XTM Inc. — Management Reports 2025

May 7, 2025

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

Management's
Discussion and Analysis

For the years ended December 31, 2024 and 2023

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

Table of Contents

INTRODUCTION

3
ACCOUNTING PERIODS 3
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS 3

CORPORATE OVERVIEW

4

RECENT EVENTS

4

SUMMARY OF ANNUAL RESULTS

7
KEY PERFORMANCE INDICATORS AND NON-IFRS MEASURES 7

ANALYSIS OF FINANCIAL PERFORMANCE

8
NET LOSS AND COMPREHENSIVE LOSS 8
REVENUE AND GROSS PROFIT 8
OPERATING EXPENSES 9
OTHER INCOME Error! Bookmark not defined.
ASSETS 10
LIABILITIES 11
SHAREHOLDERS EQUITY 12
RESTRICTED CASH AND PROGRAM DEPOSITS 12
OFF BALANCE SHEET ARRANGEMENTS 12
WORKING CAPITAL 12

RISK FACTORS AND UNCERTAINTIES

12

NEW ACCOUNTING PRONOUNCEMENTS

13

DEFINITIONS – IFRS, ADDITIONAL GAAP AND NON-GAAP

13
IFRS MEASURES 13
ADDITIONAL GAAP MEASURES 13
KEY PERFORMANCE INDICATORS (non-GAAP and non-IFRS) 14

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

INTRODUCTION

This Management's Discussion and Analysis ("MD&A") prepared as May 7, 2025 reviews the financial condition and results of operations of XTM Inc. (the "Company" or "XTM") for the year ended December 31, 2024 and all other material events up to the date of this report. The following discussion should be read in conjunction with the annual audited consolidated financial statements and related notes for the year ended December 31, 2023. Results are reported in Canadian dollars, unless otherwise noted. These statements can be found under the Company's profile on SEDAR at www.sedar.com.

This MD&A has been prepared in compliance with the requirements of section 2.2.1 of Form 51-102F1, in accordance with National Instrument 51-102 – Continuous Disclosure Obligations. The Company's audited consolidated financial statements and the financial information contained in this MD&A have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretation Committee ("IFRIC") All dollar amounts are in Canadian dollars, unless otherwise noted.

The Company's certifying officers are responsible for ensuring that the audited consolidated financial statements and MD&A 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 considering the circumstances under which it was made. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of XTM's Subordinate Voting Shares; (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board of Directors, evaluates the materiality in this regard referencing all relevant circumstances, including potential market sensitivity. The Company's directors certify that the audited consolidated financial statements and MD&A present, in all material respects, the financial condition, results of operations and cash flows, of the Company as the date thereof.

ACCOUNTING PERIODS

The following Management's Discussion & Analysis ("MD&A") is based on information in the annual audited consolidated financial statements and accompanying notes thereto for the year ended December 31, 2024. Comparative amounts in the annual audited consolidated financial statements and accompanying notes thereto are for the year ended December 31, 2023.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain sections of this MD&A may contain "forward-looking statements" within the meaning of applicable securities legislation. All statements, other than statements of historical fact, made by the Company that address activities, events or developments that the Company expects or anticipates will or may occur in the future are forward-looking statements, including, but not limited to, statements preceded by, followed by or that include words such as "may", "will", "would", "could", "should", "believes", "estimates", "projects", "potential", "expects", "plans", "intends", "anticipates", "targeted", "continues", "forecasts", "designed", "goal", or the negative of those words or other similar or comparable words. Forward-looking statements may relate to the Company's future financial conditions, results of operations, plans, objectives, performance or business developments. Forward-looking statements are necessarily based upon a number of estimates and

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

assumptions that, while considered reasonable by the Company as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements.

There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management's expectations and plans relating to the future. All forward-looking statements made in this MD&A are qualified by these cautionary statements and those made in our other filings with applicable securities regulators in Canada. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law.

CORPORATE OVERVIEW

Founded in the fintech space, the Company's mission is to further support businesses to inspire their workforce in the hospitality, personal care, entertainment, healthcare and services staffing industries. XTM provides earnings access for many large brands including Earls, Maple Leaf Sports & Entertainment, Cactus Club, Marriott Hotels and Live Nation. A cloud-based, API-driven issuer-processor, XTM processes its payments via QRails enabling payroll providers, financial institutions and other global fintech companies to keep up with the on-demand economy by delivering innovative digital payment solutions to their employees. QRails helps companies modernize and leverage payroll as a differentiator in attracting and retaining talent all at low to no cost for the employee and employer. QRails' flagship solution, AnyDay™, powers XTM's Earned Wage Access solution. Founded in 2016, the QRails processor is SAP-certified and has earned several industry certifications under PCI DSS, and SOC.

