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 September 30, 1996



           [ ]  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 November 7, 1996 was 8,310,856.

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
                  September 30, 1996 and December 31,
                  1995                                                   3-4

                  Consolidated Statements of Operations
                  for the Three and Nine Months Ended
                  September 30, 1996 and 1995                             5

                  Consolidated Statements of
                  Shareholders' Equity for the Nine
                  Months Ended September 30, 1996                         6

                  Consolidated Statements of Cash Flows
                  for the Nine Months Ended September
                  30, 1996 and 1995                                      7-8

                  Notes to Consolidated Financial
                  Statements                                             9-17



      ITEM. 2     Management's Discussion and Analysis
                  or Plan of Operation                                  18-26



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






SIGNATURES




                                        2




<PAGE>



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


                                    ASSETS
                                    ------



                                              September 30,      December 31,
                                                  1996               1995
                                              ------------      ------------


CURRENT ASSETS:

   Cash and cash equivalents                  $    213,303      $    253,510
   Restricted cash                                 500,000           500,000
   Receivables                                      36,654            50,866
   Inventories                                     304,425           384,434
   Advances to affiliate                           195,474            49,087
   Prepaid expenses                                 45,300            38,989
                                              ------------      ------------

      Total Current Assets                       1,295,156         1,276,886
                                              ------------      ------------


Furniture, equipment and
   leasehold improvements, net                   5,855,304         6,625,941

Deferred debenture issuance costs,
   net of accumulated amortization
   of $115,841 and $90,899,
   respectively                                    316,484           341,426

Other assets, net                                  380,172           364,701

Burger King Development Rights,
   net of accumulated amortization
   of $286,042 and $229,462,
   respectively                                     91,156           147,736
                                              ------------      ------------



   Total Assets                               $  7,938,272      $  8,756,690
                                              ============      ============

                             See Accompanying Notes


                                      3




<PAGE>
             INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
              CONSOLIDATED BALANCE SHEETS, Continued (unaudited)
                     LIABILITIES AND SHAREHOLDERS' EQUITY

                                              September 30,      December 31,
                                                  1996               1995
                                              ------------      ------------
CURRENT LIABILITIES:
   Accounts payable                           $    561,629      $    354,823
   Accrued interest payable                         78,545            21,580
   Other accrued expenses                          313,840           473,127
   Notes payable                                    69,307             -
   Payable to affiliates                           135,179             -
   Bank credit facilities                        1,649,401         1,604,248
   Dividends payable on Preferred Stock            132,858             -
   Non-interest bearing obligation
      payable to minority shareholder
      of IFF Polska                                500,000           500,000
                                              ------------      ------------
      Total Current Liabilities                  3,440,759         2,953,778
                                              ------------      ------------

9% SUBORDINATED CONVERTIBLE
DEBENTURES, DUE 2007                             2,756,000         2,756,000
                                              ------------      ------------
      Total Liabilities                          6,196,759         5,709,778
                                              ------------      ------------
MINORITY INTEREST IN NET ASSETS
OF CONSOLIDATED SUBSIDIARY                         523,489           689,681
                                              ------------      ------------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
   Preferred Stock, $.01 par value,
   (liquidation preference of $3,859,000
   and $5,003,000), 1,000,000 shares
   authorized; 38,590 and 50,030
   shares issued and outstanding,
   respectively                                        386               500

   Common Stock, $.01 par value,
   100,000,000 shares authorized;
   8,310,856 and 3,759,564 shares
   issued and outstanding, respectively             83,108            37,595

   Additional paid-in capital                   14,343,477        14,046,571

   Accumulated deficit                         (13,208,947)      (11,727,435)
                                              ------------      ------------
      Total Shareholders' Equity                 1,218,024         2,357,231
                                              ------------      ------------

      Total Liabilities and
          Shareholders' Equity                $  7,938,272      $  8,756,690
                                              ============      ============

                             See Accompanying Notes


                                        4

<PAGE>
                   INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
<TABLE>
<CAPTION>
                                     Three Months Ended           Nine Months Ended
                                        September 30,               September 30,
                                 --------------------------   --------------------------   
                                      1996          1995           1996          1995
                                 ------------  ------------   ------------  ------------
<S>                              <C>           <C>            <C>           <C>         
SALES                            $  1,328,937  $  1,139,784   $  4,049,772  $  3,577,878
                                 ------------  ------------   ------------  ------------
RESTAURANT OPERATING EXPENSES:
  Food and Packaging                  529,358       482,406      1,692,546     1,640,454
  Payroll and Related Costs           210,361       177,635        594,230       549,296
  Occupancy and Other Operating
   Expenses                           372,460       498,955      1,113,972     1,067,857
  Depreciation and Amortization       208,625       184,242        684,617       632,906
                                  ------------ ------------   ------------   ------------
   Total Restaurant Operating
     Expenses                       1,320,804     1,343,238      4,085,365     3,890,513
                                 ------------  ------------   ------------  ------------
GENERAL AND ADMINISTRATIVE
  EXPENSES                            349,949       435,774      1,119,086     1,432,086
                                 ------------  ------------   ------------  ------------

OPERATING LOSS                    (   341,816)  (   639,228)   ( 1,154,679)  ( 1,744,721)
                                 ------------  ------------   ------------  ------------

OTHER INCOME (EXPENSES):
  Interest and other income       (    13,936)       12,794         89,776        58,303
  Interest expense, including
   amortization of debenture
   issuance costs                 (   115,685)  (   160,008)   (   344,227)  (   456,899)
  Other expense, net                     -           41,720           -      (    13,743)
  Gain (loss) from foreign
   currency translation           (    11,618)        3,047    (   105,716)       47,266
                                 ------------  ------------   ------------  ------------

   Total other income
     (expenses)                   (   141,239)  (   102,447)   (   360,167)  (   365,073)
                                 ------------  ------------   ------------  ------------

Loss before minority interest     (   483,055)  (   741,675)   ( 1,514,846)  ( 2,109,794)

Minority interest in losses of
  consolidated subsidiary              48,531        73,742        166,192       249,015
                                 ------------  ------------   ------------  ------------

Loss before extraordinary gain    (   409,524)  (   667,933)   ( 1,348,654)  ( 1,860,779)

Extraordinary gain                       -             -              -        1,106,642
                                 ------------  ------------   ------------  ------------

NET INCOME (LOSS)                $(   434,524) $(   667,933)  $( 1,348,654) $(   754,137)
                                 ============  ============   ============  ============
NET INCOME (LOSS) PER COMMON SHARE:
  Loss before extraordinary
   gain                          $(       .06) $(       .18)  $(       .27) $(       .52)
  Extraordinary Gain                                    -              -             .31
                                 ------------  ------------   ------------  ------------

NET INCOME (LOSS)                $(       .06) $(       .18)  $(       .27) $(       .21)
                                 ============  ============   ============  ============
WEIGHTED AVERAGE NUMBER OF
  COMMON SHARES OUTSTANDING         6,776,544     3,746,453      5,053,117     3,575,955
                                 ============  ============   ============  ============
</TABLE>
                            See Accompanying Notes

                                        5



<PAGE>
                   INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                       For the Nine Months Ended September 30, 1996
                                        (unaudited)

<TABLE>
<CAPTION>
                                          Common Stock          Preferred Stock        Additional
                                    ----------------------   ----------------------      Paid In    Accumulated
                                      Shares        Amount     Shares        Amount      Capital      Deficit       Total
                                    ---------    ---------   ---------   ----------   -----------  ------------  ----------
<S>                                 <C>          <C>            <C>      <C>          <C>          <C>           <C>
Balances, December 31, 1995         3,759,564    $  37,595      50,030   $      500   $14,046,571  $(11,727,435) $2,357,231

Conversion of preferred stock         381,292        3,813   (  11,440)        (114)   (    3,699)         -           -

Sale of common stock for cash       3,550,000       35,500        -              -        209,500          -        245,000

Common stock issued in exchange
   for professional services          620,000        6,200        -              -         81,105          -         87,305

Sale of warrants for cash                -            -           -              -         10,000          -         10,000

Net loss for the period                  -            -           -              -           -      ( 1,348,654) (1,348,654)

Preferred dividends                      -            -           -              -           -      (   132,858) (  132,858)

                                    ---------    ---------   ---------   ----------   -----------  ------------  ----------  
Balances, September 30, 1996        8,310,856    $  83,108      38,590   $      386   $14,343,477  $(13,208,947) $1,218,024
                                    =========    =========   =========   ==========   ===========  ============  ==========
</TABLE>































                                    See Accompanying Notes

                                               6




<PAGE>



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



                                                        Nine Months Ended
                                                           September 30,
                                               -------------------------------  
                                                     1996               1995
                                               ------------       ------------


CASH FLOWS FROM OPERATING
  ACTIVITIES:

