<PAGE>   1
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 FORM 10-KSB/A
                               (AMENDMENT NO. 1)
                                 --------------
(Mark One)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (Fee required)

For the fiscal year ended October 31, 1996

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (No fee required)

For the transition period from        to
                               ------    -------

                           Commission File No. 0-25668

                      INTERACTIVE FLIGHT TECHNOLOGIES, INC.
                 (Name of Small Business Issuer in Its Charter)


              DELAWARE                                     11-319748
  (State or Other Jurisdiction of                       (I.R.S. Employer
   Incorporation or Organization)                     Identification Number)

                             4041 N. CENTRAL AVENUE
                             PHOENIX, ARIZONA 85012
                    (Address of Principal Executive Offices)

                                 (602) 200-8900
                (Issuer's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:  None.

         Securities registered under Section 12(g) of the Exchange Act:

<TABLE>
<CAPTION>
     Title of Each Class                               Name of Each Exchange on Which Registered
     -------------------                               -----------------------------------------
<S>                                                    <C>
Class A Common Stock, $0.01 par value per share                  Nasdaq SmallCap Market

Redeemable Class B Warrants                                      Nasdaq SmallCap Market
</TABLE>

         Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 
                            ---                       ---

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. / /

         The Issuer's revenues for the fiscal year ended October 31, 1996 were
$2,985,402.

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant on January 17, 1997 was approximately $174,000,000, based on
the closing sales price of the Class A Common Stock on such date as reported by
the Nasdaq SmallCap Market.

         The number of shares outstanding of each of the Issuer's classes of
common equity, as of January 17, 1997 was: 17,962,488 shares of Class A Common
Stock, $0.01 par value, and 3,960,000 shares of Class B Common Stock, $0.01 par
value.

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


                       DOCUMENTS INCORPORATED BY REFERENCE

         The Registrant's Definitive Proxy Statement relating to the
Registrant's 1997 Annual Meeting of Stockholders, to be filed by the Registrant
with the Securities and Exchange Commission on or before February 28, 1997, is
hereby incorporated by reference into Part III of this Annual Report on Form
10-KSB.

                 Transitional Small Business Disclosure Format:

                        Yes                        No  X
                            ---                       ---

<PAGE>   2

                      INTERACTIVE FLIGHT TECHNOLOGIES, INC

                         ANNUAL REPORT ON FORM 10-KSB/A

                       FISCAL YEAR ENDED OCTOBER 31, 1996

<TABLE>
<CAPTION>
   Caption                                                                                                Page
   -------                                                                                                ----
<S>            <C>              <C>                                                                       <C>
   PART I
               ITEM 1.          DESCRIPTION OF BUSINESS                                                     *

               ITEM 2.          DESCRIPTION OF PROPERTY                                                     *

               ITEM 3.          LEGAL PROCEEDINGS                                                           *

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

   PART II
               ITEM 5.          MARKET FOR THE REGISTRANT'S COMMON
                                STOCK AND RELATED STOCKHOLDER
                                MATTERS                                                                     *

               ITEM 6.          MANAGEMENT'S DISCUSSION AND ANALYSIS
                                OF FINANCIAL CONDITION AND RESULTS OF
                                OPERATIONS                                                                  *

               ITEM 7.          FINANCIAL STATEMENTS                                                        *

               ITEM 8.          CHANGES IN AND DISAGREEMENTS WITH
                                ACCOUNTANTS ON ACCOUNTING AND
                                FINANCIAL DISCLOSURE                                                        *

   PART III
               ITEM 9.          DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
                                AND CONTROL PERSONS; COMPLIANCE
                                WITH SECTION 16(A) OF THE EXCHANGE ACT                                      1

               ITEM 10.         EXECUTIVE COMPENSATION                                                      5

               ITEM 11.         SECURITY OWNERSHIP OF CERTAIN
                                BENEFICIAL OWNERS AND MANAGEMENT                                           11

               ITEM 12.         CERTAIN RELATIONSHIPS AND RELATED
                                TRANSACTIONS                                                               12

               ITEM 13.         EXHIBITS AND REPORTS ON FORM 8-K                                            *
</TABLE>

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

*  Previously Filed

<PAGE>   3

                                    PART III

ITEM 9 --   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
            CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
            EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth the names, ages and current positions
with the Company of the directors and executive officers of the Company:

<TABLE>
<CAPTION>
NAME                               AGE   POSITION
<S>                                <C>   <C>
Michail Itkis                      33    Chief Executive Officer and Chairman of the Board
                                           of Directors
Adam Aron                          42    Director
Brian Barents                      53    Director
General Alexander M.               72    Director
  Haig, Jr.
Yuri Itkis                         55    Director
John Pritzker                      43    Director
Howard J. Tytel                    49    Director
James H. Zukin                     48    Director
Thomas M. Metzler                  52    President and Chief Operating Officer
John W. Alderfer                   52    Chief Financial Officer and Treasurer
Robert Hooper                      61    Vice President -- Sales and Marketing
</TABLE>

         MICHAIL ITKIS has been the Chief Executive Officer and a director of
the Company since October 1994. Prior thereto, from January 1990, Mr. Itkis
served as the director of product development of FortuNet, Inc. ("FortuNet"), a
licensed gaming equipment manufacturer which distributes video gaming networks
to casinos and other gaming establishments. The Company has an exclusive license
from FortuNet for gaming technology for airline use. From May 1989 to November
1989, Mr. Itkis was project engineer for Computer Sciences Corp., a software
development firm, and, from July 1985 to May 1989, was project engineer for TRW,
Inc., a company engaged in defense system design.

         ADAM ARON has been a director of the Company since December 10, 1996.
Since July 1996, Mr. Aron has also served as Chairman of the Board and Chief
Executive Officer of Vail Resorts, Inc., the operator of the three largest ski
areas in the United States and largest ski-oriented company in the world. Prior
to joining Vail Resorts, Inc., from July 1993 to July 1996, Mr. Aron served as
President and Chief Executive Officer of Norwegian Cruise Line Limited, the
world's fourth largest cruise company. From November 1990 until July 1993 Mr.
Aron served as Senior Vice President of Marketing for United Airlines, and from
1987 to 1990 Mr. Aron served as Senior Vice President of Marketing of Hyatt
Hotels Corporation. Mr. Aron holds an M.B.A from the Harvard Business School and
a B.A in Government from Harvard College.

