Authorized Capital Stock—The Company was authorized to issue 190,000,000 shares of common stock, with a par value of $0.000004 per share as of September 30, 2022 and December 31, 2021.

Warrants—In May 2015, the Company issued warrants to acquire 116,350 shares of Common Stock at a price of approximately $17.19 per share to the placement agent as consideration for backstopping the financing completed in May 2015. These warrants were exercised in full as a cashless transaction during the first quarter of 2021. As a result of this cashless transaction, the resulting number of shares issued was 67,713 shares.

Common Stock Issuances—The Company issued the following shares of common stock:


	Three Months Ended September 30,
	2022						2021
	Shares		Average Price per Share		Total (in thousands)		Shares		Average Price per Share		Total (in thousands)
Acquisitions		—	$	—	$	—		62,738	$	52.18	$	3,274
Exercise of options		28,111		11.70		329		354,918		8.30		2,946
Total		28,111	$	11.70	$	329		417,656	$	14.89	$	6,220

	Nine Months Ended September 30,
	2022						2021
	Shares		Average Price per Share		Total (in thousands)		Shares		Average Price per Share		Total (in thousands)
Acquisitions		—	$	—	$	—		143,800	$	41.86	$	6,020
Exercise of warrants (1)		—		—		—		67,713		17.19		—
Exercise of options		62,293		13.04		812		779,068		7.74		6,032
Restricted shares, net (1)		25,289		66.58		—		38,929		31.31		—
Payment of earn-out liability		—		—		—		539,607		46.33		25,000
Payment of purchase price true up		—		—		—		24,200		44.81		1,084
Total		87,582	$	28.50	$	812		1,593,317	$	25.43	$	38,136

(1) Represents the non-cash release of common shares due to the exercise of warrants and the vesting of restricted stock.

Employee Equity Incentive Plans—The Company has two plans under which stock-based awards have been issued: (i) the Montrose Amended & Restated 2017 Stock Incentive Plan (“2017 Plan”) and (ii) the Montrose Amended & Restated 2013 Stock Option Plan (“2013 Plan”) (collectively the “Plans”).

As of September 30, 2022, and September 30, 2021, there was $152.5 million and $15.0 million, respectively, of total unrecognized stock compensation expense related to unvested options, restricted stock and stock appreciation rights granted under the Plans. Such unrecognized expense is expected to be recognized over a weighted-average four year period. The following number of shares were authorized to be issued and available for grant:


	September 30, 2022
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		5,140,112		2,037,019		7,177,131
Shares available for grant(1)		364,949		—		364,949

	September 30, 2021
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		3,944,750		2,047,269		5,992,019
Shares available for grant		1,593,287		—		1,593,287

(1) In January 2022 the Board of Directors ratified the addition of 1,185,112 shares of common stock to the number of shares available for issuance under the 2017 Plan pursuant to the annual increase provision of such plan. Unless the Board of Directors determines otherwise, additional annual increases will be effective on each January 1, through January 1, 2027. The 2017 Plan permits the company to settle awards, if and when vested, in cash at its discretion. Pursuant to the terms of the 2017 Plan, the number of shares authorized for issuance thereunder will only be reduced with respect to shares of common stock actually issued upon exercise or settlement of an award. Shares of common stock subject to awards that have been canceled, expired, forfeited or otherwise not issued

under an award and shares of common stock subject to awards settled in cash do not count as shares of common stock issued under the 2017 Plan. Shares available for grant exclude awards of stock appreciation rights approved in December 2021 that are subject to vesting based on the achievement of certain market conditions, which have not yet been, and may not be, achieved. See footnote 1 to the table in Common Stock Reserved for Future Issuance below for additional information regarding the December 2021 grant.

