| 7. | Expenses |
| (a) | Costs of Sales |
The following is the breakdown of cost of sales for years ended December 31, 2015, 2016 and 2017, respectively:
| Year ended December 31, | ||||||||||||||||
| 2015 | 2016 | 2017 | 2017 | |||||||||||||
| BRL | BRL | BRL | USD | |||||||||||||
|
Cost of product sales |
R$ | 873,068 | R$ | 1,040,768 | R$ | 1,126,781 | US$ | 340,623 | ||||||||
|
Shipping costs |
129,903 | 140,415 | 152,295 | 46,038 | ||||||||||||
|
Others |
7,530 | 7,561 | 12,351 | 3,734 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total cost of sales |
R$ | 1,010,501 | R$ | 1,188,744 | R$ | 1,291,427 | US$ | 390,395 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Cost of product sales include the non-recoverable ICMS taxes resulting from the tax incentives disclosed in note 5 granted by the States of Minas Gerais and Pernambuco. For the years ended December 31, 2015, 2016 and 2017, the total amounts of non-recoverable ICMS are as follows:
| Year ended December 31, | ||||||||||||||||
| 2015 | 2016 | 2017 | 2017 | |||||||||||||
| BRL | BRL | BRL | USD | |||||||||||||
|
State of Pernambuco |
R$ | 31,356 | R$ | 30,507 | R$ | 25,218 | US$ | 7,623 | ||||||||
|
State of Minas Gerais |
16,287 | 52,463 | 81,113 | 24,520 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Non-recoverable ICMS |
R$ | 47,643 | R$ | 82,970 | R$ | 106,331 | US$ | 32,143 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The impact of tax incentives net of non-recoverable ICMS for the years ended December 31, 2015, 2016 and 2017 is R$117,052, R$133,701 and R$112,844 (US$34,113), respectively.
During the first semester of 2016 and the year 2017, the Company reviewed and changed ICMS tax positions taken on past transactions and recorded ICMS tax credits amounting to R$ 5,500 and R$10,118 (US$3,194), respectively, as a reduction of the cost of product sales.
| (b) | Selling and Marketing Expenses |
The following is the breakdown of selling and marketing expenses for years ended December 31, 2015, 2016 and 2017, respectively:
| Year ended December 31, | ||||||||||||||||
| 2015 | 2016 | 2017 | 2017 | |||||||||||||
| BRL | BRL | BRL | USD | |||||||||||||
|
Salaries and employees’ benefits |
R$ | 118,545 | R$ | 133,819 | R$ | 141,829 | US$ | 42,875 | ||||||||
|
Marketing expenses |
176,743 | 181,030 | 213,305 | 64,482 | ||||||||||||
|
Operating lease |
13,621 | 20,299 | 20,741 | 6,270 | ||||||||||||
|
Credit card fees |
32,851 | 31,952 | 36,379 | 10,997 | ||||||||||||
|
Information technology services |
2,615 | 1,896 | 1,414 | 427 | ||||||||||||
|
Amortization and depreciation |
2,396 | 7,624 | 4,312 | 1,303 | ||||||||||||
|
Consulting |
— | — | 994 | 300 | ||||||||||||
|
Allowance for doubtful accounts |
5,833 | 6,227 | 25,443 | 7,691 | ||||||||||||
|
Sales commissions and royalties |
13,239 | 12,982 | 16,979 | 5,133 | ||||||||||||
|
Facilities expenses |
10,619 | 12,117 | 12,556 | 3,795 | ||||||||||||
|
Others |
22,052 | 35,746 | 35,256 | 10,659 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total selling and marketing expenses |
R$ | 398,514 | R$ | 443,692 | R$ | 509,208 | US$ | 153,932 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (c) | General and Administrative Expenses |
The following is the breakdown of general and administrative expenses for years ended December 31, 2015, 2016 and 2017, respectively:
| Year ended December 31, | ||||||||||||||||
| 2015 | 2016 | 2017 | 2017 | |||||||||||||
| BRL | BRL | BRL | USD | |||||||||||||
|
Salaries and employees’ benefits |
R$ | 79,446 | R$ | 85,416 | R$ | 54,584 | US$ | 16,501 | ||||||||
|
Operating lease |
7,921 | 8,679 | 8,837 | 2,671 | ||||||||||||
|
Information technology services |
32,926 | 35,381 | 35,856 | 10,839 | ||||||||||||
|
Amortization and depreciation |
18,019 | 23,578 | 27,508 | 8,316 | ||||||||||||
|
Consulting |
9,743 | 10,477 | 12,706 | 3,841 | ||||||||||||
|
Facilities expenses |
2,764 | 3,313 | 3,033 | 917 | ||||||||||||
|
Others |
6,409 | 7,720 | 10,612 | 3,208 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total general and administrative expenses |
R$ | 157,228 | R$ | 174,564 | R$ | 153,136 | US$ | 46,293 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (d) | Financial Income (Expenses) |
The following is the breakdown of financial income and expenses of the Company for years ended December 31, 2015, 2016 and 2017, respectively:
| Year ended December 31, | ||||||||||||||||
| 2015 | 2016 | 2017 | 2017 | |||||||||||||
| BRL | BRL | BRL | USD | |||||||||||||
|
Interest income |
R$ | 35,132 | R$ | 19,675 | R$ | 24,635 | US$ | 7,447 | ||||||||
|
Foreign exchange gain |
16,508 | 2,090 | 1,901 | 575 | ||||||||||||
|
Imputed interest on installment sales |
— | 5,705 | 2,255 | 682 | ||||||||||||
|
Derivative financial instruments gain |
8,934 | — | 764 | 231 | ||||||||||||
|
Other |
720 | 896 | 576 | 174 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total financial income |
R$ | 61,294 | R$ | 28,366 | R$ | 30,131 | US$ | 9,109 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Year ended December 31, | ||||||||||||||||
| 2015 | 2016 | 2017 | 2017 | |||||||||||||
| BRL | BRL | BRL | USD | |||||||||||||
|
Interest expense |
R$ | 58,473 | R$ | 67,018 | R$ | 63,478 | US$ | 19,189 | ||||||||
|
Imputed interest on credit purchases |
24,438 | 32,653 | 53,981 | 16,318 | ||||||||||||
|
Bank charges |
7,537 | 3,005 | 6,451 | 1,950 | ||||||||||||
|
Derivative financial instruments loss |
— | 1,238 | — | — | ||||||||||||
|
Foreign exchange loss |
3,509 | — | 2,327 | 703 | ||||||||||||
|
Debt issuance costs |
1,213 | 2,532 | 4,665 | 1,410 | ||||||||||||
|
Other |
1,497 | 1,104 | 874 | 266 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total financial expense |
R$ | 96,667 | R$ | 107,550 | R$ | 131,776 | US$ | 39,836 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||