RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2010

Pancake House, Inc. experiences stable financial performance during the first quarter of the year 2010. The Company continues to implement its strategies of prudent expansion, re-investment of resources, cost cutting measures and elimination of non-performing units.

Consolidated revenues slightly dipped by 1% to P433 million this year from P437 million last year. Restaurant sales of P345 million decreased by 2% from last year’s P351 million. The decrease was due to the temporary closure of several outlets due to total refurbishment and renovation to deliver enhanced dining experience to customers. Meanwhile, Commissary sales increased by 2% due to increased sales to Franchisees as a reflection of an increased system-wide sales.

Several economic conditions contributed to the increase in Operating Expenses such as occupancy and utility costs, most of which are market driven. Despite cost-cutting measures, Labor and Operating Expenses increased by 1% and 4%, respectively. Furthermore, pre-operating costs of newly-opened outlets have likewise contributed to the increase in costs as the Restaurant Sales for such outlets have yet to normalize.

On the other hand, Company was successful in bringing down its other costs such as Interest Expense by 50% thereby mitigating the negative impact of several uncontrollable costs.

As a result, the Group experienced a decrease in Net Income by 25% to P10 million from P13 million last year. However, the Consolidated EBITDA remains strong at 14% or P63 million (P53 million attributable to equity holders of the Parent) in 2010.

Results of Operations

Consolidated revenues for the 1st quarter ended March 31, 2010 amounted to P432.7 million, slightly down by 1% down from same period of last year, mainly due to lower restaurant sales amounting to P345 million posted during the current period compared to last year’s P351 million. The decrease in restaurant sales can be attributed to some outlets which have temporarily closed for renovation as well as closure of non-performing outlets. Commissary sales slightly increased by 2% while franchise revenues also increased by 0.4%.

The Company continues to implement its programs such as expanded synergies among the seven brands, resource optimization and strategic purchasing. However, combined restaurant and commissary cost of sales increased from last year’s 35.65% to this year’s 36.15% due to lower restaurant sales in the current period.

Labor cost for the three months ended March 31, 2010 was at 15.6% of sales, slightly higher than last year’s 15.25%.

Consolidated operating expenses for the current period went up to P144 million compared to P138 million in 2009 mainly due to opening of additional outlets.

Consolidated sales and marketing expenses slightly decreased from last year’s P9.9 million to this year’s P9.4 million.

Consolidated general and administrative expenses also decreased by P1 million.

Consolidated other charges net of other income significantly decreased during the current period by 50% mainly due to lower interest expense incurred in the current period.

The Group posted a net income of P10.14 million for the three months ended March 31, 2010 compared to P13.59 million in 2009. The decrease can be attributed to lower restaurant sales and higher operating expenses incurred during the three months ended March 31, 2010.

Financial Condition

As of March 31, 2010, consolidated balance sheet amounted to P1.42 billion compared to P1.44 billion as of December 31, 2010. Consolidated liabilities were at P595 million and P623 million, as of March 31, 2010 and December 31, 2009, respectively. Total Stockholder’s Equity stood at P824 million, up from P817 million as of December 31, 2009, mainly due to issuance of convertible notes in the 4th quarter of 2009.

Liquidity Position

The Group’s current ratio significantly improved from 0.72:1 as of December 31, 2009 to 0.71:1 as of March 31, 2010. Total debt to asset ratio and total debt to equity ratio went down from 0.43:1 and 0.76:1, respectively as of December 31, 2009 to 0.42:1 and 0.72:1, respectively, as of March 31, 2010. The group’s liquidity position significantly improved due the issuance of new 5-year convertible note in the 4th quarter of 2009, the proceeds of which were used to retire long term debt.