3. Acquisitions

Hyperspring, LLC

On November 14, 2014, (the "Closing Date") the Company, through its operating subsidiary, GSE Power Systems, Inc. (now GSE Performance Solutions, Inc. "GSE Performance"), acquired Hyperspring, LLC ("Hyperspring") pursuant to an Amended Membership Interests Purchase Agreement ("Purchase Agreement") with the sellers of Hyperspring ("Sellers"). Hyperspring, headquartered in Huntsville, Alabama, specializes in training and development, plant operations support services, and staff augmentation, primarily in the United States nuclear power industry. Hyperspring operates as a wholly-owned subsidiary of GSE Performance. The purchase price allocation included customer relationship intangible assets valued at $779,000 which are being amortized over seven years.

GSE Performance paid the Sellers an aggregate of $3.0 million in cash at the closing date. On September 24, 2015, Hyperspring was awarded a three year contract by the Tennessee Valley Authority ("TVA"), with substantially the same scope and profit margin as its expiring TVA contract. In accordance with the Purchase Agreement, the former owners were paid $1.2 million in October 2015 due to the successful renewal of the TVA contract. In addition, GSE Performance may be required, pursuant to the terms of the Purchase Agreement, to pay the Sellers up to an additional $2.4 million in each of the three years subsequent to the acquisition date based on earnings before interest, taxes, depreciation, and amortization ("EBITDA") thresholds. Based upon EBITDA for the period ended November 13, 2015, the Sellers earned $1.4 million which was paid in January 2016.

Hyperspring's results of operations are included in the consolidated financial statements for the period beginning November 14, 2014.

The following table summarizes the purchase price and purchase price allocation for the acquisition of Hyperspring on November 14, 2014.

	Hyperspring

(in thousands)
Cash purchase price	$	3,000
Fair value of contingent consideration		3,953
Total purchase price	$	6,953

Purchase price allocation:
Cash	$	152
Contract receivables		1,719
Prepaid expenses and other current assets		23
Property and equipment, net		12
Intangible assets		779
Goodwill		5,612
Total assets		8,297

Line of credit		749
Accounts payable, accrued expenses, and other liabilities		586
Billings in excess of revenue earned		9
Total liabilities		1,344

Net assets acquired	$	6,953

Contingent Consideration

ASC 805, Business Combinations ("ASC 805") requires that contingent consideration be recognized at fair value on the acquisition date and be re-measured each reporting period with subsequent adjustments recognized in the consolidated statement of operations. The Company estimates the fair value of contingent consideration liabilities based on financial projections of the acquired companies and estimated probabilities of achievement and discount the liabilities to present value using a weighted-average cost of capital. Contingent consideration is valued using significant inputs that are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting. The Company believes that the estimates and assumptions are reasonable, however, there is significant judgment involved. At each reporting date, the contingent consideration obligation is revalued to estimated fair value, and changes in fair value subsequent to the acquisitions are reflected as income or expense in the consolidated statements of operations, and could cause a material impact to, and volatility in, the operating results. Changes in the fair value of contingent consideration obligations may result from changes in discount periods, changes in the timing and amount of revenue and/or earnings estimates and changes in probability assumptions with respect to the likelihood of achieving the various earn-out criteria.

As of December 31, 2015 and 2014, current contingent consideration totaled $2.6 million and $2.8 million, respectively. As of December 31, 2015 and 2014, the Company also had accrued contingent consideration totaling $1.1 million and $1.9 million, respectively, which is included in long-term liabilities on the consolidated balance sheet and represents the portion of contingent consideration estimated to be payable greater than twelve months from the balance sheet date. The breakdown of contingent consideration as it relates to the Company's acquisitions is given below.

(in thousands)
	December 31,
	2015		2014
Hyperspring, LLC	$	2,647	$	2,152
IntelliQlik, LLC		-		213
EnVision Systems, Inc.		-		477
Current contingent consideration	$	2,647	$	2,842

Hyperspring, LLC	$	1,085	$	1,948
Contingent consideration	$	1,085	$	1,948