SEDAR Interim Financial Statements

LEON’S FURNITURE LIMITED Interim Condensed Consolidated Financial Statements For the period ended September 30, 2025 Leon’s Furniture Limited Table of Contents Unaudited Interim Condensed Consolidated Financial Statements Interim Consolidated Statements of Financial Position 1 Interim Consolidated Statements of Income 2 Interim Consolidated Statements of Comprehensive Income 3 Interim Consolidated Statements of Changes in Shareholders’ Equity 4 Interim Consolidated Statements of Cash Flows 5 Notes to the Unaudited Interim Condensed Consolidated Financial Statements Note 1 Reporting Entity 6 Note 2 Basis of Presentation 6 Note 3 Summary of Significant Accounting Policies 6 Note 4 Capital Risk Management 7 Note 5 Inventories 8 Note 6 Property, Plant and Equipment and Right-Of-Use Assets 8 Note 7 Investment Properties 9 Note 8 Intangible Assets 10 Note 9 Leases 11 Note 10 Long-term Debt 12 Note 11 Management Share Purchase Plan 12 Note 12 Common Shares 14 Note 13 Revenue 15 Note 14 Income Tax Expense 15 Note 15 Earnings Per Share 16 Note 16 Financial Instruments 16 Note 17 Interim Consolidated Statements of Cash Flows 18 Note 18 Comparative Financial Information 18 Leon’s Furniture Limited 1 Interim Consolidated Statements of Financial Position (unaudited) As at Notes September 30, 2025 December 31, 2024 September 30, 2024 (C$ in thousands) Assets Current assets Cash and cash equivalents 207,947 191,238 125,039 Debt securities 112,712 99,139 88,849 Equity securities 41,265 35,030 35,329 Trade receivables 156,313 185,975 182,781 Income taxes recoverable 2,587 1,458 9,632 Inventories 5 413,127 395,491 377,196 Deferred acquisition costs 13,962 13,721 13,699 Prepaid expenses and other assets 18,231 12,617 19,979 Derivative assets 16 - 1,545 833 Total current assets 966,144 936,214 853,337 Non-current assets Deferred acquisition costs 22,712 22,778 22,389 Loan receivable 11 21,336 15,546 15,714 Property, plant and equipment and right-of-use assets 6 733,926 674,676 647,930 Investment properties 7 13,432 13,724 13,813 Intangible assets 8 270,196 270,689 270,938 Goodwill 390,120 390,120 390,120 Deferred income tax assets 17,253 16,939 17,498 Total non-current assets 1,468,975 1,404,472 1,378,402 Total assets 2,435,119 2,340,686 2,231,739 Liabilities Current liabilities Trade and other payables 303,376 298,226 288,726 Current portion of provisions 7,233 8,237 10,915 Income taxes payable 2,271 1,493 2,265 Customers' deposits 126,641 177,233 146,201 Current portion of lease liabilities 9 77,659 79,690 78,531 Dividends payable 16,500 13,639 13,638 Current portion of deferred warranty plan and insurance revenue 71,384 70,508 70,301 Current portion of long-term debt 10 7,500 7,500 7,500 Derivative liabilities 16 949 - - Total current liabilities 613,513 656,526 618,077 Non-current liabilities Long-term debt 10 72,500 72,500 82,500 Lease liabilities 9 322,714 265,860 245,944 Deferred warranty plan and insurance revenue 113,340 112,987 110,874 Provisions 27,331 24,351 20,742 Deferred income tax liabilities 64,659 67,312 66,980 Total non-current liabilities 600,544 543,010 527,040 Total liabilities 1,214,057 1,199,536 1,145,117 Shareholders' equity Common shares 12 179,552 167,231 167,216 Retained earnings 1,022,152 960,471 906,289 Accumulated other comprehensive income 19,358 13,448 13,117 Total shareholders' equity 1,221,062 1,141,150 1,086,622 Total liabilities and shareholders' equity 2,435,119 2,340,686 2,231,739 The accompanying notes are an integra --- l part of these unaudited interim condensed consolidated financial statements. Leon’s Furniture Limited 2 Interim Consolidated Statements of Income (unaudited) For the Three months ended Nine months ended (C$ in thousands except share and per share amounts) Notes September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Revenue 13 678,633 651,934 1,902,273 1,831,851 Cost of sales 5 376,093 366,397 1,052,653 1,028,392 Gross profit 302,540 285,537 849,620 803,459 Selling, general and administrative expenses 240,861 232,356 700,498 681,518 Other (income) loss (8,682) 460 (1,019) (3,098) Net finance costs 3,786 3,800 9,585 11,501 Net income before income tax 66,575 48,921 140,556 113,538 Income tax expense 14 16,246 12,060 34,566 27,692 Net income for the period 50,329 36,861 105,990 85,846 Weighted average number of common shares outstanding 15 Basic 68,415,836 68,182,137 68,291,847 68,126,175 Diluted 68,744,325 68,646,871 68,676,935 68,646,525 Earnings per share 15 Basic $0.74 $0.54 $1.55 $1.26 Diluted $0.73 $0.54 $1.54 $1.25 Dividends declared per share Common $0.24 $0.20 $0.64 $0.56 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. Leon’s Furniture Limited 3 Interim Consolidated Statements of Comprehensive Income (unaudited) For the Three months ended Nine months ended (C$ in thousands) September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Net income for the period 50,329 36,861 105,990 85,846 Other comprehensive income (loss) Item that may be reclassified subsequently to profit or loss: Gain on debt instruments arising during the period 793 2,617 1,563 2,530 Reclassification adjustment for gain on disposal of debt instruments - - - 2 Item that will not be reclassified to profit or loss: Gain on equity instruments arising during the period 2,718 2,185 4,632 4,112 Income tax expense on the above (187) (220) (285) (285) Other comprehensive income