XTM Inc. — Management Reports 2025

May 30, 2025

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

Management's
Discussion and Analysis

For the periods ended March 31, 2025 and 2024

(This Management Discussion and Analysis, prepared by management, has not been reviewed by the Company's external auditor)

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XTM INC.
Management Discussion and Analysis
For the periods ended March 31, 2025 and 2024

Table of Contents

INTRODUCTION

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

CORPORATE OVERVIEW

4

RECENT EVENTS

4

HIGHLIGHTS FOR Q1 2025

4

SUMMARY OF ANNUAL RESULTS

6
KEY PERFORMANCE INDICATORS AND NON-IFRS MEASURES 6
QUARTERLY RESULTS 6

ANALYSIS OF FINANCIAL PERFORMANCE

6
NET LOSS AND COMPREHENSIVE LOSS 6
REVENUE AND GROSS PROFIT 7
OPERATING EXPENSES 7
OTHER INCOME Error! Bookmark not defined.
ASSETS 8
LIABILITIES 9
SHAREHOLDERS EQUITY 9
RESTRICTED CASH AND CLIENT DEPOSITS 9
OFF BALANCE SHEET ARRANGEMENTS 10
WORKING CAPITAL 10

RISK FACTORS AND UNCERTAINTIES

10

NEW ACCOUNTING PRONOUNCEMENTS

10

DEFINITIONS – IFRS, ADDITIONAL GAAP AND NON-GAAP

10
IFRS MEASURES 10
KEY PERFORMANCE INDICATORS (non-GAAP and non-IFRS) 11

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XTM INC. Management Discussion and Analysis For the periods ended March 31, 2024

INTRODUCTION

This Management's Discussion and Analysis ("MD&A") prepared as of May 30, 2025 reviews the financial condition and results of operations of XTM Inc. (the "Company" or "XTM") for the period ended March 31, 2025 and all other material events up to the date of this report. The following discussion should be read in conjunction with a) the annual audited consolidated financial statements and related notes for the year ended December 31, 2024, and b) unaudited consolidated condensed interim financial statements for the three months ended March 31, 2024 together with the notes thereto. 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 unaudited consolidated condensed interim 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 hereof.

ACCOUNTING PERIODS

The following Management's Discussion & Analysis ("MD&A") is based on information in the unaudited condensed consolidated interim financial statements and accompanying notes thereto for the period ended March 31, 2025. Comparative amounts in the unaudited condensed consolidated interim financial statements and accompanying notes thereto are for the period ended March 31, 2024, and year-ended December 31, 2024.

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

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XTM INC.
Management Discussion and Analysis
For the periods ended March 31, 2025 and 2024

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 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 due to 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.

RECENT EVENTS

The following notable events occurred after the period covered by the Company's 2023-year end audited consolidated financial statements and MD&A:

• 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.

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XTM INC.
Management Discussion and Analysis
For the periods ended March 31, 2025 and 2024

• 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 23. 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 Q1 2025

The Company interprets the sustainability in revenue, active user base, and attainment of GDV milestones as strong indicators of sustained momentum within the hospitality sector, despite economic challenges impacting consumer discretionary spending. The company continues to invest efforts in streamlining the technologies and reducing redundancy.

• Revenue was $2,736K for the quarter increasing $923K or 51% compared to $1,812K in Q1 2024 (see analysis of financial performance below for detail);
• Gross dollar value (“GDV”) loaded on the Company’s platform was $173.5MM for the quarter, an increase of 28% from $136MM in Q1 2023 and was consistent with the quarter ended December 31, 2023;
• Net loss was $3.2MM for the quarter compared to a net loss of $5.3MM for Q1 2024 mainly due to investments in technology and expenses to support Qrails acquisition; the increase of $2.1MM is attributed to higher gross profit and lower operating expenses mainly in staffing (consisting of “Salaries and employee benefits” plus “Consulting”), professional fees and office and general. The Company expects operating expenses to continue to reduce in the coming quarters as it continues to reduce headcount and streamlining operations.
• Working Capital of the Company as at March 31, 2025 was a deficit of $28.1MM compared to a deficit of $25.4MM as at December 31, 2024.

