DMG Blockchain Solutions Inc.

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the DMG Blockchain Solutions Q1 2026 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 Alistew, 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 only as of today, February 26, 2026. 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 Steve. Sheldon? Thank you, Adrian.

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 strategy and accomplishments. I will then pass the call to Stephen who will review the company's performance. We will structure the call to focus on the two strategic pillars we presented last quarter. the acceleration of our core business, namely data center operations to AI infrastructure, and the progress in our core plus operations, namely our digital asset financial services. This structure results in no changes to our specific business lines and how we report our financial statements. But we are reorientating our messaging in a way we believe will be easier for investors to understand. We will end the call with our Q&A session based on questions submitted to us prior to the call, as well as those from using Zoom chat. So now to provide an overview of our strategy. First, core, our data center infrastructure strategy. DMG is now focused primarily on AI infrastructure. To preface the discussion for AI, we are focused on a business model of providing AI data center co-location services. As typical, contracts provide multi-year revenue streams. While we would consider providing cloud services in the future, we are focused on infrastructure services in the near term. Now to discuss the opportunities. First, Christina Lake. As we announced in a press release earlier in December, we are focused on converting our Christina Lake facility into an AI data center that can provide at least 50 megawatts of critical IT load. As industry data points and in discussions support, there is dwindling available capacity not only for 2026, but also for 2027. We are encouraged that we can fill an industry gap in the near term with available AI capacity. In Canada, the amount of power we can offer in this timeframe puts us in what we believe to be a good position to support large-scale sovereign AI. Since our last earnings call, we have had numerous discussions with off-takers as well as potential partners that have direct relationships with large off-takers. We believe that our 65 megawatts of available power can meet the demand of what some of the new clouds are seeking. We'll provide updates as we make progress. Second, on other sites. Even as we withdrew guidance for a timeframe for the purchase of an 18-acre site in Boardman, Oregon, we are actively working with potential partners to create a pipeline of future data center capacity. It is our goal to enable a pipeline of contracted power with land that is significantly larger than our Christina Lake facility that would become available over the next several years in both Canada and the U.S. Third, on government. Also, for those who have been following the Innovation, Science, and Economic Development, or ISED, 100-megawatt data center request for information program, Yes, DMG did submit an application in conjunction with the Malahat Nation based on developing data centres on our Christine Lake facility and the Malahat Nation's properties. As it is an RFI, we don't expect it to directly result in a government contract or sponsorship, but we are encouraged that the Canadian government is more aggressively seeking partnerships with the industry to build a network of advanced AI data centres across Canada and that we have an opportunity to participate. Lastly, PDCs are prefabricated data centers. Finally, as previously reported, the two megawatts of prefabricated data centers are being shipped to Christina Lake in March. And we plan to set them up as soon as they arrive. We're considering purchasing the remainder eight megawatts that we have an option to purchase as well. Next, Core Plus, our digital asset financial services. Even with the current economics of Bitcoin mining, we're not planning to exit. That being said, we are being cautious about any fleet expansion and will continue to work to refine operations of our current fleet. We also see the opportunity to provide custody services via our systemic trust subsidiary, along with EMG's crypto asset mining hosting services. for others, and in particular for treasuries. We have taken on our first client, Luxfolio, which has a small fleet of script miners that mine Litecoin for its Litecoin DAT. For systemic trust, we have continued to upgrade the platform, whereby we can offer value-added services by integrations. In the coming months, we anticipate we will be able to provide more guidance on revenue growth. For Bitcoin mining, we reiterate our guidance to operate at approximately 1.8 exahash with an efficiency of approximately 21 jewels. TerraPool, we have continued to test TerraPool and remain encouraged that we can expand the use of the pool this year. Helm, we continue to make improvements in our Helm software and anticipate it will be among the first of our software platforms that uses AI agents where a technician could query the platform that would help the techs ensure their fleet operates most optimally. Reactor, we continue to test and upgrade versions of our Reactor software with plans to begin offering hash rate contracts in the coming months. Now for a summary of our strategy. For our core data center strategy, we encourage that the conversation of Christina Lake to an AIDA sender fills a timely industry need. We are focused on making this happen. For our core plus digital asset financial services, systemic trust remains the cornerstone of this strategy. Our long-term goal remains for revenue from custody and other financial services to be a driver of our business. Now I'll hand it over to Stephen to review the company's performance.