         BRIAN BARENTS has been a director of the Company since December 10,
1996. Since 1996, Mr. Barents has also acted as a Management Consultant for The
Pritzker Organization, based in Chicago,

<PAGE>   4

Illinois, principally in connection with negotiations regarding possible
formation of a U.S. based aerospace company. From 1989 to 1996, Mr. Barents
acted as President and Chief Executive Officer of Learjet, Inc., a subsidiary of
Bombardier, Inc. Prior thereto, Mr. Barents served as the Vice President of
Sales Staff of Toyota Motor Corporation and as a Senior Vice President of Cessna
Aircraft Company. Mr. Barents holds a Bachelor of Business Administration degree
from Western Michigan University and attended a Graduate Studies program at the
University of Michigan.

         GENERAL ALEXANDER M. HAIG, JR. has been a director of the Company since
August 1996. General Haig is the Chairman and President of Worldwide Associates,
Inc., a consulting firm which assists public and private corporations both here
and abroad in developing and implementing marketing and acquisition strategies
in addition to providing strategic advice on the domestic and international
political, economic and security environment as will affect global commercial
activities. General Haig graduated from the U.S. Military Academy in 1947, was
commissioned a Second Lieutenant in the Army and served in Japan, Korea, Europe
and Vietnam in a variety of military assignments. From 1962 to 1965 he served in
the Pentagon and received the Distinguished Service Cross for heroism during his
service in Vietnam in 1966 and 1967. Advancing through the military ranks, he
was promoted to full General in 1972. General Haig was named White House Chief
of Staff by President Nixon in 1973, at which point he retired from the
military. In 1974, President Ford recalled General Haig to active duty as
Commander-in-Chief, U.S. European Command, and was later appointed Supreme
Allied Commander in Europe, responsible for NATO's military force until he
retired in 1979. General Haig was elected President and Chief Operating Officer
of United Technologies Corporation and a member of its Board of Directors in
1979. On January 22, 1981, General Haig was sworn in as the Nation's 59th
Secretary of State under President Reagan. He resigned from this position on
July 5, 1982. He was an official candidate (1987-1988) for the nomination of the
Republican Party for the presidency of the United States. General Haig is member
of the Board of Directors of America Online, Inc., Inteneuron Pharmaceutical,
Inc., MGM Grand, Inc., and Progenitor, Inc.

         YURI ITKIS has been a director of the Company since October 1994. Since
October 1989, Mr. Itkis has been the president and sole stockholder of FortuNet.
Yuri Itkis is the father of Michail Itkis.

         JOHN A. PRITZKER has been a director of the Company since December 10,
1996. Since January 1991, Mr. Pritzker has served as the Chief Executive Officer
of the Red Sail Companies, which provide ad specialty and catalogue fulfillment
services and operate water sports and retail facilities at resorts worldwide.
Mr. Pritzker is a director of Ticketmaster Group, Inc., and a trustee of the
U.S. Ski Team Foundation, San Francisco Museum of Modern Art, San Francisco Day
School and Children Now.

         HOWARD J. TYTEL has been a director of the Company since March 1995.
Mr. Tytel has been a director, executive vice president and general counsel of
Sillerman Communications Management Corporation ("SCMC"), a diversified
communications management firm, since 1985; a director and officer of Sillerman
Media Choices, Inc., an indirect general partner of Sillerman Communications
Partners, L.P., an investment partnership, since 1989; and an officer and
director of Legacy Broadcasting Inc. ("Legacy"), the general partner of Legacy
Broadcast Partners, L.P., a radio stations operator, from 1991 to 1993. Mr.
Tytel has been a director and executive vice president of SFX Broadcasting, Inc.
("SFX") since 1992. SCMC is the management consultant to SFX and to Multi-Market
Radio, Inc. Mr. Tytel was a director and executive vice president of Legacy
Broadcasting Inc. (a company unrelated to Legacy), which owned radio stations,
and Metropolitan Broadcasting Corporation from 1986 to 1989, and 1988 to 1989,
respectively. Mr. Tytel is also of counsel to the law firm of Baker & McKenzie,
which has performed certain legal services on behalf of the Company.


                                      -2-
<PAGE>   5

         JAMES H. ZUKIN has been a director of the Company since June 1996. Mr.
Zukin is Senior Managing Director - Product Development, Chairman of the
Executive Committee, and a member of the Board of Directors of Houlihan Lokey
Howard & Zukin ("Houlihan Lokey"), a specialty investment banking firm. Prior to
joining Houlihan Lokey in September 1976, Mr. Zukin was founder and director of
ESOT Valuation Group at Marshall & Stevens and Vice President at Niederhoffer,
Cross & Zeckhauser. Currently, Mr. Zukin is a member of the ESOP Association of
America and the National Center for Employee Ownership, and a member of the
Board of Directors of Recreation World, Inc. and of the Brandeis-Bardin
Institute.

         THOMAS M. METZLER has been the President and Chief Operating Officer of
the Company since November 1996. Prior thereto, from 1967 to 1996, Mr. Metzler
served in various capacities with AMR Corporation, the parent company of
American Airlines and AMR Services (a $500 million international diversified
airline services company). Mr. Metzler's positions with AMR Corporation
included, most recently, that of President and Chief Executive Officer of AMR
Services. Mr. Metzler holds a Bachelor of Business Administration degree from
the Adelphi University and attended the Advanced Management Program at the
Harvard Business School.

         JOHN W. ALDERFER has served as the Company's Chief Financial Officer
since September 1996. Prior to joining the Company, from September 1990 through
September 1996, Mr. Alderfer served as the Senior Vice President, Treasurer and
Chief Financial Officer of Alliance Gaming Corporation, a publicly traded
diversified gaming company which operates various casinos and also engages in
gaming equipment manufacturing and distribution. From 1989 to 1990, Mr. Alderfer
served as the Chief Financial Officer of The Bicycle Club -- a Los Angeles based
California card club. From 1971 to 1989, Mr. Alderfer served in various
financial capacities with the Summa Corporation, the Howard R. Hughes Estate
Businesses, which operated numerous gaming establishments in Las Vegas and Reno.
From 1966 to 1971, he was employed as a certified public accountant by Deloitte
& Touche (then known as Haskins & Sells). Mr. Alderfer received his Bachelor of
Science in Business Administration with an accounting major from Texas Tech
University in 1966 and is a certified public accountant.

