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, 1998

           [ ]  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 11, 1998 was 44,776,143.
    
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, 1998 and December 31, 1997                   2 - 3


                  Consolidated Statements of Operations
                  for the Three and Six Months Ended
                  June 30, 1998 and 1997                                    4


                  Consolidated Statements of
                  Shareholders' Equity for the Six
                  Months Ended June 30, 1998                                5


                  Consolidated Statements of Cash Flows
                  for the Six Months Ended June 30,
                  1998 and 1997                                         6 - 7


                  Notes to Consolidated Financial
                  Statements                                           8 - 23


      ITEM. 2     Management's Discussion and Analysis
                  or Plan of Operation                                24 - 37

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

         ITEM 2   Legal Proceedings                                        38

         ITEM 6   Exhibits and Reports on Form 8K                          39

         SIGNATURES                                                        40

                                      1

<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                     ASSETS
                                     ------
                                                                                June 30,              December 31,
                                                                                  1998                     1997
                                                                                  ----                     ----
<S>                                                                         <C>                         <C>        
CURRENT ASSETS:
     Cash and cash equivalents                                              $11,018,674                 $18,642,335
     Restricted cash                                                            999,990                     999,990
     Marketable securities                                                    5,000,000                           -
     Receivables                                                                375,687                     101,528
     Inventories                                                                457,040                     372,599
     Prepaid expenses                                                           466,634                     130,711
                                                                          -------------              --------------
          Total Current Assets                                               18,318,025                  20,247,163

FURNITURE, EQUIPMENT AND
     LEASEHOLD IMPROVEMENTS, NET                                              7,664,639                   5,959,378

DEFERRED DEBENTURE ISSUANCE COSTS,
     NET OF ACCUMULATED AMORTIZATION
     OF $174,038 AND $157,410,
     RESPECTIVELY                                                               258,287                     274,915

DEFERRED ISSUANCE COSTS OF 11% CONVERTIBLE
     SENIOR SUBORDINATED DISCOUNT NOTES
     NET OF ACCUMULATED AMORTIZATION
     OF $166,421 AND $41,049,
     RESPECTIVELY                                                             2,323,219                   2,446,869

OTHER ASSETS, NET OF ACCUMULATED
     AMORTIZATION OF $199,539 AND $199,484;
     RESPECTIVELY                                                               475,547                     333,533

BURGER DEVELOPMENT RIGHTS,
     NET OF ACCUMULATED AMORTIZATION
     OF $135,135 AND $81,081,
     RESPECTIVELY                                                               864,865                     918,919

DOMINO'S DEVELOPMENT RIGHTS,
     NET OF ACCUMULATED AMORTIZATION
     OF $31,084 AND $15,542,
     RESPECTIVELY                                                               158,019                     173,561
                                                                          -------------              --------------
     Total Assets                                                           $30,062,601                 $30,354,338
                                                                          =============              ==============
</TABLE>
                             See Accompanying Notes

                                        2

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

                      LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                                 June 30,                December 31,
                                                                                   1998                      1997
                                                                                   ----                      ----
<S>                                                                        <C>                          <C>        
CURRENT LIABILITIES:
     Accounts payable                                                      $  1,165,407                 $   581,555
     Accrued interest payable                                                    82,574                      17,911
     Other accrued expenses                                                     663,003                     788,412
     Current portion of bank credit
     facilities payable                                                       1,475,113                   1,349,995
                                                                           ------------                 -----------

          Total Current Liabilities                                           3,386,097                   2,737,873

11% CONVERTIBLE SENIOR SUBORDINATED
     DISCOUNT NOTES DUE OCTOBER 31, 2007                                     21,455,816                  20,354,680

LONG TERM BANK CREDIT FACILITIES                                                617,867                     630,000

9% SUBORDINATED CONVERTIBLE
     DEBENTURES, DUE DECEMBER 15, 2007                                        2,756,000                   2,756,000
                                                                           ------------                 -----------
          Total Liabilities                                                  28,215,780                  26,478,553
                                                                           ------------                 -----------
DEFERRED CREDIT                                                               1,000,000                   1,000,000
                                                                           ------------                 -----------
MINORITY INTEREST IN NET ASSETS OF
     CONSOLIDATED SUBSIDIARY                                                     47,816                     115,294
                                                                           ------------                 -----------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
     Preferred Stock, $.01 par value,
     1,000,000 shares authorized;
     33,450 and 33,450 shares issued
     and outstanding, respectively (liquidation
     preference of $3,345,000)                                                      334                         334

     Common Stock, $.01 par value,
     100,000,000 shares authorized;
     44,776,143 and 44,641,247 shares
     issued and outstanding, respectively                                       447,762                     446,413

     Additional paid-in capital                                              17,790,543                  17,691,542

     Accumulated deficit                                                    (17,439,634)                (15,377,798)
                                                                           ------------                 -----------

          Total Shareholders' Equity                                            799,005                   2,760,491
                                                                           ------------                 -----------
          Total Liabilities and
                Shareholders' Equity                                        $30,062,601                 $30,354,338
                                                                           ============                 ===========
</TABLE>
                             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,
                                      ------------------------------      ------------------------------
                                          1998              1997               1998              1997
                                      ------------      ------------      ------------      ------------
<S>                                   <C>               <C>               <C>               <C>         
REVENUES:
  Restaurant sales                    $  1,902,902      $  1,393,949      $  3,689,022      $  2,752,559
  Other operating                           16,093            22,614            34,774            51,478
                                      ------------      ------------      ------------      ------------

     Total Revenue                       1,918,995         1,416,563         3,723,796         2,804,037

FOOD AND PACKAGING                         754,842           550,079         1,451,366         1,119,022
                                      ------------      ------------      ------------      ------------

GROSS PROFIT                             1,164,153           866,484         2,272,430         1,685,015

RESTAURANT OPERATING EXPENSES:
  Payroll and Related Costs                345,981           223,218           671,347           440,070
  Occupancy and Other Operating
    Expenses                               559,188           399,649         1,065,085           764,717
  Depreciation and Amortization            313,639           213,388           520,379           436,875
                                      ------------      ------------      ------------      ------------
     Total Restaurant Operating
       Expenses                          1,218,808           836,255         2,256,811         1,641,662
                                      ------------      ------------      ------------      ------------

                                           (54,655)           30,229            15,619            43,353
                                      ------------      ------------      ------------      ------------
GENERAL AND ADMINISTRATIVE
  EXPENSES                                 607,995           222,376         1,142,406           714,886
                                      ------------      ------------      ------------      ------------

OTHER INCOME (EXPENSES):
  Interest and other, net                  239,221       (   116,654)          516,966      (    76,983)
  Interest expense, including
     amortization of debenture
     issuance costs                    (   708,591)      (   167,624)      ( 1,414,542)     (   273,171)
  Gain on settlement of
     litigation, net of applicable
     costs                                       -                 -                 -        1,327,070
  Foreign currency exchange gain
     (loss)                                 15,462       (     2,628)      (     4,601)     (    25,862)
                                      ------------      ------------      ------------      ------------

     Total other income (expenses)     (   453,908)      (   286,906)      (   902,177)          951,054
                                      ------------      ------------      ------------      ------------

INCOME (LOSS) BEFORE MINORITY
  INTEREST                             ( 1,116,558)      (   479,053)      ( 2,028,964)          279,521

MINORITY INTEREST IN LOSSES OF
  CONSOLIDATED SUBSIDIARY                   41,656            51,247            67,478           122,499
                                      ------------      ------------      ------------      ------------

NET INCOME (LOSS)                     $( 1,074,902)     $(   427,806)     $( 1,961,486)     $    402,020
                                      ============      ============      ============      ============

NET INCOME (LOSS) PER COMMON SHARE:

     Primary                          $(       .03)     $(       .04)     $(       .05)     $        .02
                                      ============      ============      ============      ============

     Fully diluted                    $(       .03)     $(       .04)     $(       .05)     $        .03
                                      ============      ============      ============      ============
WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING

     Basic                              44,664,989        13,115,361        44,653,118        13,007,129
                                      ============      ============      ============      ============

     Diluted                            44,664,989        13,115,361        44,653,118        17,453,364
                                      ============      ============      ============      ============
</TABLE>

                             See Accompanying Notes

                                        4
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                     For the Six Months Ended June 30, 1998
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                  Additional
                                     Common Stock          Preferred Stock         Paid In      Accumulated
                                 Shares       Amount     Shares       Amount       Capital        Deficit         Total
                                 ------       ------     ------       ------       -------        -------         -----
<S>                             <C>          <C>           <C>         <C>        <C>           <C>            <C>       
Balances,
    December 31, 1997           44,641,247   $446,413      33,450      $334       $17,691,542   $(15,377,798)  $2,760,491

Issuance of common
    stock in payment
    of dividends on
    preferred stock                134,896      1,349           -         -            99,001       (100,350)           -

