SEDAR Interim Financial Statements

PIZZA PIZZA ROYALTY CORP. Interim Condensed Consolidated Financial Statements (Unaudited) For the three and nine months ended September 30, 2025 and 2024 Pizza Pizza Royalty Corp. Unaudited Interim Condensed Consolidated Statements of Financial Position As at September 30, 2025 and December 31, 2024 (Expressed in thousands of Canadian dollars) September 30, 2025 $ December 31, 2024 $ Assets Current assets Cash 1,001 781 Short-term investments 3,000 5,000 Receivable from Pizza Pizza Limited (note 8) 3,200 3,539 Trade and other receivables 94 133 Income taxes receivable 29 168 Total current assets 7,324 9,621 Non-current assets Derivative financial instruments (note 10) - 251 Pizza Pizza Rights and Marks (note 3) 289,377 283,059 Pizza 73 Rights and Marks (note 3) 80,814 80,814 Total non-current assets 370,191 364,124 Total assets 377,515 373,745 Liabilities and shareholders’ equity Current liabilities Trade and other payables 507 565 Payable to Pizza Pizza Limited (note 8) 914 1,062 Dividends payable to shareholders 1,908 1,908 Borrowings (note 4) - 46,994 Total current liabilities 3,329 50,529 Non-current liabilities Borrowings (note 4) 46,714 - Derivative financial instruments (note 10) 189 - Deferred tax liability 25,137 24,998 Total non-current liabilities 72,040 24,998 Shareholders’ equity Share capital 242,030 242,030 Exchangeable shares (note 5) 99,322 93,004 Accumulated other comprehensive earnings (loss) (151) 205 Deficit (39,055) (37,021) Total shareholders’ equity 302,146 298,218 Total liabilities and shareholders’ equity 377,515 373,745 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. Pizza Pizza Royalty Corp. Unaudited Interim Condensed Consolidated Statements of Earnings For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) Three months ended September 30, 2025 $ Three months ended September 30, 2024 $ Nine months ended September 30, 2025 $ Nine months ended September 30, 2024 $ Royalty income (note 7) 10,159 9,971 30,236 29,490 Administrative expenses (181) (176) (616) (496) Operating earnings 9,978 9,795 29,620 28,994 Interest expense on borrowings (note 4) (444) (322) (1,152) (961) Interest income 37 93 166 317 Earnings for the period before income taxes 9,571 9,566 28,634 28,350 Current tax expense (1,706) (1,714) (5,069) (5,071) Deferred tax expense (166) (183) (216) (197) Earnings for the period attributable to shareholders 7,699 7,669 23,349 23,082 Weighted average number of shares – basic and diluted (note 6) 33,353,588 32,908,631 33,353,588 32,908,631 Basic and diluted earnings per share (note 6) 0.23 0.23 0.70 0.70 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. Pizza Pizza Royalty Corp. Unaudited Interim Condensed Consolidated Statements of Comprehensive Earnings For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars) Three months ended September 30, 2025 $ Three months ended September 30, 2024 $ Nine months ended September 30, 2025 $ Nine months ended September 30, 2024 $ Earnings for the period 7,699 7,669 23,349 23,082 Other comprehensive earnings (loss) Items reclassified to net earnings: Cash flow hedges (note 10) - - (60) - Deferred tax impact of cash flow hedges - - 17 - Items that may be reclassified subsequently to net e --- arnings: Cash flow hedges (167) (556) (389) (1,090) Deferred tax impact of cash flow hedges 33 110 76 216 Total comprehensive earnings 7,565 7,223 22,993 22,208 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. Pizza Pizza Royalty Corp. Unaudited Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity For the nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars) Share capital $ Exchangeable Shares $ Accumulated other comprehensive earnings (loss) $ Deficit $ Total shareholders’ equity $ At December 31, 2024 242,030 93,004 205 (37,021) 298,218 Comprehensive earnings Earnings for the period - - - 23,349 23,349 Cash flow hedges - - (449) - (449) Deferred tax impact of cash flow hedges - - 93 - 93 Total comprehensive earnings (loss) - - (356) 23,349 22,993 Transactions with shareholders Exchangeable Shares (note 5) - 6,318 - - 6,318 Dividends declared to shareholders - - - (17,171) (17,171) Distributions on Class B and Class D Exchangeable Shares - - - (8,212) (8,212) Total transactions with shareholders - 6,318 - (25,383) (19,065) At September 30, 2025 242,030 99,322 (151) (39,055) 302,146 At December 31, 2023 242,030 85,027 1,324 (34,473) 293,908 Comprehensive earnings Earnings for the period - - - 23,082 23,082 Cash flow hedges - - (1,090) - (1,090) Deferred tax impact of cash flow hedges - - 216 - 216 Total comprehensive