1




                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
             [X] Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

                  For the quarterly period ended: June 30, 1999

             [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


                         Commission file number: 1-8443

                                TELOS CORPORATION

             (Exact name of registrant as specified in its charter)


          Maryland                                 52-0880974
  (State of Incorporation)            (I.R.S. Employer Identification No.)

  19886 Ashburn Road, Ashburn, Virginia            20147-2358
  (Address of principal executive offices)         (Zip Code)

                         Registrant's Telephone Number,
                       including area code: (703) 724-3800

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.  YES X   NO

As of August 9, 1999, the  registrant  had  21,241,980  shares of Class A Common
Stock, no par value, and 4,037,628 shares of Class B Common Stock, no par value;
and 3,185,586 shares of 12% Cumulative  Exchangeable  Redeemable Preferred Stock
par value $.01 per share, outstanding.

No public market exists for the registrant's Common Stock.

Number of pages in this report (excluding exhibits): 18


<PAGE>
<TABLE>
<CAPTION>

                    TELOS CORPORATION AND SUBSIDIARIES

                                    INDEX



                          PART I. FINANCIAL INFORMATION


<S>                                                                        <C>
Item 1. Financial Statements:

     Condensed Consolidated Statements of Operations for the
         Three and Six Months Ended June 30, 1999 and 1998 (unaudited).........4

     Condensed Consolidated Balance Sheets as of June 30, 1999 (unaudited)
         and December 31, 1998 ................................................5

     Condensed Consolidated Statements of Cash Flows for the
         Six Months Ended June 30, 1999 and 1998  (unaudited) .................6

     Notes to Condensed Consolidated Financial Statements (unaudited).......7-10

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations................................11-16

Item 3. Quantitative and Qualitative Disclosures about Market Risk............16



                           PART II. OTHER INFORMATION


Item 1. Legal Proceedings.....................................................17

Item 3. Defaults Upon Senior Securities.......................................17

Item 6. Exhibits and Reports on Form 8-K......................................17

SIGNATURES....................................................................18
</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                          PART I - FINANCIAL INFORMATION

                                        TELOS CORPORATION AND SUBSIDIARIES
                                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                                       (Unaudited)
                                                  (amounts in thousands)


                                                       Three Months Ended                 Six Months Ended
                                                             June 30,                          June 30,
                                                     ------------------------          -----------------------
                                                        1999            1998               1999          1998
                                                        ----            ----               ----          ----
<S>                                                  <C>             <C>                 <C>           <C>
Sales
    Systems and Support Services                     $  25,958       $ 27,024            $47,890       $53,324
    Products                                            30,182         18,153             46,881        34,346
    Enterworks, Inc.                                     1,771          1,532              3,689         2,833
                                                       -------         ------            -------         -----
                                                        57,911         46,709             98,460        90,503
Costs and expenses
    Cost of sales                                       48,033         39,735             83,881        80,115
    Selling,general and
     administrative expenses                             9,110          6,330             17,510        12,673
    Goodwill amortization                                  132            132                264           325
                                                       -------          -----            -------        ------
Operating income (loss)                                    636            512             (3,195)       (2,610)

Other income (expenses)
    Gain on sale of assets                                  --             --                 --         5,683
    Other income                                            21              6                 55            26
    Interest expense                                    (1,733)        (1,537)            (3,536)       (3,316)
                                                        -------        -------            -------       -------
Loss before taxes                                       (1,076)        (1,019)            (6,676)         (217)

Income tax benefit (provision)                              71           (686)             1,548          (811)
                                                    ----------         -------           -------        -------
Net loss                                             $  (1,005)      $ (1,705)           $(5,128)      $(1,028)
                                                     ==========      =========           ========      ========

























                                       The accompanying notes are an integral part of these condensed
                                                       consolidated financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>



                                                          TELOS CORPORATION AND SUBSIDIARIES
                                                         CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                  (amounts in thousands)



                                                                           ASSETS

                                                                      June 30, 1999                 December 31, 1998
                                                                      -------------                 -----------------
                                                                        (unaudited)
<S>                                                                         <C>                            <C>

Current assets
    Cash and cash equivalents (includes
       restricted cash of $160 at
       June 30, 1999 and December 31, 1998)                                 $   752                        $   408
    Accounts receivable, net                                                 39,020                         56,783
    Inventories, net                                                          6,975                          8,662
    Deferred income taxes                                                     5,486                          4,164
    Other current assets                                                        978                            707
                                                                              -----                         ------

       Total current assets                                                  53,211                         70,724

Property and equipment, net of
    accumulated depreciation of
    $24,998 and $24,159, respectively                                        13,718                         14,321
Goodwill, net                                                                 6,631                          6,896
Other assets                                                                  3,235                          3,310
                                                                             ------                       -------
                                                                            $76,795                       $ 95,251
                                                                             ======                        =======

                                                            LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current liabilities
    Accounts payable                                                        $19,480                        $25,206
    Other current liabilities                                                 7,640                          4,845
    Accrued compensation and benefits                                         7,659                          7,400
                                                                             ------                         ------

       Total current liabilities                                             34,779                         37,451

Senior credit facility                                                       25,471                         36,159
Senior subordinated notes                                                    18,693                         18,492
Capital lease obligations                                                    11,560                         11,710
                                                                             ------                        -------

       Total liabilities                                                     90,503                        103,812
                                                                             ------                        -------

Redeemable preferred stock
    Senior redeemable preferred stock                                         5,841                          5,631
    Redeemable preferred stock                                               34,351                         31,729
                                                                             ------                         ------

       Total preferred stock                                                 40,192                         37,360
                                                                             ------                         ------

Stockholders' investment
    Common stock                                                                 78                             78
    Capital in excess of par                                                      0                          2,116
    Retained deficit                                                        (53,978)                       (48,115)
                                                                             ------                         ------

       Total stockholders' investment (deficit)                             (53,900)                       (45,921)
                                                                             ------                         ------
                                                                            $76,795                       $ 95,251
                                                                             ======                        =======







                                   The accompanying notes are an integral part of these condensed consolidated
                                                                      financial statements.

