XTM Inc. — Interim / Quarterly Report 2025

May 30, 2025

XTM Inc.
CSE: PAID, OTCQB: XTMIF, FSE: 7XT
www.XTMINC.com

Interim Condensed Consolidated
Financial Statements

For the periods ended March 31, 2025 and 2024

(These unaudited interim condensed consolidated financial statements, prepared by management, have not been reviewed by the Company's external auditor)

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XTM INC.

Condensed Consolidated Interim Financial Statements for the periods ending March 31, 2025 and 2024

Management's Responsibility for Financial Statements

The accompanying unaudited consolidated condensed interim financial statements of XTM Inc. (the "Company" or "XTM") are the responsibility of management and the Board of Directors.

The unaudited consolidated condensed interim financial statements have been prepared by management, on behalf of the Board of Directors, in accordance with the accounting policies disclosed in the notes to the financial statements. Where necessary, management has made informed judgments and estimates in accounting for transactions, which were not complete at the statement of financial position date. In the opinion of management, the financial statements have been prepared within acceptable limits of materiality and are in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS").

Management has established processes which are in place to provide it sufficient knowledge to support management representations that it has exercised reasonable diligence that (i) the financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of, and for the periods presented by, the financial statements and (ii) the financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented by the financial statements.

The Board of Directors is responsible for reviewing and approving the unaudited consolidated condensed interim financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the financial statements together with other financial information of the Company for issuance to the shareholders.

Management recognizes its responsibility for conducting the Company's affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.

NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the consolidated condensed interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited consolidated condensed interim financial statements have been prepared by, and are the responsibility of, the Company's management. The Company's independent auditor has not performed a review of these financial statements.

DATED 30th day of May, 2025

XTM INC.

Per: (signed) "Marilyn Schaffer"
Name: Marilyn Schaffer
Title: Chief Executive Officer

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Table of Contents

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 3
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS 4
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) 5
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS 6
1. NATURE OF OPERATIONS 7
2. BASIS OF PREPARATION AND PRESENTATION 8
3. MATERIAL ACCOUNTING POLICIES 9
4. CASH 9
5. INVENTORY 9
6. PREPAID EXPENSES 10
7. CONTRACT ASSETS 10
8. PROPERTY AND EQUIPMENT 10
9. RIGHT-OF-USE ASSETS 11
10. INTANGIBLE ASSETS 12
11. LOAN PAYABLE 12
12. LEASE LIABILITIES 12
13. CAPITAL STOCK 13
14. CONVERTIBLE DEBENTURES & SUBSCRIPTION RECEIPTS 18
15. RELATED PARTY BALANCES AND TRANSACTIONS 21
16. UNEARNED REVENUE 22
17. COMMITMENTS AND CONTINGENCIES 22
18. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 22
19. MANAGEMENT OF CAPITAL 24
20. CLIENT AND CARDHOLDER FUNDS – RESTRICTED CASH AND PROGRAM DEPOSITS 25
21. GOVERNMENT LOAN 25
22. NET REVENUES 25
23. SUBSEQUENT EVENTS 26

2

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Expressed in Canadian Dollars	Note	As At March 31,	December 31,
		2025	2024
ASSETS
Current
Cash	4	$ 127,673	$ 64,130
Cash - restricted	20	51,187,360	65,431,206
Trade and other receivables	18	805,055	584,357
Receivables – restricted	18	166,814	2,395,732
Prepaid expenses	6	342,249	415,860
Inventory	5	133,999	65,374
Contract assets	7	308,049	387,291
		53,071,199	69,343,950
Property and equipment	8	161,228	315,648
Right-of-use assets	9	3,396	605,720
Prepayment option on convertible note	14	2,735	2,735
Intangible assets	10	5,579,074	5,992,947
Goodwill		920,000	920,000
Total Assets		$ 59,737,632	$ 77,181,000
LIABILITIES
Current
Trade and other payables	18	$ 12,389,645	$ 11,119,681
Program deposits	18,20	67,395,097	76,950,759
Sales tax payable		126,553	145,465
Due to related party	15	146,725	218,509
Loan payable	11	261,042	4,982,366
Unearned revenue	16	905,960	1,148,008
Current portion of lease liabilities	12	4,009	164,367
		81,229,031	94,729,155
Long term portion of lease liabilities	12	88	60,000
Government loan	21	60,000	595,713
Convertible debentures	14	9,695,373	9,688,036
Subscription receipts	14	1,183,109	1,184,179
Total Liabilities		$ 92,167,601	$ 106,257,083
SHAREHOLDERS’ EQUITY (DEFICIT)
Share capital	13	28,231,411	27,795,879
Contributed surplus	13	2,130,023	2,154,880
Equity conversion feature on convertible note	13,14	174,222	174,222
Warrant reserve	13,14	61,255	61,255
Cumulative translation reserve		(19,427)	(298,363)
Accumulated deficit		(63,007,453)	(58,963,956)
Total Shareholders’ Equity (Deficit)		(32,429,969)	(29,076,083)
Total Liabilities and Shareholders’ Equity (Deficit)		$ 59,737,632	$ 77,181,000
Commitments and contingencies	17
Subsequent events	23
Going concern	1

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

APPROVED BY THE BOARD OF DIRECTORS:

"Marilyn Schaffer" "Keith McKenzie" "Olga Balanovskaya"
Director Director Director

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

Expressed in Canadian Dollars	Note	March 31, 2025	For the three months ended, March 31, 2024
Net revenues	22	$ 2,735,507	$ 1,812,397
Cost of sales		2,202,652	1,855,290
Gross (loss) profit		532,855	(42,893)
Expenses
Salaries and employee benefits	15	2,039,269	2,827,160
Depreciation and amortization	8,9,10	458,124	560,974
Share-based compensation	13,15	344,269	347,210
Office and general		308,066	478,097
Consulting		297,201	170,128
Interest on debentures	14	296,781	172,194
Bank charges and interest		217,512	57,604
Professional fees		204,946	305,354
Public company and regulatory		47,473	24,738
Marketing and promotion		28,413	76,956
Travel, meals and entertainment		21,747	21,390
Bad debt and expected credit loss		19,298	9,072
Accretion on debentures	14	14,835	26,228
Other expenses (income)		(321,621)	95,244
Total expenses		3,976,313	5,172,349
Loss from operations		(3,443,458)	(5,215,242)
Income taxes		-	-
Net loss for the period		$(3,443,458)	$(5,215,242)
Other comprehensive (loss) income		278,936	(49,867)
Net loss and comprehensive loss		$(3,164,522)	$(5,265,109)
Net loss per share - Basic and diluted		$ (0.01)	$ (0.03)
Weighted average number of shares outstanding - Basic and diluted		227,402,221	208,834,324

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

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
For the three months ended March 31, 2025 and 2024