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XTM INC.
Management Discussion and Analysis
For the periods ended March 31, 2025 and 2024

SUMMARY OF QUARTERLY 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.

QUARTERLY RESULTS

The following table summarizes information derived from the Company's unaudited condensed consolidated financial statements as well as KPI's the Company uses to assess performance, for each of the eight most recently completed quarters:

Financial Results						Key Performance Indicators
Quarter-Ended	Revenue	Cost Of Sales	Gross Profit	Net Income (loss)	Net Income (loss) per share	GDV	Current Active Users (past month)	Total Active Users (past 6 months)
Statement of Loss and Comprehensive Loss	$	$	$	$	$	$MM's	#	#
March 31, 2025	2,735,507	2,022,652	532,855	(3,443,458)	(0.01)	181.6	99,266	113,115
December 31, 2024	2,724,694	3,088,899	(364,205)	(6,454,681)	(0.03)	204.5	112,572	129,956
September 30, 2024	2,414,310	2,252,908	161,402	(4,163,506)	(0.02)	215.6	88,956	127,791
June 30, 2024	2,151,467	2,028,960	122,507	(5,127,553)	(0.02)	202.6	88,114	121,469
March 31, 2024	1,812,284	1,855,290	(43,006)	(4,778,703)	(0.03)	173.5	80,086	118,615
December 31, 2023	1,832,924	2,016,716	(183,792)	(7,153,024)	(0.04)	178.7	80,410	132,037
September 30, 2023	1,895,021	1,798,098	96,923	(4,657,465)	(0.03)	178.2	81,583	125,127
June 30, 2023	1,619,188	1,488,494	130,694	(2,382,035)	(0.01)	165.5	79,421	119,326
March 31, 2023	1,427,933	1,252,467	175,466	(1,890,399)	(0.01)	136.0	72,976	111,207

(1) See "Definitions – IFRS, Additional GAAP and Non-GAAP Measures";

ANALYSIS OF FINANCIAL PERFORMANCE

NET LOSS AND COMPREHENSIVE LOSS

Net loss and comprehensive loss for Q1 2025 was $3.2MM compared to a net loss and comprehensive loss of $5.3MM for Q1 2024. The increase of $2.1MM is attributed to higher gross profit and lower operating expenses mainly in staffing (consisting of "Salaries and employee benefits" plus "Consulting"), professional fees and office and general. The Company expects operating expenses to continue to reduce in the coming quarters as it continues to reduce headcount and streamlining operations.

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XTM INC.
Management Discussion and Analysis
For the periods ended March 31, 2025 and 2024

REVENUE AND GROSS PROFIT

Gross Dollar Value ("GDV") of $181.6MM for Q1 2025 increased by $8.1MM or 5% from $173.5MM for the prior year quarter. The increase is a result of growth in the number of clients and associated active users added to the AnyDay™ Financial program.

Revenue for Q1 2025 was $2,736K, an increase of $924K or 51% from $1,812K for the prior year quarter. Of the Company's four revenue streams, transaction and program management revenue were the main drivers, increasing by $408K and 381K, respectively. In addition, subscription revenue added $120K as the new fourth revenue stream.

Transaction revenue consisting of interchange fees resulting from point-of-sale transactions ("POS"), out of network ATM withdrawal fees, and electronic transfer fees was $2,006K for Q1 2025, an increase of $408K or 25% from $1,598K for the prior year quarter. The increase is due to the Company generating more GDV per location.

Card issuance revenue consisting of revenue from the purchase and shipping of AnyDay™ Financial debit cards to the clients for use by their employees was $164K for Q1 2025, an increase of $14K or 9% from $150K for the prior year quarter. This is due to a change from how card revenue is being recognized, and the Company is amortizing revenue over the average contractual life of the cards.

