UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) (Amendment No. 4) Telos Corporation ----------------- (Name of Issuer) 12% Cumulative Exchangeable Redeemable Preferred Stock, Par Value $0.01 Per Share ------------------------------------------------------- (Title of Class of Securities) 87969B200 --------- (CUSIP Number of Class of Securities) Wynnefield Partners Small Cap Value, L.P. 450 Seventh Avenue, Suite 509 New York, New York 10123 Attention: Mr. Nelson Obus -------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Copy to: Jeffrey S. Tullman, Esq. Kane Kessler, P.C. 1350 Avenue of the Americas, 26th Floor New York, New York 10019 (212) 541-6222 May 3, 2005 ----------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a Statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this Schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ] (continued on following pages) (Page 1 of 11 Pages) - ---------------------------------------------------------------------------------------------------------------------- CUSIP No. 87969B200 13D/A Page 2 of 11 Pages - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: Wynnefield Partners Small Cap Value, L.P. S.S. OR I.R.S. IDENTIFICATION No. OF ABOVE PERSON: 13-3688497 - ---------------------------------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - ---------------------------------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC (SEE ITEM 3) - ---------------------------------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ---------------------------------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - ---------------------------------------------------------------------------------------------------------------------- 7. SOLE VOTING POWER 131,800 shares (See Item 5) NUMBER OF ----------------------------------------------------------------------------- SHARES 8. SHARED VOTING POWER BENEFICIALLY -0- (See Item 5) OWNED BY ----------------------------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER PERSON 131,800 shares (See Item 5) WITH ----------------------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 131,800 (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------------------------------------------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.1% (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - ---------------------------------------------------------------------------------------------------------------------- (Page 2 of 11 Pages) - ---------------------------------------------------------------------------------------------------------------------- CUSIP NO. 87969B200 13D/A Page 3 of 11 Pages - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: Wynnefield Small Cap Value Offshore Fund, Ltd. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: Not Applicable - ---------------------------------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) | | - ---------------------------------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC (SEE ITEM 3) - ---------------------------------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2 (d) OR 2 (e) [ ] - ---------------------------------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS - ---------------------------------------------------------------------------------------------------------------------- 7. SOLE VOTING POWER 85,400 shares (See Item 5) NUMBER OF ----------------------------------------------------------------------------- SHARES 8. SHARED VOTING POWER BENEFICIALLY -0- (See Item 5) OWNED BY ----------------------------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER PERSON 85,400 shares (See Item 5) WITH ----------------------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 85,400 shares (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------------------------------------------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.7% (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - ---------------------------------------------------------------------------------------------------------------------- (Page 3 of 11 Pages) - ---------------------------------------------------------------------------------------------------------------------- CUSIP NO. 87969B200 13D/A Page 4 of 11 Pages - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: Wynnefield Partners Small Cap Value, L.P. I S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 13-3953291 - ---------------------------------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - ---------------------------------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC (SEE ITEM 3) - ---------------------------------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ---------------------------------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE - ---------------------------------------------------------------------------------------------------------------------- 7. SOLE VOTING POWER 142,800 shares (See Item 5) NUMBER OF ----------------------------------------------------------------------------- SHARES 8. SHARED VOTING POWER BENEFICIALLY -0- (See Item 5) OWNED BY ----------------------------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER PERSON 142,800 shares (See Item 5) WITH ----------------------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 142,800 shares (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------------------------------------------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.5% (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - ---------------------------------------------------------------------------------------------------------------------- (Page 4 of 11 Pages) - ---------------------------------------------------------------------------------------------------------------------- CUSIP No. 87969B200 13D/A Page 5 of 11 Pages - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: Channel Partnership II, L.P. S.S. OR I.R.S. IDENTIFICATION No. OF ABOVE PERSON: 22-3215653 - ---------------------------------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - ---------------------------------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS WC (SEE ITEM 3) - ---------------------------------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ---------------------------------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION NEW YORK - ---------------------------------------------------------------------------------------------------------------------- 7. SOLE VOTING POWER 13,500 shares (See Item 5) NUMBER OF ----------------------------------------------------------------------------- SHARES 8. SHARED VOTING POWER BENEFICIALLY -0- (See Item 5) OWNED BY ----------------------------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER PERSON 13,500 shares (See Item 5) WITH ----------------------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 13,500 shares (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------------------------------------------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.4% (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON PN - ---------------------------------------------------------------------------------------------------------------------- (Page 5 of 11 Pages) - ---------------------------------------------------------------------------------------------------------------------- CUSIP No. 87969B200 13D/A Page 6 of 11 Pages - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: Nelson Obus S.S. OR I.R.S. IDENTIFICATION No. OF ABOVE PERSON: - ---------------------------------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - ---------------------------------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF (SEE ITEM 3) - ---------------------------------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ---------------------------------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES OF AMERICA - ---------------------------------------------------------------------------------------------------------------------- 7. SOLE VOTING POWER 13,500 shares (See Item 5) (1) NUMBER OF ----------------------------------------------------------------------------- SHARES 8. SHARED VOTING POWER BENEFICIALLY 360,000 (See Item 5) (1) OWNED BY ----------------------------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER PERSON 13,500 shares (See Item 5) (1) WITH ----------------------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER 360,000 (See Item 5) (1) - ---------------------------------------------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 373,500 shares (See Item 5)(1) - ---------------------------------------------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------------------------------------------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.7% (See Item 5)(1) - ---------------------------------------------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - ---------------------------------------------------------------------------------------------------------------------- (1) Mr. Obus may be deemed to have an indirect beneficial ownership in such shares through his positions as a co-managing member of Wynnefield Capital Management, LLC, a principal executive officer of Wynnefield Capital, Inc., and general partner of Channel Partnership II, L.P. Wynnefield Capital Management, LLC holds an indirect beneficial ownership interest in 274,600 shares which are directly owned by Wynnefield Partners Small Cap Value, L.P. and Wynnefield Partners Small Cap Value, L.P. I. Wynnefield Capital, Inc. holds an indirect beneficial ownership interest in 85,400 shares which are directly beneficially owned by Wynnefield Small Cap Value Offshore Fund, Ltd. Channel Partnership II, L.P. directly owns 13,500 shares. As Mr. Joshua H. Landes is a co-managing member of Wynnefield Capital Management, LLC and an executive officer of Wynnefield Capital, Inc., Mr. Obus shares voting and dispositive power with Mr. Landes with regard to any shares beneficially owned by Wynnefield Capital Management, LLC and Wynnefield Capital, Inc. - ---------------------------------------------------------------------------------------------------------------------- (Page 6 of 11 Pages) - -------------------------------------------------------------------------------- CUSIP No. 87969B200 13D/A Page 7 of 11 Pages - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: Joshua H. Landes S.S. OR I.R.S. IDENTIFICATION No. OF ABOVE PERSON: - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF (SEE ITEM 3) - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES OF AMERICA - -------------------------------------------------------------------------------- NUMBER OF 7. SOLE VOTING POWER SHARES -0- (See Item 5) (1) BENEFICIALLY --------------------------------------------- OWNED BY 8. SHARED VOTING POWER EACH REPORTING 360,000 (See Item 5) (1) PERSON --------------------------------------------- WITH 9. SOLE DISPOSITIVE POWER -0- (See Item 5)(1) --------------------------------------------- 10. SHARED DISPOSITIVE POWER 360,000 (See Item 5) (1) - -------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 360,000 shares (See Item 5)(1) - -------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - -------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.3% (See Item 5)(1) - -------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------- (1) Mr. Landes may be deemed to have an indirect beneficial ownership in such shares through his positions as a managing member of Wynnefield Capital Management, LLC and an executive officer of Wynnefield Capital, Inc. Wynnefield Capital Management, LLC holds an indirect beneficial ownership interest in 274,600 shares which are directly owned by Wynnefield Partners Small Cap Value, L.P. and Wynnefield Partners Small Cap Value, L.P. I. Wynnefield Capital, Inc. holds an indirect beneficial ownership interest in 85,400 shares which are directly beneficially owned by Wynnefield Small Cap Value Offshore Fund, Ltd. As Mr. Obus is a co-managing member of Wynnefield Capital Management, LLC and a principal executive officer of Wynnefield Capital, Inc., Mr. Landes