pivotree

PIVOTREE INC.
Consolidated Financial Statements
For the years ended December 31, 2024 and 2023

	Page
Independent Auditor's Report	2 - 4
Consolidated Financial Statements
Statements of Financial Position	5
Statements of Comprehensive Loss	6
Statements of Shareholders’ Equity	7
Statements of Cash Flows	8
Notes to Financial Statements	9 - 33

BDO
Tel: 289 881 1111
Fax: 905 845 8615
www.bdo.ca
BDO Canada LLP
360 Oakville Place Drive, Suite 500
Oakville ON L6H 6K8 Canada

Independent Auditor’s Report

To the Shareholders of Pivotree Inc.

Opinion

We have audited the consolidated financial statements of Pivotree Inc. and its subsidiaries (the Group), which comprise the consolidated statements of financial position as at December 31, 2024 and 2023, and the consolidated statements of comprehensive loss, consolidated statements of changes in shareholders’ equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a summary of material accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at December 31, 2024 and 2023, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards and International Accounting Standards as issued by the International Accounting Standards Board (IASB) and Interpretations (collectively IFRS Accounting Standards).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Goodwill Impairment

Refer to Note 10 – Goodwill

Description of the key audit matter

The Company has approximately $31 million of goodwill which is required to be tested for impairment on an annual basis or more frequently if events or changes in circumstances indicate their carrying amounts may not be recoverable.

This area was determined to be a key audit matter due to the significance of the estimates involved in the determination of the recoverable amount of each cash generating unit. The significant assumptions included discount rates and revenue growth rates.

How the key audit matter was addressed in the audit

Our audit procedures included, but were not limited to, the following:

Assessing discount rates used by management against discount rate ranges independently developed from publicly available data sets and consideration of comparable company metrics.

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the International BDO network of independent member firms.

BDO

Assessing management's assumptions about revenue growth rate forecasts, expected margin realization rates and terminal growth rates in light of historical results and projected future economic and market conditions.
Challenging management's assumptions and performing additional sensitivity and stress tests for cash generating units where the impairment assessments were more sensitive to changes in estimated inputs.
Reviewing the disclosures on the assumptions and the outcomes of the impairment testing, and the sensitivity analysis presented in the consolidated financial statements.
Professionals with specialized skill and knowledge in the field of valuation assisted in evaluating the reasonableness of the discount rate, Weighted average cost of capital used by management and performed a sensitivity analysis on management's forecast.

Other Information

Management is responsible for the other information. The other information comprises the information included in the Management's Discussion and Analysis of Results of Operations and Financial Condition for the year ended December 31, 2024, filed with the relevant Canadian Securities Commissions.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We obtained the Management's Discussion and Analysis of Results of Operations and Financial Condition prior to the date of this auditor's report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in this auditor's report. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

BDO

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor's report is Michael Hawtin.

BDO Canada LLP

Chartered Professional Accountants, Licensed Public Accountants

Oakville, Ontario

March 26, 2025

PIVOTREE INC.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at December 31, 2024 and 2023
(Expressed in Canadian dollars)

	Notes	December 31, 2024 $	December 31, 2023 $
ASSETS
Current assets
Cash		3,877,687	7,290,149
Restricted cash	4	-	1,329,012
Term deposits		-	1,347,800
Accounts receivable	5	13,236,879	11,600,117
Prepaid expenses and other current assets	6	1,351,327	2,223,202
		18,465,893	23,790,280
Non-current assets
Property and equipment	7	1,453,785	3,505,172
Right-of-use assets	8	422,727	779,677
Deferred income tax asset	22	-	57,316
Intangible assets	9	3,843,695	6,971,445
Goodwill	10	30,929,409	28,990,019
Total Assets		55,115,509	64,093,909
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	11	4,621,167	3,927,822
Income taxes payable		244,212	59,433
Deferred revenue		1,801,050	1,665,555
Current portion of lease liabilities	12	350,655	737,316
		7,017,084	6,390,126
Non-current liabilities
Lease liabilities	12	104,031	213,053
Total liabilities		7,121,115	6,603,179
Shareholders' Equity
Share capital	14	92,832,403	92,959,538
Contributed surplus		5,363,176	4,590,453
Deficit		(53,953,913)	(42,065,533)
Accumulated other comprehensive income (loss)		3,752,728	2,006,272
		47,994,394	57,490,730
Total Liabilities & Shareholders' Equity		55,115,509	64,093,909

Nature of operations (Note 1)

Approved on behalf of the Board of Directors:

Director

The accompanying notes are an integral part of these consolidated financial statements.

PIVOTREE INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
For the years ended December 31, 2024 and December 31, 2023
(Expressed in Canadian dollars)

	Notes	2024 $	2023 $
Revenues	18	78,242,423	89,805,807
Cost of sales	16	44,439,729	48,321,418
Gross profit		33,802,694	41,484,389
EXPENSES
General and administration	17	10,646,902	12,231,918
Research and development	17	2,011,714	2,394,136
Information technology and operations	17	11,273,293	14,581,825
Sales and marketing	17	9,155,629	9,877,260
Amortization and depreciation		7,143,696	6,411,507
Stock based compensation	15	881,477	860,413
Interest	17	147,612	269,260
Loss (gain) on foreign exchange		(656,573)	284,604
Restructure and other	17	4,372,792	1,414,179
Total expenses		44,976,542	48,325,102
Operating income (loss) before interest income and taxes		(11,173,848)	(6,840,713)
Interest income		151,409	223,032
Income (loss) before income taxes		(11,022,439)	(6,617,681)
Income tax expense (recovery) - current	22	808,625	565,563
Deferred taxes	22	57,316	46,814
Net Income (loss) for the year		(11,888,380)	(7,230,058)
Other comprehensive income (loss):
Items that may be reclassified subsequently to income:
Foreign currency translation adjustment		1,746,456	(904,463)
Comprehensive income (loss) for the year		(10,141,924)	(8,134,521)
Income (loss) per share - basic and diluted		(0.45)	(0.27)
Weighted Average Number of Common Shares Outstanding		26,351,341	26,605,913

The accompanying notes are an integral part of these consolidated financial statements.

PIVOTREE INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years Ended December 31, 2024 and December 31, 2023
(Expressed in Canadian dollars)

	Number of common shares	Capital Stock $	Contributed Surplus $	Deficit $	Accumulated Other Comprehensive Income (loss) $	Total $
Balance, December 31, 2022	26,616,416	94,262,592	3,136,558	(34,835,475)	2,910,735	65,474,410
Options exercised	153,204	216,472	(158,722)	-	-	57,750
RSUs converted	92,796	414,216	(414,216)	-	-	-
DSUs converted	13,430	77,093	(77,093)	-	-	-
Equity issuance on earnout	338,999	835,212	-	-	-	835,212
Share based compensation	-	-	860,413	-	-	860,413
Share repurchase	(774,100)	(2,846,047)	1,243,513	-	-	(1,602,534)
Foreign exchange translation	-	-	-	-	(904,463)	(904,463)
Net income (loss) for the period	-	-	-	(7,230,058)	-	(7,230,058)
Balance, December 31, 2023	26,440,745	92,959,538	4,590,453	(42,065,533)	2,006,272	57,490,730
Balance, December 31, 2023	26,440,745	92,959,538	4,590,453	(42,065,533)	2,006,272	57,490,730
RSUs converted	107,187	396,160	(396,160)	-	-	-
Share based compensation	-	-	881,477	-	-	881,477
Share repurchase	(141,700)	(523,295)	287,406	-	-	(235,889)
Foreign exchange translation	-	-	-	-	1,746,456	1,746,456
Net income (loss) for the period	-	-	-	(11,888,380)	-	(11,888,380)
Balance, December 31, 2024	26,406,232	92,832,403	5,363,176	(53,953,913)	3,752,728	47,994,394

The accompanying notes are an integral part of these consolidated financial statements.