	Notes	Number of Common Shares	Amount	Warrant Reserve	Equity conversion feature on convertible note	Contributed Surplus	Cumulative Translation Reserve	Accumulated Deficit	Total Shareholders' Equity
Balance, January 1, 2024		208,758,818	26,474,701	53,020	589,836	1,127,791	31,287	(35,606,600)	(7,329,965)
Prior year translation of foreign operations	13	-	-	-	-	-	-	(3,461)	(3,461)
Restricted stock units issued	13	171,500	28,499	-	-	(28,499)	-	-	-
Shares issued for stock options	13	146,875	13,983	-	-	13,923	-	-	27,906
Stock options vested	13	-	-	-	-	188,178	-	-	188,178
Restricted stock units vested	13	-	-	-	-	101,126	-	-	101,126
Convertible debentures equity component	13	-	-	-	(415,614)	-	-	-	(415,614)
Warrants issued from convertible debentures	13	-	-	8,235	-	-	-	-	8,235
Other comprehensive loss from translation of foreign operations		-	-	-	-	-	(46,180)	-	(46,180)
Net loss for the period		-	-	-	-	-	-	(4,932,163)	(4,932,163)
Balance, March 31, 2024		209,077,193	26,517,183	2,696,491	174,222	1,402,519	(14,893)	(40,542,224)	(12,401,938)
Balance, January 1, 2025		224,351,948	27,795,879	61,255	174,222	2,154,880	(298,363)	(58,963,956)	(29,076,083)
Prior year translation of foreign operations		-	-	-	-	-	-	(137,650)	(137,650)
Restricted stock units issued	13	2,666,875	188,319	-	-	(188,319)	-	-	-
Shares withheld/settled for taxes	13	(447,671)	-	-	-	-	-	-	-
Shares issued for stock options	13	12,500	807	-	-	568	-	-	1,375
Stock options vested	13	-	-	-	-	127,808	-	-	127,808
Restricted stock units vested	13	-	-	-	-	35,086	-	-	35,086
Shares issues for convertible debenture interest	14	4,106,759	246,406	-	-	-	-	-	246,406
Other comprehensive loss from translation of foreign operations		-	-	-	-	-	278,936	(462,389)	(183,453)
Net loss for the period		-	-	-	-	-	-	(3,443,458)	(3,443,458)
Balance, March 31, 2025		230,690,411	28,231,411	61,255	174,222	2,130,023	(19,427)	(63,007,453)	(32,429,969)

The accompanying notes are an integral part of the unaudited condensed consolidated interim financial statements.

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INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

Expressed in Canadian Dollars	Note	For the period ended March 31, 2025	December 31, 2024
OPERATING ACTIVITIES
Net loss for the year		$(3,443,458)	$(16,082,923)
Items not affecting cash:
Accretion & Interest on convertible debentures	14	311,616	273,653
Depreciation of property and equipment	8	39,528	97,599
Depreciation of right-of-use assets	9	7,553	231,230
Amortization of intangible assets	10	407,776	604,717
Expected credit loss		19,298	51,467
Interest on lease liabilities	12	-	6,187
Share-based compensation	13	410,675	1,615,261
Loss/(Gain) on sale of capital asset		3,265	-
Unrealized loss on prepayment option remeasurement	14	-	87,277
		(2,243,747)	(13,115,532)
Changes in non-cash working capital:
Accounts payable	18	1,242,084	6,250,453
Cash – restricted	20	14,239,947	1,300,550
Contract assets	7	79,242	(136,604)
Program deposits	20	(9,555,661)	4,587,500
Prepaid expenses	6	73,427	(173,410)
Trade and other receivables	18	(546,447)	75,959
Receivables - restricted	18	2,222,532	(486,542)
Inventory	5	(68,669)	(410,566)
Unearned revenue	16	(241,515)	639,938
		7,444,940	11,647,278
Cash flows used by operating activities		5,201,193	(1,468,254)
INVESTING ACTIVITIES
Additions of property and equipment	8	-	(6,824)
Disposals of property and equipment	8	111,129	11,486
Disposals of right-of-use assets	10	593,218	-
Acquisition of property and equipment	8	-	(469,584)
Acquisition of right-of-use assets	11	-	(287,268)
Addition of right of use assets	11	-	(105,380)
Acquisition of intangible assets	10	-	(7,751,744)
Investments		-	(2,014,786)
Cash flows used by investing activities		704,347	(10,624,100)
FINANCING ACTIVITIES
Advances (to) from related parties	15	(71,784)	1,776,419
Issuance of common shares	13	-	4,626,296
Addition of lease liabilities	12	(754,006)	170,567
Net proceeds from convertible debt issuance	14	(305,349)	1,483,204
Subscription receipts	14	-	1,088,467
Net proceeds from (repayment to) EWA facility	11	(4,708,949)	-
Net proceeds from warrants	13	-	53,021
Cash flows from financing activities		(5,840,088)	9,197,974
Foreign exchange affecting cash		968	300,850
Decrease in cash		66,420	(2,593,530)
Cash, beginning of period		61,253	2,687,626
Cash, end of period	4	$ 127,673	$ 94,096

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

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XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

1. NATURE OF OPERATIONS

XTM Inc. ("XTM" or the "Company"), with offices in Miami, Toronto, Denver and London, is a Fintech creator of payment innovations including fully certified Earned Wage Access ("EWA") through its AnyDay™ product. Founded in the cloud-banking space to further support businesses to inspire their workforce in the hospitality, personal care and services staffing industries, XTM provides on-demand pay for many large brands including Earls, Maple Leaf Sports & Entertainment, Cactus Club, Marriott Hotels and Live Nation.

The Company was incorporated under the Ontario Business Corporations Act on December 1, 2005. The head office, principal address and registered office of the Company is located at 67 Mowat Avenue, Suite 437, Toronto, Ontario, Canada, M6K 3E3 and the head United States office is located at 1221 Brickell Ave Suite 900 Miami, FL, 33310.

On March 10, 2020, the common shares of the Company were listed on the Canadian Securities Exchange under the trading symbol PAID. On April 29, 2020, the common shares of the Company were listed on the Frankfurt Stock Exchange (Deutsche Boerse AG) under the symbol "7XT". On March 5, 2021, XTM's shares started trading on the OTCQB Venture Market, a US trading platform that is operated by OTC Markets Group in New York. The Company's symbol is "XTMIF".

Going Concern

The Company's unaudited condensed consolidated interim financial statements are prepared on a going-concern basis, which contemplates the realisation of assets and the satisfaction of obligations in the normal course of business.

The unaudited condensed consolidated interim financial statements show a net loss of $3,443,458 for the three months ended March 31, 2025 (March 31, 2024 - $4,932,163) due primarily to higher expenses from the assumption of QRails expenses after acquisition on August 18, 2024. There is a working capital deficit of $28,157,832 (December 31, 2024 - $25,385,205), a trust deficit of $16,207,737 (December 31, 2024 - $11,519,553) and, as at that date, the Company had an accumulated deficit of $63,007,453 (December 31, 2024 - $58,963,956). These conditions indicate the existence of material uncertainties that may cast significant doubt over the ability of the Company to continue as a going concern.

In view of these matters, continuation as a going concern is dependent upon the continued development of the financial product and services of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations. The audited consolidated financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should the Company not continue as a going concern.

Management is funding operations of the Company through advances from existing shareholders, private placement of convertible debt, credit facilities, restricted cash or the issuance of shares in lieu of cash for payment of services and chooses the best funding method that is in the best interest of the Company and related stakeholders at the time of funding.

On January 1, 2025, the Company obtained a term sheet for $13,000,000 lending facility from which funds can be used for operations (with approval from the lender) and the deficit of restricted cash fully reconciled on demand, in the event a customer demands repayment of the restricted cash. Note that while the deficit of restricted cash has not been cured, the funds available under the credit facility can be used for the settlement of any demands for restricted cash in the event of such demand.

