INTERNATIONAL FAST FOOD CORP, 10QSB, 2000-05-18

INTERNATIONAL FAST FOOD CORP
10QSB, 2000-05-18
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

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

For the quarterly period ended March 31, 2000

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

For the transition period from ____________ to ____________.

COMMISSION FILE NUMBER: 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 Identification No.)
Incorporation or Organization)

1000 LINCOLN ROAD, SUITE 200
MIAMI BEACH, FLORIDA 33139
----------------------------------------------------------
(Address of Principal Executive Office)

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

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
----- ------

The number of shares outstanding of the issuer's common stock, par value $.01
per share as of May 15, 2000 was 45,589,754.

Traditional Small Business Disclosure Format: Yes [ ] No [X]
----- ------

<PAGE>

INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES

INDEX

PART I FINANCIAL INFORMATION

<S> <C>
ITEM 1. Financial Statements

Consolidated Balance Sheets as of March 31, 2000 (unaudited) and
December 31, 1999 .................................................... 2

Consolidated Statements of Operations for the Three Months Ended
March 31, 2000 and 1999 (unaudited) .................................. 3

Consolidated Statements of Shareholders' Deficit for the Three Months
Ended March 31, 2000 (unaudited) ..................................... 4

Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999 (unaudited) .................................. 5

Notes to Consolidated Financial Statements ........................... 6 - 13

ITEM 2. Management's Discussion and Analysis or Plan of Operation ... 14 - 21

PART II OTHER INFORMATION

ITEM 1. Legal Proceedings ........................................... 22

ITEM 6. Exhibits and Reports on Form 8-K ............................ 23

SIGNATURES ........................................................... 24

</TABLE>

<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET

ASSETS
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ............................................ $ 435,671 $ 383,531
Restricted cash and certificates of deposit .......................... 999,990 999,990
Receivables .......................................................... 273,734 246,077
Inventories .......................................................... 718,293 795,906
Prepaid expenses and other ........................................... 98,632 147,009
------------ ------------
Total Current Assets ............................................. 2,526,320 2,572,513

Furniture, Equipment, Buildings and Leasehold Improvements, net ........... 18,221,239 18,957,883

Deferred Debt Issuance Costs, net ......................................... 2,759,980 2,931,015

Other Assets, net of accumulated amortization of $480,162 and $443,033,
respectively ........................................................... 1,188,733 1,132,548

Burger King Development Rights, net of accumulated amortization of
$118,243 and $74,324, respectively ..................................... 131,757 175,676

Domino's Development Rights, net of accumulated amortization of $85,481
and $77,710, respectively .............................................. 103,622 111,393
------------ ------------

Total Assets ..................................................... $ 24,931,651 $ 25,881,028
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES:
Accounts payable ..................................................... $ 2,185,082 $ 2,658,055
Accrued interest payable ............................................. 211,332 56,137
Other accrued expenses ............................................... 1,851,585 1,960,956
Current portion of bank credit facilities ............................ 1,644,377 1,615,685
------------ ------------
Total Current Liabilities ........................................ 5,892,376 6,290,833

11% Convertible Senior Subordinated Discount
Notes due October 31, 2007 ........................................ 9,055,599 8,818,532
Bank Credit Facilities .................................................... 9,125,006 8,176,950
9% Subordinated Convertible Debentures, due December 15, 2007 ............. 2,756,000 2,756,000
------------ ------------
Total Liabilities ................................................ 26,828,981 26,042,315
------------ ------------
Other Liabilities ......................................................... 260,000 250,000
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTES 2, 13 AND 14)

SHAREHOLDERS' DEFICIT:

Series A Convertible Preferred Stock, $.01 par value, 2,000,000 shares
authorized; 32,985 shares issued and outstanding
(liquidation preference of $3,298,500) ............................. 330 330

Series B Convertible Preferred Stock, $.01 par value, 400,000
shares authorized; 158,134 shares issued and outstanding
(liquidation preference of $15,813,400) ............................ 1,581 1,581

Common Stock, $.01 par value, 200,000,000 shares authorized;
45,589,754 and 45,497,655 shares issued and outstanding, ........... 455,898 454,977
respectively

Additional paid-in capital ............................................. 34,555,178 34,506,099

Accumulated deficit .................................................... (37,170,317) (35,374,274)
------------ ------------
Total Shareholders' Deficit ...................................... (2,157,330) (411,287)
------------ ------------
Total Liabilities and Shareholders' Deficit ...................... $ 24,931,651 $ 25,881,028
============ ============
See Accompanying Notes

2
</TABLE>

<PAGE>

INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
----------------------------
2000 1999
------------ ------------
REVENUES:
<S> <C> <C>
Sales .................................................................. $ 3,107,271 $ 3,681,221

FOOD AND PACKAGING COSTS ............................................... 1,038,835 1,451,966
------------ ------------

GROSS PROFIT ........................................................... 2,068,436 2,229,255
------------ ------------

OPERATING EXPENSES:
Payroll and related costs .......................................... 721,962 728,261
Occupancy and other operating expenses ............................. 1,103,170 1,122,713
Preopening expenses ................................................ -- 447,735
Depreciation and amortization ...................................... 725,930 873,496
------------ ------------
Total operating expenses ...................................... 2,551,062 3,172,205
------------ ------------
(Loss) Income from operations before general and administrative expenses (482,626) (942,950)
GENERAL AND ADMINISTRATIVE EXPENSES .................................... 735,002 1,278,721
------------ ------------
Loss from operations ................................................... (1,217,628) (2,221,671)
------------ ------------

OTHER INCOME (EXPENSES):
Interest and other income, net ..................................... 126,275 156,515
Interest expense, including amortization of issuance costs ......... (714,425) (659,128)
Foreign currency exchange gain/(loss) .............................. 9,735 166,264
------------ ------------
Total other income (expenses) ................................. (578,415) (336,349)
------------ ------------
Loss before cumulative effect of accounting change ..................... (1,796,043) (2,558,020)

Cumulative effect of change in accounting principal (Note 2) ........... -- (620,000)
------------ ------------
NET LOSS ............................................................... $ (1,796,043) $ (3,178,020)
============ ============

BASIC AND DILUTED NET LOSS PER COMMON SHARE ............................ $ (.04) $ (.07)
============ ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ................... 45,548,259 44,972,055

See Accompanying Notes

3
</TABLE>

<PAGE>

INTERNATIONAL FAST FOOD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)

ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID IN ACCUMULATED
------------------ ------------------
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------- -------- ---------- -------- ----------- ------------ -----------

<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1999 ........ 191,119 $ 1,911 45,497,655 $454,977 $34,506,099 $(35,374,274) $ (411,287)

Exercise of stock options ........ -- -- 92,099 921 49,079 -- 50,000

Net loss for the period .......... -- -- -- -- -- $ (1,796,043) $(1,796,043)
------- -------- ---------- -------- ----------- ------------ -----------

Balances, March 31, 2000 (unaudited) 191,119 $ 1,911 45,589,754 $455,898 $34,555,178 $(37,170,317) $(2,157,330)
======= ======== ========== ======== =========== ============ ===========

See Accompanying Notes

4
</TABLE>

<PAGE>

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

THREE MONTHS ENDED MARCH 31,
-----------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ................................................... $(1,796,043) $(3,178,020)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Amortization and depreciation of furniture, equipment,
buildings, leasehold improvements and development rights 778,350 696,099
Amortization of debt discount and issuance costs ......... 408,102 639,201
Value of stock issued in connection with debt waiver ..... -- 114,568

