net (loss) income | $ (3,498) | $ (3,669) | $ (13,502) |
Adjustments to reconcile net loss to cash (used in) provided by operating activities: | |||
Stock-based compensation | 50 | 0 | 0 |
Dividends of preferred stock as interest expense | 3,843 | 3,890 | 3,889 |
Depreciation and amortization | 1,999 | 2,898 | 4,291 |
Provision for inventory obsolescence | 73 | 215 | 92 |
(Benefit) provision for doubtful accounts receivable | (18) | (56) | 113 |
Amortization of debt issuance costs | 160 | 65 | 152 |
Deferred income tax (benefit) provision | (2,710) | 192 | 5,113 |
Loss on disposal of fixed assets | 4 | 0 | 11 |
Changes in assets and liabilities: | |||
(Increase) decrease in accounts receivable | (5,415) | 14 | 3,364 |
(Increase) decrease in inventories | (10,041) | (866) | 352 |
(Increase) decrease in deferred program expenses | (1,886) | 548 | 657 |
Decrease in other current assets and other assets | 1,086 | 1,824 | 1,330 |
Increase (decrease) in accounts payable and other accrued payables | 10,376 | 3,722 | (3,840) |
(Decrease) increase in accrued compensation and benefits | (615) | 3,316 | 552 |
Increase in deferred revenue | 5,173 | 1,434 | 122 |
Increase in other current liabilities | 828 | 328 | 27 |
Cash (used in) provided by operating activities | (591) | 13,855 | 2,723 |
Investing activities: | |||
Capitalized software development costs | (1,481) | 0 | 0 |
Purchases of property and equipment | (748) | (624) | (394) |
Cash used in investing activities | (2,229) | (624) | (394) |
Financing activities: | |||
Proceeds from senior credit facilities | 0 | 70,032 | 139,072 |
Repayments of senior credit facilities | 0 | (75,640) | (139,118) |
Repayments of term loan | 0 | (3,200) | (2,300) |
Decrease in book overdrafts | 0 | (1,083) | (1,298) |
Proceeds from senior term loan | 9,439 | 0 | 0 |
Proceeds from subordinated debt | 0 | 0 | 2,500 |
Redemption of senior preferred stock | (2,112) | 0 | 0 |
Payments under capital lease obligations | (915) | (827) | (772) |
Proceeds from sale of Telos ID 10% membership interest | 0 | 0 | 2,000 |
Distributions to Telos ID Class B member - non-controlling interest | (3,651) | (1,912) | (2,387) |
Cash used in financing activities | 2,761 | (12,630) | (2,303) |
(Decrease) increase in cash and cash equivalents | (59) | 601 | 26 |
Cash and cash equivalents, beginning of the year | 659 | 58 | 32 |
Cash and cash equivalents, end of year | 600 | 659 | 58 |
Cash paid during the year for: | |||
Interest | 2,395 | 1,320 | 1,523 |
Income taxes | 26 | 60 | 65 |
Noncash: | |||
Dividends of preferred stock as interest expense | 3,843 | 3,890 | 3,889 |
Debt issuance costs and prepayment of interest on senior term loan | 1,561 | 0 | 0 |
Gain on extinguishment of subordinated debt | $ 1,031 | $ 0 | $ 0 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT - USD ($) $ in Thousands | Class A Common Stock [Member] | Class B Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Other Comprehensive Income [Member] | Accumulated Deficit [Member] | Noncontrolling Interest [Member] | Total |
Balance at Dec. 31, 2014 | $ 65 | $ 13 | $ 3,229 | $ 45 | $ (112,422) | $ 584 | $ (108,486) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net (loss) income | 0 | (15,940) | 2,438 | (13,502) | |||
Foreign currency translation gain (loss) | 0 | 0 | 0 | (6) | 0 | 0 | (6) |
Pension liability adjustments | 0 | 0 | 0 | (2) | 0 | 0 | (2) |
Distributions | 0 | 0 | 0 | (2,387) | (2,387) | ||
Balance at Dec. 31, 2015 | 65 | 13 | 3,229 | 37 | (128,362) | 635 | (124,383) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net (loss) income | 0 | 0 | (7,175) | 3,506 | (3,669) | ||
Foreign currency translation gain (loss) | 0 | (12) | 0 | 0 | (12) | ||
Pension liability adjustments | 0 | ||||||
Distributions | 0 | 0 | 0 | (1,912) | (1,912) | ||
Balance at Dec. 31, 2016 | 65 | 13 | 3,229 | 25 | (135,537) | 2,229 | (129,976) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net (loss) income | 0 | 0 | (5,833) | 2,335 | (3,498) | ||
Gain on extinguishment of subordinated debt | 0 | 0 | 0 | 1,031 | |||
Stock-based compensation | 0 | 0 | 0 | 50 | |||
Foreign currency translation gain (loss) | 0 | 7 | 0 | 0 | 7 | ||
Pension liability adjustments | 0 | ||||||
Distributions | 0 | 0 | 0 | (3,651) | (3,651) | ||
Balance at Dec. 31, 2017 | $ 65 | $ 13 | $ 4,310 | $ 32 | $ (141,370) | $ 913 | $ (136,037) |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 1. Summary of Significant Accounting Policies Business and Organization Telos Corporation, together with its subsidiaries, (the "Company" or "Telos" or "We") is an information technology solutions and services company addressing the needs of U.S. Government and commercial customers worldwide. We own all of the issued and outstanding share capital of Xacta Corporation, a subsidiary that develops, markets and sells government-validated secure enterprise solutions to government and commercial customers. We also own all of the issued and outstanding share capital of Ubiquity.com, Inc., a holding company for Xacta Corporation. We also have a 50% ownership interest in Telos Identity Management Solutions, LLC ("Telos ID") and a 100% ownership interest in Teloworks, Inc. ("Teloworks"). Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements include the accounts of Telos and its subsidiaries, including Ubiquity.com, Inc., Xacta Corporation, and Teloworks, all of whose issued and outstanding share capital is owned by the Company. We have also consolidated the results of operations of Telos ID (see Note 2 – Non-controlling Interests). Intercompany transactions have been eliminated on consolidation. In preparing these consolidated financial statements, we have evaluated subsequent events through the date that these consolidated financial statements were issued. Segment Reporting Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker ("CODM"), or decision making group, in deciding how to allocate resources and assess performance. We currently operate in one operating and reportable business segment for financial reporting purposes. Our Chief Executive Officer is the CODM. The CODM only evaluates profitability based on consolidated results. Use of Estimates The preparation of consolidated financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions used in the preparation of our consolidated financial statements include revenue recognition, allowance for doubtful accounts receivable, allowance for inventory obsolescence, the valuation allowance for deferred tax assets, income taxes, contingencies and litigation, potential impairments of goodwill and intangible assets, estimated pension-related costs for our foreign subsidiaries and accretion of Public Preferred Stock. Actual results could differ from those estimates. Revenue Recognition Revenues are recognized in accordance with Generally Accepted Accounting Principles ("GAAP") We recognize revenues for software arrangements upon persuasive evidence of an arrangement, delivery of the software, and determination that collection of a fixed or determinable license fee is probable. Revenues for software licenses sold on a subscription basis are recognized ratably over the related license period. For arrangements where the sale of software licenses are bundled with other products, including software products, upgrades and enhancements, post-contract customer support ("PCS"), and installation, the relative fair value of each element is determined based on VSOE. VSOE is defined by ASC 985-605, "Software Revenue Recognition," and is limited to the price charged when the element is sold separately or, if the element is not yet sold separately, the price set by management having the relevant authority. When VSOE exists for undelivered elements, the remaining consideration is allocated to delivered elements using the residual method. If VSOE does not exist for the allocation of revenue to the various elements of the arrangement, all revenue from the arrangement is deferred until the earlier of the point at which (1) such VSOE does exist or (2) all elements of the arrangement are delivered. PCS revenues, upon being unbundled from a software license fee, are recognized ratably over the PCS period. Software arrangements requiring significant production, modification, or customization of the software are accounted for in accordance with ASC 605-35 "Construction-Type and Production-Type Contracts." We may use subcontractors and suppliers in the course of performing contracts and under certain contracts we provide supplier procurement services and materials for our customers. Some of these arrangements may fall within the scope of ASC 605-45, "Reporting Revenue Gross as a Principal versus Net as an Agent." We presume that revenues on our contracts are recognized on a gross basis, as we generally provide significant value-added services, assume credit risk, and reserve the right to select subcontractors and suppliers, but we evaluate the various criteria specified in the guidance in making the determination of whether revenue should be recognized on a gross or net basis. A description of the business lines, the typical deliverables, and the revenue recognition criteria in general for such deliverables follows: Cyber Operations and Defense Regarding our deliverables of Cyber Security solutions, we provide Xacta software and cybersecurity services to our customers. The software and accompanying services fall within the scope of ASC 985-605, "Software Revenue Recognition," as discussed above. We provide consulting services to our customers under either a firm-fixed price ("FFP") or time-and-materials ("T&M") basis. Such contracts fall under the scope of ASC 605-10-S99. Revenue for FFP services is recognized on a proportional performance basis. FFP services may be billed to the customer on a percentage-of-completion basis or based upon milestones as appropriate under a particular contract, which may approximate the proportional performance of the services under the agreements, as specified in such agreements. To the extent that customer billings exceed the performance of the specified services, the revenue would be deferred. Revenue is recognized under T&M contracts based upon specified billing rates and other direct costs as incurred. For cost plus fixed fee ("CPFF") contracts, revenue is recognized in proportion to the allowable costs incurred unless indicated otherwise in the terms of the contract. Regarding our deliverables of Secure Mobility solutions, we provide wireless and wired networking solutions consisting of hardware and services to our customers. The solutions within the Secure Mobility group are generally sold as FFP bundled solutions. Certain of these networking solutions involve contracts to design, develop, or modify complex electronic equipment configurations to a buyer's specification or to provide network engineering services, and as such fall within the scope of ASC 605-35. Revenue is earned upon percentage of completion based upon proportional performance, such performance generally being defined by performance milestones. Certain other solutions fall within the scope of ASC 605-10-S99, such as resold information technology products, like laptops, printers, networking equipment and peripherals, and ASC 605-25, such as delivery orders for multiple solutions deliverables. For product sales, revenue is recognized upon proof of acceptance by the customer, otherwise it is deferred until such time as the proof of acceptance is obtained. For example, in delivery orders for Department of Defense customers, which comprise the majority of the Company's customers, such acceptance is achieved with a signed Department of Defense Form DD-250 or electronic invoicing system equivalent. Services provided under these contracts are generally provided on a FFP basis, and as such fall within the scope of ASC 605-10-S99. Revenue for services is recognized based on proportional performance, as the work progresses. FFP services may be billed to the customer on a percentage-of-completion basis or based upon milestones, which may approximate the proportional performance of the services under the agreements, as specified in such agreements. To the extent that customer billings exceed the performance of the specified services, the revenue would be deferred. Revenue is recognized under T&M services contracts based upon specified billing rates and other direct costs as incurred. Identity Management (formerly Telos ID) IT & Enterprise Solutions Estimating future costs and, therefore, revenues and profits, is a process requiring a high degree of management judgment. In the event of a change in total estimated contract cost or profit, the cumulative effect of a change is recorded in the period the change in estimate occurs. To the extent contracts are incomplete at the end of an accounting period, revenue is recognized on the percentage-of-completion method, on a proportional performance basis, using costs incurred in relation to total estimated costs, or costs are deferred as appropriate under the terms of a particular contract. In the event cost estimates indicate a loss on a contract, the total amount of such loss, excluding overhead and general and administrative expense, is recorded in the period in which the loss is first estimated. Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Our cash management program utilizes zero balance accounts. Accordingly, all book overdraft balances have been reclassified to accounts payable and other accrued payables, to the extent that availability of funds exists on our revolving credit facility. Accounts Receivable Accounts receivable are stated at the invoiced amount, less allowances for doubtful accounts. Collectability of accounts receivable is regularly reviewed based upon managements' knowledge of the specific circumstances related to overdue balances. The allowance for doubtful accounts is adjusted based on such evaluation. Accounts receivable balances are written off against the allowance when management deems the balances uncollectible. Inventories Inventories are stated at the lower of cost or net realizable value, where cost is determined on the weighted average method. Substantially all inventories consist of purchased customer off-the-shelf hardware and software, and component computer parts used in connection with system integration services that we perform. An allowance for obsolete, slow-moving or nonsalable inventory is provided for all other inventory. This allowance is based on our overall obsolescence experience and our assessment of future inventory requirements. This charge is taken primarily due to the age of the specific inventory and the significant additional costs that would be necessary to upgrade to current standards as well as the lack of forecasted sales for such inventory in the near future. Gross inventory is $15.0 million and $5.2 million at December 31, 2017 and 2016, respectively. As of December 31, 2017, it is management's judgment that we have fully provided for any potential inventory obsolescence. The components of the allowance for inventory obsolescence are set forth below (in thousands): Balance Beginning of Year Additions Charge to Costs and Expense Recoveries Balance End of Year Year Ended December 31, 2017 $ 1,672 $ 73 $ (261 ) $ 1,484 Year Ended December 31, 2016 $ 1,457 $ 215 $ -- $ 1,672 Year Ended December 31, 2015 $ 1,366 $ 92 $ (1 ) $ 1,457 Property and Equipment Property and equipment is recorded at cost. Depreciation is provided on the straight-line method at rates based on the estimated useful lives of the individual assets or classes of assets as follows: Buildings 20 Years Machinery and equipment 3-5 Years Office furniture and fixtures 5 Years Leasehold improvements Lesser of life of lease or useful life of asset Leased property meeting certain criteria is capitalized at the present value of the related minimum lease payments. Amortization of property and equipment under capital leases is computed on the straight-line method over the lesser of the term of the related lease and the useful life of the related asset. Upon sale or retirement of property and equipment, the costs and related accumulated depreciation are eliminated from the accounts, and any gain or loss on such disposition is reflected in the consolidated statements of operations. For the years ended December 31, 2017, 2016, and 2015, such amounts are negligible. Expenditures for repairs and maintenance are charged to operations as incurred. Long-lived assets, such as fixed assets, are reviewed for impairment whenever circumstances indicate that the carrying amount of the asset exceeds its estimated fair value. Considerable management judgment is necessary to estimate its fair value. Accordingly, actual results could differ from such estimates. No events have been identified that caused an evaluation of the recoverability of long-lived assets. Our policy on internal use software is in accordance with ASC 350, "Intangibles- Goodwill and Other." This standard requires companies to capitalize qualifying computer software costs which are incurred during the application development stage and amortize them over the software's estimated useful life. We expensed all such software development costs in 2017, 2016, and 2015, as we believe that such amounts are immaterial. Depreciation and amortization expense related to property and equipment, including property and equipment under capital leases was $2.0 million, $1.8 million, and $2.0 million Income Taxes We account for income taxes in accordance with ASC 740-10, "Income Taxes." Under ASC 740-10, deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences and income tax credits. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates that are applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized for differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Any change in tax rates on deferred tax assets and liabilities is recognized in net income in the period in which the tax rate change is enacted. We record a valuation allowance that reduces deferred tax assets when it is "more likely than not" that deferred tax assets will not be realized. We are required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on available evidence, realization of deferred tax assets is dependent upon the generation of future taxable income. We considered projected future taxable income, tax planning strategies, and reversal of taxable temporary differences in making this assessment. As such, we have determined that a full valuation allowance is required as of December 31, 2017 and 2016. We are not able to use temporary taxable differences related to goodwill as a source of future taxable income. As a result of a full valuation allowance against our deferred tax assets, a deferred tax liability ("hanging credit") related to goodwill remains on our consolidated balance sheet at December 31, 2017 and 2016. Due to the tax reform enacted on December 22, 2017, net operating losses generated in taxable years beginning after December 31, 2017 will have an indefinite carryforward period, which will be available to offset future taxable income created by the reversal of temporary taxable differences related to goodwill. As a result, we have adjusted the valuation allowance on our deferred tax assets and liabilities at December 31, 2017. See additional information on tax reform and its impact on our income taxes in Note 9 – Income Taxes. We follow the provisions of ASC 74-10 related to accounting for uncertainty in income taxes. The accounting estimates related to liabilities for uncertain tax positions require us to make judgments regarding the sustainability of each uncertain tax position based on its technical merits. If we determine it is more likely than not that a tax position will be sustained based on its technical merits, we record the impact of the position in our consolidated financial statements at the largest amount that is greater than fifty percent likely of being realized upon ultimate settlement. These estimates are updated at each reporting date based on the facts, circumstances and information available. We are also required to assess at each reporting date whether it is reasonably possible that any significant increases or decreases to our unrecognized tax benefits will occur during the next 12 months. Goodwill and other intangible assets We evaluate the impairment of goodwill and other intangible assets in accordance with ASC 350, which requires goodwill and indefinite-lived intangible assets to be assessed on at least an annual basis for impairment using a fair value basis. Between annual evaluations, if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount, then impairment must be evaluated. Such circumstances could include, but are not limited to: (1) a significant adverse change in legal factors or business climate, or (2) a loss of key contracts or customers. As the result of an acquisition, we record any excess purchase price over the net tangible and identifiable intangible assets acquired as goodwill. An allocation of the purchase price to tangible and intangible net assets acquired is based upon our valuation of the acquired assets. Goodwill is not amortized, but is subject to annual impairment tests. We complete our goodwill impairment tests as of December 31st each year. Additionally, we make evaluations between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The evaluation is based on the estimation of the fair values of our three reporting units, Cyber Operations and Defense ("CO&D"), Identity Management, and IT & Enterprise Solutions, of which goodwill is housed in the CO&D reporting unit, in comparison to the reporting unit's net asset carrying values. Our discounted cash flows required management judgment with respect to forecasted revenue streams and operating margins, capital expenditures and the selection and use of an appropriate discount rate. We utilized the weighted average cost of capital as derived by certain assumptions specific to our facts and circumstances as the discount rate. The net assets attributable to the reporting units are determined based upon the estimated assets and liabilities attributable to the reporting units in deriving its free cash flows. In addition, the estimate of the total fair value of our reporting units is compared to the market capitalization of the Company. The Company's assessment resulted in a fair value that was greater than the Company's carrying value, therefore the second step of the impairment test, as prescribed by the authoritative literature, was not required to be performed and no impairment of goodwill was recorded as of December 31, 2017. Subsequent reviews may result in future periodic impairments that could have a material adverse effect on the results of operations in the period recognized. Recent operating results have reduced the projection of future cash flow growth potential, which indicates that certain negative potential events, such as a material loss or losses on contracts, or failure to achieve projected growth could result in impairment in the future. We estimate fair value of our reporting unit and compare the valuation with the respective carrying value for the reporting unit to determine whether any goodwill impairment exists. If we determine through the impairment review process that goodwill is impaired, we will record an impairment charge in our consolidated statements of operations. Goodwill is amortized and deducted over a 15-year period for tax purposes. Other intangible assets consist primarily of customer relationship enhancements. Other intangible assets were amortized on a straight-line basis over their estimated useful lives of 5 years. The amortization was based on a forecast of approximately equal annual customer orders over the 5-year period. Other intangible assets were subject to impairment review if there were events or changes in circumstances that indicated that the carrying amount was not recoverable. The other intangible assets were fully amortized as of June 30, 2016. Stock-Based Compensation Compensation cost is recognized based on the requirements of ASC 718, "Stock Compensation," for all share-based awards granted. Since June 2008, we have issued restricted stock (Class A common) to our executive officers, directors and employees. In May 2017, we granted 5,005,000 shares of restricted stock to our executive officers and employees. Such stock is subject to a