Net (loss) income                              $( 1,348,654)      $(   754,137)
Adjustment to reconcile net
  income(loss) to net cash
  used in operating activities:
  Amortization and depreciation                     776,174            790,238
  Extraordinary gain on the
   debenture exchange for stock                        -           ( 1,106,642)
  Minority interest in losses of
   subsidiary                                   (   166,192)       (   249,015)
Changes in operating assets and
  liabilities:
   Receivables                                       14,212            229,634
   Accrued interest receivable                         -                 3,990
   Inventories                                       80,009             39,043
   Prepaid expenses                             (     6,311)       (    37,012)
   Accounts payable and
     accrued expenses                               191,789        (   398,580)
                                               ------------       ------------

Net cash used in operating
  activities                                    (   458,973)       ( 1,482,481)
                                               ------------       ------------


CASH FLOWS FROM INVESTING
  ACTIVITIES:

  Payments for furniture, equipment
   and leasehold improvements                          -           (   134,371)
  Payments for other assets                     (    53,794)       (    38,402)
  Disposition of furniture and equipment            114,308               -
                                               ------------       ------------
  Net cash provided by (used in)
   investing activities                              60,514        (   172,773)
                                               ------------       ------------

                              See Accompanying Notes


                                        7


<PAGE>

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

                                                      Nine Months Ended
                                                         September 30,
                                               ------------------------------- 
                                                    1996               1995
                                               ------------       ------------


CASH FLOWS FROM FINANCING
  ACTIVITIES:

  Sale of Common Shares for cash                    245,000               -
  Sale of Options for cash                           10,000               -
  Advances from (to) affiliate, net                  58,099        (    56,117)
  Repayments of bank credit
   facilities                                   (   294,248)       (   252,812)
  Borrowings under bank credit
   facilities                                       339,401               -
                                               ------------       ------------
  Net cash provided by (used in)
   financing activities                             358,252        (   308,929)
                                               ------------       ------------


DECREASE IN CASH AND CASH
  EQUIVALENTS                                   (    40,207)       ( 1,964,183)

BEGINNING CASH AND CASH
  EQUIVALENTS                                       253,510          2,600,696
                                               ------------       ------------

ENDING CASH AND CASH EQUIVALENTS               $    213,303       $    636,513
                                               ============       ============


SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION:

  Cash paid during the period for:
   Interest                                    $    262,320       $    346,527
                                               ============       ============

SUPPLEMENTAL SCHEDULE OF NON
  CASH INVESTING & FINANCING
  ACTIVITIES:


During the nine months  ended  September  30, 1996,  11,440  shares of preferred
stock were converted into 381,292 shares of Common Stock.

In September  1996, the Company paid $87,305 of legal and  professional  fees by
issuance of 620,000 shares of Common Stock.

                             See Accompanying Notes

                                        8

<PAGE>



              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.    ORGANIZATION:

      International   Fast  Food  Corporation  (the  "Company"  or  "IFFC")  was
organized for the purpose of developing  and  operating  franchised  Burger King
restaurants in the Republic of Poland  ("Poland").  A then major  shareholder of
the Company,  Capital Brands, Inc. ("CBI") entered into a development  agreement
(the "Development  Agreement") with Burger King Corporation ("BKC") and assigned
all its rights and obligations under the Development Agreement to the Company.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

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

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

      The 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.  The  U.S.  dollar  is  considered  to be  the
functional  currency of IFF Polska. The only currency that may be used in Poland
is the zloty.  As of January 1, 1995,  the National Bank of Poland  introduced a
new  currency  unit  which is named a "zloty"  (a "new  zloty").  New zlotys are
equivalent  to 10,000 old zlotys  ("old  zlotys").  Old zlotys will remain legal
tender until December 31, 1996,  after which date they will only be exchangeable
at certain  banks.  All references in this document to zlotys are to old zlotys.
At  September  30,  1996,  the  exchange  rate was 28,010 old zlotys per dollar.
Monetary assets and  liabilities  are translated  from the local  currency,  the
"zloty", to U.S. dollars at the period end exchange rate.  Non-monetary  assets,
liabilities,  and related expenses,  primarily furniture,  equipment,  leasehold
improvements  and related  depreciation and  amortization,  are translated using
historical exchange rates. Income and expense accounts,  excluding  depreciation
and amortization, are translated at an annual weighted average exchange rate.

      The  accompanying  consolidated  financial  statements as of September 30,
1996 and 1995 are unaudited.  The consolidated  Balance sheet as of December 31,
1995,  was derived  from the  December 31, 1995  audited  balance  sheet.  These
statements  have been prepared in accordance  with the rules and  regulations of
the Securities and Exchange  Commission  (the "SEC").  Certain  information  and
footnote  disclosures  normally  included in  financial  statements  prepared in
accordance with generally accepted accounting  principals have been condensed or


                                        9

<PAGE>

                   INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued:

omitted pursuant to such rules and regulations. The Company believes it has made
sufficient disclosures such that the information presented is not misleading. In
the opinion of  management,  the financial  statements  reflect all  adjustments
(which include only normal recurring  adjustments) necessary to state fairly the
financial  position  and  results  of  operations  as of  and  for  the  periods
indicated.

      These  financial  statements  should  be  read  in  conjunction  with  the
Company's consolidated financial statements and notes thereto for the year ended
December 31, 1995,  included in the Company's Form 10-KSB.  Results for the nine
month period ended  September 30, 1996,  are not  necessarily  indicative of the
results to be achieved for the year ending December 31, 1996.

      GOING CONCERN - The report of the  Company's  independant  accountants  on
their audit of the Company's December 31, 1995 consolidated financial statements
contained uncertainties relating to the Company's ability to continue as a going
concern. The accompanying  consolidated  financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

      FINANCIAL  ACCOUNTING STANDARDS NO. 121 (FAS NO. 121) - In March 1995, the
FASB issued FAS No. 121 "Accounting for the Impairment of Long-Lived  Assets and
for Long-Lived Assets to be Disposed of". This statement, which is effective for
the Company's financial  statements for its 1996 fiscal year, requires that long
lived  assets  and  certain  intangibles  to be held and used by the  Company be
reviewed for impairment  whenever  events or changes in  circumstances  indicate
that the carrying  amount of an asset may not be  recoverable.  If the estimated
undiscounted  cash flows that are  expected  to result from the use of the asset
are less than the carrying  amount of the asset,  an impairment loss is recorded
equal to the excess of the  carrying  amount  over the fair value of the assets.
The Company will review for impairment of its long-lived  assets during the year
ending December 31, 1996, using the methodology prescribed by FAS No. 121.

3.    BANK CREDIT FACILITIES PAYABLE:

      Amounts  outstanding  under bank credit  facilities at September 30, 1996,
consist of the following:

Amerbank in Poland, S.A.
      overdraft credit line, variable
      rate approximately equal to prime,
      payable in full on October 30, 1996.                          $  39,401

Amerbank revolving credit facility, 12%
      interest,  interest payable quarterly,
      payable in full on September 30, 1997.                          310,000





                                       10



<PAGE>


              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued



3.    BANK CREDIT FACILITIES PAYABLE, Continued:

Amerbank, IFFP line of credit of $300,000
      payable in full on or before
      February 1, 1997, interest payable
      monthly at Amerbank prime, guaranteed
      by IFFC.                                                       300,000

Bank  Handlowy  Warszawie,  S.A., IFFP
      credit facility of $1,000,000  payable in
      full  on  or  before  December  16,  1996,
      LIBOR  plus  3.875%  interest, collateralized
      by amounts on deposit  with Bank  Handlowy,
      unconditional guarantee of IFFC,  fixed
      assets of IFFP of $1,250,000  and an
      irrevocable standby letter of credit
      in the amount of $500,000 issued by the
      Credit Suisse Miami Agency                                    1,000.000
                                                                  -----------
                                                                    1,649,401
Less: Current Maturities                                            1,649,401
                                                                  -----------
             Total Long Term Portion                               $      -
                                                                  ===========

      On April 12, 1996, the Company  received an extension of the maturity date
of the  overdraft  credit line until  October 30,  1996.  On October 24, 1996, a
formal request was made to AmerBank asking for an extension of the maturity date
to April 30, 1997. As of November 7, 1996, AmerBank has not formally granted the
requested  extension.  No assurance  can be given that  AmerBank  will grant the
requested  extension or otherwise  modify the terms of the credit  facility in a
manner that would be acceptable to IFFP. As of November 7, 1996, the outstanding
balance on the credit facility was $27,070.

      On  November  7,  1996  the  Company  modified  the  payment  terms of the
revolving  credit  facility  whereby  principal  payments of $100,000 are due on
March 31, 1997 and June 30, 1997 with a final  payment of $110,000 on  September
30, 1997.

      IFFP's  $1,000,000  credit facility with Bank Handlowy matures on December
16,  1996.  On October 29,  1996,  IFFP  formally  requested an extension of the
maturity date of the facility. No assurance can be given that Bank Handlowy will
grant the  requested  extension  or  otherwise  modify  the terms of the  credit
facility in a manner that would be acceptable to IFFP.



