<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                  FORM 10-QSB


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

                   For the quarterly period ended June 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 August 15, 1997 is 6,285,427.

                                       1
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION



                                   CONTENTS


                        PART I - FINANCIAL INFORMATION
______________________________________________________________________________
<TABLE>
<S>            <C>                                                        <C>
ITEM 1.        Consolidated Financial Statements:
 
               Balance Sheets - June 30, 1997 and 
               December 31, 1996........................................  3
 
               Statements of Operations --
               Three Month Periods Ended June 30, 1997 and 1996 and
               Six Month Periods Ended June 30, 1997 and 1996...........  5
 
               Statement of Stockholders' Deficit --
               Six Month Period Ended June 30, 1997.....................  6
 
               Statements of Cash Flows --
               Six Month Periods Ended June 30, 1997 and 1996...........  7
 
               Notes to the Financial Statements........................  8
 
ITEM 2.        Management's Discussion and Analysis of Financial 
               Condition and Results of Operations...................... 14

 
                         PART II -- OTHER INFORMATION
______________________________________________________________________________
 
ITEM 1.        Legal Proceedings........................................ 19
 
ITEM 4.        Submission of Matters of a Vote of  Security Holders..... 20
 
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>
                                                                      June 30     December 31
                                                                       1997          1996
                                                                    ----------    -----------
                                                                    (unaudited)  
<S>                                                                <C>            <C>

Current Assets:

     Cash                                                           $  232,663    $  188,867
     Accounts receivable-trade, net of allowance for doubtful
      accounts of $67,743 at June 30, 1997 and
      $79,994 at December 31, 1996                                     384,629       430,789
     Notes receivables                                                  55,000        56,000
     Other receivables                                                  11,367         4,464
     Inventory, net                                                    240,744       361,196
     Prepaid expenses and other assets                                 210,963       271,731
                                                                    ----------    ----------

                      Total Current Assets                           1,135,366     1,313,047
 
Fixed Assets:
     Manufacturing equipment                                           290,912       290,912
     Furniture and office equipment                                    105,538       105,160
     Computer equipment                                                173,294       173,294
                                                                    ----------    ----------
                      Total Fixed Assets                               569,744       569,366
     Less accumulated depreciation and amortization                   (288,528)     (231,592)
                                                                    ----------    ----------
                      Net Fixed Assets                                 281,216       337,774
 
Other Assets:
     Intangible and other assets                                       411,254       481,254
     Less accumulated amortization                                     (51,763)      (95,561)
                                                                    ----------    ----------
                      Net Other Assets                                 359,491       385,693
                                                                    ==========    ==========

                      Total Assets                                  $1,776,073    $2,036,514
                                                                    ==========    ==========
 </TABLE>
       See accompanying notes to the consolidated financial statements.

                                       3
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                          CONSOLIDATED BALANCE SHEETS

                                  LIABILITIES
                                  -----------
<TABLE>
<CAPTION>
                                                                 June 30       December 31
                                                                  1997            1996
                                                               -----------     -----------
                                                               (unaudited)
<S>                                                          <C>             <C> 
Liabilities and Stockholders' Equity
 
Current Liabilities:
     Notes payable                                           $    624,839    $    440,022
     Accounts payable - trade                                   1,533,352         921,919
     Accrued expenses                                             660,276         789,212
     Other current liabilities                                     37,859          37,859
                                                             ------------    ------------
                      Total Current Liabilities                 2,856,326       2,189,012
 

Stockholders' Deficit:
     Series A, 6% Cumulative Convertible Preferred Stock
       $0.01 par value, cumulative, 750 shares authorized,
       750 shares issued and outstanding at June 30, 1997
       and none at December 31, 1996                                    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 June 30, 1997 and December 31, 1996; aggregate 
       liquidation preference of $50,000 at June 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 June 30, 1997 and December 31,
       1996; aggregate liquidation preference of 
       $1 at June 30, 1997 and December 31, 1996                        1               1
     Subscribed Common stock, 76,906 shares at June 30,
       1997 and 303,406 shares at December 31, 1996                76,905         341,331
     Common stock, $.0001 par value.  Authorized
       9,000,000 shares at June 30, 1997 and 9,000,000 at
       December 31, 1996, issued and outstanding
       and 5,957,053 shares at June 30, 1997 and
       4,830,259 at December 31, 1996, respectively.                9,006           8,886
     Additional paid-in capital                                22,354,495      20,547,753
     Accumulated deficit                                      (23,520,678)    (21,050,479)
                                                             ------------    ------------
                      Total Stockholders' Deficit              (1,080,253)       (152,498)
                                                             ============    ============
                      Total Liabilities and 
                        Stockholders'  Deficit               $  1,776,073    $  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                 Six Months Ended
                                                                            June 30,                         June 30,
                                                                -------------------------------     ---------------------------
                                                                   1997                 1996            1997            1996
                                                                          (unaudited)                       (unaudited)