PIVOTREE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2024 and December 31, 2023
(Expressed in Canadian dollars)

	2024	2023
	$	$
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the year	(11,888,380)	(7,230,058)
Items not affecting cash:
Amortization and depreciation	7,143,696	6,411,507
Share-based compensation	881,477	860,413
Foreign exchange (gain)/loss - without derivative impact	(987,073)	216,504
Change in fair value of derivative	330,500	68,100
Revaluation of earnout	-	74,301
Deferred income tax	57,316	46,814
Changes in non-cash working capital balances:
Accounts receivable	(948,259)	5,945,665
Prepaid expenses and other current assets	872,470	244,438
Accounts payable and accrued liabilities	640,463	(7,572,908)
Income taxes payable	179,501	209,854
Deferred revenue	(106,513)	(1,892,548)
Cash flows used in operating activities	(3,824,802)	(2,617,918)
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchase) maturity of term deposits	1,347,800	(1,347,800)
Purchase of property and equipment	(254,700)	(1,103,900)
Additions of intangible property	(1,253,101)	(418,320)
Earnout payments	-	(762,659)
Cash flows used in investing activities	(160,001)	(3,632,679)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital lease repayment	(607,780)	(972,541)
Share repurchase	(235,890)	(1,602,534)
Exercise of options	-	57,750
Cash flows used in financing activities	(843,670)	(2,517,325)
Effect of foreign currency on cash	86,999	41,055
Net decrease in cash	(4,741,474)	(8,726,867)
Cash, beginning of year	8,619,161	17,346,028
Cash, end of year	3,877,687	8,619,161
Comprised of:
Cash and cash equivalents	3,877,687	7,290,149
Restricted cash	-	1,329,012

Supplemental cash flow information (Note 24)

The accompanying notes are an integral part of these consolidated financial statements.

PIVOTREE INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Years Ended December 31, 2024 and December 31, 2023 (Expressed in Canadian dollars)

1. NATURE OF OPERATIONS

Pivotree Inc. was incorporated under the Business Corporations Act in Ontario, Canada on August 13, 1998 and provincially registered in Ontario, Canada on June 22, 2015; Pivotree and its subsidiaries (together “the Company”), principal place of business is its headquarters at 6300 Northam Drive, Mississauga, Ontario, Canada L4V 1H7. The Company designs, integrates, deploys, and manages digital platforms in Commerce, Data Management and Supply Chain for major retail and branded manufacturers throughout the world. Pivotree provides the technical skills necessary to enable the effective use of technologies combined with the business context to leverage a solution to solve clients' business challenges. Pivotree’s portfolio of products, managed and professional services help provide B2B2C digital businesses with end-to-end service to manage complex digital commerce platforms, along with ongoing support from strategic planning through product selection, deployment, and hosting, to data and supply chain management.

2. MATERIAL ACCOUNTING POLICIES

(a) Basis of Presentation

The consolidated financial statements have been prepared in accordance with IFRS Accounting Standards as issued by the International Accounting Standards Board and Interpretations (IFRS Accounting Standards). The material accounting policies applied in these consolidated financial statements are presented in note 2.

The consolidated financial statements were approved by the Company's Board of Directors on March 26, 2025.

These consolidated financial statements of the Company have been prepared on an accrual basis, except for cash flow information, and are based on historical costs, except where the Company's policy is to carry the item at fair value.

The preparation of the consolidated financial statements in compliance with IFRS Accounting Standards requires management to make certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Company's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

(b) Basis of consolidation

The consolidated financial statements include the accounts of Pivotree Inc. and its wholly owned subsidiaries Pivotree US Holdings Corp., Pivotree USA Inc., Pivotree Solutions India PVT Ltd., and Pivotree Spain, S.L. Subsidiaries are entities that the Company has control of and are fully consolidated from the date that control commences until the date that control ceases.

Effective January 1, 2024, Pivotree USA Inc., Pivotree Inc. and Thinkwrap Solutions Inc., executed an amalgamation. The Thinkwrap Solutions Inc. name has been discontinued with all business being transacted under Pivotree Inc. Thinkwrap Solutions Inc. operations that were within Spain previously have been incorporated under the name Pivotree Spain, S.L.

Intercompany balances and transactions, and unrealized gains arising from intercompany transactions are eliminated in preparing the consolidated financial statements.

(c) Functional and presentation currency

Each of the Company's subsidiaries' financial statements are measured using the currency of the primary economic environment in which the entity operates. The consolidated financial statements are presented in Canadian dollars, which is the Company's presentation currency.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

2. MATERIAL ACCOUNTING POLICIES (Continued)

(d) Foreign currency transactions:

Transactions in foreign currencies are translated to the functional currency at exchange rates on the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate on that date. Non-monetary assets and liabilities denominated in foreign currencies are translated at historic rates. Foreign currency differences arising on translation are recognized in net profit (loss).

(e) Foreign operations:

Revenues and expenses of foreign operations are translated to Canadian dollars at the average rates for the period which approximate the transaction date. Assets and liabilities are translated into CAD at exchange rates in effect at the reporting date. Related foreign currency translation differences are recognized in other comprehensive income and included in accumulated other comprehensive income in equity.

Foreign currency translation differences residing in accumulated other comprehensive income will be released to net profit (loss) upon the reduction of the net investment in foreign operations through the sale or substantial liquidation of an investment position.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and translated at the closing rates at the reporting date.

Monetary inter-company receivables from a foreign operation, the settlement of which are neither planned nor likely in the foreseeable future, are considered to form part of the net investment in the foreign operation. Related foreign exchange translation differences are recognized in other comprehensive income and presented in accumulated other comprehensive income in equity.

(f) Cash

Cash consists of cash on hand and deposits with financial institutions. As of December 31, 2024 and 2023 the Company held no cash equivalents. Restricted cash consists of collateral held in cash accounts at a financial institution as a requirement for the Company's foreign currency forward contracts and credit relationships.

(g) Short-term investments

Short-term investments consist of term deposits with maturity dates of greater than 90 days from the date of the initial investment.

(h) Revenue recognition

IFRS 15, Revenue from Contracts with Customers, applies to all contracts with customers, with only some exceptions, including certain contracts accounted for under other IFRSs. The standard requires revenue to be recognized in a manner that depicts the transfer of promised goods or services to a customer at an amount that reflects the consideration expected to be received in exchange for transferring those goods or services. This is achieved by applying the following five steps: i) identify the contract with a customer; ii) identify the performance obligations in the contract; iii) determine the transaction price; iv) allocate the transaction price to the performance obligations in the contract; and v) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company's contracts often include a number of promised goods or services. The Company's goods and services are generally distinct from other performance obligations and accounted for as separate performance obligations. A good or service is distinct if the customer can benefit from it on its own or together with other readily available resources, and the Company's promise to transfer the good or service is separately identifiable from other promises in the contractual arrangement with the customer.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

2. MATERIAL ACCOUNTING POLICIES (Continued)

In determining the transaction price of a contract with a customer, the Company considers the effects of variable consideration, existence of a significant financing component, non-cash consideration, and consideration payable to the customer (if any). The total transaction price is allocated to each performance obligation on a relative stand-alone selling price (“SSP”) basis.

The SSP reflects the price we would charge for a specific product or service if it was sold separately in similar circumstances and to similar customers. In most cases we are able to establish the SSP based on observable data.

