TELOS CORP

7. GOODWILL

As discussed in Note 2– Significant Accounting Policies, we reportedtwo operating and reportable segments: Security Solutions and Secure Networks. Thetwo operating and reportable segments represent the reporting units for purposes of testing goodwill.

The goodwill balance was $17.9 million as of December 31, 2023 and 2022, of which $3.0 million is allocated to the Security Solutions segment and $14.9 million is allocated to the Secure Networks segment.

The net assets attributable to the reporting units are determined based upon the estimated assets and liabilities attributable to the reporting units in deriving its free cash flows.

For fiscal year 2023, we performed a qualitative assessment on our reporting units and identified that it is "more-likely-than-not" that the estimated fair value of our Security Solutions reporting unit exceeded its carrying value. In contrast, based on the initial qualitative assessment of our Secure Networks reporting unit, we determined that it is not "more-likely-than-not" that the fair value of this reporting unit exceeds its carrying value, therefore we performed a quantitative impairment test. Based on the quantitative assessment on our Secure Networks reporting unit as of December 31, 2023, the estimated fair value exceeded its carrying value.

Based on the results of our annual impairment test of goodwill performed, the estimated fair value of our respective reporting units exceeded their respective carrying value, andno impairment charges were taken during the years ended December 31, 2023 and 2022.