<S>                                                             <C>                 <C>             <C>             <C>
Net sales                                                       $   402,788         $ 1,463,356     $ 1,175,107     $ 2,304,351
Cost of sales                                                       334,340           1,367,082         882,628       2,075,394
                                                                -----------         -----------     -----------     -----------
Gross profit                                                         68,448              96,274         292,479         228,957
 
Operating expenses:
         Product development                                         16,781             288,334          56,131         446,328
         Marketing                                                  359,430             559,468         739,226       1,109,226
         General and administrative                               1,304,656             707,165       1,890,887       1,029,846
                                                                -----------         -----------     -----------     -----------
 
             Total operating expenses                             1,680,867           1,554,967       2,686,244       2,585,400
                                                                -----------         -----------     -----------     ----------- 
Operating loss                                                   (1,612,419)         (1,458,693)     (2,393,765)     (2,356,443)
Other income (expense)                                               16,191             ( 8,059)         23,119           9,035
Interest expense                                                    (58,942)             (3,718)        (99,553)         (9,270)
                                                                -----------         -----------     -----------     -----------
 
             Loss before provision for income taxes              (1,655,170)         (1,470,470)     (2,470,199)     (2,356,678)
Provision for income taxes                                                0                 600               0           2,054
                                                                -----------         -----------     -----------     -----------
 
              Net loss                                          $(1,655,170)        $(1,471,070)    $(2,470,199)    $(2,358,732)
                                                                ===========         ===========     ===========     ===========

              Net loss per share                                $     (0.29)        $     (0.34)    $     (0.46)    $     (0.57)
                                                                ===========         ===========     ===========     =========== 
              Weighted Average Shares
                of Common Stock Outstanding                       5,731,586           4,363,555       5,390,957       4,153,563
                                                                ===========         ===========     ===========     ===========
</TABLE>
       See accompanying notes to the consolidated financial statements.

                                       5
<PAGE>
 
              VITAFORT INTERNATIONAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

                        SIX MONTHS ENDED JUNE 30, 1997

<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      $   341,331

Common stock subscribed in private
  placement, net of commissions                                                                     450,000
Common  stock - consulting                                                                         (264,426)
Exercise of stock options                                                                           183,100
Common stock issued as settlement
  of contract dispute
Common stock - consulting
Net loss
                                             -----------      -----------      -----------      -----------
Balance, March 31, 1997                      $        -       $        10      $         1      $   710,005
                                             ===========      ===========      ===========      ===========

Common stock issued in connection
  with private placement, net of
  commissions and offerings                                                                        (450,000)
Exercise of stock options                                                                          (183,100)
Exercise of stock options                                                                           
Common stock - consulting                                                                           
Series A Preferred issued in connection
  with private placement, net of
  commissions and offerings                            8
Net loss
                                             -----------      -----------      -----------      -----------
Balance, June 30, 1997                       $         8      $        10      $         1      $    76,905
                                             ===========      ===========      ===========      ===========

<CAPTION> 
                                                    Common Stock               Additional
                                             ----------------------------        Paid In        Accumulated
                                                Shares           Amount          Capital           Deficit            Total
                                             -----------      -----------      -----------      ------------       -----------
<S>                                           <C>             <C>              <C>              <C> 
Balance, January 1, 1997                      4,830,259       $     8,886      $20,547,753      $(21,050,479)      $  (152,498)

