Stockholders' Deficit, Option Plans, and Employee Benefit Plan

12 Months Ended

Dec. 31, 2016

Stockholders' Deficit, Option Plans, and Employee Benefit Plan [Abstract]

Stockholders' Deficit, Option Plans, and Employee Benefit Plan

Note 8. Stockholders' Deficit, Option Plans, and Employee Benefit Plan

Common Stock

The relative rights, preferences, and limitations of the Class A common stock and the Class B common stock are in all respects identical. The holders of the common stock have one vote for each share of common stock held.  Subject to the priority rights of the Public Preferred Stock and any series of the Senior Preferred Stock, holders of Class A and Class B common stock are entitled to receive such dividends as may be declared.

Restricted Stock Grants

Since June 2008, we have issued restricted stock (Class A common) to our executive officers, directors and employees. There were no grants issued in 2016. As of December 31, 2016, there were 19,047,259 shares of restricted stock outstanding.  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.  In the event of death of the employee or a change in control, as defined by the Telos Corporation 2008 Omnibus Long-Term Incentive Plan or the 2013 Omnibus Long-Term Incentive Plan, 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.

Stock Options

In 1996, the Board of Directors approved and the shareholders ratified the 1996 Stock Option Plan ("1996 Stock Option Plan"). As determined by the members of the Compensation Committee, we generally grant options under our respective plans at the estimated fair value at the date of grant, based upon all information available to it at the time.

1996 Stock Option Plan

The 1996 Stock Option Plan allowed for the award of options to purchase up to 6,644,974 shares of Class A common stock at an exercise price of not lower than the estimated fair value at the date of grant.  Vesting of the stock options for key employees was based both upon the passage of time, generally four years, and certain key events occurring including an initial public offering or a change in control. The stock options may be exercised over a ten-year period subject to the vesting requirements. Effective May 10, 2004, the 1996 Stock Option Plan was amended by the Board of Directors to increase the total amount of authorized shares of Class A common stock to 7,345,433, an increase of 700,459 shares, to reflect those options granted to Mr. Wood that were not exercised under the 1993 Stock Option Plan. The 1996 Stock Option Plan expired in March 2006, with its remaining 516,000 unissued options canceled. A total of 20,000 options were exercised in 2014. A total of 2,463,500 options were exchanged for restricted stock in June 2008.

A summary of the status of our stock options for the year ended December 31, 2014 is as follows:

	Number of Shares (000's)			Weighted Average Exercise Price
2014  Stock Option Activity
Outstanding at beginning of year		20		$	0.62
Granted		--			--
Exercised		(20	)		0.62
Canceled		--			--
Outstanding at end of year		--			--
Exercisable at end of year		--			--

There were no options outstanding and exercisable at December 31, 2016 and 2015.

Telos Shared Savings Plan

We sponsor a defined contribution employee savings plan (the "Plan") under which substantially all full-time employees are eligible to participate. The Plan holds 3,658,536 shares of Telos Class A common stock. Since no public market exists for Telos Class A common stock, the Trustees of the Plan and their professional advisors undertake an annual evaluation, based upon the most recent audited financial statements. To date, the Plan's trustees have priced the stock at the exact midpoint of the evaluated range of the value of the stock.  We match one-half of employee contributions to the Plan up to a maximum of 2% of such employee's eligible annual base salary. Participant contributions vest immediately, and Company contributions vest at the rate of 20% for each year, with full vesting occurring after completion of five years of service. The Company's matching contributions to the Plan were suspended for 2015. Our total contributions to this Plan for 2016, 2015, and 2014 were $575,000, $0, and $624,000, respectively.

Additionally, effective September 1, 2007, Telos ID sponsors a defined contribution savings plan (the "Telos ID Plan") under which substantially all full-time employees are eligible to participate.   Telos ID matches one-half of employee contributions to the Plan up to a maximum of 2% of such employee's eligible annual base salary. Telos ID's matching contributions to the Telos ID Plan were suspended for 2015. The total 2016, 2015, and 2014 Telos ID contributions to this plan were $96,000, $0, and $83,000, respectively.