Net loss for the period                  -          -           -         -                 -     (1,961,486)  (1,961,486)

Balances,                      -----------  ---------    --------   -------      ------------   ------------  -----------
    June 30, 1998               44,776,143   $447,762      33,450      $334       $17,790,543   $(17,439,634)  $  799,005
                               ===========  =========    ========   =======      ============   ============  ===========
</TABLE>

                             See Accompanying Notes

                                        5
<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (Unaudited)
<TABLE>
<CAPTION>
                                                 Six Months Ended June 30,
                                              ------------------------------
                                                  1998              1997
                                              ------------      ------------
<S>                                           <C>               <C>         
CASH FLOWS FROM OPERATING
   ACTIVITIES:

   Net (loss) income                          $( 1,961,486)     $    402,020
   Adjustment to reconcile net income
      (loss) to net cash provided by
      (used in)operating activities:
      Amortization and depreciation of
        furniture, equipment, leasehold
        improvements and other assets              589,975           468,136
      Amortization of debt discount
        and issuance costs                       1,241,414            16,628          
      Minority interest in losses of
        subsidiary                             (    67,478)      (   122,499)
      Other operating items                    (       819)           57,758
   Changes in operating assets and
     liabilities:
       Receivables                             (   274,159)      (     1,887)
       Inventories                             (    84,441)           37,191
       Prepaid expenses                        (   335,923)           12,694
       Accounts payable and
         accrued expenses                          523,106       (   363,990)
                                              ------------      ------------

   Net cash (used in)provided by
      operating activities                     (   369,811)          506,051
                                              ------------      ------------

CASH FLOWS FROM INVESTING
  ACTIVITIES:

   Note receivable                                       -       (   500,000)
   Increase in restricted cash                           -       (   946,291)
   Payments for furniture, equipment
      and leasehold improvements, net          ( 2,214,640)      (   162,864)
   Refund of franchise fees                              -            30,000
   Payments for other assets                   (   153,014)      (     4,209)
   Payment for marketable securities           ( 5,000,000)                -
                                              ------------      ------------
   Net cash (used in)
      investing activities                     ( 7,367,654)      ( 1,583,364)
                                              ------------      ------------
</TABLE>
                            See Accompanying Notes

                                      6
<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
                                 (Unaudited)
<TABLE>
<CAPTION>
                                                Six Months Ended June 30,
                                             ------------------------------
                                                  1998              1997
                                             ------------      ------------
<S>                                            <C>             <C>    
CASH FLOWS FROM FINANCING
   ACTIVITIES:
   Advances from (to) Affiliate, net                     -       (    26,545)
   Repayments of bank credit
      facilities                               (   156,882)      (   440,794)
   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                                   269,867           999,000
   Net Proceeds from issuance of
      convertible promissory notes                       -           500,000
                                              ------------      ------------
   Net cash provided by financing
      activities                                   112,985         2,660,848
                                              ------------      ------------
EFFECT OF EXCHANGE RATE CHANGES ON
   CASH AND CASH EQUIVALENTS                           819        (   15,574)
   (DECREASE) INCREASE IN CASH AND
   CASH EQUIVALENTS                            ( 7,623,661)        1,567,961
BEGINNING CASH AND CASH EQUIVALENTS             18,642,335           194,269
                                              ------------      ------------
ENDING CASH AND CASH EQUIVALENTS              $ 11,018,674      $  1,762,230
                                              ============      ============
SUPPLEMENTAL DISCLOSURES OF
   CASH FLOW INFORMATION:
   Cash paid during the period for:
      Interest                                $    208,209      $    214,291
                                              ============      ============
</TABLE>

SUPPLEMENTAL SCHEDULE OF NON
   CASH INVESTING & FINANCING
   ACTIVITIES:

SIX MONTHS ENDED JUNE 30, 1998:
      Issuance of 134,896 shares of common stock in payment of $100,350 of
      dividends on preferred stock.

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.

                             See Accompanying Notes

                                        7
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.       ORGANIZATION:

         International Fast Food Corporation ("IFFC" or the "Company"), was
incorporated in December 1991 as a Florida corporation. The Company, has,
subject to certain exceptions, the exclusive right to develop franchised Burger
King restaurants and Domino's Pizza stores ("Domino's Stores") in the Republic
of Poland ("Poland").

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, Sp. zo.o. ("IFFP"), a limited
liability company, and IFFP's two wholly-owned Polish limited liability
companies. IFFP currently operates nine Burger King restaurants in Poland.
Additionally, the consolidated financial statements include the accounts of the
Company's two wholly owned Polish limited liability companies, Krolewska Pizza,
Sp. z o.o.("KP") and Pizza King Polska, Sp. z o.o. ("PKP") for the period from
their acquisition in July 1997. KP and PKP presently operate ten Domino's Pizza
stores and a Domino's approved commissary. 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
reporting period. Actual results could differ from those 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, 1997 of International Fast Food
Corporation and Subsidiaries (the "Company"), as filed with the Securities and
Exchange Commission. The December 31, 1997 consolidated balance sheet contained
herein 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, 1998 are not necessarily
indicative of the results to be expected for the full year.

                                        8
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)

         IFFC's restaurant and store 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 years ended December 31, 1996 and 1997, the rates of inflation
and devaluation improved. For the years ended December 31, 1993, 1994, 1995,
1996, and 1997 the annual inflation rate in Poland was 35%, 32%, 21.6%, 19.5%,
and 13.0% respectively. Payment of interest and principal on the 9% Convertible
Subordinated Debentures, 11% Convertible Senior Subordinated Discount Notes and
payment of franchise fees to Burger King Corporation ("BKC") and Domino's Pizza,
Inc. ("DPI") for each restaurant and store 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 are 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.

         The official currency of 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. At June 30, 1998 and 1997, the exchange rate was 3.5095 and 3.264
zlotys per dollar, respectively. The accounts of IFFC's Polish subsidiaries are
maintained in zlotys and are remeasured into U.S. dollars, the functional
currency, at the end of each reporting period. Monetary assets and liabilities
are remeasured, using current exchange rates. Non-monetary assets, liabilities,
and related expenses, primarily furniture, equipment, leasehold improvements and
related depreciation and amortization, are remeasured using historical exchange
rates. Income and expense accounts, excluding depreciation and amortization, are
remeasured using an annual weighted average exchange rate. Transaction gains and
losses that arise from exchange rate fluctuations in transactions denominated in
a currency other than the functional currency are included in the results of
operations as incurred.

         LIQUIDITY AND PLAN OF OPERATIONS - As of June 30, 1998, IFFC had
working capital of approximately $14,931,928, Cash and Cash Equivalents of
$11,018,674 and U.S. Agency Securities of $5,000,000. IFFC's working capital and
cash position were significantly improved since March 1997 by the settlement of
its litigation with Burger King Corporation ("BKC") in March 1997, the
restructuring of bank debt, the merger with Litigation Funding, Inc., conversion
of 8% convertible promissory notes and the placement of the 11% Convertible
Senior Subordinated Discount Notes, Due October 31, 2007.

                                        9
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)

         Although IFFC believes that it has sufficient funds to finance its
present plan of operations through April 30, 1999, IFFC cannot reasonably
estimate how long it will be able to satisfy its cash requirements. The capital
requirements relating to implementation of the BKC Development Agreement and the
New Master Franchise Agreement with Dominos are significant. Based upon current
assumptions, IFFC will seek to implement its business plan utilizing its Cash
and Cash Equivalents, marketable securities and cash generated from restaurant
and store operations. In order to satisfy the capital requirements of the BKC
Development Agreement and the New Master Franchise Agreement with Dominos, IFFC
will require resources substantially greater than the amounts it presently has
or amounts that can be generated from restaurant and store operations. Other
than its existing Bank Credit Facilities, 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.

         CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with a maturity of three months or less at the time of
acquisition to be cash equivalents. The Company maintains its U.S. cash in bank
deposit accounts which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts. The Company believes it
is not exposed to any significant credit risk on cash and cash equivalents.

         MARKETABLE SECURITIES - As of June 30, 1998, marketable securities
consisted of U.S. agency securities for which fair values approximate
unamortized cost. The contractual maturities of these securities are less than
one year.
Fair values are based on quoted market prices obtained from an independent
broker.

         NET (LOSS) INCOME PER COMMON SHARE - The net (loss) income per common
share in the accompanying statements of operations has been computed based upon
the provisions of SFAS No. 128, Earnings per Share, which became effective for
reporting periods ending after December 15, 1997, and requires restatement of
previously reported per share amounts. The adoption of SFAS No. 128 did not
require a change in the net income per common share amount reported for the six
months ended June 30, 1997. The basic net (loss) income per common share in the
accompanying statements of operations is based upon the net (loss) income after
preferred dividend requirements of $100,350 and $110,850 in 1998 and 1997,
respectively, divided by the weighted average number of shares outstanding
during each period. Diluted per share data for the six months ended June 30,
1998 is the same as basic per share data since the inclusion of all potentially
dilutive common shares that would be issuable upon the exercise of options and
warrants and the assumed conversion of convertible debt and preferred stock
would be anti-dilutive. 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.