Total stock compensation expense for the Plans was as follows:


	Three Months Ended September 30,
	2022										2021
	2017 plan						2013 plan				2017 plan				2013 plan
	Options		Restricted Stock		SARs		Options		Total		Options		Restricted Stock		Options		Total
Cost of revenue	$	404	$	—	$	—	$	—	$	404	$	282	$	—	$	—	$	282
Selling, general and administrative expense		2,216		6,083		2,315		—		10,614		1,844		237		2		2,083
Total	$	2,620	$	6,083	$	2,315	$	—	$	11,018	$	2,126	$	237	$	2	$	2,365

	Nine Months Ended September 30,
	2022										2021
	2017 plan						2013 plan				2017 plan				2013 plan
	Options		Restricted Stock		SARs		Options		Total		Options		Restricted Stock		Options		Total
Cost of revenue	$	1,069	$	—	$	—	$	—	$	1,069	$	1,178	$	—	$	10	$	1,188
Selling, general and administrative expense		6,449		17,892		6,965		—		31,306		4,638		749		11		5,399
Total	$	7,518	$	17,892	$	6,965	$	—	$	32,375	$	5,816	$	749	$	21	$	6,587

Restricted Stock Awards and Restricted Stock Units—The Company issues restricted stock awards ("RSAs") to certain 2017 Plan participants as Director’s compensation. There were zero RSAs granted during both the three months ended September 30, 2022 and September 30, 2021, respectively. There were 10,920 and 19,066 RSAs granted during the nine months ended September 30, 2022 and September 30, 2021, respectively. These RSAs vest one year from the date of grant, or, in each case, in full upon a change in control, subject to the participant’s continued service as a Director throughout such date, or upon retirement. Members of the Board of Directors that receive stock-based compensation are treated as employees for accounting purposes.

During the year ended December 31, 2021, the Board of Directors approved the grant of 1,671,391 restricted stock units (“RSUs”) to certain executives and selected employees of the Company under the 2017 Plan. These RSUs represent the right to receive one share of the Company’s common stock upon vesting. These incentives were designed by the Board, in coordination with the Company’s compensation advisors, to (i) retain selected employees of the Company for a minimum of 5 years, (ii) reward selected employees for the Company’s significant outperformance and stockholder value creation in 2021, and (iii) provide incentives to selected employees of the Company to accelerate value creation for stockholders and other stakeholders over the next five-year period. With respect to 1,355,182 RSUs, 50.0% will vest on each of the 4th and 5th anniversaries of the date of grant, subject to continued service through each such date. With respect to the remaining 316,209 RSUs (“The Performance-Vested RSUs”), 50.0% will vest on each of the 4th and 5th anniversaries of the date of grant, subject to continued service through each such date and further subject to Company achieving $90.0 million in adjusted EBITDA (as reported) for any trailing twelve-month period from and after December 31, 2022. If the Performance Criteria is not met prior to the 4th anniversary of the date of grant, none of the Performance-Vested RSUs will vest at such time, and if the Performance Criteria is subsequently met prior to the 5th anniversary of the date of grant, all of the Performance-Vested RSUs will vest at such time, subject to continued service through such date. If the Performance Criteria is not met by the 5th anniversary of the date of grant, all of the Performance-Vested RSUs will be forfeited.

During 2021 and 2022, the Board of Directors approved the creation of certain supplemental incentive plans (“SI Plans”) for selected employees to reward exceptional performance. These SI Plans provide supplemental bonus opportunities payable in RSUs under the 2017 Plan upon meeting certain financial performance targets. There were 95,404 RSUs issued under these SI Plans during the nine months ended September 30, 2022 and zero RSUs issued under these SI plans during the nine months ended September 30, 2021. These RSUs vest four years from the date of grant, subject to continued service through such date.

During 2021, the Board approved and reserved for future issuance an aggregate of 135,517 RSUs (the “Future RSU Pool”) to be granted under the 2017 Plan to certain of its executives and selected employees. Final determination and allocation of the awards

under the Future RSU Pool will be determined on December 16, 2025 based on individual performance and continued service through such date. Any RSUs granted under the Future RSU Pool will vest on December 16, 2026, subject to continued service through such date.