Where possible we establish a narrow SSP range for our products and services and assess this range on a periodic basis or when material changes in facts and circumstances warrant a review. If the SSP is not directly observable, then we estimate the amount using either the expected cost plus a margin or residual approach. Estimating SSP requires judgment that could impact the amount and timing of revenue recognized. SSP is a formal process whereby management considers multiple factors including, but not limited to, geographic or regional specific factors, competitive positioning, internal costs, profit objectives, and pricing practices.

(i) Professional Services

Services revenues are derived from professional services that include designing, developing, implementing, integrating, and training for e-commerce platforms and to support data management business requirements of our customers. Professional services revenues are recognized over time as services are rendered, using input methods to measure progress towards complete satisfaction of the service. For time and material projects, revenues are recognized by multiplying the number of hours our professionals incurred in the performance of the project by the hourly rate card contracted. Funds received in advance of provided services is recorded as deferred revenue. The deferred revenue at the beginning of the year has been recognized as revenue in the current year.

Costs associated with professional services revenue include all direct labour and subcontract costs and those indirect costs related to contract performance such as benefits, travel expenses and other expense reimbursements.

(ii) Managed Services

Managed service revenues are derived from providing monthly recurring, associated overages, license fees and transactional services. The revenues include infrastructure deployment and management, data transaction services, subscription license, web and application hosting, 24/7 access to experts for system and application triage, application support, configuration management, and security. Managed services fees are structured with a minimum level of spend based on environment size and minimum level of support provided. For any overage and transaction revenues, a price list is established to charge for the respective volume. The monthly fee is recognized as revenue on a monthly basis based on the minimum commitment and the per unit charges for the transaction and overage charges.

Billing for the minimum commitment is issued at the start of the service period. Overage and transaction charges are issued after the service period, once actual volumes are available.

Costs of sales associated with managed services include labour in direct support of the revenues, data centers, public cloud, third party licensing for monitoring and security solutions plus any other 3rd party license costs required to deliver the solution.

In conjunction with both professional and management services provided, we receive commissions or margins on license resale. The net margin or commission on resale is accrued to revenues as earned. The Company is acting as an agent in these arrangements.

Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers based on payment history and willingness to pay and, generally, requires no collateral. Accounts receivable are recorded at their estimated net realizable value, net of expected credit losses. The Company’s estimate of expected credit losses is based upon its evaluation of the current status of receivables, and forward-looking information.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

2. MATERIAL ACCOUNTING POLICIES (Continued)

(i) Stock-based compensation

Stock-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Stock-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured and are recorded at the date the goods or services are received. The corresponding amount for equity settled awards is recorded to contributed surplus and cash settled awards are recorded as a liability. The fair value of options is determined using the Black-Scholes option pricing model and other market valuation methods. For employee share options, the amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be satisfied, such that the amount ultimately recognized is based on the number of awards that ultimately vest. The Company's share-based plans are described in note 15.

(j) Property and Equipment

Property and equipment is comprised of computers and network equipment, furniture and equipment, leasehold improvements and software. Property and equipment is measured at cost less accumulated depreciation and accumulated impairment loss. Depreciation is based on the estimated useful life of the asset and is provided using the following annual rates:

Computer equipment 20% - 33% declining balance basis; or 3 years straight line basis
Furniture and fixtures 20% - 22% declining balance basis; or 3 years straight line basis
Leasehold improvements 20% declining balance basis; or 7 years straight line basis

(k) Leases

At inception of a contract, the Company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits. The lease term includes periods covered by an option to extend if the Company is reasonably certain to exercise that option. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined the Company's incremental borrowing rate. Generally, the Company uses its incremental borrowing rate as the discount rate. Variable lease payments that do not depend on an index or rate are not included in the measurement of the lease liability. The lease liability is measured at amortized cost using the effective interest method.

It is re-measured when there is a change in future lease payments arising from a change in an index or rate, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Company has elected to apply the practical expedient to account for each lease component and any non-lease components, if any, as a single lease component. The Company has also elected to apply the practical expedient not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets, if any.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

2. MATERIAL ACCOUNTING POLICIES (Continued)

(l) Intangible Assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is its fair value as at the date of acquisition. The useful lives of intangible assets are assessed as either finite or indefinite. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.

Intangible assets with an indefinite life are not amortized. Such assets include brand and trademark. They are tested annually for impairment and whenever events or circumstances indicate that their carrying amount exceeds their fair value. When the carrying amount exceeds the fair value, an impairment loss is recognized in an amount equal to the excess.

Intangible assets with finite lives are amortized over their useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. Intangible assets with finite useful lives are tested for impairment when events or circumstances indicate that their carrying amount may not be recoverable and at least at the end of each reporting period. Such assets include software technologies, licenses, non-compete agreements, and customer relationships. The impairment test entails comparing the estimated future undiscounted cash flows associated with the asset to the asset’s carrying amount to determine if a write down to fair value is required. A change in the expected useful life of the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates.

Intangible assets with finite useful lives are amortized over their estimated useful lives as follows:

	Method	Rate
Software technologies	Straight-line	3 years
Customer relationships	Straight-line	6 – 10 years
License	Straight-line	8 years
Non-compete agreements	Straight-line	3 years

(m) Business combinations and goodwill

Acquisitions of businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for control of the acquiree. Acquisition-related costs in connection with a business combination are expensed as incurred.

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRS Accounting Standards sections. Changes in the fair value of contingent consideration initially classified as equity are not recognized.

The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognized at their fair value at the acquisition date.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

2. MATERIAL ACCOUNTING POLICIES (Continued)

The measurement period is the period from the date of acquisition to the date the Company obtains complete information about facts and circumstances that existed as of the acquisition date and is subject to a maximum period of one year.

The Company measures goodwill as the fair value of the consideration transferred less the net recognized amount of the identifiable assets acquired and the liabilities assumed, all measured as of the acquisition date. Goodwill is allocated to the Company’s Cash Generating Units (CGUs) that are expected to benefit from the synergies of the business combination. Goodwill is not amortized, but is tested for impairment at least annually. An impairment loss in respect of goodwill is not reversed. On the disposal or termination of a previously acquired business, any remaining balance of associated goodwill is included in the determination of the gain or loss on disposal.

(n) Research and Development

Research costs are expensed as incurred. Development costs are expensed as incurred unless certain criteria, including technical feasibility, commercial feasibility, intent and ability to develop and use the technology, are met for deferral and amortization. If deferred, costs are recorded as finite intangible assets. Once the intangible asset is in the condition necessary for it to be capable of operating in the manner intended by management, recognition of costs in the carrying amount of the intangible asset ceases unless those costs are not incidental and result in betterment of the intangible asset. Amortization for development costs commences in the period that the developed asset is completed and ready for use. Management assesses development costs to ensure costs are recoverable through future sales or cost savings.

(o) Impairment of non-financial assets

At the end of each reporting period, the Company’s non-financial assets are reviewed to determine whether there is any indication that those assets may be impaired. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are adjusted for the risks specific to the asset and are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in profit or loss for the period. For an asset that does not generate largely independent cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. When an impairment loss subsequently reverses (except for goodwill), the carrying amount of the asset (or CGU) is increased to the revised estimate of its recoverable amount, but to an amount that does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

(p) Income Taxes

Income tax comprises current and deferred tax. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or other comprehensive income, in which case the income tax is also recognized directly in equity or other comprehensive income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years. Current tax assets and current tax liabilities are only offset if a legally enforceable right exists to offset the amounts and the Company intends to settle on a net basis, or to realize the asset and settle the liability simultaneously.