                                       10
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)

         Reclassification  - Certain amounts in the 1997 financial statements 
have been reclassified to conform with the 1998 presentation.

3.       RESTRICTED CASH:

         At June 30, 1998, the Company had a $999,990 certificate of deposit
hypothecated to an outstanding line of credit with Totalbank.

4.       BANK CREDIT FACILITIES:

         Bank credit facilities at June 30, 1998 consists of the following:

Amerbank, S.A, IFFP overdraft 
  credit line, variable rate approximately 
  equal to prime, expires March 1, 1999                           $     -0-

Amerbank, S.A., PKP overdraft
  credit line, variable rate approximately
  equal to prime, expires June 1, 1999                                2,113

Amerbank, PKP line of credit of $300,000 
  payable in ten quarterly installments
  of $30,000 commencing on December 26, 1998, 
  interest payable monthly at 3-1/8% above 
  LIBOR, due at maturity March 26, 2001                             167,769

Amerbank, IFFP line of credit of $950,000 
  payable in twenty nine monthly installments
  of $32,000 commencing on March 12, 1998,
  interest payable monthly at 2.50% above
  LIBOR, due at maturity on August 12, 2000.                        822,000

 Amerbank, IFFP revolving credit facility, interest 
  is payable monthly at 2.50% above LIBOR, $1,300,000 
  maximum credit until June 2000, payable in thirty
  five monthly installments thereafter of $36,111
  with final payment of $36,115 due at maturity 
  on May 18, 2003.                                                  102,098

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

              Total Debt                                          2,092,980
              Less: Current Maturities                            1,475,113
                                                                 ----------
              Long Term Debt                                     $  617,867
                                                                 ==========
                                       11

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

5.       9% CONVERTIBLE SUBORDINATED DEBENTURES:

         The 9% Convertible Subordinated Debentures (the "Debentures") mature on
December 15, 2007 and provide for the payment of cash interest, semi-annually on
June 15 and December 15, until maturity.

         The Debentures are subordinated and subject in right of payment to the
prior payment of all Senior Indebtedness as defined in the Debentures. The
indenture contains no provision restricting the incurrence of additional debt or
the issuance of additional securities. The Debentures may be redeemed together
with accrued interest at the option of the Company in whole or in part, at any
time on at least 30 days notice to Debentureholders at decreasing redemption
prices from 109% in 1993 to 100% in 2002 and thereafter. The Debentures are
redeemable through the operation of a sinking fund beginning 1998 through 2006.
Sinking fund payments will be reduced for Debentures previously converted or
redeemed by the Company.

6.       11% CONVERTIBLE SENIOR SUBORDINATED DISCOUNT NOTES:

         On November 5, 1997, the Company sold $27,536,000 of 11% Convertible
Senior Subordinated Discount Notes Due October 31, 2007 ( the "Notes") in a
private offering. At June 30, 1998, the notes are comprised as follows:

                 Face amount of notes at maturity                   $27,536,000

                 Unamortized discount to be accreted as
                   interest expense and added to the
                   original principal balance of the
                   notes over a period of three years               ( 6,080,184)
                                                                   ------------

                 Balance at June 30, 1998                           $21,455,816
                                                                   ============

         The Company received net proceeds of $17,662,174 after reduction of the
face of the notes for unamortized discount of $7,535,908 and placement costs in
the amount of $2,337,918. In addition to the placement costs incurred, the
Company also issued to the placement agent 500,000 shares of Common Stock which
were valued at $150,000.

         The Notes mature on October 31, 2007, and interest is payable
semi-annually, in cash, on April 30 and October 31 of each year, commencing
April 30, 2001.

         The Notes are redeemable at the option of the Company, in whole or in
part, at any time or from time to time on and after October 31, 2002; initially
at 105.5% of their accreted value on the date of redemption, plus accrued
interest, declining ratably to 100% of their principal amount, plus accrued
interest, on and after October 31, 2006.

                                       12
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)

         The Notes are convertible, at the option of the holder, into Common
Stock at any time after November 5, 1998. The number of shares of Common Stock
issuable upon conversion of the Notes is equal to the Accreted Value of the
Notes being converted, on the date of conversion, divided by $.70 (the
"Conversion Ratio"), subject to adjustment in certain events. Accordingly, the
number of shares of Common Stock available for issue upon conversion of the
Notes will increase as the accreted value of the Notes increases. In addition,
(a)if the closing sale price (the "closing price") of the Common Stock on the
Nasdaq National Market or other securities exchange or system on which the
Common Stock is then traded or (b) if not so traded, then the best bid offered
price on the OTC Bulletin Board Service (the "BBS") on the days when
transactions in the Common Stock are not effected, or on such days as
transactions are effected on the BBS, the highest price at which a trade was
executed, during any period described below has exceeded the price for such
period for at least 20 consecutive trading days (the "Market Criteria Period"),
and a registration statement with respect to the resale of Common Stock to be
issued upon conversion of the Notes is effective, all of the Notes will be
automatically converted into Common Stock at the close of business on the last
day of the Market Criteria Period; provided, however, that if the Market
Criteria is satisfied during the third year after the closing date of the
offering, the conversion will occur only if the Closing Price or OTC Price, as
applicable, of the Common Stock is at least $2.80 on such date :

              12 Months Beginning                      Closing Price
              -------------------                      -------------

                 October 31, 1999                         $2.80

                 October 31, 2000                         $3.25

         The Company is obligated to cause to be declared effective, before
November 5, 1998, a registration statement registering the resale of the shares
of Common Stock to be issued upon conversion of the Notes. In the event a
registration statement is not declared effective by such date, the denominator
of the Conversion Ratio will be decreased by $.15 from $.70. If such
registration statement is declared effective but, subject to certain exceptions,
thereafter ceases to be effective, then IFFC is obligated to pay certain
liquidated damages to the holders of the Notes ranging from 1/2% to a maximum of
5.0% of the principal balance of such Notes, depending upon the length of the
period of time the registration statement is not effective.

         In the event of a change of control, as defined in the Convertible
Senior Subordinated Discount Notes Indenture (the "Indenture"), the holders of
the Notes will have the right to require the Company to purchase the Notes at a
purchase price of 101% of their Accreted Value on the date of such purchase,
plus accrued interest.

         The Indenture contains certain covenants which among other things,
restrict the ability of IFFC and its Restricted Subsidiaries (as defined in the
Indenture) to: incur additional indebtedness; create liens, pay dividends or
make distributions in respect to their capital stock;

                                       13

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

make investments; or make certain other restricted payments; sell assets, issue
or sell stock of Restricted Subsidiaries; enter into transactions with
stockholders or affiliates; engage in unrelated lines of business; or
consolidate, merge, or sell all or substantially all of their assets. In
addition, Mitchell Rubinson must remain the Company's Chief Executive Officer.

         The Indenture specifically requires that any temporary cash investments
can only be placed in banks that have total capital in excess of $100 million.

7.       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, 1998 is as follows:

          Outstanding at beginning of period                 670,000
          Granted                                            250,000
          Exercised                                                -
          Expired                                                  -
                                                        ------------
          Outstanding at end of period                       920,000
                                                        ============

          Exercisable at end of period                       258,000
                                                        ============

          Price range of options outstanding
                at end of period                        $.71 to $.40
                                                        ============

          Available for grant at end of period             1,080,000
                                                        ============

         In July 1997, all options outstanding were repriced to $.40,
respectively, which was equivalent to the market price of the Common Stock on
such date.

                                       14
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)

         At June 30, 1998, IFFC had reserved the following shares of Common
Stock for issuance:

              Stock option plan                                2,000,000

              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 on or before
              December 15, 2007                                  324,235

              Preferred Stock convertible into Common
              Stock at a conversion price of $3.00
              per share                                        1,115,000

              Warrants to purchase 50,000 shares of
              Common Stock at an exercise price of
              $.2831 per share on or before January 5, 2004       50,000
    

              Convertible Senior Subordinated Discount
              Notes convertible into Common Stock, after
              November 5, 1998, at a conversion price
              of $.70 per share                               39,337,143
                                                              ----------

                        Total reserved shares                 43,117,178
                                                              ==========

                                     15
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)

9.       COMMITMENTS AND CONTINGENCIES:

         On March 14, 1997, IFFC and Burger King Corporation ("BKC") entered
into a new Development Agreement (the "BKC Development Agreement"), which was
then assigned by IFFC to IFFP; IFFC continues to remain liable for the
obligations contained in the BKC Development Agreement. Pursuant to the 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 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
restaurant. A Burger King kiosk restaurant shall, for purposes of the BKC
Development Agreement, be considered one quarter restaurant.