</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                                           TELOS CORPORATION AND SUBSIDIARIES
                                                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                        (Unaudited)
                                                                  (amounts in thousands)



                                                                                              Six Months
                                                                                            Ended June 30,
                                                                                         1999              1998
                                                                                         ----              ----
<S>                                                                                    <C>               <C>


Operating activities:
     Net loss                                                                          $(5,128)          $(1,028)
      Adjustments to reconcile net loss to cash
        provided by operating activities:
         Gain on sale of fixed assets                                                      (88)               --
         Gain on sale of assets                                                             --            (5,683)
         Depreciation and amortization                                                   2,146             1,668
         Goodwill amortization                                                             264               325
         Other noncash items                                                             1,003               381
         Changes in assets and liabilities                                              14,283            12,541
                                                                                        ------            ------
         Cash provided by operating activities                                          12,480             8,204
                                                                                        ------            ------

Investing activities:
     Proceeds from sale of fixed assets                                                    171               --
     Proceeds from sale of assets                                                           --            14,675
     Investment in capitalized software and other assets                                  (762)           (1,111)
     Purchase of property and equipment                                                   (666)             (790)
                                                                                        -------          -------
         Cash (used in) provided by investing activities                                (1,257)           12,774
                                                                                        -------           -------
Financing activities:
     Repayment of borrowings under senior credit facility                              (10,688)          (16,195)
     Payments under capital leases                                                        (191)             (229)
     Retirement of Class B redeemable preferred stock                                       --            (5,000)
                                                                                       -------            -------
         Cash used in financing activities                                             (10,879)          (21,424)
                                                                                       --------           ------
     Increase(decrease) in cash and cash equivalents                                       344              (446)

     Cash and cash equivalents at beginning
         of period                                                                         408               587
                                                                                       -------               ---
     Cash and cash equivalents at end
         of period                                                                     $   752            $  141
                                                                                       =======              ====













   The accompanying notes are an integral part of these condensed consolidated
                              financial statements.

</TABLE>
<PAGE>

                           TELOS CORPORATION AND SUBSIDIARIES
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                     (Unaudited)


Note 1.  General

         The  accompanying   condensed  consolidated  financial  statements  are
unaudited and include the accounts of Telos Corporation ("Telos") and its wholly
owned  subsidiaries,  Telos Corporation  (California),  Telos Field Engineering,
Inc.,  Telos  International  Corporation  and  its  majority  owned  subsidiary,
Enterworks,  Inc.  (collectively,   the  "Company").   Significant  intercompany
transactions  have  been  eliminated.   In  the  opinion  of  the  Company,  the
accompanying  financial statements reflect all adjustments and reclassifications
(which  include  only normal  recurring  adjustments)  necessary  for their fair
presentation  in  conformity  with  generally  accepted  accounting  principles.
Interim  results  are not  necessarily  indicative  of fiscal  year  performance
because of the impact of seasonal and  short-term  variations.  These  financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and notes thereto  included in the  Company's  annual report on Form
10-K for the fiscal year ended December 31, 1998.

         The accompanying  condensed consolidated financial statements have been
prepared on a going concern basis,  which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business.  However,  the
Company  incurred a net loss of $9.2 million  during 1998 and a net loss of $5.1
million for the first six months of 1999.  In  addition,  the Company was not in
compliance with several  covenants of its Senior Credit Facility at December 31,
1998 and June 30, 1999.  The lender has provided  waivers for the  violations at
December 31, 1998, as well as waivers  through June 30, 1999.  Future  financial
covenants   have  been  amended  to  conform  to  the   Company's   1999  budget
expectations.   Based  on  its  budget,  the  Company  anticipates  a  need  for
approximately  $10 million of additional  financing for the second half of 1999.
These  factors,  including  the  uncertainty  surrounding  whether  and when the
additional  financing  will be secured,  and  whether the Company  will meet its
budget expectations and bank covenants in the second half of 1999, indicate that
the Company may be unable to continue as a going concern for a reasonable period
of time. The financial statements do not include any adjustments relating to the
recoverability  of  assets  and  classification  of  liabilities  that  might be
necessary  should the  Company be unable to  continue  as a going  concern.  The
Company's  continuation as a going concern is dependent on its ability to obtain
the additional financing required,  meet its 1999 budgeted cash flow objectives,
and comply with the terms of its Senior Credit Facility.

         The  Company  continues  to pursue  additional  financing.  The Company
believes that the necessary financing will be secured through one or more of the
following  sources:  the sale of a division or asset that is not critical to its
strategic  goals;  additional debt financing;  or additional  equity  financing.
Alternatives  are currently being pursued under each of these sources;  however,
the  required  financing  has not yet been  secured.  The Company  believes  the
required  funding  will be  arranged  in a timely  manner  that  does not have a
significant adverse impact on its operations. However, there can be no assurance
that the Company will be able to secure  financing  sufficient for its needs and
at terms favorable to the Company. Additionally,  there can be no assurance that
the Company will be  successful  in meeting its budget  expectations,  or comply
with its bank  covenants  in 1999.  Failure by the Company to obtain  sufficient
financing,  meet its budget expectations,  or meet its bank covenants may have a
material  adverse  effect  on  the  Company's  financial  position,  results  of
operations and cash flows.

         Certain  reclassifications  have  been made to prior  period  financial
statements to conform to the classifications used in the
current period.

Note 2.  Sale of Assets

         On February 28, 1998, Telos sold substantially all of the net assets of
one of its  divisions,  Telos  Information  Systems  ("TIS"),  to NYMA,  Inc., a
subsidiary of Federal Data Corporation of Bethesda,  Maryland for  approximately
$14.7  million in cash.  The Company has  recorded a gain of $5.7 million in its
condensed consolidated statement of operations for the six months ended June 30,
1998.