vesting schedule as follows: 25% of the restricted stock vests immediately on the date of grant, thereafter, an additional 25% will vest annually on the anniversary of the date of grant subject to continued employment or services. As of December 31, 2017, there were 3,723,750 shares of restricted stock that remained subject to vesting. In the event of death of the employee or a change in control, as defined by the Telos Corporation 2008 Omnibus Long-Term Incentive Plan, the 2013 Omnibus Long-Term Incentive Plan, or the 2016 Omnibus Long-Term Incentive Plan, all unvested shares shall automatically vest in full. In accordance with ASC 718, we recorded immaterial compensation expense for any of the issuances as the value of the common stock was nominal, based on the deduction of our outstanding debt, capital lease obligations, and preferred stock from an estimated enterprise value, which was estimated based on discounted cash flow analysis, comparable public company analysis, and comparable transaction analysis. Additionally, we determined that a significant change in the valuation estimate for common stock would not have a significant effect on the consolidated financial statements. Software Development Costs Software development costs for software to be sold, leased or otherwise marketed, such costs are expensed as incurred until technological feasibility is reached, at which time additional costs are capitalized until the product is available for general release to customers. Technological feasibility is established when all planning, designing, coding and testing activities have been completed, and all risks have been identified. For the year ended December 31, 2017, we capitalized $1.5 million of software development costs, which are amortized over the estimated product life of 2 years on a straight-line basis. Amortization expense was $0.2 million for the year ended December 31, 2017. The Company analyzes the net realizable value of capitalized software development costs on at least an annual basis and has determined that there is no indication of impairment of the capitalized software development costs as forecasted future sales are adequate to support amortization costs. During 2017, 2016 and 2015, we incurred salary costs for research and development of approximately $3.2 million, $2.6 million and $2.1 million, respectively, which were included as part of the selling, general and administrative expense in the consolidated statements of operations. Earnings (Loss) per Share As we do not have publicly held common stock or potential common stock, no earnings per share data is reported for any of the years presented. Comprehensive Income Comprehensive income includes changes in equity (net assets) during a period from non-owner sources. Our accumulated other comprehensive income was comprised of a loss from foreign currency translation of $75,000 and $82,000 as of December 31, 2017 and 2016, respectively; and actuarial gain on pension liability adjustments in Teloworks of $107,000 as of December 31, 2017 and 2016. Financial Instruments We use various methods and assumptions to estimate the fair value of our financial instruments. Due to their short-term nature, the carrying value of cash and cash equivalents, accounts receivable and accounts payable approximates fair value. The fair value of long-term debt is based on the discounted cash flows for similar term borrowings based on market prices for the same or similar issues. See Note 4 – Fair Value Measurements for fair value disclosures of the senior redeemable preferred stock. Fair value estimates are made at a specific point in time, based on relevant market information. These estimates are subjective in nature and involve matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers," which requires an entity to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. In July 2015, the FASB finalized the delay of the effective date by one year, making the new standard effective for interim periods and annual period beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08, "Revenues from Contract with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," which clarifies the implementation guidance in ASU 2014-09 relating to principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, "Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing," which further clarifies the implementation guidance relating to identifying performance obligations and the licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients," which clarifies the implementation guidance related to collectability, presentation of sales tax, noncash consideration, contract modifications and completed contracts at transition. These standards can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application. We will adopt the modified retrospective transition period, and reflecting cumulative changes, if any, in accumulated deficit. The adoption of the new standard is not expected to have an effect on the accounting treatment of many of our contractual arrangements. At this point in the evaluation, the best estimate for the effect that the adoption of the new standard will have on certain proprietary software arrangements is expected to result in a cumulative adjustment to decrease accumulated deficit in the first quarter of 2018 of approximately $3.8 million, which will reduce the balance of deferred revenue. The Company has substantially completed its evaluation of the effect on the adoption of the new standard. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." The guidance in this update supersedes the requirements in ASC Topic 840, Leases. The update will require business entities to recognize lease assets and liabilities on the balance sheet and to disclose key information about leasing arrangements. A lessee would recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2018, and is to be applied on a modified retrospective basis. We are currently assessing the impact the adoption of this ASU will have on our consolidated financial position, results of operations and cash flows. We expect to recognize increases in reported amounts for property and equipment, and related lease liabilities upon the adoption of this standard, and are still evaluating the impact it will have on results of operations. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which introduces new guidance for estimating credit losses on certain types of financial instruments based on expected losses and the timing of the recognition of such losses. The new standard will be effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. While we are currently assessing the impact the adoption of this ASU will have on our consolidated financial position, results of operations and cash flows, we do not believe the adoption of this ASU will have a material impact on our financial statements. In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of certain cash receipts and cash payments," which intends to reduce the diversity in practice in how certain transactions are classified on the statement of cash flows. This new standard will be effective retrospectively for interim and annual reporting periods beginning after December 31, 2017, and early adoption is permitted. The adoption of this ASU will not have a material impact on our consolidated financial position, results of operations and cash flows. In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230) – Restricted Cash," which requires the presentation of changes in restricted cash or restricted cash equivalents on the statement of cash flows. This standard will be effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU will not have a material impact on our consolidated financial position, results of operations and cash flows. In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment loss will instead be measured at the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the recorded amount of goodwill. The provisions of this ASU are effective for years beginning after December 15, 2019, with early adoption permitted for any impairment test performed on testing dates after January 1, 2017. The adoption of this ASU will not have a material impact on our consolidated financial position, results of operations and cash flows. In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting," which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU will not have a material impact on our consolidated financial position, results of operations and cash flows. |
Non-controlling Interests
Non-controlling Interests | 12 Months Ended |
Dec. 31, 2017 | |
Non-controlling Interests [Abstract] | |
Non-controlling Interests | Note 2. Non-controlling Interests On April 11, 2007, Telos ID was formed as a limited liability company under the Delaware Limited Liability Company Act. We contributed substantially all of the assets of our Identity Management business line and assigned our rights to perform under our U.S. Government contract with the Defense Manpower Data Center ("DMDC") to Telos ID at their stated book values. The net book value of assets we contributed totaled $17,000. Until April 19, 2007, we owned 99.999% of the membership interests of Telos ID and certain private equity investors ("Investors") owned 0.001% of the membership interests of Telos ID. On April 20, 2007, we sold an additional 39.999% of the membership interests to the Investors in exchange for $6 million in cash consideration. In accordance with ASC 505-10, "Equity-Overall," we recognized a gain of $5.8 million. As a result, we owned 60% of Telos ID, and therefore continue to account for the investment in Telos ID using the consolidation method. On December 24, 2014 (the "Closing Date"), we entered into a Membership Interest Purchase Agreement (the "Purchase Agreement"), between the Company and the Investors, pursuant to which the Investors acquired from the Company an additional ten percent (10%) membership interest in Telos ID in exchange for $5 million (the "Transaction"). In connection with the Transaction, the Company and the Investors entered into the Second Amended and Restated Operating Agreement (the "Operating Agreement") governing the business, allocation of profits and losses and management of Telos ID. As of December 31, 2014, we had received $3 million of the $5 million of consideration for the sale. The remaining $2 million was recorded as a receivable and received in January 2015. Despite the post-Transaction ownership of Telos ID being evenly split at 50% by each member, Telos maintains control of the subsidiary through its holding of three of the five Telos ID board of director seats. Under the Operating Agreement, the Class A and Class B members each have certain options with regard to the ownership interests held by the other party including the following: ● Upon the occurrence of a change in control of the Class A member (as defined in the Operating Agreement, a "Change in Control"), the Class A member has the option to purchase the entire membership interest of the Class B member. ● Upon the occurrence of the following events: (i) the involuntary termination of John B. Wood as CEO and chairman of the Class A member; (ii) the bankruptcy of the Class A member; or (iii) unless the Class A member exercises its option to acquire the entire membership interest of the Class B member upon a Change in Control of the Class A member, the transfer or issuance of more than fifty-one percent (51%) of the outstanding voting securities of the Class A member to a third party, the Class B member has the option to purchase the membership interest of the Class A member; provided, however, that in the event that the Class B member exercises the foregoing option, the Class A Member may then choose to purchase the entire interest of the Class B member. ● In the event that more than fifty percent (50%) of the ownership interests in the Class B member are transferred to persons or individuals (other than members of the immediate family of the initial owners of the Class B member) without the consent of Telos ID, the Class A member has the option to purchase the entire membership interest of the Class B member. ● The Class B member has the option to sell its interest to the Class A member at any time if there is not a letter of intent to sell Telos ID, a binding contract to sell all of the assets or membership interests in Telos ID, or a standstill for due diligence with respect to a sale of Telos ID. Notwithstanding the foregoing, the Class A member will not be obligated to purchase the interest of the Class B member if that purchase would constitute a violation of any existing line of credit available to the Company after giving effect to that purchase and the applicable lender refuses to consent to that purchase or to waive such violation. If either the Class A member or the Class B member elects to sell its interest or buy the other member's interest upon the occurrence of any of the foregoing events, the purchase price for the interest will be based on an appraisal of Telos ID prepared by a nationally recognized investment banker. If the Class A member fails to satisfy its obligation, subject to the restrictions in the Purchase Agreement, to purchase the interest of the Class B member under the Operating Agreement, the Class B member may require Telos ID to initiate a sales process for the purpose of seeking an offer from a third party to purchase Telos ID that maximizes the value of Telos ID. The Telos ID Board must accept any offer from a bona fide third party to purchase Telos ID if that offer is approved by the Class B member, unless the purchase of Telos ID would violate the terms of any existing line of credit available to the Company and the applicable lender does not consent to that purchase or waive the violation. The sale process is the sole remedy available to the Class B member if the Class A member does not purchase its membership interest. Under such a forced sale scenario, a sales process would result in both members receiving their proportionate membership interest share of the sales proceeds and both members would always be entitled to receive the same form of consideration. Pursuant to the Transaction, the Class A and Class B members each owns 50% of Telos ID, as mentioned above, and as such was allocated 50% of the profits, which was $2.3 million, $3.5 million, and $2.4 million for 2017, 2016, and 2015, respectively. The Class B member was the non-controlling interest. Distributions are made to the members only when and to the extent determined by the Telos ID's Board of Directors, in accordance with the Operating Agreement. During the year ended December 31, 2017, 2016, and 2015, the Class B member received a total of $3.7 million, $1.9 million, and $2.4 million, respectively, of such distributions. The following table details the changes in non-controlling interest for the years ended December 31, 2017, 2016, and 2015 (in thousands): 2017 2016 2015 Non-controlling interest, beginning of period $ 2,229 $ 635 $ 584 Net income 2,335 3,506 2,438 Distributions (3,651 ) (1,912 ) (2,387 ) Non-controlling interest, end of period $ 913 $ 2,229 $ 635 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Other Intangible Assets [Abstract] | |
Goodwill and Intangible Assets | Note 3. Goodwill and Other Intangible Assets The goodwill balance was $14.9 million as of December 31, 2017 and 2016. Goodwill is subject to annual impairment tests and if triggering events are present before the annual tests, we will assess impairment. As of December 31, 2017, no impairment charges were taken. Other intangible assets consist primarily of customer relationship enhancements. Other intangible assets were amortized on a straight-line basis over their estimated useful lives of 5 years. The amortization was based on a forecast of approximately equal annual customer orders over the 5-year period. The other intangible assets were fully amortized as of June 30, 2016. Amortization expense for 2016 and 2015 was $1.1 million, and $2.3 million, respectively. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2017 | |
Fair Value Measurements [Abstract] | |
Fair Value Measurements | Note 4. Fair Value Measurements The accounting standard for fair value measurements provides a framework for measuring fair value and expands disclosures about fair value measurements. The framework requires the valuation of investments using a three-tiered approach. The statement requires fair value measurement to be classified and disclosed in one of the following categories: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets and liabilities; Level 2: Quoted prices in the markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). As of December 31, 2017 and 2016, we did not have any financial instruments with significant Level 3 inputs and we did not have any financial instruments that are measured at fair value on a recurring basis. As of December 31, 2017 and 2016, the carrying value of the Company's 12% Cumulative Exchangeable Redeemable Preferred Stock, par value $.01 per share (the "Public Preferred Stock") was $131.6 million and $127.7 million, respectively, and the estimated fair market value was $42.2 million and $31.9 million, respectively, based on quoted market prices. As of December 31, 2016, the carrying value of the Senior Redeemable Preferred Stock was $2.1 million. We redeemed all outstanding shares of the Senior Redeemable Preferred Stock on April 18, 2017 for $2.1 million. For certain of our non-derivative financial instruments, including receivables, accounts payable and other accrued liabilities, the carrying amount approximates fair value due to the short-term maturities of these instruments. The estimated fair value of the Credit Agreement (as defined below) and long-term debt is based primarily on borrowing rates currently available to the Company for similar debt issues. The fair value approximates the carrying value of long-term debt. |
Revenue and Accounts Receivable
Revenue and Accounts Receivable | 12 Months Ended |
Dec. 31, 2017 | |
Revenue and Accounts Receivable [Abstract] | |
Revenue and Accounts Receivable | Note 5. Revenue and Accounts Receivable Revenue resulting from contracts and subcontracts with the U.S. Government accounted for 94.2%, 96.7%, and 97.3% of consolidated revenue in 2017, 2016, and 2015, respectively. As our primary customer base includes agencies of the U.S. Government, we have a concentration of credit risk associated with our accounts receivable, as 96.5% of our billed accounts receivable were directly with U.S. Government customers. While we acknowledge the potentially material and adverse risk of such a significant concentration of credit risk, our past experience of collecting substantially all of such receivables provide us with an informed basis that such risk, if any, is manageable. We perform ongoing credit evaluations of all of our customers and generally do not require collateral or other guarantee from our customers. We maintain allowances for potential losses. On July 15, 2016, the Company entered into an accounts receivable purchase agreement under which the Company sells certain accounts receivable to a third party, or the " " The components of accounts receivable are as follows (in thousands): December 31, 2017 2016 Billed accounts receivable $ 11,736 $ 13,164 Unbilled receivables 13,195 6,352 Allowance for doubtful accounts (411 ) (429 ) $ 24,520 $ 19,087 Balance Beginning of Year Bad Debt Expenses (1) Recoveries (2) Balance End of Year Year Ended December 31, 2017 $ 429 $ (18 ) $ -- $ 411 Year Ended December 31, 2016 $ 485 $ (56 ) $ -- $ 429 Year Ended December 31, 2015 $ 372 $ 113 $ -- $ 485 (1) Accounts receivable reserves and reversal of allowance for subsequent collections, net (2) Accounts receivable written-off and subsequent recoveries, net Revenue by Major Market and Significant Customers We derived substantially all of our revenues from contracts and subcontracts with the U.S. Government. Revenue by customer sector for the last three fiscal years is as follows: 2017 2016 2015 (dollar amounts in thousands) Federal $ 101,519 94.2 % $ 130,415 96.7 % $ 117,328 97.3 % State & Local, and Commercial 6,208 5.8 % 4,453 3.3 % 3,306 2.7 % Total $ 107,727 100.0 % $ 134,868 100.0 % $ 120,634 100.0 % |
Current Liabilities and Debt Ob
Current Liabilities and Debt Obligations | 12 Months Ended |
Dec. 31, 2017 | |
Current Liabilities and Debt Obligations [Abstract] | |
Current Liabilities and Debt Obligations | Note 6. Current Liabilities and Debt Obligations Accounts Payable and Other Accrued Payables As of December 31, 2017 and 2016, the accounts payable and other accrued payables consisted of $15.4 million and $12.1 million, respectively, in trade account payables and $10.3 million and $3.2 million, respectively, in accrued payables. Deferred Revenue As of December 31, 2017 and 2016, the deferred revenue primarily consisted of software license subscription services and product support services. Enlightenment Capital Credit Agreement On January 25, 2017, we entered into a Credit Agreement (the "Credit Agreement") with Enlightenment Capital Solutions Fund II, L.P., as agent (the "Agent"), and the lenders party thereto (the "Lenders"), (together referenced as "EnCap"). The Credit Agreement provides for an $11 million senior term loan (the "Loan") with a maturity date of January 25, 2022, subject to acceleration in the event of customary events of default. An amount of approximately $1.1 million was netted from the proceeds on the Loan as a prepayment of all interest due and payable at the Accrual Rate during the period from January 25, 2017 to October 31, 2017. A separate fee letter executed by the Company and the Agent, dated January 25, 2017, sets forth the fees payable to the Agent in connection with the Credit Agreement. The Credit Agreement contains representations, warranties, covenants, terms and conditions customary for transactions of this type. In connection with the Credit Agreement, the Agent has been granted, for the benefit of the Lenders, a security interest in and general lien upon various property of the Company, subject to certain permitted liens and any intercreditor agreement. The occurrence of an event of default under the Credit Agreement could result in the Loan and other obligations becoming immediately due and payable and allow the Lenders to exercise all rights and remedies available to them under the Credit Agreement or as a secured party under the UCC, in addition to all other rights and remedies available to them. While we did not earn sufficient revenue to meet the revenue covenant in Section 7.15(d) of the Credit Agreement, the Lenders agreed to waive our compliance as of September 30, 2017. In connection with the Credit Agreement, on January 25, 2017, the Company issued warrants (each, a "Warrant") to Agent and certain of the Lenders representing in the aggregate the right to purchase in accordance with their terms 1,135,284.333 shares of the Class A Common Stock of the Company, no par value per share, which is equivalent to approximately 2.5% of the common equity interests of the Company on a fully diluted basis. The exercise price is $1.321 per share and each Warrant expires on January 25, 2027. The value of the warrants was determined to be de minimis and no value was allocated to them on a relative fair value basis in accounting for the debt instrument. Effective February 23, 2017, the Credit Agreement was amended to change the required timing of certain post-closing items, to allow for more time to complete the legal and administrative requirements around such items. On April 18, 2017, the Credit Agreement was further amended (the "Second Amendment") to incorporate the parties' agreement to subordinate certain debt owed by the Company to the affiliated entities of Mr. John R. C. Porter (the "Subordinated Debt") and to redeem all outstanding shares of the Series A-1 Redeemable Preferred Stock and the Series A-2 Redeemable Preferred Stock, including those owned by Mr. John R.C. Porter and his affiliates, for an aggregate redemption price of $2.1 million. In connection with the Second Amendment and that subordination of debt, on April 18, 2017, we also entered into Subordination and Intercreditor Agreements (the "Intercreditor Agreements") with affiliated entities of Mr. John R. C. Porter (together referenced as "Porter"), in which Porter agreed that the