shares voting and dispositive power with Mr. Obus with regard to any shares beneficially owned by Wynnefield Capital Management, LLC and Wynnefield Capital, Inc. (Page 7 of 11 Pages) - ---------------------------------------------------------------------------------------------------------------------- CUSIP NO. 87969B200 13D/A Page 8 of 11 Pages - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: Wynnefield Capital Management, LLC S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 13-4018186 - ---------------------------------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - ---------------------------------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF (SEE ITEM 3) - ---------------------------------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ---------------------------------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION NEW YORK - ---------------------------------------------------------------------------------------------------------------------- 7. SOLE VOTING POWER 274,600 shares (See Item 5) (1) NUMBER OF ----------------------------------------------------------------------------- SHARES 8. SHARED VOTING POWER BENEFICIALLY -0- (See Item 5) OWNED BY ----------------------------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER PERSON 274,600 shares (See Item 5) (1) WITH ----------------------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 274,600 shares (See Item 5) (1) - ---------------------------------------------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------------------------------------------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8.6% (See Item 5) (1) - ---------------------------------------------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON OO (Limited Liability Company) - ---------------------------------------------------------------------------------------------------------------------- (1) Wynnefield Capital Management, LLC, as the general partner of Wynnefield Partners Small Cap Value, L.P. and Wynnefield Partners Small Cap Value, L.P. I, holds an indirect beneficial interest in these shares which are directly beneficially owned by Wynnefield Partners Small Cap Value, L.P. and Wynnefield Partners Small Cap Value, L.P. I. - ---------------------------------------------------------------------------------------------------------------------- (Page 8 of 11 Pages) - ---------------------------------------------------------------------------------------------------------------------- CUSIP NO. 87969B200 13D/A Page 9 of 11 Pages - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- 1. NAME OF REPORTING PERSON: Wynnefield Capital, Inc. S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: N/A - ---------------------------------------------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] - ---------------------------------------------------------------------------------------------------------------------- 3. SEC USE ONLY - ---------------------------------------------------------------------------------------------------------------------- 4. SOURCE OF FUNDS AF (SEE ITEM 3) - ---------------------------------------------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - ---------------------------------------------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS - ---------------------------------------------------------------------------------------------------------------------- 7. SOLE VOTING POWER 85,400 shares (See Item 5)(1) NUMBER OF ----------------------------------------------------------------------------- SHARES 8. SHARED VOTING POWER BENEFICIALLY -0- (See Item 5) OWNED BY ----------------------------------------------------------------------------- EACH REPORTING 9. SOLE DISPOSITIVE POWER PERSON 85,400 shares (See Item 5)(1) WITH ----------------------------------------------------------------------------- 10. SHARED DISPOSITIVE POWER -0- (See Item 5) - ---------------------------------------------------------------------------------------------------------------------- 11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 85,400 shares (See Item 5)(1) - ---------------------------------------------------------------------------------------------------------------------- 12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] - ---------------------------------------------------------------------------------------------------------------------- 13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.7% (See Item 5)(1) - ---------------------------------------------------------------------------------------------------------------------- 14. TYPE OF REPORTING PERSON CO - ---------------------------------------------------------------------------------------------------------------------- (1) Wynnefield Capital, Inc. as the sole investment manager of Wynnefield Small Cap Value Offshore Fund, Ltd., holds an indirect beneficial interest in these shares which are directly beneficially owned by Wynnefield Small Cap Value Offshore Fund, Ltd. - ---------------------------------------------------------------------------------------------------------------------- (Page 9 of 11 Pages) This Amendment No. 4 (the "Amendment") amends the Statement of Beneficial Ownership on Schedule 13D, filed with the Securities and Exchange Commission (the "Commission") on April 1, 2005 (the "Amended and Restated Schedule 13D"), which amended and restated the previous Statements of Beneficial Ownership on Schedule 13D filed by Wynnefield Partners Small Cap Value, L.P. (the "Partnership"), Wynnefield Small Cap Value Offshore Fund, Ltd. (the "Fund"), Wynnefield Partners Small Cap Value, L.P. I (the "Partnership-I") and Channel Partnership II, L.P. ("Channel" and, collectively with the Partnership, the Fund, the Partnership-I and Channel, the "Original Reporting Persons"), with respect to the shares of 12% Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share (the "Preferred Stock"), of Telos Corporation, a Maryland corporation with its principal executive offices located at 19886 