         Pursuant to the BKC Development Agreement, IFFC is to open three
restaurants through September 30, 1998 of which one was opened in July 1998,
four restaurants in each year beginning October 1, 1998 and ending September 30,
2001 and five restaurants in each year beginning October 1, 2001 and ending
September 30, 2007. As of the date hereof, construction has commenced on three
new restuarants.

         Pursuant to the 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(as defined below) 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 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.

                                       16
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)

         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.

         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.

         On August 28, 1997, KP entered into a New Master Franchise Agreement
with Domino's Pizza International, Inc. ("Domino's"), granting KP the exclusive
right to develop and operate and to sub-license Domino's Pizza stores and to
operate a commissary for the Domino's system and the use of the Domino's and
related marks in the operation of stores in Poland. IFFC also agreed that
additional capital as may be required above such amount will also be dedicated
to KP as needed to permit KP to meet its development quotas. The term of the New
Master Franchise Agreement will expire on December 31, 2003, and if KP is in
compliance with all material provisions of the New Master Franchise Agreement,
it may be extended for an addition ten (10) years in accordance with certain
minimum development quotas which KP and Domino's may agree upon by execution of
an amendment to the New Master Franchise Agreement. Under the terms of the New
Master Franchise Agreement, KP shall be obligated to open 5, 6, 7, 8, 9, and 10
stores, respectively, beginning in 1998 and ending in the year 2003 for a total
of fifty (50) stores. Of such stores, third party franchise stores shall not
exceed 25% of the number of open and operating stores and all stores located in
Warsaw, Poland shall be corporate stores.

         During the term of the New Master Franchise Agreement, KP and its
controlling shareholders, including the controlling shareholder of IFFC, will
not have any interest as an owner, investor, partner, licensee or in any other
capacity in any business engaged in sit-down, delivery or carry-out pizza or in
any business or entity which franchises or licenses or otherwise grants to
others the right to operate a business engaged in such business which is located
in Poland. The latter restriction shall apply for a period of one (1) year
following the effective date of termination of the New Master Franchise
Agreement.

                                       17
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)

         On April 2, 1998, PKP entered into a $300,000 development loan with the
American Bank in Poland ("Amerbank") for the development of its Domino's stores.
Borrowings under this credit facility may be made until December 26, 1998 and
are secured by: (i) fixed assets of each new store financed; and (ii) the
guarantee of IFFC. The loan shall be paid in ten equal quarterly installments of
$30,000 commencing December 26, 1998 with a final payment due at maturity (March
26, 2001). Interest is paid monthly at the prevailing one month LIBOR rate plus
3-1/8%. This rate approximates 8.75% as of August 12, 1998. According to the
terms of the agreement, the proceeds of the loan could be used to finance up to
fifty percent (50%) of the development costs of Domino's Pizza stores operated
by PKP. As of June 30, 1998, $167,769 was outstanding on the facility.

         On April 10, 1998, PKP entered into a lease for an unlimited period of
time with the Municipality of Ursynow, Warsaw for its tenth Domino's store site
consisting of approximately 94 square meters. The lease may be terminated by PKP
at any time upon three months' notice. The Municipality may terminate the lease
at any time upon three months' notice. In the event the Municipality terminates
the lease, PKP is entitled to recover its costs, including leasehold
improvements, net of depreciation. Annual lease payments, excluding utility
charges are approximately 15,000 zlotys (approximately $4,300 at June 30, 1998
exchange rates). The store was opened in July (See "Subsequent Events" below).

         On April 29, 1998, IFFP entered into a five year lease agreement with
Praga Centrum Department Store, Sp. z o.o. ("Praga") for approximately 468
square meters of office space for its corporate offices in Warsaw. The minimum
annual lease payments under the lease agreement are approximately $112,000. The
lease commencement date is June 1, 1998; rent payments will commence in July
1998, and IFFP received a one time rental rebate of $4,500. In addition, Praga
is required to build out all IFFP leasehold improvements at its expense. The
company moved into these new offices on July 20, 1998.

         On April 30, 1998, IFFP entered into a twenty (20) year sublease
agreement with BP Poland, Sp. z o.o. ("BP") for purposes of constructing a
Burger King restaurant in Plonsk, Poland. The site will be built adjacent to a
BP gas station. Under the terms of the sublease agreement, the Company's annual
rental payments for the lease is $30,000 ("minimum rent") or 5.0% of its net
sales, whichever is greater. The minimum rent payment is adjusted each year to
represent 75% of the previous year's total rent paid. The lease contains two
(2), ten (10) year options, exercisable by IFFP at its sole and absolute
discretion, to renew under the same terms and conditions. Each lease grants IFFP
right of first refusal on the right to purchase the property from BP.

         On May 8, 1998, the Company's symbol on the electronic bulletin board
was changed from FOOD to IFFC.

         In June 1998, PKP opened its ninth Domino's store at a cost of
approximately $152,000 which costs include leasehold improvements, equipment,
furniture and fixtures, franchise fees and other pre-opening costs. The store
consists of approximately 200 square meters including a 70 square meter training
facility. Annual lease payments, excluding electricity, are approximately 23,574
zlotys (approximately $6,700 at June 30, 1998 exchange rates). The lease was
executed in November 1997 between PKP and the Municipality of Warsaw. The lease
is for a ten year term.

                                       18
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)

         On June 15, 1998, IFFC executed an employment agreement with Michael
Welch, which provides that he will serve as IFFC's President and Chief Operating
Officer for an initial term of three years, which IFFC may extend for up to an
additional two years. His annual salary for the first year is $165,000.
Additionally, under the terms of the employment agreement, Mr. Welch shall be
eligible to receive stock option grants under IFFC's Stock Option Plans in the
discretion of IFFC's Board of Directors or Option Committee. IFFC granted Mr.
Welch stock options to acquire 250,000 shares of IFFC's Common Stock at an
exercise price of $.71 per share, which are exercisable in whole or in part and
cumulatively according to the following schedule: (i) 20% one year after the
effective date of the employment agreement; (ii) 60% two years after the
employment agreement; and (iii) 100% three years after the effective date of the
employment agreement. Mr. Welch is, in addition to salary, entitled to certain
fringe benefits including an automobile to use in connection with the
performance of his duties under the agreement; and a housing allowance of $2,500
per month which terminates when Mr. Welch's family relocates to Poland. Mr.
Welch's employment agreement provides for a payment of $50,000 in the event that
his employment is terminated by reason of death or disability and, in the event
his employment is terminated without cause, Mr. Welch is entitled to a severance
payment as follows (i) on or prior to December 14, 1998, the severance amount
will be $25,000; (ii) after December 14, 1998 but on or prior to June 14, 1999,
the severance amount will be $50,000; and (iii) after June 15, 1999, the
severance amount will be $75,000. Mr. Welch's employment agreement does not
provide for a severance payment in the event his employment is terminated for
cause. Additionally, the employment agreement requires that Mr. Welch not
compete or engage in any business competitive with IFFC's business for the term
of the agreement and for period of two years thereafter.

         On June 19, 1998, a development loan in the principal amount of
$1,300,000 was executed with Amerbank for IFFP. The purpose of this loan is to
provide partial credit for the development of new Burger King restaurants.
Borrowings under this credit facility are to be made until June 18, 2000 and are
secured by: (i) fixed assets of each new restaurant financed; and (ii) a
guarantee of IFFC. The loan is scheduled to be repaid in thirty five equal
installments of $36,111 starting in June 2000 with a final payment of $36,115
due at maturity on May 18, 2003. Interest is to be paid monthly at the
prevailing one month LIBOR rate plus 2.5%. According to the terms of the
agreement, the proceeds of the loan are be used to finance up to fifty percent
(50%) of the costs of furnishing and commencing operation of Burger King
restaurants operated by IFFP. As of June 30, 1998, $102,098 was outstanding on
this credit facility.
                                       19
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)


10.      GAIN ON SETTLEMENT OF BURGER KING LITIGATION:

         On March 11, 1997, the Company and all other parties to the BKC
Litigation settled the litigation and the Company realized a gain on the
settlement which is comprised as follows:
<TABLE>
<CAPTION>
<S>                                                                                     <C>       
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 Litigation
                Funding pursuant to the litigation 
                financing agreements                                                      (750,001)
              Deferred Credit                                                           (1,000,000)
                                                                                        ----------

                                          Net settlement proceeds                        3,302,685

              Portion of net settlement proceeds due to
                Litigation Funding pursuant to the
                litigation financing agreements                                         (2,477,014)

              Legal fees and costs paid by IFFC
                in years prior to 1997 and charged
                against operations                                                         501,399
                                                                                        ----------

              IFFC gain on settlement                                                   $1,327,070
                                                                                        ==========
</TABLE>
                                       20
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
                                   (Unaudited)

         At June 30, 1997, the payable to Litigation Funding was comprised as
follows:

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

Reimbursement of legal fees and costs paid
  by Litigation funding                                                 750,001
                                                                   ------------
Original principal balance payable to Litigation Funding              3,227,015

Principal payment                                                    (1,028,521)
                                                                   ------------
Balance due at June 30, 1997                                         $2,198,494
                                                                   ============

11.      OTHER TRANSACTIONS

         In July 1997, the Company purchased 100% of KP and PKP, two Polish
limited liability companies, for a nominal consideration and assumption of all
liabilities, including the liabilities of KP to the Company under a $500,000
promissory note. KP owns the exclusive master franchise rights and a Domino's
approved commissary. PKP owns the individual store franchises for Domino's Pizza
stores in Poland.

         The acquisition was accounted for under the purchase method of
accounting, and the net assets acquired are included in the Company's
consolidated balance sheet based upon their estimated fair values at the date of
acquisition. Results of operations of KP are 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 are 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.
<TABLE>
<CAPTION>
                                               Three Months Ended,                         Six Months Ended,
                                   ---------------------------------------     ------------------------------------
                                           6/30/98            6/30/97            6/30/98                   6/30/97
                                           -------            -------            -------                   -------
<S>                                 <C>                       <C>               <C>                       <C>       
Total Revenues                      $ 1,902,902               $1,719,006        $ 3,689,022               $3,392,476

Net income (loss)                   $(1,074,902)              $( 513,390)       $(1,961,486)              $  105,690

Basic and diluted
  net income (loss) per share       $(      .03)              $(     .04)       $(      .05)              $      .01

</TABLE>
                                       21
<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (Unaudited)

12.      LITIGATION:

Polish Fiscal Authority Disputes

         As of July 1995, IFFP likely became 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. 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 value added tax deductions for July and August
1995. Additionally, penalties and interest may be imposed on these disallowed
deductions. IFFP believes that its potential exposure is approximately $400,000,
which amount was accounted for in its 1997 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 Minister's ruling. Although
IFFP's NCR Cash Register System (the "Cash Register System") was a modern
system, the Cash Register System could not be modified. IFFP has replaced the
system with a new Siemen's system which complies with Polish regulations.

Other Litigation

         The Company is not a party to any litigation or governmental
proceedings that management believes would result in any judgements or penalties
that would have a material adverse effect on the Company

                                       22

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

13.      SUBSEQUENT EVENTS:

         On July 1, 1998, IFFP entered into a new twenty year lease with Statoil
Polska, Sp. z o.o. ("Statoil") for purposes of constructing a Burger King
restaurant in Pabianice, Poland. The site will be built adjacent to a Statoil
gas station. Under the terms of the lease agreement, IFFP's annual rental
payments for the lease is $36,000 ("minimum rent") or 4.0% of its net sales,
whichever is greater. The minimum rent payment is adjusted quarterly to Polish
inflation index. The lease contains a 10 year option, exercisable by IFFP at its
sole and absolute discretion, to renew under the same terms and conditions as
the underlying lease. The Company expects to open this Burger King restaurant in
the fourth quarter of 1998.

         On July 10, 1998, IFFP opened its ninth Burger King restaurant in
Mikolow. Poland. The restaurant is attached to a Conoco-Jet petrol station. The
restaurant cost approximately $840,000 which costs include road improvements,
leasehold improvements, equipment, furniture and decor, franchise fees and
pre-opening costs. The restaurant has 60 interior seats and an outdoor
playground with 20 additional seats. Annual lease payments for the restaurant
are 2.25% of net sales with no minimum lease payments required. The lease was
executed in November 1997 between IFFP and Dupont-Conoco for a twenty year term.
The lease contains two (2) ten (10) year renewal options.

         On July 20, 1998, PKP opened its tenth Domino's store in Warsaw at a
cost of approximately $132,000 which costs include leasehold improvements,
equipment, furniture and fixtures, franchise fees and other pre-opening costs.
The store consists of approximately 94 square meters. Annual lease payments,
excluding electricity, are approximately 15,000 zlotys (approximately $4,300 at
June 30, 1998 exchange rates). The lease was executed in April 1998 between PKP
and the Municipality of Ursynow. The lease is for an unlimited term.

         On July 21, 1998, IFFP entered into two (2) twenty year lease
agreements with Statoil Polska, Sp. z o.o. ("Statoil") for purposes of
constructing a Burger King restaurant in Olsztyn and Raciborz, Poland. The sites
will be built adjacent to Statoil gas stations. Under the terms of the lease
agreements, the Company's annual rental payments for each lease is $36,000
("minimum rent") or 4.0% of its net sales, whichever is greater. The minimum
rent payment is adjusted quarterly to the Polish inflation index. Both leases
contain a ten (10) year option, exercisable by IFFP at its sole and absolute
discretion, to renew under the same terms and conditions as the underlying
leases. The Company expects to open these Burger King restaurants in the fourth
quarter of 1998.

                                       23
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

GENERAL

         Management's 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, 1998, IFFC had working capital of approximately
$14,931,928, Cash and Cash Equivalents of $11,018,674 and marketable securities
consisting of short term U.S. agency securities of $5,000,000. IFFC's working
capital and cash position were significantly improved beginning in March 1997 by
the settlement of its litigation with Burger King Corporation ("BKC") coupled
with recent debt consolidation, merger with Litigation Funding, Inc. and
placement of the 11% Convertible Senior Subordinated Discount Notes, Due October
31, 2007. Although IFFC believes that it has sufficient funds to finance its
present plan of operations through April 30, 1999, IFFC cannot reasonably
estimate how long it will be able to satisfy its cash requirements. The capital
requirements relating to implementation of the BKC Development Agreement and the
New Master Franchise Agreement with Dominos are significant. Based upon current
assumptions, IFFC will seek to implement its business plan utilizing its Cash
and Cash Equivalents, marketable securities and cash generated from restaurant
and store operations. In order to satisfy the capital requirements of the BKC
Development Agreement and the New Master Franchise Agreement with Dominos, IFFC
will require resources substantially greater than the amounts it presently has
or amounts that can be generated from restaurant and store operations. Other
than its existing Bank Credit Facilities, 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 Burger King restaurant business in Poland
through its majority owned (85%) Polish subsidiary, IFFP, and its wholly-owned
Polish limited liability corporations, IFF Polska-Kolmer and IFF-DX Management.
IFFC operates its Domino's Pizza business in Poland through its two wholly-owned
Polish subsidiaries, Krolewska Pizza, Sp. z o.o. and Pizza King Polska, Sp. z
o.o. Unless the context indicates otherwise, references herein to IFFC include
all of its operating subsidiaries.

         IFFC currently operates nine Traditional Burger King Restaurants and
ten Domino's Pizza stores. IFFC has incurred losses and anticipates that it will
continue to incur losses until, at the earliest, it establishes a number of
restaurants and stores 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.

         On April 2, 1998, PKP entered into a $300,000 development loan with the
American Bank in Poland ("Amerbank") for the development of its Domino's stores.
Borrowings under this credit facility may be made until December 26, 1998 and
are secured by: (i) fixed assets of each new store financed; and (ii) the
guarantee of IFFC. The loan shall be paid in ten equal quarterly installments of
$30,000 commencing December 26, 1998 with a final payment due at maturity (March
26, 2001). Interest is paid monthly at the prevailing one month LIBOR rate plus
3-1/8%. This rate approximates 8.75% as of August 12, 1998. According to the
terms of the agreement, the proceeds of the loan could be used to finance up to
fifty percent (50%) of the development costs of Domino's Pizza stores operated
by PKP. As of June 30, 1998 and August 10, 1998, approximately $167,769 and
$220,276, respectively was outstanding on the facility.

                                       24
<PAGE>
         On April 10, 1998, PKP entered into a lease for an unlimited period of
time with the Municipality of Ursynow, Warsaw for its tenth Domino's store site
consisting of approximately 94 square meters. The lease may be terminated by PKP
at any time upon three months' notice. The Municipality may terminate the lease
at any time upon three months' notice. In the event the Municipality terminates
the lease, PKP is entitled to recover its costs, including leasehold
improvements, net of depreciation. Annual lease payments, excluding utility
charges are approximately 15,000 zlotys (approximately $4,300 at June 30, 1998
exchange rates). The store was opened in July (See "Subsequent Events" below).

         On April 29, 1998, IFFP entered into a five year lease agreement with
Praga Centrum Department Store, Sp. z o.o. ("Praga") for approximately 468
square meters of office space for its corporate offices in Warsaw. The minimum
annual lease payments under the lease agreement are approximately $112,000. The
lease commencement date is June 1, 1998; the rent payments commence in July
1998, and IFFP will receive a one time rental rebate of $4,500 in July. In
addition, Praga is required to build out all IFFP leasehold improvements at its
expense. The company moved into these new offices on July 20, 1998.