Common stock subscribed in private
  placement, net of commissions                                                                                        450,000
Common  stock - consulting                      235,000                23          226,477                             (37,926)
Exercise of stock options                                                                                              183,100
Common stock issued as settlement
  of contract dispute                            70,000                 7           78,743                              78,750
Common stock - consulting                        20,000                 2           22,498                              22,500
Net loss                                                                                            (815,029)         (815,029)
                                              ---------       -----------      -----------      ------------       -----------
Balance, March 31, 1997                       5,155,259       $     8,918      $20,875,471      $(21,865,508)      $  (271,103)
                                              =========       ===========      ===========      ============       ===========

Common stock issued in connection
  with private placement, net of
  commissions and offerings                     500,000                50          449,950                                  -
Exercise of stock options                       183,100                18          183,082                                  -
Exercise of stock options                       185,600                19          162,381                             162,400
Common stock - consulting                        10,000                 1           10,619                              10,620
Series A Preferred issued in connection
  with private placement, net of
  commissions and offerings                                                        672,992                             673,000
Net loss                                                                                         (1,655,170)        (1,655,170)
                                              ---------       -----------      -----------      ------------       -----------
Balance, June 30, 1997                        6,033,959       $     9,006      $22,354,495      $(23,520,678)      $(1,080,253)
                                              =========       ===========      ===========      ============       ===========
</TABLE> 

                                       6
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                            Six Months Ended
                                                                                June  30,
                                                                     -------------------------------
                                                                          1997              1996
                                                                               (unaudited)
<S>                                                                  <C>                 <C>
Increase (Decrease) In Cash:                                      
 
Cash flows from operations:
   Net loss                                                          $(2,470,199)        $(2,358,732)
   Adjustments to reconcile net income to net cash used in
     operating activities:
     Depreciation and amortization                                        83,138              63,044
   (Increase) decrease in:
     Inventory                                                           120,452          (1,341,656)
     Accounts receivable                                                  46,160            (882,958)
     Prepaids and other assets                                            54,865            (442,479)
   Increase (decrease) in:
     Accounts payable                                                    611,433             818,918
     Accrued expenses                                                   (128,936)             27,961
                                                                     -----------         ----------- 
             Net cash used in operating activities                    (1,683,087)         (4,115,902)
                                                                     -----------         ----------- 
Cash flows from investing activities:
   Purchase of short-term investment                                           0            (291,000)
   Purchase of property and equipment                                       (378)           (180,229)
                                                                     -----------         ----------- 
             Net cash used in investing activities                          (378)           (471,229)
                                                                     -----------         ----------- 
Cash flows from financing activities:
   Proceeds from issuance of common and preferred stock, net           1,542,444           4,871,616
   Proceeds from (repayment of) notes payable, short-term                300,000             (47,457)
   Repayment of note payable - bank                                     (115,183)                  0
   Prepayment of long-term debt                                                0            (147,458)
                                                                     -----------         ----------- 
             Net cash provided by financing activities                 1,727,261           4,676,701
                                                                     -----------         ----------- 
             Net increase in cash                                         43,796              89,570
                                                                     -----------         -----------  
             Cash at beginning of period                                 188,867           1,316,406
                                                                     -----------         -----------  
             Cash at end of period                                   $   232,663         $ 1,405,976
                                                                     ===========         ===========

Supplemental disclosures of cash flow information:
   Cash paid during the period for interest                          $    45,000         $     8,061
                                                                     ===========         =========== 

Supplemental disclosures of non-cashing investing and financing
activities:
   Issuance of common stock for:
     Payment for services and equipment                              $   683,870         $   550,708
                                                                     ===========         ===========
</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 included in the Company's Annual Report on 
     Form 10-KSB.

     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 inter-company
         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.

     (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 or less years.

     (e) Intangible assets are composed of debt issuance costs, customer lists,
         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.

     (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.

                                       8
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

(4)  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.