Thank you, Sheldon. I'm Steve Eliskew, DMG COO. Now to review our financial results. In the December quarter, revenue decreased 2% sequentially to $11.2 million. As self-mining revenue decreased 16% on 13%, lower network Bitcoin per hash generation and 12% lower average Bitcoin price. partly offset by a 10% higher hash rate. The decline in self-mining revenue is mostly offset by a one-time $1.5 million energy incentive. For our mining operations in the December quarter, we received 68.5 Bitcoin from mining. a decrease of 5% from the September quarter, with an average hash rate of 1.76 exahash, up 10% sequentially and 9% year-over-year, with a fleet efficiency of 22 joules per terahash. We expect our hash rate to remain about steady and our fleet efficiency to slightly improve in the March quarter. Hosting revenue decreased 2% sequentially to $0.1 million in the December quarter. We expect our existing hosting revenue to decline to near zero in fiscal 26, but hosting has the potential to support new clients, as we recently brought on Luxfolio, Small Fleet of Script Miners, In conjunction with expectations, it could be onboarded as a systemic trust client, holding in custody at least part of its Litecoin digital asset treasury. Operating and maintenance costs decreased 2% sequentially to $6.7 million in December quarter, as our 8% sequential increase in energy consumption was more than offset by an 11% reduction in the cost of energy. Well, typically we would expect the winter months to result in an increase in energy rates. This year has been mild in western North America, and hence our energy costs have been low even through February. Our margin percentage on our revenue, less operating and maintenance costs, was 40% in December quarter, flat from 40% in the September quarter, as we benefited from the energy incentive. Our energy cost to mine a Bitcoin was about 64K US, flat from the September quarter, as decreased Bitcoin per hash was offset by lower energy rates. As a proxy for cash flow from our business, which assumes we're selling 100% of our generated Bitcoin, our earnings before other items, excluding depreciation, amortization and stock-based comp was $1.9 million, or 17% of revenue on a percentage basis in the December quarter, a decrease from $3.5 million and 30% in the September quarter, but more in line with prior quarters as we benefited from a one-time R&D expense adjustment in the September quarter. Our cash flow from operations was minus $5.6 million in the December quarter as we sold only 12% of the Bitcoin we mined so that we could build up our Bitcoin balance. We remain bullish on Bitcoin in the long run, notwithstanding the current downturn. Non-mine expenses, excluding depreciation, amortization, and stock-based comp, were $2.5 million in the December quarter, in line with recent quarters prior to the September quarter, as we recognized the one-time R&D expense adjustment previously cited. We will continue to manage expenses by rationalizing our staff and hiring only where it can directly help us drive revenues. Our earnings before other items was minus 2.1 million in the December quarter versus minus 1.5 million in the September quarter, which included the one-time R&D adjustment. Net income in the December quarter was minus 2.2 million, or minus one cent per share. Regarding our balance sheet, our cash short-term investments plus Bitcoin holdings on December 31st was $58.6 million, down 10% from the September quarter, mainly on the decreased value of Bitcoin. With the decrease in value of our digital asset holdings, And the increase in debt, working capital increased 25%, decreased 25% to $39.5 million from the September quarter. The value of our property and equipment and long-term deposits decreased 6% to $50.5 million from from the end of the September quarter as depreciation exceeded our capital additions. Accordingly, our total asset base decreased to $122 million from the end of the September quarter. Book value was $98.5 million, or $0.48 per share. Our Signum loan balance was $16.2 million at the end of December quarter. As we pause liquidations and utilize this debt facility to support rebuilding our Bitcoin balance. However, we do not intend to utilize our debt facility in the near term, but rather we'll look to pay it down. Our Bitcoin balance rose from an unaudited low of 307 at the end of July to 414 at the end of January. For at least the near term, we will not be providing guidance as to how we manage our Bitcoin holdings, as we want maximum flexibility as to how we utilize our Bitcoin, given the increased market uncertainty. In the December quarter, we sold eight Bitcoin or 12% of our mined output, generating 1.2 million of cash. Regarding raising new capital for a future where AI could be a major component of our business, The bulk of our capital raising would most likely be debt instruments tied to client contracts. I will now hand the call back to Sheldon to summarize our prepared comments, and we will answer questions. Sheldon?

