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

                  
              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934      
                     
                 For the quarterly period ended MARCH 31, 1998      

                  
              [_] 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, 1997 (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 May 19, 1998, 1998 is 7,004,852.      


<PAGE>
 
                            
                       VITAFORT INTERNATIONAL CORPORATION      
                                        
                                    CONTENTS      

                             
                         PART 1 - FINANCIAL INFORMATION      
     
 ______________________________________________________________________________
                                             
<TABLE>      
<C>       <S>                                                                   <C>
ITEM 1.   Consolidated Financial Statements:


          Balance Sheets--March 31, 1998 (unaudited) and December 31, 1997...    3-4
 
          Statements of Operations--
          Three Month Periods Ended March 31, 1998 and 1997 (unaudited)......      5
 
          Statement of Stockholders' Equity (Deficit)--
          Three Month Period Ended March 31, 1998 (unaudited)................      6
 
          Statements of Cash Flows--
          Three Month Periods Ended March 31, 1998 and 1997 (unaudited)......      7
 
          Notes to the Financial Statements (unaudited)......................   8-12
 

ITEM 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations..........................................  13-16
</TABLE>      
                               
                           PART II - OTHER INFORMATION      

 ______________________________________________________________________________
                                        
<TABLE>     
          <S>                                                                 <C> 
          Litigation.........................................................     17

          Signature..........................................................     18
</TABLE>      


                                       2
<PAGE>
 
                    
               VITAFORT INTERNATIONAL CORPORATION & SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEET
                  As of March 31, 1998 and December 31, 1997      
                                        
                                    ASSETS      
                                    ------
<TABLE>     
<CAPTION>
                                                                           March 31,
                                                                             1998        December 31,
                                                                         (Unaudited)         1997
                                                                         -----------     ------------
<S>                                                                      <C>             <C>
Current assets
  Cash and cash equivalents                                               $1,068,943      $2,199,036
  Accounts receivable, trade, less allowance
    for doubtful accounts of $25,743                                         507,643         412,289
  Inventories (Note 3)                                                       319,011         247,611
  Notes receivable - related party                                           104,290          10,000
  Prepaid expenses and other current assets (Note 4)                         393,999         269,268
                                                                          ----------      ----------
    Total Current Assets                                                   2,393,886       3,138,204
                                                                          ----------      ----------

Equipment
  Manufacturing equipment                                                    290,912         290,912
  Furniture and equipment                                                    126,667         105,160
  Computer equipment                                                         195,821         193,571
                                                                          ----------      ----------
                                                                             613,400         589,643
  Less accumulated depreciation                                             (376,975)       (347,493)
                                                                          ----------      ----------
                                                                             236,425         242,150
                                                                          ----------      ----------

Other Assets
  Intangible assets, net of accumulated amortization
   of $99,278  and $73,163 (Notes 2 and 6)                                   625,268         338,091
  Advances to Global International Sourcing (Note 6)                            -            193,818
  Other assets                                                                 1,100            -
                                                                          ----------      ----------
    Total Other Assets                                                       626,368         531,909
                                                                          ----------      ----------

                                                                          $3,256,679      $3,912,263
                                                                          ==========      ==========
</TABLE>      
         
     See accompanying notes to condensed consolidated financial statements      

                                       3
<PAGE>
 
                    
               VITAFORT INTERNATIONAL CORPORATION & SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEET
                  As of March 31, 1998 and December 31, 1997      
                         
                     LIABILITIES AND STOCKHOLDERS' EQUITY      
                     ------------------------------------
<TABLE>     
<CAPTION>
                                                                                March 31,
                                                                                  1998        December 31,
                                                                              (Unaudited)        1997
                                                                              -----------     ------------
<S>                                                                          <C>             <C>
Current liabilities
  Notes payable - bank (Note 7)                                              $     28,485    $     60,757
  Notes payable - others                                                          152,210         283,898
  Accounts payable                                                                765,787         909,315
  Accrued expenses (Note 5)                                                       231,479         342,437
  Current maturities of long-term debt (Note 7)                                    37,859          37,859
                                                                             ------------    ------------
    Total Current Liabilities                                                   1,215,820       1,634,266
                                                                             ------------    ------------

Commitments and contingencies (Notes 9 and 10)

