SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2005

Commission File Number: 000-23278

Brazil Fast Food Corp.

Rua Voluntários da Pátria, 80-4° andar
Rio de Janeiro RJ, Brazil, CEP 22270-010
(Address of principal executive offices)

Registrant’s telephone number: 011 55 21 2564-6452

     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 o

     As of May 21, 2005 there were issued and outstanding 8,102,177 shares of the Registrant’s Common Stock, par value $0.0001.

BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss (Unaudited)

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Statements of Changes In Shareholders’ Equity (Unaudited)

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

See Notes to Consolidated Financial Statements

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BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

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 March 31, 2005 and for all periods presented have been made. The results of operations for the periods ended March 31, 2005 and 2004 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, 2004.

NOTE 2 — BUSINESS AND OPERATIONS

     Brazil Fast Food Corp. (the “Company”) was incorporated in the State of Delaware on September 16, 1992. During 1996, the Company acquired (the “Acquisition”)100% of the capital of Venbo Comercio de Alimentos Ltda. (“Venbo”), a Brazilian limited liability company which conducts business under the trade name “Bob’s”, owns and, directly and through franchisees, operates a chain of hamburger fast food restaurants in Brazil.

     During the second half of 2004, Venbo established, in an association with a Brazilian individual (“Associate”), a new company, Suprilog Transportadora Ltda (“Suprilog”). Suprilog renders transportation services at usual market value to Venbo, to Bob’s franchisees and to other Brazilian companies. At the time of its constitution, Venbo paid in 90% of Suprilog’s Capital and the remaining 10% would be paid in by the Associate in no later than a year. During the first quarter of 2005, the Associate reach an agreement with Venbo, by which he left the joint venture and Venbo became wholly-owner of Suprilog.

     Suprilog’s financial statements are being entirely consolidated in the accompanying financial statements.

NOTE 3 — 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$61,113 and at March 31, 2005, consolidated current liabilities exceed consolidated current assets by R$5,395.

     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$500 of unused credit line.

     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 menu expansion to meet customer demand, development of intensive training programs and other human resources investments. In order to act on these plans and sustain current operations, the Company is dependent upon the continued forbearance of its creditors, as well as additional financing.

     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, there can be no assurance that the Company will continue to receive the forbearance of its creditors, or that it will locate suitable new franchisees, or desirable locations for new franchisees to open stores. The Company’s ability to remarket

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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.

     The Acquisition’s Purchase Agreement stated that Venbo’s former owner (“VENDEX”) would be responsible for off-balance liabilities derived from Venbo’s transactions prior to the Acquisition, up to 5% of the purchasing price. Through 1997 to date, the Company has been receiving some communications from the Brazilian fiscal authorities related to the period prior to the Acquisition. Those communications are always sent to Vendex and its attorneys. During the last months of 2004, the Company received several communications of possible tax debts which amounts may exceed the above mentioned limit. All demands are being defended by VENDEX attorneys, however the Company can not predict if their outcome will result in liabilities that will reach the Company’s financial position.

     These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

NOTE 4 – CONTINGENCIES AND REASSESSED TAXES

Reassessed taxes

     During 1999, 2001 and beginning 2002 certain Brazilian State and Federal taxes levied on the Company were not paid. In addition during 2002, Brazilian Social Security Authorities applied penalties against the Company, by charging certain operating transactions not covered by the Company’s previous calculation of Social Security contributions. Those debts were renegotiated in different moments and with different levels of Brazilian Government.