earnings - - (874) 23,082 22,208 Transactions with shareholders Exchangeable Shares (note 5) - 7,977 - - 7,977 Dividends declared to shareholders - - - (17,171) (17,171) Distributions on Class B and Class D Exchangeable Shares - - - (8,040) (8,040) Total transactions with shareholders - 7,977 - (25,211) (17,234) At September 30, 2024 242,030 93,004 450 (36,602) 298,882 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. Pizza Pizza Royalty Corp. Unaudited Interim Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars) September 30, 2025 $ September 30, 2024 $ Cash provided by (used in) Operating activities Earnings for the period 23,349 23,082 Amortization of deferred financing fees 41 14 Non-cash swap expiry (note 10) 6 - Deferred tax expense 216 197 Changes in non-cash working capital (note 9) 311 (276) Cash provided by operating activities 23,923 23,017 Financing activities Debt refinancing fees (320) - Dividends paid to shareholders (17,171) (17,171) Distributions on Class B and Class D Exchangeable Shares (8,212) (8,040) Cash used in financing activities (25,703) (25,211) Investing activities Proceeds on redemption of short-term investment 5,000 1,500 Investment in short-term investment (3,000) (1,500) Cash provided by investing activities 2,000 - Increase (decrease) in cash 220 (2,194) Cash, beginning of period 781 2,505 Cash, end of period 1,001 311 Supplementary information Interest paid 1,104 708 Income taxes paid 4,928 6,128 Total cash and short-term investments September 30, 2025 $ September 30, 2024 $ Cash 1,001 311 Short-term investments 3,000 6,000 Total cash and short-term investments 4,001 6,311 The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. Pizza Pizza Royalty Corp. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the three and nine --- months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) 1 1. General information The Pizza Pizza Royalty Corp. (the “Company”) is governed by the Business Corporations Act (Ontario) pursuant to its articles of incorporation dated April 4, 2012 and articles of arrangement dated December 31, 2012. The Company’s common shares are traded on the Toronto Stock Exchange under the stock symbol PZA. The Company is incorporated and domiciled in Canada, and the address of its registered office is 500 Kipling Avenue, Toronto, Ontario, Canada. The Company acquired, through the Pizza Pizza Royalty Limited Partnership (the “Partnership”), the trademarks, trade names, operating procedures, systems and other intellectual property and proprietary rights associated therewith owned by Pizza Pizza Limited (“PPL”) used in connection with the operation of all restaurants operated by PPL, its subsidiaries and its franchisees (collectively, the “Pizza Pizza Rights and Marks”). Concurrent with the acquisition of the Pizza Pizza Rights and Marks on July 6, 2005, the Partnership granted PPL an exclusive and unlimited licence to use the Pizza Pizza Rights and Marks for an initial term of 99 years for which PPL pays a royalty equal to 6% of system sales from all Pizza Pizza restaurants in the Royalty Pool, as defined in the Pizza Pizza Licence and Royalty Agreement. On July 24, 2007, the Company, through the Partnership, acquired the trademarks, trade names, operating procedures and systems, and other intellectual property and proprietary rights owned by Pizza 73 Inc. and its affiliated companies (together, “Pizza 73”) used in connection with the operation of all restaurants operated by Pizza 73 and its partners (collectively, the “Pizza 73 Rights and Marks”). Concurrent with the acquisition of the Pizza 73 Rights and Marks, the Partnership granted PPL an exclusive and unlimited licence to use the Pizza 73 Rights and Marks for an initial term of 99 years for which PPL pays a royalty equal to 9% of system sales from all Pizza 73 restaurants in the Royalty Pool, as defined in the Pizza 73 Licence and Royalty Agreement. In November 2021, the Partnership and PPL entered into a licence and royalty agreement for international operations, under which PPL may be granted licences to use the Pizza Pizza Rights in connection with the business of franchising, licensing and/or operating restaurants dedicated to the sale of pizza and related products in designated territories outside of Canada, initially in Mexico. In consideration of the licence for Mexico, PPL is required to pay the Partnership, commencing with the first calendar month that is 18 months following the opening of the first traditional restaurant in Mexico, a fee calculated as 12.5% of the royalty received by PPL under the Master Franchise