Note 3.  Debt Obligations

Senior Credit Facility

         The Company has a $45 million Senior Credit Facility  ("Facility") with
a bank which matures on July 1, 2000.  As of July 1, 1999,  the Facility will be
classified as a current  liability as the Facility will have a term of less than
one year.  Borrowings under the Facility are collateralized by a majority of the
Company's assets including accounts receivable,  inventory,  and Telos' stock in
Enterworks,  Inc.. The amount of available  borrowings  fluctuates  based on the
underlying  asset  borrowing  base.  At June 30,  1999,  the  Company was not in
compliance  with several  financial  covenants  contained  within the  Facility,
including  covenants relating to certain leverage,  net worth,  tangible capital
and fixed charge coverage goals. The bank has waived this noncompliance.
<PAGE>
                       TELOS CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Senior Subordinated Notes

         In 1995 the Company  issued  Senior  Subordinated  Notes  ("Notes")  to
certain  shareholders.  The Notes are classified as either Series B or Series C.
Series B Notes, which total $6.5 million at June 30, 1999 and December 31, 1998,
are  collateralized by fixed assets of the Company.  Series C Notes, which total
$7.9 million at June 30, 1999 and December 31,  1998,  are  unsecured.  Both the
Series B and  Series C Notes  have a  maturity  date of October 1, 2000 and have
interest rates ranging from 14% to 17%. Interest is paid quarterly on January 1,
April 1, July 1, and  October 1 of each  year.  The Notes can be  prepaid at the
Company's option. Additionally, these Notes have a cumulative payment premium of
13.5% per annum  payable only upon certain  circumstances.  These  circumstances
include  an  initial  public  offering  of  the  Company's  common  stock  or  a
significant  refinancing,  to the extent  that net  proceeds  from either of the
above  events are  received and are  sufficient  to pay the premium.  Due to the
contingent  nature of the premium payment,  the associated  premium expense will
only be recorded  after the occurrence of a triggering  event.  At June 30, 1999
the prepayment premium that would be due upon a triggering event is $9,099,000.

     In November 1998, the Company issued additional Senior  Subordinated  Notes
to certain  shareholders  which are  classified  as Series D. The Series D Notes
total $1.8 million and are unsecured. The Series D Notes have a maturity date of
October 1, 2000 and bear interest at 14% per annum.  Interest is paid  quarterly
on  January 1,  April 1, July 1, and  October 1 of each  year.  The notes can be
prepaid at the Company's  option.  These Notes contain the same payment  premium
provisions as the Series B and Series C notes (see above). At June 30, 1999, the
prepayment  premium  that would be due upon a triggering  event is $151,000.  In
connection  with the debt,  the Company  issued  1,500,000  warrants to purchase
shares of the  Company's  Class A Common  Stock.  The warrants  have an exercise
price of $.01 and an exercise  period of 22 months.  The Company has  assigned a
value to the warrants of $420,000  which has been  included in capital in excess
of par.  The  amount  outstanding  of the  subordinated  debt was  approximately
$1,492,000 at June 30, 1999.

Enterworks Subordinated Notes

     During 1996, the Company completed a private  financing whereby  $3,277,960
of 8% subordinated  debt of Enterworks was issued.  Investors  included  certain
members of the Board of Directors and management and certain shareholders of the
Company.  The  subordinated  debt has a five  year  maturity.  Interest  is paid
quarterly,  beginning January 1, 1998, on the first of January,  April, July and
October each year. In connection  with the debt,  the Company  issued  2,048,725
warrants to purchase  shares of Enterworks  common  stock.  The warrants have an
exercise  price of one dollar and an exercise  period of ten years.  The Company
has  assigned a value to the  warrants  of $921,926  which has been  included in
capital in excess of par. The amount  outstanding of this  subordinated debt was
approximately  $2,818,000 and $2,723,000 at June 30, 1999 and December 31, 1998,
respectively.

Note 4.       Preferred Stock

Senior Redeemable Preferred Stock

     The components of the senior redeemable  preferred stock are Series A-1 and
Series  A-2,  each with $.01 par  value and 1,250 and 1,750  shares  authorized,
issued and outstanding, respectively. The Series A-1 and Series A-2 each carry a
cumulative  per annum  dividend  rate of 14.125% of their  liquidation  value of
$1,000  per  share.  The  dividends  are  payable  semi-annually  on June 30 and
December 31 of each year.  The  liquidation  preference of the senior  preferred
stock is the face amount of the Series A-1 and A-2 ($1,000 per share),  plus all
accrued  and unpaid  dividends.  The  Company is  required  to redeem all of the
outstanding  shares of the stock on  December  31,  2001,  subject  to the legal
availability  of funds.  Mandatory  redemptions  are  required  from excess cash
flows,  as defined  in the stock  agreements.  The Series A-1 and A-2  Preferred
Stock is senior to all other  present  and  future  equity of the  Company.  The
Series A-1 is senior to the Series A-2. The Company has not  declared  dividends
on its senior  redeemable  preferred stock since its issuance.  At June 30, 1999
and December 31, 1998 cumulative undeclared, unpaid dividends relating to Series
A-1 and  A-2  redeemable  preferred  stock  totaled  $2,841,000  and  $2,631,000
respectively.

12% Cumulative Exchangeable Redeemable Preferred Stock

     A maximum of 6,000,000  shares of 12%  Cumulative  Exchangeable  Redeemable
Preferred Stock (the "Public  Preferred  Stock"),  par value $.01 per share, has
been authorized for issuance.  The Company  initially issued 2,858,723 shares of
the Public  Preferred  Stock  pursuant to the  acquisition of the Company during
fiscal year 1990. The Public  Preferred  Stock was recorded at fair value on the
date of original  issue,  November 21, 1989, and the Company is making  periodic
accretions  under the interest method of the excess of the redemption value over
the  recorded  value.  Accretion  for the six  months  ended  June 30,  1999 was
$710,000.  The Company declared stock dividends  totaling 736,863 shares in 1990
and 1991.
<PAGE>
                       TELOS CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

         In November  1998,  the Company  retired  410,000  shares of the Public
Preferred Stock held by certain shareholders.  The Company repurchased the stock
at $4.00 per share. The carrying value of these shares was determined to be $3.8
million,  and the $2.2 million excess of the carrying  amount of these shares of
Public Preferred Stock over the redemption price of $1.6 million was recorded as
an increase in capital in excess of par; there was no impact on income from this
transaction.

