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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2002
Commission file number: 0-23278

BRAZIL FAST FOOD CORP.

(Exact name of registrant as specified in its charter)


|                                                                                                           |  |                                                
|---------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization)                                    |  | 13-3688737
(I.R.S. Employer
Identification No.)
|                                                                                                           |  |                                                
|Av. Brasil
6431  Bonsucesso
CEP 21040-360
Rio de Janeiro, Brazil
(Address of principal executive offices) |  | N/A
(Zip Code)                                 

Registrants telephone number, including area code: 55 21 2564-4219

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

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

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

Common Stock, par value $.0001 per share
(Title of Class)



---



Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   
Yes   x   
No   o

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.   o

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).   
Yes   o   
No   x

The aggregate market value of the voting common stock held by
non-affiliates of the Registrant, computed by referenced to the average bid and
asked price of such common stock, as of the last business day of the
Registrants most recently completed second fiscal quarter, was $842,081.

The number of shares outstanding of the Registrants common stock is
7,569,718 (as of April 2, 2003).





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TABLE OF CONTENTS



|                                                                                  |                                            |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  |  | 
|PART I                                                                           
|FORWARD LOOKING STATEMENTS                                                       
|PART II                                                                          
|PART III                                                                         
|Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
|PART IV                                                                          
|SIGNATURES                                                                       
|CERTIFICATION                                                                    
|EXHIBIT INDEX                                                                    
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                       
|                                                                                  | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|EX-10.5 Master Franchise Agreement                                               
|EX-99.1 Certification of CEO & Acting CFO                                        



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Unless otherwise specified, all references in this report to Reais, the
Real or R$ are to the Brazilian Real (singular), or to the Brazilian Reais
(plural), the legal currency of Brazil, and U.S. Dollars or $ are to United
States Dollars. Unless otherwise specified, all financial statements and other
financial information presented herein are stated in R$ and 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 that
conducts business under the trade name Bobs, owns and operates, directly and
through franchisees, the second largest fast food hamburger restaurant chain in
Brazil. As of December 31, 2002, we had 303 restaurants, or points of sale,
including 34 kiosks and trailers.

We were incorporated in Delaware in 1992. Our executive offices are
located at Av. Brasil, 6431  Bonsucesso, CEP 21040-360, Rio de Janeiro,
Brazil. Our telephone number is 55 (21) 2564-6452.

The audit opinions of our independent public accountants contained
elsewhere in this report contain qualifications that, due to our recurring
losses from operations and our negative working capital position, there is
substantial doubt as to our ability to continue as a going concern. See Risk
Factors  Risk Relating to Operations and Managements Discussion and
Analysis of Financial Condition and Results of Operations for a further
discussion of these factors.

Recent Developments

Brazilian Economy:Beginning in mid-1999 and continuing to the end of
2000, the Brazilian economy experienced a recovery from its economic recession,
which began in late 1998, and showed substantial increases in agricultural and
industrial production, reduced unemployment, increased retail sales levels and
a positive trade balance. During this period, we experienced revenue growth.
This recovery ceased at the end of the third quarter of 2001 due to a number of
factors, including the September 11th terrorist attacks in New York City and
Washington, D.C., economic problems in Argentina, the increased cost of
commercial borrowing in Brazil and the devaluation of the Real against the U.S.
Dollar, as well as an energy crisis in Brazil that caused the Brazilian federal
government to implement electricity rationing and the financial speculation in
relation with the Brazilian Presidential Elections of October 2002. These
factors negatively affected the Brazilian economy and, in turn, adversely
affected our restaurant sales and the results of our operations. See Risk
FactorsRisks Relating to Brazil and Managements Discussion and Analysis of
Financial Condition and Results of Operations for a further discussion of
these factors.



| | (b) |  | FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
| | --- |  | ---------------------------------------------

Not applicable, due to the fact that we operate in one segment.



| | (c) |  | NARRATIVE DESCRIPTION OF BUSINESS
| | --- |  | ---------------------------------

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Restaurant Operations

As of December 31, 2002, Bobs had 303 points of sale, including 34 kiosks
and trailers. Of the 303 points of sale, we own and operate 61 and the
remaining 242 are franchises, which are each operated under the tradename
Bobs by a franchisee. For a description of our franchise program, see
Franchise Program. Approximately 200 of these points of sale are located in
Rio de Janeiro and São Paulo and the remaining points of sale are widely spread
throughout major cities in other parts of Brazil, except for three franchised
restaurants that opened in Portugal in November 2001. The largest number of
franchised operations outside of Rio and São Paulo are in Pernambuco, Santa
Catarina, Pará, Bahia, Espirito Santo and Brasilia. All points of sale serve a
uniform menu of hamburgers, chickenburgers, hot dogs, sandwiches, french fries,
soft drinks, juices, desserts and milk shakes. Selected points of sale also
serve coffee and/or beer. We are particularly known for our milkshakes and the
special spicing of our hamburgers. Our target clients are between the ages of
15 and 35 and come from all social groups.

Historically, our points of sale have been distinguishable from other
fast food operations due to our unique service design whereby customers would
place and pay for their food on one line and pick up their food on another
line. Cooks would prepare orders as read to them by the counter service
representative who took the order. We have changed this two line system into a
single line system, which has improved both the quality and speed of service,
while retaining our cooked-to-order philosophy. This change has been made
possible by the deployment of software which facilitates communication between
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, thereby assuring that each
customer will receive his food rapidly while permitting us to retain
cooked-to-order offerings.

Our points of sale are generally open all year round, seven days a week.
Historically, we have experienced increased sales each year during the
Brazilian summer months and during Brazils school holiday periods in the
months of December, January, February and July. We have also experienced
strong sales in December due to the Christmas holidays.

Our points of sale 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 points of sale remain open for the
after hours crowd. Our points of sale are not generally open for breakfast,
as results from test-marketing that we conducted at various times during 1999
and 2000 indicated that offering fast food breakfast is not economically
viable.

Our prices are consistently positioned at the same levels as those for
comparable products offered by our major competitors. We attempt to maintain
the overall cost of our meals at levels competitive with lunch prices offered
by popular street snack bars known as lanchonetes.

Originally, our points of sale were built as counter service facilities to
accommodate our initial primary clientele of teenagers. In keeping with our
current efforts to attract family-oriented customers, all of our points of sale
built since 1980 have included seating facilities. In addition, all of our
pre-1980 points of sale have now been renovated to update the decor, expand the
seating facilities and provide air conditioning. During 2001, we introduced a
new more modern and cheerful evolution of our logo and visible manifestations.
All new franchisees open their restaurants with this housestyle and all
existing restaurants are planned to be refitted by year ended 2003. This style
is carried through in the uniforms worn by our personnel, which are
occasionally modified to feature hats and shirts used in promotions.

For the past several years, we have been the exclusive provider of
hamburgers and related items at two of Brazils largest special events  the
Rio de Janeiro Carnivale, the one week festive period which precedes the advent
of Lent, and the Formula One Automobile Racing Championships. In addition, our

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food products are sold at other special events throughout Brazil,
including boat fairs, automobile fairs and State rodeos. Using custom
constructed trailers and moveable kiosks, we are able to offer most of our
products at temporary locations for the duration of each special event. In
addition to providing an additional revenue source, our visibility is enhanced
by signage that can be picked up via television coverage of the special event
and by reaching a consumer market where we may not have a permanent outlet. In
November 2001, our first foreign franchise was opened in Portugal pursuant to a
master franchise agreement, which provides that 30 franchises be opened in
Portugal over the next ten years.

The following table presents the openings and closings of both our owned
and operated restaurants and our franchised restaurants for the years ended
December 31, 2002, 2001 and 2000:

|                                   |                               |                                     |  |                    |     |         |  |         |     |  |  |     |     | 
|---------------------------------- | ----------------------------- | ----------------------------------- |  | ------------------ | --- | ------- |  | ------- | --- |  |  | --- | --- | 
|                                   |                               |                                     |  |                    |     |         |  | Years   |     |  |  |    
|                                   |                               |                                     |  | Ended December 31,
|                                   |                               |                                     |  |                   
|                                   |                               |                                     |  | 2002(a)            |     | 2001(a) |  | 2000(a)
|                                   |                               |                                     |  |                    |     |         |  |        
|Owned and operated restaurants(a): |                               |                                     |  |                    |     |         |  |         |     |  |  |    
|                                   | Opened during period          |                                     |  | 1                  |     |         |  | 1       |     |  |  | 7   |    
|                                   | Closed during period          |                                     |  | 1                  |     |         |  | 2       |     |  |  |    |    
|                                   | Sold to franchisees           |                                     |  | 5                  |     |         |  | 3       |     |  |  | 1   |    
|                                   | Bought from franchisees       |                                     |  |                   |     |         |  | 1       |     |  |  | 2   |    
|                                   | Open at end of period         |                                     |  | 55                 |     |         |  | 60      |     |  |  | 63  |    
|Franchised restaurants(a):         |                               |                                     |  |                    |     |         |  |         |     |  |  |    
|                                   | Opened during period          |                                     |  | 46                 | (b) |         |  | 40      | (c) |  |  | 29  | (d)
|                                   | Closed during period          |                                     |  | 5                  |     |         |  | 3       |     |  |  | 2   |    
|                                   | Sold to us by our franchisees |                                     |  |                   |     |         |  | 1       |     |  |  | 2   |    
|                                   | Open at end of period         |                                     |  | 210                |     |         |  | 169     |     |  |  | 133 |    
|                                   |                               |                                     |  |                    |     |         |  |         |     |  |  |    
|                                   |                               | Total Number of Restaurants of Sale |  |                    | 265 |         |  |         | 229 |  |  |     | 196 | 



---

|(a) |  | Does not include trailers and kiosks used for temporary locations during
2002, 2001 and 2000.                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Includes 5 of our owned and operated points of sale that were sold to a
franchisee during the year ended December 31, 2002.
|   
|(c) |  | Includes 3 of our owned and operated points of sale that were sold to a
franchisee during the year December 31, 2001.      
|   
|(d) |  | Includes 1 of our owned and operated points of sale that was sold to a
franchisee during the year ended December 31, 2000. 

The average guest check per customer for our owned and operated points of
sale for the years ended December 31, 2002, 2001 and 2000 was R$6.06, R$5.87
and R$5.22, respectively.

We strive to maintain quality and uniformity throughout both our owned and
operated and our franchised points of sale by publishing detailed
specifications for food products, food preparation, and service, by continuous
in-service training of employees and by field visits from our supervisors.
Quality control at each point of sale 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 our franchisees, a marketing manager in each of our
six primary geographic regions periodically reviews their operations and makes
recommendations to assist in the franchisees compliance with our
specifications.

Our quality control inspectors are also sent periodically to each
restaurant, whether owned by us or by one of our franchisees, to conduct a
review of the food stock. These inspectors also take samples of

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the water used at 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

Bobs is
Brazils second largest hamburger fast food operation. Although many of
our major competitors have been experiencing operational and franchise
difficulties, we continue to add points of sale and improve our revenues. Our
primary goal is to continue to increase our network of points of sale in
Brazil, where we believe fast food is a developing market, and to gain market
share by entering city markets where we are under-represented.

Brazils population of 169.8 million is the fifth largest in the world
(behind China, India, the United States and Indonesia). São Paulo, Brazils
largest city, has 10.4 million residents and a metropolitan area population of
17.9 million. The city of São Paulo is located within the state of São Paulo,
which has a population of 37.0 million. Rio de Janeiro, Brazils second
largest city, has 5.9 million residents and a metropolitan area population of
10.9 million. The city of Rio de Janeiro is located within the state of Rio de
Janeiro, which has a population of 14.4 million. Thirteen metropolitan areas,
including those of Rio de Janeiro and Sao Paulo, have populations in excess of
one million. According to IBGE, a non-affiliated consulting concern, in 2000
the average annual income of the Brazilian population was as follows:

|                     |  |                 |      |  
|-------------------- |  | --------------- | ---- | -
|Annual Income        |  | % of Population
|                     |  |                
|R$0 to R$3,264       |  |                 | 27.6 | %
|R$3,265 to R$8,159   |  |                 | 32.2 | %
|R$8,160 to R$16,319  |  |                 | 18.6 | %
|R$16,320 to R$32,639 |  |                 | 9.9  | %
|R$32,640 and above   |  |                 | 5.9  | %

According to Media Data 98, another non-affiliated consulting concern,
the fast food market is one of Brazils fastest growing business segments,
which could exceed 60,000,000 customers. Based upon the foregoing, we believe
there is significant opportunity for sales growth in the Brazilian fast food
market. To capitalize on this opportunity, we intend to make capital
expenditures of R$2,100,000 in 2003 to refurbish old points of sale, install
new signage, upgrade our equipment and to maintain the number of our company
owned and operated points of sale in Brazil of 61.

We are also focusing our growth efforts upon the development of new
franchises, especially in northern Brazil, where competition is not as intense
as in other urban areas. We will also seek to increase our number of
franchisees. We intend to enter into territory agreements with franchisees
which will require franchisees to commit to the development of several Bobs
points of sale in a particular region. We also intend to focus on developing
joint ventures with gasoline station retailers. See Franchise Program below
for a description of our franchise program and the terms of these joint
ventures.

We expect to continue to capitalize on our 50-year history in Brazil. As
our operations are based almost exclusively in Brazil, we believe we have the
capacity to understand and respond to consumer taste preferences in developing
additional local markets and test marketing new products and concepts. We
intend to utilize our customized trailers and moveable kiosks to maximize our
ability to cater to special events and temporary markets, and also to test
certain markets on a temporary basis. We also anticipate taking advantage of
the continuing construction and development of shopping malls and supermarkets
in Brazil, where fast food can be a significant profit center.

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In 1999, we initiated a computer-based delivery system for telephonic food
and beverage orders. As of December 31, 2002, our telephonic order delivery
system had been installed in almost all of our 61 owned and operated points of
sale.

Franchise Program

As of December 31, 2002, 242 of our 303 points of sale were owned and
operated by franchises. In 2002, for the six year in a row, Bobs received the
Quality Seal of the Brazilian Franchise Association.

Our franchise agreements generally require the franchisee of a traditional
Bobs restaurant to pay us an initial fee of $30,000 and 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 us 4% of
monthly gross sales in cooperative advertising fees. Our typical franchise
agreement also provides that the franchisee has the right to use the Bobs
trademark and formulas in a specific location or area and must use our approved
supplies and suppliers and must build each franchised outlet in accordance with
our specifications at approved locations. The term of the majority of our
franchise agreements is 10 years, with a few agreements having 5 year terms.
Our existing franchise agreements have an average remaining duration of
approximately eight years. Historically, upon expiration a franchise agreement
is renewed without the interruption of the franchisees business. We generally
have no financing obligations with respect to these franchise agreements.

At present, approximately 9 months elapse between our initial contact with
a prospective franchisee and the opening of a franchised point of sale. 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 franchise agreement is signed, which, among other matters, requires
the prospective franchisee to pay us a non-refundable sum equal to 50% of the
initial franchising fee to partially compensate us for the cost of a
three-month training program to familiarize the prospective franchisee with our
operations. Following mutual agreement as to the site of a new restaurant, a
definitive franchise agreement is signed, outlining the obligations and
responsibilities of each party, including the franchising fees and promotion
commissions to be paid to us. 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
we incur.

In some instances, the franchise agreements that we have negotiated with
existing franchisees accommodate specific requirements and characteristics of
the franchisee. We have entered into territory agreements with franchisees
located in areas where we have determined that it is in our best interest to
establish two or more stores within a geographic region. The territory
agreements incorporate the same terms and conditions of our franchise
agreements, but also provide for the franchisee to commit to opening an
agreed-upon number and type of store within a specified time-frame. In a
limited number of instances, we may grant franchisees exclusive territorial
rights if we believe such grants would further the development of new market
opportunities.

Under Brazilian law, we cannot dictate the price at which our franchisees
sell their products, although the prices charged by our franchisees generally
mirror the prices charged by our owned and operated points of sale.

Individuals wishing to own and operate a Bobs franchise are required to
submit an application. A steering committee formed by our top management
receives formal franchising proposals and reviews them to determine which
applications should be accepted. In addition to our existing 110 franchisees

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who, collectively, operated 242 points of sale, including 29 kiosks and 3
trailers, at December 31, 2002, we had signed final franchising contracts with
approximately 20 new franchisees to open and operate a like number of
additional points of sale, to be located in the states of Rio de Janeiro, Sao
Paulo, Mato Grosso do Sul, Brasilia, Parana, Pernambuco, Santa Catarina,
Maranhao and in the Federal District of Brasilia. The majority of these
additional points of sale will begin operations in the first semester of 2003.

As part of our growth strategy, we have begun entering into franchise
agreements requiring the franchisee to commit to the development of a fixed
number of Bobs points of sale. We are also focusing on developing joint
ventures with gasoline retailers to house Bobs points of sale in retail
gasoline stations. We contemplate that substantially all of these new
restaurant/gas stations, or joint sites, although housed at the gas stations,
will be built, owned and operated by our present and future franchisees and not
the gasoline retailer. We will then share a portion of the royalties received
from the franchisee of a particular joint site with its respective gasoline
retailer. In 2000, based on favorable testing of joint sites in 1999, we
entered into an agreement with Petrobras, one of the largest gasoline retailers
in Brazil, with approximately 7,000 locations, whereby Petrobras has agreed to
house a Bobs restaurant in 30 of its gas stations over the next two years.
Pursuant to this agreement, we and Petrobras will work together to select the
proper locations to open these joint sites. To date, six joint sites have been
opened in Petrobras gas stations.

We are currently testing several joint sites with other gasoline
retailers, including Shell, Forza, Ale, AGIP and Repsol. Our agreements with
each of these gasoline retailers do not establish a set number of joint sites
to be established. These agreements, like our standard franchise agreements,
merely set forth conditions to establish a joint site and do not limit the
number of joint sites that may be opened under the agreement. To date, Shell
has three joint sites in operation and we are negotiating an agreement with
them to house a specific number of joint sites in certain approved locations.
Forza, a gasoline retailer catering to the taxicab industry, has now thirteen
Bobs sites in operation, with the objective of housing 20 joint sites in
total. Alé, another gasoline retailer, has three joint sites and an agreement
with them for the creation of multiple joint sites has been signed.

In our first effort to expand our Bobs brand beyond Brazil, we entered
into a master franchisee agreement in 2000 to open franchised points of sale in
Portugal. This agreement requires the master franchisee to open 30 Bobs
retail points of sale over a 10-year period, of which no less than 5 must be
owned and operated by the master franchisee and the remaining may be owned and
operated by the master franchisees subfranchisees. The master franchisee will
assume financial responsibility for marketing the Bobs brand in Portugal.
Pursuant to this agreement, which contains substantially the same operational
guidelines as our standard Brazilian franchise agreement, the master franchisee
agreed to pay us a master franchisee fee of $200,000 minus the costs related to
registering the trademark Bobs in Portugal. In addition, we will receive
33%, or at least $10,000, of the initial fees charged to the Portuguese
franchisees by the master franchisee. The agreement provides that we will
receive from the master franchisee initial fees in the amount of $16,000 for
each of the five stores to be opened and operated by the master franchisee.
The master franchisee also agreed to pay us 20% of royalty fees charged to the
Portuguese franchisees. The first Portuguese franchise under this agreement
opened in November 2001 and two more have opened in 2002.

We generally retain a right of first refusal in connection with any
proposed sale of a franchisees interest.

Advertising and Promotions

We utilize television, radio, outdoors and a variety of promotional
campaigns to advertise our products. We also use colorful cardboard boxes
imprinted with the Bobs symbol for our premium

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sandwich offerings, replacing paper bags, thereby enhancing our quality
image. In 2001, we updated our logo and expect all of our points of sale to be
using the logo by end-2003.

We are constantly seeking to expand the breadth and quality of our product
offerings:



| |  |  | In 1997, we 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 our best selling offerings.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | In 1998, we launched the Bobs Dog, an extra-large hot dog
with two different sauces.                                                                                                                                                     
|
| |  |  | In 1999, we introduced a chocolate mousse pie dessert; bacon
was also added as an option to all of our sandwich offerings.                                                                                                                  
|
| |  |  | In 2000, we introduced a cheese, ham and egg sandwich and a
hot fudge topped ice cream sundae; we also introduced our MEGA
sized sandwiches and combination meals.                                                                        
|
| |  |  | In 2001, we introduced chicken nuggets; we also introduced a
new sandwich offering of bacon, egg and cheese.                                                                                                                                
|
| |  |  | In 2002 we introduced a 120 grams barbecue tasting hamburger
with barbecue sauce and a prune sundae and milkshake, as well as a
hamburger with cheddar cheese on a whole-wheat bun.                                                         

We and our advertising agency annually develop a multi-media marketing
program to advertise our restaurant network in its primary markets. We
periodically develop 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. We also offer a kids meal, which includes three food items and
a small packaged toy. Certain of our points of sale offer special services for
childrens birthday parties and also feature appearances by Bobi, our mascot.
All these programs are reinforced by visual tools, such as banners, posters
and place mats.

We keep franchisees informed of current advertising techniques and
effective promotions and make our advertising materials available to our
franchisees. Our franchisees are required, generally, to pay us 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. We commit approximately 4% of our system-wide gross sales to
marketing activities.

We are 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 store chains 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 program, which has been expanded to
encompass other areas of Brazil, is ongoing.

We intend to increase our marketing efforts in Sao Paulo in an effort to
capitalize upon our increasing number of stores in the number one city market
of Brazil.

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Sources of Supply

We and our franchisees have not experienced any material shortages of
food, equipment, fixtures, or other products which are necessary to restaurant
operations. We anticipate no such shortages of products and, in any event,
believe that alternate suppliers are available.

We purchase food products and packaging from numerous independent
suppliers. In selecting and periodically adjusting the mix of our suppliers, we
assess and continuously monitor the efficiency of their regional and national
distribution capabilities. To take advantage of volume discounts, we have
entered into centralized purchasing agreements. Food products are ordered by,
and delivered directly to each point of sale. Billing and payment for our
company owned and operated points of sale 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 our points of sale.
This centralized purchasing helps assure availability of products and provides
quantity discounts, quality control and efficient distribution.

We participate 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 with Mate Leao for a popular Brazilian brand of iced tea.
Pursuant to a 1996 agreement with a Brazilian subsidiary of Coca-Cola, we
agreed to sell, on an exclusive basis, Coca-Cola soft drink products in our
restaurants until 2006 in exchange for $4,000,000. This agreement was amended
in 2000 to extend the exclusivity period to 2008.

Trademarks

We believe that our trademarks and service marks, all of which are owned
by us, are important to our business.

Our trademarks and service marks have been registered in the Brazilian
trademark office. These trademarks and service marks expire at various times
from 2005 to 2012, when they are routinely renewed. The following table sets
forth our significant trademarks and service marks that are registered in the
Brazilian trademark office:

|                            |  |                  
|--------------------------- |  | -----------------
|Trademark or Service Mark   |  | Expiration Date  
|                            |  |                  
|Bobs                     |  | June 4, 2012     
|Tri kids                  |  | May 15, 2008     
|Bobs Burgão              |  | May 1, 2005      
|Bobi                      |  | May 1, 2005      
|Bobs Double Cheeseburger |  | October 24, 2010 
|Franfilé                  |  | November 23, 2009
|Big Bob                   |  | January 5, 2012  

Renewals of these trademarks and service marks generally have been
obtained prior to their expiration. We have begun the process of registering
the Bobs trademark in Portugal and we have a temporary license to use the
trademark in our franchised points of sale prior to such registration.

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Competition

In terms of the number of points of sale, we are the second largest
hamburger food service organization in Brazil. Each of our restaurants is in
competition with other food service operations within the same geographical
area. We compete 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, we believe that we and McDonalds are the market
leaders in the hamburger fast food business in Rio de Janeiro and São Paulo. McDonalds
Brazilian points of sale accounted for substantially all of the balance of
this market.

As of December 31, 2002, McDonalds had approximately 1,251 Brazilian
points of sale, including 670 kiosks. As of December 31, 2001 and 2000,
McDonalds had approximately 1,174 and 1,095 Brazilian points of sale,
respectively. As of December 31, 2002,2001 and 2000 Pizza Hut had 62 fast
food pizza points of sale in Brazil. Dominos Pizza had 23 points of sale in
Brazil as of December 31, 2002 and 20 and 13 points of sale as of December 31,
2001 and 2000, respectively. Arbys closed all points of sale in Brazil during
1999. Habibs, a Middle Eastern fast food chain, had approximately 200 points
of sale in Brazil as of December 31, 2002, as compared with approximately 170
and 157 as of December 31, 2001 and 2000, respectively.

Our competitive position is enhanced by our 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 our
restaurants and our relatively long history in Brazil. We believe that the use
of moveable trailers and kiosks, which are not utilized by our competitors,
affords us an advantage over our competitors. We also believe that, as a
Brazilian-based company, we have the advantage over our non-Brazilian
competitors of being able to readily understand and respond to local consumer
preferences.