Agreement (without any deduction for withholding or any other taxes). Royalties commenced in October 2024. The international licence and royalty agreement provides only for a cash royalty payment, and openings and closings of restaurants in Mexico will not result in changes to the Royalty Pool nor to the Class B and Class D Exchange Multipliers. As at September 30, 2025, there were four PZA restaurants in Mexico. As at September 30, 2025, there were 694 Pizza Pizza restaurants and 100 Pizza 73 restaurants in the Royalty Pool (2024 – 672 and 102, respectively); the Royalty Pool is adjusted annually on J --- anuary 1. The Company pays monthly dividends directly to public shareholders. For the nine months ended September 30, 2025, the Company declared dividends of $0.6975 per share (2024 – $0.6975 per share). PPL, a privately owned corporation headquartered in Toronto, Ontario, operates in the food service industry primarily throughout Ontario and Alberta, and primarily franchises and operates quick-service restaurant businesses under the Pizza Pizza and Pizza 73 brands. PPL derives revenue from franchisees through the sale of franchise restaurants, food and supplies and royalties. PPL also derives revenue from company owned and jointly controlled restaurants through the sale of food products to retail customers. The Company’s revenue is earned from certain operations of PPL and, accordingly, the revenue of the Company and its ability to pay dividends to shareholders are dependent on the ability of PPL to generate and pay royalties to the Company. Pizza Pizza Royalty Corp. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) 2 2. Material accounting policies The material accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all periods presented unless otherwise stated. a. Statement of compliance The Company prepares its unaudited interim condensed consolidated financial statements in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting (“IAS 34”). Accordingly, these unaudited interim condensed consolidated financial statements do not include all disclosures required for annual financial statements and should be read in conjunction with the annual consolidated financial statements of the Company as at and for the year ended December 31, 2024. The Company’s preparation of financial statements in accordance with IAS 34 requires the use of certain accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the unaudited interim condensed consolidated financial statements, were the same as those that applied to the Company’s consolidated financial statements as at and for the year ended December 31, 2024. The accounting policies adopted in the preparation of these unaudited interim condensed consolidated financial statements are consistent with those followed in the preparation of the Company’s annual consolidated financial statements as at and for the year ended December 31, 2024. The Company has not adopted any other standard, interpretation or amendment that has been issued, but is not yet effective. These unaudited interim condensed consolidated financial statements were authorized for issue by the Board of the Directors on November 4, 2025. b. Accounting standards and amendments issued but not yet adopted Enhanced presentation and disclosure of financial statements (IFRS 18) On April 9, 2024, the IASB issued a new standard IFRS 18 Presentation and Disclosure in Financial Statements to improve the usefulness and comparability of financial statement information. The new standard replaces IAS 1 and introduces three sets of new presentation and disclosur --- e requirements: (1) it codifies the reporting structure of the income statement and requires defined subtotals; (2) disclosure of management- defined performance measures that relate to the income statement; and (3) enhanced guidance on how to organize information in the financial statements and whether to provide it in the primary financial statements or in the notes. The new standard is effective for annual periods beginning on or after January 1, 2027. The Company is currently assessing whether the new standard will have a material impact on the consolidated financial statements. c. Consolidation The unaudited interim condensed consolidated financial statements incorporate the assets and liabilities of the Company and its subsidiaries as at September 30, 2025 and December 31, 2024 and the results of these subsidiaries for the three and nine months ended September 30, 2025 and 2024. Pizza Pizza Royalty Corp. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) 3 The Company’s subsidiaries and its respective holdings at September 30, 2025 and December 31, 2024 are outlined below: Subsidiary September 30, 2025 December 31, 2024 Pizza Pizza GP Inc. 73.8% 74.8% Pizza Pizza Royalty Limited Partnership 73.8% 74.8% 3. Pizza Pizza and Pizza 73 Rights and Marks Pizza Pizza Rights and Marks $ Pizza 73 Rights and Marks $ Total $ Net book value at December 31, 2023 275,082 80,814 355,896 Accretion of value – January 1, 2024 vend-in 4,090 - 4,090 Accretion of value – January 1, 2023 true-up 3,887 - 3,887 Net book value at December 31, 2024 283,059 80,814 363,873 Accretion of value – January 1, 2025 vend-in 4,904 - 4,904 Accretion of value – January 1, 2024 true-up 1,414 - 1,414 Net book value at September 30, 2025 289,377 80,814 370,191 The Company, through its interest in the Partnership, acquired the Pizza Pizza Rights and Marks used in the Pizza Pizza quick service restaurant business in Canada in July 2005. Funding for the purchase came from the completion of the Pizza Pizza Royalty Income Fund’s initial public offering in July 2005 and from proceeds of the term loan. Concurrent with the acquisition of the Pizza Pizza Rights and Marks, the Partnership granted PPL an exclusive and unlimited licence to use the Pizza Pizza Rights and Marks for an initial term of 99 years, for which PPL pays a royalty equal to 6% of system sales for all Pizza Pizza restaurants in the Royalty Pool, as defined in the Pizza Pizza Licence and Royalty Agreement. In July 2007, the Company, through its interest in the Partnership, acquired the Pizza 73 Rights and Marks from Pizza 73. The purchase was funded by a public and private placement of Fund units and proceeds from the term loan. Concurrent with the acquisition of the Pizza 73 Rights and Marks, the Partnership granted PPL an exclusive and unlimited licence to use the Pizza 73 Rights and Marks for an initial term of 99 years, for which PPL pays a royalty equal to 9% of system sales of all Pizza 73 restaurants included in the Royalty Pool, as defined in the Pizza 73 Licence and Royalty Agreement. Annually, on January 1 (the “Adjustment Date”), the Royalty Pool is adjusted to include the forecasted system sales from new Pizza Pizza restaurants opened on or before December 31 of the prior year, less system sales from any Pizza Pizza restaurant --- s that permanently closed during the year. Similarly, on the Adjustment Date, the Royalty Pool is adjusted to include the forecasted system sales from new Pizza 73 restaurants opened on or before September 1 of the prior year, less any system sales from any Pizza 73 restaurants that permanently closed during the year. In return for adding net additional royalty revenue, PPL receives the right to indirectly acquire additional shares of the Company through an adjustment to the Class B and Class D Exchange Multipliers (see note 5). As a result of the adjustment to the Royalty Pool on January 1, 2025, the Pizza Pizza Rights and Marks increased by $4,904 in 2025 (2024 – increased $4,090) and increased by $1,414 related to the January 1, 2024 true-up (2024 – increased $3,887), and the Pizza 73 Rights and Marks remained unchanged (2024 – unchanged) (see note 5). Pizza Pizza Royalty Corp. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) 4 4. Borrowings September 30, 2025 $ December 31, 2024 $ Borrowings 47,000 47,000 Less: unamortized deferred financing fees 286 6 Total borrowings 46,714 46,994 The borrowings are a committed, non-revolving facility, and were used to finance a portion of the acquisition costs of the Pizza Pizza Rights and Marks in 2005 and the Pizza 73 Rights and Marks in 2007. As security for repayment of the facility, PPL grants a continuing general security interest subject to certain exceptions, in all present and acquired property of PPL, which may not be assigned without the prior consent of PPL and the bank. On March 20, 2025, the Partnership amended and extended its $47,000 credit facility from April 24, 2025 to April 24, 2028. The facility bears interest at an adjusted Canadian Overnight Repo Rate Average (“CORRA”) rate plus a credit spread of 1.0% to 1.5%, depending on certain financial ratios. On April 3, 2025, the Partnership entered into a three-year forward swap arrangement, commencing April 24, 2025; the credit facility has a new effective interest rate of 3.51%, comprised of a fixed rate of 2.51% plus the new credit spread, currently set at 1.00%. The previous facility bore interest at an adjusted CORRA rate plus a credit spread of 0.875% to 1.375%, depending on certain financial ratios. The Partnership’s interest rate