Other operating items .................................... 208,969 105,024
Changes in operating assets and liabilities, net of
acquisition of business:
Receivables ............................................ (27,657) 713,625
Inventories .............................................. 77,613 (8,454)
Prepaid expenses and other ............................... 48,377 782,732
Accounts payable and accrued expenses .................... (582,344) (981,382)
----------- -----------
Net cash (used in) provided by operating activities ........ (884,633) (1,116,607)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for furniture, equipment, buildings and leasehold
improvements ............................................. -- (3,759,968)
Payments for franchise fees and other assets ............... (46,200) (192,917)
----------- -----------
Net cash used in investing activities ...................... (46,200) (3,952,885)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of bank credit facilities ....................... (126,000) (149,592)
Proceeds from exercise of employee stock options ........... 50,000 --

Borrowings from shareholder ................................ 10,000 --

Borrowings under bank credit facilities .................... 1,102,748 2,751,367
----------- -----------
Net cash provided by (used in ) financing activities ....... 1,036,748 2,601,775
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (53,775) (105,024)
----------- -----------
INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS ......... 52,140 (2,572,741)
BEGINNING CASH AND CASH EQUIVALENTS ........................ 383,531 4,013,371
----------- -----------
ENDING CASH AND CASH EQUIVALENTS ........................... $ 435,671 $ 1,440,630
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ................................................. $ 110,621 $ 64,513
=========== ===========
Interest capitalized ..................................... -- $ 112,900
----------- ===========

See Accompanying Notes

</TABLE>

<PAGE>

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

1. ORGANIZATION:

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION -- The accompanying unaudited consolidated
financial statements, which are for interim periods, have been prepared by the
Company in conformity with the instructions to Form 10-QSB and Article 10 of
Regulation S-X and therefore do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. These unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements and the footnotes thereto
contained in the Annual Report on Form 10-KSB for the year ended December 31,
1999 of International Fast Food Corporation and Subsidiaries (the "Company"), as
filed with the Securities and Exchange Commission. The December 31, 1999
consolidated balance sheet contained herein was derived from audited
consolidated financial statements, but does not include all disclosures required
by generally accepted accounting principles.

The accompanying unaudited consolidated financial statements include
the accounts of the Company and its Polish subsidiaries, International Fast Food
Polska, Sp. z.o.o. ("IFFP"), Krolewska Pizza, Sp. z.o.o. ("KP") and Pizza King
Polska, Sp. z.o.o. ("PKP"). IFFP currently operates 23 Burger King restaurants
and 16 Domino's Pizza stores and a Domino's-approved commissary in Poland. All
significant intercompany transactions and balances have been eliminated in
consolidation. In the opinion of management, the interim consolidated financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the information contained
therein. The interim results of operations are not necessarily indicative of the
results which may be expected for the full year.

IFFC's restaurant and store operations are conducted in Poland. The
Polish economy has historically been characterized by high rates of inflation
and devaluation of the Polish zloty against the dollar and European currencies.
However, in recent years, the rates of inflation and devaluation improved. For
the years ended December 31, 1995, 1996, 1997, 1998 and 1999 the annual
inflation rate in Poland was 21.6%, 19.5%, 13.0%, 8.6% and 7.3%, respectively.
Payment of interest and principal on the 9% Convertible Subordinated Debentures,
11% Convertible Senior Subordinated Discount Notes and payment of franchise fees
to Burger King Corporation ("BKC") and Domino's Pizza, Inc. ("Domino's") for
each restaurant and store opened are in United States currency. Additionally,
the Company is dependent on certain sources of supply which require payment in
European or United States currencies. Because IFFC's revenues from operations
are in zlotys, the official currency of Poland, IFFC is subject to the risk of
currency fluctuations. IFFC has and intends to maintain substantially all of its
unutilized funds in United States or Western European currency denominated
securities and/or European Currency Units. There can be no assurance that IFFC
will successfully manage its exposure to currency fluctuations or that such
fluctuations will not have a material adverse effect on IFFC.

The value of the zloty is pegged pursuant to a system based on a basket
of currencies, as well as all other economic and political factors that effect
the value of currencies generally. At March 31, 2000 and December 31, 1999, the
exchange rate was 4.1033 and 4.1483 zlotys per dollar, respectively. The
accounts of IFFC's Polish subsidiaries are maintained in zlotys and are
remeasured into U.S. dollars, the functional currency, at the end of each
reporting period. Monetary assets and liabilities are remeasured, using current
exchange rates. Non-monetary assets, liabilities, and related expenses,
primarily furniture, equipment, leasehold improvements and related depreciation
and amortization, are remeasured using historical exchange rates. Income and
expense accounts, excluding depreciation and amortization, are remeasured using
an annual weighted average exchange rate. Transaction gains and losses that
arise from exchange rate fluctuations in transactions denominated in a currency
other than the functional currency are included in the results of operations as
incurred.

<PAGE>

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

LIQUIDITY AND PLAN OF OPERATIONS -- As of March 31, 2000, IFFC had
negative working capital of approximately $3,366,056 and cash and cash
equivalents of $435,671. IFFC has significant commitments to develop restaurants
in accordance with the BKC Development Agreement and the New Master Franchise
Agreement with Domino's. The Company has sustained losses from operations since
its incorporation in December 1991. For the three months ended March 31, 2000
and 1999, the Company reported net losses of $1,796,043 and $3,178,020,
respectively. At March 31, 2000 the Company had an accumulated deficit of
$37,170,317 and a shareholders' deficit of $2,157,330. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

Management believes that cash flows from currently existing stores
together with existing financial resources will not be sufficient to fund
operations. Management is seeking to obtain additional equity and or debt
financing to fund future development. No assurance can be given that such
financing will be obtained or that it can be obtained on favorable terms.

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

NET LOSS PER COMMON SHARE -- The net loss per common share in the
accompanying statements of operations has been computed based upon the
provisions of SFAS No. 128, Earnings Per Share, which became effective for
reporting periods ending after December 15, 1997. The basic net loss per common
share in the accompanying statements of operations is based upon the net loss
after preferred dividend requirements of $55,875 in 2000 and 1999, respectively,
divided by the weighted average number of shares outstanding during each period.
Diluted per share data for the three months ended March 31, 2000 and March 31,
1999 is the same as basic per share data since the inclusion of all potential
common shares that would be issuable upon the exercise of options and warrants
and the assumed conversion of convertible debt and preferred stock would be
anti-dilutive.

STORE PREOPENING EXPENSES -- Prior to January 1, 1999, the Company
capitalized preopening costs associated with opening new restaurants. Upon
commencement of revenue producing activities at a restaurant location, these
capitalized preopening costs were amortized over one year. In April 1998, the
Accounting Standards Executive Committee of the American Institute of Public
Accountants issued Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-Up Activities." SOP 98-5 requires costs of start-up activities to be
expensed as incurred. The Company adopted SOP 98-5 on January 1, 1999. Upon
adoption, the Company expensed previously capitalized start-up costs totaling
$620,000 at January 1, 1999. In accordance with SOP 98-5, adoption has been
reported as a cumulative effect of change in accounting principle on the
accompanying statement of operations for the three months ended March 31, 1999.
Preopening costs of $447,735 incurred subsequent to December 31, 1998 have been
charged directly to expense.

ADVERTISING EXPENSE -- The Company accounts for advertising expense in
accordance with SOP 93-7, "Accounting for Advertising Costs" which generally
requires that advertising costs be expensed either as incurred or the first time
the advertising takes place. It is the Company's policy to expense advertising
costs the first time the advertising takes place. However, Accounting Principles
Board Opinion ("APB") No. 28, "Interim Financial Reporting" allows advertising
costs to be deferred within a fiscal year if the benefits of an advertising
expenditure clearly extend beyond the interim period in which the expenditure is
made. Pursuant to APB 28, it is the Company's policy to defer advertising
expenses at the end of interim periods to the extent that such costs will
clearly benefit future interim periods. During the three months ended March 31,
2000, the Company incurred advertising expense of $275,278, of which $98,036 was
deferred. During the three months ended March 31, 1999, the Company incurred
advertising expense of approximately $710,000, of which approximately $382,000
was deferred at March 31, 1999 and is included in prepaid expenses on the
accompanying balance sheets. Pursuant to SOP 93-7, the Company is required to
expense all advertising incurred at the end of the fiscal year.

