Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2019 | |
Cover [Abstract] | |
Entity Registrant Name | TELOS CORP |
Entity Central Index Key | 0000320121 |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | true |
Entity Ex Transition Period | false |
Document Type | S-1/A |
Amendment Flag | false |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Revenue (Note 5) | |||
Revenue | $ 159,218 | $ 138,016 | $ 107,727 |
Costs and expenses | |||
Total costs and expenses | 106,874 | 84,954 | 67,161 |
Selling, general and administrative expenses | 47,319 | 44,048 | 40,152 |
Operating income (loss) | 5,025 | 9,014 | 414 |
Other income (expenses) | |||
Non-operating income | 201 | 12 | 11 |
Interest expense | (7,467) | (7,258) | (6,690) |
Income (loss) before income taxes | (2,241) | 1,768 | (6,265) |
Benefit (provision) from income taxes (Note 9) | 104 | (31) | 2,767 |
Net income (loss) | (2,137) | 1,737 | (3,498) |
Less: Net income attributable to non-controlling interest (Note 2) | (4,264) | (3,377) | (2,335) |
Net income (loss) attributable to Telos Corporation | $ (6,401) | $ (1,640) | $ (5,833) |
Class A Common Stock [Member] | |||
Other income (expenses) | |||
Net loss per share attributable to Telos Corporation, basic and diluted (in dollars per share) | $ (0.17) | $ (0.04) | $ (0.16) |
Weighted-average shares outstanding, basic and diluted (in shares) | 34,525 | 33,558 | 32,570 |
Class B Common Stock [Member] | |||
Other income (expenses) | |||
Net loss per share attributable to Telos Corporation, basic and diluted (in dollars per share) | $ (0.17) | $ (0.04) | $ (0.16) |
Weighted-average shares outstanding, basic and diluted (in shares) | 3,204 | 3,204 | 3,204 |
Services [Member] | |||
Revenue (Note 5) | |||
Revenue | $ 143,581 | $ 120,990 | $ 81,606 |
Costs and expenses | |||
Total costs and expenses | 98,772 | 76,857 | 49,965 |
Products [Member] | |||
Revenue (Note 5) | |||
Revenue | 15,637 | 17,026 | 26,121 |
Costs and expenses | |||
Total costs and expenses | $ 8,102 | $ 8,097 | $ 17,196 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) [Abstract] | |||
Net (loss) income | $ (2,137) | $ 1,737 | $ (3,498) |
Other comprehensive (loss) income, net of tax: | |||
Foreign currency translation adjustments | (11) | (15) | 7 |
Less: Comprehensive income attributable to non-controlling interest | (4,264) | (3,377) | (2,335) |
Comprehensive income (loss) attributable to Telos Corporation | $ (6,412) | $ (1,655) | $ (5,826) |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Current assets | ||
Cash and cash equivalents | $ 6,751 | $ 72 |
Accounts receivable, net of reserve of $720 and $306, respectively (Note 1) | 27,942 | 34,542 |
Inventories, net of obsolescence reserve of $860 and $520, respectively (Note 1) | 1,965 | 4,389 |
Deferred program expenses | 673 | 244 |
Other current assets | 2,914 | 1,985 |
Total current assets | 40,245 | 41,232 |
Property and equipment (Note 1) | ||
Furniture and equipment | 18,709 | 12,756 |
Leasehold improvements | 2,536 | 2,503 |
Property and equipment under capital leases | 30,792 | 30,832 |
Property and equipment, gross | 52,037 | 46,091 |
Accumulated depreciation and amortization | (32,470) | (28,665) |
Property and equipment, net | 19,567 | 17,426 |
Operating lease right-of-use assets | 1,979 | 0 |
Goodwill (Note 3) | 14,916 | 14,916 |
Other assets | 985 | 915 |
Total assets | 77,692 | 74,489 |
Current liabilities | ||
Accounts payable and other accrued liabilities (Note 6) | 15,050 | 21,779 |
Accrued compensation and benefits | 12,187 | 9,082 |
Contract liabilities | 6,337 | 5,232 |
Finance lease obligations - short-term (Note 10) | 1,224 | 1,115 |
Other current liabilities | 2,505 | 1,895 |
Total current liabilities | 37,303 | 39,103 |
Senior term loan, net of unamortized discount and issuance costs (Note 6) | 16,335 | 10,984 |
Subordinated debt (Note 6) | 2,927 | 2,597 |
Finance lease obligations - long-term (Note 10) | 15,641 | 16,865 |
Operating lease obligations - long-term (Note 10) | 1,553 | 0 |
Deferred income taxes (Note 9) | 621 | 818 |
Public preferred stock (Note 7) | 139,210 | 135,387 |
Other liabilities (Note 9) | 724 | 838 |
Total liabilities | 214,314 | 206,592 |
Commitments and contingencies (Notes 10 and 13) | ||
Telos stockholders' deficit | ||
Additional paid-in capital | 4,310 | 4,310 |
Accumulated other comprehensive income | 6 | 17 |
Accumulated deficit | (145,530) | (139,129) |
Total Telos stockholders' deficit | (141,136) | (134,724) |
Non-controlling interest in subsidiary (Note 2) | 4,514 | 2,621 |
Total stockholders' deficit | (136,622) | (132,103) |
Total liabilities, redeemable preferred stock, and stockholders' deficit | 77,692 | 74,489 |
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, 2019 | Dec. 31, 2018 |
Current assets | ||
Accounts receivable, reserve | $ 720 | $ 306 |
Inventories, obsolescence reserve | $ 860 | $ 520 |
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) | 35,826,200 | 35,838,105 |
Common stock, shares outstanding (in shares) | 35,826,200 | 35,838,105 |
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) | 3,204,293 | 3,204,293 |
Common stock, shares outstanding (in shares) | 3,204,293 | 3,204,293 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Operating activities: | |||
Net (loss) income | $ (2,137) | $ 1,737 | $ (3,498) |
Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities: | |||
Stock-based compensation | 0 | 0 | 50 |
Dividends from preferred stock recorded as interest expense | 3,823 | 3,822 | 3,843 |
Depreciation and amortization | 4,972 | 3,028 | 1,999 |
Provision for inventory obsolescence | 376 | 30 | 73 |
Provision (benefit) for doubtful accounts receivable | 414 | (105) | (18) |
Amortization of debt issuance costs | 461 | 198 | 160 |
Deferred income tax (benefit) provision | (197) | 77 | (2,710) |
Loss on disposal of fixed assets | 15 | 3 | 4 |
Changes in assets and liabilities: | |||
Decrease (increase) in accounts receivable | 6,186 | (9,917) | (5,415) |
Decrease (increase) in inventories | 2,048 | 9,101 | (10,041) |
(Increase) decrease in deferred program expenses | (429) | 1,828 | (1,886) |
(Increase) decrease in other current assets and other assets | (3,576) | (465) | 1,086 |
(Decrease) increase in accounts payable and other accrued payables | (6,730) | (3,914) | 10,376 |
Increase (decrease) in accrued compensation and benefits | 3,105 | 1,626 | (615) |
Increase (decrease) in contract liabilities | 1,106 | (960) | 5,173 |
Increase in other current liabilities | 2,379 | 179 | 828 |
Cash provided by (used in) operating activities | 11,816 | 6,268 | (591) |
Investing activities: | |||
Capitalized software development costs | (2,442) | (1,649) | (1,481) |
Purchases of property and equipment | (4,090) | (2,465) | (748) |
Cash used in investing activities | (6,532) | (4,114) | (2,229) |
Financing activities: | |||
Proceeds from senior term loan | 4,881 | 0 | 9,439 |
Redemption of senior preferred stock | 0 | 0 | (2,112) |
Payments under finance lease obligations | (1,115) | (1,013) | (915) |
Distributions to Telos ID Class B member - non-controlling interest | (2,371) | (1,669) | (3,651) |
Cash provided by (used in) financing activities | 1,395 | (2,682) | 2,761 |
Increase (decrease) in cash and cash equivalents | 6,679 | (528) | (59) |
Cash and cash equivalents, beginning of period | 72 | 600 | 659 |
Cash and cash equivalents, end of period | 6,751 | 72 | 600 |
Cash paid during the year for: | |||
Interest | 3,299 | 2,483 | 2,395 |
Income taxes | 40 | 19 | 26 |
Noncash: | |||
Dividends from preferred stock recorded as interest expense | 3,823 | 3,822 | 3,843 |
Debt issuance costs and prepayment of interest on senior term loan | 119 | 0 | 1,561 |
Gain on extinguishment of subordinated debt | $ 0 | $ 0 | $ 1,031 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT - USD ($) $ in Thousands | Additional Paid-In Capital [Member] | Accumulated Other Comprehensive Income [Member] | Accumulated Deficit [Member] | Noncontrolling Interest [Member] | Total | Class A Common Stock [Member] | Class B Common Stock [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]Additional Paid-In Capital [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]Accumulated Other Comprehensive Income [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]Accumulated Deficit [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member]Noncontrolling Interest [Member] | Cumulative Effect, Period of Adoption, Adjustment [Member] |
Beginning balance at Dec. 31, 2016 | $ 3,229 | $ 25 | $ (135,537) | $ 2,229 | $ (129,976) | $ 65 | $ 13 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net loss | 0 | (5,833) | 2,335 | (3,498) | ||||||||
Gain on extinguishment of subordinated debt | 1,031 | 0 | 0 | 0 | 1,031 | 0 | 0 | |||||
Stock-based compensation | 50 | 0 | 0 | 0 | 50 | |||||||
Foreign currency translation gain (loss) | 0 | 7 | 0 | 0 | 7 | 0 | 0 | |||||
Distributions | 0 | 0 | 0 | (3,651) | (3,651) | |||||||
Ending balance at Dec. 31, 2017 | 4,310 | 32 | (141,370) | 913 | (136,037) | 65 | 13 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net loss | 0 | 0 | (1,640) | 3,377 | 1,737 | |||||||
Foreign currency translation gain (loss) | 0 | (15) | 0 | 0 | (15) | |||||||
Distributions | 0 | 0 | 0 | (1,669) | (1,669) | 0 | 0 | |||||
Ending balance at Dec. 31, 2018 | 4,310 | 17 | (139,129) | 2,621 | (132,103) | 65 | 13 | $ 0 | $ 0 | $ 3,881 | $ 0 | $ 3,881 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net loss | 0 | 0 | (6,401) | 4,264 | (2,137) | |||||||
Foreign currency translation gain (loss) | 0 | (11) | 0 | 0 | 0 | 0 | ||||||
Distributions | 0 | 0 | 0 | (2,371) | (2,371) | |||||||
Ending balance at Dec. 31, 2019 | $ 4,310 | $ 6 | $ (145,530) | $ 4,514 | $ (136,622) | $ 65 | $ 13 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
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”) and Telos APAC Pte. Ltd. (Telos APAC). 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, Teloworks, and Telos APAC, 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 in 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 estimated pension-related costs for our foreign subsidiaries. Actual results could differ from those estimates. Revenue Recognition We account for revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers.” The unit of account in ASC 606 is a performance obligation, which is a promise in a contract with a customer to transfer a good or service to the customer. ASC 606 prescribes a five-step model for recognizing revenue that includes identifying the contract with the customer, determining the performance obligation(s), determining the transaction price, allocating the transaction price to the performance obligation(s), and recognizing revenue as the performance obligations are satisfied. Timing of the satisfaction of performance obligations varies across our businesses due to our diverse product and service mix, customer base, and contractual terms. Significant judgment can be required in determining certain performance obligations, and these determinations could change the amount of revenue and profit recorded in a given period. Our contracts may have a single performance obligation or multiple performance obligations. When there are multiple performance obligations within a contract, we allocate the transaction price to each performance obligation based on our best estimate of standalone selling price. We account for a contract after it has been approved by the parties to the contract, the rights and the payment terms of the parties are identified, the contract has commercial substance and collectability is probable, which is presumed for our U.S. Government customers and prime contractors for which we perform as subcontractors to U.S. Government end-customers. The majority of our revenue is recognized over time, as control is transferred continuously to our customers who receive and consume benefits as we perform, and is classified as services revenue. All of our business groups earn services revenue under a variety of contract types, including time and materials, firm-fixed price, firm fixed price level of effort, and cost plus fixed fee contract types, which may include variable consideration as discussed further below. Revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, subcontractor costs and indirect expenses. This continuous transfer of control to the customer is supported by clauses in our contracts with U.S. Government customers whereby the customer may terminate a contract for convenience and then pay for costs incurred plus a profit, at which time the customer would take control of any work in process. For non-U.S. Government contracts where we perform as a subcontractor and our order includes similar Federal Acquisition Regulation (the FAR) provisions as the prime contractor’s order from the U.S. Government, continuous transfer of control is likewise supported by such provisions. For other non-U.S. Government customers, continuous transfer of control to such customers is also supported due to general terms in our contracts and rights to recover damages which would include, among other potential damages, the right to payment for our work performed to date plus a reasonable profit. Due to the transfer of control over time, revenue is recognized based on progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the performance obligations. We generally use the cost-to-cost measure of progress on a proportional performance basis for our contracts because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred. Due to the nature of the work required to be performed on certain of our performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment. Contract estimates are based on various assumptions including labor and subcontractor costs, materials and other direct costs and the complexity of the work to be performed. A significant change in one or more of these estimates could affect the profitability of our contracts. We review and update our contract-related estimates regularly and recognize adjustments in estimated profit on contracts on a cumulative catch-up basis, which may result in an adjustment increasing or decreasing revenue to date on a contract in a particular period that the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. Revenue that is recognized at a point in time is for the sale of software licenses in our Secure Mobility and Network Management/Defense Enterprise Solutions (formerly CO&D’s Secure Mobility Solutions) and Secure Communications Cyber and Enterprise Solutions (formerly IT & Enterprise Solutions) business groups and for the sale of resold products in Telos ID Enterprise Solutions (formerly Identity Management Solutions) and Cyber & Cloud Solutions (formerly CO&D’s Cyber Security Solutions), and is classified as product revenue. Revenue on these contracts is recognized when the customer obtains control of the transferred product or service, which is generally upon delivery of the product to the customer for their use, due to us maintaining control of the product until that point. Orders for the sale of software licenses may contain multiple performance obligations, such as maintenance, training, or consulting services, which are typically delivered over time, consistent with the transfer of control disclosed above for the provision of services. When an order contains multiple performance obligations, we allocate the transaction price to the performance obligations using our best estimate of standalone selling price. Contracts are routinely and often modified to account for changes in contract requirements, specifications, quantities, or price. Depending on the nature of the modification, we determine whether to account for the modification as an adjustment to the existing contract or as a new contract. Generally, modifications are not distinct from the existing contract due to the significant interrelatedness of the performance obligations and are therefore accounted for as an adjustment to the existing contract, and recognized as a cumulative adjustment to revenue (as either an increase or reduction of revenue) based on the modification’s effect on progress toward completion of a performance obligation. Our contracts may include various types of variable consideration, such as claims (for instance, indirect rate or other equitable adjustments) or incentive fees. We include estimated amounts in the transaction price based on all of the information available to us, including historical information and future estimations, and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when any uncertainty associated with the variable consideration is resolved. We have revised and re-submitted several years of incurred cost submissions reflecting certain indirect rate structure changes as a result of regular DCAA audits of incurred cost submissions. This resulted in signed final rate agreement letters for fiscal years 2011 to 2013 and conformed incurred cost submissions for 2014 to 2015. We evaluated the resulting changes to revenue under the applicable cost plus fixed fee contracts for the years 2011 to 2015 as variable consideration, and determined the most likely amount to which we expect to be entitled, to the extent that no constraint exists that would preclude recognizing this revenue or result in a significant reversal of cumulative revenue recognized. We included these estimated amounts of variable consideration in the transaction price and as performance on these contracts is complete, we have recognized revenue of $6.0 million during the year ended December 31, 2018. Historically, most of our contracts do not include award or incentive fees. For incentive fees, we would include such fees in the transaction price to the extent we could reasonably estimate the amount of the fee. With limited historical experience, we have not included any revenue related to incentive fees in our estimated transaction prices. We may include in our contract estimates additional revenue for submitted contract modifications or claims against the customer when we believe we have an enforceable right to the modification or claim, the amount can be estimated reliably and its realization is probable. We consider the contractual/legal basis for the claim (in particular FAR provisions), the facts and circumstances around any additional costs incurred, the reasonableness of those costs and the objective evidence available to support such claims. For our contracts that have an original duration of one year or less, we use the practical expedient applicable to such contracts and do not consider the time value of money. We capitalize sales commissions related to proprietary software and related services that are directly tied to sales. We do not elect the practical expedient to expense as incurred the incremental costs of obtaining a contract if the amortization period would have been one year or less. For the sales commissions that are capitalized, we amortize the asset over the expected customer life, which is based on recent and historical data. Contract assets are amounts that are invoiced as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Generally, revenue recognition occurs before billing, resulting in contract assets. These contract assets are referred to as unbilled receivables and are reported within accounts receivable, net of reserve on our consolidated balance sheets. Billed receivables are amounts billed and due from our customers and are reported within accounts receivable, net of reserve on the consolidated balance sheets. