In line with the Company’s strategic growth initiatives, the Company acquired certain businesses during the three months ended March 31, 2022 and during the year ended December 31, 2021. The results of each of those acquired businesses are included in the unaudited condensed consolidated financial statements beginning on the acquisition date. Each transaction qualified as an acquisition of a business and was accounted for as a business combination. All acquisitions resulted in the recognition of goodwill. The Company paid these premiums resulting in such goodwill for a number of reasons, including expected synergies from combining operations of the acquiree and the Company while also growing the Company’s customer base, acquiring assembled workforces, expanding its presence in certain markets and expanding and advancing its product and service offerings. The Company recorded the assets acquired and liabilities assumed at their acquisition date fair value, with the difference between the fair value of the net assets acquired and the acquisition consideration reflected as goodwill.

The identifiable intangible assets for acquisitions are valued using the excess earnings method discounted cash flow approach for customer relationships, the relief from royalty method for trade names, the patent and external proprietary software, the “with and without” method for covenants not to compete and the replacement cost method for the internal proprietary software by incorporating Level 3 inputs as described under the fair value hierarchy of ASC 820. These unobservable inputs reflect the Company’s own assumptions about which assumptions market participants would use in pricing an asset on a non-recurring basis. These assets will be amortized over their respective estimated useful lives.

Other purchase price obligations (primarily deferred purchase price liabilities and target working capital liabilities or receivables) are included on the unaudited condensed consolidated statements of financial position in accounts payable and other accrued liabilities, other non-current liabilities or accounts receivable-net in the case of working capital deficits. Contingent consideration outstanding from acquisitions are included on the unaudited condensed consolidated statements of financial position in business acquisition contingent consideration, current or in business acquisitions contingent consideration, long-term. The contingent consideration elements of the purchase price of the acquisitions are related to earn-outs which are based on the expected achievement of revenue or earnings thresholds as of the date of the acquisition and for which the maximum potential amount is limited.

The Company considers several factors when determining whether or not contingent consideration liabilities are part of the purchase price, including the following: (i) the valuation of its acquisitions is not supported solely by the initial consideration paid, (ii) the former stockholders of acquired companies that remain as key employees receive compensation other than contingent consideration payments at a reasonable level compared with the compensation of the Company’s other key employees and (iii) contingent consideration payments are not affected by employment termination. The Company reviews and assesses the estimated fair value of contingent consideration at each reporting period.

The Company may be required to make up to $8.7 million in aggregate true up and earn-out payments between the years 2022 and 2025 in connection with certain of its business acquisitions.

Transaction costs related to business combinations totaled $0.5 million and $0.2 million for the three months ended March 31, 2022 and March 31, 2021, respectively. These costs are expensed within selling, general and administrative expense in the accompanying unaudited condensed consolidated statements of operations.

Environmental Standards, Inc. (“EnvStd”)—In January 2022, the Company completed the acquisition of Environmental Standards, Inc. by acquiring 100.0% of its common stock. EnvStd is a provider of environmental consulting services. EnvStd is based in Valley Forge, PA with satellite locations nationwide. The upfront cash payment made to acquire EnvStd was funded through cash on hand.

Industrial Automation Group, Inc. (“IAG”)—In January 2022, the Company completed the acquisition of Industrial Automation Group, Inc. by acquiring certain of its employees and a covenant not to compete. The upfront cash payment made to acquire IAG was funded through cash on hand.

The following table summarizes the elements of the purchase price of the acquisitions completed during the three months ended March 31, 2022:


	Cash		Common Stock		Other Purchase Price Components Current		Other Purchase Price Components Long Term		Contingent Consideration Current		Contingent Consideration Long Term		Total Purchase Price
EnvStd	$	14,473	$	—	$	38	$	—	$	—	$	1,166	$	15,677
IAG		150		—		—		—		—		50		200
Total	$	14,623	$	—	$	38	$	—	$	—	$	1,216	$	15,877

The other purchase price components of the EnvStd purchase price consist of a surplus working capital amount, which is not finalized at this time.