(5)  Prepaid Expenses and Other Assets:

     Prepaid expenses and other current assets as of June 30, 1997 and 
     December 31, 1996 consist of the following:
    <TABLE>
    <CAPTION>
                                                         June 30,     December 31,
                                                           1997          1996
                                                         --------     -----------
     <S>                                                 <C>          <C>
     Deposits                                            $  1,600       $ 10,000
     Trade promotion expenses                              42,180        177,865
     Insurance                                             80,382         14,897
     Consulting (Current Portion)                          55,933            -0-
     Other prepaids                                        30,868         68,969
                                                         --------       --------
     Total Prepaid and Other Current Assets              $210,963       $271,731
                                                         ========       ========
     </TABLE> 

(6)  Accrued Expenses
 
     Accrued expenses and other current liabilities as of June 30, 1997 and 
     December 31, 1996 are detailed as follows:

     <TABLE> 
     <CAPTION> 
                                                         June 30,     December 31,
                                                           1997          1996
                                                         --------     -----------
     <S>                                                 <C>          <C>
     Accrued Compensation                                $ 49,303       $ 65,570
     Accrued Insurance                                     68,426              0
     Accrued Interest Payable                              12,857            436
     Accrued Legal Fees                                         0         70,811
     Accrued Consulting Fees                                    0         22,500
     Accrued Commissions                                   90,133            -0-
     Accrued Advertising/Promotion                        243,713        407,359
     Other Accrued Expenses                               195,844        222,536
                                                         --------       --------
                                                         $660,276       $789,212
                                                         ========       ========
     </TABLE>
(7)  Notes Payable - Bank:

     The Company was in default with respect to certain financial covenants
     under the terms of its agreement with the secured lender. Discussions are
     ongoing with respect to curing the defaults. For financial statement
     purposes, the entire amount is classified as a current liability.

                                       9
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

(8)  Other current liabilities:

<TABLE> 
<CAPTION> 
                                                     Current       Long-Term    Total
                                                     -------       ---------   --------
<S>                                                  <C>           <C>         <C>
     14% note payable to shareholders, due in
     monthly installments of $4,033, including
     interest, through October 1997 secured by
     certain of the Company's fixed assets           $37,859         $ -0-     $ 37,859
                                                     =======         =====     ========
</TABLE> 
(9)  Stockholders' Equity:

     During the six-month period ended June 30, 1997, the following common stock
     transactions occurred:

     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.

     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
         June 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 Preferred 1997 Series A stock. The
         preferred stock has a cumulative dividend rate of 6% (six percent) with
         no voting rights. The conversion price is the lower of $1.25 per share
         or a 30% (thirty percent) discount to the market price at the time of
         conversion. The preferred stock is convertible at any time. The
         facilitator received a 10% (ten percent) 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 Series "A" Preferred Stock. The series
         has a cumulative dividend rate of 6% (six percent), no voting rights,
         and is convertible at any time at the lower of $1.25 or a 30%

                                       10
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

         (thirty percent) discount to the market price at the time of
         conversion. The facilitator received a 10% (ten percent) 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 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.

(10) Going Concern:

     The Company has prepared the financial statements included herewith
     assuming that the Company will continue as a going concern. At June 30,
     1997 total current liabilities exceeded current assets by $1,720,960 and
     the Company had a negative net worth of $1,080,253. The Company received
     $6,750,000 as proceeds from the Keebler arbitration but the Company must
     realize a satisfactory level of profitability from its current and future
     operations in order to remain a viable entity. The accompanying
     consolidated financial statements do not include any adjustments that might
     result from the outcome of any uncertainty.

(11) Reverse Stock Split:

     Pursuant to a Board of Directors' resolution, the Company effected a 1 for
     20 reverse common stock split for common shareholders of record as of
     October 4, 1996. The prior year earnings per share and common shares
     outstanding have been restated to reflect the reverse split.

(12) Stock-based Compensation:

     Effective January 1, 1996, the Company adopted Statement of Financial
     Standards No. 123, "Accounting for Stock-based Compensation" (FAS 123),
     which was issued in October 1995. This statement encourages, but does not
     require, a fair value based method of accounting for employee stock options
     or similar equity instruments. FAS 123 allows an entity to elect to
     continue to measure compensation cost under Accounting Principles Board
     Opinion No. 25, "Accounting for Stock Issued to Employees" (APBO No. 25),
     but requires pro forma disclosures of net earnings and earnings per share
     as if the fair value based method of accounting had been applied. The
     Company has elected to continue to measure compensation cost under APBO No.
     25, "Accounting for Stock Issued to Employees," and will comply with the
     pro forma disclosure requirements in its December 31, 1996 Annual Report on
     Form 10-KSB. The adoption of FAS 123 had no impact on the Company's
     financial position or results of operations.