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component due to the intent of the retainage being the customer’s protection with respect to full and final performance under the contract. Contract liabilities are payments received in advance and milestone payments from our customers on selected contracts that exceed revenue earned to date, resulting in contract liabilities. Contract liabilities typically are not considered a significant financing component because they are generally satisfied within one year and are used to meet working capital demands that can be higher in the early stages of a contract. Contract liabilities are reported on our consolidated balance sheet on a net contract basis at the end of each reporting period. We have one reportable segment. We treat sales to U.S. customers as sales within the U.S. regardless of where the services are performed. Substantially all of our revenues are from U.S. customers as revenue derived from international customers is de minimus. The following tables disclose revenue (in thousands) by customer type and contract type for the periods presented. Prior period amounts have not been adjusted under the modified retrospective method. 2019 2018 2017 Federal $ 149,257 $ 129,279 $ 101,519 State & Local, and Commercial 9,961 8,737 6,208 Total $ 159,218 $ 138,016 $ 107,727 2019 2018 2017 Firm fixed-price $ 131,629 $ 103,454 $ 89,516 Time-and-materials 14,569 16,795 10,222 Cost plus fixed fee 13,020 17,767 7,989 Total $ 159,218 $ 138,016 $ 107,727 The following table discloses accounts receivable and contract assets (in thousands): December 31, 2019 2018 Billed accounts receivable $ 11,917 $ 18,848 Unbilled receivables 16,745 16,000 Allowance for doubtful accounts (720 ) (306 ) Receivables – net $ 27,942 $ 34,542 The following table discloses contract liabilities (in thousands): December 31, 2019 2018 Contract liabilities $ 6,337 $ 5,232 As of December 31, 2019 and 2018, we had $112.4 million and $79.3 million of remaining performance obligations, respectively, which we also refer to as funded backlog. We expect to recognize approximately 98.4% of our remaining performance obligations as revenue in 2020, an additional 1.1% by 2021 and the balance thereafter. For the years ended December 31, 2019 and 2018, the amount of revenue recognized during the year that was included in the opening contract liabilities balance was $4.2 million and $5.5 million, respectively. 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 liabilities. Accounts Receivable Accounts receivable are stated at the invoiced amount, less an allowance 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 using 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 was $2.8 million and $4.9 million at December 31, 2019 and 2018, respectively. As of December 31, 2019, 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, 2019 $ 520 $ 376 $ (36 ) $ 860 Year Ended December 31, 2018 $ 1,484 $ 30 $ (994 ) $ 520 Year Ended December 31, 2017 $ 1,672 $ 73 $ (261 ) $ 1,484 Property and Equipment Property and equipment is recorded at cost. Depreciation is provided using the straight-line method at rates based on the estimated useful lives of the individual assets or classes of assets as follows: Furniture and equipment 3-5 Years Leasehold improvements Lesser of life of lease or useful life of asset Property and equipment under finance leases Lesser of life of lease or useful life of asset Leased property meeting certain criteria is capitalized at the present value of the related minimum lease payments. Amortization of property and equipment under finance leases is computed using 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, 2019, 2018, and 2017, 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. Depreciation and amortization expense related to property and equipment, including property and equipment under finance leases was $5.0 million, $3.0 million, and $2.0 million Software Development Costs Our policy on accounting for development costs of software to be sold is in accordance with ASC Topic 985-20, “Software – Costs of Software to be Sold, Leased, or Marketed” and ASC Topic 350-40 “Internal Use Software” in so far as our Xacta products being available in various deployment modalities including on premises licenses and cloud-based Software as a Service (“SaaS”). Under both standards, software development 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 or is ready for its intended use, as appropriate. Technological feasibility is established when all planning, designing, coding and testing activities have been completed, and all risks have been identified. Beginning with the second quarter of 2017, software development costs are capitalized and amortized over the estimated product life of 2 years on a straight-line basis. As of December 31, 2019 and 2018, we capitalized $5.6 million and $3.1 million of software development costs, respectively, which are included as a part of property and equipment. Amortization expense was $1.8 million and $1.1 million for the year ended December 31, 2019 and 2018, respectively. Accumulated amortization was $3.1 million and $1.3 million as of December 31, 2019 and 2018, respectively. 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 2019, 2018 and 2017, we incurred salary costs for research and development of approximately $4.2 million, $3.5 million and $3.2 million, respectively, which were included as part of the selling, general and administrative expense in the consolidated statements of operations. Income Taxes We account for income taxes in accordance with ASC 740, “Income Taxes.” Under ASC 740, 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, 2019 and 2018. As a result of a full valuation allowance against our deferred tax assets, a deferred tax liability related to goodwill remains on our consolidated balance sheet at December 31, 2019 and 2018. 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, 2019 and 2018. See additional information on tax reform and its impact on our income taxes in Note 9 – Income Taxes. We follow the provisions of ASC 740 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 We evaluate the impairment of goodwill 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”), Telos ID Enterprise Solutions, and Secure Communications Cyber and Enterprise Solutions, of which goodwill is housed in the CO&D reporting units, in comparison to the reporting unit’s net asset carrying values. Our discounted cash flows required management’s 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, 2019. 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. 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 3,972,007 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, 2019, there were 951,337 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. Earnings (Loss) per Share Basic net earnings (loss) per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of unvested restricted common stock and common stock warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive. On November 12, 2020, the Company effected a 0.794-for-1 reverse stock split of its common stock. The par value and the authorized shares of the common stock were not adjusted as a result of the reverse stock split. The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the reverse stock split for all periods presented. Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares): 2019 2018 2017 Unvested restricted stock 945 1,926 2,955 Common Stock Warrants, exercisable at $1.665/share 901 901 901 Total 1,846 2,827 3,856 Comprehensive Loss Comprehensive loss includes changes in equity (net assets) during a period from non-owner sources. Our accumulated other comprehensive income (loss) was comprised of a loss from foreign currency translation of $101,000 and $90,000 as of December 31, 2019 and 2018, respectively; and actuarial gain on pension liability adjustments in Teloworks of $107,000 as of December 31, 2019 and 2018. 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. 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 Adopted In February 2016, the FASB issued ASU 2016-02, “Leases (ASC Topic 842)”, which requires lessees to recognize a right-of-use asset and lease liability on the balance sheet and expands |
Non-controlling Interests
Non-controlling Interests | 12 Months Ended |
Dec. 31, 2019 | |
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 Telos ID Enterprise 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, “Equity,” we recognized a gain of $5.8 million. As a result, we owned 60% of Telos ID, and therefore continued 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. Under the Operating Agreement, Telos ID is managed by a board of directors comprised of five (5) members (the “Telos ID Board”). The Operating Agreement provides for two classes of membership units, Class A (owned by the Company) and Class B (owned by the Investors). The Class A member (the Company) owns 50% of Telos ID, is entitled to receive 50% of the profits of Telos ID, and may appoint three (3) members of the Telos ID Board. The Class B member (the Investors) owns 50% of Telos ID, is entitled to receive 50% of the profits of Telos ID, and may appoint two (2) members of the Telos ID Board. 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 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. As a result of the Transaction, the Class A and Class B members each own 50% of Telos ID, as mentioned above, and as such each was allocated 50% of the profits, which was $4.3 million, $3.4 million, and $2.3 million for 2019, 2018, and 2017, respectively. The Class B member is the non-controlling interest. Distributions are made to the members only when and to the extent determined by Telos ID’s Board of Directors, in accordance with the Operating Agreement. During the years ended December 31, 2019, 2018, and 2017, the Class B member received a total of $2.4 million, $1.7 million, and $3.7 million, respectively, of such distributions. The following table details the changes in non-controlling interest for the years ended December 31, 2019, 2018, and 2017 (in thousands): 2019 2018 2017 Non-controlling interest, beginning of period $ 2,621 $ 913 $ 2,229 Net income 4,264 3,377 2,335 Distributions (2,371 ) (1,669 ) (3,651 ) Non-controlling interest, end of period $ 4,514 $ 2,621 $ 913 |
Goodwill
Goodwill | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill [Abstract] | |
Goodwill | Note 3. Goodwill The goodwill balance was $14.9 million as of December 31, 2019 and 2018. 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, 2019 and 2018, no impairment charges were taken. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2019 | |
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 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, 2019 and 2018, 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, 2019 and 2018, the carrying value of the Company’s 12% Cumulative Exchangeable Redeemable Preferred Stock, par value $.01 per share (the “Public Preferred Stock”) was $139.2 million and $135.4 million, respectively, and the estimated fair market value was $60.5 million and $41.4 million, respectively, based on quoted market prices. 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, 2019 | |
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 93.7%, 93.7%, and 94.2% of consolidated revenue in 2019, 2018, and 2017, 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 92.7% 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, 2019 2018 Billed accounts receivable $ 11,917 $ 18,848 Unbilled receivables 16,745 16,000 Allowance for doubtful accounts (720 ) (306 ) Total $ 27,942 $ 34,542 The activities in the allowance for doubtful accounts are set forth below (in thousands): Balance Beginning of Year Bad Debt Expenses (1) Recoveries (2) Balance End of Year Year ended December 31, 2019 $ 306 $ 414 $ -- $ 720 Year ended December 31, 2018 $ 411 $ (105 ) $ -- $ 306 Year ended December 31, 2017 $ 429 $ (18 ) $ -- $ 411 (1) Accounts receivable reserves and reversal of allowance for subsequent collections, net (2) Accounts receivable written-off and subsequent recoveries, net Revenue by Major Market and Significant Customers We derived a substantial portion 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: 2019 2018 2017 (dollar amounts in thousands) Federal $ 149,257 93.7 % $ 129,279 93.7 % $ 101,519 94.2 % State & Local, and Commercial 9,961 6.3 % 8,737 6.3 % 6,208 5.8 % Total $ 159,218 100.0 % $ 138,016 100.0 % $ 107,727 100.0 % |
Current Liabilities and Debt Ob
Current Liabilities and Debt Obligations | 12 Months Ended |
Dec. 31, 2019 | |
Current Liabilities and Debt Obligations [Abstract] | |
Current Liabilities and Debt Obligations | Note 6. Current Liabilities and Debt Obligations Accounts Payable and Other Accrued Liabilities As of December 31, 2019 and 2018, the accounts payable and other accrued payables consisted of $13.5 million and $18.5 million, respectively, in trade account payables and $1.5 million and $3.3 million, respectively, in accrued liabilities. Contract Liabilities Contract liabilities are payments received in advance and milestone payments from our customers on selected contracts that exceed revenue earned to date, resulting in contract liabilities. Contract liabilities typically are not considered a significant financing component because they are generally satisfied within one year and are used to meet working capital demands that can be higher in the early stages of a contract. Contract liabilities are reported on our consolidated balance sheets on a net contract basis at the end of each reporting period. As of December 31, 2019 and 2018, the contract liabilities primarily related to 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 provided 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. All borrowings under the Credit Agreement accrue interest at the rate of 13.0% per annum (the “Accrual Rate”). If, at the request of the Company, the Agent executes an intercreditor agreement with another senior lender under which the Agent and the Lenders subordinate their liens (an "Alternative Interest Rate Event"), the interest rate will increase to 14.5% per annum. After the occurrence and during the continuance of any event of default, the interest rate will increase 2.0%. The Company is obligated to pay accrued interest in cash on a monthly basis at a rate of not less than 10.0% per annum or, during the continuance of an Alternate Interest Rate Event, 11.5% per annum. The Company may elect to pay the remaining interest in cash, by payment-in-kind (by addition to the principal amount of the Loan) or by combination of cash and payment-in-kind. Upon thirty days prior written notice, the Company may prepay any portion or the entire amount of the Loan. An amount of approximately $1.1 million was netted from the proceeds of 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. In connection with the Credit Agreement, on January 25, 2017, the Company issued warrants (each, a "Warrant") to the Agent and certain of the Lenders representing in the aggregate the right to purchase in accordance with their terms 900,970.463 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 $1.665 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. The Credit Agreement also included an $825,000 exit fee, which was payable upon any repayment or prepayment of the loan. This amount had been included in the total principal due and treated as an unamortized discount on the debt, which would 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. 