Stockholders' Equity (Deficit)

12 Months Ended

Dec. 31, 2020

18. STOCKHOLDERS’ EQUITY (DEFICIT)

Authorized Capital Stock—The Company was authorized to issue 190,000,000 and 25,000,000 shares of common stock, with a par value of $0.000004 per share as of December 31, 2020 and 2019, respectively.

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. There were no changes related to these warrants during 2020 or 2019.

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

	2020					2019				2018
	Shares			Average Price per Share		Shares		Average Price per Share		Shares			Average Price per Share
Common stock issued in connection with initial public offering		11,500,000		$	15.00		—	$	—		—		$	—
Acquisitions		791,139			31.60		150,439		26.90		264,582			20.26
Redemption of series A-1 preferred stock		1,786,739			15.00		—		—		—			—
Exercise of warrant options		2,534,239			0.01		—		—		—			—
Exercise of options		47,600			8.06		27,350		6.16		5,000			6.03
Shares sold		—			—		42,415		31.60		—			—
Restricted shares, net		20,488			24.00		12,132		18.82		184,400			13.64
Cancellation of shares		(117,785	)		17.15		—		—		—			—
Repurchase of common shares		—			—		—		—		(277,714	)		9.80
Conversion of convertible preferred stock into common stock		—			—		—		—		674,008			22.20
		16,562,420		$	13.72		232,336	$	24.89		850,276		$	30.10

Furthermore, during 2019, certain shares of common stock were repurchased from an investor. This repurchase transaction was accounted for as treasury stock by the Company and recorded as a reduction to additional paid in capital. The treasury stock is carried at cost at the purchase price of $9.80 per share. There are no commitments to repurchase capital stock nor any restrictions imposed by state law related to this transaction. Amounts paid to repurchase these shares were funded through the issuance of the Redeemable Series A-1 Preferred 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, 2020, there was $15.3 million of total unrecognized stock compensation expense related to unvested options and restricted stock granted under the Plans. Such unrecognized expense is expected to be recognized over a weighted-average three year period. The following number of shares were authorized to be issued and available for grant as of December 31:

	2017 Plan
	2020		2019		2018
Shares authorized to be issued		2,945,443		997,785		600,900
Shares available for grant		848,241		137,908		131,113

	2013 Plan
	2020		2019		2018
Shares authorized to be issued		2,047,269		2,058,619		2,154,600
Shares available for grant		—		1,550		79,946

Total stock compensation expense for the Plans was as follows:

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

	2019
	2017 plan				2013 plan
	Options		Restricted Stock		Options		Total
Cost of revenue	$	963	$	—	$	449	$	1,412
Selling, general and administrative expense		652		433		1,848		2,933
	$	1,615	$	433	$	2,297	$	4,345

	2018
	2017 plan				2013 plan
	Options		Restricted Stock		Options		Total
Cost of revenue	$	272	$	—	$	619	$	891
Selling, general and administrative expense		47		1,953		2,903		4,903
	$	319	$	1,953	$	3,522	$	5,794

Montrose Amended & Restated 2017 Stock Incentive Plan

Restricted Stock—During the years ended December 31, 2020, 2019, and 2018, the Company issued 33,229, 40,000 and 26,400 shares of restricted stock with a fair market value of $31.60, $24.00 and $13.64 per share, respectively, to certain 2017 Plan participants as Director’s compensation. These shares of restricted stock granted during the year ended December 31, 2020 vest one year from the date of grant and the shares of restricted stock granted during the year ended December 31, 2019 vest over three years, 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. There were 22,155, 12,132 and 8,775 shares of restricted stock that became fully vested and were released as unrestricted shares of common stock during the years ended December 31, 2020, 2019, and 2018, respectively. There were 1,667 shares of restricted stock that were forfeited during the year ended December 31, 2020. There were no forfeitures of restricted shares during the year ended December 31, 2019. There were an aggregate of 267,173, 239,893, and 212,025, restricted shares outstanding as of December 31, 2020, 2019, and 2018, respectively.

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 period. The following summarizes the options activity of the 2017 Plan for the years ended December 31:

	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 January 1, 2018		49,875		$	14	$	7		—	$	40
Granted		220,900			21		11		—		—
Forfeited/cancelled		(6,000	)		18		—		—		—
Expired		(7,013	)		14		—		—		—
Outstanding at December 31, 2018		257,762		$	20	$	10		—	$	1,151
Granted		380,820			27		14		—		—
Forfeited/cancelled		(20,730	)		20		—		—		—
Outstanding at December 31, 2019		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		—		—		7,918
Outstanding at December 31, 2020		1,840,229		$	23	$	12		9.09	$	15,598
Exercisable at December 31, 2020		147,833			21		—		7.57		1,538
Options vested and expected to vest		1,840,229		$	23	$	—		9.09	$	15,598

The following weighted-average assumptions were used in the Black-Sholes option-pricing model calculation for the years ended December 31:

	2020			2019			2018
Common stock value (per share)	$	21.81		$	26.97		$	20.65
Expected volatility		46.59	%		48.13	%		48.69	%
Risk- free interest rate		0.65	%		2.06	%		2.88	%
Expected life (years)	7				7			7
Forfeiture rate	None			None			None
Dividend rate	None			None			None

Montrose Amended & Restated 2013 Stock Option Plan—The following summarizes the activity of the 2013 Plan for the years ended December 31, 2020 and 2019:

				Weighted-		Weighted		Weighted		Aggregate
	Options to			Average		Average		Average		Intrinsic Value
	Purchase			Exercise		Grant Date		Remaining		of In-The- Money
	Common			Price per		Fair Value		Contract Life		Options
	Stock			Share		per Share		(in Years)		(in Thousands)
Outstanding January 1, 2018		2,066,000		$	6	$	1		7.83	$	16,534
Forfeited/cancelled		(43,225	)		7		—		—		—
Expired		(117,371	)		6		—		—		—
Exercised		(5,000	)		6		—		—		60
Outstanding at December 31, 2018		1,900,404		$	6	$	1		7.30	$	33,290
Forfeited/cancelled		(10,635	)		8		—		—		—
Expired		(6,950	)		8		—		—		—
Exercised		(27,350	)		6		—		—		—
Outstanding at December 31, 2019		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
Exercisable at December 31, 2020		1,768,794			6		—		5.39		43,482
Options vested and expected to vest		1,787,869		$	6	$	—		5.40	$	43,867

Total shares outstanding from exercised options were 249,200 shares and 201,600 shares as of December 31, 2020 and 2019.

Common Stock Reserved for Future Issuances—At December 31, 2020, 2019, and 2018, the Company has reserved certain stock of its authorized but unissued common stock for possible future issuance in connection with the following:

	2020		2019		2018
Warrants		116,350		650,590		650,590
Montrose 2013 Stock Incentive Plan		2,047,269		2,058,619		2,154,600
Montrose 2017 Stock Incentive Plan		2,945,443		997,785		600,900
Common stock reserved for future issuance		5,109,062		3,706,994		3,406,090