Deferred tax is calculated on all temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

2. MATERIAL ACCOUNTING POLICIES (Continued)

Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit, including differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on the tax rates that have been enacted or substantively enacted at the reporting date.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

(q) Financial Instruments

The Company classifies its financial assets in the following measurement categories i) those to be measured subsequently at fair value through profit or loss (FVTPL); ii) those to be measured subsequently at fair value through other comprehensive income (FVOCI); and iii) those to be measured at amortized cost. The classification of financial assets depends on the business model for managing the financial assets and the contractual terms of the cash flows. Financial liabilities are classified as those to be measured at amortized cost unless they are designated as those to be measured subsequently at FVTPL (irrevocable election at the time of recognition). For assets and liabilities measured at fair value, gains and losses are either recorded in profit or loss or other comprehensive income.

The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.

(i) Measurement

All financial instruments are required to be measured at fair value on initial recognition, plus, in the case of a financial asset or financial liability not at FVTPL, transaction costs that are directly attributable to the acquisition or issuance of the financial asset or financial liability. Transaction costs of financial assets and financial liabilities carried at FVTPL are expensed in profit or loss. Financial assets and financial liabilities with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of the subsequent accounting periods. All other financial assets are measured at their fair values at the end of subsequent accounting periods, with any changes taken through profit and loss or other comprehensive income (irrevocable election at the time of recognition). For financial liabilities measured subsequently at FVTPL, changes in fair value due to credit risk are recorded in other comprehensive income. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of a financial liability, or, where appropriate, a shorter period.

PIVOTREE INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2024 and December 31, 2023
(Expressed in Canadian dollars)

2. MATERIAL ACCOUNTING POLICIES (Continued)

(ii) Impairment

The Company assesses all information available, including on a forward-looking basis the expected credit loss associated with its assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition based on all information available, and reasonable and supportive forward-looking information. For trade receivables only, the Company applies the simplified approach as permitted by IFRS 9. The simplified approach to the recognition of expected losses does not require the Company to track the changes in credit risk; rather, the Company recognizes a loss allowance based on lifetime expected credit losses at each reporting date from the date of the trade receivable.

Evidence of impairment may include indications that the counterparty debtor is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Receivables are reviewed qualitatively on a case-by-case basis to determine whether they need to be written off.

Expected credit losses are measured as the difference in the present value of the contractual cash flows that are due to the Company under the contract, and the cash flows that the Company expects to receive. The Company measures expected credit loss by considering the risk of default over the contract period and incorporates forward-looking information into its measurement. The Company assesses all information available, including past due status, credit ratings, and forward looking macro-economic factors in the measurement of the expected credit losses associated with its assets carried at amortized cost.

Summary of the Company's Classification and Measurements of Financial Assets and Liabilities

	IFRS 9
	Classification	Measurement
Cash and cash equivalents	Amortized cost	Amortized cost
Accounts receivable	Amortized cost	Amortized cost
Accounts payable and accrued liabilities	Amortized cost	Amortized cost
Lease liability	Amortized cost	Amortized cost

(r) Operating Segment

Management has determined that the Company operates in one reportable operating segment. Management determined this fact through its product integration, standardized pricing and consistent customer base across all revenue streams.

(s) Adoption of new accounting standards

The following new standards and amendments to existing standards were issued by the IASB and were adopted by the Company on January 1, 2024.

Amendments to IAS 1 Presentation of Financial Statements

In January 2020, the IASB issued amendments to IAS 1, Presentation of Financial Statements to clarify how to classify debt and other liabilities as current or non-current. The amendments help to determine whether, in the consolidated statements of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments also include clarifying the classification requirements for debt and equity might settle by converting it into equity. The amendments are effective for annual reporting periods beginning on or after January 1, 2024. The amendment did not have a material impact to the Company as it does not hold liabilities with uncertain settlement dates or any convertible instruments.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

2. MATERIAL ACCOUNTING POLICIES (Continued)

The following new standards and amendments to existing standards were issued by the IASB and are expected to be adopted by the Company in 2025 or later.

"IFRS 18, Presentation and Disclosure in Financial Statements"

In April 2024, IFRS 18, “Presentation and Disclosure in Financial Statements” (“IFRS 18”) was issued to achieve comparability of the financial performance of similar entities. The issuance of IFRS 18 is expected to have a substantive impact on financial statements, including potential changes to the structure of the income statement and various disclosure requirements. The standard, which replaces IAS 1, “Presentation of Financial Statements”, impacts the presentation of primary financial statements and notes, including the statement of earnings where companies will be required to present separate categories of income and expense for operating, investing, and financing activities with prescribed subtotals for each new category. The standard will also require management-defined performance measures to be explained and included in a separate note within the consolidated financial statements. The standard is effective for annual reporting periods beginning on or after January 1, 2027, including interim financial statements, and requires retrospective application. The Company is assessing the potential impact of the standard on its consolidated financial statements.”

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Significant estimates and assumptions

The preparation of these consolidated financial statements in accordance with IFRS Accounting Standards requires the Company to make estimates and assumptions concerning the future. The Company’s management reviews these estimates and underlying assumptions on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the period in which the estimates are revised.

The main assumptions and estimates that were used in preparing the Company’s consolidated financial statements relate to:

Impairments

In determining whether a long-lived asset is impaired, the Company has to exercise judgment and make estimation in assessing (1) whether an event or indicator has occurred that may affect the asset values; (2) whether the carrying value of an asset can be supported by the recoverable amount; and (3) the appropriate key assumptions to be applied in estimating the recoverable amount including cash flow projections and appropriate discount rate.

The recoverable amounts of goodwill, intangible assets and property, plant and equipment is based on estimates and assumptions regarding the expected market outlook and cash flows from each CGU or group of CGUs.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

In order to estimate recoverable amount, the Company typically estimates future revenue, considers market factors and estimates future cash flows. Based on these key assumptions, judgements and estimates, the Company determines whether to record an impairment charge to reduce the value of the asset carried on the consolidated statements of financial position to its estimated fair value. Assumptions, judgements and estimates about future values are complex and often subjective. They can be affected by a variety of factors, including external factors such as industry and economic trends, and internal factors such as changes in the Company's business strategy or internal forecasts. Although the Company believes the assumptions, judgements and estimates made in the past have been reasonable and appropriate, different assumptions, judgements and estimates could materially affect the recoverable amount of the assets being evaluated and the Company's reported financial results.

Deferred taxes

Income taxes are determined based on estimates of the Company's current income taxes and estimates of deferred income taxes resulting from temporary differences. Deferred tax assets are assessed to determine the likelihood that they will be realized from future taxable income before they expire.

4. RESTRICTED CASH

Restricted cash of nil (2023 - $1,329,012) consisted of collateral held in cash accounts at a financial institution as a requirement for the Company's foreign currency forward contracts and credit relationships.

5. ACCOUNTS RECEIVABLE

The Company's accounts receivable is comprised of the following:

	December 31,
	2024	2023
	$	$
Trade receivables	11,893,442	10,492,813
Other receivables	1,432,396	1,198,363
Less: expected credit loss provision	(88,959)	(91,059)
Net accounts receivable	13,236,879	11,600,117

A continuity of the Company's expected credit loss provision is as follows:

	December 31,
	2024	2023
	$	$
Opening balance	91,059	62,797
Additions	127,716	106,269
Less: write-offs	(129,816)	(78,007)
Ending balance	88,959	91,059

For the year ended December 31, 2024, the Company recorded bad debt expense of $127,716 (December 31, 2023 — $106,269).

