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XTM Inc.

Other OTC: XTMIF US$0.3101

CNQ: PAID C$0.3850

September 9, 2021

 

Business Overview

 

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Toronto-based XTM Inc. is a fintech innovator that has a digital wages and gratuity payout solution for hospitality and personal care businesses and their workers. The TipstodayTM platform (Today) is comprised of a free mobile app, a Mastercard or Visa debit card, and free banking features. It is compliant with all paycard, wage, and gratuity disbursement rules and regulations in both the U.S. and Canada.

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The addressable markets are quite substantial. In pre-COVID 2018, there were 39 million workers in the hospitality, leisure, personal care, and delivery service industries. U.S. restaurant sales for 2019 were more than $863 billion, and Canadian restaurant sales for 2017 exceeded $85 billion. North American food delivery and takeout sales for 2019 were $168 billion. North American North American hair, nail, beauty, and esthetics sales for 2018 were $105 billion.

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Most of those businesses took a severe hit as COVID-19 spread throughout North America and various government entities in both Canada and the U.S. put restrictions on business operations and personal mobility. Although some restrictions linger, most businesses have now reopened. Many have instituted various safety protocols, including contactless transactions.

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XTM customers include 80% of the restaurant groups in Canada, five of the largest pizza delivery chains in Canada (including Dominos and Boston Pizza), 60% of the Regis salon chain in Canada (the largest chain in North America), and one of the largest sports and entertainment groups in North America (Maple Leaf Sports and Entertainment). Customer acquisition costs (CN$2.00) are low.

 

 

Technology and Revenue Generation

 

The Company has developed considerable technology integration with third parties, and its published APIs facilitate Today use by both clients and cardholders. XTM offers a white-labeled user interface, allowing clients to customize payments, logs, and branding.

 

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XTM has integrated its systems with Lightspeed (TSX: LSPD / NYSE: LSPD), TouchBistro, Clover, BlackFox, PizzaHut, and Deliver Plus.

 

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The technology is backed by Amazon Web Services, RBC, and Telpay.

 

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The Company is a global issuer of reloadable Mastercard and Visa debit cards.

 

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Today cards provide same-day payout of earnings and gratuities. Mobile banking features include direct deposits, POS and online transactions, ATM transactions, user-to-user transfers, bill payments, text notifications, and ACT or Interact e-transfers.

As of April 8, 2021, XTM generated 66.1% of its revenues from interchange (including POS), 30.4% from e-transfers/ACH, and 3.5% from ATM usage. Average revenue per user was approximately CN$5 per month. Additional future revenue sources are outlined in the Expansion Plans section below.

 

 

Recent Events

 

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BMO Field (Toronto). On July 16, 2021, the Company announced that BMO Field will re-open and operate as a cashless venue that includes the Today program to help staff take their tips home digitally. The capacity of the venue is 15,000 fans.

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Tiproll acquisition. On July 13, 2021, XTM closed the acquisition of the assets of Tiproll, a gratuity-pooling software solution that management has since added on to the Today platform. Tiproll is designed to solve various complex, labor-intensive tip out calculations. It is offered for free to existing employers and as a monthly subscription to new clients.

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US launch. In April 2021, the Company launched its Today program in the U.S., a market that is possibly 10x the size of the Canadian market. In June 2021, XTM appointed Jason Giagrande, a successful hospitality executive, to lead its U.S. business strategy.

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CurrencyWorks, Inc. (TSXV: CWRK and OTCQB: CWRK). In March 2021, XTM signed a deal to allow Today mobile wallet holders to access the CurrencyWorks Collectibles NFT and payment platforms.

 

 

Expansion Plans

 

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New markets. Management is now targeting entry into golf courses, private clubs, and wedding/event venues.

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New offerings. XTM plans a full rollout of credit and overdraft offerings. Management estimates that micro-credit, under the product name Moretoday, could generate new revenue per user of approximately $4 per month. Depending upon the frequency and amount of deposits, opt-in users will have access to levels of overdraft from $20 to $250.