7
<PAGE>

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

RECLASSIFICATION -- Certain amounts in the 1999 financial statements
have been reclassified to conform with the 2000 presentation.

3. RESTRICTED CASH:

At March 31, 2000, the Company had a $999,990 certificate of deposit
hypothecated to an outstanding line of credit with Totalbank.

4. BANK CREDIT FACILITIES:

Bank credit facilities at March 31, 2000 and December 31, 1999 consists
of the following:

March 31, December 31,
2000 1999
------------ -------------
(unaudited)
<S> <C> <C>
Amerbank, S.A, PKP overdraft credit line, variable rate
approximately equal to prime, expires June 1, 2000 .................... $ 3,923 $ 689
Amerbank, S.A., IFFP overdraft credit line, variable rate
approximately equal to prime, expires April 1, 2000 ................... 97 --
Amerbank, PKP line of credit of $300,000 payable in 10
quarterly installments of $30,000 commencing on December
26, 1998, interest payable monthly at 3-1/8% above LIBOR,
due at maturity March 26, 2001 ........................................ 116,363 146,363
Amerbank, IFFP line of credit of $950,000 payable in 29
monthly installments of $32,000 commencing on March 12,
1998, interest payable monthly at .50% above LIBOR, due
at maturity on August 12, 2000 ........................................ 150,000 246,000
Amerbank, IFFP revolving credit facility of $1,500,000,
interest is payable monthly at 2.50% above LIBOR, payable in 35 monthly
installments of $91,666 with final payment
of $41,690 due at maturity on May 18, 2003 ............................ 1,500,000 1,500,000
Totalbank, IFFC line of credit of $999,000 payable in full on
August 19, 2000, interest at 6.5% payable quarterly
collateralized by certificates of deposit in the amount
of $999,990 ........................................................... 999,000 999,000
Citibank, IFFP line of credit of $10,000,000 payable at
maturity on December 30, 2002, interest at LIBOR plus
.95%, interest payable quarterly, unsecured ........................... 8,000,000 6,900,583
------------ ------------
Total Debt ................................................................. 10,769,383 9,792,635
Less: Current Maturities ................................................... (1,644,377) (1,615,685)
------------ ------------
Long Term Debt ............................................................. $ 9,125,006 $ 8,176,950
============ ============
</TABLE>

8
<PAGE>

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

5. 9% CONVERTIBLE SUBORDINATED DEBENTURES:

The 9% Convertible Subordinated Debentures (the "Debentures") mature on
December 15, 2007 and provide for the payment of cash interest, semi-annually on
June 15 and December 15, until maturity. At March 31, 2000 and December 31,
1999, there are $2,756,000 of Debentures outstanding.

6. 11% CONVERTIBLE SENIOR SUBORDINATED DISCOUNT NOTES:

On November 5, 1997, the Company sold $27,536,000 of 11% Convertible
Senior Subordinated Discount Notes Due October 31, 2007 ( the "Notes") in a
private offering. At March 31, 2000 and December 31, 1999, the notes are
comprised as follows:
<TABLE>
<CAPTION>

March 31, December 31,
2000 1999
(unaudited)
----------- -----------

<S> <C> <C>
Face amount of notes at maturity .......... $ 9,636,000 $ 9,636,000

Unamortized discount to be accreted as
interest expense and added to the original
principal balance of the notes over a period
of three years ............................ (580,401) (817,468)

----------- -----------
Carrying value ............................ $ 9,055,599 $ 8,818,532
=========== ===========
</TABLE>

The Notes are convertible, at the option of the holder, into Common
Stock at any time after November 5, 1998. On August 31, 1999, $17,900,000 of the
Notes were exchanged for an aggregate of 158,134 shares of Series B Convertible
Preferred Stock. Additionally, in October 1999, the remaining holders of the
Notes agreed to amend the Notes to provide that interest earned on the Notes
from October 31, 2000 to October 31, 2003 will be paid in Notes, rather than
cash. Interest payable thereafter will be payable in cash. As of March 31, 2000,
no additional portion of the Notes had been converted into Common Stock or
Preferred Stock.

7. SHAREHOLDERS' EQUITY:

The Company's stock option plan provides for the granting of options to
qualified employees and directors of the Company. Stock option activity is shown
below for the three months ended March 31, 2000:
<TABLE>
<CAPTION>

Weighted
Average
2000 Share Price
--------- -----------
<S> <C> <C>
Outstanding at beginning of period ...................... 1,670,000 $.45
Granted
Expired
Exercised ............................................... (92,099) $.54
---------
Outstanding at end of period ............................ 1,577,901 $.55
=========
Exercisable at end of period ............................ 425,401 $.43
Price range of options outstanding at end of period ..... $.40 - $.81
Available for grant at end of period .................... 2,422,099
</TABLE>

<PAGE>

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

<TABLE>

At March 31, 2000, IFFC had reserved the following shares of Common
Stock for issuance:

<S> <C>
Stock option plans ..................................................................... 4,000,000
Convertible Debentures convertible into Common Stock at a conversion price
of $8.50 per share on or before December 15, 2007 .............................. 324,235
Series A Preferred Stock convertible into Common Stock at a conversion rate
of 33 1/3 Common Shares per share .............................................. 1,099,500
Series B Preferred Stock convertible into Common Stock at a conversion rate
of 151 1/2 Common Shares per share.............................................. 23,957,301
Convertible Senior Subordinated Discount Notes convertible into Common
Stock, after November 5, 1998, at a conversion price of $.70 per share ......... 13,765,714
Warrants exercisable at $2.00 per share................................................. 4,000,000
----------
Total reserved shares .................................................................. 47,146,750
==========
</TABLE>

8. COMMITMENTS AND CONTINGENCIES:

On February 24, 1999, IFFP entered into a credit agreement (the "Credit
Agreement") with Citibank (Poland) S.A. pursuant to which Citibank granted IFFP
a loan in the amount of $5,000,000 (the "Loan"). The purpose of the loan is to
finance the construction of nine Burger King restaurants. The loan is priced at
0.8% above LIBOR and matures on January 15, 2000. As of March 31, 2000,
$5,000,000 was outstanding on this credit facility. In order for IFFP to enter
into the Credit Agreement, holders of the outstanding Notes were required to
waive certain provisions of the Note Indenture. As compensation for such waiver,
the Noteholders were issued an aggregate of 204,585 shares of Common Stock, with
a fair value of $0.56 per share. The fair value of the common stock has been
expensed in the quarter.

The Loan is guaranteed by BKC and the Company granted BKC a security
interest in the outstanding shares of IFFP. As a condition to the guarantee, BKC
required that IFFC, IFFP and Mitchell Rubinson, the Chairman of the Board and
Chief Executive Officer of the Company and a principal shareholder ("Rubinson"),
enter into a general release (the "Release") in favor of BKC for any and all
matters occurring prior to the date of the guarantee. Additionally, the Company
and IFFP entered into a reimbursement agreement (the "Reimbursement Agreement")
pursuant to which they agreed to reimburse BKC for any and all amounts paid out
by BKC pursuant to the guaranty and all costs and expenses incurred by BKC in
connection with the enforcement of its rights under the Reimbursement Agreement.
BKC also required that the Company, IFFP and Rubinson, execute a general release
of BKC relating to any matters that occurred prior to the execution of the
Credit Agreement.