for the period 3,324 4,582 5,910 6,359 Comprehensive income for the period 53,653 41,443 111,900 92,205 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. Leon’s Furniture Limited 4 Interim Consolidated Statements of Changes in Shareholders’ Equity (unaudited) (C$ in thousands) Common shares Accumulated other comprehensive income Retained earnings Total As at December 31, 2024 167,231 13,448 960,471 1,141,150 Comprehensive income Net income for the period - - 105,990 105,990 Other comprehensive income for the period - 5,910 - 5,910 Total comprehensive income - 5,910 105,990 111,900 Transactions with shareholders Dividends declared - - (43,795) (43,795) Management share purchase plan [note 11] 12,376 - - 12,376 Repurchase of common shares [note 12] (55) - (514) (569) Total transactions with shareholders 12,321 - (44,309) (31,988) As at September 30, 2025 179,552 19,358 1,022,152 1,221,062 (C$ in thousands) Common shares Accumulated other comprehensive income Retained earnings Total As at December 31, 2023 164,875 6,758 856,891 1,028,524 Comprehensive income Net income for the period - - 85,846 85,846 Other comprehensive income for the period - 6,359 - 6,359 Total comprehensive income - 6,359 85,846 92,205 Transactions with shareholders Dividends declared - - (38,153) (38,153) Management share purchase plan [note 11] 2,046 - - 2,046 Share repurchase commitment [note 12] 295 - 1,705 2,000 Total transactions with shareholders 2,341 --- - (36,448) (34,107) As at September 30, 2024 167,216 13,117 906,289 1,086,622 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. Leon’s Furniture Limited 5 Interim Consolidated Statements of Cash Flows (unaudited) For the Nine months ended (C$ in thousands) Notes September 30, 2025 September 30, 2024 Operating activities Net income before income tax 140,556 113,538 Add (deduct) items not involving an outlay of cash: Depreciation of property, plant and equipment, right-of-use assets and investment properties 81,650 79,139 Amortization of intangible assets 807 924 Amortization of deferred warranty plan revenue 13 (53,539) (51,109) Amortization of deferred insurance revenue 13 (20,817) (18,765) Amortization of premium (108) (77) Net finance costs 9,585 11,501 Gain on sale of property, plant and equipment and investment properties (368) (220) Gain on settlement (3,513) - Loss / (gain) on derivatives 2,494 (3,098) Gain on sale of marketable securities - (2) Gain on management share purchase plan (2,090) (1,608) 154,657 130,223 Change in operating working capital 17 (30,573) 43,221 Cash received on warranty plan sales 54,806 52,877 Cash received on insurance sales 20,779 18,765 Income taxes paid (38,169) (33,488) Cash provided by operating activities 161,500 211,598 Investing activities Purchase of property, plant and equipment 6 (25,612) (46,838) Purchase of intangible assets 8 (314) (649) Proceeds on sale of property, plant and equipment and investment properties 485 263 Purchase of debt and equity instruments (32,644) (30,216) Proceeds on sale of debt and equity instruments 19,139 17,576 Repayment of loan receivable 4,357 5,357 Interest received 6,571 4,914 Cash used in investing activities (28,018) (49,593) Financing activities Payment of lease liabilities 9 (60,290) (57,682) Dividends paid (40,934) (36,761) Decrease of employee loans-redeemable shares 2,074 2,046 Repurchase of common shares 12 (569) - Repayment of long-term debt 10 - (20,000) Issuance of long-term debt 10 - 10,000 Interest paid (17,054) (17,313) Cash used in financing activities (116,773) (119,710) Net increase in cash and cash equivalents during the period 16,709 42,295 Cash and cash equivalents, beginning of period 191,238 82,744 Cash and cash equivalents, end of period 207,947 125,039 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 6 1. Reporting Entity Leon’s Furniture Limited (“Leon’s” or the “Company”) was incorporated by the Articles of Incorporation under the Business Corporations Act on February 28, 1969. Leon’s is a retailer of home furnishings, mattresses, appliances and electronics across Canada. Leon’s is a public company listed on the Toronto Stock Exchange (TSX – LNF) and is incorporated and domiciled in Canada. The address of the Company’s head office and registered office is 45 Gordon Mackay Road, Toronto, Ontario, M9N 3X3. The Company’s business is seasonal in nature. Retail sales are traditionally higher in the third and fourth quarters. 2. Basis of Presentation The interim condensed consolidated financial statements of the Company are prepared in accordance with IAS 34, Int --- erim Financial Reporting. Accordingly, certain information and note disclosure normally included in the annual financial statements prepared in accordance with IFRS® Accounting Standards, as issued by the International Accounting Standards Board (“IASB”), have been omitted or condensed. The interim condensed consolidated financial statements of the Company include the financial results of Leon’s Furniture Limited and its wholly owned subsidiaries. These interim condensed consolidated financial statements were approved and authorized for issuance by the Board of Directors on Thursday, November 6, 2025. 