Ashburn Road, Ashburn, Virginia 20147-2358 (the "Issuer"). In addition to the Original Reporting Persons, this Amendment is filed by and on behalf of Wynnefield Capital Management, LLC ("WCM"), Wynnefield Capital, Inc., Nelson Obus ("Mr. Obus") and Joshua H. Landes. The information contained in this Amendment is as of the date hereof, unless otherwise expressly provided herein. ITEM 4. PURPOSE OF TRANSACTION. Item 4. Purpose of Transaction appearing in the Amended and Restated Schedule 13D is supplemented by adding the following disclosure to the end of such item: On May 3, 2005, Mr. Obus of WCM sent a letter to the Committee of Independent Directors of the Board of Directors of the Issuer jointly with other holders of the Preferred Stock. A copy of the letter is filed as Exhibit 99.1 hereto and is incorporated herein by reference. The letter urges the Committee of Independent Directors to consider a strategic transaction such as, but not limited to, a public equity offering or a merger transaction so that the Issuer may recognize its unrealized enterprise value and raise sufficient legally available funds to fulfill its contractual obligations to redeem the Preferred Stock on November 21, 2005. The signatories to the letter included four other holders of the Preferred Stock. The signatories to the letter expressly state that they are not acting together for purposes of acquiring, holding, voting or disposing of any equity security of the Issuer, and they expressly deny that they constitute a group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS The following exhibit is filed as part of this Amendment: Exhibit 99.1 Letter dated May 3, 2005 to the Committee of Independent Directors of the Board of Directors of the Issuer (Page 10 of 11 Pages) SIGNATURE After reasonable inquiry and to the best of their knowledge and belief, the undersigned certify that the information set forth in this Amendment is true, complete and correct. Dated: May 6, 2005 WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P. By: Wynnefield Capital Management, LLC, its General Partner By: /s/ Nelson Obus ------------------------------------------ Nelson Obus, Co-Managing Member WYNNEFIELD PARTNERS SMALL CAP VALUE, L.P. I By: Wynnefield Capital Management, LLC, its General Partner By: /s/ Nelson Obus ------------------------------------------ Nelson Obus, Co-Managing Member WYNNEFIELD SMALL CAP VALUE OFFSHORE FUND, LTD. By: Wynnefield Capital, Inc., its Investment Manager By: /s/ Nelson Obus ------------------------------------------ Nelson Obus, President WYNNEFIELD CAPITAL MANAGEMENT, LLC By: /s/ Nelson Obus ------------------------------------------ Nelson Obus, Co-Managing Member WYNNEFIELD CAPITAL, INC. By: /s/ Nelson Obus ------------------------------------------ Nelson Obus, President CHANNEL PARTNERSHIP II, L.P. By: /s/ Nelson Obus ------------------------------------------ Nelson Obus, General Partner /s/ Nelson Obus ---------------------------------------------- Nelson Obus, Individually /s/ Joshua H. Landes ---------------------------------------------- Joshua H. Landes, Individually (Page 11 of 11 Pages) EXHIBIT INDEX Exhibit 99.1 Letter dated May 3, 2005 to the Committee of Independent Directors of the Board of Directors of the Issuer
Exhibit 99.1
Dr. Fred C. Ikle
Mr. David Borland
Ambassador Langhorne A. Motley
Committee of Independent Directors of the Board of Directors
Telos Corporation
c/o Joseph M. Berl
Powell Goldstein LLP
901 New York Avenue, N.W.
Washington, D.C. 20001-4413
May 3, 2005
Gentlemen:
The parties signing this letter (the Signatories) are responding to your recent letters to them soliciting their input to the financial restructuring of Telos Corporation(1) (the Company). As the Signatories are among the largest holders of the Companys sole public security, they are pleased to provide a joint response based on the verbal acknowledgement by legal counsel to the Independent Committee.
(1) Formerly C3 Inc.
The Signatories each hereby acknowledges and agrees that, by holding discussions and meetings relating to a possible restructuring of the capital of the Company, and by delivering this proposal in connection with such possible restructuring, none of the Signatories has acted together nor agreed to act together with another for purposes of acquiring, holding, voting or disposing of an equity security of the Company or for any other purpose, and therefore the Signatories do not constitute a group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Neither the submission of this letter nor anything contained herein or discussed shall be construed as an admission that the Signatories constitute a person or group for any purpose, or an admission that any Signatory is, for the purposes of Section 13(d) or 13(g) of the Exchange Act, the beneficial owner of any of the equity securities of the Company owned by any other Signatory. The Signatories expressly acknowledge and agree that no Signatory has any shared voting or dispositive power over the equity securities of the Company owned by any other Signatory. Except for the submission of this letter in response to the solicitation of the Company, the Signatories do not have any contracts, arrangements, understandings or relationships (legal or otherwise) with or among each other with respect to any securities of the Company, including but not limited to transfer or voting of any of the securities of the Company, finders fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, or a pledge or contingency the occurrence of which would give another person voting or dispositive power over the securities of the Company.
Each of the Signatories is aware that the security that he owns, Telos 12% Cumulative Exchangeable Redeemable Preferred Stock (the Security), was issued in 1989 as a component of the leveraged buyout (LBO) of C3 Inc. by C3 Acquisition Corp. Each of the Signatories is also aware that the Security has a first mandatory redemption date of November 21, 2005 at a price of $10 per share, plus accrued and unpaid, contractually obligated dividends.
