Stockholders' Deficit | 18. STOCKHOLDERS’ DEFICIT Authorized Capital Stock— The Company was authorized to issue 25,000,000 shares of common stock, with a par value of $0.000004 per share as of June 30, 2020 and December 31, 2019. 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 the three and six months ended June 30, 2020 and June 30, 2019. Common Stock Issuances and Repurchases —During the three and six months ended June 30, 2020, the Company issued 791,139 shares of common stock with an average price per share of $31.60, in connection with the CTEH business acquisition and issued 3,500 shares at an average price per share of $6.03, in connection with the exercise of certain employee stock options. During the three months ended June 30, 2019, the Company issued 125,031 shares of common stock with an average price per share of $26.90, in connection with the TES and TESUS business acquisition and 13,750 shares of common stock with an average price per share of $7.38, in connection with the exercise of certain employee stock options. During the six months ended June 30, 2019, the Company issued 125,031 shares of common stock with an average price per share of $26.90, in connection with the TES and TESUS business acquisition and 15,000 shares of common stock with an average price per share of $6.71, in connection with the exercise of certain employee stock options. 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, 2020 and June 30, 2019, there was $6.5 million and $6.8 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 the next two years. The following number of shares were authorized to be issued and available for grant as of June 30, 2020 and June 30, 2019: June 30, 2020 2017 Plan 2013 Plan Shares authorized to be issued 1,066,160 2,050,244 Shares available for grant 20,817 — June 30, 2019 2017 Plan 2013 Plan Shares authorized to be issued 981,800 2,074,604 Shares available for grant 201,183 — Total stock compensation expense for the Plans was as follows: Three Months Ended June 30, 2020 2019 2017 plan 2013 plan 2017 plan 2013 plan Options Restricted Stock Options Total Options Restricted Stock Options Total Cost of revenue $ 342 $ — $ 61 $ 403 $ 205 $ — $ 147 $ 352 Selling, general and administrative expense 299 370 68 737 145 110 687 942 $ 641 $ 370 $ 129 $ 1,140 $ 350 $ 110 $ 834 $ 1,294 Six Months Ended June 30, 2020 2019 2017 plan 2013 plan 2017 plan 2013 plan Options Restricted Stock Options Total Options Restricted Stock Options Total Cost of revenue $ 697 $ — $ 131 $ 828 $ 345 $ — $ 293 $ 638 Selling, general and administrative expense 586 740 136 1,462 272 212 1,400 1,884 $ 1,283 $ 740 $ 267 $ 2,290 $ 617 $ 212 $ 1,693 $ 2,522 Montrose Amended & Restated 2017 Stock Incentive Plan Restricted Stock —During the six months ended June 30, 2020 and June 30, 2019, the Company issued 33,229 and 30,000 shares of restricted stock with a fair market value of $31.60 and $24.00 per share, respectively, to certain 2017 Plan participants as Director’s compensation. These shares of restricted stock granted in the six months ended June 30, 2020 vest one year from the date of grant and the shares of restricted stock granted during the six months ended June 30, 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. No restricted shares vested and were released as unrestricted shares of common stock during the six months ended June 30, 2020 and June 30, 2019. There were an aggregate of 273,122 and 242,025 restricted shares outstanding as of June 30, 2020 and June 30, 2019, respectively. There were no forfeitures, cancellations or expirations of restricted shares during the six and three months ended June 30, 2020 and June 30, 2019. 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 six months ended June 30, 2020 and June 30, 2019: 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 December 31, 2018 257,762 $ 20 $ 10 — $ 1,151 Granted 308,990 24 13 Forfeitured/cancelled (14,800 ) 24 Outstanding at June 30, 2019 551,952 23 12 — 2,136 Outstanding at December 31, 2019 617,852 24 12 7.82 4,696 Granted 160,712 32 12 Forfeitured/cancelled (5,500 ) 20 Outstanding at June 30, 2020 773,064 26 12 8.03 4,651 Options vested and expected to vest 773,064 $ 26 8.57 $ 4,651 The following weighted-average assumptions were used in the Black-Sholes option-pricing model calculation for the six months ended June 30, 2020 and June 30, 2019: June 30, 2020 June 30, 2019 Common stock value (per share) $ 31.60 $ 26.90 Expected volatility 45.26 % 48.42 % Risk-free interest rate 0.49 % 2.19 % Expected life (years) 7 7 Forfeiture rate None None Dividend rate None None Montrose Amended & Restated 2013 Stock Option Plan —The following summarizes the activity of the 2013 Plan for the six months ended June 30, 2020 and June 30, 2019: 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 December 31, 2018 1,900,404 $ 6 $ 1 7.30 33,290 Forfeitured/ cancelled (12,600 ) 14 Expired (4,475 ) 8 Exercised (11,385 ) 5 283 Outstanding at June 30, 2019 1,871,944 6 1 6.87 38,235 Outstanding at December 31, 2019 1,855,469 6 1 6.40 46,617 Forfeitured/ cancelled (1,250 ) 6 Expired (8,550 ) 6 Exercised (3,500 ) 6 89 Outstanding at June 30, 2020 1,842,169 6 1 5.91 46,276 Options vested and expected to vest 1,842,169 6 5.43 46,276 Total shares outstanding from exercised options were 205,100 shares and 201,600 shares as of June 30, 2020 and December 31, 2019. Common Stock Reserved for Future Issuances —At June 30, 2020 and June 30, 2019, the Company has reserved certain stock of its authorized but unissued common stock for possible future issuance in connection with the following: June 30, 2020 December 31, 2019 Warrants 2,002,550 650,590 Montrose 2013 Stock Incentive Plan 2,050,244 2,058,619 Montrose 2017 Stock Incentive Plan 1,066,160 997,785 Common stock reserved for future issuance 5,118,954 3,706,994 |