3. Summary of Significant Accounting Policies Except for the adoption of the new, revised or amended accounting standards noted below, these interim condensed consolidated financial statements have been prepared using the same accounting policies and methods of computation as the annual consolidated financial statements of Leon’s for the year ended December 31, 2024. The disclosure contained in these interim condensed consolidated financial statements does not include all requirements in IAS 1, Presentation of Financial Statements (“IAS 1”). Accordingly, the interim condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2024. Segment reporting The Company has two operating segments, Leon’s and The Brick, both in the business of the sale of home furnishings, mattresses, appliances and electronics in Canada. The Company’s chief operating decision-maker, identified as the Chief Executive Officer, monitors the results of operating segments for the purpose of allocating resources and assessing performance. Leon’s and The Brick operating segments are aggregated into a single reportable segment because they show a similar long-term economic performance (gross margin), have comparable products, customers and distribution channels, operate in the same regulatory environment, and are steered and monitored together. Accordingly, there is no reportable segment information to provide in these interim condensed consolidated financial statements. Adoption of new accounting standards Amendments to IAS 21, The Effects of Changes in Foreign Exchange Rates In August 2023, the IASB issued amendments to IAS 21 – The Effects of Changes in Foreign Exchange Rates in relation to Lack of Exchangeability. The amendments require entities to apply a consistent approach in assessing whether a currency can be exchanged into another currency, and in determining the exchange rate to use and the disclosures to provide when it cannot. These amendments are effective for annual reporting periods beginning on or after January 1, 2025, with early adoption permitted. The adoption of this standard does not have a material impact on the financial statements. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 7 Accounting standards and amendments issued but not yet adopted IFRS 18, Presentation and Disclosure in Financial Statements (“IFRS 18”) The IASB issued IFRS 18 “Presentation and Disclosure in the Financial Statements” ("IFRS 18"), which sets out requirements and guidance on presentation and disclosure in financial statements, including: • Presentation in income statement of inco --- me and expenses within five defined categories: operating, investing, financing, income taxes, and discontinued operations • Presentation in the income statements of new defined subtotals for operating profit and profit before financing and income taxes • Enhanced guidance on aggregation and disaggregation of information and whether to provide information in the financial statements or in the notes • Disclosure of specified expenses by nature • Disclosure of explanations of management-defined performance measures IFRS 18 will replace IAS 1 “Presentation of Financial Statements” but carries forward many requirements from IAS 1 without any change. The standard is effective for the annual reporting periods beginning on or after January 1, 2027, with early application permitted. The Company is currently assessing the impact of this new standard on its consolidated financial statements. Amendments to IFRS 9 and IFRS 7: Classification and Measurement of Financial Instruments In May 2024, the IASB issued amendments to IFRS 9, Financial Instruments, and IFRS 7, Financial Instruments: Disclosures, relating to the classification and measurement requirements of financial instruments recognized within those standards. These amendments include, among others: • Clarify that a financial liability is to be derecognized on the 'settlement date' and introduces an accounting policy to derecognize financial liabilities settled through an electronic payment system before settlement date if certain conditions are met; and • Require additional disclosures for financial assets and liabilities with contractual terms that reference a contingent event and equity instruments classified at fair value through other comprehensive income. These amendments will be effective for annual periods beginning on or after January 1, 2026 and will be applied retrospectively with an adjustment to opening retained earnings. Prior periods will not be required to be restated and can only be restated without using hindsight. The Company does not expect material impacts from these amendments on its interim financial statements. 4. Capital Risk Management The Company’s objectives when managing capital are to: • ensure sufficient liquidity to support its financial obligations and execute its operating and strategic plans; and • utilize working capital to negotiate favourable supplier agreements both in respect of early payment discounts and overall payment terms. The capital structure currently includes working capital, debt and equity securities, lease liabilities, term credit facility and borrowing capacity available under the revolving credit facilities (note 10). As at September 30, 2025, $187,642 is available to draw on under the Company’s $200,000 revolving credit facility, as the borrowing capacity is reduced by ordinary letters of credit of $8,608 (December 31, 2024 - $8,508) and utilizing $3,750 of the revolving credit facility. Under the Senior Secured Credit Agreement (“SSCA”), the financial and non-financial covenants are reviewed on an ongoing basis by management to monitor compliance with the agreement. The Company was in compliance with these covenants as at September 30, 2025. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 8 The Board of Directors reviews and approves --- any material transactions out of the ordinary course of business, including proposals on acquisitions or other major investments or divestitures, as well as capital and operating budgets. Based on the Company’s borrowing capacity available and expected cash flow from operating activities, management believes that the Company has sufficient funds available to meet its liquidity requirements at any point in time. However, if cash from operating activities is lower than expected or capital costs for projects exceed current estimates, or if the Company incurs major unanticipated expenses, it may be required to seek additional capital. The Company is not subject to any externally imposed capital requirements, other than with respect to its insurance subsidiaries. Refer to note 25 in the fiscal year 2024 consolidated financial statements. 5. Inventories The amount of inventory recognized as an expense for the three and nine months ended September 30, 2025 was $360,389 (three months ended September 30, 2024 - $355,091) and $1,004,122 (nine months ended September 30, 2024 - $985,516), which is presented within cost of sales in the unaudited interim condensed consolidated statements of income. During the nine months ended September 30, 2025, there was $1,390 in inventory write downs (nine months ended September 30, 2024 - $524 inventory write downs). As at September 30, 2025, the inventory markdown provision totaled $8,743 (as at December 31, 2024 - $7,353). 6. Property, Plant and Equipment and Right-Of-Use Assets (C$ in thousands) Land Buildings Equipment Vehicles Building improvements Leased property Leased equipment Total Cost Balance as at December 31, 2024 111,341 347,157 204,494 77,663 253,213 751,957 2,128 1,747,953 Additions - 8,439 4,365 7,029 6,803 111,733 2,355 140,724 Disposals - - (3,811) (1,782) (1,444) - (1,220) (8,257) Balance as at September 30, 2025 111,341 355,596 205,048 82,910 258,572 863,690 3,263 1,880,420 Accumulated depreciation Balance as at December 31, 2024 - 191,411 153,471 53,769 224,118 448,823 1,685 1,073,277 Depreciation - 7,260 6,140 3,542 5,414 58,660 342 81,358 Disposals - - (3,780) (1,735) (1,444) - (1,182) (8,141) Balance as at September 30, 2025 - 198,671 155,831 55,576 228,088 507,483 845 1,146,494 Net book value as at September 30, 2025 111,341 156,925 49,217 27,334 30,484 356,207 2,418 733,926 (C$ in thousands) Land Buildings Equipment Vehicles Building improvements Leased property Leased equipment Total Cost Balance as at December 31, 2023 111,304 313,658 190,520 71,809 249,576 686,196 2,232 1,625,295 Additions 220 33,499 14,537 7,103 5,632 67,824 - 128,815 Disposals (183) - (563) (1,249) (1,995) (2,063) (104) (6,157) Balance as at December 31, 2024 111,341 347,157 204,494 77,663 253,213 751,957 2,128 1,747,953 Accumulated depreciation Balance as at December 31, 2023 - 182,831 146,326 50,269 218,537 374,103 1,465 973,531 Depreciation - 8,580 7,687 4,640 7,572 76,262 324 105,065 Disposals - - (542) (1,140) (1,991) (1,542) (104) (5,319) Balance as at December 31, 2024 - 191,411 153,471 53,769 224,118 448,823 1,685 1,073,277 Net book value as at December 31, 2024 111,341 155,746 51,023 23,894 29,095 303,134 443 674,676 Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 9 Included in the above balances as at S --- eptember 30, 2025, are assets not being amortized with a net book value of approximately $10,068 (as at December 31, 2024 - $12,467), being construction in progress. Depreciation of property, plant and equipment is included within selling, general and administrative expenses on the unaudited interim consolidated statements of income. 7. Investment Properties (C$ in thousands) Land Buildings Building improvements Total As at September 30, 2025: Cost Balance as at December 31, 2024 10,646 15,396 964 27,006 Balance as at September 30, 2025 10,646 15,396 964 27,006 As at September 30, 2025: Accumulated depreciation Balance as at December 31, 2024 - 12,585 697 13,282 Depreciation - 254 38 292 Balance as at September 30, 2025 - 12,839 735 13,574 Net book value as at September 30, 2025 10,646 2,557 229 13,432 (C$ in thousands) Land Buildings Building improvements Total As at December 31, 2024: Cost Balance as at December 31, 2023 10,646 15,396 953 26,995 Additions - - 11 11 Balance as at December 31, 2024 10,646 15,396 964 27,006 As at December 31, 2024: Accumulated depreciation Balance as at December 31, 2023 - 12,254 651 12,905 Depreciation - 331 46 377 Balance as at December 31, 2024 - 12,585 697 13,282 Net book value as at December 31, 2024 10,646 2,811 267 13,724 The estimated fair value of the investment properties portfolio as at September 30, 2025, was approximately $40,400 (as at December 31, 2024 - $40,400). This recurring fair value disclosure is categorized within Level 3 of the fair value hierarchy (note 16 for definition of levels). This was compiled internally by management based on available market evidence. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 10 8. Intangible Assets (C$ in thousands) Customer relationships, brand name and franchise agreements Computer software Total Cost Balance as at December 31, 2024 275,500 20,218 295,718 Additions - 314 314 Balance as at September 30, 2025 275,500 20,532 296,032 Accumulated amortization Balance as at December 31, 2024 9,500 15,529 25,029 Amortization - 807 807 Balance as at September 30, 2025 9,500 16,336 25,836 Net book value as at September 30, 2025 266,000 4,196 270,196 (C$ in thousands) Customer relationships, brand name and franchise agreements Computer software Total Cost Balance as at December 31, 2023 275,500 20,872 296,372 Additions - 673 673 Disposals - (1,327) (1,327) Balance as at December 31, 2024 275,500 20,218 295,718 Accumulated amortization Balance as at December 31, 2023 9,500 15,659 25,159 Amortization - 1,197 1,197 Disposals - (1,327) (1,327) Balance as at December 31, 2024 9,500 15,529 25,029 Net book value as at December 31, 2024 266,000 4,689 270,689 Amortization of intangible assets is included within selling, general and administrative expenses on the unaudited interim consolidated statements of income. The following table presents the details of the Company’s indefinite-life intangible assets: As at September 30, 2025 December 31, 2024 (C$ in thousands) The Brick brand name (allocated to The Brick division) 245,000 245,000 The Brick franchise agreements (allocated to The Brick division) 21,000 21,000 Total 266,000 266,000 The Company currently has no plans to change The Brick store banners and expects these assets to generate cash flows over an indefin --- ite future period. Therefore, these intangible assets are considered to have indefinite useful lives for accounting purposes. The Brick franchise agreements have expiry dates with options to renew. The Company’s intention is to renew these agreements at each renewal date indefinitely. The Company expects the franchise agreements and franchise locations will generate cash flows over an indefinite future period. Therefore, these assets are also considered to have indefinite useful lives. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 11 9. Leases Company as a lessee Leasing arrangements The Company leases various items of real estate property, vehicles and equipment used in its operations. The lease terms are generally between 5 and 15 years. There are some leases with renewal options, which are included when management is reasonably certain they will be exercised. Management uses significant judgment in determining whether these extensions are reasonably certain to be exercised. Lease liabilities Carrying amounts of lease liabilities are as follows: (C$ in thousands) September 30, 2025 December 31, 2024 Balance, beginning of period 345,550 353,925 Additions 115,113 69,694 Disposals - (577) Interest 14,208 17,070 Payments (74,498) (94,562) Balance, end of period 400,373 345,550 Reported as: Current 77,659 79,690 Non-current 322,714 265,860 Total 400,373 345,550 Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 12 10. Long-term Debt Bank indebtedness On July 31, 2025, the Company completed an amending agreement number three to its existing Senior Secured Credit Agreement (“SSCA”). Under this amendment, the Company’s total credit facility was at $276,250. Out of the total amount, $76,250 was related to its term loan and the remaining $200,000 is attributable to the Company’s revolving credit facility. The amount borrowed under this amendment must be repaid in full by May 31, 2027. As at September 30, 2025 the Company had a total of $80,000 borrowed and recognized on the interim consolidated statement of financial position. The $80,000 million is comprised of $3,750 drawn under the revolving credit facility and $76,250 outstanding for its term loan. In addition, the Company adopted the Canadian Overnight Repo Rate Average (“CORRA”) as the new base reference rate, given the discontinuation of the Canadian Dollar Offered Rate (“CDOR”). Bank indebtedness bears interest based on Canadian prime rate, Secured Overnight Financing Rate (“SOFR”) and Bankers’ Acceptance (“BA”) rates plus an applicable standby fee on undrawn amounts. The Company has the ability to choose the type of advance required. Interest is based on the market rate plus an applicable margin. The term credit facility is repayable in the amount of $7,500 per annum, with the remainder due on maturity. Currently, the Company has entered into a 32-day Bankers’ Acceptance with a cost of borrowing of 3.69% that was renewed on September 29, 2025. The Company can prepay without penalty amounts outstanding under the facilities at any time. The agreement includes a general security agreement, --- which constitutes a lien on all property of the Company. In addition to this, there are financial covenants related to the credit facility. As at September 30, 2025, the Company was in full compliance of these financial and non-financial covenants. The company expects to continue to be in compliance with these covenants. 