As you are aware, the Security is a fixed obligation of the Company and the holders of the Security are not considered by the Company to be equity participants, as disclosed in the October 20, 1989 Proxy Statement/Prospectus:
As a result [of receiving the Security] the public shareholders of the Company [existing prior to completion of the LBO] will be deprived of the opportunity to share in any future earnings or growth of the Company
Additionally, each of the Signatories is aware of the Board of Directors disclosure statements made in the Companys SEC filings on Forms 8-K, 10-Q and 10-K beginning in March 2004 that the Company believes it will more likely than not be unable to meet the redemption schedule in accordance with the contractual obligations set forth in the terms of the Security.
Each of the Signatories acknowledges that based on the Companys Form 10-K for the fiscal year ended December 31, 2004, on that date, the Company did not have sufficient cash on hand to effect the mandatory redemption that is scheduled to commence this year in accordance with the contractual obligations of the Company under the terms of the Security. However, each of the Signatories believes that the Company has substantial unrealized total enterprise value (TEV) that could be unlocked by the Board of Directors through a strategic transaction such as, but not limited to, a public equity offering or a merger transaction (a Strategic Transaction). Such a Strategic Transaction is interesting because it has the potential to unlock substantial value that can be made available to the Company to provide legally available funds to either completely or near completely fulfill the contractual obligations of the Company under the terms of the Security.
Based on independent analysis conducted by certain of the Signatories, and submitted in the enclosed summary, each of the Signatories estimates that the Companys unrealized TEV is at least between $80 million and $100 million.
In exploring the Companys ability to execute a Strategic Transaction, some of the Signatories have had informal extensive discussions with nationally-recognized investment banks that specialize in the Companys sector, including Friedman Billings Ramsey, BB&T Windsor Group, RBC Capital Markets, Stephens Financial Group and Morgan Joseph. These investment banks have expressed confidence in their respective independent abilities to successfully execute a Strategic Transaction on behalf of the Company.
The Committee of Independent Directors, in addition to the entire Board of Directors, has a fiduciary duty to direct and aggressively pursue a Strategic Transaction that would unlock the unrealized TEV and provide legally available funds for fulfilling the contractual obligations of the Company under the terms of the Security.
To assist the Committee of Independent Directors and the Company in facilitating a Strategic Transaction for the purposes of unlocking unrealized TEV and fulfilling the contractual obligations of the Company under the terms of the Security, some interest has been expressed by the Signatories in the possibility that holders of the Security may consent to a reduction to the dollar amount of the accrued and unpaid dividends currently due and owed by the Company ($38.75 million as of March 31, 2005).
Each of the Signatories would welcome an opportunity to meet with you to discuss these issues. The Signatories understand from certain conversations with Counsel to the Committee of Independent Directors that a meeting will be held on May 10, 2005 at the office of Powell Goldstein. Subject to scheduling, each of the Signatories would be very pleased to meet with you at that time.
Sincerely,
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/s/ Timothy G. Ewing |
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/s/ Andrew R. Siegel |
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Timothy G. Ewing |
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Andrew R. Siegel |
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Ewing & Partners |
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Costa Brava Partnership III, L.P. |
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/s/ Nelson Obus |
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Nelson Obus |
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Victor Morgenstern |
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Wynnefield Capital Management, LLC |
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/s/ David P. Cohen |
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David P. Cohen |
