APPROVAL TO AMEND THE RIOT BLOCKCHAIN, INC. ARTICLES OF INCORPORATION
Background
On September [•], 2022, our Board unanimously approved that, subject to stockholder approval, the Company’s current Articles of Incorporation, as amended to date, be amended in the form attached hereto as Appendix B. The proposed amendment is to increase the number of shares of common stock authorized for issuance thereunder from 170,000,000 shares to 340,000,000 shares. The additional shares of common stock authorized for issuance by this Proposal would be a part of the existing class of common stock and, if and when issued, would have the same rights and privileges as the common stock presently issued and outstanding. The amendment to the current Articles of Incorporation would not change the total number of authorized shares of preferred stock. The text of the proposed amendment is set forth on Appendix B. We encourage you to read Appendix B in its entirety.
In determining the size of the share increase under the Amended Plan, our Board worked with management and independent advisors to evaluate a number of factors, including our corporate strategy, the potential need to raise additional capital to fund future expansions of our business including potential business transactions, our compensation philosophy of broad-based employee eligibility for equity incentive awards, our recent and projected share usage, and the total potential dilution. The Board believes that amending the Articles of Incorporation to authorize an additional 170,000,000 shares of common stock is appropriate and in the best interests of stockholders and the Company given the capital-intensive nature of our business operations and of future business expansion projects, the highly competitive environment in which we compete for talent, the recent volatility in the capital markets and its impact on our stock price, and our projected share usage. However, estimating our future share needs is challenging, particularly under current market conditions, as our estimates are based on our current internal modeling and depend on a number of factors that are difficult to predict or are beyond our control, including market conditions, competition for talent, our future financial and operating performance, our hiring needs, the amount of forfeitures of outstanding awards, and the future price of our common stock.
Why We Propose the Amended Articles
Our Board has determined that it would be in the Company’s best interests to increase the number of authorized shares of common stock to provide our Company with the flexibility to pursue all corporate opportunities involving our stock, which may include, among other business purposes, strategic acquisitive corporate transactions, public or private offerings of our equity securities, and financing opportunities for future expansions of our business. Additionally, we operate in a highly competitive talent market and our success depends in part on our continued ability to attract, retain and motivate highly qualified and skilled employees, particularly management, which is of particular concern in the relatively small Bitcoin mining and data center development communities. If the amendment to the Articles of Incorporation is not approved by our stockholders, the lack of unissued and unreserved authorized shares of common stock to provide future financing and equity incentive opportunities could adversely impact our ability to achieve these strategic corporate goals and to retain employees. In short, if our stockholders do not approve this proposal, we may not be able to access the capital markets, complete corporate collaborations or partnerships, attract, retain and motivate employees, and pursue other business opportunities integral to our growth and success. Each additional authorized share of common stock would have the same rights and privileges as each share of our currently authorized common stock.
As of our Record Date, [•] shares of common stock, no par value, were outstanding, leaving [•] shares of common stock, no par value, available for issuance.
At present, excluding our at-the-market offering disclosed on Form 8-K dated March 31, 2022 (SEC File Number 001-33675) and Prospectus dated March 31, 2022 (SEC File Number 333-259212), and that we are continually evaluating potential business opportunities, our Board has no immediate plans, arrangements, or understandings to issue the additional shares of common stock. However, the Company desires to have the shares available to provide additional future flexibility to use our common stock for business or financial purposes in the future as well as to have sufficient shares to provide appropriate equity incentives to attract and retain top talent. The issuance of additional shares of common stock in the future will have the effect of diluting earnings per share, voting power and common shareholdings of stockholders. It could also have the effect of making it more difficult for a third party to acquire control of our company. The shares will be available for issuance by our Board for proper corporate purposes,