Moving forward, the Company's focus is on creating shareholder value by driving earnings access including tips and wages to a global, I-want-it-now economy. Through its AnyDay™ product, a mobile and enterprise software solution specifically designed to provide earned wages to employees, on demand, via a mobile wallet, accessible via the internet or by a free mobile app paired with a Chip & PIN EMV Mastercard debit card, the Company's solution includes free banking features and is used by thousands of employees in Canada and the United States.

The head office, principal address, and registered office of the Company is located at 67 Mowat Avenue, Suite 437, Toronto, Ontario, Canada, M6K 3E3 with offices in Miami, Toronto, Denver and London.

RECENT EVENTS

The following notable events occurred after the period covered by the Company's 2024 year end audited consolidated financial statements and MD&A:

• In February 2024, the Company began funding EWA advances from its lending facility. The lending facility totals up to USD $100MM with access to $20MM for the initial tranche.
• On February 27, 2024, the Company announced the official commercial launch of AnyDay™, its SAP-certified and fully-compliant EWA solution through its channel partner Alight, for a Fortune 15 Employer, marking XTM's largest EWA program to date.

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

• 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, 2023, for aggregate gross proceeds of US$11,028,468 oversubscribed from the original maximum offering size of US$5,000,000. Five million of the $11,028,468 was rescinded due to an investor's finances being intercepted in an injunction; however, in February 2024 the Company obtained a $20,000,000 lending facility from which funds can be used for operations and the deficit of prepaid funds fully reconciled on demand, in the event a customer demands repayment of the prepaid funds. Note that while the deficit of prepaid funds has not been cured, the funds available under the credit facility can be used for the settlement of any demands for prepaid funds in the event of such demand and there is no risk to the return of prepaid funds.

• On July 3, 2024, the Ontario Securities Commission (the "OSC") issued a failure-to-file cease trade order.

• On September 30, 2024, the Company filed its annual audited financial statements for the year-ended December 31, 2023, interim financial statements for the three months ended March 31, 2024, interim financial statements for the six months ended June 30, 2024, together with the management's discussion and analysis and required certifications in respect of each period (collectively, the "Filings").

• On October 3, 2024, the Company announced the appointment of Mr. Jakob Ripshtein as the Company's Chief Financial Officer ("CFO"), effective October 3, 2024. Mr. Ripshtein brings over 30 years of experience leading finance, corporate strategy, marketing, and sales and has a deep understanding of diversified industries. As President of Diageo Canada followed by CFO of Diageo North America, Jakob was charged with providing the financial and strategic leadership to deliver the Diageo North America Financial performance NSV and trading profit commitments to the company, directly contributing to and shaping the business strategy, as well as managing a complex governance and compliance agenda.

• On October 7, 2024, the Company's stock resumed trading through the facilities of the Canadian Securities Exchange (CSE: PAID) as the above Filings had been made and the OSC issued an order revoking cease trade order issued on July 3, 2024 against the Company for failing to file.

• On October 16, 2024, the Company announced the launch and roll-out of a Global Workers Payout Program called PayNow. The new program empowers temporary workers to, with a simple mobile app download and know your client application, open a secure digital bank account to receive earnings, load cash conveniently at 50,000 locations across the United States, make point of sale transactions with a paired debit card and access employee benefits including remittance (initially to Mexico) and sick day pay.

• On October 24, 2024, the Company announced a private placement offering of convertible debentures of the Company ("Debentures") at a price of C$1,100 per Debenture for aggregate gross proceeds of up to C$7,000,000 (the "Offering"). The Debentures will mature 24 months from the date of issue (the "Maturity Date"), carry an interest rate of 12% per year and will be convertible to units ("Debenture Units") at a conversion price of $0.11 per Unit. Each Debenture Unit shall consist of one common share of the Company and one additional common share purchase warrant exercisable until the Maturity Date for an additional common share a price of C$0.11 (each a "Warrant"). In the event the 5-day volume weighted average price of the common shares of the Company is C$0.50 or more on the Canadian Securities Exchange, the Company may accelerate the expiry date of the Warrants to the date that is 30 days from the date of an announcement of such acceleration. The Debenture will be a secured obligation of the Company ranking pari-passu to the existing secured debenture holders of the Company and shall be senior in right of payment to all future unsecured obligations of the Corporation.

