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DMG Blockchain Solutions Reports Second Quarter 2024 Results Ending March 31, 2024

VANCOUVER, British Columbia, May 22, 2024 (GLOBE NEWSWIRE) — DMG Blockchain Solutions Inc. (TSX-V: DMGI) (OTCQB US: DMGGF) (FRANKFURT: 6AX) (“DMG”), a vertically integrated blockchain and data center technology company, today announces its fiscal second quarter 2024 financial results. All financial references are in Canadian Dollars unless specified otherwise.

Q2 2024 Financial Results Highlights

Sheldon Bennett, DMG Blockchain Solutions’ Chief Executive Officer, commented, “We are pleased with our robust performance this quarter, achieving a 3% sequential revenue increase to $10.0M and maintaining profitability for the second consecutive quarter. Our strategic investments in both our Core and Core+ strategies are delivering promising results. Systemic Trust is paving the way for financial institutions to transact bitcoin in a carbon-neutral manner, while the deployment of our Bitmain T21 miners positions us to achieve 1.7 EH/s by the end of June with further expansion planned. Additionally, our strong cash flow from operations of $4.5M and a solid balance sheet with $43.6M in cash and digital currency underscore our execution.”

Second Quarter 2024 Financial Results Review

Revenue for the second fiscal quarter ending March 31, 2024 was $10.0 million versus $7.6 million in the prior year period, an increase of 31%, primarily due to the increase in digital currency mining revenues as a result of bitcoin price increasing 133% over the year-ago period to an average of $71,851 in the March quarter. This increase was partially offset by a 93% increase in Bitcoin network difficulty that lowered DMG’s bitcoin generation per EH/s by 47% from the same period last year. In addition, revenue was also partially offset by a loss in net pool revenue of $1.3 million.

Income before other items for the three months ended March 31, 2024 was -$1.8 million versus -$4.6 million in the prior year period.

Operating and maintenance costs for the three months ended March 31, 2024 were $5.3 million as compared to $4.6 million in the same quarter in the prior year. The increase is attributed to utility expenses, driven by the expansion of digital currency mining operations and the addition of new miners.

Net income for the three months ending March 31, 2024 was $2 thousand versus a loss of $3.8 million in the prior year period. The improvement in net income was driven primarily by an increase in revenue of $10.0 million versus $7.6 million in the prior year period, unrealized revaluation gain on digital currency, which was a gain of $1.0 million versus zero in the prior year period as well as realized gain on sale of digital currency of $1.1 million versus $0.5 million in the year-ago period. It was also driven by lower depreciation, which was $3.8 million versus $5.9 million in the prior year period. These were partially offset by operating and maintenance costs, which increased by $0.7 million and general and administrative expenses which increased by $1.1 million over the prior year.

Earnings per share for the second fiscal quarter ending March 31, 2024 was $0.00 versus -$0.02 in the prior year period.

As of March 31, 2024, the Company had cash of $1.6 million, digital currency of $42.0 million and total assets of $118.4 million. For more details, please refer to the Company’s filings.

Readers are encouraged to review the Company’s March 31, 2024 quarterly unaudited financial statements and management’s discussion and analysis thereof for a fulsome assessment of the Company’s performance and applicable risk factors, available at www.sedarplus.ca.

DMG Blockchain Solutions Inc. Second Quarter 2024 Financial Results Conference Call

The Company will host a conference call to review second quarter 2024 financial results and provide a corporate update on May  23, 2024 at 4:30 pm ET. Participants are asked to pre-register for the call through this link. Registered participants will receive a conference call weblink and dial-in information in their confirmation email.

As there will be no live Q&A session, management will address pre-submitted questions during the call. Those wishing to submit a question may do so via investors@dmgblockchain.com using the subject line ‘Conference Call Question Submission’ through 2:00 pm ET on May 23, 2024.

About DMG Blockchain Solutions Inc.

DMG is an environmentally friendly vertically integrated blockchain and data center company that manages, operates and develops end-to-end digital solutions to monetize the blockchain ecosystem. DMG’s sustainable businesses are segmented into two business lines under the Core and Core+ strategies and unified through DMG’s vertical integration.

For more information on DMG Blockchain Solutions visit: www.dmgblockchain.com
Follow @dmgblockchain on X and subscribe to DMG’s YouTube channel.

For further information, please contact:

On behalf of the Board of Directors,

Sheldon Bennett, CEO & Director
Tel: 516-222-2560
Email: investors@dmgblockchain.com
Web: www.dmgblockchain.com

Investor Relations Contact:
Core IR 516-222-2560

For Media Inquiries:
Jules Abraham
Core IR
917-885-7378
julesa@coreir.com

Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.