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. On March 30, 2018, the Credit Agreement was further 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). The increase in interest expense has been paid in cash. Contemporaneously with the Third Amendment, Mr. John B. Wood agreed to transfer 39,680 shares of the Company’s Class A Common Stock owned by him to EnCap. On July 19, 2019, we entered into the Fourth Amendment to Credit Agreement and Waiver; First Amendment to Fee Letter (“Fourth Amendment”) to amend the Credit Agreement. As a result of the Fourth Amendment, several terms of the Credit Agreement were amended, including the following: • The Company borrowed an additional $5 million from the Lenders, increasing the total amount of the principal to $16 million. • The maturity date of the Credit Agreement was amended from January 25, 2022 to January 15, 2021. • The prepayment price was amended as follows: (a) from January 26, 2019 through January 25, 2020, the prepayment price is 102% of the principal amount, (b) from January 26, 2020 through October 14, 2020, the prepayment price is 101% of the principal amount, and (c) from October 15, 2020 to the maturity date, the prepayment price will be at par. However, the prepayment price for the additional $5 million loan attributable to the Fourth Amendment will be at par. • The following financial covenants, as defined in the Credit Agreement, were amended and updated: Consolidated Leverage Ratio, Consolidated Senior Leverage Ratio, Consolidated Capital Expenditures, Minimum Fixed Charge Coverage Ratio, and Minimum Consolidated Net Working Capital. • Any actual or potential non-compliance with the applicable provisions of the Credit Agreement were waived. • The borrowing under the Credit Agreement continues to be collateralized by substantially all of the Company’s assets including inventory, equipment and accounts receivable. • The Company paid the Agent a fee of $110,000 in connection with the Fourth Amendment. We incurred immaterial third party transaction costs which were expensed in the current period. • The exit fee was increased from $825,000 to $1,200,000. The exit fee 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 17.3% over the remaining term of the loan. For the measurement period ended December 31, 2019 we were in compliance with the Credit Agreement’s financial covenants, based on an agreement between the Company and EnCap on the definition of certain input factors that determine the measurement against the covenants. On March 26, 2020, the Credit Agreement was amended (the “Fifth Amendment”) to modify the financial covenants for 2020 through the maturity of the Credit Agreement to establish that the covenants will remain at the December 31, 2019 levels and to update the previously agreed-upon definition of certain financial covenants, specifically the amount of Capital Expenditures to be included in the measurement of the covenants. The Fifth Amendment also provides for the right for the Company to elect to extend the maturity date of the Credit Agreement which is currently scheduled to mature on January 15, 2021. The Fifth Amendment provides for four quarterly maturity date extensions, which would increase the Exit Fee payable under the Credit Agreement by $250,000 for each quarterly maturity date extension elected, for a total of $1 million increase to the Exit Fee were all four of the maturity date extensions to be elected. The Company paid EnCap an amendment fee of $100,000 and out-of-pocket costs and expenses in consideration for the Fifth Amendment. The carrying amount of the Credit Agreement consisted of the following (in thousands): December 31, 2019 2018 Senior term loan principal, including exit fee $ 17,200 $ 11,825 Less: Unamortized discount, debt issuance costs, and lender fees (865 ) (841 ) Senior term loan, net $ 16,335 $ 10,984 We incurred interest expense in the amount of $2.2 million, $1.7 million and $1.5 million for the years ended December 31, 2019, 2018 and 2017, respectively, under the Credit Agreement. 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. On November 15, 2019, the term of the Purchase Agreement was extended to June 30, 2022. No fee or consideration of any kind was paid in connection with these extensions. 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 Receivables are outstanding; (iii) a commitment fee equal to 1% per annum of the 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. 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 the 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 had a term of two years, provided that the Company may terminate it at any time without penalty upon written notice. On August 13, 2018, the Financing Agreement was extended through January 2, 2019. No fee or consideration of any kind was paid in connection with this extension. The Financing Agreement was not extended beyond this date. 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 35.0% 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 a prior senior lender, in which the Porter Notes were fully subordinated to the financing provided by that senior lender, and payments under the Porter Notes were permitted only if certain conditions are met. According to the original 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 Intercreditor Agreements with Porter and EnCap, in which the Porter Notes are fully subordinated to the Credit Agreement and any subsequent senior lenders, and payments under the Porter Notes were permitted only if certain conditions are met. 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. All We incurred interest expense in the amount of $330,000, $308,000, and $292,000 for 2019, 2018, and 2017, respectively, on the Porter Notes. |
Redeemable Preferred Stock
Redeemable Preferred Stock | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019 and 2018, 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 various financing agreements 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, 2019 and 2018. 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 also 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 of 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, 2019. This classification is consistent with ASC 210, “Balance Sheet” and 470, “Debt” and the FASB ASC Master Glossary definition of “Current Liabilities.” ASC 210 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 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% per share for each $.60 of such dividends not paid in cash. For the cash dividends payable since December 1, 1995, we have accrued $107.4 million and $103.5 million as of December 31, 2019 and 2018, respectively. We accrued dividends on the Public Preferred Stock of $3.8 million for each of the years ended December 31, 2019, 2018, and 2017, which was recorded as interest expense. Prior to the effective date of ASC 480 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 have been extended. 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 $0, $0, and $20,000 for the years ended December 31, 2019, 2018, and 2017, respectively, which were reported as interest expense. Prior to the effective date of ASC 480, “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, 2019 | |
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, 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 3,972,007 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, 2019, there were 951,337 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. A summary of restricted stock activities for the years ended December 31, 2019, 2018 and 2017 is as follows: December 31, 2019 2018 2017 (number of shares) Outstanding at beginning of year 3,904,550 3,948,199 -- Granted -- -- 3,972,007 Forfeited (11,904 ) (43,648 ) (23,808 ) Outstanding at end of year 3,892,646 3,904,550 3,948,199 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 2,903,443 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% each year, with full vesting occurring after completion of five years of service. Our total contributions to this Plan for 2019, 2018, and 2017 were $861,000, $721,000, and $617,000, respectively. Additionally, 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 Telos ID Plan up to a maximum of 2% of such employee’s eligible annual base salary. The total 2019, 2018, and 2017 Telos ID contributions to this plan were $151,000, $125,000, and $105,000, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes [Abstract] | |
Income Taxes | Note 9. Income Taxes The provision (benefit) for income taxes attributable to income from operations includes the following (in thousands): For the Years Ended December 31, 2019 2018 2017 Current provision (benefit) Federal $ 25 $ (29 ) $ (86 ) State 68 (17 ) 29 Total current 93 (46 ) (57 ) Deferred (benefit) provision Federal 88 15 (2,622 ) State (285 ) 62 (88 ) Total deferred (197 ) 77 (2,710 ) Total (benefit) provision $ (104 ) $ 31 $ (2,767 ) 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, 2019 2018 2017 Computed expected income tax provision 21.0 % 21.0 % 34.0 % State income taxes, net of federal income tax benefit (0.2 ) (20.9 ) 0.9 Change in valuation allowance for deferred tax assets (8.5 ) 47.7 (26.9 ) Cumulative deferred adjustments (0.4 ) -- -- Provision to return adjustments 0.5 1.8 -- Other permanent differences (3.7 ) (12.2 ) (1.3 ) Dividend and accretion on preferred stock (12.3 ) (49.9 ) (15.2 ) FIN 48 liability (1.3 ) (4.6 ) (0.9 ) R&D credit 6.5 27.7 4.6 Impact of Tax Act -- (12.5 ) 35.5 Other -- -- 1.5 1.6 % (1.9 )% 32.2 % The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2019 and 2018 are as follows (in thousands): December 31, 2019 2018 Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts $ 185 $ 79 Allowance for inventory obsolescence and amortization 316 281 Accrued liabilities not currently deductible 1,649 1,634 Accrued compensation 1,655 1,206 Deferred rent 4,808 4,750 Section 163(j) interest limitation 804 246 Net operating loss carryforwards - federal 2,583 1,956 Net operating loss carryforwards - state 796 653 Federal tax credit 1,326 983 Total gross deferred tax assets 14,122 11,788 Less valuation allowance (7,206 ) (6,652 ) Total deferred tax assets, net of valuation allowance 6,916 5,136 Deferred tax liabilities: Amortization and depreciation (2,623 ) (2,237 ) Unbilled accounts receivable, deferred for tax purposes (1,611 ) (955 ) Goodwill basis adjustment and amortization (2,886 ) (2,713 ) Telos ID basis difference (417 ) (49 ) Total deferred tax liabilities (7,537 ) (5,954 ) Net deferred tax liabilities $ (621 ) $ (818 ) The components of the valuation allowance are as follows (in thousands): Balance Beginning of Period Additions Recoveries Balance End of Period December 31, 2019 $ 6,652 $ 554 $ -- $ 7,206 December 31, 2018 $ 7,219 $ -- $ (567 ) $ 6,652 December 31, 2017 $ 10,499 $ -- $ (3,280 ) $ 7,219 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 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” 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. We re-measured our deferred tax assets and liabilities and adjusted the valuation allowance related to the hanging credit deferred tax liability and included these amounts in our consolidated financial statements for the year ended December 31, 2017. As of December 31, 2018, we have completed the accounting for all income tax effects of the Tax Act and recorded a SAB 118 adjustment in the current period tax provision related to state conformity to the indefinite-lived net operating loss provision of the Tax Act. Beginning January 1, 2018, we are subject to several provisions of the Tax Act including computations under Section 162(m) executive compensation limitation and Section 163(j) interest limitation rules and we have considered the impact of each of these provisions in our overall tax expense for the years ended December 31, 2019 and 2018. 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, 2019 and 2018. As a result of a full valuation allowance against our deferred tax assets and liabilities, a deferred tax liability related to goodwill remained on our consolidated balance sheets at December 31, 2019 and 2018. At December 31, 2019, for federal income tax purposes there was approximately a $12.4 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 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, we determined that there were approximately $673,000 and $648,000 of unrecognized tax benefits, including $304,000 and $278,000 of related interest and penalties, required to be recorded in other liabilities as of December 31, 2019 and 2018, 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, 2016 to 2019, 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): 2019 2018 2017 Unrecognized tax benefits, beginning of period $ 648 $ 677 $ 762 Gross decreases — tax positions in prior period (39 ) (63 ) (127 ) Gross increases — tax positions in current period 101 92 77 Settlements (37 ) (58 ) (35 ) Unrecognized tax benefits, end of period $ 673 $ 648 $ 677 |
Commitments
Commitments | 12 Months Ended |
Dec. 31, 2019 | |
Commitments, Contingencies and Subsequent Events [Abstract] | |
Commitments | Note 10. Commitments Leases We lease office space and equipment under noncancelable operating and finance leases with various expiration dates, some of which contain renewal options. Operating Leases We account for leases in accordance with ASC Topic 842, “Leases,” which requires lessees to recognize a right-of-use asset and lease liability on the balance sheet and expands disclosures about leasing arrangements for both lessees and lessors, among other items, for most lease arrangements. In accordance with the adoption of ASC 842 on January 1, 2019, we recorded operating lease right-of-use (“ROU”) assets, which represent our right to use an underlying asset for the lease term, and operating lease liabilities which represent our obligation to make lease payments. Generally, we enter into operating lease agreements for facilities. The amount of operating lease liabilities due within 12 months are recorded in other current liabilities, with the remaining operating lease liabilities recorded as non-current liabilities in our consolidated balance sheet based on their contractual due dates. The operating lease ROU assets and liabilities are recognized as of the lease commencement date at the present value of the lease payments over the lease term. Most of our leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate which was 5.75% for all operating leases. Our operating lease agreements may include options to extend the lease term or terminate it early. We have included options to extend in the operating lease ROU assets and liabilities when we are reasonably certain that we will exercise such options. The weighted average remaining lease terms and discount rates for our operating leases were approximately 3.5 years and 5.75% at December 31, 2019. Operating lease expense is recognized as rent expense on a straight-line basis over the lease term. Some of our operating leases contain lease and non-lease components, which we account for as a single component. We evaluate ROU assets for impairment consistent with our property and equipment policy disclosure included in Note 1 – Summary of Significant Accounting Policies. As of December 31, 2019, operating lease ROU assets were $2.0 million and operating lease liabilities were $2.2 million, of which $1.6 million were classified as noncurrent. Finance Leases 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 2014 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 weighted average remaining lease terms and discount rates for finance leases were approximately 9.3 years and 5.04% at December 31, 2019. In accordance with the 2014 Lease, the basic rent increases by a fixed 2.5% escalation annually. Accumulated amortization for property and equipment under finance leases at December 31, 2019 and 2018 was $18.7 million and $17.5 million, respectively. Future minimum lease commitments at December 31, 2019 were as follows (in thousands): Operating Leases Finance Leases 2020 $ 710 $ 2,046 2021 715 2,097 2022 564 2,149 2023 368 2,203 2024 28 2,258 After 2024 -- 10,658 Total minimum lease payments 2,385 21,411 Less imputed interest (230 ) (4,546 ) Net present value of minimum lease payments 2,155 16,865 Less current portion (602 ) (1,224 ) Long-term lease obligations at December 31, 2019 $ 1,553 $ 15,641 The components of lease expense were as follows (in thousands): Year Ended December 31, 2019 Operating lease cost $ 597 Short-term lease cost (1) 147 Finance lease cost Amortization of finance lease assets 1,221 Interest on finance lease liabilities 881 Total finance lease cost 2,102 Total lease costs $ 2,846 (1) Leases that have terms of 12 months or less. Supplemental cash flow information related to leases was as follows (in thousands): Year Ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Cash flows from operating activities - operating leases $ 604 Cash flows from operating activities - finance leases $ 1,995 Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 488 Rent expense charged to operations totaled $1.1 million, $1.6 million, and $1.6 million for 2019, 2018, and 2017, 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, 2019 $ 30 $ -- $ -- $ 30 Year Ended December 31, 2018 $ 30 $ -- $ -- $ 30 Year Ended December 31, 2017 $ 51 $ -- $ (21 ) $ 30 |
