[Item 21: FINANCIAL STATEMENTS]

NOTE 7 - RELATED PARTY TRANSACTIONS

The Company has entered into transactions with certain companies or individuals, which are related parties by virtue of being holders of the Company's common stock, by being officers/directors of the Company or because they are controlled by significant stockholders or officers/directors of the Company.

The Company and its franchisees each pay a percentage of sales to the Checkers/Rally's National Production Fund, Inc. (the "Fund" or "NPF"), established for the purpose of creating and producing advertising for the benefit of both Company-operated and franchised restaurants. During the fiscal year ended December 30, 2024 (Successor) and the periods ended January 1, 2024 (Successor) and June 16, 2023 (Predecessor), only one member, representing 25% of the Board of Directors of the Fund, is an employee of the Company. The Fund is not included in the accompanying consolidated financial statements, although the Company's contributions to the Fund are included in advertising expense in the accompanying consolidated statements of operations. Additionally, certain Company-operated restaurants and franchisees participate in advertising co-ops. The Company consolidates advertising co-ops for which it is determined to control on the basis of voting interests, and does not consolidate advertising co-ops it does not control. Co-ops not controlled by the Company are accounted for similarly to the fund. The

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

contributions to the Fund represent 0.5% of net restaurant sales, while contributions to the advertising co-ops range from 0.5% to 4.25% of net restaurant sales. [Item 21: FINANCIAL STATEMENTS]

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS PURPOSE AND ORGANIZATION

Checkers Drive-In Restaurants, Inc. ("Checkers", "CDI", the "Company", "we", "our", or "us"), owns and operates and franchises quick service restaurants in the United States under two similar operating brands, Checkers and Rally's ("Checkers" and "Rally's").

As of December 30, 2024 (Successor) and January 1, 2024 (Successor) there were approximately 230 and 240 corporate owned locations, respectively. As of December 30, 2024 (Successor) and January 1, 2024 (Successor) there were approximately 530 and 550 franchise owned locations, respectively.

We have a national footprint under our Checkers and Rally's brands, with strongholds in the Southeast, Mid-Atlantic and Midwest, as well as a footprint in the western United States, including California, Nevada and Arizona. Throughout our system of restaurants, we are known for our signature buildings and design that evoke timeless American imagery and for providing customers with bold and flavorful food at an attractive value.

CDI was founded in 1986 in Mobile, Alabama, with a mission to provide customers with a bold and flavorful alternative to the standard burgers served by large hamburger quick service restaurant chains. We have focused on, and continue to provide, a differentiated menu with robust made-to-order offerings, delivered to customers at an exceptional value.

In September 1991, CDI was incorporated as a Delaware corporation. We conduct business under our corporate name and the names Checkers and Rally's. We have owned, operated and franchised Checkers restaurants since 1991 and Rally's restaurants since our merger with Rally's in August 1999.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP").

The consolidated financial statements present the results of the operations, financial position and cash flows of CDI, and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. We consolidate all entities where the Company is deemed to have a controlling or voting financial interest, including those that are wholly owned subsidiaries.

[Item 21: FINANCIAL STATEMENTS]

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

contributions to the Fund represent 0.5% of net restaurant sales, while contributions to the advertising co-ops range from 0.5% to 4.25% of net restaurant sales.

The Company and its franchisees each pay charges based on volumes of products purchased from suppliers to Checkers and Rally's Distribution and Services, Inc. ("CDSI"), established for the purpose of providing procurement services and quality assurance support for the benefit of both Company-operated and franchised restaurants. During the fiscal year ended December 30, 2024 (Successor) and the period from June 17, 2023 through January 1, 2024 (Successor) and the period from January 3, 2023 through June 16, 2023 (Predecessor) only one member, representing 25% of the CDSI Board of Directors is an employee of the Company. CDSI is not included in the accompanying consolidated financial statements, although the company's contributions to CDSI are included within restaurant food and paper costs in the accompanying consolidated statements of operations.

The Company pays invoices on behalf of NPF and CDSI and then bills each for the balance of these invoices each period. As of December 30, 2024 (Successor), there was approximately $2.0 million and $1.0 million of accounts receivable due from the NPF and CDSI, respectively. As of January 1, 2024 (Successor), the accounts receivable due from the NPF and CDSI was approximately $2.6 million and $0.7 million, respectively. Accounts receivable for the NPF and CDSI are included in the accounts and notes receivable, net in the accompanying consolidated balance sheets.

The Fund purchases print advertising on behalf of the Company and franchisees to be used in restaurants. The Company recorded $1.3 million, $0.4 million, and $0.2 million for the fiscal year ended December 30, 2024 (Successor), and for the periods from June 17, 2023 through January 1, 2024 (Successor) and from January 3, 2023 through June 16, 2023 (Predecessor), respectively, related to this print advertising in advertising expense in the accompanying consolidated statements of operations.

