<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                        
                                   FORM 10-K
 
(Mark One)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
      For the fiscal year ended December 31, 1998
OR
[_]   TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
      For the transition period from                 to

Commission file number:  0-23278

                             BRAZIL FAST FOOD CORP.
             (Exact name of registrant as specified in its charter)

          Delaware                                   13-3688737
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                  Identification No.)

Av. Brasil
6431 - Bonsucesso
CEP 21040-360
Rio de Janeiro, Brazil                                    N/A
(Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code: 55-21-560-5090


Securities registered pursuant to Section 12(b) of the Act:

                                         Name of each exchange
          Title of each class            on which registered
          -------------------            ---------------------

                  --

Securities registered pursuant to Section 12(g) of the Act:

       Common Stock, Class A Redeemable Common Stock Purchase Warrants,
               Class B Redeemable Common Stock Purchase Warrants
                               (Title of Class)

                               -----------------
<PAGE>
 
     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
                                                ---     --- 

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [_]

             APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDING DURING THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes           No              
                         ---          ---

     The number of shares outstanding of the Registrant's common stock is
12,933,638 (as of March 30, 1999).

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant is $4,768,212 (as of March 30, 1999).


                      DOCUMENTS INCORPORATED BY REFERENCE

     Registrant's Proxy Statement for its Annual Meeting of Stockholders to be
convened on May 28, 1999.
<PAGE>
 
     Unless otherwise specified, all references in this Report to (i) "reais,"
the "real" or "R$" are to the Brazilian real (singular), or to the Brazilian
reais (plural), the legal currency of Brazil, and (ii) "U.S. dollars" or "$" are
to United States dollars.  All amounts in Brazilian currencies which existed
prior to the adoption of the real as the Brazilian national currency on July 1,
1994 have been restated in reais in this Report.  Unless otherwise specified,
all financial statements and other financial information presented herein are in
accordance with generally accepted accounting principles in the United States
("U.S. GAAP").

                              --------------------

                                     PART I


ITEM 1.   BUSINESS


(a)  General Development of Business

     Brazil Fast Food Corp., through its wholly-owned subsidiary, Venbo Comercio
de Alimentos Ltda., a Brazilian limited liability company which conducts
business under the trade name "Bob's", owns and, directly and through
franchisees, operates the second largest chain of hamburger fast food
restaurants in Brazil.

Recent Developments
-------------------

     Brazil is currently in the midst of an economic recession, as a consequence
of which consumers have less discretionary income to spend at retail
establishments, including "fast food" restaurants such as Bob's.  The recession
stems in part from the global economic crisis which spread from Asia and Russia
to Brazil in 1998, coupled with concern that the Brazilian government would not
be able to reduce public spending due to opposition within and without the
government.  The recession and the outflow of foreign investment from Brazil
forced Brazil to devalue its currency on January 13, 1999, resulting in higher
interest rates and inflation.

     The recession and resultant lack of discretionary consumer spending has
materially adversely affected the Company's 
<PAGE>
 
operating results for the year ended December 31, 1998. Although Brazil
ultimately reached an agreement with the International Monetary Fund (the "IMF")
whereby the IMF granted to Brazil, subject to certain conditions, a $40 billion
economic aid package and there are some recent positive economic signs, i.e.,
relative stabilization of the real following several months of volatility and
modest interest rate reductions, there can be no assurances that Brazil's
recessionary economy will materially improve during 1999 or that the Company's
1999 operating results would be positively affected by any such improvement. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation."


(b)  Financial Information About Industry Segments

     Not applicable


(c)  Narrative Description of Business

History of "Bob's"
------------------

     The first Bob's restaurant was established in 1952 by Bob Falkenburg, an
American Wimbledon tennis champion.  Mr. Falkenburg opened his first restaurant
on Copacabana Beach, selling hamburgers, hot-dogs, french fries and milk shakes.
Following upon the success of the first Bob's, Mr. Falkenburg opened another six
in the metropolitan Rio area.  He ran the business for 22 years and sold it to
Libby McNeil E. Libby USA in 1974.  After acquiring such business, Libby opened
additional outlets and broadened the menu. In 1982 Nestle Ind'l Com'l Ltd.
purchased the worldwide businesses of Libby, including Bob's. Nestle ran the
business until 1987, when it was sold to Vendex International N.V., which in
turn sold the business to the Company on March 19,1996.


Restaurant Operations
---------------------

     Bob's, whose slogan is "Tasty is in Bob's," is particularly known for its
milkshakes (which were selected almost unanimously as the milkshake preferred by
leading young artists in a survey 

                                       2
<PAGE>
 
conducted for the Sunday magazine of the Jornal do Brasil, a national newspaper)
and the special spicing of its hamburgers. Each Bob's restaurant serves a
generally uniform menu featuring hamburgers, french fries, soft drinks and
juices, cold sandwiches, desserts and milkshakes. Selected Bob's restaurants
also serve coffee and/or beer. The food is prepared to order with the customer's
choice of selected condiments.

     Historically, Bob's restaurants were distinguishable from other "fast food"
operations by their unique service design whereby customers would place and pay
for their order on one line and pick up their order on another line.  Cooks
would prepare orders then "cook" as read to them by the counter service
representative who took the order.  The Company has recently changed this two
line system into a single line system, which has improved both the quality and
speed of service, while retaining the Company's cooked-to-order philosophy.
This change has been made possible by deployment of Company-developed software,
which facilitates communication between the counter personnel and the kitchen
staff.  Under this new system, as each order is input by a service
representative into a countertop terminal, it also appears on a computer screen
in the kitchen. The new system assures that each customer will receive his or
her food rapidly while retaining cooked-to-order offerings.

     Bob's restaurants generally open at 10:00 A.M. for lunch and remain open
for dinner.  Closing hours vary according to location. In some locations with
proximity to late night entertainment, the outlets remain open for the "after
hours" crowd.  Bob's restaurants are not generally open for breakfast, although
the Company is presently test marketing a limited breakfast menu at selected
restaurants.

     Bob's prices are consistently positioned at the same level as those for
comparable products offered by its major competitors. Management attempts to
maintain the overall cost of a Bob's meal to be competitive with lunch prices
covered at the popular street snack bars known as "lanchonetes".

     Originally, Bob's restaurants were built as counter service facilities to
accommodate its initial primary clientele of teenagers.  In keeping with its
current efforts to attract family oriented customers, all Bob's restaurants
built since 1980 

                                       3
<PAGE>
 
have included seating facilities. In addition, approximately one-half of the 26
pre-1980 restaurants have been renovated to update the decor, expand the seating
facilities and provide air conditioning. Bob's restaurants have an identifiable
style highlighted by their distinctive red and white color theme, which is used
on all Bob's signage as well as paper goods. The Bob's style is carried through
in the uniforms worn by Bob's personnel, which are occasionally modified to
feature hats and shirts used in Bob's promotions.

     For the past several years, Bob's has been the exclusive provider of
hamburgers and related items at three of Brazil's largest special events -
Carnivale, the one week festive period which precedes the advent of Lent, the
Formula One Automobile Racing Championships and the Motorcycle Grand Prix.  In
addition, Bob's products are sold at other special events throughout Brazil,
including boat fairs, automobile fairs and State rodeos. Using custom
constructed trailers and moveable kiosks, Bob's is able to offer most of its
products at temporary locations for the duration of each special event.  In
addition to providing an additional source of revenues,  Bob's visibility is
enhanced by signage that can be picked up via television coverage of the special
event and by reaching a consumer market where the Company may not have a
permanent outlet.

     The following table presents information concerning openings and closings
of Company-owned and franchised restaurants for the years ended December 31,
1998, 1997 and 1996(a):

 
                               Year Ended December 31,
                              --------------------------
                                 1998      1997    1996
                              ----------  ------  ------

Company-Owned Restaurants:
     Opened during Period           1          7      30
     Closed during Period           3          1       0
     Sold to franchisees           15          9       0
     Open at end of Period         60         77      80
 
Franchised  Restaurants:
     Opened during Period     26(b)           23      17
     Closed During Period           2          1       3
     Open at end Period            80         56      34
--------
(a)  Does not include trailers and kiosks used for temporary 

                                       4
<PAGE>
 
     locations.

(b)  Includes 15 Company-owned restaurants sold to franchisees during the year
     ended December 31, 1998.


     The Company has the opportunity from time to time to acquire the interests
of and to sell restaurants to franchisees, and management anticipates that the
Company may engage in such transactions in the future. The Company generally
retains a right of first refusal in connection with any proposed sale of a
franchisee's interest.

     The following table presents information concerning the average guest check
per customer and the sales distribution by meal period for Company-owned
restaurants for the years ended December 31, 1998, 1997 and 1996:

<TABLE>
<CAPTION>
                              Percent of Total Daily Sales        Average Guest Check Per Person
                              ----------------------------        ------------------------------
----------------------------------------------------------------------------------------------------
                               1998         1997         1996       1998        1997        1996 
                              ------       ------       ------     ------      ------      ------
----------------------------------------------------------------------------------------------------
<S>                           <C>          <C>          <C>        <C>         <C>         <C>   
                                                                                                 
Lunch (10:00am - 5:00pm)       51.0%        50.1%        70.0%     R$4.60      R$4.01      R$4.79
-----------------------------------------------------------------------------------------------------
                                                                                                 
Dinner (5:00pm - 10:00pm)      49.0%        49.9%        30.0%     R$4.70      R$4.30      R$5.11
                              -----        -----        -----      ------      ------      ------
----------------------------------------------------------------------------------------------------
Total                         100.0%       100.0%       100.0%     R$4.65      R$4.16      R$4.89
                              =====        =====        =====      ======      ======      ======
</TABLE>


     The Company strives to maintain quality and uniformity throughout all
Company-owned and franchised restaurants by publishing detailed specifications
for food products, food preparation, and service, by continuous in-service
training of employees, and by field visits from Company supervisors.  Quality
control at each restaurant is undertaken by the store manager, who visually
inspects the products as they are being prepared for cooking.  The manager also
keeps a record of the expiration date of the products in inventory.  In the case
of franchisees, field visits are made by Company personnel who review operations
and make recommendations to assist in compliance with Company specifications.

     The Company's quality control inspectors are also sent to each restaurant
periodically to conduct a review of the food stock.  These inspectors also take
samples of the water used at 

                                       5
<PAGE>
 
each restaurant in the preparation of food and drinks as well as random samples
of one food item which are taken to a contract laboratory for a microbiological
analysis.


Growth Strategy
---------------

     Brazil's population of 160 million is the sixth largest in the world and is
expected to increase to 180 million by the year 2000.  Sao Paulo, Brazil's
largest city, has 10 million residents and a metropolitan area population of 17
million persons.  Rio de Janeiro, Brazil's second largest city, has 5.5 million
residents and a metropolitan area population of 11 million persons.  Eight other
metropolitan areas have populations in excess of one million.  According to
Media Data '98, a non-affiliated consulting concern, the average annual income
for the population of nine major markets in Brazil, including Sao Paulo and Rio
de Janeiro, was as follows: R$70,728 for 1% of such population, R$44,916 for 4%
of such population, R$29,328 for 7% of such population, R$19,368 for 12% of such
population, R$10,128 for 31% of such population, R$5,220 for 33% of such
population and R$2,748 for 12% of such population.  The study, which took into
account income and spending habits of the targeted population, concluded that
the fast food market is one of Brazil's fastest growing business segments and
that Brazil's fast food market could exceed 60,000,000 customers.  Based upon
the foregoing, management believes there is significant room for expansion in
the Brazilian fast food market, notwithstanding the current recession.

     Management is currently focusing the Company's growth efforts upon the
development of new franchises, especially in northern Brazil, where competition
is not as intense as in other urban areas. Management also intends to enter into
territory agreements with franchisees pursuant to which the franchisee will
commit to the development of several Bob's restaurants in a particular region.
Management also anticipates taking advantage of the continuing construction and
development of shopping malls in Brazil, where food fast can be a significant
profit center.

     In addition, management expects to continue to capitalize on Venbo's 47
year history in Brazil.  As a locally based company, Venbo believes it has the
capacity to understand and respond to 

                                       6
<PAGE>
 
consumer taste preferences in developing additional local markets and test
marketing new products and concepts.

     Management will also take advantage of its customized trailers and moveable
kiosks--unique among the Company's competitors--to continue to maximize its
ability to cater to special events and temporary markets, and also to test
certain markets on a temporary basis.

     During the year ended December 31, 1998, the Company entered into
substantially similar agreements with each of Petrobras and Ipiranga, the two
largest Brazilian gasoline retailers with approximately 7,200 and 5,600 outlets,
respectively, which provide that the Company and, respectively, Petrobras and
Ipiranga, as applicable, will jointly select sites for development, each to
include both a Bob's restaurant and a retail gas station.  The Company
contemplates that substantially all of such sites will be built, owned and
operated by present and future Company franchisees.  The Company and these
gasoline retailers will share royalties payable by each franchisee operating a
joint restaurant/gas retail station.

     In conjunction with its growth plans for the Company, management is
constantly evaluating new means of maximizing the efficiency of the Company's
operations.

     The Company is implementing a new computer system which will facilitate
automated transmission of daily sales receipts, inventory levels, and personnel
utilization data from each retail outlet to the Company's headquarters.  As of
December 31, 1998, the Company had installed this computer system in restaurants
accounting for approximately 42% of 1998's total sales revenues. Management
expects to have this computer system installed in all Bob's restaurants by June
1, 1999.

     Management is continuing to explore alternate distribution channels for the
Company's products to maximize consumer exposure in an economically efficient
manner.  Management expects to utilize the "store-within-a-store" concept
whereby the Company will either rent space from a larger non-competitive retail
consumer operation or will rent space in its own outlet to other non-competitive
fast food providers, thereby maximizing consumer traffic while minimizing costs
of operation.  The Company 

                                       7
<PAGE>
 
currently rents space in two of its Sao Paulo stores to Dunkin' Donuts, which
does not compete directly with Bob's, but offers complementary products.


Franchise Program
-----------------

     Each Company franchise agreement provides for a franchisee of a traditional
Bob's restaurant to make an initial payment of $30,000 (or $20,000 for a compact
store) and to pay additional fees equal to 4% of the franchisee's gross sales in
its first two years of operation and 5% of monthly gross sales thereafter.  In
addition, franchisees pay 4% of monthly gross sales for cooperative advertising.
The franchise agreement also provides that the franchisee must use Company
approved supplies and suppliers and must build each franchised outlet in
accordance with Company specifications at Company approved locations.  The term
of a majority of the franchise agreements is 10 years, with a few agreements
having 5 year terms.

     At present, approximately 9 months elapse between the Company's initial
contact with a prospective franchisee and the opening of a franchised outlet.
After the initial meeting, and if the potential franchisee meets certain basic
conditions, such as significant business experience, financial resources and
knowledge of the market in the area where the franchise will be located, a
preliminary agreement is signed.  Prospective franchisees are required to pay
the obligations and responsibilities of each party, including the franchising
fees and a non-refundable fee equal to 50% of the initial franchising fee to
partially compensate the Company for the cost of a three-month training program
to familiarize the prospective franchisee with the operation.  After
approximately three months, a final franchising contract is signed outlining the
obligations and responsibilities of each party, including the franchising fees
and promotion commissions to be paid to the Company.  The franchisee then begins
a three-month training program. Construction of the restaurant typically begins
at the beginning of the training program and is generally completed within three
to six months. The franchising fee is sufficient to cover all training expenses
incurred by the Company.

                                       8
<PAGE>
 
     In some cases, the contracts negotiated with existing franchisees have
differed from the standard described above to accommodate specific requirements
and characteristics of the franchisee.  The Territory Agreement has been, and
management expects that it will be, used with franchisees located in areas where
the Company has determined that it is in its best interest to establish two or
more stores within a geographic region.  The Territory Agreements incorporate
the same terms and conditions of the Company's franchise agreements, but also
provide for the franchisee to commit to opening an agreed-upon number and type
of stores within a specified time-frame.  In a limited number of instances, the
Company may grant franchisees exclusive territorial rights if the Company
believes such grants would further the development of new market opportunities.

     Under Brazilian law, the Company cannot dictate the price at which
franchisees sell their products, although in general, franchisee prices mirror
the prices at company-owned stores.

     The Company receives 50 to 70 inquiries monthly from potential franchisees.
A steering committee formed by the Company's top management receives formal
franchising proposals and reviews them to determine which should be accepted.

     In addition to the 53 franchisees who, collectively, operated 92 outlets,
including two kiosks, at December 31, 1998, the Company has signed final
franchising contracts with 11 new franchisees to open and operate a like number
of additional outlets, to be located in the States of Rio de Janeiro, Sao Paulo,
Mato Grosso de Sul, Brasilia, Rio Grande do Norte and Maranhao.  The majority of
these additional outlets are scheduled to begin operations prior to the end of
1999.

     The Company has been the recipient of numerous awards from the Brazilian
Franchise Association, an independent trade organization, including

     .    quality seal for the years 1998, 1997 and 1996.
     .    best Brazilian franchise operation in 1997 out of approximately 1,000
          candidates.

                                       9
<PAGE>
 
Advertising and Promotions
--------------------------

     The Company utilizes television, radio, and a variety of promotional
campaigns to advertise its products.  The Company's primary promotional campaign
in 1996, a four-in-one meal, consisting of a sandwich, french fries, a drink and
dessert for one value price, was well received, and has been a feature on the
regular menu since 1997.

     The Company introduced colorful cardboard boxes imprinted with the "Bob's"
symbol for the Company's premium sandwich offerings in 1997, replacing paper
bags, thereby enhancing Bob's quality image.

     In September 1997, the Company launched a new line of chicken products in
an effort to capitalize upon customers' requests for "health-oriented" food
offerings.  One of these products, a chicken steak sandwich, has become one of
the Company's best selling offerings.

     In June 1998, the Company launched the "Bob's Dog," an extra-large hot dog
with two different sauces. The Company intends to give customers the option to
order their hamburgers with bacon during 1999.

     The Company and its advertising agency annually develop a multi-media
marketing program to advertise the restaurant network in its primary markets.
The Company periodically develops 15 and 30 second television commercials which,
typically, are aired one to six times a day for a 15-day period. Temporary
product discounts are offered in Rio de Janeiro and Sao Paulo through radio and
television advertising several times a year.  Other successful promotional
programs have included offering products tied into popular movies with certain
value meals, and selling specially produced hats at a discount with certain
value meals. Bob's outlets also offer a "kids meal" which includes three food
items and a small packaged toy. Certain outlets offer special services for
children's birthday parties and also feature appearances by "Bobi", Bob's
mascot.  All these programs are reinforced by visual tools, such as banners,
posters and place mats.

                                       10
<PAGE>
 
     The Company keeps franchisees informed of current advertising techniques
and effective promotions and makes the Company's advertising materials available
to the franchisees. Each franchise agreement provides that franchisees will
spend 4% of their monthly gross receipts for advertising and promotions.
Individual stores also develop promotional programs to attract additional
clientele or to assist in the implementation of expanded business hours. These
promotions are paid for by each outlet.  The Company commits approximately 4% of
system wide gross sales to its marketing activities.

     The Company is a participant in a joint retail marketing effort initiated
in 1998 in Rio de Janeiro, together with Shell, Lojas Americanas (one of the
biggest department stores in Brazil) and Sendas (one of the biggest supermarket
chains in Brazil), of memberships in "Smart Club," which offers special premiums
to repeat customers.  This ongoing program will be expanded during 1999 to
encompass other areas of Brazil.


Sources of Supply
-----------------

     The Company and its franchisees have not experienced any material shortages
of food, equipment, fixtures, or other products which are necessary to
restaurant operations. Management anticipates no such shortages of products and,
in any event, believes that alternate suppliers are available.

     The Company purchases food products and packaging from numerous independent
suppliers.  To take advantage of volume discounts, the Company has entered into
centralized purchasing agreements with these suppliers.  See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." Food
products are ordered by, and delivered directly to, each restaurant.  Billing
and payment for Company-owned restaurants are handled through the centralized
office, while franchisees handle their own invoices directly.  Packaging and
durable goods are delivered to a centralized warehouse operated by a non-
affiliated person, which delivers supplies to each of the Company's restaurants.
This centralized purchasing helps assure availability of products and provides
quantity discounts, quality control and efficient distribution.

                                       11
<PAGE>
 
     The Company participates in joint promotion and marketing programs with
Coca-Cola for its soft drink products and with Novartis Nutricion for its
Ovomaltine chocolate, as well as for hamburger meat and a popular Brazilian
brand of iced tea.


Trademarks
----------

     Management believes that the Company trademarks and service marks, all of
which are owned by the Company, are important to its business.

     The Company's trademarks and service marks have been registered in the
Brazilian trademark office. These trademarks and service marks expire at various
times from 1999 to 2007. Renewals of these trademarks and service marks
generally have been obtained prior to their expiration.


Competition
-----------

     In terms of the number of retail outlets, the Company is the second largest
food service organization in Brazil.  Each Bob's restaurant is in competition
with other food service operations within the same geographical area.  The
Company competes with other organizations primarily through the quality,
variety, and value perception of food products offered.  The number and location
of units, quality and speed of service, attractiveness of facilities, and
effectiveness of marketing are also important factors.  The price charged for
each menu item may vary from market to market depending on competitive pricing
and the local cost structure.

     Based on several articles which have appeared in independent Brazilian
newspapers and periodicals, the Company believes that it and McDonald's are the
market leaders in the hamburger fast food business in Rio de Janeiro and Sao
Paulo. Statistical data drawn from these articles indicate that the Company's
share of the fast food hamburger chain market approximated 11.0%, 11.2% and
11.5% during the years ended December 31, 1998, 1997 and 1996, respectively.
McDonald's, which ended 1998 with approximately 590 outlets including 81 kiosks,
accounted for substantially all of the balance of this market.  At the end of

                                       12
<PAGE>
 
1997, McDonald's Brazilian outlets and kiosks approximated 490 in the aggregate.

     Pizza Hut ended 1998 with 63 fast food pizza outlets in Brazil, as
contrasted with 110 outlets at the end of 1997 and 132 at the end of 1996.
Subway, which had undertaken an expansion program in late 1996 and early 1997,
closed several outlets by the end of 1997 (some of which were subsequently taken
over by the Company and reopened as "Bob's" outlets).  Domino's Pizza, which
also withdrew from the Brazilian market in 1997, opened 9 stores in 1998 with
the intention to open 17 more in the next year.  Arby's ended 1998 with 24
outlets.  Habib's, a Middle Eastern fast food chain ended 1998 with
approximately 130 outlets.

     The Company's competitive position is enhanced by its use of fresh ground
beef and special flavorings, made-to-order operations, comparatively diverse
menu, use of promotional products, wide choice of condiments, atmosphere and
decor of its restaurants and its relatively long history in Brazil. Management
believes that the use of moveable trailers and kiosks, which are not utilized by
competitors, affords the Company a competitive advantage over its competitors.
Management also believes that Venbo, as a Brazilian-based company, has the
advantage over its American competitors of being able to readily understand and
respond to local consumer preferences.


Personnel
---------

     As of December 31, 1998, the Company, including its franchisees, employed
3,203 persons, of whom 1,576 were employed in Company-owned restaurants.  The
total number of full-time employees at that date was 1,360, of which 216 were
temporary personnel. The Company is reducing the number of hours in each
worker's shift, from 8 hours to 6 hours, in order to increase productivity.

     The Company's employee relations historically have been satisfactory. The
Company is not a party to any collective bargaining agreements. However, it has
agreed to be bound by the terms, as they may be applicable to the Company's
employees, of agreements negotiated on a city-by-city basis by trade

                                       13
<PAGE>
 
associations of hotel, restaurant and fast food owners and operators, of which
the Company is a member.


Government Regulation
---------------------

     The Company and its franchisees are subject to regulatory provisions
relating to the wholesomeness of food, sanitation, health, safety, fire, land
use and environmental standards and where applicable, liquor licensing as it
relates to serving beer in selected restaurants.  Suspension of certain licenses
or approvals due to failure to comply with applicable regulations or otherwise,
could interrupt the operations of the affected restaurant.  The Company and its
franchisees are also subject to Brazilian federal labor codes establishing
minimum wages and regulating overtime and working conditions.

     Franchising regulations at the federal level were enacted in Brazil at the
end of 1994 and the Company is in compliance with such regulations.  Should any
further laws applicable to franchise relationships and operations be enacted,
the Company is unable to predict their effect on its operations.  The Company is
in material compliance with all regulatory provisions relating to operations.

     Brazil does not impose any price regulations on the Company.



(d)  Financial Information About Foreign and Domestic Operations and Export
     Sales

     Not applicable.

                                       14
<PAGE>
 
                           FORWARD-LOOKING STATEMENTS

     Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties including without limitation the following:


Risks Relating to Operations

Operating Losses; Accumulated Deficit; Need for Additional Financing; Qualified
Report of Independent Auditors

     For the year ended December 31, 1998, the Company incurred a net loss of
R$14,349,000.   The Company's accumulated deficit at December 31, 1998 was
R$25,902,000 and its working capital deficit at such date was R$10,189,000. The
Company's plans to expand its retail operations may be significantly curtailed
unless it obtains additional financing. There can be no assurance as to the
availability or, if available, the terms of any such additional financing. See
"Management's Discussion and Analysis -Liquidity and Capital Resources."

Independent Auditors' Report

     The independent auditors' report upon the Company's consolidated financial
statements comprising a portion of this Annual Report includes an explanatory
paragraph stating that such financial statements have been prepared assuming the
Company's continuity as a going concern and also stating that the Company has
suffered recurring losses from operations, has a net capital deficiency and has
incurred negative cash flows from operations, which raises substantial doubt
about the Company's ability to continue as a going concern.  See Note 2 to
"Management's Discussion and Analysis - Liquidity and Capital Resources" and
Note 2 to the Consolidated Financial Statements.

                                       15
<PAGE>
 
Competition

     The restaurant industry, and particularly the fast food segment, is highly
competitive with respect to price, service, food quality (including taste,
freshness, healthfulness and nutritional value) and location.  The Company and
its franchisees face competition from a broad range of other restaurants and
food service establishments.  These competitors include international, national
and local fast food chains.  The Company's most significant competitor is
McDonald's, whose restaurants offer food products similar to those offered by
Bob's restaurants, at comparable prices.  Several other international
competitors are present in the Brazilian fast food market, including Arby's,
Subway, Habib's and Pizza Hut.  McDonald's, in particular, has vastly greater
over-all financial and other resources than the Company.

     The fast food industry is characterized by the frequent introduction of new
products, accompanied by substantial promotional campaigns.  In recent years,
numerous companies in the fast food industry have introduced products positioned
to capitalize on growing consumer preference for food products that are, or are
perceived to be, healthful, nutritious, low in calories and low in fat content.
The Company is subject to increasing competition from companies whose products
or marketing strategies address these consumer preferences.  There can be no
assurance that consumers will continue to regard Bob's products as sufficiently
distinguishable from competitive products, that substantially equivalent
products will not be introduced by the Company's other competitors or that the
Company will be able to compete successfully.

Certain Factors Affecting the Fast Food Restaurant Industry

     In order to remain competitive, the Company is required to respond to
changing consumer preferences, tastes and eating habits, increases in food and
labor costs and national, regional and local economic conditions.  Many
companies internationally have adopted "value pricing" strategies.  Such
strategies could have the effect of drawing customers away from companies that
do not engage in discount pricing and could also negatively impact the operating
margins of competitors that do attempt to match competitors' price reductions.
Continuing or sustained price 

                                       16
<PAGE>
 
discounting in the fast food industry could have an adverse effect on the
Company. In addition, after investing resources in the training of its
employees, the Company faces pressure from competitors who may try to hire such
employees after they have been trained by the Company.

Risks Attendant to Franchise Expansion

     The Company's growth strategy is substantially dependent upon its ability
to attract, retain and contract with qualified franchisees and the ability of
these franchisees to open and operate their restaurants successfully.  In
addition, the Company's continued growth will depend in part on the ability of
existing and future franchisees to obtain sufficient financing or investment
capital to meet their market development obligations. If the Company experiences
difficulty in contracting with qualified franchisees, if franchisees are unable
to meet their development obligations or if franchisees are unable to operate
their restaurants profitably, then the Company's future operating results could
be adversely affected.

Government Regulation

     The Company and its franchisees are subject to regulatory provisions
relating to the wholesomeness of food, sanitation, health, safety, fire, land
use and environmental standards. Suspension of certain licenses or approvals due
to failure to comply with applicable regulations or otherwise, could interrupt
the operations of the affected restaurant.  The Company and its franchisees are
also subject to Brazilian federal labor codes establishing minimum wages and
regulating overtime and working conditions.  Changes in such codes could result
in increased labor costs that could adversely impact future operating results. A
Brazilian federal franchising law, enacted in December 1994, requires a
franchisor to furnish a written offering statement to each perspective
franchisee prior to consummation of the sale of a franchise, containing the
franchisor's background, the duties and responsibilities of each of the
franchisor and franchisee, all fees payable by the franchisee to the franchisor
and information with respect to the operations and profitability of prior
franchisees of the franchisor.  This offering statement is not required to be
reviewed by, or filed with any governmental agency.  The franchise law also
delineates the respective legal 

                                       17
<PAGE>
 
rights and primarily rights of action of the franchisor and franchisee. Should
any further laws applicable to franchise relationships and operations be
enacted, the Company would be unable to predict their effect on its operations.

Dependence on Key Personnel

     Management believes that the Company's future success will depend in
significant part upon the continued service of certain key personnel
(principally Peter van Voorst Vader, its chief executive officer and the
President of both the Company and Venbo), and upon the Company's ability to
attract and retain highly qualified managerial personnel.  Competition for such
personnel is intense, and there can be no assurance that the Company can retain
its existing key managerial personnel or that it can attract and retain such
employees in the future.  The loss of key personnel or the inability to hire or
retain qualified personnel in the future could have a material adverse effect
upon the Company's results of operations.


Risks Relating to Brazil

Change of Economic Environment

     In March 1994 the Brazilian government commenced a new economic
stabilization plan, known as the "Real Plan".  Pursuant to the Real Plan, the
government (a) implemented a tax and public spending reform program designed to
reduce public expenditures and to improve the collection of tax revenues, (b)
announced the continuation of a privatization program and (c) on July 1,
1994,introduced a new currency, known as the real, to replace the cruzeiro real.

     The Real Plan has resulted in substantial reduction in Brazil's rate of
inflation, which has declined from 2,489.11% per annum in 1993 to 929.32% per
annum in 1994 to 22.5% per annum in 1995, to 9.2% per annum in 1996, to 7.7% per
annum in 1997 and to 1.79% per annum in 1998.

     Despite the success to date of the Real Plan in reducing inflation in
Brazil, the fiscal adjustment program necessary to reduce government
expenditures is not complete after the fifth 

                                       18
<PAGE>
 
year of the Real Plan. There can be no assurance that this economic program will
be any more successful than previous programs in reducing inflation over the
long term, especially in light of (i) the Brazilian congress' delay in approving
(a) certain reductions in government expenditures as called for in the Real Plan
and (b) reform of Brazil's social security system, and (ii) the negative effects
of the Asian, Russian and Latin American crises on Brazil, which has caused a
flight of foreign investment, the devaluation of the real and new inflationary
pressures on the Brazilian economy. Accordingly, periods of substantial
inflation may once again have significant adverse effects on the Brazilian
economy, on the value of the real and on the Company's financial condition,
results of operations and prospects.

Currency Fluctuations

     Fluctuations in the exchange rates between the Brazilian currency and the
U.S. Dollar will affect the Company's operations. Brazil has historically
experienced generally unpredictable currency devaluation for many years.
Although the exchange rate between the real and the U.S. dollar had been
relatively stable from mid-July 1994 through late 1998, the spread of the Asian
and Russian economic difficulties to South America culminated in the devaluation
of the real in mid-January 1999.  By the end of January 1999, the real dropped
against the dollar by approximately 60% compared to the end of December 1998. In
addition, Gustavo Franco, the president of Brazil's central bank and an
architect of the Real Plan, resigned, amid rumors of policy differences between
Mr. Franco and Mr. Francisco Lopes, then the central bank's Director of Monetary
Policy and who has since been replaced. Although some recent economic measures
have been taken by the Brazilian Federal Government in an effort to stabilize
the real, the potential for future devaluation or volatility continues to
persist.

Political and Constitutional Uncertainty

     The Brazilian political scene has been marked by high levels of uncertainty
since the country returned to civilian rule in 1985 after 20 years of military
government.  The death of a President-elect and the impeachment of another
President, as well 

                                       19
<PAGE>
 
as frequent turnovers at and immediately below the cabinet level, particularly
in the economic area, have contributed to the absence of a coherent and
consistent policy to confront Brazil's economic problems. While the free market
and liberalization measures of recent years have enjoyed broad political and
public support, some important political factions remain opposed to significant
elements of the reform program, including, in particular, the Workers' Party,
headed by Mr. Luiz Inacio Lula da Silva, the runner-up in each of the 1998, 1994
and 1989 Presidential elections. Mr. Fernando Henrique Cardoso, the former
Finance Minister, was re-elected to a second four-year term in October 1998. Mr.
Cardoso is expected to continue to pursue the adoption of free market and
economic liberalization measures similar to those undertaken in recent years.
There can be no assurance, however, that such measures will be adopted or, if
adopted, that they will be successful. Failure to adopt economic reform measures
could adversely impact Brazil's economy which in turn could adversely affect our
revenues and results of operations. In addition, Gustavo Franco, the president
of Brazil's central bank, resigned in the wake of the devaluation of the real.
See "Risks Relating to Brazil-Change of Economic Environment" and "Risks
Relating to Brazil-Currency Fluctuations."

Controls on Foreign Investments

     Brazil generally requires governmental approval for the repatriation of
capital and income by foreign investors.  Although such approvals are usually
given, there can be no assurance that such approvals will be forthcoming in the
future.  In addition, the government may impose temporary restrictions on
foreign capital remittances abroad, if there is a deterioration in the balance
of payments or for other reasons.  The Company could be adversely affected by
delays in, or a refusal to grant, any required governmental approval for
repatriation of capital from Venbo.  There can be no assurance that additional
or different restrictions or adverse policies applicable to Venbo will not be
imposed in the future, or as to the duration or impact of any such restrictions
or policies.

Accounting Reporting Standards

     Companies in Brazil are subject to accounting, auditing and 

                                       20
<PAGE>
 
financial standards and requirements that differ, in some cases significantly,
from those applicable to companies in the United States. In particular,
inflation accounting rules may require for both tax and accounting purposes that
certain assets and liabilities be restated using an index established by the
government in order to express such items in terms of currency of constant
purchasing power. However, the official index for price level restatement varies
from year to year and may more accurately reflect actual inflation rates in one
year than in another year. Consequently, the financial statements of the Company
included in this Report, expressed in reais although prepared in accordance with
U.S. GAAP, may not accurately reflect all inflationary distortions in such
financial statements.



ITEM 2.   PROPERTIES

     Bob's restaurants are built to Company specifications as to exterior style
and interior decor.  All 140 Bob's restaurants currently in operation, excluding
kiosks and movable trailers, are either in a strip of stores on a neighborhood
street or in mall food court outlets, with some free-standing, one-story
buildings, all substantially uniform in design and appearance.  The restaurants
are constructed on sites ranging from approximately 1,100 to 7,500 square feet,
with parking at the free-standing restaurants for more than 15 cars.  Most
restaurants are located in downtown areas or shopping malls, are of a store-
front type and vary according to available locations but generally retain
standard signage and interior decor.

     The Company owns the land and building for 9 restaurants, of which 4 are
presently leased to franchisees, has leases covering land and building for 4
restaurants, and has leases for 59 restaurants.  The Company's land and building
leases are generally written for terms of five years with one or more five-year
renewal options.  In certain lease agreements the Company has the option to
purchase the underlying real estate.  Certain leases require the payment of
additional rent equal to the greater of a percentage (ranging from 1% to 10%) of
monthly sales or specified amounts.

     The Company's corporate headquarters are located in premises at Avenida
Brasil, 6431-Bonsucesso, CEP 21040-360, Rio de Janeiro, 

                                       21
<PAGE>
 
Brazil, which the Company purchased in 1998.


ITEM 3.  LEGAL PROCEEDINGS

     The Company is not a party to any legal proceedings which may have a
material adverse effect upon either the Company, its assets or its properties.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1998.

                                       22
<PAGE>
 
                                    PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

     (a) The Company's Common Stock, Class A Redeemable Common Stock Purchase
Warrants ("Class A Warrants") and Class B Redeemable Common Stock Purchase
Warrants ("Class B Warrants") are each quoted on the OTC Bulletin Board under
the respective symbols "BOBS," "BOBSA" and "BOBSB".  The following table sets
forth the range of the high and low bid quotations on the OTC Bulletin Board for
the periods indicated:

<TABLE>
<CAPTION>
                        Common Stock       Class A Warrants    Class B Warrants
                      -----------------    -----------------   ----------------
Three Months Ended     High      Low        High     Low          High    Low
--------------------  -------  --------    ------  --------      ------  -----
<S>                   <C>      <C>         <C>     <C>           <C>    <C>  
March 31, 1997        $     3  $ 2-7/64    $19/32     $ 3/8      $ 1/2  $ 1/8
June 30, 1997         $3-1/16  $      2    $13/16     $ 3/8      $5/16  $ 1/8
September 30, 1997    $ 3-1/2  $  1-7/8    $ 5/16     $ 1/4      $1/16  $1/16
December 31, 1997     $ 4-7/8  $  2-1/8    $ 5/16     $ 1/8      $3/16  $1/16
March 31, 1998        $ 3-1/2  $ 2-3/32    $  1/4     $ 1/8      $3/32  $1/32
June 30, 1998         $     3  $1-27/32    $ 5/32     $1/32      $ 3/8  $1/32
September 30, 1998    $ 2-1/8  $    3/4    $ 5/32     $1/32      $5/32  $1/32
December 31, 1998     $1-1/16  $   9/16    $ 5/32     $1/32      $5/32  $1/32 
</TABLE>

The above quotations represent prices between dealers and do not include retail
markup, markdown or commission.  They do not necessarily represent actual
transactions.

     (b) As of March 30, 1999, there were 85, 16 and 18 recordholders of the
Common Stock, Class A Warrants and Class B Warrants, respectively.

     (c) The Company has not declared any cash dividends on its Common Stock and
has no intention to pay cash dividends in the foreseeable future.

                                       23
<PAGE>
 
ITEM 6.  SELECTED FINANCIAL DATA

     The following selected financial data has been derived from the audited
consolidated financial statements of the Company subsequent to the acquisition
of Venbo and from the audited financial statements of Venbo, the predecessor,
prior to the acquisition.  All amounts are stated in constant R$ in accordance
with U.S. GAAP, unless otherwise noted.

     The following data should be read in conjunction with the Consolidated
Financial Statements and related notes of the Company, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the other
financial information included elsewhere in this Report.

                                       24
<PAGE>
 
Statement of Operations Data:
(in thousands)


<TABLE>
<CAPTION>
                                                       BFFC                        Venbo Years Ended
                            BFFC          BFFC      March 19,        Venbo           December 31,
                         Year Ended    Year Ended    1996 to      January 1,     ---------------------
                        December 31,    December    December    1996 to March       1995        1994    
                            1998        31, 1997    31, 1996       18,1996         -----       ----- 
                            ----        --------    --------      --------                          
                                                                 (Predecessor)       (Predecessor)  
 
                                                                                
                                                                                
                                                                                

<S>                     <C>            <C>          <C>         <C>              <C>        <C>
NET OPERATING
 REVENUES:
Restaurant Sales          R$63,666      R$ 73,008   R$ 56,381        R$ 15,001   R$70,188   R$ 55,535
Franchise Income               1,939        1,475         651              161        727         508
Other Income                   2,187        1,705       1,253              113        466         405
                             --------  ----------   ---------           ------     ------     -------
TOTAL NET OPERATING
 REVENUES                     67,792       76,188      58,285           15,275     71,381      56,448 
                            --------   ----------   ---------           ------     ------     ------- 
                                                                                                      
COST AND EXPENSES:
Cost of Restaurant
 Sales                        23,453       25,861      20,479            6,430     26,598      19,786
 
Restaurant Payroll
 and other employees
 benefits                     15,389       17,490      13,412            3,231     13,727      12,172
 
 
Restaurant
 Occupancy and Other
 Expenses                      7,316        7,532       4,645            1,085      6,225       5,268
 
 
Depreciation and                            4,139       2,650              675      3,117       3,548
 Amortization                  3,738
 
Other Operating                            10,751       8,632            3,111     13,200       8,113
 Expenses                      9,978
 
Selling Expenses               3,700        4,719       3,599              880      3,632       4,552

General and Administrative
 Expenses                     10,161       10,745      10,128            3,609     12,205      11,231 
Expenses                           -            -           -                -        280       3,216
Impairment of
 Goodwill                      5,076            -           -                -          -           -
                          ----------   ----------   ---------           ------     ------     -------  
Total Cost and
 Expenses                     78,811       81,237      63,545           19,021     78,984      67,886
                          ----------   ----------   ---------           ------     ------     -------
(Loss) From
 Operations                  (11,019)      (5,049)     (5,260)          (3,746)    (7,603)    (11,438)
 
Interest Income                  109           45         111            2,196      1,738       2,608
Interest Expenses            ( 3,151)      (1,488)       (139)            (989)    (5,366)     (5,647)
Foreign Exchange
 (loss)gain                  (   288)         (23)          4              273      1,425       9,858 
                          ----------   ----------   ---------           ------     ------     -------
(Loss) Before
 benefit from income
 taxes                       (14,349)      (6,515)     (5,284)          (2,266)    (9,806)     (4,619)
Benefit from income
 taxes                             -            -          46                -          -           - 
                          ----------   ----------   ---------           ------     ------     ------- 
Net (Loss)               R$(14,349)     R$ (6,515)   R$(5,238)        R$(2,266)  R$(9,806)   R$(4,619)
                         ===========   ==========   =========           ======     ======     =======
Basic Net (Loss)
 per common share        R$( 1.13)        R$ (.58)     R$(.68)
                         ===========   ==========   ========= 
Weighted average
 common  Shares
 Outstanding (basic)      12,678,990   11,326,428   7,696,106
                         ===========   ==========   =========
</TABLE>

                                       25
<PAGE>
 
Balance Sheet Data:


<TABLE>
<CAPTION>
                       At December 31,1998   At December 31,1997   At December 31,1996
                       --------------------  --------------------  --------------------
<S>                    <C>                   <C>                   <C>
Working capital
 (deficit)             R$(10,189)            R$ (6,741)            R$ (6,127)
 
Total Assets           R$ 41,632             R$ 49,354             R$ 50,613
Retained earnings
 (deficit)             R$(25,902)            R$ (11,553)           R$ (5,038)
 
Total Shareholders'
 equity                R$ 19,997             R$ 32,901             R$ 33,500
 
</TABLE>


Exchange Rates

     On August 1, 1993, the cruzeiro real replaced the cruzeiro as the unit of
Brazilian currency, with each cruzeiro real being equal to 1,000 cruzeiros.
Beginning in December 1993, the Brazilian Federal Government (the "Government")
began implementation of the Real Plan, which was intended to reduce inflation.
As part of the Real Plan, in March 1994 the Government introduced a new unit of
account, the URV, linked to the movements in the exchange rate of the cruzeiro
real to the U.S. dollar and intended to be transformed into the new unit of
currency, the real.  Certain contracts and public utility rates were required to
be indexed to the URV.  The URV ceased to exist upon the introduction of the
real.  On July 1, 1994, the real replaced the cruzeiro real as the unit of
Brazilian currency, with each real being equal to 2,750 cruzeiros reais and
initially having an exchange rate of R$1.00 to $1.00.

     The issuance of reais was initially subject to quantitative limits backed
by a corresponding amount of U.S. dollars in reserves, but the Government
subsequently expanded those quantitative limits and allowed the real to float,
with parity between the real and the U.S. dollar (R$1.00 to $1.00) as a ceiling.
In March 1995, the Central Bank do Brasil (the "Central Bank") announced that it
would intervene in the market and buy or sell U.S. dollars and established a
band within which the real/U.S. dollar exchange rate could fluctuate.  The
Central Bank initially set the band with a floor of R$0.86 per $1.00 and a
ceiling of R$0.90 per $1.00 and provided that after May 2, 1995, the band would
be between R$0.88 and R$0.98 per $1.00.  The band was in effect until February
1997, when the Central Bank reset 

                                       26
<PAGE>
 
the band between R$1.05 and R$1.14 per $1.00. In January 1999, the Brazilian
Central Bank removed the band, thus allowing the real to float freely,
preventing a further drain on its monetary reserves. This new monetary policy,
caused in part by the South American financial crisis and the flight of foreign
capital from Brazil, caused a devaluation of the real of approximately 60% in
one month's time.

     The following table sets forth information on Commercial Market Rates, for
the periods indicated, expressed in reais per U.S. dollar.  Amounts expressed in
reais have been translated from the predecessor currencies in effect during the
relevant period at the rates of exchange at the time the successor currency took
effect.  Accordingly, cruzeiros reais have been translated into reais at the
rate of CR$2,750 to R$1.00 and cruzeiros have been translated into reais at the
rate of C$2,750,000 to R$1.00.

<TABLE>
<CAPTION>

                           Average
                             for                        
 Period   Period-end     period (1)  High      Low
--------  ----------    ---------- --------  --------
<S>       <C>         <C>          <C>       <C>
1990        0.000062     0.000025  0.000062  0.000004
1991        0.000389     0.000149  0.000389  0.000062
1992        0.004505     0.001655  0.004505  0.000389
1993        0.118589     0.032809  0.118584  0.004505
1994        0.846000     0.645000  1.000000  0.118584
1995        0.973000     0.923000  0.973000  0.842000
1996        1.038600     1.007400  1.038600  0.973000
1997        1.116400     1.077500  1.116400  1.038600
1998        1.208700     1.164325  1.208700  1.123700
</TABLE>
------
(1)  Weighted average of exchange rates on business days.


     Through June 30, 1997 the consolidated financial statements have been
indexed and expressed in currency of constant purchasing power by using a
monthly index derived from the Indice Geral de Precos-Mercado (IGP-M).  Since
the implementation of the Real Plan in June 1994, the Brazilian economy has
experienced a declining rate of inflation, with a cumulative inflation rate for
the three-year period from July 1994 to June 1997, as measured by the IGP-M of
54%.  Based on the foregoing, management determined that Brazil ceased to be
considered a hyperinflationary economy, 

                                       27
<PAGE>
 
as defined in FASB 52, and from July 1, 1997 no longer indexed its financial
statements for constant currency purchasing power.

     Through 1995, the Company used the Unidade Fiscal de Referencia (UFIR) as
the basis to reflect constant Brazilian Reais. Starting in 1996, the Company
commenced using the IGP-M as the basis for indexation.

<TABLE>
<CAPTION>
                Value of 1.0
                Restatement
                Units of One   Inflation for
Year                Real       the Period(%)
--------------  ------------- ---------------
<S>             <C>            <C>
1992                0.0026691         1,129.4
1993                0.0673164         2,422.1
1994                0.0676700           905.3
1995                0.8287000             9.2
June 30,1997        0.9510000            5.09
</TABLE>


     The Company believes that the above indicies are appropriate general price
level inflation indicators to be used under US GAAP.

     Items in the consolidated statements of operations for the years ended
December 31, 1997, 1996, 1995 and 1994 are adjusted to the balance sheet date
by:

     .    Allocating inflationary holding gains or losses on interest bearing
          monetary assets and liabilities to their corresponding interest income
          and expense captions;

     .    Allocating inflationary holding gains and losses from other monetary
          items to their corresponding income and expense captions.

     The allocation of the inflationary gains and losses to their respective
consolidated statement of operations income statement captions is shown in Note
11 to the Consolidated Financial Statements.

                                       28
<PAGE>
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     The following discussion is based on and should be read together with the
Consolidated Financial Statements and notes thereto appearing elsewhere in this
Report.  See "Selected Historical Financial Data."  All amounts referred to
herein that refer directly to financial statement balances of the Company or are
otherwise drawn directly from the Consolidated Financial Statements of the
Company or notes thereto are stated in constant R$ in accordance with U.S. GAAP.


Background
----------

     Brazilian Political Environment

     The Brazilian political environment has been marked by high levels of
uncertainty since the country returned to civilian rule in 1985 after 20 years
of military government. The death of a President in 1985 and the resignation of
another President in the midst of impeachment proceedings in 1992, as well as
rapid turnover at and immediately below the cabinet level, have adversely
affected the implementation of consistent economic and monetary policies,
including consistent policies in the areas of government-owned enterprises and
telecommunications.

     Measures by the Government intended to influence the course of Brazil's
economy (e.g. actions to control inflation, interest rates or consumption) have
been frequent and occasionally drastic. Changes in policy, social instability or
other political or economic developments, and the Brazilian government's
responses to such developments, may have a material adverse effect on the
Company's financial condition and results of operations.

     Mr. Fernando Henrique Cardoso was elected President of Brazil in October
1994 and took office in January 1995 for a single four-year term.  He has
generally sought to continue the economic stabilization and liberalization
policies he developed as Finance Minister from May 1993 through April 1994 under
President Itamar Franco.  President Cardoso is the leader of a coalition of
political parties that represents a majority of the Federal Congress and his
party controls the state governments of 

                                       29
<PAGE>
 
the States of Sao Paulo and others. Brazil's constitution was amended in 1998 to
permit President Cardoso to stand for re-election to a second four-year term.
Although President Cardoso's policies appear to have broad political support and
he was re-elected in October 1998 for another four year term, his policies have
suffered major setbacks in 1998, including the failure of Brazil's congress to
pass social security reform and various austerity measures on government
spending. There can be no assurance that President Cardoso's policies will not
be revised in whole or in part at some future date. Furthermore, some important
groups remain opposed to significant elements of his program, and the
implementation of any policies of economic stabilization or liberalization is
subject to significant compromises and accommodations.

     Economic Environment

     The financial condition and results of operations of the Company are
dependent on general economic conditions in Brazil, and in particular on (i)
economic growth and its impact on demand for fast food services and (ii)
exchange rates between Brazilian and foreign currencies.  Historically, the
Brazilian economy has been extremely volatile, and the Government has
implemented a succession of programs intended to stabilize the economy and
provide a basis for sustainable, non-inflationary growth.  Venbo has been
affected by such programs in a variety of ways, particularly when such programs
have resulted in contractions in demand or very high real interest rates.

     Beginning in December 1993, the Government introduced the Real Plan, an
economic stabilization program intended to reduce the rate of inflation by
reducing certain public expenditures, collecting liabilities owed to the
Government, increasing tax revenues, continuing to privatize government-owned
entities and introducing a new currency.  The real was introduced as Brazil's
currency in July 1994, based on a monetary correction index, the URV, introduced
earlier in the year.  Since taking office in January 1995, President Cardoso has
continued to implement the Real Plan. Under the Real Plan, the rate of inflation
has decreased significantly, and the rate of growth of real gross domestic
product has increased substantially.  Since mid 1997, Brazil has faced
continuing deficits in its payment balance and, simultaneously, the market began
to doubt the government's 

                                       30
<PAGE>
 
capability to reduce public spending. Based on these and other reasons,
including massive outflows of foreign capital in the first two weeks of January
1999, Brazil devalued its currency. Brazil and the IMF have recently reached an
agreement whereby Brazil would receive, under certain conditions (such as
minimum level of country reserves and reversal of public spending deficit), a
$40 billion bail-out package. The long-term effects upon Brazil in general and
the Company in particular of (i) the Real Plan and (ii) the devaluation and
success of the bail-out package, are uncertain.

     Effects of Inflation and Devaluation

     Brazil has experienced extremely high and generally unpredictable rates of
inflation and of devaluation of Brazilian currency for many years.

     Since the introduction of the Real Plan in July 1994, the rate of inflation
has decreased considerably. As measured through 1995 by the Unidade Fiscal de
Referencia (the "UFIR") and by the Indice Geral de Precos-Mercado (the "IGP-M")
thereafter, the annualized rate of inflation was 6,624% for the first six months
of 1994, 50% for the last six months of 1994 and 22.4% for the year 1995, with
significantly all of 1995's inflation occurring during the first six months of
that year.   The annual rate of inflation during 1998 was 1.8% as compared to
7.7% in 1997 and 9.2% in 1996.  1999's inflation is expected to be high due to a
60% devaluation of the real.  Although there is no way to predict 1999's
inflation rate, experts predict an annual rate of inflation of between 16% and
20% due to Brazil's economic recession, the size of the public deficit and the
difficulty to sustain external reserves.

     The following table sets forth Brazilian inflation, as measured by the
UFIR/IGP-M, and the devaluation of the Brazilian currency against the U.S.
dollar for the periods shown.

                                       31
<PAGE>
 
                             Year Ended December 31, (1)
                          ----------------------------------
                          1998   1997   1996   1995    1994
                          -----  -----  -----  -----  ------

Inflation (UFIR/IGP-M)     1.8%   7.7%   9.2%  22.5%  905.3%
Devaluation (Brazilian
 Currency                  8.3%   6.7%   6.9%  14.9%  613.4%
 
________
(1)    Annualized rates
 
See "Selected Historical Financial Data - Exchange Rates."

     The Company's results of operations in 1997, 1996, 1995 and 1994 have been
affected by inflation, and such financial information should be evaluated in
light of the methodology for recognition of the effects of inflation.  See
"Selected Financial Data."   Significant effects include the following:

     .    Effects of Purchasing Power Gains and Losses on Revenues. Inflation
          produces purchasing power losses on accounts receivable between the
          date of service and the date of payment by the customer. These losses
          are partly offset by purchasing-power gains on accounts payable and
          accrued expenses, value-added taxes and other taxes on operating
          revenues between the date of accrual and the date of payment. See Note
          3 to the Consolidated Financial Statements of the Company.

     .    Effects of Inflation on Financial Instruments Denominated in Brazilian
          Currency. The Company has both assets and liabilities that are
          financial instruments denominated in Brazilian currency. Until July 1,
          1994, the indexation of principal was provided for according to the
          index specified in the relevant instrument (subsequent to that time,
          only interest was impacted by indexation). As of July 1, 1997, the
          Company's management determined that Brazil no longer had a
          hyperinflationary economy as defined in SFAS 52 and ceased indexing
          the Company's Consolidated Financial Statements for constant currency
          purchasing power. In the Consolidated Financial Statements of the
          Company, interest income or expense is reported net of the associated
          inflationary losses or gains, respectively,  

                                       32
<PAGE>
 
          and accordingly depends on the relationship between the rate of
          interest (and, where applicable, indexation of principal) and the rate
          of inflation as measured by the UFIR, which is used to determine
          inflationary gains and losses. For example, indebtedness denominated
          in reais gives rise to interest expense to the extent that the rates
          of interest plus indexation exceed the rate of inflation, and it may
          give rise to negative interest expense if the rates of interest plus
          indexation are less than the rate of inflation.

     .    Effects of Inflation and Devaluation on Indebtedness Denominated in
          Foreign Currency. At December 31, 1998, the Company had R$6,428,000 of
          indebtedness denominated principally in U.S. dollars. See Note 10 to
          the Consolidated Financial Statements of the Company. The Company does
          not hedge its obligations under its foreign currency-denominated
          indebtedness. In the Consolidated Financial Statements of the Company,
          the interest expense attributable to foreign-currency denominated
          indebtedness is reported net of the associated inflationary gain and
          foreign exchange loss. When the rate of inflation and the rate of
          devaluation differ substantially, the effect on reported interest
          expense can be substantial. See "Selected Financial Data -Exchange
          Rates" and Note 3 to the Consolidated Financial Statements of the
          Company.

     The Company's financial statements are presented in accordance with U.S.
GAAP and accordingly recognize certain effects of inflation and restate data
from prior periods in constant reais of June 30, 1997 purchasing power. Such
restatement has been effected using the integral restatement method (correcao
integral) required by the CVM (the Brazilian Securities Commission) to be used
for financial statements of public corporations. In periods of inflation,
monetary assets generate inflationary loss, and monetary liabilities generate
inflationary gain, due to the decline in purchasing power of the currency.
Inflationary gains or losses on monetary assets and liabilities have been
allocated to their corresponding income or expense in the consolidated
statements of operations. Inflationary gains or losses without a corresponding
income or 

                                       33
<PAGE>
 
expense caption have been allocated to other net operating income/(expense). See
Note 11 to the Consolidated Financial Statements.


RESULTS OF OPERATIONS
---------------------

     Since the implementation of Real Plan in June 1994, the Brazilian economy
has experienced declining levels of inflation rates,  with a cumulative
inflation rate for the three-year period from July 1994 to June 1997, as
measured by the IGP-M (a Brazilian General Price Index), of 54%.  The inflation
rate since June 30, 1997 and through December 1998, as measured by the IGP-M,
was approximately 2.9% per annum.  Considering the above, and notwithstanding
new inflationary pressures now facing Brazil, management has made the
determination that Brazil should no longer be considered a highly inflationary
economy from July 1, 1997 onward, pursuant to FASB 52.

     Accordingly, operating results for the periods ended December 31, 1997 and
1996 presented in the accompanying financial statements have been indexed and
expressed in currency of constant purchasing power of June 30, 1997 by using a
monthly index derived from IGP-M index. The Company believes that the IGP-M
index is an appropriate general price inflation indicator to be used under US
GAAP.  From July 1, 1997, the Company no longer indexed its financial statements
for constant currency purchasing power.

                                       34
<PAGE>
 
<TABLE>
<CAPTION>
 
                                                                       (Proforma*)
                              Twelve                                     Twelve
                              Months                                     Months
                              Ended                 Twelve               Ended
                             December              Months               December
                             31, 1998               Ended               31, 1996
                                (in       % to    December     % to        (in       % to
                            thousands)   Sales    31, 1997    Sales    thousands)   Sales
                           -----------  ------   ---------   ------   -----------  ------- 
<S>                         <C>          <C>      <C>         <C>      <C>          <C>
  Net Operating Revenue
- Restaurant Sales           R$ 63,666            R$ 73,008             R$ 71,382
- Franchise Income               1,939                1,475                   812
- Other Income                   2,187                1,705                 1,366
                               -------               ------                ------
Total Net Operating             67,792      100      76,188      100       73,560      100
 Revenues                      -------               ------                ------
Costs and Expenses:
- Cost of Restaurant            23,453     34.6      25,861     33.9       26,909     36.6
  Sales
- Restaurant Payroll and        15,389     22.7      17,490     23.0       16,643     22.6
  Other Employees
  Benefits
- Restaurant Occupancy           7,316     10.8       7,532      9.9        5,730      7.8
 and Other Expenses
- Depreciation and               3,738      5.5       4,139      5.4        3,325      4.5
 Amortization
- Other Operating                9,978     14.7      10,751     14.1       11,743     16.0
 Expenses
- Selling Expenses               3,700      5.5       4,719      6.2        4,479      6.1
- General and Adminis-
  trative Expenses              10,161     15.0      10,745     14.1       13,737     18.7 
- Impairment of Goodwill         5,076      7.5           -        -            -        -
                               -------   ------      -------   -----       ------    -----
Total Cost and Expenses         78,811    116.3      81,237    106.6       82,566    112.2
                               -------   ------      ------    -----       ------    -----
(Loss) From Operations         (11,019)  ( 16.3)     (5,049)    (6.6)      (9,006)   (12.2)
- Interest Income
 (Expenses), Net               ( 3,330)  (  4.9)     (1,466)    (1.9)       1,456      2.0
                               --------  ------     --------   ------      ------    -----
(Loss) Before Benefit                                                                        
 from Income Taxes             (14,349)   (21.2)     (6,515)    (8.6)      (7,550)   (10.3)  
Benefit from Income
 Taxes                               -        -           -         -          46      0.1
                               -------   ------      ------   --------     ------    ----- 
Net (Loss)                   R$(14,349)  ( 21.2)     (6,515)    (8.6)    R$(7,504)   (10.2)
                               ========  ======      ======   ========    ========   ======
</TABLE>


---------
*    Proforma financial data includes result of operations of Venbo from January
     1 to March 18, 1996, prior to the Acquisition.


RESTAURANT SALES
----------------
     Net restaurant sales for Company-owned stores were R$63,666,000,
R$73,008,000, and R$71,382,000 for the years ended 

                                       35
<PAGE>
 
December 31, 1998, 1997, and 1996, respectively. Same store sales for the year
ended December 31, 1998 declined 9.85% when compared to the year ended December
31, 1997.

     The approximately 12.8% decrease in 1998 revenues is primarily attributable
to the following factors

     .    the closing of five Company-owned outlets in the year ended December
31, 1998, the sale of 19 outlets to franchisees and the opening of 3 new
outlets, for a total of 68 Company-owned stores as of December 31, 1998.  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.

     .    Brazil's economic recession, stemming from the so-called "Asian
Crisis" and exacerbated thereafter by the worsening Russian economy, resulted in
a significant outflow of foreign investment.  Measures taken by the Brazilian
Central Bank in December 1998 to stem such outflow included materially raising
interest rates, which substantially increased the cost of consumer indebtedness,
with a corresponding reduction in discretionary consumer spending.

     .    increased competition, resulting in an approximately 3.7% average
price reduction in the sales prices of the Company's food and beverage
offerings, in May 1998.

     .    economic concerns caused by the-then uncertain outcome of the
Brazilian national election in October 1998 adversely affected consumer spending
during the months leading up to the election.

     .    Significant reductions in store patronage during normally busy
luncheon and early evening hours in June and July 1998 as a consequence of
contemporaneous broadcasts of World Cup soccer matches involving the Brazilian
national team.


FRANCHISE INCOME
----------------

     Franchise income was R$1,939,000, R$1,475,000 and R$812,000 

                                       36
<PAGE>
 
for the years ended December 31, 1998, 1997 and 1996, respectively. The increase
of 31.5% and 81.6% in 1998 and 1997, respectively, is primarily due to the
expansion of franchised locations, which increased from an average of 27 units
in 1996 to 46 units in 1997 to 76 units in 1998. At December 31, 1998, 1997 and
1996, the Company had 92, 56 and 34 franchised locations, respectively. The
increase in the number of franchisees resulted in increases in initial fees
charged to new franchisees and royalty fees. Franchise average income was
partially reduced by the opening of new stores with lower sales levels than
those previously in operation. A number of these outlets are located in smaller
cities or were opened as kiosks in location having close proximity to other
Bob's stores.

     Through the period from January 1, 1997 to December 31 1998, the Company
sold 26 of its restaurants to franchisees (7 in 1997 and 19 in 1998).  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.

     In some situations the Company has provided incentives in the form of
reduced royalties to franchisees for a period of time.


OTHER INCOME
------------

     Other income was R$2,187,000, R$1,705,000 and R$1,366,000 for the years
ended December 31, 1998, 1997 and 1996, respectively, and is comprised of income
derived from suppliers pursuant to license as well as exclusivity agreements,
from marketing fees and initial fees paid by new franchisees.  The increase
through the periods is primarily attributable to the increase in the number of
franchised outlets, noted above.

                                       37
<PAGE>
 
COST OF RESTAURANT SALES
------------------------

     Cost of restaurant sales expressed as a percentage of net operating
revenues were 34.6%, 33.9% and 36.6% for the years ended December 31, 1998, 1997
and 1996, respectively.  The reduction from 1996 to 1997 is due to continuous
renegotiation of purchase terms and prices with suppliers and seeking
alternative sources of products.  The increase of system wide sales enabled the
Company to reduce the average cost of major products such as meat, french fries
and ice cream, by approximately 15% in the first two years of operation.  At the
end of 1997 and during 1998, this reduction was partially offset by an increase
in costs of certain items such as bread and soft drinks primarily caused mainly,
by increased taxation on these items.


RESTAURANT PAYROLL AND OTHER EMPLOYEE BENEFITS
----------------------------------------------

     Restaurant payroll and other employee benefits expressed as a percentage of
net operating revenues were 22.7%, 23.0% and 22.6% for the year ended December
31, 1998, 1997 and 1996. Despite annual salary increases mandated by union-
driven agreements (8% in 1997 and 4% in 1998 for Rio de Janeiro employees and 6%
in 1997 and 3% in 1998 for Sao Paulo employees), implementation of the following
procedures in mid-1997 and during 1998 have resulted in a net reduction of such
expenses in 1998

     .    an ongoing store headcount revision, which result in a reduction in
the number of assistant store managers as well as in the average number of store
employees (from 30 in 1996, to 25 in 1997 and to 24 in 1998)

     .    adoption of a new recruiting program allowing for a greater degree of
flexibility in manpower usage and lower costs of recruitment and staff
replacement

     .    reductions in employee medical costs, night shift differentials and
transportation benefits.


RESTAURANT OCCUPANCY COSTS AND OTHER EXPENSES
---------------------------------------------

     Restaurant occupancy costs and other expenses expressed as a 

                                       38
<PAGE>
 
percentage of net operating revenues were approximately 10.8%, 9.9% and 7.8% for
the years ended December 31, 1998, 1997 and 1996, respectively. The increase is
mainly due to the portion of minimum rent which is linked to the Brazilian
inflation rate (1.78% per annum in 1998 and 7% per annum in 1997). In addition,
the sale of Company-owned stores to franchisees, noted above, included 4 stores
which prior to their sale were located in Company-owned properties, changed the
correlation between restaurant operating costs and net operating revenues since
the newly opened stores were relocated to leased properties.


DEPRECIATION AND AMORTIZATION
-----------------------------

     The decrease from 1997 to 1998 is attributable to the completion of
depreciation upon several assets (leasehold improvements) in June 1998.
Depreciation and Amortization expense expressed as a percentage of net operating
revenues was approximately 5.5%, 5.4% and 4.5% for the years ended December 31,
1998, 1997 and 1996, respectively.  The increase from 1996 to 1997 is primarily
due to increased asset values resulting from the application of the purchase
method of accounting in conjunction with the Acquisition.


OTHER OPERATING EXPENSES
------------------------

     Other operating expenses expressed as a percentage of net operating
revenues were approximately 14.7%, 14.1% and 16.0% for the years ended in 1998,
1997 and 1996, respectively.  The slight increase from 1997 to 1998 was mainly
attributable to the effect of annual inflationary adjustments of service
contracts, partially offset by negotiated reductions and non-renewals of certain
of such contracts.  Those negotiation and non-renewals had a stronger effect
during the first year following the Acquisition, which caused the greater
decrease in expenses between 1997 and 1996.


SELLING EXPENSES
----------------

     Selling expenses expressed as a percentage of net operating revenues were
approximately 5.5%, 6.2% and 6.1% for the years 

                                       39
<PAGE>
 
ended December 31, 1998, 1997 and 1996. The decrease is primarily attributable
to internal cost efficiencies implemented by the Company during 1998.


GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------

     General and administrative expenses expressed as a percentage of net
operating revenues were approximately 15.0%, 14.1% and 18.7% for the years ended
December 31, 1998, 1997 and 1996, respectively.

     General and administrative expenses for the year ended December 31, 1997
included approximately R$600,000 of non-recurrent charges arising primarily
from: (i) higher professional fees attributable to financing activities and
regulatory filings, (ii) a write-off of obsolete equipment and (iii) a partial
write-off of certain deferred charges.  

     The reduction in administrative expenses is mainly due to

     .    a total headcount reduction of 13 administrative employees (including
2 senior managers and 3 managers)

     .    restructuring of the Company's middle management, including the
outsourcing of some departments in order to reduce administrative charges

     .    the termination of an accounting service agreement in September 1998
with a total net economy of approximately 

                                       40
<PAGE>
 
R$100,000 per month

     .    relocation of the Company's executive and principal administrative
offices to a Company-owned facility

     .    termination of a strategic consulting agreement with Hardee's, which
had cost the Company R$290,000 during 1997.

IMPAIRMENT OF GOODWILL
----------------------

     In the fourth quarter of 1998, the Company determined, based upon its
evaluation of the undiscounted cash flows that an impairment of its goodwill
existed and took a charge of R$5,076,000.

INTEREST INCOME AND EXPENSES
----------------------------

     Interest income and expenses expressed as a percentage of net operating
revenues were approximately (4.9%), (1.9)% and 2.0% for the years ended December
31, 1998, 1997 and 1996, respectively.

     The increase in interest expense in 1997 results from an increase in the
Company's total indebtedness stemming from borrowings to satisfy the final
payment to the Company's prior owner in March 1998 of approximately R$3,000,000
which was funded on a short term basis by the existing credit facilities.  Such
indebtedness was converted into long term debt owed to a Brazilian financial
institution at lower interest rate by the middle of 1998.  In addition, the
increase in interest expenses is also attributable to higher interest rates
imposed by the Brazilian Central Bank in an effort to stabilize the real.


SEASONALITY
-----------

     The Company's revenues are subject to seasonality as approximately 20% of
its sales are generated during the Brazilian summer months of December and
January when students are on vacation and holiday shopping is widespread.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     Since March 19, 1996, the Company has funded its operating losses of 
R$21,328,000 and made acquisitions of businesses and capital improvements 
(including store remodeling) by using cash remaining at the closing of the 
Acquisition, by borrowing funds from various sources and private placements of  
securities.  As of December 31, 1998, the Company had cash on hand of R$817,000 
and a working capital deficiency of R$10,189,000.

     The Company's capital requirements are primarily for expansion of its 
retail operations.  Currently, 55 of the Company's stores are in leased 
facilities and 5 of the Company's stores are in owned facilities.  For the year 
ended December 31, 1998 the Company's EBITDA was R$(7,281,000).  During the 
fiscal year ended December 31, 1998, the Company's average cost to open a store 
approximated 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, constructions supervision and obtaining permits.  The Company
currently estimates that capital expenditures for fiscal 1999 will approximate 
R$1,000,000.  During 1999, the Company intends to focus its efforts on expanding
both the number of its franchisees and its franchised outlets, neither of which 
are  expected to involve significant capital expenditures by the Company.  See 
"Business--Growth Strategy" and "--Franchise Program."

     In 1998, the Company had net cash used in operating activities of 
R$5,776,000 and had net cash used in investing activities of R$1,145,000.  The 
primary use of cash for investing activities was for capital expenditures 
related to the Company's retail store expansion.

     Management plans to address its immediate and future cash flow needs
include focusing on a number of areas including: the sale of Company-owned
stores; reduction of expenses, including head count reductions; the expansion of
its franchisee base, which would generate additional cash flows from royalties
and 

                                       41
<PAGE>
 
franchise fees without significant capital expenditure; the introduction of new
programs and menu expansion to meet the wants of the consumer. 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 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 the time to complete
such sales.  Additionally, the Company's ability to achieve its plans is further
impacted by the instability of the economic environmental 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.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Reference is made to pp. F-1 through F-28 comprising a portion of this
Report.



ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     Not Applicable.

                                       42
<PAGE>
 
                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Item 10 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of December 31, 1998.



ITEM 11.  EXECUTIVE COMPENSATION

     Item 11 is hereby incorporated by reference from the Company's  definitive
Proxy Statement to be filed within 120 days of December 31, 1998.



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Item 12 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of December 31, 1998.



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Item 13 is hereby incorporated by reference from the Company's definitive
Proxy Statement to be filed within 120 days of December 31, 1998.

                                       43
<PAGE>
 
                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) Financial Statements and Financial
          Statement Schedules:

          (i)  Financial Statements

               Reports of Independent Public Accountants

               Consolidated Balance Sheets - December 31, 1998 and December 31,
               1997

               Consolidated Statements of Operations for the years ended
               December 31, 1998 and 1997, the period March 19, 1996 through
               December 31, 1996 and the period January 1, 1996 through March
               18, 1996 (Venbo)

               Consolidated Statements of Comprehensive Loss for the years ended
               December 31, 1998 and 1997, the period March 19, 1996 through
               December 31, 1996 and the period January 1, 1996 through March
               18, 1996 (Venbo)

               Consolidated Statement of Changes in Shareholders' Equity for the
               years ended December 31, 1998 and 1997, the period March 19, 1996
               through December 31, 1996 and the period January 1, 1996 through
               March 18, 1996 (Venbo)

               Consolidated Statements of Cash Flows for the year ended December
               31, 1998 and 1997, the period March 19, 1996 through December 31,
               1996 and the period January 1, 1996 through March 18, 1996
               (Venbo)

               Notes to Consolidated Financial Statements

                                       44
<PAGE>
 
     (ii)  Financial Statement Schedules

          All financial statement schedules are omitted because the conditions
requiring their filing do not exist or the information required thereby is
included in the financial statements filed, including the notes thereto.


     (b)  Reports on Form 8-K

          None.


     (c)  Exhibits

     3.1       Certificate of Incorporation of the Registrant, as amended(2)
     3.2       By-laws of the Registrant(1)
     4.1       Form of certificate evidencing shares of Common Stock(1)
     4.2       Form of certificate evidencing Series A Redeemable Common Stock
               Purchase Warrants(1)
     4.3       Form of certificate evidencing Series B Redeemable Common Stock
               Purchase Warrants(1)
     4.4       Form of Unit Purchase Option between the Registrant and GKN
               Securities Corp.(1)
     4.5       Form of Redeemable Warrant Agreement between the Registrant and
               American Stock Transfer & Trust Company, as warrant agent(1)
     10.1      Amended and Restated 1992 Stock Option Plan(1)
     10.2      Form of Trust Agreement by and between Registrant and The Chase
               Manhattan Bank, N.A.(1)
     10.3      Form of Escrow Agreement by and among Registrant, Barry Goldin,
               Lawrence Burstein, John Cattier, Barry Ridings, Rio Bravo
               Inversiones, Ltd., Trinity Capital Corp. and American Stock
               Transfer & Trust Company(1)
     10.4      Form of Letter Agreement concerning conflicts of interest(1)
     10.5      Form of Letter Agreement concerning finder's fees(1)
     10.6      Form of Agreement relating to the vote by Affiliated Initial
               Stockholders on a Business 

                                       45
<PAGE>
 
               Combination and their waiver of the right
               to participate in a certain type of liquidation(1)
     10.7      Form of Agreement relating to the vote by Non-Affiliated Initial
               Stockholders on a Business Combination and their waiver of
               certain of their rights to participate in a certain type of
               liquidation(1)
     10.8      General and Administrative Services Agreement, dated as of
               September 1, 1993, by and between Registrant and Trinity Capital
               Corp.(1)
     10.9      Heads of Agreement dated October 30, 1995 among Bob's Industria e
               Comercio Ltda. ("BIEC"), Arnaldo Bisoni ("Bisoni"), Shampi
               Investments A.E.C. ("Shampi"), Registrant and Vendex do Brasil
               Industria e Comercio Ltda. ("Vendex")(2)
     10.10     Supplement to Heads of Agreement dated October 30, 1995 among
               BIEC, Bisoni, Shampi, Registrant and Vendex(2)
     10.11     Indemnification Agreement dated October 30, 1995 among
               Registrant, BIEC, Bisoni and Vendex(2)
     10.12     Trademarks Commitment dated October 30, 1995 with respect to the
               assignment of trademarks relating to Venbo's business from Vendex
               International N.V. to Shampi and Registrant(2)
     10.13     First Amendment to the Heads of Agreement dated January 18, 1996
               among BIEC, Bisoni, Shampi, Registrant and Vendex(2)
     10.14     Assignment and Transfer of Quotas and Other Covenants dated March
               19, 1996 by and among BIEC, Bisoni, Registrant, Vendex and
               Shampi(2)
     10.15     Conditional Assignment and Transfer of Trademark Rights dated
               March 19, 1996 between Registrant and Vendex International,
               N.V.(2)
     10.16     Pledge and Security Agreement dated March 19, 1996 by and among
               Shampi, Registrant, BIEC, Vendex and Vendex International,
               N.V.(2)
     10.17     Agreement dated March 19, 1996 by and among Coca-Cola Industrias
               Ltda., Recofarma Industria do Amazonas Ltda. and Venbo(2)
     10.18     Agreement dated January 8, 1996 by and between Hardee's Food
               Systems, Inc. and Venbo(2)
     10.19     Agreement to the Assignment and Transfer of Quotas 

                                       46
<PAGE>
 
               of Bigburger Sao Paulo Lanchonetes Ltda. dated June 10, 1996
               among Rucker, Theodoro Henrique da Silva, Registrant and Theodoro
               Henrique da Silva Junior(3)
     10.20     Agreement to the Assignment and Transfer of Quotas of Bigburger
               Goiania Lanchonetes Ltda. dated June 10, 1996 among Rucker,
               Theodoro Henrique da Silva, Registrant and Theodoro Henrique da
               Silva Junior(3)

     10.21     Exchange Agreement dated July 24, 1996 among Registrant,
               BigBurger Ltda., BigBurger Niteroi Lanchonetes Ltda., BigBurger
               Fortaleza Lanchonetes Ltda., BigBurger Aracaju Lanchonetes Ltda.,
               BigBurger Porto Alegre Lanchonetes Ltda., and BigBurger Recife
               Lanchonetes Ltda.(4)

     10.22     Stock Purchase Agreement dated July 23, 1997 by and between
               Registrant and AIG Latin America Equity Partners Ltd.
               ("AIGLAEP")(5)
     10.23     Stockholders' Agreement dated as of August 11, 1997 by and
               between Registrant, AIGLAEP and the stockholders listed on
               Schedule A thereto(5)
     10.24     Warrant Agreement dated as of August 11, 1997 by and between
               Registrant and AIGLAEP(5)
     10.25     Registration Rights Agreement dated as of August 11, 1997 between
               Registrant and AIGLAEP(5)
     21.1      Subsidiaries of Registrant(6)
     27.1      Financial Data Schedule

____________
(1)  Denotes document filed as an exhibit to Registrant's Registration Statement
     on Form S-1 (File No. 33-71368) and incorporated herein by reference.
(2)  Denotes document filed as an exhibit to Registrant's Registration Statement
     on Form S-1 (File No. 333-3754) and incorporated herein by reference.
(3)  Denotes document filed as an exhibit to Registrant's Current Report on form
     8-K dated June 24, 1996.
(4)  Denotes document filed as an exhibit to Registrant's Current Report on Form
     8-K-/A dated August 7, 1996.
(5)  Denotes document filed as an exhibit to Registrant's Current Report on Form
     8-K dated August 29, 1997.
(6)  Denotes document filed as an exhibit to Registrant's Annual Report on Form
     10-K for the year ended December 31, 1997.

                                       47
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

================================================================================

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                  ------------------------------------------

<TABLE>
<CAPTION>
                                                                Page
                                                                ----
<S>                                                             <C>
  Reports of Independent Public Accountants                     F-1
 
  Consolidated Balance Sheets                                   F-3
 
  Consolidated Statements of Operations                         F-4
 
  Consolidated Statements of Comprehensive Loss                 F-5
 
  Consolidated Statements of Changes in Shareholders' Equity    F-6
 
  Consolidated Statements of Cash Flows                         F-7
 
  Notes to Consolidated Financial Statements                    F-8
</TABLE>
<PAGE>
 
                    Report of Independent Public Accountants
                    ----------------------------------------

To the Shareholders of Brazil Fast Food Corp. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Brazil Fast Food
Corp. and subsidiaries (formerly Trinity Americas, Inc.) (a Delaware
corporation) as of December 31, 1998 and 1997, and the related consolidated
statements of operations, comprehensive loss, changes in shareholders' equity
and cash flows for the years ended December 31, 1998 and 1997, and the period
from March 19, 1996 through December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brazil Fast Food Corp. and
subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for the years ended December 31, 1998 and 1997,
and the period from March 19, 1996 through December 31, 1996, in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations,
has a net capital deficiency and has incurred negative cash flows from
operations that raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

New York, New York                                ARTHUR ANDERSEN LLP
March  26, 1999

                                      F-1
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Brazil Fast Food Corp. and Subsidiaries:

We have audited the accompanying statements of operations and cash flows of 
Venbo Comercio de Alimentos Ltda. for the period from January 1, 1996 through 
March 18, 1996. These financial statements are the responsibility of the  
Company's management. Our responsibility is to express an opinion on these 
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable 
assurance about whether the financial statements are free of material 
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by 
management, as well as evaluating the overall financial statement presentation. 
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the results of operations and cash flows of Venbo 
Comercio de Alimentos Ltda. for the period from January 1, 1996 through March 
18, 1996, in conformity with generally accepted accounting principles.

New York New York                     ARTHUR ANDERSEN LLP
August 1, 1997

                                      F-2
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)
                                        
================================================================================

                                     ASSETS
                                     ------
<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                                 ---------------------
                                                                            1998                      1997  
                                                                          ---------                 ---------- 
<S>                                                                     <C>                         <C>     
CURRENT ASSETS:                                                                                             
 Cash and cash equivalents                                             R$     817                   R$ 1,522
 Accounts receivable, net of allowance for doubtful                                                         
  accounts of R$187 and R$187                                               2,146                      3,197
 Inventories                                                                  660                        775
 Prepaid expenses and other  current assets                                   545                        594
                                                                           ------                     ------
                                                                                                            
   TOTAL CURRENT ASSETS                                                     4,168                      6,088
                                                                                                            
PROPERTY AND EQUIPMENT, NET                                                22,587                     23,613
                                                                                                            
DEFERRED CHARGES, NET                                                      12,162                     14,073
                                                                                                            
GOODWILL, NET OF ACCUMULATED AMORTIZATION OF R$508                              -                      5,386
                                                                                                            
OTHER RECEIVABLES                                                           2,715                          -
                                                                                                            
OTHER ASSETS                                                                    -                        194 
                                                                           ------                     ------
                                                                                                                
   TOTAL ASSETS                                                        R$  41,632                  R$ 49,354
                                                                         ========                    ======== 

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------
<CAPTION> 
<S>                                                                      <C>                        <C>      
CURRENT LIABILITIES:                                                                                         
 Notes payable                                                          R$  4,565                  R$  4,295 
 Accounts payable                                                           1,854                      2,697 
 Accrued expenses                                                           2,083                      1,874 
 Payroll and related accruals                                               2,397                      1,868 
 Taxes, other than income taxes                                             2,355                        672 
 Deferred income                                                              866                        910 
 Other                                                                        237                        513 
                                                                           ------                     ------ 
                                                                                                             
  TOTAL CURRENT LIABILITIES                                                14,357                     12,829 
                                                                                                             
NOTES PAYABLE, less current portion                                         5,194                        694 
                                                                                                             
DEFERRED INCOME, less current portion                                       2,084                      2,930 
                                                                           ------                     ------ 
                                                                                                             
  TOTAL LIABILITIES                                                        21,635                     16,453 
                                                                           ------                     ------  

COMMITMENTS AND CONTINGENCIES (Note 15)

SHAREHOLDERS' EQUITY:
 Preferred stock, $.01 par value, 5,000 shares authorized; no
  shares issued                                                               -                          -
 Common stock, $.0001 par value, 40,000,000 shares authorized;
  12,933,638 and 12,304,484 shares issued and outstanding                       1                          1 
 Additional paid-in capital                                                46,226                     44,698 
 Deficit                                                                  (25,902)                   (11,553)
 Accumulated comprehensive loss                                              (328)                      (245)
                                                                          -------                    ------- 
                                                                                                             
   TOTAL SHAREHOLDERS' EQUITY                                              19,997                     32,901 
                                                                          -------                    ------- 
   TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                           R$ 41,632                  R$ 49,354 
                                                                         ========                   ========  
 
</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-3
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except share amounts)
<TABLE>
<CAPTION>
 
 
                                                                              BFFC                    BFFC           VENBO       
                                                                       -------------------------  ------------  ---------------
                                                                                                 March 19, 1996  (predecessor)
                                                                                                    through     January 1, 1996
                                                                        Year Ended December 31,    December 31,    through
                                                                       -------------------------
                                                                          1998          1997           1996       March 18, 1996
                                                                       ----------   ------------  -------------   ---------------
<S>                                                                    <C>           <C>           <C>             <C>
NET OPERATING REVENUES:
 Restaurant sales                                                       R$ 63,666    R$ 73,008      R$56,381         R$15,001
 Franchise income                                                           1,939        1,475           651              161 
 Other income                                                               2,187        1,705         1,253              113 
                                                                           ------       ------        ------           ------ 
                                                                                                                              
TOTAL NET OPERATING REVENUES                                               67,792       76,188        58,285           15,275 
                                                                           ------       ------        ------           ------  
COSTS AND EXPENSES:
 Cost of restaurant sales                                                  23,453       25,861        20,479             6,430
 Restaurant payroll and other employee benefits                            15,389       17,490        13,412             3,231
 Restaurant occupancy and other expenses                                    7,316        7,532         4,645             1,085
 Depreciation and amortization                                              3,738        4,139         2,650               675
 Other operating expenses                                                   9,978       10,751         8,632             3,111
 Selling expenses                                                           3,700        4,719         3,599               880
 General and administrative expenses                                       10,161       10,745        10,128             3,609
 Impairment of goodwill                                                     5,076            -             -                 -
                                                                          -------       ------        ------            ------
                                                                                                                              
TOTAL COSTS AND EXPENSES                                                   78,811       81,237        63,545            19,021
                                                                          -------       ------        ------            ------
                                                                                                                              
(LOSS) FROM OPERATIONS                                                    (11,019)      (5,049)       (5,260)           (3,746)
INTEREST INCOME                                                               109           45           111             2,196
INTEREST EXPENSE                                                           (3,151)      (1,488)         (139)             (989)
FOREIGN EXCHANGE (LOSS) GAIN                                                 (288)         (23)            4               273
                                                                          -------       ------        ------            ------ 

(LOSS) BEFORE BENEFIT FROM
  INCOME TAXES                                                            (14,349)      (6,515)       (5,284)           (2,266) 
BENEFIT FROM INCOME TAXES                                                       -            -            46                 -  
                                                                          -------       ------        ------            ------  
                                                                                                                                
NET (LOSS)                                                             R$ (14,349)   R$ (6,515)    R$ (5,238)         R$(2,266) 
                                                                       ==========    =========      =========          ========  
                                                                                                               
NET (LOSS) PER COMMON SHARE                                                                                    
 BASIC AND DILUTED                                                      R$  (1.13)   R$   (.58)    R$   (.68) 
                                                                       ===========   =========     ==========

WEIGHTED AVERAGE COMMON
 SHARES OUTSTANDING:
  BASIC AND DILUTED                                                    12,678,990   11,326,428     7,696,106
                                                                       ==========   ==========     =========


</TABLE> 
         

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-4
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                                 (in thousands)

===============================================================================
<TABLE>
<CAPTION>
                                                                              BFFC                    BFFC           VENBO       
                                                                       -------------------------  ------------  ---------------
                                                                                                 March 19, 1996  (predecessor)
                                                                                                    through     January 1, 1996
                                                                        Year Ended December 31,    December 31,    through
                                                                       -------------------------
                                                                          1998          1997           1996       March 18, 1996
                                                                       ----------   ------------  -------------   ---------------
<S>                                                                    <C>           <C>           <C>             <C> 
Net Loss                                                                R$(14,349)     R$(6,515)      R$(5,238)       R$(2,266)

Other comprehensive (loss) income:
 Foreign currency translations adjustment                                     (83)         (252)             7            -
                                                                        -----------  ------------   ------------   --------------

Comprehensive Loss                                                      R$(14,432)     R$(6,767)       R$(5,231)      R$(2,266)
                                                                        ==========     =========     ===========    ============ 
</TABLE> 
                                        

   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-5
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
                      (in thousands, except share amounts)
<TABLE>
<CAPTION>
 
                                                                Additional      Retained         Accumulated                     
                                     Common Stock                Paid-In         Earnings      Comprehensive              
                             ---------------------------                                                                         
                               Shares         Par Value          Capital        (Deficit)            Loss          Totals       
                             -----------    ------------       -----------   --------------  ---------------   --------      
<S>                          <C>            <C>                <C>           <C>                <C>             <C>          
Balance,  January 1, 1996      2,964,861      R$   -           R$10,222      R$     200        R$               R$10,422     
                                                                                                     -                       
Issuance of shares for                                                                                                       
 acquisitions                  3,076,422           -             12,183               -               -           12,183     
                                                                                                                             
Issuance of shares for                                                                                                       
 private placements            4,363,201            1            16,125                -                -          16,126     
                                                                                                                             
Net loss                         -                  -                -            (5,238)               -          (5,238)      
                                                                                                                             
Cumulative translation                                                                                                       
adjustment                       -                  -                -                 -                 7              7      
                              -----------     ---------         -------       ------------         ----------     ---------
                                                                                                                             
Balance, December 31, 1996    10,404,484            1            38,530           (5,038)               7         33,500     
                                                                                                                             
Issuance of shares for                                                                                                       
  private placements           1,900,000           -              6,168               -              -             6,168     
                                                                                                                             
Net loss                               -           -                -             (6,515)            -            (6,515)     
                                                                                                                             
Cumulative translation                                                                                                       
  adjustment                           -           -                -                 -              (252)          (252)     
                               ----------     -------          ---------    ------------        -----------   ----------     
                                                                                                                             
Balance, December 31, 1997    12,304,484            1            44,698          (11,553)            (245)        32,901     
                                                                                                                             
Issuance of shares for                                                                                                       
 private placements              623,000            -             1,506               -               -            1,506     
                                                                                                                             
Exercise of options                6,154            -                22               -               -               22     
                                                                                                                             
Net loss                             -              -               -             (14,349)              -        (14,349)          
                                                                                                                             
Cumulative translation                              -                                                                        
adjustment                           -              -               -                 -                 (83)         (83)     
                              ----------      --------         ---------      -----------         -----------     ---------
                                                                                                                             
Balance, December 31, 1998    12,933,638       R$   1          R$46,226         R$(25,902)         R$  (328)     R$ 19,997        
                              ==========       =======         ========         ==========         ==========    =========     
                                                               

</TABLE> 
             

  The accompanying notes are an integral part of the consolidated financial 
                                  statements.

                                      F-6
<PAGE>
 
       BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

        CONSOLIDATED STATEMENTS OF CASH FLOWS
          (in thousands, except share amounts)
<TABLE> 
<CAPTION> 
===================================================================================================================================
                                                                              BFFC                    BFFC           VENBO       
                                                                       -------------------------  ------------  ---------------
                                                                                                 March 19, 1996  (predecessor)
                                                                                                    through     January 1, 1996
                                                                        Year Ended December 31,    December 31,    through
                                                                       -------------------------
                                                                          1998          1997           1996       March 18, 1996
                                                                       ----------   ------------  -------------   ---------------
<S>                                                                    <C>           <C>           <C>             <C> 

CASH FLOW FROM OPERATING ACTIVITIES:
 Net (loss)                                                            R$(14,349)     R$(6,515)      R$(5,238)      R$(2,266)
 Adjustments to reconcile net (loss) to cash
   (used in) provided by operating activities:
   Loss from impairment of goodwill                                        5,076            -              -              -
   Depreciation and amortization                                           3,735         4,139          3,171            497
   Loss on disposals                                                         656            -               -              -
 Changes in assets and liabilities, net of effects
  from acquisitions:
   Decrease (increase) in accounts receivable                               1,051       (1,630)          (682)           553
   Decrease (increase) in inventories                                         115           95           (250)         1,057
   Decrease (increase) in prepaid expenses and other current assets            49          673           (903)           112
   Decrease other assets                                                      194            -              -              -
   (Increase) other receivables                                            (2,715)           -              -              -
   Increase (decrease) in accounts payable and accrued expenses              (634)        (325)         2,603         (2,170)
   Increase (decrease) in payroll and related accruals                        529         (592)           352            189
   Increase (decrease) in taxes other than income taxes                     1,683         (245)           452            (71)
   (Decrease) increase in other liabilities                                  (320)          51         (2,062)        (1,044)
   (Decrease) increase in deferred income                                    (846)         186          3,654              -
   Other                                                                        -          524            (11)             -
                                                                           ------       ------         ------         ------ 

            CASH FLOWS (USED IN) PROVIDED BY
            OPERATING ACTIVITIES                                           (5,776)      (3,639)         1,086         (3,143)
                                                                         ---------     ---------       --------       ------
                                   

CASH FLOW FROM INVESTING ACTIVITIES:
 Payment for purchase of acquisitions,
     net of cash acquired                                                       -            -        (18,305)           -
 Additions to property and equipment                                       (3,905)      (1,788)        (7,377)           -
 Additions to deferred charges                                               (161)        (788)             -            -
 Proceeds from sale of property and equipment                                 790            -              -            -
 Proceeds from sale of deferred charges                                     2,131            -              -            -
 Decrease in restricted cash and investments                                    -            -          9,959            -
                                                                           ------       ------        -------         -------
            CASH FLOWS (USED IN) INVESTING
             ACTIVITIES                                                    (1,145)      (2,576)       (15,723)           -
                                                                           ------       ------        -------         -------
CASH FLOW FROM FINANCING ACTIVITIES:
 Proceeds from issuance of shares of common stock                           1,528        6,168         16,126              -
 Proceeds from issuance of notes payable                                    9,693        1,056          1,744              -
 Repayments of notes payable                                               (4,923)        (148)        (1,713)             -
 Net advances/repayments of bank overadvance facility                           -         (764)             -              -
 Increase in due to related parties                                             -            -              -          1,974
                                                                           ------        -----         ------          ----- 
            CASH FLOWS PROVIDED BY FINANCING
             ACTIVITIES                                                     6,298        6,312         16,157          1,974
                                                                           ------        -----         ------          ----- 
EFFECT OF FOREIGN EXCHANGE RATE                                               (82)        (131)             8              -
                                                                           ------        -----         ------          ----- 

NET (DECREASE) INCREASE IN CASH AND CASH
  EQUIVALENTS                                                                (705)         (34)         1,528         (1,169)
 
CASH AND CASH EQUIVALENTS AT BEGINNING
  OF PERIOD                                                                 1,522        1,556             28          1,169
                                                                           ------        -----         ------          ----- 
 
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                 $  817     R$ 1,522       R$ 1,556        R$   - 
                                                                           ======        =====         ======          ===== 

</TABLE>
  The  accompanying notes are an integral part of the consolidated financial
                                  statements.

                                      F-7
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 1 -  BUSINESS AND OPERATIONS

     Brazil Fast Food Corp. (formerly Trinity Americas Inc.) (the "Company") was
     incorporated in the State of Delaware on September 16, 1992, to serve as a
     vehicle to effect a merger, exchange of capital stock, asset acquisition or
     other similar business combination with an operating business. The Company
     was in the development stage until March 19, 1996.

     On March 19, 1996 (the "Closing"), the Company acquired all of the
     outstanding quotas (shares of capital stock) of Venbo from Bob's Industria
     e Comercio Ltda. ("BIEC") and Arnaldo Bisoni ("Bisoni" and with BIEC,
     collectively, the "Sellers") for $19,200 (the "Purchase Price") plus
     related acquisition costs, of which $16,700 was paid in cash at the Closing
     (inclusive of $100 which had been previously paid in October 1995 upon the
     parties' execution of the Heads of Agreement), with the balance of $2,500
     payable with interest at the rate of 1-1/2% per annum over LIBOR due 720
     days from the Closing. In addition, the Company acquired all of the
     trademarks relating to Venbo's business from Vendex International N.V., an
     affiliate of the Sellers, for $1,800 payable to BIEC with interest at the
     rate of 6 7/8% per annum in monthly installments equal to 4% of Venbo's net
     sales for each immediately preceding month. The Company's acquisition of
     the quotas and trademarks is hereinafter referred to as the "Acquisition".

     The Acquisition was treated for accounting purposes as a purchase and the
     consideration paid in excess of the net assets acquired was allocated to
     those net assets based on their fair market value. The unallocated amount
     was classified as goodwill (R$3,762) and amortized over a 20 year period
     (See Note 4).

     In order to raise sufficient cash to complete the Acquisition and to fund
     the Company's subsequent expansion strategy, the Company sold 3,115,701
     shares of its common stock to new investors in a private transaction (the
     "Private Placement") at $3.20 per share, resulting in net proceeds to the
     Company of approximately $10,000.

     Funding of the cash portion of the Purchase Price was derived from the
     following sources; (i) approximately $9,900 from the Company's own funds;
     (ii) $4,000 from a Brazilian subsidiary of Coca-Cola, which was paid to the
     Company concurrently with the consummation of the Acquisition, in
     consideration for Coca-Cola products being designated the exclusive soft
     drink products for all of the Company's restaurants for a ten-year term and
     for the Company's agreement to participate at its own expense in joint
     promotions and marketing programs with Coca-Cola during such term; and
     (iii) the balance of $2,800 from the proceeds of the Private Placement.

                                      F-8
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 1 -  BUSINESS AND OPERATIONS (cont'd)

     At the Closing, the Company issued 1,046,422 shares of its common stock to
     Shampi Investments A.E.C. ("Shampi") in exchange for the assignment by
     Shampi to the Company of Shampi's right to acquire the outstanding quotas
     of Venbo.

     As a result of the Acquisition and the Private Placement: (i) Venbo became
     a wholly-owned subsidiary of the Company, (ii) Shampi and the investors in
     the Private Placement, collectively, acquired approximately 58.4% of the
     outstanding common stock of the Company, (iii) designees of Shampi, being
     respectively, Peter VanVoorst Vader, Omar Carneiro da Cunha and Arnaldo
     Bisoni, became three members of the Company's Board of Directors, and (iv)
     the Company's name was changed to "Brazil Fast Food Corp.".

NOTE 2 -  MANAGEMENT PLANS REGARDING GOING CONCERN

     Since the acquisition of Venbo by the Company in 1996, the Company has
     sustained net losses totaling approximately R$25.8 million, has used cash
     flows of approximately R$27.8 million and, at December 31, 1998, has a net
     capital deficiency of approximately R$9.8 million. To date, the Company has
     been dependent upon its initial capital, additional equity and debt
     financing to fund its operating losses and capital expansion. Currently,
     the Company has no debt financing available under its current credit lines,
     other than the ability to finance certain acquisitions of property and
     equipment.

     Management plans to address its immediate and future cash flow needs by
     focusing on a number of areas including: the sale of Company-owned stores;
     reduction of expenses, including head count reductions; the expansion of
     its franchisee base, which would generate additional cash flows from
     royalties and franchise fees without significant capital expenditure; the
     introduction of new programs and menu expansion to meet the wants of the
     consumer. 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.

                                      F-9
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 2 -  MANAGEMENT PLANS REGARDING GOING CONCERN (cont'd)

          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 forebearance
          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 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 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 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Generally Accepted Accounting Principles ("GAAP")

          The financial statements have been prepared in accordance with GAAP
          used in the United States. Such accounting principles differ in
          certain respects from Brazilian GAAP, which is applied by the Company
          for annual financial statement preparation.  In addition, certain
          reclassifications and changes in terminology have been made to the
          financial statements previously issued in order that the present
          financial statements conform with reporting practices prevailing in
          the United States. Unless otherwise specified, all references in this
          financial statement to (i) "reais," the "real" or "R$" are to the
          Brazilian real (singular), or to the Brazilian reais (plural), the
          legal currency of Brazil, and (ii) "U.S. dollars" or "$" are to United
          States dollars.

          Use of Estimates

          The preparation of financial statements in conformity with generally
          accepted accounting principles requires management to make estimates
          and assumptions that affect the reported amounts of assets and
          liabilities and disclosure of contingent assets and liabilities at the
          date of the financial statements and the reported amounts of revenues
          and expenses during the reporting period. Actual results could differ
          from those estimates.

                                      F-10
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

          Geographic Area of Operations

          The Company operates primarily in Rio de Janeiro and San Paulo,
          Brazil, making it susceptible to changes in the economic, political,
          and social conditions in Brazil. Brazil has experienced political,
          economic and social uncertainty in recent years, including an economic
          crisis characterized by exchange rate instability and real
          devaluation, increased inflation, high domestic interest rates,
          negative economic growth, reduced consumer purchasing power and high
          unemployment. Under its current leadership, the Brazilian government
          has been pursuing economic stabilization policies, including the
          encouragement of foreign trade and investment and an exchange rate
          policy of free market flotation (see Note 17). No assurance can be
          given, however, that the Brazilian government will continue to pursue
          these policies, that these policies will be successful if pursued or
          that these policies will not be significantly altered. A decline in
          the Brazilian economy, political or social problems or a reversal of
          Brazil's foreign investment policy is likely to have an adverse effect
          on the Company's results of operations and financial condition.
          Additionally, inflation in Brazil may lead to higher wages and
          salaries for employees and increase the cost of raw material, which
          would adversely affect the Company's profitablity.

          Risks inherent in foreign operations include nationalization, war,
          terrorism and other political risks and risks of increases in foreign
          taxes or U.S. tax treatment of foreign taxes paid and the imposition
          of foreign government royalties and fees.

          Principles of Consolidation

          The consolidated financial statements include the accounts of the
          Company and its wholly-owned subsidiaries. All material intercompany
          accounts and transactions have been eliminated in consolidation.

          Constant Currency Restatement

          Through June 30, 1997 the consolidated financial statements have been
          indexed and expressed in currency of constant purchasing power by
          using a monthly index derived from the Indice Geral de Precos-Mercado
          (IGP-M). Since the implementation of the Real Plan in June 1994, the
          Brazilian economy has experienced a declining rate of inflation, with
          a cumulative inflation rate for the three-year period from July 1994
          to June 1997, as measured by the IGP-M of 54%. Based on the foregoing,
          management determined that Brazil ceased to be considered a
          hyperinflationary economy, as defined in Statement of Financial
          Accounting Standards ("SFAS") No. 52, and from July 1, 1997 no longer
          indexed its financial statements for constant currency purchasing
          power.

                                      F-11
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

          Constant Currency Restatement (cont'd)

          Through 1995, the Company used the Unidade Fiscal de Referencia
          ("UFIR") as the basis to reflect constant Brazilian reais. Starting in
          1996, the Company commenced using the IGP-M as the basis for
          indexation.
<TABLE>
<CAPTION>

           
                               Value of 1.0  Inflation for
                          Restatement Units     the period
         Year                   of One Real             %
         ----------       -----------------  -------------
         <S>                  <C>           <C>          
                                                         
                1992             0.0026691        1,129.4
                1993             0.0673164        2,422.1
                1994             0.6767000          905.3
                1995             0.8287000           22.5
                1996             0.9049000            9.2
            June 30, 1997        0.9510000           5.09 
</TABLE>

          The Company believes that the above indicies are an appropriate
          general price level inflation indications to be used under US GAAP.

          Items in the consolidated statement of operations were adjusted to the
          consolidated balance sheet by:

          . Allocating inflationary holding gains or losses on interest bearing
          monetary assets and liabilities to their corresponding interest income
          and expense captions;

          . Allocating inflationary holding gains and losses from other monetary
          items to their corresponding income and expense captions.

          The allocation of the inflationary gains and losses to their
          respective statement of operations' captions is shown in Note 11.

          Foreign Currency

          Transactions in foreign currency are recorded at the prevailing
          exchange rate at the time of the related transactions. Assets and
          liabilities denominated in foreign currencies are translated into
          Brazilian reais at exchange rates reported by the Central Bank of
          Brazil at the balance sheet date. The related transaction gains and
          losses are recognized in the statement of operations as they occur.

                                      F-12
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 3 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

          Cash and Cash Equivalents

          The company considers all highly liquid investments purchased with an
          original maturity of three months or less to be cash equivalents.

          Inventories

          Inventories, primarily consisting of food, beverages and supplies, are
          stated at the lower of cost or replacement value. Cost of inventories
          is determined principally on the average cost method.

          Property and Equipment

          Property and equipment are stated at price-level adjusted cost, less
          price-level adjusted accumulated depreciation until June 30, 1997 and
          historical cost less accumulated depreciation thereafter. Depreciation
          on property and equipment is provided using the straight-line method
          over the following estimated useful lives of the related assets:
<TABLE>
<CAPTION>
                                                 Years
                                                 -----
          <S>                                    <C>  
                                                      
          Buildings and building improvements       50
          Leasehold improvements                  5-10
          Machinery and equipment                10-15
          Furniture and fixtures                 10-15
          Vehicles                                  13 
</TABLE>

          Deferred Charges

          Deferred charges, which relate to leasehold premiums paid in advance
          for rented outlet premises are stated at price-level adjusted cost,
          less price-level adjusted accumulated amortization until June 30, 1997
          and historical cost less accumulated amortization thereafter.

          The amortization periods, which range from 5 to 20 years, are the
          terms of management's estimate of the related rental contracts
          including renewal options, which are solely at the discretion of the
          Company.

          Preopening Costs

          Labor costs and the costs of hiring and training personnel and certain
          other costs relating to the opening of new restaurants are expensed as
          incurred.

                                      F-13
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd):

          Revenue Recognition

          Initial franchise fee revenue is recognized when all material services
          and conditions relating to the franchise have been substantially
          performed or satisfied which normally occurs when the restaurant is
          opened. Annual franchise fees based on a percentage of the revenues of
          the franchisee are recognized when earned.

          Amounts received from the Coca-Cola agreement entered into as part of
          the Acquisition were recorded as deferred income and are being
          recognized over the term of the agreement. The Company accounts for
          other supplier exclusivity fees on a straight-line basis over the life
          of the related supply agreement.

          Advertising Expense

          The Company expenses advertising costs as incurred. Advertising
          expense was R$2,923, R$3,215 and R$2,612 for the years ended December
          31, 1998, 1997 and 1996, respectively.

          Income Taxes

          Deferred taxes are provided on the liability method on a full
          provision basis in accordance with SFAS No. 109.

          Long-lived Assets

          The Company adopted SFAS No. 121, "Accounting for the Impairment of
          Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
          effective January 1, 1996. SFAS No. 121 requires impairment losses to
          be recorded on long-lived assets used in operations when indicators of
          impairment are present and the undiscounted cash flows estimated to be
          generated by those assets are less than the assets' carrying amount.
          SFAS No. 121 also addresses the accounting for long-lived assets that
          are expected to be disposed of. The Company periodically reviews the
          recovery of long-lived assets in accordance with SFAS No. 121 based
          primarily upon expected future operating cash flows. See Note 4 for
          the discussion of an impairment of goodwill identified by the Company
          in the fourth quarter of 1998.

                                      F-14
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd):

     Net Income (Loss) Per Common Share

     In 1997 the FASB issued SFAS No. 128, "Earnings Per Share" effective for
     financial statements issued for periods ending after December 15, 1997.
     This statement establishes standards for computing and presenting earnings
     per share ("EPS"), replacing the presentation of currently required primary
     EPS with a presentation of Basic EPS and Diluted EPS on the face of the
     statement of operations. Under this new standard, Basic EPS is computed
     based on weighted average shares outstanding and excludes any potential
     dilution; Diluted EPS reflects potential dilution from the exercise or
     conversion of securities into common stock or from other contracts to issue
     common stock. There were no common shares equivalents outstanding as of
     December 31, 1998, 1997 and 1996 that would have had a dilutive effect on
     earnings for those respective years. As required by SFAS No. 128, the 1996
     net loss per share amounts have been restated to comply with this standard.

     Recently Issued Accounting Standards

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
     Income," which establishes standards for reporting and display of
     comprehensive income and its components (revenue, expenses, gains, and
     losses) in a full set of general-purpose financial statements. The Company
     adopted SFAS No. 130 in 1998.

     In June 1997, the FASB also issued SFAS No. 131 "Disclosures about Segments
     of an Enterprise and Related Information" which is effective for periods
     beginning after December 15, 1997. SFAS No. 131 establishes standards for
     reporting financial and descriptive information regarding an enterprise's
     operating segments. SFAS No. 131 has had no impact on the disclosures as
     the Company operates in one industry and geographic location.

     In June 1998, the FASB issued Statement of Financial Accounting Standards
     No. 133, Accounting for Derivatives and Hedging Activities ("SFAS No.
     133"). SFAS No. 133 establishes accounting and reporting standards of
     derivative instruments, including certain derivative instruments embedded
     in other contracts, and for hedging activities. The Company does not expect
     the adoption of this standard to have a material effect on the Company's
     results of operations, financial position or cash flows.

     In April 1998, the American Institute of Certified Public Accountants
     issued Statement of Position No. 98-5, Reporting the Costs of Start-Up
     Activities ("SOP 98-5"). SOP 98-5 requires that all non-governmental
     entities expense the costs of start-up activities, including organization
     costs, as those costs are incurred. SOP 98-5 is effective for financial
     statements for fiscal years beginning after December 15, 1998. Management
     has reviewed the provisions of SOP 98-5 and does not believe adoption of
     this standard will have a material effect on the Company's result of
     operations, financial position or cash flows.

                                      F-15
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 4 - IMPAIRMENT OF ASSETS

     In connection with the acquisition of Venbo described in Note 1, and the
     subsequent acquisitions of the Acquired Companies and BigBurger described
     in Note 5, the Company had recorded approximately $5.9 million of goodwill.

     In accordance with SFAS No. 121, the Company periodically evaluated the
     realizability of such amounts based primarily on undiscounted cash flows.
     In the fourth quarter of 1998, the Company determined, based on its
     evaluation of the undiscounted cash flows resulting from the business
     acquired in the acquisitions referred to above, negative cash flows from
     operations and operating losses incurred, among other factors, that an
     impairment in the realizability of the goodwill existed. Accordingly, an
     impairment of goodwill of R$5,076 was recorded in the accompanying
     consolidated statements of operations for the year ended December 31, 1998.

NOTE 5 - RESTRICTED CASH AND INVESTMENTS

     The Company, pursuant to the terms of its initial public offering ("the
     Offering"), held approximately $9.6 million as of March 19, 1996, which
     included interest income, in a trust account which was primarily invested
     in a short term U.S. Government Security. These funds were released, in
     connection with the terms of the Offering, upon the consummation of the
     Acquisition.

NOTE 6 - OTHER ACQUISITIONS

     On June 10, 1996, the Company acquired all of the outstanding quotas of,
     respectively, BigBurger Sao Paulo Lanchonetes Ltda. and BigBurger Goiania
     Lanchonetes Ltda., each a Brazilian corporation (collectively, the
     "Acquired Companies"), from Rucker Holding Corporation, a non-affiliated
     British Virgin Islands corporation ("Rucker"), for (i) R$264 and (ii)
     510,000 shares of the Company's common stock valued at R$1,799. The
     Acquired Companies owned and operated 7 "Mr. Theo" hamburger fast food
     restaurants in Sao Paulo and Goiania, Brazil. All of these restaurants have
     been rebranded and are now operating under the Company's "Bob's" tradename.
     This acquisition has been accounted for using the purchase method of
     accounting. In connection with this acquisition, the Company recorded
     approximately R$387 of excess purchase price over net assets acquired which
     was amortized over a 20-year period (See Note 4).

     On July 24, 1996, the Company acquired all of the operating assets of each
     of BigBurger Ltda. ("BigBurger") and five of its affiliates, all Brazilian
     corporations (collectively, the "BigBurger Companies"), for 1,520,000
     shares of the Company's common stock valued at R$6,751. The BigBurger
     Companies owned and operated 27 hamburger fast food restaurants, inclusive
     of outlets operated by franchisees, in 9 Brazilian states. All of these
     restaurants have been rebranded and are now operating under the Company's
     "Bob's" tradename. This acquisition has been accounted for using the
     purchase method of accounting. In connection with this acquisition, the
     Company recorded R$2,486 of excess purchase price over net assets acquired
     which was being amortized over a 20-year period (See Note 4).

                                      F-16
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 6 - OTHER ACQUISITIONS (cont'd)

     During 1997, the Company sold all of the stock in the Acquired Companies
     back to Rucker in order to transfer certain pre-acquisition liabilities
     back to the seller. Before the sales were made, essentially all of the
     operating assets were transferred to the Company and in essence, only the
     corporate shells were sold. As these sales were made at nominal value,
     there was no impairment in the acquired operating assets, and no writedown
     of the goodwill was necessary.

     The following unaudited proforma information presents a summary of the
     consolidated results of operations of the Company as if the above-mentioned
     acquisitions had occurred on January 1, 1996.
                                                               1996     
                                                             --------
     Net Operating Revenues                                  R$80,085
     Net Loss                                                R$(8,047)
     Loss per Common Share                                   R$  (.78)

     The unaudited proforma results have been prepared for comparative purposes
     only and include certain adjustments, such as the amortization of the
     excess of cost over net assets acquired and increased number of shares
     outstanding. No adjustment has been made for stores that had been closed
     for rebranding during this period. These pro-forma results do not purport
     to be indicative of the results of operations which actually would have
     resulted had the acquisitions been in effect on January 1, 1996 or of
     future results of operations of the consolidated entities.

NOTE 7 -  PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:
 
                                                         December 31,
                                                      -------------------
                                                        1998       1997
                                                      --------   --------
 
     Land                                             R$ 2,828   R$ 2,828
     Buildings and building improvements                 4,480      4,372
     Leasehold improvements                              6,007      6,976
     Machinery and equipment                             8,833     10,426
     Furniture and fixtures                              3,083      3,411
     Assets under capitalized leases                     2,869          -
     Vehicles                                              120        295
     Other                                                 858         50
                                                      --------   --------
                                                        29,078     28,358
     Less: Accumulated depreciation and amortization    (6,491)    (4,745)
                                                      --------   --------
                                                      R$22,587   R$ 23,613
                                                      ========   =========


                                      F-17
<PAGE>
 
                     BRAZIL FAST FOOD CORP. AND SUBSIDIARIES
  
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================
NOTE 8 -  DEFERRED CHARGES
 
     Deferred charges consists of the following:

                                                       December 31,
                                                    -------------------
                                                      1998       1997
                                                    --------   --------
     Leasehold premiums                             R$14,011   R$15,355
     Less: Accumulated amortization                   (1,849)    (1,282)
                                                    --------   --------
                                                    R$12,162   R$14,073
                                                    ========   ========

NOTE 9 -  ACCRUED EXPENSES
 
     Accrued expenses consists of the following:
 
                                                        December 31,
                                                    -------------------
                                                      1998       1997
                                                    --------   --------
     Rent payable                                   R$   525   R$   672
     Accrued utilities                                   132        176
     Accrued freight                                      17         18
     Accrued maintenance                                  55         84
     Accrued advertising                                 125        183
     Other accrued liabilities                         1,229        741
                                                    --------   --------
                                                    R$ 2,083   R$ 1,874
                                                    ========   ========
 
NOTE  10 - NOTES PAYABLE
 
     Notes payable consists of the following:
 
                                                        December 31,
                                                    -------------------
                                                      1998       1997
                                                    --------   --------
 
     Revolving lines of credit (a)                  R$ 3,331   R$   920
     Mortgages payable (b)                             3,291          -
     Equipment leasing facility (c)                    3,064        949
     Seller notes payable (d)                              -      3,047
     Other                                                73         73
                                                    --------   --------
                                                       9,759      4,989
     Less:  current portion                           (4,565)    (4,295)
                                                    --------   --------
                                                    R$ 5,194   R$   694
                                                    ========   ========

                                      F-18
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE  10 - NOTES PAYABLE (cont'd)

     At December 31, 1998, future maturities of notes payable are as follows:
 
          December 31,
         --------------
             1999               R$4,565
             2000                 4,414
             2001                   780
                                -------
                                R$9,759
                                =======

(a)  Provides for maximum borrowings of R$3,400; due on demand from various
     financial institutions; interest rates ranging from 35% to 80% per annum;
     collaterized by accounts receivables and various fixed assets; guaranteed
     by certain officers.

(b)  Due in full April 2000; interest payments due semi-annually; interest
     charged at 13% per annum; secured by certain real property; principal and
     interest indexed to the U.S. dollar,  thus susceptible to exchange rate
     variations due to the devaluation of the Real subsequent to year end, the
     principal balance would have been approximately R$4,704 at March 26, 1999
     based on the revaluation (See Note 17).