The preliminary purchase price attributable to the acquisitions was allocated as follows:


	EnvStd		IAG		Total
Cash	$	295	$	—	$	295
Accounts receivable and contract assets		4,876		—		4,876
Other current assets		456		—		456
Current assets		5,627		—		5,627
Property and equipment		168		—		168
Operating lease right-of-use asset—net		2,895		—		2,895
Customer relationships		5,807		—		5,807
Trade names		1,010		—		1,010
Covenants not to compete		269		50		319
Goodwill		3,874		150		4,024
Total assets		19,650		200		19,850
Current liabilities		1,645		—		1,645
Operating lease liability—net of current portion		2,328		—		2,328
Total liabilities		3,973		—		3,973
Purchase price	$	15,677	$	200	$	15,877

Goodwill associated with the IAG acquisition is deductible for income tax purposes.

For the acquisitions completed during the three months ended March 31, 2022, the results of operations since the acquisition dates have been combined with those of the Company. The Company’s unaudited condensed consolidated statement of operations for the three months ended March 31, 2022 includes revenue of $3.3 million and pre-tax income of $0.8 million. EnvStd and IAG are included in the Company’s Assessment, Permitting and Response and Remediation and Reuse segments, respectively.

MSE Group, LLC (“MSE”)—In January 2021, the Company completed the acquisition of MSE Group, LLC by acquiring 100.0% of its membership interests. MSE is a provider of environmental assessment, compliance, engineering, and design services primarily to the U.S. federal government. MSE is based in Orlando, FL with additional offices in Tampa, Orlando, Jacksonville, San Antonio, TX, and Wilmington, NC, and satellite locations nationwide. The upfront cash payment made to acquire MSE was funded through cash on hand and the common stock portion of the purchase price was funded through the issuance of 71,740 shares of common stock.

Vista Analytical Laboratory, Inc. (“Vista”)—In June 2021, the Company completed the acquisition of Vista Analytical Laboratory, Inc. (“Vista”) by acquiring 100.0% of its common stock. Vista provides specialty analytical services related to Per- and polyfluoroalkyl substances (“PFAS”) and other semi-volatile organic compounds. Vista is based in Dorado Hills, CA. The upfront cash payment made to acquire Vista was funded through cash on hand and the common stock portion of the purchase price was funded through the issuance of 9,322 shares of common stock.

Environmental Intelligence, LLC (“EI”) —In July, 2021 the Company completed the acquisition of Environmental Intelligence, LLC (“EI”) by acquiring 100.0% of its membership interests. EI is an environmental consulting company recognized for its innovative work in wildlife mitigation, biological assessments, and other environmental services. EI is based in Laguna Beach, CA and enhances Montrose’s ecological planning and service capabilities in California and the US West Coast. The upfront cash payment made to acquire EI was funded through cash on hand and the common stock portion of the purchase price was funded through the issuance of 43,100 shares of common stock.

SensibleIoT, LLC (“Sensible”) —In August, 2021, the Company completed the business acquisition of SensibleIoT, LLC (“Sensible”) by acquiring 100.0% of its membership interests. Sensible is a technology platform that connects sensors and sources of environment data to a central, proprietary database that enables real-time client interaction. Sensible provides Montrose with an advanced ability to integrate environmental services and enhance environmental data analytics for clients. The upfront cash payment made to acquire Sensible was funded through cash on hand and the common stock portion of the purchase price was funded through the issuance of 19,638 shares of common stock.

Environmental Chemistry, Inc. (“ECI”) —In October 2021, the Company completed the business acquisition of Environmental Chemistry, Inc. (“ECI”) by acquiring 100.0% of its common stock. ECI provides a full suite of environmental laboratory analytical services to industrial, governmental, and engineering/consulting clients. Combined with the Company’s existing Houston, TX laboratory, ECI (located also in Houston, TX) will enable Montrose to provide air, water and soil analytical services in the gulf coast region. The upfront cash payment made to acquire ECI was funded through cash on hand.