         On April 30, 1998, IFFP entered into a twenty (20) year sublease
agreement with BP Poland, Sp. z o.o. ("BP") for purposes of constructing a
Burger King restaurant in Plonsk, Poland. The site will be built adjacent to a
BP gas station. Under the terms of the sublease agreement, the Company's annual
rental payments for the lease is $30,000 ("minimum rent") or 5.0% of its net
sales, whichever is greater. The minimum rent payment is adjusted each year to
represent 75% of the previous year's total rent paid. The lease contains two
(2), ten (10) year options, exercisable by IFFP at its sole and absolute
discretion, to renew under the same terms and conditions. Each lease grants IFFP
right of first refusal on the right to purchase the property from BP.

         On May 8, 1998, the Company's symbol on the electronic bulletin board
was changed from FOOD to IFFC.

         In June 1998, PKP opened its ninth Domino's store at a cost of
approximately $152,000 which costs include leasehold improvements, equipment,
furniture and fixtures, franchise fees and other pre-opening costs. The store
consists of approximately 200 square meters including a 70 square meter training
facility. Annual lease payments, excluding electricity, are approximately 23,574
zlotys (approximately $6,700 at June 30, 1998 exchange rates). The lease was
executed in November 1997 between PKP and the Municipality of Warsaw. The lease
is for a ten year term.

                                       25
<PAGE>
         On June 15, 1998, IFFC executed an employment agreement with Michael
Welch, which provides that he will serve as IFFC's President and Chief Operating
Officer for an initial term of three years, which IFFC may extend for up to an
additional two years. His annual salary for the first year is $165,000.
Additionally, under the terms of the employment agreement, Mr. Welch shall be
eligible to receive stock option grants under IFFC's Stock Option Plans in the
discretion of IFFC's Board of Directors or Option Committee. IFFC granted Mr.
Welch stock options to acquire 250,000 shares of IFFC's Common Stock at an
exercise price of $.71 per share, which are exercisable in whole or in part and
cumulatively according to the following schedule: (i) 20% one year after the
effective date of the employment agreement; (ii) 60% two years after the
employment agreement; and (iii) 100% three years after the effective date of the
employment agreement. Mr. Welch is, in addition to salary, entitled to certain
fringe benefits including an automobile to use in connection with the
performance of his duties under the agreement; and a housing allowance of $2,500
per month which terminates when Mr. Welch's family relocates to Poland. Mr.
Welch's employment agreement provides for a payment of $50,000 in the event that
his employment is terminated by reason of death or disability and, in the event
his employment is terminated without cause, Mr. Welch is entitled to a severance
payment as follows (i) on or prior to December 14, 1998, the severance amount
will be $25,000; (ii) after December 14, 1998 but on or prior to June 14, 1999,
the severance amount will be $50,000; and (iii) after June 15, 1999, the
severance amount will be $75,000. Mr. Welch's employment agreement does not
provide for a severance payment in the event his employment is terminated for
cause. Additionally, the employment agreement requires that Mr. Welch not
compete or engage in any business competitive with IFFC's business for the term
of the agreement and for period of two years thereafter.

         On June 19, 1998, a development loan in the principal amount of
$1,300,000 was executed with Amerbank for IFFP. The purpose of this loan is to
provide partial credit for the development of new Burger King restaurants.
Borrowings under this credit facility are to be made until June 18, 2000 and are
secured by: (i) fixed assets of each new restaurant financed; and (ii) a
guarantee of IFFC. The loan is scheduled to be repaid in thirty five equal
installments of $36,111 starting in June 2000 with a final payment of $36,115
due at maturity on May 18, 2003. Interest is to be paid monthly at the
prevailing one month LIBOR rate plus 2.5%. According to the terms of the
agreement, the proceeds of the loan are be used to finance up to fifty percent
(50%) of the costs of furnishing and commencing operation of Burger King
restaurants operated by IFFP. As of June 30, 1998 and August 10, 1998, $102,098
and $440,534 was outstanding on this credit facility, respectively.

                                       26
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998 VS SIX MONTHS ENDED JUNE 30, 1997

RESULTS OF OPERATIONS

         Results of operations for the six months ended June 30, 1998, include
the results of Krolewska Pizza Sp. z o.o. ("KP"), and Pizza King Polska, Sp. z
o.o. ("PKP") which were acquired in July 1997 in a transaction accounted for as
a purchase. KP owns the exclusive development rights and PKP owns the franchises
for Domino's pizza stores and commissary in Poland.

         During the six months ended June 30, 1998, KP and PKP generated
$933,824 of store sales from their nine Domino's pizza stores and incurred Food
and Packaging Costs of $331,099, Payroll and Related Costs of $203,650,
occupancy and Other Operating Expenses of $339,212 and Depreciation and
Amortization of $98,179. As a percentage of sales, Food and Packaging Costs were
35.5%, Payroll and Related Costs were 21.8%, Occupancy and Other Operating
Expenses were 36.3% and Depreciation and Amortization were 10.5%. Since the
acquisition of KP and PKP were accounted for as a purchase, no amounts are
included in the accompanying financial statements for the six months ended June
30, 1997.

         For the six months ended June 30, 1998 and June 30, 1997, IFFC
generated Restaurant Sales of $3,689,022 and $2,752,559, respectively which
includes sales of $933,824 for the Domino's Pizza stores in 1998. In U.S. dollar
and Polish zloty terms IFFC's Burger King Restaurant Sales increased by
approximately .10% and 12.5%, respectively, for the six months ended June 30,
1998 as compared to the six months ended June 30, 1997. The increase is
primarily attributable to the increase in the average check price per
transaction resulting from the Company's menu price increase implemented in
January 1998.

         During the six months ended June 30, 1998, IFFC incurred Food and
Packaging Costs of $1,451,366, Payroll and Related Costs of $671,347, Occupancy
and Other Operating Expenses of $1,065,085 and Depreciation and Amortization
Expense of $520,379.

         Food and Packaging Costs applicable to Burger King restaurants for the
six months ended June 30, 1998 and 1997 were 40.6% and 40.7% of Restaurant
Sales, respectively. The .01% decrease as a percentage of Restaurant Sales is
primarily attributable to improved product sourcing, coupled with an increase in
Restaurant Sales.

         Payroll and Related Costs applicable to Burger King restaurants for the
six months ended June 30, 1998 and 1997 were 17.0% and 16.0% of Restaurant
Sales, respectively. The 1.0% increase as a percentage of Restaurant Sales is
primarily the result of an increase in managerial salaries at the restaurant
level in order to keep pace with the labor market.

                                       27
<PAGE>
         Occupancy and Other Operating Expenses applicable to Burger King
restaurants for the six months ended June 30, 1998 and 1997 were 26.4% and 27.8%
of Restaurant Sales, respectively. The 1.4% decrease as a percentage of
Restaurant Sales is primarily attributable to the decrease in royalties payable
to Burger King Corporation in accordance with the New BKC Development Agreement.

         Depreciation and Amortization Expense applicable to Burger King
restaurants as a percentage of Restaurant Sales was 15.3% and 15.9% in the six
months ended June 30, 1998 and 1997, respectively. The .6% decrease as a
percentage of restaurant sales is primarily attributable to an increase in
Restaurant Sales coupled with the fully depreciated status of certain assets
still in use.

         General and Administrative Expenses for the six months ended June 30,
1998 (which includes $123,582 applicable to KP and PKP) and 1997 were 30.1% and
26.0% of Restaurant Sales, respectively. The 5.1% increase as a percentage of
Sales is primarily attributable to the addition of PKP, new hires and increased
salaries and related benefits. For the six months ended June 30, 1998, General
and Administrative Expenses were comprised of executive and office staff
salaries and benefits ("Salary Expense") $466,766; legal and professional fees,
office rent, travel, telephone and other corporate expenses ("Corporate Overhead
Expense") $600,411, and depreciation and amortization $75,230. For the six
months ended June 30, 1997, General and Administrative Expense included Salary
Expenses of $248,681; Corporate Overhead Expenses of $418,226, and depreciation
and amortization of $47,979.

         For the six months ended June 30, 1998 and 1997 Interest and Other
Income was comprised as follows:

                                                    Six Months Ended June 30,
                                                    -------------------------
                                                     1998             1997
                                                     ----             ----

          Interest income                          $539,969        $   70,193
          Management fee                                  -             9,580
          All other, net                            (23,003)         (156,756)
                                                  ---------        ----------

                                                  $ 516,966          $(76,983)
                                                  =========        ==========

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

                                       28
<PAGE>
Interest Expense is comprised as follows:

<TABLE>
<CAPTION>
                                                                          Six Months Ended June 30,
                                                                          -------------------------
                                                                        1998                    1997
                                                                        ----                    ----
<S>                                                                   <C>                       <C>     
              Interest Expense on 9% Subordinated
                            Convertible Debentures                    $124,020                $124,020

              Interest Expense on 8% Convertible
                            Promissory Notes                                 -                  16,178

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

              Amortization of Debt
                            Issuance Costs                             140,278                  16,628

              Accretion of discount on 11%
                            Convertible Senior Subordinated
                            Discount Notes                           1,101,136                       -

              Interest Expense on Bank
                            Facilities                                  49,108                  72,674
                                                                  ------------             -----------

                           Total                                    $1,414,542                $273,171
                                                                  ============             ===========
</TABLE>
         Interest Expense exceeded Interest and Other Income by $897,576 and
$350,154 for the six months ended June 30, 1998 and 1997, respectively. The
primary reason for the increase for the six month period ended June 30, 1998, is
due to the accretion of the 11% Convertible Senior Subordinated Discount Notes
and the related amortization of debt issuance costs.