Certain Relationships and Relat
Certain Relationships and Related Transactions | 12 Months Ended |
Dec. 31, 2019 | |
Related Party 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 2019, 2018, and 2017 were $529,000, $552,000, and $570,000, respectively. Additionally, Mr. Wood owned 810,000 shares of the Company’s Class A Common Stock as of December 31, 2019 and 2018, and 50,000 shares of the Company’s Class B Common Stock as of December 31, 2019 and 2018. 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 35.0% 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 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 $330,000, $308,000, and $292,000 for the years ended December 31, 2019, 2018, and 2017, respectively, on the Porter Notes. As of December 31, 2019, approximately $1.1 million of accrued interest was payable according to the stated interest rate of 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, 2019 | |
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 2019 Revenue $ 31,166 $ 36,048 $ 45,531 $ 46,473 Gross profit 8,976 10,015 16,313 17,040 (Loss) income before income taxes and non-controlling interest (3,137 ) (1,974 ) 3,708 (838 ) Net income (loss) attributable to Telos Corporation (1)(2) (3,413 ) (1,741 ) 2,233 (3,480 ) Weighted Average Common Shares Outstanding, Class A, Basic 33,912 34,438 34,869 34,869 Weighted Average Common Shares Outstanding, Class B, Basic 3,204 3,204 3,204 3,204 Weighted Average Common Shares Outstanding, Class A, Diluted 33,912 34,438 36,727 34,869 Weighted Average Common Shares Outstanding, Class B, Diluted 3,204 3,204 3,204 3,204 Earnings per Share, Class A - Basic (0.09 ) (0.05 ) 0.06 (0.09 ) Earnings per Share, Class B - Basic (0.09 ) (0.05 ) 0.06 (0.09 ) Earnings per Share, Class A - Diluted (0.09 ) (0.05 ) 0.06 (0.09 ) Earnings per Share, Class B - Diluted (0.09 ) (0.05 ) 0.06 (0.09 ) 2018 Revenue $ 32,401 $ 34,943 $ 34,695 $ 35,977 Gross profit 10,232 12,078 16,287 14,465 (Loss) income before income taxes and non-controlling interest (1,693 ) 450 4,722 (1,711 ) Net (loss) income attributable to Telos Corporation (1)(3) (1,986 ) (87 ) 4,113 (3,680 ) Weighted Average Common Shares Outstanding, Class A, Basic 32,927 33,468 33,912 33,912 Weighted Average Common Shares Outstanding, Class B, Basic 3,204 3,204 3,204 3,204 Weighted Average Common Shares Outstanding, Class A, Diluted 32,927 33,468 36,752 33,912 Weighted Average Common Shares Outstanding, Class B, Diluted 3,204 3,204 3,204 3,204 Earnings per Share, Class A - Basic (0.05 ) 0.00 0.11 (0.10 ) Earnings per Share, Class B - Basic (0.05 ) 0.00 0.11 (0.10 ) Earnings per Share, Class A - Diluted (0.05 ) 0.00 0.10 (0.10 ) Earnings per Share, Class B - Diluted (0.05 ) 0.00 0.10 (0.10 ) (1) Changes in net income are the result of several factors, including seasonality of the government year-end buying season, as well as the nature and timing of other deliverables. (2) Net income for the third quarter of 2019 is attributable to $2.6 million in proprietary software sales which carry lower cost of sales. (3) Net income for the third quarter of 2018 included $5.6 million of revenue accruals for multiple contracts as a result of several years of cumulative indirect rate adjustments which did not include direct costs in Secure Mobility and Network Management/Defense Enterprise solutions deliverables. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments, Contingencies and Subsequent Events [Abstract] | |
Commitments, Contingencies and Subsequent Events | Note 13. Commitments, Contingencies and Subsequent Events Financial Condition and Liquidity As described in Note 6 – Current Liabilities and Debt Obligations, we maintain a Credit Agreement with EnCap and a Purchase Agreement with RCA. The willingness of RCA to purchase our accounts receivable under the Purchase Agreement, and our ability to obtain additional financing, may be limited due to various factors, including the eligibility of our receivables, the status of our business, global credit market conditions, and perceptions of our business or industry by EnCap, RCA, or other potential sources of financing. If we are unable to maintain the Purchase Agreement, we would need to obtain additional credit to fund our future operations. If credit is available in that event, lenders may impose more restrictive terms and higher interest rates that may reduce our borrowing capacity, increase our costs, or reduce our operating flexibility. The failure to maintain, extend, renew or replace the Purchase Agreement with a comparable arrangement or arrangements that provide similar amounts of liquidity for the Company would have a material negative impact on our overall liquidity, financial and operating results. 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 $2.9 million and $2.1 million as of December 31, 2019 and 2018, respectively. Although no assurances can be given, we expect that our financing arrangements with EnCap and RCA, collectively, and funds generated from operations 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 Partners 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 (the “Telos Defendants”) in the Circuit Court for Baltimore City, Maryland (the “Circuit Court”). A second holder of the Company’s Public Preferred Stock, Wynnefield Partners 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 alleged, 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” and that “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 without prejudice of its counterclaim against Plaintiffs (for their interference with the Company’s relationship with the Company’s then senior lender, Wells Fargo). 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 the shareholder oppression claim against Mr. Porter. The appeal did not include any challenge to the dismissal of other counts, including 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 Appeals of Maryland, which was denied on January 22, 2013. On remand, the Defendants (excluding Mr. Porter) filed a Motion to Dismiss the derivative claims under the standard of review dictated by the opinion of the Court of Special Appeals as a result of the findings of the Special Litigation Committee in its final report of July 20, 2007 (“Defendants’ Motion to Dismiss”). Following full briefing by the parties, a hearing on the Defendants’ Motion to Dismiss was held on April 24, 2014 and the matter was taken under advisement by the Court. 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 (“Mr. Porter’s Motion to Dismiss”). 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 the Circuit Court. The Court had previously denied the Motions to Dismiss for Lack of Personal Jurisdiction on March 30, 2006. The Motion to Reconsider was precipitated by and based upon a newly decided Maryland appellate decision related to personal jurisdiction over directors of a Maryland corporation. Following full briefing by the parties, a hearing was held on December 19, 2018 on the Motion to Reconsider and on Mr. Porter’s Motion to Dismiss, and the matters were taken under advisement by the Court. On December 18, 2019, the Circuit Court filed three (3) Memorandum Opinions and entered four (4) Orders addressing all of the pending motions and open claims in the litigation and closing the case. First, the Circuit Court granted the Motion to Reconsider the Circuit Court’s March 30, 2006 order denying the Motions to Dismiss for Lack of Personal Jurisdiction filed by a number of the past and present directors and officers. The Circuit Court determined that the intervening appellate decision was binding legal precedent on a pertinent legal issue, and concluded that the Court lacked personal jurisdiction over the moving defendants. The Circuit Court entered an order dismissing the derivative claims against these defendants for lack of personal jurisdiction. Second, the Circuit Court granted the Defendants’ Motions to Dismiss the derivative claims. The Defendants’ Motion to Dismiss relied on the conclusions in the final report of the Special Litigation Committee (SLC) that the derivative claims lacked merit and that it was not in the best interests of the Company to pursue them. The Circuit Court found, among other things, that the Telos Defendants had sustained their burden of proof to show that (i) the SLC was independent, (ii) the legal counsel for the SLC was independent, (iii) the SLC acted in good faith in conducting its investigation and reaching its conclusions, and (iv) the SLC conducted a reasonable investigation with factually supported conclusions. The Circuit Court also determined that the procedural mechanism the Telos Defendants had utilized to present the issue to the Circuit Court — proceedings under Maryland Rule 2-502 — was an appropriate procedural vehicle to use for this issue. The Circuit Court entered an order granting the Defendants’ Motion to Dismiss and ordering the dismissal of the derivative claims on the merits. Third, the Circuit Court granted Mr. Porter’s Motion to Dismiss based on a lack of minimum contacts with the State of Maryland, and entered an order dismissing the claim for shareholder oppression against Mr. Porter for lack of jurisdiction. Finally, the Circuit Court entered a separate order concluding that all claims in the Third Amended Complaint had been dismissed by various orders of the Court dated June 6, 2007, January 7, 2008, April 15, 2008, and December 18, 2019, and further ordering the Clerk of the Court to close the case with costs to be paid by Plaintiffs. Costa Brava noted an appeal to the Court of Special Appeals of Maryland on January 17, 2020 from the Circuit Court’s final judgment which remains pending. Co-plaintiff Wynnefield elected not to note or pursue an appeal. As of December 31, 2019, Costa Brava and Wynnefield, directly and through affiliated funds, own 12.7% and 17.4%, respectively, of the outstanding Public Preferred Stock. At this stage of the litigation, it is impossible to reasonably determine the degree of probability related to Plaintiff Costa Brava’s success in relation to any of the assertions it will make on the pending appeal. 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 Plaintiff Costa Brava’s allegations and continue to vigorously defend the matter and oppose all relief sought by Costa Brava. Hamot et al. v. Telos Corporation As previously reported, on August 2, 2007, Messrs. Seth W. Hamot (“Hamot”) and Andrew R. Siegel (“Siegel”), principals of Costa Brava Partnership III, L.P. (“Costa Brava”), instituted litigation against the Company as Plaintiffs 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 provided to them promptly and were necessary to fulfill their duties as directors of the Company. Subsequently, Hamot and Siegel 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 Hamot and Siegel are entitled to responses and documents, within certain time frames established by the Court, 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. 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 by Hamot and Siegel from that preliminary injunction order later was held to be moot by the Court of Special Appeals of Maryland. 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, the Circuit Court docketed two decisions in this matter. First, with respect to the Plaintiffs’ complaint related to access to books and records of the Company, the Circuit Court 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% Exchangeable Redeemable Preferred Shares – and the resignation was a foreseeable consequence of Hamot and Siegel’s interference. 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 in 2007 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 Count Two of the third amended counterclaim: (1) to correct the amount of damages awarded on Count Two 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. 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. The Company filed a notice with the Circuit Court appealing the judgment to the Court of Special Appeals of Maryland on October 11, 2017, and on October 17, 2017, Hamot and Siegel filed a notice of a cross-appeal, which they later withdrew. On or about July 6, 2018, the attorneys representing Mr. Hamot filed a Notice of Substitution of Party in the Circuit Court and the Court of Special Appeals, providing notice that Mr. Steven Tannenbaum was appointed and qualified as the Special Personal Representative of the Estate of Seth Hamot to represent the estate in the litigation. Oral argument on the appeal in the Court of Special Appeals on issues related to the damages awarded to the Company and against Messrs. Hamot and Siegel on its Counterclaim for interference with one of its prior auditor relationships was held on October 3, 2018. On November 28, 2018, the Court of Special Appeals issued an unpublished opinion affirming the judgment of the Circuit Court on the issues related to damages. On January 25, 2019, Telos filed a Petition for Writ of Certiorari with Court of Appeals of Maryland seeking review in that Court of issues related to the damage award, and on March 29, 2019, the Petition for Writ of Certiorari was granted. Following oral argument, the Court of Appeals issued a per curiam order on September 13, 2019 dismissing the appeal and entered its Mandate on October 11, 2019. Hamot and Siegel at various times in this litigation have sought to be indemnified or to be awarded advancement of various attorney’s fees and expenses incurred by them in this litigation. 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 motion for injunctive relief on which the Company was successful. On November 3, 2011, the Circuit Court denied the Plaintiffs’ motion. On May 21, 2012, the Circuit Court denied Plaintiffs’ motion for reconsideration of these decisions. Subsequently, on October 19, 2017, Hamot and Siegel submitted a 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 their books and records claim and in defense of the Company’s counterclaims for auditor interference, 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 that the Company will not 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 alleged that they 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 their affirmative claims in On June 27, 2018, the Circuit Court issued a decision on Hamot and Siegel’s Motion for Advancement and Indemnification of Legal Fees and Expenses. The Court, inter alia: (i) denied Hamot and Siegel’s request for indemnification as premature, given the pendency of the Company's then-appeal and Hamot and Siegel’s then-cross-appeal (subsequently withdrawn) from the judgment rendered against them after the trial on the merits; (ii) concluded that the evidence established a nexus between the claims against Hamot and Siegel in the Counterclaim and their service as directors; (iii) determined that indemnification was not available to Hamot and Siegel as a matter of law in connection with their right to inspect claim in their Third Amended Complaint; (iv) determined that Hamot and Siegel were not entitled to advancement of expenses incurred between May 21, 2012 and November 20, 2017, because this request seeks "reimbursement for fees relating to a proceeding that has concluded, and concluded with a ruling that definitively resolves the claims, at least at this juncture", and further determined that "[a]ccepting the extremely low good faith standard and providing advancement would require the court to ignore the findings that the court has made on the very claims that gave rise to the expenses that are the basis of the request"; and (v) determined that Hamot and Siegel were entitled to advancement of expenses related to the appeal of the Counterclaim, pending completion of the appellate proceedings, explaining that the "fact that this court found against Hamot and Siegel on the merits does not compel the conclusion that they could not entertain a good faith belief in the merits of their appeal" and that they met the low bar for showing their good faith belief that they will be successful on the issues related to the counterclaim on appeal. On September 21, 2018, Hamot and Siegel filed in the Circuit Court a Motion for Entry of Money Judgment of Advancement Fees and Expenses, or, in the Alternative, for Order that Telos Corporation Show Cause Why Telos Corporation Should Not be Held in Contempt for Failing to Comply with this Court’s June 27, 2018 Order Directing Telos Corporation to Pay Advancement Fees and Expenses (Motion for Entry of Monetary Judgment), the Company filed an opposition to the motion, and a hearing was held on the Plaintiffs’ Motion for Entry of Monetary Judgment on November 21, 2018. Effective on January 4, 2019, the parties entered into a partial settlement agreement with respect to certain issues related to Plaintiffs’ claim for advancement of fees and expenses on the appeal and certain other matters, and subsequently the Circuit Court issued an order on January 9, 2019 determining that the Motion for Entry of Monetary Judgment was moot. In connection with the partial settlement agreement, the Company provided advancement of a negotiated and compromised amount of expenses incurred by Hamot and Siegel in connection with the Company’s appeal of the damages awarded for auditor interference. At this stage of the litigation, it is impossible to reasonably determine the degree of probability related to the Company’s success in relation to any possible further claim by Hamot and Siegel for indemnification for certain attorney’s fees and expenses incurred in this litigation. No claim for indemnification is pending as of the reporting date. The Company intends to vigorously defend the matter and oppose any claim for indemnification if it is pursued. 