Mr. Sheldon Bennett reports

DMG BLOCKCHAIN SOLUTIONS INC. PROVIDES Q3 2022 AND AUGUST MINING RESULTS; COMPANY TO PRESENT AT H.C. WAINWRIGHT GLOBAL INVESTMENT CONFERENCE

DMG Blockchain Solutions Inc. has provided updates on its third quarter results, monthly bitcoin production and an upcoming investor conference.

DMG Q3 2022 results highlights

Readers are encouraged to review the company's complete Q3 2022 financial statements and management's discussion and analysis thereof for a fulsome assessment of the company's performance and applicable risk factors.

The following provides a recap of the company's prepared commentary for its third quarter ended June 30, 2022, financial results and corporate update.

DMG continues to work toward its goals for building out one EH/s (exahash per second) of self-mining capacity, as it increased hashrate by 18 per cent in the June quarter versus the prior quarter and continues to build the foundation to execute upon its Core+ strategy. DMG's balance sheet remains sound despite challenging market conditions.

Revenue: Revenue declined 12 per cent versus the prior quarter to $10.5-million from $11.9-million in the prior quarter, mainly as revenue from self-mining declined a similar percentage to $9-million from $10.3-million. The average price of a mined bitcoin declined 19 per cent versus the prior quarter to $42,288.

Margins: Gross margin percentage was 66 per cent, down from 73 per cent the prior quarter ended March 31, 2022. As a proxy for cash flow from operations, the company's operating margin percentage less depreciation and amortization and stock-based compensation was 52 per cent, down from 58 per cent the prior quarter, and its operating margin percentage was minus 6 per cent, down from 13 per cent the prior quarter. With increased depreciation, operating margin fell into negative territory. Operating expenses, excluding depreciation and amortization and stock-based compensation, decreased 11 per cent versus the prior quarter to $1.5-million, as the company maintains tight control of cash expenses. Due largely to losses on digital currency, DMG swung to a net loss for the quarter of $12.2-million and, for the year, a net loss of $7.1-million.

Depreciation: The company expects depreciation to continue to rise as it deploys additional miners through the end of the calendar year. Even as the company expects operating margin less depreciation and amortization, stock-based compensation to stay in strong positive territory through this crypto downturn, and hence allowing continued investment in its business, on the income statement, this result is likely to be more than offset on the operating margin line by rising depreciation in the near term, assuming the current bitcoin price environment does not materially improve.

Balance sheet: Cash plus bitcoin holdings value decreased to $11.9-million from $28.1-million in the prior quarter, as the price used to value its bitcoin on the balance sheet decreased 56 per cent versus the prior quarter. Total asset base accordingly decreased to $106.6-million from $124.8-million.

Bitcoin mined: DMG mined 212 bitcoins, an 8-per-cent increase versus the prior quarter from 195 bitcoins, as its 18-per-cent increase in realized hashrate to an average of 0.55 EH/s was partly offset by a 9-per-cent reduction of the network BTCs (bitcoins) per hash. In the quarter ended June 30, 2022, DMG operated approximately 10 per cent below its installed mining capacity, as it dealt with reliability and heat issues with Bitmain's S19j Pro miner, even as the company planned to mitigate the summer heat with additional evaporative cooling capacity. Year to date, DMG has mined 592 bitcoins.

September quarter mining commentary: In the current quarter, this situation has worsened with summer temperatures and, as such, it expects only a very modest change in realized hashrate in the quarter to end Sept. 30, 2022. DMG expects the situation to markedly improve in the December quarter as temperatures rapidly cool and the company approaches its expected calendar year-end target of one EH/s of installed mining capacity, assuming Bitmain deliveries and installations stay on track.

Bitcoin sold: In the June quarter, DMG sold 171 bitcoins at an average bitcoin price of $38,934, generating $6.7-million of cash. Thus, DMG sold 81 per cent of the bitcoin amount it generated, down from the prior quarter of selling 133 per cent of the bitcoin amount generated. Year to date, DMG has sold 508 bitcoins, 86 per cent of what it has mined.

Hosting revenue: DMG hosting revenue declined by 3 per cent versus the prior quarter to $900,000 and a more significant decline is expected in the back half of calendar 2022, as the company focuses on expanding its self-mining capacity. That being said, the company is eying specific strategic opportunities to provide hosting services for the purpose of expanding Terra Pool's network share.

Debt raise update; use of proceeds: DMG has no debt, but continues to consider opportunities for raising debt, mainly to accelerate the deployment in its Christina Lake mining facility of the company's immersion cooling technology, which is expected to cost in the range of $10-million to $15-million. Based on the benefits provided by immersion cooling, the deployment is expected to expand hashrate to 1.4 EH/s from one EH/s. DMG believes immersion cooling provides a very capital efficient way of growing hashrate and, accordingly, Terra Pool's hashrate.

August preliminary mining results

In August, 2022, DMG mined 69 bitcoins and added 87 PH/s (petahashes per second) of mining capacity. DMG's bitcoin balance as of Aug. 31, 2022, was 362 bitcoin. DMG is on target with respect to its original schedule for received miner deliveries for growing its hashrate to one EH/s by the end of 2022, subject to the receipt, installation and operation of the additional miners.

24th annual H.C. Wainwright Global Investment Conference

DMG announces that Sheldon Bennett, chief executive officer, and Steven Eliscu, chief operating officer, will present a corporate overview at the 24th annual H.C. Wainwright Global Investment Conference being held on Sept. 12, 2022, to Sept. 14, 2022.

Presentation date:  Sept. 13, 2022

Time:  2:30 p.m. to 3 p.m. ET

Location:  Lotte New York Palace

Mr. Bennett and Mr. Eliscu will be available for one-on-one meetings.

About DMG Blockchain Solutions Inc.

DMG is an environmentally friendly vertically integrated blockchain and cryptocurrency 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.

We seek Safe Harbor.