     Since June 2002, the Company has paid all its current taxes on a timely basis. The tax debt evolution and their current status are summarized as follows:

–  State tax – value added

		Since the second quarter of 2000, the Company has been reaching a sequence of agreements with the Rio de Janeiro state government to make installments on those unpaid taxes.
		The last agreement with the Rio de Janeiro state government was settled during the third quarter of 2004, through which the Company sold one of its property in exchange of (a) a sum in cash; (b) the waiver of the balance of the unpaid state tax that were being paid in installments according to previous agreements; (c) tax credits which compensated tax on revenues accounted for during the last quarter of 2004.
		During the last agreement, a portion of the Company state tax liability was not recognized by the fiscal authorities and another portion is being recalculated by them. The entire consolidation of the remaining debt is not expected to be computed during 2005, and accordingly the Company accrued both portions, according to its estimates, as a long term liability.
		During 2005, the Company did not pay material amounts related to Rio de Janeiro state government agreements.

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– Federal taxes – PAES

		Concerning the unpaid Federal taxes and the Social Security penalties, the Company applied to join and was accepted into two subsequent amnesty programs offered by the Brazilian Federal government (REFIS during 1999 and PAES during 2003).
		The second amnesty program (PAES) included the balance of the previous Federal tax amnesty program (REFIS) and unpaid 2001 and 2002 federal tax, as well as the Social Security penalties. The total debt included in such program is being 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 9.75% per year.

     All installments related to those programs have been paid on a timely basis.

     During 2005, the Company paid approximately R$340 related to such Brazilian Federal tax amnesty program (see note 4).

     During February 2005, the Company compared its remaining debt regarding PAES with statements provided by the Brazilian Federal Government. Those statements reported that Company’s total debt would be greater than the figures in the Company’s balance sheet, in the amount of approximately R$4,853. In result of that comparison, the Company processed a retroactive adjustment on its balance sheet at December, 31 2004.

     During March, 2005, the Company filed a formal request with the Brazilian Federal Authorities, claiming to have its total debt reviewed. Such request, reconciles the amounts the Company had accrued at its accounting books (prior to the retroactive adjustment) to the amounts reported in the official statement at the same period. In connection with such request, and based on the Company’s legal advisors, a portion of that amount was reversed during the first quarter of 2005. The Company believes that the amounts accrued at the balance sheet as of March 31,2005 are correct, however, there is no assurance that the outcome of this situation will derive further liability to the Company.

Contingencies

– Leasing litigation

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, the Company has deposited all installment payments due under its lease financing agreements with the court in Reais, inclusive of 12% per annum interest. The installment payments ceased on November, 2002, the end of the contract term. Despite the Company’s claim that it owes the lower amounts, the Company has accrued the full contracted amounts as of March 31, 2005.

– ISS tax litigation

		ISS is a tax charged by Brazilian cities on services rendered by Brazilian companies.
		None of the Company’s revenues were subject to such tax until 2003. However, in the beginning of 2004 a new ISS legislation has been implemented and according to it, royalty fees should be included on the basis of ISS calculation.
		The Company’s Management is claiming in court that royalty fees should not be considered as a service rendered and therefore should not be taxed by ISS.

     While awaiting the court’s determination, the Company is depositing monthly with the court the amount claimed by ISS. In addition, the Company has accrued the claimed amounts as of March 31, 2005.

     In addition, such change in the ISS tax regulations motivated deep debates whether marketing funds paid by franchisees would be considered as service rendered by the ISS tax authorities.

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     To prevent that inadequate understanding, during 2005, the marketing fund was accounted for, at first, as a liability — since the Company has the obligation with the franchise of investing that entire amount on the Bob’s
brand promotions.

     The incurred marketing expenses were, at first, charged against that liability account. As the marketing expenses for the first quarter of 2005 exceeded the market fund for the same period, the balance was transferred to
Marketing Expenses’ caption at the Consolidated Statement of Operations.

     The change of the accounting steps did not change the net results of marketing investments at the P&L for the purpose of prior period comparison.

     Liabilities related to tax amnesty programs and litigation consist of the following:

NOTE 5 – 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 would 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. In May, 2004, Ricardo Bomeny requested CCC Empreendimentos e Participações to receive 250,000 shares of the additional 260,000 shares due to him.

     During the first quarter of 2004 the Company charged R$77 to operating results related to those services. Such amount is a result of number of shares owed on accrual basis during the first quarter 2004, multiplied by their average fair value.

NOTE 6 – STOCK OPTION PLAN ACTIVITY

     During the last quarter of 2004, under the Company’s Stock Option Plan, the Compensation Committee granted options to purchase 32,500 shares with an average exercise price of $.26, immediate vesting, and valued at average fair value of $7,703 using the Black Scholes option pricing model. Such grant represents the compensation for the period comprised from June, 2004 to May, 2005.

     There were no options canceled during the three months ended March 31, 2005, under the Company’s Stock Option Plan.

     Under the Company’s Stock Option Plan, options to purchase a total of 12,500 shares have expired during the three months ended March 31, 2005.”

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NOTE 7 – TREASURY STOCK

     During the last quarter of 2004, the Company’s Board of Directors approved a stock repurchase plan covering the repurchase of as many as 200,000 shares of its own common stock. The plan goal is to optimize the cash generated in the Company’s U.S. office.

     During the first quarter of 2005, the Company purchased a total amount of 9,800 shares, under the referred stock repurchase plan. The Company’s total disbursement for these transactions totaled to R$16 and was accounted for as a deduction of Paid in Capital, at the Stock Holders’ Equity.

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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 QUARTERS ENDED MARCH 31, 2005 AND 2004

     Since the first quarter of 2003, the Company has reformatted its consolidated statement of operations in order to improve the quality of analysis. Basically, the current statement differ 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 following table sets forth certain operating data for the quarters ended March 31, 2005 and 2004.

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Store Results

Net Restaurant Sales

     Net restaurant sales for our company-owned retail outlets increased R$1,945 or 12.0 %, to R$ 18,099 for the three months ended March 31, 2005 as compared to R$ 16,154 for the three months ended March 31, 2004.

     Same store sales increased approximately 14.0% for the three months ended March 31, 2005 as compared to the three months ended March 31, 2004.

     There was a very positive economic environment in Brazil during the first quarter of 2005. Most of Brazilian economic figures improved from the first quarter of previous year and, as a consequence, the overall consumer spend increased as well. The Company restaurant sales were favorably impacted by such economic trend. In addition, restaurant sales were positively impacted by (a) an intensive marketing campaign concerning one of the Company’s most popular products (“Ovomaltine” milkshake), (b) investments on remodeling stores and; (c) an average increase of 10% in the sales price of Company’s products since March 31, 2005.

Food, Beverage and Packaging Costs

     As a percentage of net restaurant sales, food, beverage and packaging costs were (36.7%) and (37.2%) for the three months ended March 31, 2005 and 2004, respectively.

     Those costs decreased from period to period, due to the Company’s ongoing efforts of reducing goods purchase prices with the main suppliers. Such negotiations have been beneficial to the company due to: (a) the permanent growth of our franchise network is enhancing its negotiation power with the suppliers and; (b) the devaluation of U.S. Dollar against the Brazilian reais, which provides a positive impact on imported goods such as French fries, along with a positive impact on goods derived from commodities denominated in U.S. Dollar such as meat and chicken.

     In addition, investments on logistics and distribution made by the Company in the middle of 2004 also derived in the reduction of such costs.

Payroll & Related Benefits

     As a percentage of net restaurant sales, store payroll and related benefits increased from (22.3%) for the three months ended March 31, 2004 to (22.8%) for the same period ended March 31, 2005.

     This increase is due to the raise of Company’s store personnel salaries of approximately 6.6% provided by union-driven agreements. As a consequence, social charges that are computed based on employees salaries increased as well.

Restaurant Occupancy Costs and Other Expenses

     Restaurant occupancy costs and other expenses expressed as a percentage of net restaurant sales were approximately (11.5%) and (12.9%) for the three months ended March 31, 2005 and 2004, respectively.