         IFFC's interest expense on bank facilities was $49,108 and $72,674 for
the six months ended June 30, 1998 and 1997, respectively. The $23,566 decrease
is attributable to IFFC's lower average level of borrowings under bank credit
facilities during the six month period ended June 30, 1998, coupled with lower
interest rates.

         During the six months ended June 30, 1997, IFFC recorded a
non-recurring gain of $1,327,070, or $.11 per share of IFFC's Common Stock in
connection with the settlement of the BKC Litigation. See Note 10 of Notes To
Consolidated Financial Statements for the components included in the calculation
of the gain.

         As a result of the foregoing, the six months ended June 30, 1998, IFFC
generated a net loss of $(1,961,486) or $(.05) per share of IFFC's Common Stock
compared to net income of $402,020, or $.02 per share of IFFC's Common Stock for
the six months ended June 30, 1997. 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.

                                       29
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

         IFFC's material commitments for capital expenditures in its restaurant
and store business relate to the provisions of the BKC Development Agreement and
the New Master Franchise Agreement with Domino's.

         On March 14, 1997, a new Development Agreement (the "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 BKC Development Agreement. Pursuant to the BKC
Development Agreement, IFFC has been granted the exclusive right until September
30, 2007 to develop and be franchised to operate Burger King restaurants in
Poland with certain exceptions discussed below. Pursuant to the 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 BKC Development
Agreement, be considered one quarter of a unit. Pursuant to the BKC Development
Agreement, IFFC is to open three Development Units through September 30, 1998 of
which one was opened in July 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 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 undertaking of Mr.
Mitchell Rubinson, IFFC's Chairman, that the Rubinson Group (as defined below)
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.

                                       30
<PAGE>
         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.

         On August 28, 1997, KP entered into a New Master Franchise Agreement
with Domino's Pizza International, Inc. ("Domino's"), granting KP the exclusive
right to develop and operate and to sub-license Domino's Pizza stores and to
operate a commissary for the Domino's system and the use of the Domino's and
related marks in the operation of stores in Poland. As a condition to the New
Master Franchise Agreement, IFFC shall contribute or cause other entities to
contribute to KP a minimum amount of $2,000,000 by December 31, 1997. As of
December 31, 1997, IFFC had contributed $2,000,000 to KP. IFFC also agreed that
any additional capital required above such amount will also be dedicated to KP
as needed to permit KP to meet its development quotas. The term of the New
Master Franchise Agreement will expire on December 31, 2003, and if KP is in
compliance with all material provisions of the New Master Franchise Agreement,
it may be extended for an additional ten (10) years in accordance with certain
minimum development quotas which KP and Domino's may agree upon by execution of
an amendment to the New Master Franchise Agreement.

         Under the terms of the New Master Franchise Agreement, KP shall be
obligated to open 5, 6, 7, 8, 9, and 10 stores, respectively, beginning in 1998
and ending in the year 2003 for a total of 45 new stores. Of such stores, third
party franchise stores shall not exceed 25% of the number of open and operating
stores and all stores located in Warsaw, Poland shall be company owned stores.
The Company has met its obligation for 1998.

         During the term of the New Master Franchise Agreement, KP and its
controlling shareholders, including the controlling shareholder of IFFC, will
not have any interest as an owner, investor, partner, licensee or in any other
capacity in any business engaged in sit-down, delivery or carry-out pizza or in
any business or entity which franchises or licenses or otherwise grants to
others the right to operate a business engaged in such business which is located
in Poland. The latter restriction shall apply for a period of one (1) year
following the effective date of termination of the New Master Franchise
Agreement.

         On November 5, 1997, the Company sold $27,536,000 11% Convertible
Senior Subordinated Discount Notes Due October 31, 2007 (the "Notes") in a
private offering. At March 31, 1998, the notes are comprised as follows:

                 Face amount of notes at maturity              $27,536,000

                 Unamortized discount to be accreted as
                   interest expense and added to the
                   original principal balance of the
                   notes over a period of three years           (6,080,184)
                                                               -----------

                 Balance at June 30, 1998                      $21,455,816
                                                               ===========

                                       31
<PAGE>
         The Company received net proceeds of $17,662,174 after reduction of the
face of the notes for unamortized discount of $7,535,908 and placement costs in
the amount of $2,337,918. In addition to the placement costs incurred, the
Company also issued to the placement agent 500,000 shares of Common Stock which
were valued at $150,000. The Notes mature on October 31, 2007, and interest is
payable semi-annually, in cash, on April 30 and October 31 of each year,
commencing April 30, 2001. The Notes are redeemable at the option of the
Company, in whole or in part, at any time or from time to time on and after
October 31, 2002 ; initially at 105.5% of their Accreted Value on the date of
redemption, plus accrued interest, declining ratably to 100% of their principal
amount, plus accrued interest, on and after October 31, 2006.

         The Notes are convertible, at the option of the holder, into Common
Stock at any time after November 5, 1998. The number of shares of Common Stock
issuable upon conversion of the Notes is equal to the accreted value of the
Notes being converted, on the date of conversion, divided by $.70 (the
"Conversion Ratio"), subject to adjustment in certain events. Accordingly, the
number of shares of Common Stock issuable upon conversion of the Notes will
increase as the Accreted Value of the Notes increases. In addition, (a) if the
closing sale price (the "closing price") of the Common Stock on the Nasdaq
National Market or other securities exchange or system on which the Common Stock
is the traded or (b) if not so traded, then the best bid offered price on the
OTC Bulletin Board Service (the "BBS") on the days when transactions in the
Common Stock are not effected, or on such days as transactions are effected on
the BBS, the highest price at which a trade was executed, during any period
described below has exceeded the price for such period for at least 20
consecutive trading days (the "Market Criteria Period"), and a registration
statement with respect to the resale of Common Stock to be issued upon
conversion of the Notes is effective, all of the Notes will be automatically
converted into Common Stock at the close of business on the last day of the
Market Criteria Period; provided, however, that if the Market Criteria is
satisfied during the third year after the closing date of the offering, the
conversion will occur only if the Closing Price or OTC Price, as applicable, of
the Common Stock is at least $2.80 on such date :

                       12 Months Beginning           Closing Sale Price
                       -------------------           ------------------

                        October 31, 1999                  $2.80

                        October 31, 2000                  $3.25

         The Company is obligated to cause to be declared effective, before
November 5, 1998, a registration statement registering the resale of the shares
of Common Stock to be issued upon conversion of the Notes. In the event a
registration statement is not declared effective by such date, the denominator
of the Conversion Ratio will be decreased by $.15 from $.70. If such
registration statement is declared effective but, subject to certain exceptions,
thereafter ceases to be effective, then IFFC is obligated to pay certain
liquidated damages to the holders of the Notes ranging from 1/2% to a maximum of
5.0% of the principal balance of such Notes, depending upon the length of the
period of time the registration statement is not effective.

                                       32
<PAGE>
         In the event of a change of control, as defined in the Convertible
Senior Subordinated Discount Notes Indenture (the "Indenture"), the holders of
the Notes will have the right to require the Company to purchase the Notes at a
purchase price of 101% of their accreted value on the date of such purchase,
plus accrued interest.

         The Indenture contains certain covenants which among other things,
restrict the ability of IFFC and its Restricted Subsidiaries (as defined in the
Indenture) to: incur additional indebtedness; create liens, pay dividends or
make distributions in respect to their capital stock; make investments; or make
certain other restricted payments; sell assets, issue or sell stock of
Restricted Subsidiaries; enter into transactions with stockholders or
affiliates; engage in unrelated lines of business; or consolidate, merge, or
sell all or substantially all of their assets. In addition, Mitchell Rubinson
must remain the Company's Chief Executive Officer.

         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 and IFFC's best estimates of the expenses IFFC anticipates incurring and
the timing of such expenses.

         To date, IFFC's business operations have been principally financed by
proceeds from public and private offerings of IFFC's equity and debt securities,
proceeds from various bank credit facilities, the BKC Settlement Agreement, and
proceeds from the private sale of the 11% Convertible Senior Subordinated
Discount Notes.

