<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                     
                                 FORM 10-QSB/A     


              [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934

               For the quarterly period ended SEPTEMBER 30, 1997


             [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934

              For the transition period from ________ to ________

                         Commission File Number 0-18438
                                                -------


                       VITAFORT INTERNATIONAL CORPORATION
                       ----------------------------------
             Exact name of Registrant as specified in its charter)

                    DELAWARE                        68-0110509
                    --------                        ----------
          (State or other Jurisdiction of        (I.R.S. Employer
          incorporation or organization)       Identification Number)

           1800 AVENUE OF THE STARS, SUITE 480, LOS ANGELES, CA 90067
           ----------------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)


                                (310) 552-6393
                                --------------
              (Registrant's telephone number, including area code)


Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act of 1934 of during the preceding twelve
months ended December 31, 1995 (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 ninety days.

                     Yes: X          No:
                          -             
    
The number of shares of the Registrant's Common Stock, par value $.0001 per
share outstanding on January 15, 1998 is 7,072,052.      

                                       1
<PAGE>
 
                       VITAFORT INTERNATIONAL CORPORATION



                                    CONTENTS


                         PART I - FINANCIAL INFORMATION

--------------------------------------------------------------------------------
<TABLE>    
<S>                                                                       <C>
ITEM 1.   Consolidated Financial Statements:
 
          Balance Sheets - September 30, 1997 (unaudited)
          and December 31, 1996........................................   3
 
          Statements of Operations -
          Three Month Periods Ended September 30, 1997 and 1996
          (unaudited) and Nine Month Periods Ended September 30, 1997
          and 1996 (unaudited)                                            5
 
          Statement of Stockholders' Equity (Deficit) -
          Nine Month Period Ended September 30, 1997 (unaudited).......   6
 
          Statements of Cash Flows -
          Nine Month Periods Ended September 30, 1997 and 1996
          (unaudited)..................................................   7
 
          Notes to the Financial Statements............................   8
 
ITEM 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations....................................   14
</TABLE>      

                          PART II - OTHER INFORMATION

--------------------------------------------------------------------------------
<TABLE>    
<S>                                                                       <C>
ITEM 1.   Legal Proceedings............................................   19
 
ITEM 4.   Submission of Matters of a Vote of  Security Holders.........   19
 
ITEM 6.   Exhibits and Reports on Form 8-K.............................   20
 
          Signatures...................................................   21
</TABLE>      

                                       2
<PAGE>
 
                         PART I - FINANCIAL INFORMATION

                         ITEM 1.  FINANCIAL STATEMENTS

                       VITAFORT INTERNATIONAL CORPORATION
                          CONSOLIDATED BALANCE SHEETS


                                     ASSETS
                                     ------
<TABLE>    
<CAPTION>
                                                                        September 30    December 31
                                                                            1997            1996
                                                                        -------------   ------------
                                                                         (unaudited)
<S>                                                                     <C>             <C>
Current Assets:
 
          Cash and cash equivalents                                       $3,597,943     $  188,867
          Accounts receivable-trade, net of allowance for doubtful
            accounts of $67,743 at September 30, 1997 and
            $79,994 at December 31, 1996                                     508,852        430,789
          Notes receivable                                                    10,000         56,000
          Other receivables                                                   33,894          4,464
          Inventory, net                                                     268,989        361,196
          Prepaid expenses and other assets                                  262,727        271,731
                                                                          ----------     ----------
 
              Total Current Assets                                         4,682,405      1,313,047
 
Fixed Assets:
          Manufacturing equipment                                            290,912        290,912
          Furniture and office equipment                                     105,539        105,160
          Computer equipment                                                 179,827        173,294
                                                                          ----------     ----------
              Total Fixed Assets                                             576,278        569,366
          Less accumulated depreciation and amortization                    (316,997)      (231,592)
                                                                          ----------     ----------
              Net Fixed Assets                                               259,281        337,774
 
Other Assets:
          Intangible and other assets                                        411,254        481,254
          Less accumulated amortization                                      (64,864)       (95,561)
                                                                          ----------     ----------
              Net Other Assets                                               346,390        385,693
                                                                          ==========     ==========
 
              Total Assets                                                $5,288,076     $2,036,514
                                                                          ==========     ==========
 
</TABLE>      
        See accompanying notes to the consolidated financial statements.

                                       3
<PAGE>
 
                       VITAFORT INTERNATIONAL CORPORATION
                          CONSOLIDATED BALANCE SHEETS

                 LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
                 ---------------------------------------------
<TABLE>     
<CAPTION>
                                                                   September 30    December 31
                                                                       1997           1996
                                                                   -------------   -----------
                                                                    (unaudited)
<S>                                                                <C>             <C>
Liabilities and Stockholders' Equity (Deficit)

Current Liabilities:
  Notes payable                                                       $  243,349      $  440,022
  Accounts payable                                                       312,727       1,263,250
  Accrued expenses                                                       608,431         789,212
  Note payable to shareholders                                            37,859          37,859
                                                                      ----------      ----------
                   Total Current Liabilities                           1,202,366       2,530,343