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

• On November 12, 2024, the Company signed an exclusive referral agreement with KOHO Financial Inc. ("KOHO") to offer enhanced financial services to its more than 100,000 AnyDay™ platform member base. As part of the commercial referral agreement there are multiple closing conditions, including XTM agreeing to close a financing of $5 million CAD within 30 days of the effective date, as well as audit rights. Other notable terms include that the Company will generate revenue via customer acquisition fees and a time-bound revenue share for new users that KOHO acquires. This will enable the Company to eliminate banking, network, transactional and customer service costs, thereby offsetting a significant amount of cost of goods sold that, to date, have prevented the company from realizing profitability on its Canadian business.
• On December 11, 2024, the Company executed an arms-length, non-binding Letter of Intent with Pateno Payments Inc. ("Pateno"), a subsidiary of Digital Commerce Group, for the acquisition by Pateno of 51% of the equity of the XTM business in consideration for Pateno capitalizing the XTM business with a $10 million cash injection. However, this transaction was formally terminated due to the asset sale in April 2025 (see below).
• In March 2025, the Company made an executive decision to dissolve its referral agreement with KOHO, aligning with its focus on core strategic priorities and direct customer engagement, affirming XTM's commitment to strengthening its financial position, simplifying its capital structure, and enhancing long-term shareholder value through disciplined balance sheet management.
• On April 25, 2025, the Company executed a definitive Asset Purchase Agreement with Pateno 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.
• 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 support the trust deficit reported in note 24. 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.

HIGHLIGHTS FOR FISCAL 2024

The 2024 calendar year was a transitional year for the company with streamlining the operation and realizing the full value of its people and assets. The Company invested significant effort in streamlining the technologies and reducing redundancy. The Company successfully began the process of reducing its overheads, secured long term sales partnerships and continue to focus on its long-term success.

The Company successfully increased its 2024 revenue by 34% to $9.1MM in revenue while processing more than $800MM in gross dollar value of payments ("GDV") to hospitality sector employees, with 95% generated from the Canadian market. The Company views the 21% growth in GDV and 34% growth in revenue as a clear sign of continued positive momentum even though economic headwinds continue to suppress consumer discretionary spend.

• The Company introduced a new revenue stream for subscriptions to the Company's AnyDay™ Financial platform, adding $244K of new revenue in 2024. This is a high margin stream of revenue that will

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

continue to grow and contribute to profitability to the Company. Clients are receptive to the monthly Software as a Service fee, understanding the need for the company to generate revenue behind transactional fees and interchange.

• Current Active users at the end of 2024 (defined as card holders that completed a minimum of one transaction in a current month) on the Company's AnyDay™ Financial platform totalled 113K, an increase of over 33K or 40% from 80K for the year ended 2023.
• Revenue was $9.1MM for fiscal 2024, increasing $2.3MM or 34% compared to prior year, with subscription revenue adding $244K of net new revenue and transaction revenue growing 31% to $7.8MM for fiscal 2024 compared to $5.9MM for the prior year.
• Gross Profit was $96K or 1% of revenue for fiscal 2024 compared to $219K or 3% for the prior year.
• Operating expenses were $23.0MM for fiscal 2024 compared to $16.3MM for the prior year with the increase resulting from the QRails acquisition including increased staffing and professional fees, professional fees from audit and legal fees from acquisition, increases in office and general, amortization on intangible assets acquired and share-based compensation increases contributing to a full year of expenses (versus 2023 where only 4.5 months impacted operating expenses);
• Net loss was $22.9MM for fiscal 2024 compared to 16.1MM for 2023. Current year net loss increased compared to prior year by $6.8M mainly due to the QRails acquisition investments in new technology, new hires to support growth, further investment into programs for the US market, and expansion to new verticals;
• Cash totaled $64K at December 31, 2024, down $30K from 2023's year end total of $94K, due to optimizing cash management.
• Working capital of the Company was a deficit of $25.4MM at December 31, 2024, a decrease of $9.7MM compared to working capital deficit of $15.7MM at December 31, 2023, with the decrease due to increased deposit liabilities, payables, loan payable and due to related parties plus a decrease in cash, restricted cash, receivables and restricted receivables. The company has been focused on a turnaround while preserving its reliance on the lending facility and protecting its position with the option of the line of credit.