(13) Impairment of Long-lived Assets:

     Effective January 1, 1996, the Company adopted Statement of Financial
     Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of
     Long-lived Assets and for Long-lived Assets to Be Disposed Of," which was
     issued in March 1995. This statement establishes accounting standards for
     the recognition and measurement of impairment of long-lived assets, certain
     identifiable intangibles and goodwill either to be held or disposed of. The
     adoption of

                                       11
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

      FAS 121 did not have a material impact on the Company's financial position
      or results of operations.

(14)  Legal Proceedings

      On November 1, 1995, Keebler Company (Keebler) and the Company entered
      into a co-packer agreement (the Agreement) to manufacture Caketts. In
      1996, the Company suffered losses and terminations of business
      relationships by a number of the Company's distributors, retailers and
      brokers due to mold in the Caketts product. In August 1996, Keebler gave
      the Company thirty (30) days notice of termination of the Agreement
      between the parties, and indicated that it had discontinued further
      production of the Company's product. The Agreement between Keebler and the
      Company provides for the binding arbitration of disputes. On August 15,
      1996, the Company filed a demand for arbitration seeking compensatory
      damages, which was heard during May 1997. The Company sought damages in
      excess of $5,000,000. In defending the arbitration proceeding, Keebler had
      alleged that Vitafort was responsible for the quality control problems and
      failed to comply with certain labeling requirements. Keebler had filed a
      counterclaim against the Company for breach of contract which alleges
      damages in excess of $300,000. The Company believed that Keebler breached
      the agreement by failing to meet its warranties to Vitafort to manufacture
      the products in an acceptable process manner, improperly terminating the
      agreement; and, made intentional misrepresentations regarding the cause of
      the mold problems. In June 1997, the Arbitrator awarded the Company
      $5,983,000 in damages plus expenses and costs associated with this
      arbitration. In July 1997, the Company received $6,750,000 in full and
      final settlement of the above action.

      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 and realize a
      profit on his $75,000 investment.

      In February 1996, Cottage Bakery, Inc., a former co-packer of Fudgets,
      initiated a lawsuit against the Company in Superior Court, San Joaquin
      County, California. The Complaint alleges breach of contract and fraud
      against the Company and seeks damages in an unspecified amount in excess
      of $150,000. The Company disputes this liability and filed a cross
      complaint against Cottage Bakery. The parties have executed a settlement
      agreement, which does not subject the Company to any material liability.

                                       12
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

      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. The litigation is in the
      early stages and the Company intends to vigorously pursue the same.

      Michel's Bakery, Inc., a former co-packer of Fudgets, initiated an action
      in state court in Philadelphia, Pennsylvania, seeking damages in excess of
      $140,000 under various contract and tort theories. In November 1996, the
      Company removed this action to the Federal District Court for the Eastern
      District of Pennsylvania. The Company has filed a counterclaim alleging
      breach of contract and other claims relating to the product manufactured
      by Michel's. The parties have agreed to discuss a settlement, which if
      completed, would be favorable to the Company. If, however, the matter is
      not resolved through mediation, the Company intends to vigorously
      prosecute this lawsuit.

      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 recently filed an amended
      complaint against the Company. The litigation is in its early stages and
      the Company will vigorously defend the action.

(15)  Subsequent Events

      In June, 1997 the Company was awarded a preliminary ruling by the
      arbitrator in the Keebler arbitration. This ruling provided for damages to
      be awarded to the Company in the amount of $5,983,000 plus legal fees and
      costs. The fees and costs expenses in the three month period ended June
      30, 1997 related to this arbitration were $667,166. In addition, the award
      found that the Company was not required to pay Keebler or any of its
      operating units the amount of unpaid invoices currently reflected by the
      Company on its financial statements. On July 15, 1997, the two parties
      reached an agreement and Keebler wired $6,750,000 to the Company in full
      and final settlement of the award. After payment of legal fees and costs,
      and the payment to ATCOLP INVESTMENT PARTNERS, the Company should have
      approximately $4,500,000 with which to meet past obligations, fund future
      new products and support the sales programs for existing products. In
      addition, the Company may use some portion of the proceeds in a potential
      merger and/or acquisition should it locate an organization, which the
      Company believes will fit with its long-term plans.