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Athena Capital Management, Inc. |
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Enc: summary valuation analysis
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Submission to Committe of Independent Directors |
Telos Corporation |
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Indicative |
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Value Ranges |
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Mid |
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($ in millions) |
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Point |
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Comparable M&A Transactions |
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Revenue |
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$ |
83.1 |
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- |
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$ |
264.5 |
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$ |
173.8 |
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EBITDA |
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$ |
48.3 |
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- |
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$ |
122.2 |
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$ |
85.2 |
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Adjusted EBITDA (1) |
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$ |
63.6 |
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- |
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$ |
161.0 |
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$ |
112.3 |
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Comparable Public Equity Market |
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Revenue |
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$ |
84.2 |
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- |
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$ |
291.2 |
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$ |
187.7 |
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EBITDA |
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$ |
60.3 |
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- |
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$ |
128.0 |
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$ |
94.2 |
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Adjusted EBITDA (1) |
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$ |
79.4 |
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- |
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$ |
168.7 |
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$ |
124.0 |
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Indicative Value Range |
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Revenue |
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$ |
83.1 |
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- |
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$ |
291.2 |
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$ |
187.1 |
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EBITDA |
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$ |
48.3 |
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- |
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$ |
128.0 |
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$ |
88.2 |
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Adjusted EBITDA (1) |
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$ |
63.6 |
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- |
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$ |
168.7 |
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$ |
116.1 |
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(1) EBITDA adjusted for discretionary cash bonuses and consulting fees to the majority common shareholder
Indicative Valuation Ranges
($ in millions)
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Indicative |
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Valuation Mutiples |
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Comparable M&A Transactions |
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Revenue multiples: |
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0.7x |
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- |
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2.3x |
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EBITDA multiples: |
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6.6x |
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- |
