DMG Blockchain Solutions Inc. (DMGI) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the DMG Blockchain Solutions Q3 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 Steven 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 recent 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, August 27, 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 Steven. Sheldon?

Thank you, Adrian. Good afternoon, and thanks to everyone who has joined the call today. My name is Sheldon Bennett, and I'm the CEO and Founder of DMG Blockchain Solutions. This quarter, we will evolve our earnings call format where we focus on progress to deliver AI infrastructure and then summarize our efforts in digital asset financial services. I will then pass the call to Steven, 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 from those using Zoom chat. So now to provide an overview of our strategy. First, our core data center infrastructure business focused on AI colocation. Our focus remains on providing AI data center colocation services as we believe this is a business model that leverages our core strengths and enables us to deliver long-term value to shareholders. Specifically, we want to give you an update on the conversation of our Christina Lake facility to an AI data center. Regarding our letter of intent for 50 megawatts of AI colocation services with our offtake client, we continue to work towards a definitive agreement. But we have agreed on primary commercial terms as per our LOI, which we have characterized as being in line with market. A definitive agreement is a much more complex document, which encompasses both the construction of the data center and a ready-for-service date as well as operational service levels that we must meet. We are not in a position to provide guidance as to when this would be complete. As with our LOI, we would announce the agreement as soon as it is signed. Regarding the time line of having servers running before the end of the year, this was always communicated on a best-efforts basis and it was predicated in part on quickly reaching a definitive agreement. As we are now entering September, this is obviously an even bigger challenge, but we remain committed to enabling our client to operate its servers as quickly as possible. Regarding choosing vendors, we have a good working relationship with the leading vendors that supply equipment into this market, and we have a good understanding of pricing and lead times for major equipment needed to construct the data center. Regarding a general contractor, we plan to use one. While others have in-sourced this role, given our smaller size, to help ensure project success, we plan to partner with contracted staff who have a track record, relationships and expertise to get the job done. We have gone through an extensive search. And at this point, we are working with several candidates towards a decision. Regarding design firms, we plan to utilize the electrical engineering firm that we have utilized for the past decade. We have already selected an architectural firm. For mechanical and structural engineering, we are currently working with several candidates towards a decision. Regarding permitting, we have applied for a permit for an addition to our current building, which would double its capacity. This would house the balance the tenant needs. We do not believe permitting will be a gating item for this project. Additionally, as a reminder, we already have the zoning in place to operate as a data center. While there has been recent news of an area in our region banning data centers, that measure applied to an area which already had no zoning for data centers, and thus would not impact DMG. While we have encountered opposition from a few members of the local community who were opposed to DMG as a crypto miner as well. But as in the past, we have been open and cooperative. We have emphasized that our project will not impact utility rates as we will use the same 15 megawatts of firm power that we have been utilizing for over the last 5 years, while using less water and generating less noise than Bitcoin mining. The rest of our power is non-firm and is procured by our utility from the wholesale market in the Pacific Northwest. That has no impact on local rates. Regarding tradesmen, we have secured a couple of electrician firms at the start. And as we know, we will need more. Part of our selection criteria of the general contractor and design firms is that they can help us source additional tradesmen. In addition, we look to balance the amount of labor that is incorporated into prefabricated assemblies versus building on site so as to optimize lead time, assembly time and cost. Regarding connectivity, we have contracted to connect 100-gigabit fiber to our facility, and we are deciding regarding a second diverse path and possibly a third. These lines may be upgraded to 400 gigs in the future. Given the remoteness of our site, connectivity has been one of our bigger long lead item concerns and is an area where we have committed material capital expenditures ahead of a definitive agreement. As a follow-up from the previously disclosed verbal approval, we now have written approval from our utility for an additional 10 megawatts of non-firm power, that gets us up to 60 megawatts of non-firm power along with the 15 megawatts of firm, which formally increases our total contracted power to 75 megawatts. Note that while there are delivery risks associated with non-firm power, having the 15 megawatts of firm power should always allow our tenant to operate its GPUs even at a lower level for relatively rare events when non-firm power cannot be delivered. Typically, we have hours of notification time that allows for proper throttling down of workloads during those periods. Our existing Christina Lake substation that we own can already support the full 75 