In line with the Company’s strategic growth initiatives, the Company acquired several businesses during the nine months ended September 30, 2020 and September 30, 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 or receivables) are included on the 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 condensed consolidated statements of financial position in business acquisition contingent consideration, current or in business acquisitions contingent consideration, long-term. 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.

Transaction costs related to business combinations totaled $3.8 million and $2.4 million for the nine months ended September 30, 2020 and September 30, 2019, respectively, and zero and $1.3 million for the three months ended September 30, 2020 and September 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, L.L.C. (“CTEH”) was funded through the issuance of the Convertible and Redeemable Series A-2 Preferred Stock (Note 16) 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 nine months ended September 30, 2019 were funded through the Company’s prior senior secured credit facility (Note 12).

The Center for Toxicology and Environmental Health, L.L.C.—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.

Leed Environmental Inc.— In September 2020, the Company acquired certain testing assets, and operations from Leed Environmental Inc. (“LEED”). LEED provides environmental project management and coordination services. LEED expands the Company’s remediation capabilities in the Northeast region of the United States.

American Environmental Testing Co.— In September 2020, the Company acquired certain assets and operations of American Environmental Testing Co. (“AETC”), a stack testing company in Utah. AETC expands the Company’s air measurement and analysis capabilities in the West Coast region.

The following table summarizes the elements of purchase price of the acquisitions completed during the nine months ended September 30, 2020:

	Cash		Common Stock		Other Purchase Price Component Current			Other Purchase Price Component Long Term		Contingent Consideration Current		Contingent Consideration Long Term		Total Purchase Price
CTEH	$	175,000	$	25,000	$	(2,297	)	$	—	$	34,451	$	10,543	$	242,697
All other acquisitions		450		—		50			100		210		—		810
	$	175,450	$	25,000	$	(2,247	)	$	100	$	34,661	$	10,543	$	243,507

The contingent consideration elements of the purchase price of the acquisitions 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.

CTEH 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 1), 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 preliminary purchase price attributable to the acquisitions was allocated as follows:

	CTEH		All Other Acquisitions		Total
Cash	$	1,527	$	—	$	1,527
Accounts receivable		17,059		—		17,059
Other current assets		1,265		—		1,265
Current assets		19,851		—		19,851
Property and equipment		7,042		75		7,117
Customer relationships		56,000		—		56,000
Trade names		4,200		—		4,200
Covenants not to compete		4,000		109		4,109
Proprietary software		14,700		—		14,700
Goodwill		146,625		626		147,251
Total assets		252,418		810		253,228
Current liabilities		9,721		—		9,721
Total liabilities		9,721		—		9,721
Purchase price	$	242,697	$	810	$	243,507

For the acquisitions completed during the nine months ended September 30, 2020, the results of operations have been combined with those of the Company. The Company’s condensed consolidated statement of operations for the three and nine months ended September 30, 2020 includes revenue and pre-tax income of $37.2 million and $5.7 million, respectively, related mainly to the CTEH acquisition. CTEH, LEED and AETC are included in the Company’s Assessment, Permitting and Response, Remediation and Reuse and Measurement and Analysis segments, respectively.

The weighted average useful lives for the acquired customer relationships and internal proprietary software for the CTEH 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 the CTEH acquisition is 5 years. The weighted average useful lives for the acquired covenants not to compete for the other acquisitions is 4 years.

Goodwill associated with the CTEH, LEED and AETC acquisitions is deductible for income tax purposes.

Golden Specialty, Inc.— In March 2019, the Company acquired 100% of the issued and outstanding capital stock 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 region.

Advanced Environmental Compliance LLC—In July 2019, the Company acquired certain emissions testing assets, employees and customer relationships from Advanced Environmental Compliance LLC (“AEC”). AEC is in the business of providing air quality measurement and analysis services, together with environmental laboratory services. AEC expands the Company’s emissions testing services offering in the West Coast region.

LEHDER Environmental Services Ltd.—In July 2019, the Company acquired 100% of the issued and outstanding capital stock of LEHDER Environmental Services (“LEHDER”), a provider of air quality management services in Canada. LEHDER expands the Company’s international reach and air quality services capabilities in Canada.

Emerging Compounds Treatments Technologies, Inc.—In August 2019, the Company acquired 100% of the issued and outstanding capital stock of Emerging Compounds Treatments Technologies, Inc. (“ECT2”), a provider of novel technologies for removing contaminants/compounds from water and air. ECT2 expands the Company’s water and air treatment capabilities throughout the United States and Australia.

The following table summarizes the elements of purchase price of the acquisitions completed during the nine months ended September 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
AEC		808		—		—			—		808
LEHDER		3,878		684		—			13		4,575
ECT2		54,037		—		(220	)		—		53,817
	$	87,285	$	4,047	$	1,450		$	5,401	$	98,183

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.

	ECT2		All Other Acquisitions		Total
Cash	$	3,149	$	2,137	$	5,286
Restricted cash		629		—		629
Accounts receivable		1,707		3,751		5,458
Other current assets		498		61		559
Current assets		5,983		5,949		11,932
Property and equipment		776		3,288		4,064
Customer relationships		13,840		12,748		26,588
Trade names		1,008		659		1,667
Covenants not to compete		3,360		2,083		5,443
Proprietary software		—		2,560		2,560
Patent		17,479		—		17,479
Goodwill		16,395		20,227		36,622
Total assets		58,841		47,514		106,355
Current liabilities		5,024		977		6,001
Non- current liabilities		—		2,171		2,171
Total liabilities		5,024		3,148		8,172
Purchase price	$	53,817	$	44,366	$	98,183

The weighted average useful lives for the acquired customer relationships, trade names, covenants not to compete, proprietary software and patent for these acquisitions are 9.5 years, 1.5 years, 4 years, 3 years and 16 years, respectively.

For the acquisitions completed during the nine months ended September 30, 2019, the results of operations since the acquisition dates have been combined with those of the Company. The Company’s three and nine months ended September 30, 2019 condensed consolidated statement of operations includes revenue of $7.7 million and pre-tax income of $1.5 million, respectively, related to these acquisitions. The Golden, TES, TESUS, AWS, AEC and LEHDER acquisitions are included in the Company’s Measurement and Analysis segment. The ECT2 acquisition is included in the Company’s Remediation and Reuse segment.

Goodwill associated with the acquisitions of Golden, AEC and ECT2 is deductible for income tax purposes.

Supplemental Unaudited Pro-Forma—The unaudited condensed consolidated financial information summarized in the following table gives effect to the 2020 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 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, 2019, nor does the information purport to reflect results for any future period.

	For the Three Months Ended September 30,
	2020								2019
	As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)			As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)
Revenues	$	84,705		$	—	$	84,705		$	57,623		$	18,551	$	76,174
Net (loss) income		(30,737	)		—		(30,737	)		(6,683	)		4,042		(2,641	)

	For the Nine Months Ended September 30,
	2020								2019
	As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)			As reported			Acquisitions Pro-Forma (Unaudited)		Consolidated Pro-Forma (Unaudited)
Revenues	$	219,502		$	31,253	$	250,755		$	165,978		$	107,459	$	273,437
Net (loss) income		(58,761	)		10,288		(48,473	)		(12,247	)		30,002		17,755