DMG Blockchain Solutions Inc.

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the DMG Blockchain Solutions Q3 2025 Update Conference Call. Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A webcast replay of the call will be available on the company's website. Joining us today from DMG Blockchain Solutions is Sheldon Bennett, the company's Chief Executive Officer, and Stephen Eliscu, Chief Operating Officer. During this call, management will be making forward-looking statements, including statements that address DMG Blockchain Solutions' expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially, from those statements. For more information about these risks, please refer to the risk factors described in DMG Blockchain Solutions' most recently filed periodic reports and the company's recent press releases. particularly the cautionary statements within. The content of this call contains time-sensitive information that is accurate and only as of today, August 25th, 2025. Except as required by law, DMG Blockchain Solutions disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Sheldon and Stephen. Sheldon?

Thank you, Chantelle. Good afternoon, and thanks to everyone who has joined the call today. My name is Sheldon Bennett, and I am the CEO and founder of DMG Blockchain Solutions. With a similar format as recent quarters, first I will provide an overview of the company's achievements in the past quarter. I will then pass the call to Stephen, who will review the company's performance. We will end the call with our Q&A session based on questions submitted to us prior to the call, as well as those using Zoom chat. So now on to our highlights of recent achievements. First, our core plus, our software and services strategy. For systemic, our progress for onboarding clients and achieving our revenue target has been slower than we earlier anticipated. While we are unlikely to realize significant revenue this calendar year, we are optimistic about the long-term opportunity of the business. Building a world-class custody platform and acquiring customers in a competitive market is hard, but we also feel we offer competitive advantage with a focus on Canada where clients are seeking to mitigate geopolitical risk, competitive pricing, and white-glove service that far larger U.S. firms are simply not able to provide. Accordingly, we believe we can achieve scale over the next 12 months that would begin to result in material revenue. With respect to systemic trust go-to-market, we are adopting a more tiered strategy of onboarding smaller customers such as family offices and smaller funds. We do not feel that we are being gated by any of the compliance hurdles that we need to achieve given our more realistic view of the sales cycle. For systemic trust platform expansion, we are working closely with our regulators so that we can offer yield generating and other value-added services. We will provide additional information as we proceed through the balance of the year regarding timing and specifics of what we will offer. We are also exploring the regulatory requirements and capital required to expand services to the U.S., To offer settlement services, we continue to focus on partnering with crypto trading platforms, including Bosonic, with which, specifically, we are also aiming to realize value from our investment. For TerraPool, we continue to evaluate the best way to enable our carbon-neutral Bitcoin ecosystem. The market wants decentralization of the Bitcoin network, and as it has been well-documented in the media, the network is dominated by a few large pools. which even with benevolent intentions could become an increasing overhang for growth in the value of Bitcoin. Our focus remains to work with a limited number of larger mining entities looking to leverage the portion of their energy mix that is carbon neutral and provide them the opportunity to increase their revenue. Our immediate goal is to demonstrate this opportunity for increased revenue on TerraPool. In addition, we know the value proposition of TerraPool becomes even greater when we can offer a suite of complementary products, including Helm, Reactor, and Explorer, along with our custody offering. Now for a few words on each. First, Helm, DMG's data center infrastructure management software, continues to be enhanced to be best-in-class software for maximizing the profitability of Bitcoin mining. Helm is being used in-house, and we are working with beta customers to deploy Helm at their facilities, including our hosting partner. With announcements by Foundry and Block, including general facility management tools with their offerings, and even Block announcing its code will be open-sourced, we believe the days of proprietary and high-priced legacy platforms are coming to an end. We are embracing this trend and see Helm, which is already utilizing open-source code, to do even more such in the future. Our goal remains to be best in class