         ROBERT HOOPER has served as the Company's Vice President -- Sales and
Marketing since January 1997. From June 1994 through November 1996, Mr. Hooper
acted as Vice President of Industry Marketing & Business Development for Stratus
Computer, Inc., a system and software manufacturer. From 1992 to 1994, Mr.
Hooper served as Vice President -- Marketing and Product Planning for American
Airlines (AMRIS, Transportation Automation Services), a subsidiary of AMR
Corporation. From 1989 to 1992, Mr. Hooper served as Vice President -- Marketing
and Sales and Vice President -- Airline Marketing of British Airways. From 1960
to 1989, Mr. Hooper held various positions with International Business Machines
Corp. including, most recently, that of Director of International Airline
Marketing. Mr. Hooper holds a Bachelor of Arts degree from the University of
Rochester and attended the Financial Management for Senior Executives program of
the Harvard Business School.

         Directors serve until the next annual meeting or until their successors
are elected and qualified, subject to the provisions of a stockholders'
agreement. See "Item 12 -- Certain Relationships and Related Transactions."
Officers serve at the discretion of the Board of Directors, subject to rights,
if any, under contracts of employment.


                                      -3-
<PAGE>   6

MEETINGS OF THE BOARD OF DIRECTORS

         The business affairs of the Company are managed under the direction of
the Board of Directors. Members of the Board are kept informed through various
reports and documents sent to them, through operating and financial reports
routinely presented at Board and committee meetings by Michail Itkis, as the
Chairman of the Board, and other officers, and through other means. In addition,
directors of the Company discharge their duties throughout the year not only by
attending Board meetings, but also through personal meetings and other
communications, including considerable telephone contact, with the Chief
Executive Officer and others regarding matters of interest and concern to the
Company.

         During the fiscal year ended October 31, 1996, the Company's Board of
Directors held eight meetings. Each person who was a director attended all of
the Board meetings except as follows: Mr. Haig was unable to attend two special
meetings of the Board and Mr. Boris Itkis was unable to attend one special
meeting of the Board.

BOARD COMMITTEES

         The Company's Board of Directors has an Executive Committee, an Audit
Committee and a Compensation Committee but does not have a nominating committee.
The members of each committee are appointed by the Board of Directors.

         Executive Committee. The Executive Committee has and may exercise all
the powers and authority of the Board of Directors in the management of the
business and affairs of the Company to the fullest extent authorized by the
provisions of the Delaware General Corporations Law. The Executive Committee
currently consists of Messrs. Michail Itkis, John Pritzker and James Zukin. The
Executive Committee was in session at various times during fiscal 1996.

         Audit Committee. The Audit Committee recommends to the Board of
Directors the auditing firm to be selected each year as independent auditors of
the Company's financial statements and to perform services related to the
completion of such audit. The Audit Committee also has responsibility for (i)
reviewing the scope and results of the audit, (ii) reviewing the Company's
financial condition and results of operations with management, (iii) considering
the adequacy of the internal accounting and control procedures of the Company,
and (iv) reviewing any non-audit services and special engagements to be
performed by the independent auditors and considering the effect of such
performance on the auditors' independence. The Audit Committee currently
consists of Messrs. Aron and Barents. There was no Audit Committee in session
during any of the meetings of the Board of Directors during fiscal 1996.

         Compensation Committee. The Compensation Committee reviews and
recommends to the Board of Directors the compensation and benefits of all
officers of the Company, reviews general policy matters relating to compensation
and benefits of employees of the Company and administers the Company's stock
incentive plan. The Compensation Committee during fiscal 1996 consisted of
Messrs Haig and Zukin. The Compensation Committee currently consists of Messrs.
Zukin and Pritzker. The Compensation Committee was in session at various times
during fiscal 1996.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

         The Securities and Exchange Commission (the "Commission") has
comprehensive rules relating to the reporting of securities transactions by
directors, officers and stockholders who beneficially own


                                      -4-
<PAGE>   7

more than 10% of the Company's Common Stock (collectively, the "Reporting
Persons"). These rules are complex and difficult to interpret. Based solely on a
review of Section 16 reports received by the Company from Reporting Persons, the
Company believes that no Reporting Person has failed to file a Section 16 report
on a timely basis during the most recent fiscal year, except that (i) annual
reporting of changes for fiscal 1996 (or initial reports for newly elected
directors and officers, as the case may be) for John Alderfer, Adam Aron, Brian
Barents, Alexander Haig, Michail Itkis, Thomas Metzler, John Pritzker and Lauren
Snopkowski were not filed until February 1997 and (ii) Messrs. Zukin, Yuri
Itkis, Boris Itkis, Steven Fieldman and Lance Fieldman have not yet filed
reports on Form 4 or Form 5 for changes of beneficial ownership for fiscal 1996
and transactions occurring thereafter as described elsewhere herein.


ITEM 10 --   EXECUTIVE COMPENSATION

COMPENSATION TABLES

         The following summary compensation table sets forth the aggregate
compensation paid or accrued by the Company for the fiscal period commencing
February 1, 1994 (commencement of operations) through October 31, 1994 and the
fiscal years ended October 31, 1996 and October 31, 1995 to (i) the Chief
Executive Officer (the "CEO"), and (ii) those executive officers other than the
CEO whose total annual compensation for the 1996 fiscal year exceeded $100,000
(the "Named Executive Officers"):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                     LONG TERM
                                                                       ANNUAL COMPENSATION      COMPENSATION AWARDS
NAME AND PRINCIPAL POSITION                             FISCAL YEAR         SALARY ($)           STOCK OPTIONS (#)
---------------------------                             -----------         ----------           -----------------
<S>                                                     <C>            <C>                      <C>    
Michail Itkis, Chief Executive Officer(1).............      1996            $  188,933                 375,000
                                                            1995            $  125,000                  15,000
                                                            1994                    --                      --
Robert J. Aten, Former Chief Financial Officer(2).....      1996            $  216,380(4)               30,000
                                                            1995            $   97,115                      --
                                                            1994                    --                      --
Lance D. Fieldman, Former Vice President--                  1996            $  298,075(4)               35,000
Sales(3)..............................................      1995            $   60,000                   5,000
                                                            1994                    --                      --
Donald H. Goldman, Former President(5)................      1996            $  107,308(6)                   --
                                                            1995            $  150,000                  15,000
                                                            1994                    --                      --
</TABLE>

-----------

(1)      Excludes relocation expenses of $114,997 paid to Mr. Itkis during the
         1996 fiscal year.

