Revision of Prior Year Interim Financial Statements

6 Months Ended

Jun. 30, 2022

Accounting Changes and Error Corrections [Abstract]

Revision of Prior Year Interim Financial Statements

REVISION OF PRIOR YEAR INTERIM FINANCIAL STATEMENTS

During the third quarter of 2021, the Company identified that stock compensation for a single individual was incorrectly charged to "cost of sales - services" instead of "general and administrative expense." The total amount of stock compensation incorrectly charged to cost of sales was $0.3 million, of which $0.1 million was related to the first quarter of 2021, and $0.2 million related to the second quarter of 2021. The Company corrected the error during the third quarter of 2021.

During the third quarter of 2021, the Company identified that the allocation of stock compensation for two of the Company's overhead cost pools was incorrectly charged to "cost of sales" instead of "general and administrative expense" during the second quarter of 2021. The total amount of the allocated stock compensation incorrectly charged to cost of sales was $0.7 million, which the Company corrected during the third quarter of 2021.

In the third quarter of 2021, the Company identified $1.1 million in revenue related to the stub period of a newly awarded contract that should have been recognized as income during the second quarter of 2021. The Company initially corrected the error during the third quarter of 2021. Additionally, and related to this contract, in the fourth quarter of 2021 the Company identified $0.3 million of products revenue for the second quarter of 2021 that should be classified in the condensed consolidated statements of operations as services revenue.

The Company erroneously presented the $2.4 million final payment to fully acquire all membership interest of Telos ID as an operating activity on the condensed consolidated statements of cash flows. The Company corrected the presentation to properly reflect the final payment within financing activities on the consolidated statements of cash flows in the fourth quarter of 2021.

Table 18.1: Impact of the Correction to the Condensed Consolidated Statement of Operations
	For the Three Months Ended June 30, 2021						For the Six Months Ended June 30, 2021
	Previously Reported		Error Correction		As Adjusted		Previously Reported		Error Correction		As Adjusted
	(in thousands, except per share amounts)
Revenue - services	$	47,618	$	1,385	$	49,003	$	99,676	$	1,385	$	101,061
Revenue - products	4,941		(300)		4,641		8,641		(300)		8,341
Revenue	52,559		1,085		53,644		108,317		1,085		109,402
Cost of sales - services	29,501		(892)		28,609		69,103		(1,004)		68,099
Costs and expenses	32,002		(892)		31,110		73,402		(1,004)		72,398
General and administrative	28,743		892		29,635		48,708		1,004		49,712
Selling, general and administrative expenses	39,113		892		40,005		66,965		1,004		67,969
Operating loss	(18,556)		1,085		(17,471)		(32,050)		1,085		(30,965)
Loss before income taxes	(18,716)		1,085		(17,631)		(33,460)		1,085		(32,375)
Net loss	(18,729)		1,085		(17,644)		(33,507)		1,085		(32,422)
Net loss attributable to Telos Corporation	(18,729)		1,085		(17,644)		(33,507)		1,085		(32,422)
Net loss per share attributable to Telos Corporation
Basic	$	(0.28)	$	0.02	$	(0.26)	$	(0.51)	$	0.02	$	(0.49)
Diluted	$	(0.28)	$	0.02	$	(0.26)	$	(0.51)	$	0.02	$	(0.49)

Table 18.2: Impact of the Correction to the Condensed Consolidated Statement of Comprehensive Loss
	For the Three Months Ended June 30, 2021						For the Six Months Ended June 30, 2021
	Previously Reported		Error Correction		As Adjusted		Previously Reported		Error Correction		As Adjusted
	(in thousands)
Net loss	$	(18,729)	$	1,085	$	(17,644)	$	(33,507)	$	1,085	$	(32,422)
Comprehensive loss attributable to Telos Corporation	(18,724)		1,085		(17,639)		(33,534)		1,085		(32,449)

Table 18.3. Impact of the Correction to the Condensed Consolidated Statement of Cash Flows
	For the Six Months Ended June 30, 2021
	Previously Reported		Error Correction		As Adjusted
	(in thousands)
Net loss	$	(33,507)	$	1,085	(32,422)
Changes in other operating assets and liabilities	(10,074)		1,351		(8,723)
Cash used in operating activities	(5,790)		2,436		(3,354)
Distribution to Telos ID Class B member – non-controlling interest	—		(2,436)		(2,436)
Cash provided by financing activities	35,474		(2,436)		33,038

Table 18.4. Impact of the Correction to the Condensed Consolidated Statement of Changes in Stockholders' Equity
	For the Three Months Ended June 30, 2021						For the Six Months Ended June 30, 2021
	Previously Reported		Error Correction		As Adjusted		Previously Reported		Error Correction		As Adjusted
	(in thousands)
Net loss	$	(18,729)	$	1,085	$	(17,644)	$	(33,507)	$	1,085	$	(32,422)
Accumulated deficit	(177,350)		1,085		(176,265)		(177,350)		1,085		(176,265)
Total Stockholders' equity	164,700		1,085		165,785		164,700		1,085		165,785