and a key value add for being on TerraPool. Second, Reactor, which is our proprietary software for assuring the delivery of hash rate over the term of a hash rate contract and gives TerraPool clients the option to sell hash rate and be paid up front for delivering hash rate over the term of a contract. We are currently testing Reactor along with providing additional functionality by its underlying software layer called MineApp. We will discuss some more about this in the coming months. Our near-term goal is to demonstrate the operation of Reactor by selling a relatively small portion of DMG's hash rate and multiple hash rate contracts. We plan to integrate Reactor along with TerraPool and Helm into a single seamless environment. Finally, we released Bloxy Explorer last month to offer the Bitcoin community a tool for miners and others engaged with Bitcoin. The next step for Explorer is to expand its analytics capabilities. In summary, we now have the critical mass of products to be able to realize our vision of monetizing a carbon-neutral Bitcoin ecosystem. Our focus now is customer acquisition and feature enhancements. Regarding our core data center infrastructure, first, for AI, regarding the two megawatts of prefabricated data center infrastructure we purchased, from the same party we announced the MOU to acquire 10 megawatts of infrastructure, we have an indication of interest from a potential client for purchasing and or facilitating this asset to be located in Canada. As we have nothing definitive at this point, we cannot claim this as a deal, but we are encouraged by the progress we continue to make. With respect to the Canadian defense sector, this remains a focus area. We are aware of specific requirements for which we are having discussions. We believe that with our execution partners, which we have yet to announce, we are well positioned to address Canada's military needs. I personally met with Secretary of State, Stéphane Vieure, who was responsible for defence procurement about two weeks ago at the Abbotsford International Airshow, and was very encouraged by our discussion. We plan to have additional ministerial-level discussions in the coming weeks. Last October, we signed a Memorandum of Understanding with the Malahat Nation to build up 30 megawatts of AI compute capacity split between our parties. We are now focused on executing agreements with the Malahat as well as more actively pursuing the financing of smaller projects ahead of a potentially much larger AI data center project financing. Next, for Bitcoin mining, with our Hydra miners fully energized during the quarter, we realized 1.8 exahash with a fleet efficiency of 22.6 joules. At the very beginning of May, we reached our short-term hash rate goal of 2.1 exahash. As disclosed in our recent press release, we have been operating below that number based on the summer heat and suboptimal operations of our air-cooled fleet, even as our hydro miners achieved 0.4x hash in the latter part of July and have maintained a steady hash rate since, even with the hottest temperatures near 100 degrees Fahrenheit or for Canadians around 40 degrees Celsius. Regarding Bitcoin mining site expansion, we remain focused on lowering our cost of energy, which includes expanding the use of non-firm energy in Christina Lake and finding new sites with low-cost energy. We reached an agreement with the party we announced in May 2023, which could realize for us an additional exahash later next calendar year. We continue to evaluate locating Bitcoin mining at other locations in Canada and the U.S. Regarding our three exahash goal by the end of this calendar year, we are looking to achieve this goal with non-dilutive financing. One of our options to achieve this goal is by converting a porch number Christina Lake building facility to hydro mining. As a reminder, this building already contains all the power distribution and racking to energize up to 36 megawatts of capacity, which facilitated with modern miners could generate about two and a half exahash. For equipment financing options, we are considering our existing debt facility or other debt options that would still allow us to realize our ROI targets. For DMG's digital asset treasury, our DAT, we are still evaluating the best options to proceed. As we announced, we have brought in consultants to evaluate how we can support the market's need for custody services for digital asset funds and treasuries. Our objective is to set policy that will apply evenly through the next crypto winter. Technical analysis analysts would point to past Bitcoin cycles, which would suggest that Bitcoin pricing peaks this November and subsequently declines in excess of 70% in the subsequent downturn. While we have no way to forecast where Bitcoin pricing actually goes, or if this cycle is different because of secular drivers, as many pundits are saying, our objective will be to set an example for the industry of how