Additionally, Rubinson entered into a purchase agreement (the "Purchase
Agreement") with BKC which provides that if IFFP and the Company default on
their obligations under the Reimbursement Agreement and BKC takes possession of
the IFFP shares, Rubinson is required to purchase the IFFP shares from BKC for
an amount equal to all amounts paid out by BKC pursuant to the guaranty and all
costs and expenses incurred by BKC in connection with the enforcement of its
rights under the Reimbursement Agreement. Rubinson received a fee of $150,000
from the Company in connection with the Purchase Agreement.

In October 1999, IFFP increased the amount of the line of credit to
$8,000,000. IFFP may increase the line of credit in increments of $500,000 to an
aggregate of $10,000,000 if it meets specified criteria. As of March 31, 2000,
IFFP met such criteria. The maturity date of the line of credit was extended to
December 2002. As of March 31, 2000 and May 15, 2000, $8,000,000 was outstanding
on this facility. Drawings on the line in excess of the original $5,000,000 bear
interest at 0.95% above LIBOR. The guarantee automatically terminates in October
2002. In addition, Burger King may withdraw its guarantee if certain criteria
set forth in the Guarantee of Future Advances Agreement is not met. In

<PAGE>

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

connection with the increase of the line of credit, all of the prior transaction
documents were re-executed, including the Purchase Agreement and the Release,
and the Company, Rubinson, IFFP and BKC entered into the Guarantee of Future
Advances Agreement pursuant to which BKC would guarantee the repayment of future
funds advanced under the line of credit. Additionally, as security of the line
of credit, Burger King required that Mitchell Rubinson enter into a personal
guaranty with Burger King and pledge 5,000,000 shares of our common stock owned
by him. In connection with these matters, we entered into a reimbursement and
fee agreement whereby we agreed to reimburse Rubinson for all amounts paid by
him under his personal guaranty and to pay him a fee equal to 3% annually of the
amount being guaranteed. As of the date hereof, Rubinson has not been paid under
this agreement. In order for IFFP to increase the line of credit, holders of the
outstanding 11% convertible notes were required to waive applicable provisions
of the note indenture.

In March 1999, the Company entered into a letter agreement whereby it
granted Host Marriott Service Corporation ("Host Marriott") the non-exclusive
rights to develop and operate Burger King restaurants within enclosed shopping
centers located in Poland where Host Marriott has leased substantially all of
the food and beverage facilities, each location to be subject to the approval of
Burger King. Pursuant to such agreement, Host Marriott will pay IFFC (a) an
initial fee of US $25,000 per location in exchange for IFFC's pre-opening
support and assistance, including furnishing design and construction advice,
hiring and training management staff, and advising on the selection of
information and accounting systems for each Burger King restaurant developed by
Host Marriott, and (b) an on-going annual fee equal to the greater of U.S.
$7,000 per location, or 1.5% of Host Marriott's gross receipts from the
operation of each Burger King restaurant, in exchange for IFFC's on-going
technical assistance and services, including maintaining quality standards,
procurement and supply services, and on-going staff training. The annual fee
will be payable monthly, with an annual reconciliation, and will continue for
the duration of Host Marriott's operation of the location as a Burger King
restaurant.

Further, IFFC has the option to acquire up to 50% interest in the net
income of any Burger King restaurants developed by Host Marriott pursuant to the
agreement. IFFC may exercise such option by giving Host Marriott written notice,
at any time prior to the opening of each Burger King restaurant, specifying the
percentage interest that IFFC intends to acquire. If IFFC exercises such option,
it will be responsible for a pro rata portion of the total costs incurred by
Host Marriott in building, equipping and opening such restaurant, together with
a pro rata portion of the cost of any common facilities (e.g., seating areas,
tray wash areas, office and storage space, point of sale and telecommunications
systems, etc.) used in connection therewith. The letter agreement terminates
simultaneously with the BKC Agreement. Additionally, Host Marriott will be
responsible for all amounts payable to BKC (e.g., franchise fees, advertising
contributions, and royalty fees) for the franchise rights for each location
developed by it pursuant to the agreement.

9. LITIGATION:

DISPUTE WITH POLISH FISCAL AUTHORITIES. As of July 1995, IFFC may have
become subject to penalties for failure to comply with an 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. As
a penalty for noncompliance, Polish tax authorities may disallow certain value
added tax deductions for July and August 1995. Additionally, penalties and
interest may be imposed on these disallowed deductions. Although IFFP's NCR Cash
Register System was a modern system, it could not be modified. In 1998, IFFP
replaced the system with a new Siemen's system which complies with Polish
regulations. In December 1999, the Polish Tax Court ruled against IFFP but
reduced the fine and related penalties to 474,776 Polish zlotys or approximately
US$115,706 at March 31, 2000 exchange rates.

REGENESIS MATTER. The Company is a party to the following legal
proceeding: ELPOINT COMPANY, LLC AND GENNADY YAKOVLEV, VS. MITCHELL RUBINSON,
MARILYN RUBINSON, EDDA RUBINSON, NIGEL NORTON, JAMES F. MARTIN, LEON BLUMENTHAL,
LAWRENCE RUTSTEIN, SHULMAN & ASSOCIATES, INC., MANNY SCHULMAN, FRANKLYN
WEICHSELBAUM, JAMES MIRANTI, INTERNATIONAL FAST FOOD CORPORATION, DOMINO'S PIZZA
INTERNATIONAL, INC., REGENESIS HOLDINGS CORPORATION, United States District
Court, Northern District of California (Case No. 99-1107 CRB). On March 10,
1999, certain shareholders of Regenesis Holdings Corporation (f/k/a QPQ

11
<PAGE>

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

Corporation) ("Regenesis") filed a complaint against IFFC and certain of its
senior management and principal shareholders, including Mitchell Rubinson,
IFFC's Chairman of the Board and Chief Executive Officer, and James Martin,
IFFC's Vice President and Chief Financial Officer. Regenesis formerly held the
right to develop Domino's Pizza stores in Poland. Certain former officers and
principal stockholders of Regenesis are officers and principal shareholders of
IFFC. The complaint alleges, among other things, that the defendants
fraudulently transferred the Domino's development rights to IFFC, thereby
causing Regenesis to lose value. Additionally, the complaint alleges that IFFC
engaged in the misappropriation of corporate opportunities of Regenesis. We
reached a settlement in this matter and pursuant to such settlement, we must pay
$300,000. An accrual for this amount has been provided for in the 1999
consolidated financial statements.

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

10. SEGMENT INFORMATION:

The Company operates subsidiaries in the fast food industry in the
Republic of Poland. The Company, through its two wholly owned subsidiaries,
International Fast Food Polska, Sp. z o.o. ("IFFP") and Pizza King Polska Sp. z
o.o. ("PKP"), operates franchised Burger King restaurants and Domino's Pizza
stores, respectively, in the Republic of Poland. The Company's reportable
segments are strategic business units that offer different products. The Company
evaluates the performance of its segments based on revenue and operating income.
The Company's Burger King restaurants offer dine-in and take out hamburgers,
cheeseburgers, chicken sandwiches, fish sandwiches, french fries, soft drinks
including milk shakes and ice cream. The Company Domino's Pizza stores offer its
customers take out and delivery service for its pizzas, salads, sandwiches,
chicken wings, breadsticks, soft drinks and ice cream. There is no material
intersegment revenue. Interest expense related to working capital and
development activity is included in the Company's Consolidated Statements of
Operations.