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XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

2. BASIS OF PREPARATION AND PRESENTATION

a) Statement of compliance

The unaudited condensed consolidated interim financial statements for the three-month period ended March 31, 2025 were prepared in accordance with International Accounting Standards ("IAS") 34, Interim Financial Reporting, using the same accounting policies as those used in the Company's most recent audited annual consolidated financial statements. These unaudited condensed consolidated interim financial statements do not include all the disclosures included in the Company's audited annual consolidated financial statements. Accordingly, these unaudited condensed consolidated interim financial statements should be read together with the most recent audited annual consolidated financial statements.

These unaudited condensed consolidated interim financial statements for the period ended March 31, 2025, were authorized for issue by the Company's Board of Directors on May 30, 2025.

b) Basis of presentation

The unaudited condensed consolidated interim financial statements are prepared on a going concern basis under the historical cost convention and in accordance with IAS 34, Interim Financial Reporting using the same accounting policies and methods of computation as presented in the audited annual consolidated financial statements for the year ended December 31, 2024. Unless otherwise stated, the unaudited condensed consolidated interim financial statements are presented in Canadian dollars which is the Company's functional and presentation currency as (i) the Company is based in Canada; (ii) the majority of its costs are denominated in Canadian dollars; and (iii) the majority of its revenues are denominated in Canadian dollars.

In the preparation of these unaudited condensed consolidated interim financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and the reported amounts of expenses during the year.

Estimates are based on management's best knowledge of current events and actions the Company may undertake in the future. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The estimates, judgements and assumptions used in the most recent audited annual consolidated financial statements do not differ materially from those used for these condensed consolidated interim financial statements.

c) Basis of consolidation

The unaudited condensed consolidated interim financial statements include the accounts of the Company's wholly owned subsidiaries below:

Name of Subsidiary and / or Investment	Place of Incorporation	Ownership Interest	Functional Currency	Status
XTM Inc.	Ontario, Canada	100%	CAD	Active
XTM USA Inc.	Delaware, United States	100%	USD	Active
QRails, Inc.	Delaware, United States	100%	USD	Active
QRails Limited	United Kingdom	100%	GBP	Active
QRails Ireland Ltd.	Ireland	100%	EUR	Active

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XTM Inc.
Notes to the unaudited condensed consolidated interim financial statements
For the three months ended March 31, 2025 and 2024

Intercompany transactions, balances and unrealized gains or losses between subsidiaries are eliminated in the preparation of the condensed consolidated financial statements. The financial statements of the subsidiaries are prepared for the same reporting period as the reporting Company using consistent accounting policies.

d) Critical accounting estimates and judgements

In preparing these unaudited condensed consolidated interim financial statements, management has made critical judgements, estimates and assumptions that affect the applicability of the Company's accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. Management reviews these judgements, estimates and 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 prospectively in the period in which the estimates are revised. In preparing these unaudited condensed consolidated interim financial statements, the significant estimates and critical judgments were the same as those applied to the audited annual consolidated financial statements as at and for the year ended December 31, 2024.

1. MATERIAL ACCOUNTING POLICIES

The accounting policies followed by the Company are set out in the audited annual consolidated financial statements for the year ended December 31, 2024 and have been consistently followed in the preparation of these unaudited condensed consolidated interim financial statements.

1. CASH

Cash is comprised of bank balances at major Canadian and US financial institutions. Transaction costs are expensed when incurred. As at March 31, 2025, the Company held the totals below in cash and is not currently utilizing money market instruments (December 31, 2024; $nil).

Expressed in Canadian Dollars	As at March 31, 2025	As at December 31, 2024
Cash consists of:
CAD Operating account	$92,448	$27,909
USD Operating account	35,225	36,221
	$127,673	$64,130

1. INVENTORY

Inventory is comprised of the following items:

Expressed in Canadian Dollars	As at March 31, 2025	As at December 31, 2024
Payment cards	$120,201	$51,049
Program collateral & envelopes	13,798	14,325
	$133,999	$65,374

Inventories are written down for any obsolescence or when the net realizable value considering future events and conditions is less than the carrying value. There were no write-downs in the three months ended March 31, 2025.

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XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

6. PREPAID EXPENSES

The Company's prepaid expenses are comprised of the following amounts:

	As at March 31, 2025	As at December 31, 2024
Prepaid expenses consist of:
Insurance premiums	$26,217	$41,021
Subscriptions	78,386	108,289
Licensing Fees	111,062	111,062
Program and other operating related	65,277	86,871
Leasehold deposits	13,248	13,238
Consulting services & other	48,059	55,379
	$342,249	$415,860

Program and other operating related prepaid expenses consist of payments for trade shows, debit card inventory, association fees, and deposits with service providers.

7. CONTRACT ASSETS

Contract assets represent the balance of deferred cost of goods sold pertaining to card issuance. The cost of goods sold is deferred over the term of clients' contracts. Management estimates the average term of contracts as 2.5 years, and an estimated gross margin of 25%. A continuity for contract assets for the periods ending March 31, 2025 and December 31, 2024, is as follows:

Contract	Amount
Balance, January 1, 2024	$384,121
Additions deferred to future periods	342,240
Unearned revenue recognized in current year	(339,070)
Balance, December 31, 2024	$387,291
Additions deferred to future periods	$14,785
Unearned revenue recognized in current year	(94,027)
Balance, March 31, 2025	$308,049

8. PROPERTY AND EQUIPMENT

A continuity of the property and equipment, including finance leases for the period ended March 31, 2025 is as follows:

Property and equipment Cost	Computer Equipment	Furniture and Fixtures	Servers and Hardware	Telephone Equipment	Total
Balance as at January 1, 2024	$150,353	$107,431	$459,365	$8,707	$725,856
Additions	-	-	-	-	-
Derecognition	-	(32,517)	(25,000)	(8,707)	(66,224)
Foreign exchange effect	2,063	-	38,013	-	40,076
Balance as at December 31, 2024	$152,416	$74,914	$472,378	$ -	$699,708
Additions	-	-	-	-	-
Derecognition	-	-	-	-	-
Foreign exchange effect	(21)	-	(427)	-	(448)
Balance as at March 31, 2025	$ 152,395	$74,914	$471,951	$ -	$699,260

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XTM Inc.
Notes to the unaudited condensed consolidated interim financial statements
For the three months ended March 31, 2025 and 2024

Accumulated Depreciation
Balance as at January 1, 2024	($100,489)	($62,942)	($74,720)	($8,242)	($246,393)
Depreciation	(27,999)	(6,204)	(139,523)	-	(173,726)
Derecognition	-	19,051	21,264	8,242	48,557
Foreign exchange effect	(953)	-	(11,545)		(12,498)
Balance as at December 31, 2024	($129,441)	($50,095)	($204,524)	$ -	($384,060)
Depreciation	(5,480)	(1,241)	(36,073)	-	(42,794)
Derecognition	-	-	(111,129)	-	(111,129)
Foreign exchange effect	(16)	(7)	(26)	-	(49)
Balance as at March 31, 2025	($134,937)	($51,343)	($351,752)	$ -	(538,032)
Carrying Amount
---	---	---	---	---	---
Balance as at December 31, 2024	$22,975	$24,819	$267,854	$ -	$315,648
Balance as at March 31, 2025	$17,458	$23,571	$120,199	$ -	$161,228