(2)      Excludes relocation expenses of $20,453 paid to Mr. Aten during the
         1996 fiscal year. Mr. Aten resigned as Chief Financial Officer as of
         October 11, 1996.

(3)      Mr. Fieldman resigned as Vice-President of Sales as of November 2,
         1996.

(4)      Includes certain payments due as severance upon resignation. See "--
         Employment and Severance Agreements."


                                      -5-
<PAGE>   8

(5)      Mr. Goldman resigned as President as of May 10, 1996.

(6)      Includes certain payments due as severance upon resignation. See "--
         Employment and Severance Agreements."


                          OPTION GRANTS IN FISCAL YEAR

         The following table sets forth the grant of stock options made during
the 1996 fiscal year to the CEO and the Named Executive Officers:


<TABLE>
<CAPTION>
                                                                    % TOTAL OPTIONS GRANTED
                                                                      TO EMPLOYEES IN 1996       EXERCISE      EXPIRATION
NAME                                          OPTIONS GRANTED            FISCAL YEAR(1)          PRICE(2)         DATE
----                                          ---------------       -----------------------     ---------      ----------
<S>                                           <C>                   <C>                          <C>            <C> 
Michail Itkis.............................        300,000                                        $  9.875       8/27/2006
                                                   75,000                                        $ 11.00        2/20/2006
                                                =========
                                                  375,000                   24.52%              
Robert J. Aten............................         30,000                    1.96%               $  4.40        1/31/2006
Lance D. Fieldman ........................         25,000                                        $  5.00        1/31/2005
                                                   10,000                                        $ 11.00        2/20/2006
                                                =========
                                                   35,000                    2.29%                
Donald H. Goldman.........................         25,000                    1.64%               $ 11.00        2/20/2006
</TABLE>

-----------

(1)      Based on a total of 1,529,000 options granted to employees during the
         1996 fiscal year.

(2)      Represents 100% of the fair market value of the Class A Common Stock on
         the date of grant. However, all stock options under the 1994 Plan with
         exercise prices in excess of $8.00 were repriced to $8.00 on January 6,
         1997 provided the holder was a current employee, officer, director or
         consultant of the Company.


                                      -6-
<PAGE>   9

                 AGGREGATED OPTION EXERCISES IN 1996 FISCAL YEAR
                             AND FY-END OPTION VALUE

         The following table provides certain information regarding stock option
ownership and exercises by the CEO and the Named Executive Officers, as well as
the number and assumed value of exercisable and unexercisable options held by
those persons, at October 31, 1996:

<TABLE>
<CAPTION>
                                                                                                         VALUE OF
                                                                                   NUMBER OF            UNEXERCISED
                                                                                  UNEXERCISED          IN-THE-MONEY
                                                                                    OPTIONS             OPTIONS AT
                                                                                 AT OCTOBER 31,         OCTOBER 31,
                                                                                    1996 (#)              1996($)
                                       SHARES ACQUIRED          VALUE             EXERCISABLE/         EXERCISABLE/
NAME                                   ON EXERCISE (#)      REALIZED ($)        UNEXERCISABLE(1)     UNEXERCISABLE(1)
----                                   ---------------      ------------        ----------------     ----------------
<S>                                    <C>                  <C>                 <C>                  <C>
Michail Itkis.......................           --                   --           115,000/275,000          $99,000/
                                                                                                        $1,125,000
Robert J. Aten......................       19,847             $258,000                       0/0             $0/$0
Lance D. Fieldman...................        3,040             $ 38,760                  0/35,000             $0/$0
Donald H. Goldman...................        5,708             $ 58,507                  0/25,000             $0/$0
</TABLE>

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

(1)      Value of exercisable "in-the-money" options is equal to the difference
         between the closing bid price per share of the Class A Common Stock on
         the Nasdaq Small-Cap Market of $11.00 at October 31, 1996 and the
         option exercise price per share multiplied by the number of shares
         subject to options.

EMPLOYMENT AND SEVERANCE AGREEMENTS

         The Company has an employment agreement with Michail Itkis, the
Company's Chief Executive Officer, which provides for per annum base salary of
$125,000, and the grant of options to purchase up to 15,000 shares of Class A
Common Stock per year, respectively, at an exercise price equal to the fair
market value on the date of grant, except for the first grant. The agreement
provides for 12 months severance pay (with certain offset provisions) if Mr.
Itkis is terminated by the Company under certain conditions. The agreement also
provides that Mr. Itkis will not compete with the Company during the term of the
agreement and for a period of three years thereafter. The agreement expires
October 30, 1997; however, the Board has approved, and the Company and Mr. Itkis
are negotiating the terms of, a new employment for Mr. Itkis which would extend
through August 27, 1999, and would provide for an annual base salary of $250,000
per year.

         Donald H. Goldman served as a director of the Company and was employed
by the Company as President until he resigned from such positions as of May 10,
1996. Mr. Goldman left the Company voluntarily to pursue other interests. In
connection with his resignation, the Company and Mr. Goldman agreed that Mr.
Goldman will render such consulting, legal and other services to the Company,
consistent with his experience and background and subject to his other business
commitments, as may be reasonably requested by the Company's then President or
Chief Executive Officer during the 15 month period commencing on May 10, 1996.
The Company agreed to pay Mr. Goldman at the rate of $150,000 per year during
such 15 month period and to grant Mr. Goldman an option to purchase 10,000
shares of


                                      -7-
<PAGE>   10

Class A Common Stock in the event that either or both of Messrs. Michail Itkis
and Steven Fieldman receive compensatory options during the Consulting Term.