Program Management revenue consisting mainly of licensing fees or customization and support fees of the Company's AnyDay™ Financial technology was $445K for Q1 2025, an increase of $381K or 598% from $64K for the prior year quarter.

Subscription revenue consists of revenue from the enrollment of the AnyDay™ Financial program, where clients have the choice between monthly, 1-year, and 3-year terms. The revenue for Q1 2025 was $120K.

Gross profit for Q1 2025 was $533K or 19% of revenue, an increase of $576K from a $43K gross loss, or 2% of revenue for the prior year quarter. The increase in gross profit is a result of KOHO revenue earned in Q1 with no associated cost of sales.

OPERATING EXPENSES

Total operating expenses for Q1 2025 were $3,976K, a decrease of $1,196K or 23% from $5,172K for the prior year quarter. The main reasons for the decrease were lower salaries and employee benefits from staff turnover, as well as a decrease in other expenses, as well as a gain on foreign exchange. Operating expenses of the company consist of:

Salaries and employee benefits were $2,039K for Q1 2025 compared to $2,877K for the prior year quarter. The decrease of $788K is because of a reduced headcount from streamlining our operations.

Depreciation and amortization were $458K for Q1 2025 compared to $561K for the prior year quarter. The decrease of $103k is due to the termination of the office space for QRails, as well as month-to-month rent billing for XTM, as there was no formal lease renewal agreement at the end of the previous lease term.

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XTM INC.
Management Discussion and Analysis
For the periods ended March 31, 2025 and 2024

Share-based compensation was $344K for Q1 2025 compared to $347K for the prior year quarter, remaining consistent due to the vesting of existing restricted stock units (RSU)'s and stock options.

Office and General was $308K for Q1 2025 compared to $478K for the prior year quarter. The decrease of $170K is mainly due to a significant decrease in software licensing fees.

Professional fees were $205K for Q1 2025 compared to $305K for the prior year quarter. The decrease of $100K was mostly because of the decrease in audit fees as well as a significant decrease in hiring costs.

Accretion and interest on debentures were $297K and $15K, respectively for Q1 2025 compared to $172K and $26K, respectively for the prior year quarter. The increase of $125K and decrease of $11K, respectively are due to the 2023 CAD debentures being extinguished and the new issuances of the debentures in Q2 2024 and Q4 2024. See note 15 for further disclosures.

Consulting fees were $297K in Q1 2025 compared to $170K for the prior year quarter. The increase of $102K is mainly due to new consultants hired for both XTM and QRails.

Marketing and promotion were $28K for Q1 2025 compared to $77K for the prior year quarter. The decrease of $49K is mainly due to decreased spend of $30K on cardholder communications.

Bank charges and interest was $218K for Q1 2025 compared to $58K for the prior year quarter. The increase of $160K is due to the added interest changes on the 2Shores lending facility, used to fund EWA.

Public company and regulatory was $47K for Q1 2025 compared to $25K for the prior year quarter. The increase of $23K is mainly due to a $21K increase in Investor Relations spend pertaining to market analysis.

Travel, meals, and entertainment was $22K for Q1 2024 compared to $21K for the prior year quarter, largely remaining consistent year over year.

Other (income) expense for Q1 2025 was $(322K) compared to $95K for the prior year quarter. The current quarter income is a result of gain on translation in the quarter, as well as a gain on termination of the office lease.

ASSETS

Cash as of March 31, 2025 was $128K compared to $64K on December 31, 2024. The consolidated statement of cash flows details the cash movements during the quarter.

Trade and other receivables as at March 31, 2025 were $805K compared to $584K on December 31, 2024. The increase of $221K is mainly due to $267K owing from KOHO for clients transitioned in March 2025.

Prepaid expenses as at March 31, 2025, were $342K compared to $415K on December 31, 2024. The decrease of $73K is due to a decrease in subscriptions, as well as deposits applied against the services performed.

Receivables – restricted as at March 31, 2025, were $167K compared to $2,396K at December 31, 2024. Majority of this balance relates to the QRails EWA transaction funding receivable.