The following table presents financial information regarding the
Company's different industry segments as of and for the three month periods
ended March 31, 2000 and 1999 (in thousands).
<TABLE>
<CAPTION>

Three Months Ended March 31, 2000 (unaudited)
-----------------------------------------------------------------------------
IFFP PKP Total Corporate Consolidated
---------- ---------- ---------- ----------- ------------

<S> <C> <C> <C> <C> <C>
Restaurant/store sales........... $ 2,148 $ 959 $ 3,107 $ -- $ 3,107
Food and packaging costs......... 731 308 1,039 -- 1,039
Restaurant operating costs....... 1,245 580 1,825 -- 1,825
Preopening expenses.............. 0 0 0 -- 0
Depreciation and amortization.... 578 148 726 -- 726
General and administrative expenses 338 135 473 262 735
Loss from operations............. $ (744) $ (212) $ (956) $ (262) $ (1,218)

Three Months Ended March 31, 1999 (unaudited)
-----------------------------------------------------------------------------
IFFP PKP Total Corporate Consolidated
---------- ---------- ---------- ----------- ------------

Restaurant/store sales........... $ 2,651 $ 1,030 $ 3,681 $ -- $ 3,681
Food and packaging costs......... 1,099 353 1,452 -- 1,452
Restaurant operating costs....... 1,299 551 1,850 -- 1,850
Preopening expenses.............. 365 83 448 -- 448

Depreciation and amortization.... 668 206 874 -- 874
General and administrative expenses
329 125 454 824 1,278
Loss from operations............. $ (1,109) $ (288) $ (1,397) $ (824) $ (2,221)
Total assets:
December 31, 1999............. $ 18,382 $ 3,211 $ 21,593 $ 4,288 $ 25,881
March 31, 2000................ $ 17,815 $ 3,072 $ 20,887 $ 4,045 $ 24,932
</TABLE>

12
<PAGE>

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

11. SUBSEQUENT EVENTS:

On April 19, 2000, IFFP sought to draw $500,000 under its line of
credit with Citibank. As long as IFFP is in compliance with certain criteria set
forth in the Guarantee of Future Advances Agreement, BKC has agreed to guarantee
the repayment of additional funds drawn under IFFP's line of credit.
Subsequently, BKC notified IFFP that it believed IFFP was not in compliance with
the Guarantee of Future Advances Agreement and BKC, therefore, would not
guarantee the repayment of any funds drawn. As a result, Citibank would not
honor IFFP's request to draw down the additional funds and IFFP has not been
able to obtain additional funds under the Credit Agreement.

The Company believes that unless this matter is resolved immediately,
IFFP will be forced to file a voluntary creditors protection action in Poland,
as it will have insufficient funds for its operations. IFFP may have to cease
operations. In addition, the Company believes that resulting negative publicity
and possible restrictions on the Company will affect PKP's ability to obtain
capital and could result in PKP also filing a voluntary creditors protection
action in Poland. Such a filing by either IFFP or PKP will constitute a default
under certain of the Company's debt agreements. Furthermore, the Company has
guaranteed payment of funds to certain creditors of IFFP which the Company will
be unable to satisfy. As a result of these circumstances, the Company may be
forced to consider all its alternatives, including the filing of a voluntary
petition under the United States Bankruptcy Code.

Although the Company believes it is in compliance with the Guarantee of
Future Advances Agreement and that BKC has breached its agreements with the
Company, the Company continues to negotiate with BKC to seek a resolution that
will allow IFFP and the Company to continue operations. The Company has,
however, retained counsel in the United States and Poland to protect its
interests and, if necessary, seek recovery for damages in the event this
situation cannot be resolved.

13
<PAGE>

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

GENERAL

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Information contained in this Quarterly Report on Form 10-QSB contains
"forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "could," "intends," "estimates," "projected," "contemplated" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology. No assurances can be given that the future results covered by the
forward-looking statements will be achieved. These statements, by their nature,
involve substantial risks and uncertainties, certain of which are beyond IFFC's
control. The following factors and other factors described elsewhere in this
annual report could cause actual experience to vary materially from the future
results covered in such forward-looking statements:

- -- the future growth of our business and our ability to comply with the
restaurant development agreement with Burger King Corporation (the "BKC
Agreement") and the master franchise agreement with Domino's (the "Domino's
Agreement");

- -- our ability to improve levels of profitability; the sufficiency of cash
flow provided by our operating, investing and financing activities;

- -- changes in our financial condition, and the economic, business and
political conditions in Poland;

- -- the demand for our products and the ability of our third-party suppliers to
meet our quantity and quality requirements;

- -- the ability to consummate joint ventures or other strategic associations
with third parties or lessors;

- -- the ability to obtain suitable restaurant sites;

- -- changes in the level of operating expenses and revenues;

- -- changes in the present and future level of competition; and

- -- our future liquidity and capital resource needs.

Other factors, such as the general state of the economy, could also cause actual
experience to vary materially from the matters covered in such forward-looking
statements.

GENERAL

IFFC currently operates 23 Burger King restaurants and 16 Domino's
Pizza stores. IFFC has incurred losses and anticipates that it will continue to
incur losses until, at the earliest, it establishes a number of restaurants and
stores generating sufficient revenues to offset its operating costs and the
costs of its proposed continuing expansion. There can be no assurance that IFFC
will ever achieve profitability or be able to successfully establish a
sufficient number of restaurants to achieve profitability.

14
<PAGE>

THREE MONTHS ENDED MARCH 31, 2000 VS THREE MONTHS ENDED MARCH 31, 1999

RESULTS OF OPERATIONS

For the three months ended March 31, 2000 and March 31, 1999, IFFC
generated sales of $3,107,271 and $3,681,221, respectively, which includes sales
of $2,148,430 and $2,651,043 for the Burger King restaurants and $958,841 and
$1,030,178 for the Domino's Pizza stores, respectively. In U.S. dollar and
Polish zloty terms IFFC's Burger King restaurant sales decreased by
approximately 19% and 11.2%, respectively, for the three months ended March 31,
2000 as compared to the three months ended March 31, 1999. In U.S. dollar and
Polish zloty terms IFFC's Burger King same restaurant sales decreased by
approximately 22.9% and 15.6%, respectively, for the three months ended March
31, 2000 as compared to the three months ended March 31, 1999. The decrease in
same restaurant sales was primarily attributable to the initial start up of
television advertising in February 1999 compared to limited local store
marketing during the three months ended March 31, 2000. In U.S. dollar terms,
IFFC's Domino's store sales decreased by approximately 6.9% for the three months
ended March 31, 2000 as compared to the three months ended March 31, 1999. In
Polish zloty terms, IFFC's Domino's store sales increased by approximately 2%
for the three months ended March 31, 2000 as compared to the three months ended
March 31, 1999. In U.S. dollar and Polish zloty terms IFFC's Domino's same store
sales decreased by approximately 15.5% and 7.4%, respectively, for the three
months ended March 31, 2000 as compared to the three months ended March 31,
1999. The decrease in same store sales was attributed to increased competition
in the Warsaw market.

Food and packaging costs applicable to Burger King restaurants for the
three months ended March 31, 2000 and 1999 were 34% and 41.5% of restaurant
sales, respectively. The 7.5% decrease as a percentage of restaurant sales was
primarily attributable to increased menu prices coupled with lower food costs
obtained from key suppliers. Food and packaging costs applicable to Domino's
stores for the three months ended March 31, 2000 and 1999 were 32.2% and 34.2%
of store sales, respectively. The 2% decrease as a percentage of store sales was
primarily attributable to a reduction in the cost of key food items from its
major vendors.