                                       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 AND EXCHANGE COMMISSION FILINGS.

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

Results of Operations:

     The Company's liquidity problem continued to erode its ability to maintain
     adequate inventory levels to swiftly complete shipping orders to customers
     orders without shortages and in a timely manner. In addition, the mold
     problem associated with the product produced by Keebler continues to
     interfere with the operation of the Company's ongoing business and results
     in product returns.

     The preparation for the Keebler arbitration and the associated human
     resources and cost were incurred substantially in this quarter and the
     application of resources to this effort negatively impacted sales. Such
     effort was also incurred during the six to nine months previous to this
     quarter. The arbitrator announced an award in June 1997 of $5,983,000 for
     damages plus legal costs and fees. See Subsequent Events for more
     information concerning this award.


Net Sales:

     For the three months ended June 30, 1997, net sales were $402,788 compared
     to $1,463,356 for the three-month period ended June 30, 1996, a decrease of
     $1,060,568 from the previous year. The customer reaction to the mold issue
     manifests itself in the sales mix. In the three months ended June 30, 1997,
     Auburn Farms/Natures Warehouse brands represented approximately 71% of
     total sales for the quarter compared to approximately 18% of net sales in
     the three months ended June 30, 1996. The Toast'N Jammers brand of low fat
     toaster pastries continues to increase in both volume and margin and
     represented approximately one-half of the Company's sales volume in the
     three months ended June 30, 1997.

Gross Profit:

     Gross profit increase from 6.6% for the three months ended June 30, 1996 to
     17.0% for the same three month period in 1997, however the absolute dollars
     declined from $96,275 to $68,448. The continued improvement in margin is a
     result of the Company's focus of improving production efficiency and
     reducing manufacturing overhead expenses whenever possible.

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

                                  (Unaudited)

Operating Expenses:

     Product Development: The Company continues its shift of product development
     from an independent unit within the Company to a working relationship with
     a co-packer to be involved in the ultimate manufacture of the new product.
     The reduction in product development costs from $288,344 for the three
     months ended June 30, 1996 to $16,781 for the same period in 1997 reflects
     the savings. The other most significant factor in reducing expenses was the
     lack of a significant production problem, which had been partially
     responsible for the expense increase in the 1996 three-month period ended
     June 30 1996 compared to earlier periods.

     Sales & Marketing:  The expenses in this area declined from $559,468 in the
     three months ended June 30, 1996 to $359,430 for the same period in 1997, a
     reduction of $200,038 or approximately 35.7%. The reduction reflects the
     Company's liquidity problems which resulted in a reduced marketing effort.

     General & Administrative:  The Company continued to incur increased
     administrative costs due to the Keebler arbitration and other litigation
     matters. In addition, the Company incurred the legal and other professional
     expenses related to the 10-KSB filing and other securities issues. For the
     three months ended June 30, 1997, the expenses of the Company in the
     general & administrative area were $1,304,656 compared to $707,165 for the
     same three month period in 1996, a increase of $597,491. Legal and other
     professional service costs for the three months ended June 30, 1997 were
     approximately $1,036,000 compared to $140,800 for the identical period in
     1996, an increase of $895,200. The Keebler award and subsequent settlement,
     which provided for the recovery of legal fees and costs associated with the
     arbitration, is estimated to provide for the payment to the Company of
     $767,000 of the costs incurred in this three-month period. The remainder of
     the expenses represents the ongoing costs of public reporting and continued
     legal and consulting services. See Note (15) Subsequent Events of the notes
     to financial statements for further explanation of the Keebler award.

Other income (expense) including interest:

     The increase in interest expense is due primarily to the secured lender.
     Under the terms of the Loan and Security Agreement, the interest charges
     are now at a minimum level of $15,000 per month. In addition, there were
     other short-term loans made during the period, which carried nominal
     interest rates.