Thank you, Stephen. To reiterate our key results and outlook, DMG earned 68.5 Bitcoin for mining in Q1 2026 on a hash rate of 1.76 exahash, and a fleet efficiency of 22 jewels. Cash, short-term investments, and digital currency on December 31st totaled $58.6 million. Total assets were $122 million, and book value was $0.48 per share. Our operating income, excluding depreciation, amortization, and share-based compensation, was $1.9 million for Q1 2026. We had a net loss of $2.2 million or minus $0.01 per share. We were focused on realizing revenue from our AI and digital asset financial services initiatives that can help drive shareholder value. For our core infrastructure, we were resisting DMG to expand into AI in a meaningful way with a focus on developing a pristine-like data center and a 50-plus megawatt co-location facility. For our core plus services, we are committed to systemic trust as the cornerstone of our digital asset financial services business and believe there are opportunities to build a strong base of business with material revenues in the next six to 12 months. Even as the environment for Bitcoin mining has become more challenging, we are focused on where we can maximize value from our Christina Lake facility, along with our growth initiatives and digital asset financial services. We appreciate your continued support. So now on to our Q&A. We have multiple questions here, and as we have done in the past, I will answer a few. Stephen's free to jump in when he wants, and I've given a few here to Stephen to answer. First question, what is the status of getting an off-taker for Christina Lake? What is the timeframe you expect that to happen? So it's a great question. It's a question we're asked continuously. We are reaching out to a number of different avenues to find off-takers. One, just going directly to neoclouds and hyperscalers. Two, talking with the commercial real estate brokers that traditionally assist in partnering and pairing up off-takers and suppliers. And three, You know, we've been talking to the, you know, ecosystem partners from chip manufacturers to the infrastructure providers for AI data centers. And lastly, we've been talking to the investment banks as they're quite important to have due to the amount of capital needed and insurance is that, you know, we or anybody would be able to have the capital available available to deploy to construct and build and commission and turn on a neocloud or a hyperscaling facility. So we've been following all of those relationships and working them all. So far, we're very encouraged that our Christina Lake facility fits the profile where there's significant demand, and we have power access already, we have infrastructure already, and our conversations with a variety of groups have been very positive, and we're really focused on our efforts to convert Christina Lake into a full-on AI, new cloud slash hyperscale ecosystem. And as I said earlier, we're focused on co-location for this first sort of 50 megawatts of critical IT load that we're trying to get into a deal with right now. What is the status of government contracts and the ISED RFI? I said, okay, so this, as I said earlier, the ISED or ISED is the Innovation Science and Economic Development Department in Canada, part of the Ministry of Industry. It's sent out a request for information. from Canadian companies that are interested and able to build 100 megawatts or more of sovereign AI in Canada. And so we've responded to that. We sent in our submission. We've done that as a partnership with the Malahat Nation. And we hope that at least we can progress to the next stage. uh which would likely you know be a more specific proposal from us and we believe that the federal government will be looking at uh working with multiple companies across canada uh to build you know ai data centers uh probably not just one but We think that if multiple companies are used, we have a good chance of being involved. If they want just one, you know, it'll be a bit of a bake-off. It takes some time. But so far, we think we have a very strong application for this. And then just with respect to the military, we have multiple companies. I don't know if you want to call them offers, but proposals to the Canadian military. They're looking at them. Things never move that quickly with any government, and the military is no different. So, you know, as soon as we get some feedback, you know, we'll let our investors know. Another question. What specifics led to the withdrawal of timing, guidance, and certainty of the Oregon facility? Is the site still a priority? Well, yes, it's still a priority. We're well aware that we do need to have a U.S. presence in the long term. We didn't anticipate any issues in this deal. We're not going to disclose the issues, but just... For those that haven't done a type of cross-border transaction like this, normally, not normally, but one of the ways it works is you construct a deal that both parties agree to. We call it heads of terms. And that kicks off. a detailed due diligence um and so instead of doing all the detailed due diligence before you sort of agree on how you want transactional work you agree on how that transaction work then you do the detailed due diligence and so that's what we've done during that detailed due diligence some stuff popped up that you know we weren't expecting um and we've gone back to the seller and said you know they need to rectify these things for us to conclude this transaction and From what we can tell, they plan on rectifying this, and we would like to finish this transaction, but the ball's sort of in their court. And we're hoping, as we get information, we will tell our shareholders, but we're hoping that we conclude that. But until these things are rectified, we're not really giving any guidance on yes or no or when on this specific transaction. Another question. What are you doing to gain customer adoption for systemic trust? Within Core Plus, but aside from systemic trust, what initiatives could bring increased revenue near term? So, right now, we're focused on building a client base for systemic trust. This is done primarily through direct sales efforts. And so we have a robust direct sales strategy and process that we've developed and are implementing. Regarding things that aren't systemic trust, those are mainly, from our point of view, Terra Pool and Reactor. We don't have really anything more to say than what I said earlier, but TerraPool and Reactor are operating, and we are making some adjustments to them, and we'll have some announcements about them coming up in the next quarter or so, or month or quarter, depending on which one we're talking about. Another question, I understand that TSX has stricter governance and reporting requirements, but it also offers pretty liquidity and institutional awareness. Are you considering a move from the Vancouver Exchange to the main TSX? I guess first, just to clarify, we're on the Toronto Venture Exchange, so not to be confused with the Vancouver Exchange. So we are on the, I guess, the junior TSX exchange called the Venture Exchange, not the main board. And then the second part of the question, you know, yes, you know, we've looked up this listing multiple times, different ways of doing it, including the TSX main board. Most of our feelings, and I say that by sort of management, our board, is we would probably not up-list to the TSX main board if we had the option of up-listing to the U.S. like NASDAQ. We would probably stay TSX Venture listed in Canada, NASDAQ listed in the U.S. versus upgrading from TSX Venture to TSX. If we didn't have the option of going to the US, then maybe we would just have Uplift to the TSX full board. But I think that the preference of the company would be to have a US listing in addition to our venture listing. A few more questions here. Steve, did you want to jump in? Yeah. This next question.