                                       33
<PAGE>
         In January 1997, Mr. Rubinson and his wife, Marilyn Rubinson, Jaime
Rubinson and Kim Rubinson, purchased $100,000, $300,000, $50,000 and $50,000
aggregate principal amount of convertible promissory notes, respectively. The
notes bore interest at 8% per annum and were to mature on January 13, 1999. The
notes were converted 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 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, Inc. ("Funding") as
partial payment of amounts due to Funding in connection with the settlement of
the BKC Litigation.

         On July 14, 1997, IFFC and Acquisition Sub entered into a Merger
Agreement with 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 received
by the Funding shareholders was 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 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 BKC Development Agreement. Funding was entitled to receive
seventy-five percent (75%) of the litigation proceeds, as defined, under its
prior agreements with the Company.

         As of June 30, 1998 and August 11, 1998, the Company had $1,609,673 and
$1,106,398, respectively, in Polish bank accounts with substantially all of such
funds held as U.S. dollar denominated deposits. Substantially all of the
Company's remaining cash including the net proceeds of the private placement is
held in U.S. dollar accounts in U.S.
Banks.
                                       34
<PAGE>
         IFFC has also financed its operations through the use of credit
facilities, which credit facilities are described below.

         On September 30, 1996, PKP entered into a revolving credit facility
with Amerbank totaling 100,000 zlotys (approximately $28,490 at June 30, 1998
exchange rates). The credit facility was renewed on May 27, 1998 and matures on
June 1, 1999. The credit facility bears interest at a floating rate. The note is
secured by the guarantee of IFFC. As of June 30, 1998 and August 11, 1998 the
balance of the credit facility was approximately $2,113 and $12,288,
respectively.

         As of January 28, 1993, IFFP entered into a revolving credit facility
with American Bank of Poland S.A. ("AmerBank") totaling 300,000 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) credit available was
decreased to 200,000 zlotys (approximately $56,980 at June 30, 1998 exchange
rates), and (ii) in March 1997, the credit facility was further amended to
100,000 zlotys (approximately $28,490 at June 30, 1998 exchange rates). The
credit facility matured on March 31, 1998. In April 1998, the credit facility
was renewed under the same terms and conditions for an additional year. As of
June 30, 1998 and August 11, 1998, there was $0 outstanding on the credit
facility.
                                       35

<PAGE>
         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 matured on May 19, 1998. On
May 18, 1998, the credit facility was renewed for three months under the same
terms and conditions.

         On August 12, 1997, the Company executed two credit agreements with the
American Bank in Poland ("Amerbank"). The first credit facility was in the
amount of $950,000. The purpose of this facility was to consolidate existing
debt owed to Amerbank totaling $300,000 with existing debt owed to Bank Handlowy
of $650,000. Pursuant to the terms of the new loan, interest is payable monthly
at the prevailing one month LIBOR rate plus 2.75%. This rate approximates 8.5%
as of May 12, 1998. Commencing in March 1998, the loan is to be repaid in
monthly installments of $32,000 for twenty nine months with a balloon payment of
$22,000 due at maturity (August 12, 2000). The loan is secured by all existing
restaurant assets and the guarantee of IFFC. The balance of this credit facility
as of June 30, 1998 and August 14, 1998 was $822,000 and $790,000, respectively.

         The second credit agreement was a development loan in the principal
amount of $1,500,000. The purpose of this loan was to provide partial credit for
the development of new Burger King restaurants. Borrowings under this credit
facility were to be made until August 1999 and were to be secured by: (i) fixed
assets of each new restaurant financed; and (ii) a guarantee of IFFC. The loan
was scheduled to be repaid in thirty five equal installments of $42,000 starting
in September 1999 with a balloon payment of $30,000 due at maturity (August 12,
2002). Interest was to be paid monthly at the prevailing one month LIBOR rate
plus 2.5%. According to the terms of the agreement, the proceeds of the loan
could be used to finance up to fifty percent (50%) of the costs of furnishing
and commencing operation of Burger King restaurants operated by IFFP. No
advances were made on this facility and it was cancelled in favor of a new
credit facility as described below.

         On April 2, 1998, PKP entered into a $300,000 development loan with The
American Bank in Poland ("Amerbank") for the development of its Domino's stores.
Borrowings under this credit facility may be made until December 26, 1998 and
are secured by: (i) fixed assets of each new restaurant financed; and (ii) a
guarantee of IFFC. The loan is required to be repaid in ten equal quarterly
installments of $30,000 starting on December 26, 1998 with a final payment due
at maturity (March 26, 2001). Interest is paid monthly at the prevailing one
month LIBOR rate plus 3-1/8%. This rate approximates 8.75% as of August 12,
1998. According to the terms of the agreement, the proceeds of the loan could be
used to finance up to fifty percent (50%) of the costs of furnishing and
commencing operation of Domino's stores operated by PKP. As of June 30, 1998 and
August 10, 1998, approximately $167,769 and $202,276 was outstanding on the
facility.

         On June 19, 1998, a development loan in the principal amount of
$1,300,000 was executed with Amerbank for IFFP. The purpose of this loan is to
provide partial credit for the development of new Burger King restaurants.
Borrowings under this credit facility are to be made until June 18, 2000 and are
secured by: (i) fixed assets of each new restaurant financed; and (ii) a
guarantee of IFFC. The loan is scheduled to be repaid in thirty five equal
installments of $36,111 starting in June 2000 with a final payment of $36,115
due at maturity (May 18, 2003). Interest is to be paid monthly at the prevailing
one month LIBOR rate plus 2.5%. According to the terms of the agreement, the
proceeds of the loan are be used to finance up to fifty percent (50%) of the
costs of furnishing and commencing operation of Burger King restaurants operated
by IFFP. As of June 30, 1998 and August 10, 1998, $102,098 and $440,534 was
outstanding on this credit facility.

         On December 28, 1995, IFFC increased its equity interest in IFFP from
80% to 85% by purchasing from the minority shareholder 5% (25% of the minority
holdings) of the outstanding capital stock of IFFP in exchange for a $500,000
non-interest bearing obligation was paid in full in June 1997.

                                       36
<PAGE>
IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS

         The accounts of IFFC's Polish subsidiaries are maintained using the
Polish zloty.

         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. At June 30, 1998 and August 11, 1998, the exchange rate was 3.51 and
3.45 zlotys per dollar, respectively.

         IFFC's restaurant and store 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 years ended December 31, 1996 and 1997, the rates of inflation
and devaluation improved. For the years ended December 31, 1993, 1994, 1995,
1996, and 1997 the annual inflation rate in Poland was 35%, 32%, 21.6%, 19.5%,
and 13.0% respectively, and as of December 31, 1993, 1994, 1995, 1996, and 1997
the exchange rate was 2.134, 2.437, 2.468, 2.872, and 3.514 zlotys per dollar,
respectively. Payment of interest and principal on the 9% Convertible
Subordinate Debentures, 11% Convertible Senior Subordinated Discount Notes and
payment of franchise fees to BKC and DPI for each restaurant and store 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.

YEAR 2000 COMPUTER ISSUE

         The SEC has issued Staff Legal Bulletin No. 5 (CF/IM) stating that
public operating companies should consider whether there will be any anticipated
costs, problems and uncertainties associated with the Year 2000 issue, which
affects many existing computer programs that use only two digits to identify a
year in the date field. The Company anticipates that its business operations
will electronically interact with third parties very minimally, if at all, and
the issues raised by Staff Legal Bulletin No. 5 are not applicable in any
material way to the Company's business or operations. Additionally, the Company
intends that any computer systems that the Company may purchase or lease that
are incident to the Company's business will have already addressed the Year 2000
issue.

                                       37
<PAGE>
                           PART II. OTHER INFORMATION

ITEM 2.  LEGAL PROCEEDINGS

Polish Fiscal Authority Disputes

         As of July 1995, IFFP likely became 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. 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 value added tax deductions for July and August
1995. Additionally, penalties and interest may be imposed on these disallowed
deductions. IFFP believes that its potential exposure is approximately $400,000,
which amount was accounted for in its 1997 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 Minister's ruling. Although
IFFP's NCR Cash Register System (the "Cash Register System") was a modern
system, the Cash Register System could not be modified. IFFP has replaced the
system with a new Siemen's system which complies with Polish regulations.

Other Litigation

         The Company is not a party to any litigation or governmental
proceedings that management believes would result in any judgments or fines that
would have a material adverse effect on the Company.

                                       38
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

          (a)     Exhibits:

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

               10.74             Michael T. Welch Employment Agreement

                27.1             Financial Data Schedule 

          (b) The following reports on Form 8-K were filed during the quarter
              ended on June 30, 1998:

                None




                                       39

<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    12, 1998       By: /s/ Mitchell Rubinson
                                    -------------------------
                                    Mitchell Rubinson, Chairman of the Board,
                                    Chief Executive Officer
                                    (Principal Executive Officer)

DATE:      August    12, 1998       By: /s/ James Martin
                                    --------------------
                                    James Martin, Chief Financial Officer
                                    (Principal Financial and Accounting Officer)






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