         Robert J. Aten was employed by the Company as Chief Financial Officer
pursuant to an employment agreement with the Company until he was replaced in
that position as of October 11, 1996. In connection with his termination, the
Company and Mr. Aten agreed that Mr. Aten will render certain limited consulting
and other services to the Company as may be reasonably requested by the Company.
Pursuant to Mr. Aten's employment agreement, he received an aggregate severance
payment of $90,390 upon his termination.

         Lance D. Fieldman was employed by the Company as Vice President of
Sales pursuant to an employment agreement with the Company until he resigned
from the position as of November 2, 1996. In connection with his resignation,
the Company and Mr. Fieldman agreed that Mr. Fieldman will render certain
limited consulting and other services to the Company, consistent with his
experience and background and subject to his other business commitments, as may
be reasonably requested by the Company during the one-year period commencing on
November 2, 1996. The Company agreed to pay Mr. Fieldman an aggregate of
$100,000 as compensation for such services and an additional $300,000 as
settlement of certain commissions claimed to be owed to him. Mr. Fieldman has
further agreed that he will vote his stock on all matters in proportion to the
vote of the Company's other stockholders.

         Steven M. Fieldman served as a director of the Company and was employed
by the Company as Vice President of Business Development pursuant to an
agreement with the Company until he resigned from the position as of November 2,
1996. In connection with his resignation, the Company and Mr. Fieldman agreed
that Mr. Fieldman will render certain limited consulting and other services to
the Company, consistent with his experience and background and subject to his
other business commitments, as may be reasonably requested by the Company during
the period ending October 27, 1999. Mr. Fieldman will receive a fee of $55,000
per year for such services. In addition, the Company has agreed that,
notwithstanding Mr. Fieldman's resignation, all of his outstanding employee or
director stock options will continue to vest and be exercisable in accordance
with their respective terms, except that vesting of 300,000 options granted
August 27, 1996 will be partially accelerated. Mr. Fieldman has further agreed
that he will vote his stock on all matters in proportion to the vote of the
Company's other stockholders.

DIRECTOR COMPENSATION

         Directors are reimbursed for expenses actually incurred in connection
with each meeting of the Board of Directors or any Committee thereof attended.
In addition, Mr. Tytel receives $1,000 for each Board meeting and $500 for each
Committee meeting attended. Certain directors are entitled to automatic grants
of options under the Company's 1994 Stock Option Plan. See "-- Stock Options --
Directors' Options."

STOCK OPTIONS

         In October 1994, the Board of Directors adopted, and in November 1994
the Company's stockholders approved, the 1994 Stock Option Plan (the "1994
Plan"). In August 1996 the stockholders approved an amendment to the 1994 Plan
which increased the number of shares authorized under the plan to 2,400,000
shares of the Company's Class A Common Stock. Under the 1994 Plan, employees,
officers and directors of, and consultants or advisers to, the Company and any
subsidiary corporations are eligible to receive incentive stock options
("incentive options") within the meaning of Section 422 of


                                      -8-
<PAGE>   11

the Code and/or options that do not qualify as incentive options ("non-qualified
options"). The 1994 Plan, which expires in September 2004, is administered by
the Board of Directors or a committee of the Board of Directors, provided,
however, that with respect to "officers" and "directors," as such terms are
defined for the purposes of Rule 16b-3 ("Rule 16b-3") promulgated under the
Exchange Act, such committee shall consist of "disinterested" directors as
defined in Rule 16b-3, but only if at least two directors meet the criteria of
"disinterested" directors as defined in Rule 16b-3. The 1994 Plan also provides
for automatic grants of options to certain directors in the manner set forth
below under "-- Directors' Options."

         Options granted under the 1994 Plan may be either incentive options or
non-qualified options. Incentive options granted under the 1994 Plan are
exercisable for a period of up to 10 years from the date of grant at an exercise
price which is not less than the fair market value of the Class A Common Stock
on the date of the grant, except that the term of an incentive option granted
under the 1994 Plan to a stockholder owning more than 10% of the outstanding
voting power may not exceed five years and its exercise price may not be less
than 110% of the fair market value of the Class A Common Stock on the date of
the grant. To the extent that the aggregate fair market value, as of the date of
grant, of the shares for which incentive options become exercisable for the
first time by an optionee during the calendar year exceeds $100,000, such
options will be treated as non-qualified options to the extent that the fair
market value of the optioned shares exceeds $100,000. Additionally, the
aggregate number of shares of Class A Common Stock that may be subject to
options granted to any person in a calendar year shall not exceed 25% of the
maximum number of shares of Class A Common Stock which may be issued from time
to time under the 1994 Plan. Options granted under the 1994 Plan to officers,
directors or employees of the Company may be exercised only while the optionee
is employed or retained by the Company or within 90 days of the date of
termination of the employment relationship or directorship, unless otherwise
agreed by the Company. However, options which are exercisable at the time of
termination by reason of death or permanent disability of the optionee may be
exercised within 12 months of the date of termination of the employment
relationship or directorship. Upon the exercise of an option, payment may be
made by cash or by any other means that the Board of Directors or the committee
determines. No option may be granted under the 1994 Plan after October 2004.

         Options may be granted only to such employees, officers and directors
of, and consultants and advisors to, the Company or any subsidiary of the
Company as the Board of Directors or the committee shall select from time to
time in its sole discretion, provided that only employees of the Company or a
subsidiary of the Company shall be eligible to receive incentive options.

         As of February 14, 1997, options to purchase an aggregate of 2,432,700
shares have been granted under the 1994 Plan at exercise prices of between $4.40
and $16.125 per share, of which 130,250 had been exercised and 118,000 had been
forfeited. Accordingly, as of February 24, 1997, options to purchase 2,184,450
shares were outstanding under the 1994 Plan. The Company has filed a
registration statement with the Commission covering the 2,400,000 shares of
Class A Common Stock issuable upon exercise of options granted under the 1994
Plan.

