XTM Signs Definitive Agreement to Acquire Issuer, Processor, Certified EWA Provider-QRails

By Business Wire On Jun 16, 2023

XTM a Miami and Toronto-based Fintech creator of payment innovations and mobile solutions specifically geared towards service industries including hospitality, personal care and other service providers,announced that it has entered into a definitive agreement dated June 15, 2023 (the “Purchase Agreement”) to acquire (the “Transaction”) all of the issued and outstanding securities of QRails Inc. (“QRails”), a prepaid payments issuer-processor and one of the first vertically integrated providers of earned wage access (“EWA”). The securities of QRails will be acquired from its current shareholders (the “Sellers”) for total consideration of US$3,500,000, consisting of US$100,000 in cash with the remaining US$3,400,000 to be paid through the issuance of common shares of the Company (“Common Shares”) at a deemed price of US$0.12 (CAD$0.16), resulting in 28,333,333 Common Shares being issued to the Sellers. The Transaction is expected to close on or about July 3, 2023, subject to reporting timelines and customary closing conditions.

“We are excited about how the merger of QRails and XTM will help extend earned wage access to our global client base”

The Transaction is structured as an agreement and plan of merger by and between the Company, XTM USA Inc., QRails and XTM QRails USA Inc. (“SubCo”), a wholly owned subsidiary of the Company. On close, QRails and SubCo will merge with the continuing merged entity becoming a subsidiary of the Company.

In connection with the Transaction, XTM has advanced to QRails bridge financing in the amount of US$1,507,000, which is evidenced by a promissory note due and payable in the event of the termination of the Purchase Agreement. The bridge financing is without interest until such time as it becomes due, following which the principal attracts interest at a rate of 12% per year.

The Transaction, the Purchase Agreement and the purchase price payable to the Sellers was negotiated at arm’s-length, and no finders fee is being paid in connection with the Transaction.

QRails currently operates in the United States and the U.K., with offices in Denver, Kansas City and London, further accelerating XTM’s expansion plans in those markets, with a qualified pipeline of new clients, representing hundreds of thousands of new users. QRails’ product AnyDay is a leading EWA brand and has been white labeled for some of the largest HR & Payroll Solution Providers in the world.

“We are excited about how the merger of QRails and XTM will help extend earned wage access to our global client base,” said Raj Sharmacharya, Managing Director of Veritas Prime. “Our clients will benefit from the expanded product and support resources that the combined company will bring.”

QRails is fully integrated to multiple payroll and time & attendance systems, providing workers with real-time access to available wages. Some of the product features included in AnyDay are:

Full suite of payment options including virtual and physical card, mobile wallet, card-to-card transfers
White label opportunities for integration into existing apps using APIs and SDKs
Perfect for Workforce Management (“WFM”), Time and Attendance, and Payroll partners to include as part of the overall solution

QRails has not historically produced material revenue as it has been focusing on customer acquisition and entering into agreements with a large number of customers as it scales its operations and develops its technology assets. It is expected that QRails will have material revenue in 2023, with increases to revenue in 2024 together with opportunities for strategic cross-selling opportunities with XTM products and services. Information on QRails’ traction in the EWA space can be reviewed at the following link: QRails News.

The Transaction will allow the teams to identify strengths and opportunities for growth in the AnyDay and Today Payment products and to leverage these strengths and realize the economies of scale.

“The union with QRails brings us processing control, incredible talent, an established U.S. book of business and a complimentary economic model,” said Marilyn Schaffer, CEO of XTM.

“Both the QRails and XTM teams are enthusiastic about the merger” said Cary Strange, President, QRails. “Everyone is fully vested in our combined future. Our expanded geographic market, combination of market-defining solutions, and our competitive EWA position produces a winning combination.”

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