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 26, 2020, the Credit Agreement was amended (the “Fifth Amendment”) to modify the financial covenants for 2020 through the maturity of the Credit Agreement to establish that the covenants will remain at the December 31, 2019 levels and to update the previously agreed-upon definition of certain financial covenants, specifically the amount of Capital Expenditures to be included in the measurement of the covenants. The Fifth Amendment also provides for the right for the Company to elect to extend the maturity date of the Credit Agreement which is currently scheduled to mature on January 15, 2021. The Fifth Amendment provides for four quarterly maturity date extensions, which would increase the Exit Fee payable under the Credit Agreement by $250,000 for each quarterly maturity date extension elected, for a total of $1 million increase to the Exit Fee were all four of the maturity date extensions to be elected. The Company paid EnCap an amendment fee of $100,000 and out-of-pocket costs and expenses in consideration for the Fifth Amendment. COVID-19 Pandemic In December 2019, an outbreak of the COVID-19 virus was reported in Wuhan, China. On March 11, 2020, the World Health Organization declared the COVID-19 virus a global pandemic and on March 13, 2020, President Donald J. Trump declared the virus a national emergency. This highly contagious disease has spread to most of the countries in the world and throughout the United States, creating a serious impact on customers, workforces, and suppliers, disrupting economies and financial markets, and potentially leading to a world-wide economic downturn. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on the Company’s financial condition, liquidity, and future results of operations. The Company is dependent on its workforce to deliver its solutions. Developments such as social distancing and stay-at-home orders from various jurisdictions may impact the Company’s ability to deploy its workforce effectively. While expected to be temporary, prolonged workforce disruptions could negatively impact sales in fiscal year 2020 and the Company’s overall liquidity. As of the date of this report, the Company’s suppliers and subcontractors have not notified the Company of inability to meet expected orders or of decreased production capacity. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate any adverse effects of the COVID-19 outbreak on its results of operations, financial condition, or liquidity for fiscal year 2020. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
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, Teloworks, and Telos APAC, 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 in 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 estimated pension-related costs for our foreign subsidiaries. Actual results could differ from those estimates. |
Revenue Recognition | Revenue Recognition We account for revenue in accordance with ASC Topic 606, “Revenue from Contracts with Customers.” The unit of account in ASC 606 is a performance obligation, which is a promise in a contract with a customer to transfer a good or service to the customer. ASC 606 prescribes a five-step model for recognizing revenue that includes identifying the contract with the customer, determining the performance obligation(s), determining the transaction price, allocating the transaction price to the performance obligation(s), and recognizing revenue as the performance obligations are satisfied. Timing of the satisfaction of performance obligations varies across our businesses due to our diverse product and service mix, customer base, and contractual terms. Significant judgment can be required in determining certain performance obligations, and these determinations could change the amount of revenue and profit recorded in a given period. Our contracts may have a single performance obligation or multiple performance obligations. When there are multiple performance obligations within a contract, we allocate the transaction price to each performance obligation based on our best estimate of standalone selling price. We account for a contract after it has been approved by the parties to the contract, the rights and the payment terms of the parties are identified, the contract has commercial substance and collectability is probable, which is presumed for our U.S. Government customers and prime contractors for which we perform as subcontractors to U.S. Government end-customers. The majority of our revenue is recognized over time, as control is transferred continuously to our customers who receive and consume benefits as we perform, and is classified as services revenue. All of our business groups earn services revenue under a variety of contract types, including time and materials, firm-fixed price, firm fixed price level of effort, and cost plus fixed fee contract types, which may include variable consideration as discussed further below. Revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material, subcontractor costs and indirect expenses. This continuous transfer of control to the customer is supported by clauses in our contracts with U.S. Government customers whereby the customer may terminate a contract for convenience and then pay for costs incurred plus a profit, at which time the customer would take control of any work in process. For non-U.S. Government contracts where we perform as a subcontractor and our order includes similar Federal Acquisition Regulation (the FAR) provisions as the prime contractor’s order from the U.S. Government, continuous transfer of control is likewise supported by such provisions. For other non-U.S. Government customers, continuous transfer of control to such customers is also supported due to general terms in our contracts and rights to recover damages which would include, among other potential damages, the right to payment for our work performed to date plus a reasonable profit. Due to the transfer of control over time, revenue is recognized based on progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the performance obligations. We generally use the cost-to-cost measure of progress on a proportional performance basis for our contracts because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred. Due to the nature of the work required to be performed on certain of our performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment. Contract estimates are based on various assumptions including labor and subcontractor costs, materials and other direct costs and the complexity of the work to be performed. A significant change in one or more of these estimates could affect the profitability of our contracts. We review and update our contract-related estimates regularly and recognize adjustments in estimated profit on contracts on a cumulative catch-up basis, which may result in an adjustment increasing or decreasing revenue to date on a contract in a particular period that the adjustment is identified. Revenue and profit in future periods of contract performance are recognized using the adjusted estimate. Revenue that is recognized at a point in time is for the sale of software licenses in our Secure Mobility and Network Management/Defense Enterprise Solutions (formerly CO&D’s Secure Mobility Solutions) and Secure Communications Cyber and Enterprise Solutions (formerly IT & Enterprise Solutions) business groups and for the sale of resold products in Telos ID Enterprise Solutions (formerly Identity Management Solutions) and Cyber & Cloud Solutions (formerly CO&D’s Cyber Security Solutions), and is classified as product revenue. Revenue on these contracts is recognized when the customer obtains control of the transferred product or service, which is generally upon delivery of the product to the customer for their use, due to us maintaining control of the product until that point. Orders for the sale of software licenses may contain multiple performance obligations, such as maintenance, training, or consulting services, which are typically delivered over time, consistent with the transfer of control disclosed above for the provision of services. When an order contains multiple performance obligations, we allocate the transaction price to the performance obligations using our best estimate of standalone selling price. Contracts are routinely and often modified to account for changes in contract requirements, specifications, quantities, or price. Depending on the nature of the modification, we determine whether to account for the modification as an adjustment to the existing contract or as a new contract. Generally, modifications are not distinct from the existing contract due to the significant interrelatedness of the performance obligations and are therefore accounted for as an adjustment to the existing contract, and recognized as a cumulative adjustment to revenue (as either an increase or reduction of revenue) based on the modification’s effect on progress toward completion of a performance obligation. Our contracts may include various types of variable consideration, such as claims (for instance, indirect rate or other equitable adjustments) or incentive fees. We include estimated amounts in the transaction price based on all of the information available to us, including historical information and future estimations, and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when any uncertainty associated with the variable consideration is resolved. We have revised and re-submitted several years of incurred cost submissions reflecting certain indirect rate structure changes as a result of regular DCAA audits of incurred cost submissions. This resulted in signed final rate agreement letters for fiscal years 2011 to 2013 and conformed incurred cost submissions for 2014 to 2015. We evaluated the resulting changes to revenue under the applicable cost plus fixed fee contracts for the years 2011 to 2015 as variable consideration, and determined the most likely amount to which we expect to be entitled, to the extent that no constraint exists that would preclude recognizing this revenue or result in a significant reversal of cumulative revenue recognized. We included these estimated amounts of variable consideration in the transaction price and as performance on these contracts is complete, we have recognized revenue of $6.0 million during the year ended December 31, 2018. Historically, most of our contracts do not include award or incentive fees. For incentive fees, we would include such fees in the transaction price to the extent we could reasonably estimate the amount of the fee. With limited historical experience, we have not included any revenue related to incentive fees in our estimated transaction prices. We may include in our contract estimates additional revenue for submitted contract modifications or claims against the customer when we believe we have an enforceable right to the modification or claim, the amount can be estimated reliably and its realization is probable. We consider the contractual/legal basis for the claim (in particular FAR provisions), the facts and circumstances around any additional costs incurred, the reasonableness of those costs and the objective evidence available to support such claims. For our contracts that have an original duration of one year or less, we use the practical expedient applicable to such contracts and do not consider the time value of money. We capitalize sales commissions related to proprietary software and related services that are directly tied to sales. We do not elect the practical expedient to expense as incurred the incremental costs of obtaining a contract if the amortization period would have been one year or less. For the sales commissions that are capitalized, we amortize the asset over the expected customer life, which is based on recent and historical data. Contract assets are amounts that are invoiced as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals or upon achievement of contractual milestones. Generally, revenue recognition occurs before billing, resulting in contract assets. These contract assets are referred to as unbilled receivables and are reported within accounts receivable, net of reserve on our consolidated balance sheets. Billed receivables are amounts billed and due from our customers and are reported within accounts receivable, net of reserve on the consolidated balance sheets. The portion of the payments retained by the customer until final contract settlement is not considered a significant financing component due to the intent of the retainage being the customer’s protection with respect to full and final performance under the contract. Contract liabilities are payments received in advance and milestone payments from our customers on selected contracts that exceed revenue earned to date, resulting in contract liabilities. Contract liabilities typically are not considered a significant financing component because they are generally satisfied within one year and are used to meet working capital demands that can be higher in the early stages of a contract. Contract liabilities are reported on our consolidated balance sheet on a net contract basis at the end of each reporting period. We have one reportable segment. We treat sales to U.S. customers as sales within the U.S. regardless of where the services are performed. Substantially all of our revenues are from U.S. customers as revenue derived from international customers is de minimus. The following tables disclose revenue (in thousands) by customer type and contract type for the periods presented. Prior period amounts have not been adjusted under the modified retrospective method. 2019 2018 2017 Federal $ 149,257 $ 129,279 $ 101,519 State & Local, and Commercial 9,961 8,737 6,208 Total $ 159,218 $ 138,016 $ 107,727 2019 2018 2017 Firm fixed-price $ 131,629 $ 103,454 $ 89,516 Time-and-materials 14,569 16,795 10,222 Cost plus fixed fee 13,020 17,767 7,989 Total $ 159,218 $ 138,016 $ 107,727 The following table discloses accounts receivable and contract assets (in thousands): December 31, 2019 2018 Billed accounts receivable $ 11,917 $ 18,848 Unbilled receivables 16,745 16,000 Allowance for doubtful accounts (720 ) (306 ) Receivables – net $ 27,942 $ 34,542 The following table discloses contract liabilities (in thousands): December 31, 2019 2018 Contract liabilities $ 6,337 $ 5,232 As of December 31, 2019 and 2018, we had $112.4 million and $79.3 million of remaining performance obligations, respectively, which we also refer to as funded backlog. We expect to recognize approximately 98.4% of our remaining performance obligations as revenue in 2020, an additional 1.1% by 2021 and the balance thereafter. For the years ended December 31, 2019 and 2018, the amount of revenue recognized during the year that was included in the opening contract liabilities balance was $4.2 million and $5.5 million, respectively. |
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 liabilities. |
Accounts Receivable | Accounts Receivable Accounts receivable are stated at the invoiced amount, less an allowance 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 using 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 was $2.8 million and $4.9 million at December 31, 2019 and 2018, respectively. As of December 31, 2019, 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, 2019 $ 520 $ 376 $ (36 ) $ 860 Year Ended December 31, 2018 $ 1,484 $ 30 $ (994 ) $ 520 Year Ended December 31, 2017 $ 1,672 $ 73 $ (261 ) $ 1,484 |
Property and Equipment | Property and Equipment Property and equipment is recorded at cost. Depreciation is provided using the straight-line method at rates based on the estimated useful lives of the individual assets or classes of assets as follows: Furniture and equipment 3-5 Years Leasehold improvements Lesser of life of lease or useful life of asset Property and equipment under finance leases Lesser of life of lease or useful life of asset Leased property meeting certain criteria is capitalized at the present value of the related minimum lease payments. Amortization of property and equipment under finance leases is computed using 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, 2019, 2018, and 2017, 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. Depreciation and amortization expense related to property and equipment, including property and equipment under finance leases was $5.0 million, $3.0 million, and $2.0 million |