was also fixed through two interest rate swap arrangements, which commenced in April 2020 and matured in April 2025. The interest rate was 2.69%, comprised of interest rate swaps of 1.81% plus a credit spread of 0.875%. The Company is currently making interest-only payments until the loan matures on April 24, 2028. The facility is subject to certain financial ratios, specifically a maximum debt-to-EBITDA ratio, an interest coverage ratio, and a covenant on distributable cash, all of which have been met as at September 30, 2025. The borrowings are held within the Partnership, and therefore, the financial covenants for the borrowings pertain only to the results of the Partnership and not the Company. 5. Exchangeable Shares As at September 30, 2025, PPL directly and indirectly holds, through its wholly-owned subsidiary Pizza Pizza Holdings Ltd., an effective 26.2% interest in the Company (December 31, 2024 – 25.2%) by holding all Class B ordinary partnership units (the “Class B Units”) and Class D ordinary partnership unit --- s (the “Class D Units”) of the Partnership. Subject to the Amended and Restated Exchange Agreement (“Exchange Agreement”), one Class B or Class D Unit may be exchanged indirectly for that number of shares equal to the Class B Exchange Multiplier or Class D Exchange Multiplier, respectively, applicable at the date of such exchange, as described under “Licence and Royalty Adjustment of the Royalty Pool Changes in the Restaurants in the Royalty Pool” in the Exchange Agreement. Subject to the prior rights of the Company’s Class C Units, a monthly distribution is paid to both PPL (as indirect holder of the Class B and Class D Units) and the Company (as holders of the Class A Units), on a pro rata ownership basis. Distributions are subject to the discretion of the Pizza Pizza GP Inc., which the Company Pizza Pizza Royalty Corp. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) 5 controls. Distributions made to PPL are recorded directly in equity. The equivalent number of shares issuable on the exchange of Class B and Class D Units outstanding are as follows: Number of Class B Exchangeable Shares Number of Class D Exchangeable Shares Total Number of Exchangeable Shares Amount $ At December 31, 2023 5,474,213 2,244,975 7,719,188 85,027 Add: January 1, 2024 vend-in 285,250 - 285,250 4,090 Add: January 1, 2023 true-up 285,801 - 285,801 3,887 At December 31, 2024 6,045,264 2,244,975 8,290,239 93,004 Add: January 1, 2025 vend-in 346,317 - 346,317 4,904 Add: January 1, 2024 true-up 98,640 - 98,640 1,414 At September 30, 2025 6,490,221 2,244,975 8,735,196 99,322 a. 2024 Royalty Pool Adjustment In early January 2025, a second adjustment was made to the royalty payments and PPL’s Class B Exchange Multiplier based on the actual performance of the 41 new restaurants added to the Royalty Pool on January 1, 2024. As a result of the adjustments, PPL obtained an additional 98,640 shares, the Class B Exchange Multiplier is 2.449489, and Class B Units can be exchanged for 6,143,904 shares effective January 1, 2024. In early January 2025, a second adjustment was made to the royalty payments and PPL’s Class D Exchange Multiplier based on the actual performance of the four Pizza 73 restaurants added to the Royalty Pool on January 1, 2024. The final 2024 Pizza 73 Royalty Pool adjustment confirmed that $850 was applied against the Make-Whole Carryover Amount. The Make-Whole Payment will continue to be paid for subsequent years, until on an Adjustment Date, additional system sales of additional restaurants are sufficient to offset the Pizza Pizza system sales attributable to all closed Pizza 73 restaurants. As a result of the adjustments, the Class D Exchange Multiplier is unchanged at 22.44976 and Class D Units can be exchanged for 2,244,975 shares effective January 1, 2024. b. 2025 Royalty Pool Adjustment – Class B Exchange Multiplier On January 1, 2025, 22 net Pizza Pizza restaurants were added to the Royalty Pool as a result of 44 new restaurants opening and 22 closing from January 1, 2024 to December 31, 2024. The total number of Pizza Pizza restaurants in the Royalty Pool has increased to 694. The additional system sales from the 44 new restaurants are estimated at $12,943 annually, less sales of $3,583 from the 22 permanently closed Pizza Pizza restaurants. As a result, $9,360 net, --- estimated Pizza Pizza sales were added to the Royalty Pool, resulting in an Estimated Determined Amount of $5,695 added to the Royalty Pool. The yield of the shares was determined to be 7.07% calculated using $13.16 as a weighted average share price. Weighted