Stockholders' equity
  Series A, 6% Cumulative Convertible Preferred Stock,
   $0.01 par value cumulative; 1,701 shares authorized,
   issued & outstanding, 1,701 and 750 shares,                                         17               8
   liquidation preference of $1,701,000 and $750,000 (Note 8)
  Series B, 10% Cumulative Convertible Preferred Stock,
   $.01 par value; authorized 1l0,000 shares; issued and
   outstanding 1,000 shares, aggregate liquidation preference                          10              10
   of $50,000
  Series C, Convertible Preferred Stock, $.01 par value;
   authorized 450 shares; issued and outstanding 50 shares,                             1               1
   aggregate liquidation preference of $50,000

  Common stock, $.0001 par value; authorized 30,000,000
   shares; issued and outstanding  6,973,853 and 6,683,853                          8,892           8,863
   shares (Note 8)

  Additional paid-in-capital (Note 8)                                          24,063,875      23,115,727
  Accumulated deficit                                                         (22,031,936)    (20,846,612)
                                                                             ------------    ------------
    Total Stockholders' Equity                                                  2,040,859       2,277,997
                                                                             ------------    ------------

                                                                             $  3,256,679    $  3,912,263
                                                                             ============    ============
</TABLE>      
         
     See accompanying notes to condensed consolidated financial statements      

                                       4
<PAGE>
 
                   
              VITAFORT INTERNATIONAL CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)      

<TABLE>     
<CAPTION>
                                                                             March 31,
                                                                        1998          1997
<S>                                                                  <C>           <C>
Net revenues                                                         $   346,836   $  765,239

Cost of sales                                                            268,572      548,288
                                                                     -----------   ----------

      Gross profit                                                        78,264      216,951
                                                                     -----------   ----------

Operating expenses
  Research and development                                                61,359       39,350
  Sales and marketing                                                    258,097      379,797
  General and administrative                                             723,491      586,232
                                                                     -----------   ----------
    Total Operating Expenses                                           1,042,947    1,005,379
                                                                     -----------   ----------

    Loss from Operations                                                (964,683)    (788,428)

Other income (expense)
  Other income                                                              (385)      14,010
  Interest income                                                         30,826         -
  Interest expense                                                       (47,569)     (40,611)
                                                                     -----------   ----------
    Total other income (expense)                                         (17,128)     (26,601)
                                                                     -----------   ----------

    Loss before income tax expense                                      (981,811)    (815,029)

State income tax expense                                                   3,200         -
                                                                     -----------   ----------

Net loss                                                                (985,011)    (815,029)
Deemed dividend to preferred shareholders (Note 8)                      (163,728)        -
                                                                     -----------   ----------
Net loss allocable to common shareholders                             (1,148,739)    (815,029)
                                                                     ===========   ==========

Loss per share                                                       $     (0.17)  $    (0.14)
                                                                     ===========   ==========

Weighted average number of common shares outstanding                   6,856,961    5,821,635
                                                                     ===========   ==========
</TABLE>      
         
     See accompanying notes to condensed consolidated financial statements      

                                       5
<PAGE>
 
                  
              VITAFORT INTERNATIONAL CORPORATION AND SUBSIDIARIES      
                    
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                       THREE MONTHS ENDED MARCH 31, 1998
                                  (Unaudited)      

<TABLE>    
<CAPTION>
                                                           Series A
                                                          Cumulative               Series B              Series C
                                                          Convertible             Convertible           Convertible
                                                        Preferred Stock         Preferred Stock       Preferred Stock
                                                        ---------------         ---------------       ---------------
                                                        Shares   Amount         Shares   Amount       Shares   Amount
                                                        ------   ------         ------   ------       ------   ------
<S>                                                     <C>      <C>            <C>      <C>          <C>      <C>
Balance, January 1, 1998                                   750    $ 8            1,000    $10           50       $1

Series A Preferred issued in connection with
  a private placement, net of expenses                     500      5

Common stock issued as settlement of contract
  disputes

Exercise of stock options

Stock issued for acquisition of marketing contract

Preferred stock deemed dividends                           451      4

Net loss
                                                         -----    ---            -----    ---           --       --
Balance, March 31, 1998                                  1,701    $17            1,000    $10           50       $1
                                                         =====    ===            =====    ===           ==       ==

<CAPTION>
                                                                              Additional
                                                         Common Stock           Paid-In          Accumulated
                                                      Shares       Amount       Capital            Deficit          Total
                                                      ------       ------       -------            -------          -----
<S>                                                  <C>           <C>        <C>               <C>               <C>
Balance, January 1, 1998                             6,683,853     $8,863     $23,152,312       ($20,883,197)     $2,277,997