Yes, thanks, Sheldon. The next question here is, do you anticipate needing further equity or debt financing in 2026 to reach the 50 megawatts of critical IT load? And the short answer is no. Yes, you could just look at our peers and see how much that they've been raising and 50 megawatts of infrastructure to support GPU computing is a lot of capital. And part of what we're doing right now is to lay the groundwork so we can be properly capitalized as we look also to close an off-tape deal. And to be clear on that, we're not giving guidance. We've said we think there's a good fit. There's clearly a time window there. So we're encouraged, but just we want to be clear we're not providing guidance as to when we would close an offtake deal or even have an LOI. How are you managing the AI migration from Bitcoin mining to How should investors think of revenue generation during this transition? And the short answer is we will run Bitcoin mining, Christina Lake, until we can't. And we'll plan a graceful migration to either another site or decommissioning, depending on where they are in Bitcoin. their life cycle. With an off-tape deal, it's not simply you get a deal and you move forward. There's typically a very detailed program schedule in the industry. They refer to it as a level five schedule, which defines to the hour as to when work is done ahead of commissioning cycle. So we'll know how long we can be able to run the equipment. and we'll make appropriate decisions as to how we will dispose of or disposition the Bitcoin mining equipment until then. As we've said, we want to have Bitcoin mining to support what we're doing in digital assets, and we'll give updates as they become available. Bitcoin mining economics have seriously deteriorated. And there's only two years from the next happening or having why not exit like others such as BitFarms has announced. And Shalma and I have been through downturns. There is just – we've seen the cycles change. And if you go back to 2020, 2021, there was a huge overinvestment in North America after the China ban earlier in the decade. And we believe we're actually in the beginning part of a multi-year reversal of likely prolonged underinvestment. So our goal is going to be to capitalize over the next several years, look for creative ways that don't require the historically large outlays of capital, and also to find new sources of low-cost power that wouldn't be suitable for AI or HPC. So that's our intention. over the longer run, and we'll give updates as they become available. Next question here is, now that the debt bubble has burst, why do you expect this to be a revenue driver for systemic trust? And, yes, stats are evolving. And it's hard to say it will ever become a large driver of systemic trust business. It's just that the point we made earlier is we can enable DATS to also mine crypto rather than simply buy it. And that's a service other custodians do not offer. And we believe it's going to be one of many growth drivers for our custody business. We have one more question here that came in about the Malahat Utility MOU and what would that look like. And with the two memos of understanding that we have with the Malahat. The first one we did was regarding 30 megawatts of AI compute capacity, and that's the first that we're also focused on turning into a definitive agreement. And we're working also on behind the scenes with BC Hydro as far as on the utility side. And we want to progress that to a definitive agreement in due time as well. I'll pass it back to Sheldon as I think we're out of questions. Sheldon?

Yeah, just as Stephen knows and others in D&G and the Mel has, make a quick comment. You know, the MOU for the utility with Malahat is, you know, a two-party. It's Malahat and DMG. But the reality is the province and BC Hydro are a major part of this because of the power requests and the plans the Malahat have. So, you know, we're not going to put in words for the Malahat. They can speak on their own, and we can speak what we can say about the project, but... You know, I've given a lot of feedback and information and ideas and strategies to the Malahat. I think that they're appreciative of that. It's sort of almost like a three-party system. We need the provincial government via BC Hydro to agree a bunch of things on power and timelines and these things with the Malahat. We'll support the Malahat as best we can through this process. And then once we kind of know what that looks like, then finishing off our MOU into a definitive agreement gets a lot faster and easier. But we're not quite sure what to make a definitive agreement on until we can work out where the Malhat is going to land on the power assets and the future power they're going to get. So it's a long answer, but trust us that we are working very closely with the Malhat and giving them the best advice. power deal they can get on their territory. With that said, that is the end of our questions. Just on some concluding remarks here, as our Q&A has ended, DMG will be attending the Roth Technology Conference March 23rd and 24th in California. For anyone that will be there, please feel free to reach out to have a meeting. Steve and I will be there. So happy with any investors. Other than that, we thank everyone for attending and our call is now over.