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 June 30, 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 August 15, 1997 was 43,474,727.

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
                  June 30, 1997 and December 31, 1996                  2 - 3


                  Consolidated Statements of Operations
                  for the Three and Six Months Ended
                  June 30, 1997 and 1996                                 4


                  Consolidated Statements of
                  Shareholders' Equity for the Six
                  Months Ended June 30, 1997                             5


                  Consolidated Statements of Cash Flows
                  for the Six Months Ended June 30,
                  1997 and 1996                                        6 - 7


                  Notes to Consolidated Financial
                  Statements                                           8 - 21



      ITEM. 2     Management's Discussion and Analysis
                  or Plan of Operation                                22 - 41



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

SIGNATURES




                                      1


<PAGE>



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


                                    ASSETS
                                    ------



                                                June 30,        December 31,
                                                  1997              1996
                                              ------------       -----------

CURRENT ASSETS:

   Cash and cash equivalents                 $   1,762,230      $    194,269
   Restricted cash and
      certificates of deposit                    1,446,291           500,000
   Note receivable                                 500,000
   Receivables                                      44,235            42,348
   Inventories                                     263,026           300,217
   Advances to affiliate                           106,147           228,984
   Prepaid expenses                                 41,100            53,794
                                              ------------       -----------

      Total Current Assets                       4,163,029         1,319,612
                                              ------------       -----------


FURNITURE, EQUIPMENT AND
   LEASEHOLD IMPROVEMENTS, NET                   5,378,045         5,586,844

DEFERRED DEBENTURE ISSUANCE COSTS,
   NET OF ACCUMULATED AMORTIZATION
   OF $140,783 AND $124,155,
   RESPECTIVELY                                    291,542           308,170

OTHER ASSETS, NET OF ACCUMULATED
   AMORTIZATION OF $276,238 and
   $206,792                                        523,741           618,978

BURGER KING DEVELOPMENT
   RIGHTS, NET OF ACCUMULATED
   AMORTIZATION OF $27,027                         972,973              -
                                              ------------       -----------



   Total Assets                               $ 11,329,330       $ 7,833,604
                                              ============       ===========


                             See Accompanying Notes

                                        2

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

                      LIABILITIES AND SHAREHOLDERS' EQUITY

                                                June 30,        December 31,
                                                  1997              1996
                                              ------------      ------------
CURRENT LIABILITIES:
   Accounts payable                           $    464,767       $   454,697
   Accrued interest payable                         52,587            10,335
   Other accrued expenses                          393,294         1,009,606
   Bank credit facilities payable                1,978,701         1,220,495
   Other notes payable                                -               69,307
   Payable to affiliate                               -              149,382
   Non-interest bearing obligation
     payable to minority shareholder
     of IFF Polska                                    -              500,000
                                              ------------      ------------

      Total Current Liabilities                  2,889,349         3,413,822

LONG TERM BANK CREDIT FACILITIES                   100,000           300,000

NOTE PAYABLE TO LITIGATION FUNDING               2,198,494              -

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

      Total Liabilities                          7,943,843         6,469,822
                                              ------------      ------------

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

MINORITY INTEREST IN NET ASSETS OF
   CONSOLIDATED SUBSIDIARY                         337,862           460,361
                                              ------------      ------------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
   Preferred Stock, $.01 par value,
   (liquidation preference of
   $3,695,000 , 1,000,000 shares
   authorized; 36,950 and 38,240
   shares issued and outstanding,
   respectively                                       369                382

   Common Stock, $.01 par value,
   100,000,000 shares authorized;
   17,565,516 and 10,322,521 shares
   issued and outstanding, respectively            175,655           103,225

   Additional paid-in capital                   15,150,944        14,523,361

   Accumulated deficit                         (13,304,241)      (13,706,261)

   Accumulated translation adjustment               24,898       (    17,286)
                                              ------------      ------------

      Total Shareholders' Equity                 2,047,625           903,421
                                              ------------      ------------
      Total Liabilities and
          Shareholders' Equity                $ 11,329,330      $  7,833,604
                                              ============      ============

                            See Accompanying Notes

                                      3

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

<TABLE>
<CAPTION>
                                             Three Months Ended                  Six Months Ended
                                                  June 30,                           June 30,
                                      ------------------------------      ------------------------------
                                          1997              1996               1997              1996
                                      ------------      ------------      ------------      ------------
<S>                                   <C>               <C>               <C>               <C>         
REVENUES:
  Restaurant sales                    $  1,393,949      $  1,346,092      $  2,752,559      $  2,614,766
  Other operating                           22,614            30,792            51,478            68,869
                                      ------------      ------------      ------------      ------------

     Total Revenue                       1,416,563         1,376,884         2,804,037         2,683,635

FOOD AND PACKAGING                         550,079           590,907         1,119,022         1,163,188
                                      ------------      ------------      ------------      ------------

GROSS PROFIT                               866,484           785,977         1,685,015         1,520,447

RESTAURANT OPERATING EXPENSES:
  Payroll and Related Costs                223,218           198,380           440,070           383,869
  Occupancy and Other Operating
     Expenses                              399,649           328,069           764,717           707,399
  Depreciation and Amortization            213,388           229,496           436,875           475,992
                                      ------------      ------------      ------------      ------------
     Total Restaurant Operating
        Expenses                           836,255           755,945         1,641,662         1,567,260
                                      ------------      ------------      ------------      ------------