Directors' Options

         The provisions of the 1994 Plan provide for the automatic grant of
non-qualified stock options to purchase shares of Common Stock ("Director
Options") to directors of the Company who are not employees or principal
stockholders of the Company ("Eligible Directors"). Eligible Directors of the
Company were granted a Director Option to purchase 10,000 shares of Class A
Common Stock on March 7, 1995 ("Initial Director Option"). Further, commencing
on the day immediately following the


                                       -9-
<PAGE>   12

date of the annual meeting of stockholders for the Company's fiscal year ending
October 31, 1996, each Eligible Director, other than directors who received an
Initial Director Option since the last annual meeting, will be granted a
Director Option to purchase 1,000 shares of Common Stock ("Automatic Grant") on
the day immediately following the date of each annual meeting of stockholders,
as long as such director is a member of the Board of Directors. The exercise
price for each share subject to a Director Option shall be equal to the fair
market value of the Class A Common Stock on the date of grant, except for
directors who receive incentive options and who own more than 10% of the voting
power, in which case the exercise price shall be not less than 110% of the fair
market value on the date of grant. Director Options are exercisable in four
equal annual installments, commencing one year from the date of grant. Director
Options will expire the earlier of 10 years after the date of grant or 90 days
after the termination of the director's service on the Board of Directors.


ITEM 11 --  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
            MANAGEMENT


         The following table sets forth certain information as of February 26,
1997, regarding the ownership of Class A Common Stock and Class B Common Stock
by (i) each person known by the Company to own beneficially more than five
percent of any class of outstanding Common Stock, (ii) each director of the
Company, (iii) each "named executive officer" as defined under the rules and
regulations of the Securities Act of 1933, as amended, and (iv) all executive
officers and directors of the Company as a group.


<TABLE>
<CAPTION>
    NAME AND ADDRESS OF                  CLASS B                              CLASS A
    BENEFICIAL OWNER (1)              COMMON STOCK(2)                     COMMON STOCK(2)
---------------------------     ---------------------------      ------------------------------
                                  NUMBER           PERCENT           NUMBER             PERCENT  PERCENT OF TOTAL
                                 OF SHARES        OF CLASS         OF SHARES           OF CLASS  VOTING POWER (3)
<S>                             <C>               <C>             <C>                    <C>        <C>        
Michail Itkis ...........         888,889(4)        22.5%         215,000(4)(5)(6)       1.2%       13.2%
Yuri Itkis ..............         888,889(7)        22.5          140,000(8)               *        13.1
Boris Itkis .............         888,889(9)        22.5             0(9)                  *        12.8
Donald H. Goldman .......         566,666           14.3           61,958(10)              *         8.3
Steven M. Fieldman ......         566,666(11)       14.3          255,000(12)            1.4         8.7(13)
Adam Aron ...............               0              *           20,000(14)              *           *
Brian Barents ...........               0              *                0                  *           *
Alexander M. Haig, Jr ...               0              *           50,000(15)              *           *
John A. Pritzker ........               0              *          371,500(16)            2.0           *
Howard J. Tytel .........               0              *           10,000(17)              *           *
James Zukin .............               0              *          200,000(18)            1.1           *
Lance D. Fieldman .......         160,001              *           35,000(19)              *         2.4(13)
Robert J. Aten ..........               0              *                0                  *           *
All current executive
   officers and directors
   of the Company as a
   group (11 persons) ...       1,777,778           44.9%       1,148,166(20)            6.0%       27.7%
</TABLE>


                                      -10-
<PAGE>   13

*        Less than 1%.

(1)      Except as otherwise indicated below, the address of each beneficial
         owner is c/o Interactive Flight Technologies, Inc., 4041 N. Central
         Avenue, Phoenix, Arizona 85012. Based on the most recent information
         provided to the Company, Steven M. Fieldman's address is 609 B
         Manhattan Avenue, Hermosa Beach, California 90254, (ii) Lance D.
         Fieldman's address is 326 Columbus, #4G, New York, New York 10023, and
         (iii) Donald H. Goldman's address is 331 W. Broadway, Long Beach, New
         York, 11561. Unless otherwise noted, the Company believes that all
         persons named in the table have sole voting and investment power with
         respect to all shares of Common Stock beneficially owned by them,
         subject to the Stockholders' Agreement described in "Item 12-- Certain
         Relationships and Related Transactions" and the agreements by Steven
         Fieldman and Lance Fieldman to vote in proportion to the Company's
         other stockholders as described in "Item 10-- Executive Compensation--
         Employment and Severance Agreements."

(2)      Shares of Class B Common Stock convert on a share for share basis into
         shares of Class A Common Stock automatically upon their transfer to any
         person other than another holders of Class B Common Stock. Of the
         3,960,000 shares of Class B Common Stock, 3,200,000 are shares held in
         escrow and will be released to the holders only if the Company meets
         certain specified performance criteria specified in the escrow
         agreement.

(3)      Based on 3,960,000 shares of Class B Common Stock, each of which has
         six votes per share, and 17,962,488 shares of Class A Common Stock
         outstanding, except that shares underlying options to purchase Class A
         Common Stock exercisable within 60 days are deemed to be outstanding
         for purposes of calculating the percentage owned by the holder of such
         options.

(4)      Excludes shares owned by Yuri Itkis and Boris Itkis, Michail Itkis'
         father and brother, respectively, as to which shares Michail Itkis
         disclaims beneficial ownership.

(5)      Includes 215,000 shares issuable upon exercise of options exercisable
         within 60 days.

(6)      Excludes 15,000 shares issuable upon exercise of options exercisable
         within 60 days which are held by Mr. Itkis' wife, an employee of the
         Company, as to which Mr. Itkis disclaims beneficial ownership.

(7)      Excludes shares owned by Michail Itkis and Boris Itkis, as to which
         shares Yuri Itkis disclaims beneficial ownership.

(8)      Includes 90,000 shares issuable upon exercise of options exercisable
         within 60 days and 50,000 shares issuable upon exercise of a Stock
         Purchase Warrant held by FortuNet, Inc.

(9)      Excludes shares owned by Michail Itkis and Yuri Itkis, as to which
         shares Boris Itkis disclaims beneficial ownership.

(10)     Includes 25,000 shares issuable upon exercise of options exercisable
         within 60 days.

(11)     Excludes shares owned by Lance Fieldman, Steven Fieldman's son, as to
         which shares Steven Fieldman disclaims beneficial ownership.

(12)     Includes 255,000 shares issuable upon exercise of options exercisable
         within 60 days.