         The Public Preferred Stock has a 20 year maturity, however, the Company
must redeem, out of funds legally  available,  20% of the Public Preferred Stock
on the 16th 17th, 18th and 19th  anniversaries of November 12, 1989, leaving 20%
to be redeemed at  maturity.  On any dividend  payment  date after  November 21,
1991, the Company may exchange the Public  Preferred Stock, in whole or in part,
for  12%  Junior   Subordinated   Debentures  that  are  redeemable  upon  terms
substantially  similar to the Public  Preferred  Stock and  subordinated  to all
indebtedness for borrowed money and like obligations of the Company.

         The Public Preferred Stock accrues a semi-annual dividend at the annual
rate of 12% ($1.20) per share,  based on the  liquidation  preference of $10 per
share and is fully  cumulative.  Through  November 21, 1995, the Company had the
option to pay dividends in additional shares of Preferred Stock in lieu of cash.
Dividends in additional  shares of the Preferred  Stock were paid at the rate of
6% of a share for each $.60 of such  dividends  not paid in cash.  Dividends are
payable by the Company,  provided the Company has legally  available funds under
Maryland law and is able to pay dividends  under its charter and other corporate
documents,  when and if declared by the Board of Directors,  commencing  June 1,
1990, and on each six month anniversary thereof. For the years 1992 through 1994
and for the dividend  payable June 1, 1995,  the Company has accrued  undeclared
dividends in additional  shares of preferred stock.  These accrued dividends are
valued at $3,950,000.  Had the Company  accrued these dividends on a cash basis,
the total amount  accrued would have been  $15,101,000.  For the cash  dividends
payable since December 1, 1995, the Company has accrued $16,766,000.

         The  Company  has not  declared or paid  dividends  since 1991,  due to
restrictions  and  ambiguities  relating to the payment of  dividends  contained
within its charter,  its working capital facility agreement,  and under Maryland
law.

Note 5.  Reportable Business Segments

         The Company  adopted SFAS No. 131,  "Disclosures  About  Segments of an
Enterprise and Related  Information",  in 1998 which changes the way the Company
reports information about its operating segments.

         The  Company  has  three  reportable  segments:   Systems  and  Support
Services,  Products, and Enterworks,  Inc. The Company evaluates the performance
of its  operating  segments  based on revenue,  gross  profit and income  before
goodwill amortization,  income taxes, non-recurring items and interest income or
expense.

         Summarized  financial  information  concerning the Company's reportable
segments  for the  three  months  ended  June 30,  1999 and 1998 is shown in the
following table. The "other" column includes corporate related items.


<PAGE>
<TABLE>
<CAPTION>
                       TELOS CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)



                                    Systems and
                                    Support Services     Products         Enterworks      Other (1)          Total
                                    ----------------     --------         ----------      ---------          -----
<S>                                  <C>                 <C>              <C>             <C>                <C>

         June 30, 1999
External Revenues                    $25,958             $30,182          $ 1,771         $    --            $57,911
Intersegment Revenues                    151                  --              101              --                252
Gross Profit                           5,472               4,250              156              --              9,878
Segment profit(loss)(3)                4,101               1,548           (4,881)             --                768
Total assets                          31,746              12,457            6,190           26,402            76,795
Capital Expenditures                      34                   3              133              114               284
Depreciation &
 Amortization(2)                     $   237             $    56          $   635         $    323           $ 1,251

         June 30, 1998
External Revenues                    $27,024             $18,153          $ 1,532         $     --           $46,709
Intersegment Revenues                    208                 619               --               --               827
Gross Profit                           4,789               1,947              238               --             6,974
Segment profit(loss)(3)                3,398                (546)          (2,208)              --               644
Total assets                          39,638               5,758            7,325           31,827            84,548
Capital Expenditures                      24                  --              137               85               246
Depreciation &
 Amortization(2)                     $   (61)            $   133          $   434         $    397           $   903
<FN>

(1) Corporate  assets are  principally  property and  equipment,  cash and other
assets.
(2)  Depreciation  and  amortization  includes  amounts relating to property and
     equipment, goodwill, deferred software costs and spare parts inventory.
(3) Segment profit (loss)  represents  operating  income (loss) before  goodwill
amortization.
</FN>

         The  Company  does not have  material  international  revenues,  profit
(loss),  assets  or  capital   expenditures.   The  Company's  business  is  not
concentrated in a specific geographical area within the United States, as it has
56 separate facilities located in 19 states.

</TABLE>




<PAGE>



Item 2.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.

General

         Sales for the first six months of 1999 were $98.5 million,  an increase
of $8.0 million or 8.8% as compared to the same 1998 period.  This  increase was
primarily  attributable to a $12.5 million  increase in sales from the Company's
Products  Group  which  experienced  increased  sales from its Joint  Recruitive
Information Support Services Blanket Purchase  Agreement.  The increase in sales
was also  attributable  to sales  from the  Company's  Enterworks  Group,  which
increased its sales by $856,000 over 1998. These increases were partially offset
by decreases in sales in the Systems and Support Services Group of approximately
$5.4  million.  This  decrease is due to the sale of the  Company's  Information
Systems  division ("TIS") in February 1998, as well as decreased sales under the
Artillery Training Simulation devices product line.

         Operating losses through the first six months of 1999 were $3.2 million
as compared to an operating  loss of $2.6  million  during the same 1998 period.
Operating   profitability   declined   principally  as  a  result  of  increased
investments  by the Company in sales and marketing and research and  development
in its Enterworks subsidiary.

         Total backlog from existing contracts was approximately  $712.8 million
and $923.3 million as of June 30, 1999 and December 31, 1998, respectively.  The
decrease  in total  backlog  is due to the  expiration  of the  Company's  SMCII
contract in April of 1999, which was previously  disclosed in the Company's Form
10-K for the year ended  December  31,  1998.  As of June 30,  1999,  the funded
backlog of the Company totaled $86.1 million,  an increase of $29.6 million from
December  31,  1998.  Funded  backlog  represents  aggregate  contract  revenues
remaining  to be earned by the Company at a given time,  but only to the extent,
in the case of government contracts, funded by a procuring government agency and
allotted to the contracts.