megawatts load, but we will need to twin the main transformer for redundancy. This is a long lead time item, but it will not gate the initial ramp-up, which may operate with limited redundancy. We plan to phase in backup power generation as well. We're actively exploring financing with multiple financial institutions with a range of instruments from rated bonds, lines of credit and equity convertible debt. Our goal is to optimize for cost of capital, flexibility and speed while minimizing dilution. We'll update the market once terms are finalized. In addition, future expansion is important to us as we want to go beyond a single event story of converting Christina Lake to a 50-megawatt AI data center. Therefore, we are investigating how we can expand the capacity of Christina Lake beyond 75 megawatts of contracted power. We are continuing discussions about expanding the amount of firm power. We have disclosed in the past that we have an application with the utility for 150 megawatts of firm power. This will require us putting up significant capital, but we believe that given the long-term nature of our leases, these investments could yield attractive returns. Combined with our non-firm power, assuming we have line capacity, this could give us over 200 megawatts of electrical energy to the site. We are also investigating setting up additional sites in Canada. We're working on several sites, each of which could near Christina Lake in size. While we don't want to diminish the other opportunities we have discussed in prior calls, we know that for maximizing our valuation, getting to a definitive agreement on 50 megawatts at Christina Lake and as many megawatts under our belt within the 2027 to 2029 site energization time line is paramount. We have no updates to report on the Boardman, Oregon site, where we have placed a deposit to purchase a building on an 18-acre lease parcel, but we remain interested in this property for longer-term expansion. Next, Core+, our digital asset financial services. Even while our digital asset financial services business is getting -- is generating very limited revenue, we continue to develop it. It is foundationally -- as foundationally, we have built a differentiated platform that we believe can grow over time with modest investments going forward. We have done this with a limited sized software team that continues to get more efficient as we leverage AI tools combined with agile management that allows us to get far more done now than we did several years ago with a larger team. Note that in July, we changed the name of our custodian business to Numis Trust from Systemic Trust. This is more than a name change as we expanded our vision beyond just custody and added greater functionality allows a much larger audience to interact with the platform. We encourage you to go to numis-trust.com as we have revamped the website to better communicate the value proposition of the platform. Regarding Terra Pool, Helm, Reactor, we will provide updates as they are forthcoming. Now I'll hand it over to Steven to review the company's performance.

Thank you, Sheldon. I'm Steve Eliscu, DMG's COO. In the spirit of reorienting these calls to focus on our future, I will shorten my comments versus prior calls, allowing ample time for questions. Now to review our financial results for Q3 or June quarter of 2026. Revenue decreased 13% sequentially to $6.4 million in the June quarter, mainly due to 14% lower hash rate as our miners that had been hosted were being transported back to our Christina Lake facility last quarter and our miners at our facility operated at less than full capacity in the seasonally warmer weather. Our hash rate decline -- our hash rate for the quarter was 1.47 exahash with an efficiency of 21.9 joules per terahash. We received 61.9 Bitcoin, a 10% sequential decline. Note that we did not report monthly results after May as our regulator is now requiring that these disclosures include accompanying detail that we would typically only report with our quarterly results. As such, we are reporting our mining results on a quarterly basis going forward. Operating and maintenance costs in the June quarter decreased 15% sequentially on lower hash rate and lower utility costs, supporting a slightly higher margin of 31% versus the prior quarter of 29%. Our energy cost to mine a Bitcoin was about USD 43,000. As a proxy for cash flow from our business, which assumes we are selling 100% of our generated Bitcoin, our earnings before other items, excluding depreciation, amortization and stock-based comp in the June quarter was $0.2 million or 3% of revenue on a percentage basis as we tightly manage operational expenses. Our cash flow from operations was $1.2 million. Our earnings before other items in the June quarter was minus $3 million, and net loss was minus $3.9 million or minus $0.02 per share. Regarding our balance sheet, our cash, short-term investments plus Bitcoin holdings at the end of the June quarter was $41.6 million, down 12% from the prior quarter, mainly on the decreased value of our Bitcoin holdings. The value of our property and equipment and long-term deposits decreased 5% to $45 million from the end of the prior quarter as depreciation exceeded our capital additions. Accordingly, our total asset base decreased to $102.3 million from $109.9 million in the prior quarter. Book value was $77.3 million or $0.37 per share. Our Sygnum loan balance was $19.7 million at the end of the June quarter. We do not expect to draw from the facility in the near term, and we'll look for opportunities to pay it down. In the June quarter, we sold 80 Bitcoin or 129% of our mined output, generating $7.8 million of cash. Our Bitcoin balance decreased 5% from the prior quarter to 379 Bitcoin. I will now hand the call back to Sheldon to summarize our prepared comments, and we will answer questions. Sheldon?

