Mr. Sheldon Bennett reports

DMG BLOCKCHAIN SOLUTIONS PROVIDES YEAR IN REVIEW, DECEMBER MINING RESULTS

DMG Blockchain Solutions Inc. has released its December, 2022, preliminary mining results -- DMG mined 104.6 bitcoin with realized hashrate of 0.91 exahash per second (EH/s). DMG's bitcoin balance as of Dec. 31, 2022, was 454 bitcoin.

Year-in review

For DMG, calendar 2022 was an important year, as the company transitioned toward becoming a full-fledged self-miner and is now much better positioned for the long term.

Core strategy

DMG nearly reached its bitcoin mining computational capacity goal of one exahash per second (EH/s) at the end of calendar 2022. While it entered its 2022 financial year at about 15 petahashes per second (PH/s), it exited at about 700 PH/s and nearly reached one EH/s at the end of the calendar year, as it has received almost all its miner deliveries from Bitmain. The company has yet to receive its final 42 PH/s delivery of S19 XPs and it plans to purchase additional miners using accumulated credits from Bitmain. It plans to provide more details about its additional purchases in the near future.

To accommodate space for these new miners, as its Christina Lake mine building is full, it is setting up containerized mining on the property next to its substation, which will require very modest amounts of capital for interconnection of its previously purchased transformers to its existing distribution line, as well as for the purchase of mining containers.

As an update on its longer-term mining goals, it still plans to implement immersion cooling, from which it expects to achieve up to a 40-per-cent hashrate increase. However, its time frame for deployment will likely extend beyond its prior guidance for mid-calendar 2023. This is for two reasons: first, it is slowing its rate of spending given the current environment; and second, it will be performing more extensive testing before it commits to large-scale conversion of its facility. This is because the company has observed suboptimal performance from other miners that have rushed into immersion. Its objective is to lower its capital cost per hash implementing immersion by optimizing tradeoffs among overclocking gains, available electrical infrastructure and operational efficiency in a variety of ambient conditions. In addition, it has deferred its goal for two EH/s of self-mining capacity to a time beyond the end of calendar 2023 given current market conditions.

Based on its expectation of slow or no bitcoin network hashrate growth in coming months, assuming bitcoin pricing remains around current levels, it may still be able to grow its hashrate faster than the bitcoin network over the next 12 months with very limited and highly targeted capital investments. Unlike other miners that have taken on extensive debt and are restructuring, DMG has only added $1-million of debt. The company may consider raising modest amounts of additional debt, which would be focused solely on accelerating the deployment of its immersion cooling infrastructure. The company believes immersion will become essential for bitcoin mining as the industry evolves.

Core+ strategy

In its Core+ software, it has slowed its development pace due to market conditions. Its key objectives for Core+ going forward will be to 1) grow its Terra Pool hashrate with a longer-term goal of reaching 10-per-cent network share; 2) create a carbon-neutral BTC marketplace; and 3) actively transact bitcoin in a carbon-neutral manner through Terra Pool using its Petra technology. It remains committed to these goals, as it believes achieving them will enable the company to grow its Core+ revenue to be significantly larger in the long term.

The company also plans to make its first Petra main-net bitcoin transaction soon. Petra enables financial institutions to transact bitcoin using carbon-neutral energy sources, while DMG's Walletscore technology ensures they are not commingling their bitcoin with transactions using wallets that have been blacklisted by the United States Department of Treasury's OFAC (Office of Foreign Assets Control). The company believes the Bosonic Exchange could become a platform for transacting bitcoin using Petra technology and is in discussions with Bosonic to integrate.

It expects more regulation and oversight in North America post-FTX. Assuming miners are not incorrectly classified as money services businesses or forced to perform know-your-customer checks on broadcasted transactions, it believes DMG should be a net beneficiary from increased regulation.

Board of directors

This year, the company built a new independent board, as Steven Eliscu moved into a management role from his initial board seat. It also added three new directors, John Place, who brings a wealth of legal and public sector experience, Kelly Allin, who comes with an accounting and audit background, and J.D. Abouchar, an entrepreneur and investor with a keen understanding as to how the right management team and strategy can deliver returns to shareholders. It is happy to have such a spectrum of experience being brought to bear as it weathers the current environment.

DMG five-year public company anniversary

Finally, the company would like to thank the employees of DMG for their hard work, as it will be the company's five-year public company anniversary on Feb 10. It is because of their hard work that it has built a company that is well positioned for the future. In the near term, it will stay focused on building up its foundation of bitcoin mining, along with its software, which it continues to believe offers great long-term potential.

Grant of stock options

DMG also announces it has granted 200,000 stock options to a company director. The options are exercisable for a period of five years at a price of 17 cents per share and will vest as to 25 per cent on each of the six-, 12-, 18- and 24-month anniversaries of the grant date.

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.

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