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

                                  (Unaudited)

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

Results of Operations:

     While the liquidity problems and the customer response to the product mold
     hampers the Company's ability to move forward aggressively, it is still
     moving forward by increasing its gross profit margins and developing new
     products while it attempts to improve communication with its customers and
     vendors to prepare them for the Company's anticipated efforts for the
     remainder of the year. Overall operating costs were reduced, except that
     legal fees for litigation, particularly related to the Keebler arbitration,
     continue to be heavy.

Net Sales:

     Net sales for the six months ended June 30, 1997 were $1,175,107 compared
     to $2,304,351 for the same period in 1996, a decline of $1,129,244. This
     decline is due primarily to the continued resistance of customers to the
     same products introduced last year, which now have a reputation within the
     customer base that they will become moldy. While the Company has selected a
     new co-packer and does not believe that the problems of last year will
     reoccur, there is continued resistance by customers. The Company believes
     that new products and/or repackaging and renaming of old products is the
     only solution to overcoming this resistance.

Gross Profit:

     The Gross profit margin for the six-month period ended June 30, 1997 was
     24.9% compared to 9.9% for the same period last year. The Company believes
     it is making progress in reducing manufacturing overhead expenses while at
     the same time assisting the co-packer with improvements in the
     manufacturing process, resulting in lower cost for the co-packer and thus
     for the Company. This process continues as the Company looks for strategic
     partners as co-packers who can provide both product development capability
     and manufacturing knowledge thereby providing a good tasting, extended life
     product at a reasonable cost.

Operating Expenses:

     Overall operating expenses increased by $100,844 for the six months ended
     June 30, 1997 compared to the same period in 1996. Continued litigation and
     other professional service costs increased from $212,867 for the six months
     ended June 30, 1997 to $1,347,486 for the same period in 1997. Total other
     operating expenses declined from $2,372,533 for the six months ended June
     30, 1996 to $1,338,758 for same period in 1997, a reduction of $1,033,775.

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

                                  (Unaudited)

     Product Development: The Company has significantly reduced its product
     development expenditures for the first six months of 1997 as a result of
     the liquidity problems which forced delays in the development of some of
     its new product programs, and the change in strategy which is now to become
     a partner with the co-packer that will ultimately manufacture the products.
     In addition, the mold problem which was the cause of the Keebler
     arbitration began to manifest itself in customer complaints in the end of
     the second quarter (June, 1996), which resulted in increased cost impact in
     both product development and sales and marketing areas during the past
     twelve months.

     Sales and Marketing:  The decline in expenses is primarily due to the
     decline in overall net sales, and the decision to monitor the sales
     promotion expenses to insure adequate margins and customer cooperation in
     moving forward with new products. In addition, the Company decided not to
     participate in the trade shows so far this year due primarily to the
     illiquid position of the Company. Expenses for the six months ended June
     30, 1997 were $739,226 compared to $1,109,226 for the same period in 1996,
     a reduction of $370,000. Samples, trade shows and sales promotions were
     reduced by approximately $260,000 from the six months ended June 30, 1996
     to the same period of 1997. Additionally, travel and related expenses were
     likewise reduced by approximately $127,000 during the comparable period.
     Such reductions reflect the Company's attempt to reduce overall
     expenditures, the focus on improving margins by preparing communication to
     the customers first, and the past liquidity constraints.

     General and Administrative: The Company increased the general and
     administrative expenses for the six months ended June 30, 1997 by $861,041
     over the same six month period in 1996. This increase is primarily due to
     the litigation expenses, especially with respect to the Keebler
     arbitration, where the increase was over $800,000 from the six months ended
     June 30, 1996 compared to the six months ended June 30, 1997. In addition,
     the increase in other professional services is the result of the increased
     financing activities and the services rendered in assisting the Company in
     the formulation of its litigation strategy against Keebler.

Interest Expense:

     The increase in interest expense is due to the new financing Agreement with
     the secured lender that was signed in August, 1996. This Agreement calls
     for increasing base interest charges to a minimum of $15,000 per month. The
     six months ended June 30, 1997 reflect this minimum interest fee.
 