Stockholders' Equity(Deficit):
  Series A, 6% Cumulative Convertible Preferred Stock
   $0.01 par value, cumulative, 750 shares authorized,
   750 shares issued and outstanding at September 30, 1997
   and none at December 31, 1996; aggregate liquidation
   preference of $750,000 at September 30, 1997                                8               0
  Series B, 10% Cumulative Convertible Preferred Stock
   $0.01 par value, cumulative, 110,000 shares authorized,
   1,000 shares issued and outstanding at September 30, 1997
   and December 31, 1996; aggregate liquidation
   preference of $50,000 at September 30, 1997 and
   December 31, 1996                                                          10              10
  Series C, Convertible Preferred stock, $0.01 par value,
   450 shares authorized, 50 shares issued and outstanding
   as of September 30, 1997 and December 31, 1996;
   aggregate liquidation preference of $50,000 at September 30,
   1997 and December 31, 1996                                                  1               1
  Common stock, $.0001 par value.  Authorized
   9,000,000 shares at September 30, 1997 and 9,000,000 at
   December 31, 1996, issued and outstanding
   6,741,050 shares at September 30, 1997 and
   4,908,664 at December 31, 1996, respectively.                           8,870           8,686
 Additional paid-in capital                                           23,246,457      20,547,953
 Accumulated deficit                                                 (19,169,636)    (21,050,479)
                                                                    ------------    ------------
       Total Stockholders' Equity(Deficit)                             4,085,710        (493,829)
                                                                    ============    ============

       Total Liabilities and Stockholders' Equity(Deficit)          $  5,288,076    $  2,036,514
                                                                    ============    ============
</TABLE>      

        See accompanying notes to the consolidated financial statements.

                                       4
<PAGE>
 
                       VITAFORT INTERNATIONAL CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>    
<CAPTION>
 
                                                              Three Months Ended                Nine Months Ended
                                                                 September 30,                    September 30,
                                                        ------------------------------     -----------------------------
                                                           1997                1996             1997            1996
                                                                 (unaudited)                        (unaudited)
<S>                                                     <C>                 <C>              <C>             <C>
Net sales                                               $  322,116          $ 2,104,314      $ 1,497,223     $ 4,408,665
Cost of sales                                              196,226            1,912,734        1,078,854       3,988,128
                                                        ----------          -----------      -----------     -----------
Gross profit                                               125,890              191,580          418,369         420,537
 
Operating expenses:
 Product development                                       123,137              247,061          179,268         693,389
 Sales and Marketing                                       257,016              580,798          996,242       1,690,024
 General and administrative                                  3,227              573,929        1,894,114       1,603,775
                                                        ----------          -----------      -----------     -----------
 
  Total operating expenses                                 383,380            1,401,788        3,069,624       3,987,188
                                                        ----------          -----------      -----------     -----------
 
Operating loss                                            (257,490)          (1,210,208)      (2,651,255)     (3,566,651)
Other income (expense)                                      (3,409)               2,758           19,710          11,793
Interest expense                                           (53,585)              (4,423)        (153,138)        (13,693)
Interest income                                             47,742                    0           47,742               0
Litigation recovery, net of costs                        4,886,947                    0        4,886,947               0
                                                        ----------          -----------      -----------     -----------
 
  Income(Loss) before provision
    for income taxes                                     4,620,205           (1,211,873)       2,150,006      (3,568,551)
Provision for income taxes                                       0                1,105                0           3,159
                                                        ----------          -----------      -----------     -----------
 
   Net Income(Loss)                                      4,620,205           (1,212,978)       2,150,006      (3,571,710)
 
Deemed dividends to preferred shareholders                       0                    0         (269,164)              0
                                                        ----------          -----------      -----------     -----------
 
   Net Income (Loss) allocable to
    common shareholders                                 $4,620,205          $(1,212,978)     $ 1,880,842     $(3,571,710)
                                                        ==========          ===========      ===========     ===========
 
   Net Income(Loss) per share                                $0.67               $(0.28)           $0.33          $(0.85)
                                                        ==========          ===========      ===========     ===========
 
   Weighted Average Shares
     of Common Stock                                     6,868,277            4,339,878        5,762,985       4,215,668
                                                        ==========          ===========      ===========     ===========
 
</TABLE>      
        See accompanying notes to the consolidated financial statements.

                                       5
<PAGE>
 
              VITAFORT INTERNATIONAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
                     Nine Months ended September 30, 1997
                                  (unaudited)
<TABLE>   
<CAPTION>
                                      Series A     Series B     Series C
                                     Convertible  Convertible  Convertible
                                      Preferred    Preferred    Preferred   Subscribed
                                        Stock        Stock        Stock       Stock
                                     -----------  -----------  -----------  ----------
<S>                                  <C>          <C>          <C>          <C> 
Balance, January 1, 1997             $       -    $       10   $        1   $      -
Common stock issued in private
  placement, net of commissions                                                    -
Exercise of stock options                                                          -
Common stock issued as settlement
  of contract dispute
Exercise of stock options
Series A Preferred issued in
  connection with private
  placement, net of commissions
  and expenses                                8
Conversion of debt to equity

Exercise of stock options

Preferred Stock Dividends

Net income
                                     ----------    ----------   ----------   ---------
Balance, September 30, 1997          $        8    $       10   $        1   $      -
                                     ==========    ==========   ==========   =========
</TABLE>     

<TABLE>    
<CAPTION>
                                         Common Stock
                                     --------------------    Additional Paid    Accumulated
                                      Shares       Amount       In Capital        Deficit          Total
                                     ---------     ------    ---------------   ------------     ----------
<S>                                  <C>           <C>         <C>             <C>              <C> 
Balance, January 1, 1997             4,908,664     $8,686      $20,547,953     $(21,050,479)    $ (493,829)
Common stock issued in private
  placement, net of commissions        500,000         50          449,950                         450,000
Exercise of stock options              183,100         18          183,082                         183,100
Common stock issued as settlement
  of contract dispute                   70,000          7           78,743                          78,750
Exercise of stock options              185,600         19          162,381                         162,400
Series A Preferred issued in
  connection with private
  placement, net of commissions
  and expenses                                                     672,992                         673,000
Conversion of debt to equity           803,686         81          796,401                         796,482

Exercise of stock options               90,000          9           85,791                          85,800

Preferred Stock Dividends                                          269,164         (269,164)            -

Net income                                                                        2,150,007      2,150,007
                                     ---------     ------      -----------     ------------     ----------
Balance, September 30, 1997          6,741,050     $8,870      $23,246,457     $(19,169,636)    $4,085,710
                                     =========     ======      ===========     ============     ==========
</TABLE>     

                                       6
<PAGE>
 
                       VITAFORT INTERNATIONAL CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>     
<CAPTION>
                                                         Nine Months Ended
                                                           September 30,
                                                   ----------------------------
                                                      1997             1996
                                                           (unaudited)
<S>                                                <C>              <C>
Increase (Decrease) In Cash and Cash
 Equivalents:                                     
Cash flows from operations:
    Net Income(Loss)                                $2,150,006       $(3,571,710)
    Adjustments to reconcile net income 
     (loss) to net cash used in operating
      activities:
      Depreciation and amortization                    124,708            94,998
      Allowance for doubtful accounts                  (12,250)                0
      Inventory reserves                              (832,296)                0
    (Increase) decrease in:
      Inventory                                        924,502        (1,516,839)
      Accounts receivable                              (69,640)       (1,150,328)
      Prepaids and other current assets                 29,403          (477,613)
    Increase (decrease) in:
      Accounts payable                                  75,969         1,325,140
      Accrued expenses                                (180,781)         (205,668)
                                                    ----------       -----------
         Net cash provided by (used in)
          operating activities                       2,209,621        (5,502,020)
                                                    ----------       -----------
Cash flows from investing activities:
     Purchase of short-term investment                       0           (41,000)
     Purchase of property and equipment                 (6,912)         (180,741)
     Cash paid for acquisition                               0          (183,907)
                                                    ----------       -----------
          Net cash provided by (used in)
           investing activities                         (6,912)         (405,648)
                                                    ----------       -----------
Cash flows from financing activities:
     Proceeds from issuance of common and
      preferred stock, net                           1,633,050         5,118,501
     Repayment of notes payable                      ( 576,683)          (75,000)
     Proceeds from notes payable                       150,000           896,587    
     Repayment of long-term debt                             0          (164,505)
                                                    ----------       -----------
          Net cash provided by financing
           activities                                1,206,367         5,775,583
                                                    ----------       -----------
          Net increase(decrease) in cash             3,409,076          (132,085)
                                                    ----------       -----------
          Cash and cash equivalents at
           beginning of period                         188,867         1,316,406
                                                    ----------       -----------
Cash and cash equivalents at end of period          $3,597,944       $ 1,184,321
                                                    ==========       ===========
Supplemental disclosures of cash flow
 information:
     Cash paid during the period for interest       $   45,000       $     5,632
                                                    ==========       ===========
Supplemental disclosures of non-cash investing
 and financing activities:
Issuance of common stock for conversion of debt     $  796,482       $   973,207
                                                    ==========       ===========
</TABLE>      
        See accompanying notes to the consolidated financial statements.

                                       7
<PAGE>
 
                       VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

(1)  General:

     The unaudited consolidated financial statements have been prepared on
     the same basis as the audited consolidated financial statements and, in the
     opinion of management, reflect all adjustments (consisting of normal
     recurring adjustments) necessary for a fair presentation for each of the
     periods presented.  The results of operations for interim periods are not
     necessarily indicative of results to be achieved for full fiscal years.
         
     As contemplated by the Securities and Exchange Commission (SEC) under
     item 310(b) of Regulation S-B, the accompanying consolidated financial
     statements and related footnotes have been and do not contain certain
     information that will be included in the Company's annual consolidated
     financial statements and footnotes thereto.  For further information, refer
     to the consolidated financial statements and related footnotes for the year
     ended December 31, 1996.     

     The Company is presently engaged in formulating, marketing and
     distributing fat-free, low fat and reduced fat foods.

(2)  Summary of significant accounting policies:
         
     (a) The accompanying consolidated financial statements include the
         accounts of the Company and its subsidiaries.  All material
         intercompany accounts and transactions have been eliminated.  The
         subsidiaries have had no operations since 1994.      

     (b) Inventories are stated at the lower of cost (first-in, first-out 
         basis) or market.
         