Results of Operations

         The condensed consolidated statements of operations include the results
of  operations  of Telos  Corporation  and its wholly owned  subsidiaries  Telos
Corporation   (California),   Telos  Field  Engineering  Inc.   ("TFE"),   Telos
International  Corporation ("TIC"), and it majority owned subsidiary Enterworks,
Inc.  ("Enterworks")  ("the  Company").  The  major  elements  of the  Company's
operating  expenses as a percentage of sales for the three and six month periods
ended June 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>


                                                             Three Months Ended            Six Months Ended
                                                                    June 30,                      June 30,
                                                            ----------------------        ---------------------

<S>                                                         <C>            <C>            <C>            <C>

                                                            1999            1998           1999            1998
                                                            ----            ----           ----            ----

Sales                                                       100.0%         100.0%          100.0%        100.0%
Cost of sales                                                82.9           85.1            85.2          88.5
SG&A expenses                                                15.7           13.5            17.8          14.0
Goodwill amortization                                         0.2            0.3             0.2           0.4
                                                             ----            ---            ----           ---

Operating income (loss)                                       1.2            1.1            (3.2)         (2.9)
Other income                                                   --             --              --            --
Gain on sale of assets                                         --             --              --           6.3
Interest expense                                             (3.0)          (3.3)           (3.6)         (3.6)
Income tax benefit (provision)                                0.1           (1.5)            1.6          (0.9)
                                                              ---            ---             ---           ---
Net loss                                                     (1.7)%          3.7)%          (5.2)%        (1.1)%
                                                              ===            ===             ===           ===

</TABLE>

<PAGE>
<TABLE>
<CAPTION>



Financial Data by Market Segment


         Sales, gross profit, and gross margin by market segment for the periods
designated below are as follows:

                                                                    Three Months Ended                      Six Months Ended
                                                                          June 30,                               June 30,
                                                                    -------------------                     -----------------

                                                                   1999           1998                   1999           1998
                                                                   ----           ----                   ----           ----
                                                                                (amounts in thousands)
<S>                                                              <C>            <C>                    <C>            <C>
Sales:
   Systems and Support Services                                  $25,958        $27,024                $47,890        $53,324
   Products                                                       30,182         18,153                 46,881         34,346
   Enterworks, Inc.                                                1,771          1,532                  3,689          2,833
                                                                  ------          -----                 ------          -----
         Total                                                   $57,911        $46,709                $98,460        $90,503
                                                                  ======         ======                 ======         ======

Gross Profit:
   Systems and Support Services                                  $ 5,472        $ 4,789                $ 9,109        $ 7,650
   Products                                                        4,250          1,947                  5,068          2,111
   Enterworks, Inc.                                                  156            238                    402            627
                                                                  ------         ------                 ------            ---
         Total                                                   $ 9,878        $ 6,974                $14,579        $10,388
                                                                  ======         ======                 ======         ======

Gross Margin:
   Systems and Support Services                                     21.1%          17.7%                  19.0%          14.3%
   Products                                                         14.1%          10.7%                  10.8%           6.1%
   Enterworks, Inc.                                                  8.8%          15.5%                  10.9%          22.1%

         Total                                                      17.1%          14.9%                  14.8%          11.5%
</TABLE>

         For the three month  period  ended June 30,  1999,  sales  increased by
$11.2  million,  or 24.0% to $57.9 million from $46.7 million for the comparable
1998 period.  Of the $11.2 million  increase,  $12.0 million was attributable to
the Products Group, which experienced  increased sales from its Joint Recruitive
Information  Support  Services  Blanket  Purchase  Agreement  ("JRISS BPA"). The
overall  increase in the revenue was also enhanced by an increase of $239,000 in
Enterworks revenue for the second quarter of 1999 compared to the second quarter
of 1998. The increase is primarily due to sales of the Group's  Process  Manager
product.  Offsetting  these  increases  was a decrease  in Systems  and  Support
Services  revenue of $1.1  million from second  quarter 1999  compared to second
quarter  1998.  This decrease is primarily due to a decline in revenue under the
Artillery Training  Simulation devices product line. This decline in revenue was
partially  offset by an increase in sales from the Company's  data  integration,
information security,  advanced message handling system solutions and enterprise
management  business areas.  The decline in revenue was also partially offset by
the revenue  generated from a subcontract to the  Consolidated  Space Operations
Contract,  a subcontract  awarded to the company's hardware services division by
Lockheed Martin Corporation.

         Sales  increased  $8.0  million  or 8.8% to $98.5  million  for the six
months ended June 30, 1999,  from $90.5 million for the comparable  1998 period.
The  increase  for the six month  period  includes a $12.5  million  increase in
Product sales and a $856,000 increase in Enterworks sales, partially offset by a
decrease of $5.4 million in Systems and Support Services revenue.  This increase
in the six month  revenue is  primarily  due to the increase in revenue from the
JRISS BPA.  These  increases were slightly  offset by decreased  sales under the
Artillery Training Simulation Devices product line of $3.0 million, and the sale
of the Company's Information Systems division ("TIS") in February, 1998. The TIS
division generated sales of $4.0 million prior to being sold.


<PAGE>
         Cost of sales was 82.9% of sales for the quarter and 85.2% of sales for
the six months ended June 30, 1999,  as compared to 85.1% and 88.5% for the same
periods in 1998.  The  decreases in cost of sales as a  percentage  of sales are
primarily  attributable to favorable  changes in contract mix within the Systems
and Support Services Group, as well as a high margin transaction with one of the
Company's partners.

         Gross profit  increased  $2.9 million in the three month period to $9.9
million in 1999, from $7.0 million in the comparable 1998 period.  Gross margins
were 17.1% and 14.8%, respectively,  for the three and six month periods of 1999
as  compared to 14.9% and 11.5%,  respectively,  for the  comparable  periods of
1998.

         Selling,  general,  and  administrative  expense ("SG&A")  increased by
approximately  $2.8 million or 43.9%,  to $9.1 million in the second  quarter of
1999 from  $6.3  million  in the  comparable  period of 1998.  For the six month
period of 1999,  SG&A increased $4.8 million to $17.5 million from $12.7 million
in 1998. These increases are due primarily to the Company's increased investment
in research and development  and sales and marketing for  Enterworks.  Excluding
the additional expense incurred for Enterworks  research and development of $2.2
million  and  Enterworks  sales and  marketing  costs of $2.8  million,  selling
general and  administrative  expense decreased $200,000 for the six months ended
June 30, 1999 compared to the same period in 1998.