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

6. PREPAID EXPENSES

	December 31,
	2024	2023
	$	$
Software subscriptions	673,294	1,124,275
Rent deposits	-	169,013
Insurance	266,472	388,179
Derivative	-	168,400
Other	411,561	373,335
Ending balance	1,351,327	2,223,202

7. PROPERTY AND EQUIPMENT

	Computer Equipment* $	Furniture and Equipment $	Leasehold Improvements $	Total $
COST
Balance, December 31, 2022	23,359,852	1,234,662	434,529	25,029,043
Additions	1,103,900	-	-	1,103,900
Effect of foreign currency translation	(5,826)	-	-	(5,826)
Balance, December 31, 2023	24,457,926	1,234,662	434,529	26,127,117
Additions	254,699	-	-	254,699
Write-off of fully depreciated assets	(11,335,033)	(614,024)	(434,529)	(12,383,586)
Effect of foreign currency translation	14,317	-	-	14,317
Balance, December 31, 2024	13,391,909	620,638	-	14,012,547
ACCUMULATED DEPRECIATION
Balance, December 31, 2022	20,268,899	987,762	340,039	21,596,700
Additions	901,194	78,570	39,656	1,019,420
Effect of foreign currency translation	5,825	-	-	5,825
Balance, December 31, 2023	21,175,918	1,066,332	379,695	22,621,945
Additions	2,131,600	146,617	54,834	2,333,051
Write-off of fully depreciated assets	(11,335,033)	(614,024)	(434,529)	(12,383,586)
Effect of foreign currency translation	(12,648)	-	-	(12,648)
Balance, December 31, 2024	11,959,837	598,925	-	12,558,762
Net book value December 31, 2023	3,282,008	168,330	54,834	3,505,172
Net book value December 31, 2024	1,432,072	21,713	-	1,453,785

*Included in computer equipment is equipment under lease and accounted for as a Right-of-use-Asset pursuant to the Company's adoption of IFRS 16 (see Note 8).

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

8. RIGHT-OF-USE ASSETS

The Company leases certain office premises. The leases typically run for a period of 3 to 4 years with an option to renew the lease after that date. Lease payments are renegotiated within one year of expiry to reflect market rentals.

Information about leases for which the Company is a lessee is presented below:

	Premises Leases $	Computer Equipment $	Total $
Balance, December 31, 20212	1,252,451	102,693	1,355,144
Additions	250,555	-	250,555
Depreciation charge for the year	(716,396)	(29,205)	(745,601)
Effects of foreign exchange	(6,933)	-	(6,933)
Balance, December 31, 2023	779,677	73,488	853,165
Additions	639,242	-	639,242
Terminations	(515,704)	-	(515,704)
Depreciation charge for the year	(502,977)	(35,645)	(538,622)
Effects of foreign exchange	22,489	-	22,489
Balance, December 31, 2024	422,727	37,843	460,570

9. INTANGIBLE ASSETS

	Software Technologies $	Brand & Trademark $	Non-Compete $	License $	Customer List $	Total $
COST
Balance, December 31, 2022	5,820,199	86,093	391,480	1,864,272	22,150,269	30,312,313
Additions	418,320	-	-	-	-	418,320
Foreign exchange movement	-	-	(8,352)	(33,437)	(379,764)	(421,553)
Balance, December 31, 2023	6,238,519	86,093	383,128	1,830,835	21,770,505	30,309,080
Additions	1,253,101	-	-	-	-	1,253,101
Write-off of fully depreciated assets	(5,311,266)	(86,093)	-	(297,000)	(7,519,888)	(13,214,247)
Foreign exchange movement	9,672	-	32,627	130,625	1,320,227	1,493,151
Balance, December 31, 2024	2,190,026	-	415,755	1,664,460	15,570,844	19,841,085
ACCUMULATED AMORTIZATION
Balance, December 31, 2022	5,319,632	18,285	152,242	505,970	12,640,185	18,636,314
Amortization	376,966	67,808	119,368	344,932	3,766,618	4,675,692
Foreign exchange movement	14,014	-	5,092	13,151	(6,628)	25,629
Balance, December 31, 2023	5,710,612	86,093	276,702	864,053	16,400,175	23,337,635
Amortization	330,213	-	99,473	344,932	3,533,159	4,307,777
Write-off of fully depreciated assets	(5,311,266)	(86,093)	-	(297,000)	(7,519,888)	(13,214,247)
Foreign exchange movement	14,929	-	39,580	96,773	1,414,943	1,566,225
Balance, December 31, 2024	744,488	-	415,755	1,008,758	13,828,389	15,997,390
Net book value December 31, 2023	527,907	-	106,426	966,782	5,370,330	6,971,445
Net book value December 31, 2024	1,445,538	-	-	655,702	1,742,455	3,843,695

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

10. GOODWILL

	December 31,
	2024	2023
	$	$
Opening balance	28,990,019	29,486,561
Foreign exchange movement	1,939,390	(496,542)
Ending balance	30,929,409	28,990,019

The Company performs an annual goodwill impairment test as needed or when there are indications of impairment. As at December 31, 2024, management has performed a goodwill impairment test on its group of cash generating units ("group of CGUs"), Pivotree Inc. The recoverable amount of the group of CGUs was determined using a fair value less costs to sell approach. Under the fair value less costs to sell approach, the group of CGUs' recoverable amount is calculated based on the present value of future cash flows expected to be derived from the group of CGUs.

As at December 31, 2024, the carrying value of goodwill was $30,929,409 for the group of CGUs (2023 - $28,990,019).

The values assigned to the key assumptions represent management's assessment of future trends and have been based on historical data from both external and internal sources; the following assumptions are relevant for the group of CGUs:

2024

5-year cash flow projections expected to be generated based on financial budgets with a terminal growth rate of 2%. The projections are prepared for the Company's group of CGUs and are based on financial budgets approved by the Board.
Revenue growth is based on management's best estimates considering historical and expected operating plans, strategic plans and industry outlook.
Gross margins are based on average values achieved in the previous years.
Budgeted earnings before income taxes, depreciation and amortization ("EBITDA") is estimated taking into account past experience and the Company's strategic plan.
Discount rate represents the current market assessment of the risks specific to the Company's group of CGUs, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate is derived from the Company's weighted average cost of capital ("WACC") at 26.4%.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

10. GOODWILL (Continued)

2023

5-year cash flow projections expected to be generated based on financial budgets with a terminal growth rate of 2%. The projections are prepared for the Company’s group of CGUs and are based on financial budgets approved by the Board.
Revenue growth is based on management’s best estimates considering historical and expected operating plans, strategic plans and industry outlook.
Gross margins are based on average values achieved in the previous years.
Budgeted earnings before income taxes, depreciation and amortization (“EBITDA”) is estimated taking into account past experience and the Company’s strategic plan.

Discount rate represents the current market assessment of the risks specific to the Company’s group of CGUs, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated in the cash flow estimates. The discount rate is derived from the Company’s weighted average cost of capital (“WACC”) at 22%.

No impairment charge (2023 – no impairment charge) was determined to be necessary based on the calculations.

11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

The Company’s accounts payable and accrued liabilities are comprised of the following:

	December 31,
	2024	2023
	$	$
Accounts payable	2,025,381	1,673,087
Payroll accruals*	1,885,570	638,998
Derivative	162,100	-
Accrued liabilities	548,116	1,615,737
	4,621,167	3,927,822

*Included in payroll accruals are $1,369,357 (2023 - $8,125) of restructuring costs.