     Minimum rent obligations increase due its indexation to Brazilian inflation, currently at 11.2% per annum, however, the growth of sales optimized the occupancy cost resulting on a percentage decrease.

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Contracted Services

     Expenses related to contracted services expressed as a percentage of net restaurant sales were approximately (11.9%) and (13.9%) for the three months ended March 31, 2005 and 2004, respectively.

     This decrease is mainly attributable the reduction of utilities (especially communication), to decreases on money collection expenses as well as delivery costs.

     Those reductions were partially offset by increases in the costs of maintenance on equipments and buildings.

Other Store Cost and Expenses

     Other store cost and expenses expressed as a percentage of net restaurant sales were approximately (4.0%) and (4.7%) for the three months ended March 31, 2005 and 2004, respectively.

     Other store cost and expenses remained at a constant level from period to period, however, the growth of sales mentioned above provided percentage decrease of such expenses in comparison with company’s revenues.

Franchise Results

Net Franchise Royalty Fees

     Net franchise royalty fees increased R$643 or 34.4%, to R$2,513 for the three months ended March 31, 2005 as compared to R$1,870 for the three months ended March 31, 2004.

     This increase is attributable to the growth of Company’s franchise business from 286 retail outlets as of March 31, 2004 to 330 as of March 31, 2005 and to the macroeconomic environment improvement in Brazil.

Franchise Costs and Expenses

     Franchise cost and expenses expressed as a percentage of net restaurant sales were approximately (2.5%) and (2.6%) for the three months ended March 31, 2005 and 2004, respectively.

     Such decrease is attributable to the optimization of the franchise expenses related to the growth of the franchise network.

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Marketing, General and Administrative (Expenses) Income

Marketing income (expenses)

     As a percentage of net restaurant sales, net marketing income were approximately (0.6)% and 1.5% for the three months ended March 31, 2005 and 2004, respectively.

     The reverse of net marketing income for the three months ended March 31, 2004 to net marketing expenses for three months ended March 31, 2005 is attributable to higher marketing investments mainly related to TV commercials.

General and Administrative Expenses

     As a percentage of restaurant sales, general and administrative expenses were approximately (10.9%) and (10.4%) for the three months ended March 31, 2005 and 2004, respectively.

     This increase is attributable to increase in salaries and labor charges of Company’s administrative personnel, to increases on legal and consulting as well as administrative rental costs.

     Those increases were partially offset by reduction of utilities expenses (mainly electricity).

Other Operating Income (Expenses)

     Other operating income (expense) expressed as a percentage of net restaurant sales were 8.1%, for the three months ended March 31, 2004 to 10.3% for the three months ended March 31, 2005.

     Other operating income (expenses) are mainly comprised of the initial fees paid by Company’s franchisees, as well as income derived from suppliers pursuant to terms of certain exclusivity agreements and non recurring income or expenses. The following table sets forth the breakdown of Other Operating Income (Expense):

     The first quarter of 2005 was impacted by the reassessed tax reversal discussed at note 4 of the consolidated financial statements and by the operations of Venbo ´s subsidiary. This positive impact was partially offset by write-offs of specific rebate receivables and by the reduction of initial fees. Decrease on initial fees was due to opening of a greater number of franchised kiosks which proceeds are lower than franchised restaurants.

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Depreciation and Amortization (Stores and Headquarters)

     As a percentage of net restaurant sales, depreciation and amortization were approximately (4.7%) and (4.4%) for the three months ended March 31, 2005 and 2004, respectively.

     The increase on depreciation and amortization expenses is due to the acquisition of trucks for the operation of Suprilog (Venbo’s subsidiary)

Impairment of Assets and Net Result of Assets Sold

     The Company usually review its fixed assets in accordance with SFAS 144, which requires that long-lived assets being disposed of be measured at the lower of carrying amount or fair value less cost to sell. As a consequence of such review, the Company recorded expenses in the first quarter of 2005 derived by the adjustments to reach such appropriate fixed asset value.