     (c) Prepaid assets include product introduction expenses, which are 
         recorded at cost and amortized over the economic life thereof, but
         not in excess of twelve months, consulting and other prepaids.      

     (d) Fixed assets are composed of manufacturing equipment, furniture,
         office equipment, and computer equipment and are recorded at cost.
         Depreciation is computed on a straight-line basis over the estimated
         useful life, generally five years or less.
         
     (e) Intangible assets are composed of debt issuance costs and
         acquisition costs of Auburn Farms and Natures Warehouse trademarks,
         prepaid professional services contracts and are recorded at cost.  The
         acquisition costs associated with trademarks are being amortized on a
         straight-line basis over twenty years.  All other intangible assets
         are being amortized on a straight-line basis over periods not
         exceeding five years.      

                                       8
<PAGE>
                           
                       VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)       
 
          (f) For the purpose of cash flow, the Company considers all highly
              liquid investments purchased with an original maturity of three 
              months or less to be cash equivalents.

          (g) Certain 1996 amounts have been reclassified to conform to the 1997
              presentation.
              
          (h) For the three and nine months ended September 30, 1997, earnings
              per share has been computed using the average number of common
              shares outstanding during the period and common stock equivalents,
              consisting of stock options, calculated by using the treasury
              stock method.      
                  
              Common stock equivalents are anti-dilutive for the three and nine
              months ended September 30, 1996.  Dividends on cumulative 
              preferred stock are not material.      
    
(3)  Inventories:      
         
     Inventories are stated at the lower of cost (first-in, first-out
     basis) or market.  Market-based valuations are based upon estimates and
     assumptions, and are generally limited to slow moving product offerings.
     Inventory consisted of the following:      

<TABLE>     
<CAPTION>
                                                             September 30,    December 31,
                                                                  1997            1996
                                                            --------------   -------------
<S>                                                         <C>              <C>
          Finished Goods                                        $   68,390     $ 1,071,180
          Packaging and Raw Material                               551,427         473,140
          Less:  Reserves for slow moving and spoilage            (350,828)     (1,183,124)
                                                                ----------     -----------
 
                                                                $  268,989     $   361,196
                                                                ==========     ===========
</TABLE>      
         
     During the three and nine months ended September 30, 1997 and during
     the three and nine months ended September 30, 1996, charges included in
     cost of sales related to inventory reserves were $427,345 and $863,109, and
     $0, and $0, respectively.      

    
(4)  Prepaid Expenses and Other Current Assets:      

     Prepaid expenses and other current assets as of September 30, 1997 and
     December 31, 1996 consist of the following:

<TABLE>     
<CAPTION>
                                                        September 30,   December 31,
                                                            1997            1996
                                                        -------------   ------------
<S>                                                     <C>             <C>
          Deposits                                         $  1,600       $ 10,000
          Product introduction costs                         15,653        177,865
          Insurance                                          45,253         14,897
          Consulting                                        151,194            -0-
          Other prepaids                                     49,027         68,969
                                                           --------       --------
          Total Prepaid and Other Current Assets           $262,727       $271,731
                                                           ========       ========
</TABLE>      
                                       9
<PAGE>
                           
                       VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)      
     
(5)  Accrued Expenses      

     Accrued expenses and other current liabilities as of September 30, 1997 and
     December 31, 1996 are detailed as follows:

<TABLE>     
<CAPTION>
                                        September 30,   December 31,
                                            1997            1996
                                        -------------   ------------
     <S>                                <C>             <C>
     Accrued Compensation                    $      0       $ 65,570
     Accrued Interest Payable                       0            436
     Accrued Legal Fees                        43,000         70,811
     Accrued Consulting Fees                        0         22,500
     Accrued Commissions                       89,276            -0-
     Accrued Advertising/Promotion            272,716        407,359
     Other Accrued Expenses                   203,439        222,536
                                             --------       --------
                                             $608,431       $789,212
                                             ========       ========
</TABLE>      
    
(6)  Notes Payable - Bank:      
 
     The Company is no longer in default with respect to certain financial
     covenants under the terms of its agreement with the secured lender. For
     financial statement purposes, the entire amount is classified as a current
     liability, however, due to the financial uncertainty of the business.

    
(7)  Note Payable to Shareholders:      
         
     Note payable to shareholders consists of a $37,859 14% note payable,
     due in monthly installments of $4,033, including interest, through October
     1997, secured by certain of the Company's fixed assets.      

    
(8)  Stockholders' Equity:      
         
     During the nine-month period ended September 30, 1997, the following
     common stock transactions occurred, all of which were valued at fair
     market:      

     a. The Company issued 70,000 shares at a value of $1.125 per share as
        settlement for a contract dispute.

     b. The Company issued 20,000 shares at a value of $1.125 per share
        upon the exercise of an option granted to a former employee as
        compensation for consulting services and past unpaid accrued vacation.