There were no awards granted during the three months ended September 30, 2022 and September 30, 2021. There were an aggregate of zero and 25,289 shares underlying RSAs and RSUs that became fully vested and were released as unrestricted shares of common stock during the three and nine months ended September 30, 2022, respectively. During the three and nine months ended September 30, 2021, there were an aggregate of zero and 38,929 shares underlying RSAs that became fully vested and were released as unrestricted shares of common stock, respectively. There was an aggregate of 2,064,197 and 286,239 shares underlying outstanding RSA and RSU awards as of September 30, 2022 and September 30, 2021, respectively. There were no forfeitures of RSAs or RSUs during the three and nine months ended September 30, 2022 and September 30, 2021.

Stock Appreciation Rights— During the year ended December 31, 2021, the Board of Directors approved the grant of 3,000,000 units of stock appreciation rights (“SARs”) to certain executives and selected employees under the 2017 Plan. These SARs represent the right to receive, upon exercise, a payment equal to the excess of (a) the fair market value of one share of the Company’s common stock, over (b) an exercise price of $66.79, payable, at the Company’s election, in cash or shares of common stock. These SARs vest on the 5th anniversary of the date of grant based on achievement of performance hurdles over a five year period, subject to continued service on the vesting date. The performance hurdles shall be deemed achieved if the average trading price per share of the Company’s common stock equals or exceeds the following stock prices:

The performance hurdles shall be deemed achieved if the average trading price per share of the Company’s common stock equals or exceeds the applicable stock price performance hurdle set forth above for the trading days falling in a consecutive 20-day period prior to the vesting date. The SARs expire 10 years after the grant date. The fair value of these SARs at the grant date was $46.0 million. The weighted average remaining contract life of these SARs as of September 30, 2022 was 9.21 years.

Options—Options issued to all optionees under the 2017 Plan vest over four years from the date of issuance (or earlier vesting start date, as determined by the Board of Directors) as follows: one half on the second anniversary of date of grant and the remaining half on the fourth anniversary of the date of grant, with the exception of certain annual grants to certain executive officers, which vest annually over a 3-year and 1-year period. The following summarizes the options activity of the 2017 Plan:


	Options to Purchase Common Stock			Weighted- Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Contract Life (in Years)		Aggregate Intrinsic Value of In-The- Money Options (in Thousands)
Outstanding as of January 1, 2021		1,840,229		$	23	$	12		9.09	$	15,598
Granted		264,470			40		22		—		—
Forfeited/ cancelled		(29,025	)		28		—		—		—
Expired		(1,250	)		18		—		—		—
Exercised		(66,875	)		22		—		—		2,078
Outstanding as of September 30, 2021		2,007,549			25		14		8.53		73,724

Outstanding as of January 1, 2022		2,036,729		$	26	$	14		8.30	$	91,030
Granted		664,784			44		16		—		—
Forfeited/ cancelled		(60,167	)		36		—		—		—
Exercised		(26,258	)		22		—		—		671
Outstanding as of September 30, 2022		2,615,088		$	30	$	15		8.04	$	18,784
Exercisable at September 30, 2022		1,010,302			26		—		7.48		9,966

Montrose Amended & Restated 2013 Stock Option Plan—The following summarizes the activity of the 2013 Plan:


	Options to Purchase Common Stock			Weighted- Average Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Contract Life (in Years)		Aggregate Intrinsic Value of In-The- Money Options (in Thousands)
Outstanding as of January 1, 2021		1,787,869		$	6	$	1		5.40	$	43,867
Expired		(625	)		6		—		—		—
Exercised		(710,568	)		6		—		—		33,480
Outstanding as of September 30, 2021		1,076,676			6		2		4.65		59,532

Outstanding as of January 1, 2022		897,674		$	6	$	2		4.37	$	57,529
Expired		(125	)		6		—		—		—
Exercised		(36,035	)		6		—		—		1,425
Outstanding as of September 30, 2022		861,514		$	6	$	2		3.61	$	23,448
Exercisable at September 30, 2022		861,514			6		—		3.61		23,448

Total shares outstanding from exercised options were 1,271,383 shares and 1,028,268 shares as of September 30, 2022 and September 30, 2021, respectively.

Common Stock Reserved for Future Issuances—The Company has reserved certain stock of its authorized but unissued common stock for possible future issuance in connection with the following: