U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB



           [X]  Quarterly Report Under Section 13 or 15(d) of the
                Securities Exchange Act of 1934

                For the quarterly period ended March 31, 1997



           [ ]  Transition Report Under Section 13 or 15(d) of
                the Exchange Act

                For the transition period from ____________ to ____________.


                   Commission file number 0-20203 and 1-11386


                       INTERNATIONAL FAST FOOD CORPORATION
--------------------------------------------------------------------------------
        (Exact Name of Small Business Issuer as Specified in Its Charter)

               Florida                                      65-0302338
    -------------------------------                     -------------------
    (State or Other Jurisdiction of                       (I.R.S. Employer
    Incorporation or Organization)                       Identification No.)

                          1000 Lincoln Road, Suite 200
                           Miami Beach, Florida 33139
                ------------------------------------------------ 
                     (Address of Principal Executive Office)

                                 (305) 531-5800
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

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  [ ]

The number of shares  outstanding of the issuer's  common stock,  par value $.01
per share as of May 8, 1997 was 12,355,517.

Traditional Small Business Disclosure Format:     Yes   [x]   No   [ ]



<PAGE>



             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                         INDEX TO FINANCIAL STATEMENTS






                                                                       Page
                                                                       ----
PART I.  FINANCIAL INFORMATION
------------------------------

      ITEM. 1     Financial Statements


                  Consolidated Balance Sheets as of
                  March 31, 1997 and December 31,
                  1996                                                 2 - 3


                  Consolidated Statements of Operations
                  for the Three Months Ended March 31,
                  1997 and 1996                                          4


                  Consolidated Statements of
                  Shareholders' Equity for the Three
                  Months Ended March 31, 1997                            5


                  Consolidated Statements of Cash Flows
                  for the Three Months Ended March 31,
                  1997 and 1996                                        6 - 7


                  Notes to Consolidated Financial
                  Statements                                           8 - 19



      ITEM. 2     Management's Discussion and Analysis
                  or Plan of Operation                                20 - 36



PART II.  OTHER INFORMATION
---------------------------






SIGNATURES                                                              37    

                                        1

<PAGE>



             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)


                                    ASSETS
                                    ------



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

CURRENT ASSETS:

   Cash and cash equivalents                 $   4,825,614      $    194,269
   Restricted cash                                 473,578           500,000
   Receivables                                      53,385            42,348
   Inventories                                     258,949           300,217
   Advances to affiliate                           254,680           228,984
   Prepaid expenses                                 59,412            53,794
                                              ------------       -----------

      Total Current Assets                       5,925,618         1,319,612
                                              ------------       -----------


FURNITURE, EQUIPMENT AND
   LEASEHOLD IMPROVEMENTS, NET                   5,433,805         5,586,844

DEFERRED DEBENTURE ISSUANCE COSTS,
   NET OF ACCUMULATED AMORTIZATION
   OF $132,469 AND $124,155,
   RESPECTIVELY                                    299,856           308,170

OTHER ASSETS, NET                                  562,375           618,978

BURGER KING DEVELOPMENT
   RIGHTS                                        1,000,000              -

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


   Total Assets                               $ 13,221,654       $ 7,833,604
                                              ============       ===========


                          See Accompanying Notes

                                      2



<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                    CONSOLIDATED BALANCE SHEETS, Continued
                                 (Unaudited)

                     LIABILITIES AND SHAREHOLDERS' EQUITY

                                                March 31,       December 31,
                                                  1997              1996
                                              ------------      ------------
CURRENT LIABILITIES:
   Accounts payable                           $    452,698      $    454,697
   Accrued interest payable                         79,634            10,335
   Other accrued expenses                          855,119         1,009,606
   Bank credit facilities payable                1,078,995         1,220,495
   Other notes payable                              69,307            69,307
   Payable to affiliate                            149,382           149,382
   Payable to Litigation Funding                 1,028,521              -
   Non-interest bearing obligation
     payable to minority shareholder
     of IFF Polska                                 500,000           500,000
                                              ------------      ------------
      Total Current Liabilities                  4,213,656         3,413,822

LONG TERM BANK CREDIT FACILITIES                   200,000           300,000

PROMISSORY NOTE PAYABLE
   TO LITIGATION FUNDING                         2,198,494              -

9% SUBORDINATED CONVERTIBLE
  DEBENTURES, DUE DECEMBER 15, 2007              2,756,000         2,756,000

8% CONVERTIBLE PROMISSORY NOTES,
  DUE JANUARY 13, 1999                             500,000              -
                                              ------------      ------------
      Total Liabilities                          9,868,150         6,469,822
                                              ------------      ------------

DEFERRED CREDIT                                  1,000,000              -
                                              ------------      ------------

MINORITY INTEREST IN NET ASSETS OF
   CONSOLIDATED SUBSIDIARY                         389,109           460,361
                                              ------------      ------------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
   Preferred Stock, $.01 par value,
   (liquidation preference of
   $3,725,000 , 1,000,000 shares
   authorized; 37,250 and 38,240
   shares issued and outstanding,
   respectively                                        372               382

   Common Stock, $.01 par value,
   100,000,000 shares authorized;
   12,355,517 and 10,322,521 shares
   issued and outstanding, respectively            123,555           103,225

   Additional paid-in capital                   14,703,041        14,523,361

   Accumulated deficit                         (12,876,435)      (13,706,261)

   Accumulated translation adjustment               13,862       (    17,286)
                                              ------------      ------------

      Total Shareholders' Equity                 1,964,395           903,421
                                              ------------      ------------
      Total Liabilities and
          Shareholders' Equity                $ 13,221,654      $  7,833,604
                                              ============      ============
                            See Accompanying Notes
                                      3

<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)

                                               Three Months Ended March 31,
                                              ------------------------------ 
                                                   1997              1996
                                              ------------      ------------
REVENUES:
  Restaurant sales                            $  1,358,610      $  1,268,674
  Other operating, net                              28,864            38,077
                                              ------------      ------------

      Total Revenue                              1,387,474         1,306,751

FOOD AND PACKAGING COSTS                           568,943           572,281
                                              ------------      ------------

GROSS PROFIT                                       818,531           734,470

RESTAURANT OPERATING EXPENSES:
  Payroll and related costs                        216,852           185,489
  Occupancy and other operating expenses           365,068           379,330
  Depreciation and amortization                    223,487           246,496
                                              ------------      ------------
   Total Restaurant Operating
      Expenses                                     805,407           811,315
                                              ------------      ------------

                                                    13,124       (    76,845)
                                              ------------      ------------

GENERAL AND ADMINISTRATIVE EXPENSES                492,510           499,313

OTHER INCOME (EXPENSES):
   Interest and other income                        16,437            51,909
   Interest expense, including
      amortization of debenture
      issuance costs                           (   105,547)      (   110,677)
   Gain on settlement of litigation,
      net of applicable costs                    1,327,070              -
                                              ------------      ------------

          Total other income (expenses)          1,237,960       (    58,768)
                                              ------------      ------------

INCOME (LOSS) BEFORE MINORITY INTEREST             758,574       (   634,926)

MINORITY INTEREST IN LOSSES OF
   CONSOLIDATED SUBSIDIARY                          71,252            72,326
                                              ------------      ------------

NET INCOME (LOSS)                             $    829,826      $(   562,600)
                                              ============      ============
NET INCOME (LOSS) PER COMMON SHARE:

   Primary                                    $        .07      $(       .14)
                                              ============      ============

   Fully diluted                              $        .06      $(       .14)
                                              ============      ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:

   Primary                                      11,631,201         3,903,065
                                              ============      ============

   Fully diluted                                15,855,436         3,903,065
                                              ============      ============
                            See Accompanying Notes
                                      4


<PAGE>

             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                   For the Three Months Ended March 31, 1997
                                 (Unaudited)


                        INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                              For the Three Months Ended March 31, 1997
                                             (Unaudited)
<TABLE>
<CAPTION>

                                  Common Stock          Preferred Stock      Additional   Accumulated
                              --------------------   --------------------     Paid In     Translation   Accumulated
                               Shares      Amount     Shares      Amount      Capital      Adjustment     Deficit          Total
                              --------    --------   --------    --------    ----------   -----------   -----------     ----------
<S>                          <C>          <C>          <C>       <C>       <C>            <C>           <C>             <C>
Balances,
   December 31, 1996         10,322,521   $103,225     38,240    $   382   $ 14,523,361   $(  17,286)   $(13,706,261)   $   903,421


Conversion of
   preferred stock               32,996        330   (    990)   (    10)   (       320)                        -              -
Common Stock issued in
   exchange for professional
   services                   2,000,000     20,000       -          -           180,000         -               -           200,000
Translation adjustments            -          -          -          -              -          31,148            -            31,148
Net income for the period          -          -          -          -              -                         829,826        829,826
                             ----------   --------   --------    -------   ------------   ----------    ------------    -----------
Balances,
   March 31, 1997            12,355,517   $123,555     37,250    $   372   $ 14,703,041   $   13,862    $(12,876,435)   $ 1,964,395
                             ==========   ========   ========    =======   ============   ==========    ============    ===========



</TABLE>











































                                  See Accompanying Notes

                                             5

<PAGE>



             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)


                                                Three Months Ended March 31,
                                              ------------------------------  
                                                   1997              1996
                                              ------------      ------------

CASH FLOWS FROM OPERATING
   ACTIVITIES:

   Net income (loss)                          $    829,826      $(   562,600)
   Adjustment to reconcile net income
      (loss) to net cash provided by
      (used in)operating activities:
      Amortization and depreciation                231,801           279,567
      Minority interest in losses of
          subsidiary                           (    71,252)      (    72,326)
   Changes in operating assets and
      liabilities:
          Receivables                          (    11,037)           11,525
          Inventories                               41,268            45,103
          Prepaid expenses                     (     5,618)      (    16,410)
          Accounts payable and
             accrued expenses                      112,813           178,466
                                              ------------      ------------

   Net cash provided by (used in)
      operating activities                       1,127,801       (   136,675)
                                              ------------      ------------


CASH FLOWS FROM INVESTING
  ACTIVITIES:

   Decrease in restricted cash                      26,422              -
   Payments for furniture, equipment
      and leasehold improvements, net          (    45,039)             -
   Refund of franchise fees                         30,000              -
   Changes in other assets, net                      1,194       (    30,212)
                                              ------------      ------------

   Net cash provided by (used in)
      investing activities                          12,577       (    30,212)
                                              ------------      ------------




                            See Accompanying Notes

                                      6



<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
                                 (Unaudited)

                                                Three Months Ended March 31,
                                              ------------------------------  
                                                   1997              1996
                                              ------------      ------------
CASH FLOWS FROM FINANCING
   ACTIVITIES:

   Advances from (to) Affiliate, net           (    25,696)          122,063
   Repayments of bank credit
      facilities                               (   241,500)      (   133,485)
   Increase in Payable to Litigation
      Funding                                    3,227,015              -
   Borrowings under bank credit
      facilities                                      -              165,743
   Net Proceeds from issuance of
      Convertible promissory notes                 500,000              -
                                              ------------      ------------
   Net cash provided by financing
      activities                                 3,459,819           154,321
                                              ------------      ------------
FOREIGN CURRENCY TRANSLATION
   ADJUSTMENT                                       31,148       (    28,314)

INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                              4,631,345       (    40,880)

BEGINNING CASH AND CASH EQUIVALENTS                194,269           253,510
                                              ------------      ------------

ENDING CASH AND CASH EQUIVALENTS              $  4,825,614      $    212,630
                                              ============      ============
SUPPLEMENTAL DISCLOSURES OF
   CASH FLOW INFORMATION:

   Cash paid during the period for:
      Interest                                $     36,248      $     38,272
                                              ============      ============
SUPPLEMENTAL SCHEDULE OF NON
   CASH INVESTING & FINANCING
   ACTIVITIES:

Quarter Ended March 31, 1997:

      Issuance of 32,996  shares of Common Stock upon the exchange of 990 shares
      of Preferred Stock.

      Issuance  of  2,000,000  shares of Common  Stock in payment of $200,000 of
      legal fees.

Quarter Ended March 31, 1996:

      Issuance  of 215,645  shares of Common  Stock upon the  exchange  of 6,470
      shares of Preferred Stock.

                             See Accompanying Notes
                                        7

<PAGE>



             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


1.    ORGANIZATION:

      International   Fast  Food  Corporation  (the  "Company"  or  "IFFC")  was
organized for the purpose of developing  and  operating  franchised  Burger King
restaurants  in the  Republic  of  Poland  ("Poland").  IFFC  operates  under an
exclusive  Development  Agreement  (the "New BKC  Development  Agreement").  The
agreement expires on September 30, 2007.


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

      BASIS OF PRESENTATION - The accompanying consolidated financial statements
include  the  accounts  of the  Company  and  its  majority-owned  (85%)  Polish
subsidiary,  International  Fast Food Polska ("IFF Polska" or "IFFP"), a limited
liability  corporation,  and IFFP's three wholly-owned  Polish limited liability
corporations.  All significant intercompany  transactions and balances have been
eliminated in consolidation.

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

      The accompanying unaudited  consolidated  financial statements,  which are
for  interim  periods,  do not include  all  disclosures  provided in the annual
consolidated  financial  statements.   These  unaudited  consolidated  financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and the  footnotes  thereto  contained in the Annual  Report on Form
10-KSB  for the  year  ended  December  31,  1996  of  International  Fast  Food
Corporation and Subsidiaries  (the "Company"),  as filed with the Securities and
Exchange  Commission.  The  December  31, 1996  consolidated  balance  sheet was
derived from audited consolidated financial statements, but does not include all
disclosures required by generally accepted accounting principles.