Subordinated Debt is fully subordinated to the amended Credit Agreement and related documents, and that required payments, if any, under the Subordinated Debt are permitted only if certain conditions are met. The Credit Agreement also includes an $825,000 exit fee, which is payable upon any repayment or prepayment of the loan. This amount has been included in the total principal due and treated as an unamortized discount on the debt, which will be amortized over the term of the loan, using the effective interest method at a rate of 15.0%. We incurred fees and transaction costs of approximately $374,000 related to the issuance of the Credit Agreement, which are being amortized over the life of the Credit Agreement. As of December 31, 2017, the carrying amount of the Credit Agreement consisted of the following (in thousands): December 31, 2017 Senior term loan principal, including exit fee $ 11,825 Less: Unamortized discount, debt issuance costs, and lender fees (1,039 ) Senior term loan, net $ 10,786 We incurred interest expense in the amount of $1.5 million for the year ended December 31, 2017 on the Credit Agreement. On March 30, 2018, the Credit Agreement was amended (the "Third Amendment") to waive certain covenant defaults and to reset the covenants for 2018 measurement periods to more accurately reflect the Company's projected performance for the year. The measurement against the covenants for consolidated leverage ratio and consolidated fixed charge coverage ratio were agreed to not be measured as of December 31, 2017 and were reset for 2018 measurement periods. Additionally, a minimum revenue covenant and a net working capital covenant were added. In consideration of these amendments, the interest rate on the loan was increased by 1%, which will revert back to the original rate upon achievement of two consecutive quarters of a specified fixed charge coverage ratio as defined in the agreement. The Company may elect to pay the increase in interest expense in cash or by payment-in-kind (by addition to the principal amount of the Loan). Contemporaneously with the Third Amendment, Mr. Wood agreed to transfer 50,000 shares of the Company's Class A Common Stock owned by him to EnCap. Accounts Receivable Purchase Agreement On July 15, 2016, we entered into an Accounts Receivable Purchase Agreement (the "Purchase Agreement") with Republic Capital Access, LLC ("RCA" or "Buyer"), pursuant to which we may offer for sale, and RCA, in its sole discretion, may purchase, eligible accounts receivable relating to U.S. government prime contracts or subcontracts of the Company (collectively, the "Purchased Receivables"). Upon purchase, RCA becomes the absolute owner of any such Purchased Receivables, which are payable directly to RCA, subject to certain repurchase obligations of the Company. The total amount of Purchased Receivables is subject to a maximum limit of $10 million of outstanding Purchased Receivables (the "Maximum Amount") at any given time. The Purchase Agreement had an initial term expiring on June 30, 2018 and automatically renews for successive 12-month renewal periods unless terminated in writing by either the Company or RCA.On March 2, 2018, the term of the Purchase Agreement was extended to June 30, 2020. No fee or consideration of any kind was paid in connection with this extension. The initial purchase price of a Purchased Receivable is equal to 90% of the face value of the receivable if the account debtor is an agency of the U.S. government, and 85% if the account debtor is not an agency of the U.S. government; provided, however, that RCA has the right to adjust these initial purchase price rates in its sole discretion. After collection by RCA of the portion of a Purchased Receivable in excess of the initial purchase price, RCA shall pay the Company the residual 10% or 15% of such Purchased Receivable, as appropriate, less (i) a discount factor equal to 0.30%, for federal government prime contracts (or 0.56% for non-federal government investment grade account obligors or 0.62% for non-federal government non-investment grade account obligors) of the face amounts of Purchased Receivables; (ii) a program access fee equal to 0.008% of the daily ending account balance for each day that Purchased Receivable are outstanding; (iii) a commitment fee equal to 1% per annum of Maximum Amount minus the amount of Purchased Receivables outstanding; and (iv) fees, costs and expenses relating to the preparation, administration and enforcement of the Purchase Agreement and any other related agreements. At the time the Purchase Agreement was signed, the Company received proceeds in an amount equal to $6.3 million, net of an initial enrollment fee equal to $25,000. Those proceeds were used to repay the outstanding amount under the Facility to Wells Fargo as described below. The Purchase Agreement provides that in the event, but only to the extent, that the conveyance of Purchased Receivables by the Company is characterized by a court or other governmental authority as a loan rather than a sale, the Company shall be deemed to have granted RCA, effective as of the date of the first purchase under the Purchase Agreement, a security interest in all of the Company's right, title and interest in, to and under all of the Purchased Receivables, whether now or hereafter owned, existing or arising. The Company provides a power of attorney to RCA to take certain actions in the Company's stead, including (a) to sell, assign or transfer in whole or in part any of the Purchased Receivables; (b) to demand, receive and give releases to any account debtor with respect to amounts due under any Purchased Receivables; (c) to notify all account debtors with respect to the Purchased Receivables; and (d) to take any actions necessary to perfect RCA's interests in the Purchased Receivables. The Company is liable to Buyer for any fraudulent statements and all representations, warranties, covenants, and indemnities made by the Company pursuant to the terms of the Purchase Agreement. It is considered an event of default if (a) the Company fails to pay any amounts it owes to RCA when due (subject to a cure period); (b) the Company has voluntary or involuntary bankruptcy proceedings commenced by or against it; (c) the Company is no longer solvent or is generally not paying its debts as they become due; (d) any voluntary liens, garnishments, attachments, or the like are issued against or attach to the Purchased Receivables; (e) the Company breaches any warranty, representation, or covenant (subject to a cure period); (f) the Company is not in compliance or has otherwise defaulted under any document or obligation in favor of RCA or an RCA affiliate; or (g) the Purchase Agreement or any material provision terminates (other than in accordance with the terms of the Purchase Agreement) or ceases to be effective or to be a binding obligation of the Company. If any such event of default occurs, then RCA may take certain actions, including ceasing to buy any eligible receivables, declaring any indebtedness or other obligations immediately due and payable, or terminating the Purchase Agreement. Financing and Security Agreement On July 15, 2016, we entered into a Financing and Security Agreement (the "Financing Agreement") with Action Capital Corporation ("Action Capital"), pursuant to which Action Capital agreed to provide the Company with advances of up to 90% of the net amount of certain acceptable customer accounts of the Company that have been assigned as collateral to Action Capital (the "Acceptable Accounts"). The maximum outstanding principal amount of advances under the Financing Agreement was $5 million. The Financing Agreement has a term of two years, provided that the Company may terminate it at any time without penalty upon written notice. At the time the Financing Agreement was signed, the Company did not borrow any amounts under the Financing Agreement. The Company shall pay Action Capital interest on the advances outstanding under the Financing Agreement at a rate equal to the prime rate of Wells Fargo Bank, N.A. in effect on the last business day of the prior month plus 2%, and a monthly fee equal to 0.50%. All interest calculations are based on a year of 360 days. The Company's obligations under the Financing Agreement are secured by certain assets of the Company pertaining to the Acceptable Accounts, including all accounts, accounts receivable, earned and unbilled revenue, contract rights, chattel paper, documents, instruments, general intangibles, reserves, reserve accounts, rebates, books and records, and all proceeds of the foregoing. Pursuant to the terms of the Financing Agreement, Action Capital shall have full recourse against the Company when an Acceptable Account is not paid in full by the respective customer within 90 days of the date of purchase or if for any reason it ceases to be an Acceptable Account, including the right to charge-back any such Acceptable Account. It is considered an event of default if the Company breaches any covenant or warranty, knowingly provides false or incorrect material information to Action Capital, or otherwise defaults on any of its material obligations under the Financing Agreement or any other material agreements with Action Capital (subject to a cure period). If any such events of default occur, then Action Capital may take certain actions, including declaring any indebtedness immediately due and payable, requiring any customers with Acceptable Accounts to make payments directly to Action Capital, exercising its power of attorney from the Company to take actions in the Company's stead with respect to any of Company's Acceptable Accounts, or terminating the Financing Agreement. As of December 31, 2017 and 2016, there were no outstanding borrowings under the Financing Agreement. Senior Revolving Credit Facility As of December 31, 2015, the interest rate on the Facility was 5.75%. We incurred interest expense in the amount of $0.2 million and $0.6 million for the years ended December 31, 2016 and 2015, respectively, on the Facility. The effective weighted average interest rates on the outstanding borrowings under the Facility was 6.7% for the year ended December 31, 2015. On March 30, 2016 the Facility was amended (the "Seventeenth Amendment") to extend the maturity date to January 1, 2017. The Seventeenth Amendment also amended the terms of the Facility, reducing the total credit available from $20 million to $10 million effective as of the date of the amendment, which more appropriately reflected the Company's projected utilization of the Facility. The Seventeenth Amendment fixed the interest rate at the higher of the Wells Fargo Bank "prime rate" plus 2.25%, the Federal Funds rate plus 2.75%, or the 3-month LIBOR rate plus 3.25%. The Seventeenth Amendment also increased the minimum excess availability requirement under the revolving component from $1.25 million to $2.0 million, effective as of the date of the amendment, and increased the requirement to $2.5 million, effective July 1, 2016, and $3.0 million, effective November 1, 2016, if the Company did not receive $5 million of equity or subordinated debt investment by June 1, 2016. If such capital investment was not received by June 1, 2016, we would pay a fee of $100,000 to Wells Fargo, which was paid in June 2016. In consideration for the closing of the Seventeenth Amendment, we paid Wells Fargo a fee of $100,000, plus expenses related to the closing. On May 16, 2016, the Facility was amended to extend the maturity date to April 1, 2017. In connection with the Purchase Agreement and the Financing Agreement, we terminated the Facility with Wells Fargo, effective as of July 15, 2016, prior to its maturity date of April 1, 2017, and repaid all amounts outstanding under the Facility; other than (1) the obligations of the Company under the Facility and related loan documents with respect to letters of credits and fees, charges, costs and expenses related thereto, (2) the obligations of the Company under the Facility and related loan documents to reimburse Wells Fargo for costs and expenses that may become due and payable after the date of the termination of the Facility, and (3) any customary contingent indemnification obligations. The Company paid an early termination fee of $100,000, and no other early termination fees or prepayment penalties were incurred by the Company in connection with the termination of the Facility. Subordinated Debt On March 31, 2015, the Company entered into Subordinated Loan Agreements and Subordinated Promissory Notes ("Porter Notes") with affiliated entities of Mr. John R. C. Porter (together referenced as "Porter"). Mr. Porter and Toxford Corporation, of which Mr. Porter is the sole shareholder, own 34.9% of our Class A Common Stock. Under the terms of the Porter Notes, Porter lent the Company $2.5 million on or about March 31, 2015. Telos also entered into Subordination and Intercreditor Agreements (the "Subordination Agreements") with Porter and Wells Fargo, in which the Porter Notes are fully subordinated to the Facility and any subsequent senior lenders (including Action Capital), and payments under the Porter Notes are permitted only if certain conditions specified by Wells Fargo are met. According to the terms of the Porter Notes, the outstanding principal sum bears interest at the fixed rate of twelve percent (12%) per annum which would be payable in arrears in cash on the 20th day of each May, August, November and February, with the first interest payment date due on August 20, 2015. The Porter Notes do not call for amortization payments and are unsecured. The Porter Notes, in whole or in part, may be repaid at any time without premium or penalty. The unpaid principal, together with interest, was originally due and payable in full on July 1, 2017. On April 18, 2017, we amended and restated the Porter Notes to reduce the interest rate from twelve percent (12%) to six percent (6%) per annum, to be accrued, and extended the maturity date from July 1, 2017 to July 25, 2022. Telos also entered into the Intercreditor Agreements with Porter and EnCap, in which the Porter Notes are fully subordinated to the Credit Agreement and any subsequent senior lenders (including Action Capital), and payments under the Porter Notes are permitted only if certain conditions are met. All other terms remain in full force and effect. We incurred interest expense in the amount of $292,000, $300,000, and $229,000 for 2017, 2016, and 2015, respectively, on the Porter Notes. As a result of the amendment and restatement of the Porter Notes, we recorded a gain on extinguishment of debt of approximately $1 million, which consisted of the remeasurement of the debt at fair value. As the extinguishment was with a related party, the transaction was deemed to be a capital transaction and the gain was recorded in the Company's stockholders' deficit as of December 31, 2017. |
Redeemable Preferred Stock
Redeemable Preferred Stock | 12 Months Ended |
Dec. 31, 2017 | |
Redeemable Preferred Stock [Abstract] | |
Redeemable Preferred Stock | Note 7. Redeemable Preferred Stock Public Preferred Stock A maximum of 6,000,000 shares of the Public Preferred Stock, par value $.01 per share, has been authorized for issuance. We initially issued 2,858,723 shares of the Public Preferred Stock pursuant to the acquisition of the Company during fiscal year 1990. The Public Preferred Stock was recorded at fair value on the date of original issue, November 21, 1989, and we made periodic accretions under the interest method of the excess of the redemption value over the recorded value. We adjusted our estimate of accrued accretion in the amount of $1.5 million in the second quarter of 2006. The Public Preferred Stock was fully accreted as of December 2008. We declared stock dividends totaling 736,863 shares in 1990 and 1991. Since 1991, no other dividends, in stock or cash, have been declared. In November 1998, we retired 410,000 shares of the Public Preferred Stock. The total number of shares issued and outstanding at December 31, 2017 and 2016, was 3,185,586. The Public Preferred Stock is quoted as "TLSRP" on the OTCQB marketplace and the OTC Bulletin Board. Since 1991, no dividends were declared or paid on our Public Preferred Stock, based upon our interpretation of restrictions in our Articles of Amendment and Restatement, limitations in the terms of the Public Preferred Stock instrument, specific dividend payment restrictions in the Facility and the Porter Notes to which the Public Preferred Stock is subject, other senior obligations currently or previously in existence, and Maryland law limitations in existence prior to October 1, 2009. Subsequent to the 2009 Maryland law change, dividend payments continue to be prohibited except under certain specific circumstances as set forth in Maryland Code Section 2-311, which the Company did not satisfy as of the measurement dates. Pursuant to the terms of the Articles of Amendment and Restatement, we were scheduled, but not required, to redeem the Public Preferred Stock in five annual tranches during the period 2005 through 2009. However, due to our substantial senior obligations currently or previously in existence, limitations set forth in the covenants in the Credit Agreement and the Porter Notes, foreseeable capital and operational requirements, and restrictions and prohibitions of our Articles of Amendment and Restatement, we were and remain unable to meet the redemption schedule set forth in the terms of the Public Preferred Stock as of the measurement dates. Moreover, the Public Preferred Stock is not payable on demand, nor callable, for failure to redeem the Public Preferred Stock in accordance with the redemption schedule set forth in the instrument. Therefore, we classify these securities as noncurrent liabilities in the consolidated balance sheets as of December 31, 2017 and 2016. On January 25, 2017, we became parties with certain of our subsidiaries to the Credit Agreement with EnCap. Under the Credit Agreement, we agreed that, until full and final payment of the obligations under the Credit Agreement, we would not make any distribution or declare or pay any dividends (other than common stock) on our stock, or purchase, acquire, or redeem any stock, or exchange any stock for indebtedness, or retire any stock. Additionally, the Porter Notes contain similar prohibitions on dividend payments or stock redemptions. Accordingly, as stated above, we will continue to classify the entirety of our obligation to redeem the Public Preferred Stock as a long-term obligation. The Credit Agreement and the Porter Notes prohibit, among other things, the redemption of any stock, common or preferred, other than as described above. The Public Preferred Stock by its terms cannot be redeemed if doing so would violate the terms of an agreement regarding the borrowing of funds or the extension of credit which is binding upon us or any of our subsidiaries, and it does not include any other provisions that would otherwise require any acceleration of the redemption of or amortization payments with respect to the Public Preferred Stock. Thus, the Public Preferred Stock is not and will not be due on demand, nor callable, within 12 months from December 31, 2017. This classification is consistent with ASC 210-10, "Balance Sheet" and 470-10, "Debt" and the FASB ASC Master Glossary definition of "Current Liabilities." ASC 210-10 and the FASB ASC Master Glossary define current liabilities as follows: The term current liabilities is used principally to designate obligations whose liquidation is reasonably expected to require the use of existing resources properly classifiable as current assets, or the creation of other current liabilities. As a balance sheet category, the classification is intended to include obligations for items which have entered into the operating cycle, such as payables incurred in the acquisition of materials and supplies to be used in the production of goods or in providing services to be offered for sale; collections received in advance of the delivery of goods or performance of services; and debts that arise from operations directly related to the operating cycle, such as accruals for wages, salaries, commissions, rentals, royalties, and income and other taxes. Other liabilities whose regular and ordinary liquidation is expected to occur within a relatively short period of time, usually twelve months, are also intended for inclusion, such as short-term debts arising from the acquisition of capital assets, serial maturities of long-term obligations, amounts required to be expended within one year under sinking fund provisions, and agency obligations arising from the collection or acceptance of cash or other assets for the account of third persons. ASC 470-10 provides the following: The current liability classification is also intended to include obligations that, by their terms, are due on demand or will be due on demand within one year (or operating cycle, if longer) from the balance sheet date, even though liquidation may not be expected within that period. It is also intended to include long-term obligations that are or will be callable by the creditor either because the debtor's violation of a provision of the debt agreement at the balance sheet date makes the obligation callable or because the violation, if not cured within a specified grace period, will make the obligation callable. If, pursuant to the terms of the Public Preferred Stock, we do not redeem the Public Preferred Stock in accordance with the scheduled redemptions described above, the terms of the Public Preferred Stock require us to discharge our obligation to redeem the Public Preferred Stock as soon as we are financially capable and legally permitted to do so. Therefore, by its very terms, the Public Preferred Stock is not due on demand or callable for failure to make a scheduled payment pursuant to its redemption provisions and is properly classified as a noncurrent liability. We pay dividends on the Public Preferred Stock when and if declared by the Board of Directors. The Public Preferred Stock accrues a semi-annual dividend at the annual rate of 12% ($1.20) per share, based on the liquidation preference of $10 per share and is fully cumulative. Dividends in additional shares of the Public Preferred Stock for 1990 and 1991 were paid at the rate of 6% of a share for each $.60 of such dividends not paid in cash. For the cash dividends payable since December 1, 1995, we have accrued $99.7 million and $95.9 million as of December 31, 2017 and 2016, respectively. We accrued dividends on the Public Preferred Stock of $3.8 million for the years ended December 31, 2017, 2016, and 2015, which was recorded as interest expense. Prior to the effective date of ASC 480-10 on July 1, 2003, such dividends were charged to stockholders' accumulated deficit. Senior Redeemable Preferred Stock The Senior Redeemable Preferred Stock was senior to all other outstanding equity of the Company, including the Public Preferred Stock. The Series A-1 ranked on a parity with the Series A-2. The components of the authorized Senior Redeemable Preferred Stock were 1,250 shares of Series A-1 and 1,750 shares of Series A-2 Senior Redeemable Preferred Stock, each with $.01 par value. The Senior Redeemable Preferred Stock carried a cumulative per annum dividend rate of 14.125% of its liquidation value of $1,000 per share. The dividends were payable semiannually on June 30 and December 31 of each year. We had not declared dividends on our Senior Redeemable Preferred Stock since its issuance, other than in connection with the redemptions from 2010 to 2013. The liquidation preference of the Senior Redeemable Preferred Stock was the face amount of the Series A-1 and A-2 ($1,000 Due to the terms of the Credit Agreement, the Porter Notes, other senior obligations currently or previously in existence, the Senior Redeemable Preferred Stock and applicable provisions of Maryland law governing the payment of distributions, we had been precluded from redeeming the Senior Redeemable Preferred Stock and paying any accrued and unpaid dividends on the Senior Redeemable Preferred Stock, other than the redemptions that occurred from 2010 to 2013. In addition, certain holders of the Senior Redeemable Preferred Stock had entered into standby agreements whereby, among other things, those holders would not demand any payments in respect of dividends or redemptions of their instruments and the maturity dates of the instruments had been extended. As a result of such standby agreements, as of December 31, 2016, instruments held by Toxford Corporation ("Toxford"), the holder of 76.4% of the Senior Redeemable Preferred Stock, would mature on May 31, 2018. At December 31, 2016, the total number of shares of Senior Redeemable Preferred Stock issued and outstanding was 197 shares and 276 shares for Series A-1 and Series A-2, respectively. Due to the limitations, contractual restrictions, and agreements described above, the Senior Redeemable Preferred Stock was classified as noncurrent as of December 31, 2016. At December 31, 2016, cumulative undeclared, unpaid dividends relating to Senior Redeemable Preferred stock totaled $1.6 million. In accordance with the requirements of the Second Amendment to the EnCap Credit Agreement, we redeemed all outstanding shares of the Senior Redeemable Preferred Stock on April 18, 2017 for $2.1 million. We accrued dividends on the Senior Redeemable Preferred Stock of $20,000, $67,000, and $67,000 for the years ended December 31, 2017, 2016, and 2015, respectively, which were reported as interest expense. Prior to the effective date of ASC 480-10, "Distinguishing Liabilities from Equity," on July 1, 2003, such dividends were charged to stockholders' deficit. |
