Stockholder's Equity (Deficit)

3 Months Ended

Mar. 31, 2021

17. STOCKHOLDERS’ EQUITY (DEFICIT)

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 March 31, 2021 and December 31, 2020.

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 three months ended March 31, 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 March,
	2021				2020
	Shares		Average Price per Share		Shares		Average Price per Share
Acquisitions		71,740	$	31.65		—	$	—
Exercise of warrants		67,713		17.19		—		—
Exercise of options		330,060		6.62		—		—
Restricted shares, net		36,817		29.88		—		—
Total		506,330	$	13.27		—	$	—

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 March 31, 2021 and March 31, 2020, there was $18.8 million and $7.2 million, respectively, 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:

	March 31, 2021
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		3,944,750		2,047,269		5,992,019
Shares available for grant		1,618,996		—		1,618,996

	March 31, 2020
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		1,057,785		2,058,619		3,116,404
Shares available for grant		8,217		4,775		12,992

Total stock compensation expense for the Plans was as follows:

	Three Months Ended March 31,
	2021								2020
	2017 plan				2013 plan				2017 plan				2013 plan
	Options		Restricted Stock		Options		Total		Options		Restricted Stock		Options		Total
Cost of revenue	$	606	$	—	$	10	$	616	$	355	$	—	$	70	$	425
Selling, general and administrative expense		1,004		182		3		1,189		287		370		68		725
Total	$	1,610	$	182	$	13	$	1,805	$	642	$	370	$	138	$	1,150

Montrose Amended & Restated 2017 Stock Incentive Plan

Restricted Stock—During the three months ended March 31, 2021 and March 31, 2020, the Company issued 14,532 and 33,229 shares of restricted stock with a fair market value of $30.96 and $31.60 per share, respectively, to certain 2017 Plan participants as Director’s compensation. These shares of restricted stock granted in the three months ended March 31, 2021 and March 31, 2020 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. There were 36,817 and zero shares of restricted stock that became fully vested and were released as unrestricted shares of common stock during the three months ended March 31, 2021 and March 31, 2020, respectively. There were no forfeitures of restricted shares during the three months ended March 31, 2021 and March 31, 2020. There were an aggregate of 281,705 and 273,122 restricted shares outstanding as of March 31, 2021 and March 31, 2020, 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 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 at January 1, 2020		617,852		$	24	$	12		7.82	$	4,696
Granted		158,062			32		12		—		—
Forfeited/ cancelled		(2,000	)		32		—		—		—
Outstanding at March 31, 2020		773,914			26		12		8.50		4,693

Outstanding at January 1, 2021		1,840,229			23		12		9.09		15,598
Granted		224,270			38		20		—		—
Forfeited/ cancelled		(10,000	)		26		—		—		—
Expired		(1,250	)		18		—		—		—
Exercised		(17,188	)		16		—		—		519
Outstanding at March 31, 2021		2,036,061			24		13		8.97		52,317
Exercisable at March 31, 2021		218,379			24		—		7.79		5,702
Options vested and expected to vest		2,036,061			24		—		8.97		52,317

The following weighted-average assumptions were used in the Black-Sholes option-pricing model calculation:

	March 31,			March 31,
	2021			2020
Common stock value (per share)	$ 37.61			$ 31.60
Expected volatility		58.01	%		31.87	%
Risk-free interest rate		0.71	%		1.78	%
Expected life (years)	5.5-7.0			7.0
Forfeiture rate	None			None
Dividend rate	None			None

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 at January 1, 2020		1,855,469		$	6	$	1		6.14		46,617
Expired		(725	)		6		—		—		—
Outstanding at March 31, 2020		1,854,744			6		1		6.14		46,521

Outstanding at January 1, 2021		1,787,869			6		—		5.40		43,867
Exercised		(311,872	)		6		—		—		12,321
Outstanding at March 31, 2021		1,475,997			6		—		5.14		64,492
Exercisable at March 31, 2021		1,456,922			6		—		5.13		63,740
Options vested and expected to vest		1,475,997			6		—		5.14		64,492

Total shares outstanding from exercised options were 579,260 shares and 201,600 shares as of March 31, 2021 and March 31, 2020, 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:

	March 31,
	2021		2020
Warrants		—		650,590
Montrose 2013 Stock Incentive Plan		2,047,269		2,058,619
Montrose 2017 Stock Incentive Plan		3,944,750		1,057,785
Common stock reserved for future issuance		5,992,019		3,766,994