9. RIGHT-OF-USE ASSETS

Cost	Total
Balance as at January 1, 2024	$732,386
Additions	687,383
Effects of foreign exchange	66,031
Balance as at December 31, 2024	$1,485,800
Derecognition	(728,103)
Effects of foreign exchange	(934)
Balance as at March 31, 2025	$756,763
Accumulated Depreciation	Total
---	---
Balance as at January 1, 2024	($490,475)
Depreciation	(365,152)
Effects of foreign exchange	(24,453)
Balance as at December 31, 2024	($880,080)
Depreciation	(7,554)
Derecognition	133,893
Effects of foreign exchange	374
Balance as at March 31, 2025	($753,367)
Carrying Amount	Total
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Balance as at December 31, 2024	$605,720
Balance as at March 31, 2025	$3,396

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XTM Inc.
Notes to the unaudited condensed consolidated interim financial statements
For the three months ended March 31, 2025 and 2024

10. INTANGIBLE ASSETS

A continuity of the intangible assets for the period ended March 31, 2025 is as follows:

Cost	Software platform acquired	Software platform	Total
Balance as at January 1, 2024	$7,565,272	$424,000	$7,989,272
Effects of foreign exchange	665,237	-	665,237
Balance as at December 31, 2024	$8,230,509	$424,000	$8,654,509
Effects of foreign exchange	(7,436)	-	(7,436)
Balance as at March 31, 2025	$8,223,073	$424,000	$8,647,073
Accumulated Amortization			Total
---	---	---	---
Balance as at January 1, 2024	($553,574)	($397,143)	($950,717)
Amortization	(1,567,617)	(26,858)	(1,594,475)
Effects of foreign exchange	(116,370)	-	(116,370)
Balance as at December 31, 2024	($2,237,561)	($424,001)	($2,661,562)
Amortization	(408,458)	1	(408,457)
Effects of foreign exchange	2,020	-	2,020
Balance as at March 31, 2025	($2,643,999)	($424,000)	($3,067,999)
Carrying Amount			Total
---	---	---	---
Balance as at December 31, 2024	$5,992,947	$-	$5,992,947
Balance as at March 31, 2025	$5,579,074	$-	$5,579,074

Subsequent to quarter end, the software platform acquired was sold as described in note 23.

11. LOAN PAYABLE

In March 2024, the Company secured, senior first lien revolving credit facility to fund eligible EWA advances with an initial capacity of US$20M, with incremental capacity available to $100M. The facility bears interest at a rate of the facility is 13% per annum, compounded monthly and has a maturity date of March 31, 2026 (inclusive of a 12-month extension option). The credit facility includes a guarantee by the Company.

As at March 31, 2025 the Company had drawn $261,042 the credit facility as a loan payable (December 31, 2024 - $4,982,366).

12. LEASE LIABILITIES

A continuity of the Company's lease liabilities, which consist of an office lease is as follows:

Item	Amount
Balance, January 1, 2024	$257,435
Addition of new leases	665,050
Repayment of lease liability	(282,199)
Interest expense on lease liability	63,750
Effect of foreign exchange	56,044
Balance, December 31, 2024	$760,080
Addition of new leases	10,522
Termination of lease liability	(765,808)

---

XTM Inc.
Notes to the unaudited condensed consolidated interim financial statements
For the three months ended March 31, 2025 and 2024

| Interest expense on lease liability
Effect of foreign exchange | -
(697) |
| --- | --- |
| Balance, March 31, 2025 | $4,097 |
| Lease liabilities due within one year | 4,009 |
| Lease liabilities – long term | 88 |
| Total lease liabilities, March 31, 2025 | $4,097 |

The Company's lease term at its head office in Canada expired on November 30, 2024 and the Company is leasing month-to-month.

In Q1 2025, the Company terminated its office lease in Denver, Colorado and removed the lease liabilities and corresponding right-of-use assets.

13. CAPITAL STOCK

Share capital

The Company is authorized to issue an unlimited number of common shares and an unlimited number of preference shares.

Shares issued and outstanding	Number of common shares	$
Shares issued and outstanding as at January 1, 2024	208,758,818	26,474,701
Shares issued for restricted stock units (ii)	3,846,500	327,074
Shares issued for stock options	296,875	26,641
Shares settled for taxes	(429,188)	-
Shares issued for convertible debentures	1,449,755	217,463
Shares issued for director fees (i)	10,000,000	750,000
Shares issued and outstanding as at December 31, 2024	223,922,760	27,795,879
Shares withheld for taxes	(18,483)	-
Shares issued for restricted stock units (iii)	2,666,875	188,319
Shares issues for convertible debenture interest (v)	4,106,759	246,406
Shares issued for stock options (iv)	12,500	807
Shares issued and outstanding as at March 31, 2025	230,690,411	28,231,411

Year ended December 31, 2024

(i) On December 12, 2024, the Company issued 10,000,000 shares at $0.075 per share for a total value of $750,000 to 3 members of the board of directors as part of the annual Board of Directors Compensation plan.

(ii) On December 31, 2024, the Company recorded share-based compensation pertaining to director fees of $750,000 (2023 - $390,000) during the year - Note 15.

Period ended March 31, 2025

(iii) On January 7, 2025, the Company issued 2,500,000 shares at $0.07 per share for a total value of $175,000 to a director due to RSU's granted in prior periods vesting. On January 20, 2025, the Company issued 100,000 shares at $0.095 per share for a total value of $9,500 to a director due to RSU's granted in prior periods vesting. On March 11, 2025, the company issued 110,000 shares at $0.192 per share for a total value of $21,156 to employees due to RSU's granted in prior periods vesting.

---

XTM Inc.
Notes to the unaudited condensed consolidated interim financial statements
For the three months ended March 31, 2025 and 2024

Restricted stock units

	Number of RSUs Granted	Weighted Avg. Exercise Price ($)
Balance January 1, 2024	3,948,500	0.25
Granted (vi) (vii) (ix) (x) (xi) (xiii)	6,845,000	0.15
Issued	(3,346,500)	0.13
Canceled (viii) (xii) (xiv)	(215,750)	0.16
Settled for taxes	-	0.16
Balance December 31, 2024	7,231,250	0.16
Granted (xvi) (xvii)	135,000	0.03
Issued	(2,651,948)	0.07
Cancelled (xviii) (xix) (xx)	(545,000)	0.13
Settled for taxes	(14,927)	0.06
Balance March 31, 2025	4,154,375	0.16

Year ended December 31, 2024

(iv) On April 1, 2024, the Company granted 2,500,000 RSUs to executives of the Company under the RSU plan which vest quarterly in equal allotments over a 24-month period. The RSUs issued had a grant date fair value of $387,500 based on the closing price per common share. The expense is recorded in stock-based compensation on the consolidated statements of loss and comprehensive loss.

(v) On April 5, 2024, the Company granted 500,000 RSUs to an executive of the Company under the RSU plan which vest quarterly in equal allotments over a 24-month period. The RSUs issued had a grant date fair value of $92,500 based on the closing price per common share. The expense is recorded in stock-based compensation on the consolidated statements of loss and comprehensive loss.

(vi) On June 15, 2024, 15,000 RSU's which were previously granted on September 1, 2023, were forfeited by an employee who left the Company.

(vii) On August 2, 2024, 8,750 RSU's which were previously granted on September 1, 2023, were forfeited by an employee who left the Company.