Cautionary Note Regarding Forward-Looking Information

This news release contains forward-looking information or statements based on current expectations. Forward-looking statements contained in this news release include statements regarding DMG’s strategies and plans, the expected increase in realized hashrate, deploying Bitmain T21 miners to reach 1.7 EH/s by June 2024, targeting 2 EH/s and beyond, hosting the conference call, the deployment of new capacity, the expected arrival of new miners, the expected timelines, the opportunity and plans to monetize bitcoin transactions, the continued investment in Bitcoin network software infrastructure and applications, developing and executing on the Company’s products and services, increasing self-mining, efforts to improve the operation of its mining fleet, the launch of products and services, events, courses of action, and the potential of the Company’s technology and operations, among others, are all forward-looking information.

Future changes in the Bitcoin network-wide mining difficulty rate or Bitcoin hash rate may materially affect the future performance of DMG’s production of bitcoin, and future operating results could also be materially affected by the price of bitcoin and an increase in hash rate mining difficulty.

Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations, or intentions regarding the future. Such information can generally be identified by the use of forwarding-looking wording such as “may”, “expect”, “estimate”, “anticipate”, “intend”, “believe” and “continue” or the negative thereof or similar variations. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company, including but not limited to, market and other conditions, volatility in the trading price of the common shares of the Company, business, economic and capital market conditions; the ability to manage operating expenses, which may adversely affect the Company’s financial condition; the ability to remain competitive as other better financed competitors develop and release competitive products; regulatory uncertainties; access to equipment; market conditions and the demand and pricing for products; the demand and pricing of bitcoins; security threats, including a loss/theft of DMG’s bitcoins; DMG’s relationships with its customers, distributors and business partners; the inability to add more power to DMG’s facilities; DMG’s ability to successfully define, design and release new products in a timely manner that meet customers’ needs; the ability to attract, retain and motivate qualified personnel; competition in the industry; the impact of technology changes on the products and industry; failure to develop new and innovative products; the ability to successfully maintain and enforce our intellectual property rights and defend third-party claims of infringement of their intellectual property rights; the impact of intellectual property litigation that could materially and adversely affect the business; the ability to manage working capital; and the dependence on key personnel. DMG may not actually achieve its plans, projections, or expectations. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which the Company will operate in the future, including the demand for its products, the ability to successfully develop software, that there will be no regulation or law that will prevent the Company from operating its business, anticipated costs, the ability to secure sufficient capital to complete its business plans, the ability to achieve goals and the price of bitcoin. Given these risks, uncertainties, and assumptions, you should not place undue reliance on these forward-looking statements. The securities of DMG are considered highly speculative due to the nature of DMG’s business. For further information concerning these and other risks and uncertainties, refer to the Company’s filings on www.sedarplus.ca. In addition, DMG’s past financial performance may not be a reliable indicator of future performance.

Factors that could cause actual results to differ materially from those in forward-looking statements include, failure to obtain regulatory approval, the continued availability of capital and financing, equipment failures, lack of supply of equipment, power and infrastructure, failure to obtain any permits required to operate the business, the impact of technology changes on the industry, the impact of viruses and diseases on the Company’s ability to operate, secure equipment, and hire personnel, competition, security threats including stolen bitcoins from DMG or its customers, consumer sentiment towards DMG’s products, services and blockchain technology generally, failure to develop new and innovative products, litigation, adverse weather or climate events, increase in operating costs, increase in equipment and labor costs, equipment failures, decrease in the price of Bitcoin, failure of counterparties to perform their contractual obligations, government regulations, loss of key employees and consultants, and general economic, market or business conditions. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The reader is cautioned not to place undue reliance on any forward-looking information. The forward-looking statements contained in this news release are made as of the date of this news release. Except as required by law, the Company disclaims any intention and assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Additionally, the Company undertakes no obligation to comment on the expectations of or statements made by third parties in respect of the matters discussed above.

DMG Blockchain Solutions Inc.
Consolidated Statements of Loss and Comprehensive Loss
(Expressed in Canadian Dollars)
(Unaudited)

    For the Three Months
Ended
For the Six Months Ended
  Notes March 31,
2024
March 31,
2023
March 31,
2024
March 31,
2023
 
           
Revenue 15 10,015,659 7,623,323 19,706,423 14,797,915  
           
Expenses          
Operating and maintenance costs 16(a) 5,270,851 4,594,898 10,418,502 9,003,690  
General and administrative 16(b) 1,846,398 776,942 2,732,459 1,724,878  
Stock-based compensation   398,010 423,079 766,502 938,209  
Research and development   486,216 499,165 924,395 931,104  
Provision for doubtful accounts   42 50,773 3,806 114,377  
Depreciation 10 3,805,988 5,854,704 8,147,770 11,945,549  
Total expenses   11,807,503 12,199,561 22,993,434 24,657,807  
           
Loss before other items   (1,791,844) (4,576,238) (3,287,011) (9,859,892)  
           
Other income (expense)          
Interest and other income 7 170,044 122,091 335,825 235,232  
Provision of sales tax receivable   (381,690) (635,590)  
Gain on disposition of assets   4,809 4,809 70,429  
Foreign exchange loss   (28,341) (26,014) (122,926) (106,991)  
Unrealized gain on revaluation of digital currency 5 1,019,456 9,182,316  
Realized gain on sale of digital currency   1,143,489 506,054 1,995,359 328,892  
Gain (loss) on change in fair value of marketable securities   (133,708) 134,698 111,043 (94,823)  
Loss on fair value of investments 10   (609,120  
Net income (loss)   2,215 (3,839,409) 6,974,705 (9,427,153)  
           