SUMMARY OF ANNUAL RESULTS

KEY PERFORMANCE INDICATORS AND NON-IFRS MEASURES

The key performance indicators ("KPI's") and non-IFRS measures for the Company are gross dollar value load ("GDV"), Current Active Users, and Total Active Users. The Company's success will be measured by its growth in revenue from one reporting period to the next and is directly a result of increased dollar value transacted through its platform. Revenue growth is dependent on the Company continuing to sign on new hospitality locations, increase the percentage of GDV used for POS transactions, and the addition of new products to enhance current programs.

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

ANALYSIS OF FINANCIAL PERFORMANCE

NET LOSS AND COMPREHENSIVE LOSS

Net loss and comprehensive loss for fiscal 2024 was $23.3MM compared to a net loss of $16.0MM for the prior year. The increased loss of $7.3MM is attributed to higher operating expenses mainly in Salaries and employee benefits, depreciation and amortization, and office and general. This is largely driven by QRails being operational for the whole year in 2024, compared to 4.5 months of the prior year. The Company expects operating expenses to decrease in 2025 due to reduced headcount, streamlining business and various other cost saving initiatives and expects reach cash neutrality by Q3 2025.

REVENUE AND GROSS PROFIT

Gross Dollar Value ("GDV") of $801MM for 2024 increased by $137MM or 21% from $659MM for 2023. The increase is a result of significant growth in the number of clients and associated active users added to the AnyDay™ Financial program over the preceding 12 months coupled with new subscription revenue and the launch of EWA in the US for QRails.

Revenue totaled $9,091K for fiscal 2024, an increase of $2,316K or 34% from $6,775K for 2023. Of the Company's three revenue streams, Transaction revenue was the main driver, increasing by $1,852K, while Card issuance revenue and Program management revenue increased by $252K and $213K respectfully.

Transaction revenue which consists of interchange resulting from point-of-sale transactions ("POS"), out of network ATM withdrawal fees, and electronic transfer fees totaled $7,815K for fiscal 2024, an increase of $1,852K or 31% from $5,963K for the prior year. The increase is due to the Company generating more GDV per location as a result of 1) growing its location count resulting in active user growth by over 33K card holders during 2024, and 2) generating new fees from clients due to adding new services and implementing new wallet management-based fees.

Card issuance revenue which consists of revenue from the purchase and shipping of AnyDay™ Financial debit cards to the clients for use by their employees, totaled $859K for fiscal 2024, an increase of $252K or 41% from $607K for the prior year. This is due to a change from card revenue is being recognized, and the Company is amortizing revenue over the average contractual life of the cards.

Program management revenue which consists mainly of licensing fees or customization and support fees of the Company's AnyDay™ Financial technology totaled $173K for fiscal 2024, a decrease of $32K or 15% from $205K for 2023. The decrease is due mainly to an overall decline in recurring program fees as the Company refocused sales and development efforts to its primary products and services to drive improved efficiencies mainly through economies of scale. The Company anticipates this revenue stream will decline further in 2025 as while EWA revenue will increase as a new stream.

Subscription revenue was added as a new revenue stream, contributing $244K to revenue in 2024. Providing services to clients who access the AnyDay™ Financial platform is charged monthly or annually to new and existing clients renewing their contracts.

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

Gross Profit (loss) for fiscal 2024 totaled $96K or 1% of revenue, a decrease of $123K from $219K or 3% of revenue for the prior year. The decrease in gross profit percent is driven by startup costs associated with the EWA program at QRails in the US. Gross profit at the Canadian tips business increased to $1,315K in 2024 from $786K in 2023, an increase of $617K, while the gross loss at QRails totaled $1,219K in 2024 compared to a loss of $447K in 2023, an increase of $654K that offset the Canadian tips business.

