<PAGE>
                                                         
                                  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, 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 August 1, 1997, the  registrant  had  23,076,753  shares of Class A Common
Stock, no par value, and 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):   14



<PAGE>







                       TELOS CORPORATION AND SUBSIDIARIES

                                      INDEX




                          PART I. FINANCIAL INFORMATION



Item 1.        Financial Statements (Unaudited):

     Condensed Consolidated Statements of Income for the Three and Six Months
          Ended June 30, 1997 and 1996 .......................................3

     Condensed Consolidated Balance Sheets as of June 30, 1997
         and December 31, 1996 ...............................................4

     Condensed Consolidated Statements of Cash Flows for the
         Six Months Ended June 30, 1997 and 1996..............................5

     Notes to Condensed Consolidated Financial Statements...................6-8

Item 2.        Management's Discussion and Analysis of Financial
               Condition and Results of Operations.........................9-12


                           PART II. OTHER INFORMATION


Item 3.        Defaults Upon Senior Securities...............................13

Item 4.        Submission of Matters to a Vote of Security Holders...........13

Item 6.        Exhibits and Reports on Form 8-K..............................13

SIGNATURES...................................................................14




<PAGE>
<TABLE>
<CAPTION>


                                                PART I - FINANCIAL INFORMATION

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


                                                         Three Months Ended                 Six Months Ended
                                                              June 30,                          June 30,
                                                      ------------------------         ------------------------
                                                         1997            1996               1997          1996
                                                         ----            ----               ----          ----
<S>                                                    <C>            <C>                <C>           <C>   
Sales
    Systems and Support Services                       $33,182        $26,223            $59,300       $52,455
    Systems Integration                                 24,907         17,643             53,134        31,574
                                                        ------         ------             ------        ------
                                                        58,089         43,866            112,434        84,029
Costs and expenses
    Cost of sales                                       48,511         38,352             95,159        74,255
    Selling, general and
     administrative expenses                             6,869          6,770             13,394        12,821
    Goodwill amortization                                  209            275                434           550
                                                         -----           ----             ------          ----

Operating income (loss)                                  2,500         (1,531)             3,447        (3,597)

Other income (expenses)
    Other income (expenses)                                 11           (352)                23          (349)
    Interest expense                                    (1,883)        (1,336)            (3,643)       (2,536)
                                                         -----          -----              -----         -----

Income (loss) before taxes                                 628         (3,219)              (173)       (6,482)

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

Income (loss) from continuing operations                   628         (3,219)              (173)       (6,482)

Discontinued operations:

    Income from discontinued operations                     --            261                 --           130
                                                           ---          -----                ---         -----

Net income (loss)                                         $628        $(2,958)             $(173)      $(6,352)
                                                           ===          =====                ===         =====
</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)

                                                                    June 30, 1997               December 31, 1996
                                                                    -------------               -----------------
<S>                                                                  <C>                            <C>    
Current assets
    Cash and cash equivalents (includes                               $   757                        $ 2,781
    restricted cash of $327 at June 30, 1996)
    Accounts receivable, net                                           49,032                         51,549
    Inventories, net                                                   15,673                         17,066
    Other current assets                                                4,086                          2,567
                                                                       ------                          -----
       Total current assets                                            69,548                         73,963

Property and equipment, net of
    accumulated depreciation of
    $21,580 and $20,390, respectively                                  16,536                         16,486

Goodwill                                                               13,111                         13,545
Other assets                                                            6,553                          6,070
                                                                       ------                        -------
                                                                     $105,748                       $110,064
                                                                      =======                        =======

                                         LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current liabilities
     Accounts payable                                                 $17,544                        $35,730
     Other current liabilities                                         10,281                         11,708
     Accrued compensation and benefits                                  8,857                         10,163
                                                                       ------                         ------
       Total current liabilities                                       36,682                         57,601