(viii) On October 7, 2024, the Company granted 2,500,000 RSUs to an executive of the Company under the RSU plan which vest monthly in equal allotments over a 3-month period. The RSUs issued had a grant date fair value of $275,000 based on the closing price per common share. The expense is recorded in stock-based compensation on the consolidated statements of loss and comprehensive loss.

(ix) On October 7, 2024, the Company granted 75,000 RSUs to an employees of the Company under the RSU plan which vest quarterly in equal allotments over a 24-month period. The RSUs issued had a grant date fair value of $8,250 based on the closing price per common share. The expense is recorded in stock-based compensation on the consolidated statements of loss and comprehensive loss.

(x) On October 11, 2024, 60,000 RSUs which were previously granted on September 1, 2023, were forfeited by an employee who left the Company.

(xi) On October 15, 2024, the Company granted 50,000 RSU's to an employee of the Company under the RSU plan which vest immediately. The RSU's had a grant date fair value of $3,000 based on the closing price per common share. The expense is recorded in stock-based compensation on the consolidated statements of loss and comprehensive loss.

14

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XTM Inc.
Notes to the unaudited condensed consolidated interim financial statements
For the three months ended March 31, 2025 and 2024

(xii) On October 18, 2024, 32,000 RSU’s which were previously granted on September 1, 2023, were forfeited by an employee who left the company.

(xiii) On November 19, 2024, 80,000 RSU’s which were previously granted on April 1, 2024, were forfeited by an executive who left the company. In addition, 20,000 RSU’s, which were previously granted on September 1, 2023, were forfeited by an employee who left the company.

(xiv) On November 29, 2024, the Company granted 3,000,000 RSU’s to an employee of the Company under the RSU plan which vest immediately. The RSU’s had a grant date fair value of $225,000 based on the closing price per common share. The expense is recorded in stock-based compensation on the consolidated statements of loss and comprehensive loss.

(xv) As at December 31, 2024, the Company recorded share-based compensation of $588,572 in the consolidated statements of loss and comprehensive loss.

Three months ended March 31, 2025

(xviii) On February 26, 2025, the Company granted 85,000 RSU’s to an employee of the Company under the RSU plan which vest quarterly in equal allotments over a 24-month period. The RSU’s issued had a grant date fair value of $2,975 based on the closing price per common share. The expense is recorded in stock-based compensation on the consolidated statements of loss and comprehensive loss.

(xix) On February 28, 2025, the Company granted 50,000 RSU’s to an employee of the Company under the RSU plan which vest quarterly in equal allotments over a 24-month period. The RSU’s issued had a grant date fair value of $1,750 based on the closing price per common share. The expense is recorded in stock-based compensation on the consolidated statements of loss and comprehensive loss

(xx) On January 6, 2025, 15,000 RSU’s which were previously granted on September 1, 2023, were forfeited by an employee who left the Company.

(xxi) On February 14, 2025, 2,000,000 and 1,000,000 RSU’s, which were previously granted on April 1, 2023, and April 1, 2024, respectively, were forfeited by a director who left the Company.

(xxii) On March 26, 2025, 30,000 RSU’s which were previously granted on September 1, 2023, were forfeited by an employee who left the company.

Stock options

	Number of Options	Weighted Average Exercise Price
Balance outstanding, January 1, 2024	16,322,500	$0.14
Granted (xxiii)	2,075,000	$0.12
Exercised	(296,875)	$0.16
Expired / Forfeited (xxiv)	(3,456,500)	$0.10
Balance outstanding, December 31, 2024	14,644,125	$0.15
Granted (xxvi) (xxvii)	875,000	$0.05
Exercised (xxviii)	(8,942)	$0.06
Expired / Forfeited (xxix)	(2,836,625)	$0.14
Settled for Taxes (xxviii)	(3,558)	$0.06
Balance outstanding, March 31, 2025	12,670,000	$0.15

15

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XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

Year Ended December 31, 2024

(xxiii) The Company granted 2,075,000 stock options to employees and officers of the Company, with 12.5% vesting every quarter from the day of the grant.

(xxiv) There were 3,456,500 stock options cancelled/forfeited during the period as a result of employee turnover.

(xxv) The Company recorded $788,292 in stock-based compensation relating to stock options (December 31, 2023; $256,073).

Three months ended March 31, 2025

(xxvi) The company granted 175,000 stock options on February 26, 2025, to employees of the Company, with 12.5% vesting every quarter from the day of the grant.

(xxvii) The company granted 100,000 stock options on February 28, 2025, to employees of the Company, with 12.5% vesting every quarter from the day of the grant.

(xxviii) On January 17, 2025, there were 12,500 stock options exercised at strike price $0.11, with fair value on exercise date of $0.07. 3,558 options were withheld for taxes.

(xxix) There were 2,836,625 options cancelled/forfeited due to employee turnover.

(xxx) The company recorded $129,183 in stock-based compensation related to stock options (March 31, 2024: $216,084).

The fair value of stock options was determined using the Black Scholes model with the following assumptions:

Grant Date	Share Price	Exercise Price	Term	Dividend Rate	Risk-free rate	Volatility
8-Mar-22	0.33	0.33	3 years	0%	1.49%	82%
13-May-22	0.25	0.19	3 years	0%	2.68%	85%
30-Nov-22	0.13	0.13	3 years	0%	3.64%	94%
1-Feb-23	0.16	0.16	3 years	0%	3.38%	96%
1-Apr-23	0.155	0.155	3 years	0%	3.51%	97%
1-Sep-23	0.125	0.125	3 years	0%	4.31%	104%
31-Jan-24	0.125	0.125	1 year	0%	5.07%	181%
2-Nov-23	0.16	0.16	3 years	0%	3.38%	107%
31-Jan-24	0.19	0.19	3 years	0%	3.77%	96%
14-Feb-24	0.155	0.155	3 years	0%	4.02%	96%
1-Apr-24	0.18	0.18	3 years	0%	4.00%	137%
15-Apr-24	0.165	0.145	3 years	0%	4.11%	137%
20-Jun-24	0.12	0.15	3 years	0%	3.74%	139%
07-Oct-24	0.085	0.11	3 years	0%	3.21%	141%
29-Nov-24	0.08	0.075	3 years	0%	2.98%	150%
17-Dec-24	0.07	0.065	3 years	0%	2.95%	151%
26-Feb-25	0.06	0.065	3 years	0%	2.63%	156%
28-Feb-25	0.06	0.06	3 years	0%	2.55%	156%
10-Mar-25	0.06	0.055	3 years	0%	2.53%	156%
15-Mar-25	0.05	0.05	3 years	0%	2.57%	160%

---

XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

Details of options outstanding as at March 31, 2025:

Expiry Date	Number of Options Outstanding	Exercise Price ($)	Weighted Average Remaining Contractual Life (years)	Number of Options Exercisable
May 13, 2025	400,000	$0.19	0.1	400,000
November 29, 2025	190,000	$0.13	0.7	190,000
March 31, 2026	1,750,000	$0.16	1.0	1,750,000
September 1, 2026	8,317,500	$0.13	1.4	7,155,000
February 14, 2027	50,000	$0.16	1.9	25,000
April 15, 2027	100,000	$0.15	2.0	37,500
June 19, 2026	100,000	$0.15	2.2	100,000
October 7, 2027	87,500	$0.11	2.5	0
November 29, 2027	750,000	$0.08	2.7	93,750
December 17, 2027	50,000	$0.07	2.7	6,250
February 25, 2028	175,000	$0.07	2.9	0
February 27, 2028	100,000	$0.06	2.9	0
March 9, 2028	100,000	$0.06	2.9	0
March 14, 2028	500,000	$0.05	3.0	0
Balance	12,670,000	$0.13	1.4	9,757,500

Warrants

Summary of the warrant activity is as follows:

	Number of Warrants	Weighted Avg. Exercise Price ($)
Balance January 1, 2024	1,405,000	0.40
Warrants extinguished from convertible debentures	(990,000)	0.40
Balance December 31, 2024	415,000	0.40
Balance March 31, 2025	415,000	0.40

Warrants outstanding as at March 31, 2025 were as follows:

Expiry Date	Number of Warrants	Exercise Price ($)
31-May-25	415,000	0.40

The weighted average life of the warrants outstanding and exercisable at March 31, 2025 is 0.2 years.