Payroll and related costs applicable to Burger King restaurants for the
three months ended March 31, 2000 and 1999 were 24.1% and 18.5% of restaurant
sales, respectively. The 5.6% increase as a percentage of restaurant sales was
primarily the result of fixed labor costs at low volume drive through
restaurants. Payroll and related costs applicable to Domino's stores for the
three months ended March 31, 2000 and 1999 were 21.4% and 23.1% of store sales,
respectively. The 1.7% decrease as a percentage of restaurant sales was
primarily the result of improved labor efficiency achieved with the crew labor.

Occupancy and other operating expenses applicable to Burger King
restaurants for the three months ended March 31, 2000 and 1999 were 33.9% and
30.6% of restaurant sales, respectively. The 3.3% increase as a percentage of
restaurant sales was primarily attributable to fixed costs incurred at low
volume drive through restaurants. Occupancy and other operating expenses
applicable to Domino's stores for the three months ended March 31, 2000 and 1999
were 39.1% and 30.3% of store sales, respectively. The 8.8% increase as a
percentage of store sales is primarily attributable to higher delivery vehicle
costs coupled with higher fixed costs at the new Domino's commissary.

Depreciation and amortization expense applicable to Burger King
restaurants was $577,668 as compared to $667,503 for the three months ended
March 31, 2000 and 1999, respectively. The decrease was primarily attributable
to asset impairment charges incurred in 1999; which reduced the carrying value
of fixed assets in 1999 by $1,063,277. Depreciation and amortization expense
applicable to Domino's stores was $148,262 as compared to $205,993 for the three
months ended March 31, 2000 and 1999, respectively. The decrease was primarily
attributable to assets from older stores which have become fully depreciated.

General and administrative expenses for the three months ended March
31, 2000 and 1999 were 23.6% and 34.6% of sales, respectively. The 11% decrease
as a percentage of sales was primarily attributable to lower salaries, legal and
professional fees and consulting fees incurred at the corporate level. For the
three months ended March 31, 2000, general and administrative expenses consisted
of executive and office staff salaries and benefits ("Salary Expenses") of
$268,878; legal and professional fees, office rent, travel, telephone and other
corporate expenses ("Corporate Overhead Expenses") of $413,705, and depreciation
and amortization of $52,420. For the three months ended March 31, 1999, general
and administrative expense included Salary Expenses of $368,945; Corporate
Overhead Expenses of $846,815, and depreciation and amortization of $62,961. The
$625,718 decrease is primarily attributable to a reduction of salaries and
benefits expenses at the corporate level; and a reduction in legal and
professional and consulting fees - primarily incurred in 1999 as the result of
the Citibank loan.

15
<PAGE>

For the three months ended March 31, 2000 and 1999 Interest and Other
Income consisted of the following:
<TABLE>
<CAPTION>

Three Months Ended March 31,
-----------------------------
2000 1999
--------- ---------
<S> <C> <C>
Interest income................................................. $ 24,805 $ 39,817
All other, net.................................................. 101,470 103,346
--------- ---------
$ 126,275 $ 143,163
========= =========

Interest Expense consisted of the following:

Three Months Ended March 31,
-----------------------------
2000 1999
--------- ----------
Interest Expense on 9% Subordinated Convertible Debentures...... $ 62,010 $ 62,010
Amortization of Debt Issuance Costs............................. 171,035 30,247
Accretion of discount on 11% Convertible Senior Subordinated
Discount Notes............................................... 237,067 608,954
Interest Expense on Bank Facilities............................. 244,313 70,817
Capitalized interest............................................ (112,900)
-------- ---------
Total........................................................... $714,425 $659,128
======== =========
</TABLE>

Interest expense exceeded interest and other income by $588,150 and
$515,965 for the three months ended March 31, 2000 and 1999, respectively. The
primary reason for the increase for the three month period ended March 31, 2000
was higher interest and amortization of debt issuance costs on the bank
facilities.

IFFC's interest expense on bank facilities was $244,313 and $70,817 for
the three months ended March 31, 2000 and 1999, respectively. The $173,496
increase was attributable to IFFC's increase of borrowings under bank credit
facilities.

As a result of the foregoing, the three months ended March 31, 2000,
IFFC generated a net loss of $1,714,043 or $.04 per share of IFFC's Common Stock
compared to net loss of $3,178,020, or $.07 per share of IFFC's Common Stock for
the three months ended March 31, 1999.

LIQUIDITY AND CAPITAL RESOURCES

To date, IFFC's business operations have been principally financed by
proceeds from public offerings of IFFC's equity and debt securities, private
offerings of equity and debt securities, proceeds from various bank credit
facilities, proceeds from the sale of certain equity securities, the settlement
of certain litigation with BKC, and proceeds from the private sale of the Notes.

Net cash used in operating activities decreased by $231,974 for the
three months ended March 31, 2000 compared to the three months ended March 31,
1999. The decrease was primarily attributable to a reduction in losses from
operations in 2000.

Net cash flows used in investing activities decreased from $3,952,885
to $46,200 for the three months ended March 31, 1999 and 2000, respectively. The
decrease was attributable to the lack of development of Burger King restaurants
and Domino's stores in 2000.

16
<PAGE>

Net cash provided by financing activities decreased by $1,565,027 for
the three months ended March 31, 2000, compared to the three months ended March
31, 1999. The decrease was primarily attributable to fewer advances under the
Citibank Loan.

As of March 31, 1999, IFFC had negative working capital of
approximately $3,366,056 and cash and cash equivalents of $435,671. IFFC has
significant commitments to develop restaurants in accordance with the BKC
Agreement and the Domino's Agreement. The Company has sustained losses from
operations since its incorporation in December 1991. For the three months ended
March 31, 2000 and 1999, the Company reported net losses of $1,796,043 and
$3,178,020, respectively. At March 31, 2000 the Company had an accumulated
deficit of $37,170,317 and a shareholders' deficit of $2,157,330. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

Management believes that cash flows from existing stores when combined
with existing financial resources will not be sufficient to fund operations.
Management is seeking to obtain additional equity financing to fund future
development. No assurance can be given that such financing will be obtained or
that it can be obtained on favorable terms.

BKC AGREEMENT AND DOMINO'S AGREEMENT -- IFFC's material commitments for
capital expenditures in its restaurant and store business relate to the
provisions of the BKC Agreement and the Domino's Agreement.

AGREEMENT WITH MARRIOTT -- In March 1999, the Company entered into a
letter agreement whereby it granted Host Marriott Service Corporation ("Host
Marriott") the non-exclusive rights to develop and operate Burger King
restaurants within enclosed shopping centers located in Poland where Host
Marriott has leased substantially all of the food and beverage facilities, each
location to be subject to the approval of Burger King. Pursuant to such
agreement, which was amended in May 1999, Host Marriott will pay IFFC (a) an
initial fee of US $25,000 per location in exchange for IFFC's pre-opening
support and assistance, including furnishing design and construction advice,
hiring and training management staff, and advising on the selection of
information and accounting systems for each Burger King restaurant developed by
Host Marriott, and (b) an on-going annual fee equal to the greater of U.S.
$7,000 per location, or 1.5% of Host Marriott's gross receipts from the
operation of each Burger King restaurant, in exchange for IFFC's on-going
technical assistance and services, including maintaining quality standards,
procurement and supply services, and on-going staff training. The annual fee
will be payable monthly, with an annual reconciliation, and will continue for
the duration of Host Marriott's operation of the location as a Burger King
restaurant.