Thank you, Steven. To reiterate our key results and outlook, DMG is focused on securing a definitive agreement from our offtake client and is moving to secure contractors, design engineering and on-site tradesmen to execute this project. DMG received 61.9 BTC from mining in Q3 2026 on a hash rate of 1.47 exahash and fleet efficiency of 21.9 joules. Cash, short-term investments and digital currency at the end of the June quarter totaled $41.6 million. Total assets were $102.3 million and book value was $0.37 per share. Our earnings before other items, excluding depreciation, amortization and stock-based comp was $0.2 million for Q3 2026. We had a net loss of $3.9 million or $0.02 per share. We are focused on realizing revenue from our AI infrastructure and digital asset financial services initiatives that can drive shareholder value. We appreciate your continued support. So now on to our Q&A. We'll start with questions that have been previously submitted to us.

Question one, what type of details need to be hammered out with your tenant to reach a definitive agreement? So with the definitive agreement and the master service agreement, which is contained within it, there are two main challenges -- is the construction of the data center and agreeing on delivery time lines. And this is really dependent on having our supply chain well understood and delivery dates that give an in-service date for our tenant that our tenant can accept. Then the second part that needs to be hammered out is the operation of the data center. There are very stringent service level agreements for uptime and environmental requirements with penalties when they're not met. And this is a -- very difficult conditions to negotiate. One thing that some people may not -- maybe realize, if you're thinking of is the contract that we're negotiating now is really according to the information we disclosed on our LOI, it's a 12-year contract. If you look at the 3 renewal periods, it's over 25 years. So what we're agreeing now, we need to be able to perform for up to 25 years. So this contract is quite substantive, and will rule our relationship for a very long period of time. So it's important we get this done correctly. A second question. Please provide any updates on the 2-megawatt SCIF-rated prefab data centers to begin generating revenue for the announced contract. And after that, do you have any updates regarding military contracts, which may involve SCIFs? So we believe that even if the trade war between Canada and U.S. goes on for the next few years, regardless of that situation, Canada is likely to spend more and continue to spend more on military and non-military applications related to secure computing and sovereign compute. We believe that we will fill our SCIFs and that this will be an important part of our longer-term strategy to provide data center infrastructure. Right now, our current focus is to provide infrastructure to those who are selling equipment to prime defense contractors and to partner with complementary equipment manufacturers for solutions that are already approved for use in defense, and we plan on giving some more information about that in the future. Given the long time frame of these programs, this is why near term, it's hard to give accurate predictions of where our sales will be and with whom. But longer term, we're quite confident that these SCIFs will be filled and filled in long-term contracts. That all being said, outside of the one contract we've announced, we have several parties that we are discussing part to all of the SCIFs with -- that may conclude and result in contracts at any time. Another question. Why has the process to reach a definitive agreement with the Malahat stalled? Well, we have a great relationship with the Malahat. It's clear though that although we are close to an agreement, we haven't quite got across the finish line. I believe the Malahat, and I don't want to speak for them, but in my meetings with them and discussions with them, I believe they have a lot on their plate. Just like DMG, we have a lot on our plate that we're doing. And time is limited, staff is limited. We both are working towards executing this agreement. There's a bit of a push and a pull with the Malahat where we're pushing them on the AI side, obviously, because we think that's a great opportunity to be taken advantage of as quickly as possible. They're pulling a bit more on the power infrastructure side of getting their new substation prioritized, built and operational and concluding agreements with BC Hydro. We want both done. So I think that although contractual agreements are taking a little bit of time to complete, the process of working with them and the common goals we have are all aligned, and we think this is going to be a very long fruitful relationship with them. Steven, did you want to do a few questions?

