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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2003
Commission File Number: 0-23278
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Brazil Fast Food Corp.
(Exact name of Registrant as specified in its charter)
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Delaware 13-3688737
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Av. Brasil, 6431 - Bonsucesso, CEP 21040
360, Rio de Janeiro, Brazil
(Address of principal executive offices)
Registrant's telephone number: 011 55 21 2564-6452
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
As of June 30, 2003 there were issued and outstanding 7,569,718 shares
of the Registrant's Common Stock, par value $0.0001.
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BRAZIL FAST FOOD CORP. AND SUBSIDIARY
Consolidated Balance Sheets (Unaudited)
(in thousands of Brazilian Reais, except share amounts)
June, 30 December 31,
2003 2002
------------ ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents R$ 860 R$ 1,461
Inventories 1,600 1,536
Accounts receivable
Clients 645 714
Franchisees 5,312 5,333
Allowance for doubtful accounts (1,680) (1,893)
Prepaid expenses 1,087 637
Other current assets 152 231
------------ ------------
TOTAL CURRENT ASSETS 7,976 8,019
------------ ------------
PROPERTY AND EQUIPMENT, NET 16,705 17,081
DEFERRED CHARGES, NET 8,334 9,035
OTHER RECEIVABLES AND OTHER ASSETS 2,755 2,849
------------ ------------
TOTAL ASSETS R$ 35,770 R$ 36,984
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Notes payable R$ 4,484 R$ 6,317
Accounts payable and accrued expenses 4,191 5,295
Payroll and related accruals 1,778 2,645
Taxes, other than income taxes 490 1,155
Deferred income 609 637
Contingencies and taxes in litigation (note 4) 5,399 5,901
Other current liabilities 724 307
------------ ------------
TOTAL CURRENT LIABILITIES 17,675 22,257
NOTES PAYABLE, less current portion 1,959 --
DEFERRED INCOME, less current portion 1,770 1,761
CONTINGENCIES AND TAXES IN LITIGATION, less
current portion (note 4) 18,125 14,173
OTHER LIABILITIES 211 303
------------ ------------
TOTAL LIABILITIES 39,740 38,494
------------ ------------
SHAREHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.01 par value, 5,000 shares authorized; no
shares issued -- --
Common stock, $.0001 par value, 40,000,000 shares authorized;
7,542,790 shares issued and outstanding 1 1
Additional paid-in capital 59,297 59,297
Deficit (62,300) (59,614)
Accumulated comprehensive loss (968) (1,194)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY (DEFICIENCY) (3,970) (1,510)
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY) R$ 35,770 R$ 36,984
------------ ------------
See Notes to Consolidated Financial Statements
2
BRAZIL FAST FOOD CORP. AND SUBSIDIARY
Consolidated Statements of Operations (Unaudited)
(in thousands of Brazilian Reais, except share amounts)
Six Months Ended June 30,
---------------------------------
2003 2002
----------- -----------
STORE RESULTS
Net Restaurant Sales R$ 29,349 R$ 31,831
Store Costs and Expenses
Food, Beverage and Packaging (11,892) (12,754)
Payroll & Related Benefits (6,820) (6,927)
Restaurant Occupancy (3,628) (4,214)
Contracted Services (4,023) (4,063)
Other Store Costs and Expenses (982) (1,117)
Total Store Costs and Expenses (27,345) (29,075)
----------- -----------
STORE OPERATING INCOME 2,004 2,756
----------- -----------
FRANCHISE RESULTS
Net Franchise Royalty Fees R$ 3,103 R$ 2,205
Franchise Costs and Expenses (1,043) (629)
----------- -----------
FRANCHISE OPERATING INCOME 2,060 1,576
----------- -----------
MARKETING, GENERAL AND
ADMINISTRATIVE (EXPENSES) INCOME
Marketing (Expenses) Income 107 (431)
Administrative Expenses (3,137) (3,958)
Other Operating Income (Expenses) (405) 987
Depreciation and Amortization (1,742) (1,880)
Total Marketing, G & A (Expenses) Income (5,177) (5,282)
----------- -----------
OPERATING INCOME (LOSS) (1,113) (950)
----------- -----------
Interest Income (Expense) (1,602) (2,756)
Foreign Exchage and Monetary Restatement Gain (Loss) 29 (1,021)
----------- -----------
NET INCOME (LOSS) R$ (2,686) R$ (4,727)
=========== ===========
NET (LOSS) PER COMMON SHARE
BASIC AND DILUTED R$ (0.36) R$ (1.09)
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC AND DILUTED 7,542,790 4,347,790
=========== ===========
See Notes to Consolidated Financial Statements
3
BRAZIL FAST FOOD CORP. AND SUBSIDIARY
Consolidated Statements of Operations (Unaudited)
(In Thousands of Brazilian Reais, Except Share Amounts)
Three Months Ended June 30,
---------------------------------
2003 2002
----------- -----------
STORE RESULTS
Net Restaurant Sales R$ 13,902 R$ 14,716
Store Costs and Expenses
Food, Beverage and Packaging (5,761) (5,926)
Payroll & Related Benefits (3,356) (3,390)
Restaurant Occupancy (1,833) (2,072)
Contracted Services (1,914) (1,953)
Other Store Costs and Expenses (305) (364)
Total Store Costs and Expenses (13,169) (13,705)
----------- -----------
STORE OPERATING INCOME 733 1,011
----------- -----------
FRANCHISE RESULTS
Net Franchise Royalty Fees R$ 1,486 R$ 1,036
Franchise Costs and Expenses (593) (306)
----------- -----------
FRANCHISE OPERATING INCOME 893 730
----------- -----------
MARKETING, GENERAL AND
ADMINISTRATIVE (EXPENSES) INCOME
Marketing (Expenses) Income (216) (82)
Administrative Expenses (1,623) (1,770)
Other Operating Income (Expenses) 880 449
Depreciation and Amortization (859) (899)
Total Marketing, G & A (Expenses) Income (1,818) (2,302)
----------- -----------
OPERATING INCOME (LOSS) (192) (561)
----------- -----------
Interest Income (Expense) (784) (1,511)
Foreign Exchage and Monetary Restatement Gain (Loss) 380 (1,133)
----------- -----------
NET INCOME (LOSS) R$ (596) R$ (3,205)
=========== ===========
NET (LOSS) PER COMMON SHARE
BASIC AND DILUTED R$ (0.08) R$ (0.64)
=========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
BASIC AND DILUTED 7,542,790 4,972,790
=========== ===========