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16.6x |
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Comparable Public Equity Market |
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|
|
|
|
|
|
|
Revenue multiples: |
|
0.7x |
|
- |
|
2.5x |
|
|
|
EBITDA multiples: |
|
8.2x |
|
- |
|
17.4x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indicative Multiple Range |
|
|
|
|
|
|
|
|
|
Revenue multiples |
|
0.7x |
|
- |
|
2.5x |
|
|
|
EBITDA multiples |
|
6.6x |
|
- |
|
17.4x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telos LTM, as of 12/31/2004 (in $ millions) |
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
116.7 |
|
|
|
|
|
|
EBITDA |
|
$ |
7.4 |
|
|
|
|
|
|
Adjusted EBITDA (1) |
|
$ |
9.7 |
|
|
|
|
|
(1) EBITDA adjusted for discretionary cash bonuses and consulting fees to the majority common shareholder
|
($MM) |
|
|
|
|
|
|
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|
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|
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||
|
Date |
|
|
|
|
|
Transaction |
|
Target |
|
TEV / |
|
TEV / |
|
||
|
Announced |
|
Target |
|
Acquirer |
|
Value |
|
LTM Revenue |
|
LTM Revenue |
|
LTM EBITDA |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
4/26/2005 |
|
PEC Solutions, Inc. |
|
Nortel Networks Inc. |
|
$ |
448.0 |
|
$ |
202.7 |
|
2.2x |
|
14.0x |
|
|
3/22/2005 |
|
ComGlobal Systems, Incorporated |
|
Analex Corp. |
|
$ |
47.0 |
|
$ |
39.5 |
|
1.2x |
|
9.2x |
|
|
2/18/2005 |
|
SYTEX Group Inc. |
|
Lockheed Martin Corporation |
|
$ |
462.0 |
|
$ |
425.0 |
|
1.1x |
|
NA |
|
|
2/18/2005 |
|
Integic Corporation |
|
Northrop Grumman Corporation |
|
$ |
313.0 |
|
$ |
161.0 |
|
1.9x |
|
NA |
|
|
1/19/2005 |
|
OnBoard Software Inc. |
|
MTC Technologies Inc. |
|
$ |
34.0 |
|
$ |
15.0 |
|
2.3x |
|
NA |
|
|
1/12/2005 |
|
Shenandoah Electronic Intelligence Inc. |
|
SI International Inc. |
|
$ |
75.0 |
|
$ |
73.9 |
|
1.0x |
|
7.9x |
|
|
1/7/2005 |
|
Windermere Group LLC |
|
Essex Corp. |
|
$ |
69.4 |
|
$ |
64.0 |
|
1.1x |
|
NA |
|
|
1/3/2005 |
|
Sytel Inc. |
|
TechTeam Global, Inc. |
|
$ |
20.5 |
|
$ |
28.8 |
|
0.7x |
|
7.2x |
|
|
12/27/2004 |
|
Manufacturing Technology Inc. |
|
MTC Technologies Inc. |
|
$ |
75.0 |
|
$ |
50.0 |
|
1.5x |
|
NA |
|
|
12/16/2004 |
|
RCI Holdings Corp. |
|
Serco Group Plc |
|
$ |
215.0 |
|
$ |
256.0 |
|
0.8x |
|
14.3x |
|
|
12/1/2004 |
|
Bridge Technology Corporation |
|
SI International Inc. |
|
$ |
30.0 |
|
$ |
22.2 |
|
1.4x |
|
8.6x |
|
|
9/11/2004 |
|
DigitalNet Holdings Inc. |
|
BAE Systems North America |
|
$ |
585.9 |
|
$ |
354.2 |
|
1.7x |
|
NA |
|
|
9/9/2004 |
|
AC Technologies Inc. |
|
PEC Solutions, Inc. |
|
$ |
49.7 |
|
$ |
48.5 |
|
1.0x |
|
6.6x |
|
|
8/11/2004 |
|
Integrated Management Services, Inc. |
|
Anteon International Corp. |
|
$ |
31.0 |
|
$ |
30.0 |
|
1.0x |
|
NA |
|
|
8/2/2004 |
|
Impact Innovations Group LLC (Gov division) |
|
Dynamics Research Corporation |
|
$ |
53.4 |
|
$ |
47.0 |
|
1.1x |
|
NA |
|
|
7/27/2004 |
|
Simulation Technologies, Inc. |
|
Anteon International Corp. |
|
$ |
15.0 |
|
$ |
20.0 |
|
0.8x |
|
NA |
|
|
6/29/2004 |
|
Command Technologies, Inc. |
|
MTC Technologies Inc. |
|
$ |
47.0 |
|
$ |
36.0 |
|
1.3x |
|
NA |
|
|
6/1/2004 |
|
EPOS Corp |
|
Tier Technologies Inc. |
|
$ |
19.0 |
|
$ |
15.0 |
|
1.3x |
|
NA |
|
|
5/28/2004 |
|
Integrated Information Technology Corp. |
|
PEC Solutions Inc. |
|
$ |
35.0 |
|
$ |
36.0 |
|
1.0x |
|
8.3x |
|
|
5/6/2004 |
|
Beta Analytics International Inc. |
|
Analex Corp. |
|
$ |
32.3 |
|
$ |
33.0 |
|
1.0x |
|
NA |
|
|
4/5/2004 |
|
STI Government Systems |
|
BAE Systems North America |
|
$ |
27.0 |
|
NA |
|
NA |
|
NA |
|
|
|
3/10/2004 |
|
AMS Defense & Intelligence Group |
|
CACI International |
|
$ |
415.0 |
|
$ |
250.0 |
|
1.7x |
|
16.6x |
|
|
2/12/2004 |
|
CMS Information Services, Inc |
|
CACI International |
|
$ |
30.0 |
|
$ |
39.0 |
|
0.8x |
|
10.7x |
|
|
1/22/2004 |
|
Science & Engineering Associates, Inc. |
|
ITS Services Inc. |
|
$ |
100.0 |
|
$ |
108.0 |
|
0.9x |
|
11.6x |
|
|
1/8/2004 |
|
ORION Scientific Systems, Inc. |
|
SRA International Inc. |
|
$ |
34.5 |
|
$ |
30.0 |
|
1.2x |
|
NA |
|
|
1/8/2004 |
|
FAAC, Inc. |
|
Arotech Corp. |
|
$ |
14.0 |
|
$ |
15.0 |
|
0.9x |
|
NA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
Average |
|
1.2x |
|
10.5x |
|
||
|
|
|
|
|
|
|
|
|
Median |
|
1.1x |
|
9.2x |
|
||
|
Target |
|
Services Provided to the U.S. Federal Government (DoD, Intelligence, other) |
|
|
|
|
|
PEC Solutions, Inc. |
|
Secure, interoperable technology solutions |
|
ComGlobal Systems, Incorporated |
|
