4.	Acquisitions

2019 Acquisition

DP Engineering

On February 15, 2019, through its wholly-owned subsidiary Performance Solutions, the Company entered into a membership interest purchase agreement with Steven L. Pellerin, Christopher A. Davenport, and DP Engineering (the “DP Engineering Purchase Agreement”), to purchase 100% of the membership interests in DP Engineering for $13.5 million. The purchase price is subject to customary pre- and post-closing working capital adjustments plus an additional earn-out amount not to exceed $5 million, potentially payable in 2020 and 2021 depending on DP Engineering’s satisfaction of certain targets for adjusted earnings before interest, tax, depreciation and amortization ("EBITDA") in calendar years 2019 and 2020, respectively. The acquisition was completed through the drawdown of $14.3 million (including transaction costs) of the term loan. An escrow of approximately $1.7 million was funded at the closing and is available to GSE to satisfy indemnification claims for 18 months after the closing.

DP Engineering is a provider of value-added technical engineering solutions and consulting services to nuclear power plants with an emphasis on preparation and implementation of design modifications during plant outages, which is in line with our Performance segment. The Company's allocation of the purchase price remains preliminary and the net assets are subject to adjustments within the measurement period, which is not to exceed one year from the acquisition date.

Based on preliminary forecasted adjusted EBITDA of DP Engineering for year 2019 and 2020, as of the acquisition date, the estimated fair value of the total earn-out amount was $1.2 million and was recorded as contingent consideration.

The following table summarizes the calculation of adjusted purchase price as of the acquisition date (in thousands):

Base purchase price per agreement	$	13,500
Pre closing working capital adjustment		155
Fair value of contingent consideration		1,200
Total purchase price	$	14,855

The following table summarizes the consideration paid to acquire DP Engineering and the preliminary fair value of the assets acquired and liabilities assumed at the date of the transaction. Due to the recent completion of the acquisition, the Company recorded the assets acquired and liabilities assumed at their preliminary estimated fair value. As of June 30, 2019, the Company had not finalized the determination of the fair value allocated to various assets and liabilities, including, but not limited to, contract receivables, prepaid expenses and other current assets, intangible assets, accounts payable, accrued expenses, contingent consideration, accrued compensation and the residual amount allocated to goodwill. The following amounts except for cash are all reflected in the consolidated statement of cash flows within the "Acquisition of DP Engineering, net of cash acquired" line caption.

(in thousands)

Total purchase price	$	14,855
Purchase price allocation:
Cash		134
Contract receivables		2,934
Prepaid expenses and other current assets		209
Property, and equipment, net		210
Intangible assets		6,798
Other assets		1,806
Accounts payable and accrued expenses		(1,375	)
Other liabilities		(1,494	)
Total identifiable net assets		9,222
Goodwill		5,633
Net assets acquired	$	14,855

The fair value of the assets acquired includes gross trade receivables of $2.9 million, of which the Company has collected in full. GSE did not acquire any other class of receivable as a result of the acquisition of DP Engineering.

The goodwill is primarily attributable to value-added technical engineering solutions and consulting services to nuclear power plants with an emphasis on preparation and implementation of design modification during plant outages, the workforce of the acquired business and the significant synergies expected to arise after the acquisition of DP Engineering. The total amount of goodwill is expected to be tax deductible. All of the $5.6 million of goodwill was assigned to our Performance segment. As discussed above, the goodwill amount is provisional pending receipt of the final valuations of various assets and liabilities and is subject to adjustments within the measurement period, which is not to exceed one year from the acquisition date.

The Company identified other intangible assets of $6.8 million, including customer contracts and relationships, tradename, and non-compete agreements, with amortization periods of five years to fifteen years. Please see Note 8 for further analysis on the carrying amount change due to impairment on goodwill and definite-lived intangible assets during the six months ended June 30, 2019.

The Company is assessing the likelihood of additional impairment against goodwill and intangible assets upon the termination notice received from the customer of DP Engineering on August 6, 2019, as described in Note 8 and Note 19.

The following table summarizes the fair value of intangible assets acquired at the date of acquisition and the related weighted average amortization period:

Intangible Assets	Weighted average amortization period		Fair Value
	(in years)		(in thousands)
Customer relationships		15	$	4,898
Tradename		10		1,172
Non-compete agreements		5		728
Total			$	6,798

DP Engineering contributed revenue of $4.3 million to GSE for the period from February 15, 2019 to June 30, 2019.