CONVERTIBLE NOTES -- In November 1997, the Company sold $27,536,000 of
its 11% Convertible Senior Subordinated Discount Notes Due October 31, 2007 (the
"Notes") in a private offering. Interest is payable semi-annually, in cash, on
April 30 and October 31 of each year, commencing April 30, 2001. The Notes are
comprised as follows at March 31, 2000 and December 31, 1999:

17
<PAGE>

March 31, December 31,
2000 1999
---------- ------------
<S> <C> <C>
Face amount of notes at maturity......................... $9,636,000 $9,636,000
Unamortized discount to be accreted as interest
expense and added to the original principal balance
of the notes over a period of three years.............. (580,401) (817,468)
---------- ----------
Carrying value........................................... $9,055,599 $8,818,532
========== ==========
</TABLE>

DISPUTE WITH POLISH FISCAL AUTHORITIES -- IFFC anticipates that it will
continue to incur certain expenses in connection with its disputes with the
Polish Fiscal Authorities. See "Legal Proceedings -- Dispute with Polish Fiscal
Authority" for a description of such matters and IFFC's best estimates of the
expenses IFFC anticipates incurring and the timing of such expenses.

POLISH BANK ACCOUNTS-- As of March 31, 2000 and December 31, 1999, the
Company had approximately $435,022 and $334,009, respectively, in Polish bank
accounts with substantially all of such funds held as U.S. dollar denominated
deposits. Substantially all of the Company's remaining cash is held in U.S.
dollar accounts in U.S. Banks.

CREDIT FACILITIES - We have also financed our operations through the
use of credit facilities.

In January 1993, IFFP entered into a revolving credit facility with
American Bank of Poland S.A. ("AmerBank") totaling 300,000 zlotys (approximately
$72,319 at December 31, 1999 exchange rates). Borrowings under the AmerBank
credit facility were secured by a guarantee of our company and bore interest at
a monthly adjusted variable rate approximately equal to AmerBank's prime rate.
In April 1996, the credit available was decreased to 200,000 zlotys
(approximately $48,215 at December 31, 1999 exchange rates) and in March 1997,
the credit facility was further decreased to 100,000 zlotys (approximately
$24,371 at March 31, 2000 exchange rates). The credit facility was renewed on
April 1, 2000. On March 31, 2000 and May 15, 2000, the facility had
approximately $97 and $22,386 outstanding, respectively.

In September 1996, PKP entered into a revolving credit facility with
AmerBank totaling 100,000 zlotys (approximately $24,371 at March 31, 2000
exchange rates). The note is secured by our guarantee. The credit facility is
due on June 1, 2000. The balance on this note as of March 31, 2000 and May 15,
2000 was $3,923 and $13,093, respectively.

In May 1997, we entered into a $999,000 credit facility with Totalbank
that is secured by $999,000 of certificates of deposit. The credit facility
bears interest at 6.5% per annum and was originally scheduled to mature in
August 1998. The credit facility was renewed in February 2000 for six months
under the same terms and is scheduled to mature in August 2000. The outstanding
balance of the facility as of March 31, 2000 and May 15, 2000 was $999,000.

In August 1997, we executed a credit agreement with AmerBank in the
amount of $950,000. Interest is payable monthly at the prevailing one month
LIBOR rate plus 2.75% (9.25% at December 31, 1999). Commencing in March 1998,
the loan is being repaid in monthly installments of $32,000 for 29 months with a
balloon payment of $22,000 due on August 12, 2000. The loan is secured by all
existing restaurant assets and IFFC's guarantee. The balance of this credit
facility as of March 31, 2000 was $150,000 and as of May 15, 2000 was $86,000.

18
<PAGE>

In April 1998, PKP entered into a $300,000 development loan with
AmerBank for the development of its Domino's stores. Borrowings under this
credit facility are secured by: (a) fixed assets of each new restaurant
financed; and (b) our guarantee. The loan is being repaid in ten equal quarterly
installments of $30,000 starting in December 1998, with a final payment due at
maturity (March 26, 2001). Interest is paid monthly at the prevailing one month
LIBOR rate plus 31/8% (9.63% at December 31, 1999). As of March 31, 2000 and May
15, 2000, approximately $116,363 was outstanding on the facility.

In June 1998, IFFP entered into a development loan in the principal
amount of $1.3 million with AmerBank. Borrowings under this credit facility are
to be made until June 18, 2000 and are secured by: (a) fixed assets of each new
restaurant financed; and (b) our guarantee. The loan is scheduled to be repaid
in thirty-five equal monthly installments of $36,111, starting in June 2000,
with a final payment of $36,115 due at maturity, which is May 18, 2003. Interest
is to be paid monthly at the prevailing one month LIBOR rate plus 2.5% (9.0% at
December 31, 1999). According to the terms of the agreement, the proceeds of the
loan are to be used to finance up to half of the costs of furnishing and
commencing operation of Burger King restaurants operated by IFFP. In October
1998, we executed an amendment to this facility with AmerBank, increasing the
borrowing limit to $1.5 million. The scheduled loan payments are as follows:
thirty-five equal monthly installments of $41,666 starting in June 2000 with a
final payment of $41,690 due at maturity on May 18, 2003. As of March 31, 2000
and May 15, 2000, $1,500,000 was outstanding on this credit facility.

In February 1999, IFFP entered into a line of credit agreement with
Citibank (Poland) S.A. under which Citibank granted IFFP a loan in the amount of
$5,000,000. The purpose of the line of credit was to finance the construction of
nine Burger King restaurants. The line of credit is priced at 0.8% above LIBOR
(7.3% at December 31, 1999) and was originally scheduled to mature on January
15, 2000. In order for IFFP to enter into the credit agreement with Citibank,
holders of our outstanding 11% convertible notes were required to waive
applicable provisions of the note indenture. As compensation for the waiver, the
noteholders were issued an aggregate of 204,585 shares of our common stock, with
a fair value of $.56 per share.

The line of credit is guaranteed by Burger King and we granted Burger
King a security interest in the outstanding shares of IFFP. As a condition to
the guarantee, Burger King required that we, IFFP and Mitchell Rubinson, the
Chairman of the Board and Chief Executive Officer of the Company and a principal
shareholder, enter into a general release in favor of Burger King for any and
all matters occurring before the date of the guarantee. Additionally, we and
IFFP entered into a reimbursement agreement (the "Reimbursement Agreement")
under which we agreed to reimburse Burger King for any and all amounts paid out
by Burger King under the guaranty and all costs and expenses incurred by Burger
King in connection with the enforcement of its rights under the Reimbursement
Agreement. Burger King also required that we, IFFP and Rubinson execute a
general release of Burger King relating to any matters that occurred before the
execution of the Credit Agreement.

Additionally, Mr. Rubinson entered into a purchase agreement with
Burger King which provides that if IFFP and our company default on our
obligations under the Reimbursement Agreement and Burger King takes possession
of the IFFP shares, he is required to purchase the IFFP shares from Burger King
for an amount equal to all amounts paid out by Burger King under the guaranty
and all costs and expenses incurred by Burger King in connection with the
enforcement of its rights under the Reimbursement Agreement. Mr. Rubinson
received a fee of $150,000 from our company in connection with the Purchase
Agreement.

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<PAGE>

2002. In addition, Burger King may withdraw its guarantee if certain criteria
set forth in the Guarantee of Future Advances Agreement is not met. In
connection with the increase of the line of credit, all of the prior transaction
documents were re-executed, including the purchase agreement and the release and
the Company, Rubinson, IFFP and BKC entered into the Guarantee of Future
Advances Agreement pursuant to which BKC would guarantee the repayment of future
funds advanced under the line of credit. Additionally, as security of the line
of credit, Burger King required that Mitchell Rubinson enter into a personal
guaranty with Burger King and pledge 5,000,000 shares of our common stock owned
by him. In connection with these matters, we entered into a reimbursement and
fee agreement whereby we agreed to reimburse Mr. Rubinson for all amounts paid
by him under his personal guaranty and to pay him a fee equal to 3% annually of
the amount being guaranteed. As of the date hereof, Mr. Rubinson has not been
paid under this agreement. In order for IFFP to increase the line of credit,
holders of the outstanding 11% convertible notes were required to waive
applicable provisions of the note indenture.