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Revenue-generating partnerships. Healthcare and loyalty represent opportunities to monetize data and client base. Management is hopeful that healthcare will generate new revenue per user of $4.50 per month and cashback rewards an additional $0.50 per month.

 

 

Officers & Directors

 

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Marilyn Schaffer, CEO, Founder and a Director, was previously Chief Marketing Officer at Pay Mobile, Inc..

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Paul Dowdall, CFO, effective September 13, 2021, was previously CFO for Ignite International Brands Ltd. (OTCQX: BILZF and CSE: BILZ), an international consumer packaged goods company headquartered in Vaughan, Canada.

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Chad Arthur, CTO

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Jason Giagrande, Head of Business Strategy/America. Mr. Giagrande is a serial hospitality entrepreneur.

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Randy Khalaf, Director, is Chief Financial & Enterprise Systems Officer, EVP, and Treasurer of Novus International, a Missouri-based global animal nutrition solutions company.

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On February 18, 2020, management and directors as a group beneficially owned 5,910,000 common shares (5.8% of the total outstanding). They also owned options to purchase 950,000 shares.

 

 

Financials (CAD)

 

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Income Statement (6 months through 06/30/21 vs. 06/30/20)

 

Net revenue: 650,821 vs. 372,797

Cost of sales: 401,615 vs. 340,945

Gross profit: 249,206 vs. 31,852

Salaries & benefits: 802,524 vs. 434,257

Marketing & promotion: 210,572 vs. 221,621

Professional fees: 308,647 vs. 228,589

Other expenses: 513,866 vs. 469,696

Operating income (loss): (1,835,609) vs. (1,357,163)

Other income: 6,000 vs. 98,490

Net income (loss): (1,829,609) vs. (1,258,673)

Earnings (loss) per basic and diluted common share: (0.01) vs. (0.01)

Weighted average common shares outstanding: 130,687,410 vs. 88,157,633

 

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Balance Sheet (06/30/21)

 

Cash: 3,913,317

Cash held in trust & customer deposits: 11,037,100

Other current assets: 635,076

Total current assets: 15,585,493

Property & equipment: 89,869

Intangible assets: 178,277

Goodwill: 920,000

Total assets: 16,773,637

Client funds: 11,027,100

Other current liabilities: 2,708,395

Total current liabilities: 13,735,495

Non-current liabilities: 53,674

Equity by stockholders: 2,985,470

Common shares outstanding: 137,931,256

Stock options outstanding: 5,175,000 at a weighted average exercise price of $0.17 per share

Warrants outstanding: 17,916,439 at a weighted average exercise price of $0.28 per share

 

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During the six months ended June 2021, the exercise of options and warrants generated $2,088,945 in exchange for 12,101,353 common shares.

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In April 2021, XTM cancelled 4,877,500 common shares that were returned to the treasury.

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On February 26, 2021, XTM closed a non-brokered private placement consisting of 7,966,663 units at $0.15 per unit ($1,195,000 gross proceeds). Each unit consisted of a common share and one 24-month warrant exercisable at $0.30.

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The financial statements for December 31, 2020, were prepared on a going-concern basis and audited by MNP LLP (Mississauga,Ontario). The auditors expressed an unqualified opinion.

 

 

Valuation Considerations

 

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Although the future course of the COVID-19 pandemic is impossible to predict, businesses are adapting to the unfolding circumstances. The contactless nature of the XTM payout solution should be viewed as a plus in this environment.

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Management has successfully broadened the scope of operations and established relationships with a large number of blue chip clients. Customer acquisition costs are low and the addressable markets substantial. Recent entry into the U.S. greatly expands the size of the addressable market.

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The Company may require significant additional financial resources to carry out its business plans.

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The SEDAR filings (www.sedar.com) list other risk factors which are hereby incorporated by reference.

 

 

Contacts

 

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Address: 67 Mowat Avenue, Suite 437, Toronto, ON M6K 3E3 Canada. Satellite office in Miami, FL.

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Phone: 416.260.1641

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Website: http://xtminc.com

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Investor contact: finance@xtminc.com

 

 

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