11. Management Share Purchase Plan Employee benefit plan Members of senior management participate in the Company’s Management Share Purchase Plan (“MSPP”). Under the terms of the MSPP, the Company advanced non-interest bearing loans to certain of its employees in 2018, 2022 and 2025 to allow them to acquire common shares of the Company. Participation in the MSPP is voluntary. The common shares purchased under the MSPP are held in trust by a trustee for the benefit of the employee until the later of three years from the date of issue and the date the related loan to acquire the shares is repaid in full. While such shares are held in trust, any dividends paid on these common shares are credited against the related loan. During 2018, a total of 1,188,873 of the 2018 series of common shares were issued under the 2018 MSPP to senior management employees at $15.30 per share. The Company recognized a loan receivable in the amount of $13,191 (recognized at fair value) and a deferred compensation expense of $2,315. The common shares issued of $15,506 are shown within common shares on the interim consolidated statements of financial position. During 2022, a total of 903,013 of the 2022 series of common shares were issued under the 2022 MSPP to senior management employees at $17.29 per share. The Company recognized a loan receivable in the amount of $11,274 (recognized at fair value) and a deferred compensation expense of $1,517. The common shares issued of $12,791 are shown within common shares on the interim consolidated statements of financial position. During the third quarter of 2025, a total of 422,229 of the 2025 series of common shares were issued under the 2025 MSPP to senior management employees at $29.84 per share. The Company recognized a loan receivable in the amount of $9,026 (recognized at fair value) and a deferred compensation expense of $1,276 recognized initially on the interim consolidated statement of financial position. The common shares issued of $10,302 are shown within common shares on the interim consolidated statement of financial position. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 13 Loan receivable As at (C$ in thousands) September 30, 2025 December 31, 2024 Balance, beginning of period 15,546 19,669 Issuance of 2025 series 9,026 - Fair value adjustment 1,121 1,616 Forfeiture (166) (997) Dividends paid (804) (1,002) Loan repayment (3,387) (3,740) Balance, end of period 21,336 15,546 Deferred compensation expense September 30, 2025 December 31, 2024 Balance, beginning of period 1,972 2,435 Recognition of 2025 series 1,276 - Compensation expense (306) (463) Balance, end of period 2,942 1,972 Redeemable share liability As at September 30, 2025 December 31, 2024 (C$ in thousands) Authorized 306,500 convertible, non-voting, series 2012 shares 1,485,000 convertible, non-voting, series 2013 shares 740,000 convertible, non-voting, series 2014 shares 880,000 convertible, non-voting, series 2015 shares Is --- sued and fully paid 0 series 2012 shares (December 31, 2024 - 43,929) - 545 77,098 series 2013 shares (December 31, 2024 - 162,357) 878 1,849 77,807 series 2014 shares (December 31, 2024 - 96,498) 1,172 1,453 131,813 series 2015 shares (December 31, 2024 - 152,362) 1,774 2,051 Less employee share purchase loans (3,817) (5,891) Total 7 7 Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 14 Under the terms of the Plan, the Company advanced non-interest bearing loans to certain of its employees in 2012, 2013, 2014 and 2015 to allow them to acquire convertible, series 2012 shares, series 2013 shares, series 2014 shares and series 2015 shares, respectively, of the Company. These loans are repayable through the application against the loans of any dividends on the shares with any remaining balance repayable on the date the shares are converted to common shares. Each issued and fully paid for series 2012 share may be converted into one common share at any time after the fifth anniversary date of the issue of these shares and prior to the thirteenth anniversary of such issue. Each issued and fully paid for series 2013, series 2014 and series 2015 share may be converted into one common share at any time after the third anniversary date of the issue of these shares and prior to the thirteenth anniversary of such issue. The series 2012, series 2013, series 2014 and series 2015 are redeemable at the option of the holder for a period of one business day following the date of issue of such shares. The Company has the option to redeem the series 2012 shares at any time after the fifth anniversary date of the issue of these shares and must redeem them prior to the thirteenth anniversary of such issue. The Company has the option to redeem the series 2013, series 2014 and series 2015 shares at any time after the third anniversary date of the issue of these shares and must redeem them prior to the thirteenth anniversary of such issue. The redemption price is equal to the original issue price of the shares adjusted for subsequent subdivisions of shares plus accrued and unpaid dividends. The purchase prices of the shares are $12.41 per series 2012 share, $11.39 per series 2013 share, $15.05 per series 2014 share and $13.46 per series 2015 share. Dividends paid to holders of series 2012, 2013, 2014 and 2015 shares of approximately $164 (2024 - $197) have been used to reduce the respective shareholder loans. The preferred dividends are paid once a year during the first quarter. During the nine-month period ended September 30, 2025, 43,929 series 2012 shares, 85,259 series 2013 shares, 18,691 series 2014 shares and 20,549 series 2015 shares (nine-month period ended September 30, 2024 - 1,184 series 2012 shares, 69,500 series 2013 shares, 36,389 series 2014 shares and 51,400 series 2015 shares) were converted into common shares with a stated value of approximately $545, $971, $281 and $277, respectively (nine-month period ended September 30, 2024 - $15, $792, $548 and $692 respectively). During the nine-month period ended September 30, 2025, the Company did not cancel any shares from any of the series of shares (nine-month period ended September 30, 2024 - no shares were cancelled in any of the series of shares). Employee share purchase loans have been netted aga --- inst the redeemable share liability, as the Company has the legally enforceable right of set-off and the positive intent to settle on a net basis. This balance is included under trade and other payables on the interim consolidated statements of financial position. 