Software Development Costs | Software Development Costs Our policy on accounting for development costs of software to be sold is in accordance with ASC Topic 985-20, “Software – Costs of Software to be Sold, Leased, or Marketed” and ASC Topic 350-40 “Internal Use Software” in so far as our Xacta products being available in various deployment modalities including on premises licenses and cloud-based Software as a Service (“SaaS”). Under both standards, software development 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 or is ready for its intended use, as appropriate. Technological feasibility is established when all planning, designing, coding and testing activities have been completed, and all risks have been identified. Beginning with the second quarter of 2017, software development costs are capitalized and amortized over the estimated product life of 2 years on a straight-line basis. As of December 31, 2019 and 2018, we capitalized $5.6 million and $3.1 million of software development costs, respectively, which are included as a part of property and equipment. Amortization expense was $1.8 million and $1.1 million for the year ended December 31, 2019 and 2018, respectively. Accumulated amortization was $3.1 million and $1.3 million as of December 31, 2019 and 2018, respectively. 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 2019, 2018 and 2017, we incurred salary costs for research and development of approximately $4.2 million, $3.5 million and $3.2 million, respectively, which were included as part of the selling, general and administrative expense in the consolidated statements of operations. |
Income Taxes | Income Taxes We account for income taxes in accordance with ASC 740, “Income Taxes.” Under ASC 740, 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, 2019 and 2018. As a result of a full valuation allowance against our deferred tax assets, a deferred tax liability related to goodwill remains on our consolidated balance sheet at December 31, 2019 and 2018. 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, 2019 and 2018. See additional information on tax reform and its impact on our income taxes in Note 9 – Income Taxes. We follow the provisions of ASC 740 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 | Goodwill We evaluate the impairment of goodwill 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”), Telos ID Enterprise Solutions, and Secure Communications Cyber and Enterprise Solutions, of which goodwill is housed in the CO&D reporting units, in comparison to the reporting unit’s net asset carrying values. Our discounted cash flows required management’s 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, 2019. 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. |
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 3,972,007 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, 2019, there were 951,337 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. |
Earnings (Loss) per Share | Earnings (Loss) per Share Basic net earnings (loss) per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods. Dilutive common stock equivalents are comprised of unvested restricted common stock and common stock warrants. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive. On November 12, 2020, the Company effected a 0.794-for-1 reverse stock split of its common stock. The par value and the authorized shares of the common stock were not adjusted as a result of the reverse stock split. The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the reverse stock split for all periods presented. Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares): 2019 2018 2017 Unvested restricted stock 945 1,926 2,955 Common Stock Warrants, exercisable at $1.665/share 901 901 901 Total 1,846 2,827 3,856 |
Comprehensive Income | Comprehensive Loss Comprehensive loss includes changes in equity (net assets) during a period from non-owner sources. Our accumulated other comprehensive income (loss) was comprised of a loss from foreign currency translation of $101,000 and $90,000 as of December 31, 2019 and 2018, respectively; and actuarial gain on pension liability adjustments in Teloworks of $107,000 as of December 31, 2019 and 2018. |
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. 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 Adopted In February 2016, the FASB issued ASU 2016-02, “Leases (ASC Topic 842)”, which requires lessees to recognize a right-of-use asset and lease liability on the balance sheet and expands disclosures about leasing arrangements for both lessees and lessors, among other items, for most lease arrangements. The new standard is effective for fiscal years beginning after December 15, 2018, which made the new standard effective for us on January 1, 2019. In July 2018, the FASB issued ASU 2018-11, “Leases (ASC Topic 842): Targeted Improvements,” which allows for an additional transition method under the modified retrospective approach for the adoption of ASU 2016-02. The two permitted transition methods are (a) to apply the new lease requirements at the beginning of the earliest period presented (the Comparative Method) and (b) to apply the new lease requirements at the effective date (the Effective Date Method). Under both transition methods there is a cumulative effect adjustment. We adopted the standard on January 1, 2019 by applying the new lease requirements utilizing the Effective Date Method for all leases with terms greater than 12 months. We elected the package of practical expedients permitted under the transition guidance within the new standard, which included carrying forward historical assessments of: (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. The adoption of this standard resulted in the recognition of right-of-use assets of $2.0 million and additional lease liabilities of $2.0 million as of January 1, 2019. The adoption of the standard did not have a material impact on our operating results or cash flows. The comparative periods have not been restated for the adoption of ASU 2016-02. Recent Accounting Pronouncements Not Yet Adopted 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. This 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 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 that 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 August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement”, which modifies the disclosure requirement for fair value measurement under ASC 820 to improve the effectiveness of such disclosures. Those modifications include the removal and addition of disclosure requirements as well as clarifying specific disclosure requirements. This standard will be effective for interim and annual reporting periods beginning after December 15, 2019, 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 August 2018, the FASB issued ASU 2018-15, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This standard will be effective for interim and annual reporting periods beginning after December 15, 2019, 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 Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Summary of Significant Accounting Policies [Abstract] | |
Disaggregation of Revenue | We have one reportable segment. We treat sales to U.S. customers as sales within the U.S. regardless of where the services are performed. Substantially all of our revenues are from U.S. customers as revenue derived from international customers is de minimus. The following tables disclose revenue (in thousands) by customer type and contract type for the periods presented. Prior period amounts have not been adjusted under the modified retrospective method. 2019 2018 2017 Federal $ 149,257 $ 129,279 $ 101,519 State & Local, and Commercial 9,961 8,737 6,208 Total $ 159,218 $ 138,016 $ 107,727 2019 2018 2017 Firm fixed-price $ 131,629 $ 103,454 $ 89,516 Time-and-materials 14,569 16,795 10,222 Cost plus fixed fee 13,020 17,767 7,989 Total $ 159,218 $ 138,016 $ 107,727 |
Contract Assets and Liabilities | The following table discloses accounts receivable and contract assets (in thousands): December 31, 2019 2018 Billed accounts receivable $ 11,917 $ 18,848 Unbilled receivables 16,745 16,000 Allowance for doubtful accounts (720 ) (306 ) Receivables – net $ 27,942 $ 34,542 The following table discloses contract liabilities (in thousands): December 31, 2019 2018 Contract liabilities $ 6,337 $ 5,232 |
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, 2019 $ 520 $ 376 $ (36 ) $ 860 Year Ended December 31, 2018 $ 1,484 $ 30 $ (994 ) $ 520 Year Ended December 31, 2017 $ 1,672 $ 73 $ (261 ) $ 1,484 |
Property and Equipment Useful Lives | Property and equipment is recorded at cost. Depreciation is provided using the straight-line method at rates based on the estimated useful lives of the individual assets or classes of assets as follows: Furniture and equipment 3-5 Years Leasehold improvements Lesser of life of lease or useful life of asset Property and equipment under finance leases Lesser of life of lease or useful life of asset |
Potentially Dilutive Securities not Included in Calculation of Diluted Net Loss per share | Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares): 2019 2018 2017 Unvested restricted stock 945 1,926 2,955 Common Stock Warrants, exercisable at $1.665/share 901 901 901 Total 1,846 2,827 3,856 |
Non-controlling Interests (Tabl
Non-controlling Interests (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019, 2018, and 2017 (in thousands): 2019 2018 2017 Non-controlling interest, beginning of period $ 2,621 $ 913 $ 2,229 Net income 4,264 3,377 2,335 Distributions (2,371 ) (1,669 ) (3,651 ) Non-controlling interest, end of period $ 4,514 $ 2,621 $ 913 |
Revenue and Accounts Receivab_2
Revenue and Accounts Receivable (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Revenue and Accounts Receivable [Abstract] | |
Accounts Receivable Components | The components of accounts receivable are as follows (in thousands): December 31, 2019 2018 Billed accounts receivable $ 11,917 $ 18,848 Unbilled receivables 16,745 16,000 Allowance for doubtful accounts (720 ) (306 ) Total $ 27,942 $ 34,542 |
Allowance for Doubtful Accounts | The activities in the allowance for doubtful accounts are set forth below (in thousands): Balance Beginning of Year Bad Debt Expenses (1) Recoveries (2) Balance End of Year Year ended December 31, 2019 $ 306 $ 414 $ -- $ 720 Year ended December 31, 2018 $ 411 $ (105 ) $ -- $ 306 Year ended December 31, 2017 $ 429 $ (18 ) $ -- $ 411 (1) Accounts receivable reserves and reversal of allowance for subsequent collections, net (2) Accounts receivable written-off and subsequent recoveries, net |
Revenue by Customer Sector | We derived a substantial portion 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: 2019 2018 2017 (dollar amounts in thousands) Federal $ 149,257 93.7 % $ 129,279 93.7 % $ 101,519 94.2 % State & Local, and Commercial 9,961 6.3 % 8,737 6.3 % 6,208 5.8 % Total $ 159,218 100.0 % $ 138,016 100.0 % $ 107,727 100.0 % |
Current Liabilities and Debt _2
Current Liabilities and Debt Obligations (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Current Liabilities and Debt Obligations [Abstract] | |
Carrying Amount of the Credit Agreement | The carrying amount of the Credit Agreement consisted of the following (in thousands): December 31, 2019 2018 Senior term loan principal, including exit fee $ 17,200 $ 11,825 Less: Unamortized discount, debt issuance costs, and lender fees (865 ) (841 ) Senior term loan, net $ 16,335 $ 10,984 We incurred interest expense in the amount of $2.2 million, $1.7 million and $1.5 million for the years ended December 31, 2019, 2018 and 2017, respectively, under the Credit Agreement. |
Stockholders' Deficit, Option_2
Stockholders' Deficit, Option Plans, and Employee Benefit Plan (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Stockholders' Deficit, Option Plans, and Employee Benefit Plan [Abstract] | |
Restricted Stock Activities | A summary of restricted stock activities for the years ended December 31, 2019, 2018 and 2017 is as follows: December 31, 2019 2018 2017 (number of shares) Outstanding at beginning of year 3,904,550 3,948,199 -- Granted -- -- 3,972,007 Forfeited (11,904 ) (43,648 ) (23,808 ) Outstanding at end of year 3,892,646 3,904,550 3,948,199 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Taxes [Abstract] | |
Provision (Benefit) for Income Taxes | The provision (benefit) for income taxes attributable to income from operations includes the following (in thousands): For the Years Ended December 31, 2019 2018 2017 Current provision (benefit) Federal $ 25 $ (29 ) $ (86 ) State 68 (17 ) 29 Total current 93 (46 ) (57 ) Deferred (benefit) provision Federal 88 15 (2,622 ) State (285 ) 62 (88 ) Total deferred (197 ) 77 (2,710 ) Total (benefit) provision $ (104 ) $ 31 $ (2,767 ) |
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, 2019 2018 2017 Computed expected income tax provision 21.0 % 21.0 % 34.0 % State income taxes, net of federal income tax benefit (0.2 ) (20.9 ) 0.9 Change in valuation allowance for deferred tax assets (8.5 ) 47.7 (26.9 ) Cumulative deferred adjustments (0.4 ) -- -- Provision to return adjustments 0.5 1.8 -- Other permanent differences (3.7 ) (12.2 ) (1.3 ) Dividend and accretion on preferred stock (12.3 ) (49.9 ) (15.2 ) FIN 48 liability (1.3 ) (4.6 ) (0.9 ) R&D credit 6.5 27.7 4.6 Impact of Tax Act -- (12.5 ) 35.5 Other -- -- 1.5 1.6 % (1.9 )% 32.2 % |
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, 2019 and 2018 are as follows (in thousands): December 31, 2019 2018 Deferred tax assets: Accounts receivable, principally due to allowance for doubtful accounts $ 185 $ 79 Allowance for inventory obsolescence and amortization 316 281 Accrued liabilities not currently deductible 1,649 1,634 Accrued compensation 1,655 1,206 Deferred rent 4,808 4,750 Section 163(j) interest limitation 804 246 Net operating loss carryforwards - federal 2,583 1,956 Net operating loss carryforwards - state 796 653 Federal tax credit 1,326 983 Total gross deferred tax assets 14,122 11,788 Less valuation allowance (7,206 ) (6,652 ) Total deferred tax assets, net of valuation allowance 6,916 5,136 Deferred tax liabilities: Amortization and depreciation (2,623 ) (2,237 ) Unbilled accounts receivable, deferred for tax purposes (1,611 ) (955 ) Goodwill basis adjustment and amortization (2,886 ) (2,713 ) Telos ID basis difference (417 ) (49 ) Total deferred tax liabilities (7,537 ) (5,954 ) Net deferred tax liabilities $ (621 ) $ (818 ) |
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, 2019 $ 6,652 $ 554 $ -- $ 7,206 December 31, 2018 $ 7,219 $ -- $ (567 ) $ 6,652 December 31, 2017 $ 10,499 $ -- $ (3,280 ) $ 7,219 |
Unrecognized Tax Benefits Roll Forward | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands): 2019 2018 2017 Unrecognized tax benefits, beginning of period $ 648 $ 677 $ 762 Gross decreases — tax positions in prior period (39 ) (63 ) (127 ) Gross increases — tax positions in current period 101 92 77 Settlements (37 ) (58 ) (35 ) Unrecognized tax benefits, end of period $ 673 $ 648 $ 677 |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments, Contingencies and Subsequent Events [Abstract] | |
Future Minimum Lease Commitments | Future minimum lease commitments at December 31, 2019 were as follows (in thousands): Operating Leases Finance Leases 2020 $ 710 $ 2,046 2021 715 2,097 2022 564 2,149 2023 368 2,203 2024 28 2,258 After 2024 -- 10,658 Total minimum lease payments 2,385 21,411 Less imputed interest (230 ) (4,546 ) Net present value of minimum lease payments 2,155 16,865 Less current portion (602 ) (1,224 ) Long-term lease obligations at December 31, 2019 $ 1,553 $ 15,641 |
Components of Lease Expense | The components of lease expense were as follows (in thousands): Year Ended December 31, 2019 Operating lease cost $ 597 Short-term lease cost (1) 147 Finance lease cost Amortization of finance lease assets 1,221 Interest on finance lease liabilities 881 Total finance lease cost 2,102 Total lease costs $ 2,846 (1) Leases that have terms of 12 months or less. |
Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information related to leases was as follows (in thousands): Year Ended December 31, 2019 Cash paid for amounts included in the measurement of lease liabilities: Cash flows from operating activities - operating leases $ 604 Cash flows from operating activities - finance leases $ 1,995 Operating lease right-of-use assets obtained in exchange for operating lease liabilities $ 488 |
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, 2019 $ 30 $ -- $ -- $ 30 Year Ended December 31, 2018 $ 30 $ -- $ -- $ 30 Year Ended December 31, 2017 $ 51 $ -- $ (21 ) $ 30 |
Summary of Selected Quarterly_2
Summary of Selected Quarterly Financial Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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 2019 Revenue $ 31,166 $ 36,048 $ 45,531 $ 46,473 Gross profit 8,976 10,015 16,313 17,040 (Loss) income before income taxes and non-controlling interest (3,137 ) (1,974 ) 3,708 (838 ) Net income (loss) attributable to Telos Corporation (1)(2) (3,413 ) (1,741 ) 2,233 (3,480 ) Weighted Average Common Shares Outstanding, Class A, Basic 33,912 34,438 34,869 34,869 Weighted Average Common Shares Outstanding, Class B, Basic 3,204 3,204 3,204 3,204 Weighted Average Common Shares Outstanding, Class A, Diluted 33,912 34,438 36,727 34,869 Weighted Average Common Shares Outstanding, Class B, Diluted 3,204 3,204 3,204 3,204 Earnings per Share, Class A - Basic (0.09 ) (0.05 ) 0.06 (0.09 ) Earnings per Share, Class B - Basic (0.09 ) (0.05 ) 0.06 (0.09 ) Earnings per Share, Class A - Diluted (0.09 ) (0.05 ) 0.06 (0.09 ) Earnings per Share, Class B - Diluted (0.09 ) (0.05 ) 0.06 (0.09 ) 2018 Revenue $ 32,401 $ 34,943 $ 34,695 $ 35,977 Gross profit 10,232 12,078 16,287 14,465 (Loss) income before income taxes and non-controlling interest (1,693 ) 450 4,722 (1,711 ) Net (loss) income attributable to Telos Corporation (1)(3) (1,986 ) (87 ) 4,113 (3,680 ) Weighted Average Common Shares Outstanding, Class A, Basic 32,927 33,468 33,912 33,912 Weighted Average Common Shares Outstanding, Class B, Basic 3,204 3,204 3,204 3,204 Weighted Average Common Shares Outstanding, Class A, Diluted 32,927 33,468 36,752 33,912 Weighted Average Common Shares Outstanding, Class B, Diluted 3,204 3,204 3,204 3,204 Earnings per Share, Class A - Basic (0.05 ) 0.00 0.11 (0.10 ) Earnings per Share, Class B - Basic (0.05 ) 0.00 0.11 (0.10 ) Earnings per Share, Class A - Diluted (0.05 ) 0.00 0.10 (0.10 ) Earnings per Share, Class B - Diluted (0.05 ) 0.00 0.10 (0.10 ) (1) Changes in net income are the result of several factors, including seasonality of the government year-end buying season, as well as the nature and timing of other deliverables. (2) Net income for the third quarter of 2019 is attributable to $2.6 million in proprietary software sales which carry lower cost of sales. (3) Net income for the third quarter of 2018 included $5.6 million of revenue accruals for multiple contracts as a result of several years of cumulative indirect rate adjustments which did not include direct costs in Secure Mobility and Network Management/Defense Enterprise solutions deliverables. |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||||