                                       11




<PAGE>


              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued


4.    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 is shown
below at September 30, 1996:
                                                           1996
      Outstanding at beginning of year                   282,000
      Granted                                               -
      Exercised                                             -
      Expired                                               -
                                                         -------
      Outstanding at end of period                       282,000
                                                         =======  
      Exercisable at end of period                       246,000
                                                         =======   
      Price range of options outstanding at end
        of period                               $1.375 - $6.4375
                                                ================
      Available for grant at end of period               368,000
                                                         =======

      At September 30, 1996,  IFFC had reserved the  following  shares of Common
Stock for issuance:

         Stock option plan                                  650,000

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

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

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

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

         Preferred Stock convertible into Common
         Stock at a conversion price of $3.00
         per share                                        1,286,208
                                                          ---------
                   Total reserved shares                  2,798,890
                                                          =========

                                      12



<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued


      In May, 1996,  IFFC sold 2,200,000  shares of Common Stock to its Chairman
of the Board,  Chief  Executive  Officer and  President for $110,000 cash and on
September  12,  1996 sold  1,350,000  shares of  Common  Stock to seven  private
investors for $135,000  cash. In September  1996 IFFC issued  370,000  shares of
Common Stock in payment of $62,305 of legal fees and expense and 250,000  shares
of Common Stock in payment of $25,000 of professional fees.


5.    CONVERTIBLE SUBORDINATED DEBENTURES:

      The Convertible  Subordinated Debentures (the "Debentures") mature in 2007
and provide for the payment of interest at 9% semi-annually until maturity.

      On November 7, 1994, the Company  initiated an Exchange Offer whereby each
$1,000 in principal amount of the Debentures validly tendered, will be exchanged
for ten shares of the Company's  Series A 6%  Convertible  Preferred  Stock (the
"Series A Convertible  Preferred  Stock").  The Series A  Convertible  Preferred
Stock  (i) has a  liquidation  preference  value  of  $100  per  share,  (ii) is
convertible  into shares of the Company's  Common Stock at a conversion price of
$3.00  per  share,  and  (iii)  is  entitled  to  receive   dividends,   payable
semi-annually  on each June 15 and  December 15, at the rate of $6.00 per annum,
which dividends may, at the option of the Company,  be paid in cash, through the
issuance of Common Stock or a combination  of cash and Common Stock and (iv) may
be redeemed by the Company  under  certain  circumstances.  The  Exchange  Offer
expired on January 13, 1995,  and resulted in  $5,636,000  of the  $8,392,000 in
Debentures  then  outstanding  being  tendered  and  accepted by the Company for
exchange.

      The Company  calculated  the fair value of the 56,380  shares of preferred
stock to  aggregate  $3,757,590,  which  represents  the value of the  aggregate
number of common  shares  that could be  obtained  through a  conversion  of the
preferred  stock applied to the per share market value of the  Company's  common
stock on January 13, 1995.

      The Company  recognized  an  extraordinary  gain on the exchange  which is
calculated as follows:

            Debentures tendered                  $ 5,636,000
            Value assigned to preferred stock      3,757,590
            Reduction of unamortized debenture
              issuance costs related to
              debentures tendered                 (  771,768)
                                                 -----------

      Extraordinary gain                         $ 1,106,642
                                                 ===========

6.    LITIGATION:

      BKC LITIGATION - On March 17, 1995, IFFC and IFFP (collectively, the "IFFC
Affiliates"),  filed suit against BKC in the Eleventh  Judicial Circuit Court of
the State of Florida.  In their amended complaint,  the IFFC Affiliates alleged,
among  other  things,  that BKC  breached  certain of its  express  and  implied
obligations under the BKC Development Agreement and the eight existing franchise

                                      13

<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

6.    LITIGATION, Continued:

agreements (the "Franchise  Agreements")  pertaining to IFFP's eight Burger King
restaurants.  The IFFC Affiliates  further alleged that in connection with BKC's
sale of certain of its rights pursuant to the BKC Development  Agreement and the
Franchise  Agreements,  BKC failed to timely  deliver to the IFFC  Affiliates  a
complete and  accurate  franchise  offering  circular in  accordance  with rules
promulgated  by the  Federal  Trade  Commission  (the  "FTC  Count").  The  IFFC
affiliates also alleged that BKC committed  certain acts which  constitute fraud
and/or deceptive and unfair business  practices.  The IFFC Affiliates have asked
the court to, among other things,  award them  compensatory  damages of not less
that $15,000,000 punitive damages and certain costs and expenses.

      On August 21, 1995, BKC filed an answer which asserts nineteen affirmative
defenses and three  counterclaims.  Subsequently  BKC voluntarily  dismissed its
counterclaims  and the parties agreed that to the extent that IFFC may owe money
to BKC for  royalties,  any such amount will be  deducted  from any  judgment in
favor of IFFC.

      The IFFC Affiliates' and  BKC's efforts at  court  ordered  mediation  and
voluntary settlement discussions have not been successful.  The IFFC Affiliates'
five count suit has not  survived all of BKC's  motions to dismiss.  On February
14, 1996, the Eleventh  Judicial  Circuit Court granted BKC's motion for summary
judgement with respect to the FTC Count.  The Eleventh  Judicial Circuit Courts'
decision was based upon its belief that,  as a matter of law, such a count could
not be maintained by  "sophisticated  business  entities".  The IFFC  Affiliates
believe  the  court's  decision  was made in error and if their  claims  are not
satisfactorily  addressed  at the  conclusion  of the trial the IFFC  Affiliates
intend to appeal the court's  decision.  The trial is  scheduled  to commence on
January 21, 1997.

      IFFC  cannot  reasonable  estimate  how long it will take or the amount of
money it will need to expend in order to  resolve  the BKC  Litigation.  Even if
IFFC knew BKC desired to settle the BKC  Litigation,  IFFC could not  reasonably
estimate  the  structure  of a proposed  settlement.  Even if IFFC  prevails  on
certain of the issues disputed in the BKC Litigation,  there can be no assurance
as to the remedies  granted by the courts.  Termination  of the BKC  Development
Agreement  and/or  Franchise  Agreements  for any  reason  could have a material
adverse effect on the Company.

      Under  the BKC  Development  Agreement,  IFFC  was  required  to have  ten
restaurants  open  by  September  24,  1995.  Given  that  IFFC  operates  eight
restaurants,  IFFC is in technical default under the BKC Development  Agreement.
By letter dated June 30, 1995,  BKC notified IFFC that, at that time,  BKC would
not elect to declare IFFC to be in default under the BKC Development  Agreement.
BKC further  stated that such notice was not a waiver of its legal  rights under
the BKC  Development  Agreement  to, in the future,  declare  IFFC's  failure to
develop the requisite number of BKC Restaurants an act of default.

      The  Agreement  to  Assign  Litigation  Proceeds  -  In  order  to  secure
additional funds to finance the BKC Litigation, as of January 25, 1996, the IFFC


                                       14




<PAGE>


              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

Affiliates entered into an Agreement to Assign Litigation Proceeds (the "Funding
Agreement") with Litigation Funding,  Inc., a Florida  Corporation  ("Funding").
Mitchell  Rubinson,  the  Chairman  of the Board,  Chief  Executive  Officer and
President of IFFC is also the Chairman of the Board, Chief Executive Officer and
President and the principal shareholder of Funding.

      Pursuant to the Funding Agreement, Funding agreed to pay on behalf of IFFC
and/or IFFP up to $500,001 (the "Amount") for all expenses (including attorneys'
fees, court costs and other related expenses, but not judgements or amounts paid
in  settlement)  actually  incurred  by or on  behalf  of  IFFC  and/or  IFFP in
connection with investigating, defending, prosecuting, settling or appealing the
BKC  Litigation  and any and all claims or  counterclaims  of BKC  against  IFFC
and/or IFFP  (collectively,  the "BKC Matter").  Funding has paid all amounts it
has been  requested to pay pursuant to the Funding  Agreement.  On July 3, 1996,
the Company  and Funding  executed an  amendment  to the Funding  Agreement.  To
Complete the BKC matter,  Funding has agreed to pay up to an additional $250,000
so that the maximum amount paid by Funding would be $750,001.

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

      Specifically,   IFFC  and  IFFP  each  individually  assigned,  set  over,
transferred and conveyed to Funding all of its right,  title and interest in and
to the sum of the following (the "Assigned  Proceeds");  (i) fifty percent (50%)
of the  Proceeds  to the  extent  that such  amount  does not  exceed  Funding's
Expenses  (Funding's  Expenses")  which are defined as the sum of the  aggregate
amount of money paid by  Funding as the Amount and the amount of money  expended
by Funding if it assumes the  prosecution of the BKC Matter;  (ii) fifty percent
(50%) of any  Proceeds,  excluding any Sales  Proceeds,  in excess of the sum of
Funding's  Expenses and the IFFC  Affiliates'  Expenses (as such term is defined
below, the "IFFC  Affiliates'  Expenses");  and (iii) fifty percent (50%) of any
Sales  Proceeds  in  excess  of the  sum of  Funding's  Expenses  and  the  IFFC
Affiliates' Expenses.

                                       15

<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued

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

      For  consideration of the additional  $250,000 payment Funding received an
additional  twenty five percent  (25%) of the Proceeds,  and the term  "Assigned
Proceeds" remains unchanged from its meaning in the Funding Agreement except for
the twenty five percent (25%) increase to seventy five percent (75%).