                                            30,229            30,032            43,353       (    46 813)
                                      ------------      ------------      ------------      ------------
GENERAL AND ADMINISTRATIVE
  EXPENSES                                 222,376           269,824           714,886           769,137
                                      ------------      ------------      ------------      ------------

OTHER INCOME (EXPENSES):
  Interest and other, net              (   119,282)           54,890       (   102,845)          106,799
  Interest expense, including
     amortization of debenture
     issuance costs                    (   167,624)      (   117,865)      (   273,171)      (   228,542)
  Gain on settlement of
     litigation, net of applicable
     costs                                     -                -            1,327,070              -
                                      ------------      ------------      ------------      ------------
           
     Total other income
        (expenses)                     (   286,906)      (    62,975)          951,054       (   121,743)
                                      ------------      ------------      ------------      ------------

INCOME (LOSS) BEFORE MINORITY
  INTEREST                             (   479,053)      (   302,767)          279,521       (   937,693)

MINORITY INTEREST IN LOSSES OF
  CONSOLIDATED SUBSIDIARY                   51,247            45,335           122,499           117,661
                                      ------------      ------------      ------------      ------------

NET INCOME (LOSS)                     $(   427,806)     $(   257,432)     $    402,020      $(   820,032)
                                      ============      ============      ============      ============

NET INCOME (LOSS) PER COMMON SHARE:

     Primary                          $(       .03)     $(       .06)     $        .03      $(       .20)
                                      ============      ============      ============      ============

     Fully diluted                    $(       .03)     $(       .06)     $        .03      $(       .20)
                                      ============      ============      ============      ============
WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING

     Primary                            13,115,361         4,462,168        13,007,129         4,182,621
                                      ============      ============      ============      ============

     Fully diluted                      13,115,361         4,462,168        17,453,364         4,182,621
                                      ============      ============      ============      ============
</TABLE>
                                              See Accompanying Notes

                                                       4

<PAGE>

<TABLE>
<CAPTION>
                                        INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                                          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                               For the Six Months Ended June 30, 1997
                                                            (Unaudited)


                                      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                 42,995       430   (  1,290)  (    13)   (       417)                        -              -
Common Stock issued in
   exchange for professional
   services                     2,000,000    20,000       -         -           180,000          -              -           200,000
Common Stock issued in
   exchange for Underwriter
   and debenture warrants         200,000     2,000       -         -       (     2,000)         -              -
Conversion of 8% Convertible
   Promissory Notes             5,000,000    50,000       -         -           450,000                         -           500,000
Translation adjustments              -         -          -         -              -           42,184           -            42,184
Net income for the period            -         -          -         -              -                         402,020        402,020
                               ----------  --------   --------   -------   ------------  ------------   ------------    -----------
Balances,
   June 30, 1997               17,565,516  $175,655     36,950   $   369   $ 15,150,944  $     24,898   $(13,304,241)   $ 2,047,625
                               ==========  ========   ========   =======   ============  ============   ============    ===========

</TABLE>








































                                                       See Accompanying Notes

                                                                 5



<PAGE>



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


                                                 Six Months Ended June 30,
                                              ------------------------------  
                                                  1997              1996
                                              ------------      ------------

CASH FLOWS FROM OPERATING
   ACTIVITIES:

   Net income (loss)                          $    402,020      $(   820,032)
   Adjustment to reconcile net income
      (loss) to net cash provided by
      (used in)operating activities:
      Amortization and depreciation                484,764           539,477
      Minority interest in losses of
          subsidiary                           (   122,499)      (   117,661)
   Changes in operating assets and
      liabilities:
          Receivables                          (     1,887)      (    45,857)
          Inventories                               37,191       (       945)
          Prepaid expenses                          12,694             1,321
          Accounts payable and
             accrued expenses                  (   363,990)          189,642
                                              ------------      ------------

   Net cash provided by (used in)
      operating activities                         448,293       (   254,055)
                                              ------------      ------------


CASH FLOWS FROM INVESTING
  ACTIVITIES:

   Note receivable                             (   500,000)             -
   Increase in restricted cash and
      certificates of deposit                  (   946,291)             -
   Payments for furniture, equipment
      and leasehold improvements, net          (   162,864)             -
   Payments for other assets                   (     4,209)      (    52,306)
   Disposition of furniture & equipment               -              133,215
   Refund of franchise fees                         30,000              -
                                              ------------      ------------

   Net cash provided by (used in)
      investing activities                     ( 1,583,364)           80,909
                                              ------------      ------------




                            See Accompanying Notes

                                      6

<PAGE>

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

                                                 Six Months Ended June 30,
                                             ------------------------------ 
                                                  1997              1996
                                             ------------      ------------
CASH FLOWS FROM FINANCING
   ACTIVITIES:
   Sale of common shares for cash                     -              110,000
   Sale of options for cash                           -               10,000
   Advances from (to) Affiliate, net           (    26,545)           68,099
   Repayments of bank credit
      facilities                               (   440,794)      (   219,248)
   Increase in Payable to Litigation
      Funding                                    3,227,015              -
   Payment to Litigation Funding               ( 1,028,521)             -
   Payment of other notes payable              (    69,307)             -
   Payment of non-interest bearing
      obligation to minority share-
      holder of IFF Polska                     (   500,000)             -
   Borrowings under bank credit
      facilities                                   999,000           300,000
   Net Proceeds from issuance of
      convertible promissory notes                 500,000              -
                                              ------------      ------------
   Net cash provided by financing
      activities                                 2,660,848           268,851
                                              ------------      ------------
FOREIGN CURRENCY TRANSLATION
   ADJUSTMENT                                       42,184       (    94,098)
INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                              1,567,961             1,607
BEGINNING CASH AND CASH EQUIVALENTS                194,269           253,510
                                              ------------      ------------
ENDING CASH AND CASH EQUIVALENTS              $  1,762,230      $    255,117
                                              ============      ============
SUPPLEMENTAL DISCLOSURES OF
   CASH FLOW INFORMATION:
   Cash paid during the period for:
      Interest                                $    214,291      $    175,815
                                              ============      ============

SUPPLEMENTAL SCHEDULE OF NON
   CASH INVESTING & FINANCING
   ACTIVITIES:
SIX MONTHS ENDED JUNE 30, 1997:
      Issuance  of 42,995  shares of Common  Stock  upon the  exchange  of 1,290
      shares of Preferred Stock.

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

      Issuance of 5,000,000  shares of Common Stock upon  conversion of $500,000
      principal amount of 8% Convertible Promissory Notes.

      Issuance  of  200,000   shares  of  Common   Stock  in  exchange  for  the
      cancellation of 130,000  Underwriter Common Stock warrants and Underwriter
      $1,000,000 debenture warrants.

SIX MONTHS ENDED JUNE 30, 1996:
      Issuance  of 293,970  shares of Common  Stock upon the  exchange  of 8,820
      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 six months ended June 30, 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 June 30, 1997 and


                                      8

<PAGE>
                INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                       (Unaudited)
    
1996,   the  exchange  rate  was  3.2640  and  2.7720  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  and six  months  ended  June 30,  1996,  were
decreased by $65,784 and $94,098 and $.01 and $.02, respectively.

      LIQUIDITY AND PLAN OF  OPERATIONS - As of June 30, 1997,  IFFC had working
capital of approximately $1,273,680 and Cash and Cash Equivalents of $1,762,230.
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 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.  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
six months ended June 30, 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 six
months  ended June 30, 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 six months ended June 30, 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 June  30,  1997 the  Company  had  $1,446,291  of  restricted  cash and
certificates  of  deposit,  $446,301  of  which  represents  collateral  for  an
outstanding  letter  of  credit  and  $999,990  represents   collateral  for  an
outstanding line of credit.

4.    BANK CREDIT FACILITIES:

Bank credit facilities at June 30, 1997 consists of the following:

Amerbank  in  Poland,   S.A.   overdraft
  credit     line,     variable     rate
  approximately equal to prime,  expires
  March 31, 1998                                                  $     19,701

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                                                             110,000

Bank  Handlowy  Warszawie,   S.A.,  IFFP
  credit   facility   in  the   original
  principal    amount   of   $1,000,000,
  payable  $100,000 on 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                                                            650,000

Totalbank  line of  credit  of  $999,000
  payable  in  full  on  May  19,  1998,
  interest  at  6.5%  payable  quarterly
  collateralized   by   certificates  of
  deposit in the amount $999,990                                      999,000
                                                                 ------------

                                                                    2,078,701

Less: Current Maturities                                            1,978,701
                                                                 ------------
      Total Long Term Debt                                     $      100,000
                                                               ==============


                                       10


<PAGE>


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



5.    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
six months ended June 30, 1997 follows:
                                                      1997
                                                     -------
      Outstanding at beginning of period             210,000
      Granted                                           -
      Exercised                                         -
      Expired                                       ( 50,000)
                                                     -------
      Outstanding at end of period                   160,000
                                                     =======
      Exercisable at end of period                   156,000
                                                     =======
      Price range of options outstanding        
        at end of period                            $  1.375
                                                     =======
      Available for grant at end of period           490,000
                                                     =======
                                            
      During the six months  ended June 30,  1997 and 1996,  42,995 and  293,970
shares of Common  Stock were issued upon  exchange of 1,290 and 8,820  shares of
Preferred Stock.

6.    CONVERTIBLE PROMISSORY NOTES:

      In January  and March  1997,  IFFC sold to the  Company's  Chairman of the
Board,  Chief  Executive  Officer  and  President  and his wife as well as other
members of his family an aggregate of $500,000 8% convertible  promissory  notes
due January 1999. The notes were converted into 5,000,000 shares of Common Stock
on June 19, 1997.

      At June 30, 1997,  IFFC had reserved the following  shares of Common Stock
for issuance:

      Stock option plan                              650,000

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

      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                           1,231,548

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

          Total reserved shares                    2,546,583
                                                   =========

                                      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
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.

                                       12


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



      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
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.