Senior credit facility                                                 33,421                         15,418
Subordinated notes                                                     16,647                         17,439
Capital lease obligation                                               12,257                         12,537
Other long-term liabilities                                                --                            154
                                                                       ------                        -------
       Total liabilities                                               99,007                        103,149
                                                                       ------                        -------

Redeemable preferred stock
     Senior redeemable preferred stock                                  4,993                          4,828
     Class B redeemable preferred stock                                11,501                         11,087
     Redeemable preferred stock                                        27,083                         24,230
                                                                       ------                         ------
       Total preferred stock                                           43,577                         40,145
                                                                       ------                         ------

Stockholders' investment
     Common stock                                                          78                             78
     Capital in excess of par                                             615                          4,048
     Retained earnings (deficit)                                      (37,529)                       (37,356)
                                                                       ------                         ------

       Total stockholders' investment (deficit)                       (36,836)                       (33,230)
                                                                       ------                         ------
                                                                     $105,748                       $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)

                                                                                              Six Months
                                                                                            Ended June 30,
                                                                                        1997            1996
                                                                                        --------------------
                                                                                       
                                                                                    
<S>                                                                                 <C>               <C>    

Operating activities:
     Net (loss) income                                                              $   (173)         $(6,352)
     Adjustments to reconcile net (loss) income to
     cash used in operating activities:
         Depreciation and amortization                                                 1,919            1,365
         Goodwill amortization                                                           434              780
         Provision for legal settlement                                                   --              355
         Other noncash items                                                              39               90
         Changes in assets and liabilities                                           (19,128)          (1,024)
                                                                                      ------            -----
         Cash used in operating activities                                           (16,909)          (4,786)
                                                                                      ------            -----

Investing activities:
     Investment in products                                                           (1,154)            (668)
     Purchase of property and equipment                                               (1,106)          (1,643)
                                                                                       -----            -----
         Cash used in investing activities                                            (2,260)          (2,311)
                                                                                       -----            -----

Financing activities:
     Proceeds from borrowings under senior
         credit facility                                                              18,003           10,823
     Proceeds from capital lease transaction                                              --            1,300
     Payments under capital leases                                                      (183)              --
     Repayment of senior subordinated notes                                             (675)              --
                                                                                      ------           ------
         Cash provided by financing activities                                        17,145           12,123
                                                                                      ------           ------

     (Decrease) increase in cash and
         cash equivalents                                                             (2,024)           5,026
     Cash and cash equivalents at beginning
         of period                                                                     2,781              735
                                                                                       -----             ----

     Cash and cash equivalents at end
         of period                                                                    $  757           $5,761
                                                                                        ====            =====

</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 June 30, 1997 and December 31, 1996, and
the  results  of its  operations  and its cash flows for the three and six month
periods  ended  June 30,  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 and six month period ended June 30, 1996 have been reported separately
as "income from 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>

                                           June 30, 1997      December 31, 1996
      <S>                                     <C>                  <C>    
      Billed accounts receivable              $35,915               $40,225
      Unbilled accounts receivable             14,164                12,249
                                               ------                ------

                                               50,079                52,474
         Allowance for doubtful accounts       (1,047)                 (925)
                                                -----                 -----

                                              $49,032               $51,549
                                               ======                ======
</TABLE>



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



Note 3.           Debt Obligations

Senior Credit Facility

     At June 30,  1997,  the Company had a $45 million  senior  credit  facility
("Facility") with a bank maturing on July 1, 2000.


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 June 30,  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 $1,993,000 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 June 30, 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  $4,001,000  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.
<PAGE>
                       TELOS CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

        
     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 June 30, 1997 accrued
for financial  reporting purposes totaled  $12,578,000.  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,  June 1, 1996,  December 1, 1996,  and June 1, 1997
totaling $8,628,000 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 six 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, as well as revenue generated from
contracts  awarded  in 1997 to the  Systems  and  Support  Services  Group.  The
increase in  profitability  was also  attributable  to the cost  reductions  and
branch  consolidation  measures  implemented  by the Company in the last half of
1996. The  profitability  was further  enhanced by an improvement in the product
mix on the Company's long term contracts and improved profit margins realized on
new contracts.