Personnel

As of December 31, 2002, we, including our franchisees, employed 6,544
persons, of whom 1,596 were employed in our owned and operated restaurants.
The total number of full-time employees at that date was 1,704 of which 98 were
temporary personnel. Since 1999, we have reduced the number of hours in each
workers shift, from 8 hours to 6 hours, in order to increase productivity.

Our employee relations historically have been satisfactory. We are not a
party to any collective bargaining agreements. However, we have agreed to be
bound by the terms, as they may be applicable to our employees, of agreements
negotiated on a city-by-city basis by trade associations of hotel, restaurant
and fast food owners and operators, of which we are a member.



| | (d) |  | FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
| | --- |  | ----------------------------------------------------------------------------

Not applicable

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FORWARD LOOKING STATEMENTS

This report contains forward-looking statements including statements
regarding, among other items, business strategy, growth strategy and
anticipated trends in our business, which are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
The words believe, expect and anticipate and similar expressions identify
forward-looking statements, which speak only as of the date the statement is
made. These forward-looking statements are based largely on our expectations
and are subject to a number of risks and uncertainties, some of which cannot be
predicted or quantified and are beyond our control. Future events and actual
results could differ materially from those set forth in, contemplated by, or
underlying the forward-looking statements. Statements in this report,
including those set forth in Risk Factors, describe factors, among others,
that could contribute to or cause such differences. In light of these risks
and uncertainties, there can be no assurance that the forward-looking
information contained in this prospectus will in fact transpire or prove to be
accurate. Investors are cautioned that such forward looking statements involve
risks and uncertainties including without limitation the following:

Risks Relating to Operations



| |  |  | We have a history of significant net losses and we may not be
profitable in the future; We may need to seek the forbearance of
creditors in the future.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

We incurred net losses of R$11,210,000, R$ 8,250,000 and R$ 3,351,000 for
the years ended December 31, 2002, 2001 and 2000, respectively. Our
accumulated deficit at December 31, 2002 was R$ 59,614,000 and our working
capital deficit at such date was R$ 14,238,000. There is no assurance that our
future operations will become profitable. We may continue to report net losses
for the foreseeable future, which could adversely affect our ability to service
our debt or finance our business operations in the future.

In order to sustain our operations, we have, in the past, been dependent
upon the continued forbearance of our creditors. While we believe that we are
currently in compliance with our agreements with creditors, there can be no
assurance that we will not be forced to seek the forbearance of our creditors
in the future.



| |  |  | Our independent auditors report raises uncertainties about our
ability to continue as a going concern; Need for additional financing.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------

The reports of Arthur Andersen S/C, the independent auditors of our
consolidated financial statements for the years ended December 31, 2000 and
1999, and of Grant Thornton, the independent auditors of our consolidated
financial statements for the years ended December 31, 2002 and 2001, recites
that our recurring losses from operations and negative working capital raise
substantial doubt about our ability to continue as a going concern. Our plans
to continue as a going concern, discussed elsewhere in this report, focus on
efforts to raise additional capital and increase our cash flow. We are
currently working to evaluate strategic alternatives that will enable us to
obtain the funds necessary to continue our business operations. At this time,
we cannot state with any degree of certainty whether such funding will be
available to us and, if available, that the source of such funding would be
available on terms and conditions acceptable to us. Any potential sources of
additional financing may be subject to business and economic conditions outside
of our control. If we do not obtain the funds we need to pay our debt
obligations or operating expenses, we may need to curtail our operations or we
may be forced to evaluate other alternatives to continuing our present
operations. See Managements Discussion and Analysis of Financial Condition
and Results of Operations  Liquidity and Capital Resources.

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| |  |  | The composition of our board of directors is controlled by the
parties to a stockholders agreements which restrict our ability to
direct certain aspects of our business and operations
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On August 11, 1997 we entered into a stockholders agreement (the 1997
Stockholders Agreement) with AIG Latin America Equity Partners, Ltd.,
referred to herein as AIGLAEP, and our then executive officers and directors,
and certain of their affiliates, as a condition to the closing of a stock
purchase agreement with AIGLAEP, pursuant to which AIGLAEP purchased 375,000
shares of our common stock and warrants to purchase 62,500 shares of our common
stock.

Pursuant to the terms of the 1997 Stockholders Agreement, each of the
parties to the agreement agreed, among other things, to vote its respective
shares of our common stock to elect as directors one designee of AIGLAEP, two
designees of Shampi Investments A.E.C., two designees of Lawrence Burstein and
certain other of our former executive officers and directors, and one designee
of BigBurger Ltda.

The 1997 Stockholders Agreement provides that if we fail to achieve 75%
of our projected cumulative EBITDA (earnings before interest, taxes,
depreciation and amortization), as set forth in the 1997 Agreement, for each of
the periods from January 1, 1997 to December 31, 1999, 2000 or 2001,
respectively, AIGLAEP could appoint such number of its designees which,
together with an expansion of the board and the filling of vacancies created by
the resignation of certain directors serving at such time, would then
constitute a majority of our board of directors, thereby effecting a change in
our control.

We failed to achieve the performance targets for the year ended December
31, 2000. Following negotiations with AIGLAEP, the 1997 Stockholders Agreement
was amended on March 14, 2001, to provide, among other things, for the
suspension, until the completion of our audited financial statements for the
year ended December 31, 2002, of AIGLAEPs right to appoint a majority of our
board of directors. In partial consideration of AIGLAEPs agreeing to the
suspension and possible termination of its right to take control of our board
and certain of its prior approval rights, we issued to AIGLAEP warrants to
purchase 35,813 shares of our common stock at an exercise price of $5.00 per
share and reduced the exercise price of additional warrants to purchase 64,187
shares of our common stock held by AIGLAEP to $5.00 per share. Further, certain
of our shareholders agreed to grant AIGLAEP an option to purchase an aggregate
of 40,000 shares of our common stock held by such shareholders (and among them
as they shall agree) at an exercise price of $1.50 per share.

The amendment to the 1997 Stockholders Agreement provides that if certain
economic performance targets, based on our results of operations for the year
ending December 31, 2002 and set out in the amendment to the 1997 Stockholders
Agreement, are met, or if AIGLAEP at any time owns less than 187,500 issued and
outstanding shares of our common stock, subject to any adjustments for any
stock split or restructuring, AIGLAEPs right to take control of our board of
directors and certain of its prior approval rights will terminate. If, however,
we fail to meet these performance targets, our chief executive officer must
promptly resign and our board of directors will be required, except as limited
by their fiduciary obligations, to adopt recommendations for improving our
financial performance as may be proposed by a committee of the board of
directors composed of representatives of AIGLAEP and certain other investors
who purchased our equity securities in a private offering in March 2001.

As reflected in the financial statements contained elsewhere in this
report, we failed to meet the original performance targets for the year ended
December 31, 2002. However, the amendment to the 1997 Stockholders Agreement
contains a provision that requires the parties to renegotiate the performance
targets in good faith in the event that (i) the Brazil SELIC central bank rate
exceeds an average of 18% for a continuous period of ninety business days or
(ii) there is a devaluation of the Brazilian Real against the US dollar
exceeding 10% over any three-month period. Both such events have occurred
since the amendment. However, due to the fact that our request to renegotiate
the performance

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targets in good faith did not receive a response, we believe that the
performance targets are no longer applicable.

On May 15, 2002, we entered into an additional stockholders agreement
(the 2002 Stockholders Agreement) with Gustavo Figueredo Bomeny and CCC
Emprendimentos e Participacoes Ltd. (the New Investors) and certain of our
current investors, namely BigBurger Ltda., Jose Ricardo Bousquet Bomeny, Omar
Carneiro da Cunha, Seaview Venture Group, Peter van Voorst Vader and Shampi
Investments A.E.C., as a condition to the closing of a stock purchase agreement
with the New Investors, pursuant to which the New Investors purchased 3,700,000
shares of our common stock.

Pursuant to the terms of the 2002 Stockholders Agreement, each of the
parties to the agreement agreed, among other things, to vote its respective
shares of our common stock to elect as directors one designee of Omar Carneiro
da Cunha, one designee of Lawrence Burstein, one designee of BigBurger Ltda.
and two designees of the New Investors. The parties to the 2002 Stockholders
Agreement also agreed that, with regard to certain matters that may arise at
our Annual Stockholders Meetings, all of their shares of common stock will be
voted in accordance with the instructions of a majority of the total shares of
common stock held by such parties. The 2002 Stockholders Agreement, by its
terms, is subject to the terms of the 1997 Stockholders Agreement.



| |  |  | Our success depends on our ability to compete with our major
competitors in the fast food industry
| | - |  | --------------------------------------------------------------------------------------------------

The success of our business is dependent upon our ability to compete with
other restaurants and fast food chains. To compete, we may be required to
spend significant funds on marketing and promotions and on developing and
offering new products, while maintaining the prices we charge our customers.
Many of our competitors, like McDonalds, have vastly greater over-all
financial and other resources available to them than we do. We may not have
the resources necessary to compete effectively, which may cause consumers to
prefer the products of our competitors. As a result, we could experience a
decrease in revenues which would have an adverse impact on our business and
operations.



| |  |  | The fast food industry may be adversely affected by current value
pricing trends
| | - |  | ----------------------------------------------------------------------------------

In order to remain competitive, we are 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. There can
be no assurance that the use of value pricing strategies will stop. If
companies were to continue to implement value pricing, we may be forced to
reduce our sales prices or maintain our prices and perhaps lose customers,
either of which would cause a reduction in our revenues.



| |  |  | Our future success is dependent upon the success and expansion of
our franchise program
| | - |  | ---------------------------------------------------------------------------------------

A portion of our revenues are attributable to the fees we collect from our
franchisees. To improve our revenues in the future, we have developed a growth
strategy that includes increasing our number of franchised points of sale.
This growth strategy is substantially dependent upon our ability to attract,
retain and contract with qualified franchisees and the ability of these
franchisees to open and operate their Bobs points of sale successfully. In
addition, our continued growth will depend in part on the ability of our
existing and future franchisees to obtain sufficient financing or investment
capital to meet their market development obligations. If we experience
difficulty in contracting with qualified franchisees, if franchisees are unable
to meet their development obligations or if franchisees are unable to operate
their

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points of sale profitably, the amount of franchise fees paid to us by our
franchisees would decrease and our future operating results could be adversely
affected.



| |  |  | We are subject to extensive regulatory requirements applicable to
the food service industry
| | - |  | -------------------------------------------------------------------------------------------

Both we and our 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
our or our franchisees failure to comply with applicable regulations could
interrupt the operations of the affected restaurant and inhibit our or their
ability to sell products. Both we and our franchisees are also subject to
Brazilian federal labor codes, which establish minimum wages and regulate
overtime and working conditions. Changes in such codes could result in
increased labor costs that could cause a reduction in our operating income. We
are also subject to Brazilian federal franchising laws applicable to franchise
relationships and operations. Changes in these or any other regulations may
contain requirements that impose increased burdens on our business, which may
adversely affect our results of operations. We cannot assure you that we will
be able to deal successfully with any potential new or amended regulations.

Risks Relating to Brazil



| |  |  | Our operations are subject to changes in Brazils economy
| | - |  | ---------------------------------------------------------

In March 1994, the Brazilian government introduced an economic
stabilization program, known as the Real Plan, intended to reduce the rate of
inflation by reducing certain public expenditures, collecting liabilities owed
to the Brazilian 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 that year. The Real Plan resulted in a
substantial reduction in Brazils rate of inflation, which declined from
2,489.11% per annum in 1993 to 10.4% per annum in 2002. With the exception of
a few months in 1999, the Real Plan also caused the exchange rate between the
Real and the U.S. Dollar to remain relatively stable from 1994 to 2000.

Although Brazils economy was expected to expand from 2001 onwards, a
number of factors limited this expansion, including the September 11th
terrorist attacks in New York City and Washington, D.C., economic problems in
Argentina, the increased cost of debt in Brazil, the devaluation of the Real
against the U.S. Dollar and an energy crisis in Brazil that caused the
Brazilian federal government to implement electricity rationing, and resulted
in a rate of inflation of 10.4% and a 18.7% devaluation of the Real against the
U.S. Dollar for the year ended December 31, 2001. To reduce inflation, the
Central Bank of Brazil increased interest rates by over 18% for the year ended
December 31, 2001. The instability in the Brazilian economy continued during
2002, principally due to speculation on the Brazilian presidential crisis and
the ongoing economic weakness in the United States, resulting in a rate of
inflation of 25.3% and a devaluation of 52.3% for the year ended December 31,
2002.

The economic stabilization program remains incomplete during the tenth
year of the Real Plan. There can be no assurance that changes or additions to
this economic program will be any more successful than previous programs in
reducing inflation over the long term. Accordingly, periods of substantial
inflation may continue to have significant adverse effects on the Brazilian
economy, interest rates and on the value of the Real. These adverse effects
could cause our costs and expenses to increase. If we are not able to
counteract these increased costs and expenses by increasing our sales prices,
we may experience lower demand for our products and a decline in revenues.

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| |  |  | Currency fluctuations between the Real and the U.S. Dollar will
have a direct impact on our financial condition and our results of
operations
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------

Fluctuations in the exchange rates between the Brazilian Real and the U.S.
Dollar have a significant impact on our financial condition and our results of
operations. For example, financing costs on our U.S. Dollar-denominated debt,
which are paid by us with Reais, would increase substantially as the Real
devalues against U.S. Dollars. Similarly, most of the products and raw
materials we purchase are, or contain, commodities that are denominated in U.S.
Dollars, such as plastic cups, bread (which includes wheat grown in the United
States), meat and chicken. Our costs to purchase these products and raw
materials rise significantly when the Reais used to pay for them must be
converted into U.S. Dollars using the current exchange rate. If we cannot
raise our selling prices to accommodate increases in the cost of these products
and raw materials, our profit on these products and raw materials will
decrease.



| |  |  | Our business may be affected by political and constitutional
uncertainty in Brazil
| | - |  | ----------------------------------------------------------------------------------

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-elect in 1985 and the
resignation of another president in 1992 in the midst of impeachment
proceedings, as well as rapid turnover at and immediately below the cabinet
level, have adversely affected the implementation of consistent economic and
monetary policies. 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. 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. Mr. Fernando Henrique Cardoso, who
was re-elected to a second four-year term as president in October 1998,
continued to pursue the adoption of free market and economic liberalization
measures similar to those undertaken prior to his re-election. However, after
the October elections of 2002, in which Mr. Luiz Inácio Lula da Silva was
elected president, there can be no assurance that the necessary measures will
continue to be pursued and will be adopted or, if adopted, that they will be
successful. Failure to adopt economic reform measures could adversely impact
Brazils economy and inhibit our ability to sell products, which could impair
our results of operations.



| |  |  | Controls on foreign investments may limit our ability to receive
capital from our Brazilian operating subsidiary
| | - |  | ----------------------------------------------------------------------------------------------------------------

Brazil generally requires the registration of foreign capital invested in
Brazilian markets or businesses. Thereafter, any repatriation of the foreign
capital, or income earned on the foreign capital investment, must be approved
by the Brazilian government. In the past, the Brazilian government has also
imposed temporary restrictions on foreign capital remittances abroad when
Brazils foreign currency reserves decline significantly. Although approvals
on repatriation are usually granted and we know of no current restrictions on
foreign capital remittances, there can be no assurance that in the future
approvals on repatriation will be granted or restrictions or adverse policies
will not be imposed. If the Brazilian government delays or refuses to grant
approval for the repatriation of funds or imposes restrictions on the
remittance of foreign capital, the ability of our Brazilian operating
subsidiary, Venbo Comercio de Alimentos Ltda., to transfer cash from our
operations out of Brazil may be limited, which would prevent us from paying our
non-Brazilian debts and accounts payable. Any defaults on these obligations
may cause the acceleration of such obligations or require us to pay penalties.

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Risks Relating to Our Common Stock



| |  |  | Our common stock has been delisted from The Nasdaq SmallCap Market
| | - |  | ------------------------------------------------------------------

Our common stock was delisted from The Nasdaq SmallCap Market on March 11,
2002. As a result, our common stock is now quoted on the OTC Bulletin Board,
which may further reduce the already thin trading market of our common stock.
In addition, the delisting from The Nasdaq SmallCap Market may significantly
impair our ability to raise additional funds to operate our business.

Risk Relating to Arthur Andersen



| |  |  | Our Use of Arthur Andersen LLP as our Independent Auditor May Pose
Risks to Us and Limit Your Ability to Seek Potential Recoveries from
Them Related to Their Work.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our consolidated financial statements as of, and for, each of the three
years in the period ended December 31, 2000 were audited by Arthur Andersen
LLP. On June 15, 2002, Arthur Andersen was convicted on a federal obstruction
of justice charge arising from the governments investigation of Enron
Corporation. Arthur Andersen has stated publicly that it intends to appeal
that conviction, but also ceased providing auditing services to public
companies as of August 31, 2002.

SEC rules require us to present our audited financial statements in
various SEC filings, along with Arthur Andersens consent to our inclusion of
its audit report in those filings. Due to the cessation of Arthur Andersens
auditing practice (and other businesses), it is likely that Arthur Andersen
will be unable to provide us with consents for the use of its audit report in
connection with any future Securities Act filings we make, or with assurance
services with respect to those financial statements, such as advice customarily
given to underwriters of our securities offerings and other similar market
participants. The SEC recently has provided regulatory relief designed to
allow companies that file reports with the SEC to dispense with the requirement
to file a consent of Arthur Andersen in certain circumstances, including with
respect to this report. Notwithstanding this relief, the inability of Arthur
Andersen to provide its consent or to provide assurance services to us in the
future could negatively affect our ability to, among other things, access the
public capital markets. Any delay or inability to access the public markets as
a result of this situation could have a material adverse impact on us. Also,
the ability of purchasers of securities sold under certain of our registration
statements to seek potential recoveries from Arthur Andersen related to any
claims that they may assert as a result of audits performed by Arthur Andersen
will be limited significantly both as a result of the absence of a consent and
the diminished amount of assets of Arthur Andersen that are, or may in the
future, be available to satisfy claims. The registration statements in
question are those that include or incorporate by reference financial
statements of ours audited by Arthur Andersen, but as to which Arthur Andersen
has not consented to such inclusion or incorporation by reference.

ITEM 2. PROPERTIES

All of our restaurants currently in operation, excluding kiosks and
movable trailers, have been built to our specifications as to exterior style
and interior decor, are either in a strip of stores on a neighborhood street or
in mall food court points of sale, with some free-standing, one-story
buildings, and are substantially uniform in design and appearance. They are
constructed on sites ranging from approximately 1,100 to 7,500 square feet,
free-standing points of sale. Most 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.

We own the land and buildings for 9 points of sale, 5 of which are
presently leased to franchisees. In addition, we own the land and the buildings
located on the land for 4 points of sale, and we also have

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leases for 56 points of sale. Our land and building leases are generally
written for terms of five years with one or more five-year renewal options. In
certain instances, we have 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.

Our corporate headquarters are located in premises at Avenida Brasil,
6431-Bonsucesso, CEP 21040-360, Rio de Janeiro, Brazil, which Venbo acquired in
1995.

ITEM 3. LEGAL PROCEEDINGS

In 1999, we commenced court actions to defer payment of R$11,444 million
past due taxes to Brazilian state and federal taxing authorities. These
actions, which were filed pursuant to procedures enacted under Brazilian law
specifically to challenge the payments of taxes in arrears and to seek a
deferred payment schedule, were intended to extend payments on past due taxes
and reduce financing interest charges. During 2000 and 2002, we reached
agreements with the state authorities and obtained the right to fulfill our
outstanding state tax obligation by making payments over a ten-year period, as
indexed to Brazils Unidade Fiscal de Referencia, which is currently 12.0% per
annum. Consequently, we withdrew the legal action. During the second quarter
of 2000, we also applied and were accepted to join a tax amnesty program
offered by the Brazilian federal government and withdrew our action regarding
the federal taxes. Under the federal tax amnesty program, we may fulfill our
outstanding federal tax obligation by making monthly installment payments equal
to 1.2% of our gross sales, with interest accruing at rates set by the
Brazilian federal government, which are currently set at 10.0% per year.

In 2001, we initiated a court action to seek a judicial determination that
our equipment lease financing agreements should not have their respective
principal amounts indexed to the US dollar, but instead stated in Brazilian
reais bearing interest at 12% per annum. While awaiting the courts
determination, we have deposited all installment payments due under our lease
financing agreements with the court in reais, inclusive of 12% per annum
interest. In the event that we have an unfavorable outcome in the litigation,
we would be required to pay R$1,897,000, in addition to the R$1,246,000
previously deposited with the court.

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

On December 30, 2002, we held our annual meeting of stockholders to elect
seven directors to our board of directors to serve for a term of one year.

The following individuals were elected to serve as directors for a term of
one year and until their successors are elected and qualify:

|                             |  |           |           |               |  |  |       | 
|---------------------------- |  | --------- | --------- | ------------- |  |  | ----- | 
|Nominee                      |  | Votes for |           | Votes Against
|                             |  |           |           |              
|Omar Carneiro da Cunha       |  |           | 5,892,727 |               |  |  | 1,963 | 
|Peter J. F. van Voorst Vader |  |           | 5,892,727 |               |  |  | 1,963 | 
|Jose Ricardo Bousquet Bomeny |  |           | 5,892,727 |               |  |  | 1,963 | 
|Stephen J. Rose              |  |           | 5,892,727 |               |  |  | 1,963 | 
|Guillermo Hector Pisano      |  |           | 5,892,727 |               |  |  | 1,963 | 
|Gustavo Figueiredo Bomeny    |  |           | 5,892,727 |               |  |  | 1,963 | 
|Romulo Borges Fonseca        |  |           | 5,892,727 |               |  |  | 1,963 | 

The individuals, other than Guillermo Hector Pisano, Gustavo Figueiredo
Bomeny and Romulo Borges Fonseca, served as directors immediately prior to this
annual meeting.

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PART II

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

Our common stock is quoted on OTC Bulletin Board under the symbol
BOBS.OB. Prior to March 11, 2002, our common stock was quoted on The Nasdaq
SmallCap Market. There is a limited public trading market for our common
stock. The following table sets forth the range of the high and low bid
quotations for our common stock for the periods indicated:

|                   |  |              |      |     |  |   |      | 
|------------------ |  | ------------ | ---- | --- |  | - | ---- | 
|                   |  | Common Stock
|                   |  |             
|Three Months Ended |  | High         |      | Low
|                   |  |              |      |    
|March 31, 2002     |  | $            | 1.60 |     |  |   | .30  | 
|June 30, 2002      |  |              | .60  |     |  |   | .22  | 
|September 30, 2002 |  |              | .45  |     |  |   | .17  | 
|December 31, 2002  |  |              | .35  |     |  |   | .23  | 
|                   |  |              |      |     |  |   |      | 
|March 31, 2001     |  | $            | 2.03 |     |  | $ | 1.91 | 
|June 30, 2001      |  |              | 2.30 |     |  |   | 2.20 | 
|September 30, 2001 |  |              | .81  |     |  |   | .61  | 
|December 31, 2001  |  |              | 1.60 |     |  |   | .60  | 

The above quotations represent prices between dealers, without retail
markup, markdown or commission. They do not necessarily represent actual
transactions. As of December 31, 2002, there were 101 recordholders of our
common stock.

We have never paid or declared cash dividends on our common stock and we
currently intend to retain any future earnings for the development of our
business. Therefore, we do not anticipate paying any cash dividends in the
foreseeable future.

Brazil generally requires the registration of foreign capital invested in
Brazilian markets or businesses. Thereafter, any repatriation of the foreign
capital, or income earned on the foreign capital investment, must be approved
by the Brazilian government. In addition, the Brazilian government may also
impose temporary restrictions on foreign capital remittances abroad if Brazils
foreign currency reserves decline significantly. Although approvals on
repatriation are usually granted and we know of no current restrictions on
foreign capital remittances, our payment of dividends would be subject to these
limits if the Brazilian government delays, imposes these restrictions on, or
does not approve, the transfer by our Brazilian operating subsidiary, Venbo
Comercio de Alimentos Ltda., of funds out of Brazil for the payment of
dividends to our non-Brazilian shareholders. See Risk Factors  Risks
Relating to Brazil.

Our ability to declare dividends is subject to the prior written approval
of AIG Latin America Equity Partners, Ltd., or AIGLAEP, pursuant to the terms
of the 1997 Stockholders Agreement, as amended on March 14, 2001. AIGLAEPs
prior right of approval expires if we meet certain performance criteria for the
two-year period ended December 31, 2002, as set forth in the amendment to the
1997 Stockholders Agreement. See Item 13. Certain Relationships and Related
Transactions for a description of the 1997 Stockholders Agreement and the
amendment thereto.

Our payment of dividends is also restricted under the terms of the
documents governing our lines of credit and other notes payable.

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See Item 12. Security Ownership of Certain Beneficial Owners and
Management, for a disclosure regarding securities authorized for issuance
under our Amended and Restated 1992 Stock Option Plan.