      The IFFC Affiliates have also entered a second  agreement to assist in the
financing of the BKC Litigation.  On April 7, 1996 the IFFC  Affiliates  entered
into a letter agreement (the "Fee Agreement") with the law firm (the "Litigation
Counsel")  representing  the IFFC Affiliates in the BKC Litigation.  Pursuant to
the Fee  Agreement,  IFFC and IFFP have  agreed to pay  Litigation  Counsel  the
greater of (a)  Litigation  Counsel's  accrued  hourly  fees for legal  services
provided in connection with the BKC Litigation;  and (b) a certain percentage of
any  final  monetary  recovery  obtained  by the  IFFC  Affiliates  in  the  BKC
Litigation, in exchange for Litigation Counsel's services. The percentage of any
monetary recovery payable to Litigation Counsel varies depending upon whether or
not:  (1) the BKC  Litigation  is  settled at or before  mediation;  (2) the BKC
Litigation  is  settled  after  mediation  but  before  a  verdict;  (3) the BKC
Litigation is resolved by a jury or court verdict;  and (4) the IFFC  Affiliates
successfully  appeal a verdict  in the BKC  Litigation  or if they  successfully
defend  against an appeal by BKC of the  verdict in the BKC  Litigation.  In the
event  the  IFFC  Affiliates  recover  in  excess  of  $10,000,000  in  the  BKC
Litigation,  IFFC has agreed to issue the Litigation  Counsel  200,000 shares of
IFFC Common Stock. Under the Fee Agreement, the IFFC Affiliates are not required
to make any future legal fee payments to  Litigation  Counsel  until there is an
award with respect to or settlement of the BKC Litigation.

      DOMONT LITIGATION - On May 31, 1995, legal action was filed against IFFP a
85% owned subsidiary of the Company,  in Polish Court in the city of Warsaw. The
suit was filed by Domont S.C., a general  contractor  formerly  hired by IFFP to
construct  several of its  Restaurants  in Poland.  The suit  alleges  that IFFP
failed to pay invoices due to Domont for work  performed.  Domont seeks  payment
and damages of approximately  $126,236.  IFFP contends that it has fulfilled its
contractual  obligations  and believes that Domont's  claims and allegations are
without merit.

     POLISH  FISCAL  AUTHORITY  DISPUTES - As of July 1995, IFFC may have become
subject to  penalties  for  failure to comply  with a recently  amended  tax law
requiring  the use of cash  registers  with certain  calculating  and  recording
capabilities  and which are approved for use by the Polish  Fiscal  Authorities.
Although IFFP's NCR Cash Register  System (the "Cash Register  System") is a new
and modern  system,  IFFP's Cash  Register  System had to be  modified  and will
ultimately  need to be replaced in order to comply with the new tax law. IFFP is
now in compliance  with the tax law but was unable to modify and/or  replace its
Cash Register  System before July 1995. As a penalty for  noncompliance,  Polish
tax authorities may disallow  certain VAT deductions for July and August,  which
were previously  deducted by IFFP.  Additionally,  penalties and interest may be
imposed  on these  disallowed  deductions.  IFFP  believes  that  its  potential
exposure is  approximately  $150,000,  which amount has been provided for in the
accompanying  December 31, 1995 financial  statements.  IFFP is currently in the
process of requesting a final  determination  by the Polish Fiscal  Authorities.
                                       16

<PAGE>
              INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued



 6.   LITIGATION, Continued:

IFFC believes this  situation  could have been avoided if BKC were providing the
service,  support  and  assistance  promised  to  IFFC  in the  BKC  Development
Agreement and the Franchise Agreements.












































                                      17




<PAGE>



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

GENERAL

      IFFC currently  operates eight Traditional  Burger King Restaurants.  IFFC
has incurred losses and anticipates that it will continue to incur losses until,
at the earliest,  it establishes a number of restaurants  generating  sufficient
revenues to offset its operating costs and the costs of its proposed  continuing
expansion.  There can be no  assurance  that  IFFC will be able to  successfully
establish a sufficient number of restaurants to achieve  profitable  operations.
IFFC  believes  that it will not  generate  sufficient  revenues  to offset  its
operating costs until, at least, the BKC Litigation is favorably resolved and/or
BKC  provides  the support  promised to IFFC in the  Development  Agreement  and
Franchise  Agreements so that IFFC's per restaurant  sales are increased  and/or
its Food and  Packaging  Expenses and General and  Administrative  Expenses as a
percentage of Sales are decreased.  IFFC's independent auditors have included an
explanatory  paragraph in their report for the year ended  December 31, 1995 and
December 31, 1994 stating that IFFC's  financial  statements  have been prepared
assuming IFFC will continue as a going concern  although IFFC's recurring losses
and the potentially  significant  cash  requirements of the BKC Litigation raise
substantial doubt about IFFC's ability to do so.

      Certain  disputes have arisen between IFFC and BKC and, on March 17, 1995,
IFFC and its majority owned (85%)  subsidiary,  IFFP,  filed suit against BKC in
the Eleventh Judicial Circuit Court of the State of Florida.  IFFC believes that
BKC has not provided all of the support,  supervision and assistance required of
it under the BKC Development  Agreement and eight Franchise  Agreements  between
BKC and IFFC.  Pendency of the litigation has affected the  relationship  of BKC
and IFFC,  including  the  ability of IFFC to  develop  additional  Burger  King
restaurants.  See "---Results of Operations,"  "Liquidity and Capital Resources"
and "Part II. Item 2. LEGAL PROCEEDINGS."

      In order to secure  additional funds to finance the BKC Litigation,  as of
January 25, 1996, the IFFC  Affiliates  entered into the Funding  Agreement with
Litigation Funding, Inc. ("Funding") and, as of April 7, 1996, IFFC entered into
the Fee Agreement with Litigation  Counsel.  Pursuant to the Funding  Agreement,
funding has agreed to pay on behalf of IFFC  and/or IFFP up to $500,001  for all
expenses  actually  incurred  by IFFC  and/or  IFFP  in  connection  with  their
prosecution and defense of the BKC Litigation.  In exchange,  IFFC and IFFP have
each assigned  funding a  substantial  portion of any and all benefits and gross
sums,  amounts and  proceeds  that each of them may receive,  collect,  realize,
otherwise  obtain or benefit from in  connection  with the BKC  Litigation.  See
"Part II, Item 2. LEGAL  PROCEEDINGS."  Pursuant to the Fee Agreement,  IFFC and
IFFP  have  agreed to pay  Litigation  Counsel  the  greater  of (i)  Litigation
counsel's accrued hourly fees for legal services provided in connection with the
BKC  Litigation;  and (ii) a certain  percentage of any final monetary  recovery
obtained  by the  IFFC  Affiliates  in  the  BKC  Litigation,  in  exchange  for
Litigation Counsel's services.  Under the Fee Agreement, the IFFC Affiliates are
not  required to make any future  legal fee or expense  payments  to  Litigation
Counsel  until  there is an award  with  respect to or a  settlement  of the BKC
Litigation.  See "Part II, Item 2. LEGAL PROCEEDINGS" for a detailed description
on the Funding Agreement and the Fee Agreement. On July 3, 1996, the Company and
Funding  executed an  amendment  to the Funding  Agreement.  To complete the BKC
matter,  Funding  has  agreed to pay up to an  additional  $250,000  so that the
minimum total amount paid by Funding would be $750,001.

                                      18

<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 1996 VS NINE MONTHS ENDED SEPTEMBER 30, 1995
RESULTS OF OPERATIONS

      For the nine month period ended  September  30, 1996,  IFFC incurred a net
loss of $1,348,654 or $(.27) per share of IFFC's Common Stock  compared to a net
loss  $754,137  or $(.21)  per share of IFFC's  Common  Stock for the nine month
period ended September 30, 1995.

      For the nine month  periods  ended  September  30, 1996 and  September 30,
1995, IFFC generated Sales of $4,049,772 and $3,577,878,  respectively.  In U.S.
dollar and Polish zloty terms, IFFC's Sales increased by approximately 13.2%, in
the nine  months  ended  September  30, 1996  relative to the nine months  ended
September 30, 1995.  IFFC believes the increase in Sales is attributable to more
effective  marketing  strategies.  IFFC believes that it has been experiencing a
lower level of sales per  restaurant  than most other  franchises  in the Burger
King System.  IFFC also believes its Sales would be higher if BKC were providing
the  service,  support and  assistance  promised to IFFC in the BKC  Development
Agreement and the  Franchise  Agreements.  See  discussion  below  regarding BKC
Litigation,  "Part II, Item 2. LEGAL  PROCEEDINGS" and "---Liquidity and Capital
Resources".

      During the nine month  period ended  September  30,  1996,  IFFC  incurred
$1,692,546 of Food and Packaging Expense, $594,230 of Payroll and Related Costs,
$1,113,972 of Occupancy and Other Operating  Expenses,  $684,617 of Depreciation
and Amortization Expense, respectively.