ACCOUNTING POLICIES -- The following is a summary of certain accounting
policies that are new or have become material to the Company's operations during
the first quarter of 2000. For a discussion of all of the Company's material
accounting policies, reference is made to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999.

Prior to January 1, 1999, the Company capitalized preopening costs
associated with opening new restaurants. Upon commencement of revenue producing
activities at a restaurant location, these capitalized preopening costs were
amortized over one year. In April 1998, the Accounting Standards Executive
Committee of the American Institute of Public Accountants issued Statement of
Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5
requires costs of start-up activities to be expensed as incurred. The Company
adopted SOP 98-5 on January 1, 1999. Upon adoption, the Company expensed
previously capitalized start-up costs totaling $620,000 at January 1, 1999. In
accordance with SOP 98-5, adoption has been reported as a cumulative effect of
change in accounting principle on the accompanying statement of operations for
the three months ended March 31, 1999. Preopening costs of $447,735 incurred
subsequent to December 31, 1998 have been charged directly to expense.

The Company accounts for advertising expense in accordance with SOP
93-7, "Accounting for Advertising Costs" which generally requires that
advertising costs be expensed either as incurred or the first time the
advertising takes place. It is the Company's policy to expense advertising costs
the first time the advertising takes place. However, Accounting Principles Board
Opinion ("APB") No. 28, "Interim Financial Reporting" allows advertising costs
to be deferred within a fiscal year if the benefits of an advertising
expenditure clearly extend beyond the interim period in which the expenditure is
made. Pursuant to APB 28, it is the Company's policy to defer advertising
expenses at the end of interim periods to the extent that such costs will
clearly benefit future interim periods. During the three months ended March 31,
2000, the Company incurred advertising expense of $275,278, of which $98,036 was
deferred. During the three months ended March 31, 1999, the Company incurred
advertising expense of approximately $710,000, of which approximately $382,000
was deferred at March 31, 1999 and was included in prepaid expenses on the
balance sheet as of March 31, 1999. Pursuant to SOP 93-7, the Company is
required to expense all advertising incurred at the end of the fiscal year.

IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS

The official currency in Poland is the zloty. The value of the zloty is
pegged pursuant to a system based on a basket of currencies, as well as all
other economic and political factors that effect the value of currencies
generally. At March 31, 2000, the exchange rate was 4.1033 zlotys per dollar.
The accounts of IFFC's Polish subsidiaries are maintained using the Polish
zloty.

20
<PAGE>

dependent on certain sources of supply which require payment in European or
United States currencies. Since IFFC's revenues from operations will be in
zlotys, IFFC is subject to the risk of currency fluctuations. IFFC has and
intends to maintain substantially all of its unutilized funds in United States
or Western European currency denominated securities and/or European Currency
Units. There can be no assurance that IFFC will successfully manage its exposure
to currency fluctuations or that such fluctuations will not have a material
adverse effect on IFFC.

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

YEAR 2000 COMPUTER ISSUE

The SEC has issued Staff Legal Bulletin No. 5 stating that public
operating companies should consider whether there will be any anticipated costs,
problems and uncertainties associated with the Year 2000 issue. The "Year 2000
Issue" is the result of computer programs that were written using two digits
rather than four to define the applicable year. If our computer programs with
date-sensitive functions are not Year 2000 compliant, they may recognize a date
"00" as the Year 1900 rather than the Year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including a
temporary inability to process transactions, inability to interchange
information with connecting railroads or engage in similar normal business
activities.

To date, we have not experienced any immediate adverse impact on our
operations from the transition to the Year 2000. However, we cannot assure you
that our operations have not been affected in a manner that is not yet apparent
or in a manner that will arise in the future, or that we will not incur
additional Year 2000 expenses. In addition, some computer programs that were
date sensitive to the Year 2000 may not have been programmed to process the Year
2000 as a leap year, and negative effects from this remain unknown. As a result,
we will continue to monitor our Year 2000 compliance and the Year 2000
compliance of our suppliers and customers. However, we do not anticipate any
Year 2000 problems that are reasonably likely to have a material adverse effect
on our operations.

To date, we estimate that we have spent approximately $50,000 on Year
2000 efforts across all areas and expect to spend a total of approximately
$100,000 when complete. We have funded Year 2000 costs through operating cash
flows and proceeds from debt and equity financings. All system modification
costs associated with Year 2000 will be expensed as incurred.

21
<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

DISPUTE WITH POLISH FISCAL AUTHORITY. In 1995, IFFP became subject to
penalties for failure to comply with an amended tax law requiring the use of
cash registers with calculating and recording capabilities and which are
approved for use by the Polish Fiscal Authorities. As a penalty for
noncompliance, Polish tax authorities had the right to disallow some value added
tax deductions for July and August 1995. Additionally, penalties and interest
could have been imposed on these disallowed deductions. Although IFFP's NCR Cash
Register System was a modern system, it could not be modified. IFFP replaced the
system with a new Siemen's system which complies with Polish regulations. In
December 1999, the Polish Tax Court ruled against IFFP but reduced the fine and
related penalties to 474,776 Polish zloty or approximately $115,706 using March
31, 2000 exchange rates.

REGENESIS MATTER. We are a party to the following legal proceeding:
ELPOINT COMPANY, LLC AND GENNADY YAKOVLEV, VS. MITCHELL RUBINSON, MARILYN
RUBINSON, EDDA RUBINSON, NIGEL NORTON, JAMES F. MARTIN, LEON BLUMENTHAL, C.
LAWRENCE RUTSTEIN, SHULMAN & ASSOCIATES, INC., MANNY SCHULMAN, FRANKLYN
WEICHSELBAUM, JAMES MIRANTI, INTERNATIONAL FAST FOOD CORPORATION, DOMINO'S PIZZA
INTERNATIONAL, INC., REGENESIS HOLDINGS CORPORATION, United States District
Court, Northern District of California (Case No. 99-1107 CRB). In March 1999,
some of the shareholders of Regenesis Holdings Corporation (f/k/a QPQ
Corporation) ("Regenesis") filed a complaint against us and some of our senior
management and principal shareholders, including Mitchell Rubinson, our Chairman
of the Board and Chief Executive Officer, and James Martin, our President and
Chief Financial Officer. Regenesis formerly held the right to develop Domino's
Pizza stores in Poland. Certain former officers and principal stockholders of
Regenesis are officers and principal shareholders of our company. The complaint
alleges, among other things, that the defendants fraudulently transferred the
Domino's development rights to us, thereby causing Regenesis to lose value.
Additionally, the complaint alleges that we engaged in the misappropriation of
corporate opportunities of Regenesis. We reached a settlement in this matter and
pursuant to such settlement, we must pay $300,000. An accrual for this amount
has been provided for in the 1999 consolidated financial statements.

We are not a party to any other litigation or governmental proceedings
that management believes would result in any judgments or fines that would have
a material adverse effect on us.

22
<PAGE>

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

27.1 - Financial Data Schedule (filed electronically only).

(b) The following reports on Form 8-K were filed during the
quarter ended on March 31, 2000:

None.

23
<PAGE>

SIGNATURES

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

INTERNATIONAL FAST FOOD CORPORATION

DATE: May 18, 2000 By: /S/ MITCHELL RUBINSON
----------------------
Mitchell Rubinson,
Chairman of the Board,
Chief Executive Officer
(Principal Executive Officer)

DATE: May 18, 2000 By:/S/ JAMES MARTIN
----------------
James Martin,
Chief Financial Officer
(Principal Financial and
Accounting Officer)

24
<PAGE>

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