ITEM 6. SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA

The following selected consolidated financial data has been derived from
our audited financial statements and should be read in conjunction with our
consolidated financial statements, including the accompanying notes, and
Managements Discussion and Analysis of Financial Condition and Results of
Operations, appearing elsewhere in this report.

|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |          |        |        | 
|------------------------------------------------------------ | ---------------- | -------------------------------------------------- | ------------------------ | -------- | ------ | ------ | --------- | -------- | --------------------------------- | ------ | --------- | -------- | ------ | ------ | --------- | -------- | ------ | ------ | --------- | -------- | ------ | ------ | 
|                                                             |                  |                                                    |                          |          | 2002   |        | 2001      |          | 2000                              |        | 1999      |          | 1998  
|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |       
|                                                             |                  |                                                    |                          |          |        |        |           |          | (in thousands, except share data) |        |           |          |       
|Statement of Operations Data:                                |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |         
|NET OPERATING REVENUES:                                      |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |         
|                                                             | Restaurant sales |                                                    |                          | R$63,562 |        |        |           | R$68,397 |                                   |        |           | R$63,775 |        |        |           | R$56,370 |        |        |           | R$63,666 |       
|                                                             | Franchise income |                                                    |                          | 5,116    |        |        |           | 4,099    |                                   |        |           | 3,134    |        |        |           | 2,343    |        |        |           | 1,427    |       
|                                                             | Other income     |                                                    |                          | 7,632    |        |        |           | 6,483    |                                   |        |           | 4,884    |        |        |           | 3,667    |        |        |           | 2,699    |       
|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |          |       
|TOTAL NET OPERATING REVENUES                                 |                  |                                                    | 76,310                   |          |        |        | 78,979    |          |                                   |        | 71,793    |          |        |        | 62,380    |          |        |        | 67,792    |         
|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |          |       
|COSTS AND EXPENSES:                                          |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |         
|                                                             |                  | Cost of restaurant sales                           |                          |          | 25,333 |        |           |          | 27,541                            |        |           |          | 24,560 |        |           |          | 21,715 |        |           |          | 23,453 |       
|                                                             |                  | Restaurant payroll and other employee benefits     |                          |          | 13,061 |        |           |          | 13,106                            |        |           |          | 12,329 |        |           |          | 12,660 |        |           |          | 15,389 |       
|                                                             |                  | Restaurant occupancy and other expenses            |                          |          | 8,043  |        |           |          | 8,174                             |        |           |          | 6,963  |        |           |          | 6,755  |        |           |          | 7,316  |       
|                                                             |                  | Depreciation and amortization                      |                          |          | 3,774  |        |           |          | 3,966                             |        |           |          | 3,610  |        |           |          | 3,489  |        |           |          | 3,738  |       
|                                                             |                  | Other operating expenses                           |                          |          | 13,161 |        |           |          | 14,225                            |        |           |          | 11,951 |        |           |          | 8,534  |        |           |          | 9,978  |       
|                                                             |                  | Selling expenses                                   |                          |          | 4,805  |        |           |          | 5,906                             |        |           |          | 5,759  |        |           |          | 5,127  |        |           |          | 3,700  |       
|                                                             |                  | General and administrative expenses                |                          |          | 9,428  |        |           |          | 6,598                             |        |           |          | 6,111  |        |           |          | 6,518  |        |           |          | 10,161 |       
|                                                             |                  | Impairment of assets and Net Result of assets sold |                          |          | 1,661  |        |           |          | 122                               |        |           |          | 20     |        |           |          |       |        |           |          | 5,076  |       
|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |          |       
|                                                             |                  |                                                    | TOTAL COSTS AND EXPENSES |          |        | 79,266 |           |          |                                   | 79,638 |           |          |        | 71,303 |           |          |        | 64,798 |           |          |        | 78,811 | 
|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |          |       
|INCOME (LOSS) FROM OPERATIONS                                |                  |                                                    | (2,956                   | )        |        |        | (659      | )        |                                   |        | 490       |          |        |        | (2,418    | )        |        |        | (11,019   | )       
|INTEREST INCOME                                              |                  |                                                    | 15                       |          |        |        |           |          |                                   |        | 1         |          |        |        | 16        |          |        |        | 109       |         
|INTEREST EXPENSE                                             |                  |                                                    | (4,834                   | )        |        |        | (5,922    | )        |                                   |        | (3,418    | )        |        |        | (5,046    | )        |        |        | (3,151    | )       
|FOREIGN EXCHANGE (LOSS) GAIN                                 |                  |                                                    | (3,435                   | )        |        |        | (1,669    | )        |                                   |        | (424      | )        |        |        | (3,453    | )        |        |        | (288      | )       
|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |          |       
|LOSS BEFORE BENEFIT FROM
INCOME TAXES                        |                  |                                                    | (11,210                  | )        |        |        | (8,250    | )        |                                   |        | (3,351    | )        |        |        | (10,901   | )        |        |        | (14,349   | )       
|BENEFIT FROM INCOME TAXES                                    |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |         
|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |          |       
|NET LOSS                                                     |                  |                                                    | (11,210                  | )        |        |        | (8,250    | )        |                                   |        | (3,351    | )        |        |        | (10,901   | )        |        |        | (14,349   | )       
|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |          |       
|BASIC AND DILUTED NET LOSS PER
COMMON SHARE                  |                  |                                                    | (1,96                    | )        |        |        | (2,27     | )        |                                   |        | (1.04     | )        |        |        | (3.37     | )        |        |        | (4.53     | )       
|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |          |       
|WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING BASIC AND DILUTED |                  |                                                    | 5,707,957                |          |        |        | 3,626,626 |          |                                   |        | 3,235,290 |          |        |        | 3,235,290 |          |        |        | 3,169,748 |         
|                                                             |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |          |       
|Balance Sheet Data (End of Period):                          |                  |                                                    |                          |          |        |        |           |          |                                   |        |           |          |        |        |           |          |        |        |           |         
|WORKING CAPITAL DEFICIT                                      |                  |                                                    | 14,238                   |          |        |        | (18,717   | )        |                                   |        | (14,807   | )        |        |        | (11,560   | )        |        |        | (10,189   | )       
|TOTAL ASSETS                                                 |                  |                                                    | 36,984                   |          |        |        | 39,777    |          |                                   |        | 41,694    |          |        |        | 39,410    |          |        |        | 41,632    |         
|ACCUMULATED DEFICIT                                          |                  |                                                    | (59,614                  | )        |        |        | (48,404   | )        |                                   |        | (40,154   | )        |        |        | (36,803   | )        |        |        | (25,902   | )       
|TOTAL SHAREHOLDERS EQUITY                                   |                  |                                                    | (1,510                   | )        |        |        | 1,217     |          |                                   |        | 5,538     |          |        |        | 8,963     |          |        |        | 9,997     |         

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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with Selected
Consolidated Historical Financial Data and our consolidated financial
statements and related notes appearing elsewhere in this report.

Background

Over the last five years, we have endeavored to reduce our operating
costs, to increase our product offerings, to improve our image to our
customers, to continuously develop and implement promotional campaigns and to
steadily increase our restaurant network and franchise base. As a result, we
have experienced increases in operating revenues. Due primarily to factors
that have caused a sharp devaluation of the Real against the U.S. Dollar and
increases in interest rates charged on our short-term debt, we have been unable
to be profitable. These factors include the following:

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.
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. 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. Mr. Fernando Henrique Cardoso, who was re-elected to a second
four-year term as president in October 1998, continued to pursue the adoption
of free market and economic liberalization measures similar to those undertaken
prior to his re-election. To date, economic reform measures have failed to
provide Brazil with sustained positive economic results and stability. Mr. Luiz
Inácio Lula da Silva, who was elected president in October 2002, is expected to
continue the economic stabilization program as well as a stimulation program
for economic growth.

Brazilian Economy



| |  |  | Beginning in mid-1999 and continuing to the end of 2000, the
Brazilian economy experienced a recovery from its economic recession
that began in late 1998 and showed substantial increases in
agricultural and industrial production, reduced unemployment,
increased retail sales levels and a positive trade balance. During
this period, we experienced revenues growth.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During 2001 and 2002, certain factors brought a halt to the recovery of
the Brazilian economy, which had a negative impact on our restaurant
sales and the results of our operations. These factors include the
following:



| |  |  | The September 11th terrorist attacks in New York City and
Washington, D.C.: As in the rest of the world, the Brazilian
population was shocked and saddened by the September 11th attacks in
New York City and Washington, D.C. and, as a result, reduced
expenditures on entertainment and dining out.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Worsening of Argentinas economy: After years of economic
recession, the perception of Argentinas lack of alternatives to
bolster or maintain its economy grew stronger during                                                                                                                       

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| |   |  | 2001. This perception was fueled by rumors that Argentina would
have to either devaluate the peso or fully adopt the U.S. Dollar as
the national currency in the near future. These rumors, which
recently became a reality when Argentina was forced to devalue the
peso by nearly 300% against the U.S. Dollar, together with the
concern that Argentina would possibly default on its debt, caused
the financial markets to view the economies of all Latin America
countries as unstable. The worsening economic outlook in Argentina
during 2001, which recently culminated in Argentina declaring
itself bankrupt, made it more expensive for Brazilian firms to
raise and maintain their funding due to the increased perception of
risk for the entire South American region.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Increasing cost of debt in Brazil: Due to several factors,
the September 11th terrorist attacks and the increase of uncertainty
in Latin American economies, Brazils rate of inflation steadily
increased throughout 2001. In an attempt to reduce the rate of
inflation, Brazilian banks quickly revised their credit policies and
increased their interest rates on short-term debt. As a result,
funding through Brazilian banks became more difficult to obtain and
much more expensive.                                                                                                                                                                                                                                                                                        
|
| |  |  | Political uncertainty: The pre-election process for the
October 2002 presidential election caused a lot of speculation on
the outcome of these elections resulting in a speculation against
the Real.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

Effects of Inflation and Devaluation

In March 1994, the Brazilian government introduced an economic
stabilization program, known as the Real Plan, intended to reduce the rate of
inflation by reducing certain public expenditures, collecting liabilities owed
to the Brazilian government, increasing tax revenues, continuing to privatize
government-owned entities and introducing the Real, a new currency based on a
monetary correction index. From 1994 to 2000, the Real Plan resulted in a
substantial reduction in Brazils rate of inflation and, with the exception of
a few months in 1999, caused the exchange rate between the Real and the U.S.
Dollar to remain relatively stable.

Although Brazils economy was expected to expand in 2001, a number of
factors, including the September 11th terrorist attacks in New York City and
Washington, D.C., economic problems in Argentina, the increased cost of debt in
Brazil, the devaluation of the Real against the U.S. Dollar and an energy
crisis in Brazil that caused the Brazilian federal government to implement
electricity rationing, limited this expansion and caused inflation rates and
interest rates to increase and the further devaluation of the Real against the
U.S. Dollar. The following table sets forth Brazilian inflation, as measured
by the Indice Geral de Precos-Mercado, and the devaluation of the Brazilian
currency against the U.S. Dollar for the periods shown.

|            |  |                         |      |      |  |      |      |      |  |      |     |   |  |  |      |   |  |  |     |  
|----------- |  | ----------------------- | ---- | ---- |  | ---- | ---- | ---- |  | ---- | --- | - |  |  | ---- | - |  |  | --- | -
|            |  | Year Ended December 31,
|            |  |                        
|            |  | 2002                    |      | 2001 |  | 2000 |      | 1999 |  | 1998
|            |  |                         |      |      |  |      |      |      |  |     
|Inflation   |  |                         | 25.3 | %    |  |      | 10.4 | %    |  |      | 9.9 | % |  |  | 20.1 | % |  |  | 1.8 | %
|Devaluation |  |                         | 52.3 | %    |  |      | 18.7 | %    |  |      | 9.3 | % |  |  | 48.0 | % |  |  | 8.3 | %

Devaluation of the Brazilian Real against the U.S. Dollar, and its effect
on transactions involving the exchange of Reais and U.S. Dollars, have a
significant impact on our financial condition and our results of operations.
For example, financing costs on our U.S. Dollar-denominated debt, which are
paid by us with Reais, increase substantially when adjusted to take into
account the current sharp exchange rate. Similarly, most of the products and
raw materials we purchase are, or contain, commodities that are denominated in
U.S. Dollars, such as plastic cups, bread (which includes wheat grown in the
United States), meat and chicken. Our costs to purchase these products and raw
materials rise significantly when

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the Reais used to pay for them must be converted into U.S. Dollars using
the current exchange rate. If we cannot raise our selling prices to
accommodate increases in the cost of these products and raw materials, our
profit on these products and raw materials are adversely affected.

Energy Crisis.

In May 2001, as a result of a shortfall of electricity generating and
transmission capacity by Brazilian utilities suppliers, the Brazilian federal
government announced an electricity rationing plan in order to avoid
electricity outages throughout most of Brazil. The rationing plan imposed
significant penalties on residences and companies that failed to reduce
electricity consumption by at least 20% in relation to amounts consumed in the
previous year. These penalties ranged from substantial increases in tariffs on
consumption to the disruption of electricity service for a number of days. We
have effected at least a 20% reduction in our electrical consumption, thereby
avoiding the imposition of penalties under this rationing plan, and,
furthermore, we are selling the excess electricity savings to other companies.
We have achieved this reduction through, among other measures, selective and
temporary curtailed hours of operation in many of our points of sale. We are
aware that many of our franchisees have effected similar cutbacks.

We believe reduced hours of operation will continue to impact adversely
both our operating and franchise revenues. We are unable to predict the
quantitative impact that long-term continuation of the governments energy
conservation plan, which is currently facing constitutional challenges in the
Brazilian federal courts, and the penalties imposed by it, will have on our
future results of operations.

The energy rationing plan was terminated in February 2002, but some of the
changes in habits of the population, coupled with an increase in the cost of
energy, can continuously impact our business.

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RESULTS OF OPERATIONS

COMPARISON OF YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

The following table sets forth certain operating data for the years ended
December 31, 2002, 2001 and 2000:

|                                |                                                |                                                    |         |                      |       |                  |        |                     |     |                  |        |                     |     |                  |       |       |     |  |         |        |    |  |       |       |     | 
|------------------------------- | ---------------------------------------------- | -------------------------------------------------- | ------- | -------------------- | ----- | ---------------- | ------ | ------------------- | --- | ---------------- | ------ | ------------------- | --- | ---------------- | ----- | ----- | --- |  | ------- | ------ | -- |  | ----- | ----- | --- | 
|                                |                                                |                                                    |         | Twelve Months Ended  |       | %                |        | Twelve Months Ended |     | %                |        | Twelve Months Ended |     | %               
|                                |                                                |                                                    |         | December 31, 2002    |       | Restaurant Sales |        | December 31, 2001   |     | Restaurant Sales |        | December 31, 2000   |     | Restaurant Sales
|                                |                                                |                                                    |         |                      |       |                  |        |                     |     |                  |        |                     |     |                 
|                                |                                                |                                                    |         | (Reais in thousands)
|NET OPERATING REVENUES:         |                                                |                                                    |         |                      |       |                  |        |                     |     |                  |        |                     |     |                  |       |       |     |  |         |        |    |  |       |      
|                                | Restaurant sales                               |                                                    |         | 63,562               |       |                  |        | 100.0               | %   |                  |        | 68,397              |     |                  |       | 100.0 | %   |  |         | 63,775 |    |  |       | 100.0 | %  
|                                | Franchise income                               |                                                    |         | 5,116                |       |                  |        | 8.0                 |     |                  |        | 4,099               |     |                  |       | 6.3   |     |  |         | 3,134  |    |  |       | 4.9   |    
|                                | Other income                                   |                                                    |         | 7,632                |       |                  |        | 12.0                |     |                  |        | 6,483               |     |                  |       | 9.5   |     |  |         | 4,884  |    |  |       | 7.7   |    
|                                |                                                |                                                    |         |                      |       |                  |        |                     |     |                  |        |                     |     |                  |       |       |     |  |         |        |    |  |       |       |    
|TOTAL NET OPERATING REVENUES    |                                                |                                                    | 76,310  |                      |       |                  | 120.1  |                     |     |                  | 78,979 |                     |     |                  | 115.5 |       |     |  | 71,7933 |        |    |  | 112.6 |      
|                                |                                                |                                                    |         |                      |       |                  |        |                     |     |                  |        |                     |     |                  |       |       |     |  |         |        |    |  |       |       |    
|COSTS AND EXPENSES:             |                                                |                                                    |         |                      |       |                  |        |                     |     |                  |        |                     |     |                  |       |       |     |  |         |        |    |  |       |      
|                                | Cost of restaurant sales                       |                                                    |         | 25,333               |       |                  |        | 39.9                |     |                  |        | 27,592              |     |                  |       | 40.3  |     |  |         | 24,560 |    |  |       | 38.5  |    
|                                | Restaurant payroll and
other employee benefits |                                                    |         | 13,061               |       |                  |        | 20.5                |     |                  |        | 13,106              |     |                  |       | 19.2  |     |  |         | 12,329 |    |  |       | 19.3  |    
|                                | Restaurant occupancy and
other expenses        |                                                    |         | 8,043                |       |                  |        | 12.7                |     |                  |        | 8,174               |     |                  |       | 12.0  |     |  |         | 6,963  |    |  |       | 10.9  |    
|                                | Depreciation and amortization                  |                                                    |         | 3,774                |       |                  |        | 5.9                 |     |                  |        | 3,966               |     |                  |       | 5.8   |     |  |         | 3,610  |    |  |       | 5.7   |    
|                                | Other operating expenses                       |                                                    |         | 13,161               |       |                  |        | 20.7                |     |                  |        | 14,225              |     |                  |       | 20.8  |     |  |         | 11,951 |    |  |       | 18.7  |    
|                                | Selling expenses                               |                                                    |         | 4,805                |       |                  |        | 7.6                 |     |                  |        | 5,906               |     |                  |       | 8.6   |     |  |         | 5,759  |    |  |       | 9.0   |    
|                                | General and administrative
expenses            |                                                    |         | 9,428                |       |                  |        | 14.8                |     |                  |        | 6,598               |     |                  |       | 9.6   |     |  |         | 6,111  |    |  |       | 9.6   |    
|                                |                                                | Impairment of assets and
Net Result of assets sold |         |                      | 1,661 |                  |        |                     | 2.6 |                  |        |                     | 122 |                  |       |       | 0.2 |  |         |        | 20 |  |       |       | 0.1 | 
|                                |                                                |                                                    |         |                      |       |                  |        |                     |     |                  |        |                     |     |                  |       |       |     |  |         |        |    |  |       |       |    
|TOTAL COSTS AND EXPENSES        |                                                |                                                    | 79,266  |                      |       |                  | (124.7 | )                   |     |                  | 79,638 |                     |     |                  | 116.4 |       |     |  | 71,303  |        |    |  | 111.8 |      
|                                |                                                |                                                    |         |                      |       |                  |        |                     |     |                  |        |                     |     |                  |       |       |     |  |         |        |    |  |       |       |    
|INCOME (LOSS) FROM OPERATIONS   |                                                |                                                    | (2,956  | )                    |       |                  | (4.7   | )                   |     |                  | (659   | )                   |     |                  | (1.0  | )     |     |  | 490     |        |    |  | 0.8   |      
|INTEREST INCOME
(EXPENSE)  NET |                                                |                                                    | (8,254  | )                    |       |                  | (13.0  | %)                  |     |                  | (7,591 | )                   |     |                  | (11.1 | )     |     |  | (3,842  | )      |    |  | (6.0  | )    
|                                |                                                |                                                    |         |                      |       |                  |        |                     |     |                  |        |                     |     |                  |       |       |     |  |         |        |    |  |       |       |    
|NET LOSS                        |                                                |                                                    | (11,210 | )                    |       |                  | (17.6  | %)                  |     |                  | (8,250 | )                   |     |                  | (12.1 | )%    |     |  | (3,351  | )      |    |  | (5.3  | )%   
|                                |                                                |                                                    |         |                      |       |                  |        |                     |     |                  |        |                     |     |                  |       |       |     |  |         |        |    |  |       |       |    

Introduction

During the year of 2002, several events negatively impacted the Brazilian
economy as well as our restaurant sales and results of our operations.

In the first half of 2002, the Brazilian economy was still suffering the
effects derived from the terrorist attacks in the United States of America and
the Brazilian energy crisis. This period was also affected by the worsening of
the crisis of the Argentina economy.

During the second half of 2002 the political uncertainty attendant to the
outcome of the Brazilian presidential election in October 2002 also has reduced
and/or postponed most business projects and money supply.

Brazilian currency has devaluated approximately 52.3% against the US
dollar during the year of 2002 and, as a consequence, Brazilian
inflation rates reached the highest level since the

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inception of Brazils stabilization plan in mid 1994. In response to
these events, the Brazilian Central Bank in October 2002 and subsequently in
December increased overnight interest rates from 18% to 25% per year.

All these factors together increased unemployment rates in major metropolitan
areas (Rio de Janeiro and São Paulo), and decreases in average take-home
income.

Restaurant Sales

Restaurant sales for our company-owned and operated points of sale
decreased R$4,835,000 or 7.1% to R$63,562,000 for the year ended December 31,
2002 as compared to R$68,397,000 and R$63,775,000 for the years ended December
31, 2001 and 2000, respectively. Same store sales decreased approximately 3.2%
for the year ended December 31, 2002 as compared to the year ended December 31,
2001. Same store sales for the year ended December 31, 2001 decreased by 0.2%
when compared to 2000.

The decrease from 2002 to 2001 of restaurant sales is attributable to the
macroeconomic factors described above as well as to the reduction of our
company-owned retail outlets from 70 as of December 31, 2001 to 61 as of
December 31, 2002. The company closed 3 owned-operated outlets in the year
ended December 31, 2002, sold 7 outlets to franchisees and opened 1 new outlet.
This reflects the companys strategy to limit company direct operations to
highly profitable outlets, and to focus on the growth of franchises, which
management anticipates will significantly reduce the level of the Companys
future capital expenditures.

This decrease was partially offset by:



| |  | our constant sales initiatives and promotional campaigns;                                                                                                                             
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | our continuous introduction of new products and the expansion of our product offerings;                                                                                               
| 
| |  | an average increase of 10% in the sales prices of our products during the year of 2002; and                                                                                           
| 
| |  | a change in the manner of calculating tax upon our sales in the State of Sao Paulo, which resulted in higher net sales of
approximately R$665,000 in the year ended December 31, 2002.

The increase in our net restaurant sales for the year ended December 31,
2001, compared to the same period of 2000, was partially offset by factors that
have negatively affected the Brazilian economy, during 2001 including the
September 11th terrorist attacks in New York City and Washington, D.C.,
economic problems in Argentina, the increased cost of debt in Brazil, the
devaluation of the Real against the U.S. Dollar and an energy crisis in Brazil
that caused the Brazilian federal government to implement electricity
rationing. Additionally, there was a negative impact on Companys sales due to
the reduction of our company-owned and operated points of sale from 72 as of
December 31, 2000 to 70 as of December 31, 2001.

The operating factors that positively impacted our sales during the year
ended December 31, 2001 include:



| |  | a 8.9% increase in the average sales prices of our products during the
year ended December 31, 2001; and                                                                                           
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | a reduction in the tax rate imposed upon our sales in the State of Rio
de Janeiro, which resulted in higher net restaurant sales of
approximately R$1,835,000 for the year ended December 31, 2001.

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Franchise Income

Franchise income increased R$1,017,00 or 24.8% to R$5,116,000 for the year
ended December 31, 2002 as compared to R$4,099,000 and R$3,134,000 for the
years ended December 31, 2001 and 2000, respectively. These increases are
mainly attributable to the growth of our franchised business from 153 points of
sale as of December 31, 2000 to 195 as of December 31, 2001 to 242 as of
December 31, 2002. The 2002 increase was partially offset by the effects of
the macro-economic factors described above, which had a negative impact on our
franchised restaurants sales.

Through the period from January 1, 2002 to December 31, 2002, the Company
sold 7 of its restaurants to franchisees. These stores had either low
profitability or, in some cases, operating losses. The Companys historical
experience has shown that franchisee administration can enhance the
profitability of such stores, primarily as a result of:



| |  |  | lower taxation (tax incentives from Federal and state governments to small companies)
| | - |  | -------------------------------------------------------------------------------------
|
| |  |  | better knowledge of specific markets and their local customs                         
|
| |  |  | lower operating expenses.                                                            

Other Income

Other income is comprised of the initial fees paid by all of our new
franchisees and such franchisees contributions to our marketing efforts, as
well as income derived from suppliers pursuant to the terms of certain
exclusivity agreements.

Other income increased R$1,149,000 or 17.7% to R$7,632,000 for the year
ended December 31, 2002 as compared to R$6,483,000 and R$4,884,000 for the
years ended December 31, 2001 and 2000, respectively. This increase is mainly
attributable to the growth of our franchised business noted above.

Cost of Restaurant Sales

As a percentage of restaurant sales, cost of restaurant sales were 39.9%,
40.3% and 38.5% for the years ended December 31, 2002, 2001 and 2000,
respectively.

The decrease of cost of restaurant sales in the year of 2002 is primarily
attributable to decreases in our cost of ice cream, meat and chicken products
in July of 2002, resulting from our negotiations with suppliers. The
devaluation of the Brazilian Real against the US dollar partially offset such
decrease and may reverse this trend during 2003.