Liquidity and Capital Resources:
<TABLE>
<CAPTION>
                                                         Six Months Ended
                                                             June 30,
                                                        1997           1996
                                                    -----------    -----------
<S>                                                 <C>            <C> 
     Net Cash Used for Operations                   $(1,683,087)   $(3,923,282)
     Net Cash Used for Investing Activities                (378)      (471,229)
     Net Cash Provided by Financing Activities        1,727,261      4,484,081
     Working Capital (Deficit)                       (1,720,960)     3,503,281
</TABLE>

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

                                  (Unaudited)

Trends:

     The Company has continued to attempt to conserve cash by using capital
     exchanges to assist it in relieving the liquidity pressure it constantly
     faces. While the Keebler award has removed the near term threat that the
     Company might drastically reduce or operations, it has not provided
     sufficient capital to meet what Management believes are the long term
     capital requirements of the business on a going forward basis.

     The Company is in the planning stages for some new products and
     enhancements to existing products, so now that the liquidity limitation has
     now been relieved, the Company can now progress forward within its business
     plan. The ongoing search for co-packer partners that can provide both
     product development capability as well as manufacturing capability is
     continuing. This is a major focus, in concert with the product development
     (marketing) area, to introduce well thought out, quality and good tasting
     products that will generate new customer interest and increase the
     profitability of the Company.

                                       18
<PAGE>
 
                          PART II--OTHER INFORMATION

                          ITEM 1.  Legal Proceedings

     On November 1, 1995, Keebler Company (Keebler) and the Company entered into
     a co-packer agreement (the Agreement) to manufacture Caketts. In 1996, the
     Company suffered losses and terminations of business relationships by a
     number of the Company's distributors, retailers and brokers due to mold in
     the Caketts product. In August 1996, Keebler gave the Company thirty (30)
     days notice of termination of the Agreement between the parties, and
     indicated that it had discontinued further production of the Company's
     product. The Agreement between Keebler and the Company provides for the
     binding arbitration of disputes. On August 15, 1996, the Company filed a
     demand for arbitration seeking compensatory damages, was heard during May
     1997. The Company sought damages in excess of $5,000,000. In defending the
     arbitration proceeding, Keebler had alleged that Vitafort was responsible
     for the quality control problems and failed to comply with certain labeling
     requirements. Keebler had filed a counterclaim against the Company for
     breach of contract which alleges damages in excess of $300,000. The Company
     believed that Keebler breached the agreement by failing to meet its
     warranties to Vitafort to manufacture the products in an acceptable process
     manner, improperly terminating the agreement; and, made intentional
     misrepresentations regarding the cause of the mold problems. In June 1997,
     the Arbitrator awarded the Company $5,983,000 in damages plus expenses and
     costs associated with this arbitration. In July 1997, the Company received
     $6,750,000 in full and final settlement of the above action.

     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 was 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 and realize a profit on his $75,000
     investment.

     In February 1996, Cottage Bakery, Inc., a former co-packer of Fudgets,
     initiated a lawsuit against the Company in Superior Court, San Joaquin
     County, California. The Complaint alleges breach of contract and fraud
     against the Company and seeks damages in an unspecified amount in excess of
     $150,000. The Company disputes this liability and filed a cross complaint
     against Cottage Bakery. The parties have executed a settlement agreement,
     which does not subject the Company to any material liability.

     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. The litigation is in the
     early stages and the Company intends to vigorously pursue the same.

                                       19
<PAGE>
 
     Michel's Bakery, Inc., a former co-packer of Fudgets, initiated an action
     in state court in Philadelphia, Pennsylvania, seeking damages in excess of
     $140,000 under various contract and tort theories. In November 1996, the
     Company removed this action to the Federal District Court for the Eastern
     District of Pennsylvania. The Company has filed a counterclaim alleging
     breach of contract and other claims relating to the product manufactured by
     Michel's. The parties have agreed to discuss a settlement, which if
     completed, would be favorable to the Company. If, however, the matter is
     not resolved through mediation, the Company intends to vigorously prosecute
     this lawsuit.

     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 recently filed an amended
     complaint against the Company. The litigation is in its early stages and
     the Company will vigorously defend the action.


         ITEM 4.  Submissions of Matters to a Vote of Security Holders

     During the quarter ended June 30, 1997, the Company sought 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.


                   ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     The Company filed a report on Form 8-K dated June 19, 1997 reporting the
     Interim Award from the Keebler Arbitration.

                                       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:  August 19, 1997


                                       21