      In the opinion of the Company,  the  accompanying  unaudited  consolidated
financial  statements  contain all adjustments  (which are of a normal recurring
nature)  necessary  for a fair  presentation  of the financial  statements.  The
results  of  operations  for the  three  months  ended  March  31,  1997 are not
necessarily indicative of the results to be expected for the full year.

      The official  currency that may be used in Poland is the zloty.  The value
of the zloty is pegged pursuant to a system based on a basket of currencies,  as
well as all other  economic  and  political  factors  that  effect  the value of
currencies generally. On January 1, 1995, the National Bank of Poland introduced
a new currency unit a zloty (a "new zloty"). New zlotys are equivalent to 10,000
old zlotys ("old  zlotys").  Old zlotys remained legal tender until December 31,
1996,  after  which  date  they are only  exchangeable  at  certain  banks.  All
references in this  document to zlotys are to new zlotys.  At March 31, 1997 and
1996, the exchange rate was
                                      8

<PAGE>

3.0760  and 2.5875 new zlotys  per  dollar,  respectively.  Monetary  assets and
liabilities are translated from the local currency, the "zloty", to U.S. dollars
at the period end exchange rate. Non-monetary assets,  liabilities,  and related
expenses,  primarily furniture,  equipment,  leasehold  improvements and related
depreciation and amortization,  are translated using historical  exchange rates.
Income and  expense  accounts,  excluding  depreciation  and  amortization,  are
translated at an annual weighted average exchange rate.

      The accounts of IFFP are measured using the zloty.  Due to Poland's highly
 inflationary   environment  through  December  31,  1995,   generally  accepted
 accounting principles
required IFFC to calculate  and  recognize on its  statement of  operations  its
currency  translation gains or losses associated with IFFP. Due to the reduction
in Polands inflation rate,  effective for the year ended December 31, 1996, IFFC
was no longer required pursuant to generally accepted  accounting  principles to
recognize  currency  translation gains or losses in its statement of operations.
As a result of this  change the net loss and net loss per  common  share for the
three  months  ended  March  31,  1996,  were  decreased  by  $28,314  and $.01,
respectively.

      Liquidity and plan of operations - As Of March 31, 1997,  IFFC had working
capital of approximately $1,771,962 and Cash and Cash Equivalents of $4,825,614.
IFFC's  working  capital and cash  position were  significantly  improved by the
settlement  of the BKC  Litigation  in March  1997 (See Note 8).  Although  IFFC
believes that it has sufficient  funds to finance its present plan of operations
through December 31, 1997. IFFC cannot  reasonably  estimate how long it will he
able to satisfy  its cash  requirements.  The capital  requirements  relating to
implementation of the New BKC Development Agreement are significant.  Based upon
current assumptions, IFFC will seek to implement its business plan utilizing its
Cash and Cash  Equivalents  and cash generated from  restaurant  operations.  In
order to satisfy the capital  requirements of the New BKC Development  Agreement
IFFC will require resources  substantially greater than the amounts it presently
has or amounts that can be generated from restaurant operations.  Other than its
existing Bank Credit  Facilities (See Note 4), IFFC has no current  arrangements
with  respect  to,  or  sources  of  additional  financing  and  there can be no
assurance  that  IFFC  will be  able  to  obtain  additional  financing  or that
additional  financing  will be  available  on  acceptable  terms to fund  future
commitments for capital expenditures.

      Net income  (loss) per common share - Primary net income per share for the
three months ended March 31, 1997 is based on net income for the period  divided
by the weighted average number of common shares  outstanding after giving effect
to  dilutive  warrants  and the shares  that would be  issuable  on the  assumed
conversion of preferred stock.  Fully diluted net income per share for the three
months  ended March 31, 1997 is based on net income for the period  adjusted for
the interest  expense on the 9% Subordinated  Convertible  Debentures and the 8%
Convertible  Promissory  Notes divided by the weighted  average number of Common
shares  outstanding  after giving effect to dilutive  warrants,  the shares that
would be issuable on the assumed  conversion  of preferred  stock as well as the
shares that would be issuable on the assumed  conversion of the 9%  Subordinated
Convertible Debentures and the 8% Convertible Promissory Notes.

      For the three months ended March 31, 1996,  primary and fully  diluted net
loss per share are the same and are based on the net loss for the period divided
by the weighted average number of common shares  outstanding.  Both computations
do not include  the  assumed  exercise of any options or warrants or the assumed
conversion of any outstanding convertible securities since their inclusion would
be anti-dilutive.
                                      9

<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)

      Reclassification  - Certain amounts in the 1996 financial  statements have
been reclassified to conform with the 1997 presentation.

3.    RESTRICTED CASH:

      At March  31,  1997 and 1996,  the  Company  had  $473,578  and  $500,000,
respectively of restricted cash, which represents  collateral for an outstanding
letter of credit.

4.    BANK CREDIT FACILITIES:

Bank credit facilities at March 31, 1997 consists of the following:

                                                                      1997
                                                                 ------------
Amerbank  in  Poland,   S.A.   overdraft
  credit     line,     variable     rate
  approximately equal to prime,  expires
  March 31, 1998                                                 $     18,995

Amerbank,   IFFP   line  of   credit  of
  $300,000  payable  in three  quarterly
  installments of $100,000 commencing on
  March  31,  1998,   interest   payable
  monthly at Amerbank prime,  guaranteed
  by IFFC.                                                            300,000

Amerbank revolving credit facility,  12%
  interest,   $100,000   plus   interest
  payable  on June  30,  1997,  with the
  remaining  principal  and all  accrued
  interest  payable in full on September
  30, 1997                                                            210,000

Bank  Handlowy  Warszawie,   S.A.,  IFFP
  credit   facility   in  the   original
  principal    amount   of    $1,000,000
  payable,  $100,000  quarterly  on June
  30, 1997 and September 30, 1997,  with
  the remaining  balance payable in full
  on  or  before   December   16,  1997,
  interest   at   LIBOR   plus   3.875%,
  collateralized  by  amounts on deposit
  with  Bank   Handlowy,   unconditional
  guarantee  of IFFC,  fixed  assets  of
  IFFP of  $1,250,000  and a  letter  of
  credit in the amount of $500,000                                    750,000
                                                                 ------------
                                                                    1,278,995

Less: Current Maturities                                            1,078,995
                                                                 ------------
      Total Long Term Debt                                       $    200,000
                                                                 ============
5.    CONVERTIBLE PROMISSORY NOTES:

      In January  and March  1997,  IFFC sold to the  Company's  Chairman of the
Board,  Chief  Executive  Officer  and  President  along with his wife and other
members of his family an aggregate of $500,000 8% convertible  promissory  notes
due January 1999. The notes are  collateralized by the Company's equity interest
in IFFP and are  convertible  into shares of the company's  Common Stock at $.10
per share.
                                       10

<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)
6.    SHAREHOLDERS' EQUITY:

      The  Company's  stock option plan  provides for the granting of options to
qualified employees and directors of the Company.  Stock option activity for the
three months ended March 31, 1997 follows:
                                                   1997
                                                 ------- 
      Outstanding at beginning of period         200,000
      Granted                                       -
      Exercised                                     -
      Expired                                       -
                                                 ------- 
      Outstanding at end of period               200,000
                                                 =======
      Exercisable at end of period               190,000
                                                 =======
      Price range of options outstanding
        at end of period                         $ 1.375
                                                 =======
      Available for grant at end of period       450,000
                                                 =======

      During the three months ended March 31, 1997 and 1996,  32,996 and 215,645
shares of Common  Stock were  issued upon  exchange  of 990 and 6,470  shares of
Preferred Stock.

      At March 31, 1997, IFFC had reserved the following  shares of Common Stock
for issuance:

      Stock option plan                             650,000

      Underwriter warrants, exercisable
      at $6.50 per share through
      May 31, 1997                                  130,000

      Warrants issued in connection with
      1994 exchange offer, exercisable at
      $7.00 per share through August 1,
      1999                                          290,800

      Warrants to purchase $1,000,000
      principal amount of debentures
      convertible into Common Stock at a
      conversion price of $8.50 per share
      through December 16, 1997                     117,647

      Convertible Debentures convertible
      into Common Stock at a conversion
      price of $8.50 per share                      324,235

      Preferred Stock convertible into
      Common Stock at a conversion price
      of $3.00 per share                          1,241,547

      Warrants to purchase 50,000 shares
      of Common Stock at an exercise price
      of $.2831 per share                            50,000

      Convertible Promissory Notes con-
      vertible into Common Stock at a
      conversion price of $.10 per share          5,000,000
                                                  ---------
          Total reserved shares                   7,804,229
                                                  =========
                                       11

<PAGE>


             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)



7.    COMMITMENTS AND CONTINGENCIES:

      From September 1991 to May 1996, the relationship  between IFFC and Burger
King  Corporation  ("BKC")  was  governed  principally  by the  BKC  Development
Agreement and by a franchise agreement relating to each restaurant, as described
below. A former majority shareholder entered into the BKC Development  Agreement
in September  1991 and, in December  1991,  assigned its rights and  obligations
under the BKC  Development  Agreement to IFFC.  Pursuant to the BKC  Development
Agreement,  IFFC was granted the  exclusive  right until  September  24, 1996 to
develop and to be franchised to operate Burger King restaurants in Poland,  with
certain  exceptions.  IFFC was  obligated  to open and did open one  traditional
restaurant on December 24, 1992,  three  additional  traditional  restaurants by
September 25, 1993 and three additional traditional restaurants by September 24,
1994,  which  IFFC  did in a  timely  manner.  Pursuant  to the BKC  Development
Agreement,  IFFC was required to open three additional  traditional  restaurants
during  each of the  two  following  twelve-month  periods,  for a  total  of 13
traditional  restaurants  open and  operating  by the end of the  Initial  Term.
Through the period  ended  September  24,  1994,  IFFC was ahead of the required
development  schedule.  However,  during the term of this Development  Agreement
certain disputes arose between IFFC and BKC and, on March 17, 1995, IFFC and its
majority owned (85%) subsidiary,  International Fast Food Polska ("IFFP"), filed
suit (the "BKC  Litigation")  against BKC in the Eleventh  Circuit  Court of the
State of Florida.  IFFC  alleged  that BKC did not  provide all of the  support,
supervision and assistance  required of it under the BKC  Development  Agreement
and the eight Franchise Agreements (the "Franchise  Agreements") between BKC and
IFFC. By letter dated June 30, 1995,  BKC notified IFFC that, at that time,  BKC
would not  elect to  declare  IFFC to be in  default  under the BKC  Development
Agreement.  BKC  further  stated  that such notice was not a waiver of its legal
rights under the BKC  Development  Agreement to, in the future,  declare  IFFC's
failure to develop the requisite number of BKC restaurants an act of default. By
letter  dated May 2, 1996,  BKC  notified  IFFC that BKC  believed  that the BKC
Development Agreement had terminated pursuant to its terms.


      The BKC Litigation  was settled  between the parties on March 11, 1997. In
connection  with  the  settlement  of the  BKC  Litigation,  (see  Note 8) a new
Development  Agreement (the "New BKC  Development  Agreement")  was entered into
between BKC and IFFC, which was then assigned by IFFC to IFFP on March 14, 1997;
IFFC  continues to remain  liable for the  obligations  contained in the New BKC
Development Agreement.  Pursuant to the New BKC Development Agreement,  IFFP has
been  granted the  exclusive  right until  September  30, 2007 to develop and be
franchised to operate Burger King restaurants in Poland with certain  exceptions
discussed below. Pursuant to the New BKC Development Agreement, IFFC is required
to open 45 restaurants during the term of the Agreement. Each traditional Burger
King  restaurant,  in-line  Burger King  restaurant,  or drive-thru  Burger King
restaurant shall constitute one unit. A Burger King kiosk restaurant  shall, for
purposes of the New BKC Development  Agreement,  be considered one quarter unit.
Pursuant to the New BKC Development Agreement, IFFC is to open three Development

                                      12



<PAGE>


             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)

Units through  September 30, 1998, four units in each year beginning  October 1,
1998 and ending September 30, 2001 and five units in each year beginning October
1, 2001 and ending September 30, 2007.

      Pursuant  to the  New  BKC  Development  Agreement,  IFFC  shall  pay  BKC
$1,000,000  as a  development  fee.  IFFC  shall  not be  obligated  to pay  the
development  fee if IFFC is in  compliance  with  the  development  schedule  by
September 30, 1999, and has achieved  gross sales of  $11,000,000  for 12 months
preceding the September  30, 1999 target date. If the  development  schedule has
been  achieved  but gross sales were less than  $11,000,000,  but  greater  than
$9,000,000, the development fee shall be reduced to $250,000. If the development
fee is  payable  due to failure to achieve  the  performance  targets  set forth
above,  IFFC, at its option,  may either pay the  development fee or provide BKC
with the  written and  binding  undertaking  of Mr.  Mitchell  Rubinson,  IFFC's
Chairman,  that the Rubinson  Group will  completely  divest  themselves  of any
interest in IFFC and the Burger King  restaurants  opened or operated by IFFC in
Poland within six (6) months of the date the development fee payment is due. The
Rubinson Group shall be defined to include any entity that Mr. Rubinson directly
or  indirectly  owns an aggregate  interest of ten percent  (10%) or more of the
legal or beneficial equity interest and any parent, subsidiary or affiliate of a
Rubinson  entity.  Mr.  Rubinson  has  personally   guaranteed  payment  of  the
development fee.

      For each restaurant opened, IFFC is obligated to pay BKC an initial fee of
up to $40,000 for franchise  agreements  with a term of 20 years and $25,000 for
franchise agreements with a term of ten years payable not later than twenty days
prior to the restaurant's  opening.  Each franchised  restaurant must also pay a
percentage of the restaurant's gross sales, irrespective of profitability,  as a
royalty for the use of the Burger  King  System and the Burger  King Marks.  The
annual royalty fee is five percent (5%) of gross sales. The franchises must also
contribute a monthly  advertising  and promotion  fee of 6% of the  restaurant's
gross sales, to be used for advertising,  sales promotion, and public relations.
Payment of all amounts due to BKC is guaranteed by IFFC. The New BKC Development
Agreement calls for certain cash contributions from BKC to IFFC over the term of
the Development  Agreement and additional sums based on an incentive arrangement
when earned to be retained by IFFC out of BKC's future royalties.

      BKC may  terminate  rights  granted  to  IFFC  under  the BKC  Development
Agreement,  including  franchise approvals for restaurants not yet opened, for a
variety of possible defaults by IFFC, including,  among others,  failure to open
restaurants  in  accordance  with the schedule set forth in the BKC  Development
Agreement; failure to obtain BKC site approval prior to the commencement of each
restaurant's construction;  failure to meet various operational,  financial, and
legal  requirements  set  forth  in the  BKC  Development  Agreement,  including
maintaining  of IFFP's net worth of $7,500,000  beginning on June 1, 1999.  Upon
termination of the BKC Development Agreement,  whether resulting from default or
expiration  of its  terms,  BKC has the right to license  others to develop  and
operate Burger King restaurants in Poland, or to do so itself.

      The BKC  Development  Agreement  requires  IFFC to  designate  a full-time
Managing Director to be responsible for the restaurants to be developed pursuant

                                      13


<PAGE>


             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)

to the New BKC Development. Such General Manager must be acceptable to BKC. Leon
Blumenthal,  who has served as IFFC's  Senior Vice  President,  Chief  Operating
Officer, and Managing Director has been approved by BKC.

      Specifically  excluded from the scope of the BKC Development Agreement are
restaurants on United States military establishments.  BKC has also reserved the
right to open  restaurants  in hotel  chains  with which BKC has,  or may in the
future have, a multi-territory  agreement  encompassing  Poland. With respect to
restaurants in airports,  train stations,  hospitals and other hotels,  IFFC has
the right of first  refusal with the owners of such sites.  If IFFC is unable or
unwilling to reach a mutually  acceptable  agreement,  BKC or its  affiliates or
designated third parties may do so. IFFC is restricted from engaging in the fast
food hamburger  restaurant  business  without the prior written  consent of BKC,
which consent may not be withheld so long as IFFC and the franchisees  operating
Burger King restaurants by designation of IFFC are adequately funded.

      Subject to certain exceptions, as long as IFFC is a principal of IFFP, BKC
has the right to review and consent to certain  types of new stock  issuances of
IFFC for which the consent will not be unreasonably withheld, provided that IFFC
has  complied  with  all  reasonable  conditions  then  established  by  BKC  in
connection with the proposed sale or issuance of applicable equity securities by
IFFC.


8.    LITIGATION:

      BKC LITIGATION - On March 17, 1995, IFFC and IFFP (collectively, the "IFFC
Affiliates"),  filed suit against BKC in the Eleventh  Judicial Circuit Court of
the State of Florida.  In their amended complaint,  the IFFC Affiliates alleged,
among  other  things,  that BKC  breached  certain of its  express  and  implied
obligations under the BKC Development Agreement and the eight existing franchise
agreements (the "Franchise  Agreements")  pertaining to IFFP's eight Burger King
restaurants.  The IFFC Affiliates  further alleged that in connection with BKC's
sale of certain of its rights pursuant to the BKC Development  Agreement and the
Franchise  Agreements,  BKC failed to timely  deliver to the IFFC  Affiliates  a
complete and  accurate  franchise  offering  circular in  accordance  with rules
promulgated  by the  Federal  Trade  Commission  (the  "FTC  Count").  The  IFFC
affiliates also alleged that BKC committed  certain acts which  constitute fraud
and/or  deceptive and unfair business  practices.  The IFFC Affiliates asked the
court to, among other things,  award them compensatory  damages of not less that
$15,000,000 punitive damages and certain costs and expenses.

      On March 11, 1997,  BKC,  IFFC,  IFFP and  Rubinson,  individually  and on
behalf of  Litigation  Funding,  Inc.  entered into a Settlement  Agreement.  In
connection with the execution of the Settlement Agreement,  IFFC and BKC entered
into the New BKC  Development  Agreement and eight (8) new Franchise  Agreement.
BKC paid to IFFC the sum of $5,000,000  (less $21,865 of royalties owned by IFFP
to BKC for  February  1997) for a net amount of  $4,978,135.  In  addition,  BKC

                                      14



<PAGE>


             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)

forgave  $499,768  representing  all  monies  owed BKC by IFFP and IFFC  through
January 31, 1997. Under the terms of the Settlement Agreement, a portion of such
proceeds,  not to exceed $2,000,000 cash may be used to immediately  satisfy the
actual legal fees and costs of IFFC and IFFP incurred in connection with the BKC
litigation,  including IFFC's and IFFP's  obligation under the agreement between
IFFC, IFFP and Litigation Funding,  Inc. The remaining  $3,000,000 is to be used
by IFFC and IFFP for the  development of additional BKC restaurants in Poland or
working capital for IFFP pursuant to the New BKC Development Agreement.  The New
BKC Development  Agreement calls for certain cash contributions from BKC to IFFC
over the term of such  Agreement  and  additional  sums based upon an  incentive
arrangement  when earned to be retained by IFFC out of BKC's  future  royalties.
IFFC  contributes  these funds into a marketing fund  administered  by IFFC. All
parties to the litigation stipulated to dismissal of the litigation and executed
mutual releases.

      Litigation  Financing  Agreements.  IFFC has entered  into two  agreements
specifically designed to assist it in financing the BKC Litigation. First, as of
January 25,  1996,  the IFFC  Affiliates  entered  into an  Agreement  to Assign
Litigation Proceeds (the "Funding  Agreement") with Litigation Funding,  Inc., a
Florida corporation ("Funding").  This agreement was later amended in July 1996.
Mitchell  Rubinson,  the  chairman  of the board,  chief  executive  officer and
president of IFFC is also the chairman of the board, chief executive officer and
president and the principal shareholder of Funding.

      Pursuant to the amended Funding Agreement, Funding agreed to pay on behalf
of IFFC and/or IFFP up to $750,001 (the  "Amount")  for all expenses  (including
attorneys'  fees, court costs and other related  expenses,  but not judgments or
amounts  paid in  settlement)  actually  incurred by or on behalf of IFFC and/or
IFFP in  connection  with  investigating,  defending,  prosecuting,  settling or
appealing  the BKC  Litigation  and any and all claims or  counterclaims  of BKC
against IFFC and/or IFFP (collectively,  the "BKC Matter"). Funding has paid all
amounts it has been requested to pay pursuant to the Funding Agreement.

      In consideration  of the Amount,  IFFC and IFFP each assigned to Funding a
portion of any and all benefits and gross sums,  amounts and proceeds  that each
of them may  receive,  collect,  realize,  otherwise  obtain or benefit  from in
connection with,  resulting from or arising in connection with the BKC Matter or
any related  claim,  demand,  appeal,  right  and/or cause of action of the IFFC
Affiliates,  including,  but not limited to, amounts  received or entitled to be
received  by the IFFC  Affiliates  in respect to (i) the gross  proceeds  of any
court  ordered  decision or judgement (a  "Judgement")  entered in favor of IFFC
and/or IFFP,  (ii) the Sale Proceeds (as such term is defined in the  agreement,
the "Sales  Proceeds") of any sale of the assets of IFFC and/or IFFP to BKC, any
of BKC's affiliates and/or any entity which is introduced to the IFFC Affiliates
by BKC (collectively, the "BKC Entities") in connection with a settlement of the
BKC Matter,  (iii) any amounts paid in compromise or settlement (a "Settlement")
of the BKC Matter in whole or in part,  (iv) any  liabilities or indebtedness of
IFFC or  IFFP  assumed  or  satisfied  by the BKC  Entities  (the  "Debt  Relief
Proceeds") and (v) the monetary value to the IFFC  Affiliates of any concessions
made by BKC with  respect  to its  rights  under (a) the  Development  Agreement

                                      15



<PAGE>


             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)

and/or (b) the Franchise  Agreements and any future franchise agreements between
BKC and IFFP and/or IFFC (the "Contract Modification Proceeds"). All of the IFFC
Affiliates' rights,  titles and interests,  legal and equitable,  in and to such
aforementioned  benefits and gross sums,  amounts and proceeds are  collectively
referred to herein as the "Proceeds".

      Specifically,   IFFC  and  IFFP  each  individually  assigned,  set  over,
transferred and conveyed to Funding all of its right,  title and interest in and
to the sum of the following (the "Assigned Proceeds");  (i) seventy five percent
(75%) of the  Proceeds to the extent that such amount does not exceed  Funding's
Expenses  (Funding's  Expenses")  which are defined as the sum of the  aggregate
amount of money paid by  Funding as the Amount and the amount of money  expended
by Funding if it assumes the  prosecution  of the BKC Matter;  (ii) seventy five
percent (75%) of any Proceeds,  excluding any Sales  Proceeds,  in excess of the
sum of Funding's Expenses and the IFFC Affiliates'  Expenses;  and (iii) seventy
five  percent  (75%) of any Sales  Proceeds  in  excess of the sum of  Funding's
Expenses and the IFFC Affiliates' Expenses.

      Subject to Funding's  recovery of Funding's  Expenses,  IFFC and IFFP have
retained the right in and shall be entitled to recover from the Proceeds the sum
of (i)  $303,731,  and (ii) all of the amounts  they may expend in the future in
connection with the BKC Matter,  before Funding shall be entitled to receive any
other Proceeds.

      In connection  with the  execution and delivery of the Funding  Agreement,
IFFC,  IFFP,  Funding and a law firm (the "Escrow Agent") entered into an Escrow
Agreement.  Pursuant to the Funding Agreement and the Escrow  Agreement,  except
for Proceeds  which the Escrow Agent cannot reduce to physical  possession,  all
Proceeds,  if any,  resulting  from the BKC  Matter are to be  delivered  to the
Escrow Agent before they are delivered to the IFFC  Affiliates  and/or  Funding.
The Escrow Agent is required to dispose of Proceeds only in accordance  with (1)
the joint  written  instructions  of the Company,  IFFP and Funding,  or (2) the
instructions  of a  court  of  competent  jurisdiction.  The  Funding  Agreement
provides  that the Escrow  Agent shall first  apply all Readily  Available  Cash
Proceeds {as such term is defined below, the "Readily  Available Cash Proceeds")
to satisfy  Funding's  rights to Proceeds  (assigned to Funding by IFFC or IFFP)
before any  non-Readily  Available Cash Proceeds are delivered to Funding by the
Escrow Agent on behalf of such  company.  Readily  Available  Cash  Proceeds are
defined to be all cash proceeds  payable to IFFC, IFFP or Funding within one (1}
year of a Judgement or Settlement.  In the event that the Readily Available Cash
Proceeds are not sufficient to satisfy Funding's rights in Proceeds (assigned to
Funding by such company),  then IFFC and IFFP have each agreed to pay out of its
individually  available "cash and cash  equivalents"  (the "Cash  Resources") an
amount of Cash  Resources  to  satisfy  the  deficiency.  In the event  that the
Readily  Available  Cash  Resources of a company are  insufficient  to Cover the
deficiency, such company, subject to Funding's agreement, will have the right to
elect  which  assets it will  deliver to Funding in  satisfaction  of  Funding's
rights to receive Proceeds.  In the event that Funding is unable to agree with a
company with respect to which assets such company will deliver to Funding,  then
the matter shall be submitted to a court of competent jurisdiction.

                                       16



<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)



      In consideration  of the Amount,  IFFC also assigned to Funding a security
interest (the  "Security  Interest") in its entire equity  interest in IFFP (the
"IFFP Stock").  The Security Interest secures the delivery to Funding of all the
Assigned Proceeds. In order to perfect the Security Interest, IFFC has agreed to
take all such actions as are necessary  under the laws of the Republic of Poland
("Poland")  and the State of Florida to transfer  title to the IFFP Stock to the
Escrow Agent; provided,  however, that IFFC has retained beneficial ownership of
the IFFP Stock,  including the right to vote the IFFP Stock, unless Funding does
not receive the Assigned  Proceeds in  accordance  with the terms of the Funding
Agreement  and such  nonreceipt  is not  rectified  within 45 days (an "Event of
Default"). IFFC has further agreed to deliver to the Escrow Agent such documents
as are necessary to file with the  appropriate  authorities  in Poland to, if an
Event of Default occurs,  officially  transfer legal and beneficial title to the
IFFP Stock to  Funding.  IFFC and Funding  have agreed that record  title to the
IFFP  Stock is being  transferred  to the  Escrow  Agent to  provide  Funding  a
perfected  security  interest in the IFFP Stock  without being forced to rely on
Poland's  apparently  deficient  system of  recording  and  perfecting  security
interest.  If (1) Funding receives the Assigned  Proceeds in accordance with the
terms of the Funding Agreement or (2) it becomes apparent that Funding shall not
ever  be  entitled  to  receive  any  Proceeds,  then  Funding  is  required  to
immediately  issue a notice to the Escrow  Agent with  respect to the IFFP Stock
and the Security Interest is to be satisfied and extinguished.

      The IFFC Affiliates have also entered a second  agreement to assist in the
financing of the BKC Litigation.  On April 7, 1996, the IFFC Affiliates  entered
into a letter agreement (the "Fee Agreement") with the law firm (the "Litigation
Counsel")  representing  the IFFC Affiliates in the BKC Litigation.  Pursuant to
the Fee  Agreement,  IFFC and IFFP have  agreed to pay  Litigation  Counsel  the
greater of (a)  Litigation  Counsel's  accrued  hourly  fees for legal  services
provided in connection with the BKC Litigation;  and (b) a certain percentage of
any  final  monetary  recovery  obtained  by the  IFFC  Affiliates  in  the  BKC
Litigation,  in exchange for Litigation Counsel's services.  The Company's legal
fees and related costs in connection with the BKC  litigation,  exclusive of the
$750,001 paid by Funding, were approximately  $1,447,082,  of which $200,000 was
paid by issuance of 2,000,000 shares of Common Stock to Litigation  Counsel,  in
April  1997.  The  2,000,000  shares of Common  Stock  have  been  reflected  as
outstanding in the accompanying  Consolidated  Financial  Statements as of March
31, 1997.

      The gain on settlement of the BKC Litigation is comprised as follows:

      Settlement Proceeds:
          Cash received from BKC               $ 5,000,000
          Forgiveness of liabilities due
             to BKC499,768
          Value attributable to Development
             Agreement                           1,000,000
                                               -----------
                 Total proceeds                  6,499,768
                                               
      Less Settlement Costs and Deferred Credits:
          Legal fees and costs paid by

                                      17

<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)
             IFFC                               (1,447,082)
          Legal fees and costs paid by
             Funding                            (  750,001)
          Deferred Credit                       (1,000,000)
                                               -----------
                 Net settlement proceeds         3,302,685

          Portion of net settlement proceeds
             due to Funding                     (2,477,014)

          Legal fees and costs paid by IFFC
             in prior periods and charged
             against operations                    501,399
                                               -----------
          IFFC gain on settlement              $ 1,327,070
                                               ===========

      IFFC has valued the New Development  Agreement at $1,000,000  which is its
best estimate of the cost that it would incur in obtaining  such  agreement from
BKC exclusive of all other matters  associated with the BKC  settlement.  Due to
the uncertainty relating to IFFC's ability to meet the performance  requirements
specified in the New Development Agreement,  which must be achieved by September
30, 1999,  coupled with the $1,000,000 amount that will be payable to BKC if the
minimum  performance  requirements  are not met,  IFFC has  recorded  a Deferred
Credit of $1,000,000 in connection with recognition of gain on settlement of the
BKC  Litigation.  If the  minimum  performance  objectives  required  by the New
Development  Agreement  are  achieved by  September  30,  1999,  $562,500 of the
Deferred Credit will become payable to Funding,  and $187,500 will be recognized
by IFFC as additional  gain on the BKC  Litigation  settlement and $250,000 will
become payable to BKC. If the maximum performance objectives required by the New
Development  Agreement  are  achieved by  September  30,  1999,  $750,000 of the
Deferred  Credit will become  payable to Funding and $250,000 will be recognized
by IFFC as  additional  gain on the BKC  Litigation  settlement.  If the minimum
performance  objectives are not met the $1,000,000  Deferred  Credit will become
payable to BKC.

      At March 31, 1997, the payable to Funding is comprised as follows:

          Portion of net settlement proceeds
             due to Funding                    $ 2,477,014

          Reimbursement of legal fees and
             costs paid by Funding                 750,001
                                               -----------
          Balance due to Funding                 3,227,015

          Portion classified as current          1,028,521
                                               -----------
          Promissory note payable              $ 2,198,494
                                                ==========

          The  promissory  note bears  interest at prime plus 1%, and matures on
December 31, 1998.  Interest is payable quarterly beginning on July 1, 1997. The
note may be prepaid in whole or part at any time  without  penalty.  The note is
collateralized  by the Company's equity interest in IFFP. The remaining  balance
due to Litigation Funding in the amount of $1,028,521 was paid in May 1997.
                                      18

<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                 (Unaudited)


      POLISH FISCAL  AUTHORITY  DISPUTES - As of July 1995, IFFC may have become
subject to  penalties  for  failure to comply  with a recently  amended  tax law
requiring  the use of cash  registers  with certain  calculating  and  recording
capabilities  and which are approved for use by the Polish  Fiscal  Authorities.
Although  IFFP's NCR Cash  Register  System  (the "Cash  Register  System") is a
modern  system,  the System  cannot be modified and will  ultimately  need to be
replaced in order to comply with the new tax law. IFFP is now in compliance with
the tax law using a  parallel  cash  register  system  but was  unable to modify
and/or  replace its Cash  Register  System  before  July 1995.  As a penalty for
noncompliance,  Polish tax authorities  may disallow  certain VAT deductions for
July and August, which were previously deducted by IFFP. Additionally, penalties
and interest may be imposed on these disallowed  deductions.  IFFP believes that
its potential exposure is approximately $150,000, which amount has been provided
for in the  accompanying  financial  statements.  IFFP  has  requested  a  final
determination  by the  Polish  Minister  of  Finance.  The  Company is unable to
predict the timing and nature of the Ministers  ruling.  IFFP has not yet made a
decision whether or not to replace its Cash Register System. IFFP believes a new
cash register system would cost approximately $250,000.

      ROMANSKA - NINKOWIC - In April 1997, Ms. Romanska - Ninkowic filed suit in
Voivodship Court in Krakow, Poland against IFFP. Ms. Romanska - Ninkowic alleges
that IFFP owes her approximately  266,831 PLN  (approximately  $89,000) in final
settlement for the  construction of IFFP's Katowice  restaurant.  IFFP is in the
process of filing a countersuit  against Ms. Romanska - Ninkowic  citing,  among
other things, failure to comply with the terms of the contractor's agreement. No
court date has been set. IFFP believes the charges are without merit.























                                       19



<PAGE>


ITEM I.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

GENERAL

      IFFC currently  operates its business in Poland through its majority owned
(85%) subsidiary,  International Fast Food Polska, and three wholly-owned Polish
limited liability  corporations,  IFF  Polska-Kolmer,  IFF-DX Management and IFF
Polska i Spolka.  Unless the context  indicates  otherwise,  references herin to
IFFC include all of its operating subsidiaries.

      IFFC currently  operates eight Traditional  Burger King Restaurants.  IFFC
has incurred losses and anticipates that it will continue to incur losses until,
at the earliest,  it establishes a number of restaurants  generating  sufficient
revenues to offset its operating costs and the costs of its proposed  continuing
expansion.  There can be no  assurance  that  IFFC will be able to  successfully
establish a sufficient number of restaurants to achieve profitable operations.

      The  BKC  Development   Agreement  required  IFFC  to  open  at  least  13
full-service  traditional  restaurants prior to September 1996,  including seven
traditional  restaurants by September 24, 1994 and three additional  traditional
restaurants  during  each  of  the  two  following  twelve-month  periods.  IFFC
currently  operates eight  restaurants.  Through the period ended  September 24,
1994, IFFC was ahead of the required development schedule.  However,  during the
term of this Development  Agreement  certain disputes arose between IFFC and BKC
and,  on  March  17,  1995,  IFFC  and  its  majority  owned  (85%)  subsidiary,
International  Fast Food  Polska  ("IFFP"),  filed  suit (the "BKC  Litigation")
against BKC in the Eleventh Circuit Court of the State of Florida.  IFFC alleged
that BKC did not provide all of the support, supervision and assistance required
of it under the BKC  Development  Agreement and the eight  Franchise  Agreements
(the  "Franchise  Agreements")  between BKC and IFFC.  By letter  dated June 30,
1995,  BKC notified IFFC that, at that time, BKC would not elect to declare IFFC
to be in default under the BKC Development Agreement to, in the future,  declare
IFFC's  failure to develop the  requisite  number of BKC  restaurants  an act of
default.  By letter dated May 2, 1996,  BKC notified IFFC that BKC believed that
the Development  Agreement had terminated pursuant to its terms.  Throughout the
term of this Development  Agreement  certain disputes arose between IFFC and BKC
and,  on  March  17,  1995,  IFFC  and  its  majority  owned  (85%)  subsidiary,
International  Fast Food  Polska  ("IFFP"),  filed  suit (the "BKC  Litigation")
against BKC in the Eleventh Circuit Court of the State of Florida.  IFFC alleged
that BKC did not provide all of the support, supervision and assistance required
of it under the BKC  Development  Agreement and the eight  Franchise  Agreements
(the "Franchise Agreements") between BKC and IFFC. On March 11, 1997, IFFC, BKC,
IFFP, Mitchell Rubinson,  IFFC's chairman and Litigation  Funding,  Inc. entered
into a settlement  agreement regarding the BKC litigation.  See Part II. Item 2.
Legal Proceedings - BKC Litigation.

      On March 11, 1997,  BKC,  IFFC,  IFFP, and Rubinson,  individually  and on
behalf of  Litigation  Funding,  Inc.  entered into a Settlement  Agreement.  In
connection with the execution of the Settlement Agreement,  IFFC and BKC entered
into the New BKC Development Agreement and new Franchise Agreements. BKC paid to
IFFC for the  benefit of IFFC and IFFP the sum of  $5,000,000  (less  $21,865 of
royalties owed by IFFP to BKC for February 1997) for a net amount of $4,978,135.
BKC forgave  $499,768  representing  all monies owed BKC by IFFP and IFFC to BKC
through  and  including  January  31,  1997.  Under the terms of the  Settlement
Agreement, a portion of such proceeds, not to exceed $2,000,000 cash may be used
to immediately satisfy the actual legal fees and costs of IFFC and IFFP incurred

                                      20

<PAGE>


in connection with the BKC litigation,  including  IFFC's and IFFP's  obligation
under  the  agreement  between  IFFC,  IFFP and  Litigation  Funding,  Inc.  The
remaining  3,000,000  may be used by  IFFC  and  IFFP  for  the  development  of
additional BKC restaurants in Poland or working capital for IFFP pursuant to the
New BKC  development  Agreement.  All parties to the  litigation  stipulated  to
dismissal of the litigation and executed mutual releases.

      In order to secure  additional  funds to finance the BKC Litigation,  IFFC
entered into two agreements  specifically designed to assist it in financing the
BKC Litigation.  First, as of January 25, 1996, the IFFC Affiliates entered into
an  Agreement to Assign  Litigation  Proceeds  (the  "Funding  Agreement")  with
Litigation Funding, Inc., a Florida corporation ("Funding").  This agreement was
later amended in July 1996. Mitchell Rubinson,  the chairman of the board, chief
executive officer and president of IFFC is also the chairman of the board, chief
executive officer and president and the principal shareholder of Funding.

      Pursuant to the amended Funding Agreement, Funding agreed to pay on behalf
of IFFC and/or IFFP up to $750,001 (the  "Amount")  for all expenses  (including
attorneys'  fees, court costs and other related  expenses,  but not judgments or
amounts  paid in  settlement)  actually  incurred by or on behalf of IFFC and/or
IFFP in  connection  with  investigating,  defending,  prosecuting,  settling or
appealing  the BKC  Litigation  and any and all claims or  counterclaims  of BKC
against IFFC and/or IFFP (collectively,  the "BKC Matter"). Funding has paid all
amounts it has been requested to pay pursuant to the Funding Agreement.

      In consideration  of the Amount,  IFFC and IFFP each assigned to Funding a
portion of any and all benefits and gross sums,  amounts and proceeds  that each
of them may  receive,  collect,  realize,  otherwise  obtain or benefit  from in
connection with,  resulting from or arising in connection with the BKC Matter or
any related  claim,  demand,  appeal,  right  and/or cause of action of the IFFC
Affiliates,  including,  but not limited to, amounts  received or entitled to be
received  by the IFFC  Affiliates  in respect to (i) the gross  proceeds  of any
court  ordered  decision or judgement (a  "Judgement")  entered in favor of IFFC
and/or IFFP,  (ii) the Sale Proceeds (as such term is defined in the  agreement,
the "Sales  Proceeds") of any sale of the assets of IFFC and/or IFFP to BKC, any
of BKC's affiliates and/or any entity which is introduced to the IFFC Affiliates
by BKC (collectively, the "BKC Entities") in connection with a settlement of the
BKC Matter,  (iii) any amounts paid in compromise or settlement (a "Settlement")
of the BKC Matter in whole or in part,  (iv) any  liabilities or indebtedness of
IFFC or  IFFP  assumed  or  satisfied  by the BKC  Entities  (the  "Debt  Relief
Proceeds") and (v) the monetary value to the IFFC  Affiliates of any concessions
made by BKC with  respect  to its  rights  under (a) the  Development  Agreement
and/or (b) the Franchise  Agreements and any future franchise agreements between
BKC and IFFP and/or IFFC (the "Contract Modification Proceeds"). All of the IFFC
Affiliates' rights,  titles and interests,  legal and equitable,  in and to such
aforementioned  benefits and gross sums,  amounts and proceeds are  collectively
referred to herein as the "Proceeds".

      Specifically,   IFFC  and  IFFP  each  individually  assigned,  set  over,
transferred and conveyed to Funding all of its right,  title and interest in and
to the sum of the following (the "Assigned Proceeds");  (i) seventy five percent
(75%) of the  Proceeds to the extent that such amount does not exceed  Funding's
Expenses  (Funding's  Expenses")  which are defined as the sum of the  aggregate
amount of money paid by  Funding as the Amount and the amount of money  expended
by Funding if it assumes the  prosecution  of the BKC Matter;  (ii) seventy five
percent (75%) of any Proceeds,  excluding any Sales  Proceeds,  in excess of the

                                      21

<PAGE>

sum of  Funding's  Expenses and the IFFC  Affiliates'  Expenses (as such term is
defined below, the "IFFC Affiliates' Expenses");  and (iii) seventy five percent
(75%) of any Sales  Proceeds in excess of the sum of Funding's  Expenses and the
IFFC Affiliates' Expenses.

      Subject to Funding's  recovery of Funding's  Expenses,  IFFC and IFFP have
retained the right in and shall be entitled to recover from the Proceeds the sum
of (i)  $303,731,  and (ii) all of the amounts  they may expend in the future in
connection with the BKC Matter,  before Funding shall be entitled to receive any
other Proceeds.

      The IFFC  Affiliates  also  entered  a second  agreement  to assist in the
financing of the BKC Litigation.  On April 7, 1996, the IFFC Affiliates  entered
into a letter agreement (the "Fee Agreement") with the law firm (the "Litigation
Counsel")  representing  the IFFC Affiliates in the BKC Litigation.  Pursuant to
the Fee  Agreement,  IFFC and IFFP have  agreed to pay  Litigation  Counsel  the
greater of (a)  Litigation  Counsel's  accrued  hourly  fees for legal  services
provided in connection with the BKC Litigation;  and (b) a certain percentage of
any  final  monetary  recovery  obtained  by the  IFFC  Affiliates  in  the  BKC
Litigation, in exchange for Litigation Counsel's services. The percentage of any
monetary  recovery  payable to  Litigation  Counsel  would vary  depending  upon
whether or not: (1) the BKC  Litigation is settled at or before  mediation;  (2)
the BKC Litigation is settled after mediation but before a verdict;  (3) the BKC
Litigation is resolved by a jury or court verdict;  and (4) the IFFC  Affiliates
successfully  appeal a verdict  in the BKC  Litigation  or if they  successfully
defend against an appeal by BKC of the verdict in the BKC Litigation.

      In connection  with the  settlement of the BKC  Litigation and pursuant to
the provisions of the Funding  Agreement as of March 31, 1997,  IFFC is indebted
to  Funding  for an  aggregate  amount  of  $3,227,015.  See  Note 8 of Notes To
Consolidated  Financial  Statements  for a  description  of the  amounts  due to
Funding.

      As of March 31, 1997, IFFC had working capital of approximately $1,990,482
and Cash and Cash  Equivalents  of $4,825,614.  IFFC's working  capital and cash
position were significantly  improved by the settlement of the BKC Litigation in
March 1997.  Although IFFC believes that it has sufficient  funds to finance its
present plan of operations  through  December 31, 1997,  IFFC cannot  reasonably
estimate how long it will be able to satisfy its cash requirements.  The capital
requirements relating to implementation of the New BKC Development Agreement are
significant.  Based upon current  assumptions,  IFFC will seek to implement  its
business plan  utilizing its Cash and Cash  Equivalents  and cash generated from
restaurant  operations.  In order to satisfy the capital requirements of the New
BKC Development Agreement IFFC will require resources substantially greater than
the amounts it presently  has or amounts that can be generated  from  restaurant
operations.  Except as discussed below,  IFFC has no current  arrangements  with
respect to, or sources of  additional  financing  and there can be no  assurance
that  IFFC  will be able  to  obtain  additional  financing  or that  additional
financing will be available on acceptable  terms to fund future  commitments for
capital expenditures.




                                       22



<PAGE>



THREE MONTHS ENDED MARCH 31, 1997 VS THREE MONTHS ENDED MARCH 31, 1996

RESULTS OF OPERATIONS

      For the three  months  ended  March 31,  1997 and  March  31,  1996,  IFFC
generated Restaurant Sales of $1,358,610 and $1,268,674,  respectively.  In U.S.
dollar and Polish zloty terms IFFC's Restaurant Sales increased by approximately
7% and 27% for the  three  months  ended  March 31,  1997 and  March  31,  1996,
respectively.  The increase is primarily  attributable  to improved  local store
marketing and the general improvements in the Polish economy.

      During the three  months  ended  March 31, 1997 and 1996,  IFFC  generated
other operating Revenue of $28,864 and $38,077, net of direct costs and expenses
relating to a video game arcades located in its restaurants.

      During the three  months  ended March 31,  1997,  IFFC  incurred  Food and
Packaging Expense of $568,943, Payroll and Related Costs of $216,852 , Occupancy
and Other Operating  Expenses of $365,068,  and  Depreciation  and  Amortization
Expense of $223,487.

      Food and  Packaging  Costs for the three  months  ended March 31, 1997 and
1996 were 41.9% and 45.1% of Restaurant Sales,  respectively.  The 3.2% decrease
as a  percentage  of  Restaurant  Sales is  primarily  attributable  to improved
product sourcing,  the  implementation  of tighter cost controls,  a decrease in
custom  duties  and  import  tax on paper  goods  coupled  with an  increase  in
Restaurant Sales.

      Payroll and Related  Costs for the three  months  ended March 31, 1997 and
1996  were  16% and  14.6%  of  Restaurant  Sales,  respectively.  The 1.4% as a
percentage of Restaurant Sales increased primarily as a result of an increase in
the  minimum  wage rate in Poland  effective  January 1, 1997,  coupled  with an
increase in personnel.

      Occupancy  and Other  Operating  Expenses for the three months ended March
31, 1997 and 1996 were 26.9% and 29.9% of Restaurant Sales, respectively. The 3%
decrease as a percentage  of  Restaurant  Sales is primarily  attributable  to a
decrease in advertising expense coupled with an increase in Restaurant Sales.

      Depreciation and Amortization  Expense as a percentage of Restaurant Sales
was  16.4%  and  19.4% in the  three  months  ended  March  31,  1997 and  1996,
respectively.  The 3% decrease as a percentage of restaurant  sales is primarily
attributable  to  an  increase  in  Restaurant  Sales  coupled  with  the  fully
depreciated status of certain assets still in use.

      General and  Administrative  Expenses for the three months ended March 31,
1997 and 1996 were 36.3% and 39.4% of Restaurant Sales,  respectively.  The 3.1%
decrease as a  percentage  of  Restaurant  Sales is  primarily  attributable  to
reduced legal and professional  fees and an increase in restaurant  sales.  IFFC
does not  anticipate  its  General and  Administrative  Expenses  will  increase
significantly  over the next twelve months. For the three months ended March 31,
1997, General and Administrative  Expenses was comprised of executive and office
staff salaries and benefits ("Salary Expense") $125,669;  legal and professional
fees, office rent, travel,  telephone and other corporate  expenses  ("Corporate
Overhead Expense") $358,167,  and depreciation and amortization  $8,314. For the

                                      23


<PAGE>

three  months  ended  March 31,  1996,  General and  Administrative  Expense was
comprised  of  executive  and  office  staff   salaries   $183,066;   legal  and
professional  fees, office rent,  travel,  telephone and other general corporate
expenses $291,490, and depreciation and amortization $24,757.

      For the three months ended March 31, 1997,  IFFC  generated  net income of
$829,826  or $.07 per share of IFFC's  Common  Stock  compared  to a net loss of
$(562,600),  or $(.14)  per share of IFFC's  Common  Stock for the three  months
ended  March 31,  1996.  During the three  months  ended  March 31,  1997,  IFFC
recognized a non-recurring gain of $1,327,070 or $.11 per share of IFFC's Common
Stock in connection with the settlement of the BKC Litigation.

      IFFC  anticipates  that it will  continue  to incur  certain  expenses  in
connection  with its disputes with the Polish Fiscal  Authorities.  See "Item 2.
Legal Proceedings - Polish Fiscal Authority  Disputes" for a description of such
matters.

For the three months ended March 31, 1997 and 1996 Interest and Other Income was
comprised as follows:
                                                Three Months Ended March 31,
                                                ----------------------------
                                                   1997             1996
                                                 ----------       ----------

      Interest income                           $    35,923      $    41,348
      Foreign exchange (losses)
          gains, net                             (   23,234)           2,967
      Management fee                                  3,902            1,336
      All other, net                             (      154)           6,258
                                                 ----------       ----------

                                                $    16,437      $    51,909
                                                 ==========       ==========

Interest Expense is comprised as follows:
                                                Three Months Ended March 31,
                                                ----------------------------
                                                   1997             1996
                                                 ----------       ----------
      Interest Expense on Subordinated
          Convertible Debentures                $    62,010      $    62,010

      Interest Expense on Convertible
          Promissory Notes                            7,290             -

      Amortization of Debenture
          Issuance Costs                              8,314            8,314

      Interest Expense on Bank
          Facilities                                 27,933           40,353
                                                 ----------       ----------

                 Total                          $   105,547      $   110,677
                                                 ==========       ==========

      Interest  Expense  exceeded  Interest  and Other  Income by  $386,050  and
$404,666  for the years ended  December  31, 1996 and 1995,  respectively.  As a
result of IFFC's consummation of the Second Exchange Offer (defined below) as of
January  13,  1995,  IFFC's  Interest  Expense on  Debentures  should not exceed
$248,000 in the year ended December 31, 1997.  The level of Interest  Expense on
Debentures will be partially  offset by IFFC's payment of dividends with respect

                                      24

<PAGE>


to the shares of Preferred  Stock (defined  below) issued in the Second Exchange
Offer. Each share of Preferred Stock receives dividends,  payable  semi-annually
on each June 15 and December 15, at a rate of $6.00 per annum,  which  dividends
may, at the option of IFFC,  be paid in cash,  or through  the  issuance of IFFC
Common Stock or a combination  thereof.  The June 15, 1996 and December 15, 1996
dividend  payments  were not made and as of March 31, 1997  dividends in arrears
aggregated $229,440.

      IFFC's interest expense on bank facilities was $27,933 and $40,353 for the
three months ended March 31, 1997 and 1996,  respectively.  The $12,420 decrease
is attributable to IFFC's reduction of borrowings under bank credit facilities.

      During  the  three  months  ended  March  31,   1997,   IFFC   recorded  a
non-recurring  gain of  $1,327,070,  or $.13 per share of IFFC's Common Stock in
connection  with the  settlement of the BKC  Litigation.  See Note 8 of Notes To
Consolidated Financial Statements for the components included in the calculation
of the gain.

LIQUIDITY AND CAPITAL RESOURCES

      IFFC's  material  commitments  for capital  expenditures in its restaurant
business  relate  to the  restaurants  that it is  required  to open in order to
comply with the provisions of the BKC Development Agreement.

      From September 1991 to May 1996, the relationship  between IFFC and Burger
King  Corporation  ("BKC")  was  governed  principally  by the  BKC  Development
Agreement and by a franchise agreement relating to each restaurant, as described
below. A former majority shareholder entered into the BKC Development  Agreement
in September  1991 and, in December  1991,  assigned its rights and  obligations
under the BKC  Development  Agreement to IFFC.  Pursuant to the BKC  Development
Agreement,  IFFC was granted the  exclusive  right until  September  24, 1996 to
develop and to be franchised to operate Burger King restaurants in Poland,  with
certain  exceptions.  IFFC was  obligated  to open and did open one  traditional
restaurant by December 24, 1992,  three  additional  traditional  restaurants by
September 25, 1993 and three additional traditional restaurants by September 24,
1994,  which  IFFC  did in a  timely  manner.  Pursuant  to the BKC  Development
Agreement,  IFFC was required to open three additional  traditional  restaurants
during  each of the  two  following  twelve-month  periods,  for a  total  of 13
traditional  restaurants  open and  operating  by the end of the  Initial  Term.
Through the period  ended  September  24,  1994,  IFFC was ahead of the required
development  schedule.  However,  during the term of this Development  Agreement
certain disputes arose between IFFC and BKC and, on March 17, 1995, IFFC and its
majority owned (85%) subsidiary,  International Fast Food Polska ("IFFP"), filed
suit (the "BKC  Litigation")  against BKC in the Eleventh  Circuit  Court of the
State of Florida.  IFFC  alleged  that BKC did not  provide all of the  support,
supervision and assistance  required of it under the BKC  Development  Agreement
and the eight Franchise Agreements (the "Franchise  Agreements") between BKC and
IFFC. By letter dated June 30, 1995,  BKC notified IFFC that, at that time,  BKC
would not  elect to  declare  IFFC to be in  default  under the BKC  Development
Agreement.  BKC  further  stated  that such notice was not a waiver of its legal
rights under the BKC  Development  Agreement to, in the future,  declare  IFFC's
failure to develop the requisite number of BKC restaurants an act of default. By
letter  dated May 2, 1996,  BKC  notified  IFFC that BKC  believed  that the BKC
Development Agreement had terminated pursuant to its terms.


                                       25


<PAGE>

      The BKC Litigation  was settled  between the parties on March 11, 1997. In
connection  with  the  settlement  of  the  BKC  Litigation,  a new  Development
Agreement (the "New BKC Development Agreement") was entered into between BKC and
IFFC,  which was then assigned by IFFC to IFFP on March 14, 1997; IFFC continues
to  remain  liable  for the  obligations  contained  in the New BKC  Development
Agreement.  Pursuant to the New BKC Development Agreement, IFFC has been granted
the  exclusive  right until  September  30, 2007 to develop and be franchised to
operate  Burger King  restaurants  in Poland with certain  exceptions  discussed
below. Pursuant to the New BKC Development  Agreement,  IFFC is required to open
45 Development Units during the term of the Agreement.  Each traditional  Burger
King  restaurant,  in-line  Burger King  restaurant,  or drive-thru  Burger King
restaurant shall constitute one unit. A Burger King kiosk restaurant  shall, for
purposes of the New BKC Development  Agreement,  be considered one quarter unit.
Pursuant to the New BKC Development Agreement, IFFC is to open three Development
Units through  September 30, 1998, four units in each year beginning  October 1,
1998 and ending September 30, 2001 and five units in each year beginning October
1, 2001 and ending September 30, 2007.

      Pursuant  to the  New  BKC  Development  Agreement,  IFFC  shall  pay  BKC
$1,000,000  as a  development  fee.  IFFC  shall  not be  obligated  to pay  the
development  fee if IFFC is in  compliance  with  the  development  schedule  by
September  30, 1999,  and has  achieved  gross sales of  $11,000,000  for the 12
months  preceding  the  September  30,  1999,  target date.  If the  development
schedule  has been  achieved  but gross  sales were less than  $11,000,000,  but
greater than  $9,000,000,  the development fee shall be reduced to $250,000.  If
the  development  fee is  payable  due to the  failure  of IFFC to  achieve  the
performance  targets set forth above,  IFFC,  at its option,  may either pay the
development  fee or provide BKC with the written and binding  undertaken  of Mr.
Mitchell  Rubinson,  IFFC's  Chairman,  that the Rubinson Group will  completely
divest themselves of any interest in IFFC and the Burger King restaurants opened
or operated by IFFC in Poland within six (6) months of the date the  development
fee payment is due.  The  Rubinson  Group shall be defined to include any entity
that Mr.  Rubinson  directly or  indirectly  owns an  aggregate  interest of ten
percent (10%) or more of the legal or beneficial equity interest and any parent,
subsidiary  or  affiliate of a Rubinson  entity.  Mr.  Rubinson  has  personally
guaranteed payment of the development fee.

      BKC may  terminate  rights  granted  to  IFFC  under  the BKC  Development
Agreement,  including  franchise approvals for restaurants not yet opened, for a
variety of possible defaults by IFFC, including,  among others,  failure to open
restaurants  in  accordance  with the schedule set forth in the BKC  Development
Agreement; failure to obtain BKC site approval prior to the commencement of each
restaurant's construction;  failure to meet various operational,  financial, and
legal  requirements  set  forth  in the  BKC  Development  Agreement,  including
maintaining  of IFFP's net worth of $7,500,000  beginning on June 1, 1999.  Upon
termination of the BKC Development Agreement,  whether resulting from default or
expiration  of its  terms,  BKC has the right to license  others to develop  and
operate Burger King restaurants in Poland, or to do so itself.

      IFFC currently  estimates the cost of opening a traditional  restaurant to
be  approximately  $450,000 to  $1,000,000,  including  leasehold  improvements,
furniture,  fixtures,  equipment,  and opening inventories.  Such estimates vary
depending  primarily on the size of a proposed  restaurant and the extent of the
improvements  required.  The development of additional restaurants is contingent

                                      26



<PAGE>


upon, among other things, IFFC's ability to generate cash from operations and/or
securing additional debt or equity financing.  If cash is unavailable from those
sources,  IFFC will have to curtail any additional  development until additional
cash resources are secured.

      IFFC  anticipates  that it will  continue  to incur  certain  expenses  in
connection with its disputes with the Polish Fiscal  Authorities.  See "Part II.
Item 2. Legal Proceedings - Polish Fiscal Authority  Disputes" for a description
of such  matters and IFFC's best  estimates  of the  expenses  IFFC  anticipates
incurring and the timing of such expenses.

      On May 17,  1996,  IFFC's  Common  Stock was deleted from the NASDAQ Stock
Market  and has  traded  on the over the  counter  market  since  that  date and
accordingly,  IFFC believes that its ability to raise additional  equity capital
has been negatively impacted.

      To date,  IFFC's  business  operations have been  principally  financed by
proceeds  from public  offerings of IFFC's equity and debt  securities,  private
offerings of equity and debt  securities,  proceeds from a number of bank credit
facilities  and proceeds  from the sale of certain  equity  securities of IFFC's
formerly wholly-owned subsidiary.

      In June 1992, IFFC consummated an underwritten  initial public offering of
1,495,000  shares of its common stock for an aggregate of  $7,475,000,  yielding
IFFC proceeds of  approximately  $6,134,000.  In December 1992 and January 1993,
IFFC consummated an underwritten  public offering of an aggregate of $11,400,000
in principal  amount of 9%  Convertible  Subordinated  Debentures  due 2007 (the
"Debentures") for aggregate net proceeds of approximately $9,701,000.

      On January  14,  1994,  IFFC  proposed to  exchange  (the "First  Exchange
Offer") each $1,000 in principal  amount of its Debentures  validly tendered for
one Unit  consisting of 160 newly issued shares of its Common Stock and Warrants
to purchase  100 shares of its Common  Stock at an  exercise  price of $7.00 per
share.  Upon  completion  of the First  Exchange  Offer on  February  11,  1994,
$2,908,000 in principal  amount of Debentures were tendered and accepted by IFFC
for exchange.

      On November 7, 1994,  IFFC  proposed to  exchange  (the  "Second  Exchange
Offer") for each $1,000 in principal  amount of Debentures  validly tendered ten
shares  of  IFFC's  Series A 6%  Convertible  Preferred  Stock  (the  "Preferred
Stock"). The Preferred Stock (i) has a liquidation  preference value of $100 per
share,  (ii) is  convertible  into shares of IFFC's Common Stock at a conversion
price of $3.00 per share, and (iii) receives dividends, payable semi-annually on
each June 15 and  December 15, at the rate of $6.00 per annum,  which  dividends
may,  at the option of IFFC,  be paid in cash,  through  the  issuance of Common
Stock or a combination of cash and Common Stock,  and (iv) are redeemable  under
certain  circumstances.  Upon  completion  of IFFC's  Second  Exchange  Offer on
January 13, 1995 $5,636,000 in principal  amount of Debentures were tendered and
accepted  by IFFC in  exchange  for  56,360  shares  of  Preferred  Stock.  IFFC
recognized an extraordinary  gain of $1,106,642,  the difference between (a) the
estimated fair value of the 56,360 shares of Preferred Stock issued ($3,757,590)
and (b) the sum of the carrying value of the  Debentures  and accrued  interest,
net of unamortized  Debenture  issuance  costs.  Since the  consummation  of the
second  exchange offer in January 1995,  $2,756,000  principal  amount of the 9%
Subordinated Convertible Debentures due December 15, 2007 remain outstanding.


                                      27

<PAGE>

      On June 15,  1995 and  December  15,  1995,  rather  than  expend its cash
resources,  IFFC  paid  dividends  with  respect  to its  outstanding  shares of
Preferred  Stock by issuing  107,630  and  168,912  additional  shares of Common
Stock,  respectively.  These stock dividends had no effect on total stockholders
equity as  common  stock and  additional  paid in  capital  were  increased  and
retained  earnings  were  decreased  by  $142,778 in  connection  with the first
dividend  payment and $150,078 in connection with the second  dividend  payment.
IFFC did not pay the  preferred  dividends  that  were due on June 15,  1996 and
December 15, 1996,  and as of March 31,  1997,  $229,440 of preferred  dividends
remain in arrears. At March 31, 1997 there were 37,250 shares of Preferred Stock
outstanding.

      In June 1996,  after  considering  various  alternatives and including the
market price for the Company's Common Stock, its trading volume and various time
constraints the Board of Directors  authorized the issuance of 2,200,000  shares
of the Company's Common Stock for a total purchase price of $110,000 to Mitchell
Rubinson and his wife Edda.  The Company used the proceeds  from the sale of the
shares  for  payment  of  interest  on the  Company's  Convertible  Subordinated
Debentures.

      In September 1996, the Company had working capital needs, and had incurred
additional  expenses  in  connection  with  the BKC  Litigation.  The  Board  of
Directors of IFFC  authorized  the sale of  2,500,000  shares of common stock at
$.10 per share.  Marilyn Rubinson,  Jaime Rubinson and Kim Rubinson,  the mother
and daughters of Mitchell Rubinson,  the Company's  President  purchased 250,000
shares each or a total of 750,000 shares..

      In November 1996, the Company had additional  working  capital needs.  The
Board of Directors of IFFC authorized the sale of 500,000 shares of common stock
$.10 per share  Jaime  Rubinson  and Kim  Rubinson,  the  daughters  of Mitchell
Rubinson, the Company's President purchased 250,000 shares each.

      In  December  1996,   IFFC  had   outstanding   an  interest   payment  of
approximately   $125,000  in  connection  with  its   Convertible   Subordinated
Debentures  and additional  working  capital needs.  After  considering  various
alternatives and factors,  the Board of Directors of IFFC authorized the sale of
1,500,000  shares of common  stock of IFFC to  Marilyn  Rubinson,  the Mother of
Mitchell Rubinson, the Company's President at $.10 per share.

      In January 1997, Marilyn Rubinson, the mother of Mitchell Rubinson,  Jaime
Rubinson and Kim Rubinson, Mr. Rubinson's daughters, purchased $300,000, $50,000
and  $50,000  aggregate  principal  amount  of  convertible   promissory  notes,
respectively.  The notes bear interest at 8% per annum and mature on January 13,
1999.  The notes are  convertible  into shares of the Company's  Common Stock at
$.10 per share.  The  proceeds  from the sale of the notes were used to fund the
cost and expenses in connection  with the Company's  litigation  against BKC and
general  working  capital.  In January  1997,  Mr.  Rubinson and his wife,  Edda
purchased  from the  Company  a  convertible  promissory  note in the  aggregate
principal amount of $100,000. The note bear interest at 8% percent per annum and
matures on January 13,  1999.  The note  converts  into shares of the  Company's
Common  Stock  at  $.10  per  share.   The  Convertible   promissory  notes  are
collateralized by the Companys equity interest in IFFP.

      On March 14, 1997, IFFC issued a promissory note in the original principal
amount of $2,198,494 to Litigation  Funding as partial payment of amounts due to
Litigation Funding in connection with the settlement of the BKC Litigation.  The

                                      28


<PAGE>

note bears  interest at prime plus 1%, is payable in full on December  31, 1998,
and may be prepaid in whole or in part at anytime,  without penalty. The note is
collateralized  by the Company's equity interest in IFFP. The remaining  balance
due to Litigation Funding in the amount of $1,028,521 was paid in May 1997.

      As of March 31,  1997 and May 8, 1997,  IFFC had  $492,470  and  $531,094,
respectively, in accounts with AmerBank and substantially all of such funds were
held as European  Currency Unit denominated  deposits.  As of March 31, 1997 and
May 8, 1997,  $473,578 and  $500,000,  respectively  of the cash on deposit with
Amerbank  was  restricted  and secured  outstanding  balances  of IFFP's  Credit
Facility  with Bank  Handlowy.  As of March 31,  1997 and May 8, 1997,  IFFC had
$13,637 and $20,721, respectively, in an operating account with Bank Handlowy.

      IFFC  has  also  financed  its  operations   through  the  use  of  credit
facilities, which credit facilities are described below.

      As of January 28, 1993, IFFP entered into a revolving credit facility with
American Bank of Poland S.A.  ("AmerBank")  totalling  3,000,000,000  zloty,  or
approximately $123,000 at- year end exchange rates. Borrowings under the January
28,1993  AmerBank  credit  facility  are secured by a guarantee of IFFC and bear
interest at a monthly adjusted variable rate  approximately  equal to AmerBank's
prime rate.  Borrowings under the January 28, 1993 AmerBank credit facility were
repayable  as of January 28,  1996.  However,  on October 30, 1995 and April 12,
1996, the credit facility was amended as follows: (i) the immediately  available
credit available was decreased to 2,000,000,000 in zlotys (approximately $81,000
at year end exchange rates), and (ii) repayment of borrowings was deferred until
October 30, 1996. The credit facility matures on March 31, 1998. As of March 31,
1997 and May 8, 1997, the outstanding balance on the credit facility was $18,995
and $5,938 , respectively.

      As of February 23, 1994,  IFFC  terminated  a credit  facility  created on
February  12,  1993 and  entered  into a new  $1,000,000  credit  facility  with
AmerBank.  The new credit facility was structured as a revolving credit facility
through May 31, 1994. During this initial period, draws could be made in minimum
increments of $40,000 to purchase, and are secured by, furniture,  equipment and
related items for  restaurants.  During the initial period,  interest accrued on
the  outstanding  balance  at a rate of 12% per  annum  and was due and  payable
quarterly.  As of July 31,  1994,  the  outstanding  balance  under  the  credit
facility  became due and payable at a rate of $90,000 plus interest  every three
months with any principal  outstanding as of April 30, 1996  immediately due and
payable.  On November 7, 1996  AmerBank  agreed to amend the credit  facility so
that the  outstanding  principal  balance  becomes  due and payable at a rate of
$100,000 on March 31, 1997,  $100,000 on June 30, 1997 and $110,000 on September
30, 1997 plus interest every three months. As of March 31, 1997 and May 8, 1997,
approximately $210,000 was outstanding under the AmerBank credit facility.

      On February  16, 1996,  IFFP  entered into a $300,000  line of credit with
AmerBank,  the  proceeds  of  which  may be  used  to  finance  IFFP's  business
operations. Pursuant to the line of credit, IFFC could make draws on the line of
credit until June 30, 1996.  IFFP is required to make  interest  payments on the
outstanding  principal  amount of the credit facility at AmerBank's  prime rate.
IFFP is also  obligated to pay AmerBank a 1% per annum  commission  on the daily
average  unutilized  principal  balance of the  credit  facility.  Interest  and
commission  expenses are payable monthly.  The outstanding  principal balance of
the loan is payable in three quarterly  installments  of $100,000  commencing on

                                      29



<PAGE>


March 31, 1998. The credit facility is secured by: (i) a promissory note of IFFP
and (ii) a guarantee of IFFC. As of March 31, 1997 and May 8, 1997,  $300,000 of
the credit facility was outstanding.

      On May 30, 1994, IFFC's  subsidiary,  IFFP, entered into a credit facility
with Bank Handlowy Warszawie,  S.A. ("Bank Handlowy") in the principal amount of
$10,000,000.  Borrowings  under the Bank Handlowy  credit facility could be made
until May 31,  1997 and were  secured  by:  (i)  amounts  on  deposit  with Bank
Handlowy;  (ii) an  unconditional  guarantee of IFFC;  (iii) the fixed assets of
IFFP; and (iv) a letter of credit (described  below).  Borrowings under the Bank
Handlowy credit  facility were required be repaid in fourteen equal  semi-annual
installments  with the first  installment  due on November  30,  1997.  Interest
accrued  on the  amount  outstanding  under the  credit  facility  at the London
Interbank  Offered Rate (LIBOR) for nine month  deposits  plus 3.875% per annum.
The proceeds  could be used to finance up to forty percent (40%) of the costs of
furnishing and commencing  operation of fast food restaurants  operated by IFFP.
On December 13, 1995,  the credit  facility with Bank Handlowy was amended.  The
principal amount of the credit facility was reduced to $1,000,000 and borrowings
under the credit  facility were required to be repaid on December 16, 1996.  The
maturity  date and  payment  terms of the  facility  were  further  amended  and
principal  payments of  $100,000  and  $50,000  were made in  December  1996 and
January  1997,  respectively.  The  remaining  principal  balance  is payable in
quarterly  installments  of  $100,000  commencing  on  March  31,  1997  through
September 30, 1997,  with the  remaining  principal  balance  payable in full on
December 16, 1997.  Borrowings under the amended credit facility are secured by:
(i) amounts on deposit with Bank Handlowy;  (ii) an  unconditional  guarantee of
IFFC; (iii) fixed assets of IFFP having a value of $1,250,000; and (iv) a letter
of  credit in the  amount  of  $500,000.  The  Letter  of Credit is valid  until
December  30,  1997.  As of  March  31,  1997  and  May 8,  1997,  $750,000  was
outstanding under the Bank Handlowy credit facility, respectively.

      IFFC has  financed  its  operations  in part  through  the use of proceeds
acquired in connection with a private  offering of IFFP's equity capital.  As of
December 14, 1994, Agros Holding S.A., a joint stock  corporation which produces
agricultural products ("Agros"),  acquired a 20% voting and property interest in
IFFP pursuant to a subscription agreement (the "Subscription Agreement"),  dated
November 30, 1994, between IFFC and Agros. Agros purchased the 20% interest from
IFFP for the  zloty  equivalent  of  $2,000,000.  On  December  28,  1995,  IFFC
increased its equity  interest in IFFP from 80% to 85% by purchasing  from Agros
5% (25% or the  Agros  holdings)  of the  outstanding  capital  stock of IFFP in
exchange for a $500,000  non-interest bearing obligation due in full on December
28, 1996. In December 1996,  IFFC requested an extension on the repayment of the
obligation which was refused by Agros and Agros demanded  payment.  As of May 8,
1997, the obligation was still outstanding.

      As of January 1, 1995,  IFFC and IFFP entered into a five year  consulting
agreement (the "IFFP Consulting Agreement") pursuant to which IFFC is to provide
IFFP consultation and advice with respect to the selection, design and equipping
of IFFC's offices and facilities,  the maintenance of IFFP's financial  records,
reporting  to IFFP's Board of  Directors,  the  procurement  of  financing,  the
performance of cash management functions,  the hiring of employees and officers,
the strategic planning of IFFP's business and the management of IFFP's business.
The IFFP Consulting Agreement automatically renews for an additional year unless
terminated  by either party.  In exchange for its  services,  IFFC receives from
IFFP, on a monthly  basis,  the greater of (a) 5% of IFFP's Sales for the month,
or (b) $50,000 (the  "Management  Fee").  IFFC  receives  reimbursement  for all

                                      30

<PAGE>

out-of-pocket  expenses  it incurs in  connection  with the  fulfillment  of its
obligations under the IFFP Consulting Agreement and any tax, duty or fee imposed
on the Management Fee.

IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS

      IFFC's restaurant  operations are conducted in Poland.  The Polish economy
has historically  been  characterized by high rates of inflation and devaluation
of the Polish zloty against the dollar and European currencies.  However, in the
year ended December 31, 1996, the rates of inflation and  devaluation  improved.
For the years ended December 31, 1993, 1994, 1995 and 1996, the annual inflation
rate in Poland was 35%, 32%, 21.6% and 19.5%,  respectively,  and as of December
31, 1993, 1994, 1995 and 1996 the exchange rate was 21,344,  24,372,  24,680 and
28,725 old zlotys per dollar, respectively. Payment of interest and principal on
the  Debentures  and payment of franchise  fees to BKC for each IFFC  restaurant
opened are in United States currency. Additionally, IFFC is dependent on certain
sources of supply which require payment in European or United States currencies.
Since IFFC's revenues from operations will be in zlotys,  IFFC is subject to the
risk of currency  fluctuations.  IFFC has and intends to maintain  substantially
all of its  unutilized  funds in United  States  or  Western  European  currency
denominated securities and/or European Currency Units. There can be no assurance
that IFFC will successfully manage its exposure to currency fluctuations or that
such fluctuations will not have a material adverse effect on IFFC.

      Thus far, IFFC's revenues have been used to fund restaurant operations and
IFFC's expansion. As a result, such revenues have been relatively insulated from
inflationary  conditions in Poland.  There can be no assurance that inflationary
conditions in Poland will not have an adverse effect on IFFC in the future.

      The accounts of IFFP are measured using the Polish zloty.  Due to Poland's
highly inflationary  environment  through December 31, 1995,  generally accepted
accounting  principles required IFFC to calculate and recognize on its statement
of operations its currency translation gains or losses associated with IFFP. Due
to the  reduction  in  Polands  inflation  rate,  effective  for the year  ended
December 31, 1996,  IFFC was no longer required  pursuant to generally  accepted
accounting  principles to recognize currency  translation gains or losses in its
statement of operations.

      The  official  currency in Poland is the zloty.  The value of the zloty is
pegged  pursuant  to a system  based on a basket of  currencies,  as well as all
other  economic  and  political  factors  that  effect  the value of  currencies
generally.  As of January 1, 1995, the National Bank of Poland  introduced a new
zloty (a "new  zloty").  New zlotys are  equivalent  to 10,000 old zlotys  ('old
zlotys").  Old zlotys remained legal tender until December 31, 1996, after which
date  they are only  exchangeable  at  certain  banks.  At March 31,  1997,  the
exchange rate was 3.0760 new zlotys per dollar.







                                      31



<PAGE>

                          PART II. OTHER INFORMATION


ITEM 2.   LEGAL PROCEEDINGS

      BKC Litigation - On March 17, 1995, IFFC and IFFP (collectively, the "IFFC
Affiliates"),  filed suit against BKC in the Eleventh  Judicial Circuit Court of
the State of Florida.  In their amended complaint,  the IFFC Affiliates alleged,
among  other  things,  that BKC  breached  certain of its  express  and  implied
obligations under the BKC Development Agreement and the eight existing franchise
agreements (the "Franchise  Agreements")  pertaining to IFFP's eight Burger King
restaurants.  The IFFC Affiliates  further alleged that in connection with BKC's
sale of certain of its rights pursuant to the BKC Development  Agreement and the
Franchise  Agreements,  BKC failed to timely  deliver to the IFFC  Affiliates  a
complete and  accurate  franchise  offering  circular in  accordance  with rules
promulgated  by the  Federal  Trade  Commission  (the  "FTC  Count").  The  IFFC
affiliates also alleged that BKC committed  certain acts which  constitute fraud
and/or  deceptive and unfair business  practices.  The IFFC Affiliates asked the
court to, among other things,  award them compensatory  damages of not less that
$15,000,000 punitive damages and certain costs and expenses.

      On March 11, 1997,  BKC,  IFFC,  IFFP and  Rubinson,  individually  and on
behalf of  Litigation  Funding,  Inc.  entered into a Settlement  Agreement.  In
connection with the execution of the Settlement Agreement,  IFFC and BKC entered
into the New BKC  Development  Agreement and eight (8) new Franchise  Agreement.
BKC paid to IFFC the sum of $5,000,000  (less $21,865 of royalties owned by IFFP
to BKC for  February  1997) for a net amount of  $4,978,135.  In  addition,  BKC
forgave  $499,768  representing  all  monies  owed BKC by IFFP and IFFC  through
January 31, 1997. Under the terms of the Settlement Agreement, a portion of such
proceeds,  not to exceed $2,000,000 cash may be used to immediately  satisfy the
actual legal fees and costs of IFFC and IFFP incurred in connection with the BKC
litigation,  including IFFC's and IFFP's  obligation under the agreement between
IFFC, IFFP and Litigation Funding,  Inc. The remaining  $3,000,000 is to be used
by IFFC and IFFP for the  development of additional BKC restaurants in Poland or
working capital for IFFP pursuant to the New BKC Development Agreement.  The New
BKC Development  Agreement calls for certain cash contributions from BKC to IFFC
over the term of such  Agreement  and  additional  sums based upon an  incentive
arrangement  when earned to be retained by IFFC out of BKC's  future  royalties.
IFFC  contributes  these funds into a marketing fund  administered  by IFFC. All
parties to the litigation stipulated to dismissal of the litigation and executed
mutual releases.

      LITIGATION  FINANCING  AGREEMENTS.  IFFC has entered  into two  agreements
specifically designed to assist it in financing the BKC Litigation. First, as of
January 25,  1996,  the IFFC  Affiliates  entered  into an  Agreement  to Assign
Litigation Proceeds (the "Funding  Agreement") with Litigation Funding,  Inc., a
Florida corporation ("Funding").  This agreement was later amended in July 1996.
Mitchell  Rubinson,  the  chairman  of the board,  chief  executive  officer and
president of IFFC is also the chairman of the board, chief executive officer and
president and the principal shareholder of Funding.

      Pursuant to the amended Funding Agreement, Funding agreed to pay on behalf
of IFFC and/or IFFP up to $750,001 (the  "Amount")  for all expenses  (including
attorneys'  fees, court costs and other related  expenses,  but not judgments or

                                      32



<PAGE>

amounts  paid in  settlement)  actually  incurred by or on behalf of IFFC and/or
IFFP in  connection  with  investigating,  defending,  prosecuting,  settling or
appealing  the BKC  Litigation  and any and all claims or  counterclaims  of BKC
against IFFC and/or IFFP (collectively,  the "BKC Matter"). Funding has paid all
amounts it has been requested to pay pursuant to the Funding Agreement.

      In consideration  of the Amount,  IFFC and IFFP each assigned to Funding a
portion of any and all benefits and gross sums,  amounts and proceeds  that each
of them may  receive,  collect,  realize,  otherwise  obtain or benefit  from in
connection with,  resulting from or arising in connection with the BKC Matter or
any related  claim,  demand,  appeal,  right  and/or cause of action of the IFFC
Affiliates,  including,  but not limited to, amounts  received or entitled to be
received  by the IFFC  Affiliates  in respect to (i) the gross  proceeds  of any
court  ordered  decision or judgement (a  "Judgement")  entered in favor of IFFC
and/or IFFP,  (ii) the Sale Proceeds (as such term is defined in the  agreement,
the "Sales  Proceeds") of any sale of the assets of IFFC and/or IFFP to BKC, any
of BKC's affiliates and/or any entity which is introduced to the IFFC Affiliates
by BKC (collectively, the "BKC Entities") in connection with a settlement of the
BKC Matter,  (iii) any amounts paid in compromise or settlement (a "Settlement")
of the BKC Matter in whole or in part,  (iv) any  liabilities or indebtedness of
IFFC or  IFFP  assumed  or  satisfied  by the BKC  Entities  (the  "Debt  Relief
Proceeds") and (v) the monetary value to the IFFC  Affiliates of any concessions
made by BKC with  respect  to its  rights  under (a) the  Development  Agreement
and/or (b) the Franchise  Agreements and any future franchise agreements between
BKC and IFFP and/or IFFC (the "Contract Modification Proceeds"). All of the IFFC
Affiliates' rights,  titles and interests,  legal and equitable,  in and to such
aforementioned  benefits and gross sums,  amounts and proceeds are  collectively
referred to herein as the "Proceeds".

