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 December 31, 2022 and 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, Cancellations and Repurchases—During the years ended December 31, the Company issued, cancelled and repurchased the following shares of common stock:


	2022						2021						2020
	Shares		Average Price per Share		Total		Shares		Average Price per Share		Total		Shares			Average Price per Share		Total
Common stock issued in connection with initial public offering		—	$	—	$	—		—	$	—		—		11,500,000		$	15.00	$	172,500
Common stock issued in connection with follow-on offering		—		—		—		2,875,000		59.05		169,783		—			—		—
Acquisitions		—		—		—		178,721		46.55		8,320		791,139			31.60		25,000
Redemption of series A-1 preferred stock		—		—		—		—		—		—		1,786,739			15.00		26,801
Exercise of warrants (1)		—		—		—		67,713		17.19		—		2,534,239			0.01		25.00
Exercise of options		101,340		16.21		1,643		959,890		7.54		7,237		47,600			8.05		383.00
Restricted shares, net (1)		25,532		66.30		—		42,263		30.69		—		20,488			24.00		—
Payment of earn-out liability and purchase price true up		—		—		—		563,807		46.26		26,084		—			—		—
Cancellation of shares		—		—		—		—		—		—		(117,785	)		17.15		—
Total		126,872	$	26.29	$	1,643		4,687,394	$	45.63	$	211,424		16,562,420		$	13.64	$	224,709

___________________________

(1) Represents the non-cash release of shares of common stock 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 2017 Stock Incentive Plan (“2017 Plan”) and (ii) the Montrose Amended & Restated 2013 Stock Option Plan (“2013 Plan”) (collectively the “Plans”).

As of December 31, 2022, there was $141.8 million 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 as of December 31:


	2017 Plan
	2022		2021		2020
Shares authorized to be issued		5,140,112		3,944,750		2,945,443
Shares available for grant(1)		367,243		23,153		848,241

	2013 Plan
	2022		2021		2020
Shares authorized to be issued		2,037,019		2,047,269		2,047,269
Shares available for grant		—		—		—

_______________________

(1) In January 2023 the Board of Directors ratified the addition of 1,189,801 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:


	2022
	2017 plan						2013 plan
	Options		Restricted Stock		SARs		Options		Total
Cost of revenue	$	1,507	$	—	$	—	$	—	$	1,507
Selling, general and administrative expense		8,531		23,972		9,280		—		41,783
Total	$	10,038	$	23,972	$	9,280	$	—	$	43,290

	2021
	2017 plan						2013 plan
	Options		Restricted Stock		SARs		Options		Total
Cost of revenue	$	1,482	$	—	$	—	$	10	$	1,492
Selling, general and administrative expense		6,552		1,959		307		11		8,829
Total	$	8,034	$	1,959	$	307	$	21	$	10,321

	2020
	2017 plan						2013 plan
	Options		Restricted Stock		SARs		Options		Total
Cost of revenue	$	1,441	$	—	$	—	$	136	$	1,577
Selling, general and administrative expense		1,793		1,279		—		200		3,272
Total	$	3,234	$	1,279	$	—	$	336	$	4,849

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 10,920, 19,309 and 33,229 RSAs granted during the years ended December 31, 2022 and 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 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 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 years ended December 31, 2022. No RSUs were granted under these SI Plans during the years ended December 31, 2021. During the year ended December 31, 2022, certain of these SI Plan’s 2022 financial performance targets were met. Given that these awards are pending the final approval of the Board of Directors, they are not deemed granted and thus have not been accrued for as of December 31, 2022. These RSUs will begin to amortize on the date the awards are approved and will vest 1/3 on the date of grant, 1/3 on the one-year anniversary of the grant, and 1/3 on the two-year anniversary of the grant, subject to continued service through such date.

During 2021, the Board of Directors 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.

For the year ended December 31, 2022, 2021 and 2020, RSA and RSU activity was as follows:

There were 25,532, 42,263 and 22,155 shares underlying RSAs that became fully vested and were released as unrestricted shares of common stock during the years ended December 31, 2022, 2021 and 2020, respectively.

There were no forfeitures of RSAs or RSUs during the years ended December 31, 2022 and 2021. There were forfeitures of 1,667 RSAs during the year ended December 31, 2020. There were an aggregate of 2,064,197, 1,957,873, and 267,173, shares underlying outstanding RSA and RSU awards as of December 31, 2022, 2021, and 2020, respectively.

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 December 31, 2022 was 8.96 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 for the years ended December 31, 2022, 2021 and 2020:


	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 at January 1, 2020		617,852		$	24	$	12		7.82	$	4,696
Granted		1,243,027			22		12		—		—
Forfeited/cancelled		(17,225	)		22		—		—		—
Expired		(2,500	)		18		—		—		—
Exercised		(925	)		14		—		—		8
Outstanding at December 31, 2020		1,840,229		$	23	$	12		9.09	$	15,598
Granted		300,620			44		23		—		—
Forfeited/cancelled		(33,875	)		28		—		—		—
Expired		(1,550	)		19		—		—		—
Exercised		(68,695	)		22		—		—		2,169
Outstanding at December 31, 2021		2,036,729		$	26	$	14		8.30	$	91,030
Granted		698,534			44		16		—		—
Forfeited/cancelled		(96,211	)		32		—		—		—
Exercised		(59,486	)		23		—		—		1,398
Outstanding at December 31, 2022		2,579,566		$	31	$	15		7.76	$	37,295
Exercisable at December 31, 2022		1,183,574			27		—		7.15		21,181

Montrose Amended & Restated 2013 Stock Option Plan—The following summarizes the activity of the 2013 Plan for the years ended December 31, 2022, 2021 and 2020:


										Aggregate
				Weighted-		Weighted		Weighted		Intrinsic Value
	Options to Purchase			Average Exercise		Average Grant Date		Average Remaining		of In-The- Money
	Common			Price per		Fair Value		Contract Life		Options
	Stock			Share		per Share		(in Years)		(in Thousands)
Outstanding at January 1, 2020		1,855,469		$	6	$	1		6.40	$	46,617
Forfeited/cancelled		(7,500	)		10		—		—		—
Expired		(11,300	)		6		—		—		—
Exercised		(48,800	)		8		—		—		908
Outstanding at December 31, 2020		1,787,869		$	6	$	1		5.40	$	43,867
Expired		(625	)		6		—		—		—
Exercised		(889,570	)		6		—		—		45,161
Outstanding at December 31, 2021		897,674		$	6	$	2		4.37	$	57,529
Expired		(125	)		6		—		—		—
Exercised		(41,854	)		6		—		—		1,626
Outstanding at December 31, 2022		855,695		$	6	$	2		3.31	$	32,478
Exercisable at December 31, 2022		855,695			6		—		3.31		32,478

Total shares outstanding from exercised options were 1,310,430 shares, 1,209,090 shares and 249,200 shares as of December 31, 2022, 2021 and 2020.

(1) In January 2023, the Board of Directors ratified the addition of 1,189,801 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. The Company expects to have sufficient shares available under the 2017 Plan to satisfy the future settlement of outstanding awards. Shares reserved for future issuance include 3,000,000 shares underlying the 3,000,000 performance SARs granted in December 2021 that are subject to vesting based on the achievement of certain market conditions. Assuming achievement at the highest price performance hurdle, approximately 2,000,000 shares of common stock would be issued upon vesting of these performance SARs. To date, none of the market conditions have been achieved.