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Item 1. Financial Statements

2024-08-09 compared with 2024-05-10 · 138 added, 100 removed, 450 unchanged (35% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(in thousands, except per share amounts)

24 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(in thousands)

3 unchanged sentences

Actuarial loss on pension liability adjustment — — ( 30 ) —

Other comprehensive loss ( 21 ) ( 11 ) ( 86 ) 2

Comprehensive loss $ ( 7,778 ) $ ( 8,035 ) $ ( 15,221 ) $ ( 18,768 )

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands, except per share amount and share data)

27 unchanged sentences

Stockholders’ equity:

Common stock, $ 0.001 par value, 250,000,000 shares authorized, 71,757,998 shares and 70,239,890 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Common stock, $ 0.001 par value, 250,000,000 shares authorized, 72,223,328 shares and 70,239,890 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 439,146 433,781

6 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Six Months Ended

June 30, 2024 June 30, 2023

(in thousands)

7 unchanged sentences

Loss on disposal of fixed assets — 1

Provision for doubtful accounts 41 89

(Recovery from) provision for doubtful accounts ( 32 ) 117

Amortization of debt issuance costs 35 35

13 unchanged sentences

Purchases of property and equipment ( 332 ) ( 270 )

Payment of DFT holdback amount — ( 564 )

Net cash used in investing activities ( 9,647 ) ( 8,468 )

2 unchanged sentences

Payment of tax withholding related to net share settlement of equity awards ( 430 ) ( 1,584 )

Proceeds from exercise of stock options 104 —

Payment of DFT holdback amount — ( 564 )

Repurchase of common stock — ( 139 )

12 unchanged sentences

(in thousands)

Balance at March 31, 2024 71,758 $ 110 $ 436,616 $ ( 125 ) $ ( 282,205 ) $ 154,396

Net loss — — — — ( 7,757 ) ( 7,757 )

Foreign currency translation loss — — — ( 21 ) — ( 21 )

Restricted stock unit awards vested, net of shares withheld to cover tax withholding 407 1 — — — 1

Stock-based compensation — — 2,426 — — 2,426

Issuance of common stock upon exercise of stock options 58 — 104 — — 104

Balance at June 30, 2024 72,223 $ 111 $ 439,146 $ ( 146 ) $ ( 289,962 ) $ 149,149

Balance at March 31, 2023 69,388 $ 108 $ 420,980 $ ( 42 ) $ ( 251,151 ) $ 169,895

Net loss — — — — ( 8,024 ) ( 8,024 )

Foreign currency translation loss — — — ( 11 ) — ( 11 )

Restricted stock unit awards vested, net of shares withheld to cover tax withholding 79 — — — — —

Stock-based compensation — — 5,676 — — 5,676

Balance at June 30, 2023 69,467 $ 108 $ 426,656 $ ( 53 ) $ ( 259,175 ) $ 167,536

Common Stock Additional Paid-in

Capital Accumulated

Other Comprehensive Loss Accumulated Deficit Total Stockholders’

Shares Amount

(in thousands)

Balance at December 31, 2023 70,240 $ 109 $ 433,781 $ ( 60 ) $ ( 274,827 ) $ 159,003

4 unchanged sentences

Stock-based compensation — — 4,073 — — 4,073

Issuance of common stock upon exercise of stock options 58 — 104 — — 104

Issuance of common stock for 401K match 370 — 1,618 — — 1,618

Balance at March 31, 2024 71,758 $ 110 $ 436,616 $ ( 125 ) $ ( 282,205 ) $ 154,396

Balance at June 30, 2024 72,223 $ 111 $ 439,146 $ ( 146 ) $ ( 289,962 ) $ 149,149

Balance at December 31, 2022 67,431 $ 106 $ 412,708 $ ( 55 ) $ ( 240,405 ) $ 172,354

4 unchanged sentences

Issuance of common stock for 401K match 777 1 1,941 — — 1,942

Balance at March 31, 2023 69,388 $ 108 $ 420,980 $ ( 42 ) $ ( 251,151 ) $ 169,895

Balance at June 30, 2023 69,467 $ 108 $ 426,656 $ ( 53 ) $ ( 259,175 ) $ 167,536

See accompanying notes to the unaudited consolidated financial statements.

13 unchanged sentences

GAAP") have been condensed or omitted for the interim periods presented.

We believe that the unaudited interim financial statements include all adjustments (which are normal and recurring) necessary to state fairly our financial position and the results of operations and cash flows for the periods presented.

We believe that the unaudited interim financial statements include all adjustments (which are normal and recurring) necessary for a fair statement of our financial position and the results of operations and cash flows for the periods presented.

The results of operations for the interim periods presented are not necessarily indicative of results that may be expected for the year or future periods.

17 unchanged sentences

Selling, general and administrative expenses include general and administrative expenses, as well as direct and indirect sales and marketing expenses.

These costs consists primarily of compensation and benefits (including incentive-based compensation), advertising, facilities, and certain types of depreciation and amortization.

These costs consist primarily of compensation and benefits (including incentive-based compensation), advertising, facilities, and certain types of depreciation and amortization.

Restructuring Expenses

7 unchanged sentences

The Company incurred a cumulative amount of $ 3.9 million of restructuring expenses, which is the total expected costs for this restructuring plan, as disclosed in the Company's recent Annual Report on Form 10-K for the year ended December 31, 2023.

The restructuring actions were substantially complete in fiscal year 2023.

The restructuring actions were substantially completed in fiscal year 2023.

The restructuring expenses (adjustments) are included within "Selling, general and administrative expenses" on the Company's unaudited consolidated statements of operations.

Restructuring Expenses (Adjustments)

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(in thousands)

10 unchanged sentences

Cash payments ( 364 )

Balance at March 31, 2024 $ 107

Balance at June 30, 2024 $ 26

(1) Restructuring expenses accrual is included within "Other current liabilities" on the Company's unaudited consolidated balance sheets (see Note 9 - Other Balance Sheet Components for further details).

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280):

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures." ASU 2023-07 will affect how we report segment information, starting with our Form 10-K for the year ended December 31, 2024, and our quarterly reports on Form 10-Q starting with our quarterly report for the quarter ended March 31, 2025.

This standard requires that we provide disclosures of significant segment expenses and other segment items that are regularly provided to our chief operating decision maker ("CODM") and included in each reported measure of segment profit or loss.

We will also have to disclose other segment items by reportable segment (i.e.

the difference between reported segment revenues less the significant segment expenses (which are disclosed) less reported segment profit or loss).

This standard requires that we disclose significant segment expenses and other segment items that are regularly provided to our chief operating decision maker ("CODM") and included in each reported measure of segment profit or loss.

We will also have to disclose other segment items by reportable segment (i.e., the difference between reported segment revenues less the significant segment expenses (which are disclosed) less reported segment profit or loss).

We will disclose the CODM and their position within the Company and details about the information that they regularly review to make capital allocation and other operating decisions about each segment, as well as an explanation of how the CODM uses the reported measures and other disclosures.

We are currently evaluating these new segment disclosure requirements and the impact of their adoption on our unaudited consolidated financial statements.

Not Yet Adopted

We are evaluating these new segment disclosure requirements and the impact of their adoption on our unaudited consolidated financial statements.

In December 2023, the FASB issued ASU No.

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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.

Revenue transferred to customers over time accounted for 81 % and 89 % of our revenue for the three months ended March 31, 2024 and 2023, respectively.

Revenue transferred to customers over time accounted for 84 % and 82 % of our revenue for the three and six months ended June 30, 2024, respectively, and 88 % and 89 % of our revenue for the three and six months ended June 30, 2023, respectively.

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.

For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time in which each performance obligation is fully satisfied.

For performance obligations in which control does not continuously transfer to the customer, we recognize revenue at the point in time when each performance obligation is fully satisfied.

This coincides with the point in time the customer obtains control of the product or service, which typically occurs upon customer acceptance or receipt of the product or service, given that we maintain control of the product or service until that point.

Revenue transferred to customers at a point in time accounted for 19 % and 11 % of our revenue for the three months ended March 31, 2024 and 2023, respectively.

Revenue transferred to customers at a point in time accounted for 16 % and 18 % of our revenue for the three and six months ended June 30, 2024, respectively, and 12 % and 11 % of our revenue for the three and six months ended June 30, 2023, respectively.

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.

4 unchanged sentences

We evaluate and include these estimated amounts of variable consideration in the transaction price and as performance on these contracts is complete, we adjust our revenue, when deemed necessary.

No revenue adjustments were recorded during the three months ended March 31, 2024 and 2023.

No revenue adjustments were recorded during the three and six months ended June 30, 2024, and 2023.

We provide for anticipated losses on contracts during the period when the loss is determined by recording an expense for the total expected costs that exceeds the total estimated revenue for a performance obligation.

We recorded an immaterial contract loss during the three months ended March 31, 2024.

No contract loss was recorded during the three months ended March 31, 2023.

No contract loss was recorded during the three months ended June 30, 2024.

We recorded an immaterial contract loss during the six months ended June 30, 2024.

No contract loss was recorded during the three and six months ended June 30, 2023.

Disaggregated Revenues

1 unchanged sentence

We treat sales to U.S.

customers as sales within the U.S.

regardless of where the services are performed.

customers as sales within the U.S., regardless of where the services are performed.

Substantially most of our revenues are generated from U.S.

2 unchanged sentences

Revenue by Customer Type

For the Three Months Ended

March 31, 2024 March 31, 2023

Amount % Amount %

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Amount % Amount % Amount % Amount %

(dollars in thousands)

3 unchanged sentences

Revenue by Contract Type

For the Three Months Ended

March 31, 2024 March 31, 2023

Amount % Amount %

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Amount % Amount % Amount % Amount %

(dollars in thousands)

4 unchanged sentences

Revenue Concentration Greater than 10% of Total Revenue

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

Department of Defense ("DoD") 56 % 66 % 56 % 67 %

Contract Balances

Balance Sheet Presentation March 31, 2024 December 31, 2023

Balance Sheet Presentation June 30, 2024 December 31, 2023

(in thousands)

6 unchanged sentences

The changes in the Company's contract assets and contract liabilities during the current period were primarily the result of the timing differences between the Company's performance, invoicing and customer payments.

Revenue recognized for the three months ended March 31, 2024 and 2023, that was included in the contract liabilities balance at the beginning of each reporting period was $ 2.7 million and $ 2.5 million, respectively.

As of March 31, 2024, we had approximately $ 36.1 million of remaining performance obligations, which we also refer to as funded backlog.

Revenue recognized for the three and six months ended June 30, 2024, which was included in the contract liabilities balance at the beginning of each reporting period, was $ 1.9 million and $ 4.5 million, respectively.

Revenue recognized for the three and six months ended June 30, 2023, which was included in the contract liabilities balance at the beginning of each reporting period, was $ 1.6 million and $ 4.1 million, respectively.

As of June 30, 2024, we had approximately $ 31.2 million of remaining performance obligations, which we also refer to as funded backlog.

We expect to recognize approximately 92 % of our remaining performance obligations over the next 12 months, and the balance thereafter.

1 unchanged sentence

Details of Accounts Receivable, Net

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands)

7 unchanged sentences

As our primary customer base includes agencies of the U.S.

government, we have a concentration of credit risk associated with our accounts receivable, as 96 % and 91 % of our billed and unbilled accounts receivable as of March 31, 2024 and December 31, 2023, respectively, were directly with U.S.

government, we have a concentration of credit risk associated with our accounts receivable, as 90 % and 91 % of our billed and unbilled accounts receivable as of June 30, 2024 and December 31, 2023, respectively, were directly with U.S.

government customers.

4 unchanged sentences

Details of Inventories, Net

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands)

4 unchanged sentences

Details of Property and Equipment, Net

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Gross Carrying Amount Accumulated Depreciation and Amortization Net Carrying Value Gross Carrying Amount Accumulated Depreciation and Amortization Net Carrying Value

4 unchanged sentences

Depreciation and Amortization Expense

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(in thousands)

Depreciation and amortization expense $ 259 $ 579 $ 894 $ 1,152

The goodwill balance was $ 17.9 million as of March 31, 2024, and December 31, 2023, of which $ 3.0 million is allocated to the Security Solutions segment and $ 14.9 million is allocated to the Secure Networks segment.

The goodwill balance was $ 17.9 million as of June 30, 2024, and December 31, 2023, of which $ 3.0 million is allocated to the Security Solutions segment and $ 14.9 million is allocated to the Secure Networks segment.

Goodwill is subject to annual impairment tests and if triggering events are present in the interim before the annual tests, we will assess impairment.

No impairment charges were recorded for the three months ended March 31, 2024 and 2023 .

No impairment charges were recorded for the three and six months ended June 30, 2024, and 2023 .

INTANGIBLE ASSETS, NET

Details of Intangible Assets, Net

March 31, 2024

December 31, 2023

June 30, 2024 December 31, 2023

Estimated Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Value Gross Carrying Amount Accumulated Amortization Net Carrying Value

10 unchanged sentences

Amortization Expense

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(in thousands)

1 unchanged sentence

Software development costs – cost of sales (1)

$ 1,949 $ — $ 3,107 $ —

Software development costs – research and development 860 558 1,697 861

4 unchanged sentences

Details of Other Assets

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands)

3 unchanged sentences

Other assets $ 3,954 $ 885

(1) In March 2024, we made a $ 3.0 million investment in a privately held company via a simple agreement for future equity.

We paid $ 0.9 million in March 2024 and the remainder was paid in April 2024.

The Company elected to apply the fair value option on this investment, and we did not note any changes in the fair value during the three months ended March 31, 2024.

(1) In March 2024, the Company made a $ 3.0 million investment in a privately held company via a simple agreement for future equity.

The Company elected to apply the fair value option on this investment.

The Company believes the fair value option best reflects the economics of the underlying transaction.

During the three and six months ended June 30, 2024, the Company did not note any changes in the fair value.

Details of Accounts Payable and Other Accrued Liabilities

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands)

3 unchanged sentences

Details of Other Current Liabilities

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands)

21 unchanged sentences

The Credit Agreement also requires certain financial covenants to maintain a Senior Leverage Ratio on the last day of any fiscal quarter, no greater than 3 to 1.

We were in compliance with all covenants as of March 31, 2024.

We were in compliance with all covenants as of June 30, 2024.

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.

7 unchanged sentences

On February 9, 2023, the customer notified us that it would not exercise the first option period under the DO.

The MPA provides that, if the customer terminates the DO for non-renewal and the Buyer reasonably concludes that the customer's actions constitute grounds for filing a claim with the customer's contracting officer, Buyer and Telos will cooperate in preparing such a claim, which would be filed in Telos' name.

Buyer has notified Telos of its intent to pursue a claim against the customer.

The MPA provides that, if the customer terminates the DO for non-renewal and the Buyer reasonably concludes that the customer's actions constitute grounds for filing a claim with the customer's contracting officer, the Buyer and Telos will cooperate in preparing such a claim, which would be filed in Telos' name.

The buyer has notified Telos of its intent to pursue a claim against the customer.

Concurrently, the Company transferred all the rights, title and interest in the underlying licenses in exchange for the extinguishment of the outstanding financing obligations.

1 unchanged sentence

The Company recorded the difference between the carrying value of the Company's debt instrument and the underlying licenses as a gain on early extinguishment of other financing obligations.

During the three months ended March 31, 2023, the Company reported a gain of $ 1.4 million, which was recorded as "Other income" in the unaudited consolidated statements of operations.

No gain was reported for the three months ended June 30, 2023.

For the six months ended June 30, 2023, the Company reported a gain of $ 1.4 million, which was recorded as "Other income" in the unaudited consolidated statements of operations.

STOCK-BASED COMPENSATION

The Company grants stock-based compensation awards under the 2016 Omnibus Long-Term Incentive Plan, as amended (the "2016 LTIP").

We may grant restricted stock awards, restricted stock units with time-based vesting ("RSUs") and restricted stock units with performance-based vesting ("PSUs").

The Company grants stock-based compensation awards under the Amended and Restated 2016 Omnibus Long-Term Incentive Plan (the "2016 LTIP").

We have granted stock options, restricted stock units with time-based vesting ("RSUs") and restricted stock units with performance-based vesting ("PSUs").

Awards granted under the 2016 LTIP vest over the periods determined by the Board of Directors or the Compensation Committee of the Board of Directors, which has the discretion to establish the terms, conditions and criteria of the various awards.

The RSUs granted to eligible employees generally vest in installments over a period of up to three years .

PSUs will vest upon the achievement of a defined performance target or market conditions for the Company's common stock, certain operational milestones over prescribed period, or at the end of the defined performance period from the date of grant.

There were no income tax benefits recognized on the share-based compensation expense for both periods.

Details of Stock Compensation Expense by Department

For the Three Months Ended

March 31, 2024 March 31, 2023

PSUs will vest upon the achievement of a defined performance target or market conditions for the Company's common stock or certain operational milestones over a prescribed period.

On May 21, 2024, the Company authorized an additional 8,500,000 shares to be available under the 2016 LTIP, increasing the total number of shares available for issuance under the 2016 LTIP to 21,959,913 shares.

On May 16, 2024, the Company granted PSUs that could be settled in up to 1,335,281 shares of its common stock to certain senior executives and employees that will vest upon achieving certain operational milestones prior to January 1, 2027.

On May 28, 2024, the Company granted certain PSUs to certain senior executives and employees that could settle in up to 2,499,945 shares of its common stock.