Stockholders' Deficit, Option P
Stockholders' Deficit, Option Plans, and Employee Benefit Plan | 12 Months Ended |
Dec. 31, 2017 | |
Stockholders' Deficit, Option Plans, and Employee Benefit Plan [Abstract] | |
Stockholders' Deficit, Option Plans, and Employee Benefit Plan | Note 8. Stockholders' Deficit and Employee Benefit Plan Common Stock The relative rights, preferences, and limitations of the Class A common stock and the Class B common stock are in all respects identical. The holders of the common stock have one vote for each share of common stock held. Subject to the priority rights of the Public Preferred Stock and any series of the Senior Preferred Stock, holders of Class A and Class B common stock are entitled to receive such dividends as may be declared. Restricted Stock Grants Since June 2008, we have issued restricted stock (Class A common) to our executive officers, directors and employees. In May 2017, we granted 5,005,000 shares of restricted stock to our executive officers and employees. Such stock is subject to a vesting schedule as follows: 25% of the restricted stock vests immediately on the date of grant, thereafter, an additional 25% will vest annually on the anniversary of the date of grant subject to continued employment or services. As of December 31, 2017, there were 3,723,750 shares of restricted stock that remained subject to vesting. In the event of death of the employee or a change in control, as defined by the Telos Corporation 2008 Omnibus Long-Term Incentive Plan or the 2013 Omnibus Long-Term Incentive Plan, or the 2016 Omnibus Long-Term Incentive Plan, all unvested shares shall automatically vest in full. In accordance with ASC 718, we recorded immaterial compensation expense for any of the issuances as the value of the common stock was nominal, based on the deduction of our outstanding debt, capital lease obligations, and preferred stock from an estimated enterprise value, which was estimated based on discounted cash flow analysis, comparable public company analysis, and comparable transaction analysis. Additionally, we determined that a significant change in the valuation estimate for common stock would not have a significant effect on the consolidated financial statements. Telos Shared Savings Plan We sponsor a defined contribution employee savings plan (the "Plan") under which substantially all full-time employees are eligible to participate. The Plan holds 3,658,536 shares of Telos Class A common stock. Since no public market exists for Telos Class A common stock, the Trustees of the Plan and their professional advisors undertake an annual evaluation, based upon the most recent audited financial statements. To date, the Plan's trustees have priced the stock at the exact midpoint of the evaluated range of the value of the stock. We match one-half of employee contributions to the Plan up to a maximum of 2% of such employee's eligible annual base salary. Participant contributions vest immediately, and Company contributions vest at the rate of 20% for each year, with full vesting occurring after completion of years of service. The Company's matching contributions to the Plan were suspended for 2015. Our total contributions to this Plan for 2017, 2016, and 2015 were $617,000, $575,000, and $0, respectively. Additionally, effective September 1, 2007, Telos ID sponsors a defined contribution savings plan (the "Telos ID Plan") under which substantially all full-time employees are eligible to participate. Telos ID matches one-half of employee contributions to the Plan up to a maximum of 2% of such employee's eligible annual base salary. Telos ID's matching contributions to the Telos ID Plan were suspended for 2015. The total 2017, 2016, and 2015 Telos ID contributions to this plan were $105,000, $96,000, and $0, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes [Abstract] | |
Income Taxes | Note 9. Income Taxes U.S. Tax Cuts and Jobs Act On December 22, 2017, the Tax Cuts and Jobs Act ("Tax Act") was enacted. The Tax Act made significant changes to the U.S. Internal Revenue Code including a number of changes that impact the Company, most notably a reduction to the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018, and an indefinite carryforward period for net operating losses generated in taxable years beginning after December 31, 2017. As a result, we will be able to use our hanging credit deferred tax liability as a source of taxable income to support the indefinite-lived net operating losses created by the future reversal of our temporary differences. Accordingly, we have re-measured our existing deferred tax assets and liabilities using the enacted tax rate, and adjusted the valuation allowance on our deferred taxes and recorded a decrease in deferred tax liabilities of $3.0 million, with a corresponding adjustment to deferred tax benefit for the same amount for the year ended December 31, 2017. On December 22, 2017, Staff Accounting Bulletin No. 118, "Income Tax Accounting Implications of the Tax Cuts and Jobs Act" ("SAB 118") was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company has re-measured its deferred tax assets and liabilities and adjusted the valuation allowance related to the hanging credit deferred tax liability and included these amounts in its consolidated financial statements for the year ended December 31, 2017. During 2018, we will continue to evaluate the impact of the Tax Act, which may impact our current conclusions. Any subsequent adjustment to these amounts will be recorded to current tax expense in 2018 in the quarter the analysis is completed. The (benefit) provision for income taxes attributable to income from operations includes the following (in thousands): For the Years Ended December 31, 2017 2016 2015 Current (benefit) provision Federal $ (86 ) $ 114 $ (902 ) State 29 28 54 Total current (57 ) 142 (848 ) Deferred (benefit) provision Federal (2,622 ) 155 4,333 State (88 ) 37 780 Total deferred (2,710 ) 192 5,113 Total provision (benefit) $ (2,767 ) $ 334 $ 4,265 The provision for income taxes related to operations varies from the amount determined by applying the federal income tax statutory rate to the income or loss before income taxes, exclusive of net income attributable to non-controlling interest. The reconciliation of these differences is as follows: For the Years Ended December 31, 2017 2016 2015 Computed expected income tax provision 34.0% 34.0% 34.0% State income taxes, net of federal income tax benefit 0.9 0.8 2.1 Change in valuation allowance for deferred tax assets, exclusive of impact of Tax Act (26.9) (21.5) (61.3) Cumulative deferred adjustments -- (0.3) (0.1) Provision to return adjustments -- (0.4) 1.3 Other permanent differences (1.3) (1.8) (1.1) Dividend and accretion on preferred stock (15.2) (19.3) (11.3) FIN 48 liability (0.9) 0.7 (0.8) R&D credit 4.6 3.3 1.6 Impact of Tax Act 35.5 -- -- Other 1.5 (0.4) (0.9) 32.2% (4.9)% (36.5)% The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2017 and 2016 are as follows (in thousands): December 31, 2017 2016 Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts $ 108 $ 161 Allowance for inventory obsolescence and amortization 818 778 Accrued liabilities not currently deductible 1,657 2,234 Accrued compensation 735 1,006 Deferred rent 5,134 7,682 Telos ID basis difference 65 -- Net operating loss carryforwards - federal 2,453 1,301 Net operating loss carryforwards - state 848 405 Federal tax credit 666 533 Total gross deferred tax assets 12,484 14,100 Less valuation allowance (7,219 ) (10,499 ) Total deferred tax assets, net of valuation allowance 5,265 3,601 Deferred tax liabilities: Amortization and depreciation (2,127 ) (2,696 ) Unbilled accounts receivable, deferred for tax purposes (1,282 ) (787 ) Goodwill basis adjustment and amortization (2,597 ) (3,451 ) Telos ID basis difference -- (58 ) Total deferred tax liabilities (6,006 ) (6,992 ) Net deferred tax liabilities $ (741 ) $ (3,391 ) The components of the valuation allowance are as follows (in thousands): Balance Beginning of Period Additions Recoveries Balance End of Period December 31, 2017 $ 10,499 $ -- $ (3,280 ) $ 7,219 December 31, 2016 $ 9,027 $ 1,472 $ -- $ 10,499 December 31, 2015 $ 1,868 $ 7,159 $ -- $ 9,027 We are required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on available evidence, realization of deferred tax assets is dependent upon the generation of future taxable income. We considered projected future taxable income, tax planning strategies, and reversal of taxable temporary differences in making this assessment. As such, we have determined that a full valuation allowance is required as of December 31, 2017 and 2016. We were not able to use temporary taxable differences related to goodwill, as a source of future taxable income. As a result of a full valuation allowance against our deferred tax assets, a deferred tax liability (hanging credit) related to goodwill remains on our consolidated balance sheet at December 31, 2017 and 2016. Under the Tax Act, we will be able to use hanging credit deferred tax liabilities as a source of taxable income to support the indefinite-lived net operating losses created by the future reversal of our temporary differences. Accordingly, we have re-measured our existing deferred tax assets and liabilities using the enacted tax rate, and adjusted the valuation allowance on our deferred taxes and recorded a decrease in deferred tax liabilities of $3.0 million, with a corresponding adjustment to deferred tax benefit for the same amount for the year ended December 31, 2017. At December 31, 2017, for federal income tax purposes there was approximately $11.7 million net operating loss available to be carried forward to offset future taxable income. These net operating loss carryforwards expire in 2037. In addition, there was approximately $60,000 of alternative minimum tax credit available to be carried forward indefinitely to reduce future regular tax liabilities until 2020, after which time it will be fully refundable in 2021, in accordance with the Tax Act. Under the provisions of ASC 740-10, we determined that there were approximately $677,000 and $762,000 of unrecognized tax benefits, including $266,000 and $233,000 of related interest and penalties, required to be recorded in other liabilities as of December 31, 2017 and 2016, respectively. We believe that the total amounts of unrecognized tax benefits will not significantly increase or decrease within the next 12 months. The period for which tax years are open, 2014 to 2017, has not been extended beyond the applicable statute of limitations. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): 2017 2016 2015 Unrecognized tax benefits, beginning of period $ 762 $ 803 $ 708 Gross (decreases) increases—tax positions in prior period (127 ) (66 ) 92 Gross increases—tax positions in current period 77 46 38 Settlements (35 ) (21 ) (35 ) Unrecognized tax benefits, end of period $ 677 $ 762 $ 803 |
Commitments
Commitments | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies [Abstract] | |
Commitments | Note 10. Commitments Leases We lease office space and equipment under noncancelable operating and capital leases with various expiration dates, some of which contain renewal options. On March 1, 1996, we entered into a 20-year capital lease for a building in Ashburn, Virginia, that serves as our corporate headquarters. We had accounted for this transaction as a capital lease and had accordingly recorded assets and a corresponding liability of approximately $12.3 million. Effective November 1, 2013, this lease was terminated and we entered into a 13-year lease (the "2013 lease") that would have expired in October 31, 2026. The 2013 lease was treated as a modification in accordance with ASC 840, "Leases". As a result of the 2013 lease, the corresponding capital asset and liability increased by $11.7 million, resulting in a net book value of the capital asset of $13.1 million, and capital obligation of $15.5 million. The 2013 lease included an option to purchase, assign to, or designate a purchaser on June 1, 2014, which required notice of intent to exercise the option by not later than March 31, 2014. On March 28, 2014, we entered into a definitive agreement with an unrelated third party to assign the purchase option to that third party in return for cash consideration of $1.7 million, payable upon the closing of the purchase transaction, and certain obligations under the agreement, including entering into a new 15-year lease with the third party upon the third party's exercise of the purchase option and purchase of the building from the prior landlord. On March 28, 2014, we provided the prior landlord notice of our assignment and exercise of the purchase option. On May 28, 2014 the third party completed the purchase transaction and the 2013 lease was terminated, with no ongoing obligations, by mutual agreement between us and the prior landlord. On the same day we entered into a new lease (the "2014 lease") with the third party that expires on May 31, 2029. The 2014 lease was treated as a modification of the prior lease on the property in accordance with ASC 840, and determined to be a capital lease. As a result of the new lease, the corresponding capital asset increased by $5.7 million, resulting in a net book value of the capital asset of $18.3 million and the liability increased by $6.7 million, resulting in a capital obligation of $22.0 million. As part of this treatment, the net cash consideration received in connection with the definitive agreement was treated as a lease incentive that will be amortized over the life of the lease. The following is a schedule by years of future minimum payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2017 (in thousands): Property Equipment Total 2018 $ 1,947 $ 1 $ 1,948 2019 1,995 1 1,996 2020 2,045 1 2,046 2021 2,097 2 2,099 2022 2,149 -- 2,149 Remainder 15,118 -- 15,118 Total minimum obligations 25,351 5 25,356 Less amounts representing interest (ranging from 5.0% to 21.8%) (6,361 ) (2 ) (6,363 ) Net present value of minimum obligations 18,990 3 18,993 Less current portion (1,012 ) (1 ) (1,013 ) Long-term capital lease obligations at December 31, 2017 $ 17,978 $ 2 $ 17,980 Future minimum lease payments for all noncancelable operating leases at December 31, 2017 are as follows (in thousands): 2018 $ 516 2019 494 2020 507 2021 503 2022 366 Remainder 354 Total minimum lease payments $ 2,740 In accordance with the 2014 Lease, the basic rent increases by a fixed 2.5% escalation annually. Rent expense charged to operations totaled $1.6 million, $1.7 million, and $1.8 million for 2017, 2016, and 2015, respectively. Accumulated amortization for property and equipment under capital leases at December 31, 2017 and 2016 is $16.3 million and $15.7 million, respectively. Warranties We provide product warranties for products sold through certain U.S. Government contract vehicles. We accrue a warranty liability at the time that we recognize revenue for the estimated costs that may be incurred in connection with providing warranty coverage. Warranties are valued using historical warranty usage trends; however, if actual product failure rates or service delivery costs differ from estimates, revisions to the estimated warranty liability may be required. Accrued warranties are reported as other current liabilities on the consolidated balance sheets. Balance Beginning of Year Accruals Warranty Expenses Balance End of Year (amount in thousands) Year Ended December 31, 2017 $ 51 $ -- $ (21 ) $ 30 Year Ended December 31, 2016 $ 133 $ 279 $ (361 ) $ 51 Year Ended December 31, 2015 $ 189 $ 125 $ (181 ) $ 133 |
Certain Relationships and Relat
Certain Relationships and Related Transactions | 12 Months Ended |
Dec. 31, 2017 | |
Certain Relationships and Related Transactions [Abstract] | |
Certain Relationships and Related Transactions | Note 11. Certain Relationships and Related Transactions Information concerning certain relationships and related transactions between us and certain of our current shareholders and officers is set forth below. The brother of our Chairman and CEO, Emmett J. Wood, has been an employee of ours since 1996. The amounts paid to this individual as compensation for 2017, 2016, and 2015 were $570,000, $401,000, and $305,000, respectively. Additionally, Mr. Wood owned 810,000 shares and 650,000 shares of the Company's Class A Common Stock as of December 31, 2017 and 2016, respectively, and 50,000 shares of the Company's Class B Common Stock as of December 31, 2017 and 2016. On March 31, 2015, the Company entered into the Porter Notes. Mr. Porter and Toxford Corporation, of which Mr. Porter is the sole shareholder, own 34.9% of our Class A Common Stock. Under the terms of the Porter Notes, Porter lent the Company $2.5 million on or about March 31, 2015. According to the terms of the Porter Notes, the outstanding principal sum bears interest at the fixed rate of twelve percent (12%) per annum which would be payable in arrears in cash on the 20th day of each May, August, November and February, with the first interest payment date due on August 20, 2015. The Porter Notes do not call for amortization payments and are unsecured. The Porter Notes, in whole or in part, may be repaid at any time without premium or penalty. The unpaid principal, together with interest, was originally due and payable in full on July 1, 2017. On April 18, 2017, we amended and restated the Porter Notes to reduce the interest rate from twelve percent (12%) to six percent (6%) per annum, to be accrued, and extended the maturity date from July 1, 2017 to July 25, 2022. Telos also entered into the Intercreditor Agreements with Porter and EnCap, in which the Porter Notes are fully subordinated to the Credit Agreement and any subsequent senior lenders (including Action Capital), and payments under the Porter Notes are permitted only if certain conditions are met. All other terms remain in full force and effect. We incurred interest expense in the amount of $292,000, $300,000, and $229,000 for the years ended December 31, 2017, 2016, and 2015, respectively, on the Porter Notes. As a result of the amendment and restatement of the Porter Notes, we recorded a gain on extinguishment of debt of approximately $1 million, which consisted of the remeasurement of the debt at fair value. As the extinguishment was with a related party, the transaction was deemed to be a capital transaction and the gain was recorded in the Company's stockholders' deficit as of December 31, 2017. On April 18, 2017, the Company redeemed all outstanding shares of the Senior Redeemable Preferred Stock, including 163 shares and 228 shares of Series A-1 and Series A-2 Redeemable Preferred Stock, respectively, held by Mr. Porter and Toxford. |
Summary of Selected Quarterly F
Summary of Selected Quarterly Financial Data (Unaudited) | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Selected Quarterly Financial Data (Unaudited) [Abstract] | |
Summary of Selected Quarterly Financial Data (Unaudited) | Note 12. Summary of Selected Quarterly Financial Data (Unaudited) The following is a summary of selected quarterly financial data for the previous two fiscal years (in thousands): Quarters Ended March 31 June 30 Sept. 30 Dec. 31 2017 Revenue $ 23,110 $ 21,096 $ 28,243 $ 35,278 Gross profit 8,443 7,391 9,262 15,470 (Loss) income before income taxes and non-controlling interest (2,807 ) (3,011 ) (1,755 ) 1,308 Net (loss) income attributable to Telos Corporation (1)(2) (3,099 ) (3,389 ) (3,044 ) 3,699 2016 Revenue $ 27,078 $ 26,798 $ 54,940 $ 26,052 Gross profit 10,582 9,452 14,538 8,874 (Loss) income before income taxes and non-controlling interest (149 ) (1,323 ) 1,503 (3,366 ) Net loss attributable to Telos Corporation (1) (867 ) (1,912 ) (91 ) (4,305 ) (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) A tax benefit was recorded due primarily to the remeasurement of our deferred tax assets and liabilities, and the adjustment of valuation allowance related to our hanging credit deferred tax liability in the fourth quarter of 2017, as a result of the Tax Act enacted in December 2017. |
Commitments, Contingencies and
Commitments, Contingencies and Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Commitments, Contingencies and Subsequent Events [Abstract] | |
