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 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 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 26th, 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, 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 Steven, 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. These 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. Now, to provide an overview of our strategy. First, our core, 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 colocation services. Typical contracts provide multiyear 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. 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 offtakers as well as potential partners that have direct relationships with large offtakers. We believe that our 65 MW 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. For those who have been following the Innovation, Science and Economic Development or ISED 100 MW data center Request for Information. Yes, DMG did submit an application in conjunction with the Malahat Nation based on developing data centers on our Christina 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 industry to build a network of advanced AI data centers across Canada, and that we have an opportunity to participate. Lastly, PDCs, our 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 are 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 DMG's crypto asset mining hosting for others and in particular for treasuries. We have taken on our first client, Luxxfolio, which has a small fleet of Scrypt miners that mine Litecoin for its Litecoin DAC. 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 joules. Terra Pool.
We have continued to test Terra Pool 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 operate versions of our Reactor software with plans to begin offering hash rate contracts in the coming months. For a summary of our strategy. For our core data center strategy, we encourage that the conversation of Christina Lake to an AI data center 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 the strategy.
Our long-term goal remains for revenue from custody and other financial services to be a driver of our business. I'll hand it over to Steven to review the company's performance.
Thank you, Sheldon. I'm Steven Eliscu, DMG's COO. Now to review our financial results. In 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 was mostly offset by a one-time $1.5 million energy incentive. For our mining operations in Q4, we received 68.5 Bitcoin from mining, a decrease of 5% from Q3, 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 steady and our fleet efficiency to slightly improve in the March quarter. Hosting revenue decreased 2% sequentially to $0.1 million in Q4. We expect our existing hosting revenue to decline to near zero in fiscal 2026, but hosting has the potential to support new clients, as we recently brought on Lux folio's small fleet of Scrypt miners in conjunction with expectations that 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 Q4, as our 8% sequential increase in energy consumption was more than offset by an 11% reduction in the cost of energy.
While 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 Q4, flat from 40% Q3, as we benefited from the energy incentive. Our energy cost to mine a Bitcoin was about $64K, flat from Q3, 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 about 100% of our generated Bitcoin, our earnings before other items, excluding depreciation, amortization, and stock-based comp, were $1.9 million or 17% of revenue on a percentage basis in Q4, a decrease from $3.5 million and 30% in Q3. More in line with prior quarters as we benefited from a one-time R&D expense adjustment in Q3. Our cash flow from operations was -$5.6 million in Q4 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 Q4, in line with recent quarters prior to Q3, as we recognized the one-time R&D expense adjustment previously cited. Our earnings before other items were -$2.1 million in Q4 versus -$1.5 million in Q3, which included the one-time R&D adjustment. Net income in Q4 was -$2.2 million or -$0.01 per share. Regarding our balance sheet, our cash short-term investments plus Bitcoin holdings on December 31st were $58.6 million, down 10% from Q3, mainly due to the decreased value of Bitcoin.
With the decrease in value of our digital asset holdings and the increase in debt, working capital decreased 25% to $39.5 million from Q3. The value of our property and equipment and long-term deposits decreased 6% to $50.5 million from the end of Q3 as depreciation exceeded our capital additions. Accordingly, our total asset base decreased to $122 million from the end of Q3. Book value is $98.5 million or $0.48 per share. Our Sygnum loan balance was $16.2 million at the end of Q4 as we paused liquidations and utilized 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 Q4, we sold 8 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, Steven. To reiterate our key results and outlook. DMG earned 68.5 Bitcoin from mining in Q1, 2026, on a hash rate of 1.76 exahash and a fleet efficiency of 22 joules. Cash, short-term investments in 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 -$0.01 per share. We are focused on realizing revenue from our AI and digital asset financial services initiatives that can help drive shareholder value.
For our core infrastructure, we are positioning DMG to expand into AI in a meaningful way with a focus on developing our Christina Lake data center into a 50-plus megawatt colocation 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 twelve 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 in digital asset financial services. We appreciate your continued support. Now on to our Q&A. We have multiple questions here, and as we have done in the past, I will answer a few.
Steven's free to jump in when he wants. I've given a few here to Steven to answer. First question, what is the status of getting an offtaker for Christina Lake? What is the timeframe you expect that to happen? It's a great question. It's a question we're asked continuously. We, you know, are reaching out to a number of different avenues to find offtakers. You know, one, just going directly to Neoclouds and hyperscale. Two, talking with the commercial real estate brokers that traditionally assist in partnering and pairing up offtakers and suppliers. Three, you know, we've been talking to the, you know, ecosystem partners from chip manufacturers to the infrastructure providers for AI data centers.
Lastly, we've been talking to the investment banks, as they're quite important to have, due to the amount of capital needed and assurances that, you know, we or anybody would be able to have the capital available to deploy, to construct and build and commission and turn on a Neocloud or a hyperscaling facility. 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, you know, AI Neocloud/hyperscale data center.