See Notes to Consolidated Financial Statements
4
BRAZIL FAST FOOD CORP. AND SUBSIDIARY
Consolidated Statements of Comprehensive Loss (Unaudited)
(In Thousands of Brazilian Reais)
Six Months Ended June 30, Three Months Ended June 30,
-------------------------- --------------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net Loss R$(2,686) R$(4,727) R$ (596) R$(3,205)
Other comprehensive income (loss):
Foreign currency trans226ion adjustment 226 (70) 177 (71)
-------- -------- -------- --------
ComprehensR$e Loss R$(2,460) R$(4,797) R$ (419) R$(3,276)
======== ======== ======== +=======
See Notes to Consolidated Financial Statements
5
BRAZIL FAST FOOD CORP. AND SUBSIDIARY
Consolidated Statements of Changes In Shareholders' Equity (Unaudited)
(In Thousands of Brazilian Reais)
Common Stock Additional Accumulated
-------------------------- Paid-In Comprehensive
Shares Par Value Capital (Deficit) Loss Total
---------- ---------- ---------- ---------- ------------- ----------
Balance, Decembember 31, 2002 7,542,790 R$ 1 R$ 59,297 R$ (59,614) R$ (1,194) R$ (1,510)
Net loss -- -- -- (2,686) -- (2,686)
Cumulative translati-n adjustment -- -- -- -- 226 226
---------- ---------- ---------- ---------- ---------- ----------
Balance, June 30, 2003 7,542,790 R$ 1 R$ 59,297 R$ (62,300) R$ (968) R$ (3,970)
========== ========== ========== ========== ========== ==========
See Notes to Consolidated Financial Statements
6
BRAZIL FAST FOOD CORP. AND SUBSIDIARY
Consolidated Statements of Cash Flows (Unaudited)
(In Thousands of Brazilian Reais)
Six Months Ended June 30,
---------------------------
2003 2002
------- -------
CASH FLOW FROM OPERATING ACTIVITIES:
Net (loss) R$(2,686) R$(4,727)
Adjustments to reconcile net (loss) to cash provided by
(used in) operating activities:
Depreciation and amortization 1,742 1,881
(Gain) Loss on assets sold 97 466
Contingences accrued 2,045 --
Services provided in exchange for shares 123 --
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 59 (234)
Inventories (64) (30)
Prepaid expenses and other current assets (371) 48
Other assets 94 (378)
(Decrease) increase in:
Accounts payable and accrued expenses (1,227) (1,811)
Payroll and related accruals (867) 645
Taxes other than income taxes (22) 1,442
Other liabilities 325 516
Contingencies and taxes in litigation 762 --
Deferred income (19) (318)
------- -------
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES (9) (2,500)
------- -------
CASH FLOW FROM INVESTING ACTIVITIES:
Additions to property and equipment (1,192) (773)
Proceeds from sale of property, equipment and deferred charges 248
CASH FLOWS (USED IN) INVESTING ACTIVITIES (944) (773)
------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) under lines of credit 126 (1,932)
Proceeds from issuance of shares of common stock -- 4,172
-------- --------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 126 2,240
-------- --------
EFFECT OF FOREIGN EXCHANGE RATE 226 (70)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (601) (1,103)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,461 2,267
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD R$ 860 R $1,164
======== ========
See Notes to Consolidated Financial Statements
7
BRAZIL FAST FOOD CORP. AND SUBSIDIARY
Notes to Consolidated Financial Statements (Unaudited)
(In Thousands of Brazilian Reais)
NOTE 1 - FINANCIAL STATEMENT PRESENTATION
The accompanying financial statements have been prepared by
Brazil Fast Food Corp. (the "Company"), without audit. In the
opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the
financial position, results of operations and cash flows at June
30, 2003 and for all periods presented have been made. The
results of operations for the periods ended June 30, 2003 and
2002 are not necessarily indicative of the operating results for
a full year. Unless otherwise specified all references in these
financial statements to (i ) "Reais" or "R$" are to the
Brazilian Real (singular), or to Brazilian Reais (plural), the
legal currency of Brazil, and (ii ) "U.S. Dollars" or "$" are to
United States' dollars.
Certain information and footnote disclosures prepared in
accordance with generally accepted accounting principles and
normally included in the financial statements have been
condensed or omitted. It is suggested that these financial
statements be read in conjunction with the consolidated
financial statements and notes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002.
NOTE 2 - MANAGEMENT PLANS REGARDING GOING CONCERN
Since the acquisition of Venbo Comercio de Alimentos Ltda. in
1996, the Company has sustained net losses totaling
approximately R$62,300 and at June 30, 2003, consolidated
current liabilities exceed consolidated current assets by
R$9,699.
To date, the Company has been dependent upon its initial
capital, additional equity and debt financing to fund its
operating losses and capital needed for expansion. Currently,
the Company has approximately R$700 of unused credit line.
During 2002, the Company received net proceeds in amount of
R$8,829 which were used to reduce its debt, including debt with
private individuals, debt with financial institutions in Brazil,
and past due accounts payable with suppliers and others.
Management plans to address its immediate and future cash flow
needs by focusing on a number of areas including: the continued
sale of non-profitable company-owned stores; reduction of
expenses including headcount optimization; the continued
expansion of its franchisee base, which will generate additional
cash flows from royalties and franchise fees without significant
capital expenditure; the introduction of new programs, such as a
delivery call center, an internet delivery service, menu
expansion to meet customer demand and rebate from suppliers. In
order to act on these plans and sustain current operations, the
Company has, in the past, been dependent upon the continued
forbearance of its creditors, as well as additional financing.
8
There can be no assurance that management's plans will be
realized, or that additional financing will be available to the
Company when needed, or at terms that are desirable.
Furthermore, while the Company is currently in full compliance
with agreements with the creditors, there can be no assurance
that the Company will not be forced to seek the forbearance of
its creditors in the future, or that it will locate suitable new
franchisees, or desirable locations for new franchisees to open
stores. The Company's ability to further reduce expenses and
head count is directly impacted by its need to maintain an
infrastructure to support its current and future chain of
locations. The Company's ability to remarket Company-owned
stores to franchisees, and to generate cash flows from such
activities, is impacted by the ability to locate suitable buyers
with the interest and capital to complete such transactions, and
by the time to complete such sales. Additionally, the Company's
ability to achieve its plans is further impacted by the
instability of the economic environment in Brazil, which has a
direct impact on the desire and ability of consumers to visit
fast food outlets. The Company is also dependent upon the
continued employment of key personnel. These factors, among
others, raise substantial doubt about the Company's ability to
continue as a going concern.
NOTE 3 - RECLASSIFICATION
The consolidated Balance Sheet as of December 31, 2002, as well
as the consolidated statement of operation for the three and six
month periods ended June 30, 2002, have been restated to conform
with the current quarter presentation.
NOTE 4 - OTHER LIABILITIES AND LITIGATION
During 1999, certain Brazilian taxes levied on the Company were
not paid. In the second quarter of 2000, the Company reached an
agreement with the state government to parcel unpaid taxes in
sixty months, interest free, in amounts indexed to Brazil's
UNIDADE FISCAL DE REFERENCIA, which is currently 12% per year.
In the same period, the Company applied to join a tax amnesty
program and was accepted by the Brazilian Federal government
(REFIS). Through this program, 1999 past due federal taxes ARE
being paid in monthly installments equivalent to 1.2% of the
Company's gross sales, with interest accruing at rates set by
the Brazilian Federal government, currently 12% per year.
All installments related to those agreements have been paid on a
timely basis. During six MONTHS ended June 30, 2003, the Company
paid approximately R$ 357 related to such Brazilian Federal tax
amnesty program and approximately R$1.086 related to Rio de
Janeiro state government agreement.
In the end of 2001 and beginning 2002 the Company did not pay
some other state and Federal taxes. In addition, Brazilian
Social Securities Authorities applied penalties against the
Company, by charging certain operating transactions not covered
by the Company's previous calculation of Social Security
contributions.
9
During December 2002, the Company applied to join and was
accepted to another tax amnesty program offered by the Rio de
Janeiro state government, through which the Company will parcel
unpaid 2001 and 2002 state taxes, in one hundred and twenty
months, interest free, in amounts indexed to Brazil's UNIDADE
FISCAL DE REFERENCIA, which is currently 12% per year.
During June 2003 the Brazilian Government had implemented
another tax amnesty, to which the Company is in the process of
appliance. Through this program unpaid 2002 federal taxes, as
well as the Social Security penalties, may be paid in monthly
installments equivalent to 1.5% of the Company's gross sales,
with interest accruing at rates set by the Brazilian Federal
government, currently 12% per year.
Since June 2002, the Company has paid all its current taxes on a
timely basis.
During 2001, the Company claimed in Brazilian court that their
lease financing contracts with IBM Leasing should not have their
principal amounts indexed to the US dollar, but instead stated
in Brazilian Reais bearing interest of 12% per annum. While
awaiting the court's determination, we have deposited all
installment payments due under our lease financing agreements
with the court in reais, inclusive of 12% per annum interest,
until November, 2002, the end of the contract term. However, the
Company accrued contracted amounts at June 30, 2003. Such
lawsuit is in its initial phase.
Liabilities related to tax amnesty programs and litigation
consist of the following:
June 30, December 31,
2003 2002
-------------------------------------------- -------------------------------------------
Long Long
Total Current Term Total Current Term
Liability Liability Liability Liability Liability Liability
--------- --------- --------- --------- --------- ---------
Social security tax
debts - restated R$ 6,170 -- R$ 6,170 R$ 1,365 -- R$ 1,365
Social tax charged
on revenues 3,791 3,791 -- 3,816 3,816 --
Reassessed value-
added tax 4,984 892 4,092 5,987 1,125 4,862
REFIS 4,826 716 4,110 5,082 960 4,122
IBM Leasing litigation 3,143 -- 3,143 3,187 -- 3,187
Other litigation 610 -- 610 637 -- 637
-------- ------- ------- ------- ------- -------
TOTAL R$23,524 R$ 5,399 R$18,125 R$20,074 R$ 5,901 R$14,173
======== ======== ======== ======== ======== ========
10
NOTE 5 - PRIVATE PLACEMENT
In May, 2002, the Company privately sold 2,500,000 shares of its
common stock for R$5,000 to four accredited private investors
(collectively, the New Investors), as a part of a new
shareholders agreement (the Agreement).
During the third quarter of 2002, the Company privately sold an
additional 1,200,000 shares of our common stock at a price in
Brazilian reais, computed at the times of exercise, equivalent
to US$1.00 per share.
The Company has received proceeds of R$8,829 pursuant to such
private placements during the second and the third quarters of
2002.
NOTE 6 - SERVICES PROVIDED IN EXCHANGE OF COMMON SHARES
In May, 2002 the Company entered into an agreement requiring the
Company to retain the services of either Ricardo Bomeny, or an
entity of which he is a principal, to manage the Company's
subsidiary day-to-day operations for a term of two years. For
such services the consultant will receive 20,000 shares of the
Company`s common stock for each of the first twelve months of
such two-year term, a sum in cash for the second twelve months
of such term in a amount to be mutually agreed upon at a future
date, and an additional 260,000 shares at the end of the
two-year term conditioned upon the attainment of specified
targets. During the six months ended June 30, 2003 the Company
charged R$123 to operating results related to those services.
Such amount is a result of number of shares owed on accrual
basis during the first semester of 2003, multiplied by their
average fair value.
