4.	Acquisition of DP Engineering

On February 15, 2019, we acquired 100% of the membership interests in DP Engineering for $13.5 million, subject to certain earn out provisions. We funded the acquisition by borrowing $14.3 million under our term loan agreement with Citizens Bank.

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 we paid to acquire DP Engineering, and the fair value of the assets acquired and liabilities assumed on February 15, 2019.

(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		98
Intangible assets		6,798
Other assets		1,806
Accounts payable and accrued expenses		(1,396	)
Other liabilities		(1,494	)
Total identifiable net assets		9,089
Goodwill		5,766
Net assets acquired	$	14,855

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

The goodwill was 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 $5.8 million of goodwill was assigned to our Performance Improvement Solutions segment.

We 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.

Approximately one week following our acquisition of DP Engineering, an adverse event occurred at one of DP Engineering’s major customer's locations that affected plant operations. We received a Notice of Suspension from that customer. This event adversely impacted the relationship between DP Engineering and this customer. We concluded this event represented a triggering event requiring an interim assessment of the intangible assets we acquired to determine if they had been impaired. As a result of the impairment analysis, we recognized the impairment charges of $5.6 million related to the acquired goodwill in our March 31, 2019 consolidated financial statements. On August 6, 2019, we received a Notice of Termination from this customer, notifying us they were terminating their Engineer of Choice consulting service agreement with DP Engineering. We concluded this represented a new triggering event and during the third quarter of 2019 we evaluated whether any additional impairment existed. We concluded, based on our analysis that no additional impairment was necessary.

Included in the purchase price of DP Engineering was the estimated fair value of an earn-out totaling $1.2 million, which we initially recorded as contingent consideration. Subsequent to the acquisition, primarily as a result of the events described above, we determined the conditions related to the contingent consideration would not be met and therefore we reversed this amount through our statement of operations in the first quarter of 2019.

On August 27, 2019, we made a demand for indemnification, pursuant to the DP Engineering Purchase Agreement. On December 30, 2019, we entered into a settlement agreement pursuant to which the sellers agreed to release the full escrow account balance to us, plus additional funds, in the total amount of $2.0 million. We received these funds on December 31, 2019.

Unrelated to the event described above, during the three months ended March 31, 2020, we concluded, as a result of the COVID-19 virus that a triggering event occurred requiring an interim assessment for impairment of our intangible assets, including those associated with DP Engineering. As a result of this analysis, we recorded an impairment charge of $4.3 million related to DP Engineering's definite-lived intangible assets in our March 31, 2020 consolidated financial statements.

DP Engineering recognized $1.4 million of revenue during the three months ended March 31, 2020.

Unaudited Pro Forma Financial Information

The unaudited pro forma financial information for the quarter ended March 31, 2019 in the table below summarizes the combined results of operations for GSE and DP Engineering as if the business combinations had occurred on January 1, 2019 (in thousands).

Revenue		$	25,178
Net loss			(3,451	)

The pro forma financial information has been calculated after applying GSE's accounting policies and includes pro forma adjustments resulting from our acquisition of DP Engineering, including amortization charges related to the intangible assets acquired, 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, 2019.

For the three months ended March 31, 2019, we incurred $600 thousand of selling, general and administrative costs related to the acquisition of DP Engineering. Due to the Q1 2019 triggering events described above, we also recorded a $5.6 million impairment of DP Engineering's goodwill during the three months ended March 31, 2019.

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, 2019, nor is it intended to be an indication of future operating results.