OPERATING EXPENSES

Total operating expenses for fiscal 2024 were $23,039K, an increase of $6,737K or 42% from $16,302K in the prior year. The main driver for the increase is higher salaries and employee benefits, depreciation and amortization, and office and general. This is largely driven by QRails being operational for the whole year in 2024, compared to 4.5 months of the prior year. Operating expenses of the company consist of:

• Salaries and employee benefits were $10,252K for fiscal 2024 compared to $6,872K for the prior year. The increase of $3,380K is primarily a result of the acquisition of QRails in August 2023, adding $3,479K of additional salary expense in 2024 than the stub period in 2023. The Company has reduced headcount and expects this figure to be substantially lower in 2025.

• Professional fees were $1,953K for fiscal 2024 compared to $1,657K for the prior year. The increase of 18% is in line with the prior years use of professional fees.

• Share-based compensation was $2,127K for fiscal 2024 compared to $1,615K for the prior year. The increase of $512K or 32% is due mainly to the Company issuing substantially more options and RSU's granted and increased share-based compensation to directors and other stakeholders.

• Consulting fees were $542K in fiscal 2024 compared to $551K for the prior year. The decrease of $9K is in line with the use of consultants in the prior year. The Company continually reviews staffing requirements and reliance on contract labour quarterly and adjusts based on labour market and projected workload requirements.

• Marketing and promotion were $254K for fiscal 2024 compared to $452K for the prior year. The decrease of $179K or 40% is due to decreased costs associated with the Company's rewards and loyalty program for cardholders and lower spend on tradeshow and associated content creation.

• Office and General was $1,366K for fiscal 2024 compared to $864K for the prior year. The increase of $502K is due to the addition of QRails, adding $478K in 2024 compared to 2023.

• Depreciation and amortization were $2,121K for fiscal 2024 compared to $812K for the prior year. The increase of $1,309K is due to the Company commencing amortization on the QRails software acquired as an intangible asset totaling $1,452K in incremental amortization in 2024 compared to 2023.

• Public company and regulatory were $188K for fiscal 2024 compared to $328K for the prior year. The decrease of $140K is due to decreased public market spend pertaining to awareness and outreach activities in 2023 that were mainly focused on introducing the Company to US retail and institutional investors.

• Accretion and interest on debentures were $79K and $972K, respectively for 2024 compared to $142k and $131K for the prior year. The CAD convertible debentures issued were effective April 20, 2023 with

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

accretion and interest at 10% over a 2-year period to maturity. The USD convertible debentures have a rate of 12% over a 2-year period to maturity.

Bank charges and interest was $551K for fiscal 2024 compared to $61K for the prior year. The increase of $490K is due mainly to the addition of the EWA loan payable at QRails and the associated interest.

Travel, meals, and entertainment was $73K for fiscal 2024 compared to $101K for the prior year. The decrease of $28K is due to decreased travel in 2024 compared to 2023, which was a year focused on US expansion.

Bad debt and expected credit loss ("ECL") was a loss of $58K for fiscal 2024 compared to a loss of $51K for the prior year. The loss in the current year is a result of the Company being exposed to an expected credit loss associated with receivables outstanding and higher ECL realized at QRails.

Other expense for fiscal 2024 was an expense of $295K compared to an expense of $2,664K for the prior year. The current year expense consists primarily of the write-down of card inventory that expired at QRails and loss on remeasurement of prepayment option on convertible debentures.

The prior year expense consists of:
(i) the write-down of restricted cash imbalance totaling $2,220K;
(ii) inclusion of QRails other income of $73K primarily consisting of foreign currency translation gain;
(iii) financing costs of $130K;
(iv) loss on remeasurement of prepayment option valuation totalling $87K;
(v) and foreign exchange loss totalling $300K.

ASSETS

Cash as at December 31, 2024 was $64K compared to $94K at December 31, 2023. The consolidated statement of cash flows details the cash movements during the year.

Trade and other receivables as at December 31, 2024 were $584K compared to $503K at December 31, 2023. The increase of $81K is attributable to the total for interchange receivable for the month of December 2024 increasing to $402K compared to $317K for December 2023, an increase of $85K.

Receivables – restricted as at December 31, 2024 were $2,396 compared to $658K at December 31, 2023. The balance primarily relates to the QRails EWA transaction funding receivable that has grown as part of the EWA program growth in 2024.

Prepaid expenses as at December 31, 2024 were $416K compared to $454K at December 31, 2023. The decrease of $38K is primarily due to a reduction of prepaid subscriptions from $165K in 2023 to $108K in 2024.