     During the quarter ended March 31, 2004, Company’s review in accordance with SFAS 144, derived no charge to the income statement.

Interest Income (Expenses) and Foreign Exchange Gain (loss)

Interest Income and Expenses

     As a percentage of net restaurant sales, net interest expense were approximately (1.1)% and (2.0)% for the three months ended March 31, 2005 and 2004, respectively.

     The percentage decrease for the three months ended March 31, 2005 as compared to the same period in 2004 is primarily attributable to reduction of the level of Company’s bank indebtedness.

Foreign Exchange and Monetary Restatement Gain (Loss)

     As a percentage of net restaurant sales, net foreign exchange gain and/or losses were approximately (0.1)% and (5.2)% for the three months ended March 31, 2005 and 2004, respectively.

     This decrease is a result of reversing the monetary restatement of reassessed taxes in connection with its adjustment discussed at note 4 of the consolidated financial statements.

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LIQUIDITY AND CAPITAL RESOURCES

A) Introduction

     Since March 1996, we have funded Company’s cumulative operating losses of R$61,113 and made acquisitions of businesses and capital improvements (including remodeling of Company’s stores) by using cash remaining at the closing of Company’s acquisition of Venbo, by borrowing funds from various sources and from private placements of Company’s securities. As of March 31, 2005, we had cash on hand of R$1,087 and a working capital deficiency of R$5,395.

     For the quarter ended March 31, 2005, we had net cash provided in operating activities of R$1,844, net cash used in investing activities of R$691 and net cash used on financing activities of R$1,783. Net cash used in investing activities was primarily the result of Company’s investment in property and equipment to improve Company’s retail operations. Net cash used on financing activities was a result of Company’s repayment (some in advance) of borrowings from financial institutions.

     Company’s earnings before interest, taxes, depreciation and amortization (EBITDA) were as follows:

     Company disclose EBITDA because it has been used as a target in past Stockholders’ Agreements. 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.

B) Debt Obligation — financial institutions

     Company’s cash resources are currently used primarily to pay for the servicing costs on Company’s debt obligations. Company’s debt obligations as of March 31, 2005 were as follows:

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	(a)	Due on demand from various Brazilian financial institutions with interest rates of 33% per annum, and guaranteed by certain officers and receivables. Currently, the Company has approximately R$500 of unused credit line.
	(b)	Credit facilities from related parties, including company and private individuals. Repayment of principal is indexed to IGP-M (currently at 11.2% per annum) with interest of 12.0% per annum. Those transactions were made at usual market value.
	(c)	Comprised of credit facilities from two Brazilian private financial institutions, guaranteed by certain officers and receivables. Repayment of principal of one facility and the payment of interests of 36.9% per annum is due in seven monthly installments (ending October 2005) of approximately R$115. Repayment of principal of the other facility is due in 4 monthly installments (ending July 2005) of approximately R$155. Interest of 33% per annum is due monthly in addition to principal repayment.
	(d)	This credit facility was used to purchase two stores. Repayment of principal is due in sixteen monthly installments of R$53, ending July 2006, in addition of one payment of R$497on 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.
	(e)	This amount is comprised of 10 different lease facilities with Brazilian private institutions:

	–	eight of such facilities provide maximum borrowing of R$2,020 for the funding of trucks and other vehicle; payable in monthly installments together with interest with final payments due ranging from January 2005 to February 2008; secured by equipment under lease;
	–	the remaining two facilities provide maximum borrowing of R$260 for the funding of truck equipment; one of such facility is payable in monthly installments together with interest totaling R$4 (final payment due on December, 2005) and the other facility is payable in monthly installments together with interest totaling R$3 (final payment due on December, 2007); both facilities are secured by equipment under lease;

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C) Debt Obligation — taxes

     During 1999, 2001 and beginning 2002 certain Brazilian State and Federal taxes levied on the Company were not paid. In addition during 2002, Brazilian Social Security Authorities applied penalties against the Company, by charging certain operating transactions not covered by the Company’s previous calculation of Social Security contributions. Those debts were renegotiated in different moments and with different levels of Brazilian Government.