                                       10
<PAGE>
 
                        VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)



     c.   The Company issued 183,100 shares at $1.00 per share upon the exercise
          of options granted under the Non-Incentive Stock Option Plan.  Non-
          officers of the Company paid the exercise price of such options
          through the application of accrued payroll and other various expenses.

     d.   The Company entered into a subscription agreement in February, 1997
          with an investor who purchased 500,000 shares of common stock at $1.00
          per share.  At funding, a 10% fee was paid to a facilitator and
          warrants were given to that same facilitator to purchase 125,000
          shares of common stock at a price of $1.375 per share.  During the
          period ended September 30, 1997, the Company reduced the exercise
          price of these options to $1.00.
         
     e.   The Company entered into a subscription agreement in April 1997
          with an unrelated investor for $500,000 of 1997 Series A Preferred
          Stock.  The preferred stock has a cumulative dividend rate of 6% with
          no voting rights.  The conversion price is the lower of $1.25 per
          share or a 30% discount to the market price at the time of conversion.
          The preferred stock is convertible at any time.  For accounting
          purposes, the original issue discount of $214,286 is being treated as
          a deemed dividend.  The facilitator received a 10% fee from the
          proceeds, as well as warrants to purchase 35,000 shares of common
          stock at an exercise price of $1.00 per share.      

     f.   The Company issued 185,600 shares at $0.875 per share upon the
          exercise of options granted under the Non-Incentive Stock Option Plan.
          Non-officers of the Company exercised such options through the
          application of accrued payroll and other various expenses.
         
     g.   The Company entered into a subscription agreement in May 1997 with
          another investor for $250,000 of 1997 Series A Preferred Stock. The
          series has a cumulative dividend rate of 6%, no voting rights, and is
          convertible at any time at the lower of $1.25 or a 30% discount to the
          market price at the time of conversion. For accounting purposes, the
          original issue discount of $54,878 is being treated as a deemed
          dividend. The facilitator received a 10% fee from the proceeds and a
          warrant to purchase 17,500 shares of common stock at an exercise price
          of $1.00 per share.      
         
     h.   The Company issued 10,000 shares of common stock at a value of $1.06
          per share upon the exercise of an option granted to a former employee
          as compensation for consulting services and related expenses.      
         
     i.   On July 16, 1997, the Company accepted a cashless exchange of expenses
          for options on 30,000 shares of common stock valued at $1.00 per share
          to a consultant.      

                                       11
<PAGE>
 
                       VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

         
     j.   The Company issued 418,086 shares of common stock at $1.25 per share
          to various providers of services under an S-8 filing.      
         
     k.   100,000 shares of common stock at $.93 per share was issued to a
          professional firm for previous services rendered.      
         
     l.   On August 28, the Company issued 255,600 shares of common stock at
          $.93 per share in compensation for services rendered.      
         
     m.   The Company issued a cashless option of 60,000 shares of common stock
          valued at $.93 per share for consulting services.      

    
(9)  Going Concern:      
         
     The Company has prepared the financial statements included herewith
     assuming that the Company will continue as a going concern. Although the
     Company received $6,750,000 as proceeds from the Keebler arbitration, it
     must realize a satisfactory level of profitability from its current and
     future operations in order to remain a viable entity.  The Company's
     auditors have included an explanatory paragraph in their report for the
     year ended December 31, 1996, indicating there is substantial doubt
     regarding the Company's ability to continue as a going concern.  The
     Company anticipates losses from operations during the remainder of 1997.
     The accompanying consolidated financial statements do not include any
     adjustments that might result from the outcome of any uncertainty.      
         
    
(10) Legal Proceedings      

     In December 1994, Lloyd Gaunt, who invested an aggregate of $75,000 in
     certain of the Company's private placements, initiated an action in
     Superior Court, Orange County, California against his stockbroker, two
     national brokerage firms, several companies in which he had invested; and,
     certain of those company's officers.  Included among the defendants were
     the Company and its then Chief Executive Officer.  The complaint seeks
     damages in an unspecified amount in excess of $500,000 and punitive damages
     in an unspecified amount in excess of $5,000,000.  The Court has dismissed
     the class action claims as to the Company and granted a motion that the
     claims against the brokerage firms and associated persons must be submitted
     to arbitration.  The Plaintiff has appealed that ruling.  The Company
     denies any liability to the plaintiff and intends to vigorously defend this
     action.  The Company notes that the plaintiff sold a portion of the
     securities he purchased from the Company, realizing a profit; that the
     balance of the securities

                                       12
<PAGE>
 
                       VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)


     became salable under Rule 144; and that, if sold, the Plaintiff could
     recoup his entire investment on his $75,000 investment.

     In connection with the acquisition of assets of Auburn Farms, Inc., (AFI)
     under the FPA, the Company acquired certain rights of AFI against its co-
     packer and against Barbara's Bakery.  The Company is pursuing these rights,
     and in May 1996, initiated an action alleging Lanham Act violations,
     misappropriation of trade secrets, unfair competition and related claims.
     The defendants have filed counterclaims against the Company and Auburn
     Farms alleging various tort and contract claims.  Counsel for Vitafort is
     reviewing the case to determine the best course of action to continue
     forward.

     On October 9, 1996, a complaint was filed in Superior Court, the County of
     Los Angeles, in an action entitled "Eloy Louis Ellis vs. Vitafort, Inc., a
     Delaware Corporation; Mark Beychok and Does 1-50 inclusive."  The complaint
     alleges Breach of Oral Contract, Breach of Written Contract, and other
     similar claims arising out of the consulting relationship that previously
     existed between the Company and Mr. Ellis.  The Complaint seeks damages in
     an unspecified amount.  The court has sustained, without leave to amend, a
     demurrer to the claims against Mark Beychok and sustained the demur, with
     leave to amend, against the Company.  Mr. Ellis has filed an amended
     complaint against the Company.  The Company is in the process of document
     discovery and is defending the action vigorously.