NOTE 7 - STOCK OPTION PLAN ACTIVITY
During the six months ended June 30, 2003, there were no options
granted or canceled under the Company's Stock Option Plan.
Under the Company's Stock Option Plan, options to purchase a
total of 28,125 shares have expired during the six months ended
June 30, 2003.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OUR BUSINESS
Through our wholly-owned subsidiary, Venbo Comercio de Alimentos Ltda.,
a Brazilian limited liability company which conducts business under the trade
name "Bob's," we own and, directly and through franchisees, operate the second
largest chain of hamburger fast food restaurants in Brazil
RESULTS OF OPERATIONS - COMPARISON OF THREE AND SIX MONTHS ENDED
JUNE 30, 2003 AND 2002
For the first quarter onward, the Company has reformatted its consolidated
statement of operations in order to improve the quality of analysis. Basically,
the reformatted statement differs from the previous one when segregated the
earnings provided by Company's operated stores business from the earnings
provided by franchise business. However, all the operating figures were stated
as a percentage of the Net Restaurant Sales because the Company believes that,
in general, either kind of business (restaurant operations or franchise net
earns) move towards Net Restaurant Sales evolution, and, accordingly, cost and
expenses should be analyzed in conjunction with such evolution.
The consolidated statement of operation for the three and six month period ended
June 30, 2002, has been restated to conform with the current presentation.
12
The following table sets forth certain operating data for the periods of three
and six months ended June 30, 2003 and 2002.
Six Months Six Months Three Months
Ended Ended Ended
June 30, 2003 % June 30, 2002 % June 30, 2003 %
------------- ----- ------------- ----- ------------- -------
STORE RESULTS
Net Restaurant Sales R$ 29,349,000 100.0% R$ 31,831,000 100.0% R$ 13,902,000 100%
Store Costs and Expenses
Food, Beverage and Packaging (11,892,000) -40.5% (12,754,000) -40.1% (5,761,000) -41.4%
Payroll & Related Benefits (6,820,000) -23.2% (6,927,000) -21.8% (3,356,000) -24.1%
Restaurant Occupancy (3,628,000) -12.4% (4,214,000) -13.2% (1,833,000) -13.2%
Contracted Services (4,023,000) -13.7% (4,063,000) -12.8% (1,914,000) -13.8%
Other Store Costs and Expenses (982,000) -3.3% (1,117,000) -3.5% (305,000) -2.2%
Total Store Costs and Expenses (27,345,000) -93.2% (29,075,000) -91.3% (13,169,000) -94.7%
STORE OPERATING INCOME 2,004,000 6.8% 2,756,000 8.7% 733,000 -5.3%
------------- ----- ------------ ----- ----------- -----
FRANCHISE RESULTS
Net Franchise Royalty Fees R$ 3,103,000 -10.0% R$ 2,205,000 - 6.9% R$1,486,000 10.7%
Franchise Costs and Expenses (1,043,000) - 3.6% (629,000) - 2.0% (593,000) -4.3%
FRANCHISE OPERATING INCOME 2,060,000 7.0% 1,576,000 5.0% 893,000 6.4%
------------- ----- ------------ ----- ----------- -----
MARKETING, GENERAL AND
ADMINISTRATIVE (EXPENSES) INCOME
Marketing (Expenses) Income 107,000 0.4% (431,000) -1.4% (216,000) -1.6%
Administrative Expenses (3,137,000) -10.7% (3,958,000) -12.4% (1,623,000) -11.7%
Other Operating Income
(Expenses) (405,000) -1.4% 987,000 -3.1% 880,000 6.3%
Depreciation and Amortization (1,742,000) -5.9% (1,880,000) -5.9% (859,000) -6.2%
Total Marketing, G & A (Expenses)
Income (5,177,000) -17.6% (5,282,000) -16.6% (1,818,000) -13.1%
------------- ------------ -----------
OPERATING INCOME (LOSS) (1,113,000) (950,000) (192,000)
------------- ------------ -----------
Interest Income (Expense) (1,602,000) -5.5% (2,756,000) -8.7% (784,000) -5.6%
Foreign Exchage and Monetary
Restatement- Gain (Loss) 29,000 0.1% (1,021,000) -3.2% 380,000 2.7%
------------- ----- ----------- ----- ----------- -----
NET INCOME (LOSS) R$ (2,686,000) -9.2% R$(4,727,000) -14.9% R$ (596,000) -4.3%
------------- ----- ------------ ----- ----------- -----
13
Introduction
During the second half of fiscal 2002, due to the political uncertainty
attendant to the outcome of the Brazilian presidential election in October 2002
and the subsequent victory of Labor Party, investors doubted about the future
economic trends in Brazil and reduced and/or postponed most business projects
and money supply.
Brazilian currency devaluated approximately 52.3% against the US dollar during
the year of 2002 and, as a consequence, Brazilian inflation rates reached the
highest level since the inception of Brazil's stabilization plan in mid 1994. In
response to these events, the Brazilian Central Bank in October 2002 and
subsequently in December increased overnight interest rates from 18% to 25% per
year.
The new Brazilian President took office in January 2003 starting to take acts -
which includes the discussion of implementing structural reforms- in order to
reverse the previous year-end scenario. In response to such acts, the Brazilian
inflation started to decline and the Brazilian Real valuated against the US
Dollar during the 2003. However, fiscal and monetary policies from the Brazilian
Central Bank have remained austere and the return of economic growth, despite
being expected, was postponed.
These policies increased unemployment rates in major metropolitan areas (Rio de
Janeiro and Sao Paulo), and decreases in average take-home income, negatively
impacting our restaurant sales and results of our operations for the first
semester of 2003.
STORE RESULTS
Net Restaurant Sales
Net restaurant sales for our company-owned retail outlets decreased R$
2,482,000 or 7.8%, to R$29,349,000 for the six months ended June 30, 2003 as
compared to R$31,831,000 for the six months ended June 30, 2002. Same store
sales increased approximately 0.3% for the six months ended June 30, 2003 as
compared to the same period of 2002.
Net restaurant sales for our company-owned retail outlets decreased R$
814,000 or 5.5 %, to R$13,902,000 for the three months ended June 30, 2003 as
compared to R$14,716,000 for the three months ended June 30, 2002. Same store
sales increased approximately 1.2% for the three months ended June 30, 2003 as
compared to the same period of 2002.
Same store sales increases are mainly attributable to an average
increase of 17% in the sales prices of our products since June 30, 2002, which,
actually, hides a reduction of products sold from period to period. The
reduction of products sold has been provoked by lower consumer spending due to
macro economic factors described above, as well as a stronger competition in
metropolitan areas such as Rio de Janeiro AND Sao Paulo.
The year-to-year decreases on total Net Restaurant Sales are also
attributable to the reduction of our company-owned retail outlets from 66 as of
June 30, 2002 to 60 as of June 30, 2003.
14
The company closed 1 owned-operated outlet during the period between
June 30, 2002 and June 30, 2003, sold 6 outlets to franchisees and opened 1 new
outlet. This reflects the company's strategy to limit company direct operations
to highly profitable outlets, and to focus on the growth of franchises, which
management anticipates will significantly reduce the level of the Company's
future capital expenditures.
In addition, the Company is working on marketing campaigns and on
personnel motivation in order to improve restaurant sales.
Food, Beverage and Packaging Costs
As a percentage of net restaurant sales, food, beverage and packaging
costs were (40.5%) and (40.1%) for the six months ended June 30, 2003 and 2002,
respectively.
As a percentage of net restaurant sales, food, beverage and packaging
costs were (41.4%) and (40.3%) for the three months ended June 30, 2003 and
2002, respectively.
Food, beverage and packaging costs increases from period to period, are
mainly attributable to increases on purchase prices of soft drinks, meat, ice
cream and French fries. Those increases were partially offset by long term
agreements celebrated with some suppliers and rebates negotiations.
Payroll & Related Benefits
As a percentage of net restaurant sales, store payroll and related
benefits increased from (21.8%) for the six months ended June 30, 2002 to
(23.2%) for the same period ended June 30, 2003.
As a percentage of net restaurant sales, store payroll and related
benefits increased from (23.0%) for the three months ended June 30, 2002 to
(24.1%) for the same period ended June 30, 2003.
These increases are mainly attributable to increases in employee
transportation cost, to increases in salaries mandated by union-driven
agreements and, as a consequence, social charges that are computed based on
employees salaries. In addition, the increase in the number of store
supervisors, in order to improve the quality of our restaurant operations, also
impacted our 2003 payroll costs.
Restaurant Occupancy Costs and Other Expenses
Restaurant occupancy costs and other expenses expressed as a percentage
of net restaurant sales were approximately (12.4%) and (13.2%) for the six
months ended June 30, 2003 and 2002, respectively.
Restaurant occupancy costs and other expenses expressed as a percentage
of net restaurant sales were approximately (13.2%) and (14.1%) for the three
months ended June 30, 2003 and 2002, respectively.
15
These decreases are mainly attributable to temporary and permanent
reduction of the occupancy cost of some of our stores, as well as to the closing
of one unprofitable store which had extremely high lease costs. On the other
hand, increases in our minimum rent obligations, which are indexed to Brazilian
inflation, currently at 28.2% per annum, partially offset such decreases.
Contracted Services
Expenses related to contracted services expressed as a percentage of
net restaurant sales were approximately (13.7%) and (12.8%) for the six months
ended June 30, 2003 and 2002, respectively.
Expenses related to contracted services expressed as a percentage of
net restaurant sales were approximately (13.8%) and (13.3%) for the three months
ended June 30, 2003 and 2002, respectively.
These increases are mainly attributable to increases in utility costs,
mainly electricity rate increases of 19%, as well as higher delivery costs. The
effect of those increases were partially offset by reduction obtained on
maintenance service contracts.
Other Store Cost and Expenses
Other store cost and expenses expressed as a percentage of net
restaurant sales were approximately (3.3%) and (3.5%) for the six months ended
June 30, 2003 and 2002, respectively.
Other store cost and expenses expressed as a percentage of net
restaurant sales were approximately (2.2%) and (2.5%) for the three months ended
June 30, 2003 and 2002, respectively.
Other store cost and expenses remained almost constant from period to
period.
FRANCHISE RESULTS
Net Franchise Royalty Fees
Net franchise royalty fees increased R$898,000 or 40.7%, to R$3,103,000
for the six months ended June 30, 2003 as compared to R$2,205,000 for the six
months ended June 30, 2002 and increased R$450,000 or 43.4%, to R$1,486,000 for
the three months ended June 30, 2003 as compared to R$1,036,000 for the three
months ended June 30, 2002.
This increase is mainly attributable to the growth of our franchise
business from 209 retail outlets as of June 30, 2002 to 255 as of June 30, 2003.
From the period of July 1, 2002 to June 30, 2003, the Company sold 6 of
its restaurants to franchisees. These stores had either low profitability or, in
some cases, operating losses. The Company's historical experience has shown that
franchisee administration can enhance the profitability of such stores,
primarily as a result of:
- lower taxation (tax incentives from Federal and state
governments to small companies)
- better knowledge of specific markets and their local customs -
- lower operating expenses.
16
Franchise Costs and Expenses
Franchise cost and expenses expressed as a percentage of net restaurant
sales were approximately (3.6%) and (2.0%) for the six months ended June 30,
2003 and 2002, respectively, and (4.3%) and (2.1%) for the three months ended
June 30, 2003 and 2002, respectively
Such increases are, in general, attributable to the growth of franchise network
and to an improvement on the Company's policy of following the operation of its
franchisees: our supervisors responsible for franchised stores had increased the
number of visits all around the Brazilian territory which, in turn, increased
traveling expenses.
In addition, the Company's franchise department had its payroll costs increased,
basically for the same reasons described above in the topic STORE RESULTS -
Payroll and related benefits.
MARKETING, GENERAL AND ADMINISTRATIVE (EXPENSES) INCOME
Marketing income (expenses)
As a percentage of net restaurant sales, marketing (expenses) income
were approximately 0.4% and (1.4%) for the six months ended June 30, 2003 and
2002, respectively.
As a percentage of net restaurant sales, marketing (expenses) income
were approximately (1,6%) and (0.6%) for the three months ended June 30, 2003
and 2002, respectively.
The reversal from net marketing expense for the six months ended June
30, 2002 to net marketing income for the six months ended June 30, 2003 is
mainly attributable to (i) an optimization of marketing investments; (ii)cost
reduction measures and (iii) growth of the franchise network which increased
such franchisees' contributions to our marketing efforts.
The increase for the three-month period is due to higher expenses
derived by an intensive promoting campaign of new products on the Company's
menu.
General and Administrative Expenses
As a percentage of restaurant sales, general and administrative
expenses were approximately (10.7%) and (12.4%) for the six months ended June
30, 2003 and 2002, respectively and approximately (11.7%) and (12.0%) for the
three months ended June 30, 2003 and 2002, respectively.
These decreases are mainly attributable to reductions or non-renewal of
a great number of outsourced administrative services, such as payroll
processing, legal, accounting and auditing services.
Other Operating Income (Expenses)
Other operating income (expenses) are mainly comprised of the initial
fees paid by our franchisees, as well as income derived from suppliers pursuant
to terms of certain exclusivity agreements, net result of assets sold and non
recurring income or expenses
17
Other operating income (expense) expressed as a percentage of net
restaurant sales reversed from 3.1%, for the six months ended June 30, 2002 to
(1.4%) for the six months ended June 30, 2003.
Such reversal was mainly attributable to non-recurring expenses in
amount of R$2,690,000 recorded during the first quarter of 2003 related to a
provision for fines that may be applied against the Company (in addition to
those recognized at the end of fiscal 2002) by the Brazilian Social Security
Authorities, which charged certain operating transactions not covered by the
Company's previous calculation of Social Security contributions and restated
such unpaid debt. On the other hand, also during the first quarter of 2003, the
Company recorded a non-recurring gain of R$643,000 related to a reversal of
accrued Delware Franchise Taxes derived from a review on such tax computation.
Other operating income (expense) expressed as a percentage of net
restaurant sales was 3.1%, for the three months ended June 30, 2002 and 6.3% for
the three months ended June 30, 2003.
The increase from period to period is due to a great number of rebate
agreements with suppliers during 2003.
Depreciation and Amortization
As a percentage of net restaurant sales, depreciation and amortization
were approximately 5.9% and 5.9% for the six months ended June 30, 2003 and
2002, respectively.
As a percentage of net restaurant sales, depreciation and amortization
were approximately 6.2% and 6.1% for the three months ended June 30, 2003 and
2002, respectively.
Depreciation and amortization expenses, generally, remained at constant
levels for the six months and three months ended June 30, 2003 when contrasted
with the comparable period in 2002.
INTEREST INCOME (EXPENSES) AND FOREIGN EXCHANGE GAIN (LOSS)
Interest Income and Expenses
As a percentage of net restaurant sales, net interest expense were
approximately (5.5)% and (8.7)% for the six months ended June 30, 2003 and 2002,
respectively.
As a percentage of net restaurant sales, net interest expense were
approximately (5.6)% and (10.3)% for the three months ended June 30, 2003 and
2002, respectively.
The percentage decreases for the six and three months ended June 30,
2003 as compared to the same period in 2002 is primarily attributable to
reduction of the level of our bank indebtedness.
18
Foreign Exchange and Monetary Restatement Gain (Loss)
As a percentage of net restaurant sales, net foreign exchange and
monetary restatement gain and/or losses were approximately 0.1% and (3.2)% for
the six months ended June 30, 2003 and 2002, respectively.
As a percentage of net restaurant sales, net foreign exchange gain
and/or losses were approximately 2.7% and (7.7)% for the three months ended June
30, 2003 and 2002, respectively.
The reversal from net losses during the periods of 2002 to net gains
during the periods of 2003 is primarily attributable to valuation of the
Brazilian Real against the US Dollar during the periods of three and six month
ended June 30, 2003 contrasted to A DEVALUATION OF the Brazilian Real against
the US Dollar in the same periods of 2002. Those effects of foreign exchange
gain or losses are derived from the restatements of our obligations denominated
in U.S. Dollars.
19
LIQUIDITY AND CAPITAL RESOURCES
Since March 1996, we have funded our cumulative operating losses of R$62,300,000
and made acquisitions of businesses and capital improvements (including
remodeling of our retail outlets) by using cash remaining at the closing of our
acquisition of Venbo, by borrowing funds from various sources and from private
placements of securities. As of June 30, 2003, we had cash on hand of R$860,000
and a working capital deficiency of R$9,699,000.
For the SEMESTER ended June 30, 2003, we had net cash used in operating
activities of R$9,000, net cash used in investing activities of R$944,000 and
net cash provided by financing activities of R$126,000. Net cash used in
investing activities was primarily the result of our investment in property and
equipment to improve our retail operations, mainly on remodeling two great
Company's operated stores. Net cash provided by financing activities was a
result of rescheduling our financing debts.
Our earnings before interest, taxes, depreciation and amortization (EBITDA) were
approximately R$629,000 for the period of six months ended June 30, 2003 and
approximately positive R$930,000 for the same period ended June 30, 2002. EBITDA
is not intended to be a performance measure that should be regarded as an
alternative to, or more meaningful than, either loss from operations or net loss
as an indicator of operating performance or cash flows as a measure of
liquidity, as determined in accordance with accounting principles generally
accepted in the United States.
Our cash resources are currently used primarily to pay for the servicing costs
on our debt obligations, which costs have increased significantly due to
increased interest rates in Brazil charged on short-term debt and the
devaluation of the Real against the U.S. Dollar during the fiscal 2002. Our debt
obligations as of June 30, 2003 were as follows:
June 30,
2003
----------------
Revolving lines of credit (a) R$ 2,433,000
Mortgages payable (b) 736,000
Notes payable linked to
fixed assets acquisitions (c) 3,230,000
Other notes payable 44,000
----------------
6,443,000
Less: current portion (4,484,000)
----------------
R$ 1,959,000
================
At June 30, 2003, future maturities of notes payable are as follows:
Fiscal
Year
----------------------
Remaining 2003 R$ 3,848,000
2004 R$ 940,000
2005 R$ 940,000
2006 R$ 715,000
----------------
6,443,000
================
20
- -----------
(a) Due on demand from various Brazilian financial institutions as
well as private individuals with interest rates raging from
25.6% to 29.3% per annum, and guaranteed by certain officers.
Currently, the Company has approximately R$700,000 of unused
credit line.
(b) Amount due in September, 2003. Interest on this amount accrues
at a rate of 25% per annum and is payable quarterly. Payment
is secured by certain property with a carrying value of
R$5,049,000 at June 30, 2003. Principal and interest are
indexed to the U.S. Dollar, and are therefore susceptible to
exchange rate variations between the U.S. Dollar and the
Brazilian Real.
(c) This credit facility was used to purchase three stores.
Repayment of principal with respect to one of these stores is
due in 12 monthly installments of R$25,000. Repayment of
principal with respect to the other two stores is due in 37
monthly installments of R$46,000 in addition of 3 annual
installments of R$408,000, starting January, 2004, ending
January 2006. There is no interest charged on these
borrowings. Principal is indexed to Brazilian inflation
measured by IGP-M. This facility is secured by the fixed
assets purchased.
In addition to the foregoing debt obligations, we are required to make certain
payments on restructured past-due Brazilian state taxes of approximately
R$4,984,000 and federal taxes of approximately R$4,826,000. Pursuant to
settlements reached with Brazilian state taxing authorities in 2000 and 2002, we
are required to make repayments over a ten-year period, interest free, in
amounts indexed to Brazil's UNIDADE FISCAL DE REFERENCIA, which is currently
12.0% per annum. In addition, in 2000, we applied to, and were accepted by, the
Brazilian federal government to join a tax amnesty program, which restructured
our outstanding 1999 federal tax obligations into monthly payments equal to 1.2%
of our gross sales, with interest accruing at a rate set from time-to-time by
the Brazilian federal government (TJLP), which was 12.0% a.a. as of June 30,
2003. For the remaining fiscal 2003, we expect to pay approximately R$892,000
pursuant to the state tax settlement and approximately R$357,000 pursuant to the
federal tax amnesty program.
The Company has other past due Federal Taxes which were not paid in the
beginning of 2002, as well as fines applied against the Company by the Brazilian
Social Securities Authorities, in the approximated amount of R$9,400,000, which
are not covered by any of the above mentioned tax agreements. However, during
June 2003 the Brazilian Government IMPLEMENTED another tax amnesty, to which the
Company APPLIED. Through this program unpaid 2002 federal tax, as well as the
Social Security penalties, may be paid in monthly installments equivalent to
1.5% of the Company's gross sales, with interest accruing at rates set by the
Brazilian Federal government, currently 12% per year.
Since June 2002, the Company has paid all its current taxes on a timely basis.
The Company has also long-term contractual obligations in the form of operating
lease obligations related to Company-operated outlets.
21
The future minimum lease payments under those obligations with an initial or
remaining noncancelable lease terms in excess of one year at June 30, 2003 are
as follows:
Fiscal Year Amount
----------- ------
2003 2,508,000
2004 1,966,000
2005 1,560,000
2006 1,033,000
2007 284,000
Thereafter 153,000
Rent expense was R$2,587,000 for the semester ended JUNE 30, 2003.
In the past, we have generated cash and obtained financing sufficient to meet
our debt obligations.
We plan to fund our current debt obligations mainly through cash provided by our
operations, including assets sales, franchise initial fees and rebates from
suppliers.
Currently, four of our company-owned retail outlets are located in facilities
that we own and all of our other company-owned retail outlets are located in
leased facilities.
Our average cost to open a retail outlet was approximately R$300,000 to
R$500,000 including leasehold improvements, equipment and beginning inventory,
as well as expenses for store design, site selection, lease negotiation,
construction supervision and obtaining permits.
We have estimated that our capital expenditures for fiscal 2003, which will be
used to maintain and upgrade our current restaurant network, will be
approximately R$2,100,000. We anticipate that the primary use of our cash
resources during 2003 will be to service our debt obligations. During 2003, we
intend to focus our efforts on expanding both the number of our franchisees and
the number of our franchised retail outlets, neither of which are expected to
require significant capital expenditures.
As discussed above, the Company has contractual obligations in different forms.
The following table summarizes the Company's contractual obligations and
financial commitments, as well as their aggregate maturities.
Fiscal Year Contractual Leases Fiscal Debt * Loans Payable Total
----------- ------------------ ------------- ------------- ---------
Remaining 2003 2,508,000 826,000 3,848,000 7,182,000
2004 1,966,000 2,085,000 940,000 4,991,000
2005 1,560,000 2,085,000 940,000 4,585,000
2006 1,033,000 2,085,000 715,000 3,833,000
2007 284,000 2,085,000 -- 2,369,000
Thereafter 153,000 644,000 -- 797,000
- ------------------
* Does not include fiscal debt, which were not reschedule yet, in the amount of
R$9,400,000.
Cash provided by operations along with our borrowing capacity and other sources
of cash will be used to satisfy the obligations and our estimates for capital
improvements (including remodeling of our retail outlets).
22
We plan to address our immediate and future cash flow needs to include focusing
on a number of areas including: the sale of certain of our company-owned retail
outlets; the reduction of expenses, including reducing our per-store headcount
expense by continuing to expand our operations while maintaining our current
headcount; the expansion of our franchisee base, which may be expected to
generate additional cash flows from royalties and franchise fees without
significant capital expenditures; and the introduction of new programs and menu
expansions to meet consumer needs and wishes; the extinguishments of our
obligations denominated in US dollar which will reduce our exposure to the
effects of the Brazilian Real devaluation; negotiation with suppliers in order
to obtain significant rebates in long term supply contracts; and negotiation in
order to reduce area of some stores located in shopping centers, decreasing
leasing costs and improving store profitability.
GOING CONCERN ISSUE
In order to sustain our operations, we have, in the past, been dependent upon
the continued forbearance of our creditors. While we are currently in full
compliance with agreements with our creditors, there can be no assurance that we
will not be forced to seek the forbearance of our creditors in the future. In
addition, there can be no assurance that our plans will be realized, or that
additional financing will be available to us when needed, or on terms that are
desirable.
Furthermore, there can be no assurance that we will locate suitable new
franchisees, or desirable locations for new and existing franchisees to open
retail outlets. Our ability to further reduce expenses and optimize our
headcount is directly impacted by our need to maintain an infrastructure to
support changing the locations, if required, of both our current and future
retail outlets and operations. Our ability to re-market our company-owned retail
outlets to franchisees, and to generate cash flows from such activities, is
impacted by our ability to locate suitable buyers with the interest and capital
to complete such transactions, and the time to complete such sales.
Additionally, our ability to achieve our plans is further impacted by the
instability of both the political and economic environment in Brazil, which has
a direct impact on the desire and ability of consumers to visit fast food
outlets. We are also dependent upon the continued employment of key personnel.
These factors, among others, raise substantial doubt about our ability to
continue as a going concern.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the U.S.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses as well as related disclosures. On an ongoing basis, we evaluate our
estimates and judgments based on historical experience and various other factors
that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates under different assumptions or conditions.
We annually review our financial reporting and disclosure practices and
accounting policies to ensure that they provide accurate and transparent
information relative to the current economic and business environment. We
believe that of our significant accounting policies involve a higher degree of
judgment and/or complexity. (See summary of significant accounting policies more
fully described on pages F-10 through F-15 of our 10-k report as of December 31,
2002).
23
We follow SFAS No. 144 with regard to impairment of long lived assets and
intangibles. If there is an indicator of impairment (i.e. negative operating
cash flows) an estimate of undisclosed future cash flows produced by each
restaurant within the asset grouping is compared to its carrying value.
If any asset is determined to be impaired, the loss is measured by the excess of
the asset carrying value over its fair value.
NEW ACCOUNTING STANDARDS
Asset retirement obligations
In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
Accounting for Asset Retirement Obligations, effective January 1, 2003. The
Statement requires legal obligations associated with the retirement of
long-lived assets to be recognized at their fair value at the time that the
obligations are incurred. Upon initial recognition of a liability, the cost will
be capitalized as part of the related long-lived asset and allocated to expense
over the useful life of the asset. THE ADOPTION OF THE NEW RULES IS NOT EXPECTED
TO HAVE A MATERIAL EFFECT ON THE COMPANY'S ONGOING RESULTS OF OPERATIONS OR
FINANCIAL POSITION.
Variable interest entities
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46 (FIN No. 46), Consolidation of Variable Interest Entities,
which requires an enterprise to consolidate or make certain, disclosures about
variable interest entities that meet certain criteria, effective July 1, 2003.
THE ADOPTION OF THE NEW RULES IS NOT EXPECTED TO HAVE A MATERIAL EFFECT ON THE
COMPANY'S ONGOING RESULTS OF OPERATIONS OR FINANCIAL POSITION.
Impairment of long-lived assets and intangible assets
The company follows the SFAS No. 144 and 141 with regard to the impairment of
long lived assets and intangibles. If there is an indicator of impairment (i.e.
negative operating cash flows) an estimate of undiscounted future cash flows
produced by each restaurant within the asset grouping is compared to its
carrying value. If any asset is determined to be impaired, the loss is measured
by the excess of the carrying amount of the asset over its fair value."
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this report, including statements
relating, among other things, to our business plans, business and growth
strategies, objectives, expectations, trends, intentions and adequacy of
resources, are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The words "believe," "expect,"
"anticipate" and similar expressions identify forward-looking statements, which
speak only as of the date the statement is made. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Investors are cautioned that such
forward-looking statements involve risks and uncertainties, some or all of which
cannot be predicted or quantified and are beyond our control, including, without
limitation, those risks and uncertainties described in the risk factors set
forth in certain of our periodic filings with the Securities and Exchange
Commission, including the risk factors set forth in our Annual Report
24
on Form 10-K for the year ended December 31, 2002, as filed with the Securities
and Exchange Commission on April 15, 2003. Investors are urged to read such
periodic filings and the risk factors contained in those filings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We do not engage in trading market risk-sensitive instruments or
purchasing hedging instruments or "other than trading" instruments that are
likely to expose us to market risk, whether interest rate, foreign currency
exchange, commodity price or equity price risk. We have not issued debt
instruments, entered into forward or futures contracts, purchased options or
entered into swaps. Our primary market risk exposures are those relating to
interest rate fluctuations and possible devaluations of the Brazilian currency.
In particular, a change in Brazilian interest rates would affect the rates at
which we could borrow funds under our several credit facilities with Brazilian
banks and financial institutions.
ITEM 4. CONTROLS AND PROCEDURES.
Under the supervision and with the participation of management,
including Ricardo Figueiredo Bomeny (serving as the Company's Chief Executive
Officer and Acting Chief Financial Officer), the Company has evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14, as of June 30, 2003. Based
upon that evaluation, Mr. Bomeny has concluded that the Company's disclosure
controls and procedures are effective in timely alerting him to material
information relating to the Company (including its consolidated subsidiaries)
required to be included in the Company's periodic SEC filings.
There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of their evaluation.
25
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 31.1 -- Certification of Ricardo Figueiredo Bomeny
Pursuant to Section 302
Exhibit 32.1 -- Certification of Ricardo Figueiredo Bomeny
Pursuant to Section 906
(b) Reports on Form 8-K
None
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: August 14, 2003
Brazil Fast Food Corp.
(Registrant)
By: /s/ Ricardo Figueiredo Bomeny
----------------------------------
Ricardo Figueiredo Bomeny
Chief Executive Officer
And Acting Chief Financial Officer
27