     Total backlog from existing  contracts was $1.1 billion as of June 30, 1997
and is  approximately  the same as the total backlog as of December 31, 1996. As
of June 30, 1997,  the funded  backlog of the Company  totaled $103  million,  a
decrease of $12 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 allocated 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"), enterWorks.com,
inc.  ("enterWorks"),   and  Telos  International   Corporation  ("TIC"),  ("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, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
                                                             Three Months Ended             Six Months Ended
                                                                   June 30,                      June 30,
                                                            --------------------          --------------------    
                                                            1997            1996          1997            1996
                                                            ----            ----          ----            ----
<S>                                                         <C>            <C>             <C>           <C>    
Sales                                                       100.0%         100.0%          100.0%        100.0%
Cost of sales                                                83.5           87.5            84.6          88.4
SG&A expenses                                                11.8           15.4            11.9          15.3
Goodwill amortization                                         0.4            0.6             0.4           0.6
                                                             ----           ----            ----          ----

Operating income (loss)                                       4.3           (3.5)            3.1          (4.3)
Other income (expense)                                         --           (0.8)             --          (0.4)
Interest expense                                             (3.2)          (3.0)           (3.2)         (3.0)
Income tax provision                                           --             --              --            --
                                                              ---            ---             ---           ---

Income (loss) from continuing operations                      1.1           (7.3)           (0.1)         (7.7)

Discontinued operations:
    Income from discontinued operations                        --            0.6              --           0.2
                                                              ---            ---             ---           ---

Net income (loss)                                             1.1%          (6.7)%          (0.1)%        (7.5)%
                                                              ===            ===             ===           ===
</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 periods
designated below are as follows:
<TABLE>
<CAPTION>


                                                 Three Months Ended                        Six Months Ended
                                                      June 30,                                  June 30,
                                                 -------------------                      ------------------
                                                1997              1996                   1997            1996
                                                ----              ----                   ----            ----
                                                                    (amounts in thousands)
<S>                                            <C>                <C>                   <C>             <C>   
Revenues:
     Systems and Support Services              $33,182            $26,223               $ 59,300        $52,455
     Systems Integration                        24,907             17,643                 53,134         31,574
                                                ------             ------                 ------         ------
         Total                                 $58,089            $43,866               $112,434        $84,029
                                                ======             ======                =======         ======

Gross Profit:
     Systems and Support Services               $5,886             $4,130                 $9,653        $ 7,010
     Systems Integration                         3,692              1,384                  7,622          2,764
                                                 -----              -----                  -----          -----
         Total                                   9,578             $5,514                $17,275         $9,774
                                                 =====              =====                 ======          =====

Gross Margin:
     Systems and Support Services                17.7%              15.8%                  16.3%          13.4%
     Systems Integration                         14.8%               7.8%                  14.3%           8.8%
         Total                                   16.5%              12.6%                  15.4%          11.6%
</TABLE>


     For the three month period ended June 30, 1997,  revenue increased by $14.2
million,  or 32.4%,  to $58.1 million from $43.9 million for the comparable 1996
period. The increase for the three month period includes a $7.3 million increase
in systems  integration  revenue  and a $6.9  million  increase  in systems  and
support services revenue.

     The  increase  in the Systems  Integration  Group  revenue of $7.3  million
results from increased  orders on its Small Multiuser  Computer II contract,  as
well as increased  sales in other  business  lines of the division.  The Company
anticipates  that the last  half of 1997 will show  stronger  order and  revenue
volume.  However,  there can be no  assurance  that such order and sales  volume
growth will materialize.