May 31, 2017shares | Dec. 31, 2019USD ($)$ / sharesshares | Sep. 30, 2019USD ($) | Jun. 30, 2019USD ($) | Mar. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2019USD ($)Segment$ / sharesshares | Dec. 31, 2018USD ($)shares | Dec. 31, 2017USD ($)shares | Dec. 31, 2016USD ($) | |
Segment Reporting [Abstract] | |||||||||||||
Number of reportable segments | Segment | 1 | ||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||
Revenue recognized included in opening contract liabilities | $ 4,200,000 | $ 5,500,000 | |||||||||||
Disaggregation of Revenue [Abstract] | |||||||||||||
Revenue | $ 46,473,000 | $ 45,531,000 | $ 36,048,000 | $ 31,166,000 | $ 35,977,000 | $ 34,695,000 | $ 34,943,000 | $ 32,401,000 | 159,218,000 | 138,016,000 | $ 107,727,000 | ||
Components of Contract Receivables [Abstract] | |||||||||||||
Billed accounts receivable | 11,917,000 | 18,848,000 | 11,917,000 | 18,848,000 | |||||||||
Unbilled receivables | 16,745,000 | 16,000,000 | 16,745,000 | 16,000,000 | |||||||||
Allowance for doubtful accounts | (720,000) | (306,000) | (720,000) | (306,000) | (411,000) | $ (429,000) | |||||||
Receivables - net | 27,942,000 | 34,542,000 | 27,942,000 | 34,542,000 | |||||||||
Components of Contract Liabilities [Abstract] | |||||||||||||
Contract liabilities | 6,337,000 | 5,232,000 | 6,337,000 | 5,232,000 | |||||||||
Revenue, Performance Obligation [Abstract] | |||||||||||||
Remaining performance obligation | 112,400,000 | 79,300,000 | 112,400,000 | 79,300,000 | |||||||||
Inventories [Abstract] | |||||||||||||
Gross inventory | 2,800,000 | 4,900,000 | 2,800,000 | 4,900,000 | |||||||||
Allowance for Obsolescent Inventory [Roll Forward] | |||||||||||||
Balance Beginning of Year | $ 520,000 | $ 1,484,000 | 520,000 | 1,484,000 | 1,672,000 | ||||||||
Additions Charge to Costs and Expense | 376,000 | 30,000 | 73,000 | ||||||||||
Deductions | (36,000) | (994,000) | (261,000) | ||||||||||
Balance End of Year | 860,000 | 520,000 | $ 860,000 | 520,000 | 1,484,000 | ||||||||
Property and Equipment [Abstract] | |||||||||||||
Software development estimated useful life | 2 years | ||||||||||||
Depreciation and amortization, including capital leases | $ 5,000,000 | 3,000,000 | 2,000,000 | ||||||||||
Research and Development [Abstract] | |||||||||||||
Capitalized software development costs | 5,600,000 | 3,100,000 | 5,600,000 | 3,100,000 | |||||||||
Amortization expense | 1,800,000 | 1,100,000 | |||||||||||
Accumulated amortization | $ 3,100,000 | $ 1,300,000 | 3,100,000 | 1,300,000 | |||||||||
Salary costs associated with research and development | $ 4,200,000 | $ 3,500,000 | $ 3,200,000 | ||||||||||
Goodwill [Abstract] | |||||||||||||
Goodwill amortization period for income tax purposes | 15 years | ||||||||||||
Restricted Stock Grants [Abstract] | |||||||||||||
Restricted stock issued during the period (in shares) | shares | 3,972,007 | 0 | 0 | 3,972,007 | |||||||||
Restricted stock remained subject to vesting (in shares) | shares | 951,337 | 951,337 | |||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Abstract] | |||||||||||||
Antidilutive securities excluded from computation of earnings per share (in shares) | shares | 1,846,000 | 2,827,000 | 3,856,000 | ||||||||||
Warrants exercise price (in dollars per share) | $ / shares | $ 1.665 | $ 1.665 | |||||||||||
Earnings Per Share, Pro Forma [Abstract] | |||||||||||||
Common stock conversion ratio | 0.794 | ||||||||||||
Comprehensive Income [Abstract] | |||||||||||||
Foreign currency translation | $ 101,000 | $ 90,000 | |||||||||||
Gain on pension liability adjustment | 107,000 | 107,000 | |||||||||||
ASC 606 [Member] | |||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||
Revenue accruals for multiple contracts as a result of cumulative indirect rate adjustments | 6,000,000 | ||||||||||||
Firm Fixed-Price [Member] | |||||||||||||
Disaggregation of Revenue [Abstract] | |||||||||||||
Revenue | 131,629,000 | 103,454,000 | $ 89,516,000 | ||||||||||
Time-and-Materials [Member] | |||||||||||||
Disaggregation of Revenue [Abstract] | |||||||||||||
Revenue | 14,569,000 | 16,795,000 | 10,222,000 | ||||||||||
Cost Plus Fixed Fee [Member] | |||||||||||||
Disaggregation of Revenue [Abstract] | |||||||||||||
Revenue | $ 13,020,000 | 17,767,000 | 7,989,000 | ||||||||||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | |||||||||||||
Revenue, Performance Obligation [Abstract] | |||||||||||||
Remaining performance obligation percentage | 98.40% | 98.40% | |||||||||||
Remaining performance obligation, expected timing of satisfaction, period | 1 year | 1 year | |||||||||||
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | |||||||||||||
Revenue, Performance Obligation [Abstract] | |||||||||||||
Remaining performance obligation percentage | 1.10% | 1.10% | |||||||||||
Remaining performance obligation, expected timing of satisfaction, period | 2 years | 2 years | |||||||||||
Furniture and Equipment [Member] | Minimum [Member] | |||||||||||||
Property and Equipment [Abstract] | |||||||||||||
Software development estimated useful life | 3 years | ||||||||||||
Furniture and Equipment [Member] | Maximum [Member] | |||||||||||||
Property and Equipment [Abstract] | |||||||||||||
Software development estimated useful life | 5 years | ||||||||||||
Federal [Member] | |||||||||||||
Disaggregation of Revenue [Abstract] | |||||||||||||
Revenue | $ 149,257,000 | 129,279,000 | 101,519,000 | ||||||||||
State & Local, and Commercial [Member] | |||||||||||||
Disaggregation of Revenue [Abstract] | |||||||||||||
Revenue | $ 9,961,000 | $ 8,737,000 | $ 6,208,000 | ||||||||||
Telos ID [Member] | |||||||||||||
Business and Organization [Abstract] | |||||||||||||
Percentage of ownership | 50.00% | 50.00% | |||||||||||
Teloworks [Member] | |||||||||||||
Business and Organization [Abstract] | |||||||||||||
Percentage of ownership | 100.00% | 100.00% | |||||||||||
Unvested Restricted Stock [Member] | |||||||||||||
Restricted Stock Grants [Abstract] | |||||||||||||
Restricted stock vested on date of grant | 25.00% | ||||||||||||
Restricted stock vest on anniversary of the date of grant | 25.00% | ||||||||||||
Unvested Restricted Stock [Member] | |||||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Abstract] | |||||||||||||
Antidilutive securities excluded from computation of earnings per share (in shares) | shares | 945,000 | 1,926,000 | 2,955,000 | ||||||||||
Common Stock Warrants [Member] | |||||||||||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Abstract] | |||||||||||||
Antidilutive securities excluded from computation of earnings per share (in shares) | shares | 901,000 | 901,000 | 901,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies, Recent Accounting Pronouncements (FY) (Details) - USD ($) $ in Thousands | Dec. 31, 2019 | Dec. 31, 2018 |
Recent Accounting Pronouncements [Abstract] | ||
Operating lease right-of-use assets | $ 1,979 | $ 0 |
Operating lease liabilities | 2,155 | |
ASU 2016-02 [Member] | ||
Recent Accounting Pronouncements [Abstract] | ||
Operating lease right-of-use assets | 2,000 | |
Operating lease liabilities | $ 2,000 |
Non-controlling Interests (Deta
Non-controlling Interests (Details) | Dec. 24, 2014USD ($)DirectorClass | Apr. 20, 2007USD ($) | Apr. 30, 2007Director | Apr. 19, 2007 | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Apr. 11, 2007USD ($) |
Net book value of assets [Abstract] | ||||||||
Net (loss) income | $ (2,137,000) | $ 1,737,000 | $ (3,498,000) | |||||
Changes in non-controlling interest [Abstract] | ||||||||
Non-controlling interest, beginning of period | 2,621,000 | 913,000 | 2,229,000 | |||||
Net income | 4,264,000 | 3,377,000 | 2,335,000 | |||||
Distributions | (2,371,000) | (1,669,000) | (3,651,000) | |||||
Non-controlling interest, end of period | 4,514,000 | 2,621,000 | 913,000 | |||||
Class A Membership Unit [Member] | ||||||||
Net book value of assets [Abstract] | ||||||||
Net (loss) income | $ 4,300,000 | $ 3,400,000 | $ 2,300,000 | |||||
Telos ID [Member] | ||||||||
Net book value of assets [Abstract] | ||||||||
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 | 10.00% | 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 classes of membership units | Class | 2 | |||||||
Telos ID [Member] | Class A Membership Unit [Member] | ||||||||
Net book value of assets [Abstract] | ||||||||
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] | ||||||||
Net book value of assets [Abstract] | ||||||||
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 (Details)
Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill [Abstract] | ||
Goodwill | $ 14,916 | $ 14,916 |
Asset impairment charges | 0 | |
Other Intangible Assets [Abstract] | ||
Cost | 11,286 | 11,286 |
Accumulated Amortization | 11,286 | 10,157 |
Other Intangible Assets [Member] | ||
Other Intangible Assets [Abstract] | ||
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, 2019 | Dec. 31, 2017 | Dec. 31, 1991 | Dec. 31, 2018 | Apr. 18, 2017 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Abstract] | |||||
Redemption amount of senior redeemable preferred stock | $ 2.1 | ||||
Preferred stock dividend rate per annum | 12.00% | ||||
Public Preferred Stock [Member] | |||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Abstract] | |||||
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 | $ 139.2 | $ 135.4 | |||
Estimate of Fair Value, Fair Value Disclosure [Member] | Public Preferred Stock [Member] | |||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Abstract] | |||||
Public preferred stock | $ 60.5 | $ 41.4 |
Revenue and Accounts Receivab_3
Revenue and Accounts Receivable (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2019 | Dec. 31, 2018 | ||
Accounts Receivable [Line Items] | ||||||||||||||
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 | 12,600 | $ 18,100 | ||||||||||||
Loss recognized in selling, general and administrative expenses | 100 | |||||||||||||
Balance of sold receivables | $ 0 | $ 900 | ||||||||||||
Deferred price related to sold receivables | 100 | |||||||||||||
Components of Accounts Receivable [Abstract] | ||||||||||||||
Billed accounts receivable | 11,917 | 18,848 | ||||||||||||
Unbilled receivables | 16,745 | 16,000 | ||||||||||||
Allowance for doubtful accounts | $ (720) | $ (306) | $ (306) | $ (411) | (306) | (411) | $ (429) | (720) | (306) | |||||
Total accounts receivable | $ 27,942 | $ 34,542 | ||||||||||||
Activities in Allowance for Doubtful Accounts [Roll Forward] | ||||||||||||||
Balance Beginning of Year | 306 | 411 | 306 | 411 | 429 | |||||||||
Bad Debt Expenses | [1] | 414 | (105) | (18) | ||||||||||
Deductions | [2] | 0 | 0 | 0 | ||||||||||
Balance End of Year | 720 | 306 | 720 | 306 | 411 | |||||||||
Revenue by Customer Sector [Abstract] | ||||||||||||||
Revenue | $ 46,473 | $ 45,531 | $ 36,048 | $ 31,166 | $ 35,977 | $ 34,695 | $ 34,943 | $ 32,401 | $ 159,218 | $ 138,016 | $ 107,727 | |||
Revenue from Contracts and Subcontracts [Member] | ||||||||||||||
Accounts Receivable [Line Items] | ||||||||||||||
Concentration risk percentage | 100.00% | 100.00% | 100.00% | |||||||||||
Revenue by Customer Sector [Abstract] | ||||||||||||||
Revenue | $ 159,218 | $ 138,016 | $ 107,727 | |||||||||||
Federal [Member] | ||||||||||||||
Revenue by Customer Sector [Abstract] | ||||||||||||||
Revenue | $ 149,257 | $ 129,279 | $ 101,519 | |||||||||||
Federal [Member] | Revenue from Contracts and Subcontracts [Member] | ||||||||||||||
Accounts Receivable [Line Items] | ||||||||||||||
Concentration risk percentage | 93.70% | 93.70% | 94.20% | |||||||||||
Revenue by Customer Sector [Abstract] | ||||||||||||||
Revenue | $ 149,257 | $ 129,279 | $ 101,519 | |||||||||||
Federal [Member] | Accounts Receivable [Member] | ||||||||||||||
Accounts Receivable [Line Items] | ||||||||||||||
Concentration risk percentage | 92.70% | |||||||||||||
State & Local, and Commercial [Member] | ||||||||||||||
Revenue by Customer Sector [Abstract] | ||||||||||||||
Revenue | $ 9,961 | $ 8,737 | $ 6,208 | |||||||||||
State & Local, and Commercial [Member] | Revenue from Contracts and Subcontracts [Member] | ||||||||||||||
Accounts Receivable [Line Items] | ||||||||||||||
Concentration risk percentage | 6.30% | 6.30% | 5.80% | |||||||||||
Revenue by Customer Sector [Abstract] | ||||||||||||||
Revenue | $ 9,961 | $ 8,737 | $ 6,208 | |||||||||||
[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 _3
Current Liabilities and Debt Obligations, Enlightenment Capital Credit Agreement (FY) (Details) | Mar. 26, 2020USD ($)Extension | Jul. 19, 2019USD ($) | Jul. 18, 2019USD ($) | Mar. 31, 2018shares | Jan. 25, 2017USD ($)$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2018USD ($)$ / shares | Dec. 31, 2017USD ($) | Apr. 18, 2017USD ($) |
Accounts Payable and Other Accrued Payables [Abstract] | |||||||||
Trade account payables | $ 13,500,000 | $ 18,500,000 | |||||||
Accrued trade payables | $ 1,500,000 | 3,300,000 | |||||||
Enlightenment Capital Credit Agreement [Abstract] | |||||||||
Warrants exercise price (in dollars per share) | $ / shares | $ 1.665 | ||||||||
Long-term Debt [Abstract] | |||||||||
Senior term loan principal, including exit fee | $ 17,200,000 | 11,825,000 | |||||||
Less: Unamortized discount, debt issuance costs, and lender fees | (865,000) | (841,000) | |||||||
Senior term loan, net | 16,335,000 | 10,984,000 | |||||||
Subsequent Events [Member] | |||||||||
Long-term Debt [Abstract] | |||||||||
Number of quarterly maturity date extensions | Extension | 4 | ||||||||
Amount of increase in quarterly exit fee payable | $ 250,000 | ||||||||
Amount of increase in exit fee payable | 1,000,000 | ||||||||
Amendment fee and out-of-pocket costs and expenses | $ 100,000 | ||||||||
Credit Agreement [Member] | |||||||||
Enlightenment Capital Credit Agreement [Abstract] | |||||||||
Credit agreement exit fee | $ 825,000 | ||||||||
Effective interest rate | 15.00% | ||||||||
Credit agreement transaction costs | $ 374,000 | ||||||||
Long-term Debt [Abstract] | |||||||||
Interest expense | 2,200,000 | $ 1,700,000 | $ 1,500,000 | ||||||
Exit fee | $ 825,000 | ||||||||
Class A Common Stock [Member] | |||||||||
Enlightenment Capital Credit Agreement [Abstract] | |||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0 | $ 0 | |||||||
Porter [Member] | |||||||||
Enlightenment Capital Credit Agreement [Abstract] | |||||||||
Maturity date | Jul. 25, 2022 | Jul. 1, 2017 | |||||||
Aggregate redemption price | $ 2,112,000 | ||||||||
Enlightenment Capital Solutions Fund II LP [Member] | |||||||||
Enlightenment Capital Credit Agreement [Abstract] | |||||||||
Senior term loan | $ 16,000,000 | ||||||||
Maturity date | Jan. 15, 2021 | Jan. 25, 2022 | |||||||
Credit agreement exit fee | $ 1,200,000 | $ 825,000 | |||||||
Effective interest rate | 17.30% | ||||||||
Long-term Debt [Abstract] | |||||||||
Additional borrowings | $ 5,000,000 | ||||||||
Principal amount | $ 16,000,000 | ||||||||
Prepayment price percentage for January 26, 2019 to January 25, 2020 | 102.00% | ||||||||
Prepayment price percentage for January 26, 2020 to October 14, 2020 | 101.00% | ||||||||
Agent fee | $ 110,000 | ||||||||
Exit fee | $ 1,200,000 | $ 825,000 | |||||||
Enlightenment Capital Solutions Fund II LP [Member] | Class A Common Stock [Member] | |||||||||
Enlightenment Capital Credit Agreement [Abstract] | |||||||||
Warrants issued to purchase shares of common stock (in shares) | shares | 900,970.463 | ||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0 | ||||||||
Percentage of warrants issued of common equity interests | 2.50% | ||||||||
Warrants exercise price (in dollars per share) | $ / shares | $ 1.665 | ||||||||
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) | shares | 39,680 | 810,000 | |||||||
Term loan [Member] | Porter [Member] | |||||||||
Enlightenment Capital Credit Agreement [Abstract] | |||||||||
Increase in interest rate | 1.00% | ||||||||
Term loan [Member] | Enlightenment Capital Solutions Fund II LP [Member] | |||||||||
Enlightenment Capital Credit Agreement [Abstract] | |||||||||
Senior term loan | $ 11,000,000 | ||||||||
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] | |||||||||
Principal amount | $ 11,000,000 | ||||||||
Term loan [Member] | Enlightenment Capital Solutions Fund II LP [Member] | Minimum [Member] | |||||||||
Enlightenment Capital Credit Agreement [Abstract] | |||||||||
Monthly accrued interest rate | 10.00% |
Current Liabilities and Debt _4