As I said earlier, we're focused on colocation 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 on government contracts and the ISED RFI? As I said earlier, the ISED is the Innovation, Science, and Economic Development department in Canada and part of the Ministry of Industry. It has 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. We've responded to that. We sent in our submission. We've done that as a partnership with the Malahat Nation.
We hope that at least we can progress to the next stage, which would likely, you know, be a more specific proposal from us. We believe that the federal government will be looking at working with multiple companies across Canada to build, you know, AI data centers. Probably not just one, but we think that if multiple companies are used, we have a good chance of being involved. If they come, they want just one, you know, it'll be a bit of a bake-off and take some time, but so far we think we have a very strong application for this. Just with respect to the military, we have multiple, I don't know if you wanna 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. 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. Just for those that haven't done a type of cross-border transaction like this, normally or 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.
That kicks off a detailed due diligence. Instead of doing all the detailed due diligence before you sort of agree on how you want a transaction to work, you agree on how that transaction works, then you do the detailed due diligence. That's what we've done. During that detailed due diligence, some stuff popped up that, you know, we weren't expecting. We've gone back to the seller and said, you know, "They need to rectify these things for us to conclude this transaction." 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. You know, we're hoping, you know, as we get information, we will tell our shareholders. We're hoping that we conclude that.
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? Right now, we're focused on building a client base for Systemic Trust. This is done primarily through direct sales efforts, we have a robust direct sales strategy and process that we've developed and are implementing. Regarding things that aren't Systemic Trust, those, you know, 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.
TerraPool and Reactor are operating and we are making some adjustments to them, and we'll have some announcements about them, you know, coming up in the next quarter or so, or month or quarter, depending which one we're talking about. Another question. I understand that TSX has stricter governance and reporting requirements, but it also offers greater liquidity and institutional awareness. Are you considering a move from the Vancouver Stock 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 Stock Exchange.
We are on the, I guess, the junior TSX Venture Exchange, not the TSX. The second part of the question, you know, yes, you know, we've looked at up-listing multiple times, different ways of doing it, including the TSX. Most of our feelings, I say that by sort of management, our board, is we would probably not up-list to the TSX if we had the option of up-listing to the U.S., like Nasdaq. We would probably stay TSX Venture Exchange-listed in Canada, Nasdaq listed in the U.S., versus upgrading from TSX Venture Exchange to TSX. If we didn't have the option of going to the U.S., maybe we would just up-list to the TSX.
I think that the preference of the company would be to have a U.S. listing in addition to our venture listing. Few more questions here. Steve, did you wanna 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? The short answer is 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. 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-take deal. 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.
We're encouraged, but just we wanna be clear, we're not providing guidance as to when we would close an off-take deal or even have an LOI. How are you managing the AI migration from Bitcoin mining? How should investors think of revenue generation during this transition? The short answer is, we will run Bitcoin mining, Christina Lake, until we can't. We'll plan a graceful migration to either another site or decommissioning, depending on where they are in their life cycle. With an off-take 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, and which defines to the hour as to when work is done ahead of a commissioning cycle.
We'll know how long we can be able to run the equipment, and we'll make appropriate decisions as to what we will how we will dispose of or disposition the Bitcoin mining equipment till 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 we're only two years from the next halvening or halving. Why not exit like others, such as Bitfarms has announced? Sheldon and I have been through downturns. There is just we've seen the cycles. If you go back to 2020, 2021, there was a huge over-investment in North America after the China ban earlier in the decade.
We believe we're actually in the beginning part of a multi-year reversal of likely prolonged under-investment. Our goal is gonna 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. That's our intention over the longer run. We'll give updates as they become available. Next question here is, now that the dApp bubble has burst, why do you expect this to be a revenue driver for Systemic Trust? Yes, dApps are evolving, and it's hard to say it'll ever become a large driver of Systemic Trust business.
It's just that the point we made earlier is we can enable dApps to also mine crypto rather than simply buy it. That's a service other custodians do not offer. We believe it's gonna be one of many growth drivers for our custody business. We have one more question here that came in about the Malahat Nation utility MOU, and what would that look like. With the two memos of understanding that we have with the Malahat Nation, the first one we did was regarding 30 megawatts of AI compute capacity. 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 Steven knows and others in DMG and the Malahats, make a quick comment. You know, the MOU for the utility with Malahat is, you know, two parties. It's Malahat and DMG. 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. You know, we're not gonna put in words for the Malahat. They can speak on their own, and we can speak what we can say about the project. 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. 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. We're not quite sure what to make a definitive agreement on until we can work out where the Malahat's gonna land on the power assets and the power, future power they're gonna get. It's a long answer, but trust us that we are working very closely with the Malahat and getting them the best 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 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 to meet with any investors. Other than that, we thank everyone for attending. Our call is now over.