Commitments and Contingencies and Subsequent Events | Note 13. Commitments, Contingencies and Subsequent Events Financial Condition and Liquidity Purchase Agreement and the Financing Agreement Purchase Agreement and the Financing Agreement While a variety of factors related to sources and uses of cash, such as timeliness of accounts receivable collections, vendor credit terms, or significant collateral requirements, ultimately impact our liquidity, such factors may or may not have a direct impact on our liquidity, based on how the transactions associated with such circumstances impact our availability under our credit arrangements. For example, a contractual requirement to post collateral for a duration of several months, depending on the materiality of the amount, could have an immediate negative effect on our liquidity, as such a circumstance would utilize cash resources without a near-term cash inflow back to us. Likewise, the release of such collateral could have a corresponding positive effect on our liquidity, as it would represent an addition to our cash resources without any corresponding near-term cash outflow. Similarly, a slow-down of payments from a customer, group of customers or government payment office would not have an immediate and direct effect on our availability unless the slowdown was material in amount and over an extended period of time. Any of these examples would have an impact on our cash resources, our financing arrangements, and therefore our liquidity. Management may determine that, in order to reduce capital and liquidity requirements, planned spending on capital projects and indirect expense growth may be curtailed, subject to growth in operating results. Additionally, management may seek to put in place a credit facility with a commercial bank, although no assurance can be given that such a facility could be put in place under terms acceptable to the Company. Should management determine that additional capital is required, management would likely look first to the sources of funding discussed above to meet any requirements, although no assurances can be given that these investors would be able to invest or that the Company and the investors would agree upon terms for such investments. Our working capital was $(4.1) million and $(8.6) million as of December 31, 2017 and 2016, respectively. Although no assurances can be given, we expect that our financing arrangements with EnCap, RCA and Action Capital, collectively, are sufficient to maintain the liquidity we require to meet our operating, investing and financing needs for the next 12 months. Legal Proceedings Costa Brava Partnership III, L.P. and Wynnefield Small Cap Value, L.P. v. Telos Corporation, et al. As previously reported, on October 17, 2005, Costa Brava Partnership III, L.P. ("Costa Brava"), a holder of Public Preferred Stock, instituted litigation against the Company and certain past and present directors and officers in the Circuit Court for Baltimore City, Maryland (the "Circuit Court"). A second holder of the Company's Public Preferred Stock, Wynnefield Small Cap Value, L.P. ("Wynnefield"), subsequently intervened as a co-Plaintiff (Costa Brava and Wynnefield are hereinafter referred to as "Plaintiffs"). On February 27, 2007, Plaintiffs added, as an additional defendant, Mr. John R. C. Porter, a holder of the Company's Class A Common Stock. In the litigation, Plaintiffs allege, among other things, that the Company and its officers and directors engaged in tactics to avoid paying dividends on the Public Preferred Stock, that the Company made improper bonus payments or awards to officers and directors, that certain former and present officers and directors breached legal duties or the standard of care that they owed the Company, that the Company improperly paid consulting fees to and engaged in loan transactions with Mr. Porter, that the Company failed to improve on the Company's purported insolvency, that the Company failed to redeem the Public Preferred Stock as allegedly required by the Company's charter, and that Mr. Porter engaged in actions constituting shareholder oppression. On December 22, 2005, the Company's Board of Directors established a special litigation committee ("Special Litigation Committee"), composed of certain independent directors, to review and evaluate the matters raised in the litigation. On August 30, 2006, Plaintiffs filed a motion with the Circuit Court to place the Company into a receivership following the resignations of six of the nine members of the Board of Directors on August 16, 2006. Within a week of the resignations, three new independent board members were added and two more new members were added in October 2006. Thus, the board and all board committees, including the Special Litigation Committee, were fully reconstituted. In an opinion dated November 29, 2006 the Circuit Court denied the motion for receivership. The Circuit Court concluded that the Plaintiffs' holdings in the Public Preferred Stock represented a minority equity interest (and not debt or a fixed liability), and that their equity interests did not provide a guarantee to payment of dividends or redemption of their shares. The Circuit Court further concluded that the Plaintiffs' alleged expectations to a status as debtors of the Company or to rights to current dividends were not objectively reasonable, and that the Plaintiffs in fact had not been denied any rights as defined by the proxy statement and prospectus forming the terms of the Public Preferred Stock. On July 20, 2007, the Special Litigation Committee, in its final report, concluded that the available evidence did not support Plaintiffs' derivative claims and that it was not in the best interests of the Company to pursue such claims in the litigation. On August 24, 2007, the Company moved to dismiss Plaintiffs' derivative claims based upon the report and to dismiss all remaining claims for failure to state a claim. Following an evidentiary hearing, the Circuit Court on January 7, 2008 dismissed all derivative claims based upon the recommendation of the Special Litigation Committee. On February 12, 2008, the Plaintiffs filed a Third Amended Complaint that included both new counts and previously dismissed counts. The new counts included a breach of contract claim (Count VIII), and claims for preliminary and permanent injunctions against the Company (Count IX) and for an accounting (Count X). Count VIII alleged there was a contractual obligation to pay paid-in-kind (or PIK) dividends and the Company's reversal of position in 2006 to not pay PIK dividends was a breach of contract. The Company moved to dismiss or strike the Third Amended Complaint and, on April 15, 2008, the Circuit Court issued an order dismissing with prejudice all counts in the Third Amended Complaint that were not previously disposed of by motion or stipulation. Regarding Count VIII, the Circuit Court stated that "neither the Registration Statements, nor the company charter and Articles of Amendment and Restatement can be read to give rise to a contractual obligation to pay PIK dividends." The Circuit Court added "the law is clear that a corporate board may revoke stock dividends, even if they have already been declared, up until the time they are issued." On December 2, 2008, the Company filed a motion for voluntary dismissal of its counterclaim against Plaintiffs (for their interference with the Company's relationship with Wells Fargo) without prejudice. The Circuit Court granted that motion, over Plaintiffs' opposition, on January 23, 2009. On February 23, 2009, the Plaintiffs filed a notice of appeal. In its brief, the Plaintiffs appealed the dismissal of their derivative claims and shareholder oppression claim against Mr. Porter. The appeal did not include any challenge to the dismissal of Count VIII regarding the alleged contractual obligation to pay PIK dividends. On September 7, 2012, the Court of Special Appeals of Maryland ruled that the Circuit Court applied an incorrect standard of review to evaluate the conclusions of the Special Litigation Committee. The Court of Special Appeals held that the Circuit Court's dismissal of a shareholder oppression claim (asserted against Mr. Porter) raised an issue of first impression under Maryland law and required further briefing in the Circuit Court. The Court of Special Appeals vacated the decision of the Circuit Court that had been appealed, and remanded the case for further consideration and proceedings. On October 24, 2012, the Company filed a petition for writ of certiorari in the Court of Special Appeals of Maryland, which was denied on January 22, 2013. On remand, the Circuit Court held a status and scheduling conference on July 26, 2013, as a result of which the Circuit Court issued a memorandum to counsel setting a briefing schedule to address the motion filed by the Company and other defendants to dismiss or otherwise dispose of the derivative claims as a result of the findings of the Special Litigation Committee in its final report of July 20, 2007. On November 1, 2013, the Defendants filed a Motion to Dismiss the derivative claims under the standard of review dictated by the opinion of the Court of Special Appeals. Plaintiffs filed their Opposition to the Motion on December 23, 2013, and Defendants filed their Reply on January 23, 2014. A hearing on the Motion to Dismiss was held on April 24, 2014. No decision has been rendered on the Company's motion to dismiss or otherwise dispose of the derivative claims, and the matter remains pending. On September 17, 2013, the Plaintiffs filed a request for an entry of an order for default as to Mr. Porter, which was denied by the Circuit Court on November 8, 2013. Mr. Porter ultimately filed a motion to dismiss the claim against him on May 13, 2014, raising multiple grounds. No decision has been rendered on Mr. Porter's motion to dismiss, and the matter remains pending. As of December 31, 2017, Costa Brava and Wynnefield, directly and through affiliated funds, own 12.7% and 17.4%, respectively, of the outstanding Public Preferred Stock. No material developments occurred in this litigation in 2017. On January 31, 2018, certain former and current officers and directors filed a Motion to Reconsider the Court's Orders Denying Motions to Dismiss for Lack of Personal Jurisdiction ("Motion to Reconsider") with Circuit Court. This Motion to Reconsider was precipitated by a newly decided Maryland appellate decision. The Plaintiffs filed their Opposition to the Motion to Reconsider on March 9, 2018. The matter remains pending. At this stage of the litigation, it is impossible to reasonably determine the degree of probability related to Plaintiffs' success in relation to any of their assertions in the litigation. Although there can be no assurance as to the ultimate outcome of the case, the Company and its present and former officers and directors strenuously deny Plaintiffs' allegations and continue to vigorously defend the matter and oppose all relief sought by Plaintiffs. Hamot et al. v. Telos Corporation As previously reported, since August 2, 2007, Messrs. Seth W. Hamot ("Hamot") and Andrew R. Siegel ("Siegel"), principals of Costa Brava Partnership III L.P. ("Costa Brava"), have been involved in litigation against the Company as Plaintiffs and Counter-defendants in the Circuit Court for Baltimore City, Maryland (the "Circuit Court"). Mr. Siegel is a Class D Director of the Company and Mr. Hamot was a Class D Director of the Company until his resignation on March 9, 2018. The Plaintiffs initially alleged that certain documents and records had not been promptly provided to them and were necessary to fulfill their duties as directors of the Company. Subsequently, the Plaintiffs further alleged that the Company had failed to follow certain provisions concerning the noticing of Board committee meetings and the recording of Board meeting minutes and, additionally, that Mr. Wood's service as both CEO and Chairman of the Board was improper and impermissible under the Company's Bylaws. By way of preliminary injunctions entered on August 28, 2007 and September 24, 2007, the Circuit Court ordered that the Plaintiffs are entitled to documents in response to reasonable requests for information pertinent and necessary to perform their duties as members of the Board but, in light of the Costa Brava shareholder litigation, the Company is entitled to designate certain documents as "confidential" or "highly confidential" and to withhold certain documents from the Plaintiffs based upon the attorney work product doctrine or attorney-client privilege. Pursuant to the preliminary injunctions, the Plaintiffs are also entitled to receive written responses to requests for Board of Directors or Board committee minutes within seven days of any such requests and copies of such minutes within fifteen days of any such requests, as well as written responses to all other requests for information and/or documents related to their duties as directors within seven days of such requests, and all Board of Directors appropriate information and/or documents within thirty days of any such requests. On April 23, 2008, the Company filed a counterclaim against Hamot and Siegel for money damages and preliminary and injunctive relief based upon Hamot and Siegel's interference with, and improper influence of, the Company's independent auditors regarding, among other things, a specific accounting treatment. On June 27, 2008, the Circuit Court granted the Company's motion for preliminary injunction and enjoined Hamot and Siegel from contacting the Company's auditors until the completion of the Company's Form 10-K for the preceding year. This preliminary injunction expired by its own terms and an appeal from that ordered was held to be moot by the Court of Special Appeals of Maryland. On April 12, 2010, the Plaintiffs filed a motion for the advancement of legal fees and expenses incurred in defense of the Company's counterclaim and/or its successful motion for injunctive relief. On November 3, 2011, the Circuit Court denied the Plaintiffs' motion, as well as the Plaintiffs' motion for partial summary judgment and request for attorneys' fees. On May 21, 2012, the Circuit Court denied Plaintiffs' motion for reconsideration of the same. Trial on both the Plaintiffs' books and records claims and the Company's counterclaims related to auditor interference commenced on July 5, 2013, and continued on several days in July 2013. The evidentiary portion of the trial concluded on August 1, 2013, and post-trial briefing concluded on September 16, 2013. On September 11, 2017, Judge W. Michel Pierson docketed two decisions in this matter. First, with respect to the Plaintiffs' complaint related to access to books and records of the Company, Judge Pierson declined to grant permanent injunctive relief to the Plaintiffs but, instead, issued a declaratory order setting forth the pertinent standards the parties should follow as it relates to the Plaintiffs' right to books and records. The Circuit Court found that the Plaintiffs have the right as directors to inspect and copy the records of the Company, subject to the Company's right to determine that the materials requested were not reasonably related to the scope of their duties as directors or that their use of the materials may violate the duties they owe to the Company. The Circuit Court also determined that the scope of the inspection may also be limited if Telos establishes that the request creates an undue burden or expense. Second, with respect to the third amended counterclaim, the Circuit Court entered judgment in favor of the Company and against Hamot and Siegel on the counterclaim for tortious interference with the Company's contractual relationship with its former auditors, Reznick Group ("Reznick") (Count Two) and awarded damages against Hamot and Siegel in the amount of $278,923. The Circuit Court found that Hamot and Siegel's threat of litigation against Reznick was the precipitating cause of Reznick's resignation. In addition, the Circuit Court determined that the threats of litigation were made for an improper purpose – to influence the accounting treatment that Reznick would use on the Company's financial statements, specifically as it relates to the 12.0% Exchangeable Redeemable Preferred Shares – and the resignation was a foreseeable consequence of the interference about which the Plaintiffs clearly had knowledge. The Circuit Court also entered judgment for Hamot and Siegel on the Company's claims for interference with its relationship with its former auditor, Goodman and Company, LLP ("Goodman") and on the Company's claim seeking declaratory relief in connection with Plaintiffs' claims for indemnification of attorney's fees and costs in connection with the litigation. The Circuit Court determined that the resignation of Goodman as the Company's auditor occurred upon the Plaintiffs' election to the Company's board of directors, which the Circuit Court found itself was not independently wrongful and was the precipitating cause of the resignation, and not primarily due to the litigation against Goodman maintained by Costa Brava. The Circuit Court also entered judgment for Hamot and Siegel on the alternative claims for interference with the business relationships with Goodman and Reznick (Counts Three and Four), finding that it was not necessary to decide issues of liability under these claims since it determined that contracts with each of the audit firms existed. On September 27, 2017, the Company filed a Motion under Maryland Rule 2-535 to reconsider or revise two specific aspects of the Circuit Court's judgment on the third amended counterclaim: (1) to correct the amount of damages awarded for audit expenses incurred for the audit year 2007, and (2) to amend or modify the order with respect to Count Five (the declaratory relief claim related to indemnification) to dismiss the claims instead of entering judgment in favor of Hamot and Siegel on it. The Company contended that the Circuit Court should revise an incorrect measure of damages it used in reaching its judgment on this claim and instead compensate for the financial loss directly and actually caused by Hamot and Siegel's tortious conduct, and award the Company aggregate damages in the amount of $669,989. Regarding Count Five, the Company requested that the Order entered be modified to conform it to the letter and spirit of the Circuit Court's opinion, in part to make clear that the judgment on that count does not have res judicata A hearing on the motion was held on October 11, 2017. At the conclusion of the hearing, the Circuit Court denied the Company's motion as to the damages awarded on Count Two, and granted the Company's motion on the issue related to Count Five and entered a new order accordingly. Later that same day, the Company filed a notice with the Circuit Court appealing the judgment to the Court of Special Appeals of Maryland. On October 17, 2017, Hamot and Siegel filed a notice of a cross-appeal. Oral argument on the appeal and the cross-appeal in the Court of Special Appeals is scheduled for October 2018. The Company will not have notice of the scope of the cross-appeal until Hamot and Siegel file their brief with the Court of Special Appeals. On October 19, 2017, Hamot and Siegel submitted a one and a half page letter to the Company, pursuant to Section 2-418 of the Maryland General Corporation Law, demanding that the Company advance and/or indemnify them for legal fees and expenses purportedly totaling $1,550,000 and incurred in pursuit of the foregoing books and records litigation and in defense of the Company's counterclaims, and ongoing expenses in the litigation. The Board addressed Hamot and Siegel's demand for indemnification and/or advancement at its regularly scheduled meeting on November 13, 2017. The Board, by a vote of all members present for this portion of the meeting, and for a number of reasons, determined not to provide indemnification or advancement to Hamot and Siegel in response to their demand. On November 20, 2017, Hamot and Siegel filed a Motion for Advancement and Indemnification of Legal Fees and Expenses and Request for Hearing in the Circuit Court. Hamot and Siegel allege that they have incurred approximately $1,450,000 of legal fees and expenses in relation to the counterclaim proceedings and approximately $100,000 of legal fees and expenses incurred in relation to the third amended complaint. Hamot and Siegel claim that, since the Circuit Court ruled in their favor in Counts I and III (related to Goodman), they are entitled to the $750,000 for legal fees and expenses incurred in defending those counts, plus legal fees and expenses incurred in the pending appeal. In addition, Hamot and Siegel claim that they are entitled to $659,750 (91% of the legal fees and expenses incurred in defending Counts II and IV (related to Reznick)) plus 91% of the legal fees and expenses incurred in the pending appeal. Lastly, Hamot and Siegel claim that, since they allegedly received a successful ruling in the third amended complaint, they are entitled to approximately $100,000 for legal fees and expenses incurred, plus advancement for expenses related to the pending appeal on this issue. The Company filed an opposition to Hamot and Siegel's Motion, raising a number of reasons why the relief requested by Hamot and Siegel should not be granted A hearing on this motion and the Company's opposition was held on February 28, 2018. No decision has been rendered and the matter remains pending. At this stage of the litigation, in light of the pendency of the appeal and the cross-appeal, it is impossible to reasonably determine the degree of probability related to the Company's success in relation to any of their assertions in the foregoing litigation. Other Litigation In addition, the Company is a party to litigation arising in the ordinary course of business. In the opinion of management, while the results of such litigation cannot be predicted with any reasonable degree of certainty, the final outcome of such known matters will not, based upon all available information, have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows. Subsequent Events Enlightenment Capital Credit Agreement On March 30, 2018, the Credit Agreement was amended (the "Third Amendment") to waive certain covenant defaults and to reset the covenants for 2018 measurement periods to more accurately reflect the Company's projected performance for the year. The measurement against the covenants for consolidated leverage ratio and consolidated fixed charge coverage ratio were agreed to not be measured as of December 31, 2017 and were reset for 2018 measurement periods. Additionally, a minimum revenue covenant and a net working capital covenant were added. In consideration of these amendments, the interest rate on the loan was increased by 1%, which will revert back to the original rate upon achievement of two consecutive quarters of a specified fixed charge coverage ratio as defined in the agreement. The Company may elect to pay the increase in interest expense in cash or by payment-in-kind (by addition to the principal amount of the Loan). Contemporaneously with the Third Amendment, Mr. Wood agreed to transfer 50,000 shares of the Company's Class A Common Stock owned by him to EnCap. Accounts Receivable Purchase Agreement On March 2, 2018, the term of the Purchase Agreement was extended to June 30, 2020. No fee or consideration of any kind was paid in connection with this extension. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Significant Accounting Policies [Abstract] | |
Principles of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements include the accounts of Telos and its subsidiaries, including Ubiquity.com, Inc., Xacta Corporation, and Teloworks, all of whose issued and outstanding share capital is owned by the Company. We have also consolidated the results of operations of Telos ID (see Note 2 – Non-controlling Interests). Intercompany transactions have been eliminated on consolidation. In preparing these consolidated financial statements, we have evaluated subsequent events through the date that these consolidated financial statements were issued. |
Segment Reporting | Segment Reporting Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker ("CODM"), or decision making group, in deciding how to allocate resources and assess performance. We currently operate in one operating and reportable business segment for financial reporting purposes. Our Chief Executive Officer is the CODM. The CODM only evaluates profitability based on consolidated results. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions used in the preparation of our consolidated financial statements include revenue recognition, allowance for doubtful accounts receivable, allowance for inventory obsolescence, the valuation allowance for deferred tax assets, income taxes, contingencies and litigation, potential impairments of goodwill and intangible assets, estimated pension-related costs for our foreign subsidiaries and accretion of Public Preferred Stock. Actual results could differ from those estimates. |