These PSUs may vest only if the Company achieves certain revenue and free cash flow targets for fiscal year 2025.

The Company also granted certain PSUs containing market conditions to certain executives that could settle in up to 6,875,000 shares of its common stock.

These PSUs with market conditions may vest, in whole or in part, only if the Company's closing common stock price remains at or above certain specified stock prices for 50 consecutive calendar days prior to January 1, 2027.

The Company estimates the fair value for each tranche of the stock-based compensation awards subject to market conditions on the date of grant using a Monte Carlo simulation valuation model.

Monte Carlo approaches are a class of computational algorithms that rely on repeated random sampling to compute their results.

This approach allows the calculation of the value of such PSUs based on a large number of possible stock price path scenarios.

The risk-free rate is based on the U.S.

treasury zero-coupon issues in effect at the time of grant over the performance period.

The expense for these awards is recognized over the derived service period as determined through the Monte Carlo simulation model.

Our key assumptions include a performance period of 2.59 years, an expected volatility of 83.9 %, and a risk-free rate of 4.7 %.

The fair value for these market condition PSUs at the grant date ranges between $ 2.62 - $ 3.75 , and the derived service periods ranges between 0.63 - 1.31 years.

Stock-based compensation expense for these performance-based awards whose vesting is subject to the achievement of performance targets and fulfillment of the market conditions described above is recognized over the requisite service period for each tranche on a graded-vesting basis at the time the achievement of the condition becomes probable.

Stock-based compensation expense recognized for restricted stock units and stock options granted to employees and non-employees is included in the unaudited consolidated statements of operations, net of adjustments.

There were no income tax benefits recognized on the share-based compensation expense for the three and six months ended June 30, 2024 and 2023.

For the three and six months ended June 30, 2024, the performance targets for outstanding PSUs granted prior to 2024 were not probable of being achieved.

Therefore, the Company recorded a cumulative catch-up adjustment for the change in its probability assessment, resulting in a $ 1.2 million decrease in stock-based compensation expense.

Details of Stock Compensation Expense by Category

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(in thousands)

4 unchanged sentences

Restricted Stock

Restricted Stock Activity

Restricted Stock Unit Activity

Service-Based Performance-Based Total Shares Weighted-Average Grant Date Fair Value

3 unchanged sentences

Forfeited ( 34,000 ) — ( 34,000 ) 3.30

Unvested outstanding units as of March 31, 2024 894,171 43,800 937,971 $ 5.68

As of March 31, 2024, the intrinsic value of the RSUs and PSUs outstanding, exercisable, and vested or expected to vest was $ 3.9 million.

There was approximately $ 2.1 million of total compensation costs related to stock-based awards not yet recognized as of March 31, 2024, which is expected to be recognized on a straight-line basis over a weighted-average remaining vesting period of 0.7 years.

Unvested outstanding units as of June 30, 2024 2,206,395 10,754,026 12,960,421 $ 3.65

As of June 30, 2024, the intrinsic value of the RSUs and PSUs outstanding, exercisable, and vested or expected to vest was $ 52.1 million.

There was approximately $ 30.4 million of total compensation costs related to stock-based awards not yet recognized as of June 30, 2024, which is expected to be recognized on a straight-line basis over a weighted-average remaining vesting period of 1.2 years.

Stock Options

2 unchanged sentences

Outstanding option balance as of December 31, 2023 400,000 $ 1.80 9.4 $ 740,000

Granted — — 0.0 —

Exercised ( 58,000 ) 1.80

Forfeited, cancelled, or expired — —

Outstanding option balance as of March 31, 2024 400,000 1.80 9.1 $ 944,000

Exercisable stock option as of March 31, 2024 — — 0 $ —

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the quoted closing price of the Company's common stock as of March 31, 2024.

The fair value of the stock options is expensed on a straight-line basis over the vesting period of one year , including the stock options granted to directors, as the next annual stockholders meeting is expected to occur at the same approximate time each year.

As of March 31, 2024, there were approximately $ 0.04 million of unrecognized compensation costs related to non-vested stock options.

Outstanding option balance as of June 30, 2024 342,000 $ 1.80 8.9 $ 759,240

Exercisable stock option as of June 30, 2024 342,000 $ 1.80 8.9 $ 759,240

The fair value of the stock options, including the stock options granted to directors, is expensed on a straight-line basis over the vesting period of one year , as the annual stockholders meeting is expected to occur at the same approximate time each year.