     The Systems and Support  Services Group revenue increase of $6.9 million is
due to an increase in software  support revenue of $6.5 million,  an increase in
hardware  support  revenue  of  $500,000,  offset  by  a  $100,000  decrease  in
enterWorks  revenue.  The  increase  in  software  support  is due to  increased
services under certain of the Company's large labor  contracts.  The increase is
also   attributable   to  the  revenue   recognized  on  its   Immigration   and
Naturalization  Service Blanket Purchase  Agreement for Field Operation  Support
contract,  which was awarded in early  1997.  The  increase in hardware  support
revenue is due to increased  firm orders on its existing  contracts,  as well as
sales generated on contracts awarded in 1997. The decline in enterWorks sales is
due to a decline in order volume for the quarter.



<PAGE>


     Revenue  increased  $28.4  million or 33.8% to $112.4  million  for the six
months ended June 30, 1997 from $84.0  million for the  comparable  1996 period.
The  increase  for the six month  period  includes a $21.6  million  increase in
systems  integration  revenue and a $6.8 million increase in systems and support
services revenue. The reasons for these revenue increases are discussed above.

     Cost of sales  increased by $10.2 million or 26.5%, to $48.5 million in the
three month  period ended June 30, 1997,  from $38.3  million in the  comparable
1996 period. The increase in cost of sales for the three month period includes a
$5.0 million  increase in systems  integration  and a $5.2  million  increase in
systems and support services cost of sales. The increase in systems  integration
and system and  support  services  cost of sales is due to the  increased  sales
volume for 1997 as compared to 1996.

     For the six  months  ended June 30,  1997,  cost of sales  increased  $20.9
million,  or 28.1%,  to $95.2  million from $74.3 million for the same period in
1996. The increase in cost of sales includes a $16.7 million increase in systems
integration  cost of sales and a $4.2  million  increase  in systems and support
services  cost of sales.  The  reasons  for these  cost of sales  increases  are
discussed above.

     Gross  profit  increased  $4.1  million in the three  month  period to $9.6
million in 1997, from $5.5 million in the comparable  1996 period.  The increase
in gross profit includes a $2.3 million  increase in systems  integration  gross
profit,  and a $1.8  million  increase  in systems and  support  services  gross
profit.  For the six month  period,  gross  profit  increased by $7.5 million to
$17.3 million from $9.8 million.  This increase includes a $4.9 million increase
in systems  integration  gross profit and a $2.6 million increase in systems and
support services gross profit. The reasons for the gross profit increase for the
periods  ended June 30, 1997 compared to June 30, 1996 related to the changes in
revenues and cost of sales for the respective periods. 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.

     Gross  margins  were 16.5% and 15.4%,  respectively,  for the three and six
month  periods of 1997 as  compared  to 12.6% and 11.6%,  respectively,  for the
comparable periods of 1996.

     Selling,   general,  and  administrative   expense  ("SG&A")  increased  by
approximately  100,000 or 1.5%,  to $6.9  million in the second  quarter of 1997
from $6.8 million in the comparable  period of 1996. For the six month period of
1997, SG&A increased $573,000 to $13.4 million from $12.8 million in 1996. These
increases are primarily due to increased  spending and investment by the Company
on its enterWorks subsidiary. This investment was offset by a decline in bid and
proposal and sales and marketing  expense in both the Systems  Integration Group
and the rest of the Systems and Support  Services  Group as a result of the cost
reductions and branch  consolidation  measures implemented by the Company in the
last half of 1996.  SG&A as a percentage of revenues  decreased to 11.8% for the
second  quarter  of 1997 from 15.4% in the  comparable  1996  period.  SG&A as a
percentage of revenues for the six month period ended June 30, 1997 decreased to
11.9% from 15.3% compared to the same period in 1996.

     Goodwill  amortization  expense decreased $66,000 to $209,000 for the three
months and  decreased  by $116,000 to $434,000 for the six months ended June 30,
1997.  These  reductions  are due to  adjustments  in the goodwill  balance as a
result  of  realization  of  acquired  tax  benefits  resulting  from  the  1992
acquisition of Telos  Corporation  (California)  and a writedown in the goodwill
balance from the sale of TCS in 1996.


