The Company provides stock-based compensation to directors, employees and consultants under the 2019 Equity Plan, which was approved by shareholders on October 23, 2019 at the 2019 Annual Meeting of Shareholders. On November 12, 2020 at the 2020 Annual Meeting of Shareholders, the shareholders approved the First Amendment to the 2019 Equity Plan, which raised the total number of shares of the Company’s common stock to 4,061,809 shares. The Company also provides stock-based compensation to employees, directors and consultants, with non-qualified options and warrants issued outside of the Plan.

The Company’s stock-based compensation expenses recognized during the years ended December 31, 2020 and 2019, were attributable to selling, general and administrative expenses, which are included in the accompanying consolidated statements of operations.

The Company recognized total stock-based compensation expense during the years ended December 31, 2020 and 2019, from the following categories:

A summary of the Company’s restricted stock activity in the years ended December 31, 2020 and 2019 is as follows:

	Number of Shares			Weighted Average Grant-Date Fair Value
Unvested at January 1, 2019		95,939		$	12.49
Vested		(58,772	)	$	7.66
Granted		1,542,332		$	1.41
Forfeited		(55,000	)	$	14.95
Unvested at December 31, 2019		1,524,499		$	1.37
Vested		(2,435,553	)	$	1.34
Granted		1,544,359		$	1.27
Unvested at December 31, 2020		633,305		$	1.27

The value of restricted common stock grants are measured based on their fair market value on the date of grant and amortized over their respective vesting periods. As of December 31, 2020, there was approximately $0.2 million of unrecognized compensation cost related to unvested restricted common stock rights, which is expected to be recognized over a remaining weighted-average vesting period of approximately nine months.

F-26

Index

Riot Blockchain, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except for share and per share amounts)

Stock Incentive Plan Options

The Company estimates the fair value of the share-based option awards on the date of grant using the Black-Scholes option-pricing model (the “Black-Scholes model”). Using the Black-Scholes model, the value of the award that is ultimately expected to vest is recognized over the requisite service period in the statement of operations. The Company attributes compensation to expense using the straight-line single option method for all options granted.

The Company’s determination of the estimated fair value of share-based payment awards on the date of grant under the Plan is affected by the following variables and assumptions:

•

The grant date exercise price – the closing market price of the Company’s common stock on the date of the grant;

•

Expected option term – based on historical experience with existing option holders estimated at 3-5 years;

•

Estimated dividend rates – based on historical and anticipated dividends over the life of the option;

•

Legal term of the option – grants have legal lives of 10 years;

•

Risk-free interest rates – with maturities that approximate the expected life of the options granted;

•

Calculated stock price volatility – calculated over the expected life of the options granted, which is calculated based on the daily closing price of the Company’s common stock over the period commencing in mid-2017 when the Company changed its strategic focus; and

•

Option exercise behaviors – based on actual and projected employee stock option exercises and forfeitures.

•

The Company accounts for forfeitures as they occur.

The Company currently provides stock-based compensation to employees, directors and consultants under the Plan. There were no stock options issued during the years ended December 31, 2020 and 2019.

A summary of stock option activity under the Plan for options to employees, officers, directors and consultants, for the years ended December 31, 2020 and 2019, is presented below:

	Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2019		62,000		$	15.71		9.2	$	—
Granted		—		$	—		—		—
Exercised		—		$	—		—		—
Forfeited		(50,000	)	$	18.50		—		—
Outstanding at December 31, 2019		12,000		$	4.09		3.7	$	—
Exercisable at December 31, 2020		12,000		$	4.09		2.7	$	155

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price on December 31, 2020 and 2019, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on December 31, 2020 and 2019, respectively.

As of December 31, 2020 and 2019, there was no unrecognized stock-based compensation related to stock options.

F-27

Index

Riot Blockchain, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(in thousands, except for share and per share amounts)

Other common stock purchase warrants

As of December 31, 2020, the Company had outstanding, 2,061,770 warrants issued in connection with offerings. The following is a summary of the change in outstanding warrants during the years ended December 31, 2020 and 2019:

	Shares Underlying Options/Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2019		1,671,113		$	39.47		2.0	$	—
Issued		1,908,144		$	1.94		5.2		—
Forfeited		(5,000	)	$	7.90		—		—
Outstanding at December 31, 2019		3,574,257		$	19.48		2.9		—
Exercised		(1,492,487	)	$	1.94		—		—
Forfeited		(20,000	)	$	3.50		—		—
Outstanding and exercisable at December 31, 2020		2,061,770		$	32.33		1.1	$	6,256

The Company issued Warrants to purchase 1,908,144 shares of its common stock with an exercise price of $1.94, in connection with the Notes issued on January 28, 2019.

During the year ended December 31, 2020, the Company issued 1,492,487 shares of its common stock in connection with the exercise of 1,492,487 common stock warrants for net proceeds of approximately $2.9 million.

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price on December 31, 2020 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on December 31, 2020.