12. Common Shares As at September 30, 2025 December 31, 2024 (C$ in thousands) Authorized - Unlimited common shares Issued 68,760,182 common shares (2024 - 68,191,725) 179,552 167,231 For MSPP shares converted into common shares during the year, please see Note 11. Normal course issuer bid On March 21, 2025, the Company received Toronto Stock Exchange (TSX) approval of its notice of intention to renew its common share repurchase program. The Company intends to repurchase for cancellation a maximum of 3,403,405 Common Shares representing 4.99% of the total number of its 68,204,514 issued and outstanding Common Shares as at March 12, 2025. The average daily trading volume for the six months ending February 28, 2025, was 21,980 Common Shares. Therefore, other than block purchase exemptions, daily purchases will be limited to 5,495 common shares on the Toronto Stock Exchange. The bid commenced on March 21, 2025, and terminate on the earliest of the purchase of 3,403,405 Common Shares, the issuer providing a notice of termination, and March 20, 2026. Purchases will be executed through the facilities of the TSX at market price under the normal course issuer bid rules of the TSX. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 15 On March 28, 2025, the Company entered into an automatic share purchase plan (“ASPP”) with the Company’s broker in order to facilitate the repurchase of its common shares under the normal course issuer bid during self-imposed blackout periods, commencing April 1, 2025. As at September 30, 2025, there was no obligation recognized for the repurchase of common shares under the ASPP (as at September 30, 2024 - $nil). During the nine-month period ended September 30, 2025, 22,200 common shares were purchased (during the nine-month period ended September 30, 2024 - nil). As at September 30, 2025 and 2024, dividends payable were $16,500 ($0.24 per share) and $13,638 ($0.20 per share), respectively. 13. Revenue Disaggregation of revenue For the Three months ended (C$ in thousands) September 30, 2025 September 30, 2024 Sales of goods by corporate stores 644,475 618,815 Income from franchise operations 8,562 8,231 Extended warranty revenue 17,919 17,420 Insurance sales revenue 7,268 6,937 Rental income from investment property 409 531 Total 678,633 651,934 For the Nine months ended (C$ in thousands) September 30, 2025 September 30, 2024 Sales of goods by corporate stores 1,802,147 1,736,623 Income from franchise operations 24,442 23,704 Extended warranty revenue 53,539 51,109 Insurance sales revenue 20,817 18,765 Rental income from investment property 1,328 1,650 Total 1,902,273 1,831,851 14. Income Tax Expense For the Three months ended (C$ in thousands) September 30, 2025 September 30, 2024 Current income tax expense 15,458 12,578 Deferred income tax expense (recovery) 788 (518) Total 16,246 12,060 For the Nine months ended (C$ in thousands) September 30, 2025 September 30, 2024 Current income tax expense 36,468 29,500 Deferred income tax recovery (1,902) (1,808) Tot --- al 34,566 27,692 Income tax expense is recognized based on management’s best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual rates used for the nine-month period ended September 30, 2025 and September 30, 2024 were 24.6% and 24.4%, respectively. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 16 15. Earnings Per Share Earnings per share are calculated using the weighted average number of common shares outstanding. The following table reconciles the net income for the period and the number of shares for the basic and diluted earnings per share calculations: For the Three months ended (C$ in thousands except share and per share amounts) September 30, 2025 September 30, 2024 Net income for the period for basic earnings per share 50,329 36,861 Net income for the period for diluted earnings per share 50,329 36,861 Weighted average number of common shares outstanding 68,415,836 68,182,137 Dilutive effect 328,489 464,734 Dilutive weighted average number of common shares outstanding 68,744,325 68,646,871 Basic earnings per share $0.74 $0.54 Diluted earnings per share $0.73 $0.54 For the Nine months ended (C$ in thousands except share and per share amounts) September 30, 2025 September 30, 2024 Net income for the period for basic earnings per share 105,990 85,846 Net income for the period for diluted earnings per share 105,990 85,846 Weighted average number of common shares outstanding 68,291,847 68,126,175 Dilutive effect 385,088 520,350 Dilutive weighted average number of common shares outstanding 68,676,935 68,646,525 Basic earnings per share $1.55 $1.26 Diluted earnings per share $1.54 $1.25 16. Financial Instruments Liquidity risk management Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The purpose of liquidity risk management is to maintain sufficient amounts of cash and cash equivalents and authorized credit facilities, to