12. LEASE LIABILITIES

	December 31,
	2024	2023
	$	$
Obligation under lease contracts for computer equipment	9,995	95,424
Obligation under lease contracts for office space	444,691	854,945
Less: current portion	(350,655)	(737,316)
	104,031	213,053

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

12. LEASE LIABILITIES (Continued)

(a) Future minimum cash payments required under the premises and computer equipment leases held by the Company are as follows:

	Premises $	Computer Equipment $	Total $
2025	348,802	16,972	365,774
2026	120,920	-	120,920
	469,722	16,972	486,694
Imputed interest	(25,031)	(6,977)	(32,008)
	444,691	9,995	454,686

(b) Property lease payments also include variable lease payments of overhead expenses and property taxes. For the years ended December 31, 2024 and 2023 variable lease payments were as follows:

2024	2023
$	$
155,206	294,633

	December 31,
	2024	2023
	$	$
Balance, opening	950,369	1,680,469
Additions	639,242	250,555
Terminations	(515,704)	-
Payments (net of accretion)	(619,221)	(980,655)
Present value of lease liability, balance closing	454,686	950,369

Expenses recognized in general and administrative include $47,600 (2023 - $52,800) of short term or low value leases as a result of applying the practical expedient in adoption of IFRS 16.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

13. RELATED PARTY TRANSACTIONS

The following are details of the related party transactions entered into by the Company during the years ended December 31:

	December 31,
	2024	2023
	$	$
Expenses paid to a private company related to a shareholder:
Occupancy	50,465	57,061
	50,465	57,061

Compensation of key management personnel

The Company defines key management personnel as being the Board of Directors, the Chief Executive Officer and the executive leadership team. The remuneration of key management personnel during the years ended December 31 is as follows:

	December 31,
	2024	2023
	$	$
Salaries (including benefits)	2,089,375	2,593,228
Stock based compensation	639,752	532,330
	2,729,127	3,125,558

14. SHARE CAPITAL

The authorized share capital of the Company consists of an unlimited number of common shares, an unlimited number of Series A preferred shares, an unlimited number of Series B preferred shares, an unlimited number of Series C preferred shares, and an unlimited number of Series D preferred shares. The Company's common shares are without par value, have voting rights and are entitled to receive dividends.

During the year ended December 31, 2024 the Company issued:

107,187 common shares were issued upon the conversion of restricted stock units with a previously recorded charge of $396,160.

During the year ended December 31, 2024 the Company repurchased and retired 141,700 shares for $235,889 under a normal course issuer bid (NCIB).

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

15. STOCK OPTIONS & RESTRICTED SHARES

(a) Stock-based Compensation

On October 30, 2020 the Company established its 2020 Omnibus Equity Incentive Compensation Plan (“2020 Plan”) which provides for the granting of Options, Share Appreciation Rights (“SARS”), Restricted Share Units (“RSUs”), Deferred Share Units (“DSUs”) and Performance Share Units (“PSUs”) to employees, directors, officers and consultants of the Company. The maximum number of shares issuable pursuant to Options issued under the 2020 Plan will be equal to 10% of the then outstanding shares on a rolling basis. In addition to the number of Options issuable under the 2020 Plan, the Company may issue an additional 2,362,527 shares in aggregate pursuant to the exercise of all SARs, RSU, DSUs and PSUs.

(b) Options

The following table reflects the continuity of the stock options granted for the year ended December 31, 2024 and the year ended December 31, 2023:

	December 31, 2024		December 31, 2023
	Number of options	Weighted Average Exercise Price $	Number of options	Weighted Average Exercise Price $
Outstanding, beginning of period	980,179	3.06	1,109,957	2.98
Granted	503,931	1.24	420,148	2.51
Exercised	-	-	(153,204)	(1.42)
Expired/Forfeited	(437,457)	(2.49)	(396,722)	(2.90)
Outstanding, end of period	1,046,653	2.42	980,179	3.06

The following table outlines stock options outstanding as at the year ended December 31, 2024:

Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Options Outstanding	Weighted - Average Exercise Price	Weighted-Average Life	Number of Shares Exercisable	Weighted-Average Exercise Price
$ 1.00 – 12.00	1,046,653	2.42	7.48	330,218	$ 2.86

The following table outlines stock options outstanding as at the year ended December 31, 2023:

Options Outstanding			Options Exercisable
Range of Exercise Prices	Number of Options Outstanding	Weighted - Average Exercise Price	Weighted-Average Life	Number of Shares Exercisable	Weighted-Average Exercise Price
$ 1.00 – 12.00	980,179	3.06	7.00	374,545	$ 3.38

For the years ended December 31, 2024 and 2023, the grant date fair value estimated was based on the following variables:

	2024	2023
Dividend yield	0.00%	0.00%
Risk-free interest rate	3.76%	3.22%
Expected option life in years	6.00	6.00
Volatility	60%	55%
Forfeiture rate	2%	2%

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

15. STOCK OPTIONS & RESTRICTED SHARES (Continued)

The Company estimated the expected term of its stock options based on the vesting and contractual terms. Volatility is estimated based on the average of the historical volatilities of the common stock of entities, with characteristics similar to those of the Company.

Using the Black-Scholes option-pricing model, the weighted-average estimated fair value of employee stock options granted was $0.77 (2023 - $1.35).

Stock compensation expense related to stock options for the year ended December 31, 2024 was $199,313 (December 31, 2023 - $261,265).

(c) Restricted Shares

Since 2016 the Company has provided compensation to select advisors and management all or in part with retractable common shares (the "Restricted Shares" or 'RSU(s)'. Restricted shares grant an individual share in exchange for the promise to provide services over a 1-2 year period. In the event that the individual ceases to be engaged by the Company during the Restricted Share period some or all of the common shares are retracted corresponding to the services not delivered. The fair value of restricted shares is estimated using the market price of the Company's common stock at the date of grant. The Company reports the portion of the common shares that have been fully earned and can no longer be retracted from shares outstanding.

During the years ended December 31, 2024 and 2023 the Company granted 117,451 RSUs (2023 - 146,685), and 121,182 (2023 - 34,874) were forfeited; A total of 107,187 (2023 - 92,796) RSUs vested.

As at December 31, 2024 and 2023 the Company had a total of 176,802 (2023 - 287,720) RSU's outstanding. For the year ended December 31, 2024, the Company recognized share based compensation related to RSU's of $306,880 (2023 - $386,610).

(d) Deferred Shares

The deferred share units ("DSUs") are measured at their grant date fair value and vest immediately, which is equal to the fair value of the Company's common shares. At the Company's discretion, participants shall be entitled to receive payment from the Company in settlement of DSUs in cash, in an amount equal to the product of the FMV of a share on the applicable settlement date, multiplied by the number of DSUs being settled, in a number of shares, or in some combination of the two.

During the year ended December 31, 2024 and 2023, the Company granted 391,750 DSUs (2023 - 123,206) and nil (2023 - 13,430) were converted to shares.

As at December 31, 2024 and 2023 the Company had a total of 692,537 (2023 - 300,787) DSU's outstanding. Stock compensation expense related to DSUs for the year ended December 31, 2024 and 2023 was $375,284 (2023 - $346,385).

(e) Performance Shares

During the year ended December 31, 2024 and 2023, 48,653 performance share units ("PSUs") (2023 - 5,637) were forfeited. The PSUs were to vest upon the achievement of specified revenue per share and earnings before interest, taxes, depreciation and amortization ("EBITDA") percentage targets over the period of October 1, 2023 to December 31, 2023. For the year ended December 31, 2023, because the specified targets were not met, the Company recognized a share based compensation recovery related to PSUs of $133,847. The PSUs were measured at their grant date fair value, which was equal to the fair value of the Company's common shares.