Inventory as at December 31, 2024 was $65K compared to $417K at December 31, 2023. The decrease of $352K is due to write-offs of expired and obsolete payment card inventory in the US and UK and related collateral totaling $331K in 2024.

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

Contract assets as at December 31, 2024 was $387K compared to $384K at December 31, 2023. The increase of $3K in line with expected contract assets in 2024 compared to contract assets in 2023.

Prepayment option on convertible note as at December 31, 2024 was $3K compared to $142K at December 31, 2023. The change is due to the extinguishment and rollover of some of the 2023 debentures as well as the loss on revaluation at December 31, 2024.

Intangible assets as at December 31, 2024 was $5,993K compared to $7,039K at December 31, 2023. The decrease of $1,046K is due to amortization of internally-developed software in 2024.

Goodwill as at December 31, 2024 was $920K compared to $3,128K at December 31, 2023, a decrease of $2,208K. In 2023, the business combination by the Company with Qrails resulted directly in $2,208K of Goodwill acquired as part of the acquisition in August 2023. As at December 31, 2024, it was determined by management that it is highly likely that the assets of QRails' processing business would be sold for a price that approximates book value. As a result, the Goodwill from the acquisition would be reduced to zero (as there was no longer any future cashflow anticipated without the assets).

LIABILITIES

Trade and other payables as at December 31, 2024 were $11,120K compared to $7,500K at December 31, 2023, an increase of $3,620K. The increase is partly due to the acquisition of QRails which added $1,189K as at December 31, 2024, along with large professional fees at XTM for audit and legal totaling 1,426K and interest payable on debentures totaling $972K.

Unearned revenue as at December 31, 2024 was $1,148K compared to $1,104K at December 31, 2023. The increase of $44K is attributed to the Company recognizing Card revenue over the life of customer contract.

Lease liabilities as at December 31, 2024 was $760K, comprised of a current ($164K) and long-term ($596K) portion compared to $257K at December 31, 2023. The increase of $503K is primarily due to QRails leasing a new office in Denver and recognizing the lease liability and corresponding right-of-use asset.

Due to related party as at December 31, 2024 was $219K compared to $2,259K at December 31, 2023, a decrease of $2,040K. The decrease is primarily a result of converting the related party payable to a board member into convertible debentures totaling $1,840K funding received in 2023 from the board member. The remaining difference relates to repayments made to CEO for previous year expenses paid on behalf of the Company.

Loan payable as at December 31, 2024 was $4,982K compared to nil in the prior year. The loan payable relates to the Two Shores credit facility for EWA funding and launched in 2024.

Convertible debentures as at December 31, 2024 were $9,688K compared to $1,483K, an increase of $8,205K. The Q2 2023 Tranche was reduced by $1,027K upon rollover to USD, while new issuances on Q1 2024, Q2 2024 and Q4 2024, netted to $7,564K, $271K and $890K, respectively. There was also a redemption in Q2 netting to $221K and a total FX loss in 2024 of $775K for US debentures.

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XTM INC.
Management Discussion and Analysis
For the years ended December 31, 2024 and 2023

Subscription receipts as at December 31, 2024 was $1,184K compared to $1,088K in the prior year and relates to proceeds received as part of the Company's non-brokered private placement of convertible debentures that haven't closed.

SHAREHOLDERS EQUITY

Shareholders equity as at December 31, 2024 was negative $29.1MM compared to $7.3MM at December 31, 2023. The decrease of $21.7MM is due to an increase in accumulated deficit of $23.4MM associated with the current years net loss and comprehensive loss. Partially offsetting this is an increase of $1.3MM in share capital from the issuance share-based compensation.

RESTRICTED CASH AND PROGRAM DEPOSITS

Acting as a paying agent, the Company had $65.4MM in cardholder and client funds on deposit (December 31, 2023 - $50.0MM) and corresponding liabilities for client and cardholder balances as at December 31, 2024 of $77.0M (December 31, 2023 - $57.1MM), resulting in a deficit of $11.6MM (December 31, 2023 - $7.1MM). Restricted cash consists of cash balances held in trust for cardholders resulting from the transfer of funds by the client from their respective wallet(s) to a card that is on deposit in settlement accounts controlled and subject to restrictions imposed by the card program sponsoring bank as well as individual client wallets which are on deposit in accounts controlled by the company for the benefit of the client. Cardholder balances as at December 31, 2024 there was $53.6MM of cardholder money in a segregated account (December 31, 2023 - $42.5MM) and $11.8MM in funding in float balances (December 31, 2023 - $6.6MM) with the balance available (on lender approval) through the company's lending facility of $13,000,000.