Horizon Water and Environment, LLC (“Horizon”)— In November 2021, the Company completed the business acquisition of Horizon Water and Environment, LLC (“Horizon”) by acquiring 100.0% of its membership interests. Horizon is an environmental consulting firm specializing in planning, watershed science, and environmental compliance for water and natural resource projects. The upfront cash payment made to acquire Horizon was funded through cash on hand and the common stock portion of the purchase price was funded through the issuance of 34,921 shares of common stock.

The following table summarizes the elements of the purchase price of the acquisitions completed during the year ended December 31, 2021:


	Cash		Common Stock		Other Purchase Price Components Current			Contingent Consideration Current		Contingent Consideration Long Term		Total Purchase Price
MSE	$	9,082	$	2,271	$	10,701		$	1,551	$	253	$	23,858
EI		20,721		2,274		(63	)		—		—		22,932
All other 2021 acquisitions		29,683		3,775		1,618			1,250		4,350		40,676
Total	$	59,486	$	8,320	$	12,256		$	2,801	$	4,603	$	87,466

The other purchase price components of the MSE purchase price consist of a surplus working capital amount on the date of close, a seller make-whole for taxes related to a 338(h)(10) election, an integration payment liability and a purchase price true up related to MSE’s financial performance in the fourth quarter of 2020. The other purchase price components of the EI purchase price consist of a surplus working capital amount on the date of close. The other purchase price components of all the other acquisitions

purchase price mainly consist of surplus/deficit working capital amounts and 338(h)(10) election liabilities. Horizon's closing working capital surplus/deficit amounts have not been finalized at this time.

The purchase price attributable to the acquisitions was allocated as follows:


	MSE		EI		All other acquisitions		Total
Cash	$	2,810	$	250	$	694	$	3,754
Accounts receivable		2,980		4,675		3,714		11,369
Other current assets		31		84		289		404
Current assets		5,821		5,009		4,697		15,527
Property and equipment		513		32		1,168		1,713
Operating lease right-of-use asset—net		740		106		2,233		3,079
Customer relationships		8,720		10,073		12,830		31,623
Trade names		521		996		1,958		3,475
Covenants not to compete		922		511		1,248		2,681
Acquired Technology		—		—		321		321
Goodwill		8,176		8,960		20,377		37,513
Total assets		25,413		25,687		44,832		95,932
Current liabilities		1,007		2,719		2,351		6,077
Operating lease liability—net of current portion		548		36		1,805		2,389
Total liabilities		1,555		2,755		4,156		8,466
Purchase price	$	23,858	$	22,932	$	40,676	$	87,466

Goodwill associated with all of these acquisitions is deductible for income tax purposes.

For the acquisitions completed during the three months ended March 31, 2021, the results of operations since the acquisition dates have been combined with those of the Company. The Company’s unaudited condensed consolidated statement of operations for the three months ended March 31, 2021 includes revenue of $4.0 million and pre-tax income of $0.3 million. MSE is included in the Company’s Remediation and Reuse segment, Vista and Sensible are included in the Company’s Measurement and Analysis segment and EI is included the Company’s Assessment, Permit and Response segment.

Supplemental Unaudited Pro-Forma—The unaudited condensed consolidated financial information summarized in the following table gives effect to the 2022 and the 2021 acquisitions discussed above assuming they occurred on January 1, 2021. These unaudited consolidated pro forma operating results do not assume any impact from revenue, cost or other operating synergies that are expected or may have been realized as a result of the acquisitions. These unaudited consolidated pro forma operating results are presented for illustrative purposes only and are not indicative of the operating results that would have been achieved had the acquisitions occurred on January 1, 2021, nor does the information purport to reflect results for any future period.


	For the Three Months Ended March 31,
	2022								2021
	As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)			As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)
Revenues	$	134,680		$	1,395	$	136,075		$	133,817		$	11,848	$	145,665
Net (loss) income		(7,536	)		194		(7,342	)		(12,931	)		1,984		(10,947	)