As of June 30, 2024, there were no unrecognized compensation costs related to non-vested stock options.

SHARE REPURCHASES

On May 24, 2022, the Company announced that the Board of Directors approved a new share repurchase program ("SRP") authorizing the Company to repurchase up to $ 50.0 million of its common stock.

On May 24, 2022, the Company announced that the Board of Directors approved a share repurchase program ("SRP") authorizing the Company to repurchase up to $ 50.0 million of its common stock.

Pursuant to this authorization, the Company may repurchase shares of its common stock on a discretionary basis from time to time through open market purchases.

The repurchase program has no expiration date and may be modified, suspended, or terminated at any time.

There were no share purchases during the first quarter of 2024 and 2023.

As of March 31, 2024, there was approximately $ 38.7 million of the authorization remaining for future common stock repurchases under the SRP.

There were no share repurchases during the three and six months ended June 30, 2024, and 2023.

As of June 30, 2024, there was approximately $ 38.7 million of the authorization remaining for future common stock repurchases under the SRP.

ACCUMULATED OTHER COMPREHENSIVE LOSS

8 unchanged sentences

Other comprehensive loss before reclassification ( 56 ) ( 30 ) ( 86 )

Balance as of March 31, 2024 $ ( 202 ) $ 77 $ ( 125 )

Balance as of June 30, 2024 $ ( 223 ) $ 77 $ ( 146 )

LOSS PER SHARE

1 unchanged sentence

Potentially Dilutive Securities

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(in thousands)

Unvested restricted stock and restricted stock units 1,245 410

For the three months ended March 31, 2024 and 2023, the outstanding PSUs aggregating to 43,800 and 265,608 , respectively, have been excluded from the calculation of potentially dilutive securities above because the issuance of shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period.

Weighted-average number of shares – unvested restricted stock units and stock options 654 269 1,058 401

For the three and six months ended June 30, 2024, and 2023, the outstanding PSUs aggregating to 9,418,745 and 265,608 shares, respectively, have been excluded from the calculation of potentially dilutive securities above because the issuance of shares is contingent upon certain conditions which were not satisfied by the end of the current quarter.

RELATED PARTY TRANSACTIONS

10 unchanged sentences

These segments enable the alignment of our strategies and objectives and provide a framework for the timely and rational allocation of resources within the business lines.

Our Security Solutions segment is primarily focused on cybersecurity, cloud and identity solutions, and secure messaging through Xacta ® , Telos Ghost ® , Telos Advanced Cyber Analytics ("Telos ACA TM "), Telos Automated Message Handling System ("AMHS") and Telos ID offerings.

We recognize revenue on contracts from providing various system platforms in the cloud, on-premises, and in hybrid cloud environments, as well as software sales or software-as-a-service.

9 unchanged sentences

Results of Operations by Business Segment

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Three Months Ended For the Six Months Ended

June 30, 2024 June 30, 2023 June 30, 2024 June 30, 2023

(in thousands)

20 unchanged sentences

Legal Proceedings

From time to time, the Company may be a party to litigation or claims arising in the ordinary course of business, including those relating to employment matters, relationship with clients and contractors, intellectual property disputes, and other business matters.

From time to time, the Company may be a party to litigation or claims arising in the ordinary course of business, including those relating to employment matters, relationships with clients and contractors, intellectual property disputes, and other business matters.

These legal proceedings seek various remedies, including claims for monetary damages in varying amounts, none of which are considered material, or are unspecified as to amount.

Although the outcome of any such matter is inherently uncertain and may be materially adverse, based on current information, management believes that the outcome of such known matters will not have a material adverse effect on the Company's business or its unaudited consolidated financial statements as of March 31, 2024.

Other - Government Contracts

11 unchanged sentences

Details of Cash, Cash Equivalents, and Restricted Cash

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands)

4 unchanged sentences

Supplemental Cash Flow Information

For the Three Months Ended

March 31, 2024 March 31, 2023

For the Six Months Ended

June 30, 2024 June 30, 2023

(in thousands)

1 unchanged sentence

Interest $ 287 $ 409

Income taxes 100 147

Non-cash investing and financing activities:

1 unchanged sentence

Capital expenditure activity in accounts payable and other accrued liabilities 147 536

Purchase of investment in accounts payable and other accrued liabilities 2,150 —

Issuance of common stock for 401K match 1,619 1,943

Intangible assets transferred to extinguish other financing obligations — 7,089

Withholding tax on net share settlement under other current liabilities — 65

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements