Riot Platforms, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Stock options and warrants

Stock options and warrants

9 Months Ended

Sep. 30, 2013

Stock options and warrants [Abstract]

Stock options and warrants

Note 6. Stock options and warrants:

Stock options:

The Company currently provides stock-based compensation to employees, directors and consultants, both under the Company's 2002 Stock Incentive Plan, as amended (the "Plan"), and non-qualified options and warrants issued outside of the Plan. The Company estimates the fair value of the share-based 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. Option forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. 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 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;
·	Estimated option term - based on historical experience with existing option holders;
·	Estimated dividend rates - based on historical and anticipated dividends over the life of the option;
·	Term of the option - based on historical experience, grants have lives of approximately 3-5 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 a period equal to the expected term of the option; and
·	Option exercise behaviors - based on actual and projected employee stock option exercises and forfeitures.

The Company recognized total expenses for stock-based compensation during the periods ended September 30, as follows:

	Three Months Ended				Nine months Ended
	2013		2012		2013		2012

Stock options to employees and directors	$	332,150	$	224,187	$	1,226,304	$	613,276
Stock options to consultants for:
Investor relations activities		-		-		-		23,598
APPY1 activities		100		30,751		1,293		33,733
Animal health activities		-		-		-		5,752

Total stock-based compensation	$	332,250	$	254,938	$	1,227,597	$	676,359

The above expenses are included in the accompanying Statements of Operations for the periods ended September 30, in the following categories:

	Three Months Ended				Nine months Ended
	2013		2012		2013		2012

Selling, general and administrative expenses	$	301,888	$	224,187	$	1,111,623	$	642,626
Research and development expenses		30,362		30,751		115,974		33,733

Total stock-based compensation	$	332,250	$	254,938	$	1,227,597	$	676,359

During the nine month periods ended September 30, 2013 and 2012, no options were exercised.

Stock incentive plan options:

The Company currently provides stock-based compensation to employees, directors and consultants under the Plan. During the nine months ended September 30, the Company utilized assumptions in the estimation of fair value of stock-based compensation as follows:

	2013		2012

Dividend yield		0%	0%
Expected price volatility		127-128%	121-145%
Risk free interest rate		0.65 to 0.76%	0.60-1.03%
Expected term	5 years		5 years

The Company utilized an estimated forfeiture rate of 15% for each of the nine month periods ended September 30, 2013 and 2012. Operating expenses for the three and nine month periods ended September 30, 2013 and 2012, include approximately $332,000 and $1,206,000, and $240,000 and $316,000, respectively, for the value of the stock options issued under the Plan.

A summary of stock option activity under the Plan for options to employees, officers, directors and consultants, for the nine months ended September 30, 2013, is presented below:

	Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value

Outstanding at January 1, 2013		707,940		$	13.98
Granted		525,603			2.06
Exercised		-			-
Forfeited		(13,394	)		27.69

Outstanding at September 30, 2013		1,220,149		$	8.70		8.6	$	8,603

Exercisable at September 30, 2013		507,612		$	17.60		7.8	$	2,945

The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company's closing stock price on September 30, 2013 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 September 30, 2013.

During the nine months ended September 30, 2013, 525,603 options were granted under the Plan to employees, officers, directors and consultants with a weighted average exercise price at grant date of $2.06 per option. Included in the 525,603 options issued, the non-employee directors were granted a total of 209,333 options at an average exercise price of $2.10 per share of which the majority vest quarterly over a one-year period, officers were granted 292,000 options at an average exercise price of $2.04 per share vesting over a twenty-four month period and employees were granted 24,270 options at an average exercise price of $2.02 per share which vest over a twenty-four month period following grant. All options were granted under the Company's 2002 Stock Incentive Plan and expire ten years from the grant date.

During the nine months ended September 30, 2013, a total of 13,394 options that were granted under the Plan to employees were forfeited, 6,086 of which were vested. The options were exercisable at an average of $27.69 per share and were forfeited upon the employees' terminations from the Company or the expiration of the term of the options. During the nine months ended September 30, 2012, a total of 36,446 options that were granted under the Plan to employees, including an officer, were forfeited, 11,970 of which were vested. The options were exercisable at an average of $38.88 per share and were forfeited upon the employees' terminations from the Company.

The total fair value of stock options granted to employees, directors and consultants that vested and became exercisable during the nine months ended September 30, 2013 and 2012, were approximately $1,055,000 and $1,363,000, respectively. Based upon the Company's experience, approximately 85% of the outstanding nonvested stock options, or approximately 606,000 options, are expected to vest in the future, in accordance with their terms.

A summary of the activity of nonvested options under the Plan to acquire common shares granted to employees, officers, directors and consultants during the nine months ended September 30, 2013 is presented below:

Nonvested Shares	Nonvested Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value

Nonvested at January 1, 2013		508,435		$	3.70	$	3.07
Granted		525,603			2.06		1.75
Vested		(314,193	)		4.06		3.36
Forfeited		(7,308	)		2.46		2.07

Nonvested at September 30, 2013		712,537		$	2.35	$	1.98

At September 30, 2013, based upon employee, officer, director and consultant options granted under the Plan, there was approximately $480,000 of additional unrecognized compensation cost related to stock options that will be recorded over a weighted average future period of approximately one year.

Other common stock purchase options and warrants:

As of September 30, 2013, in addition to the stock options issued under the Plan as discussed above, the Company had outstanding non-qualified options and warrants to acquire 4,622,505 shares of common stock. These options and warrants include those issued in connection with stock offerings, officers' employment inducement awards and investor relations consulting.

During the nine month period ended September 30, 2013, warrants to acquire 4,025,000 shares of common stock were issued in connection with a public offering. Each warrant issued represents the right to acquire 0.35 of a share of common stock. During the nine month period ended September 30, 2012, 325,000 stock options were granted outside of the Plan.

Operating expenses for the three and nine month periods ended September 30, 2013 and 2012, include approximately $0 and $22,000, and $15,000 and $58,000, respectively, for the value of the non-qualified options and warrants.

Following is a summary of outstanding options and warrants that were issued outside of the Plan for the nine months ended September 30, 2013:

	Shares Underlying Options / Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value

Outstanding at January 1, 2013	598,507		$	5.01
Granted	4,025,000			1.36
Exercised	-			-
Forfeited	(1,002	)		59.10

Outstanding and exercisable at September 30, 2013	4,622,505		$	1.82	4.6	$	2,334,500

The aggregate intrinsic value above represents the total intrinsic value (the difference between the Company's closing stock price on September 30, 2013 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 September 30, 2013.

In May 2013, the Company completed a $14.4 million public offering of securities and, in connection with that offering, granted investors in the offering warrants to purchase a total of 4,025,000 shares of common stock at an exercise price of $1.36 per share and expiring in May 2018.

Included at September 30, 2013 in the total outstanding options and warrants are 4,597,505 non-compensatory rights granted in connection with public offerings and 25,000 rights issued under compensatory arrangements.

In June 2012, the Company completed a $12.2 million public offering of securities and, in connection with that offering, granted the underwriter warrants to purchase a total of 305,000 shares of common stock. These warrants, which are included in the above table, became exercisable in June 2013 at an exercise price of $2.50 per share and expire in June 2017.

The total fair value of stock options and warrants previously granted to an investor relations consulting firm and to certain officers that vested and became exercisable during the nine months ended September 30, 2013 and 2012, was approximately $24,000 and $56,000, respectively.

A summary of the activity of nonvested, non-qualified options and warrants granted outside of the Plan in connection with employment and investor relations consulting services during the nine months ended September 30, 2013, is presented below:

Nonvested Shares	Nonvested Shares Underlying Options			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value

Nonvested at January 1, 2013		8,333		$	3.42	$	2.84
Granted		-			-		-
Vested		(8,333	)		3.42		2.84
Forfeited		-			-		-

Nonvested at September 30, 2013		-		$	-	$	-

At September 30, 2013, there was no unrecognized cost for non-qualified options to be recorded in the future.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References + Details