This percentage increase from the fiscal 2000 to fiscal 2001 was mainly attributable to:



| |  | increases in the cost of meat and chicken products beginning in the third quarter of 2000 and continuing into 2001, as well
as increases in the cost of soft drinks and ice cream during 2001; and
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | taxation reductions in the State of Rio de Janeiro, as noted above, which have had the effect of limiting tax credits on
certain purchases, such as food.                                         

Restaurant Payroll and Other Employee Benefits

As a percentage of restaurant sales, restaurant payroll and other employee
benefits increased from 19.2% to 20.5% for the year ended December 31, 2001 and
2002, respectively. The 2000 percentage was 19.3%.

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The decrease from the year ended December 31, 2000 to the same period
ended December 2001 were due to new personnel contracted as trainees (lower
benefits and less labor charges), which were partially offset by increase in
salaries mandated by union driven agreements.

The increase from 2001 to 2002 is mainly attributable to an increase on
transportation costs, increases in salaries mandated by union-driven agreements
and in employee charges (FGTS). The reduction in the number of trainees and
shifting them to employees during 2002 also increased payroll expenses.

Restaurant Occupancy Costs and Other Expenses

As a percentage of restaurant sales, restaurant occupancy costs and other
expenses were 12.7%, 12.0% and 10.9% for the years ended December 31, 2002,
2001 and 2000, respectively.

This increase is mainly attributable to increases in our minimum rent
obligations, which are indexed to Brazilian inflation, currently at 25.3% per
annum, as well as to the effect of our decreased restaurant sales, noted above.
During the second semester of 2002 these increases were partially offset by
temporary and permanent reductions of the occupancy cost of some of our stores.

The 2001 percentage increase was also attributable to annual contract
restatements indexed to Brazilian inflation, which was 10.4% for the
year 2001.

Depreciation and Amortization

As a percentage of restaurant sales, depreciation and amortization expense
was approximately 5.9%, 5.8% and 5.7% for the years ended December 31, 2002,
2001 and 2000, respectively. Depreciation and amortization expense has
remained stable from year to year.

Other Operating Expenses

As a percentage of restaurant sales, other operating expenses were
approximately 20.7%, 20.8%, and 18.7% for the years ended December 31, 2002,
2001 and 2000, respectively.

The percentage increase from 2000 and 2001 is mainly attributable to the
costs associated with outsourcing of managerial personnel, increased costs for
utilities, primarily those for electricity, and increases in maintenance and
money collection costs.

During 2002, the increase observed from fiscal 2000 to 2001 was reversed
by reductions in delivery costs and by not renewing certain outsourced
services.

Selling Expenses

As a percentage of restaurant sales, selling expenses were approximately
7.6%, 8.6% and 9.0% for the years ended December 31, 2002, 2001 and 2000,
respectively.

The percentage decrease from the year period of 2001 to the same period of
2002 arose from an optimization of marketing investments and cost reduction
measures, such as fewer TV media and more advertisement in newspapers,
magazines and outdoors.

Advertising and publicity costs increased during the year ended December
31, 2001 as a result of our increased number of points of sale.

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General and Administrative Expenses

As a percentage of restaurant sales, general and administrative expenses
were approximately 14.8%, 9.6% and 9.6% for the years ended December 31, 2002,
2001 and 2000, respectively.

The percentage increase from the year period of 2001 to the same period of
2002 was due to recognition of a greater allowance for doubtful accounts during
2002 as well as severance cost of some professional contracts of Venbo
management. The year of 2002 was also impacted by fines applied against the
Company by the Brazilian Social Security Authorities, which charged certain
operating transactions not covered by the Companys previous calculation of
Social Security contributions.

Impairment of Assets and Net Result of Assets Sold

A fixed assets inventory in the second and third quarters of 2002 and a
review regarding the impairment of assets in accordance to FAS 121, as well as
managements decision to close 2 unprofitable outlets and fixed assets
inventories required us to take write-offs during the year ended December 31,
2002. Those changes were partially offset by net income of assets sold during
the same period. Additionally, we recognized losses on assets sold during the
same period, mainly due to those stores that were sold to franchisees.

Interest Income and Expenses

As a percentage of restaurant sales, net interest expense and foreign
exchange gains and/or losses were approximately 13.0%, 11.1% and 6% for the
year ended December 31, 2002, 2001 and 2000, respectively. The percentages
increases year by year are primarily attributable to increases in the interest
rates charged by Brazilian banks and increases in the exchange rate between the
Brazilian Real and the U.S. Dollar. Increases in the exchange rate have had an
immediate and direct impact on our debt that is denominated in U.S. Dollars and
the interest on such debt.

LIQUIDITY AND CAPITAL RESOURCES

Since March 1996, we have funded our cumulative operating losses of
R$59,614,000 and made acquisitions of businesses and capital improvements
(including remodeling of our retail outlets) by using cash remaining at the
closing of our acquisition of Venbo, by borrowing funds from various sources
and from private placements of securities. As of December 31, 2002, we had
cash on hand of R$1,461,000 and a working capital deficiency of R$14,238,000.

For the year ended December 31, 2002, we had net cash used in operating
activities of R$2,989,000, net cash used in investing activities of R$733,000
and net cash provided by financing activities of R$3,389,000. Net cash used in
investing activities was primarily the result of our investment in property and
equipment to improve our retail operations. Net cash provided by financing
activities was a result of our private placement of equity shares in May 2002.
The proceeds from the private placement were used to reduce our debt, including
debt with private individuals, debt with financial institutions in Brazil, and
past due accounts payable with suppliers and others.

In the year ended December 31, 2001, our net cash used in operating
activities was approximately R$1,107,000, our net cash used in investing
activities was approximately R$1,977,000 and our net cash provided by financing
activities was approximately R$3,680,000. Net cash provided by operating
activities in this period was primarily the result of an increase in our
liabilities. Net cash used in investing activities was primarily the result of
our investment in property and equipment to improve our retail operations. Net
cash provided by financing activities was a result of debt obligations we
incurred.

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Our earnings before interest, taxes, depreciation and amortization
(EBITDA) were approximately R$3,307,000 for the year ended December 31, 2001
and approximately R$818,000 for the year ended December 31, 2002. EBITDA is
not intended to be a performance measure that should be regarded as an
alternative to, or more meaningful than, either loss from operations or net
loss as an indicator of operating performance or cash flows as a measure of
liquidity, as determined in accordance with accounting principles generally
accepted in the United States.

Our cash resources are currently used primarily to pay for the servicing
costs on our debt obligations, which costs have increased significantly due to
increased interest rates in Brazil charged on short-term debt and the
devaluation of the Real against the U.S. Dollar. Our debt obligations as of
December 31, 2002 were as follows:

|                                                      |  |             |             | 
|----------------------------------------------------- |  | ----------- | ----------- | 
|                                                      |  | Amount     
|Type of Debt Obligation                               |  | Outstanding
|                                                      |  |            
|Mortgages payable (a)                                 |  |             | R$2,671,000 | 
|Notes payable linked to
fixed assets acquisitions (b) |  |             | 3,646,000   | 
|                                                      |  |             |             | 
|                                                      |  |             | R$6,317,000 | 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a)   Amount due in quarterly installments, starting December, 2002, ending
September, 2003. Interest on this amount accrues at a rate of 25% per
annum and is payable quarterly, starting December, 2002. Payment is
secured by certain property with a carrying value of R$5,049,000 at
December 31, 2002. Principal and interest are indexed to the U.S.
Dollar, and are therefore susceptible to exchange rate variations between
the U.S. Dollar and the Brazilian Real.                                                              
|
| | (b)   This credit facility was used to purchase three stores. Repayment of
principal with respect to one of these stores is due in 18 monthly
installments of R$19,000, plus an intermediate payment due January, 2003
in the amount of R$157,000. Repayment of principal with respect to the
other two stores is due November 2003, in the amount of R$3,138,000.
There is no interest charged on these borrowings. Principal is indexed
to Brazilian inflation measured by IGP-M. This facility is secured by
the fixed assets purchased.

In addition to the foregoing debt obligations, we are required to make
certain payments on restructured past-due Brazilian state taxes of
approximately R$5,987,000 and federal taxes of approximately R$5,082,000.
Pursuant to a settlement reached with Brazilian state taxing authorities in
2000 and 2002, we are required to make repayments over a ten-year period,
interest free, in amounts indexed to Brazils UNIDADE FISCAL DE REFERENCIA,
which is currently 12.0% per annum. In addition, in 2000, we applied to, and
were accepted by, the Brazilian federal government to join a tax amnesty
program, which restructured our outstanding 1999 federal tax obligations into
monthly payments equal to 1.2% of our gross sales, with interest accruing at a
rate set from time-to-time by the Brazilian federal government (TJLP), which
was 10.5% a.a. as of December 31, 2002. During 2003, we expect to pay
approximately R$1,125,000 pursuant to the state tax settlement and
approximately R$960,000 pursuant to the federal tax amnesty program.

The Company has other past due Federal Taxes which were not paid in the
beginning of 2002, as well as fines applied against the Company by the
Brazilian Social Securities Authorities, in the amount of R$5,181,000, which
are not covered by any of the above mentioned tax agreements. However, the
Brazilian Government is implementing another tax amnesty program during 2003,
through which the Company intends to include those tax debts.

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Since June 2002, the Company has paid all its current taxes on a timely
basis.

The Company has also long-term contractual obligations in the form of
operating lease obligations related to Company-operated outlets.

The future minimum lease payments under those obligations with an initial
or remaining noncancelable lease terms in excess of one year at December 31,
2002 are as follows:

|            |  |        |             | 
|----------- |  | ------ | ----------- | 
|Fiscal Year |  | Amount
|            |  |       
|2003        |  |        | R$5,076,000 | 
|2004        |  |        | 1,966,000   | 
|2005        |  |        | 1,560,000   | 
|2006        |  |        | 1,033,000   | 
|2007        |  |        | 284,000     | 
|Thereafter  |  |        | 153,000     | 

Rent expense was R$5,609,000 for the years ended December 31, 2002.

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

Our capital expenditures for fiscal 2002 were approximately R$1,600,000.
We require capital primarily for the improvement of our company-owned and
operated points of sale. Currently, four of our company-owned retail outlets
are located in facilities that we own and all of our other company-owned retail
outlets are located in leased facilities.

Our average cost to open a retail outlet was approximately R$300,000 to
R$500,000 including leasehold improvements, equipment and beginning inventory,
as well as expenses for store design, site selection, lease negotiation,
construction supervision and obtaining permits.

We have estimated that our capital expenditures for fiscal 2003, which
will be used to maintain and upgrade our current restaurant network, will be
approximately R$2,100,000. We anticipate that the primary use of our cash
resources during 2003 will be to service our debt obligations. During 2003, we
intend to focus our efforts on expanding both the number of our franchisees and
the number of our franchised retail outlets, neither of which are expected to
require significant capital expenditures.

As discussed above, the Company has contractual obligations in different
forms. The following table summarizes the Companys contractual obligations
and financial commitments, as well as their aggregate maturities.

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|            |                    |             |           |               |  |       |           |  |  |  |           |  |  |  |            | 
|----------- | ------------------ | ----------- | --------- | ------------- |  | ----- | --------- |  |  |  | --------- |  |  |  | ---------- | 
|Fiscal Year | Contractual Leases | Fiscal Debt |           | Loans Payable |  | Total
|            |                    |             |           |               |  |      
|2003        |                    |             | 5,076,000 |               |  |       | 2,085,000 |  |  |  | 6,203,000 |  |  |  | 13,364,000 | 
|2004        |                    |             | 1,966,000 |               |  |       | 2,085,000 |  |  |  | 114,000   |  |  |  | 4,165,000  | 
|2005        |                    |             | 1,560,000 |               |  |       | 2,085,000 |  |  |  |          |  |  |  | 3,645,000  | 
|2006        |                    |             | 1,033,000 |               |  |       | 2,085,000 |  |  |  |          |  |  |  | 3,118,000  | 
|2007        |                    |             | 284,000   |               |  |       | 2,085,000 |  |  |  |          |  |  |  | 2,369,000  | 
|Thereafter  |                    |             | 153,000   |               |  |       | 644,000   |  |  |  |          |  |  |  | 797,000    | 

Cash provided by operations along with our borrowing capacity and other sources
of cash will be used to satisfy the obligations and our estimates for capital
improvements (including remodeling of our retail outlets.

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



| |  |  | the sale of certain of our company-owned retail outlets;                                                                                                                     
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the reduction of expenses, including reducing our per-store
headcount expense by continuing to expand our operations while
maintaining our current headcount;                
|
| |  |  | the expansion of our franchisee base, which may be expected
to generate additional cash flows from royalties and franchise fees
without significant capital expenditures; and
|
| |  |  | the introduction of new programs and menu expansions to meet
consumer needs and wishes;                                                                                      
|
| |  |  | the extinguishments of our obligations denominated in US
dollar which will reduce our exposure to the effects of the
Brazilian Real devaluation; and                         
|
| |  |  | negotiation with suppliers in order to obtain significant
rebates in long term supply contracts.                                                                             

In order to sustain our operations, we have, in the past, been dependent
upon the continued forbearance of our creditors. While we are currently in
full compliance with agreements with our creditors, there can be no assurance
that we will not be forced to seek the forbearance of our creditors in the
future. In addition, there can be no assurance that our plans will be
realized, or that additional financing will be available to us when needed, or
on terms that are desirable. Furthermore, there can be no assurance that we
will locate suitable new franchisees, or desirable locations for new and
existing franchisees to open retail outlets. Our ability to further reduce
expenses and optimize our headcount is directly impacted by our need to
maintain an infrastructure to support changing the locations, if required, of
both our current and future retail outlets and operations. Our ability to
re-market our company-owned retail outlets to franchisees, and to generate cash
flows from such activities, is impacted by our ability to locate suitable
buyers with the interest and capital to complete such transactions, and the
time to complete such sales. Additionally, our ability to achieve our plans is
further impacted by the instability of both the political and economic
environment in Brazil, which has a direct impact on the desire and ability of

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consumers to visit fast food outlets. We are also dependent upon the
continued employment of key personnel. These factors, among others, raise
substantial doubt about our ability to continue as a going concern.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Managements discussion and analysis of financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the U.S. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses as well as related disclosures. On an
ongoing basis, we evaluate our estimates and judgments based on historical
experience and various other factors that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates under
different assumptions or conditions.

We annually review our financial reporting and disclosure practices and
accounting policies to ensure that they provide accurate and transparent
information relative to the current economic and business environment. We
believe that of our significant accounting policies involve a higher degree of
judgment and/or complexity. (See summary of significant accounting policies
more fully described on pages F-10 through F-15).

We follow SFAS No. 144 with regard to impairment of long lived assets and
intangibles. If there is an indicator of impairment (i.e. negative operating
cash flows) an estimate of undisclosed future cash flows produced by each
restaurant within the asset grouping is compared to its carrying value. If any
asset is determined to be impaired, the loss is measured by the excess of the
carrying value. If any asset is determined to be impaired, the loss measured
by the excess of the carrying amount of the asset over its fair value.

NEW ACCOUNTING STANDARDS

Asset retirement obligations

In June 2001, the Financial Accounting Standards Board issued SFAS No.
143, Accounting for Asset Retirement Obligations, effective January 1, 2003.
The Statement requires legal obligations associated with the retirement of
long-lived assets to be recognized at their fair value at the time that the
obligations are incurred. Upon initial recognition of a liability, the cost
will be capitalized as part of the related long-lived asset and allocated to
expense over the useful life of the asset.

The adoption of the new rules is not expected to have a material effect on
the Companys ongoing results of operations or financial position.

Variable interest entities

In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46 (FIN No. 46), Consolidation of Variable Interest
Entities, which requires an enterprise to consolidate or make certain,
disclosures about variable interest entities that meet certain criteria,
effective July 1, 2003. The Company is currently performing an analysis to
determine the applicability of FIN No. 46 to it.

Impairment of long-lived assets and intangible assets

The company follows the SFAS No. 144 and 141 with regard to the impairment
of long lived assets and intangibles. If there is an indicator of impairment
(i.e. negative operating cash flows) an estimate of undiscounted future cash
flows produced by each restaurant within the asset grouping is

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE INFORMATION ABOUT MARKET RISK

We finance a portion of our operations by issuing debt and entering into
bank credit facilities. These debt obligations expose us to market risks,
including interest rate risk and foreign currency exchange risk. Our debt
obligations and purchase commitments are primarily denominated in U.S. Dollars,
while our operating revenues are denominated in Brazilian Reais. Fluctuations
in exchange rates between the Real and the U.S. Dollar expose us to significant
foreign exchange risk. We attempt, when possible, to protect our revenues from
foreign currency exchange risks by periodically adjusting our selling prices in
Reais.

We do not engage in trading market risk-sensitive instruments or
purchasing hedging instruments or other than trading instruments that are
likely to expose us to market risk, whether interest rate, foreign currency
exchange, commodity price or equity price risk. We have not entered into any
forward or futures contracts, purchased options or entered into swaps.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to
pp. F-1 through F-27 comprising a portion of this report.

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

As discussed in our Current Report on Form 8-K dated September 4, 2001,
and filed with the SEC on October 31, 2001, we dismissed Arthur Andersen S/C as
our independent accountant on September 4, 2001 and appointed Grant Thornton
Auditors Indepentents as our new independent public accountant.

Andersens reports on our financial statements for each of the two fiscal
years ended December 31, 2000 and 1999 were qualified in their reference to the
uncertainty of our ability to continue as going concern. Except as set forth
in the preceding sentence, such reports did not contain an adverse opinion or
disclaimer of opinion, nor were such reports qualified or modified as to
uncertainty, audit scope, or accounting principles.

There were no disagreements between ourselves and Andersen on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure during either (i) the two fiscal years ended
December 31, 2000 or (ii) the period from January 1, 2001 through September 4,
2001, which disagreements, if not resolved to the satisfaction of Andersen,
would have caused Andersen to make reference to the subject matter of the
disagreements in connection with its reports for the two fiscal years ended
December 31, 2000.

Andersen has expressed no disagreements or differences of opinion
regarding any of the kinds of events defined as reportable events in Item
304(a)(1)(v) of the SECs Regulation S-K.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers and directors are as follows:

|                             |  |     |    |          |  |                                             
|---------------------------- |  | --- | -- | -------- |  | --------------------------------------------
|Name                         |  | Age |    | Position
|                             |  |     |    |         
|Omar Carneiro da Cunha       |  |     | 56 |          |  | Chairman of the Board                       
|Ricardo Figueiredo Bomeny    |  |     | 33 |          |  | Chief Executive Officer (since January 2003)
|Peter J. F. van Voorst Vader |  |     | 48 |          |  | Director                                    
|Romulo Borges Fonseca        |  |     | 50 |          |  | Director                                    
|Jose Ricardo Bousquet Bomeny |  |     | 61 |          |  | Director                                    
|Stephen J. Rose              |  |     | 72 |          |  | Director                                    
|Guillermo Héctor Pisano      |  |     | 64 |          |  | Director                                    
|Gustavo Figueiredo Bomeny    |  |     | 35 |          |  | Director                                    

Omar Carneiro da Cunhahas been our Chairman of the Board since 1996. Mr.
Carneiro da Cunha is a founding principal of Bond Consultoria Empresarial S/C
Ltda., a Brazilian business consultancy. From September 1995 to December 1997,
he served as chief executive officer of AT&T Brazil. From 1967 to 1994, Mr.
Carneiro da Cunha held a variety of positions with Shell Brasil S.A. and its
affiliates, including serving as president of Shell Brasil S.A. from 1992 to
1994. Mr. Carneiro da Cunha received a B.A. in Economics from the University
of Political and Economical Sciences of Rio de Janeiro and a degree in Finance
Administration from Fundacao Getulio Vargas.

Ricardo Figueiredo Bomenyhas been our chief executive officer since
January 2003. Prior to that date and from 1991, Mr. Bomeny held several
positions, including chief operating officer, with different companies in the
fast food business in Brazil (Bigbuger, Pastello and Bobs) Mr. Bomeny holds a
degree in Business Administration from Candido Mendes University, Rio de
Janeiro, an MBA in Corporate Finance from IBMEC, Rio de Janeiro, an MBA in
Retail Trade, Rio de Janeiro, and a Post Graduate certificate in Marketing from
PUC, Rio de Janeiro. Ricardo Figueiredo Bomeny is the son of Jose Ricardo
Bousquet Bomeny.

Peter J. F. van Voorst Vaderhas served as one of our directors since 1996
and was our chief executive officer from March 1996 to December 2002. Prior to
that date and from 1995, he was an independent business consultant. From 1992
to 1995, Mr. van Voorst Vader was a retail sales manager for Shell Nederland
Verkoopmaatschappij B.V., overseeing the operations of 800 gas stations. From
1985 to 1992, Mr. van Voorst Vader held several positions with Shell Brasil
S.A., including sales promotion manager, marketing communications manager and
retail development manager. From 1983 to 1985, he was employed by Shell
International Petroleum Company as regional brand and communications assistant
for Africa, the Middle East, the Far East and South America. From 1980 to
1983, Mr. van Voorst Vader was a commercial assistant for Shell Italia. Mr.
van Voorst Vader received a B.S. in Hotel Management from both the Hogere Hotel
School in The Hague, Holland and Florida International University. Mr. van
Voorst Vader also has a Masters Degree in International Business from Florida
International University.

Romulo Borges Fonsecawas an engineer in the Maintenance and
Transportation division of PETROBRAS, the Brazilian Petrol Company, from 1975
to 1982. He afterwards founded MCA, a company specialized in mechanical
assemblages for fuel trucks serving airports and companies as Shell,

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Petrobras and others in the fuel business. In 1998 he started SBCQ, a
laboratory of metallic analysis, and in the same year he founded the FORZA
group consisting of gas stations specialized in natural gas distribution. Mr.
Fonseca is also a shareholder of CCC, which is a principal stockholder of our
company. Mr. Fonseca is a Mechanical Engineer graduated in PUC University, Rio
de Janeiro and has a degree in economy from Fundacao Getulio Vargas, Brazil.

Jose Ricardo Bousquet Bomenyhas served as one of our directors since
1996. Mr. Bomeny founded BigBurger Ltda. in 1975 and served as its president
until we acquired this company in July 1996. He currently owns another fast
food business, which is not competitive with our business, as well as six gas
stations and two parking lots.

Stephen J. Rosehas served as one of our directors since 2001. Since May
2000, Mr. Rose has been a founding director and shareholder of Latinco, a
London-based investment bank specializing in capital raising and other services
to medium-sized Latin American companies. Prior to that date and from 1996, he
was managing director of UBS Capital Markets in London. From 1980 to 1996, Mr.
Rose was chairman and managing director of Stephen Rose & Partners, a private
investment bank which was acquired by UBS in 1996. Mr. Rose was educated in
Marlborough College and subsequently at Worcester College, Oxford, where he
obtained First Class Honours in Law and was called to the Bar in 1954.

Guillermo Hector Pisanohas served as one of our directors since 2002.
Mr. Pisano is a Consultant, presently engaged by CCC Empreendimentos Ltda, a
civil construction and participation company. He was Vice President of UAP do
Brasil, the French Insurance Companys Brazilian Agency, from 1988 to 1996,
chief financial officer of RACIMEC, a Brazilian Industrial Computer society,
from 1983 to 1988, and chief executive officer of CGA do Brasil, an Automatism
French Manufacturer, from 1978 to 1982. He also held a variety of positions,
from 1965 to 1978, with Thomson CSF (the French Communications and Radar
manufacturer) in Argentina and in Brazil where he was the chief financial
officer. Mr. Pisano is an Electronic Engineer from de National University of
Buenos Aires and holds a degree of Administration and Financial Management from
Thomson CSF School of Business with further specialization in Industrial and
Institutional Organization.

Gustavo Figueiredo Bomenyhas served as one or our directors since 2002.
Mr. Bomeny is currently an independent project engineer for several companies.
He also has been working as Project Manager in the BigBurger Group since 1995,
this group having been incorporated by VENBO/Bobs. He has extensive
experience in studies, projects, budgets, supervision and execution of
buildings for restaurants, fast-food stores and other commercial facilities.
He holds a B.A. in Architecture and Urbanism from de Santa Ursula University,
Rio de Janeiro. Gustavo Figueiredo Bomeny is the son of Jose Ricardo Bousquet
Bomeny.

Compliance with Section 16(a) of the Securities and Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires our officers
and directors, as well as those persons who own more than 10% of our common
stock, to file reports of ownership and changes in ownership with the SEC.
These persons are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. Based solely on our review of the copies of
such forms, or written representations from certain reporting persons that no
such forms were required, we believe that during the fiscal year ended December
31, 2002, all filing requirements applicable to our officers, directors and
greater than 10% owners of our common stock were met, except that Stephen Rose
failed to file 7 Section 16 reports.

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ITEM 11.  EXECUTIVE COMPENSATION

Executive Compensation

The following table sets forth information with respect to compensation
earned during the years ended December 31, 2002, 2001 and 2000 by Peter J. F.
van Voorst Vader, our former president and chief executive officer, who
resigned effective December 31, 2002.