Broker Warrants

Summary of the broker warrants activity is as follows:

	Number of Warrants	Weighted Average Exercise Price ($)
Balance December 31, 2023	51,500	0.40
Issued	146,909	0.40
Balance December 31, 2024	198,409	0.40
Balance March 31, 2025	198,409	0.40

---

XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

Broker warrants outstanding as at March 31, 2025 were as follows:

Expiry Date	Number of Warrants	Exercise Price ($)
30-May-25	51,500	0.40
29-Feb-26	146,909	0.40
	198,409	0.40

The weighted average life of the broker's warrants outstanding at March 31, 2025 is 1.0 years.

14. CONVERTIBLE DEBENTURES & SUBSCRIPTION RECEIPTS

Q2 2023 Tranche

On April 28, 2023, the Company announced that they intend to complete a non-brokered private placement of convertible debentures of the Company (each, a "Convertible Debenture Units") at a price of US$1,000 or C$1,340 per Convertible Debenture Unit for gross proceeds to the Company of up to US$5,000,000 (the "Offering" or the "Q2 2023 Tranche").

Each Convertible Debenture Unit was comprised of US$1,000 or CAD$1,340 principal amount of unsecured convertible debenture ("Convertible Debenture") and 1,000 common share purchase warrants (a "Warrant"). Each Warrant will entitle the holder thereof to purchase one common share of XTM (a "Common Share") at a price of US$0.29 or CAD$0.40 per Common Share for a period of twenty-four (24) months from the date of issuance thereof. The Convertible Debentures carry an interest rate of 10.0% per annum, calculated and payable quarterly in arrears, commencing September 30, 2024, and mature twenty-four (24) months following the date of issuance (the "Maturity Date"). The principal amount of each Convertible Debenture (the "Principal Amount") will be convertible into Common Shares at a conversion price of US$0.185 or CAD$0.25 per Common Share (the "Conversion Price") at the option of the holder of a Convertible Debenture ("Debenture Holder") at any time prior to the close of business on the Maturity Date. A total CAD equivalent of $1,088,467 has also been recorded as subscription receipts.

The Convertible Debentures are unsecured obligations of the Company and will be subordinated in right of payment of principal and interest to all secured debt and to all existing and future senior indebtedness of the Company and senior to any of the Company's future debt that is expressly subordinated to the Convertible Debentures.

The Company pays a fee in connection with the Offering comprised of (a) cash of up to 5% of the aggregate principal amount of the Convertible Debenture Units sold pursuant to the Offering and/or (b) an aggregate number of broker warrants, with substantially the same terms as the Warrants, of up to 5% of the aggregate number of Warrants issued pursuant to the Offering.

As at June 30, 2023, had received the equivalent of $1,882,700 CAD in net proceeds under the convertible debenture terms noted above, net of legal fees of $59,492 and broker commissions of $69,010. The net proceeds received for the Q2 2023 Tranche were $1,754,198. The Q2 2023 Tranche are convertible into fixed shares at amounts determined using $0.25 per share and as such, a conversion option is recorded as equity at a fair value of $589,836. There were 1,405,000 financing warrants issued at a value of $50,071 expiring May 31, 2025 and 51,500 broker warrants issued at a fair value of $2,949 expiring May 31, 2025. There is also a prepayment option available to the Company that is considered an embedded option (derivative asset) for the Q2 2023 Tranche which was valued at $229,337 upon recognition. A gain in fair value change of $87,277 was recognized in 2024 leaving a balance of $142,060 at December 31, 2024. The extinguishment of the debt rolled over resulted in a balance of $2,735 at March 31, 2025 remaining for the prepayment option.

The equity conversion feature on convertible note relating to the remaining Q2 2023 Tranche was $174,222 at March 31, 2025 (December 31, 2024 - $174,222).

18

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XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

A summary of the Q2 2023 Convertible Debenture terms, the financial instruments recognized and the valuation methods used are as follows:

In CAD Dollars	Q2 2023 Tranche
Gross proceeds	$ 1,882,700
Less: legal and financing fees	(128,502)
Net proceeds	1,754,198
Financial instruments split out:
Broker warrants (equity)	(2,949)
Finance warrants (equity)	(50,071)
Conversion option (equity)	(589,836)
Prepayment option on convertible note (derivative asset)	229,337
Host convertible debentures at recognition	1,340,679
Add: Accretion of convertible debentures for the year	142,481
Convertible debentures at December 31, 2024	$ 1,483,160
Extinguishment of debentures rolled over to Q1 2024 USD debentures:
Accretion pre-rollover	26,229
Capitalized costs released on extinguishment	18,298
Carrying amount extinguished	(1,071,775)
Gain on extinguishment	(52,500)
Accretion of Q2 2023 CAD convertible debentures in Q1	6,474
Q2 2023 Tranche Remaining at March 31, 2025	$ 409,886

The terms used in the valuation and the related financial instruments, where applicable, are as follows:

Valuation metric	Q2 2023 Tranche
Issuance date	April 20, 2024
Maturity date	April 30, 2025
Interest rate	10%
Conversion option	C$0.25/share (Fixed)
Closing share price	C$0.175
Volatility (low / high)	75% / 85%

The shared terms used in the valuation of all convertible debentures are as follows:

Valuation metric description	Metric Value
Risk-free rate – debentures & financing warrants	4.27%
Risk-free rate – broker warrants	4.19%
Time to maturity – debentures & financing warrants	2.09 years
Time to maturity – broker warrants	1.89 years
Credit spread (low / high)	24.03% / 31.95%
Dividend yield	0%

The Q2 2023 Tranche was initially measured as an embedded derivative and bifurcated from the convertible debt and recognized as a financial asset of $229,337. The major valuation metric differences at December 31, 2024 volatility (low/high) of 100% / 120% and a credit spread (low / high) of 22.9% / 30.8%. At March 31, 2025, the value of the remaining Q2 2023 Tranche debentures approximated the value at December 31, 2024 and the tranches from the Q1 2024 Offering detailed below approximated the face value.

---

XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

Q1 2024 Offering

On February 6, 2024, the Company announced that it completed non-brokered private placement offering for convertible debentures, previously announced and revised on December 18, 2024, for aggregate gross proceeds of US$5,579,282, net of commissions of US$114,720 and oversubscribed from the original maximum offering size of US$5,000,000. Broker warrants with a fair value of US$6,113 were also issued. The debentures were issued at a par value of US$1,000, at a rate of 12% per annum from the date of issuance with a maturity date 24 months from issuance date. Each Debenture shall be convertible at the option of the holder thereof into units (“Units”) of the Company at a price of US$0.11 per Unit. Each Unit shall entitle the holder thereof to receive one common share in the capital of the Company (“Common Shares”), for no additional compensation, and one warrant to purchase a Common Share upon payment of US$0.11 to the Company. The closing occurred in 3 tranches as shown in the summary below in Canadian dollars.