As at December 31, 2024 and 2023 the Company had a total of nil (2023 - 48,653) PSU's outstanding.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

16. COST OF SALES

	Year ended December 31,
	2024	2023
	$	$
Data center costs and software usage rights	11,295,781	14,161,268
Salaries and benefits	32,815,791	33,815,014
Other direct costs	328,157	345,136
	44,439,729	48,321,418
17. EXPENSES
	Year ended December 31,
	2024	2023
General and Administrative	$	$
Salaries and benefits	7,811,434	8,832,437
Professional fees	721,985	1,014,950
Travel, rent and general office	2,113,483	2,384,531
	10,646,902	12,231,918
Research and Development
Salaries and benefits	1,727,640	2,189,571
Software and other expenses	284,074	204,565
	2,011,714	2,394,136
Information Technology and Operations
Salaries and benefits	7,916,244	11,196,510
Internet and software costs	2,156,413	1,978,342
Other expenses	1,200,636	1,406,973
	11,273,293	14,581,825
Sales and Marketing
Salaries and benefits	7,065,727	7,659,580
Advertising and marketing	1,397,319	1,297,041
Travel and other expenses	692,583	920,639
	9,155,629	9,877,260
Interest
Loans, borrowings and standy fees	98,509	194,568
Interest on lease obligations - office space	45,830	60,389
Interest on lease obligations - equipment	3,273	14,303
	147,612	269,260
Restructure and Other
Restructure*	3,728,895	1,253,053
Other	643,897	161,126
	4,372,792	1,414,179

*Included in restructure is $3,705,814 (2023 - $1,144,529) in severance costs.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

18. SEGMENT INFORMATION

The Company’s Chief Executive Officer (“CEO”) has been identified as the chief operating decision maker. The CEO evaluates the performance of the Company and allocates resources based on the information provided by the Company’s internal management system at a consolidated level. The Company has determined that it has only one operating segment.

Geographic information

The following table presents revenue on a geographical basis:

		2024	2023
		$	$
Revenue by location	Canada	17,896,809	22,317,791
	United States	53,155,962	59,793,006
	Other	7,189,652	7,695,010
Total		78,242,423	89,805,807

The following table presents revenue on a disaggregated basis:

		2024	2023
		$	$
Revenue	Managed & IP Solutions (MIPS) &
	Legacy Managed Services (LMS)	35,164,041	43,575,647
	Professional services	43,078,382	46,230,160
Total		78,242,423	89,805,807

19. EARNINGS (LOSS) PER SHARE

To the extent that the Company’s results of operations are a loss, potentially dilutive shares relating to preferred shares, deferred common shares, stock options, RSU’s, DSU’s and PSU’s as set-out below have been excluded from the calculation of the diluted number of shares as the impact would be anti-dilutive.

	2024	2023
RSU’s, DSU’s and PSU’s	869,339	637,160
Stock options	1,046,653	980,179
	1,915,992	1,617,339

20. CAPITAL RISK MANAGEMENT

The general objectives of the Company in managing capital are to ensure sufficient liquidity to pursue its strategy of organic growth and strategic acquisitions in order to continue operating, in providing benefits to its stakeholders and in providing an adequate return on investment to its shareholders by selling its services at a price commensurate with the level of operating risk assumed by the Company. The Company thus determines the total amount of capital required consistent with risk levels.

The Company’s capital structure consists of cash and shareholders’ equity, which is comprised of issued capital, contributed surplus, accumulated other comprehensive income and deficit. The Company does not currently hold debt but may in the future. This capital structure is adjusted on a timely basis depending on changes in the economic environment and in the risks of the underlying assets.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

20. CAPITAL RISK MANAGEMENT (Continued)

In March 2024, the Company entered into a new senior secured credit facility with the National Bank of Canada. The facility provides a $12,000,000 senior secured credit facility with a feature that provides for up to an additional $15,000,000 of borrowing.

The National Bank facility may be drawn by way of Canadian dollar loans or US dollar loans and will mature on March 25, 2026 and will carry an interest rate of prime plus 1.5% per annum and is subject to a general security agreement creating a First-Ranking Security interest in all present and future property of the Company and its subsidiaries. As of December 31, 2024, the Company was in compliance with the financial and non-financial covenants of the facility agreement. As of December 31, 2024, the Company has not drawn on the National Bank facility.

In March 2025, subsequent to year-end, the credit facility was amended to align with the operating cash flow requirements of the Company. The debt was amended to reduce the available credit facility to $8 million.

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and
Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

The carrying values of cash, accounts receivable and accounts payable and accrued liabilities approximate their fair values due to the immediate or short-term nature of these instruments. The carrying value of the current portion of lease liabilities approximate their fair value due to their short term to maturity. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

The following table summarizes the Company's financial instruments measured at fair value at December 31, 2024 and December 31, 2023, by categorization in the fair value hierarchy level:

	Fair value hierarchy level	December 31, 2024 $	December 31, 2023 $
Derivative	Level 2	(162,100)	168,400

Derivative

During 2024, the Company entered into an agreement with a Canadian financial institution to sell $3 million US$ over the first six months of 2025 at an exchange rate of 1.3715 for the first $1.5 million US$ during the first quarter of 2025, and 1.38 for the second $1.5 million US$ during the second quarter of 2025. At December 31, 2024 the gross amount of forward contracts outstanding was $3.0 million US$ and the unrealized decrease in the value of this derivative instrument is $162,100. The fair value of the forward contract was determined using mark-to-market information as at December 31, 2024 from a third party. The balance of the value of the derivative has been included in accounts payable and accrued liabilities (2023 – in prepaid expenses and other current assets) in the consolidated statements of financial position.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

The Company has exposure to the following risks from its use of financial instruments:

Credit Risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Cash, restricted cash and term deposits are placed with major US and Canadian financial institutions and the Company’s concentration of credit risk for cash and maximum exposure thereto is $3,877,687 (2023 — $9,966,961).

With respect to its accounts receivable, the Company assesses the credit rating of all customers and maintains provisions for potential credit losses, and any such losses to date have been within management’s expectations. The Company’s credit risk with respect to trade and other accounts receivable and maximum exposure thereto is $13,325,838 (2023 — $13,020,188). Included in accounts receivable is $88,959 (2023 — $91,059) as a provision for credit losses.

Liquidity risk

Liquidity risk is the risk that the Company will be unable to meet its financial obligations as they fall due. The Company’s approach to managing liquidity risk is to ensure, as far as possible, that it will have sufficient liquid funds to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. At December 31, the Company has liabilities with the following due dates:

	2024
	Under 3 months $	3 months – 1 year $	1 – 2 years $	3 – 5 years $	Total $
A/P and accrued liabilities	4,459,067	-	-	-	4,459,067
Leases payable	139,282	226,492	120,920	-	486,694
	4,598,349	226,492	120,920	-	4,945,761
	2023
	Under 3 months $	3 months – 1 year $	1 – 2 years $	3 – 5 years $	Total $
A/P and accrued liabilities	3,927,822	-	-	-	3,927,822
Leases payable	213,264	444,815	366,524	-	1,024,603
	4,141,086	444,815	366,524	-	4,952,425

The Company manages its liquidity risk by relying upon its revenues and available funds from existing credit facilities.

Market Risks

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to this risk through its long-term debt when incurred. As of December 31, 2024 the Company’s has no long-term debt.

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

21. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Continued)

Foreign Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company enters into foreign currency purchase and sale transactions and has assets and liabilities denominated in foreign currencies resulting in exposure to the financial risk of earnings fluctuations arising from changes in foreign exchange rates and the degree of volatility of these rates. The Company uses derivative instruments to reduce its exposure to foreign currency risk. The Company's financial instruments denominated in foreign currencies and the exchange rate (Canadian dollars per unit of foreign currency) used at the balance sheet date are as follows:

Instrument	Currency	2024	2023
Cash	U.S. Dollar	$ 2,034,179	$ 5,329,082
Cash	Euro	€ 98,764	€ 148,852
Cash	Indian Rupee	₹ 21,367,187	₹ 6,117,973
Term deposit	U.S. Dollar	-	$ 1,000,000
Accounts receivable	U.S. Dollar	$ 7,918,705	$ 7,022,453
Accounts receivable	Euro	€ 149,472	€ 209,046
Accounts receivable	Singapore Dollar	$ 46,146	$ 122,520
Accounts payable	U.S. Dollar	$ 1,125,835	$ 945,651
Accounts payable	Euro	€ 1,172	€ 24,046
Accounts payable	British Pound	£ 3,421	£ 559
Accounts payable	Indian Rupee	₹ 3,666,269	₹ 7,159,805

The year-end exchange rate to the Canadian dollar, by currency, is as follows:

Currency	2024	2023
U.S. dollar	$ 1.4386	$ 1.3257
Euro	€ 1.4986	€ 1.4633
Great British Pound	£ 1.8029	£ 1.6837
Indian Rupee	₹ 0.0168	₹ 0.0160

At December 31, 2024, the Company had net assets of $12,698,593 denominated in USD $8,827,049 [2023 – net assets of $16,446,479 in USD $12,405,883]. A 10% variation in USD, and if all other variables remain constant, would have an impact on comprehensive income of $1,269,859 during 2024 [2023 – $1,644,648]. Operating activities denominated in Euro, Great British Pound, Indian Rupee and Singapore Dollar have a minimal impact on the Company.