Revenue Recognition | Revenue Recognition Revenues are recognized in accordance with Generally Accepted Accounting Principles ("GAAP") We recognize revenues for software arrangements upon persuasive evidence of an arrangement, delivery of the software, and determination that collection of a fixed or determinable license fee is probable. Revenues for software licenses sold on a subscription basis are recognized ratably over the related license period. For arrangements where the sale of software licenses are bundled with other products, including software products, upgrades and enhancements, post-contract customer support ("PCS"), and installation, the relative fair value of each element is determined based on VSOE. VSOE is defined by ASC 985-605, "Software Revenue Recognition," and is limited to the price charged when the element is sold separately or, if the element is not yet sold separately, the price set by management having the relevant authority. When VSOE exists for undelivered elements, the remaining consideration is allocated to delivered elements using the residual method. If VSOE does not exist for the allocation of revenue to the various elements of the arrangement, all revenue from the arrangement is deferred until the earlier of the point at which (1) such VSOE does exist or (2) all elements of the arrangement are delivered. PCS revenues, upon being unbundled from a software license fee, are recognized ratably over the PCS period. Software arrangements requiring significant production, modification, or customization of the software are accounted for in accordance with ASC 605-35 "Construction-Type and Production-Type Contracts." We may use subcontractors and suppliers in the course of performing contracts and under certain contracts we provide supplier procurement services and materials for our customers. Some of these arrangements may fall within the scope of ASC 605-45, "Reporting Revenue Gross as a Principal versus Net as an Agent." We presume that revenues on our contracts are recognized on a gross basis, as we generally provide significant value-added services, assume credit risk, and reserve the right to select subcontractors and suppliers, but we evaluate the various criteria specified in the guidance in making the determination of whether revenue should be recognized on a gross or net basis. A description of the business lines, the typical deliverables, and the revenue recognition criteria in general for such deliverables follows: Cyber Operations and Defense Regarding our deliverables of Cyber Security solutions, we provide Xacta software and cybersecurity services to our customers. The software and accompanying services fall within the scope of ASC 985-605, "Software Revenue Recognition," as discussed above. We provide consulting services to our customers under either a firm-fixed price ("FFP") or time-and-materials ("T&M") basis. Such contracts fall under the scope of ASC 605-10-S99. Revenue for FFP services is recognized on a proportional performance basis. FFP services may be billed to the customer on a percentage-of-completion basis or based upon milestones as appropriate under a particular contract, which may approximate the proportional performance of the services under the agreements, as specified in such agreements. To the extent that customer billings exceed the performance of the specified services, the revenue would be deferred. Revenue is recognized under T&M contracts based upon specified billing rates and other direct costs as incurred. For cost plus fixed fee ("CPFF") contracts, revenue is recognized in proportion to the allowable costs incurred unless indicated otherwise in the terms of the contract. Regarding our deliverables of Secure Mobility solutions, we provide wireless and wired networking solutions consisting of hardware and services to our customers. The solutions within the Secure Mobility group are generally sold as FFP bundled solutions. Certain of these networking solutions involve contracts to design, develop, or modify complex electronic equipment configurations to a buyer's specification or to provide network engineering services, and as such fall within the scope of ASC 605-35. Revenue is earned upon percentage of completion based upon proportional performance, such performance generally being defined by performance milestones. Certain other solutions fall within the scope of ASC 605-10-S99, such as resold information technology products, like laptops, printers, networking equipment and peripherals, and ASC 605-25, such as delivery orders for multiple solutions deliverables. For product sales, revenue is recognized upon proof of acceptance by the customer, otherwise it is deferred until such time as the proof of acceptance is obtained. For example, in delivery orders for Department of Defense customers, which comprise the majority of the Company's customers, such acceptance is achieved with a signed Department of Defense Form DD-250 or electronic invoicing system equivalent. Services provided under these contracts are generally provided on a FFP basis, and as such fall within the scope of ASC 605-10-S99. Revenue for services is recognized based on proportional performance, as the work progresses. FFP services may be billed to the customer on a percentage-of-completion basis or based upon milestones, which may approximate the proportional performance of the services under the agreements, as specified in such agreements. To the extent that customer billings exceed the performance of the specified services, the revenue would be deferred. Revenue is recognized under T&M services contracts based upon specified billing rates and other direct costs as incurred. Identity Management (formerly Telos ID) IT & Enterprise Solutions Estimating future costs and, therefore, revenues and profits, is a process requiring a high degree of management judgment. In the event of a change in total estimated contract cost or profit, the cumulative effect of a change is recorded in the period the change in estimate occurs. To the extent contracts are incomplete at the end of an accounting period, revenue is recognized on the percentage-of-completion method, on a proportional performance basis, using costs incurred in relation to total estimated costs, or costs are deferred as appropriate under the terms of a particular contract. In the event cost estimates indicate a loss on a contract, the total amount of such loss, excluding overhead and general and administrative expense, is recorded in the period in which the loss is first estimated. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Our cash management program utilizes zero balance accounts. Accordingly, all book overdraft balances have been reclassified to accounts payable and other accrued payables, to the extent that availability of funds exists on our revolving credit facility. |
Accounts Receivable | Accounts Receivable Accounts receivable are stated at the invoiced amount, less allowances for doubtful accounts. Collectability of accounts receivable is regularly reviewed based upon managements' knowledge of the specific circumstances related to overdue balances. The allowance for doubtful accounts is adjusted based on such evaluation. Accounts receivable balances are written off against the allowance when management deems the balances uncollectible. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value, where cost is determined on the weighted average method. Substantially all inventories consist of purchased customer off-the-shelf hardware and software, and component computer parts used in connection with system integration services that we perform. An allowance for obsolete, slow-moving or nonsalable inventory is provided for all other inventory. This allowance is based on our overall obsolescence experience and our assessment of future inventory requirements. This charge is taken primarily due to the age of the specific inventory and the significant additional costs that would be necessary to upgrade to current standards as well as the lack of forecasted sales for such inventory in the near future. Gross inventory is $15.0 million and $5.2 million at December 31, 2017 and 2016, respectively. As of December 31, 2017, it is management's judgment that we have fully provided for any potential inventory obsolescence. The components of the allowance for inventory obsolescence are set forth below (in thousands): Balance Beginning of Year Additions Charge to Costs and Expense Recoveries Balance End of Year Year Ended December 31, 2017 $ 1,672 $ 73 $ (261 ) $ 1,484 Year Ended December 31, 2016 $ 1,457 $ 215 $ -- $ 1,672 Year Ended December 31, 2015 $ 1,366 $ 92 $ (1 ) $ 1,457 |
Property and Equipment | Property and Equipment Property and equipment is recorded at cost. Depreciation is provided on the straight-line method at rates based on the estimated useful lives of the individual assets or classes of assets as follows: Buildings 20 Years Machinery and equipment 3-5 Years Office furniture and fixtures 5 Years Leasehold improvements Lesser of life of lease or useful life of asset Leased property meeting certain criteria is capitalized at the present value of the related minimum lease payments. Amortization of property and equipment under capital leases is computed on the straight-line method over the lesser of the term of the related lease and the useful life of the related asset. Upon sale or retirement of property and equipment, the costs and related accumulated depreciation are eliminated from the accounts, and any gain or loss on such disposition is reflected in the consolidated statements of operations. For the years ended December 31, 2017, 2016, and 2015, such amounts are negligible. Expenditures for repairs and maintenance are charged to operations as incurred. Long-lived assets, such as fixed assets, are reviewed for impairment whenever circumstances indicate that the carrying amount of the asset exceeds its estimated fair value. Considerable management judgment is necessary to estimate its fair value. Accordingly, actual results could differ from such estimates. No events have been identified that caused an evaluation of the recoverability of long-lived assets. Our policy on internal use software is in accordance with ASC 350, "Intangibles- Goodwill and Other." This standard requires companies to capitalize qualifying computer software costs which are incurred during the application development stage and amortize them over the software's estimated useful life. We expensed all such software development costs in 2017, 2016, and 2015, as we believe that such amounts are immaterial. Depreciation and amortization expense related to property and equipment, including property and equipment under capital leases was $2.0 million, $1.8 million, and $2.0 million |
Income Taxes | Income Taxes We account for income taxes in accordance with ASC 740-10, "Income Taxes." Under ASC 740-10, deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences and income tax credits. Deferred tax assets and liabilities are measured by applying enacted statutory tax rates that are applicable to the future years in which deferred tax assets or liabilities are expected to be settled or realized for differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Any change in tax rates on deferred tax assets and liabilities is recognized in net income in the period in which the tax rate change is enacted. We record a valuation allowance that reduces deferred tax assets when it is "more likely than not" that deferred tax assets will not be realized. We are required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on available evidence, realization of deferred tax assets is dependent upon the generation of future taxable income. We considered projected future taxable income, tax planning strategies, and reversal of taxable temporary differences in making this assessment. As such, we have determined that a full valuation allowance is required as of December 31, 2017 and 2016. We are not able to use temporary taxable differences related to goodwill as a source of future taxable income. As a result of a full valuation allowance against our deferred tax assets, a deferred tax liability ("hanging credit") related to goodwill remains on our consolidated balance sheet at December 31, 2017 and 2016. Due to the tax reform enacted on December 22, 2017, net operating losses generated in taxable years beginning after December 31, 2017 will have an indefinite carryforward period, which will be available to offset future taxable income created by the reversal of temporary taxable differences related to goodwill. As a result, we have adjusted the valuation allowance on our deferred tax assets and liabilities at December 31, 2017. See additional information on tax reform and its impact on our income taxes in Note 9 – Income Taxes. We follow the provisions of ASC 74-10 related to accounting for uncertainty in income taxes. The accounting estimates related to liabilities for uncertain tax positions require us to make judgments regarding the sustainability of each uncertain tax position based on its technical merits. If we determine it is more likely than not that a tax position will be sustained based on its technical merits, we record the impact of the position in our consolidated financial statements at the largest amount that is greater than fifty percent likely of being realized upon ultimate settlement. These estimates are updated at each reporting date based on the facts, circumstances and information available. We are also required to assess at each reporting date whether it is reasonably possible that any significant increases or decreases to our unrecognized tax benefits will occur during the next 12 months. |
Goodwill and intangible assets | Goodwill and other intangible assets We evaluate the impairment of goodwill and other intangible assets in accordance with ASC 350, which requires goodwill and indefinite-lived intangible assets to be assessed on at least an annual basis for impairment using a fair value basis. Between annual evaluations, if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount, then impairment must be evaluated. Such circumstances could include, but are not limited to: (1) a significant adverse change in legal factors or business climate, or (2) a loss of key contracts or customers. As the result of an acquisition, we record any excess purchase price over the net tangible and identifiable intangible assets acquired as goodwill. An allocation of the purchase price to tangible and intangible net assets acquired is based upon our valuation of the acquired assets. Goodwill is not amortized, but is subject to annual impairment tests. We complete our goodwill impairment tests as of December 31st each year. Additionally, we make evaluations between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The evaluation is based on the estimation of the fair values of our three reporting units, Cyber Operations and Defense ("CO&D"), Identity Management, and IT & Enterprise Solutions, of which goodwill is housed in the CO&D reporting unit, in comparison to the reporting unit's net asset carrying values. Our discounted cash flows required management judgment with respect to forecasted revenue streams and operating margins, capital expenditures and the selection and use of an appropriate discount rate. We utilized the weighted average cost of capital as derived by certain assumptions specific to our facts and circumstances as the discount rate. The net assets attributable to the reporting units are determined based upon the estimated assets and liabilities attributable to the reporting units in deriving its free cash flows. In addition, the estimate of the total fair value of our reporting units is compared to the market capitalization of the Company. The Company's assessment resulted in a fair value that was greater than the Company's carrying value, therefore the second step of the impairment test, as prescribed by the authoritative literature, was not required to be performed and no impairment of goodwill was recorded as of December 31, 2017. Subsequent reviews may result in future periodic impairments that could have a material adverse effect on the results of operations in the period recognized. Recent operating results have reduced the projection of future cash flow growth potential, which indicates that certain negative potential events, such as a material loss or losses on contracts, or failure to achieve projected growth could result in impairment in the future. We estimate fair value of our reporting unit and compare the valuation with the respective carrying value for the reporting unit to determine whether any goodwill impairment exists. If we determine through the impairment review process that goodwill is impaired, we will record an impairment charge in our consolidated statements of operations. Goodwill is amortized and deducted over a 15-year period for tax purposes. Other intangible assets consist primarily of customer relationship enhancements. Other intangible assets were amortized on a straight-line basis over their estimated useful lives of 5 years. The amortization was based on a forecast of approximately equal annual customer orders over the 5-year period. Other intangible assets were subject to impairment review if there were events or changes in circumstances that indicated that the carrying amount was not recoverable. The other intangible assets were fully amortized as of June 30, 2016. |
Stock-Based Compensation | Stock-Based Compensation Compensation cost is recognized based on the requirements of ASC 718, "Stock Compensation," for all share-based awards granted. Since June 2008, we have issued restricted stock (Class A common) to our executive officers, directors and employees. In May 2017, we granted 5,005,000 shares of restricted stock to our executive officers and employees. Such stock is subject to a vesting schedule as follows: 25% of the restricted stock vests immediately on the date of grant, thereafter, an additional 25% will vest annually on the anniversary of the date of grant subject to continued employment or services. As of December 31, 2017, there were 3,723,750 shares of restricted stock that remained subject to vesting. In the event of death of the employee or a change in control, as defined by the Telos Corporation 2008 Omnibus Long-Term Incentive Plan, the 2013 Omnibus Long-Term Incentive Plan, or the 2016 Omnibus Long-Term Incentive Plan, all unvested shares shall automatically vest in full. In accordance with ASC 718, we recorded immaterial compensation expense for any of the issuances as the value of the common stock was nominal, based on the deduction of our outstanding debt, capital lease obligations, and preferred stock from an estimated enterprise value, which was estimated based on discounted cash flow analysis, comparable public company analysis, and comparable transaction analysis. Additionally, we determined that a significant change in the valuation estimate for common stock would not have a significant effect on the consolidated financial statements. |
Software Development Costs | Software Development Costs Software development costs for software to be sold, leased or otherwise marketed, such costs are expensed as incurred until technological feasibility is reached, at which time additional costs are capitalized until the product is available for general release to customers. Technological feasibility is established when all planning, designing, coding and testing activities have been completed, and all risks have been identified. For the year ended December 31, 2017, we capitalized $1.5 million of software development costs, which are amortized over the estimated product life of 2 years on a straight-line basis. Amortization expense was $0.2 million for the year ended December 31, 2017. The Company analyzes the net realizable value of capitalized software development costs on at least an annual basis and has determined that there is no indication of impairment of the capitalized software development costs as forecasted future sales are adequate to support amortization costs. During 2017, 2016 and 2015, we incurred salary costs for research and development of approximately $3.2 million, $2.6 million and $2.1 million, respectively, which were included as part of the selling, general and administrative expense in the consolidated statements of operations. |
Earnings (Loss) per Share | Earnings (Loss) per Share As we do not have publicly held common stock or potential common stock, no earnings per share data is reported for any of the years presented. |
Comprehensive Income | Comprehensive Income Comprehensive income includes changes in equity (net assets) during a period from non-owner sources. Our accumulated other comprehensive income was comprised of a loss from foreign currency translation of $75,000 and $82,000 as of December 31, 2017 and 2016, respectively; and actuarial gain on pension liability adjustments in Teloworks of $107,000 as of December 31, 2017 and 2016. |
Financial Instruments | Financial Instruments We use various methods and assumptions to estimate the fair value of our financial instruments. Due to their short-term nature, the carrying value of cash and cash equivalents, accounts receivable and accounts payable approximates fair value. The fair value of long-term debt is based on the discounted cash flows for similar term borrowings based on market prices for the same or similar issues. See Note 4 – Fair Value Measurements for fair value disclosures of the senior redeemable preferred stock. Fair value estimates are made at a specific point in time, based on relevant market information. These estimates are subjective in nature and involve matters of judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers," which requires an entity to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. In July 2015, the FASB finalized the delay of the effective date by one year, making the new standard effective for interim periods and annual period beginning after December 15, 2017. In March 2016, the FASB issued ASU 2016-08, "Revenues from Contract with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)," which clarifies the implementation guidance in ASU 2014-09 relating to principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, "Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing," which further clarifies the implementation guidance relating to identifying performance obligations and the licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients," which clarifies the implementation guidance related to collectability, presentation of sales tax, noncash consideration, contract modifications and completed contracts at transition. These standards can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application. We will adopt the modified retrospective transition period, and reflecting cumulative changes, if any, in accumulated deficit. The adoption of the new standard is not expected to have an effect on the accounting treatment of many of our contractual arrangements. At this point in the evaluation, the best estimate for the effect that the adoption of the new standard will have on certain proprietary software arrangements is expected to result in a cumulative adjustment to decrease accumulated deficit in the first quarter of 2018 of approximately $3.8 million, which will reduce the balance of deferred revenue. The Company has substantially completed its evaluation of the effect on the adoption of the new standard. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." The guidance in this update supersedes the requirements in ASC Topic 840, Leases. The update will require business entities to recognize lease assets and liabilities on the balance sheet and to disclose key information about leasing arrangements. A lessee would recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. For public companies, this update will be effective for interim and annual periods beginning after December 15, 2018, and is to be applied on a modified retrospective basis. We are currently assessing the impact the adoption of this ASU will have on our consolidated financial position, results of operations and cash flows. We expect to recognize increases in reported amounts for property and equipment, and related lease liabilities upon the adoption of this standard, and are still evaluating the impact it will have on results of operations. In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," which introduces new guidance for estimating credit losses on certain types of financial instruments based on expected losses and the timing of the recognition of such losses. The new standard will be effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. While we are currently assessing the impact the adoption of this ASU will have on our consolidated financial position, results of operations and cash flows, we do not believe the adoption of this ASU will have a material impact on our financial statements. In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of certain cash receipts and cash payments," which intends to reduce the diversity in practice in how certain transactions are classified on the statement of cash flows. This new standard will be effective retrospectively for interim and annual reporting periods beginning after December 31, 2017, and early adoption is permitted. The adoption of this ASU will not have a material impact on our consolidated financial position, results of operations and cash flows. In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230) – Restricted Cash," which requires the presentation of changes in restricted cash or restricted cash equivalents on the statement of cash flows. This standard will be effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU will not have a material impact on our consolidated financial position, results of operations and cash flows. In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment loss will instead be measured at the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the recorded amount of goodwill. The provisions of this ASU are effective for years beginning after December 15, 2019, with early adoption permitted for any impairment test performed on testing dates after January 1, 2017. The adoption of this ASU will not have a material impact on our consolidated financial position, results of operations and cash flows. In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting," which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. This ASU is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU will not have a material impact on our consolidated financial position, results of operations and cash flows. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Significant Accounting Policies [Abstract] | |