         SG&A as a  percentage  of  revenues  increased  to 15.7% for the second
quarter of 1999 from 13.5% in the comparable  1998 period.  SG&A as a percentage
of revenues for the six month period ended June 30, 1999 increased to 17.8% from
14.0% compared to the same period in 1998.

         Goodwill  amortization  expense  remained the same for the  comparative
three month  periods of 1999 and 1998,  and decreased by $61,000 to $264,000 for
the six months  ended June 30, 1999  compared  to the same period in 1998.  This
reduction is due to a decrease in the goodwill balance  associated with the sale
of TIS in early 1998.

         Operating  income  increased by $124,000 to $636,000 in the three month
period ended June 30, 1999 from $512,000 of operating  profit in the  comparable
1998 period.  Operating  income decreased  $585,000 to a $3.2 million  operating
loss for the six months ended June 30, 1999 from a $2.6 million  operating  loss
for the six month period ended June 30, 1998.  The increase in operating  profit
for the three  month  period is mostly  attributable  to the  increase  in gross
profit.  The six month decrease  resulted from the  aforementioned  increases in
SG&A.

         Telos sold substantially all of the net assets of one of its divisions,
TIS, in the first quarter of 1998. The transaction generated approximately $14.7
million in cash  proceeds  and a gain of $5.7  million  was  recorded in the six
months ended June 30, 1998.

         Interest expense  increased  approximately  $196,000 to $1.7 million in
the second quarter of 1999 from $1.5 million in the comparable 1998 period,  and
increased  approximately  $220,000 to $3.5 million for the six months ended June
30, 1999 from $3.3 million for the comparable  1998 period.  These increases are
due to increased debt levels in 1999.

         The income tax benefit  was $71,000 and $1.5  million for the three and
six  months  ended  June  30,  1999,  respectively.   These  tax  benefits  were
principally  due to the net operating loss  carryforwards  generated  during the
first quarter. The Company's net deferred tax asset includes substantial amounts
of net  operating  loss  carryforwards.  Failure to achieve  forecasted  taxable
income may affect the  ultimate  realization  of the net  deferred  tax  assets.
Management's  tax strategy  contemplates  the  generation  of taxable  income in
excess of operating losses sufficient in amounts to realize the net deferred tax
assets.  The Company  recorded an income tax  provision of $686,000 and $811,000
for the  three and six  months  ended  June 30,  1998,  respectively.  These tax
provisions were primarily  attributable to provisions for state income taxes and
increases in allowances relating to the recoverability of deferred tax assets.


Liquidity and Capital Resources

         For the six months  ended June 30,  1999,  the Company  provided  $12.5
million  of  cash  in its  operating  activities.  This  cash  was  provided  by
reductions  of accounts  receivable  of $17.7  million,  offset by  decreases in
accounts payable of $5.7 million and losses incurred in operations. Cash used in
investing  activities  was $1.3 million.  Cash was used by financing  activities
during the quarter to pay down approximately  $10.7 million of the Senior Credit
Facility balance.

         At June 30,  1999,  the  Company  had  outstanding  debt and long  term
obligations  of $55.7  million,  consisting  of $25.5  million under the secured
senior credit facility, $18.7 million in subordinated debt, and $11.6 million in
capital lease obligations.
<PAGE>

         At June 30,  1999,  the  Company  had an  outstanding  balance of $25.5
million on its $45 million Senior Credit Facility (the "Facility"). The Facility
matures on July 1, 2000 and is  collateralized  by a majority  of the  Company's
assets   (including   inventory,   accounts   receivable  and  Telos'  stock  in
Enterworks).  The amount of borrowings  fluctuates based on the underlying asset
borrowing base as well as the Company's  working capital  requirements.  At June
30, 1999,  the Company,  under its borrowing  base formula,  had $3.4 million of
unused availability.  Because the Facility matures on July 1, 2000 and therefore
will have a term of less than one year,  the Facility  will be  classified  as a
current liability on the Company's  condensed  consolidated  balance sheet as of
July 1, 1999.  The Facility has various  covenants that may, among other things,
restrict  the  ability  of the  Company to merge with  another  entity,  sell or
transfer  certain  assets,  pay  dividends and make other  distributions  beyond
certain  limitations.  The  Facility  also  requires the Company to meet certain
leverage,  net worth,  interest  coverage and operating goals. At June 30, 1999,
the  Company was not in  compliance  with  several  covenants  contained  in the
Facility; however, the bank has waived this non-compliance.

         The accompanying  consolidated  financial statements have been prepared
on a going concern  basis,  which  contemplates  the  realization  of assets and
satisfaction  of  liabilities  in the normal  course of business.  However,  the
Company  incurred a net loss of $9.2 million  during 1998 and a net loss of $5.1
million for the first six months of 1999.  In  addition,  the Company was not in
compliance with several  covenants of its Senior Credit Facility at December 31,
1998 and June 30, 1999.  The lender has provided  waivers for the  violations at
December 31, 1998, as well as waivers  through June 30, 1999.  Future  financial
covenants   have  been  amended  to  conform  to  the   Company's   1999  budget
expectations.   Based  on  its  budget,  the  Company  anticipates  a  need  for
approximately  $10 million of additional  financing for the second half of 1999.
These  factors,  including  the  uncertainty  surrounding  whether  and when the
additional  financing  will be secured,  and  whether the Company  will meet its
budget expectations and bank covenants in the second half of 1999, indicate that
the Company may be unable to continue as a going concern for a reasonable period
of time. The financial statements do not include any adjustments relating to the
recoverability  of  assets  and  classification  of  liabilities  that  might be
necessary  should the  Company be unable to  continue  as a going  concern.  The
Company's  continuation as a going concern is dependent on its ability to obtain
the additional financing required,  meet its 1999 budgeted cash flow objectives,
and comply with the terms of its Senior Credit Facility.

         The  Company  continues  to pursue  additional  financing.  The Company
believes that the necessary financing will be secured through one or more of the
following  sources:  the sale of a division or asset that is not critical to its
strategic  goals;  additional debt financing;  or additional  equity  financing.
Alternatives  are currently being pursued under each of these sources;  however,
the  required  financing  has not yet been  secured.  The Company  believes  the
required  funding  will be  arranged  in a timely  manner  that  does not have a
significant adverse impact on its operations. However, there can be no assurance
that the Company will be able to secure  financing  sufficient for its needs and
at terms favorable to the Company. Additionally,  there can be no assurance that
the Company will be  successful  in meeting its budget  expectations,  or comply
with its bank  covenants  in 1999.  Failure by the Company to obtain  sufficient
financing,  meet its budget expectations,  or meet its bank covenants may have a
material  adverse  effect  on  the  Company's  financial  position,  results  of
operations  and  cash  flows.  See  also  Note 1 to the  Consolidated  Financial
Statements.

Year 2000

         Year 2000 issues refer generally to the problems that some software may
have in determining the correct century for the year. For example, software with
date-sensitive  functions  that is not Year  2000  compliant  may not be able to
distinguish whether "00" means 1900 or 2000, which may result in failures or the
creation of erroneous results.

         The  Company,  like most  owners of  computer  software,  has  modified
significant  portions of its  internal  use  software  so that it will  function
properly in the year 2000. Accordingly,  the Company has incurred and expects to
continue to incur  internal staff costs as well as consulting and other expenses
related to software  and  infrastructure  enhancements  necessary to prepare the
systems for the year 2000.  Total  expenditures for such costs were not material
to the Company's  consolidated  financial statement in 1998 or 1999. The Company
expects to complete its internal use software  compliance  efforts  during 1999.
Maintenance,  modification costs and software purchased with the express purpose
of fixing the year 2000 problem are expensed as incurred.

         The Company has queried its key  suppliers  and vendors to assess their
Year 2000 readiness and has been informed that software  licensed to the Company
for resale will be  compliant  by the Year 2000.  Therefore,  the Company is not
aware of any problems that would have a material adverse impact on its financial
position, results of operations or cash flows. However, the Company has no means
of ensuring compliance by its suppliers or vendors. If its suppliers and vendors
are not Year 2000  compliant,  there could be a material  adverse  effect on the
Company.

         As is the case with other similarly  situated  computer  companies,  if
Telos' current or future  customers  fail to achieve Year 2000  compliance or if
they divert  technology  expenditures to address Year 2000 compliance  problems,
Telos'  business,   results  of  operations  or  financial  condition  could  be
materially  adversely  affected.  For  example,  agencies  of the United  States
Government are principal  customers of the Company.  If such agencies experience
significant  Year  2000  system  failures,  under  terms of  typical  government
contracts,  the Company's  performance  and/or  receipt of payments due would be
delayed or contracts  could be terminated  for  convenience,  which could have a
material  adverse effect on the Company.  If similar failures are experienced by
other  customers or potential  customers of the Company,  this could also have a
material adverse impact on the Company.

         Based on its internal  review and the compliance  information  received
from its  suppliers,  the Company  does not  believe  that there is a need for a
contingency  plan for  year  2000  system  non-compliance.  Such a plan  will be
developed  if the Company  becomes  aware of any year 2000  non-compliance  that
would impact its critical  operations.  The cost of developing and  implementing
such a plan, if required, may in itself be material.

         Although  the Company  does not believe that it will incur any material
unanticipated  costs  or  experience   material   disruptions  in  its  business
associated  with  preparing  its  systems  for the Year  2000,  there  can be no
assurances   that  the  Company  will  not  experience   serious   unanticipated
consequences  and/or material costs caused by undetermined  errors or defects in
the technology used in its internal systems, embedded software and the Company's
own software  products.  Worst case scenarios  could include:  (i) corruption of
data   contained  in  the   Company's   internal   information   systems,   (ii)
interruptions,  delays or terminations in the Company's business with government
agencies or other  customers  associated  with their own year 2000  problems and
(iii) the failure of infrastructure services provided by government agencies and
other third parties (e.g., electricity, phone service, water transport, internet
services,  etc.) Any of these unexpected  outcomes could have a material adverse
effect on the Company.

         Management  believes that  software  created and sold by the Company is
compliant or will be compliant by the year 2000. However, because the Company is
in the  business  of  selling  computer  systems,  the  Company's  risk of being
subjected to lawsuits  relating to year 2000 issues is likely to be greater than
that of other industries.  Computer systems may involve  different  hardware and
software components from different manufacturers; therefore, it may be difficult
to determine  which  component in a computer system may cause a year 2000 issue.
As a  result,  the  Company  may be  subjected  to year  2000  related  lawsuits
independent  of whether its products and services are year 2000  compliant.  The
outcomes of such lawsuits and the impact on the Company  cannot be determined at
this time.

Forward-Looking Statements

         This Quarterly Report on Form 10-Q contains forward-looking statements.
For this purpose,  any  statements  contained  herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the  foregoing,  the words  "believes,"  "anticipates,"  "plans,"  "expects" and
similar expressions are intended to identify forward-looking  statements.  There
are a number of important  factors that could cause the Company's actual results
to differ  materially from those indicated by such  forward-looking  statements.
These  factors  include,  without  limitation,  those set forth  below under the
caption "Certain Factors That May Affect Future Results."

Certain Factors That May Affect Future Results

         The  following  important  factors,  among  others,  could cause actual
results to differ materially from those indicated by forward-looking  statements
made in this Quarterly Report on Form 10-Q and presented elsewhere by management
from time to time.

         A number of uncertainties  exist that could affect the Company's future
operating results, including,  without limitation,  general economic conditions,
the timing and approval of the federal government's fiscal year budget, business
growth through obtaining new business and, once obtained,  the Company's ability
to successfully  perform at a profit,  the Company's ability to convert contract
backlog to  revenue,  the  Company's  ability  to secure  adequate  capital  and
financing  to support  continued  business  growth,  and the risk of the Federal
government  terminating  contracts  with the Company.  While the Company has not
experienced  contract  terminations  with the  Federal  government,  the Federal
government can terminate at its  convenience.  Should this occur,  the Company's
operating results could be adversely impacted.

         As a high percentage of the Company's  revenue is derived from business
with the federal government,  the Company's operating results could be adversely
impacted  should the Federal  government  not approve and  implement  its annual
budget in a timely fashion.
<PAGE>

         The accompanying  consolidated  financial statements have been prepared
on a going concern  basis,  which  contemplates  the  realization  of assets and
satisfaction  of  liabilities  in the normal  course of business.  However,  the
Company  incurred a net loss of $9.2 million  during 1998 and a net loss of $5.1
million for the first six months of 1999.  In  addition,  the Company was not in
compliance with several  covenants of its Senior Credit Facility at December 31,
1998 and June 30, 1999.  The lender has provided  waivers for the  violations at
December 31, 1998, as well as waivers  through June 30, 1999.  Future  financial
covenants   have  been  amended  to  conform  to  the   Company's   1999  budget
expectations.   Based  on  its  budget,  the  Company  anticipates  a  need  for
approximately $10 million of additional financing for second half of 1999. These
factors,  including the uncertainty  surrounding whether and when the additional
financing  will be  secured,  and  whether  the  Company  will  meet its  budget
expectations  and bank  covenants in the second half of 1999,  indicate that the
Company may be unable to continue as a going concern for a reasonable  period of
time. The financial  statements do not include any  adjustments  relating to the
recoverability  of  assets  and  classification  of  liabilities  that  might be
necessary  should the  Company be unable to  continue  as a going  concern.  The
Company's  continuation as a going concern is dependent on its ability to obtain
the additional financing required,  meet its 1999 budgeted cash flow objectives,
and comply with the terms of its Senior Credit Facility.

         The  Company  continues  to pursue  additional  financing.  The Company
believes that the necessary financing will be secured through one or more of the
following  sources:  the sale of a division or asset that is not critical to its
strategic  goals;  additional debt financing;  or additional  equity  financing.
Alternatives  are currently being pursued under each of these sources;  however,
the  required  financing  has not yet been  secured.  The Company  believes  the
required  funding  will be  arranged  in a timely  manner  that  does not have a
significant adverse impact on its operations. However, there can be no assurance
that the Company will be able to secure  financing  sufficient for its needs and
at terms favorable to the Company. Additionally,  there can be no assurance that
the Company will be  successful  in meeting its budget  expectations,  or comply
with its bank  covenants  in 1999.  Failure by the Company to obtain  sufficient
financing,  meet its budget expectations,  or meet its bank covenants may have a
material  adverse  effect  on  the  Company's  financial  position,  results  of
operations and cash flows.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt obligations. The Company is exposed to
interest rate volatility with regard to its variable rate debt obligations under
its Senior Credit  Facility.  This facility bears interest at 1.00%,  subject to
certain  adjustments,  over the bank's base rate. The weighted  average interest
rate for the first six months of 1999 was 9.04%.  This facility  expires on July
1, 2000 and has outstanding balance of $25.5 million at June 30, 1999.

The  Company's  other  long-term  debt at  June  30,  1999  consists  of  Senior
Subordinated  Notes B, C, and D which bear  interest at fixed rates ranging from
14% to  17%.  The  Senior  Subordinated  Notes  mature  as to  principal  in the
aggregate  amount of $16,173,000 on October 1, 2000.  Additionally,  the Company
has  subordinated  debt issued by their majority owned  subsidiary,  Enterworks,
which bears  interest at a fixed rate of 8%. The  Enterworks  Notes mature as to
principal in the aggregate amount of $3,277,960 in July 2001. The Company has no
cash flow exposure due to rate changes for its Senior Subordinated or Enterworks
Notes.
<PAGE>


                            PART II - OTHER INFORMATION


Item 1. Legal Proceedings

         The Company is party to various lawsuits arising in the ordinary course
of  business.  In the opinion of  management,  while the  results of  litigation
cannot be predicted with  certainty,  the final outcome of such matters will not
have a material adverse effect on the Company's  consolidated financial position
or results of operations.

Item 3. Defaults Upon Senior Securities

Senior Redeemable Preferred Stock

         The  Company  has  not  declared  dividends  on its  Senior  Redeemable
Preferred  Stock,  Series A-1 and A-2, since their  issuance.  Total  undeclared
unpaid dividends accrued for financial reporting purposes are $2,841,000 for the
Series A-1 and A-2 Preferred Stock at June 30, 1999.

12% Cumulative Exchangeable Redeemable Preferred Stock

         Through  November 21, 1995, the Company had the option to pay dividends
in additional  shares of Preferred Stock in lieu of cash (provided there were no
blocks on payment as further  discussed  below).  Dividends  are  payable by the
Company, provided the Company has legally available funds under Maryland law and
is able to pay dividends under its charter and other corporate  documents,  when
and if declared by the Board of Directors,  commencing June 1, 1990, and on each
six month anniversary  thereof.  Dividends in additional shares of the Preferred
Stock  were paid at the rate of 0.06 of a share for each $.60 of such  dividends
not paid in cash.  Cumulative  undeclared  dividends as of June 30, 1999 accrued
for financial  reporting purposes totaled  $20,716,000.  Dividends for the years
1992 through 1994 and for the dividend  payable June 1, 1995 were accrued  under
the assumption that the dividend will be paid in additional  shares of preferred
stock and are valued at $3,950,000. Had the Company accrued these dividends on a
cash basis, the total amount accrued would have been  $15,101,000.  For the cash
dividends payable since December 1, 1995 the Company has accrued $16,766,000.

         The  Company  has not  declared or paid  dividends  since 1991,  due to
restrictions  and  ambiguities  relating to the payment of  dividends  contained
within its charter,  its working capital facility agreement,  and under Maryland
law.


Item 6. Exhibits and Reports on Form 8-K

        (a)   Exhibits:


             27     Financial Data Schedule

        (b)      Reports on Form 8-K:       None.

Items 2, 4, and 5 are not applicable and have been omitted.

<PAGE>


                                 SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



DATE:                                                          Telos Corporation



August 16, 1999                                              /s/  Lorenzo Tellez
                                                             -------------------
                                                                  Lorenzo Tellez
                                                  (Principal Financial Officer &
                                                   Principal Accounting Officer)