that are managed. Now for a summary of our strategy. First, DMD's core plus software and services. For systemic trust, we are refining our go-to-market strategy while bolstering our operational capabilities to ensure we can smoothly onboard successively larger clients and ramp revenue. We have deferred our expectations for material revenues until next calendar year, but we remain committed to our platform as we believe we can provide a differentiated world-class offering that fulfills real market needs. Regarding our larger carbon-neutral Bitcoin ecosystem, we have the pieces in place to execute on our strategy, even as our focus is first to ensure the success of systemic trust, we remain committed to the rest of the platform. We are proud of having relaunched the world's best freely available blockchain, Explore Blocks here, which is a great example of how our small developer team leveraged the latest tools built and built to the best of breed product in minimal time. For DMG's core data center infrastructure, over the past quarter, we are nearing our goal to be a provider of AI data center co-location and compute services focused on the Canadian defense sector. We are encouraged by the progress we have made as we have navigated the defense-related agencies within the government of Canada, having established relationships with key influencers and decision makers. Additionally, we have bolstered our relationship with market-leading execution partners that can help us capitalize on what may develop into large opportunities over the coming years. Even with a big portion of our attention on AI, Bitcoin mining remains foundational to our core strategy, and hence, we are still focused on how to grow to 3x a half by the end of the calendar year and to do this in a non-dilutive way. Now, I'll hand it over to Stephen to review the company's performance.

Thank you, Sheldon. I'm Steve Illescue, DMG COO. First, a few words about the company's overall position. In the June quarter, our cash short-term investments plus Bitcoin balance was $61.8 million, about flat sequentially and up 56% year-over-year. We're utilizing about two-thirds of our Bitcoin balance as collateral for our Cigna Bank loan facility. Note that our Signum loan balance was $12.7 million in the June quarter versus $20 million the prior quarter and dropped to below $10 million in the current quarter as we disclosed in a recent press release. We believe this provides us a more optimal capital structure with lower debt servicing needs. Having adjusted our capital base, we're now in the valuation phase of implementing a digital asset treasury strategy that we can have in place for the long run. For our mining operations, our average hash rate for the quarter was below expectations as we dealt with hydro infrastructure contamination caused by manufacturer quality control issues, as well as seasonal heat-related issues for our air-cooled miners. We have largely overcome our hydro contamination, although we continue to monitor the equipment. As we have been consistently operating at 0.4 exahash, and the few miners that have failed have largely been repaired and will be put back in service in the very near future. Finally, as Sheldon detailed in his update on AI, we are encouraged by our progress, especially given indications of interest to buy our infrastructure and or services. However, we caution that government agencies move slowly, and we're new to the procurement process. But we continue to push avenues via partnerships and political angles to help us navigate the bureaucracy. Now to review our financial results. In our June quarter, our revenue decreased 8% to $11.6 million and $12.6 million the prior quarter. Mainly, a self-mining revenue decreased a similar percentage on 8% lower network Bitcoin per exahash generation. From the year-ago quarter, revenue increased 40% from $8.3 million. We received 84 Bitcoin from mining down from 91 Bitcoin the prior quarter, as our 2% hash rate increase was more than offset by the decrease in the network's Bitcoin per exahash generation. Our hosting revenue decreased 22% sequentially to 0.1 million in our June quarter. We expect hosting revenue to decline to near zero this calendar year as our existing customers retire their fleets and we utilize our capacity for self-mining. Operating and maintenance costs decreased 14%, 6.5 million from the prior quarter, mainly on lower seasonal energy rates. Note that our nonfirm power is subject to self-curtailment, and we had no curtailment events in the June quarter. Also note that the 15 megawatts of firm power we may have may ultimately support our AI venture with the Malahat, and we're working with our utility to secure additional firm power for future AI growth. Our margin percentage on our revenue-less operating and maintenance costs was 44% in the June quarter, up from 40% the prior quarter, mainly on lower energy rates. Consequently, our energy costs