(13)     Steven Fieldman and Lance Fieldman have agreed to vote all shares on
         all matters in proportion to the vote of the Company's other
         stockholders. See "Item 10 -- Executive Compensation -- Employment and
         Severance Agreements."

(14)     Includes 20,000 shares issuable upon exercise of options exercisable
         within 60 days.

(15)     Includes 50,000 shares issuable upon exercise of options exercisable
         within 60 days.

(16)     Includes 230,000 shares issuable upon exercise of options exercisable
         within 60 days.

(17)     Includes 10,000 shares issuable upon exercise of options exercisable
         within 60 days.

(18)     Includes 50,000 shares issuable upon exercise of options exercisable
         within 60 days and 150,000 shares issuable upon exercise of a Stock
         Purchase Warrant held by Houlihan Lokey Howard & Zukin.

(19)     Includes 35,000 shares issuable upon exercise of options exercisable
         within 60 days.

(20)     Includes 1,006,666 shares issuable upon exercise of options and
         warrants exercisable within 60 days. Excludes share beneficially held
         by those Named Executive Officers who are no longer executive officers
         or directors of the Company.


                                      -11-
<PAGE>   14

ITEM 12 --  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

STRATEGIC ALLIANCE WITH HYATT GROUP

         In November 1996, the Company executed a Strategic Alliance Agreement
(the "Alliance Agreement") to form a strategic alliance with Hyatt Ventures,
Inc. ("Hyatt"). Mr. Pritzker has an indirect beneficial ownership interest in
Hyatt and serves as its President. Under the terms of the Alliance Agreement,
Hyatt, directly and through certain of its affiliates (collectively, the "Hyatt
Group"), has agreed to use its best commercial efforts to assist the Company in
advancing the Company's business with respect to the Entertainment Network. In
return, Hyatt will receive warrants to purchase Class A Common Stock comprising
up to ten percent of the fully-diluted outstanding Class A and Class B Common
Stock (after giving effect to the exercise of these warrants and the exercise of
all other rights, options and warrants outstanding as of that date).
One-ninetieth of these warrants will be issued for each airplane with respect to
which the Company, or a joint venture subsidiary of the Company, obtains a
binding purchase commitment from an airline (excluding Swissair, Debonair,
Alitalia and certain smaller airlines with which the Company has had prior
negotiations). Under the Alliance Agreement, Hyatt also purchased shares of the
Company's Class A Common Stock aggregating $1 Million in the open market.

         Hyatt also has the right to designate no less than two nominees to the
Board of Directors of the Company (the "Board"), and may designate additional
nominees if the size of the Board is increased. Hyatt has designated John
Pritzker, President of Hyatt and Adam Aron, Chairman and Chief Executive Officer
of Vail Resorts, Inc. to be its representatives on the Board. Under the terms of
the Alliance Agreement, these individuals received options to purchase an
aggregate of 250,000 shares of Class A Common Stock under the Company's Amended
and Restated 1994 Stock Option Plan.

         Hyatt also has the right under the Alliance Agreement to invest in each
of up to six joint ventures in order to raise up to one-third of the financing
required by the Company for specified airline projects and up to two such joint
ventures relating to non-airline projects (each, a "Joint Venture"). The
Alliance Agreement further provides that, at any time following completion of
the installation of all Entertainment Networks initially contemplated to be
financed and sold by a specified airline Joint Venture (or at a similar mutually
agreed upon milestone with respect to any non-airline Joint Venture), Hyatt
shall have the right to convert between fifty percent and one hundred percent of
its initial equity interest in such Joint Venture into shares of Class A Common
Stock. This conversion would be at a rate based on the then market price of a
share of Class A Common Stock and a valuation of Hyatt's equity interest in the
Joint Venture on the conversion date (as mutually agreed by the parties or,
absent such agreement, as determined by an independent appraiser using a
discounted cash flow method). Such a conversion may not be fully exercised if,
after giving effect thereto, the aggregate ownership of Class A Common Stock by
Hyatt or the Hyatt Group (excluding shares of Class A Common Stock acquired
under the above-described warrants, shares acquired in the above-described $1
Million open market purchases and shares received for executing the Qantas
agreement as described below) would exceed twenty percent of the aggregate
number of shares of voting securities of the Company then outstanding,
calculated on a fully diluted basis.

         The Alliance Agreement and related agreements also provide Hyatt with
the right to demand up to four registrations, and unlimited "piggyback"
registration rights, in connection with its resale of any shares acquired under
the Alliance Agreement (other than shares acquired in the open market).

         Following execution of the Alliance Agreement, Hyatt agreed to execute
an agreement with Qantas which was necessary in order for the Company to become
a preferred provider in the Qantas bid


                                      -12-
<PAGE>   15

alignment process, in exchange for which Hyatt received an additional 60,000
shares Class A Common Stock.

FORTUNET LICENSE

         In October 1994, the Company entered into an Intellectual Property
License and Support Services Agreement with FortuNet, Inc. ("Fortunet"), which
was amended and restated on November 7, 1996 (as amended, the "FortuNet
License"). The FortuNet License grants the Company a worldwide, perpetual
license to FortuNet's current and future patents, copyrights, trade secrets and
related know-how covering a computerized system for use in all fields other than
bingo halls. Further, this license is exclusive to the Company within the
airline industry. As consideration, the Company must pay FortuNet an annual
license fee of $100,000 in monthly installments through November 2002. The
Company was previously also required to compensate FortuNet for certain
development, support and maintenance services, but this obligation has been
terminated effective November 7, 1996. Further, the restated version of the
FortuNet License no longer prohibits the Company from engaging in any gaming
activities outside of airplanes. In exchange for these amendments to the
FortuNet License and certain other modifications, on November 7, 1996, the
Company issued to FortuNet a warrant to purchase fifty thousand shares of Class
A Common Stock at a price of $9.75 per share, which was repriced on January 6,
1997 to $8.00 per share. Under the FortuNet License, an aggregate of $100,000
was paid to FortuNet in fiscal 1996.