The deficit of $14.0MM increased by $6.1MM from $7.9MM in the prior year. The deficit growth in 2024 is a product of continuing administration costs totaling $6.3MM in 2024.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements.

WORKING CAPITAL

Working capital of the Company as at December 31, 2024 was a deficit of $25.4MM compared to $15.7MM at December 31, 2023. The decrease of $9.7MM is mainly a result of an increase in trade and other payables, program deposits and a new loan payable totaling $28.6M offset by a decrease in related parties payable of $2.0MM and increase in restricted cash & restricted receivables of $17.3MM.

RISK FACTORS AND UNCERTAINTIES

Please refer to the Company's annual audited consolidated financial statements for the year ended December 31, 2024 for identification of risks effecting the Company.

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XTM INC.

Management Discussion and Analysis

For the years ended December 31, 2024 and 2023

NEW ACCOUNTING PRONOUNCEMENTS

Please refer to the Company's annual audited consolidated financial statements for the year ended December 31, 2024 for new pronouncements issued by the IASB or the IFRIC that are applicable or have a significant impact on Company's annual audited consolidated financial statements and related disclosures.

DEFINITIONS – IFRS, ADDITIONAL GAAP AND NON-GAAP

IFRS MEASURES

Cost of sales

Cost of sales consists of expenses related to servicing the customers instant pay and mobile banking solutions. These expenses include interchange and related network fees, ATM (Automated Teller Machine) fees, card set-up / printing / shipping costs, and customer support expenses for resources directly associated with the cost of services.

Gross profit and gross profit margin

Gross profit is net revenue less cost of sales while gross profit margin is gross profit divided by net revenue.

ADDITIONAL GAAP MEASURES

Professional fees

Professional fees consist of expenses the Company incurs in the normal course of business to procure the services of individuals or businesses highly skilled in a particular field which includes, but is not limited to legal, recruitment, audit and taxation, and capital markets. These fees are primarily for a fixed duration and for tasks with a finite duration and limited scope.

Consulting fees

Consulting fees consist of expenses incurred primarily for contract labour required for an indefinite period with a broad mandate that will evolve as the business needs dictate. At times management judgement will be required in determining the classification between consulting fees and professional fees when a service lies outside of the defined categories in the respective definitions.

Public company and regulatory

Public company and regulatory expenses consist mainly of expenses associated with public company filings, management of the Company's listing on the CSE, equity administration and management, and investor relations activities such as outreach and marketing.

Office and general in operating expenses

Office and general expenses include software and other computer expenses, internal compliance expense, donations, dues and fees, equipment leases, insurance, facilities, telecom, and office supplies and maintenance expenses.

Accretion expense

Accretion expense relates to expenses the Company incurs from issuing convertible debentures. Host debt of convertible debentures is initially measured at fair value, accounting for embedded derivatives. The

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XTM INC.

Management Discussion and Analysis

For the years ended December 31, 2024 and 2023

convertible debenture liability is accreted over the term of the convertible debenture to the liability amount equal to the net proceeds received.

Finance costs

Finance costs consist of interest charged on our long-term debt facility, amortization of deferred financing costs and accretion expense. The deferred financing costs are amortized using the effective interest method over the term of the loan.

Loss from operations

Loss from operations exclude foreign exchange loss, income taxes, finance costs and change in fair value of derivative liability. We consider loss from operations to be representative of the activities that would normally be regarded as operating for the Company. We believe this measure provides relevant information that can be used to assess the performance of the Company and therefore, provides meaningful information to investors.

KEY PERFORMANCE INDICATORS (non-GAAP and non-IFRS)

Gross dollar value ("GDV")

Gross dollar value loaded is the aggregate amount of all dollars loaded on to the Company's platform by hospitality, personal care, food delivery, and other establishments, and is measured on a monthly, quarterly, and annual basis.

Current Active Users

The Company classifies Current Active Users as those wallet holders who have had at least one transaction in their account in the most current reported month of the reporting period.

Total Active Users

The Company classifies Total Active Users as those wallet holders who have had at least one transaction in their account during the previous six months from the reporting date.

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