<PAGE>

                    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: March 31, 1997

[ ]           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 May 2, 1997 the registrant had 23,076,753  shares of Class A Common Stock,
no par  value,  4,037,628  shares of Class B Common  Stock,  no par  value;  and
3,595,586 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):  12


<PAGE>



                       TELOS CORPORATION AND SUBSIDIARIES

                                      INDEX




                        PART I.   FINANCIAL INFORMATION



Item 1.   Financial Statements (Unaudited):

     Condensed Consolidated Statements of Income for the Three Months Ended
       March 31, 1997 and 1996................................................3

     Condensed Consolidated Balance Sheets as of March 31, 1997
       and December 31, 1996..................................................4

     Condensed Consolidated Statements of Cash Flows for the Three Months
       Ended March 31, 1997 and 1996..........................................5

     Notes to Condensed Consolidated Financial Statements...................6-7

Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations....................8-10


                           PART II.   OTHER INFORMATION


Item 3.   Defaults Upon Senior Securities....................................11

Item 6.   Exhibits and Reports on Form 8-K...................................11

SIGNATURES...................................................................12




<PAGE>



                         
<TABLE>
<CAPTION>
                         PART I - FINANCIAL INFORMATION
                       TELOS CORPORATION AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                                   (Unaudited)

                             (amounts in thousands)

                                                                     Three Months Ended
                                                                           March 31,          
                                                                           ---------          
                                                                   1997                  1996
                                                                   ----                  ----
<S>                                                              <C>                   <C>
Sales
    Systems and Support Services                                 $26,118               $26,232
    Systems Integration                                           28,227                13,931
                                                                  ------                ------

                                                                  54,345                40,163
Costs and expenses
    Cost of sales                                                 46,648                35,903
    Selling, general and
      administrative expenses                                      6,525                 6,051
    Goodwill amortization                                            225                   275
                                                                  ------                  ----

Operating income (loss)                                              947                (2,066)

Other income (expenses)
    Other income                                                      12                     3
    Interest expense                                              (1,760)               (1,200)
                                                                   -----                 -----

Loss before taxes                                                   (801)               (3,263)

Income tax provision                                                  --                    --
                                                                   -----                 -----

Loss from continuing operations                                    $(801)              $(3,263)

Discontinued operations:

    Loss from discontinued operations                                 --                  (131)
                                                                     ---                 -----

    Net loss                                                       $(801)              $(3,394)
                                                                     ===                 =====
</TABLE>
















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


<PAGE>
<TABLE>
<CAPTION>

                       TELOS CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

                                     ASSETS
                             (amounts in thousands)


                                                       March 31, 1997               December 31, 1996
                                                       --------------               -----------------
<S>                                                       <C>                            <C>           
Current assets
     Cash and cash equivalents,
       (including $56 and $1,121 of
         restricted cash, respectively)                   $   979                        $ 2,781
     Accounts receivable, net                              47,868                         51,549
     Inventories, net                                      14,421                         17,066
     Other current assets                                   3,533                          2,567
                                                            -----                         ------
         Total current assets                              66,801                         73,963

Property and equipment, net of
     accumulated depreciation of
     $20,802 and $20,390 respectively                      16,496                         16,486

Goodwill                                                   13,320                         13,545
Other assets                                                6,315                          6,070
                                                           ------                         ------

                                                         $102,932                       $110,064
                                                          =======                        =======

                                             LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current liabilities
     Accounts payable                                     $17,800                        $35,730
     Other current liabilities                             10,947                         11,708
     Accrued compensation and benefits                      7,527                         10,163
                                                           ------                         ------
         Total current liabilities                         36,274                         57,601

Senior credit facility                                     31,318                         15,418
Senior subordinated notes                                  16,819                         17,439
Capital lease obligation                                   12,386                         12,537
Other long-term liabilities                                    20                            154
                                                           ------                         ------
         Total liabilities                                 96,817                        103,149
                                                           ------                        -------

Redeemable preferred stocks
     Senior redeemable preferred stock                      4,910                          4,828
     Class B redeemable preferred stock                    11,293                         11,087
     Redeemable preferred stock                            24,578                         24,230
                                                           ------                         ------
         Total preferred stock                             40,781                         40,145
                                                           ------                         ------

Stockholders' investment
     Common stock                                              78                             78
     Capital in excess of par                               3,413                          4,048
     Retained earnings (deficit)                          (38,157)                       (37,356)
                                                           -------                        -------
         Total stockholders' investment                   (34,666)                       (33,230)
                                                           ------                         ------