Allowance for Obsolescent Inventory | The components of the allowance for inventory obsolescence are set forth below (in thousands): Balance Beginning of Year Additions Charge to Costs and Expense Recoveries Balance End of Year Year Ended December 31, 2017 $ 1,672 $ 73 $ (261 ) $ 1,484 Year Ended December 31, 2016 $ 1,457 $ 215 $ -- $ 1,672 Year Ended December 31, 2015 $ 1,366 $ 92 $ (1 ) $ 1,457 |
Property and Equipment Useful Lives | Buildings 20 Years Machinery and equipment 3-5 Years Office furniture and fixtures 5 Years Leasehold improvements Lesser of life of lease or useful life of asset |
Non-controlling Interests (Tabl
Non-controlling Interests (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Non-controlling Interests [Abstract] | |
Changes in Non-controlling Interest | The following table details the changes in non-controlling interest for the years ended December 31, 2017, 2016, and 2015 (in thousands): 2017 2016 2015 Non-controlling interest, beginning of period $ 2,229 $ 635 $ 584 Net income 2,335 3,506 2,438 Distributions (3,651 ) (1,912 ) (2,387 ) Non-controlling interest, end of period $ 913 $ 2,229 $ 635 |
Revenue and Accounts Receivab24
Revenue and Accounts Receivable (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Revenue and Accounts Receivable [Abstract] | |
Accounts Receivable Components | The components of accounts receivable are as follows (in thousands): December 31, 2017 2016 Billed accounts receivable $ 11,736 $ 13,164 Unbilled receivables 13,195 6,352 Allowance for doubtful accounts (411 ) (429 ) $ 24,520 $ 19,087 |
Allowance for Doubtful Accounts | Balance Beginning of Year Bad Debt Expenses (1) Recoveries (2) Balance End of Year Year Ended December 31, 2017 $ 429 $ (18 ) $ -- $ 411 Year Ended December 31, 2016 $ 485 $ (56 ) $ -- $ 429 Year Ended December 31, 2015 $ 372 $ 113 $ -- $ 485 (1) Accounts receivable reserves and reversal of allowance for subsequent collections, net (2) Accounts receivable written-off and subsequent recoveries, net |
Revenue by Customer Sector | We derived substantially all of our revenues from contracts and subcontracts with the U.S. Government. Revenue by customer sector for the last three fiscal years is as follows: 2017 2016 2015 (dollar amounts in thousands) Federal $ 101,519 94.2 % $ 130,415 96.7 % $ 117,328 97.3 % State & Local, and Commercial 6,208 5.8 % 4,453 3.3 % 3,306 2.7 % Total $ 107,727 100.0 % $ 134,868 100.0 % $ 120,634 100.0 % |
Current Liabilities and Debt 25
Current Liabilities and Debt Obligations (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Current Liabilities and Debt Obligations [Abstract] | |
Carrying Amount of the Credit Agreement | The Credit Agreement also includes an $825,000 exit fee, which is payable upon any repayment or prepayment of the loan. This amount has been included in the total principal due and treated as an unamortized discount on the debt, which will be amortized over the term of the loan, using the effective interest method at a rate of 15.0%. We incurred fees and transaction costs of approximately $374,000 related to the issuance of the Credit Agreement, which are being amortized over the life of the Credit Agreement. As of December 31, 2017, the carrying amount of the Credit Agreement consisted of the following (in thousands): December 31, 2017 Senior term loan principal, including exit fee $ 11,825 Less: Unamortized discount, debt issuance costs, and lender fees (1,039 ) Senior term loan, net $ 10,786 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Taxes [Abstract] | |
Provision (Benefit) for Income Taxes | The (benefit) provision for income taxes attributable to income from operations includes the following (in thousands): For the Years Ended December 31, 2017 2016 2015 Current (benefit) provision Federal $ (86 ) $ 114 $ (902 ) State 29 28 54 Total current (57 ) 142 (848 ) Deferred (benefit) provision Federal (2,622 ) 155 4,333 State (88 ) 37 780 Total deferred (2,710 ) 192 5,113 Total provision (benefit) $ (2,767 ) $ 334 $ 4,265 |
Reconciliation of Effective Tax Rate | The provision for income taxes related to operations varies from the amount determined by applying the federal income tax statutory rate to the income or loss before income taxes, exclusive of net income attributable to non-controlling interest. The reconciliation of these differences is as follows: For the Years Ended December 31, 2017 2016 2015 Computed expected income tax provision 34.0% 34.0% 34.0% State income taxes, net of federal income tax benefit 0.9 0.8 2.1 Change in valuation allowance for deferred tax assets, exclusive of impact of Tax Act (26.9) (21.5) (61.3) Cumulative deferred adjustments -- (0.3) (0.1) Provision to return adjustments -- (0.4) 1.3 Other permanent differences (1.3) (1.8) (1.1) Dividend and accretion on preferred stock (15.2) (19.3) (11.3) FIN 48 liability (0.9) 0.7 (0.8) R&D credit 4.6 3.3 1.6 Impact of Tax Act 35.5 -- -- Other 1.5 (0.4) (0.9) 32.2% (4.9)% (36.5)% |
Deferred Tax Assets and Liabilities | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2017 and 2016 are as follows (in thousands): December 31, 2017 2016 Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts $ 108 $ 161 Allowance for inventory obsolescence and amortization 818 778 Accrued liabilities not currently deductible 1,657 2,234 Accrued compensation 735 1,006 Deferred rent 5,134 7,682 Telos ID basis difference 65 -- Net operating loss carryforwards - federal 2,453 1,301 Net operating loss carryforwards - state 848 405 Federal tax credit 666 533 Total gross deferred tax assets 12,484 14,100 Less valuation allowance (7,219 ) (10,499 ) Total deferred tax assets, net of valuation allowance 5,265 3,601 Deferred tax liabilities: Amortization and depreciation (2,127 ) (2,696 ) Unbilled accounts receivable, deferred for tax purposes (1,282 ) (787 ) Goodwill basis adjustment and amortization (2,597 ) (3,451 ) Telos ID basis difference -- (58 ) Total deferred tax liabilities (6,006 ) (6,992 ) Net deferred tax liabilities $ (741 ) $ (3,391 ) |
Components of Valuation Allowance | The components of the valuation allowance are as follows (in thousands): Balance Beginning of Period Additions Recoveries Balance End of Period December 31, 2017 $ 10,499 $ -- $ (3,280 ) $ 7,219 December 31, 2016 $ 9,027 $ 1,472 $ -- $ 10,499 December 31, 2015 $ 1,868 $ 7,159 $ -- $ 9,027 We are required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on available evidence, realization of deferred tax assets is dependent upon the generation of future taxable income. We considered projected future taxable income, tax planning strategies, and reversal of taxable temporary differences in making this assessment. As such, we have determined that a full valuation allowance is required as of December 31, 2017 and 2016. We were not able to use temporary taxable differences related to goodwill, as a source of future taxable income. As a result of a full valuation allowance against our deferred tax assets, a deferred tax liability (hanging credit) related to goodwill remains on our consolidated balance sheet at December 31, 2017 and 2016. Under the Tax Act, we will be able to use hanging credit deferred tax liabilities as a source of taxable income to support the indefinite-lived net operating losses created by the future reversal of our temporary differences. Accordingly, we have re-measured our existing deferred tax assets and liabilities using the enacted tax rate, and adjusted the valuation allowance on our deferred taxes and recorded a decrease in deferred tax liabilities of $3.0 million, with a corresponding adjustment to deferred tax benefit for the same amount for the year ended December 31, 2017. At December 31, 2017, for federal income tax purposes there was approximately $11.7 million net operating loss available to be carried forward to offset future taxable income. These net operating loss carryforwards expire in 2037. In addition, there was approximately $60,000 of alternative minimum tax credit available to be carried forward indefinitely to reduce future regular tax liabilities until 2020, after which time it will be fully refundable in 2021, in accordance with the Tax Act. |
Unrecognized Tax Benefits Roll Forward | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): 2017 2016 2015 Unrecognized tax benefits, beginning of period $ 762 $ 803 $ 708 Gross (decreases) increases—tax positions in prior period (127 ) (66 ) 92 Gross increases—tax positions in current period 77 46 38 Settlements (35 ) (21 ) (35 ) Unrecognized tax benefits, end of period $ 677 $ 762 $ 803 |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies [Abstract] | |
Future Minimum Payments Under Capital Leases | The following is a schedule by years of future minimum payments under capital leases together with the present value of the net minimum lease payments as of December 31, 2017 (in thousands): Property Equipment Total 2018 $ 1,947 $ 1 $ 1,948 2019 1,995 1 1,996 2020 2,045 1 2,046 2021 2,097 2 2,099 2022 2,149 -- 2,149 Remainder 15,118 -- 15,118 Total minimum obligations 25,351 5 25,356 Less amounts representing interest (ranging from 5.0% to 21.8%) (6,361 ) (2 ) (6,363 ) Net present value of minimum obligations 18,990 3 18,993 Less current portion (1,012 ) (1 ) (1,013 ) Long-term capital lease obligations at December 31, 2017 $ 17,978 $ 2 $ 17,980 |
Future Minimum Lease Payments for All Noncancelable Operating Leases | Future minimum lease payments for all noncancelable operating leases at December 31, 2017 are as follows (in thousands): 2018 $ 516 2019 494 2020 507 2021 503 2022 366 Remainder 354 Total minimum lease payments $ 2,740 |
Accrued Warranties | We provide product warranties for products sold through certain U.S. Government contract vehicles. We accrue a warranty liability at the time that we recognize revenue for the estimated costs that may be incurred in connection with providing warranty coverage. Warranties are valued using historical warranty usage trends; however, if actual product failure rates or service delivery costs differ from estimates, revisions to the estimated warranty liability may be required. Accrued warranties are reported as other current liabilities on the consolidated balance sheets. Balance Beginning of Year Accruals Warranty Expenses Balance End of Year (amount in thousands) Year Ended December 31, 2017 $ 51 $ -- $ (21 ) $ 30 Year Ended December 31, 2016 $ 133 $ 279 $ (361 ) $ 51 Year Ended December 31, 2015 $ 189 $ 125 $ (181 ) $ 133 |
Summary of Selected Quarterly28
Summary of Selected Quarterly Financial Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Summary of Selected Quarterly Financial Data (Unaudited) [Abstract] | |
Selected Quarterly Financial Data | The following is a summary of selected quarterly financial data for the previous two fiscal years (in thousands): Quarters Ended March 31 June 30 Sept. 30 Dec. 31 2017 Revenue $ 23,110 $ 21,096 $ 28,243 $ 35,278 Gross profit 8,443 7,391 9,262 15,470 (Loss) income before income taxes and non-controlling interest (2,807 ) (3,011 ) (1,755 ) 1,308 Net (loss) income attributable to Telos Corporation (1)(2) (3,099 ) (3,389 ) (3,044 ) 3,699 2016 Revenue $ 27,078 $ 26,798 $ 54,940 $ 26,052 Gross profit 10,582 9,452 14,538 8,874 (Loss) income before income taxes and non-controlling interest (149 ) (1,323 ) 1,503 (3,366 ) Net loss attributable to Telos Corporation (1) (867 ) (1,912 ) (91 ) (4,305 ) (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) A tax benefit was recorded due primarily to the remeasurement of our deferred tax assets and liabilities, and the adjustment of valuation allowance related to our hanging credit deferred tax liability in the fourth quarter of 2017, as a result of the Tax Act enacted in December 2017. |
Summary of Significant Accoun29
Summary of Significant Accounting Policies (Details) | 1 Months Ended | 12 Months Ended | |||
May 31, 2017shares | Dec. 31, 2017USD ($)Segmentshares | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Mar. 31, 2018USD ($) | |
Segment Reporting [Abstract] | |||||
Number of reportable segments | Segment | 1 | ||||
Inventories [Abstract] | |||||
Gross inventory | $ 15,000,000 | $ 5,200,000 | |||
Allowance for Obsolescent Inventory [Roll Forward] | |||||
Balance Beginning of Year | 1,672,000 | 1,457,000 | $ 1,366,000 | ||
Additions Charge to Costs and Expense | 73,000 | 215,000 | 92,000 | ||
Deductions | (261,000) | 0 | (1,000) | ||
Balance End of Year | 1,484,000 | 1,672,000 | 1,457,000 | ||
Property, Plant and Equipment [Line Items] | |||||
Capitalized software development costs | 1,481,000 | 0 | 0 | ||
Amortization expense | $ 200,000 | ||||
Software development estimated useful life | 2 years | ||||
Depreciation and amortization, including capital leases | $ 2,000,000 | 1,800,000 | 2,000,000 | ||
Goodwill and other intangible assets [Abstract] | |||||
Goodwill amortization period for income tax purposes | 15 years | ||||
Estimated useful life of intangible asset | 5 years | ||||
Restricted Stock Grants [Abstract] | |||||
Restricted stock issued during the period (in shares) | shares | 5,005,000 | ||||
Restricted stock remained subject to vesting (in shares) | shares | 3,723,750 | ||||
Research and Development [Abstract] | |||||
Capitalized software development costs | $ 1,481,000 | 0 | 0 | ||
Software development estimated useful life | 2 years | ||||
Amortization expense | $ 200,000 | ||||
Salary costs associated with research and development | 3,200,000 | 2,600,000 | $ 2,100,000 | ||
Comprehensive Income [Abstract] | |||||
Foreign currency translation | 75,000 | 82,000 | |||
Gain on pension liability adjustment | 107,000 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Deferred revenue | 10,073,000 | 4,900,000 | |||
Accumulated deficit | $ (141,370,000) | $ (135,537,000) | |||
Buildings [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Software development estimated useful life | 20 years | ||||
Research and Development [Abstract] | |||||
Software development estimated useful life | 20 years | ||||
Machinery and Equipment [Member] | Minimum [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Software development estimated useful life | 3 years | ||||
Research and Development [Abstract] | |||||
Software development estimated useful life | 3 years | ||||
Machinery and Equipment [Member] | Maximum [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Software development estimated useful life | 5 years | ||||
Research and Development [Abstract] | |||||
Software development estimated useful life | 5 years | ||||
Office Furniture and Fixtures [Member] | |||||
Property, Plant and Equipment [Line Items] | |||||
Software development estimated useful life | 5 years | ||||
Research and Development [Abstract] | |||||
Software development estimated useful life | 5 years | ||||
Telos ID [Member] | |||||
Business Acquisition [Line Items] | |||||
Percentage of ownership | 50.00% | ||||
Teloworks [Member] | |||||
Business Acquisition [Line Items] | |||||
Percentage of ownership | 100.00% | ||||
Restricted Stock Grants [Member] | |||||
Restricted Stock Grants [Abstract] | |||||
Restricted stock issued during the period (in shares) | shares | 5,005,000 | ||||
Restricted stock vested on date of grant | 25.00% | ||||
Restricted stock vest on anniversary of the date of grant | 25.00% | ||||
Accounting Standards Update 2014-09 [Member] | Forecast [Member] | |||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||
Deferred revenue | $ (3,800,000) | ||||
Accumulated deficit | $ 3,800,000 |
Non-controlling Interests (Deta
Non-controlling Interests (Details) | Dec. 24, 2014USD ($)DirectorSubclasses | Apr. 30, 2007USD ($)Director | Apr. 19, 2007 | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Apr. 20, 2007USD ($) | Apr. 11, 2007USD ($) |
Noncontrolling Interest [Line Items] | |||||||||
Percentage of membership interest sold to investor | 10.00% | ||||||||
Net loss | $ (3,498,000) | $ (3,669,000) | $ (13,502,000) | ||||||
Proceeds from sale of membership interest | 0 | 0 | 2,000,000 | ||||||
Changes in non-controlling interest [Abstract] | |||||||||
Non-controlling interest, beginning of period | 2,229,000 | 635,000 | 584,000 | ||||||
Net income | 2,335,000 | 3,506,000 | 2,438,000 | ||||||
Distributions | (3,651,000) | (1,912,000) | (2,387,000) | ||||||
Non-controlling interest, end of period | 913,000 | 2,229,000 | 635,000 | $ 584,000 | |||||
Class A Membership Unit [Member] | |||||||||
Noncontrolling Interest [Line Items] | |||||||||
Net loss | $ 2,300,000 | $ 3,500,000 | $ 2,400,000 | ||||||
Telos ID [Member] | |||||||||
Noncontrolling Interest [Line Items] | |||||||||
Net book value of assets contributed | $ 17,000 | ||||||||
Percentage of membership interest owned before | 99.999% | ||||||||
Owned membership interest from private equity investors | 0.001% | ||||||||
Percentage of membership interest sold to investor | 39.999% | ||||||||
Cash consideration received on sale of membership interest | $ 5,000,000 | $ 6,000,000 | |||||||
Recognized gain on sale of membership interests to the Investors | $ 5,800,000 | ||||||||
Number of members in board of director | Director | 5 | ||||||||
Number of subclasses of membership units | Subclasses | 2 | ||||||||
Proceeds from sale of membership interest | 3,000,000 | ||||||||
Receivable from sale of membership interest | $ 2,000,000 | ||||||||
Telos ID [Member] | Class A Membership Unit [Member] | |||||||||
Noncontrolling Interest [Line Items] | |||||||||
Percentage of ownership interest owned after transaction | 50.00% | 60.00% | |||||||
Percentage of profit and loss allocated | 50.00% | ||||||||
Number of directors entitled to be appointed | Director | 3 | 3 | |||||||
Telos ID [Member] | Class B Membership Unit [Member] | |||||||||
Noncontrolling Interest [Line Items] | |||||||||
Percentage of ownership interest owned after transaction | 50.00% | ||||||||
Percentage of profit and loss allocated | 50.00% | ||||||||
Number of directors entitled to be appointed | Director | 2 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Goodwill and Other Intangible Assets [Abstract] | |||
Goodwill | $ 14,916 | $ 14,916 | |
Estimated useful lives customer relationship | 5 years | ||
Amortization of intangible assets | 1,100 | $ 2,300 | |
Asset impairment charges | $ 0 | ||
Indefinite-lived Intangible Assets [Line Items] | |||
Cost | 11,286 | 11,286 | |
Accumulated Amortization | 11,286 | 10,157 | |
Other Intangible Assets [Member] | |||
Indefinite-lived Intangible Assets [Line Items] | |||
Cost | 11,286 | 11,286 | |
Accumulated Amortization | $ 11,286 | $ 10,157 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | |||
Dec. 31, 2017 | Dec. 31, 1991 | Apr. 18, 2017 | Dec. 31, 2016 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Redemption amount of senior redeemable preferred stock | $ 2.1 | |||
Preferred stock dividend rate per annum | 12.00% | |||
Senior Redeemable Preferred Stock [Member] | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Carrying amount of senior redeemable preferred stock | $ 2.1 | |||
Public Preferred Stock [Member] | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Preferred stock dividend rate per annum | 12.00% | 6.00% | ||
Public preferred stock par value (in dollar per share) | $ 0.01 | |||
Carrying value of public preferred stock | $ 131.6 | 127.7 | ||
Estimate of Fair Value, Fair Value Disclosure [Member] | Public Preferred Stock [Member] | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Public preferred stock | $ 42.2 | $ 31.9 |
Revenue and Accounts Receivab33
Revenue and Accounts Receivable (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | ||
Accounts Receivable [Line Items] | ||||||||||||||
Concentration risk, percentage | 100.00% | 100.00% | 100.00% | |||||||||||
Percentage of initial payment by factor of U.S. Federal government receivables | 90.00% | |||||||||||||
Percentage of initial payment by factor of commercial prime contractors | 85.00% | |||||||||||||
Maximum limit of sold receivables | $ 10,000 | |||||||||||||
Sold receivables during the period | 23,400 | $ 35,300 | ||||||||||||
Loss recognized in selling, general and administrative expenses | 100 | 200 | ||||||||||||
Balance of sold receivables | 0 | 1,000 | ||||||||||||
Deferred price related to sold receivables | 100 | |||||||||||||
Components of Accounts Receivable [Abstract] | ||||||||||||||
Billed accounts receivable | $ 11,736 | $ 13,164 | ||||||||||||
Unbilled receivables | 13,195 | 6,352 | ||||||||||||
Allowance for doubtful accounts | $ (411) | $ (429) | $ (429) | $ (485) | (411) | (429) | $ (485) | (411) | (429) | |||||
Accounts Receivable, Net, Total | $ 24,520 | $ 19,087 | ||||||||||||
Allowance for Doubtful Accounts Receivable [Roll Forward] | ||||||||||||||
Balance Beginning of Year | 429 | 485 | 429 | 485 | 372 | |||||||||
Bad Debt Expenses | [1] | (18) | (56) | 113 | ||||||||||
Deductions | [2] | 0 | 0 | 0 | ||||||||||
Balance End of Year | 411 | 429 | 411 | 429 | 485 | |||||||||
Revenue by Customer Sector [Abstract] | ||||||||||||||
Revenue | $ 35,278 | $ 28,243 | $ 21,096 | $ 23,110 | $ 26,052 | $ 54,940 | $ 26,798 | $ 27,078 | $ 107,727 | $ 134,868 | $ 120,634 | |||
Federal [Member] | ||||||||||||||
Accounts Receivable [Line Items] | ||||||||||||||
Concentration risk, percentage | 94.20% | 96.70% | 97.30% | |||||||||||
Revenue by Customer Sector [Abstract] | ||||||||||||||
Revenue | $ 101,519 | $ 130,415 | $ 117,328 | |||||||||||
Federal [Member] | Revenue from Contracts and Subcontracts [Member] | ||||||||||||||
Accounts Receivable [Line Items] | ||||||||||||||
Concentration risk, percentage | 94.20% | 96.70% | 97.30% | |||||||||||
Federal [Member] | Accounts Receivable [Member] | ||||||||||||||
Accounts Receivable [Line Items] | ||||||||||||||
Concentration risk, percentage | 96.50% | |||||||||||||
State & Local, and Commercial [Member] | ||||||||||||||
Accounts Receivable [Line Items] | ||||||||||||||
Concentration risk, percentage | 5.80% | 3.30% | 2.70% | |||||||||||
Revenue by Customer Sector [Abstract] | ||||||||||||||
Revenue | $ 6,208 | $ 4,453 | $ 3,306 | |||||||||||
[1] | Accounts receivable reserves and reversal of allowance for subsequent collections, net | |||||||||||||
[2] | Accounts receivable written-off and subsequent recoveries, net |
Current Liabilities and Debt 34
Current Liabilities and Debt Obligations (Details) - USD ($) | Mar. 31, 2018 | Jan. 25, 2017 | Jul. 15, 2016 | Dec. 31, 2017 | Dec. 31, 2015 | Apr. 18, 2017 | Dec. 31, 2016 |
Accounts Payable and Other Accrued Payables [Abstract] | |||||||
Trade account payables | $ 15,400,000 | $ 12,100,000 | |||||
Accrued trade payables | 10,300,000 | $ 3,200,000 | |||||
Long-term Debt [Abstract] | |||||||
Senior term loan principal, including exit fee | 11,825,000 | ||||||
Less: Unamortized discount, debt issuance costs, and lender fees | (1,039,000) | ||||||
Senior term loan, net | 10,786,000 | ||||||
Subsequent Events [Member] | |||||||
Accounts Payable and Other Accrued Payables [Abstract] | |||||||
Increase in interest rate | 1.00% | ||||||
Credit Agreement [Member] | |||||||
Accounts Payable and Other Accrued Payables [Abstract] | |||||||
Credit agreement exit fee | $ 825,000 | ||||||
Effective interest rate | 15.00% | ||||||
Credit agreement transaction costs | $ 374,000 | ||||||
Long-term Debt [Abstract] | |||||||
Interest expense | $ 1,500,000 | ||||||
Porter [Member] | |||||||
Accounts Payable and Other Accrued Payables [Abstract] | |||||||
Maturity date | Jul. 25, 2022 | Jul. 1, 2017 | |||||
Aggregate redemption price | $ 2,112,000 | ||||||
Enlightenment Capital Solutions Fund II LP [Member] | Class A Common Stock [Member] | |||||||
Accounts Payable and Other Accrued Payables [Abstract] | |||||||
Warrants issued to purchase shares of common stock (in shares) | 1,135,284.333 | ||||||
Common stock par value (in dollars per share) | $ 0 | ||||||
Percentage of warrants issued of common equity interests | 2.50% | ||||||
Warrants exercise price (in dollars per share) | $ 1.321 | ||||||
Warrants expiration date | Jan. 25, 2027 | ||||||
Emmett J. Wood [Member] | Class A Common Stock [Member] | |||||||