fulfill obligations associated with financial liabilities. To manage liquidity risk, the Company prepares budgets and cash forecasts, and monitors its performance against these. Management also monitors cash and working capital efficiency given current sales levels and seasonal variability. The Company measures and monitors liquidity risk by regularly evaluating its cash inflows and outflows under expected conditions through cash flow reporting such that it anticipates certain funding mismatches and ensures the cash management of the business is within certain tolerable levels. These cash flow forecasts are reviewed on a weekly basis by management. The Company mitigates liquidity risk through continuous monitoring of its credit facilities and the diversification of its funding sources, both in the short term as well as the long term. As at September 30, 2025, unrestricted liquidity was $549,566 comprised of cash and cash equivalents, debt and equity instruments and its undrawn revolving credit facility. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 17 Classifica --- tion of financial instruments and fair value The classification of the Company’s financial instruments, as well as their carrying amounts and fair values, are disclosed in the tables below. As at September 30, 2025 (C$ in thousands) Classification and measurement Total carrying amount Fair value Fair value hierarchy Financial assets Cash and cash equivalents Amortized cost 207,947 207,947 Level 1 Trade receivables Amortized cost 156,313 156,313 Level 2 Equity securities FVOCI 41,265 41,265 Level 1 Debt securities FVOCI 112,612 112,612 Level 1 Debt securities FVTPL 100 100 Level 2 Loan receivable FVTPL 21,336 21,336 Level 2 Financial liabilities Trade and other payables Amortized cost 303,376 303,376 Level 2 Long-term debt Amortized cost 80,000 80,000 Level 2 Derivative liabilities FVTPL 949 949 Level 2 As at December 31, 2024 (C$ in thousands) Classification and measurement Total carrying amount Fair value Fair value hierarchy Financial assets Cash and cash equivalents Amortized cost 191,238 191,238 Level 1 Trade receivables Amortized cost 185,975 185,975 Level 2 Equity securities FVOCI 35,030 35,030 Level 1 Debt securities FVOCI 99,039 99,039 Level 1 Debt securities FVTPL 100 100 Level 2 Loan receivable FVTPL 15,546 15,546 Level 2 Derivative assets FVTPL 1,545 1,545 Level 2 Financial liabilities Trade and other payables Amortized cost 298,226 298,226 Level 2 Long-term debt Amortized cost 80,000 80,000 Level 2 The fair value hierarchy of financial instruments measured at fair value as at September 30, 2025 includes financial assets of $361,824, $177,749 and $nil for Levels 1, 2 and 3 respectively, and financial liabilities of $nil, $384,325 and $nil for Levels 1, 2 and 3, respectively. The carrying amounts of the Company’s trade receivables and trade and other payables approximate their fair values due to their short-term nature. The carrying amounts of the Company’s long-term debt approximate their fair values since they bear interest at rates comparable to market rates at the end of the reporting period. The fair values of debt and equity instruments, including restricted marketable securities that are traded in active markets, are determined by reference to their quoted closing price or dealer price quotations at the reporting date. For financial instruments that are not traded in active markets, the Company determines fair values using a combination of discounted cash flow models and comparison to similar instruments for which market observable prices exist. The fair values of derivative assets and liabilities are estimated using industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using market based observable inputs including interest rate curves, foreign exchange rates and forward and spot prices for currencies. Notes to the Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Leon’s Furniture Limited Amounts in thousands of Canadian dollars, except share amounts and earnings per share 18 The Company maintains other financial derivatives, which comprises foreign exchange forwards, with maturities that do not exceed past July 2026. As at September 30, 2025, the fair value of derivative liabilities is $949 (December 31, 2024 - $1,545 derivative assets). Fair values of financial instruments reflect the credit risk of the Company and counterparties when appropriate. Fair --- value hierarchy The Company uses a fair value hierarchy to categorize the inputs used to measure the fair value of financial assets and financial liabilities, the levels of which are as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs). 17. Interim Consolidated Statements of Cash Flows The net change in operating working capital balances consist of the following: For the Nine months ended (C$ in thousands) September 30, 2025 September 30, 2024 Trade receivables 33,175 14,977 Inventories (17,636) 39,400 Prepaid expenses and other assets (4,645) (7,367) Trade and other payables 7,324 8,898 Customers’ deposits (50,592) (14,145) Provisions 1,976 1,561 Deferred acquisition costs (175) (103) Total (30,573) 43,221 18. Comparative Financial Information The comparative interim condensed consolidated financial statements have been reclassified from statements previously presented to conform to the presentation of the third quarter of 2025 interim condensed consolidated financial statements.