Current Liabilities and Debt Obligations, Accounts Receivable Purchase Agreement & Financing and Security Agreement (FY) (Details) - USD ($) $ in Millions | Jul. 15, 2016 | Dec. 31, 2019 | Sep. 06, 2016 |
Republic Capital Access LLC [Member] | Accounts Receivable Purchase Agreement [Member] | |||
Accounts Receivable Purchase Agreement [Abstract] | |||
Limit of outstanding purchased receivables | $ 10 | ||
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% | ||
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% | ||
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 | ||
Financing agreement term | 2 years |
Current Liabilities and Debt _5
Current Liabilities and Debt Obligations, Subordinated Debt (FY) (Details) - USD ($) | Mar. 31, 2015 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2015 |
Subordinated Debt [Abstract] | |||||
Debt instrument, fixed interest rate | 12.00% | ||||
Gain on extinguishment of subordinated debt | $ 0 | $ 0 | $ 1,031,000 | ||
Interest expense, related party | 292,000 | ||||
Porter [Member] | |||||
Subordinated Debt [Abstract] | |||||
Related party ownership percentage | 35.00% | ||||
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 | 330,000 | $ 308,000 | $ 292,000 | ||
Accrued interest payable | $ 1,100,000 |
Redeemable Preferred Stock (Det
Redeemable Preferred Stock (Details) | Nov. 30, 1998shares | Jun. 30, 2006USD ($) | Dec. 31, 2019USD ($)$ / sharesshares | Dec. 31, 2018USD ($)$ / shares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 1991$ / sharesshares | Dec. 31, 1990Trancheshares | Apr. 18, 2017USD ($) |
Preferred stock [Abstract] | ||||||||
Preferred stock dividend rate per annum | 12.00% | |||||||
Senior Redeemable Preferred Stock [Abstract] | ||||||||
Redemption amount of senior redeemable preferred stock | $ | $ 2,100,000 | |||||||
Public Preferred Stock [Member] | ||||||||
Preferred stock [Abstract] | ||||||||
Preferred stock authorized (in shares) | 6,000,000 | |||||||
Preferred stock par value (in dollars per share) | $ / shares | $ 0.01 | |||||||
Preferred stock dividend rate per annum | 12.00% | 6.00% | ||||||
Dividends Payable | $ | $ 107,400,000 | $ 103,500,000 | ||||||
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] | ||||||||
Preferred stock [Abstract] | ||||||||
Preferred stock authorized (in shares) | 1,250 | |||||||
Preferred stock par value (in dollars per share) | $ / shares | $ 0.01 | |||||||
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-2 Preferred Stock [Member] | ||||||||
Preferred stock [Abstract] | ||||||||
Preferred stock authorized (in shares) | 1,750 | |||||||
Senior Redeemable Preferred Stock [Member] | ||||||||
Senior Redeemable Preferred Stock [Abstract] | ||||||||
Accrued dividends reported as interest expenses | $ | $ 0 | $ 0 | $ 20,000 |
Stockholders' Deficit, Option_3
Stockholders' Deficit, Option Plans, and Employee Benefit Plan (Details) | 1 Months Ended | 12 Months Ended | ||
May 31, 2017shares | Dec. 31, 2019USD ($)Voteshares | Dec. 31, 2018USD ($)shares | Dec. 31, 2017USD ($)shares | |
Common Stock [Abstract] | ||||
Number of votes per share | Vote | 1 | |||
Restricted Stock Grants [Rollforward] | ||||
Outstanding at beginning of year (in shares) | 3,904,550 | 3,948,199 | 0 | |
Granted | 3,972,007 | 0 | 0 | 3,972,007 |
Forfeited | (11,904) | (43,648) | (23,808) | |
Outstanding at end of year (in shares) | 3,892,646 | 3,904,550 | 3,948,199 | |
Restricted stock remained subject to vesting (in shares) | 951,337 | |||
Telos Shared Savings Plan [Abstract] | ||||
Shares held in defined contribution employee savings plan (in shares) | 2,903,443 | |||
Maximum contribution percentage | 2.00% | |||
Annual vesting percentage | 20.00% | |||
Vesting period of stock options | 5 years | |||
Contributions to the Plan | $ | $ 861,000 | $ 721,000 | $ 617,000 | |
Telos ID [Member] | ||||
Telos Shared Savings Plan [Abstract] | ||||
Maximum contribution percentage | 2.00% | |||
Contributions to the Plan | $ | $ 151,000 | $ 125,000 | $ 105,000 | |
Unvested Restricted Stock [Member] | ||||
Restricted Stock Grants [Rollforward] | ||||
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, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Current provision [Abstract] | |||
Federal | $ 25,000 | $ (29,000) | $ (86,000) |
State | 68,000 | (17,000) | 29,000 |
Total current | 93,000 | (46,000) | (57,000) |
Deferred provision (benefit) [Abstract] | |||
Federal | 88,000 | 15,000 | (2,622,000) |
State | (285,000) | 62,000 | (88,000) |
Total deferred | (197,000) | 77,000 | (2,710,000) |
Total (benefit) provision | $ (104,000) | $ 31,000 | $ (2,767,000) |
Reconciliation of effective tax rate [Abstract] | |||
U.S. federal corporate tax rate | 21.00% | 21.00% | 34.00% |
State income taxes, net of federal income tax benefit | (0.20%) | (20.90%) | 0.90% |
Change in valuation allowance for deferred tax assets, exclusive of impact of Tax Act | (8.50%) | 47.70% | (26.90%) |
Cumulative deferred adjustments | (0.40%) | 0.00% | 0.00% |
Provision to return adjustments | 0.50% | 1.80% | 0.00% |
Other permanent differences | (3.70%) | (12.20%) | (1.30%) |
Dividend and accretion on preferred stock | (12.30%) | (49.90%) | (15.20%) |
FIN 48 liability | (1.30%) | (4.60%) | (0.90%) |
R&D credit | 6.50% | 27.70% | 4.60% |
Impact of Tax Act | 0 | (0.125) | 0.355 |
Other | 0.00% | 0.00% | 1.50% |
Effective income tax rate | 1.60% | (1.90%) | 32.20% |
Deferred tax assets [Abstract] | |||
Accounts receivable, principally due to allowance for doubtful accounts | $ 185,000 | $ 79,000 | |
Allowance for inventory obsolescence and amortization | 316,000 | 281,000 | |
Accrued liabilities not currently deductible | 1,649,000 | 1,634,000 | |
Accrued compensation | 1,655,000 | 1,206,000 | |
Deferred rent | 4,808,000 | 4,750,000 | |
Section 163(j) interest limitation | 804,000 | 246,000 | |
Net operating loss carryforwards - federal | 2,583,000 | 1,956,000 | |
Net operating loss carryforwards - state | 796,000 | 653,000 | |
Federal tax credit | 1,326,000 | 983,000 | |
Total gross deferred tax assets | 14,122,000 | 11,788,000 | |
Less valuation allowance | (7,206,000) | (6,652,000) | |
Total deferred tax assets, net of valuation allowance | 6,916,000 | 5,136,000 | |
Deferred tax liabilities [Abstract] | |||
Amortization and depreciation | (2,623,000) | (2,237,000) | |
Unbilled accounts receivable, deferred for tax purposes | (1,611,000) | (955,000) | |
Goodwill basis adjustment and amortization | (2,886,000) | (2,713,000) | |
Telos ID basis difference | (417,000) | (49,000) | |
Total deferred tax liabilities | (7,537,000) | (5,954,000) | |
Net deferred tax liabilities | (621,000) | (818,000) | |
Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Decrease in deferred tax liabilities | (3,000,000) | ||
Operating loss carryforwards | 12,400,000 | ||
Alternate minimum tax credit carryforwards | 60,000 | ||
Unrecognized tax benefits [Roll Forward] | |||
Unrecognized tax benefits, beginning of period | 648,000 | 677,000 | $ 762,000 |
Gross decreases-tax positions in prior period | (39,000) | (63,000) | (127,000) |
Gross increases-tax positions in current period | 101,000 | 92,000 | 77,000 |
Settlements | (37,000) | (58,000) | (35,000) |
Unrecognized tax benefits, end of period | 673,000 | 648,000 | 677,000 |
Interest and penalties | 304,000 | 278,000 | |
Valuation Allowance of Deferred Tax Assets [Member] | |||
Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Balance Beginning of Period | 6,652,000 | 7,219,000 | 10,499,000 |
Additions | 554,000 | 0 | 0 |
Deductions | 0 | (567,000) | (3,280,000) |
Balance End of Period | $ 7,206,000 | $ 6,652,000 | $ 7,219,000 |
Commitments (Details)
Commitments (Details) - USD ($) $ in Thousands | 12 Months Ended | ||||||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 1996 | ||
Weighted Average Remaining Lease Term [Abstract] | |||||||
Operating leases | 3 years 6 months | ||||||
Finance leases | 9 years 3 months 18 days | ||||||
Weighted Average Discount Rate [Abstract] | |||||||
Operating leases | 5.75% | ||||||
Finance leases | 5.04% | ||||||
Operating Leases, Right-of-Use Assets and Lease Liabilities [Abstract] | |||||||
Right-of-use asset | $ 1,979 | $ 0 | |||||
Capital Lease Obligations [Abstract] | |||||||
Term of lease | 15 years | ||||||
Capital leased property | 30,792 | 30,832 | |||||
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 | ||||||
Future Minimum Lease Commitments [Abstract] | |||||||
2020 | 710 | ||||||
2021 | 715 | ||||||
2022 | 564 | ||||||
2023 | 368 | ||||||
2024 | 28 | ||||||
After 2024 | 0 | ||||||
Total lease payments | 2,385 | ||||||
Less imputed interest | (230) | ||||||
Total | 2,155 | ||||||
Less current portion | (602) | ||||||
Long-term lease obligations, Operating leases | 1,553 | 0 | |||||
Finance Lease Liabilities, Payments, Due [Abstract] | |||||||
2020 | 2,046 | ||||||
2021 | 2,097 | ||||||
2022 | 2,149 | ||||||
2023 | 2,203 | ||||||
2024 | 2,258 | ||||||
After 2024 | 10,658 | ||||||
Total lease payments | 21,411 | ||||||
Less imputed interest | (4,546) | ||||||
Total | 16,865 | ||||||
Less current portion | (1,224) | ||||||
Long-term lease obligations, Finance leases | 15,641 | ||||||
Lease, Cost [Abstract] | |||||||
Operating lease cost | 597 | ||||||
Short-term lease cost | [1] | 147 | |||||
Finance Lease Costs [Abstract] | |||||||
Amortization of finance lease assets | 1,221 | ||||||
Interest on finance lease liabilities | 881 | ||||||
Total finance lease cost | 2,102 | ||||||
Total lease costs | 2,846 | ||||||
Cash paid for amounts included in the measurement of lease liabilities: [Abstract] | |||||||
Cash flows from operating activities - operating leases | 604 | ||||||
Cash flows from operating activities - finance leases | 1,995 | ||||||
Operating lease right-of-use assets obtained in exchange for operating lease liabilities | 488 | ||||||
Rent expense charged to operations | 1,100 | 1,600 | $ 1,600 | ||||
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward] | |||||||
Balance Beginning of Year | 30 | 30 | 51 | ||||
Accruals | 0 | 0 | 0 | ||||
Warranty Expenses | 0 | 0 | (21) | ||||
Balance End of Year | $ 30 | 30 | $ 30 | ||||
Capital Lease Obligations [Member] | |||||||
Capital Lease Obligations [Abstract] | |||||||
Annual rent increase percentage | 2.50% | ||||||
Accumulated amortization for property and equipment under capital leases | $ 18,700 | $ 17,500 | |||||
Property [Member] | Capital Lease Obligations [Member] | |||||||
Capital Lease Obligations [Abstract] | |||||||
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 | ||||||
[1] | Leases that have terms of 12 months or less. |
Certain Relationships and Rel_2
Certain Relationships and Related Transactions (Details) - USD ($) | 12 Months Ended | ||||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2018 | Apr. 18, 2017 | |
Related party transactions compensation [Abstract] | |||||
Gain on extinguishment of debt | $ 0 | $ 0 | $ 1,031,000 | ||
Interest expense, related party | 292,000 | ||||
Debt instrument, fixed interest rate | 12.00% | ||||
Emmett Wood [Member] | |||||
Related party transactions compensation [Abstract] | |||||
Compensation to related parties | $ 529,000 | $ 552,000 | $ 570,000 | ||
Emmett Wood [Member] | Class A Common Stock [Member] | |||||
Related party transactions compensation [Abstract] | |||||
Number of shares held by related party (in shares) | 810,000 | 39,680 | |||
Emmett Wood [Member] | Class B Common Stock [Member] | |||||
Related party transactions compensation [Abstract] | |||||
Number of shares held by related party (in shares) | 50,000 | ||||
Porter [Member] | |||||
Related party transactions compensation [Abstract] | |||||
Common stock held by related parties | 35.00% | ||||
Accrued interest payable | $ 1,100,000 | ||||
Gain on extinguishment of debt | 1,000,000 | ||||
Proceeds from related party, debt | 2,500,000 | ||||
Interest expense, related party | $ 330,000 | $ 308,000 | |||
Debt instrument, fixed interest rate | 6.00% | ||||
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 transactions compensation [Abstract] | |||||
Number of senior redeemable preferred stock redeemed by the Company (in shares) | 163 | ||||
Porter [Member] | Series A-2 Redeemable Preferred Stock [Member] | |||||
Related party transactions compensation [Abstract] | |||||
Number of senior redeemable preferred stock redeemed by the Company (in shares) | 228 |
Summary of Selected Quarterly_3
Summary of Selected Quarterly Financial Data (Unaudited) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||||||||||
Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |||||||||
Quarterly Financial Data [Abstract] | |||||||||||||||||||
Revenue | $ 46,473 | $ 45,531 | $ 36,048 | $ 31,166 | $ 35,977 | $ 34,695 | $ 34,943 | $ 32,401 | $ 159,218 | $ 138,016 | $ 107,727 | ||||||||
Gross profit | 17,040 | 16,313 | 10,015 | 8,976 | 14,465 | 16,287 | 12,078 | 10,232 | |||||||||||
Loss income before income taxes and non-controlling interest | (838) | 3,708 | (1,974) | (3,137) | (1,711) | 4,722 | 450 | (1,693) | (2,241) | 1,768 | (6,265) | ||||||||
Net (loss) income attributable to Telos Corporation (1)(2) | $ (3,480) | [1] | $ 2,233 | [1],[2] | $ (1,741) | [1] | $ (3,413) | [1] | $ (3,680) | [1] | $ 4,113 | [1],[3] | $ (87) | [1] | $ (1,986) | [1] | $ (6,401) | $ (1,640) | $ (5,833) |
Common Class A [Member] | |||||||||||||||||||
Quarterly Financial Data [Abstract] | |||||||||||||||||||
Weighted-average shares of stock outstanding, basic (in shares) | 34,869 | 34,869 | 34,438 | 33,912 | 33,912 | 33,912 | 33,468 | 32,927 | |||||||||||
Weighted-average shares of stock outstanding, diluted (in dollars per share) | 34,869 | 36,727 | 34,438 | 33,912 | 33,912 | 36,752 | 33,468 | 32,927 | |||||||||||
Net earnings (loss) per share attributable to Telos Corporation, basic (in dollars per share) | $ (0.09) | $ 0.06 | $ (0.05) | $ (0.09) | $ (0.10) | $ 0.11 | $ 0 | $ (0.05) | |||||||||||
Net earnings (loss) per share attributable to Telos Corporation, diluted (in dollars per share) | $ (0.09) | $ 0.06 | $ (0.05) | $ (0.09) | $ (0.10) | $ 0.10 | $ 0 | $ (0.05) | |||||||||||
Common Class B [Member] | |||||||||||||||||||
Quarterly Financial Data [Abstract] | |||||||||||||||||||
Weighted-average shares of stock outstanding, basic (in shares) | 3,204 | 3,204 | 3,204 | 3,204 | 3,204 | 3,204 | 3,204 | 3,204 | |||||||||||
Weighted-average shares of stock outstanding, diluted (in dollars per share) | 3,204 | 3,204 | 3,204 | 3,204 | 3,204 | 3,204 | 3,204 | 3,204 | |||||||||||
Net earnings (loss) per share attributable to Telos Corporation, basic (in dollars per share) | $ (0.09) | $ 0.06 | $ (0.05) | $ (0.09) | $ (0.10) | $ 0.11 | $ 0 | $ (0.05) | |||||||||||
Net earnings (loss) per share attributable to Telos Corporation, diluted (in dollars per share) | $ (0.09) | $ 0.06 | $ (0.05) | $ (0.09) | $ (0.10) | $ 0.10 | $ 0 | $ (0.05) | |||||||||||
CO&D [Member] | |||||||||||||||||||
Quarterly Financial Data [Abstract] | |||||||||||||||||||
Revenue | $ 5,600 | ||||||||||||||||||
[1] | Changes in net income are the result of several factors, including seasonality of the government year-end buying season, as well as the nature and timing of other deliverables. | ||||||||||||||||||
[2] | Net income for the third quarter of 2019 is attributable to $2.6 million in proprietary software sales which carry lower cost of sales. | ||||||||||||||||||
[3] | Net income for the third quarter of 2018 included $5.6 million of revenue accruals for multiple contracts as a result of several years of cumulative indirect rate adjustments which did not include direct costs in Secure Mobility and Network Management/Defense Enterprise Solutions deliverables. |
Commitments and Contingencies (
Commitments and Contingencies (Details) | Mar. 26, 2020USD ($)Extension | Nov. 20, 2017USD ($) | Sep. 11, 2017USD ($) | Dec. 31, 2017 | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Oct. 19, 2017USD ($) |
Financial Condition and Liquidity [Abstract] | |||||||
Working capital | $ 2,900,000 | $ 2,100,000 | |||||
Legal proceedings [Abstract] | |||||||
Litigation settlement amount awarded | $ 278,923 | ||||||
Preferred stock dividend rate per annum | 12.00% | ||||||
Possible loss for advance or indemnification of legal fees and expenses | $ 1,550,000 | ||||||
Subsequent Events [Member] | |||||||
Legal proceedings [Abstract] | |||||||
Number of quarterly maturity date extensions | Extension | 4 | ||||||
Amount of increase in quarterly exit fee payable | $ 250,000 | ||||||
Amount of increase in exit fee payable | 1,000,000 | ||||||
Amendment fee and out-of-pocket costs and expenses | $ 100,000 | ||||||
Costa Brava [Member] | |||||||
Legal proceedings [Abstract] | |||||||
Percentage of public preferred stock owned | 12.70% | ||||||
Wynnefield [Member] | |||||||
Legal proceedings [Abstract] | |||||||
Percentage of public preferred stock owned | 17.40% | ||||||
Hamot [Member] | |||||||
Legal proceedings [Abstract] | |||||||
Legal fees and expenses | $ 1,450,000 | ||||||
Hamot [Member] | Counts I and III [Member] | Pending Appeal [Member] | |||||||
Legal proceedings [Abstract] | |||||||
Legal fees and expenses, entitled | 750,000 | ||||||
Hamot [Member] | Counts II and IV [Member] | |||||||
Legal proceedings [Abstract] | |||||||
Legal fees and expenses, entitled | $ 660,000 | ||||||
Percentage entitled for legal fees and expenses | 91.00% | ||||||
Hamot [Member] | Third Amended Complaint [Member] | |||||||
Legal proceedings [Abstract] | |||||||
Legal fees and expenses | $ 100,000 | ||||||
Legal fees and expenses, entitled | $ 100,000 |