                                                         $102,932                       $110,064
                                                          =======                        =======

</TABLE>










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


<PAGE>
<TABLE>
<CAPTION>

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

                                            (amounts in thousands)

                                                                                          Three Months
                                                                                         Ended March 31,
                                                                                         ---------------
                                                                                     1997              1996
                                                                                     ----              ----
<S>                                                                               <C>                <C>
Operating activities:
     Net loss                                                                     $  (801)           $(3,394)
     Adjustments to reconcile net loss to cash
       provided by (used in) operating activities:
         Depreciation and amortization                                                989                787
         Goodwill amortization                                                        225                390
         Other non-cash items                                                         220                191
         Changes in assets and liabilities that
          (used) provided cash                                                    (16,459)             1,809
                                                                                   ------              -----
         Cash used in operating activities                                        (15,826)              (217)
                                                                                   ------                ---

Investing activities:
     Purchase of property and equipment                                              (553)              (643)
     Investment in products                                                          (563)              (119)
                                                                                    -----                ---
         Cash used in investing activities                                         (1,116)              (762)
                                                                                    -----                ---

Financing activities:
     Proceeds from senior credit facility                                          15,900              1,247
     Repayment of long-term debt                                                     (675)                --
     Payments under capital leases                                                    (85)                --
     Proceeds from capital lease transaction                                           --              1,121
                                                                                   ------              -----
         Cash provided by financing activities                                     15,140              2,368
                                                                                   ------              -----

(Decrease) increase in cash and cash equivalents                                   (1,802)             1,389
Cash and cash equivalents at beginning of period                                    2,781                735
                                                                                    -----               ----

Cash and cash equivalents at end of period                                         $  979             $2,124
                                                                                    =====              =====
</TABLE>
























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



<PAGE>


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

                                                        
Note 1.       General

     The  accompanying  condensed  consolidated  financial  statements  of Telos
Corporation  ("Telos")  and its wholly  owned  subsidiaries,  Telos  Corporation
(California),  Telos Field Engineering,  Inc., Telos International  Corporation,
and  enterWorks.com,  inc.  (collectively,  the  "Company")  have been  prepared
without audit. Certain information and note disclosures normally included in the
financial  statements presented in accordance with generally accepted accounting
principles have been condensed or omitted.  The Company believes the disclosures
made are  adequate  to make  the  information  presented  consistent  with  past
practices.  However, these condensed consolidated 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, 1996.

     In the opinion of the  Company,  the  accompanying  condensed  consolidated
financial  statements  reflect  all  adjustments  and  reclassifications  (which
include  only normal  recurring  adjustments)  necessary  to present  fairly the
financial  position of the Company as of March 31, 1997 and  December  31, 1996,
and the results of its operations and its cash flows for the three month periods
ended March 31, 1997 and 1996. Interim results are not necessarily indicative of
fiscal  year  performance  because  of the  impact of  seasonal  and  short-term
variations.

     In December 1996, the Company sold  substantially  all of the assets of its
consulting  division,  Telos  Consulting  Services  (TCS),  to COMSYS  Technical
Services, Inc., a subsidiary of COREStaff, Inc. for approximately $31.6 million.
The sale of TCS was treated as a discontinued  operation in accordance  with APB
Opinion  Number 30.  Accordingly,  the results of operations for TCS included in
the three month period  ended March 31, 1996 have been  reported  separately  as
"loss from discontinued operations". Included in the results of the discontinued
operations is allocated  interest  expense of $309,000  which has been allocated
based on the net  assets of the  discontinued  operations  at March 31,  1996 in
relation  to the  Company's  consolidated  net assets  plus  non-specific  debt.
Additionally, goodwill amortization of $115,000 has been included in the results
of the discontinued operations.

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


Note 2.       Accounts Receivable

         The components of accounts receivable are as follows (in thousands):
<TABLE>
<CAPTION>

                                        March 31, 1997       December 31, 1996
                                        --------------       -----------------
         <S>                                <C>                   <C>
     Billed accounts receivable             $36,892               $40,225
     Unbilled accounts receivable            11,970                12,249
                                             ------                ------
                                             48,862                52,474
     Allowance for doubtful accounts           (994)                 (925)
                                            -------                 -----

                                            $47,868               $51,549
                                             ======                ======
</TABLE>




<PAGE>

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

Note 3.       Debt Obligations

Senior Subordinated Note, Series A

     During the first quarter of 1997, the Company  retired the $675,000  Senior
Subordinated  Note,  Series  A held by  John  R.  Porter,  the  majority  common
shareholder.