Series A Preferred issued in connection with
  a private placement, net of expenses                                            498,995                            499,000

Common stock issued as settlement of contract
  disputes                                             115,000         12         116,738                            116,750

Exercise of stock options                              115,000         11          88,989                             89,000

Stock issued for acquisition of marketing contract      60,000          6          43,117                             43,123

Preferred stock deemed dividends                                                  163,724           (163,728)             (0)

Net loss                                                                                            (985,011)       (985,011)
                                                     ---------     ------     -----------       ------------      ----------
Balance, March 31, 1998                              6,973,853     $8,892     $24,063,875       ($22,031,936)     $2,040,859
                                                     =========     ======     ===========       ============      ==========
</TABLE>     
         
     See accompanying notes to condensed consolidated financial statements      

                                       6
<PAGE>
 
                   
               VITAFORT INTERNATIONAL CORPORATION & SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)      

<TABLE>     
<CAPTION>
                                                                                   Three Months Ended March 31,
                                                                                         1998         1997
                                                                                   ------------    ------------
<S>                                                                                 <C>            <C>
Increase (Decrease) in Cash and Cash Equivalents

Cash flows from operating activities:
    Net loss                                                                        $  (985,011)   $(815,029)
    Depreciation and amortization                                                        51,081       41,569
    Stock issued for services                                                              -            -
    Changes in operating assets and liabilities:
      (Increase) decrease in:
        Accounts receivable, trade, net                                                 227,216      (77,527)
        Inventories                                                                     (66,400)     189,937
        Other current assets                                                           (116,371)     (19,603)
        Other assets                                                                     (1,100)        -
       Increase (decrease) in:
        Accounts payable                                                               (450,634)     109,232
        Accrued expenses                                                               (110,958)      54,223
                                                                                    -----------    ---------
          Cash and cash equivalents used in operating activities                     (1,452,177)    (517,198)
                                                                                    -----------    ---------

Cash flows from investing activities:
  Purchase of equipment                                                                  (8,757)        -
  Advances to related parties                                                              -            -
  Cash acquired through acquisition of subsidiary                                        75,462
                                                                                    -----------    ---------
         Cash and cash equivalents used in investing activities                          66,705         -
                                                                                    -----------    ---------

Cash flows from financing activities:
  Proceeds from issuance of stock                                                       747,874      696,422
  Repayments of line of credit                                                          (32,272)      25,323
  Advances to Global International                                                     (328,535)
  Repayments of notes payable                                                          (131,688)        -
                                                                                    -----------    ---------
         Cash and cash equivalents provided by financing activities                     255,379      721,745
                                                                                    -----------    ---------

Increase (decrease) in cash and cash equivalents                                     (1,130,093)     204,547
Cash and cash equivalents, beginning of period                                        2,199,036      188,867
                                                                                    -----------    ---------
Cash and cash equivalents, end of period                                            $ 1,068,943    $ 393,414
                                                                                    ===========    =========
 
Supplemental  disclosure of cash flow information
  Cash paid during the period for:
    Interest                                                                        $    47,569    $  40,611
    Income taxes                                                                    $     3,200         -

Supplemental disclosure of non-cash operating, investing, and
  financial activities
    Stock issued for accounts payable                                               $   131,750         -
    Stock issued for prepaid consulting services                                    $    61,666         -
    Stock issued for acquisition of marketing contract                              $    43,124         -
    Acquisition of Global International Sourcing:
       Assets acquired, net of cash                                                 $   535,786         -
       Liabilities assumed, including $522,328 due to Vitafort                      $   829,461         -
</TABLE>      
         
     See accompanying notes to condensed consolidated financial statements      

                                       7
<PAGE>
 
                   
              VITAFORT INTERNATIONAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)      
                                            
NOTE 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 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, 1997 included in the Form 10-
KSB filed March 31, 1998.      
         
     The Company is presently engaged in formulating, marketing and distributing
fat-free, low fat and reduced fat foods.      
    
NOTE 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.      
              
     (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, which are recorded at cost, are composed of debt
         issuance costs, acquisition costs of Auburn Farms and Natures Warehouse
         trademarks, and goodwill associated with the acquisition of Global
         International Sourcing, Inc. The acquisition costs associated with
         trademarks and goodwill 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.  These
         costs are reviewed by management periodically and written down to the
         value of the future benefit expected to be derived.      
         