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XTM INC.
Management Discussion and Analysis
For the periods ended March 31, 2025 and 2024

Contract assets as at March 31, 2025, were $308K compared to $387K at December 31, 2024. The decrease of $79K is in line with expected contract assets at March 31, 2025, compared to December 31, 2024.

Prepayment option on convertible note as at March 31, 2025, was $3K and remains unchanged from $3K as at December 31, 2024.

Intangible assets as at March 31, 2025, were $5,579K compared to $5,993K at December 31, 2024. The decrease of $414K is due to the amortization of internally developed software in Q1 2025.

LIABILITIES

Trade and other payables as at March 31, 2025, were $12,390K compared to $11,120K at December 31, 2024. The increase of $1,270K was a result of aging payables longer than normal. The Company has payment plans negotiated with key vendors, reducing the need for near-term cash outlay.

Unearned revenue as at March 31, 2025, was $905K compared to $1,148K at December 31, 2024. The decrease of $242K is attributed to the Company recognizing its Card revenue across the life of its customer contracts which can range from 1 to 3 years as well as recognizing $100K relating to a contract at QRails.

Lease liabilities as at March 31, 2025, was $4K, comprised of a current ($4K) and long-term ($Nil) portion compared to $760K at December 31, 2024. The decrease of $756K is primarily due to derecognizing the office lease for QRails upon termination, as well as for XTM where there was no formal lease renewal agreement.

Due to related party as at March 31, 2025, was $147K compared to $219K at December 31, 2024, a decrease of $72K. The decrease is due to partial repayment the amount owing to the CEO.

Loan payable as at March 31, 2025, was $261K compared to $4,982K at December 31, 2024. The decrease of $4,721K is mainly because of the repayments made against the credit facility.

Convertible debentures as at March 31, 2025 were $9,695K compared to $9,688K at December 31, 2024. No new debentures were issued in Q1 and the change is due to FX.

SHAREHOLDERS EQUITY

Shareholders equity as at March 31, 2025 was a deficit of $32.4MM compared to $29.1MM at December 31, 2024. The increase of $3.3MM is due to an increase in accumulated deficit by $4.0MM associated with the current quarters net loss and comprehensive loss. Partially offsetting this is an increase of $436K in share capital.

RESTRICTED CASH AND CLIENT DEPOSITS

Acting as a paying agent, the Company had $51.2MM in restricted funds on deposit (December 31, 2024 - $65.4MM) and corresponding liabilities for client and cardholder balances as at March 31, 2025, of $67.4MM (December 31, 2024 - $77.0MM). The balance decreased due to the shift of clients to KOHO financial; however, it is anticipated that these will be returned back to XTM by Q3 2025. Restricted cash consists of cash balances held in individual client wallets which are on deposit in custodial accounts controlled by the company for the sole benefit of the client, and cardholder balances resulting from the transfer of funds by the client from their

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XTM INC.
Management Discussion and Analysis
For the periods ended March 31, 2025 and 2024

respective wallet(s) to a card which are on deposit in settlement accounts controlled and subject to restrictions imposed by the card program sponsoring bank.

OFF BALANCE SHEET ARRANGEMENTS

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

WORKING CAPITAL

Working capital of the Company as of March 31, 2025 was a deficit of $28.2MM compared to a deficit of $25.4MM on December 31, 2024. The decrease of $2.8MM is mainly a result of a decrease in restricted cash and restricted receivables of $16.5MM offset by a decrease in program deposits and loan payable of $14.3MM.

RISK FACTORS AND UNCERTAINTIES

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

NEW ACCOUNTING PRONOUNCEMENTS

Please refer to the Company's unaudited condensed consolidated interim financial statements for the period ended March 31, 2025, and the year ended December 31, 2024.

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 fix duration and for tasks with a finite duration and limited scope.

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XTM INC.
Management Discussion and Analysis
For the periods ended March 31, 2025 and 2024

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.

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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