NOTE 8 - PROPERTY AND EQUIPMENT, NET

[Item 21: FINANCIAL STATEMENTS]

Notes receivable consist of funds extended to franchisees as consideration for the sale of restaurants and repayment terms on past due rents and royalties. Specific allowances are established when collection is no longer deemed likely. With respect to secured notes, the assets of the associated restaurant often act as collateral. In the event of default, the Company has the option to acquire the restaurant assets, with the balance of the outstanding notes included in the consideration provided by the Company. However,

(Tabular Dollars in Thousands, Except Share and per Share Data)

not all notes are collateralized. Interest on outstanding notes is charged according to the terms of the promissory note and is recognized on a period basis over the term of the note.

Inventory

"Inventory", which consists of food and paper packaging, is stated at the lower of cost or realizable value. Cost is determined on a first-in, first-out basis.

Business Combination

The Company applies the provisions of ASC 805 in accounting for business combinations. ASC 805 requires the Company to recognize separately from goodwill the assets acquired, and the liabilities assumed at their acquisition date fair values. Goodwill, if any, as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and liabilities assumed.

Estimated consideration transferred in connection with the Out-of-Court Restructuring is allocated to the assets acquired and liabilities assumed based on their fair values as of the date of the Out-of-Court Restructuring, including identifiable intangible assets. The fair value determinations require judgment and involve the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discounts rates, and market multiples, among other items.

Transaction Related Expenses

Transaction related expenses consist primarily of advisory, legal, accounting, valuation, and other professional and consulting fees in connection with the Out-of-Court Restructuring and are expensed as incurred.

Property and Equipment, Net

[Item 21: FINANCIAL STATEMENTS]

Accounts and Notes Receivable, Net

Receivables consist primarily of franchise royalties, franchise fees, sublease rents, delivery sales receivables, and retail royalties. These amounts are recorded net of an allowance for credit losses. Franchisee related accounts receivable are due within 10 days of billing and in some instances, we draw the funds directly from the franchisee's bank account on a predetermined day. Although the Company

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

maintains an allowance for credit loss, the majority of the balance relates to specific accounts where collection is not expected. The reserves are established using the specific identification method based on our best estimate of the collectible balance. When determining collectability, we evaluate the debtor's financial condition, the historical experience with the debtor, and the pledged security interest value, if any. The Company has traditionally experienced a high rate of collection as the franchise agreements frequently provide remedy to the Company in the event of the franchisee's default on outstanding balances through a security interest in the assets of the business when a sublease is in place or through a personal guarantee of the franchisee.

Notes receivable consist of funds extended to franchisees as consideration for the sale of restaurants and repayment terms on past due rents and royalties. Specific allowances are established when collection is no longer deemed likely. With respect to secured notes, the assets of the associated restaurant often act as collateral. In the event of default, the Company has the option to acquire the restaurant assets, with the balance of the outstanding notes included in the consideration provided by the Company. However, not all notes are collateralized. Interest on outstanding notes is charged according to the terms of the promissory note and is recognized on a period basis over the term of the note.

Inventory

Inventory consists of food and paper packaging. Inventory is stated at the lower of cost (first-in, first-out basis) or net realizable value.

Business Combination

[Item 21: FINANCIAL STATEMENTS]

Adoption of New Accounting Standard

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in the fiscal year ended January 2, 2023 due to the adoption of ASU No. 2016-02, Leases.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date that the financial statements are available to be issued.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free of material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a quarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when

it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

[Item 21: FINANCIAL STATEMENTS]

See accompanying notes, including the supplemental disclosure of cash flow information in Note 2.

CHECKERS DRIVE—IN RESTAURANTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)

(Tabular Dollars in Thousands, Except Share and per Share Data)

[Item 21: FINANCIAL STATEMENTS]

The Company has several sale-leaseback arrangements in effect for land and buildings for certain store locations. However, these transactions did not qualify for sale accounting under the guidance in ASC 842 and were therefore accounted for as financing transactions. As a result, the Company continues to recognize the restaurant properties on its consolidated balance sheets and has recorded the proceeds received from the buyer-lessor as a financial liability. As of December 30, 2024 (Successor), and January 1, 2024 (Successor), there were approximately $7.9 million and $7.9 million, respectively, of financing obligations recorded within the accompanying consolidated balance sheets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

NOTE 12 - INCOME TAXES

Prior to the Out-of-Court Restructuring, BossCo Holdings filed a consolidated federal and state (where appropriate) income tax returns which included the Company. As noted in Note 1, the Out-of-Court Restructuring, on June 16, 2023, resulted in BossCo Holdings deconsolidating which included the Company. As part of the Out-of-Court Restructuring, which was accounted for as a business combination, the Company recognized the deferred tax asset and liabilities based on the difference in the fair values of the assets and liabilities acquired end their tax basis. In addition, as part of the Out-of-Court Restructuring, the Company reassessed its tax attributes and recognized a reduction in tax attributes no longer available to the Company.

[Item 21: FINANCIAL STATEMENTS]

NOTE 14 - LEASES

The Company leases real estate for the operation of its restaurants as well as acts as a sublessor for the operation of certain franchised restaurants. As lessee, the Company is obligated under several noncancelable leases, prima

Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)