Summary Compensation Table

|                             |  |              |      |           |  |                     |        |                     |  |           |       |                    |  |                  |   |              |  |           |   |                     |  |  |        |  |  |  |   | 
|---------------------------- |  | ------------ | ---- | --------- |  | ------------------- | ------ | ------------------- |  | --------- | ----- | ------------------ |  | ---------------- | - | ------------ |  | --------- | - | ------------------- |  |  | ------ |  |  |  | - | 
|                             |  |              |      |           |  |                     |        |                     |  |           |       |                    |  |                  |   |              |  | Long-Term
|                             |  |              |      |           |  | Annual Compensation |        | Compensation Awards
|                             |  |              |      |           |  |                     |        |                    
|                             |  | Year         |      |           |  |                     |        |                     |  |           |       |                    |  |                  |   |              |  |           |   | Number of Shares of |  |  |        | 
|                             |  | Ended        |      |           |  |                     |        |                     |  |           |       | Other              |  | Restricted Stock |   | Common Stock |  | All Other
|Name and Principal Position  |  | December 31, |      | Salary(1) |  | Bonus               |        | Annual Compensation |  | Awards(s) |       | Underlying Options |  | Compensation    
|                             |  |              |      |           |  |                     |        |                     |  |           |       |                    |  |                 
|Peter J. F. van Voorst Vader |  |              | 2002 |           |  | $                   | 37,972 |                     |  |           |      |                    |  |                  |  |              |  |           |  |                     |  |  | 90,000 |  |  |  |  | 
|President and Chief          |  |              | 2001 |           |  | $                   | 40,689 |                     |  | $         | 4,808 |                    |  |                  |  |              |  |           |  |                     |  |  | 51,875 |  |  |  |  | 
|Executive Officer            |  |              | 2000 |           |  | $                   | 63,504 |                     |  |           |      |                    |  |                  |  |              |  |           |  |                     |  |  | 42,500 |  |  |  |  | 



---

|(1) |  | In 1999, we began denominating salaries in Brazilian Reais. In this
table, salaries have been converted into U.S. Dollars based on an average
exchange rate of each period.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth information with respect to option grants
issued by us to Peter J. F. van Voorst Vader, our former president and chief
executive officer, during the fiscal year ended December 31, 2002.

Option Grants in Last Fiscal Year

|                             |  |                    |        |                     |  |                    |      |                 |  |           |      |                    |  |  |            |  |  |   |        | 
|---------------------------- |  | ------------------ | ------ | ------------------- |  | ------------------ | ---- | --------------- |  | --------- | ---- | ------------------ |  |  | ---------- |  |  | - | ------ | 
|                             |  |                    |        |                     |  | Percent of Total   |      |                 |  |           |      |                    |  |  |            |  |  |  
|                             |  | Number of Shares   |        | Options Granted to  |  |                    |      |                 |  |           |      |                    |  |  |            | 
|                             |  | Underlying Options |        | Employees in Fiscal |  | Per Share Exercise |      |                 |  |           |      | Grant Date Present
|Name                         |  | Granted            |        | Year                |  | Price              |      | Expiration Date |  | Value (1)
|                             |  |                    |        |                     |  |                    |      |                 |  |          
|Peter J. F. van Voorst Vader |  |                    | 90,000 |                     |  |                    | 59.4 | %               |  | $         | 1.06 |                    |  |  | 10/23/2005 |  |  | $ | 18,900 | 



---

|(1) |  | Present value is estimated on the date of grant using the Black Scholes
option pricing model with the following weighted average assumptions used
for grants in 2002; risk free interest rate of 5.0%; no expected dividend
yield; expected lives of 5 years; and expected stock price volatility of
242%.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth information with respect to exercises of
stock options held by Peter J. F. van Voorst Vader, our former president and
chief executive officer, during the fiscal year ended December 31, 2002 and the
value of unexercised options held by Mr. Vader as of December 31, 2002.

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Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values

|                             |  |                  |   |          |  |             |   |                      |  |                               |         |                      |  |  |   |  |  |  |   |  |  |  |   | 
|---------------------------- |  | ---------------- | - | -------- |  | ----------- | - | -------------------- |  | ----------------------------- | ------- | -------------------- |  |  | - |  |  |  | - |  |  |  | - | 
|                             |  |                  |   |          |  |             |   |                      |  | Number of Unexercised         |         |                      |  |  |   |  |  | 
|                             |  |                  |   |          |  |             |   |                      |  | Securities Underlying Options |         | Value of Unexercised
|                             |  | Number of Shares |   |          |  |             |   | at December 31, 2002 |  | In-the-Money Options         
|                             |  | Acquired on      |   | Value    |  |             |   |                     
|Name                         |  | Exercise         |   | Realized |  | Exercisable |   | Unexercisable        |  | Exercisable                   |         | Unexercisable       
|                             |  |                  |   |          |  |             |   |                      |  |                               |         |                     
|Peter J. F. van Voorst Vader |  |                  |  |          |  |             |  |                      |  |                               | 241,250 |                      |  |  |  |  |  |  |  |  |  |  |  | 

Directors Compensation

Our directors receive no cash compensation for attending board meetings
other than reimbursement of reasonable expenses incurred in attending such
meetings. Rather, we compensate our directors on an annual basis for their
services through grants of options to acquire shares of our common stock,
exercisable at the prevailing market price of our common stock on the
respective grant dates, with the next such grants scheduled to be made on the
date of the annual meeting. There is no pre-determined number of options
annually granted to our directors. The quantity of options to be granted is
defined every year by our compensation committee, which is composed of some
board members.

During fiscal 2001, our compensation committee awarded Omar Carneiro da
Cunha options to purchase 21,250 shares of our common stock, Lawrence Burnstein
options to purchase 15,625 shares of our common stock and Stephen J. Rose
options to purchase 4,375 shares of our common stock. The foregoing options
were issued on June 7, 2001 and expire on June 7, 2006. The options are
exercisable at $2.30 per share of common stock.

During fiscal 2002, our compensation committee awarded Omar Carneiro da
Cunha options to purchase 6,250 shares of our common stock, and awarded each of
Jose Ricardo Bousquet Bomeny and Stephen J. Rose options to purchase 4,375
shares of our common stock. The foregoing options were issued on July 16, 2002
and expire on July 16, 2007. The options are exercisable at $0.19 per share of
common stock.

Employment Agreements

Mr. van Voorst Vader was party to an employment agreement with us that was
scheduled to expire in February 2002. The agreement called for him to serve as
our chief executive officer at a current salary of R$148,600 per annum, or
$63,504, with provision for annual bonuses based upon future results of
operations, in such amounts, if any, as may be determined from time to time at
the discretion of our board.

Our employment arrangement with Mr. van Voorst Vader provided that if we
terminate his employment, other than for cause, following a change of control,
or he voluntarily terminates such employment within 180 days subsequent to a
change of control, we shall have to pay to such person an amount of money equal
to 2.9 times his base amount (a term defined in the Internal Revenue Code,
which essentially is such persons annualized compensation).

Further, all options, warrants, and other rights to acquire our securities
we previously granted and outstanding to Mr. van Voorst Vader upon a change of
control shall fully vest and become immediately exercisable.

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Change of control is defined as either:



| |  |  | the acquisition by a person or group of persons acting in concert
of 20% or more beneficial ownership of our common stock; or                                                                                                                                           
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the commencement or announcement of an intention to make a tender
or exchange offer for 30% or more beneficial ownership of our common
stock; or                                                                                                                        
|
| |  |  | the acquisition by a person or group of persons acting in concert
of 10% or more beneficial ownership of our common stock, when such
persons ownership interest is deemed by our board to have a material
adverse impact on our business or prospects; or              
|
| |  |  | the election or appointment of one or more individuals to our
board, which election or appointment results in a change in the
majority compensation of the board from that which existed on the date
we entered into our employment agreement with Mr. van Voorst Vader.

A change of control may occur pursuant to the stockholders agreement with
AIGLAEP. For a detailed description of the stockholders agreement, as
amended, see Item 13. Certain Relationships and Related Transactions.

Mr. van Voorst Vader has resigned from all operational tasks as president
of Venbo on October 1, 2002 and as chief executive officer of our company on
December 31, 2002. He and the board agreed that after the resignation there
was an effective change of control. It was agreed that Mr. van Voorst Vader
should receive 120,000 shares of common stock, the company car and R$160,000,
instead of 2.9 times his base salary. All of his options vested immediately on
October 31, 2002 and will remain exercisable for 36 months from that date.

We have retained the services of Ricardo Figueredo Bomeny, as our Chief
Executive Officer, to manage out day-to-day operations for a term of two years,
for which Mr. Bomeny will receive 20,000 shares of our common stock for each of
the first twelve months of such two-year term, a sum in cash for the second
twelve months of such term in an amount to be mutually agreed upon at a future
date, and an additional 260,000 shares at the end of the two-year term
conditioned upon the attainment of specified operational cost-savings.

Limitation on Liability

As permitted by Delaware law, our certificate of incorporation and bylaws
provide that our directors shall not be personally liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability:



| |  |  | for any breach of the directors duty of loyalty to us or our
stockholders;                                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;                                    
|
| |  |  | under Section 174 of the Delaware General Corporation Law, relating
to unlawful payment of dividends or unlawful stock purchases or
redemption; or
|
| |  |  | for any transaction from which the director derives an improper
personal benefit.                                                                 

As a result of this provision, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.

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##### Table of Contents



Our certificate of incorporation and bylaws provide that to the extent one
of our directors, officers, employees or agents has been successful on the
merits or otherwise in defense of any action, suit or proceeding brought
against such person by reason of the fact that he is or was one of our
directors, officers, employees or agents, he shall be indemnified by us against
expenses (including attorneys fees) actually and reasonably incurred by him in
connection with such action, suit or proceeding. If the director, officer,
employee or agent is adjudged to be liable in such action, suit or proceeding,
no indemnification will be granted unless ordered by a court and a majority of
the disinterested members of our board of directors, independent legal counsel
or our stockholders determine that such director, officer, employee or agent
acted in good faith and in our best interests, or, in the case of a criminal
action, such person believed his conduct was not unlawful.

The indemnification provided under our certificate of incorporation and
bylaws includes the right to be paid expenses (including attorneys fees) in
advance of any proceeding for which indemnification may be had, provided that
the payment of these expenses (including attorneys fees) incurred by a
director, officer, employee or agent in advance of the final disposition of a
proceeding may be made only upon delivery to us of an undertaking by or on
behalf of the director, officer, employee or agent to repay all amounts so paid
in advance if it is ultimately determined that the director or officer is not
entitled to be indemnified.

Under our bylaws, we have the power to purchase and maintain insurance on
behalf of any person who is or was one of our directors, officers, employees or
agents, against any liability asserted against the person or incurred by the
person in any such capacity, or arising out of the persons status as such, and
related expenses, whether or not we would have the power to indemnify the
person against such liability under the provisions of Delaware law, our
certificate of incorporation and our bylaws.

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been informed that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of December 31, 2002
with respect to the beneficial ownership of our common stock by:



| |  |  | each person known by us to be the beneficial owner of more
than 5% of our outstanding shares of common stock;
| | - |  | -------------------------------------------------------------------------------------------------------------
|
| |  |  | our chief executive officer;                                                                                 
|
| |  |  | each of our directors; and                                                                                   
|
| |  |  | all executive officers and directors as a group.                                                             

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|                                                            |                                                                                                                  |               |                   |       |               |  |      |   | 
|----------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ------------- | ----------------- | ----- | ------------- |  | ---- | - | 
|                                                            |                                                                                                                  |               | Amount and Nature |       | Approximate  
|                                                            |                                                                                                                  |               | of Beneficial     |       | Percentage of
|Name and Address of Beneficial Owner                        |                                                                                                                  | Ownership (1) |                   | Class
|                                                            |                                                                                                                  |               |                   |      
|AIG Latin America Equity Partners, Ltd.                     |                                                                                                                  |               | 1,613,789         | (2)   |               |  | 18.0 | %
|                                                            | 80 Pine Street
New York, NY 10016                                                                                |               |                   |       |               |  |      |   | 
|Peter J. F. van Voorst Vader                                |                                                                                                                  |               | 4,588,789         | (3)   |               |  | 51.2 | %
|                                                            | Prudente de Moraes 1933/703
Ipanema 22420-043 - Rio de Janeiro, Brazil                                           |               |                   |       |               |  |      |   | 
|Omar Carneiro da Cunha                                      |                                                                                                                  |               | 4,588,789         | (4)   |               |  | 51.2 | %
|                                                            | c/o Bond Consultoria Empresarial S/C Ltda.
RU4 Voluntarios da Patria
89 Sala 604  Botafogo-RJ  Brazil 22210-00 |               |                   |       |               |  |      |   | 
|Jose Ricardo Bousquet Bomeny                                |                                                                                                                  |               | 4,588,789         | (5)   |               |  | 51.2 | %
|                                                            | c/o Big Burger Ltda.
Rua Lauro Muller 116/2005 - Rio de Janeiro, Brazil                                          |               |                   |       |               |  |      |   | 
|Stephen J. Rose                                             |                                                                                                                  |               | 224,870           | (6)   |               |  | 2.5  | %
|                                                            | 10/11 Dacre Street
London, SW1H ODJ
United Kingdom                                                               |               |                   |       |               |  |      |   | 
|Guillermo Hector Pisano                                     |                                                                                                                  |               | 0                 |       |               |  | 0    |  
|                                                            | Rua Domingos Ferreira - 10 - Cob 01
Rio de Janeiro  RJ  Brazil  CEP22050-010                                  |               |                   |       |               |  |      |   | 
|Gustavo Figueiredo Bomeny                                   |                                                                                                                  |               | 4,137,976         | (7)   |               |  | 46.2 | %
|                                                            | Rua Gal Tasso Fragoso, 33/3001
Jardim Botanico  RJ  Brazil  CEP22470-170                                      |               |                   |       |               |  |      |   | 
|Ricardo Figueredo Bomeny                                    |                                                                                                                  |               | 180,000           |       |               |  | 2.0  | %
|                                                            | Rua Retentor, 19, Apt. 402
Rio de Janiero  RJ  Brazil                                                          |               |                   |       |               |  |      |   | 
|Romulo Borges Fonseca                                       |                                                                                                                  |               | 4,137,976         | (8)   |               |  | 46.2 | %
|                                                            | Rua Iberê de Nazareth, 140
Rio de Janeiro  RJ   Brazil   CEP22793-780                                         |               |                   |       |               |  |      |   | 
|CCC Emprendimentos Ltda.                                    |                                                                                                                  |               | 4,137,976         | (9)   |               |  | 46.2 | %
|                                                            | Rodovia Washington Luiz, 5609 - Parte
Duque de Caxias  RJ  Brazil  CEP25050-000                               |               |                   |       |               |  |      |   | 
|Mexford Resources                                           |                                                                                                                  |               | 750,000           |       |               |  | 8.4  | %
|                                                            | P.O. Box 3163 - Chera Chambers
RD Town, Tortola  British Virgin Islands                                         |               |                   |       |               |  |      |   | 
|All executive officers and directors as a group (8 persons) |                                                                                                                  |               | 4,993,659         |       |               |  | 55.7 | %



---

|(1) |  | Beneficial ownership means the sole or shared power to vote or direct the
voting of a security or the sole or shared power to invest or dispose or
direct the investment or disposition of a security. Except as otherwise
indicated, we believe that all named persons have sole voting power and
investment power with respect to their shares of common stock, except to
the extent that such authority is shared by spouses under applicable law,
and record and beneficial ownership with respect to their shares. This
table also includes any shares of common stock issuable upon exercise of
options or warrants that are currently exercisable or that will become
exercisable within 60 days of December 31, 2002.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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|(2) |  | Includes warrants that are exercisable for an aggregate of 35,813 shares
of common stock. Includes 1,162,976 shares of common stock owned by other
stockholders who are parties to the 1999 Stockholders Agreement, as
amended, for which each of the parties, including AIGLAEP, has shared
voting power to elect our board of directors. AIGLAEP has dispositive
power over 450,813 shares of common stock, including shares underlying
options, subject to the terms of the 1999 Stockholders Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | Includes options to purchase
241,250 shares of common stock. Also
includes 118,238 shares of common stock owned by Shampi Investments
A.E.C., L.G. Smith Boulevard, Punta Brabo, Oranjstad, Aruba, of which Mr.
van Voorst Vader is the sole stockholder. Also includes 120,000 shares
received in connection with his resignation as chief operating officer of
Venbo Comercio de Alimentos Ltda., our wholly owned subsidiary. Includes
1,134,301 shares of common stock beneficially owned by other stockholders
who are parties to the 1999 Stockholders Agreement, for which each of the
parties, including Mr. van Voorst Vader, has shared voting power to elect
our board of directors. Also includes 2,975,000 shares of common stock
beneficially owned by other stockholders who are parties to the 2002
Stockholders Agreement, for which each of the parties, including Mr. van
Voorst Vader, has shared voting power to elect our board of directors.
Mr. van Voorst Vader has dispositive power over 479,488 shares of common
stock, including shares underlying options, subject to the terms of the
1999 Stockholders Agreement and the 2002 Stockholders Agreement.
|   
|(4) |  | Includes 112,238 shares of common stock owned by Seaview Ventures Group
Inc., The Creque Building, P.O. Box 116, Road Town, Tortola, British
Virgin Islands, of which Mr. Carneiro da Cunha is a principal. Also
includes options to purchase 65,000 shares of common stock. Does not
reflect options owned by Mr. Carneiro da Cunha to sell 10,000 shares of
common stock. Includes 1,436,551 shares of common stock beneficially
owned by other stockholders who are parties to the 1999 Stockholders
Agreement, for which each of the parties, including Mr. Carneiro da Cunha,
has shared voting power to elect our board of directors. Also includes
2,975,000 shares of common stock beneficially owned by other stockholders
who are parties to the 2002 Stockholders Agreement, for which each of the
parties, including Mr. Carniero da Cunha, has shared voting power to elect
our board of directors. Mr. Carneiro da Cunha has dispositive power over
177,238 shares of common stock, including shares underlying options,
subject to the terms of the 1999 Stockholders Agreement and the 2002
Stockholders Agreement.                                                  
|   
|(5) |  | Includes options to purchase
46,250 shares of common stock. Also includes
360,000 shares of common stock owned by BigBurger Ltda., of which Mr.
Bomeny is a principal shareholder. Also includes 100,000 shares owned by
Big Burger Recife Ltda., of which Mr. Bomeny is a principal. Includes
1,107,539 shares of common stock beneficially owned by other stockholders
who are parties to the 1999 Stockholders Agreement, for which each of the
parties, including Mr. Bomeny, has shared voting power to elect our board
of directors. Also includes 2,975,000 shares of common stock beneficially
owned by other stockholders who are parties to the 2002 Stockholders
Agreement, for which each of the parties, including Mr. Bomeny, has shared
voting power to elect our board of directors. Mr. Bomeny has dispositive
power over 506,250 shares of common stock, including shares underlying
options, subject to the terms of the 1999 Stockholders Agreement and the
2002 Stockholders Agreement.                                                                                                                                                                         
|   
|(6) |  | Includes options to purchase
8,750 shares of common stock. Includes
100,000 shares of common stock owned by The Daedulus Retirement Fund, of
which Mr. Rose is the beneficiary. Also includes options owned by The
Daedulus Retirement Fund to purchase 12,500 shares of common stock, and
options owned by Latin American Investment Partners Ltd., of which Mr.
Rose is a principal, to purchase 37,288 shares of common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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|(7) |  | Includes 3,137,976 shares of common stock owned by other stockholders who
are parties to the 2002 Stockholders Agreement, for which each of the
parties, including Mr. Bomeny, has shared voting power to elect our board
of directors. Mr. Bomeny has dispositive power over 1,000,000 shares of
common stock subject to the terms of the 2002 Stockholders Agreement.                                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(8) |  | Includes 1,912,500 shares of common stock owned by CCC Emprendimentos
Ltda of which Mr. Fonseca is a shareholder. Includes 62,500 warrants owned
by CCC Empreendimentos Ltda. Also includes 2,162,976 shares of common
stock owned by other stockholders who are parties to the 2002
Stockholders Agreement, for which each of the parties, including Mr.
Fonseca, has shared voting power to elect our board of directors.                                                                               
|   
|(9) |  | Includes 62,500 warrants owned by CCC Empreendimentos Ltda. Also
includes 2,162,976 shares of common stock beneficially owned by other
stockholders who are parties to the 2002 Stockholders Agreement, for
which each of the parties, including CCC Emprendimentos Ltda, has shared
voting power to elect our board of directors. CCC Emprendimentos Ltda has
dispositive power over 1,975,000 shares of common stock, including shares
underlying warrants, subject to the 2002 Stockholders Agreement.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information about shares of common stock of
the Company that may be issued upon the exercise of options, warrants and
rights under the Companys equity compensation plan as of December 31, 2002.
The Companys stockholders have approved all of these plans.

|                                                           |  |                              |           |                                 |  |                                |      |  |  |  |         | 
|---------------------------------------------------------- |  | ---------------------------- | --------- | ------------------------------- |  | ------------------------------ | ---- |  |  |  | ------- | 
|                                                           |  | (a)                          |           | (b)                             |  | (c)                           
|                                                           |  |                              |           |                                 |  |                               
|                                                           |  |                              |           |                                 |  | Number of securities remaining
|                                                           |  | Number of securities         |           |                                 |  | available for future issuance 
|                                                           |  | to be issued upon            |           | Weighted-average exercise price |  | under equity compensation     
|                                                           |  | exercise of outstanding      |           | of outstanding options,         |  | plans (excluding securities   
|Plan category                                              |  | options, warrants and rights |           | warrants and rights             |  | reflected in column (a))      
|                                                           |  |                              |           |                                 |  |                               
|Equity compensation
plans approved by
security holders     |  |                              | 1,200,601 |                                 |  | R$                             | 3.70 |  |  |  | 410,000 | 
|Equity compensation
plans not approved
by security holders |  |                              | 0         |                                 |  |                                | 0    |  |  |  | 0       | 
|Total                                                      |  |                              | 1,200,601 |                                 |  | R$                             | 3.70 |  |  |  | 410,000 | 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On August 11, 1997 we entered into the 1997 Stockholders Agreement with
AIG Latin America Equity Partners, Ltd., referred to herein as AIGLAEP, and
our then executive officers and directors, and certain of their affiliates, as
a condition to the closing of a stock purchase agreement with AIGLAEP, pursuant
to which AIGLAEP purchased 375,000 shares of our common stock and warrants to
purchase 62,500 shares of our common stock.

40



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##### Table of Contents



Pursuant to the terms of the 1997 Stockholders Agreement, each of the
parties to the agreement agreed, among other things, to vote its respective
shares of our common stock to elect as directors one designee of AIGLAEP, two
designees of Shampi Investments A.E.C., two designees of Lawrence Burstein and
certain other of our former executive officers and directors, and one designee
of BigBurger Ltda.

The 1997 Stockholders Agreement provides that if we fail to achieve 75%
of our projected cumulative EBITDA (earnings before interest, taxes,
depreciation and amortization), as set forth in the 1997 Agreement, for each of
the periods from January 1, 1997 to December 31, 1999, 2000 or 2001,
respectively, AIGLAEP could appoint such number of its designees which,
together with an expansion of the board and the filling of vacancies created by
the resignation of certain directors serving at such time, would then
constitute a majority of our board of directors, thereby effecting a change in
our control.

We failed to achieve the performance targets for year ended December 31,
2000. Following negotiations with AIGLAEP, the 1997 Stockholders Agreement was
amended on March 14, 2001, to provide, among other things, for the suspension,
until the completion of our audited financial statements for the year ended
December 31, 2002, of AIGLAEPs right to appoint a majority of our board of
directors. In partial consideration of AIGLAEPs agreeing to the suspension and
possible termination of its right to take control of our board and certain of
its prior approval rights, we issued to AIGLAEP warrants to purchase 35,813
shares of our common stock at an exercise price of $5.00 per share and reduced
the exercise price of additional warrants to purchase 64,187 shares of our
common stock held by AIGLAEP to $5.00 per share. Further, certain of our
shareholders agreed to grant AIGLAEP an option to purchase an aggregate of
40,000 shares of our common stock held by such shareholders (and among them as
they shall agree) at an exercise price of $1.50 per share.

The amendment to the 1997 Stockholders Agreement provides that if certain
economic performance targets, based on our results of operations for the year
ending December 31, 2002 and set out in the amendment to the 1997 Stockholders
Agreement, are met, or if AIGLAEP at any time owns less than 187,500 issued and
outstanding shares of our common stock, subject to any adjustments for any
stock split or restructuring, AIGLAEPs right to take control of our board of
directors and certain of its prior approval rights will terminate. If, however,
we fail to meet these performance targets, our chief executive officer must
promptly resign and our board of directors will be required, except as limited
by their fiduciary obligations, to adopt recommendations for improving our
financial performance as may be proposed by a committee of the board of
directors composed of representatives of AIGLAEP and certain other investors
who purchased our equity securities in a private offering in March 2001.