                                       13

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


      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
forgave  $499,768  representing  all  monies  owed BKC by IFFP and IFFC  through

                                       14


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


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
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".
                                      15

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

      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 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

                                      17

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

          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 June 30, 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

          Payment made in May, 1997              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. As more fully described
in Note 10 the amounts due to Funding were satisfied subsequent to June 30, 1997
by issuance of 25,909,211 shares of the Company's common stock.


                                      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  $82,000 at the June
30, 1997  exchange  rate) 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.


9.    OTHER TRANSACTIONS:

      On May 23, 1997,  IFFC entered into an Undertaking and Loan Agreement (the
"Loan Agreement") with QPQ Corporation,  a Florida corporation ("QPQ") and Pizza
King Polska Sp, z.o.o., a Polish limited liability company ("PKP"), whereby IFFC
granted to QPQ a loan in the amount of $500,000, plus interest at the rate of 9%
per annum. By the terms of the Loan Agreement, the Loan was repayable by QPQ (in
U.S.  Dollars)  in full  no  later  than 3  months  from  the  date of the  Loan
Agreement.  QPQ also had the  right  to  prepay  the  principal  amount  without
penalty.  In order to  secure  IFFC's  rights  under  the  Loan  Agreement,  QPQ
transferred  to IFFC  41,258  shares of Common  Stock of PKP (the "PKP  Shares")
owned by QPQ pursuant to an Agreement on Transfer of Shares as Collateral  dated
May 23, 1997 (the  "Transfer  Agreement").  Under the Transfer  Agreement,  IFFC
agreed to transfer  the PKP Shares back to QPQ upon full  repayment of the Loan.
IFFC also  entered  into a revolving  loan  agreement  with PKP for a maximum of
$250,000. The loan is unsecured, bears interest at 9% per annum and is repayable
in full,  including  accrued  interest on August 23, 1997.  At June 30, 1997 and
August 11,  1997,  the balance  outstanding  on the loan was $30,000 and 70,000,
respectively.



                                      19

<PAGE>


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


      On May 20, 1997,  IFFP and PKP executed a management  agreement in Poland.
Under  the  terms  of  the  agreement,   IFFP  will  provide   bookkeeping   and
administrative  services to PKP in  exchange  for 10% of the annual net sales of
PKP. The term of the  agreement  is for an  unlimited  period of time but may be
canceled  by either  party upon  thirty  (30) days  written  notice to the other
party.

      On June 27,  1997,  IFFC,  QPQ and PKP mutually  agreed to  terminate  the
Transfer  Agreement and IFFC transferred the shares of PKP back to QPQ. QPQ sold
the PKP shares to Krolewska Pizza Sp.zo.o ("KP") and transferred  QPQ's $500,000
liability  owing to IFFC to KP. See Note 10 for a description of IFFC's purchase
of KP on July 18, 1997.



10.   SUBSEQUENT EVENTS:

      On  July  14,  1997,  International  Fast  Food  Corporation,   Inc.  (the
"Company") and IFFC Acquisition,  Inc., a wholly-owned subsidiary of the Company
("Acquisition  Sub") entered into a Merger  Agreement with  Litigation  Funding,
Inc.  ("Funding")  and  Mitchell and Edda  Rubinson,  the sole  shareholders  of
Funding.  Under the terms of the  Agreement,  Funding  was merged  with and into
Acquisition  Sub.  The  25,909,211  shares of common  stock of the Company to be
received by the Funding  shareholders  is determined by dividing the  $3,021,014
value  assigned to Funding by the book value per share ($.1166) of the Company's
common  stock  as of  June  30,  1997,  before  reduction  for  the  liquidation
preference applicable to the 36,950 outstanding shares of Preferred Stock.

      The value assigned to Funding  represents (i) the $2,198,494  plus accrued
interest owed to Funding by the Company  pursuant to a promissory  note and (ii)
$750,000 which represents  seventy-five  percent (75%) of the value attributable
to the New Development Agreement between Burger King Corporation ("BKC" and IFFC
and its affiliates  which was executed on March 14, 1997 in connection  with the
Company's  settlement  of its  litigation  against BKC.  Funding was entitled to
receive  seventy-five  percent (75%) of the litigation  proceeds under its prior
agreements  with the Company.  For a more  detailed  discussion of the Company's
agreements with Funding, see "Note 8 - Litigation."

      On July 18, 1997, the Company  purchased 100% of Krolewska Pizza Sp.z.o.o.
("KP"), a limited liability company, for a nominal  consideration and assumption
of all  liabilities,  including  the  liabilities  of KP to the Company  under a
$500,000  promissory note. KP and its wholly-owned  subsidiary own the exclusive
development rights and franchises of Dominos pizza stores in Poland.

      The  acquisition   will  be  accounted  for  by  the  purchase  method  of
accounting,  and the net  assets  acquired  will be  included  in the  Company's
consolidated balance sheet based upon their estimated fair values at the date of
acquisition.  Results of  operations  of KP will be  included  in the  Company's
consolidated statement of operations subsequent to the date of acquisition.  The
excess of the net assets  acquired over the purchase price will be accounted for
as a reduction of furniture, equipment and leasehold improvements.

                                      20

<PAGE>


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



      The  following  unaudited  pro-forma  summary  presents  the  consolidated
results of operations as if the acquisition had occurred at the beginning of the
periods  presented  and does not  purport  to be  indicative  of what would have
occurred had the  acquisition  actually  been made as of such date or of results
which may occur in the future.

                               Three Months Ended          Six Months Ended
                                    June 30,                   June 30,
                           -------------------------   ------------------------
                               1997          1996          1997          1996
                           -----------   -----------   -----------  -----------

    Total Revenues         $ 1,719,006   $ 1,639,041   $ 3,392,476  $ 3,200,773

    Net income (loss)      $(  513,390)  $(  365,922)  $   105,690  $(1,123,181)

    Net income loss
          per share        $(      .04)  $(      .08)  $       .01  $(      .27)


      On July 7, 1997, IFFP and British  Petroleum ("BP") of Poland,  executed a
letter of intent for the co-development of Burger King restaurants and BP petrol
stations  throughout the Republic of Poland.  The letter,  although not binding,
states that BP will provide IFFP with  packages of between 5 and 10  development
sites each.  These sites will be available to IFFP to lease for a specific  term
plus option periods at IFFP's discretion  subject to Burger King approval.  IFFP
anticipates  these locations will open in 1998 and beyond.  Rental terms will be
based on a minimum monthly rental fee and/ or a percentage of sales. IFFP and BP
are currently negotiating the terms of the master lease.

      On July 10, 1997, IFFP and Du Pont Conoco ("Conoco") of Poland, executed a
letter of intent for the  co-development  of Burger King  restaurants and Conoco
petrol  stations  throughout  the Republic of Poland.  The letter,  although not
binding,  states that Conoco will provide IFFP with packages of between 5 and 10
development  sites each.  These sites will be  available  to IFFP to lease for a
specific term plus option  periods at IFFP's  discretion  subject to Burger King
approval.  IFFP anticipates these locations will open in 1998 and beyond. Rental
terms  will be based on a minimum  monthly  rental fee and/ or a  percentage  of
sales. IFFP and Conoco are currently negotiating the terms of the master lease.

      Presently,  IFFP  is  negotiating  with  other  petrol  companies  for the
co-development  of Burger King  restaurants  throughout  the Republic of Poland.
IFFP, in  coordination  with Burger King  Corporation,  is presently  evaluating
these sites to determine the feasibility of each.


                                      21


<PAGE>



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

GENERAL

      Managements  Discussion and Analysis or Plan of Operation contains various
"forward  looking  statements"  within the meaning of the Securities Act of 1933
and the  Securities  And Exchange Act of 1934,  which  represents  the Company's
expectations or beliefs  concerning future events including  without  limitation
the following;  fluctuations  in the Polish  economy;  ability of the Company to
obtain  financing on terms and  conditions  that are  favorable;  ability of the
Company to improve levels of  profitability  and sufficiency of cash provided by
operations, investing and financing activities.

      The  Company  cautions  that these  statements  are further  qualified  by
important  factors that could cause  actual  results to differ  materially  from
those  contained  in  the  forward   looking   statements,   including   without
limitations, general economic and political conditions in Poland, the demand for
the Company's  products and services,  changes in the level of operating expense
and the present and future level of competition.  Results actually  achieved may
differ materially from expected results included in these statements.

      As of June 30, 1997, IFFC had working capital of approximately  $1,273,680
and Cash and Cash  Equivalents  of $1,762,230.  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.

      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 herein 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

                                      22

<PAGE>


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
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

                                      23

<PAGE>

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 (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

                                     24

<PAGE>


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 June 30, 1997, IFFC is indebted to
Funding for an aggregate amount of $2,198,494 pluss accrued interest.  See Notes
8 and 10 of Notes To Consolidated  Financial Statements for a description of the
amounts due to Funding and the subsequent satisfaction thereof.

      On  July  14,  1997,  International  Fast  Food  Corporation,   Inc.  (the
"Company") and IFFC Acquisition,  Inc., a wholly-owned subsidiary of the Company
("Acquisition  Sub") entered into a Merger  Agreement with  Litigation  Funding,
Inc.  ("Funding")  and  Mitchell and Edda  Rubinson,  the sole  shareholders  of
Funding.  Under the terms of the  Agreement,  Funding  was merged  with and into
Acquisition  Sub.  The  25,909,211  shares of common  stock of the Company to be
received by the Funding  shareholders  is determined by dividing the  $3,021,014
value  assigned to Funding by the book value per share ($.1166) of the Company's
common  stock  as of  June  30,  1997,  before  reduction  for  the  liquidation
preference applicable to the 36,950 outstanding shares of Preferred Stock.

      The value assigned to Funding  represents (i) the $2,198,494  plus accrued
interest owed to Funding by the Company  pursuant to a promissory  note and (ii)
$750,000 which represents  seventy-five  percent (75%) of the value attributable
to the New Development Agreement between Burger King Corporation ("BKC" and IFFC
and its affiliates  which was executed on March 14, 1997 in connection  with the
Company's  settlement  of its  litigation  against BKC.  Funding was entitled to
receive  seventy-five  percent (75%) of the litigation  proceeds under its prior
agreements  with the Company.  For a more  detailed  discussion of the Company's
agreements with Funding, see "Note 8 - Litigation."

      On May 23, 1997,  IFFC entered into an Undertaking and Loan Agreement (the
"Loan Agreement") with QPQ Corporation,  a Florida corporation ("QPQ") and Pizza
King Polska Sp, z.o.o., a Polish limited liability company ("PKP"), whereby IFFC
granted to QPQ a loan in the amount of $500,000, plus interest at the rate of 9%
per  annum  (the  "Loan").  By the  terms  of the Loan  Agreement,  the Loan was
repayable by QPQ (in U.S.  Dollars) in full no later than 3 months from the date
of the Loan  Agreement.  QPQ also had the right to prepay the  principal  amount
without penalty. In order to secure IFFC's rights under the Loan Agreement,  QPQ
transferred  to IFFC  41,258  shares of Common  Stock of PKP (the "PKP  Shares")
owned by QPQ pursuant to an Agreement on Transfer of Shares as Collateral  dated
May 23, 1997 (the  "Transfer  Agreement").  Under the Transfer  Agreement,  IFFC
agreed to transfer  the PKP Shares back to QPQ upon full  repayment of the Loan.
IFFC also  entered  into a revolving  loan  agreement  with PKP for a maximum of
$250,000. The loan is unsecured, bears interest at 9% per annum and is repayable
in full,  including  accrued  interest on August 23, 1997.  At June 30, 1997 and
August 11,  1997,  the balance  outstanding  on the loan was $30,000 and 70,000,
respectively.

      On May 20, 1997,  IFFP and PKP executed a management  agreement in Poland.
Under  the  terms  of  the  agreement,   IFFP  will  provide   bookkeeping   and
administrative  services to PKP in  exchange  for 10% of the annual net sales of
PKP. The term of the  agreement  is for an  unlimited  period of time but may be
canceled  by either  party upon  thirty  (30) days  written  notice to the other
party.
                                      25

<PAGE>

      On June 27,  1997,  IFFC,  QPQ and PKP mutually  agreed to  terminate  the
Transfer  Agreement and IFFC transferred the shares of PKP back to QPQ. QPQ sold
the PKP shares to Krolewska Pizza Sp.zo.o ("KP") and transferred  QPQ's $500,000
liability owing to IFFC to KP.

      On July 18, 1997, the Company  purchased 100% of Krolewska Pizza Sp.z.o.o.
("KP"), a limited liability company, for a nominal  consideration and assumption
of all  liabilities,  including  the  liabilities  of KP to the Company  under a
$500,000  promissory note. KP and its wholly-owned  subsidiary own the exclusive
development rights and franchises of Dominos pizza stores in Poland.

      The  acquisition   will  be  accounted  for  by  the  purchase  method  of
accounting,  and the net  assets  acquired  will be  included  in the  Company's
consolidated balance sheet based upon their estimated fair values at the date of
acquisition.  Results of  operations  of KP will be  included  in the  Company's
consolidated statement of operations subsequent to the date of acquisition.  The
excess of the net assets  acquired over the purchase price will be accounted for
as a reduction of furniture, equipment and leasehold improvements.

      The  following  unaudited  pro-forma  summary  presents  the  consolidated
results of operations as if the acquisition had occurred at the beginning of the
periods  presented  and does not  purport  to be  indicative  of what would have
occurred had the  acquisition  actually  been made as of such date or of results
which may occur in the future.

                               Three Months Ended          Six Months Ended
                                    June 30,                    June 30,
                          -------------------------   -------------------------
                              1997          1996          1997          1996
                          -------------------------   -------------------------
    Total Revenues        $ 1,719,006   $ 1,639,041   $ 3,392,476   $ 3,200,773

    Net income (loss)     $(  513,390)  $(  365,922)  $   105,690   $(1,123,181)

    Net income loss
            per share     $(      .04)  $(      .08)  $       .01   $(      .27)


      On July 7, 1997, IFFP and British  Petroleum ("BP") of Poland,  executed a
letter of intent for the co-development of Burger King restaurants and BP petrol
stations  throughout the Republic of Poland.  The letter,  although not binding,
states that BP will provide IFFP with  packages of between 5 and 10  development
sites each.  These sites will be available to IFFP to lease for a specific  term
plus option periods at IFFP's discretion  subject to Burger King approval.  IFFP
anticipates  these locations will open in 1998 and beyond.  Rental terms will be
based on a minimum monthly rental fee and/ or a percentage of sales. IFFP and BP
are currently negotiating the terms of the master lease.

      On July 10, 1997, IFFP and Du Pont Conoco ("Conoco") of Poland, executed a
letter of intent for the  co-development  of Burger King  restaurants and Conoco
petrol  stations  throughout  the Republic of Poland.  The letter,  although not
binding,  states that Conoco will provide IFFP with packages of between 5 and 10
development  sites each.  These sites will be  available  to IFFP to lease for a
specific term plus option  periods at IFFP's  discretion  subject to Burger King
approval.  IFFP anticipates these locations will open in 1998 and beyond. Rental
terms  will be based on a minimum  monthly  rental fee and/ or a  percentage  of
sales. IFFP and Conoco are currently negotiating the terms of the master lease.

                                       26

<PAGE>



      Presently,   IFFP  is   negotiating   with   petrol   companies   for  the
co-development  of Burger King  restaurants  throughout  the Republic of Poland.
IFFP, in  coordination  with Burger King  Corporation,  is presently  evaluating
these sites to determine the feasibility of each.
















































                                      27


<PAGE>



SIX MONTHS ENDED JUNE 30, 1997 VS SIX MONTHS ENDED JUNE 30, 1996

RESULTS OF OPERATIONS

      For the six months ended June 30, 1997 and June 30, 1996,  IFFC  generated
Restaurant Sales of $2,752,559 and $2,614,766,  respectively. In U.S. dollar and
Polish zloty terms IFFC's  Restaurant Sales increased by approximately  5.3% and
24.9% for the six months ended June 30, 1997 as compared to the six months ended
June 30, 1996.  The increase is primarily  attributable  to improved local store
marketing and the general improvements in the Polish economy.

      During  the six  months  ended  June  30,  1997,  IFFC  incurred  Food and
Packaging  Expense  of  $1,119,022,  Payroll  and  Related  Costs of  $440,070 ,
Occupancy  and Other  Operating  Expenses  of  $764,717,  and  Depreciation  and
Amortization Expense of $436,875.

      Food and  Packaging  Costs for the six months ended June 30, 1997 and 1996
were 40.7% and 44.5% of Restaurant Sales,  respectively.  The 3.8% 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 six months ended June 30, 1997 and 1996
were 16.0% 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 and related benefits in Poland effective January 1, 1997.

      Occupancy and Other  Operating  Expenses for the six months ended June 30,
1997 and 1996 were 27.8% and 27.1% of Restaurant  Sales,  respectively.  The .7%
increase as a percentage of  Restaurant  Sales is primarily  attributable  to an
increase in utilities and repairs and maintenance.

      Depreciation and Amortization  Expense as a percentage of Restaurant Sales
was  15.9%  and  18.2%  in  the  six  months  ended  June  30,  1997  and  1996,
respectively. The 2.3% 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 as well as the  increase in
amortization  expense  associated with the deferred leased costs associated with
the renegotiation of the Dantex lease.

      General and Administrative Expenses for the six months ended June 30, 1997
and 1996 were  26.0%  and  29.4% of  Restaurant  Sales,  respectively.  The 3.4%
decrease as a  percentage  of  Restaurant  Sales is  primarily  attributable  to
reductions  of salaries  and  related  benefits  and legal  fees.  IFFC does not
anticipate its General and Administrative  Expenses will increase  significantly
over the next twelve months. For the six months ended June 30, 1997, General and
Administrative  Expenses were  comprised of executive and office staff  salaries
and benefits ("Salary  Expense")  $248,681;  legal and professional fees, office
rent,  travel,  telephone  and other  corporate  expenses  ("Corporate  Overhead
Expense")  $418,226,  and  depreciation and  amortization  $47,979.  For the six
months ended June 30, 1996, General and Administrative Expense were comprised of
executive  and office staff  salaries  $316,956;  legal and  professional  fees,
office rent,  travel,  telephone and other general corporate  expenses $405,324,
and depreciation and amortization $46,857.

                                      28

<PAGE>

      For the six  months  ended June 30,  1997,  IFFC  generated  net income of
$402,020  or $.03 per share of IFFC's  Common  Stock  compared  to a net loss of
$(820,032),  or $(.20) per share of IFFC's Common Stock for the six months ended
June 30,  1996.  During the six months ended June 30,  1997,  IFFC  recognized a
non-recurring  gain of  $1,327,070  or $.10 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 six months  ended June 30, 1997 and 1996  Interest  and Other Income was
comprised as follows:

                                                   Six Months Ended June 30,
                                                 --------------------------- 
                                                    1997             1996
                                                 ----------       ----------

      Interest income                           $    70,193      $    49,932
      Foreign exchange (losses)
          gains, net                             (   25,862)      (    1,507)
      Management fee                                  9,580           10,996
      All other, net                             (  156,756)          47,378
                                                 ----------       ----------

                                                $(  102,845)     $   106,799
                                                 ==========       ==========

      All other,  net  includes  various  non-recurring  charges and credits not
specifically related to operating activity.

Interest Expense is comprised as follows:

                                                   Six Months Ended June 30,
                                                 --------------------------- 
                                                    1997             1996
                                                 ----------       ----------
      Interest Expense on Subordinated
          Convertible Debentures                $   124,020      $   124,020

      Interest Expense on Note Payable
          to Litigation Funding                      43,671             -

      Interest Expense on Convertible
          Promissory Notes                           16,178             -

      Amortization of Debenture
          Issuance Costs                             16,628           16,628

      Interest Expense on Bank
          Facilities                                 72,674           87,894
                                                 ----------       ----------

                 Total                          $   273,171      $   228,542
                                                 ==========       ==========


      Interest  Expense  exceeded  Interest  and Other  Income by  $376,016  and
$121,743 for the six months ended June 30, 1997 and 1996, respectively.


                                      29

<PAGE>


      IFFC's interest expense on bank facilities was $72,674 and $87,894 for the
six months ended June 30, 1997 and 1996,  respectively.  The $15,220 decrease is
attributable  to IFFC's lower level during the 1997 period of  borrowings  under
bank credit facilities.