      Food and  Packaging  Costs for the nine month period ended  September  30,
1996,  and 1995 were 41.8% and 45.8% of Sales,  respectively.  IFFC believes the
decrease  in Food and  Packaging  Costs as a  percentage  of Sales is  primarily
attributable  to a reduction of certain  foods costs.  IFFC believes that it has
been  experiencing  higher food costs as a  percentage  of sales than most other
franchises in the Burger King System.  In addition to IFFC's  negotiations  with
BKC, IFFC continues to have discussions with certain of its food suppliers in an
attempt to lower its food costs. See  "---Liquidity  and Capital  Resources" and
"Part II, Item 2. LEGAL PROCEEDINGS."

      Payroll and Related Costs as a percentage of Sales were 14.7% for the nine
month period ended  September 30, 1996 and 15.4% for the nine month period ended
September  30,  1995.  Payroll and Related  Costs as a  percentage  of Sales has
declined as IFFC has implemented a more efficient  scheduling of its labor force
and as IFFC has not had any significant training costs in 1996.

      Occupancy  and Other  Operating  Expense for the nine month  period  ended
September  30,  1996 and 1995 were 27.5% and 29.8% of Sales,  respectively.  The
decrease in Occupancy and Other  Operating  Expenses as a percentage of Sales is
attributable  primarily  to  increased  sales  volume in relation to fixed costs
expenses.  IFFC  believes  that  its  advertising  expenses  would be lower as a
percentage of Sales if BKC were providing IFFC all of the support and assistance
required of BKC in the  Development  Agreement  and  Franchise  Agreements.  See
discussion below regarding BKC Litigation,  "Part II. Item 2. LEGAL PROCEEDINGS"
and "---Liquidity and Capital Resources."

      Depreciation and  Amortization  Expense as a percentage of Sales was 16.9%
in the nine month period ended September 30, 1996 versus 17.7% in the nine month
period ended September 30, 1995.


                                      19


<PAGE>

      General  and  Administrative  Expenses  for the nine  month  period  ended
September 30, 1996 and 1995 totalled  $1,119,086 and  $1,432,086,  respectively.
For the nine month period ended September 30, 1996,  General and  Administrative
Expenses  was  comprised of  executive  and office  staff  salaries and benefits
("Salary Expense") ($401,573); legal and professional fees, office rent, travel,
telephone  and  other  corporate   expenses   ("Corporate   Overhead   Expense")
($650,898),  including  $47,327 of  professional  fees and  expenses  related to
increased  audit fees and certain  disputes with the Polish Fiscal  Authorities;
and  depreciation and  amortization  ($66,615).  For the nine month period ended
September  30,  1995,  General and  Administrative  Expenses  were  comprised of
executive and office staff salaries  ($526,327);  legal and  professional  fees,
office rent, travel,  telephone and other general corporate expenses ($772,969),
including  $22,905  of  professional  fees and  expenses  related  to the Second
Exchange  Offer,  $239,871  related to the  lawsuit  against  Burger  King;  and
depreciation  and  amortization   ($132,790).   See  "Part  II.  Item  2.  LEGAL
PROCEEDINGS" for additional  information regarding the BKC Litigation and IFFC's
disputes with Polish Fiscal Authorities.

      IFFC  believes it has been  experiencing  lower per  restaurant  Sales and
higher  Food and  Packaging  Expenses,  Advertising  Expense,  and  General  and
Administrative  Expenses as a percentage of Sales than most other  franchises in
the Burger King system.  IFFC believes its per restaurant  Sales would be higher
and its Food and  Packaging  Expenses,  Advertising  Expense,  and  General  and
Administrative  Expenses  as a  percentage  of Sales  would be lower if BKC were
providing  to  IFFC  the  services  and  support  promised  to  IFFC  in the BKC
Development  Agreement and the eight franchise  agreements  between IFFC and BKC
with respect to IFFC's BKC restaurants.  In an effort to increase sales,  reduce
costs,  and recuperate  certain  losses,  on March 17, 1995, the IFFC Affiliates
filed suit against BKC in the Eleventh  Judicial  Circuit  Court of the State of
Florida.  See  "---Liquidity  and Capital  Resources" and Part II. Item 2. Legal
Proceedings."

      For the nine month period  ended  September  30, 1996,  Interest and Other
Income was  $89,776,  which  figure  includes  interest  income of  $49,949  and
miscellaneous  non operating income totalling  $39,827,  net. For the nine month
period ended  September 30, 1995,  Interest and Other Income was $58,303,  which
figure represents interest income on invested funds.

Interest Expense is comprised as follows:
                                                 For the Nine Months Ended
                                                        September 30,
                                              ------------------------------- 
                                                   1996                1995
                                              -----------         ----------- 
  Interest Expense on Debentures              $   186,030         $   205,759
  Amortization of Debenture Issuance Costs         24,942              24,942
  Interest Expense on Bank Facilities             133,255             225,198
                                               ----------          ----------
            Total                             $   344,227         $   456,899
                                              ===========          ==========

      As a result of IFFC's  consummation  of the Second Exchange Offer (defined
below) as of January 13, 1995,  IFFC's annual  interest  expense with respect to
Debentures has dropped and should not exceed $248,000 in the year ended December
31, 1996.  The decrease in the level of Interest  Expense on Debentures  will be
partially  offset by IFFC's  payment  of  dividends  with  respect to the 38,590
shares of Preferred  Stock (defined  below) issued in the Second Exchange Offer.
Each share of Preferred Stock receives dividends,  payable semi-annually on each
June 15 and December 15, at a rate of $6.00 per annum,  which  dividends may, at
the option of IFFC,  be paid in cash,  through the issuance of IFFC Common Stock
or a  combination  thereof.  As of June  30,  1996,  IFFC  accrued  $132,858  of
dividends which were payable as of June 15, 1996.





                                       20




<PAGE>

      IFFC's  interest  expense on bank facilities was $133,255 and $225,198 for
the nine month  period  ended  September  30, 1996 and 1995,  respectively.  The
$91,943  decrease is attributable to IFFC's  reduction of borrowings under short
and long term bank facilities.

      In connection  with the Second  Exchange  Offer in the quarter ended March
31, 1995,  IFFC  recognized  an  extraordinary  gain of  $1,106,642  and applied
$3,757,590 to Shareholders' Equity. See "---Liquidity and Capital Resources."

LIQUIDITY AND CAPITAL RESOURCES

      IFFC's  material  commitments  for capital  expenditures in its restaurant
business  relate  to the  restaurants  that it is  required  to open in order to
comply with the provisions of the BKC Development Agreement. Pursuant to the BKC
Development  Agreement,  IFFC is  required  to open and  operate 13  restaurants
during the  five-year  initial  term.  Due to the  factors  which led to the BKC
Litigation,  IFFC has opened and operates eight of the ten restaurants  required
to be opened by September 24, 1995.  Accordingly,  IFFC is in technical  default
under the BKC Development Agreement. By letter dated June 30, 1995, BKC notified
IFFC that,  at that time,  BKC would not elect to declare  IFFC to be in default
under the BKC Development Agreement. BKC further stated that such notice was not
a waiver of its legal  rights  under the BKC  Development  Agreement  to, in the
future,   declare  IFFC's  failure  to  develop  the  requisite  number  of  BKC
Restaurants an act of default.  IFFC cannot reasonably estimate how long it will
take or the amount of money it will need to expend in order to  resolve  the BKC
Litigation.  Even if IFFC prevails on certain of the issues  disputed in the BKC
Litigation,  there can be no assurance as to the remedies granted by the courts.
Termination of the BKC Development Agreement and/or Franchise Agreements for any
reason could have a material  adverse effect on the Company.  See "Part II. Item
2. LEGAL PROCEEDINGS - BKC Litigation" for a description of the BKC Litigation.

      As  of  September  30,  1996,   IFFC  had  negative   working  capital  of
approximately $2,145,603 and Cash and Cash Equivalents of $213,303 Although IFFC
believes it has  sufficient  funds to finance its  proposed  plan of  operations
until  December 16, 1996,  IFFC cannot  reasonably  estimate how long it will be
able to satisfy its cash requirements. IFFC may be compelled to adjust its plans
based on the outcome of the BKC Litigation.  Based on current assumptions,  IFFC
will  seek  to  implement  its  business  plan,  utilizing  its  Cash  and  Cash
Equivalents and cash generated from restaurant operations. Any implementation of
IFFC's   business   plan  beyond   December  16,  1996  may  require   resources
substantially  greater  than  currently  available  to IFFC.  If  plans  change,
assumptions prove to be inaccurate, or the capital resources available otherwise
prove to be  insufficient to implement its business plan (as a result of the BKC
Litigation or unanticipated  expenses,  problems or difficulties,  or otherwise)
prior to December 16, 1996, IFFC would be required to seek additional  financing
or curtail or cease its activities.  IFFP's $1,000,000 credit facility with Bank
Handlowy  matures on December  16,  1996.  On October 29,  1996,  IFFP  formally
requested an extension of the maturity date of the facility. No assurance can be
given that Bank Handlowy will grant the requested  extension or otherwise modify
the terms of the credit  facility in a manner that would be  acceptable to IFFP.
After  December  16,  1996,  if IFFC does not secure  additional  financing,  or
generate  significant amounts of cash from operations,  IFFC will be required to
curtail  or cease  its  activities.  In an  effort  to  conserve  its  financial
resources,  IFFC may  close  some or all of the  Traditional  Restaurants.  IFFC
anticipates  that  even if it  elects  to close  some or all of the  Traditional
Restaurants,  to the  extent it is  financially  capable,  it will  continue  to
prosecute its claims in the BKC Litigation.  IFFC has not yet determined whether
or not it would be in its best  interests  to  attempt to  liquidate  the assets
associated  with the  Traditional  Restaurants it may elect to close.  Except as

                                      21


<PAGE>

discussed below,  IFFC has no current  arrangements  with respect to, or sources
of,  additional  financing.  There can be no assurance  that IFFC will  generate
sufficient,  or any, cash flow from  operations in the future or that additional
financing  will be  available  on  acceptable  terms,  or at all, to fund future
commitments for capital expenditures or Operations.

      On July 3, 1996, the  Company  and  Funding  executed an amendment  to the
Funding Agreement.  To complete the BKC matter,  Funding has agreed to pay up to
an additional $250,000 so that the minimum total amount paid by Funding would be
$750,001.  Litigation  Funding is not currently  obligated to provide additional
funds to IFFC and there can be no assurances  that  Litigation  Funding and IFFC
will ever agree upon the structure and terms of such an investment. The board of
directors  of IFFC has not yet  determined  whether or not it would be in IFFC's
best interests to secure  additional funds from Litigation  Funding or any other
party.

      Until  April 26, 1996  Mitchell  Rubinson,  IFFC's  Chairman of the Board,
Chief Executive  Officer and President,  controlled IFFC through Capital Brands,
Inc. From IFFC's inception until April 1996,  Capital Brands  beneficially owned
at least  1,300,000  shares  (32.7%)  of IFFC's  outstanding  common  stock.  In
connection  with and as a condition of a share exchange  between Capital Brands,
Inc.  and  certain  shareholders  of  CompScript,  Inc.,  Capital  Brands,  Inc.
exchanged  1,300,000  shares of IFFC common stock for 1,300,000 shares of common
stock of Capital Brands, Inc. owned by Mr. and Mrs. Rubinson. Accordingly, as of
the date of this report, Mr. and Mrs. Rubinson directly controlled IFFC.

      IFFC  believes BKC is required  under  Polish law to pay certain  taxes in
connection with its receipt of royalty  payments from IFFC. If BKC fails to make
the requisite tax payments,  IFFC may, under certain circumstances,  be required
by the  Polish  government  to pay the  taxes.  IFFC  believes  it would have an
additional legal claim against BKC if IFFC was required to pay such taxes.  IFFC
estimates that as of the date of this report,  BKC may owe the Polish government
up to $200,000 of taxes, interest and penalties.

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

      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
leasehold  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 and the favorable
outcome of the BKC Litigation.  If cash is unavailable from those sources,  IFFC
will have to curtail any additional  development until additional cash resources
are secured.

      To date,  IFFC's  business  operations have been  principally  financed by
proceeds from public  offerings of IFFC's equity and debt  securities,  proceeds
from a number  of bank  credit  facilities,  proceeds  from the sale of  certain
equity securities of IFFC's formerly  wholly-owned  subsidiary and proceeds from
the Assignment Agreement.
                                       22



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

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

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

      On June 15,  1995 and  December  15,  1995,  rather  than  expend its cash
resources,  IFFC  paid  dividends  with  respect  to its  outstanding  shares of
Preferred  Stock by issuing  107,630  and  168,912  additional  shares of Common
Stock,  respectively.  These stock dividends had no effect on total stockholders
equity as  common  stock and  additional  paid in  capital  were  increased  and
retained  earnings  were  decreased  by  $142,778 in  connection  with the first
dividend payment and $150,078 in connection with the second dividend payment. As
a result of the conversion of an aggregate of 11,440 shares of Preferred  Stock,
as  of  September  30,  1996  there  were  41,210  shares  of  Preferred   Stock
outstanding.  As of September 30, 1996, IFFC did not pay its scheduled  dividend
payment and  recorded a liability of $132,858  relating to the dividend  payment
due on June 15, 1996, with a corresponding decrease in retained earnings on such
date.

      IFFC maintains  substantially  all of its  unutilized  proceeds in various
bank accounts.  As of September 30, 1996 and November 7, 1996,  IFFC had $34,060
and $15,443,  respectively,  in accounts with Northern Trust of Florida, N.A. As
of  September  30, 1996 and November 7, 1996,  IFFC had  $543,066 and  $531,058,
respectively, in accounts with AmerBank and substantially all of such funds were
held as European  Currency Unit denominated  deposits.  As of September 30, 1996
and  November  7,  1996,  $500,000  of the cash on  deposit  with  Amerbank  was
restricted and secured outstanding  balances of IFFP's Credit Facility with Bank
Handlowy.  As of September  30, 1996 and November 7, 1996,  IFFC had $43,532 and
$47,286, respectively, in an operating account with Bank Handlowy.

                                       23

<PAGE>
      During the nine months ended  September  30, 1996,  Capital  Brands loaned
IFFC an aggregate of approximately  $69,000,  which indebtedness is evidenced by
promissory  notes.  The promissory  notes are payable in full on April 25, 1997.
During the nine  months  ended  September  30,  1996,  QPQ  Corporation  ("QPQ")
advanced IFFC $122,000. In addition,  QPQ purchased for $10,000 cash, options to
purchase  250,000 shares of QPQ Common Stock.  In addition QPQ acquired  various
furniture,  fixtures  and  leasehold  improvements  from  IFFC in  exchange  for
approximately $57,000 cash.

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

      As of January 28, 1993, IFFP entered into a revolving credit facility with
American Bank of Poland S.A.  ("AmerBank")  totalling  3,000,000,000  zloty,  or
approximately $123,000 at-year end exchange rates.  Borrowings under the January
28,1993  AmerBank  credit  facility  are secured by a guarantee of IFFC and bear
interest at a monthly adjusted variable rate  approximately  equal to AmerBank's
prime rate.  Borrowings under the January 28, 1993 AmerBank credit facility were
repayable  as of January 28,  1996.  However,  on October 30, 1995 and April 12,
1996, the credit facility was amended as follows: (i) the immediately  available
credit available was decreased to 2,000,000,000 in zlotys (approximately $81,000
at year end exchange rates), and (ii) repayment of borrowings was deferred until
October 30, 1996.  On October 24,  1996,  a formal  request was made to AmerBank
asking for an extension of the maturity  date to April 30, 1997.  As of November
7, 1996, AmerBank has not formally granted the requested extension. No assurance
can be given that  AmerBank  will grant the  requested  extension  or  otherwise
modify the terms of the credit  facility in a manner that would be acceptable to
IFFP. As of November 7, 1996, the outstanding balance on the credit facility was
$27,070.

      As of February 23, 1994,  IFFC  terminated  a credit  facility  created on
February  12,  1993 and  entered  into a new  $1,000,000  credit  facility  with
AmerBank.  The new credit facility was structured as a revolving credit facility
through May 31, 1994. During this initial period, draws could be made in minimum
increments of $40,000 to purchase, and are secured by, furniture,  equipment and
related items for  restaurants.  During the initial period,  interest accrued on
the  outstanding  balance  at a rate of 12% per  annum  and was due and  payable
quarterly.  As of July 31,  1994,  the  outstanding  balance  under  the  credit
facility  became due and payable at a rate of $90,000 plus interest  every three
months with any principal  outstanding as of April 30, 1996  immediately due and
payable.  On November 7, 1996  AmerBank  agreed to amend the credit  facility so
that the  outstanding  principal  balance  becomes  due and payable at a rate of
$100,000 on March 31, 1997,  $100,000 on June 30, 1997 and $110,000 on September
30, 1997 plus interest every three months. As of September 30, 1996 and November
7,  1996  approximately  $310,000  was  outstanding  under the  AmerBank  credit
facility.

      On February  16, 1996,  IFFP  entered into a $300,000  line of credit with
AmerBank,  the  proceeds  of  which  may be  used  to  finance  IFFP's  business
operations. Pursuant to the line of credit, IFFC could make draws on the line of
credit until June 30, 1996.  IFFP is required to make  interest  payments on the
outstanding  principal  amount of the credit facility at AmerBank's  prime rate.
IFFP is also  obligated to pay AmerBank a 1% per annum  commission  on the daily
average  unutilized  principal  balance of the  credit  facility.  Interest  and
commission  expenses are payable monthly.  The outstanding  principal balance of
the loan is payable on February 1, 1997. The credit  facility is secured by: (i)
a promissory note of IFFP and (ii) a guarantee of IFFC. As of September 30, 1996
and November 7, 1996, $300,000 of the credit facility was outstanding.