Note 4.       Preferred Stock

Senior Redeemable Preferred Stock

     The components of the senior redeemable  preferred stock are Series A-1 and
Series  A-2  redeemable  preferred  stock each with $.01 par value and 1,250 and
1,750 shares authorized, issued and outstanding, respectively. From July 1, 1995
through June 30, 1997,  the Series A-1 and A-2 each carry a cumulative  dividend
rate equal to 11.125%  per annum of its  liquidation  value,  and  increases  to
14.125% per annum thereafter. The dividends are payable semi-annually on June 30
and December 31 of each year. The liquidation  preference of the 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 Series A-1 and A-2 Preferred Stock is senior
to all other present and future  equity of the Company.  The Company is required
to redeem all of the  outstanding  shares of the Series A-1 and A-2 on  December
31,  2001,  subject to the legal  availability  of funds.  At March 31, 1997 and
December 31, 1996 cumulative undeclared, unpaid dividends relating to Series A-1
and A-2  Preferred  Stock were accrued for financial  reporting  purposes in the
amount of $1,910,000 and $1,828,000, respectively.

Class B Redeemable Preferred Stock

     The Class B  Redeemable  Preferred  Stock has a $.01 par value,  with 7,500
shares  authorized,  issued and  outstanding.  The Class B Redeemable  Preferred
Stock has a cumulative  dividend  payable  semi-annually at June 30 and December
31. From July 1, 1995  through June 30, 1997,  the dividend is  calculated  at a
rate equal to 11.125%  per annum of its  liquidation  value,  and  increases  to
14.125% per annum  thereafter.  The Class B  Redeemable  Preferred  Stock may be
redeemed at its liquidation value together with all accrued and unpaid dividends
at any time at the option of the  Company.  The  liquidation  preference  of the
preferred  stock is the face  amount,  $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.  At March 31, 1997 and December 31, 1996  cumulative  undeclared,  unpaid
dividends  relating to the Class B Redeemable  Preferred  Stock were accrued for
financial  reporting  purposes  in  the  amount  of  $3,793,000  and  $3,587,000
respectively.

12% Cumulative Exchangeable Redeemable Preferred Stock

     A maximum of 6,000,000  shares of 12%  Cumulative  Exchangeable  Redeemable
Preferred  Stock,  par value $.01 per share,  have been authorized for issuance.
The  Company  has  issued  3,595,586  shares  of  12%  Cumulative   Exchangeable
Redeemable  Preferred Stock (the "Preferred Stock"). The 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  (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.  No dividends  have been  declared or paid during fiscal years
1992  through  1996.  Cumulative  undeclared  dividends  as of December 31, 1996
accrued for financial reporting purposes totaled $10,421,000.  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.
The dividends payable on December 1, 1995 and for June 1 and December 1, 1996 of
$6,471,000 were accrued on a cash basis.

     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.
<PAGE>





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

General

     In the first three months of 1997,  the Company had  increased  revenue and
profitability as compared to 1996. The increased revenue resulted from increased
order volume in the Systems Integration Group. The increase in profitability was
attributable   to  the  cost  reductions  and  branch   consolidation   measures
implemented by the Company in the last half of 1996. The  profitability was also
increased  by a  margin  improvement  due  to a  change  in  product  mix on the
Company's long term contracts.

     Total backlog from existing  contracts was approximately $1.2 billion as of
March 31, 1997 and December 31, 1996. As of March 31, 1997,  the funded  backlog
of the Company  totaled $126  million,  an increase of $11 million from December
31, 1996. 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 income  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 enterWorks.com,  inc.  ("enterWorks"),
("the  Company").  The major elements of the Company's  operating  expenses as a
percentage  of sales for the three month  periods  ended March 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                          March 31,
                                                          ---------
                                                   1997               1996
                                                   ----               ----
<S>                                               <C>                <C>
Sales                                             100.0%             100.0%
Cost of sales                                     (85.8)             (89.4)
SG&A expenses                                     (12.0)             (15.1)
Goodwill amortization                              (0.4)              (0.7)
                                                   -----              -----
Operating income (loss)                             1.8               (5.2)

Other income                                         --                 --
Interest expense                                   (3.2)              (3.0)
Income tax provision                                 --                 --
                                                   ----                ---
Loss from continuing operations                    (1.4)              (8.2)


Discontinued operations:
    Loss from discontinued operations                --               (0.3)
                                                    ---                ---

Net loss                                           (1.4)%             (8.5)%
                                                    ===                ===
</TABLE>




<PAGE>


Financial Data by Market Segment

     The Company operates in two market  segments:  systems and support services
(the "Systems and Support  Services  Group"),  which  consists of enterWorks and
hardware and software support services; and the Systems Integration Group.