Q2 2023 Rollover

On February 16th, 2024, a portion of convertible debtholders elected to rollover their debentures to new convertible debentures offered under the new terms of the Q1 2024 offering; however, a portion of the debenture holders did not exercise this right. For the debentures rolled over, it was determined that since the fair value changed by greater than 10%, the original debentures are to be treated as an extinguishment and a gain or loss recognized. The remaining original debentures would continue to be accounted for in the same manner. The new debentures were included in the Q1 2024 Tranche 2 amount below and the fair value used to calculate the gain on extinguishment of the Q2 2023 debentures as calculated above.

Q2 2024 Tranche

In Q2 2024, a portion of the third tranche has been redeemed for a total of 1,449,755 common shares at $0.15 per share. In addition, the Company has received $200,000 USD or $270,800 CAD for a total of 200 new debentures, at $1,000 USD per debenture, or $1,354 CAD equivalent on May 31, 2024. Each debenture will be convertible at the option of the holder, at any time on or before the maturity date, at a conversion price of $0.11 USD, or $0.15 CAD per unit. Each unit consists of one common share and one warrant to purchase common shares.

Q4 2024 Tranche

The Company received $947,000 CAD on December 27, 2024, under the same terms of other 2024 tranches, except in Canadian dollars. Upon initial measurement, the fair value of the convertible debenture was equal to the principal amount less commissions of $56,820, totaling $890,180.

Convertible Debenture Summary

| In Canadian Dollars | Q1 2024
Tranche 1 | Q1 2024
Tranche 2 | Q1 2024
Tranche 3 | Q2 2024
Tranche USD | Q4 2024
Tranche CAD | Total |
| --- | --- | --- | --- | --- | --- | --- |
| Proceeds – 2024 debentures | $ 5,646,091 | $ 1,710,536 | $ 371,273 | $ 270,800 | $ 947,000 | $ 8,945,700 |
| Less: Commissions | (133,766) | (21,932) | - | | (56,820) | (212,518) |
| Net proceeds | 5,512,325 | 1,688,604 | 371,273 | 270,800 | 890,180 | 8,733,182 |
| Less: Broker warrants | (6,785) | (1,512) | - | - | - | (8,297) |
| Total 2024 debentures | 5,505,540 | 1,687,092 | 371,273 | 270,800 | 890,180 | 8,724,885 |
| Less: redemption in Q2 2024 | | | (221,404) | | | (221,404) |
| Effect of foreign exchange | | | | | | 774,669 |
| Total convertible debentures Q1-Q4 2024 Tranches, December 31, 2024 | | | | | | $ 9,278,150 |
| Add: Q2 2023 Tranche, December 31, 2024 | | | | | | 409,886 |
| Total convertible debentures, December 31, 2024 | | | | | | $ 9,688,036 |
| Effect of foreign exchange – Q1 2025 | | | | | | 7,337 |
| Total convertible debentures, March 31, 2025 | | | | | | $ 9,695,373 |

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XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

15. RELATED PARTY BALANCES AND TRANSACTIONS

(i) Key management personnel

Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of certain executive and non-executive members of the Company's Board of Directors, its CEO, and its CFO.

Remuneration attributed to key management personnel can be summarized as follows:

	For the three month period ending March 31,
	2025	2024
	$	$
Management salaries, bonuses, and other benefits	146,725	121,434
Share-based payments - Management		-
Share-based payments - Directors		-
Total	146,725	121,434

(ii) Due to / from related parties:

As at March 31, 2025, the Company had a balance payable of $145,887 (December 31, 2024 - $153,886) owing to the CEO of the Company.

As at March 31, 2025, the Company had a balance payable of $838 to the director of the Company.

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XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

16. UNEARNED REVENUE

Revenue	Amount
Balance, January 1, 2024	$1,104,249
Additions deferred to future periods	1,052,073
Unearned revenue recognized in current year	(1,034,482)
Effects of foreign exchange	26,168
Balance, December 31, 2024	$1,148,008
Additions deferred to future periods	76,402
Unearned revenue recognized in current year	(318,287)
Effects of foreign exchange	(163)
Balance, March 31, 2025	$905,960

17. COMMITMENTS AND CONTINGENCIES

In the ordinary course of operating, the Company may from time to time be subject to various claims or possible claims. Management believes that there are no claims or possible claims that if resolved would either individually or collectively result in a material adverse impact on the Company's financial position, results of operations, or cash flows. These matters are inherently uncertain, and management's view of these matters may change in the future.

18. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The fair value of cash, trade and other receivables, government loans, due from related parties, accounts payable and accrued liabilities, and due to related party approximate their carrying values due to the relatively short-term nature of these financial instruments. The carrying value of the loan payable and government loan approximates its fair value as the interest rates are consistent with the current rates offered to the Company for loans with similar terms.

The Company's activities expose it to a variety of financial risks: market risk (including interest rate risk and price risk), credit risk and liquidity risk. The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of the Company.

The Company uses various methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks.

(a) Market risk

(i) 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 does not have any financial instrument subject to floating interest rates; therefore, interest rate risk is considered low.

(ii) 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. As at March 31, 2025, the Company had the following balances denominated in U.S. dollars: Cash of $24,124 (December 31, 2024 - $24,750), restricted cash of 47,451 (December 31, 2024 - $1,649,853) trade and other receivables, including restricted, of $198,961 (December 31, 2024 - $1,840,488), trade and other payables of $2,865,253 (December 31, 2024 - $2,536,507), and loan payable of $181,582 (December 31, 2024 - $1,249,000). As at March 31, 2025, a 10% depreciation or

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XTM Inc.
Notes to the unaudited condensed consolidated interim financial statements
For the three months ended March 31, 2025 and 2024

appreciation of the U.S. dollar against the Canadian dollar would result in an approximate $399,121 increase or decrease, respectively, in net loss and comprehensive loss.

(iii) Other price risks

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to other price risk.

(b) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of dealing with credit-worthy counterparties. The Company's exposure and credit ratings of counterparties is continuously monitored. The Company's maximum exposure to credit risk for its trade receivables is summarized as follows:

| | March 31, 2025
$ | December 31, 2024
$ |
| --- | --- | --- |
| Trade receivables aging: | | |
| 0-30 days | 560,141 | 549,440 |
| 31-90 days | 196,667 | 24,510 |
| Greater than 90 days | 78,365 | 45,893 |
| Trade receivables | 835,173 | 619,843 |
| Provision for expected credit losses | (102,868) | (98,916) |
| Net trade receivables | 732,305 | 520,927 |
| Other receivables | 72,750 | 63,430 |
| Net trade and other receivables | 805,055 | 584,357 |
| Receivables – Restricted | 166,814 | 2,395,732 |
| Total trade and other receivables | 971,869 | 2,980,089 |

The Company recognizes a restricted receivable for earned wage access advances to client employees, which is paid back when client settles payroll. On average, the duration of these advances is 10 days. The Company also recognizes a restricted receivable when temporary deficiencies arise between the Cash - Restricted asset balances and Program Deposits liabilities. These deficiencies can occur due as a result of fraud credits being issued to cardholders in advance of reimbursement by the network (Visa or Mastercard) to the Company, and temporary client overdrafts stemming from funding transaction failures. The Company considers restricted receivables low risk due to the counter involved parties and therefore does not apply an expected loss provision.