2018 Acquisition

True North

On May 11, 2018, GSE, through its wholly-owned subsidiary Performance Solutions, entered into a membership interest purchase agreement with Donald R. Horn, Jenny C. Horn, and True North Consulting LLC (the "True North Purchase Agreement") to purchase 100% of the membership interests in True North Consulting LLC ("True North") for $9.75 million. The purchase price was subject to customary pre- and post-closing working capital adjustments, resulting in total consideration of $9.9 million. The True North Purchase Agreement contains customary representations, warranties, covenants, and indemnification provisions subject to certain limitations. An escrow of $1.5 million was funded from the cash paid to the sellers of True North at the closing and is available to GSE to promote retention of key personnel and satisfy indemnification claims for 18 months after the closing. The acquisition of True North was completed on an all-cash transaction basis. In connection with the acquisition, we drew down a $10.3 million term loan to finance the transaction (including the transaction costs). See Note 12, for further details of the loan.

True North is a provider of technical engineering solutions to nuclear and fossil fuel power plants with an emphasis on regulatory-driven ASME code programs. Located in Montrose, Colorado, True North is a well-regarded service provider to leading companies in the power industry. The acquisition of True North is expected to broaden our engineering services offering, expand our relationships with several of the largest nuclear energy providers in the United States, and add a highly specialized, complementary talent pool to our employee base.

The following table summarizes the consideration paid to acquire True North and the preliminary fair value of the assets acquired and liabilities assumed at the date of the transaction. The Company recorded the assets acquired and liabilities assumed at their preliminary estimated fair value. As of June 30, 2019, the Company had finalized the determination of the fair value allocated to various assets and liabilities, including, but not limited to, contract receivables, prepaid expenses and other current assets, intangible assets, accounts payable, accrued expenses, accrued compensation and the residual amount allocated to goodwill.

(in thousands)

Total purchase price	$	9,915

Purchase price allocation:
Cash		306
Contract receivables		1,870
Prepaid expenses and other current assets		8
Property, and equipment, net		1
Intangible assets		5,088
Accounts payable, accrued expenses		(1,744	)
Accrued compensation		(353	)
Total identifiable net assets		5,176
Goodwill		4,739
Net assets acquired	$	9,915

The fair value of the assets acquired includes gross trade receivables of $1.9 million, of which the Company has collected in full as of June 30, 2019. GSE did not acquire any other class of receivable as a result of the acquisition of True North.

The goodwill is primarily attributable to a broader engineering service offering to new and existing customers, the workforce of the acquired business and the significant synergies expected to arise after the acquisition of True North. The total amount of goodwill is tax deductible. All of the $4.7 million of goodwill was assigned to our Performance segment.

The Company identified other intangible assets of $5.1 million, including customer relationships, tradename, non-compete agreements, and alliance agreements, with amortization periods of four years to fifteen years. The fair value of the intangible assets is finalized per final valuations for these assets.

The following table summarizes the fair value of intangible assets acquired at the date of acquisition and the related weighted average amortization period:

Intangible Assets	Weighted average amortization period		Fair Value
	(in years)		(in thousands)
Customer relationships		15	$	3,758
Tradename		10		582
Non-compete agreements		4		221
Alliance agreements		5		527
Total			$	5,088

Unaudited Pro Forma Financial Information

The unaudited pro forma financial information in the table below summarizes the combined results of operations for GSE, True North and DP Engineering as if the business combinations had occurred on January 1, 2018.

	Three months ended June 30,					Six months ended June 30,
	2019			2018		2019			2018
	(unaudited and in thousands)

Revenue		$	23,458	$	31,664	$	48,636		$	59,577
Net income (loss)			77		1,331		(4,250	)		(173	)

The pro forma financial information for all periods presented has been calculated after applying GSE's accounting policies and has also included pro forma adjustments resulting from these acquisitions, including amortization charges of the intangible assets identified from these acquisitions, interest expenses related to the financing transaction in connection with the acquisition of DP Engineering, and the related tax effects as if aforementioned companies were combined as of January 1, 2018.

For the six months ended June 30, 2019, the Company has incurred $0.6 million of transaction costs related to the acquisition of DP Engineering. Due to a triggering event described in Note 8, an impairment test was conducted, which resulted in substantially writing down the estimated fair value of goodwill and some of the definite-lived intangible assets initially recognized upon the acquisition. These expenses are included in general and administrative expense on GSE's consolidated statements of operations and are reflected in pro forma loss for the six months ended June 30, 2019, in the table above.

For the six months ended June 30, 2018, the Company has incurred $0.5 million of transaction costs related to the acquisition of True North. These expenses are included in general and administrative expense on GSE's consolidated statements of operations and are reflected in pro forma loss for the six months ended June 30, 2018, in the table above.

The pro forma financial information is not intended to reflect the actual results of operations that would have occurred if the acquisition had been completed on January 1, 2018, nor is it intended to be an indication of future operating results.