     Since June 2002, the Company has paid all its current taxes on a timely basis. The tax debt evolution and their current status are summarized as follows:

     State tax

     Since the second quarter of 2000, the Company has been reaching a sequence of agreements with the Rio de Janeiro state government to parcel unpaid taxes.

     The last agreement with the Rio de Janeiro state government was settled during the third quarter of 2004, through which the Company sold one of its property in exchange of (a) a sum in cash; (b) the waiver of the balance of the unpaid state tax that were parceled according to previous agreements; (c) tax credits which compensated tax on revenues accounted for during the last quarter of 2004.

     During the last agreement, a portion of the Company’s state tax liability was not recognized by the fiscal authorities and another portion is being recalculated by them. The consolidation of the remaining debt is not expected to be computed during 2005. Company estimates that both portions amounts to R$1,086 and fully accrued such amount as of March 31, 2005.

     During 2005, the Company did not paid any significant amounted related to Rio de Janeiro state government agreements.

     Federal Taxes

     Concerning the unpaid Federal taxes and the Social Security penalties, the Company applied to join and was accepted into two subsequent amnesty programs offered by the Brazilian Federal government (REFIS during 1999 and PAES during 2003).

     The second amnesty program (PAES) included the balance of the previous Federal tax amnesty program (REFIS) and unpaid 2001 and 2002 federal tax, as well as the Social Security penalties. The total debt included in such program is being 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 9.75% per year.

     All installments related to those programs have been paid on a timely basis. During 2005, the Company paid approximately R$340 related to such Brazilian Federal tax amnesty program.

D) Debt Obligation — summary

     Considering all the above mentioned fiscal debts, we are required to pay restructured past-due Brazilian state taxes of approximately R$1,086 and federal taxes of approximately R$14,918.

     For the remaining period of 2005, we expect to pay approximately R$1,020 pursuant to the federal tax amnesty program. We do not expect to have any payment regarding the state tax settlements during 2005, since the remaining balance is not expected to be consolidated by the tax authorities through this period.

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E) Other Obligations

     We also have long-term contractual obligations in the form of operating lease obligations related to Company’s owned and operated stores.

     The future minimum lease payments under those obligations with an initial or remaining noncancelable lease terms in excess of one year at March 31, 2005 are as follows:

     In the past, we have generated cash and obtained financing sufficient to meet Company’s debt obligations. We plan to fund Company’s current debt obligations mainly through cash provided by Company’s operations, borrowings and capital raising.

     Company’s 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 Company’s capital expenditures for fiscal 2005, which will be used to maintain and upgrade Company’s current restaurant network, will be approximately R$4,456. We anticipate that the primary use of Company’s cash resources during 2005 will be to service Company’s debt obligations. During 2005 we intend to focus Company’s efforts on expanding both the number of Company’s franchisees and the number of Company’s franchised stores, neither of which are expected to require significant capital expenditures.

     As discussed above, we have contractual obligations in different forms.

     The following table summarizes Company’s contractual obligations and financial commitments, as well as their aggregate maturities.

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     Cash provided by operations along with Company’s borrowing capacity and other sources of cash will be used to satisfy the obligations and Company’s estimates for capital improvements (including remodeling of Company’s stores).

     We plan to address Company’s immediate and future cash flow needs to include focusing on a number of areas including:

	–	the sale of certain of Company’s owned and operated stores;
	–	the reduction of expenses, including reducing Company’s per-store headcount expense by continuing to expand Company’s operations while maintaining Company’s current headcount;
	–	the expansion of Company’s franchisee base, which may be expected to generate additional cash flows from royalties and franchise initial fees without significant capital expenditures;
	–	the introduction of new programs and menu expansions to meet consumer needs and wishes; and
	–	negotiation with suppliers in order to obtain significant rebates in long term supply contracts;
	–	renegotiation of past due receivables with franchisees.

GOING CONCERN ISSUE

     In order to sustain Company’s operations, we have, in the past, been dependent upon the continued forbearance of Company’s creditors. While we are currently in full compliance with agreements with Company’s creditors, there can be no assurance that we will not be forced to seek the forbearance of Company’s creditors in the future. In addition, there can be no assurance that Company’s 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 stores. Company’s ability to further reduce expenses and optimize Company’s headcount is directly impacted by Company’s need to maintain an infrastructure to support changing the locations, if required, of both Company’s current and future stores and operations. Company’s ability to re-market Company’s owned and operated stores to franchisees, and to generate cash flows from such activities, is impacted by Company’s ability to locate suitable buyers with the interest and capital to complete such transactions, and the time to complete such sales. Additionally, Company’s ability to achieve Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s significant accounting policies the following involve a higher degree of judgment and/or complexity.

Constant currency restatement

     Through June 30, 1997 the Brazilian economy was hyperinflationary as defined in Statement of Financial Accounting Standards (“SFAS”) No.52. The financial statements prior to that time were comprehensively restated for the effects of inflation. After that date, inflation restatement was not applied, however the non- monetary assets reflect the effects of inflation through that date.

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Foreign currency

     Assets and liabilities recorded in functional currencies other than Brazilian Reais are translated into Brazilian Reais at the prevailing exchange rate as reported by the Central Bank of Brazil as of the balance sheet date. Revenue and expenses are translated at the weighted-average exchange rates for the year. The resulting translation adjustments are charged or credited to other comprehensive income. Gains or losses from foreign currency transactions, such as those resulting from the settlement of receivables or payables denominated in foreign currency, are recognized in the consolidated statement of operations as they occur.

Accounts receivable

     The allowance for doubtful accounts is estimated based on aspects such as aging of due receivables and client’s current economic situation.

Long-Lived Assets

     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 carrying value. If any asset is determined to be impaired, the loss measured by the excess of the carrying amount of the asset over its fair value.

NEW ACCOUNTING STANDARDS

Inventory Cost

     In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs”. This statement requires that certain costs such as idle facility expense, excessive spoilage, double freight, and re-handling costs be recognized as current-period charges and that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of the statements shall be effective for inventory costs incurred during fiscal years beginning after June 15,2005. Adoption of this statement is not anticipated to have a significant impact on the Company’s financial condition, results of operations, or cash flows.

Share-Based Payment

     In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment”. This statement is a revision of FASB Statement No. 123, “Accounting for Stock-Based Compensation” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. This statement requires that the Company records compensation expense for stock options issued based on the estimated fair value of the options at the date of grant. This statement is effective as of the first interim period beginning after June 15, 2005. We currently are not required to record stock-based compensation charges if the employee’s stock option exercise price is equal to or exceeds the fair value of the stock at the date of grant. We have not yet determined what impact, if any, the proposed pronouncement would have on Company’s financial statements.

OFF-BALANCE SHEET ARRANGEMENTS

     We are not involved in any off-balance sheet arrangements.

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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 on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission on April 15, 2005. 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, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer, Ricardo Bomeny, who is also our acting Principal Financial Officer has concluded that, as of March 31, 2005, these disclosure controls and procedures were effective in timely alerting him to material information relating to our company required to be included in our periodic SEC reports. Since March 31, 2005, there were no significant changes in our internal control over financial reporting, or in other factors, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II-OTHER INFORMATION

ITEM 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.

     During the first quarter 2005, the Company purchased a total of 9,800 shares of common stock for R$16.

ITEM 6. Exhibits and Reports on Form 8-K.

     (a) Exhibits

     (b) Reports on Form 8-K

     None

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