<PAGE>



     Operating  income  increased by $4.0  million to a $2.5  million  operating
profit in the 1997 three month period from $1.5 million of operating loss in the
comparable  1996  period.  Operating  income  increased  $7.0  million to a $3.4
million  operating  profit from a $3.6 million  operating loss for the six month
period ended June 30, 1997 compared to the six month period ended June 30, 1996.
These  increases  resulted from the  aforementioned increases in gross profit.

     Non  operating  income  (expense) in the three and six month  periods ended
June 30, 1997  increased  over the  comparable  1996 periods due to the $355,000
Rosecliff  litigation  settlement provision expense that the Company recorded in
the second quarter of 1996.

     Interest expense  increased  approximately  $547,000 to $1.9 million in the
second quarter of 1997 period from $1.3 million in the  comparable  1996 period,
and  increased  approximately  $1.1  million to $3.6  million for the six months
ended June 30, 1997 from $2.5  million for the  comparable  1996  period.  These
increases  are due to  increased  debt  levels in 1997 as well as an increase in
interest recorded for capital lease payments for leases entered into after March
1996.

     The  Company did not have an income tax  provision  for the three month and
six month periods ended June 30, 1997 or 1996 due to its  cumulative  net losses
in the six month 1997 and 1996 periods.

Liquidity and Capital Resources

     For the six months ended June 30, 1997,  the Company used $16.9  million of
cash  in  its  operating  activities  primarily  as a  result  of 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 June 30,  1997,  the  Company  had  outstanding  debt of $50.0  million,
consisting of $33.4 million under the secured  senior credit  facility and $16.6
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
term  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  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 continually evaluates its financing requirements to support its
business base and anticipated  growth. The Company  anticipates that its current
facility  will be adequate for 1997.  However,  should  faster than  anticipated
growth occur, the Company believes that an expanded senior credit facility would
be required through a multi-bank syndication arrangement.


<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 $1,993,000 for the Series A-1 and A-2 Preferred Stock and
$4,001,000 for the Class B Preferred Stock at June 30, 1997.


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.  No dividends  have been  declared or paid during fiscal years
1992 through 1996.  Cumulative  undeclared dividends as of June 30, 1997 accrued
for financial  reporting purposes totaled  $12,578,000.  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,  June 1, 1996,  December 1, 1996,  and June 1, 1997
totaling $8,628,000 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.


Item 4.   Submission of Matters to a Vote of Security Holders

     On May 24,  1997 at the annual  meeting of common  shareholders  a vote was
taken to elect the following  directors:  Dr. Fred Charles Ikle',  John B. Wood,
Norman P. Byers, and Dr. Stephen Bryen.  The persons  nominated were approved to
be directors of the Corporation by unanimous vote of all shareholders present at
the  meeting  which  represented  a  majority  of the  Company's  common  shares
outstanding.


Item 6.   Exhibits and Reports on Form 8-K

     (a)    Exhibits:

     10.82     Amended and Restated Credit  Agreement among Telos  Corporation, 
               a Maryland   Corporation;  Telos  Corporation,  a  California   
               Corporation;  and NationsBank,  N.A. dated as of July 1, 1997
 
     27        Financial Data Schedule

     (b)  Reports on Form 8-K:

               None.



<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 14, 1997                             /s/  Lorenzo Tellez
                                                 Lorenzo Tellez
                                                 (Principal Financial Officer &
                                                 Principal Accounting Officer)



<PAGE>


                                Telos Corporation
                                  Exhibit Index


   Exhibit
   Number                          Exhibit Name                            
   
    10.82     Amended and Restated Credit Agreement among Telos 
              Corporation; a Maryland Corporation; Telos Corporation;
              a California Corporation, and NationsBank, N.A. dated
              as of July 1, 1997

    27        Financial Data Schedule
<PAGE>