Long-term Debt [Abstract] | |||||||
Number of shares held by related party (in shares) | 810,000 | 650,000 | |||||
Emmett J. Wood [Member] | Class A Common Stock [Member] | Subsequent Events [Member] | |||||||
Long-term Debt [Abstract] | |||||||
Number of shares held by related party (in shares) | 50,000 | ||||||
Emmett J. Wood [Member] | Common Class A and Class B [Member] | Subsequent Events [Member] | |||||||
Long-term Debt [Abstract] | |||||||
Number of shares held by related party (in shares) | 50,000 | ||||||
Term loan [Member] | Enlightenment Capital Solutions Fund II LP [Member] | |||||||
Accounts Payable and Other Accrued Payables [Abstract] | |||||||
Maturity date | Jan. 25, 2022 | ||||||
Accrual rate | 13.00% | ||||||
Increase in interest rate | 14.50% | ||||||
Increase in interest rate in event of default | 2.00% | ||||||
Monthly accrued interest rate during continuance of an Alternate Interest Rate Event | 11.50% | ||||||
Number of days prior written notice | 30 days | ||||||
Proceeds from loan prepayment | $ 1,100,000 | ||||||
Long-term Debt [Abstract] | |||||||
Senior term loan, net | $ 11,000,000 | ||||||
Term loan [Member] | Enlightenment Capital Solutions Fund II LP [Member] | Minimum [Member] | |||||||
Accounts Payable and Other Accrued Payables [Abstract] | |||||||
Monthly accrued interest rate | 10.00% | ||||||
Republic Capital Access LLC [Member] | Accounts Receivable Purchase Agreement [Member] | |||||||
Accounts Receivable Purchase Agreement [Abstract] | |||||||
Limit of outstanding purchased receivables | $ 10,000,000 | ||||||
Automatic renewal term | 12 months | ||||||
Percentage of initial purchase price of purchased receivable | 85.00% | ||||||
Residual percentage of purchased receivable | 15.00% | ||||||
Percentage of discount factor for federal government prime contracts | 0.30% | ||||||
Percentage of discount factor for non-federal government investment grade account obligors | 0.56% | ||||||
Percentage of discount factor for non-federal government non-investment grade account obligors | 0.62% | ||||||
Percentage of program access fee | 0.008% | ||||||
Percentage of commitment fee | 1.00% | ||||||
Proceeds from purchase agreement | $ 6,300,000 | ||||||
Initial enrollment fee | $ 25,000 | ||||||
Republic Capital Access LLC [Member] | Accounts Receivable Purchase Agreement [Member] | US Government Agency [Member] | |||||||
Accounts Receivable Purchase Agreement [Abstract] | |||||||
Percentage of initial purchase price of purchased receivable | 90.00% | ||||||
Residual percentage of purchased receivable | 10.00% |
Current Liabilities and Debt 35
Current Liabilities and Debt Obligations, Financing and Security Agreement (Details) - USD ($) | Jul. 15, 2016 | Mar. 30, 2016 | Dec. 31, 2017 | Sep. 06, 2016 |
Revolving credit [Member] | ||||
Financing and Security Agreement [Abstract] | ||||
Early termination fee | $ 100,000 | |||
Revolving credit [Member] | Prime Rate [Member] | ||||
Financing and Security Agreement [Abstract] | ||||
Percentage added to reference rate to compute the variable rate | 2.25% | |||
Action Capital Corporation [Member] | Financing and Security Agreement [Member] | ||||
Financing and Security Agreement [Abstract] | ||||
Percentage of advances | 90.00% | |||
Maximum outstanding principal amount of advances | $ 5,000,000 | |||
Financing agreement term | 2 years | |||
Percentage of monthly fee | 0.50% | |||
Outstanding borrowing of credit facility | $ 0 | |||
Action Capital Corporation [Member] | Financing and Security Agreement [Member] | Prime Rate [Member] | ||||
Financing and Security Agreement [Abstract] | ||||
Percentage added to reference rate to compute the variable rate | 2.00% |
Current Liabilities and Debt 36
Current Liabilities and Debt Obligations, Senior Revolving Credit Facility (Details) - USD ($) | Mar. 30, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Mar. 26, 2015 |
Senior Revolving Credit Facility [Abstract] | |||||
Interest rate on credit facility | 5.75% | ||||
Weighted average interest rates on outstanding borrowings | 6.70% | ||||
Revolving credit [Member] | |||||
Senior Revolving Credit Facility [Abstract] | |||||
Interest expense | $ 200,000 | $ 600,000 | |||
Maximum revolving credit facility | $ 10,000,000 | $ 20,000,000 | |||
Current line of credit borrowing capacity | 2,000,000 | $ 1,250,000 | |||
Current line of credit borrowing capacity, condition one | 2,500,000 | ||||
Current line of credit borrowing capacity, condition two | 3,000,000 | ||||
Equity or subordinated debt | 5,000,000 | ||||
Amount of fee expected to be paid if capital investment is not received by specified date | 100,000 | ||||
Fees paid in connection with amendment | $ 100,000 | ||||
Revolving credit [Member] | Prime Rate [Member] | |||||
Senior Revolving Credit Facility [Abstract] | |||||
Percentage added to reference rate to compute the variable rate | 2.25% | ||||
Revolving credit [Member] | Federal Funds Rate [Member] | |||||
Senior Revolving Credit Facility [Abstract] | |||||
Percentage added to reference rate to compute the variable rate | 2.75% | ||||
Revolving credit [Member] | 3-Month LIBOR [Member] | |||||
Senior Revolving Credit Facility [Abstract] | |||||
Percentage added to reference rate to compute the variable rate | 3.25% | ||||
Term of variable rate | 3 months |
Current Liabilities and Debt 37
Current Liabilities and Debt Obligations, Subordinated Debt (Details) - USD ($) | Mar. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Subordinated Debt [Abstract] | ||||
Proceeds from related party, debt | $ 0 | $ 0 | $ 2,500,000 | |
Debt instrument, fixed interest rate | 12.00% | |||
Gain on extinguishment of subordinated debt | $ 1,031,000 | $ 0 | 0 | |
Interest expense, related party | $ 229,000 | |||
Porter [Member] | ||||
Subordinated Debt [Abstract] | ||||
Related party ownership percentage | 34.90% | |||
Proceeds from related party, debt | $ 2,500,000 | |||
Debt instrument, fixed interest rate | 12.00% | 6.00% | ||
Debt instrument, first interest payment due date | Aug. 20, 2015 | |||
Debt instrument, last principal and interest payment date | Jul. 25, 2022 | Jul. 1, 2017 | ||
Gain on extinguishment of subordinated debt | $ 1,000,000 | |||
Interest expense, related party | $ 292,000 | $ 300,000 | $ 229,000 |
Redeemable Preferred Stock (Det
Redeemable Preferred Stock (Details) | Nov. 30, 1998shares | Jun. 30, 2006USD ($) | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / shares | Dec. 31, 2015USD ($) | Dec. 31, 1991$ / sharesshares | Dec. 31, 1990Trancheshares | Apr. 18, 2017USD ($) |
Class of Stock [Line Items] | ||||||||
Preferred stock dividend rate per annum | 12.00% | |||||||
Dividends Payable | $ | $ 3,843,000 | $ 3,890,000 | $ 3,889,000 | |||||
Senior Redeemable Preferred Stock [Abstract] | ||||||||
Redemption amount of senior redeemable preferred stock | $ | $ 2,100,000 | |||||||
Senior Redeemable Preferred Stock [Member] | ||||||||
Senior Redeemable Preferred Stock [Abstract] | ||||||||
Senior redeemable preferred stock maturity date | May 31, 2018 | |||||||
Undeclared unpaid dividends | $ | 1,600,000 | |||||||
Accrued dividends reported as interest expenses | $ | $ 20,000 | 67,000 | $ 67,000 | |||||
Senior Redeemable Preferred Stock [Member] | Toxford [Member] | ||||||||
Senior Redeemable Preferred Stock [Abstract] | ||||||||
Percentage of redeemable preferred stock held by related party after redemption | 76.40% | |||||||
Public Preferred Stock [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Preferred stock authorized (in shares) | 6,000,000 | |||||||
Preferred stock par value (in dollar per share) | $ / shares | $ 0.01 | |||||||
Preferred stock dividend rate per annum | 12.00% | 6.00% | ||||||
Dividends Payable | $ | $ 99,700,000 | $ 95,900,000 | ||||||
Public preferred stock, shares retired | 410,000 | |||||||
Preferred stock issued and outstanding (in shares) | 3,185,586 | 2,858,723 | ||||||
12% Cumulative Exchangeable Redeemable Preferred Stock [Abstract] | ||||||||
Adjusted accrued accretion of public preferred stock | $ | $ 1,500,000 | |||||||
Number of shares declared as dividend (in shares) | 736,863 | |||||||
Number of annual tranches during the period | Tranche | 5 | |||||||
Period during which redeemable preferred stock not callable | 12 months | |||||||
Preferred stock dividend rate per annum (in dollars per share) | $ / shares | $ 1.20 | $ 0.60 | ||||||
Preferred stock, liquidation preference (in dollars per share) | $ / shares | $ 10 | |||||||
Dividends on preferred stock | $ | $ 3,800,000 | |||||||
Series A-1 Preferred Stock [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Preferred stock dividend rate per annum | 14.125% | |||||||
Senior Redeemable Preferred Stock [Abstract] | ||||||||
Redeemable preferred stock liquidation value (in dollar per share) | $ / shares | $ 1,000 | |||||||
Series A-1 Preferred Stock [Member] | Senior Redeemable Preferred Stock [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Preferred stock authorized (in shares) | 1,250 | |||||||
Preferred stock par value (in dollar per share) | $ / shares | $ 0.01 | |||||||
Preferred stock issued and outstanding (in shares) | 197 | |||||||
Series A-2 Preferred Stock [Member] | Senior Redeemable Preferred Stock [Member] | ||||||||
Class of Stock [Line Items] | ||||||||
Preferred stock authorized (in shares) | 1,750 | |||||||
Preferred stock issued and outstanding (in shares) | 276 |
Stockholders' Deficit, Option39
Stockholders' Deficit, Option Plans, and Employee Benefit Plan (Details) | 1 Months Ended | 12 Months Ended | ||
May 31, 2017shares | Dec. 31, 2017USD ($)Voteshares | Dec. 31, 2016USD ($) | Dec. 31, 2015USD ($) | |
Common Stock [Abstract] | ||||
Number of votes per share | Vote | 1 | |||
Restricted Stock Grants [Abstract] | ||||
Restricted stock issued during the period (in shares) | 5,005,000 | |||
Restricted stock remained subject to vesting (in shares) | 3,723,750 | |||
Telos Shared Savings Plan [Abstract] | ||||
Shares held in defined contribution employee savings plan (in shares) | 3,658,536 | |||
Maximum contribution percentage | 2.00% | |||
Annual vesting percentage | 20.00% | |||
Contributions to the Plan | $ | $ 617,000 | $ 575,000 | $ 0 | |
Telos ID [Member] | ||||
Telos Shared Savings Plan [Abstract] | ||||
Maximum contribution percentage | 2.00% | |||
Contributions to the Plan | $ | $ 105,000 | $ 96,000 | $ 0 | |
Restricted Stock [Member] | ||||
Restricted Stock Grants [Abstract] | ||||
Restricted stock issued during the period (in shares) | 5,005,000 | |||
Restricted stock vested on date of grant | 25.00% | |||
Restricted stock vest on anniversary of the date of grant | 25.00% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Income Taxes [Abstract] | |||
Deferred income taxes (Note 9) | $ 741,000 | $ 3,391,000 | |
Decrease in deferred tax liabilities | (3,000,000) | ||
Operating loss carryforwards | 11,700,000 | ||
Alternate minimum tax credit carryforwards | 60,000 | ||
Current provision [Abstract] | |||
Federal | (86,000) | 114,000 | $ (902,000) |
State | 29,000 | 28,000 | 54,000 |
Total current | (57,000) | 142,000 | (848,000) |
Deferred provision (benefit) [Abstract] | |||
Federal | (2,622,000) | 155,000 | 4,333,000 |
State | (88,000) | 37,000 | 780,000 |
Total deferred | (2,710,000) | 192,000 | 5,113,000 |
Total provision | $ (2,767,000) | $ 334,000 | $ 4,265,000 |
Reconciliation of effective tax rate [Abstract] | |||
Computed expected income tax provision | 34.00% | 34.00% | 34.00% |
State income taxes, net of federal income tax benefit | 0.90% | 0.80% | 2.10% |
Change in valuation allowance for deferred tax assets, exclusive of impact of Tax Act | (26.90%) | (21.50%) | (61.30%) |
Cumulative deferred adjustments | 0.00% | (0.30%) | (0.10%) |
Provision to return adjustments | 0.00% | (0.40%) | 1.30% |
Other permanent differences | (1.30%) | (1.80%) | (1.10%) |
Dividend and accretion on preferred stock | (15.20%) | (19.30%) | (11.30%) |
FIN 48 liability | (0.90%) | 0.70% | (0.80%) |
R&D credit | 4.60% | 3.30% | 1.60% |
Impact of Tax Act | 35.50% | 0.00% | 0.00% |
Other | 1.50% | (0.40%) | (0.90%) |
Effective income tax rate | 32.20% | (4.90%) | (36.50%) |
Deferred tax assets [Abstract] | |||
Accounts receivable, principally due to allowance for doubtful accounts | $ 108,000 | $ 161,000 | |
Allowance for inventory obsolescence and amortization | 818,000 | 778,000 | |
Accrued liabilities not currently deductible | 1,657,000 | 2,234,000 | |
Accrued compensation | 735,000 | 1,006,000 | |
Deferred rent | 5,134,000 | 7,682,000 | |
Telos ID basis difference | 65,000 | 0 | |
Net operating loss carryforwards - federal | 2,453,000 | 1,301,000 | |
Net operating loss carryforwards - state | 848,000 | 405,000 | |
Federal tax credit | 666,000 | 533,000 | |
Total gross deferred tax assets | 12,484,000 | 14,100,000 | |
Less valuation allowance | (7,219,000) | (10,499,000) | |
Total deferred tax assets, net of valuation allowance | 5,265,000 | 3,601,000 | |
Deferred tax liabilities [Abstract] | |||
Amortization and depreciation | (2,127,000) | (2,696,000) | |
Unbilled accounts receivable, deferred for tax purposes | (1,282,000) | (787,000) | |
Goodwill basis adjustment and amortization | (2,597,000) | (3,451,000) | |
Telos ID basis difference | 0 | (58,000) | |
Total deferred tax liabilities | (6,006,000) | (6,992,000) | |
Net deferred tax liabilities | (741,000) | (3,391,000) | |
Unrecognized tax benefits [Roll Forward] | |||
Unrecognized tax benefits, beginning of period | 762,000 | 803,000 | $ 708,000 |
Gross increases-tax positions in prior period | 92,000 | ||
Gross decreases-tax positions in prior period | (127,000) | (66,000) | |
Gross increases-tax positions in current period | 77,000 | 46,000 | 38,000 |
Settlements | (35,000) | (21,000) | (35,000) |
Unrecognized tax benefits, end of period | 677,000 | 762,000 | 803,000 |
Interest and penalties | 266,000 | 233,000 | |
Valuation Allowance of Deferred Tax Assets [Member] | |||
Valuation and Qualifying Accounts Disclosure [Line Items] | |||
Balance Beginning of Period | 10,499,000 | 9,027,000 | 1,868,000 |
Additions | 0 | 1,472,000 | 7,159,000 |
Deductions | (3,280,000) | 0 | 0 |
Balance End of Period | $ 7,219,000 | $ 10,499,000 | $ 9,027,000 |
Commitments (Details)
Commitments (Details) - USD ($) $ in Thousands | 12 Months Ended | |||||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 1996 | |
Property Subject to or Available for Operating Lease [Line Items] | ||||||
Term of lease | 15 years | |||||
Capital leased property | $ 30,832 | $ 30,829 | ||||
Proceeds from assignment of purchase option under lease | $ 1,700 | |||||
Increase in capital leased property | 5,700 | |||||
Capital lease obligations | 22,000 | |||||
Increase in capital lease obligations | 6,700 | |||||
Net book value of capital asset | 18,300 | |||||
Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments, Fiscal Year Maturity [Abstract] | ||||||
2,018 | 1,948 | |||||
2,019 | 1,996 | |||||
2,020 | 2,046 | |||||
2,021 | 2,099 | |||||
2,022 | 2,149 | |||||
Remainder | 15,118 | |||||
Total minimum obligations | 25,356 | |||||
Less amounts representing interest (ranging from 5.8% to 18.8%) | (6,363) | |||||
Net present value of minimum obligations | 18,993 | |||||
Less current portion | (1,013) | (918) | ||||
Capital lease obligations | 17,980 | 18,990 | ||||
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | ||||||
2,018 | 516 | |||||
2,019 | 494 | |||||
2,020 | 507 | |||||
2,021 | 503 | |||||
2,022 | 366 | |||||
Remainder | 354 | |||||
Total minimum lease payments | 2,740 | |||||
Rent expense charged to operations | 1,600 | 1,700 | $ 1,800 | |||
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward] | ||||||
Balance Beginning of Year | 51 | 133 | 189 | |||
Accruals | 0 | 279 | 125 | |||
Warranty Expenses | (21) | (361) | (181) | |||
Balance End of Year | $ 30 | 51 | $ 133 | $ 189 | ||
Capital Lease Obligations [Member] | ||||||
Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments, Fiscal Year Maturity [Abstract] | ||||||
Annual rent increase percentage | 2.50% | |||||
Accumulated amortization for property and equipment under capital leases | $ 16,300 | $ 15,700 | ||||
Capital Lease Obligations [Member] | Minimum [Member] | ||||||
Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments, Fiscal Year Maturity [Abstract] | ||||||
Interest rate percentage | 5.00% | |||||
Capital Lease Obligations [Member] | Maximum [Member] | ||||||
Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments, Fiscal Year Maturity [Abstract] | ||||||
Interest rate percentage | 21.80% | |||||
Property [Member] | ||||||
Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments, Fiscal Year Maturity [Abstract] | ||||||
2,018 | $ 1,947 | |||||
2,019 | 1,995 | |||||
2,020 | 2,045 | |||||
2,021 | 2,097 | |||||
2,022 | 2,149 | |||||
Remainder | 15,118 | |||||
Total minimum obligations | 25,351 | |||||
Less amounts representing interest (ranging from 5.8% to 18.8%) | (6,361) | |||||
Net present value of minimum obligations | 18,990 | |||||
Less current portion | (1,012) | |||||
Capital lease obligations | 17,978 | |||||
Property [Member] | Capital Lease Obligations [Member] | ||||||
Property Subject to or Available for Operating Lease [Line Items] | ||||||
Term of lease | 13 years | 20 years | ||||
Capital leased property | $ 12,300 | |||||
Increase in capital leased property | $ 11,700 | |||||
Capital lease obligations | 15,500 | |||||
Net book value of capital asset | $ 13,100 | |||||
Equipment [Member] | ||||||
Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments, Fiscal Year Maturity [Abstract] | ||||||
2,018 | 1 | |||||
2,019 | 1 | |||||
2,020 | 1 | |||||
2,021 | 2 | |||||
2,022 | 0 | |||||
Remainder | 0 | |||||
Total minimum obligations | 5 | |||||
Less amounts representing interest (ranging from 5.8% to 18.8%) | (2) | |||||
Net present value of minimum obligations | 3 | |||||
Less current portion | (1) | |||||
Capital lease obligations | $ 2 |
Certain Relationships and Rel42
Certain Relationships and Related Transactions (Details) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Apr. 18, 2017 | Mar. 31, 2015 | |
Related Party Transaction [Line Items] | |||||
Gain on extinguishment of debt | $ 1,031,000 | $ 0 | $ 0 | ||
Interest expense, related party | 229,000 | ||||
Debt instrument, fixed interest rate | 12.00% | ||||
Emmett Wood [Member] | |||||
Related Party Transaction [Line Items] | |||||
Compensation to related parties | $ 570,000 | $ 401,000 | 305,000 | ||
Emmett Wood [Member] | Class A Common Stock [Member] | |||||
Related Party Transaction [Line Items] | |||||
Number of shares held by related party (in shares) | 810,000 | 650,000 | |||
Emmett Wood [Member] | Class B Common Stock [Member] | |||||
Related Party Transaction [Line Items] | |||||
Number of shares held by related party (in shares) | 50,000 | ||||
Porter [Member] | |||||
Related Party Transaction [Line Items] | |||||
Common stock held by related parties | 34.90% | ||||
Gain on extinguishment of debt | $ 1,000,000 | ||||
Proceeds from related party, debt | 2,500,000 | ||||
Interest expense, related party | $ 292,000 | $ 300,000 | $ 229,000 | ||
Debt instrument, fixed interest rate | 6.00% | 12.00% | |||
Debt instrument, last principal and interest payment date | Jul. 25, 2022 | Jul. 1, 2017 | |||
Debt instrument, first interest payment due date | Aug. 20, 2015 | ||||
Porter [Member] | Series A-1 Redeemable Preferred Stock [Member] | |||||
Related Party Transaction [Line Items] | |||||
Number of senior redeemable preferred stock redeemed by the Company (in shares) | 163 | ||||
Porter [Member] | Series A-2 Redeemable Preferred Stock [Member] | |||||
Related Party Transaction [Line Items] | |||||
Number of senior redeemable preferred stock redeemed by the Company (in shares) | 228 |
Summary of Selected Quarterly43
Summary of Selected Quarterly Financial Data (Unaudited) (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||||||
Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2016 | Jun. 30, 2016 | Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |||||||||
Summary of Selected Quarterly Financial Data (Unaudited) [Abstract] | |||||||||||||||||||
Revenue | $ 35,278 | $ 28,243 | $ 21,096 | $ 23,110 | $ 26,052 | $ 54,940 | $ 26,798 | $ 27,078 | $ 107,727 | $ 134,868 | $ 120,634 | ||||||||
Gross profit | 15,470 | 9,262 | 7,391 | 8,443 | 8,874 | 14,538 | 9,452 | 10,582 | |||||||||||
Loss before income taxes and non-controlling interest | 1,308 | (1,755) | (3,011) | (2,807) | (3,366) | 1,503 | (1,323) | (149) | (6,265) | (3,335) | (9,237) | ||||||||
Net loss attributable to Telos Corporation | $ 3,699 | [1],[2] | $ (3,044) | [1],[2] | $ (3,389) | [1],[2] | $ (3,099) | [1],[2] | $ (4,305) | [2] | $ (91) | [2] | $ (1,912) | [2] | $ (867) | [2] | $ (5,833) | $ (7,175) | $ (15,940) |
[1] | A tax benefit was recorded due primarily to the remeasurement of our deferred tax assets and liabilities, and the adjustment of valuation allowance related to our hanging credit deferred tax liability in the fourth quarter of 2017, as a result of the Tax Act enacted in December 2017. | ||||||||||||||||||
[2] | 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. |
Commitments, Contingencies an44
Commitments, Contingencies and Subsequent Events (Details) - USD ($) | Mar. 31, 2018 | Nov. 20, 2017 | Sep. 11, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | Oct. 19, 2017 | Sep. 27, 2017 | Jan. 25, 2017 | Dec. 24, 2014 |
Financial Condition and Liquidity [Abstract] | ||||||||||
Working capital | $ (4,100,000) | $ (8,600,000) | ||||||||
Legal Proceedings [Line Items] | ||||||||||
Percentage of membership interest sold to investor | 10.00% | |||||||||
Litigation settlement amount awarded | $ 278,923 | |||||||||
Preferred stock dividend rate per annum | 12.00% | |||||||||
Possible gain contingency amount | $ 669,989 | |||||||||
Possible loss for advance or indemnification of legal fees and expenses | $ 1,550,000 | |||||||||
Proceeds from sale of Telos ID 10% membership interest | $ 0 | $ 0 | $ 2,000,000 | |||||||
Subsequent Event [Line Items] | ||||||||||
Senior term debt | $ 10,786,000 | |||||||||
Term loan [Member] | Enlightenment Capital Solutions Fund II LP [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Senior term debt | $ 11,000,000 | |||||||||
Maturity date | Jan. 25, 2022 | |||||||||
Accrual rate | 13.00% | |||||||||
Increase in interest rate in event of default | 2.00% | |||||||||
Monthly accrued interest rate during continuance of an Alternate Interest Rate Event | 11.50% | |||||||||
Number of days prior written notice | 30 days | |||||||||
Proceeds from loan prepayment | $ 1,100,000 | |||||||||
Increase in interest rate | 14.50% | |||||||||
Term loan [Member] | Minimum [Member] | Enlightenment Capital Solutions Fund II LP [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Monthly accrued interest rate | 10.00% | |||||||||
Subsequent Events [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Increase in interest rate | 1.00% | |||||||||
Subsequent Events [Member] | Emmett J. Wood [Member] | Common Class A And Class B [Member] | ||||||||||
Subsequent Event [Line Items] | ||||||||||
Number of shares held by related party (in shares) | 50,000 | |||||||||
Costa Brava [Member] | ||||||||||
Legal Proceedings [Line Items] | ||||||||||
Percentage of public preferred stock owned | 12.70% | |||||||||
Wynnefield [Member] | ||||||||||
Legal Proceedings [Line Items] | ||||||||||
Percentage of public preferred stock owned | 17.40% | |||||||||
Telos ID Class B [Member] | ||||||||||
Legal Proceedings [Line Items] | ||||||||||
Percentage of membership interest sold to investor | 10.00% | |||||||||
Proceeds from sale of Telos ID 10% membership interest | $ 5,000,000 | |||||||||
Hamot [Member] | ||||||||||
Legal Proceedings [Line Items] | ||||||||||
Legal fees and expenses | $ 1,450,000 | |||||||||
Hamot [Member] | Counts I and III [Member] | Pending Appeal [Member] | ||||||||||
Legal Proceedings [Line Items] | ||||||||||
Legal fees and expenses, entitled | $ 750,000 | |||||||||
Percentage entitled for legal fees and expenses | 91.00% | |||||||||
Hamot [Member] | Counts II and IV [Member] | ||||||||||
Legal Proceedings [Line Items] | ||||||||||
Legal fees and expenses, entitled | $ 659,750 | |||||||||
Percentage entitled for legal fees and expenses | 91.00% | |||||||||
Hamot [Member] | Third Amended Complaint [Member] | ||||||||||
Legal Proceedings [Line Items] | ||||||||||
Legal fees and expenses | $ 100,000 | |||||||||
Legal fees and expenses, entitled | $ 100,000 |