TELOS CORP
For the period ended Sep 30, 2026. Filed Nov 9, 2026.
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Sep 30, 2026 · Filed Nov 9, 2026
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11. Stock-Based Compensation
- STOCK-BASED COMPENSATION
On May 7, 2026, the Company's stockholders approved Amendment No. 2 to the Amended and Restated 2016 Omnibus Long-Term Incentive Plan ("2016 LTIP") that increased the number of shares available for issuance under the 2016 LTIP by an additional 5,380,000 shares.
As of September 30, 2026, approximately 1.8 million shares of our common stock were available for future grants under the 2016 LTIP. There wereno income tax benefits recognized on the stock-based compensation expense (as reflected in the table below) for the three and nine months ended September 30, 2026, and 2025.
| Table 11.1: Details of Stock Compensation Expense by Category | ||||
|---|---|---|---|---|
| For the Three Months Ended | For the Nine Months Ended | |||
| September 30, 2026 | September 30, 2025 | September 30, 2026 | September 30, 2025 | |
| (in thousands) | ||||
| Cost of sales – services | $187 | $154 | $605 | $493 |
| Research and development | 295 | 421 | 746 | 705 |
| Selling, general and administrative | 2,529 | 8,813 | 7,844 | 22,995 |
| Total | $3,011 | $9,388 | $9,195 | $24,193 |
Restricted Stock
| Table 11.2: Restricted Stock Unit Activity | ||||
|---|---|---|---|---|
| Service-Based | Performance-Based | Total Shares | Weighted-Average Grant Date Fair Value | |
| Unvested outstanding units as of December 31, 2025 | 2,182,836 | 10,861,854 | 13,044,690 | $3.49 |
| Granted | 2,383,357 | 1,369,241 | 3,752,598 | 5.60 |
| Vested | (2,220,433) | (2,420,691) | (4,641,124) | 3.46 |
| Forfeited, cancelled, or expired | (27,255) | — | (27,255) | 3.70 |
| Unvested outstanding units as of September 30, 2026 | 2,318,505 | 9,810,404 | 12,128,909 | $3.90 |
On May 26, 2026, the Company granted performance-based restricted stock units ("PSUs") with market conditions dependent on total shareholder return ("TSR") to certain executives and senior employees. The vesting criteria for these awards are based on the Company's TSR performance relative to the TSR performance of the Company's current compensation peer group over thethree-year performance period, June 1, 2026, through May 31, 2029, and conditioned upon neutral or positive free cash flow (i.e., cash flows from operating activities less capital expenditures) at the end of each fiscal year in the performance period. The final payout of these PSUs will vary between 0% to 200% of the target number of PSUs granted, depending on the TSR performance and meeting the free cash flow requirements.
The grant date fair value per share is estimated at the grant date using a Monte Carlo simulation model. Stock-based compensation expense for PSUs with a TSR market condition is recognized over the service period based on target probability.
| Table 11.3: PSUs with a TSR Market Condition Fair Value and Assumptions | |
|---|---|
| Expected Volatility | 92.1% |
| Risk-free rate | 4.0% |
| Service period | 3.0 years |
| Grant date fair value | $7.66 |
As of September 30, 2026, and 2025, the intrinsic value of the RSUs and PSUs outstanding, exercisable, and vested or expected to vest was $49.4 million and $105.0 million, respectively. As of September 30, 2026, approximately $19.6 million of total compensation costs related to stock-based awards had not yet been recognized, and we expect to recognize it on a straight-line basis over a weighted-average remaining vesting period of 0.8 years.
Stock Options
| Table 11.4: Stock Option Activity | ||||
|---|---|---|---|---|
| Stock Options Outstanding | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |
| Outstanding option balance as of December 31, 2025 | 227,000 | $1.80 | 7.4 | $749,100 |
| Granted | — | — | 0 | — |
| Exercised | — | — | 0 | — |
| Forfeited, cancelled, or expired | — | — | 0 | — |
| Outstanding option balance as of September 30, 2026 | 227,000 | $1.80 | 6.6 | $515,290 |
| Exercisable stock options as of September 30, 2026 | 227,000 | $1.80 | 6.6 | $515,290 |
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 September 30, 2026.
The fair value of the stock options is expensed on a straight-line basis over the vesting period ofone year, including the stock options granted to directors, as the annual stockholders meeting is expected to occur at the same approximate time each year. As of September 30, 2026, there wereno unrecognized compensation costs related to non-vested stock options.
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