Other comprehensive income          
Items that may be reclassified subsequently to income or loss:          
Unrealized revaluation gain on digital currency 5 15,472,215 6,245,331 15,472,215 4,820,027  
Cumulative translation adjustment   (11,278) 48,347 (1,196) 48,091  
Comprehensive income (loss)      15,463,152    2,454,269  

22,445,724

 

(4,559,035)

 
           
           
Basic and diluted income (loss) per share 13(d) 0.00 (0.02) 0.04 (0.06)  
Weighted average number of shares outstanding 13(d)        
– basic   169,029,065 167,681,377 168,585,910 167,599,591  
– diluted   172,516,428 167,681,377

173,248,160

167,599,591  
             

DMG Blockchain Solutions Inc.
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
(Unaudited)

   

Notes

As at
March 31, 2024
(unaudited)
As at
September 30,
2023
(audited)
 
ASSETS   $ $  
Current      
Cash and cash equivalents   1,609,479 1,789,913  
Amounts receivable 6 2,102,769 2,476,679  
Digital currency 5 41,966,494 17,142,683  
Prepaid expense and other current assets   332,900 193,512  
Marketable securities 8 498,027 386,984  
Assets held for sale 11 3,702,466 3,451,024  
Total current assets   50,212,135 25,440,795  
       
Long-term deposits 9 18,687,623 3,256,324  
Property and equipment 12 42,632,378 47,398,585  
Long-term investments 13 45,000 45,000  
Amount recoverable 7 6,782,076 6,446,251  
Total assets   118,359,212 82,586,955  
       
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current      
Trade and other payables 14 5,408,373 4,178,104  
Deferred revenue 19 63,712 64,361  
Current portion of lease liability 15 57,014 50,555  
Current portion of loans payable 16 12,127,654 1,272,397  
Total current liabilities   17,656,753 5,565,417  
       
Long-term lease liability 15 71,873 41,202  
Total liabilities   17,728,626 5,606,619  
       
Shareholders’ Equity      
Share capital 17(a) 111,820,687 110,820,540  
Reserves 17(b)(c) 45,711,651 45,507,272  
Accumulated other comprehensive income   15,620,063 149,044  
Accumulated deficit   (72,521,815) (79,496,520)  
Total shareholders’ equity   100,630,586 76,980,336  
Total liabilities and shareholders’ equity   118,359,212 82,586,955  
       
Contingencies 23    
Subsequent events 25    
       

DMG Blockchain Solutions Inc.
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)

    For the Six Months Ended  
  March 31, 2024 March 31, 2023  
   $  $  
OPERATING ACTIVITIES    
Net income (loss) for the period 6,974,705 (9,427,153)  
Non-cash items:    
Accretion 23,272 25,466  
Depreciation 8,147,770 11,945,549  
Share-based payments 766,502 938,209  
Unrealized foreign exchange loss 40,351 43,613  
Gain on disposition of assets (4,809) (70,429)  
Gain (loss) on change in fair value of marketable securities (111,043) 94,824  
Loss on fair value of investment 609,120  
Provision for sales tax receivable 635,590  
Bad debt expense 3,806 114,377  
Digital currency related revenue (18,355,313) (13,773,874)  
Unrealized gain on digital currency (9,182,315)  
Digital currency sold 20,173,781 11,161,893  
Realized gain on sale of digital currency (1,995,359) (328,892)  
Non-cash interest income (329,914) (229,349)  
Accrued interest (129)  
     
Changes in non-cash operating working capital:    
Prepaid expenses and other current assets (144,388) 52,650  
Amounts receivable (212,015) 3,000,466  
Amounts recoverable (237,039)  
Deferred revenue 11,277 (91,752)  
Trade and other payables 1,144,920 1,895,676  
Net cash provided by operating activities 8,195,938 5,114,106  
     
INVESTING ACTIVITIES    
Purchase of property and equipment (830,859) (572,044)  
Deposits on mining equipment (18,102,867) (1,991,167)  
Proceeds on sale of equipment 4,829  
Purchase of short-term investment (609,120)  
Proceeds from sublease 37,012  
Net cash used by investing activities (19,542,846) (2,521,370)  
     
FINANCING ACTIVITIES    
Proceeds from option exercises 438,024 63,750  
Principal lease payments (61,187) (102,973)  
Proceeds from secured loan 10,791,288 950,665  
Repayment of loans payable (1,668)  
Net cash provided by financing activities 11,166,457 911,442  
     
Impact of currency translation on cash 17  (481)  
Change in cash  (180,434)  3,503,697  
Cash, beginning 1,789,913  1,247,513  
Cash, end  1,609,479  4,751,210  


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