TELOS CORP

For the period ended Dec 31, 2025. Filed Mar 16, 2026.

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FY2025 · Filed Mar 16, 2026

TLS$7.67+7.0%Stored close · as of Nov 10, 2026

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Contents

. Income Taxes

INCOME TAXES

Table 14.1: Loss Before Income Tax
	For the Year Ended December 31,
	2025	2024
(in thousands)
Loss from continuing operations before income taxes:
Domestic	$(37,302)	$(52,573)
Foreign	93	79
Total loss before income taxes	$(37,209)	$(52,494)

Table 14.2: Components of (Benefit from) Provision for Income Taxes
	For the Year Ended December 31,
	2025	2024
(in thousands)
Current provision
Federal	$—	$—
State	85	21
Foreign	12	5
Total current	97	26
Deferred tax expense
Federal	(560)	46
State	(200)	(46)
Total deferred	(760)	—
(Benefit from) provision for income taxes	$(663)	$26

Table 14.3: Reconciliation of Statutory Income Tax Expense to Actual Income Tax Expense
	For the Year Ended December 31,
	2025		2024
	Amount	Rate	Amount	Rate
(dollars in thousands)
U.S. federal statutory rate	$(7,814)	21.0%	$(11,024)	21.0%
State income taxes, net of federal income tax benefit (1)	(90)	—%	(25)	—%
Change in valuation allowance for deferred tax assets	7,775	(21.0)%	9,855	(18.7)%
Foreign tax effect
Philippines	(8)	—%	(10)	—%
Tax credits:
R&D credit	(26)	—%	(1,200)	2.2%
Nontaxable or nondeductible items:
Other permanent differences	(90)	—%	82	(0.1)%
Stock-based compensation	(1,603)	4.0%	298	(0.5)%
Section 162(m) limitation - covered employees	1,020	(2.0)%	1,711	(3.3)%
Changes in unrecognized tax benefits:
Uncertain tax positions	6	—%	300	(0.6)%
Other adjustments:
Cumulative deferred adjustments	44	—%	48	(0.1)%
Provision to return adjustments	123	—%	(9)	—%
Effective tax rate	$(663)	2.0%	$26	(0.1)%

(1) State income taxes in Texas made up the majority (greater than 50%) of the tax effect in this category.

Table 14.4: Components of Deferred Tax Assets (Liabilities)
	As of December 31,
	2025	2024
(in thousands)
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful accounts	$10	$14
Allowance for inventory obsolescence and amortization	135	60
Accrued liabilities not currently deductible	1,299	763
Stock-based compensation	9,179	2,734
Accrued compensation	2,282	783
Lease liabilities	2,106	2,594
Goodwill	29,437	28,122
Capitalized research and development costs	10,446	10,116
Net operating loss carryforwards - federal	15,974	15,101
Net operating loss carryforwards - state	2,619	2,672
R&D tax credit	4,763	4,856
Amortization and depreciation	69	—
Total gross deferred tax assets	78,319	67,815
Less valuation allowance	(77,196)	(67,117)
Total deferred tax assets, net of valuation allowance	1,123	698
Deferred tax liabilities:
Right-of-use assets	(1,176)	(1,510)
Amortization and depreciation	—	(1)
Total deferred tax liabilities	(1,176)	(1,511)
Net deferred tax liabilities	$(53)	$(813)

Table 14.5: Valuation Allowance Activity
	For the Year Ended December 31,
	2025	2024
(in thousands)
Balance at beginning of year	$67,117	$54,999
Additions	10,079	12,118
Balance at end of year	$77,196	$67,117

We 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. The 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.

Based on available evidence, we have determined that a valuation allowance is required as of December 31, 2025, and 2024 against the net of our deferred tax assets and liabilities to the extent that only a deferred tax liability related to indefinite-lived goodwill remains on our consolidated balance sheets on December 31, 2025, and 2024.

On December 31, 2025, for federal income tax purposes, there was approximately a $76.0 million net operating loss available to be carried forward to offset future taxable income. Approximately $10.6 million of these net operating loss carryforwards expire in 2037, the remaining will be carried forward indefinitely. As of December 31, 2025, there was approximately $6.1 million of R&D credit carryover which begins to expire in 2033. Certain tax attributes of the Company, including net operating losses and credits, would be subject to a limitation should an ownership change as defined under Section 382 of the Internal Revenue Code of 1986, as amended, occur. The limitations resulting from a change in ownership could affect the Company's ability to utilize its tax attributes. A study was completed in 2020 which confirmed that no limitation applies to the Company's tax attributes as of December 31, 2020. We believe that ownership activity since December 31, 2020, would not result in limitation sufficient to result in the expiration of unused attributes.

Under the provision of ASC 740, we determined that the unrecognized tax benefits as of December 31, 2025, and 2024 were approximately $1.5 million for both periods. As of December 31, 2025, and 2024, the tax benefits that, if recognized, would not impact the effective tax rate due to the Company's valuation allowance (as included in the balance of unrecognized tax benefits) were $1.5 million for both periods. We report interest and penalties as a component of income tax expense. There wasno accrued interest and penalties related to the unrecognized tax benefits as of December 31, 2025, and 2024. 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 with regards to unrecognized tax benefits, 2014 to 2025, has not been extended beyond the applicable statute of limitations.

We file income tax returns in the U.S. federal jurisdiction and are subject to the continuous examination of our income tax returns by the Internal Revenue Service ("IRS") and other tax authorities. The applicable statute of limitations is no longer open for audit or examination for the years before 2022 for federal income taxes in the U.S. We were notified by the IRS in September 2024 regarding an audit of our 2021 federal income tax return. In April 2025, the IRS notified us that it had completed its examination of our 2021 federal income tax return with no changes to our reported tax.

Table 14.6: Unrecognized Tax Benefit Activity
	For the Year Ended December 31,
	2025	2024
(in thousands)
Balance at beginning of year	$1,515	$1,228
Increase (decrease) in prior year tax positions	(56)	123
Increase related to current year tax positions	63	177
Decrease related to lapse of statutes	—	(13)
Balance at end of year	$1,522	$1,515

Table 14.7: Components of Income Taxes Paid (Net of Refunds Received)
	For the Year Ended December 31,
	2025	2024
(in thousands)
Federal	$—	$—
State	30	55
Foreign	12	—
Total	$42	$55

Table 14.8: Net Income Tax Payments (Refund) by Jurisdiction To or Greater than 5% of Total Income Taxes Paid, Net
	For the Year Ended December 31,
	2025	2024
(in thousands)
Texas	$30	$55
Philippines	$12	$—

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