(c)  Provides for maximum borrowings of R$3,626 for information technology
     funding and R$2,417 for funding of restaurant equipment; payable in monthly
     installments together with interest with a final payment due November 2001;
     interest charged at rates ranging between 15% and 18% per annum:  secured
     by equipment under lease; principal and interest indexed to the U.S.
     dollar, thus susceptible to exchange rates variations due to the
     devaluation of the Real subsequent to year end, the principal balance would
     have been approximately R$4,473 at March 26, 1999 based on the revaluation
     (See Note 17).

(d)  Payable to former owners; interest at LIBOR plus 1 1/2 per annum due and
     paid on March 31, 1998.

The carrying amount of notes payable approximates fair value at December 31,
1998 because they are indexed to the U.S. dollar (See Note 17).

                                      F-19
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================
NOTE  11 - INFLATIONARY EFFECTS ON THE FINANCIAL STATEMENTS

     Through June 30, 1997, the consolidated financial statements have been
     indexed and expressed in currency of constant purchasing power by using a
     monthly index derived for the IGP-M. Effective July 1, 1997, management
     determined that Brazil ceased to be considered a hyperinflationary economy
     and no longer indexed its financial statements for constant currency
     purchasing power (See Note 3).

     Inflationary effects on the financial statements that are included in the
     consolidated statements of operations comprise principally net purchasing
     power gains. For the purposes of presenting the financial statements in
     their fully indexed form, realized inflationary gains and losses on
     non-interest bearing assets and liabilities have been allocated to the
     following captions of the statements of operations:

                                                            December 31,
                                                          ----------------
                                                           1997      1996

                                                          ------    ------
     Net operating revenues                               R$ 137    R$ 216
     Cost of restaurant sales                                174       179
     Restaurant occupancy and other expenses                  99        58
     Other operating expenses                                 56      (283)
     General and administrative expenses                      23        27
                                                          ------    ------
                                                          R$ 489    R$ 197
                                                          ======    ======
     
     The above stated gain and losses were generated from the following
      consolidated balance sheet accounts:
 
                                                            December 31,
                                                          ----------------
                                                           1997      1996
                                                          ------    ------
     Cash and cash equivalents                            R$  54    R$ 186
     Accounts receivable                                      72        43
     Other assets                                            528       262
     Accounts payable and accrued expenses                  (113)     (104)
     Payroll and related accruals                           (121)     (140)
     Taxes, other than income taxes                          (37)      (24)  
     Other liabilities                                      (680)     (321)
                                                          ------    ------
                                                          R$(297)   R$ (98)
                                                          ======    ======

                                      F-20
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================
NOTE  11 - INFLATIONARY EFFECTS ON THE FINANCIAL STATEMENTS (cont'd)

     Inflationary gains and losses on interest bearing assets and liabilities
     were allocated to the following captions in the consolidated statements of
     operations:
 
                                                       December 31,
                                                   -------------------
                                                     1997       1996
                                                   ---------   -------
 
     Gross interest income                         R$    195   R$  296
     Inflationary loss                                  (466)     (313)
                                                   ---------   -------
     Net interest loss                             R$   (271)  R$  (17)
                                                   =========   =======
 
     Gross interest expense                        R$ (1,272)  R$ (270)
     Inflationary gain                                   274       131
                                                   ---------   -------
     Net interest expense                          R$   (998)  R$ (139)
                                                   =========   =======
 
     Gross exchange (loss)                         R$    (23)  R$  (76)
     Inflationary gain                                     -        82
                                                   ---------   -------
     Net exchange (loss) gain                      R$    (23)  R$    6
                                                   =========   =======
 
     The inflationary gains and losses were generated from bank balances and
     bank overdrafts.
 
NOTE 12 - CASH FLOW INFORMATION
 
     Supplemental Disclosure of Cash-flow Information:
 
                                                  Year ended December 31,
                                            -----------------------------------
                                              1998         1997         1996
                                            --------     ---------    ---------
     Interest paid                          R$ 1,877     R$    747    R$    201
     Income taxes paid                      R$    -      R$     -     R$    -
                                            
     Details of Acquisitions:               
       Fair Value of assets acquired        R$    -      R$     -     R$ 42,217
       Liabilities assumed                        -             -       (11,487)
       Stock issued                               -             -       (12,183)
       Cash acquired                              -             -          (242)
                                            --------     ---------    ---------
       Net cash used in acquisitions        R$    -      R$  -        R$ 18,305
                                            ========     =========    =========

                                      F-21
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================
NOTE 13 - TAXATION

     Tax losses through December 31, 1998 relating to income tax and social
     contribution tax amount to R$31,348. Social contribution tax is a Brazilian
     tax levied on taxable income and is by its nature comparable to corporate
     income tax. At the date of Acquisition, Venbo had R$5,512 of loss
     carryforwards. The utilization of these pre-acquisition losses recognized
     subsequent to the Acquisition, first reduces to zero any goodwill related
     to the Acquisition, second reduces other non-current intangible assets to
     zero, and third reduces income tax expense.

     The accumulated tax loss position can be offset against future taxable
     income. Brazilian tax legislation restricts the offset of accumulated tax
     losses to 30% of taxable profits on an annual basis. These losses can be
     used indefinitely and are not impacted by a change in ownership of the
     Company.

     The following is a reconciliation of the amount of reported income tax
     benefit and the amount computed by applying the combined statutory tax rate
     of 33% to the loss before income taxes:
 
                                                         December 31,
                                              -------------------------------
                                                1998       1997       1996
                                              --------   --------  ----------
     Tax benefit at the combined 
      statutory rate                          R$(2,850)  R$(1,256)  R$ (1,743)
     Valuation allowances recorded against 
      net deferred tax assets                    2,850      1,256       1,743
     Other                                          -          -           46
                                              --------   --------  ----------
     Income tax benefit as reported in the 
      accompanying consolidated
      statement of operations                 R$    -    R$    -   R$      46
                                              ========   ========  ==========

                                      F-22
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 13 - TAXATION (cont'd)

     The following summarized the composition of deferred tax assets and
     liabilities and the related valuation allowance at December 31, 1998 and
     1997, based on temporary differences and tax loss carryforwards determined
     by applying social contribution tax and income tax rates of 8% and 25%,
     respectively.

                                         December 31,
                                      ------------------
                                        1998       1997
                                      --------   -------
     Deferred tax assets:            
      Tax loss carry forward          R$10,345   R$7,791
      Provision for contingencies          145        44
      Non-deductible reserves                -        16
      Deferred income                      246       140
                                        ------    ------
                                
       Total deferred tax assets        10,736     7,991
                                        ------    ------
                                
     Deferred tax liabilities:       
      Present value adjustment               8        13
      Fixed assets                       1,765     1,028
      Deferred charges                   2,959     2,944
                                        ------    ------
                                
     Total deferred tax liabilities      4,732     3,985
                                        ------    ------
                                
     Net deferred tax asset              6,004     4,006
                                
     Valuation allowance                (6,004)   (4,006)
                                        ------    ------
                                      R$    -    R$   -
                                        ======    ======

     The valuation allowance reflects the Company's assessment of the likelihood
     of realizing the net deferred tax assets in view of current operations and
     the Company's recurring losses.

NOTE 14 - RELATED PARTY TRANSACTIONS

     In 1996, the Company was charged $100 by an entity related to two of the
     Company's directors related to their assistance in the Company's financing
     activities.

                                      F-23
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================
NOTE 15 - COMMITMENTS AND CONTINGENCIES

Operating Leases

     The future minimum lease payments under operating leases with an initial or
     remaining noncancelable lease term in excess of one year at December 31,
     1998 are as follows:

          December 31,
          ------------
             1999                            R$ 4,303
             2000                               3,665
             2001                               3,257
             2002                               2,304
             2003                               1,484
          Thereafter                            5,142
                                             --------
                                             R$20,155
                                             ========

     Rent expense was R$4,925, R$5,361 and R$3,116 for the years ended December
     31, 1998, 1997 and 1996, respectively.

Other Commitments

     The Company has long term contracts (5 to 10 years) with all of its
     franchisees. Under these contracts the franchisee has the right to use the
     Bob's name and formulas in a specific location or area. The Company has no
     specific financial obligations in respect of these contracts.

NOTE 16- STOCKHOLDERS' EQUITY

     Preferred Stock

     The Board of Directors of the Company is empowered, without stockholder
     approval, to issue up to 5,000 shares of "blank check" preferred stock (the
     "Preferred Stock") with dividend, liquidation, conversion, voting or other
     rights which could adversely affect the voting power or other rights of the
     holders of the Company's common stock. As of December 31, 1998, no
     Preferred Stock had been issued.

                                      F-24
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 16- STOCKHOLDERS' EQUITY (cont'd)

     Common Stock

     In March 1996, the Company completed a Private Placement of 3,115,701
     shares of its common stock at $3.20 per share, resulting in net proceeds to
     the Company of approximately $10,000. In addition, 5,000 shares of the
     Company's common stock were redeemed in accordance with the terms of the
     Company's Articles of Incorporation.

     At the Closing of the Acquisition, the Company issued 1,046,422 shares of
     its common stock to Shampi valued at $3,349, in exchange for the assignment
     by Shampi to the Company of Shampi's right to acquire the outstanding
     quotas of Venbo.

     In June 1996, the Company issued 510,000 shares of its common stock to the
     Acquired Companies valued at R$1,799 for the acquisition of all of its
     outstanding quotas.

     In July 1996, the Company issued 1,520,000 shares of its common stock to
     the BigBurger Companies valued at R$6,751 for the acquisition of the
     operating assets of the BigBurger Companies.

     In September 1996, the Company closed a private placement of 621,250 units
     (the "Private Placement Units"). Each Private Placement Unit consisted of
     two shares of the Company's common stock and one warrant to purchase one
     share of common stock at an exercise price of $5.50 through September 20,
     2001. The Company received net proceeds exclusive of related expenses of
     approximately $4,854 (R$4,956).

     In fiscal 1997, the Company issued 1,900,000 shares of its common stock and
     warrants to purchase 250,000 shares of the Company's common stock at an
     initial exercise price of $4.00 per share, which exercise price and number
     of shares is subject to adjustment, in private placements, receiving net
     proceeds of R$6,168.

     In 1998, the Company issued 6,154 shares of common stock upon the exercise
     of stock options, receiving net proceeds of R$23.

     In 1998, the Company issued 623,000 shares of common stock in a private
     placement, receiving net proceeds of R$1,506.

                                      F-25
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================
NOTE 16- STOCKHOLDERS' EQUITY (cont'd)

     Stock Option Plan

     On September 18, 1992, the Company's Board of Directors and a majority
     interest of the shareholders of the Company approved the Trinity Americas
     Inc. 1992 Stock Option Plan (the "Plan").

     The Plan, as amended and restated, authorizes the granting of awards, the
     exercise of which would allow up to an aggregate of 500,000 shares of the
     Company's common stock to be acquired by the holders of said awards. The
     awards can take the form of Incentive Stock Options ("ISOs") or
     Non-qualified Stock Options ("NQSOs"). Options may be granted to employees,
     directors and consultants. ISOs and NQSOs are granted in terms not to
     exceed ten years and become exercisable as set forth when the award is
     granted. Options may be exercised in whole or in part. The exercise price
     of the ISOs must be at least equal to the fair market price of the
     Company's common stock on the date of grant or in the case of a plan
     participant who is granted an option price with at least 110% of the fair
     market value on the date of grant and the option must be exercised within
     five years from the date of grant. The exercise price of all NQSOs granted
     under the Plan shall be determined by the Board of Directors of the Company
     at the time of grant. No options may be granted under the Plan after
     September 17, 2002.

     The Company accounts for awards granted to employees and directors under
     Accounting Principles Board ("APB") opinion No. 25, "Accounting for Stock
     Issued to Employees", under which no compensation cost has been recognized
     for stock options granted. Had compensation costs of these stock options
     been determined consistent with SFAS No. 123 "Accounting for Stock Based
     Compensation", the Company's net loss and loss per share would have been
     the following pro forma amounts:
 
                                            1998        1997       1996
                                          ---------   --------   --------
     Net (loss) as reported               R$(14,349)  R$(6,515)  R$(5,238)
     Net (loss) pro forma                 R$(15,253)  R$(7,289)  R$(5,921)
     Net (loss) per share, as reported    R$  (1.13)  R$  (.58)  R$  (.68) 
     Net (loss) per share, pro forma      R$  (1.20)  R$  (.64)  R$  (.77)

     The effects of applying SFAS No. 123 in this pro forma disclosure are not
     indicative of future amounts.

     All transactions with individuals other than those considered employees, as
     set forth within the scope of APB No. 25, must be accounted for under the
     provisions of SFAS No. 123. During 1998, 1997 and 1996, no options were
     granted to outside consultants.

                                      F-26
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================

NOTE 16- STOCKHOLDERS' EQUITY (cont'd)

     Stock Option Plan (cont'd)

     Vesting terms of the options range from immediately vesting of all options
     to a ratable vesting period of 5 1/2 years. Option activity for the years
     ended December 31, 1998, 1997 and 1996 is summarized as follows:

<TABLE>
<CAPTION>
 
                                                          1998             1997               1996
                                                  ---------------- ------------------  -------------------
                                                          Weighted           Weighted             Weighted
                                                          Average            Average              Average
                                                          Exercise           Exercise             Exercise
                                                  Shares   Price   Shares     Price      Shares    Price
                                                 --------  -----  --------  ----------  --------  --------
<S>                                              <C>       <C>    <C>       <C>         <C>       <C>
      Options outstanding at beginning of year   560,000   $3.25   465,000  $   3.25(A)        -  $   -
      Granted                                    110,000    2.62    95,000       3.25    465,000      4.71
      Exercised                                   (6,154)   3.63         -          -          -         -
      Canceled                                   (50,000)   3.25         -          -          -         -
                                                 -------   -----   -------      -----    -------     -----
      Options outstanding at end of year         613,846    3.14   560,000       3.25    465,000      4.71
      Options exercisable at end of year         533,846    3.12   340,000       3.25    135,000      3.80
</TABLE>

     (A) On June 6, 1997, as a result of the decline in market price of the
     Company's common stock, the Board of Directors approved a repricing of all
     options outstanding prior to this date to an exercise price of $3.25 per
     share, the market value of the Company's common stock on that date.

     During 1998, the Board of Directors approved an increase in options
     available for grant under the Plan from 500,000 to 1,000,000.

     The weighted average fair values of options granted during 1998, 1997, and
     1996 were $1.30, $2.16, and $3.56, respectively.

     The fair value of each option grant is estimated on the date of grant using
     the Black Scholes option pricing model with the following weighted average
     assumptions used for grants in 1998, 1997 and 1996: (1) risk-free interest
     rate of 5.07%, 6.35% and 6.26%; (2) no expected divided yield, (3) expected
     lives of 5 years; and (4) expected stock price volatility of 50%, 76% and
     142%, respectively.

The options outstanding at December 31, 1998, range in price from $3.25 per
share to $2.52 per share and have a weighted average remaining contractual  life
of 2.93 years.

                                      F-27
<PAGE>
 
                    BRAZIL FAST FOOD CORP. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (in thousands, except share amounts)

================================================================================
NOTE 17- SUBSEQUENT EVENTS

     On January 13, 1999, the Brazilian Central Bank changed its exchange
     policy, discontinuing the "exchange band," through which it controlled the
     Brazilian Real fluctuation margin in relation to the U.S. dollar.
     Thereafter, the exchange rate was freely negotiated in the market. As a
     consequence of such change, the Real devalued from a rate of R$1.2087 to
     the U.S. dollar, at December 31, 1998 to R$1.7750 to the U.S. dollar at
     March 26, 1999.

                                      F-28
<PAGE>
 
                                   SIGNATURES
                                        
     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Rio de
Janeiro, Country of Brazil, on the    31st day of March, 1999.

                              BRAZIL FAST FOOD CORP.


                              By: /s/Peter van Voorst Vader
                                  -----------------------------
                                    Peter van Voorst Vader
                                    President and Chief
                                    Executive Officer

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

     Signature                Title                      Date
     ---------                -----                      ----

                              President and
                              Chief Executive
                              Officer
                              (Principal
                              Executive
                              Officer)
/s/Peter van Voorst Vader    and Director             March 31, 1999
---------------------------
Peter van Voorst Vader

                              Vice President -
                              Finance (Principal
                              Financial Officer
/s/Carlos Henrique            and Accounting
da Silva Rego                 Officer)                March 31, 1999
------------------------------                              
Carlos Henrique da Silva Rego


                              Chairman of
/s/Omar Carneiro da Cunha     the Board               March 31, 1999
------------------------------                               
Omar Carneiro da Cunha


/s/Ian S. Barnett              Director               March 31, 1999
------------------------------                              
Ian S. Barnett
<PAGE>
 
/s/Lawrence Burstein            Director              March 31, 1999
------------------------------                              
Lawrence Burstein




------------------------------  Director        
Jose Ricardo Bosquet Bomeny



------------------------------  Director
Carlos Gustavo Simas