22. INCOME TAXES

Income tax expense (recovery) consists of the following components:

	2024 $	2023 $
Current income tax expense (recovery)
Current year	808,625	565,563
Deferred income tax expense (recovery)
Origination and reversal of temporary differences	57,316	46,814
Income tax expense (recovery)	865,941	612,377

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

22. INCOME TAXES (Continued)

The following table reconciles the expected income tax expense (recovery) at the Canadian statutory income tax rates to the amounts recognized in the statement of operations and comprehensive loss for the years ended December 31, 2024 and 2023.

	2024	2023
	$	$
Loss before taxes	(11,022,439)	(6,617,681)
Combined basic federal and provincial tax rates	26.50%	26.50%
Expected income tax recovery at statutory rate	(2,920,946)	(1,753,685)
Increase (decrease) in taxes resulting from:
Non-deductible expenses	(7,287)	76,247
Stock-based compensation	233,592	228,009
Effect of (lower) higher income tax rates of U.S. subsidiary	40,476	249,743
Change in unrecognized deferred tax assets	3,609,272	1,524,680
Adjustments in respect of prior taxation years	335,099	217,485
Other	(424,265)	69,898
Income tax expense (recovery)	865,941	612,377

The significant components of the Company's deferred income tax asset (liabilities) comprise the following:

	As of December 31, 2023 $	Recovery (expense) through earnings $	Other $	As of December 31, 2024 $
Property and equipment	(845,794)	500,412	-	(345,382)
Intangible assets	(143,930)	143,930	-	-
Lease liabilities	117,959	(2,340)	-	115,619
Investment tax credits	40,386	(40,386)	-	-
Tax loss carryforwards	742,414	(306,996)	-	435,418
Other	146,281	(351,936)	-	(205,655)
	57,316	(57,316)	-	-
	As of December 31, 2022 $	Recovery (expense) through earnings $	Other $	As of December 31, 2023 $
Property and equipment	(576,364)	(267,232)	(2,198)	(845,794)
Intangible assets	(1,159,068)	1,015,138	-	(143,930)
Lease liabilities	(18,761)	136,720	-	117,959
Investment tax credits	798,492	(758,106)	-	40,386
Tax loss carryforwards	1,212,247	(469,833)	-	742,414
Other	(150,218)	296,499	-	146,281
	106,328	(46,814)	(2,198)	57,316

Deferred income tax assets are recorded to the extent that the realization of the related tax benefit is probable based on estimated future earnings. Deferred income tax assets have not been recognized with respect to the following deductible temporary differences:

PIVOTREE INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31, 2024 and December 31, 2023

(Expressed in Canadian dollars)

INCOME TAXES (Continued)

	2024	2023
	$	$
Tax loss carryforwards	31,675,535	25,688,990
SRED carryforwards	4,946,976	868,955
Interest deductible in future	4,510,650	2,917,837
Intangible assets	2,804,374	-
Investment tax credits	478,038	180,119
Reserves and other	88,959	-
Financing costs	278,104	880,613
Total unrecognized deductible temporary differences	44,782,636	30,536,514

Tax attributes are subject to review, and potential adjustment, by tax authorities.

The Company has non-capital losses of approximately $31.7 million (2023 - $25.7 million) which are available to reduce future year's taxable income in Canada and the U.S. Non-capital losses will commence to expire in 2040 if not utilized.

No deferred tax liability has been recognized at December 31, 2024 on temporary differences associated with earnings retained in the Company's investments in foreign subsidiaries in which it has an equity percentage. The Company is able to control the timing of the reversal of these differences and currently has no plans in the foreseeable future to repatriate any funds in excess of its foreign investment.

SUPPLEMENTAL CASH FLOW INFORMATION

The following are non-cash investing activities that occurred during the year ended December 31:

	2024	2023
	$	$
Non-cash settlement of earnouts	-	835,212

COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform to the financial statement presentation adopted in the year.

AI assistant

Pivotree Inc. — Audit Report / Information 2024

47959_rns_2025-03-27_141440ca-e138-4dc1-a488-0a6c91877add.pdf

Independent Auditor’s Report

Opinion

Basis for Opinion

Key Audit Matters

Goodwill Impairment

Description of the key audit matter

How the key audit matter was addressed in the audit

Other Information

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Auditor's Responsibilities for the Audit of the Consolidated Financial Statements

1. NATURE OF OPERATIONS

2. MATERIAL ACCOUNTING POLICIES

(a) Basis of Presentation

(b) Basis of consolidation

(c) Functional and presentation currency

2. MATERIAL ACCOUNTING POLICIES (Continued)

(d) Foreign currency transactions:

(e) Foreign operations:

(f) Cash

(g) Short-term investments

(h) Revenue recognition

2. MATERIAL ACCOUNTING POLICIES (Continued)

(i) Professional Services

(ii) Managed Services

2. MATERIAL ACCOUNTING POLICIES (Continued)

(i) Stock-based compensation

(j) Property and Equipment

(k) Leases

2. MATERIAL ACCOUNTING POLICIES (Continued)

(l) Intangible Assets

(m) Business combinations and goodwill

2. MATERIAL ACCOUNTING POLICIES (Continued)

(n) Research and Development

(o) Impairment of non-financial assets

(p) Income Taxes

2. MATERIAL ACCOUNTING POLICIES (Continued)

(q) Financial Instruments

(i) Measurement

2. MATERIAL ACCOUNTING POLICIES (Continued)

(ii) Impairment

Summary of the Company's Classification and Measurements of Financial Assets and Liabilities

(r) Operating Segment

(s) Adoption of new accounting standards

Amendments to IAS 1 Presentation of Financial Statements

2. MATERIAL ACCOUNTING POLICIES (Continued)

"IFRS 18, Presentation and Disclosure in Financial Statements"

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Significant estimates and assumptions

Impairments

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

Deferred taxes

4. RESTRICTED CASH

5. ACCOUNTS RECEIVABLE

6. PREPAID EXPENSES

7. PROPERTY AND EQUIPMENT

8. RIGHT-OF-USE ASSETS

9. INTANGIBLE ASSETS

10. GOODWILL

2024

10. GOODWILL (Continued)

2023

11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

12. LEASE LIABILITIES

12. LEASE LIABILITIES (Continued)

13. RELATED PARTY TRANSACTIONS

Compensation of key management personnel

14. SHARE CAPITAL

15. STOCK OPTIONS & RESTRICTED SHARES

(a) Stock-based Compensation

(b) Options

15. STOCK OPTIONS & RESTRICTED SHARES (Continued)

(c) Restricted Shares

(d) Deferred Shares

(e) Performance Shares

16. COST OF SALES

18. SEGMENT INFORMATION

Geographic information

Pivotree Inc. Audit Report / Information 2024