As reflected in the financial statements contained elsewhere in this
report, we failed to meet the original performance targets for the year ended
December 31, 2002. However, the amendment to the 1997 Stockholders Agreement
contains a provision that requires the parties to renegotiate the performance
targets in good faith in the event that (i) the Brazil SELIC central bank rate
exceeds an average of 18% for a continuous period of ninety business days or
(ii) there is a devaluation of the Brazilian Real against the US dollar
exceeding 10% over any three-month period. Both such events have occurred
since the amendment. However, due to the fact that our request to renegotiate
the performance targets in good faith did not receive a response, we believe
that the performance targets are no longer applicable.

On May 15, 2002, we entered into the 2002 Stockholders Agreement with
Gustavo Figueredo Bomeny and CCC Emprendimentos e Participacoes Ltd. (the New
Investors) and certain of our current investors, namely BigBurger Ltda., Jose
Ricardo Bosquet Bomeny, Omar Carneiro da Cunha, Seaview Venture Group, Peter
van Voorst Vader and Shampi Investments A.E.C., as a condition to the closing
of a stock purchase agreement with the New Investors, pursuant to which the New
Investors purchased 3,700,000 shares of our common stock.

41



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##### Table of Contents



Pursuant to the terms of the 2002 Stockholders Agreement, each of the
parties to the agreement agreed, among other things, to vote its respective
shares of our common stock to elect as directors one designee of Omar Carneiro
da Cunha, one designee of Lawrence Burstein, one designee of BigBurger Ltda.
and two designees of the New Investors. The parties to the 2002 Stockholders
Agreement also agreed that, with regard to certain matters that may arise at
our Annual Stockholders Meetings, all of their shares of common stock will be
voted in accordance with the instructions of a majority of the total shares of
common stock held by such parties. The 2002 Stockholders Agreement, by its
terms, is subject to the terms of the 1997 Stockholders Agreement.

ITEM 14. CONTROLS AND PROCEDURES

Within the 90 days prior to the filing date of this report, under the
supervision and with the participation of management, including Ricardo
Figueiredo Bomeny (serving as the Companys Chief Executive Officer and Acting
Chief Financial Officer), the Company has evaluated the effectiveness of the
design and operation of the Companys disclosure controls and procedures
pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, Mr. Bomeny
concluded that the Companys disclosure controls and procedures are effective
in timely alerting him to material information relating to the Company
(including its consolidated subsidiaries) required to be included in the
Companys periodic SEC filings.

There have been no significant changes in the Companys internal controls
or other factors that could significantly affect internal controls subsequent
to the date of their evaluation.

42



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##### Table of Contents






PART IV

ITEM 15. EXHIBITS, FINANCIAL
STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  Financial Statements and Financial Statement Schedules:

(i) Financial Statements filed as a part of this Annual Report are listed
on the Index to Financial Statements at page F-1 herein.

(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

The Registrant filed a Current Report on Form 8-K on November 6, 2002, to
disclose the resignation of Peter van Voorst Vader as the chief executive
officer of the Registrant and the appointment of Ricardo Figueiredo Bomeny as
his replacement.

The registrant also filed a Current Report on Form 8-K on November 18,
2002, to file that certification required by Section 906 of the Saibanes-Oxley
Act of 2002, in connection with the registrants Quarterly Report on Form 10-Q
for the period ended September 30, 2002.

(c) Exhibits

|              |  |                                                                                                                                                                                                                                                                                                                                                               
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Index |  | Description                                                                                                                                                                                                                                                                                                                                                   
|              |  |                                                                                                                                                                                                                                                                                                                                                               
|3.1           |  | Certificate of Incorporation of the Registrant, as amended (1)                                                                                                                                                                                                                                                                                                
|3.2           |  | By-laws of the Registrant (2)                                                                                                                                                                                                                                                                                                                                 
|10.1          |  | Amended and Restated 1992 Stock Option Plan (2)                                                                                                                                                                                                                                                                                                              
|10.2          |  | Stockholders Agreement dated as of August
11, 1997, between Registrant, AIG Latin America Equity
Partners, Ltd. and Registrants then-current executive
officers and directors, and certain of their affiliates (3)                                                                                                                                          
|10.3          |  | Amendment, dated as of March 14, 2001, to
Stockholders Agreement between the Registrant, AIG Latin
America Equity Partners, Ltd. and Registrants then-current
executive officers and directors, and certain of their
affiliates (4)                                                                                                                         
|10.4          |  | Capitalization and Administrative
Restructuring Intentions Protocol, dated as of May 15,
2002, by and among Brazil Fast Food Corp., Gustavo
Figueredo Bomeny, CCC Emprendimentos e Participacoes Ltda.,
BigBurger Ltda., Jose Ricardo Bousquet Bomeny, Omar
Carneiro da Cunha, Seaview Venture Group, Peter van Voorst
Vader and Shampi Investments A.E.C. (5)

43



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|              |  |                                                                                                                                                           
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Index |  | Description                                                                                                                                               
|              |  |                                                                                                                                                           
|10.5          |  | Master Franchise Agreement, dated as of
December 4, 2000, by and between Venbo Comercio de
Alimentos Ltda. and Antonio Carlos da Silveira Pinheiro*       
|21.1          |  | Subsidiaries of Registrant (6)                                                                                                                            
|24.1          |  | Power of Attorney (comprises a portion of
the signature page of this report)                                                                              
|99.1          |  | Certifying Statement of the Chief Executive
Officer and Acting Chief Financial Officer pursuant to
Section 1350 of the Title 18 of the United States Code.



---

|   |  | Denotes a compensatory plan.                                                                                           
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|   
|*   |  | Filed herewith.                                                                                                        
|   
|(1) |  | Filed as an exhibit to Registrants Registration Statement on Form S-1
(File No. 333-3754).                            
|   
|(2) |  | Filed as an exhibit to Registrants Registration Statement on Form S-1
(File No. 33-71368).                            
|   
|(3) |  | Filed as an exhibit to Registrants Current Report on Form 8-K, dated
August 29, 1997 (File No. 0-23278).              
|   
|(4) |  | Filed as an exhibit to Registrants Current Report on Form 8-K, dated
April 12, 2001.                                  
|   
|(5) |  | Filed as an exhibit to Registrants Current Report on Form 8-K, dated
July 3, 2002.                                    
|   
|(6) |  | Filed as an exhibit to Registrants Annual Report on Form 10-K for the
year ended December 31, 1997 (File No. 0-23278).

44



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##### Table of Contents






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, Federative Republic of Brazil, on the 2nd day of April, 2003.

| |  |                       |  |                                                                
| |  | --------------------- |  | ---------------------------------------------------------------
| |  | BRAZIL FAST FOOD CORP
| |  |                       |  |                                                                
| |  | By:                   |  | /s/ Ricardo Figueiredo Bomeny                                  
| |  |                       |  |                                                                
| |  |                       |  | Ricardo Figueiredo Bomeny
President and Chief Executive Officer

KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints and hereby authorizes Ricardo Figueiredo Bomeny
and Peter J.F. van Voorst Vader, severally, such persons true and lawful
attorneys-in-fact, with full power of substitution or resubstitution, for such
person and in such persons name, place and stead, in any and all capacities,
to sign on such persons behalf, individually and in each capacity stated
below, any and all amendments, including post-effective amendments to this
registration statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact, full power and authority to
do and perform each and every act and
thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

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:

45



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##### Table of Contents



|                     |  |                                                                                     
|-------------------- |  | ------------------------------------------------------------------------------------
|Date: April 15, 2003 |  | /s/ Ricardo Figueiredo Bomeny                                                       
|                     |  |                                                                                     
|                     |  | Ricardo Figueiredo Bomeny
Chief Executive Officer and Acting Chief
Financial Officer
|                     |  |                                                                                     
|Date: April 15, 2003 |  | /s/ Omar Carneiro da Cunha                                                          
|                     |  |                                                                                     
|                     |  | Omar Carneiro da Cunha
Chairman of the Board                                        
|                     |  |                                                                                     
|Date: April 15, 2003 |  | /s/ Peter J.F. van Voorst Vader                                                     
|                     |  |                                                                                     
|                     |  | Peter J.F. van Voorst Vader
Director                                                
|                     |  |                                                                                     
|Date: April 15, 2003 |  | /s/ Romulo Borges Fonseca                                                           
|                     |  |                                                                                     
|                     |  | Romulo Borges Fonseca
Director                                                      
|                     |  |                                                                                     
|Date: April 15, 2003 |  | /s/ José Ricardo Bousquet Bomeny                                                    
|                     |  |                                                                                     
|                     |  | José Ricardo Bousquet Bomeny
Director                                               
|                     |  |                                                                                     
|Date: April 15, 2003 |  | /s/ Stephen J. Rose                                                                 
|                     |  |                                                                                     
|                     |  | Stephen J. Rose
Director                                                            
|                     |  |                                                                                     
|Date: April 15, 2003 |  | /s/ Guillermo Hector Pisano                                                         
|                     |  |                                                                                     
|                     |  | Guillermo Hector Pisano
Director                                                    
|                     |  |                                                                                     
|Date: April 15, 2003 |  | /s/ Gustavo Figueiredo Bomeny                                                       
|                     |  |                                                                                     
|                     |  | Gustavo Figueiredo Bomeny
Director                                                  

46



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##### Table of Contents






CERTIFICATION



|   |  | I, Ricardo Figueiredo Bomeny, certify that:                                                                                                                                                                                                                                                                             
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|1. |  | I have reviewed this annual report on Form 10-K of Brazil Fast Food Corp.
(the Company);                                                                                                                                                                                                                              
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the Company as of, and for, the periods presented in this annual report;                      
|  
|4. |  | I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
Company and have:                                                                                                                                                     



| | (a) |  | Designed such disclosure controls and procedures to ensure
that material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this annual
report is being prepared;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Evaluated the effectiveness of the Companys disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | (c) |  | Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                     



|5. |  | I have disclosed, based on my most recent evaluation, to the Companys
auditors and the audit committee of the Companys Board of Directors (or
persons performing the equivalent function):
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (a) |  | All significant deficiencies in the design or operation of
internal controls which could adversely affect the Companys ability
to record, process, summarize and report financial data and have
identified for the Companys auditors any material weaknesses in
internal controls; and
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | Any fraud, whether or not material, that involves management
or other employees who have a significant role in the Companys
internal controls; and                                                                                                                                     



|6. |  | I have indicated in this annual report whether there were significant
changes in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weakness.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                     |  |                                                                                     
|-------------------- |  | ------------------------------------------------------------------------------------
|Date: April 15, 2003 |  | /s/ Ricardo Figueiredo Bomeny                                                       
|                     |  |                                                                                     
|                     |  | Ricardo Figueiredo Bomeny
Chief Executive Officer and Acting Chief
Financial Officer





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##### Table of Contents






EXHIBIT INDEX

|              |  |                                                                                                                                                                                                                                                                                                                                                               
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Index |  | Description                                                                                                                                                                                                                                                                                                                                                   
|              |  |                                                                                                                                                                                                                                                                                                                                                               
|3.1           |  | Certificate of Incorporation of the Registrant, as amended (1)                                                                                                                                                                                                                                                                                                
|3.2           |  | By-laws of the Registrant (2)                                                                                                                                                                                                                                                                                                                                 
|10.1          |  | Amended and Restated 1992 Stock Option Plan (2)                                                                                                                                                                                                                                                                                                              
|10.2          |  | Stockholders Agreement dated as of August 11, 1997, between
Registrant, AIG Latin America Equity Partners, Ltd. and Registrants
then-current executive officers and directors, and certain of their
affiliates (3)                                                                                                                                          
|10.3          |  | Amendment, dated as of March 14, 2001, to Stockholders
Agreement between the Registrant, AIG Latin America Equity Partners,
Ltd. and Registrants then-current executive officers and directors,
and certain of their affiliates (4)                                                                                                                         
|10.4          |  | Capitalization and Administrative Restructuring Intentions
Protocol, dated as of May 15, 2002, by and among Brazil Fast Food
Corp., Gustavo Figueredo Bomeny, CCC Emprendimentos e Participacoes
Ltda., BigBurger Ltda., Jose Ricardo Bousquet Bomeny, Omar Carneiro
da Cunha, Seaview Venture Group, Peter van Voorst Vader and Shampi
Investments A.E.C. (5)
|10.5          |  | Master Franchise Agreement, dated as of December 4, 2000, by
and between Venbo Comercio de Alimentos Ltda. and Antonio Carlos da
Silveira Pinheiro*                                                                                                                                                                                                           
|21.1          |  | Subsidiaries of Registrant (6)                                                                                                                                                                                                                                                                                                                                
|24.1          |  | Power of Attorney (comprises a portion of the signature page
of this report)                                                                                                                                                                                                                                                                                  
|99.1          |  | Certifying Statement of the Chief Executive Officer and
Acting Chief Financial Officer pursuant to Section 1350 of the Title
18 of the United States Code.                                                                                                                                                                                                    



---

|   |  | Denotes a compensatory plan.                                                                                           
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|   
|*   |  | Filed herewith.                                                                                                        
|   
|(1) |  | Filed as an exhibit to Registrants Registration Statement on Form S-1
(File No. 333-3754).                            
|   
|(2) |  | Filed as an exhibit to Registrants Registration Statement on Form S-1
(File No. 33-71368).                            
|   
|(3) |  | Filed as an exhibit to
Registrants Current Report on Form 8-K, dated August 29, 1997 (File No. 0-23278).              
|   
|(4) |  | Filed as an exhibit to Registrants Current Report on Form 8-K, dated
April 12, 2001.                                  
|   
|(5) |  | Filed as an exhibit to Registrants Current Report on Form 8-K, dated
July 3, 2002.                                    
|   
|(6) |  | Filed as an exhibit to Registrants Annual Report on Form 10-K for the
year ended December 31, 1997 (File No. 0-23278).





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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002, 2001 AND 2000





---



##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARY

INDEX TO FINANCIAL STATEMENTS

|                                                           |  |            
|---------------------------------------------------------- |  | -----------
|                                                           |  | Page       
|                                                           |  |            
|Report of independent public accountants                   |  | F-2        
|Report of independent public accountants                   |  | F-3        
|Financial statements:                                      |  |            
|Consolidated balance sheets                                |  | F-4        
|Consolidated statements of operations                      |  | F-5        
|Consolidated statements of comprehensive loss              |  | F-6        
|Consolidated statements of changes in shareholders equity |  | F-7        
|Consolidated statements of cash flows                      |  | F-8        
|Notes to consolidated financial statements                 |  | F-9 to F-27





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##### Table of Contents



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
Brazil Fast Food Corp. and subsidiary

We have audited the accompanying consolidated balance sheets of Brazil Fast
Food Corp. and subsidiary (a Delaware corporation) as of December 31, 2002 and
2001, and the related consolidated statements of operations, comprehensive
loss, changes in shareholders equity and cash flows for each of the two years
in the period then ended. 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. The consolidated financial
statements of the Company as of December 31, 2000 and for the year ended
December 31, 2000, were audited by other auditors whose report dated March 15,
2001, expressed an unqualified opinion with a going concern emphasis similar to
the last paragraph.

We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. 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 consolidated financial position of Brazil Fast Food
Corp. and subsidiary as of December 31, 2002 and 2001 and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.

The financial statements as of December 31, 2002 and for the year then ended
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 and has a negative working capital and shareholders equity
that raises substantial doubt about its ability to continue as a going concern.
Managements plans in regards 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.

Rio de Janeiro, Brazil
March 20, 2003

Grant Thornton Auditores Independentes

F-2



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##### Table of Contents



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

We have audited the accompanying consolidated balance sheets of Brazil Fast
Food Corp. and subsidiary (a Delaware corporation) as of December 31, 2000 and
1999, and the related consolidated statements of operations, comprehensive
loss, changes in shareholders equity and cash flows for the years ended
December 31, 2000, 1999 and 1998. 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 auditing standards generally
accepted in the United States. 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
subsidiary as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for the years ended December 31, 2000, 1999 and
1998, in conformity with accounting principles generally accepted in the United
States.

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
and has a negative working capital 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.

Arthur Andersen S/C

Rio de Janeiro, Brazil
March 15, 2001

F-3



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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
(In thousands of Brazilian Reais, except share amounts)

ASSETS

|                                                                      |                                                                                                                      |                                                         |        |              |        |   |        |         |        | 
|--------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ------ | ------------ | ------ | - | ------ | ------- | ------ | 
|                                                                      |                                                                                                                      |                                                         |        | December 31, |       
|                                                                      |                                                                                                                      |                                                         |        |              |       
|                                                                      |                                                                                                                      |                                                         |        | 2002         |        |   | 2001   |        
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |        |        
|CURRENT ASSETS:                                                       |                                                                                                                      |                                                         |        |              |        |   |        |        
|                                                                      | Cash and cash equivalents                                                                                            |                                                         | R$     | 1,461        |        |   | R$     | 2,267   |       
|                                                                      | Accounts receivable, net of allowance for doubtful accounts
of R$1,893 and R$1,969, respectively                     |                                                         |        | 4,295        |        |   |        | 3,834   |       
|                                                                      | Inventories                                                                                                          |                                                         |        | 1,536        |        |   |        | 924     |       
|                                                                      | Prepaid expenses and other current assets                                                                            |                                                         |        | 727          |        |   |        | 710     |       
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |       
|                                                                      |                                                                                                                      | TOTAL CURRENT ASSETS                                    |        |              | 8,019  |   |        |         | 7,735  | 
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |       
|PROPERTY AND EQUIPMENT, NET                                           |                                                                                                                      |                                                         | 17,081 |              |        |   | 19,891 |        
|DEFERRED CHARGES, NET                                                 |                                                                                                                      |                                                         | 9,035  |              |        |   | 9,690  |        
|OTHER RECEIVABLES AND OTHER ASSETS                                    |                                                                                                                      |                                                         | 2,849  |              |        |   | 2,461  |        
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |       
|                                                                      |                                                                                                                      | TOTAL ASSETS                                            |        | R$           | 36,984 |   |        | R$      | 39,777 | 
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |       
|LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIENCY)                    
|CURRENT LIABILITIES:                                                  |                                                                                                                      |                                                         |        |              |        |   |        |        
|                                                                      | Notes payable                                                                                                        |                                                         | R$     | 6,317        |        |   | R$     | 8,779   |       
|                                                                      | Accounts payable and accrued expenses                                                                                |                                                         |        | 5,295        |        |   |        | 7,246   |       
|                                                                      | Payroll and related accruals                                                                                         |                                                         |        | 2,645        |        |   |        | 1,686   |       
|                                                                      | Taxes, other than income taxes                                                                                       |                                                         |        | 1,155        |        |   |        | 431     |       
|                                                                      | Deferred income                                                                                                      |                                                         |        | 637          |        |   |        | 637     |       
|                                                                      | Contingencies and taxes in litigation                                                                                |                                                         |        | 5,901        |        |   |        | 4,864   |       
|                                                                      | Other current liabilities                                                                                            |                                                         |        | 307          |        |   |        | 485     |       
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |       
|                                                                      |                                                                                                                      | TOTAL CURRENT LIABILITIES                               |        |              | 22,257 |   |        |         | 24,128 | 
|DEFERRED INCOME, less current portion                                 |                                                                                                                      |                                                         | 1,761  |              |        |   | 2,398  |        
|CONTINGENCIES AND TAXES IN LITIGATION, less
current portion (note 10) |                                                                                                                      |                                                         | 14,173 |              |        |   | 11,897 |        
|OTHER LIABILITIES                                                     |                                                                                                                      |                                                         | 303    |              |        |   | 137    |        
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |       
|                                                                      |                                                                                                                      | TOTAL LIABILITIES                                       |        |              | 38,494 |   |        |         | 38,560 | 
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |       
|SHAREHOLDERS EQUITY (DEFICIENCY):                                    |                                                                                                                      |                                                         |        |              |        |   |        |        
|                                                                      | Preferred stock, R$.01 par value, 5,000 shares authorized; no
shares issued                                          |                                                         |        |             |        |   |        |        |       
|                                                                      | Common stock, R$.0001 par value, 40,000,000 shares authorized;
7,542,790 and 3,235,390 shares issued and outstanding |                                                         |        | 1            |        |   |        | 1       |       
|                                                                      | Additional paid-in capital                                                                                           |                                                         |        | 59,297       |        |   |        | 50,341  |       
|                                                                      | Deficit                                                                                                              |                                                         |        | (59,614      | )      |   |        | (48,404 | )     
|                                                                      | Accumulated comprehensive loss                                                                                       |                                                         |        | (1,194       | )      |   |        | (721    | )     
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |       
|                                                                      |                                                                                                                      | TOTAL SHAREHOLDERS EQUITY (DEFICIENCY)                 |        |              | (1,510 | ) |        |         | 1,217  | 
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |       
|                                                                      |                                                                                                                      | TOTAL LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIENCY) |        | R$           | 36,984 |   |        | R$      | 39,777 | 
|                                                                      |                                                                                                                      |                                                         |        |              |        |   |       

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

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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of Brazilian Reais, except share amounts)

|                                           |                                                |                   |                              |        |                         |        |        |        |           |        |        |        |           |        | 
|------------------------------------------ | ---------------------------------------------- | ----------------- | ---------------------------- | ------ | ----------------------- | ------ | ------ | ------ | --------- | ------ | ------ | ------ | --------- | ------ | 
|                                           |                                                |                   |                              |        | Year Ended December 31, |       
|                                           |                                                |                   |                              |        |                         |       
|                                           |                                                |                   |                              |        | 2002                    |        |        | 2001   |           |        | 2000   |       
|                                           |                                                |                   |                              |        |                         |        |        |        |           |        |        |       
|NET OPERATING REVENUES:                    |                                                |                   |                              |        |                         |        |        |        |           |        |        |       
|                                           | Restaurant sales                               |                   | R$                           | 63,562 |                         |        | R$     | 68,397 |           |        | R$     | 63,775 |          
|                                           | Franchise income                               |                   |                              | 5,116  |                         |        |        | 4,099  |           |        |        | 3,134  |          
|                                           | Other income                                   |                   |                              | 7,632  |                         |        |        | 6,483  |           |        |        | 4,884  |          
|                                           |                                                |                   |                              |        |                         |        |        |        |           |       
|                                           |                                                |                   | TOTAL NET OPERATING REVENUES |        |                         | 76,310 |        |        |           | 78,979 |        |        |           | 71,793 | 
|                                           |                                                |                   |                              |        |                         |        |        |        |           |       
|COSTS AND EXPENSES:                        |                                                |                   |                              |        |                         |        |        |        |           |        |        |       
|                                           | Cost of restaurant sales                       |                   |                              | 25,333 |                         |        |        | 27,541 |           |        |        | 24,560 |          
|                                           | Restaurant payroll and other employee benefits |                   |                              | 13,061 |                         |        |        | 13,106 |           |        |        | 12,329 |          
|                                           | Restaurant occupancy and other expenses        |                   |                              | 8,043  |                         |        |        | 8,174  |           |        |        | 6,963  |          
|                                           | Depreciation and amortization                  |                   |                              | 3,774  |                         |        |        | 3,966  |           |        |        | 3,610  |          
|                                           | Other operating expenses                       |                   |                              | 13,161 |                         |        |        | 14,225 |           |        |        | 11,951 |          
|                                           | Selling and marketing expenses                 |                   |                              | 4,805  |                         |        |        | 5,906  |           |        |        | 5,759  |          
|                                           | General and administrative expenses            |                   |                              | 9,428  |                         |        |        | 6,598  |           |        |        | 6,111  |          
|                                           | Impairment of assets and loss on assets sold   |                   |                              | 1,661  |                         |        |        | 122    |           |        |        | 20     |          
|                                           |                                                |                   |                              |        |                         |        |        |        |           |       
|                                           |                                                |                   | TOTAL COSTS AND EXPENSES     |        |                         | 79,266 |        |        |           | 79,638 |        |        |           | 71,303 | 
|                                           |                                                |                   |                              |        |                         |        |        |        |           |       
|INCOME (LOSS) FROM OPERATIONS              |                                                |                   | (2,956                       | )      |                         |        | (659   | )      |           |        | 490    |       
|INTEREST INCOME                            |                                                |                   | 15                           |        |                         |        |       |        |           |        | 1      |       
|INTEREST (EXPENSE)                         |                                                |                   | (4,834                       | )      |                         |        | (5,922 | )      |           |        | (3,418 | )     
|FOREIGN EXCHANGE (LOSS)                    |                                                |                   | (3,435                       | )      |                         |        | (1,669 | )      |           |        | (424   | )     
|                                           |                                                |                   |                              |        |                         |        |        |        |           |       
|NET (LOSS)                                 |                                                | R$                | (11,210                      | )      |                         | R$     | (8,250 | )      |           | R$     | (3,351 | )     
|                                           |                                                |                   |                              |        |                         |        |        |        |           |       
|NET (LOSS) PER COMMON SHARE                |                                                |                   |                              |        |                         |        |        |        |           |        |        |       
|                                           | BASIC AND DILUTED                              |                   | R$                           | (1.96  | )                       |        | R$     | (2.27  | )         |        | R$     | (1.04  | )        
|                                           |                                                |                   |                              |        |                         |        |        |        |           |       
|WEIGHTED AVERAGE COMMONSHARES OUTSTANDING: |                                                |                   |                              |        |                         |        |        |        |           |        |        |       
|                                           |                                                | BASIC AND DILUTED |                              |        | 5,707,957               |        |        |        | 3,626,626 |        |        |        | 3,235,290 |       
|                                           |                                                |                   |                              |        |                         |        |        |        |           |       