The Company applies the simplified approach to provide for expected credit losses as prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables and contract assets. The expected credit loss provision is based on the Company's historical collections and loss experience and incorporates forward-looking factors, where appropriate.

All of the Company's cash is held with major Canadian or US financial institutions and thus the exposure to credit risk is considered insignificant. Management actively monitors the Company's exposure to credit risk under its financial instruments, including with respect to trade and other receivables.

(c) Liquidity risk

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XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

Liquidity risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities. The Company has a planning and budgeting process in place by which it anticipates and determines the funds required to support its normal operating requirements. The Company coordinates this planning and budgeting process with its financing activities through its capital management process.

The Company's approach to managing liquidity risk is to ensure that it will have sufficient funds to meet liabilities as they come due and to execute on its business plan. The Company manages liquidity risk by maintaining adequate cash reserves and loan facilities and by continuously monitoring forecast and actual cash flows. At March 31, 2025, the Company had a cash balance of $127,673 (December 31, 2024 - $64,130).

Maturity analysis of liabilities which are due in next twelve months can be summarized as follows:

	At March 31, 2025	At December 31, 2024
	$	$
Trade and other liabilities	12,389,645	11,119,681
Due to related party	146,725	218,509
Sales Tax Payable	126,553	145,465
Lease liabilities (current) (note 12)	4,009	164,367
Loan Payable (note 11)	261,042	4,982,366
Program deposits	67,395,097	76,950,759
Total	80,323,071	93,581,147

Maturity analysis of liabilities which are due beyond next twelve months can be summarized as follows:

	March 31, 2025	At December 31, 2024
	$	$
Government loan (note 21)	60,000	60,000
Subscription receipts (note 14)	1,183,109	1,184,179
Long term portion of lease liabilities (note 12)	88	595,713
Convertible debentures (note 14)	9,695,373	9,588,036
Total	10,938,570	11,527,928

As at March 31, 2025, the Company had negative working capital of $28,157,832 (December 31, 2024 – negative working capital of $25,385,205).

19. MANAGEMENT OF CAPITAL

At March 31, 2025, the Company's capital consists of the negative shareholders' deficit in the amount of $32,429,969 (December 31, 2024 - $29,076,083).

The Company's capital management is designed to ensure that it has sufficient financial flexibility both in the short and long-term to support its financial obligations and the future development of the business.

The Company manages its capital with the following objectives:

a) Ensuring sufficient liquidity is available to support its financial obligations and to execute its strategic plans;
b) Maintaining financial capacity and flexibility through access to capital to develop the future of the business;
c) Minimizing its cost of capital and considering all industry, market and economic risks and conditions;
d) Utilizing short term funding sources to manage its working capital requirements and long-term funding sources to match the long-term nature of the property, plant and equipment of the business; and
e) Managing cash flows related to restricted cashflows that are utilized to meet withdrawals from program deposits.

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XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

20. CLIENT AND CARDHOLDER FUNDS – RESTRICTED CASH AND PROGRAM DEPOSITS

During the period ended March 31, 2025, there was $67,395,065 of program deposits made by customers (December 31, 2024 - $76,950,759). As at March 31, 2025, there was $44,391,256 of cardholder money in a segregated account (December 31, 2024 - $53,629,427) and $6,656,159 in funding in float balances (December 31, 2023 - $11,801,779) with the balance available (on lender approval) through the Company's lending facility of $13,000,000.

For the US operations, the Company holds trust assets in the form of restricted cash totaling $139,945 (December 31, 2024 – 2,443,553) and these assets do not offset the Canadian deficit.

	March 31, 2025	December 31, 2024
Cash – restricted (CA)	$ 51,047,415	$ 62,987,653
Trust assets	51,047,415	62,987,653
Program deposits	(67,395,065)	(76,950,726)
Deficit	$ (16,347,650)	$ (13,963,073)
Deficit, prior period (A)	$ (13,963,073)	$ (7,929,411)
Deficit, current period:
Administration (B)	(2,328,720)	(6,318,692)
Fraud losses (C)	(91,818)	(166,354)
Timing differences (D)	35,961	434,917
Total deficit, current period	(2,384,577)	(6,050,129)
Closing Deficit	$ (16,347,650)	$ (13,963,073)

21. GOVERNMENT LOAN

On April 21, 2020, the Company received a $40,000 Canada Emergency Business Account ("CEBA") loan from the Government of Canada. On December 16, 2020, the Company received an additional $20,000 CEBA loan. Both loans are unsecured and interest-free until December 31, 2024, at which time the remaining balance converted to a 2-year term loan at an interest rate of 5% per annum.

The balance of the government loan as at March 31, 2025 was $60,000 (December 31, 2024 - $60,000).

22. NET REVENUES

The Company generates revenue through three distinct streams:

1) Transaction Revenue - Card holder transactions consisting of merchant transactions resulting in interchange revenue, and fee revenue for ATM withdrawals and electronic fund transfers.
2) Program Management - Program Management which consists of one-time and recurring fees charged to clients for bespoke program support and platform licensing, recurring fixed fees not tied to client transactions, and development support fees.
3) Card Revenue - Procurement and fulfillment of Today debit cards to the clients for use by card holders.
4) Subscription revenue - monthly and annual subscription fees paid by clients to access the Anyday™ platform.

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XTM Inc.

Notes to the unaudited condensed consolidated interim financial statements

For the three months ended March 31, 2025 and 2024

Revenues for the three months ended March 31, 2025, and 2024 are as follows:

	March 31, 2025	March 31, 2024
Transaction Revenue	$2,005,891	$1,598,422
Card revenue	164,419	150,225
Program management	444,773	63,750
Subscription revenue	120,424	-
Net Revenue	$2,735,507	$1,812,397
Geographical Information:
Canada	$2,329,301	$1,692,744
United States	406,206	119,653
Net Revenue	$2,735,507	$1,812,397

23. SUBSEQUENT EVENTS

finalization of the audited consolidated financial statements:

On April 25, 2025, the Company executed a definitive Asset Purchase Agreement with Pateno Payments Inc. ("Pateno"), a subsidiary of Digital Commerce Group, on for the sale of the QRails, Inc. processing technology. The strategic transaction, valued at USD $3,000,000 (subject to purchase adjustments), is expected to reduce XTM's monthly operating costs by approximately 50%. XTM will retain full ownership and management of its proprietary EWA platform, including key contracts, integrations with payroll, time & attendance, and other critical systems. The previously announced letter of intent with Pateno was formally cancelled.

On April 28, 2025, the Company entered into a secured demand loan agreement, effective January 1, 2025 from Pateno, which provides for a revolving credit facility in the principal amount of up to $13,000,000. The credit facility combined with the proceeds of the sale of the processor operations supports the trust deficit reported in note 21. A total of 20,000,000 XTM shares will be issued to pay the standby fee of the facility in four instalments of 5,000,000 shares over 9 months.

The Company also dissolved its referral agreement with KOHO, aligning with its focus on core strategic priorities and direct customer engagement. The decision affirms the Company's commitment to strengthening its financial position, simplifying its capital structure, and enhancing long-term shareholder value through disciplined balance sheet management.