to mine a Bitcoin was down to about 51K U.S., even as network difficulty rose 10% from the prior quarter. As we will likely continue to utilize non-firm power for much of our energy mix going forward, we will experience more volatility in our mining costs than we've had historically. As a proxy for cash flow from our business, which assumes we're selling 100% of our Bitcoin generated, our earnings before other items, excluding depreciation, amortization, and stock-based comp, was 2.7 million, or 23% on a percentage basis in the June quarter, an increase from 2.5 million and 20% in the prior quarter, again due in large part to lower energy rates. Our cash flow from operations was $18 million in the June quarter, as we sold $15 million more of Bitcoin than we earned. Our cash balance increased to $2 million on our cash generation, which also funded our capital additions and pay down of debt. As we have already reported in a recent press release, our Bitcoin balance declined in July to an unaudited amount of 307 Bitcoin. Investors should expect our Bitcoin balance for the remainder of the quarter to rise from this level, as we believe we have achieved a more optimal capital structure, and we do not expect to pay down our debt further in the near term. Non-mine expenses, excluding depreciation, amortization, and stock-based comp, were $2.4 million in the June quarter, down 5% from the prior quarter of $2.5 million. We continue to expect non-mine expenses to rise only modestly this year. We have added headcount to support program execution, especially given what we need to accomplish on AI, as well as business development for our software initiatives and operations. For at least the near term, these are targeted hires helping us to ensure operational and sales execution. Depreciation expense of $4.5 million in the June quarter increased 5% from the prior quarter, as all of our S21 plus hydro miners are now fully in service. As a percentage of revenue, our depreciation expense was 39%, up from the prior quarter of 34%, but still among the lowest in the industry. We continue to look towards future miner capex, to be in the million dollars per megawatt range, while we underclock our legacy miners to extend their useful life. Our earnings before other items was minus $2.5 million in the June quarter, similar to the minus $2.6 million the prior quarter. Our net income was minus $0.4 million, or zero cents per share versus minus $3.3 million and minus two cents per share the prior quarter. Note that also our comprehensive income, which combines our P&L with the unrealized Bitcoin valuation gains on our balance sheet, was $9.7 million for the quarter and is $11.7 million fiscal year to date. Regarding our balance sheet, our cash short-term investments plus Bitcoin holdings was $61.8 million, about flat from the prior quarter and an increase of 56% from the prior year. With the reduction in debt, working capital increased 16% to $47.5 million from the prior quarter and is up 91% from the prior year-ago quarter. The value of our property and equipment and long-term deposits increased 7% to $59.6 million from the prior quarter as depreciation was exceeded by our capital additions, namely the two megawatts of data center infrastructure. Accordingly, our total asset base increased 3% to $133.6 million from the prior quarter and increased by 20% the prior year. In the June quarter, we sold 201 Bitcoins, generating $26.4 million of cash. Thus, we sold 239% of the Bitcoin amount mined, versus the prior quarter selling 42% of the Bitcoin mined. It is possible that with our Bitcoin sales this quarter, DMG will sell more than 100% of its mined Bitcoin in fiscal 2025. In the past, we have stated that as a treasury policy, investors should continue to expect us to sell most or all of the Bitcoin we mine, and that our Bitcoin holding should decline as a percentage of our total asset base over time. We are updating this policy to state that we are considering setting aside a dedicated digital asset treasury as part of a long-term holding to to which we accumulate digital assets initially with Bitcoin only. While we would not intend to liquidate that treasury, we may want to periodically rebalance it with cryptocurrencies other than Bitcoin. Regarding raising new capital, As for a future where AI could be a major component of our business, our capital raising would most likely be dead instruments tied to offtake and co-location contracts. For Bitcoin mining expansion, we're most likely to continue to utilize Bitcoin-backed loans and other forms of debt financing. Note that as we look to our next phase of expansion towards 3x a hash, we believe we can source near-leading-edge 13 to 16 joule per terahash equipment later this year that should cost in the $1 million per megawatt range in U.S. currency. I will now hand the call back to Sheldon to summarize her prepared comments, and we will both answer questions. Sheldon?