    
(11) Recent Financial Developments      
         
     On Friday, June 20, 1997, the Company received notice of the interim award
     under the arbitration with the Keebler Company.  The award was for
     $5,983,923 as well as compensation for all legal fees and costs associated
     with the arbitration proceedings.  Based on the agreement with ATCOLP
     INVESTMENT PARTNERS (the "Lender"), the Company agreed to pay the Lender a
     sliding percentage of the proceeds from the settlement in exchange for
     advancing $300,000 to the Company to meet the litigation expenses.      
         
     On Tuesday, July 15, the Company received $6,750,000 in full and final
     settlement.  Of that amount, $1,055,608 was paid for legal fees and costs,
     plus $1,236,882 to ATCOLP INVESTMENT PARTNERS under the existing agreement.
     Additionally, the Company was able to cancel $140,829 in debt due to the
     Keebler Company.  The amount of the award, $5,983,000, has been reported as
     income, under the heading litigation, net of costs, while the difference
     between the $6,750,000 award and the $5,983,000 recovery, or $767,000, has
     been treated as a reimbursement of expenses in the general and
     administrative expenses for the three month period ended, September 30,
     1997.      

                                       13
<PAGE>
 
          ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AS RESULTS OF OPERATIONS

                                  (Unaudited)


  CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR PROVISIONS OF THE PRIVATE
                   SECURITIES LITIGATION REFORM ACT OF 1995:

EXCEPT FOR HISTORICAL FACTS, ALL MATTERS DISCUSSED IN THIS REPORT WHICH ARE
FORWARD LOOKING INVOLVE A HIGH DEGREE OF RISKS AND UNCERTAINTIES.  POTENTIAL
RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, COMPETITIVE PRESSURES
FROM OTHER FOOD COMPANIES AND WITHIN THE GROCERY INDUSTRY, ECONOMIC CONDITIONS
IN THE COMPANY'S PRIMARY MARKETS AND OTHER UNCERTAINTIES DETAILED FROM TIME TO
TIME IN THE COMPANY'S SECURITIES EXCHANGE COMMISSION FILINGS.
    
Nine Months and Three Months Ended September 30, 1997 and 1996      
--------------------------------------------------------------

Results of Operations:

     The net proceeds from the damage award in the Keebler Company arbitration
     has eliminated, at least in the short term, the liquidity problem that has
     plagued the Company over the past year.  Currently, the Company is
     negotiating payout terms with certain vendors and reestablishing credit
     terms with its current co-packers to improve its inventory levels to meet
     customer requirements while at the same time prolonging its current cash
     position.
         
     The Company has reduced its cost of sales by centralizing the warehousing
     of its products in a single location and negotiated lower rates with
     existing manufacturers or by selecting another competent less expensive
     producer.  In addition, the Company increased prices on the majority of its
     products effective August 1 of this year and changed its terms of sale to
     F.O.B. the Company's warehouse.  The Company also eliminated the cash
     discount for prompt payment since most customers were taking the discount
     beyond the terms.  Finally, the Company will be changing the Vitafort trade
     name and the Fudgets and Caketts product names due to the problems in 1996.
     These steps, coupled with improvements in subcontract manufacturing quality
     control and quality assurance monitoring improvements in Company internal
     control and communications with respect to product returns and deductions,
     should improve the Company's prospects to achieve profitability.      

     Although the cash position has improved, the problems associated with the
     lack of resources in the past continue to hamper customer relations through
     the impact of returned products on the ability of the Company to collect
     its trade accounts receivable in full, the position of some customers who
     will continue to do business with the Company only after the past amounts
     due them for advertising and returns are settled in full, and other
     customers who are waiting to see new products introduced by the Company
     before agreeing to continue to be a customer of the Company.

                                       14
<PAGE>
 
          ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AS RESULTS OF OPERATIONS

                                  (Unaudited)


     Since the cash infusion, the Company has focused on continuing to repair
     the relationships with its customers and vendors by insuring that the
     records of both organizations are in agreement, establishing a payment
     schedule, if necessary, agreeable to both parties, and using this
     communication to open the relationship to future business.  In addition,
     the Company is using its resources to prepare for the new products that it
     will need to launch to maintain its position in the market and improve its
     visibility with the ultimate customer, the consumer.

Net Sales:

     For the three month period ended September 30, 1997, net sales were
     $322,116 compared to $2,104,314 for the same period in 1996, a decrease of
     $1,782,198 from the previous year.  The lack of customer confidence in some
     of the products, mainly Fudgets and Caketts, is reflected in the decline in
     sales of those products from $1,342,334 for the three months ended
     September 30, 1996 to $151,989 for the same period in 1997.  Additionally,
     the cash flow constraints imposed upon the Company during the first part of
     1997 has contributed to the reduction of sales for the nine month periods
     from $4,408,665 in 1996 to $1,497,223 in 1997, a decrease of  $2,911,442.
     The Toast'N Jammers brand of low fat toaster pastries continues to
     represent almost one-half of the total net sales for the three months ended
     September 30, 1997 and over one-third for the nine month period ended
     September 30, 1997.

Gross Profit:

     Gross profit increased from 9.1% of net sales for the three months ended
     September 30, 1996 to 39.1% for the same three-month period in 1997.
     Absolute dollar amounts, however, declined from $191,580 to $125,890 for
     the three-month periods ending September 30, 1996 and 1997 respectively.
     The overall increase in the Company's gross profit margin reflects the
     continued effort to maintain overall profit targets without major discounts
     and allowances.  For the nine months ended September 30, 1996 the gross
     profit margin was $420,537 or 9.5% of net sales compared to $418,369 or
     27.9% for the same period ended September 30, 1997.  This increase in gross
     margin as a percent of net sales continues to reflect the Company's effort
     toward improving this area.

Operating Expenses:

     Overall expenses have been reduced due to the cost control procedures
     implemented by the Company.  In addition, the reimbursement of $767,000 in
     this quarter of legal fees and costs associated with the Keebler
     arbitration award is reflected in the reduction in general and
     administrative expenses.  The reduction in both product development and
     sales and marketing expenses reflects the effort by the Company in these
     areas to increase

                                       15
<PAGE>
 
          ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AS RESULTS OF OPERATIONS

                                  (Unaudited)


     performance without significant expenditures of resources.  The reduction
     in general and administrative expenses would have been greater had the
     final legal fees and associated costs relating to the Keebler arbitration
     not been included.  Since the award, the Company is beginning to both
     refocus its efforts in the product development area to introduce new
     products and in the sales and marketing area as it reestablishes its
     customer, broker, and support organizations.
     
Product Development (Research and Development):      

     During 1997, the Company has been forced to substantially reduce its
     expenditures in this area due to the financial constraints in the first
     half of the year.  This has resulted in a drop in expenditures of $514,121
     for the nine months ended September 30, 1997 compared to the same period of
     1996.  The drop in expenses are primarily in salaries, travel, and
     laboratory research and development where the expenses in 1996 were
     $137,665 for the three months ended September 30, 1996 compared to $0 for
     the same period in 1997.  This was partially offset, however, by the
     increase in consulting expenses during the three month period in 1997 which
     were $57,925 more than the same period of 1996.  As a result of the
     Keebler award, the Company is again starting to apply resources to this
     area both to improve or modify existing products and to introduce new
     products during the end of 1997 and 1998 and 1999.  However, in keeping
     with its new strategies, it will seek to utilize co-packers and their
     resources to improve and develop products so that the Company's costs may
     be minimized.

Sales and Marketing:
         
     The Company's expense levels in these disciplines continues to be reduced
     as a result of both lower net sales volume and concerted effort by
     management to continue to eliminate expenses where appropriate.  For the
     nine months ended September 30, 1997 expenses were $996,242 compared to
     $1,690,024 for the same nine month period in 1996, a decrease of $693,782
     from 1997 to 1996.  The majority of these cost reductions are in salaries,
     consultants and travel, $361,500; freight of $59,335; sales promotions,
     $242,708; commissions and royalties of $101,020; and postage and
     communication costs of $52,463.  These reductions were offset by the
     increase in product introduction cost of $197,008.  For the three month
     period ended September 30, 1997, the total sales and marketing expenses
     were $257,016 compared to $580,798 for the same period of 1996, a decrease
     of $323,782.  The reduction was primarily in the areas directly related to
     volume of net sales, such as commissions and royalties, freight out, sales
     promotions, and travel.  The Company is beginning to reenter the
     distribution network by reestablishing relationships with existing
     customers, adding new brokers and customers as appropriate, and starting
     the process of improving its customer relations with all customers.      

                                       16
<PAGE>
 
          ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AS RESULTS OF OPERATIONS

                                  (Unaudited)


General and Administrative:
         
     For the nine months ended September 30, 1997, expenses were $1,894,114
     compared to $1,603,775 for the nine months ended September 30, 1996, an
     increase of $290,339.  The majority of the increase in expenses are in the
     professional services area, particularly legal expenses totaling $1,055,608
     less the Keebler arbitration reimbursement of $767,000.  The professional
     services increase is almost directly related to the litigation defenses of
     the Company, primarily for the Keebler arbitration.  For the three months
     ended September 30, 1997 general and administrative expenses were $770,227
     before the award of $767,000 which resulted in a balance of $3,227
     compared to $573,929 for the three month period ended September 30, 1996.
     The increases in 1997 over 1996 of $192,298 are in the areas of
     amortization and depreciation of $30,564; an increase in bad debts of 
     $45,000 from an employee due to the filing of personal bankruptcy; and the
     increase in insurance cost of $65,666.      

Other income (expense) including interest and litigation recovery, net of
expenses:

     Interest expense reflects the continuing cost of the line of credit with
     Coast Business Credit, the primary lender.  Upon receipt of the Keebler
     arbitration, the Company immediately invested the proceeds in short-term
     government securities, with the approval of the Board of Directors.  The
     interest income for the three months ended September 30, 1997 reflects the
     receipts from these short-term investments.
         