      During the six months ended June 30, 1997,  IFFC recorded a  non-recurring
gain of $1,327,070,  or $.10 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.

      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

                                      30


<PAGE>

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
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.

                                      31

<PAGE>

      On May 17,  1996,  IFFC's  Common  Stock was deleted from the NASDAQ Stock
Market and has traded on the over the counter market (Electronic bulletin board)
since that date.

      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  various  bank credit
facilities  and proceeds  from the sale of certain  equity  securities of IFFC's
formerly wholly-owned subsidiary and the BKC Settlement Agreement,

      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,
December  15,  1996 and June 15,  1997  and as of June  30,  1997,  $332,550  of
preferred dividends remain in arrears. At June 30, 1997 there were 36,950 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 of the offering.

      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
at $.10 per share.  Jaime  Rubinson  purchased  250,000  shares and Kim Rubinson
purchased  250,000  shares.  Both are the  daughters of Mitchell  Rubinson,  the
Company's President.

      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,


                                      32


<PAGE>


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 purchased
from the Company a convertible promissory note in the aggregate principal amount
of $100,000.  In June,  1997 the $500,000  principal  amount of the  convertible
promissory notes was converted into 5,000,000 shares of Common Stock.

      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
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.

      See Note 9 of notes to consolidated financial statements for a description
of  transactions  involving the payment of amounts due to Litigation  Funding by
issuance of 25,909,211 shares of Common Stock.

      As of June 30, 1997 and August 11, 1997,  IFFC had $482,076 and  $531,094,
respectively, in accounts with AmerBank and substantially all of such funds were
held as European  Currency Unit  denominated  deposits.  As of June 30, 1997 and
August 11, 1997, $446,301 and $429,742, respectively of the cash on deposit with
Amerbank  was  restricted  and secured  outstanding  balances  of IFFP's  Credit
Facility with Bank Handlowy.  Substantially all of the Company's  remaining cash
is held in U.S. Banks.

      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  300,000  new  zlotys.
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. On April
12, 1996, the credit facility was amended as follows:  (i) to 200,000 new zlotys
(approximately $61,275 at June 30, 1997 exchange rates), and (ii) in March 1997,
the credit  facility  was further  amended to 100,000 new zlotys  (approximately
$30,600 at June 30, 1997 exchange  rates).  The credit facility matures on March
31, 1998. As of June 30, 1997 and August 11, 1997,  the  outstanding  balance on
the credit facility was $19,701 and $28,095 , 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 six
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


                                      33


<PAGE>


that the  outstanding  principal  balance  becomes  due and payable at a rate of
$100,000 on June 30, 1997 and $110,000 on September 30, 1997 plus interest every
six months. As of June 30, 1997 and August 11, 1997,  approximately $110,000 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
March 31, 1998. The credit facility is secured by: (i) a promissory note of IFFP
and (ii) a guarantee of IFFC.  As of June 30, 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 June 30, 1997 and May 8, 1997, $650,000 was outstanding
under the Bank Handlowy credit facility, respectively.

      On May 19,  1997,  IFFC  entered  into a  $999,000  credit  facility  with
Totalbank which is  collateralized  by $999,990 of certificates of deposit.  The
credit  facility  bears interest at 6.5% per annum and is payable in full on May
19, 1998.

      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

                                      34

<PAGE>

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. As of June 30, 1997, the obligation was paid in full.

      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
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.


                                      35


<PAGE>



      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 June 30, 1997, the exchange
rate was 3.2640 new zlotys per dollar.










































                                      36


<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


                                      37

<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

                                      38

<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,  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 June 30,
1997.

                                      39

<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 BKC                                 499,768
          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 June 30, 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

          Payment made in May, 1997               1,028,521
                                                -----------

          Promissory note payable               $ 2,198,494
                                                 ==========
                                      40

<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. As more fully described
in Note 10 of notes to the consolidated  financial statements the amounts due to
Funding were  satisfied  subsequent  to June 30, 1997 by issuance of  25,909,211
shares of the Company's common stock.

      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  $82,000 at the June
30, 1997  exchange  rate) 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.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits:

             Exhibit
             -------

             10.1   Undertaking and Loan  Agreement,  dated May 23, 1997, by and
                    among QPQ,  International  Fast Foot  Corporation  and Pizza
                    King Polska Sp,z.o.o.

             10.2   Agreement on Transfer of Shares as Collateral, dated May 23,
                    1997  by  and   among  QPQ  and   International   Fast  Food
                    Corporation.

          (b)  The following  reports on Form 8-K were filed during the quarter
                ended on June 30, 1997:

               (i)  On April 4, 1997, the Company filed a Form 8-K in connection
                    with  the   settlement  of   litigation   with  Burger  King
                    Corporation.

                                      41

<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:  August 15, 1997              By: /s/ Mitchell Rubinson
                                       -----------------------------------------
                                    Mitchell Rubinson, Chairman of the Board,
                                    Chief Executive Officer and President
                                    (Principal Executive Officer)



DATE:  August 15, 1997              By: /s/ James Martin
                                       -----------------------------------------
                                    James Martin, Chief Financial Officer
                                    (Principal Financial and Accounting Officer)