Stockholder's Equity (Deficit)

6 Months Ended

Jun. 30, 2021

18. 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 June 30, 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 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 June 30,
	2021						2020
	Shares		Average Price per Share		Total Consideration (in thousands)		Shares		Average Price per Share		Total Consideration (in thousands)
Acquisitions		9,322	$	50.95	$	475		791,139	$	31.60	$	25,000
Exercise of options		94,090		9.58		901		3,500		6.03		21
Restricted shares, net		2,112		56.31		—		—		—		—
Payment of earn-out liability		539,607		46.33		25,000		—		—		—
Payment of purchase price true up		24,200		44.81		1,084		—		—		—
Total		669,331	$	41.20	$	27,460		794,639	$	31.49	$	25,021


	Six Months Ended June 30,
	2021						2020
	Shares		Average Price per Share		Total Consideration (in thousands)		Shares		Average Price per Share		Total Consideration (in thousands)
Acquisitions		81,062	$	33.88	$	2,746		791,139	$	31.60	$	25,000
Exercise of warrants		67,713		17.19		—		—		—		—
Exercise of options		424,150		7.28		3,086		3,500		6.03		21
Restricted shares, net		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		1,175,661	$	29.17	$	31,916		794,639	$	31.49	$	25,021

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 June 30, 2021 and June 30, 2020, there was $16.4 million and $6.5 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:

	June 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		1,609,687		—		1,609,687

	June 30, 2020
	2017 Plan		2013 Plan		Total
Shares authorized to be issued		1,066,160		2,050,244		3,116,404
Shares available for grant		20,817		—		20,817

Total stock compensation expense for the Plans was as follows:

	Three Months Ended June 30,
	2021								2020
	2017 plan				2013 plan				2017 plan				2013 plan
	Options		Restricted Stock		Options		Total		Options		Restricted Stock		Options		Total
Cost of revenue	$	290	$	—	$	—	$	290	$	342	$	—	$	61	$	403
Selling, general and administrative expense		1,790		330		6		2,126		299		370		68		737
Total	$	2,080	$	330	$	6	$	2,416	$	641	$	370	$	129	$	1,140



	Six Months Ended June 30,
	2021								2020
	2017 plan				2013 plan				2017 plan				2013 plan
	Options		Restricted Stock		Options		Total		Options		Restricted Stock		Options		Total
Cost of revenue	$	896	$	—	$	10	$	906	$	697	$	—	$	131	$	828
Selling, general and administrative expense		2,794		512		9		3,315		586		740		136		1,462
Total	$	3,690	$	512	$	19	$	4,221	$	1,283	$	740	$	267	$	2,290

Montrose Amended & Restated 2017 Stock Incentive Plan

Restricted Stock—The Company issues restricted stock to certain 2017 Plan participants as Director’s compensation. These shares of restricted stock granted in the three and six months ended June 30, 2021 and June 30, 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. Restricted stock activity was as follows:

	Three Months Ended June 30,
	2021						2020
	Shares		Average Price per Share		Total (in thousands)		Shares		Average Price per Share		Total (in thousands)
Shares granted		4,534	$	56.31	$	255		—	$	—	$	—

	Six Months Ended June 30,
	2021						2020
	Shares		Average Price per Share		Total (in thousands)		Shares		Average Price per Share		Total (in thousands)
Shares granted		19,066	$	36.99	$	705		33,229	$	31.60	$	1,050

There were no forfeitures of restricted shares during the six months ended June 30, 2021 and June 30, 2020.

There were 2,112 and 38,929 shares of restricted stock that became fully vested and were released as unrestricted shares of common stock during the three and six months ended June 30, 2021, respectively. No restricted shares vested and were released as unrestricted shares of common stock during the three or six months ended June 30, 2020. There was an aggregate of 286,239 and 273,122 restricted shares outstanding as of June 30, 2021 and June 30, 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		160,712			32		12		—		—
Forfeited/ cancelled		(5,500	)		20		—		—		—
Outstanding at June 30, 2020		773,064			26		12		8.03		4,651

Outstanding at January 1, 2021		1,840,229			23		12		9.09		15,598
Granted		232,470			38		21		—		—
Forfeited/ cancelled		(13,425	)		27		—		—		—
Expired		(1,250	)		18		—		—		—
Exercised		(33,918	)		20		—		—		1,014
Outstanding at June 30, 2021		2,024,106			25		13		8.74		58,785
Exercisable at June 30, 2021		293,299			25		—		7.65		8,396
Options vested and expected to vest		2,024,106			25		—		8.74		58,785

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

	June 30,			June 30,
	2021			2020
Common stock value (per share)	$	38.23		$ 31.60
Expected volatility		58.22	%		45.26	%
Risk-free interest rate		0.73	%		0.49	%
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		6.40		46,617
Forfeited/ cancelled		(1,250	)		6
Expired		(8,550	)		6		—		—		—
Exercised		(3,500	)		6
Outstanding at June 30, 2020		1,842,169			6		1		5.91		46,276

Outstanding at January 1, 2021		1,787,869			6		1		5.40		43,867
Exercised		(389,232	)		6		—		—		15,922
Outstanding at June 30, 2021		1,398,637			6		1		4.88		65,982
Exercisable at June 30, 2021		1,390,812			6		—		4.88		65,651
Options vested and expected to vest		1,398,637			6		—		4.88		65,982

Total shares outstanding from exercised options were 673,350 shares and 205,100 shares as of June 30, 2021 and June 30, 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:

	June 30,
	2021		2020
Warrants		—		2,002,550
Montrose 2013 Stock Incentive Plan		2,047,269		2,050,244
Montrose 2017 Stock Incentive Plan		3,944,750		1,066,160
Common stock reserved for future issuance		5,992,019		5,118,954