     Upon the Keebler arbitration award, the Company has recorded the $5,983,000
     as income under the heading "litigation recovery, net of costs."  In
     addition, the Company was able to cancel outstanding debt in the amount of
     $140,829 due to the Keebler Company and incurred and paid $1,236,882 to
     ATCOLP INVESTMENT PARTNERS under the existing agreement with them for the
     advancement of certain funds to pay the litigation expenses.      
 
Liquidity and Capital Resources:
<TABLE>    
<CAPTION>
                                                    Nine Months Ended
                                                      September 30,
                                                   1997           1996
                                               ----------     ------------
<S>                                            <C>            <C>
Net Cash Generated (Used) for Operations       $1,413,139     $(5,502, 020)
Net Cash Used for Investing Activities             (6,912)        (405,648)
Net Cash Provided by Financing Activities       2,002,849        5,775,583
Working Capital (Deficit)                       3,480,039         (875,965)

</TABLE>      

                                       17
<PAGE>
 
          ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AS RESULTS OF OPERATIONS

                                  (Unaudited)

         
     The Keebler award has eliminated the short-term cash requirements of the
     Company and has allowed the Company the time to begin increasing its
     efforts in the areas of product development and sales and marketing.  In
     addition, the Company has negotiated long term payment schedules with
     certain of its old vendors, which will allow it to further conserve cash.
     Although the cash position has improved, the long-term financial viability
     still remains in doubt due to the lack of customer acceptance of the
     Fudgets and Caketts and the loss of distribution and shelf space due to the
     past inability to ship product in a timely manner.  While the Company is
     now able to ship product timely, the rebuilding of the customer
     relationship and the continuing effort in the product development function
     will continue to adversely impact the Company's liquidity in the near term.
          
                                       18
<PAGE>
 
                          PART II - OTHER INFORMATION

                           ITEM 1.  LEGAL PROCEEDINGS
    
In December 1994, Lloyd Gaunt, who invested an aggregate of $75,000 in certain
of the Company's private placements, initiated an action in Superior Court,
Orange County, California against his stockbroker, two national brokerage firms,
several companies in which he had invested; and, certain of those company's
officers.  Included among the defendants were the Company and its then Chief
Executive Officer.  The complaint seeks damages in an unspecified amount in
excess of $500,000 and punitive damages in an unspecified amount in excess of
$5,000,000.  The Court has dismissed the class action claims as to the Company
and granted a motion that the claims against the brokerage firms and associated
persons must be submitted to arbitration.  The Plaintiff has appealed that
ruling.  The Company denies any liability to the plaintiff and intends to
vigorously defend this action.  The Company notes that the plaintiff sold a
portion of the securities he purchased from the Company, realizing a profit;
that the balance of the securities became salable under Rule 144; and that, if
sold, the Plaintiff could recoup his entire investment on his $75,000
investment.      

In connection with the acquisition of assets of Auburn Farms, Inc., (AFI) under
the FPA, the Company acquired certain rights of AFI against its co-packer and
against Barbara's Bakery.  The Company is pursuing these rights, and in May
1996, initiated an action alleging Lanham Act violations, misappropriation of
trade secrets, unfair competition and related claims.  The defendants have filed
counterclaims against the Company and Auburn Farms alleging various tort and
contract claims.  Counsel for Vitafort is reviewing the case to determine the
best course of action to continue forward.
    
On October 9, 1996, a complaint was filed in Superior Court, the County of Los
Angeles, in an action entitled "Eloy Louis Ellis vs. Vitafort, Inc., a Delaware
Corporation; Mark Beychok and Does 1-50 inclusive."  The complaint alleges
Breach of Oral Contract, Breach of Written Contract, and other similar claims
arising out of the consulting relationship that previously existed between the
Company and Mr. Ellis.  The Complaint seeks damages in an unspecified amount.
The court has sustained, without leave to amend, a demurrer to the claims
against Mark Beychok and sustained the demur, with leave to amend, against the
Company.  Mr. Ellis has filed an amended complaint against the Company.  The
Company is in the process of document discovery and is defending the action
vigorously.      


         ITEM 4.  SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the quarters ended September 30, 1997, the Company obtained written
consent of the holders of a majority of its issued and outstanding common
shares, which the Company has the authority to issue, from 9,000,000 shares to
30,000,000 shares.  The holders of 3,218,102 common shares gave their consent to
the proposal; the holders of 182,761 common shares did not consent; and the
holders of 20,655 common shares abstained from voting based on the written
consents received by the Company's transfer agent through July 7, 1997.

                                       19
<PAGE>
 
                   ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)       Exhibits.    None

(b)       Reports on Form 8-K.
                       Report on Form 8-K dated June 19, 1997, reporting the
                       interim award in the Keebler Arbitration as an "Item 5.
                       Other Event."

                                       20
<PAGE>
 
                       VITAFORT INTERNATIONAL CORPORATION

                                   SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.



                       VITAFORT INTERNATIONAL CORPORATION
                       ----------------------------------
                                   (Company)



                              /s/ Mark Beychok
                            -----------------------
                                  Mark Beychok
                            Chief Executive Officer


                              /s/ Jack B. Spencer
                            -----------------------
                                Jack B. Spencer
                            Chief Operating Officer
                            Chief Financial Officer


                                
                            Date:   January 16, 1998      

                                       21