     Sales,  gross  profit,  and gross  margin by market  segment  for the first
quarter of 1997 and 1996 were as follows:
<TABLE>
<CAPTION>

                                                 Three Months Ended
                                                      March 31,
                                                     ---------
                                             1997                   1996
                                             ----                   ----
                                               (amounts in thousands)
<S>                                        <C>                     <C>
Sales:
     Systems and Support Services          $26,118                 $26,232
     Systems Integration                    28,227                  13,931
                                            ------                  ------
         Total                             $54,345                 $40,163
                                            ======                  ======

Gross Profit:
     Systems and Support Services           $3,767                  $2,880
     Systems Integration                     3,930                   1,380
                                             -----                   -----
         Total                              $7,697                  $4,260
                                             =====                   =====

Gross Margin:
     Systems and Support Services             14.4%                   11.0%
     Systems Integration                      13.9%                    9.9%
         Total                                14.2%                   10.6%
</TABLE>

     For the  three  month  period  ended  March 31,  1997  sales  increased  by
approximately  $14.2 million,  or 35.3%, to $54.3 million from $40.1 million for
the comparable  1996 period.  This increase for the three month period is due to
the Systems  Integration Group, which reported increased sales of $14.3 million.
Offsetting  this increase was  decreased  sales during the period by the Systems
and Support Services Group of approximately $114,000.

     Systems Integration Group sales increased by $14.3 million during the first
quarter  of 1997 as  compared  to the  first  quarter  of  1996 as a  result  of
increased  order  volume  on its Small  Multiuser  Computer  II and  Immigration
Naturalization  Service contracts,  as well as increased sales in other business
lines of the division.

     Within the Systems and Support  Services  Group,  software  services  sales
increased  approximately $481,000 due to increased activity and head count under
certain large labor contracts. The increase was offset by a $501,000 decrease in
hardware  support  sales and a decrease  in  enterWorks  sales of  $94,000.  The
decrease in hardware support sales is due to the loss of certain  follow-on work
to  existing  contracts.  The  decline  in  hardware  support  revenue  is  also
attributable  to  continued  price  competitiveness  within  the  industry.  The
decrease  in  enterWorks  sales  is due to a  decline  in order  volume  for the
quarter.

     Cost of sales  increased by $10.7 million or 29.9% to $46.6 million  during
the three  month  period  ended  March  31,  1997,  from  $35.9  million  in the
comparable 1996 period. The increase in cost of sales resulted from the increase
in sales for the period.

     Gross profit increased by $3.4 million in the first quarter of 1997 to $7.7
million  from $4.3  million  in the  comparable  1996  period as a result of the
matters discussed above. In addition,  the Systems Integration Group experienced
shifts in product mix on its large contracts which improved profit margins.  The
Systems and Support  Services  Group improved its gross margin by maximizing its
efforts on profitable  contracts and  progressively  reducing the number of less
profitable  contracts.  The Group further enhanced its gross profit through cost
reduction  measures  implemented  in the fourth  quarter of 1996.  Total Company
gross  margins were 14.2% and 10.6% for the three month  periods ended March 31,
1997 and 1996, respectively.


<PAGE>


     Selling,  general and  administrative  costs  increased for the three month
period by  approximately  $474,000 to $6.5  million in 1997 from $6.1 million in
1996. This increase is due to the Company's increased investment in research and
development  and sales and marketing for its enterWorks  division.  The increase
was partially offset by indirect cost control measures implemented in late 1996.
SG&A as a  percentage  of sales was 12.0% and 15.1% for the three month  periods
ended March 31, 1997 and 1996, respectively.

     Goodwill amortization expense was $225,000 for the three months ended March
31, 1997 compared to $275,000 for the period ended March 1996.  The reduction in
goodwill  amortization is attributable to adjustments in the goodwill balance as
a result  of  realization  of  acquired  tax  benefits  resulting  from the 1992
acquisition of Telos Corporation (California).

     Operating  income  increased by $3.0 million  during the three months ended
March 31, 1997 to $947,000 in  operating  profit.  The Company had an  operating
loss of $2.1 million in the comparable period of 1996. The increase in operating
profit  resulted  primarily  from the  aforementioned  sales  and  gross  profit
increases.

     Interest expense increased by approximately $560,000 to $1.8 million during
the three month period ended March 31, 1997, from $1.2 million in the comparable
period of 1996.  The  increase  is  primarily  attributed  to an increase in the
outstanding  balance of the subordinated  debt and related interest rate as well
as interest  recorded for capital lease  payments for leases  entered into after
March 1996.

     The Company did not have a tax  provision  in either the three month period
ended March 31, 1997 or 1996 as a result of the net operating losses.

Liquidity and Capital Resources

     For the three months ended March 31, 1997,  the Company used $15.8  million
of  cash  in its  operating  activities  primarily  as a  result  a  significant
reduction in trade accounts  payable and other Company  obligations.  The use of
cash  was  also a result  of a  significant  investment  by the  Company  in its
enterWorks  division.  The Company funded its net loss and use of operating cash
as well as its investing  activities through increased borrowings under its term
facility.

     As a result of the Company's  sale of its TCS division for $31.6 million in
December 1996, the Company's  short-term  liquidity  constraints  have improved.
However,  the Company  continues to aggressively  manage its cash and reduce its
discretionary  spending.  The  Company  also  continues  to  evaluate  its  cost
reduction programs and its investment in enterWorks.

     At March 31,  1997,  the Company  had  outstanding  debt of $48.1  million,
consisting of $31.3 million under the secured  senior credit  facility and $16.8
million in  subordinated  debt.  Subsequent to December 31, 1996,  the Company's
bank  entered into an  agreement  with the Company to refinance  its $45 million
Facility and extend the maturity date to July 1, 2000.  The terms and conditions
of the new facility are similar to the previous  senior credit  facility  except
for amendments made to certain of the financial and non financial covenants.

     The Company is not in compliance with certain financial covenants contained
in the senior  credit  facility as of March 31,  1997.  The  Company's  bank has
waived such non compliance.

     The  Company  is  actively   reviewing  its  financing   requirements   for
enterWorks,  and  continues to fund  on-going  product  development,  sales and
marketing, and business activities of the subsidiary.  The Company will continue
to  evaluate   various   financing   alternatives  to  maintain  the  enterWorks
operations.  

     The Company  anticipates  that its current  senior credit  facility will be
adequate  for 1997.  However,  the Company  continues  to  evaluate  the funding
requirements for the operational  activities and investments of the Company, and
will aggressively pursue additional financing alternatives if necessary.
<PAGE>




                         PART II - OTHER INFORMATION


Item 3.       Defaults Upon Senior Securities

Senior and Class B Redeemable Preferred Stocks

     The Company has not declared  dividends on its Senior Redeemable  Preferred
Stock,  Series A-1 and A-2,  and its Class B  Redeemable  Preferred  Stock since
their  issuance.  Total  undeclared  unpaid  dividends,  accrued  for  financial
reporting  purposes,  are $1,910,000 for the Series A-1, A-2 Preferred stock and
$3,793,000 for the Class B Preferred Stock at March 31, 1997.

12% Cumulative Exchangeable Redeemable Preferred Stock

     A maximum of 6,000,000  shares of 12%  Cumulative  Exchangeable  Redeemable
Preferred  Stock,  par value $.01 per share,  have been authorized for issuance.
The Company  had  3,595,586  shares of 12%  Cumulative  Exchangeable  Redeemable
Preferred Stock (the "Preferred Stock"), par value $.01 per share outstanding at
March 31, 1997. The 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  (provided  there were no
blocks on the payment of dividends),  all dividends thereafter are to be 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.
Dividends in additional  shares of the  Preferred  Stock are paid at the rate of
0.06 of a share of the Preferred  Stock for each $.60 of such dividends not paid
in cash.

     No dividends  were  declared or paid during fiscal years 1992 through 1996.
Cumulative  undeclared  dividends as of December 31, 1996 accrued by the Company
were  $10,421,000.  The  Company  has accrued  these  dividends  for the periods
although the Company is uncertain when or if these dividends will be declared or
paid.


Item 6.       Exhibits and Reports on Form 8-K

       (a)  Exhibits:

                  27       Financial Data Schedule



       (b)  Reports on Form 8-K:  Registrant   filed a   Current Report on Form 
            8-K,  dated  January 10, 1997,  in   respect  of  the  Registrant's
            selling  its  consulting division,  Telos  Consulting  Services, on
            December 27, 1996.

<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:      May 15, 1997                      TELOS CORPORATION


                                             /s/  Lorenzo Tellez
                                                  Lorenzo Tellez
                                                  (Principal Financial Officer &
                                                  Principal Accounting Officer)