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

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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands of Brazilian Reais)

|                                        |  |                         |         |   |      |    |        |      |  |    |        |  
|--------------------------------------- |  | ----------------------- | ------- | - | ---- | -- | ------ | ---- |  | -- | ------ | -
|                                        |  | Year Ended December 31, |        
|                                        |  |                         |        
|                                        |  | 2002                    |         |   | 2001 |    |        | 2000 | 
|                                        |  |                         |         |   |      |    |        |      | 
|Net Loss                                |  | R$                      | (11,210 | ) |      | R$ | (8,250 | )    |  | R$ | (3,351 | )
|Other comprehensive (loss):             |  |                         |         |   |      |    |        |      |  |    |        |  
|Foreign currency translation adjustment |  |                         | (473    | ) |      |    | (186   | )    |  |    | (74    | )
|                                        |  |                         |         |   |      |    |        |      | 
|Comprehensive Loss                      |  | R$                      | (11,683 | ) |      | R$ | (8,436 | )    |  | R$ | (3,425 | )
|                                        |  |                         |         |   |      |    |        |      | 

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

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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(In thousands of Brazilian Reais)

|                                  |  |              |           |  |            |    |   |         |  |    |           |               |  |      |         |   |       |    |        |   |  |    |         |  
|--------------------------------- |  | ------------ | --------- |  | ---------- | -- | - | ------- |  | -- | --------- | ------------- |  | ---- | ------- | - | ----- | -- | ------ | - |  | -- | ------- | -
|                                  |  | Common Stock |           |  | Additional |    |   |         |  |    |           | Accumulated   | 
|                                  |  |              |           |  | Paid-In    |    |   |         |  |    |           | Comprehensive | 
|                                  |  | Shares       |           |  | Par Value  |    |   | Capital |  |    | (Deficit) |               |  | Loss |         |   | Total |   
|                                  |  |              |           |  |            |    |   |         |  |    |           |               |  |      |         |   |       |   
|Balance, December 31, 1999        |  |              | 3,235,290 |  |            |    | 1 |         |  |    | 46,226    |               |  |      | (36,803 | ) |       |    | (461   | ) |  |    | 8,963   |  
|Net loss                          |  |              |          |  |            |    |  |         |  |    |          |               |  |      | (3,351  | ) |       |    |       |   |  |    | (3,351  | )
|Cumulative translation adjustment |  |              |          |  |            |    |  |         |  |    |          |               |  |      |        |   |       |    | (74    | ) |  |    | (74     | )
|                                  |  |              |           |  |            |    |   |         |  |    |           |               |  |      |         |   |       |   
|Balance, December 31, 2000        |  |              | 3,235,290 |  |            |    | 1 |         |  |    | 46,226    |               |  |      | (40,154 | ) |       |    | (535   | ) |  |    | 5,538   |  
|Private placement                 |  |              | 487,500   |  |            |    |   |         |  |    | 4,115     |               |  |      |         |   |       |    |        |   |  |    | 4,115   |  
|Net loss                          |  |              |          |  |            |    |  |         |  |    |          |               |  |      | (8,250  | ) |       |    |       |   |  |    | (8,250  | )
|Cumulative translation adjustment |  |              |          |  |            |    |  |         |  |    |          |               |  |      |        |   |       |    | (186   | ) |  |    | (186    | )
|                                  |  |              |           |  |            |    |   |         |  |    |           |               |  |      |         |   |       |   
|Balance, December 31, 2001        |  |              | 3,722,790 |  |            | R$ | 1 |         |  | R$ | 50,341    |               |  | R$   | (48,404 | ) |       | R$ | (721   | ) |  | R$ | 1,217   |  
|Private placement                 |  |              | 3,700,000 |  |            |    |  |         |  |    | 8,829     |               |  |      |        |   |       |    |       |   |  |    | 8,829   |  
|Shares granted                    |  |              | 120,000   |  |            |    |   |         |  |    | 127       |               |  |      |         |   |       |    |        |   |  |    | 127     |  
|Net loss                          |  |              |          |  |            |    |  |         |  |    |          |               |  |      | (11,210 | ) |       |    |       |   |  |    | (11,210 | )
|Cumulative translation adjustment |  |              |          |  |            |    |  |         |  |    |          |               |  |      |        |   |       |    | (473   | ) |  |    | (473    | )
|                                  |  |              |           |  |            |    |   |         |  |    |           |               |  |      |         |   |       |   
|Balance, December 31, 2002        |  |              | 7,542,790 |  |            | R$ | 1 |         |  | R$ | 59,297    |               |  | R$   | (59,614 | ) |       | R$ | (1,194 | ) |  | R$ | (1,510  | )
|                                  |  |              |           |  |            |    |   |         |  |    |           |               |  |      |         |   |       |   

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

F-7



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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Brazilian Reais)

|                                                     |                                                                                         |                                              |                                                       |         |                         |        |       |        |       |        |       |        |        |        |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------- | -------------------------------------------- | ----------------------------------------------------- | ------- | ----------------------- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | ------ | ------ | -
|                                                     |                                                                                         |                                              |                                                       |         | Year Ended December 31, |       
|                                                     |                                                                                         |                                              |                                                       |         |                         |       
|                                                     |                                                                                         |                                              |                                                       |         | 2002                    |        |       | 2001   |       |        | 2000  |       
|                                                     |                                                                                         |                                              |                                                       |         |                         |        |       |        |       |        |       |       
|CASH FLOW FROM OPERATING ACTIVITIES:                 |                                                                                         |                                              |                                                       |         |                         |        |       |        |       |        |       |       
|                                                     | Net (loss)                                                                              |                                              | R$                                                    | (11,210 | )                       |        | R$    | (8,250 | )     |        | R$    | (3,351 | )     
|                                                     | Adjustments to reconcile net (loss) to cash provided by
(used in) operating activities: |                                              |                                                       |         |                         |        |       |        |       |        |       |        |       
|                                                     |                                                                                         | Depreciation and amortization                |                                                       |         | 3,774                   |        |       |        | 3,966 |        |       |        | 3,610  |       
|                                                     |                                                                                         | Gain on vendor capitalization                |                                                       |         |                        |        |       |        | 915   |        |       |        |       |       
|                                                     |                                                                                         | Loss on assets sold and impairment of assets |                                                       |         | 1,661                   |        |       |        | 453   |        |       |        | 391    |       
|                                                     |                                                                                         | Expense accounted for on grant of shares     |                                                       |         | 127                     |        |       |        |      |        |       |        |       |       
|                                                     |                                                                                         | Expense paid through issuance of equity      |                                                       |         |                        |        |       |        | 158   |        |       |        |       |       
|                                                     |                                                                                         | Services provided in exchange for shares     |                                                       |         | 111                     |        |       |        |      |        |       |        |       |       
|                                                     | Changes in assets and liabilities:                                                      |                                              |                                                       |         |                         |        |       |        |       |        |       |        |       
|                                                     | (Increase) decrease in:                                                                 |                                              |                                                       |         |                         |        |       |        |       |        |       |        |       
|                                                     |                                                                                         | Accounts receivable                          |                                                       |         | 1,280                   |        |       |        | (49   | )      |       |        | (1,270 | )     
|                                                     |                                                                                         | Inventories                                  |                                                       |         | (612                    | )      |       |        | 416   |        |       |        | (612   | )     
|                                                     |                                                                                         | Prepaid expenses and other current assets    |                                                       |         | (17                     | )      |       |        | (482  | )      |       |        | 362    |       
|                                                     |                                                                                         | Other assets                                 |                                                       |         | (388                    | )      |       |        |      |        |       |        |       |       
|                                                     | (Decrease) increase in:                                                                 |                                              |                                                       |         |                         |        |       |        |       |        |       |        |       
|                                                     |                                                                                         | Accounts payable and accrued expenses        |                                                       |         | (2,062                  | )      |       |        | 1,367 |        |       |        | 1,744  |       
|                                                     |                                                                                         | Payroll and related accruals                 |                                                       |         | 959                     |        |       |        | (787  | )      |       |        | 713    |       
|                                                     |                                                                                         | Taxes other than income taxes                |                                                       |         | 724                     |        |       |        | 1,071 |        |       |        | 2,395  |       
|                                                     |                                                                                         | Other liabilities                            |                                                       |         | 3,301                   |        |       |        | (82   | )      |       |        | 217    |       
|                                                     |                                                                                         | Deferred income                              |                                                       |         | (637                    | )      |       |        | 197   |        |       |        | 296    |       
|                                                     |                                                                                         |                                              |                                                       |         |                         |        |       |        |      
|                                                     |                                                                                         |                                              | CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES |         |                         | (2,989 | )     |        |       | (1,107 | )     |        |        | 4,495  |  
|                                                     |                                                                                         |                                              |                                                       |         |                         |        |       |        |      
|CASH FLOW FROM INVESTING ACTIVITIES:                 |                                                                                         |                                              |                                                       |         |                         |        |       |        |       |        |       |       
|                                                     | Additions to property and equipment                                                     |                                              |                                                       | (1,364  | )                       |        |       | (2,308 | )     |        |       | (4,114 | )     
|                                                     | Proceeds from sale of property, equipment and deferred charges                          |                                              |                                                       | 631     |                         |        |       | 331    |       |        |       | 52     |       
|                                                     |                                                                                         |                                              | CASH FLOWS (USED IN) INVESTING ACTIVITIES             |         |                         | (733   | )     |        |       | (1,977 | )     |        |        | (4,062 | )
|                                                     |                                                                                         |                                              |                                                       |         |                         |        |       |        |      
|CASH FLOW FROM FINANCING ACTIVITIES:                 |                                                                                         |                                              |                                                       |         |                         |        |       |        |       |        |       |       
|                                                     | Borrowings under lines of credit                                                        |                                              |                                                       | 0       |                         |        |       | 7,650  |       |        |       | 7,610  |       
|                                                     | Repayments under lines of credit                                                        |                                              |                                                       | (5,440  | )                       |        |       | (7,013 | )     |        |       | (7,266 | )     
|                                                     | Proceeds from issuance of shares of common stock                                        |                                              |                                                       | 8,829   |                         |        |       | 3,043  |       |        |       |       |       
|                                                     |                                                                                         |                                              |                                                       |         |                         |        |       |        |      
|                                                     |                                                                                         |                                              | CASH FLOWS PROVIDED BY FINANCING ACTIVITIES           |         |                         | 3,389  |       |        |       | 3,680  |       |        |        | 344    |  
|                                                     |                                                                                         |                                              |                                                       |         |                         |        |       |        |      
|EFFECT OF FOREIGN EXCHANGE RATE                      |                                                                                         |                                              | (473                                                  | )       |                         |        | (186  | )      |       |        | (74   | )     
|                                                     |                                                                                         |                                              |                                                       |         |                         |        |       |        |      
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                         |                                              | (806                                                  | )       |                         |        | 410   |        |       |        | 703   |       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR       |                                                                                         |                                              | 2,267                                                 |         |                         |        | 1,857 |        |       |        | 1,154 |       
|                                                     |                                                                                         |                                              |                                                       |         |                         |        |       |        |      
|CASH AND CASH EQUIVALENTS AT END OF YEAR             |                                                                                         | R$                                           | 1,461                                                 |         |                         | R$     | 2,267 |        |       | R$     | 1,857 |       
|                                                     |                                                                                         |                                              |                                                       |         |                         |        |       |        |      

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

F-8



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##### Table of Contents



BRAZIL FAST FOOD CORP. AND SUBSIDIARY
(In thousands of Brazilian reais)







NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|1 |  | BUSINESS AND OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Brazil Fast Food Corp. (the Company) was incorporated in the State of
Delaware on September 16, 1992. The Company, through its wholly-owned
subsidiary, Venbo Comercio de Alimentos Ltda. (Venbo), a Brazilian
limited liability company which conducts business under the trade name
Bobs, owns and, directly and through franchisees, operates a chain of
hamburger fast food restaurants in Brazil.                                                                                                                                                                                                                                                                                                                 
| 
|2 |  | MANAGEMENT PLANS REGARDING GOING CONCERN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| 
|  |  | Since March 1996, the Company has sustained net losses totaling R$59,614,
and at December 31, 2002, consolidated current liabilities exceed
consolidated current assets by R$14,238.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| 
|  |  | To date, the Company has been dependent upon its initial capital,
additional equity and debt financing to fund its operating losses and
capital needed for expansion. Currently, the Company has unused credit
line in the amount of approximately R$500.                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| 
|  |  | During 2002, the Company received net proceeds in amount of R$8,829 which
were used to reduce our debt, including debt with private individuals,
debt with financial institutions in Brazil, and past due accounts payable
with suppliers and others (see note 11).                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| 
|  |  | Management plans to address its immediate and future cash flow needs by
focusing on a number of areas including: the continued sale of
non-profitable company-owned stores; reduction of expenses including
headcount optimization; the continued expansion of its franchisee base,
which will generate additional cash flows from royalties and franchise
fees without significant capital expenditure; the introduction of new
programs, such as a delivery call center, an internet delivery service and
menu expansion to meet customer demand. 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                                                                                         

F-9



---



##### Table of Contents





|  |  | Company-owned stores to franchisees, and to generate cash flows from such
activities, is impacted by the ability to locate suitable buyers with the
interest and capital to complete such transactions, and by the time to
complete such sales. Additionally, the Companys ability to achieve its
plans is further impacted by the instability of the economic environment
in Brazil, which has a direct impact on the desire and ability of
consumers to visit fast food outlets. The Company is also dependent upon
the continued employment of key personnel. These factors, among others,
raise substantial doubt about the Companys ability to continue as a going
concern.                                                                                                                                                                                                                                                                                              
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|3 |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| 
|  |  | Generally Accepted Accounting Principles (GAAP)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| 
|  |  | These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (U.S.
GAAP). Such accounting principles differ in certain respects from
accounting principles generally accepted in Brazil (Brazilian GAAP),
which is applied by the Company for its annual consolidated financial
statement preparation. Unless otherwise specified, all references in these
financial statements to (i) reais, the real or R$ are to the
Brazilian real(singular), or to the Brazilian reais(plural), the legal
currency of Brazil, and (ii) U.S. dollars or R$ are to United States
dollars.                                                                                                                                                                                                                                                                                                       
| 
|  |  | Use of estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| 
|  |  | The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| 
|  |  | Geographic area of operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| 
|  |  | The Company primarily operates in Rio de Janeiro and S¢o 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. Despite
the current improvement of Brazilian economic environment, no assurance
can be given 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

F-10



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| |  | 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
materials, which would adversely affect the Companys profitability.                                                                                                                                                                                                                    
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | 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 subsidiary. All material intercompany accounts and
transactions have been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Constant currency restatement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Through June 30, 1997 the Brazilian economy was hyperinflationary as
defined in Statement of Financial Accounting Standards (SFAS) No.52.
The financial statements prior to that time were comprehensively restated
for the effects of inflation. After that date, inflation restatement was
not applied, however the non-monetary assets reflect the effects of
inflation through that date.                                                                                                                                                                                                                                                            
|
| |  | Foreign currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Assets and liabilities recorded in functional currencies other than
Brazilian Reais are translated into Brazilian Reais at the prevailing
exchange rate as reported by the Central Bank of Brazil as of the balance
sheet date. Revenue and expenses are translated at the weighted-average
exchange rates for the year. The resulting translation adjustments are
charged or credited to other comprehensive income. Gains or losses from
foreign currency transactions, such as those resulting from the settlement
of receivables or payables denominated in foreign currency, are recognized
in the consolidated statement of operations as they occur.
|
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

F-11



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##### Table of Contents





| |  | Accounts receivable                                                                                                                                                                                                                                                                                                          
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Long term receivables denominated in Brazilian reais not indexed higher
than the Brazilian general price level inflation indicator (IGP-M) are
discounted to their present value. The allowance for doubtful accounts is
estimated based on aspects such as aging of due receivables and clients
current economic situation.
|
| |  | 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 through June 30, 1997.
Depreciation on property and equipment is provided using the straight-line
method over the following estimated useful lives of the related assets:                                 

|                                    |  |       |       | 
|----------------------------------- |  | ----- | ----- | 
|                                    |  | Years |      
|                                    |  |       |      
|Buildings and building improvements |  |       | 50    | 
|Leasehold improvements              |  |       | 4-5   | 
|Machinery and equipment             |  |       | 10-15 | 
|Furniture and fixtures              |  |       | 10-15 | 
|Vehicles                            |  |       | 5-13  | 



| |  |  | 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.
Leasehold premiums related to unprofitable stores were written off.
|
| |  |  | 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-12



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| |  |  | 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 exclusivity agreements (see note 10)
as well as amounts received from other suppliers linked to exclusivity
agreements are recorded as deferred income and are being recognized on a
straight line basis over the term of such agreements or the related supply
agreement. The Company accounts for other supplier exclusivity fees on a
straight-line basis over the related supply agreement.                                                      
|
| |  |  | Advertising expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | The Company expenses advertising costs as incurred. Advertising expense
was R$2,958, R$5,244 and R$4,126 for the years ended December 31, 2002,
2001 and 2000, respectively.                                                                                                                                                                                                                                                                                                             
|
| |  |  | Stock option                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | 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:

|                                |  |      |         |   |      |  |        |      |  |  |        |  
|------------------------------- |  | ---- | ------- | - | ---- |  | ------ | ---- |  |  | ------ | -
|                                |  | 2002 |         |   | 2001 |  |        | 2000 | 
|                                |  |      |         |   |      |  |        |      | 
|Net loss as reported            |  |      | (11,210 | ) |      |  | (8,250 | )    |  |  | (3,351 | )
|Stock compensation              |  |      | (505    | ) |      |  | (836   | )    |  |  | (38    | )
|Net loss pro forma              |  |      | (11,715 | ) |      |  | (9,086 | )    |  |  | (3,389 | )
|Net loss per share, as reported |  |      | (1,96   | ) |      |  | (2.27  | )    |  |  | (1.04  | )
|Net loss per share, pro forma   |  |      | (2.05   | ) |      |  | (2.51  | )    |  |  | (1.14  | )



| |  | 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 2002, 2001 and 2000, no options
were granted to outside consultants.
|
| |  | The weighted average fair values of options granted during 2002, 2001, and
2000 were R$.21, R$1.39, and R$.96, respectively.                                                                                                                                 

F-13



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##### Table of Contents





| |  | 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 2002, 2001, and 2000: (1) risk-free
interest rate of 5.00%, 5.00% and 5.71% (2) no expected dividend yield,
(3) expected lives of 5 years; and (4) expected stock price volatility of
242%, 68%, and 98%, respectively.                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Under the asset and liability method of
SFAS No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis and operating loss carry-forwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Under SFAS No. 109, the effect of
a change in tax rates or deferred tax assets and liabilities is recognized
in income in the period that includes the enactment date.
|
| |  | Long-lived and intangibles 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.                                                                                                               
|
| |  | In August 2001, the FASB issued SFAS No. 144, which replaces SFAS 121. The
primary objectives of SFAS 144 are to develop one accounting model, based
upon the framework established in SFAS 121, for long-lived assets to be
disposed of by sale and to address significant implementation issues. This
Statement requires that long-lived assets being disposed of be measured at
the lower of carrying amount or fair value less cost to sell, whether
reported in continuing operations or in discontinued operations.
Therefore, discontinued operations are no longer measured at net
realizable value or include amounts for operating losses that have not yet
occurred.                                                                                                                                
|
| |  | If an indicator of impairment (e.g., negative operating cash flows for the
most recent trailing twelve-month period) exists for any grouping of
assets, an estimate of undiscounted future cash flows produced by each
restaurant within the asset grouping is compared to its carrying value. If
any asset is determined to be impaired, the loss is measured by the excess
of the carrying amount of the asset over its fair value as determined by
an estimate of discounted future cash flows.                                                                                                                                                                                                                                                                                                             

F-14



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##### Table of Contents





| |  | The Company adopted SFAS 144. The adoption of such standard had no
material effect on the Companys consolidated financial position, results
of operations, or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In June 2001, the FASB issued Statements of Financial Accounting Standards
No. 141, Accounting for Business Combinations (SFAS No. 141) and No.
142, Accounting for Goodwill and Other Intangible Assets. SFAS No. 141
establishes accounting and reporting standards for all business
combinations initiated after June 30, 2001. SFAS No. 142 establishes
accounting and reporting standards for all acquisitions of intangible
assets made after June 30, 2001. The adoption of these standards had no
material effect on the Companys consolidated financial position, results
of operations, or cash flows.                                                                                                                                                                                                                                        
|
| |  | Net 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 required primary EPS with
a presentation of Basic EPS and Diluted EPS on the face of the statement
of operations. Under this 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 share equivalents outstanding as of December
31, 2002, 2001 and 2000 that would have had a dilutive effect on earnings
for those respective years.
|
| |  | Recently issued accounting standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Asset retirement obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | In June 2001, the Financial Accounting Standards Board issued SFAS No.
143, Accounting for Asset Retirement Obligations, effective January 1,
2003. The Statement requires legal obligations associated with the
retirement of long-lived assets to be recognized at their fair value at
the time that the obligations are incurred. Upon initial recognition of a
liability, the cost will be capitalized as part of the related long-lived
asset and allocated to expense over the useful life of the asset.                                                                                                                                                                                                                                                                                                                                             
|
| |  | The adoption of the new rules is not expected to have a material effect on
the Companys ongoing results of operations or financial position.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Variable interest entities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46 (FIN No. 46), Consolidation of Variable Interest
Entities, which requires an enterprise to consolidate or make certain,
disclosures about variable interest entities that meet certain criteria,
effective July 1, 2003. The Company is currently performing an analysis to
determine the applicability of FIN No. 46 to it.                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-15



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##### Table of Contents





|  |  | Reclassifications                                                                                                                                     
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | The consolidated financial statements for the years ended December 31,
2001 and 2000 have been restated to conform with the current year
presentation.
| 
|4 |  | PROPERTY AND EQUIPMENT                                                                                                                                
| 
|  |  | Property and equipment consists of the following:                                                                                                     

|                                                |  |              |         |   |      |    |         |  
|----------------------------------------------- |  | ------------ | ------- | - | ---- | -- | ------- | -
|                                                |  | December 31, |        
|                                                |  |              |        
|                                                |  | 2002         |         |   | 2001 |   
|                                                |  |              |         |   |      |   
|Land                                            |  | R$           | 2,828   |   |      | R$ | 2,828   |  
|Buildings and building improvements             |  |              | 4,639   |   |      |    | 4,560   |  
|Leasehold improvements                          |  |              | 5,271   |   |      |    | 6,789   |  
|Machinery and equipment                         |  |              | 11,868  |   |      |    | 12,684  |  
|Furniture and fixtures                          |  |              | 2,333   |   |      |    | 2,811   |  
|Assets under capitalized leases                 |  |              | 3,846   |   |      |    | 3,987   |  
|Vehicles                                        |  |              | 233     |   |      |    | 237     |  
|Other                                           |  |              | 50      |   |      |    | 405     |  
|                                                |  |              |         |   |      |   
|                                                |  |              | 31,068  |   |      |    | 34,301  |  
|Less: Accumulated depreciation and amortization |  |              | (13,987 | ) |      |    | (14,410 | )
|                                                |  |              |         |   |      |   
|                                                |  | R$           | 17,081  |   |      | R$ | 19,891  |  
|                                                |  |              |         |   |      |   



| | 5 |  | DEFERRED CHARGES                           
| | - |  | -------------------------------------------
|
| |   |  | Deferred charges consists of the following:

|                               |  |              |        |   |      |    |        |  
|------------------------------ |  | ------------ | ------ | - | ---- | -- | ------ | -
|                               |  | December 31, |       
|                               |  |              |       
|                               |  | 2002         |        |   | 2001 |   
|                               |  |              |        |   |      |   
|Leasehold premiums             |  | R$           | 12,972 |   |      | R$ | 13,691 |  
|Less: accumulated amortization |  |              | (3,937 | ) |      |    | (4,001 | )
|                               |  |              |        |   |      |   
|                               |  | R$           | 9,035  |   |      | R$ | 9,690  |  
|                               |  |              |        |   |      |   