Software and information technology firm providing C4I services to military and federal government agencies |
|
SYTEX Group Inc. |
|
Technology engineering and systems integration, network security solutions, business management solutions |
|
Integic Corporation |
|
Enterprise health and business process software solutions |
|
OnBoard Software Inc. |
|
Technical development of hardware and software |
|
Shenandoah Electronic Intelligence Inc. |
|
Records management, applications support, secure optical card processing |
|
Windermere Group LLC |
|
Software development, advanced engineering design and information assurance |
|
Sytel Inc. |
|
Network design and network security services, help desk support |
|
Manufacturing Technology Inc. |
|
Product life cycle support for systems and electronics |
|
RCI Holdings Corp. |
|
Systems engineering and HR business process management |
|
Bridge Technology Corporation |
|
Program management, systems and software engineering |
|
DigitalNet Holdings Inc. |
|
Networked infrastructure, information assurance solutions |
|
AC Technologies Inc. |
|
Software engineering and network services primarily to non-security civilian federal agencies |
|
Integrated Management Services, Inc. |
|
Information security / assurance, infrastructure security, enterprise IT architecture |
|
Impact Innovations Group LLC (Gov division) |
|
Enterprise content management, application development, IT service management, information security |
|
Simulation Technologies, Inc. |
|
Modeling and simulation software solutions and services |
|
Command Technologies, Inc. |
|
Professional and technical services, information technology |
|
EPOS Corp |
|
Interactive communications and transaction processing technologies |
|
Integrated Information Technology Corp. |
|
Network and computer services, satellite communications, communication system engineering and installation |
|
Beta Analytics International Inc. |
|
Security and intelligence data support |
|
STI Government Systems |
|
IT systems and integration |
|
AMS Defense & Intelligence Group |
|
IT support and software design for financial management, logistics, warfighting, intelligence |
|
CMS Information Services, Inc |
|
Enterprise network solutions, enterprise financial management systems, software engineering and integration |
|
Science & Engineering Associates, Inc. |
|
Advanced sensor development, spectral imaging, security solutions, system engineering and design |
|
ORION Scientific Systems, Inc. |
|
Analytical support, system development, proprietary knowledge management |
|
FAAC, Inc. |
|
Simulators, systems engineering and related software products |
|
($ MM) |
|
LTM |
|
EBITDA |
|
Margin |
|
Total |
|
Net |
|
Market |
|
TEV |
|
TEV / |
|
TEV / |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
CACI International Inc. |
|
$ |
1,551.6 |
|
$ |
177.3 |
|
11.4 |
% |
$ |
347.4 |
|
$ |
284.1 |
|
$ |
1,830.1 |
|
$ |
2,114.2 |
|
1.4x |
|
11.9x |
|
|
|
Anteon International Corp. |
|
$ |
1,330.0 |
|
$ |
117.3 |
|
8.8 |
% |
$ |
164.2 |
|
$ |
129.0 |
|
$ |
1,509.5 |
|
$ |
1,638.6 |
|
1.2x |
|
14.0x |
|
|
|
Mantech International Corp. |
|
$ |
842.4 |
|
$ |
48.2 |
|
5.7 |
% |
$ |
25.2 |
|
$ |
2.2 |
|
$ |
781.4 |
|
$ |
783.7 |
|
0.9x |
|
16.3x |
|
|
|
SRA International Inc. |
|
$ |
755.5 |
|
$ |
89.0 |
|
11.8 |
% |
$ |
0.0 |
|
$ |
(180.3 |
) |
$ |
1,728.3 |
|
$ |
1,547.9 |
|
2.0x |
|
17.4x |
|
|
|
Cubic Corp. |
|
$ |
740.9 |
|
$ |
57.8 |
|
7.8 |
% |
$ |
93.6 |
|
$ |
77.3 |
|
$ |
478.3 |
|
$ |
555.6 |
|
0.7x |
|
9.6x |
|
|
|
MTC Technologies Inc. |
|
$ |
298.4 |
|
$ |
35.7 |
|
12.0 |
% |
$ |
63.3 |
|
$ |
63.3 |
|
$ |
471.5 |
|
$ |
534.8 |
|
1.8x |
|
15.0x |
|
|
|
SI International Inc. |
|
$ |
290.1 |
|
$ |
21.8 |
|
7.5 |
% |
$ |
100.0 |
|
$ |
87.7 |
|
$ |
258.7 |
|
$ |
346.3 |
|
1.2x |
|
15.9x |
|
|
|
Argon ST Inc. (1) |
|
$ |
206.4 |
|
$ |
30.8 |
|
14.9 |
% |
$ |
0.2 |
|
$ |
(42.2 |
) |
$ |
557.0 |
|
$ |
514.8 |
|
2.5x |
|
16.7x |
|
|
|
PEC Solutions Inc. |
|
$ |
202.7 |
|
$ |
31.9 |
|
15.7 |
% |
$ |
0.0 |
|
$ |
(29.4 |
) |
$ |
422.2 |
|
$ |
392.8 |
|
1.9x |
|
12.3x |
|
|
|
Analex Corp. (1) |
|
$ |
145.7 |
|
$ |
15.0 |
|
10.3 |
% |
$ |
73.8 |
|
$ |
73.2 |
|
$ |
49.3 |
|
$ |
122.5 |
|
0.8x |
|
8.2x |
|
|
|
Tier Technologies Inc. |
|
$ |
133.1 |
|
$ |
7.1 |
|
5.3 |
% |
$ |
0.2 |
|
$ |
(53.3 |
) |
$ |
149.4 |
|
$ |
96.1 |
|
0.7x |
|
13.5x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
1.4x |
|
13.7x |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median |
|
1.2x |
|
14.0x |
|
|||||||
(1) LTM figues are pro forma for significant material merger transactions in the LTM period.