         Yuri Itkis, a director and principal stockholder of the Company, is the
President and sole stockholder of FortuNet and Boris Itkis, a former director of
the Company and a son of Yuri Itkis, is an employee of FortuNet. Michail Itkis,
the Chief Executive Officer and a director of the Company, is also a son of Yuri
Itkis and was an employee of FortuNet until October 1994. The FortuNet License
was entered into after extensive negotiations between the parties and the
Company believes that the terms of the agreement are no less favorable to the
Company than could be obtained from an unaffiliated third party.

STOCKHOLDERS' AGREEMENT

         In October 1994, the Company entered into a stockholders' agreement
with Yuri Itkis, Michail Itkis, Boris Itkis, Steven M. Fieldman, Donald H.
Goldman and Lance Fieldman (the "Stockholders' Agreement"). In connection with
the May 1996 and November 1996 resignations of Messrs. Goldman, S. Fieldman and
L. Fieldman described in "Item 10 -- Executive Compensation," and in connection
with the execution of the Strategic Alliance Agreement with Hyatt, the parties
to the Stockholders' Agreement entered into agreements which terminated the
Stockholders' Agreement as to Messrs. Goldman, S. Fieldman and L. Fieldman,
added Hyatt as a Stockholder under the Stockholders' Agreement, and amended the
terms of the Stockholders' Agreement.

         As amended, the Stockholders' Agreement provides that Michail Itkis and
Yuri Itkis shall each be entitled to designate one nominee to the Company's
Board of Directors and that Hyatt shall be entitled to designate two nominees to
the Company's Board of Directors. No other parties have any continuing right
under the Stockholders' Agreement to nominate a director. Each stockholder who
is party to the Stockholders' Agreement agreed to vote all the shares of Common
Stock owned by him for the election of the directors so nominated and not to
take any action to remove any director so elected (except for the director(s)
nominated by such stockholder). In addition, the Stockholders' Agreement no
longer contains provisions which restrict the sale, transfer or assignment of
the parties stock in the Company and no longer governs meetings of the Company's
board of directors.


                                      -13-
<PAGE>   16

EMPLOYMENT AGREEMENTS

         The Company has employment agreements with each of its executive
officers and has granted such officers options to purchase shares of Class A
Common Stock. See "Item 10 -- Executive Compensation -- Employment Agreements." 
In addition, Michail Itkis's wife, Lauren Snopkowski, is currently the Secretary
and an employee of the Company. Ms. Snopkowski, who also served as Controller
and Treasurer of the Company during fiscal 1996, received compensation in fiscal
1996 of $113,906. In addition, Mr. Itkis' sister-in-law, Jennifer Snopkowski,
was the Company's Product Engineering Manager, for which she received
compensation of $75,760 in fiscal 1996. Jennifer Snopkowski was formerly a
project engineer for Hughes Aircraft Company for over 10 years, and has masters
and bachelors degrees in Mechanical Engineering from the Massachusetts Institute
of Technology.

CONSULTING AND ADVISORY AGREEMENTS

         The Company had consulting arrangements with Howard J. Tytel pursuant
to which he received fees of $100,000 for the fiscal year ended October 31, 1996
and $50,000 for the fiscal year ended October 31, 1995. Mr. Tytel's services to
the Company included assistance in negotiating the FortuNet License described
below, the Stockholders' Agreement, and various employment agreements of the
Company, negotiation of certain financing arrangements for the Company, as well
as consulting on various business and financial matters. The Company has no
current consulting arrangements with Mr. Tytel.

         Currently with the 1994 execution of the FortuNet License, the Company
entered into a Consulting Agreement with Yuri Itkis, which provided for an
annual consulting fee of $100,000 and the grant of stock options to purchase
40,000 shares of Class A Common Stock at an exercise price of $4.40 per share.
Under this consulting agreement, Mr. Itkis received an aggregate of $100,000 in
fiscal 1996. This consulting agreement was terminated effective November 7,
1996.

         On April 8, 1996, the Company entered into a consulting agreement (the
"Haig Consulting Agreement") with General Alexander M. Haig, Jr. and Worldwide
Associates, Inc., a corporation controlled by General Haig. Pursuant to the Haig
Consulting Agreement, General Haig will provide strategic advisory services for
the Company to advance the Company's interests worldwide. In consideration of
such services, during the three-year term of the Haig Consulting Agreement the
Company will pay an aggregate of $50,000 annually and a fee of one percent (1%)
of gross revenues received by the Company from customers obtained through the
significant advice or assistance provided by General Haig. Under the Haig
Consulting Agreement, General Haig received options to acquire an aggregate of
100,000 shares of Class A Common Stock vesting over a three-year period.

         By letter agreement dated May 28, 1996, the Company entered into a
financial advisory agreement with Houlihan Lokey Howard & Zukin Capital
("Houlihan Lokey"), pursuant to which Houlihan Lokey provides certain advice and
assistance regarding its strategic posture and alternatives and as to various
financing alternatives. The Company in turn agreed to pay Houlihan Lokey a
one-time retainer fee of $50,000 and a monthly fee thereafter of $20,000. The
Company also agreed to pay Houlihan Lokey a percentage of capital raised in
certain transactions and, pursuant this provision, the Company paid Houlihan
Lokey $699,377 for its services in connection with the Company's November 1996
Class B Warrant exercise offer. In addition, as compensation for its services in
negotiating the above-described transactions with Hyatt, Houlihan Lokey received
a warrant to purchase one hundred fifty thousand shares of Class A Common Stock
at an exercise price of $9.75 per share, which was repriced on January 6, 1997
to $8.00 per share. By letter dated February 25, 1997, the Company's


                                      -14-
<PAGE>   17

agreement with Houlihan Lokey was modified to eliminate the monthly retainer fee
as well as Houlihan Lokey's right to receive a percentage of any capital raised
by the Company, although the Company and Houlihan Lokey may agree from time to
time, on a project by project basis, for Houlihan Lokey to provide additional
services for fees to be agreed upon at that time. Mr. Zukin is a Managing
Director of Houlihan Lokey and a member of its Board of Directors.


                                      -15-
<PAGE>   18

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                        INTERACTIVE FLIGHT TECHNOLOGIES, INC.


Dated:  February 27, 1997               By: /s/ John Alderfer
                                           ------------------
                                                John Alderfer
                                                Chief Financial Officer


                                      -16-