F-16



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##### Table of Contents





|6 |  | NOTES PAYABLE                           
|- |  | ----------------------------------------
| 
|  |  | Notes payable consists of the following:

|                                                     |  |              |        |   |      |    |        |  
|---------------------------------------------------- |  | ------------ | ------ | - | ---- | -- | ------ | -
|                                                     |  | December 31, |       
|                                                     |  |              |       
|                                                     |  | 2002         |        |   | 2001 |   
|                                                     |  |              |        |   |      |   
|Revolving lines of credit(a)                         |  | R$           |       |   |      | R$ | 4,590  |  
|Mortgages payable(b)                                 |  |              | 2,671  |   |      |    | 4,189  |  
|Notes payable linked to
fixed assets acquisitions(c) |  |              | 3,646  |   |      |    |       |  
|                                                     |  |              |        |   |      |   
|                                                     |  |              | 6,317  |   |      |    | 8,779  |  
|Less: current portion                                |  |              | (6,317 | ) |      |    | (8,779 | )
|                                                     |  |              |        |   |      |   
|                                                     |  | R$           |       |   |      | R$ |       |  
|                                                     |  |              |        |   |      |   



| |  | (a) Provides for maximum borrowings of R$500; Currently, we have no
other external sources of liquidity.                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (b) Amount due in quarterly installments, starting December, 2002, ending
September, 2003. Interest on this amount accrues at a rate of 25% per
annum and is payable quarterly, starting December, 2002. Payment is
secured by certain property with a carrying value of R$5,049 at December
31, 2002. Principal and interest are indexed to the U.S. Dollar, and are
therefore susceptible to exchange rate variations between the U.S. Dollar
and the Brazilian Real.                                                      
|
| |  | (c) This credit facility was used to purchase three stores. Repayment of
principal with respect to one of these stores is due in 18 monthly
installments of R$19, plus an intermediate payment due January, 2003 in
the amount of R$157. Repayment of principal with respect to the other two
stores is due November 2003, in the amount of R$3,138. There is no
interest charged on these borrowings. Principal is indexed to Brazilian
inflation measured by IGP-M. This facility is secured by the fixed assets
purchased.
|
| |  | The carrying amount of notes payable approximates fair value at December
31, 2002 and 2001 because they are indexed to the U.S. dollar and are at
market interest rates.                                                                                                                                                                                                                                                                                                                                                     

F-17



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##### Table of Contents





|7 |  | ACCOUNTS PAYABLE AND ACCRUED EXPENSES      
|- |  | -------------------------------------------
| 
|  |  | Accrued expenses consists of the following:

|                          |  |              |       |  |      |    |       | 
|------------------------- |  | ------------ | ----- |  | ---- | -- | ----- | 
|                          |  | December 31, |      
|                          |  |              |      
|                          |  | 2002         |       |  | 2001 |   
|                          |  |              |       |  |      |   
|Suppliers                 |  | R$           | 3,006 |  |      | R$ | 3,444 | 
|Rent payable              |  |              | 680   |  |      |    | 1,124 | 
|Outsourcing fees          |  |              | 721   |  |      |    | 1,214 | 
|Bonuses                   |  |              | 119   |  |      |    | 271   | 
|Accrued utilities         |  |              | 229   |  |      |    | 228   | 
|Accrued maintenance       |  |              | 71    |  |      |    | 155   | 
|Accrued advertising       |  |              | 293   |  |      |    | 335   | 
|Contingencies             |  |              |      |  |      |    | 140   | 
|Audit services            |  |              | 89    |  |      |    | 95    | 
|Other accrued liabilities |  |              | 87    |  |      |    | 240   | 
|                          |  |              |       |  |      |   
|                          |  | R$           | 5,295 |  |      | R$ | 7,246 | 
|                          |  |              |       |  |      |   



|8 |  | CASH FLOW INFORMATION                            
|- |  | -------------------------------------------------
| 
|  |  | Supplemental Disclosure of Cash Flow Information:
| 
|  |  | (i) Interest and income tax:                     

|                  |  |                         |       |  |      |  |       |      |  |  |       | 
|----------------- |  | ----------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                  |  | Year ended December 31, |      
|                  |  |                         |      
|                  |  | 2002                    |       |  | 2001 |  |       | 2000 | 
|                  |  |                         |       |  |      |  |       |      | 
|Interest paid     |  |                         | 1,497 |  |      |  | 2,016 |      |  |  | 1,533 | 
|Income taxes paid |  |                         |      |  |      |  |      |      |  |  |      | 



| |  | (ii) In the period ended March 31, 2001, the Company issued common stock
to satisfy certain vendor credit and future services in the amount of
R$915.                                                                       
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | (ii) In the quarter ended March 31, 2001, the Company paid certain
expenses related to the amendment to the Stockholders Agreement through
the issuance of equity valued at R$157.                                         
|
| |  | (iii) During fiscal year 2002 the Company purchased three stores
(including fixed assets and deferred charges) using credit facilities of
R$3,470. As of December 31, 2002 the Company had paid R$472 relating to
such debt.

F-18



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##### Table of Contents





|9 |  | TAXATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Tax losses through December 31, 2002 relating to income tax were R$45,344
and to social contribution tax were R$50,490. 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
tax 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.                                                                                                                                                                                                                                                                               
| 
|  |  | During 2001, the Company reduced its accumulated tax loss position (both
income tax and social contribution) in the amount of R$8,932 in order to
offset interest due on taxes included in the tax amnesty program (see note
10).                                                                                                                                                                                                                                                                                                                                                       
| 
|  |  | 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 34% to the loss before income taxes:                                                                                                                                                                                                                                                                                                                                                                                              

|                                                                                                   |  |              |        |   |      |    |        |      |  |    |        |  
|-------------------------------------------------------------------------------------------------- |  | ------------ | ------ | - | ---- | -- | ------ | ---- |  | -- | ------ | -
|                                                                                                   |  | December 31, |       
|                                                                                                   |  |              |       
|                                                                                                   |  | 2002         |        |   | 2001 |    |        | 2000 | 
|                                                                                                   |  |              |        |   |      |    |        |      | 
|Tax benefit at the combined statutory rate                                                         |  | R$           | (3,811 | ) |      | R$ | (2,805 | )    |  | R$ | (1,139 | )
|Combined statutory rate applied to differences between
taxable results Brazil and reported results |  |              | 1,763  |   |      |    | 994    |      |  |    | 255    |  
|                                                                                                   |  |              |        |   |      |    |        |      | 
|Tax benefit for the year                                                                           |  |              | (2,048 | ) |      |    | (1,811 | )    |  |    | (884   | )
|Valuation allowances recorded against net deferred
tax assets                                      |  |              | 2,048  |   |      |    | 1,811  |      |  |    | 884    |  
|                                                                                                   |  |              |        |   |      |    |        |      | 
|Income tax benefit as reported in the accompanying
consolidated statement of operations            |  | R$           |       |   |      | R$ |       |      |  | R$ |       |  
|                                                                                                   |  |              |        |   |      |    |        |      | 



| |  | Differences between taxable results in Brazil and reported results are
primarily due to differences between Brazilian GAAP and U.S. GAAP.                                                                                                                                                          
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The following summarizes the composition of deferred tax assets and
liabilities and the related valuation allowance at December 31, 2002 and
2001, based on temporary differences and tax loss carryforwards determined
by applying rates of 9% for social contribution tax and 25% for income
tax.

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##### Table of Contents



|                          |                             |                                |         |              |        |    |        |        |        | 
|------------------------- | --------------------------- | ------------------------------ | ------- | ------------ | ------ | -- | ------ | ------ | ------ | 
|                          |                             |                                |         | December 31, |       
|                          |                             |                                |         |              |       
|                          |                             |                                |         | 2002         |        |    | 2001   |       
|                          |                             |                                |         |              |        |    |        |       
|Deferred tax assets:      |                             |                                |         |              |        |    |        |       
|                          | Tax loss carry forward      |                                | R$      | 15,880       |        |    | R$     | 12,490 |       
|                          | Provision for contingencies |                                |         | 171          |        |    |        | 83     |       
|                          | Present value adjustment    |                                |         | 106          |        |    |        | 102    |       
|                          |                             |                                |         |              |        |    |       
|                          |                             | Total deferred tax assets      |         |              | 16,157 |    |        |        | 12,675 | 
|                          |                             |                                |         |              |        |    |       
|Deferred tax liabilities: |                             |                                |         |              |        |    |        |       
|                          | Deferred income             |                                |         |             |        |    |        | 83     |       
|                          | Property and equipment      |                                |         | 8            |        |    |        | 534    |       
|                          | Deferred charges            |                                |         | 854          |        |    |        | 2,884  |       
|                          |                             |                                |         |              |        |    |       
|                          |                             | Total deferred tax liabilities |         |              | 862    |    |        |        | 3,501  | 
|                          |                             |                                |         |              |        |    |       
|Net deferred tax asset    |                             |                                | 15,295  |              |        |    | 9,174  |       
|Valuation allowance       |                             |                                | (15,295 | )            |        |    | (9,174 | )     
|                          |                             |                                |         |              |        |    |       
|                          |                             | 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 consolidated net losses.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents





|10 |  | COMMITMENTS AND LITIGATION                                                                                                                                                
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Operating leases                                                                                                                                                          
|  
|   |  | The future minimum lease payments under operating leases with an
initial or remaining noncancelable lease terms in excess of one year
at December 31, 2002 are as follows:

|            |  |        |       | 
|----------- |  | ------ | ----- | 
|Fiscal Year |  | Amount |      
|            |  |        |      
|2003        |  |        | 5,076 | 
|2004        |  |        | 1,966 | 
|2005        |  |        | 1,560 | 
|2006        |  |        | 1,033 | 
|2007        |  |        | 284   | 
|Thereafter  |  |        | 153   | 



| |  | Rent expense was R$5,609, R$5,632, and R$4,772 for the years ended
December 31, 2002, 2001, and 2000, 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.                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | The Company has a supply agreement with the Brazilian subsidiary of
Coca-Cola, which was amended during 2000, in order to enhance and extend
the original exclusivity term to March, 2008 (an additional two years from
the original agreement). As part of such agreement, the Coca Cola
Brazilian subsidiary agreed to pay the Company an additional R$1,000 in
connection with the extension of exclusivity.                                                                                                                                                                                                                                                      
|
| |  | Litigation and tax amnesty program                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | During 1999, certain Brazilian taxes levied on the Company were not paid.
Using current proceedings from enacted Brazilian laws, the Companys legal
advisors filed lawsuits asking that those taxes be paid in several
installments (60  240 months) based on the usual terms for rescheduling
of taxes in arrears. The Company is also claiming that neither fines nor
interest higher than 12% per annum should be included in the above
mentioned installments. However, the interest rates required by Brazilian
Laws, which are higher than those claimed by the Company, have been
recorded in the consolidated financial statements as of December 31, 1999.

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##### Table of Contents





| |  | During the second quarter of 2000, the Company reached an agreement with
the state government to parcel unpaid taxes in sixty months, interest
free, in amounts indexed to Brazils UNIDADE FISCAL DE
REFERÒNCIA, which
is currently 12% per year. Subsequentto this agreement, the Company
withdrew its lawsuit. In the same period, the Company withdrew its
lawsuit regarding federal taxes and applied to join a tax amnesty program
offered by the Brazilian Federal government (REFIS). Through this
program, all past due federal taxes will be paid in monthly installments
equivalent to 1.2% of the Companys gross sales, with interest accruing at
rates set by the Brazilian Federal government, currently 10.5% per year.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Additionally, during December 2002, the Company applied to join another
tax amnesty program offered by the Rio de Janeiro state government,
through which the Company will parcel unpaid state taxes in one hundred
and twenty months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | During fiscal year 2002, the Company paid approximately R$960 related to
such Brazilian Federal tax amnesty program and approximately R$4,146
related to Rio de Janeiro state government agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | The Company has other past due Federal Taxes which were not paid in
the beginning of 2002 in the amount of R$3,816, as well as penalties
applied against the Company by the Brazilian Social Securities
Authorities, in the amount of R$1,365, which are not covered by any of the
above mentioned tax agreements. However, the Brazilian Government is
implementing another tax amnesty program during 2003, through which the
Company intends to include those tax debts.                                                                                                                                                                                                                                                            
|
| |  | Since June 2002, the Company has paid all its current taxes on a timely
basis.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | During 2001, the Company claimed in Brazilian court that their lease
financing contracts with IBM Leasing should not have their principal
amounts indexed to the US dollar, but instead stated in Brazilian Reais
bearing interest of 12% per annum. While awaiting the courts
determination, we have deposited all installment payments due under our
lease financing agreements with the court in reais, inclusive of 12% per
annum interest, until November, 2002, the end of the contract term.
However, the Company accrued contracted amounts at December 31, 2002 and
2001. Such lawsuit is in its initial phase.                                                                                                              

F-22



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##### Table of Contents





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

|                               |  |           |        |  |           |    |       |           |  |      |           |  |  |           |        |  |           |    |       |  |      |    |        | 
|------------------------------ |  | --------- | ------ |  | --------- | -- | ----- | --------- |  | ---- | --------- |  |  | --------- | ------ |  | --------- | -- | ----- |  | ---- | -- | ------ | 
|                               |  | 2002      |        |  | 2001      |   
|                               |  |           |        |  |           |   
|                               |  |           |        |  |           |    |       |           |  | Long |           |  |  |           |        |  |           |    |       |  | Long |   
|                               |  | Total     |        |  | Current   |    |       | Term      |  |      | Total     |  |  | Current   |        |  | Term      |   
|                               |  | Liability |        |  | Liability |    |       | Liability |  |      | Liability |  |  | Liability |        |  | Liability |   
|                               |  |           |        |  |           |    |       |           |  |      |           |  |  |           |        |  |           |   
|Social security tax
penalty    |  | R$        | 1,365  |  |           |    |      |           |  | R$   | 1,365     |  |  | R$        |       |  |           | R$ |      |  |      | R$ |       | 
|Reassessed value-
added tax    |  |           | 5,987  |  |           |    | 1,125 |           |  |      | 4,862     |  |  |           | 6,547  |  |           |    | 2,319 |  |      |    | 4,228  | 
|
|Social tax charged on revenues |  |           | 3,816  |  |           |    | 3,816 |           |  |      |          |  |  |           | 1,599  |  |           |    | 1,599 |  |      |    |       | 
|IBM Leasing litigation         |  |           | 3,187  |  |           |    |       |           |  |      | 3,187     |  |  |           | 2,324  |  |           |    |       |  |      |    | 2,324  | 
|Other litigation               |  |           | 637    |  |           |    |      |           |  |      | 637       |  |  |           | 243    |  |           |    |      |  |      |    | 243    | 
|REFIS                          |  |           | 5,082  |  |           |    | 960   |           |  |      | 4,122     |  |  |           | 6,048  |  |           |    | 946   |  |      |    | 5,102  | 
|                               |  |           |        |  |           |    |       |           |  |      |           |  |  |           |        |  |           |   
|TOTAL                          |  | R$        | 20,074 |  |           | R$ | 5,901 |           |  | R$   | 14,173    |  |  | R$        | 16,761 |  |           | R$ | 4,864 |  |      | R$ | 11,897 | 
|                               |  |           |        |  |           |    |       |           |  |      |           |  |  |           |        |  |           |   



|11 |  | SHAREHOLDERS EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Preferred stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | The Board of Directors of the Company is empowered, without shareholder
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, 2002, no
Preferred Stock had been issued.                                                                 
|  
|   |  | Private placements                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | In March 2001, the Company privately sold 487,500 units at price of R$4.00
per unit. Each unit consists of one share of common stock and a warrant
to purchase one share of common stock at an exercise price of R$5.00 per
share. Included in the sale was 118,750 units issued to Company vendors
in exchange for amounts owed to them and for future services in the amount
of R$915. The Company received net proceeds of approximately R$3,958 from
the sale of the units.

F-23



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##### Table of Contents





| |  | As a precedent to closing the private placement, the Company and AIG Latin
America Equity Partners, Ltd, (AIGLAEP) amended their Stockholders
Agreement dated August 11, 1997 (the Stockholders Agreement). Among
other things, the Stockholders Agreement accorded AIGLAEP the right to
designate such number of directors as would then constitute a majority of
the Companys Board of Directors, thereby effecting a change in control if
the Company failed to achieve certain performance targets as set forth in
the Stockholders Agreement.                                                                                                                                                                                                                                                           
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On March 14, 2001, after the Company had failed to achieve certain of
these performance targets, the Stockholders Agreement was amended to
provide for the suspension of AIGLAEPs right to appoint a majority of the
Board of Directors, the suspension of AIGLAEPs right of approval over the
Companys annual budget, and the Companys ability to obtain financing of
up to R$15 million.                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | In conjunction with the amendment to the Stockholders Agreement, the
Company agreed to pay AIGLAEP R$350,000. Of this amount, R$100,000 was paid
on March 31, 2001, with the balance to be paid in equal payments of
R$35,750 over each of the next seven (7) succeeding fiscal quarters.
Additionally, the Company issued AIGLAEP a warrant to purchase 35,813
shares of the Companys common stock at an exercise price of R$5 per share,
and amended the exercise price to R$5 per share on warrants held by the
Shareholder which entitled them to purchase an additional 64,187 shares of
the Companys common stock. Certain of the Companys Directors agreed to
issue an option to AIGLAEP to sell 40,000 shares of common stock
personally owned by the Directors to AIGLAEP at a price of R$1.50 per
share.
|
| |  | At the date of the transaction, the quoted market price of the Companys
common stock was R$2.50 per share. Accordingly, the excess of the quoted
market price of the common stock subject to purchase by AIGLAEP over the
price to be paid by AIGLAEP in the amount of R$R86 has been treated as a
contribution of capital during the quarter ended March 31, 2001. The costs
associated with the amendment to the Stockholders Agreement in the amount
of R$959 have been included in general and administrative expenses in the
2001 consolidated statement of operations.                                                                                                                                                                                                                                        
|
| |  | In November 2001, the Company amended its previously issued quarterly
consolidated financial statements to reflect the costs associated with the
amendment to the Stockholders Agreement as an expense, rather than a
direct charge to capital. The effect of this change was to decrease the
Companys reported consolidated net income by R$959 for the three months
ended March 31, 2001 and to increase the Companys reported consolidated
net loss by R$959 for the six months ended June 30, 2001, respectively.                                                                                                                                                                                                                                                                                              
|
| |  | In May, 2002, the Company privately sold 2,500,000 shares of its common
stock for R$5,000 to four accredited private investors (collectively, the
New Investors), as a part of a new shareholders agreement (the
Agreement). As of December 31, 2002 the Company had received the total
amount of such private placement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-24



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##### Table of Contents





| |  | During the third quarter of 2002, the Company privately sold an additional
1,200,000 shares of our common stock at a price in Brazilian reais,
computed at the times of exercise, equivalent to USR$1.00 per share. The
Company has received net proceeds of R$3,829 pursuant to such private
placement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Services provided in exchange of common shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | In May, 2002 the Company entered into an agreement requiring the
Company to retain the services of either Ricardo Bomeny, or an entity of
which he is a principal, to manage the Companys subsidiary
day-to-day operations for a term of two years. For such services the
consultant will receive 20,000 shares of the Company`s common stock
for each of the first twelve months of such two-year term, a sum in
cash for the second twelve months of such term in a amount to be
mutually agreed upon at a future date, and an additional 260,000
shares at the end of the two-year term conditioned upon the attainment of
specified targets. During 2002 the Company charged R$111 to operating
results related to those services. Such amount is a result of number of
shares owed on accrual basis until December 31, 2002, multiplied by their
average fair value.
|
| |  | Severance agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | In October, 2002 we granted 120,000 shares to Mr. Peter Van Voorst Vader
as a severance payment for leaving the presidency of Venbo. Exemption from
registration under the Securities Act of 1933, as amended, was claimed for
this issuance in reliance upon the exemption afforded by Section 4(2) of
the Securities Act as a transaction by an issuer not involving any public
offering. During 2002 the Company charged R$127 to operating results
related to those severance agreement. Such amount is a result of number of
shares granted, multiplied by their fair value.                                                                                                                                                                                                                                                                                         
|
| |  | Stock option plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | On September 18, 1992, the Companys Board of Directors and a majority of
the shareholders of the Company approved the 1992 Stock Option Plan (the
Plan).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | During 1998, the Board of Directors approved an increase in options
available for grant under the Plan from 500,000 to 1,000,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-25



---



##### Table of Contents





| |  | The Plan, as amended and restated, authorizes the granting of awards, the
exercise of which would allow up to an aggregate of 1,000,000 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 of at least 110% of the fair
market value on the date of grant, 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.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Vesting terms of the options range from immediately vesting of all options
to a ratable vesting period of 3 years. Option activity for the years
ended December 31, 2002, 2001 and 2000 is summarized as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                                        |  |        |          |   |       |          |      |        |  |  |         |   |          |        |       |  |       |  |         |          |  |   |       | 
|--------------------------------------- |  | ------ | -------- | - | ----- | -------- | ---- | ------ |  |  | ------- | - | -------- | ------ | ----- |  | ----- |  | ------- | -------- |  | - | ----- | 
|                                        |  | 2002   |          |   | 2001  |          |      | 2000   | 
|                                        |  |        |          |   |       |          |      |        | 
|                                        |  |        |          |   |       | Weighted |      |        |  |  |         |   | Weighted |        |       |  |       |  |         | Weighted | 
|                                        |  |        |          |   |       | Average  |      |        |  |  |         |   | Average  |        |       |  |       |  |         | Average  | 
|                                        |  |        |          |   |       | Exercise |      |        |  |  |         |   | Exercise |        |       |  |       |  |         | Exercise | 
|                                        |  | Shares |          |   | Price |          |      | Shares |  |  | Price   |   |          | Shares |       |  | Price | 
|                                        |  |        |          |   |       |          |      |        |  |  |         |   |          |        |       |  |       | 
|Options outstanding at beginnig of year |  |        | 564,437  |   |       | $        | 2.29 |        |  |  | 446,412 |   |          | $      | 11.04 |  |       |  | 224,387 |          |  | $ | 11.04 | 
|Granted                                 |  |        | 175,250  |   |       |          | 1.25 |        |  |  | 188,750 |   |          |        | 2.30  |  |       |  | 241,500 |          |  |   | 2.18  | 
|Exercised                               |  |        |         |   |       |          |     |        |  |  |        |   |          |        |      |  |       |  |        |          |  |   |      | 
|Expired                                 |  |        | (25,937  | ) |       |          | 2.45 |        |  |  | (67,225 | ) |          |        | 13.00 |  |       |  |        |          |  |   |      | 
|Canceled                                |  |        | (123,750 | ) |       |          | 2.18 |        |  |  | (3,500  | ) |          |        | 2.23  |  |       |  | (19,475 | )        |  |   |      | 
|                                        |  |        |          |   |       |          |      |        |  |  |         |   |          |        |       |  |       | 
|Options outstanding at end of year      |  |        | 590,000  |   |       | $        | 2.35 |        |  |  | 564,437 |   |          | $      | 2.29  |  |       |  | 446,412 |          |  | $ | 4.95  | 
|Options exercisable at end of year      |  |        | 555,000  |   |       | $        | 2.43 |        |  |  | 544,437 |   |          | $      | 2.29  |  |       |  | 400,162 |          |  | $ | 5.35  | 



| |  | The options outstanding at December 31, 2002, range in price from R$0.19
per share to R$10.12 per share and have a weighted average remaining
contractual life of 3.13 years.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-26



---



##### Table of Contents



|12 |  | SELECTED QUARTERLY FINANCIAL DATA
|-- |  | ---------------------------------

|                                           |  |         |           |   |         |  |           |         |  |  |           |   |  |  |           |  
|------------------------------------------ |  | ------- | --------- | - | ------- |  | --------- | ------- |  |  | --------- | - |  |  | --------- | -
|                                           |  | First   |           |   | Second  |  |           | Third   |  |  | Fourth    |  
|                                           |  | Quarter |           |   | Quarter |  |           | Quarter |  |  | Quarter   |  
|                                           |  |         |           |   |         |  |           |         |  |  |           |  
|2002                                       |  |         |           |   |         |  |           |         |  |  |           |   |  |  |           |  
|Total Net Operating Revenues               |  |         | 20,204    |   |         |  | 17,519    |         |  |  | 17,689    |   |  |  | 20,898    |  
|Operating income (loss)                    |  |         | (220      | ) |         |  | (404      | )       |  |  | (966      | ) |  |  | (1,366    | )
|Net income (loss)                          |  |         | (1,520    | ) |         |  | (3,205    | )       |  |  | (3,791    | ) |  |  | (2,694    | )
|Basic and diluted income
(loss) per share  |  |         | (.41      | ) |         |  | (.64      | )       |  |  | (.57      | ) |  |  | (.34      | )
|Weighted average common
shares outstanding |  |         | 3,722,790 |   |         |  | 4,972,790 |         |  |  | 6,622,790 |   |  |  | 7,513,457 |  
|2001                                       |  |         |           |   |         |  |           |         |  |  |           |   |  |  |           |  
|Total Net Operating Revenues               |  |         | 21,473    |   |         |  | 18,601    |         |  |  | 17,930    |   |  |  | 20,975    |  
|Operating income (loss)                    |  |         | (306      | ) |         |  | (564      | )       |  |  | (692      | ) |  |  | 903       |  
|Net income (loss)                          |  |         | 434       |   |         |  | (4,988    | )       |  |  | (3,032    | ) |  |  | (664      | )
|Basic and diluted income
(loss) per share  |  |         | 13        |   |         |  | (1.33     | )       |  |  | (.81      | ) |  |  | (.18      | )
|Weighted average common
shares outstanding |  |         | 3,327,373 |   |         |  | 3,722,790 |         |  |  | 3,722,790 |   |  |  | 3,722,790 |  

F-27