      Specifically,   IFFC  and  IFFP  each  individually  assigned,  set  over,
transferred and conveyed to Funding all of its right,  title and interest in and
to the sum of the following (the "Assigned Proceeds");  (i) seventy five percent
(75%) of the  Proceeds to the extent that such amount does not exceed  Funding's
Expenses  (Funding's  Expenses")  which are defined as the sum of the  aggregate
amount of money paid by  Funding as the Amount and the amount of money  expended
by Funding if it assumes the  prosecution  of the BKC Matter;  (ii) seventy five
percent (75%) of any Proceeds,  excluding any Sales  Proceeds,  in excess of the
sum of Funding's Expenses and the IFFC Affiliates'  Expenses;  and (iii) seventy
five  percent  (75%) of any Sales  Proceeds  in  excess of the sum of  Funding's
Expenses and the IFFC Affiliates' Expenses.

      Subject to Funding's  recovery of Funding's  Expenses,  IFFC and IFFP have
retained the right in and shall be entitled to recover from the Proceeds the sum
of (i)  $303,731,  and (ii) all of the amounts  they may expend in the future in
connection with the BKC Matter,  before Funding shall be entitled to receive any
other Proceeds.

      In connection  with the  execution and delivery of the Funding  Agreement,
IFFC,  IFFP,  Funding and a law firm (the "Escrow Agent") entered into an Escrow
Agreement.  Pursuant to the Funding Agreement and the Escrow  Agreement,  except
for Proceeds  which the Escrow Agent cannot reduce to physical  possession,  all
Proceeds,  if any,  resulting  from the BKC  Matter are to be  delivered  to the
Escrow Agent before they are delivered to the IFFC  Affiliates  and/or  Funding.
The Escrow Agent is required to dispose of Proceeds only in accordance  with (1)
the joint  written  instructions  of the Company,  IFFP and Funding,  or (2) the
instructions  of a  court  of  competent  jurisdiction.  The  Funding  Agreement

                                      33


<PAGE>


provides  that the Escrow  Agent shall first  apply all Readily  Available  Cash
Proceeds {as such term is defined below, the "Readily  Available Cash Proceeds")
to satisfy  Funding's  rights to Proceeds  (assigned to Funding by IFFC or IFFP)
before any  non-Readily  Available Cash Proceeds are delivered to Funding by the
Escrow Agent on behalf of such  company.  Readily  Available  Cash  Proceeds are
defined to be all cash proceeds  payable to IFFC, IFFP or Funding within one (1}
year of a Judgement or Settlement.  In the event that the Readily Available Cash
Proceeds are not sufficient to satisfy Funding's rights in Proceeds (assigned to
Funding by such company),  then IFFC and IFFP have each agreed to pay out of its
individually  available "cash and cash  equivalents"  (the "Cash  Resources") an
amount of Cash  Resources  to  satisfy  the  deficiency.  In the event  that the
Readily  Available  Cash  Resources of a company are  insufficient  to Cover the
deficiency, such company, subject to Funding's agreement, will have the right to
elect  which  assets it will  deliver to Funding in  satisfaction  of  Funding's
rights to receive Proceeds.  In the event that Funding is unable to agree with a
company with respect to which assets such company will deliver to Funding,  then
the matter shall be submitted to a court of competent jurisdiction.

      In consideration  of the Amount,  IFFC also assigned to Funding a security
interest (the  "Security  Interest") in its entire equity  interest in IFFP (the
"IFFP Stock").  The Security Interest secures the delivery to Funding of all the
Assigned Proceeds. In order to perfect the Security Interest, IFFC has agreed to
take all such actions as are necessary  under the laws of the Republic of Poland
("Poland")  and the State of Florida to transfer  title to the IFFP Stock to the
Escrow Agent; provided,  however, that IFFC has retained beneficial ownership of
the IFFP Stock,  including the right to vote the IFFP Stock, unless Funding does
not receive the Assigned  Proceeds in  accordance  with the terms of the Funding
Agreement  and such  nonreceipt  is not  rectified  within 45 days (an "Event of
Default"). IFFC has further agreed to deliver to the Escrow Agent such documents
as are necessary to file with the  appropriate  authorities  in Poland to, if an
Event of Default occurs,  officially  transfer legal and beneficial title to the
IFFP Stock to  Funding.  IFFC and Funding  have agreed that record  title to the
IFFP  Stock is being  transferred  to the  Escrow  Agent to  provide  Funding  a
perfected  security  interest in the IFFP Stock  without being forced to rely on
Poland's  apparently  deficient  system of  recording  and  perfecting  security
interest.  If (1) Funding receives the Assigned  Proceeds in accordance with the
terms of the Funding Agreement or (2) it becomes apparent that Funding shall not
ever  be  entitled  to  receive  any  Proceeds,  then  Funding  is  required  to
immediately  issue a notice to the Escrow  Agent with  respect to the IFFP Stock
and the Security Interest is to be satisfied and extinguished.

      The IFFC Affiliates have also entered a second  agreement to assist in the
financing of the BKC Litigation.  On April 7, 1996, the IFFC Affiliates  entered
into a letter agreement (the "Fee Agreement") with the law firm (the "Litigation
Counsel")  representing  the IFFC Affiliates in the BKC Litigation.  Pursuant to
the Fee  Agreement,  IFFC and IFFP have  agreed to pay  Litigation  Counsel  the
greater of (a)  Litigation  Counsel's  accrued  hourly  fees for legal  services
provided in connection with the BKC Litigation;  and (b) a certain percentage of
any  final  monetary  recovery  obtained  by the  IFFC  Affiliates  in  the  BKC
Litigation,  in exchange for Litigation Counsel's services.  The Company's legal
fees and related costs in connection with the BKC  litigation,  exclusive of the
$750,001 paid by Funding, were approximately  $1,447,082,  of which $200,000 was
paid by issuance of 2,000,000 shares of Common Stock to Litigation  Counsel,  in
April  1997.  The  2,000,000  shares of Common  Stock  have  been  reflected  as
outstanding in the accompanying  Consolidated  Financial  Statements as of March
31, 1997.

                                      34

<PAGE>

      The gain on settlement of the BKC Litigation is comprised as follows:

      Settlement Proceeds:
          Cash received from BKC                $ 5,000,000
          Forgiveness of liabilities due
             to BKC499,768
          Value attributable to Development
             Agreement                            1,000,000
                                                 ----------   
                 Total proceeds                   6,499,768

      Less Settlement Costs and Deferred Credits:
          Legal fees and costs paid by
             IFFC                                (1,447,082)
          Legal fees and costs paid by
             Funding                             (  750,001)
          Deferred Credit                        (1,000,000)
                                                 ----------
                 Net settlement proceeds          3,302,685

          Portion of net settlement proceeds
             due to Funding                      (2,477,014)

          Legal fees and costs paid by IFFC
             in prior periods and charged
             against operations                     501,399
                                                 ----------
          IFFC gain on settlement               $ 1,327,070
                                                 ==========

      IFFC has valued the New Development  Agreement at $1,000,000  which is its
best estimate of the cost that it would incur in obtaining  such  agreement from
BKC exclusive of all other matters  associated with the BKC  settlement.  Due to
the uncertainty relating to IFFC's ability to meet the performance  requirements
specified in the New Development Agreement,  which must be achieved by September
30, 1999,  coupled with the $1,000,000 amount that will be payable to BKC if the
minimum  performance  requirements  are not met,  IFFC has  recorded  a Deferred
Credit of $1,000,000 in connection with recognition of gain on settlement of the
BKC  Litigation.  If the  minimum  performance  objectives  required  by the New
Development  Agreement  are  achieved by  September  30,  1999,  $562,500 of the
Deferred Credit will become payable to Funding,  and $187,500 will be recognized
by IFFC as additional  gain on the BKC  Litigation  settlement and $250,000 will
become payable to BKC. If the maximum performance objectives required by the New
Development  Agreement  are  achieved by  September  30,  1999,  $750,000 of the
Deferred  Credit will become  payable to Funding and $250,000 will be recognized
by IFFC as  additional  gain on the BKC  Litigation  settlement.  If the minimum
performance  objectives are not met the $1,000,000  Deferred  Credit will become
payable to BKC.

      At March 31, 1997, the payable to Funding is comprised as follows:

          Portion of net settlement proceeds
             due to Funding                     $ 2,477,014

          Reimbursement of legal fees and
             costs paid by Funding                  750,001
                                                 ----------

          Balance due to Funding                  3,227,015

          Portion classified as current           1,028,521
                                                 ----------
 
         Promissory note payable                $ 2,198,494
                                                 ==========
                                       35

<PAGE>
          The  promissory  note bears  interest at prime plus 1%, and matures on
December 31, 1998.  Interest is payable quarterly beginning on July 1, 1997. The
note may be prepaid in whole or part at any time  without  penalty.  The note is
collateralized  by the Company's equity interest in IFFP. The remaining  balance
due to Litigation Funding in the amount of $1,028,521 was paid in May 1997.

      POLISH FISCAL  AUTHORITY  DISPUTES - As of July 1995, IFFC may have become
subject to  penalties  for  failure to comply  with a recently  amended  tax law
requiring  the use of cash  registers  with certain  calculating  and  recording
capabilities  and which are approved for use by the Polish  Fiscal  Authorities.
Although  IFFP's NCR Cash  Register  System  (the "Cash  Register  System") is a
modern  system,  the System  cannot be modified and will  ultimately  need to be
replaced in order to comply with the new tax law. IFFP is now in compliance with
the tax law using a  parallel  cash  register  system  but was  unable to modify
and/or  replace its Cash  Register  System  before  July 1995.  As a penalty for
noncompliance,  Polish tax authorities  may disallow  certain VAT deductions for
July and August of 1995, which were previously  deducted by IFFP.  Additionally,
penalties  and  interest  may be imposed on these  disallowed  deductions.  IFFP
believes that its potential exposure is approximately $150,000, which amount has
been provided for in the accompanying financial statements. IFFP has requested a
final determination by the Polish Minister of Finance.  The Company is unable to
predict the timing and nature of the Ministers  ruling.  IFFP has not yet made a
decision whether or not to replace its Cash Register System. IFFP believes a new
cash register system would cost approximately $250,000.

      ROMANSKA - NINKOWIC - In April 1997, Ms. Romanska - Ninkowic filed suit in
Voivodship Court in Krakow, Poland against IFFP. Ms. Romanska - Ninkowic alleges
that IFFP owes her approximately  266,831 PLN  (approximately  $89,000) in final
settlement for the  construction of IFFP's Katowice  restaurant.  IFFP is in the
process of filing a countersuit  against Ms. Romanska - Ninkowic  citing,  among
other things, failure to comply with the terms of the contractor's agreement. No
court date has been set. IFFP believes the charges are without merit.


      Statements  contained in this report that are not based on historical fact
are  "forward-looking  statements"  within the meaning of the private securities
litigation reform act of 1995.  Forward-looking  statements may be identified by
the  use of  forward  looking  terminology  such  as  "may,"  "will,"  "expect,"
"believe," "estimate,"  "anticipate," "continue," or similar terms or variations
of those  terms or the  negative of those  terms.  There are many  factors  that
affect the Company's  business and the results of its  operations  and may cause
the actual  results of operations in future  periods to differ  materially  from
those currently expected or desired.  These factors include, but are not limited
to: receipt and fulfillment of expected orders,  changes in general business and
economic  conditions,  the growth of  segments  in which the  Company  operates,
market volatility; the effectiveness of price and other competition faced by the
Company;  the market acceptance of the Company's products and the timing of such
acceptance;  the change in customers' buying patterns;  changes in the Company's
sales practice; the raising of capital and other important factors.

                                   36

<PAGE>



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)     Exhibits:

        Exhibit                        Description
        -------                        -----------

        10.1    Promissory Note dated March 11, 1997 by International  Fast Food
                Corporation to Litigation Funding Inc.

        10.2    Second  Amendment to Agreement  to Asssign  Litigation  Proceeds
                dated   March  13,   1997   between   International   Fast  Food
                Corporation,   International  Fast  Food  Polska  Sp.  Zo.o  and
                Litigation Funding, Inc.

        10.3    Agreement dated May 9, 1997, between Litigation  Funding,  Inc.,
                International  Fast Food Corporation and International Fast Food
                Polska Sp. Zo.o.


        (b)     The following  reports on Form 8-K were filed during the quarter
ended on March 31, 1997:

                (i)     On January 22,  1997,  the  Company  filed a Form 8-K in
connection  with the issuance of three 8%  Convertible  Promissory  Notes for an
aggregate total of $400,000.

                (ii)    On  February 7, 1997,  the Company  filed a Form 8-K, in
connection with the change of accountants to Moore Stephens-Lovelace, Roby, P.L.

                (iii)   On March 19,  1997,  the  Company  filed a Form 8-K/A in
connection with the change of accountants to Moore Stephens-Lovelace, Roby, P.L.

                (iv)    On March 19,  1997,  the  Company  filed a Form 8-K,  in
connection with the issuance of one 8% Convertible Promissory Note in the amount
of $100,000.




















                                       37

<PAGE>









                                   SIGNATURES

      In accordance with Section 13 or 15 (d) of the Securities  Exchange Act of
1934,  International Fast Food has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.


                              INTERNATIONAL FAST FOOD CORPORATION



DATE:  May  14  , 1997              By: /s/ Mitchell Rubinson
                                       -----------------------------------------
                                    Mitchell Rubinson, Chairman of the Board,
                                    Chief Executive Officer and President
                                    (Principal Executive Officer)



DATE:  May  14 , 1997               By: /s/ James Martin
                                       -----------------------------------------
                                    James Martin, Chief Financial Officer
                                    (Principal Financial and Accounting Officer)