                                       24

<PAGE>
      On May 30, 1994, IFFC's  subsidiary,  IFFP, entered into a credit facility
with Bank Handlowy Warszawie,  S.A. ("Bank Handlowy") in the principal amount of
$10,000,000.  Borrowings  under the Bank Handlowy  credit facility could be made
until May 31,  1997 and were  secured  by:  (i)  amounts  on  deposit  with Bank
Handlowy;  (ii) an  unconditional  guarantee of IFFC;  (iii) the fixed assets of
IFFP; and (iv) a letter of credit (described  below).  Borrowings under the Bank
Handlowy credit  facility were required be repaid in fourteen equal  semi-annual
installments  with the first  installment  due on November  30,  1997.  Interest
accrued  on the  amount  outstanding  under the  credit  facility  at the London
Interbank  Offered Rate (LIBOR) for nine month  deposits  plus 3.875% per annum.
The proceeds  could be used to finance up to forty percent (40%) of the costs of
furnishing and commencing  operation of fast food restaurants  operated by IFFP.
On December 13, 1995,  the credit  facility with Bank Handlowy was amended.  The
principal amount of the credit facility was reduced to $1,000,000 and borrowings
under the credit  facility are  required to be repaid on December  16, 1996.  On
October 29, 1996,  IFFP formally  requested an extension of the maturity date of
the  facility.  No  assurance  can be given  that Bank  Handlowy  will grant the
requested  extension or otherwise  modify the terms of the credit  facility in a
manner that would be acceptable  to IFFP.  Borrowings  under the amended  credit
facility  are  secured by: (i) amounts on deposit  with Bank  Handlowy;  (ii) an
unconditional  guarantee  of IFFC;  (iii) fixed assets of IFFP having a value of
$1,250,000;  and (iv) a letter of credit.  On July 15, 1994 Credit  Suisse Miami
Agency  established  an  irrevocable  standby  letter of credit of $500,000 (the
"Credit Suisse Letter of Credit") in Bank Handlowy's favor. The Letter of Credit
supported  borrowings of $1,000,000  under the Bank Handlowy's  credit facility.
The Letter of Credit is valid until December 30, 1996 and is secured by a letter
of credit  issued by AmerBank.  As of  September  30, 1996 and November 7, 1996,
$1,000,000 was outstanding under the Bank Handlowy credit facility.

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

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

       On May 17,  1996,  IFFC's  Common Stock was deleted from the NASDAQ Stock
Market  and has  traded  on the over the  counter  market  since  that  date and
accordingly,  IFFC believes that its ability to raise additional  equity capital
has been negatively impacted.
                                       25

<PAGE>

IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS

      IFFC's restaurant  operations are conducted in Poland.  The Polish economy
has historically  been  characterized by high rates of inflation and devaluation
of the Polish zloty against the dollar and European currencies.  However, in the
year ended December 31, 1995, the rates of inflation and  devaluation  improved.
For the years ended December 31, 1993, 1994 and 1995, the annual  inflation rate
in Poland was 35%,  32% and 21.6%,  respectively,  and as of December  31, 1993,
1994 and 1995 the exchange rate was 21,344, 24,372 and 24,680 zlotys per dollar,
respectively. Payment of interest and principal on the Debentures and payment of
franchise fees to BKC for each IFFC  restaurant  opened will be in United States
currency.  Additionally,  IFFC is dependent  on foreign  sources of supply which
require payment in European or United States  currencies.  Since IFFC's revenues
from operations will be in zlotys,  IFFC will be subject to the risk of currency
fluctuations. In order to protect its funds against declines in the value of the
Polish zloty and to acquire foreign goods imported into Poland,  IFFC intends to
invest  its  unutilized  funds in United  States or  Western  European  currency
denominated securities and/or European Currency Units. 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.

      The accounts of International Fast Food Polska, IFF Polska-Kolmer,  IFF-DX
Management and IFF Polska i Spolka, subsidiaries of IFFC, are measured using the
Polish  zloty.  Due to Poland's  inflationary  environment,  generally  accepted
accounting  principles  require IFFC to calculate and recognize on its statement
of  operations  its  currency   translation  gains  or  losses  associated  with
International  Fast Food Polska.  For the nine month periods ended September 30,
1996  and  1995,  IFFC  had  a  foreign  currency  translation  gain  (loss)  of
approximately ($105,716) and $47,266, respectively.

      The only  currency  that may be used in Poland is the zloty.  The value of
the zloty is pegged  pursuant to a system  based on a basket of  currencies,  as
well as all other  economic  and  political  factors  that  effect  the value of
currencies  generally.  As of  January  1,  1995,  the  National  Bank of Poland
introduced a new  currency  unit which is named a "zloty" (a "new  zloty").  New
zlotys are  equivalent  to 10,000 old zlotys  ('old  zlotys").  Old zlotys  will
remain legal tender until December 31, 1996,  after which date they will only be
exchangeable at certain banks.  All references in this document to zlotys are to
old zlotys.  At September  30, 1996,  the  exchange  rate was 28,010  zlotys per
dollar.














                                      26



<PAGE>
                          PART II.  OTHER INFORMATION

ITEM 2.  LEGAL PROCEEDINGS
         -----------------
 
         BKC  LITIGATION.  On March 17 1995,  the  IFFC  Affiliates  filed  suit
against BKC in the Eleventh  Judicial Circuit Court of the State of Florida.  In
their amended complaint,  the IFFC Affiliates alleged,  among other things, that
BKC  breached  certain of its  express  and  implied  obligations  under the BKC
Development   Agreement  and  the  eight  existing  franchise   agreements  (the
"Franchise Agreements") pertaining to IFFP's eight Burger King restaurants.  The
IFFC Affiliates further alleged that in connection with BKC's sale of certain of
its  rights  pursuant  to  the  BKC  Development  Agreement  and  the  Franchise
Agreements,  BKC failed to timely deliver to the IFFC  Affiliates a complete and
accurate franchise offering circular in accordance with rules promulgated by the
Federal Trade  Commission  (the "FTC Count").  The IFFC  Affiliates also alleged
that BKC  committed  certain acts which  constitute  fraud and/or  deceptive and
unfair  business  practices.  The IFFC Affiliates have asked the court to, among
other  things,  award them  compensatory  damages of not less than  $15,000,000,
punitive damages and certain costs and expenses.

         On  August  21,  1995,  BKC  filed an  answer  which  asserts  nineteen
affirmative  defenses  and three  counterclaims.  Subsequently  BKC  voluntarily
dismissed its  counterclaims and the parties agreed that to the extent that IFFC
may owe money to BKC for  royalties,  any such amount will be deducted  from any
judgment in favor of IFFC.

         The IFFC Affiliates' and BKC's efforts at court ordered  mediation  and
voluntary  settlement  discussions have not been successful The IFFC Affiliates'
five count suit has not  survived all of BKC's  motions to dismiss.  On February
14, 1996, the Eleventh  Judicial  Circuit Court granted BKC's motion for summary
judgement with respect to the FTC Count.  The Eleventh  Judicial Circuit Courts'
decision was based upon its belief that,  as a matter of law, such a count could
not be maintained by  "sophisticated  business  entities."  The IFFC  Affiliates
believe the  court's  decision  was made in error and,  if their  claims are not
satisfactorily  addressed,  at the  conclusion of the trial the IFFC  Affiliates
intend  to appeal  the  court's  decision.  The trial  with  respect  to the BKC
Litigation is scheduled to commence on January 21, 1997.

         IFFC cannot reasonably  estimate how long it will take or the amount of
money it will need to expend in order to  resolve  the BKC  Litigation.  Even if
IFFC knew BKC desired to settle the BKC  Litigation,  IFFC could not  reasonably
estimate the structure of a proposed settlement. In the event that IFFC prevails
on  certain  of the  issues  disputed  in the BKC  Litigation,  there  can be no
assurance  as to the  remedies  granted by the  courts.  Termination  of the BKC
Development  Agreement and/or  Franchise  Agreements for any reason could have a
material adverse effect on the Company. See "Item 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION."

         Due to the factors identified above, IFFC has opened and operates eight
of the ten restaurants required to be opened by September 24, 1995. Accordingly,
IFFC is in technical  default  under the BKC  Development  Agreement.  By letter
dated June 30, 1995,  BKC notified IFFC that, at that time,  BKC would not elect
to  declare  IFFC to be in  default  under the BKC  Development  Agreement.  BKC
further  stated that such notice was not a waiver of its legal  rights under the
BKC Development  Agreement to, in the future,  declare IFFC's failure to develop
the requisite number of BKC Restaurants an act of default.

                                      27


<PAGE>
         By letter dated May 2, 1996,  BKC notified  IFFC that BKC believes that
the Development  Agreement had terminated  pursuant to its terms.  IFFC believes
that the Development Agreement has not terminated.

         The IFFC Affiliates have advised BKC that the IFFC Affiliates may close
their  eight  Traditional  Restaurants.  Even if some or all of the  Traditional
Restaurants  are  closed,  the IFFC  Affiliates  intend,  to the extent they are
financially   capable,  to  continue  to  prosecute  their  claims  in  the  BKC
Litigation.