Yes. We got a bunch more to get through. So let's continue here. Just the next question, which is a great question, is, can you tell us whether the prospective tenant is already participating in the engineering and design process? Or are you currently designing the facility more generally for the AI market? And to answer the second question first, there really is no generic design. There are certainly modular approaches that a number of vendors are offering. But in our case, because the attraction of Christina Lake to our tenant was that they could leverage thousands of hours of electrical work that have already been done connecting our medium-voltage transformers essentially to areas that are well spaced out in the building for putting AI servers. That is something where you can never just drop in and absolutely require some engineering trade-offs and back and forth that we've had with our offtake client to be able to move the project forward. And I think we have a plan for that. We have a plan for how we would do the extension to the building and the relationship so far has been very collaborative. So I'll just leave it at that. Next question is just what's the estimated CapEx? So I think we've had several questions for 50-megawatt conversion. Right now, we are assuming what the market is pricing this at, which is in the order of USD 10 million to USD 12 million per megawatt. And that's what we're telling our banking friends, and it could be less as a brownfield. It could be less as we could leverage China to some degree, especially in transformers and some of the other gear with -- on battery backup, those are great places to save significant amounts of capital. We've had quotes from Chinese vendors, and we know that without tariffs in Canada, it will -- it can be a lot more cost effective. However, there are some other things because we want to get this done quickly, it may be offsetting. So we are just using that range. And so you should assume this is going to be a very expensive project in line with many others. Once the definitive agreement is signed, do you expect the project to be financeable primarily at the project level against cash flows? Or will we need to provide -- will DMG shareholders essentially incur the impact of us seeking the markets for additional equity? What we would say is we've always -- as a primary goal is to minimize dilution. At this point, we don't expect that it will be 100% debt financing. It may. We may be able to find ways of being able to combine multiple sources of financing that, some are specifically for the project. But even outside the -- even if it is 100% of debt capital, we are likely to raise additional capital on top of this. I think, first of all, it's just -- we want to have cash so we can be opportunistic. We can get the momentum to grow. And specifically, it's around new site acquisition as well as growing our digital assets business. So on to the next question. Can you give us a better understanding of what you will do with your digital assets business, given you're not providing any guidance on revenue? And as we stated in the prepared comments, we're rebuilding the brand around this new, more expansive story that -- with the foundation of compliance and security and focusing on the Canadian market. Our larger vision is really that with the foundation of a thriving AI business, we'll be able to more aggressively pursue acquisitions, acqui-hires that will allow us to address a much larger digital assets financial story. Custody is still going to be a cornerstone of the business, but we certainly have a vision to do a lot more. What is your view -- next question, what is your view on uplisting to a U.S. exchange? This is a really timely question. In the past, we've talked about it more from a visionary point of view. Now it's kind of something we see specific mechanics of what we need to do. First is to nail down Christina Lake as a 50-megawatt AI data center and to also be able to show that we have a pipeline of additional sites and growth for Christina Lake as well. And assuming that gives us the momentum and the valuation that we think we can achieve, that's really the right timing to be able to think about an uplisting. And ahead of that, we'll certainly have some visibility such that we'll be able to move, we think, in a timely manner. But there is -- we do -- based on our vision, there is the right time for us to do that, and that's really going to be based on our execution. What kind of banking and capital markets relationships do we have to raise this kind of capital? And we certainly appreciate the established relationships that we have. And we've continued to have discussions with our established relationships, new relationships. But we've kind of given the scale of this project, which I think we've hinted towards, we're likely going to need additional banking relationships as well that involve larger institutions that we've never dealt with in the past. So it's going to likely be some combination and depend a lot on the financial instrument that we raise. The last of the questions that came in ahead of time, concurrent with this project, how will we build out the necessary talent? And that's a great question because the executive team here at DMG works really hard, but we only have so many hours in a day and just kind of given the complexity and scope that we're talking about in the future of multiple sites and continuing to drive the businesses that we've built, we will need more talent, finance, operations, marketing, you name it, adding not just execs, but building out a bench as well. Sheldon, did you want to address any of the questions that came in through the chat?