average share price is calculated based on the market price of the shares traded on the Toronto Stock Exchange during the period of twenty consecutive days ending on the fifth trading day before January 1, 2025. As a result of the contribution of the additional net sales to the Royalty Pool, the Class B Exchange Multiplier increased fractionally by 80% of the total adjustment or 0.130872 (representing 346,317 equivalent shares); the new Class B Multiplier is 2.587561. This adjustment will also increase the entitlement of the holders of the Class B units to distributions of cash and allocations of income from the Partnership. The second adjustment to the Class B Exchange Multiplier will be adjusted to be effective January 1, 2025, once the actual performance of the new restaurants is determined in early 2026. Pizza Pizza Royalty Corp. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) 6 c. 2025 Royalty Pool Adjustment – Class D Exchange Multiplier On January 1, 2025, two net Pizza 73 restaurants were removed from the Royalty Pool as a result of one new restaurant opening between September 2, 2023 and September 1, 2024 and three restaurants closing between January 1, 2024 and December 31, 2024. The total number of Pizza 73 restaurants in the Royalty Pool has decreased to 100. The forecasted additional system sales from the one new restaurant is estimated at $286 annually, less $384 in system sales attributable to the three closed Pizza 73 restaurants. As a result, $98 net, estimated Pizza 73 sales were added to the $647 Make-Whole Carryover Amount. The cumulative Make-Whole Carryover Amount of $745 will be carried over, and continue to be paid for subsequent years, until on an Adjustment Date, additional system sales of additional restaurants are sufficient to offset the Pizza 73 system sales attributable to all closed Pizza 73 restaurants. The yield of the shares was determined to be 7.07% calculated using $13.16 as a weighted average share price. Weighted average share price is calculated based on the market price of the shares traded on the Toronto Stock Exchange during the period of twenty consecutive days ending on the fifth trading day before January 1, 2025. As per the Pizza Pizza Royalty Limited Partnership agreement, whenever the Estimated Determined Amount is negative it shall be deemed to be zero. Accordingly, the Class D Exchange Multiplier remained unchanged at 22.44976. The second adjustment to the Class D Exchange Multiplier will be adjusted to be effective January 1, 2025, once the actual performance of the new restaurant is determined in early 2026. d. Pizza Pizza Royalty Corp. Outstanding Shares In exchange for adding the forecasted Pizza Pizza system sales to the Royalty Pool, PPL has received 346,317 additional equivalent shares (through the change to the Class B Exchange Multiplier). These represent 80% of the forecasted equivalent shares entitlement to be received (432,896 equivalent shares represent 100%), with the final equivalent shares entitlement to be determined when the new res --- taurants’ 2025 actual sales performance is known with certainty in early 2026. PPL’s Class D equivalent share entitlement is unchanged for 2025. In any year that the forecasted system sales (less closed restaurants sales and other adjustments) is negative, as was the case with the Class D equivalent share entitlement calculation for 2025, no increase or decrease in the Exchange Multiplier is made. PPL will only have an increased Class D equivalent share entitlement for 2025 if the actual sales performance of the new restaurants exceeds the Make-Whole Carryover Amount when the actual sales performance is known with certainty in early 2026. After giving effect to PPL’s entitlement to additional equivalent shares at January 1, 2025, PPL directly and indirectly owns equivalent shares representing 26.2% of the Company’s fully diluted shares. 6. Share capital The basic earnings per share is calculated by dividing earnings for the period by the weighted average number of shares outstanding during the period. The denominator in basic earnings per share includes PPL’s Class B and Class D Exchangeable Shares, as if they have been converted, since they are exchangeable into and economically equivalent to the Company’s common shares. There were no potentially dilutive instruments outstanding during the nine months ended September 30, 2025 and 2024. Pizza Pizza Royalty Corp. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) 7 The following table illustrates the computation of basic and diluted earnings per share: Three months ended September 30, 2025 Three months ended September 30, 2024 Nine months ended September 30, 2025 Nine months ended September 30, 2024 Weighted average number of: Common shares 24,618,392 24,618,392 24,618,392 24,618,392 Exchangeable Shares (note 5) 8,735,196 8,290,239 8,735,196 8,290,239 Weighted average number of shares outstanding – basic and diluted 33,353,588 32,908,631 33,353,588 32,908,631 Basic and diluted earnings per share $0.23 $0.23 $0.70 $0.70 7. Royalty income Royalty income earned by the Company has been derived as shown in the table below: Three months ended September 30, 2025 $ Three months ended September 30, 2024 $ Nine months ended September 30, 2025 $ Nine months ended September 30, 2024 $ Restaurants in Royalty Pool 794 774 794 774 System sales reported by Pizza Pizza restaurants in the Royalty Pool 137,997 134,924 407,164 397,046 System sales reported by Pizza 73 restaurants in the Royalty Pool 20,812 20,835 64,350 62,964 Total system sales 158,809 155,759 471,514 460,010 Royalty – 6% on Pizza Pizza system sales 8,280 8,095 24,430 23,823 Royalty – 9% on Pizza 73 system sales 1,873 1,876 5,792 5,667 International royalties 6 - 14 - Royalty income 10,159 9,971 30,236 29,490 System sales do not represent the operating results of the Company but are used to calculate the royalty income as presented above. 8. Related party transactions and balances PPL is a related party by virtue of directly and indirectly holding Class B and Class D Units that are exchangeable into shares of the Company. Disclosure related to these Exchangeable Shares is provided in note 5. PPL, pursuant to the Partnership Agreement, is providing certain administrative services to the Company. The fee for these services, which on an annual basis shall not exceed --- $25, has been waived for the period. The Company has a receivable from PPL as at September 30, 2025 of $3,200 (December 31, 2024 - $3,539) and a payable to PPL as at September 30, 2025 of $914 (December 31, 2024 - $1,062). The receivable relates to royalty amounts receivable from the Royalty Pool system sales, while the payable to PPL relates to distributions Pizza Pizza Royalty Corp. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) 8 payable in respect of Class B and Class D Units and other expenses paid by PPL on behalf of the Partnership. Transactions with related parties are in the normal course of operations. No amount of related party balances was written off during the three and nine months ended September 30, 2025 and 2024. The Company has no paid executives in 2025 or 2024, but the total director compensation for the three and nine months ended September 30, 2025 was $47 and $184, respectively (September 30, 2024 - $57 and $172). 9. Consolidated statements of cash flows information Changes in non-cash working capital are as follows: September 30, 2025 $ September 30, 2024 $ Receivable from Pizza Pizza Limited 339 531 Trade and other receivables 39 231 Trade and other payables (58) 73 Payable to Pizza Pizza Limited (148) (54) Income taxes receivable/(payable) 139 (1,057) Changes in non-cash working capital 311 (276) 10. Financial risk management Fair value The following table presents the carrying amount and the fair value of the Company’s financial instruments. Fair value is estimated as disclosed below. These amounts represent point-in-time estimates and may not reflect fair value in the future. The only financial instruments carried at fair value in the consolidated statements of financial position are the derivative financial instruments. The carrying amounts of cash, short-term investments, receivable from PPL, trade and other receivables, trade and other payables, payable to PPL, and dividends payable to shareholders all approximate their fair value given the short-term nature of these financial instruments. The carrying value and fair value of all other financial instruments are as follows: September 30, 2025 December 31, 2024 Carrying value $ Fair value $ Carrying value $ Fair value $ Derivative financial instruments – asset (liability) (189) (189) 251 251 Borrowings 46,714 47,000 46,994 47,000 The different fair value hierarchy levels are as follows: • Level 1: Quoted prices (unadjusted) in active markets for identical financial assets or financial liabilities; • Level 2: Inputs other than quoted prices included within Level 1 that are observable for the financial asset or financial liability, either directly or indirectly; and • Level 3: Inputs for the financial assets or financial liabilities that are not based on observable market data. Pizza Pizza Royalty Corp. Notes to the Unaudited Interim Condensed Consolidated Financial Statements For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) 9 As at September 30, 2025, inputs used to fair value the derivative financial instruments were Level 2 and based on observable inputs available for similar assets and liabilities in the active markets, as provided by sources independent from the Compan --- y. The fair value of the borrowings balance, which equals the principal amount outstanding, is $47,000 (December 31, 2024 – $47,000) since the debt has variable interest rates at terms that the Company believes are reflective of currently available terms. The Company has no plans to prepay these instruments prior to maturity. The valuation is determined using Level 2 inputs, which are observable inputs or inputs that can be corroborated by observable market data for substantially the full term of the asset or liability. Credit risk The Company is exposed to credit risk in the event of non-payment by PPL and due to the fact that PPL’s operations are all within the same segment, commercial food services. The credit risk is mitigated since monthly royalty payments are received from PPL based on sales generated by a large number of Pizza Pizza and Pizza 73 restaurants in diverse geographical regions. These royalty payments are used to fund monthly distributions to the Company on its Class A and C Limited Partnership Units and to fund distributions to PPL on the Class B and D Units. All trade and other receivables, and the amount receivable from PPL, are current and no amounts have been written off or provided for during the period. Credit risk also arises from cash and derivative financial instruments with banks and financial institutions. The Company places its cash and transacts in derivative financial instruments with institutions of high creditworthiness. Maximum credit risk exposure, which is equivalent to the carrying amount, represents the loss that would be incurred if all of the Company’s counterparties were to default at the same time. Liquidity risk Liquidity risk is the risk that an entity is unable to fund its assets or meet its financial obligations as they come due. The Company is subject to liquidity risk with respect to trade and other payables, borrowings and funding the dividends payable to Company shareholders. The Company receives monthly royalties from PPL, and the Company is of the opinion that this risk is mitigated by the large number of Pizza Pizza and Pizza 73 restaurants in diverse geographical areas that generate the royalties used to fund the monthly royalty payments. To mitigate its liquidity risk, the Company has the discretion to reduce the dividends payable to the Company’s shareholders in the event of a reduction of the Company’s royalty income. The dividends payable to shareholders and trade and other payables, are expected to be paid within 30 days of the date of the consolidated statements of financial position. Liquidity risk is managed, in part, through cash flow forecasting by the Company. The Company monitors its forecasts of liquidity requirements to ensure it has the ability to meet operational needs with cash on hand and cash from operations. Such forecasting involves a degree of judgment, which takes into consideration current and projected macroeconomic conditions. Interest rate risk The interest rate swaps eliminate the Company’s interest rate cash flow risk by fixing the rate of interest that is paid on the borrowings. However, the Company is still exposed to fair value interest rate risk as a result of fair value movements in the value of the interest rate swaps that are recorded in other comprehensive earnings (loss) to the extent that the interest rate swaps are effective as cash flow hedges. If interest rates changed by plus/minus Pizza Pizza Royalty Corp. Notes to the Unaudited Interim C --- ondensed Consolidated Financial Statements For the three and nine months ended September 30, 2025 and 2024 (Expressed in thousands of Canadian dollars, except number of shares and per share amounts) 10 10% of the existing rate, total comprehensive earnings and shareholders’ equity would change by plus/minus $292 as at September 30, 2025 (December 31, 2024 – $25) based on movements in the fair value of the interest rate swaps. In April 2025, the Company’s previous interest rate swaps expired. As a result, the remaining hedge reserve of $6 was reclassified to the statement of earnings. This reclassification does not represent a cash inflow during the quarter. The Company’s new swaps became effective in April 2025 (note 4).