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

         Pursuant to the Funding  Agreement,  Funding agreed to pay on behalf of
IFFC and/or IFFP up to  $500,001  (the  "Amount")  for all  expenses  (including
attorneys'  fees, court costs and other related  expenses,  but not judgments or
amounts  paid in  settlement)  actually  incurred by or on behalf of IFFC and/or
IFFP in  connection  with  investigating,  defending,  prosecuting,  settling or
appealing  the BKC  Litigation  and any and all claims or  counterclaims  of BKC
against IFFC and/or IFFP (collectively,  the "BKC Matter"). Funding has paid all
amounts it has been requested to pay pursuant to the Funding Agreement.  On July
3, 1996, the Company and Funding executed an amendment to the Funding Agreement.
To  complete  the BKC  matter,  Funding  has  agreed to pay up to an  additional
$250,000 so that the minimum total amount paid by Funding would be $750,001.

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

         Specifically,  IFFC and IFFP  each  individually  assigned,  set  over,
transferred and conveyed to Funding all of its right,  title and interest in and
to the sum of the following (the "Assigned  Proceeds"):  (i) fifty percent (50%)
of the  Proceeds  to the  extent  that such  amount  does not  exceed  Funding's
Expenses ("Funding's  Expenses"),  which are defined as the sum of the aggregate
amount of money paid by  Funding as the  Amount and the amount of money expended
                                       28

<PAGE>

by Funding if it assumes the  prosecution of the BKC Matter;  (ii) fifty percent
(50%) of any  Proceeds,  excluding any Sales  Proceeds,  in excess of the sum of
Funding's  Expenses and the IFFC  Affiliates'  Expenses (as such term is defined
below, the "IFFC  Affiliates'  Expenses");  and (iii) fifty percent (50%) of any
Sales  Proceeds  in  excess  of the  sum of  Funding's  Expenses  and  the  IFFC
Affiliates' Expenses.

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

         In consideration of the additional $250,000 payment Funding received an
additional  twenty five percent  (25%) of the Proceeds,  and the term  "Assigned
Proceeds" remains unchanged from its meaning in the Funding Agreement except for
the twenty five percent (25%) increase to seventy five percent (75%).

         The  definition  of Sales  Proceeds  in the  Funding  Agreement  varies
depending  upon whether the  transaction  is structured as (1) a sale by IFFC of
all or substantially  all of its equity interest in IFFP (an "Equity Sale"),  or
(2) a sale by IFFP of all or substantially  all of its assets (an "Asset Sale").
In the event of an Equity  Sale,  Sale  Proceeds  are defined as the  difference
between the value of the consideration  paid to or for the benefit of IFFC and a
sum which is designed to roughly  approximate the net market value of the assets
and  liabilities  underlying the equity interest  purchased.  In the event of an
Asset Sale, Sale Proceeds are defined as the difference between the value of the
consideration  paid to or for the benefit of IFFP and a sum which is designed to
roughly  approximate  the  net  market  value  of  the  assets  and  liabilities
purchased.

         Pursuant to the Funding Agreement,  proceeds other than cash are deemed
to have a value equal to the fair  market  value of such assets on the date such
Proceeds are payable to IFFC, IFFP or Funding.  Provided,  however, if such cash
Proceeds are not all to be paid within 90 days of a Judgment or Settlement, then
the net present value of the cash Proceeds to be paid are to be calculated by an
independent  certified  public  accountant  (the  "Appraiser")  selected  by the
Company and Funding.  The value of non-cash Proceeds are to be determined by the
Appraiser.

         In connection with the execution and delivery of the Funding Agreement,
IFFC,  IFFP,  Funding and a law firm (the "Escrow Agent") entered into an Escrow
Agreement.  Pursuant to the Funding Agreement and the Escrow  Agreement,  except
for Proceeds  which the Escrow Agent cannot reduce to physical  possession,  all
Proceeds,  if any,  resulting  from the BKC  Matter are to be  delivered  to the
Escrow Agent before they are delivered to the IFFC  Affiliates  and/or  Funding.
The Escrow Agent is required to dispose of Proceeds only in accordance  with (1)
the joint  written  instructions  of the Company,  IFFP and Funding,  or (2) the
instructions  of a  court  of  competent  jurisdiction.  The  Funding  Agreement
provides  that the Escrow  Agent shall first  apply all Readily  Available  Cash
Proceeds (as such term is defined below, the "Readily  Available Cash Proceeds")
to satisfy  Funding's  rights to Proceeds  (assigned to Funding by IFFC or IFFP)
before any non- Readily  Available Cash Proceeds are delivered to Funding by the
Escrow Agent on behalf of such  company.  Readily  Available  Cash  Proceeds are
defined to be all cash Proceeds  payable to IFFC, IFFP or Funding within one (1)
year of a Judgement or Settlement.  In the event that the Readily Available Cash
Proceeds are not sufficient to satisfy Funding's rights in Proceeds (assigned to
Funding by such company),  then IFFC and IFFP have each agreed to pay out of its
individually  available "cash and cash  equivalents"  (the "Cash  Resources") an
amount of Cash  Resources  to  satisfy  the  deficiency.  In the event  that the
                                      29


<PAGE>

Readily  Available  Cash  Resources of a company are  insufficient  to cover the
deficiency, such company, subject to Funding's agreement, will have the right to
elect  which  assets it will  deliver to Funding in  satisfaction  of  Funding's
rights to receive Proceeds.  In the event that Funding is unable to agree with a
company with respect to which assets such company will deliver to Funding,  then
the matter shall be submitted to a court of competent jurisdiction.

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

         In the event the IFFP Stock is transferred to Funding,  the proceeds of
any sale of, or other  realization upon, all or any part of the IFFP Stock shall
be applied by Funding in the following  order of priority:  first, to payment of
the  expenses  of such  sale  or  other  realization,  including  all  expenses,
liabilities  and  advances  incurred  or made by the  Funding or its  counsel in
connection therewith or in connection with the care or safekeeping of any or all
of the IFFP  Stock;  second,  to  payment  of  Funding's  right to the  Assigned
Proceeds;  and finally, any surplus then remaining shall be paid to the Company,
or its  successors  or assigns,  or to  whosoever  may be  lawfully  entitled to
receive the same or as a court of competent jurisdiction may direct.

         In the event that the IFFC Affiliates fail to use their best efforts to
vigorously  pursue their claims  against BKC,  then Funding shall have the right
to, at its own expense,  participate  in and assume the  prosecution of the IFFC
Affiliates'  claims in the BKC Matter ("Assume the  Prosecution").  In order for
Funding to Assume the  Prosecution,  it must first  provide the IFFC  Affiliates
written  notice of its intention to Assume the  Prosecution  and identify  which
material  action  or  actions  the IFFC  Affiliates  failed  to take in order to
vigorously  pursue their claims  against BKC. If the IFFC  Affiliates  do not or
cannot take action or actions to  compensate  for their past failure or failures
to take action, then Funding may Assume the Prosecution.

         In connection with the execution of the Funding Agreement, the Chairman
of the Board unconditionally guaranteed to the IFFC Affiliates Funding's payment
of the Amount.

         The IFFC Affiliates  have also entered a second  agreement to assist in
the  financing  of the BKC  Litigation.  On April 7, 1996,  the IFFC  Affiliates
entered into a letter  agreement  (the "Fee  Agreement")  with the law firm (the
"Litigation  Counsel")  representing  the IFFC Affiliates in the BKC Litigation.
Pursuant  to the Fee  Agreement,  IFFC and IFFP have  agreed  to pay  Litigation
Counsel the greater of (a)  Litigation  Counsel's  accrued hourly fees for legal




                                      30



<PAGE>


services  provided  in  connection  with the BKC  Litigation;  and (b) a certain
percentage of any final monetary recovery obtained by the IFFC Affiliates in the
BKC Litigation, in exchange for Litigation Counsel's services. The percentage of
any monetary  recovery  payable to  Litigation  Counsel  varies  depending  upon
whether or not: (1) the BKC  Litigation is settled at or before  mediation;  (2)
the BKC Litigation is settled after mediation but before a verdict;  (3) the BKC
Litigation is resolved by a jury or court verdict;  and (4) the IFFC  Affiliates
successfully  appeal a verdict  in the BKC  Litigation  or if they  successfully
defend  against an appeal by BKC of the  verdict in the BKC  Litigation.  In the
event  the  IFFC  Affiliates  recover  in  excess  of  $10,000,000  in  the  BKC
Litigation,  IFFC has agreed to issue the Litigation  Counsel  200,000 shares of
IFFC Common Stock. Under the Fee Agreement, the IFFC Affiliates are not required
to make any future legal fee or expense  payments to  Litigation  Counsel  until
there is an award with respect to or settlement of the BKC Litigation.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
         --------------------------------
  
         (b) No  Reports  on Form  8-K  were  filed  during  the  quarter  ended
September 30, 1996.

































                                       31




<PAGE>







                                   SIGNATURES

      In accordance  with the  requirements  of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                              INTERNATIONAL FAST FOOD CORPORATION



DATE:  November 12, 1996            By: /s/ Mitchell Rubinson
                                       --------------------------------------

                                    Mitchell Rubinson, Chairman of the Board,
                                    Chief Executive Officer and President
                                    (Principal Executive Officer)



DATE:  November 12, 1996            By: /s/ Stephen R. Groth
                                       --------------------------------------

                                    Stephen R. Groth, Chief Financial Officer
                                    and Treasurer (Principal Financial and
                                    Accounting Officer)