In line with the Company’s strategic growth initiatives, the Company acquired several businesses during the six months ended June 30, 2020 and 2019. The results of each of those acquired businesses are included in the condensed consolidated financial statements beginning on the respective acquisition dates. 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) and contingent consideration outstanding from acquisitions are included on the condensed consolidated statements of financial position in accounts payable and other accrued liabilities, other non-current liabilities for long term payables and accounts receivable-net for any working capital deficit receivable balance. These obligations are scheduled to be settled if certain performance thresholds are met.

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.

External transaction costs related to business combinations totaled $3.8 million and $1.1 million for the six months ended June 30, 2020 and June 30, 2019, respectively and $2.5 million and $0.9 million for the three months ended June 30, 2020 and June 30, 2019, respectively. These costs are expensed within the selling, general and administrative expense in the accompanying condensed consolidated statements of operations.

The cash payment made to acquire The Center for Toxicology and Environmental Health, LLC (“CTEH”) was funded through the issuance of the Convertible and Redeemable Series A-2 Preferred Stock (Note 17) and the common stock portion of the purchase price was funded through the issuance of 791,139 shares of common stock. Cash payments made to acquire businesses during the six months ended June 30, 2019 were funded through the Company’s prior senior secured credit facility (Note 13).

The Center for Toxicology and Environmental Health, LLC—In April 2020, the Company completed the acquisition of CTEH by acquiring 100% of its membership interests. CTEH is an environmental consulting company headquartered in Arkansas that specializes in environmental response and toxicology. The transaction qualified as an acquisition of a business and is accounted for as a business combination. The following table summarizes the elements of the purchase price of CTEH:

Cash

Common

Stock

Other

Purchase

Price

Component

Contingent

Consideration

Current

Contingent

Consideration

Long Term

Total

Purchase

Price

CTEH

175,000

25,000

(2,884

)

34,451

10,543

242,110

The contingent consideration elements of the purchase price of CTEH’s acquisition is 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 first year earnout is to be calculated at twelve times CTEH’s 2020 EBITDA (as defined in the purchase agreement) in excess of $18.3 million, with a maximum first year earn-out payment of $50.0 million. The second year earn-out is to be calculated at ten times CTEH’s 2021 EBITDA in excess of actual 2020 EBITDA (with actual 2020 EBITDA subject to a minimum of $18.3 million and a maximum of $22.5 million), with a maximum second year earn-out payment of $30.0 million. The 2020 earn out was initially payable 100% in common stock, but as a result of the completion of the Company’s IPO (Note 23), 50% of any 2020 earnout payment will be payable in cash and 50% will be payable, at the Company’s election, in cash or shares of common stock. The 2021 earn out, if any, is payable 100% in cash. The current portion of the contingent consideration is recorded in accounts payable and other accrued liabilities. The long term portion of the contingent consideration is recorded in other non-current liabilities.

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


Cash	$	1,527
Accounts receivable		17,059
Other current assets		1,265
Current assets		19,851
Property plant and equipment		7,042
Customer relationships		56,000
Trade names		4,200
Covenants not to compete		4,000
Proprietary software		14,700
Goodwill		146,038
Total assets		251,831
Current liabilities		9,721
Total liabilities		9,721
Purchase price	$	242,110

The results of operations of CTEH since the acquisition date have been combined with those of the Company. The Company’s condensed consolidated statement of operations for the three and six months ended June 30, 2020 includes revenue and pre-tax income of $14.6 million and $1.2 million, respectively, related to the CTEH acquisition. CTEH is included in the Company’s Assessment, Permitting and Response segment.

The weighted average useful lives for the acquired customer relationships and internal proprietary software for this acquisition are 15 years and 3 years, respectively. The weighted average useful lives for the acquired tradenames, covenants not to compete and external proprietary software for this acquisition is 5 years.

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

Golden Specialty, Inc.—In March 2019, the Company acquired all of the assets and operations of Golden Specialty, Inc. (“Golden”), an air testing laboratory in Texas. Golden expands the Company’s air measurement and analysis capabilities in the Gulf Coast region.

Target Emission Services Inc.—In April 2019, the Company acquired 100% of the issued and outstanding capital stock of Target Emission Services, Inc. (“TES”), an emission detection company in Canada. TES expands the Company’s LDAR business, increasing the geographic footprint in Canada and initiating growth into international markets.

Target Emission Services USA LP—In April 2019, the Company acquired 100% of the issued and outstanding capital stock of Target Emission Services USA LP (now Target Emission Services USA LLC) (“TESUS”), an emission detection company in the United States. TESUS expands the Company’s LDAR business throughout the United States.

Air Water & Soil Laboratories, Inc.—In June 2019, the Company acquired 100% of the issued and outstanding capital stock of Air Water & Soil Laboratories, Inc. (“AWS”), a provider of air, water, and soil testing in the mid-Atlantic region. AWS expands the Company’s air, water, and soil environmental lab services in the East Coast.

The following table summarizes the elements of purchase price of the acquisitions completed during the six months ended June 30, 2019:

	Cash		Common Stock		Other Purchase Price Components		Contingent Consideration		Total Purchase Price
Golden	$	1,500					$	477	$	1,977
TES		2,359		322		25		4,911		7,617
TESUS		18,683		3,041		1,495		—		23,219
AWS		6,020		—		150		—		6,170
	$	28,562	$	3,363	$	1,670	$	5,388	$	38,983

Contingent consideration elements of the purchase price of these acquisitions are related to earn-outs which are based on the expected achievement of revenue or earnings thresholds by the applicable business as of the date of the acquisition and for which the maximum potential amount to be earned is generally not limited.


Cash	$	1,863
Accounts receivable		2,670
Other current assets		31
Current assets		4,564
Property and equipment		2,450
Customer relationships		11,823
Trade names		463
Covenants not to compete		1,661
Proprietary software		2,560
Goodwill		17,893
Total assets		41,414
Current liabilities		748
Non- current liabilities		1,683
Total liabilities		2,431
Purchase price	$	38,983

The weighted average useful lives for the acquired customer relationships, trade names, covenants not to compete and proprietary software for these acquisitions are 10 years, 1.5 years, 4 years and 3 years, respectively.

For the acquisitions completed during the six months ended June 30, 2019, the results of operations since the acquisition dates have been combined with those of the Company. The Company’s three and six months ended June 30, 2019 condensed consolidated statement of operations includes revenue of $1.6 million and pre-tax income of $0.8 million, respectively, related to these acquisitions. The TES, TESUS and AWS acquisitions are included in the Company’s Measurement and Analysis segment.

Goodwill associated with the acquisitions completed during the six months ended June 30, 2019 is not deductible for income tax purposes.

Supplemental Unaudited Pro-Forma—The unaudited condensed consolidated financial information summarized in the following table gives effect to the CTEH acquisition and the 2019 acquisitions discussed above assuming they occurred on January 1, 2019. These unaudited consolidated pro forma operating results do not assume any impact from revenue, cost or other operating synergies that are expected 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, 2019, nor does the information purport to reflect results for any future period.

	Three months ended June 30,
	2020						2019
	As reported		Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)		As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)
Revenues	$	73,766	$	31,253	$	105,019	$	57,401		$	59,565	$	116,966
Net income (loss)		13,224		10,288		23,512		(322	)		19,971		19,649

	Six months ended June 30,
	2020								2019
	As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)			As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)
Revenues	$	134,797		$	31,253	$	166,050		$	108,355		$	88,908	$	197,263
Net (loss) income		(28,024	)		10,288		(17,736	)		(5,564	)		25,959		20,395