     (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) For the three months ended March 31, 1998, basic loss per share has
         been computed using the weighted average number of common shares
         outstanding during the period. Dividends on cumulative preferred stock
         are not material.      


                                       8
<PAGE>
 
          
     (h) Advertising: General costs are expensed as incurred or prepaid until
         the advertisement is published, at which time the related costs are
         expensed.      

    
NOTE 3 -- INVENTORIES      
        
    Inventories are stated at the lower of cost (first in, first out) or market.
Market-based valuations are based upon estimates and assumptions, and are
generally limited to slow moving product offerings.  Inventory consists of the
following:      

<TABLE>     
<CAPTION> 
                                      March 31, 1998      December 31, 1997
                                      --------------      -----------------
   <S>                                <C>                 <C> 
   Finished goods                           $123,799               $ 30,188
   Packaging and raw material                195,212                217,423
                                             -------               --------
                                            $319,011               $247,611
                                            ========               ========
</TABLE>      
    
NOTE 4 -- PREPAID EXPENSES AND OTHER CURRENT ASSETS      
        
    Prepaid expenses and other current assets consist of the following:      

<TABLE>     
<CAPTION> 
                                              March 31, 1998      December 31, 1997
                                              --------------      -----------------
   <S>                                        <C>                 <C>              
   Deposits                                         $      -               $  1,100
   Product introduction costs                         14,250                 10,711   
   Insurance                                          65,816                 36,377
   Consulting                                        137,714                108,080   
   Other prepaids                                    176,219                113,000 
                                                    --------               --------

     Total prepaid and other current assets         $393,999               $269,268
                                                    ========               ========
</TABLE>       
    
NOTE 5 - ACCRUED EXPENSES      
       
   Accrued expenses consist of the following:      

<TABLE>     
<CAPTION> 
                                              March 31, 1998      December 31, 1997
                                              --------------      -----------------
   <S>                                        <C>                 <C>              
   Accrued compensation                             $145,122               $156,764
   Accrued commissions                                17,295                      -
   Accrued legal fees                                      -                 40,112
   Accrued consulting fees                                 -                  4,919
   Other accrued expenses                             69,062                140,642
                                                    --------               --------
                                                             
   Total accrued expenses                           $231,479               $342,437
                                                    ========               ========
</TABLE>      

    
NOTE 6 -- ACQUISITION OF SUBSIDIARY      
         
     Effective March 31, 1998, the Company acquired 100% of the outstanding
stock of Global International Sourcing, Inc. (Global) for $25.  The acquisition
was accounted for as a purchase and the operations of Global will be included
with the Company's operations commencing April 1, 1998.  The assets and
liabilities of Global were recorded at fair value and resulted in goodwill of
$218,213.  Had the      


                                       9
<PAGE>
 
     
Company consolidated its operating performance for the first quarter ended March
31, 1998, the results would have been as follows:      

<TABLE>     
     <S>                                               <C> 
     Net Sales                                         $   732,641
     Gross Profit                                          123,119
     Net Loss                                           (1,100,389)
     Net Loss Allocable to Common Shareholders          (1,264,117)
     Net Loss Per Share                                     ($0.18)
</TABLE>      
         
     Global was formed in October 1997 and its financial position and results of
operations are not material compared to the Company's financial position at
December 31, 1997 or its results of operations for the year ended December 31,
1997.      

    
NOTE 7 -- CURRENT MATURITIES OF LONG-TERM DEBT:      
         
     The note 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.  The agreement with the secured lender,
Coast Business Credit, included a provision that halted payments on this note. 
     
    
NOTE 8 - STOCKHOLDERS' EQUITY      
         
     During the three month period ended March 31, 1998, the following stock
transactions occurred, all of which were valued at fair market:      
         
     (a)  The Company issued 85,000 shares of common stock at a value of $1.00
          per share as settlement for contract disputes previously recorded as a
          liability.      
         
     (b)  The Company issued 30,000 shares of common stock at a value of $1.058
          per share as settlement of a contract dispute related to consulting
          services previously recorded as a liability.      
         
     (c)  The Company issued 60,000 shares of common stock at a value of $.71875
          per share and forgave a $25,000 note receivable in exchange for the
          distribution rights with respect to all marshmallow products in North
          America. The Company also received $5,000 of sample inventory and
          $15,000 of furniture and equipment as part of this transaction.      
         
     (d)  The Company issued 100,000 shares of common stock at a value of $0.74
          per share upon the exercise of an option granted a consultant in
          exchange for future consulting services.      
         
     (e)  The Company issued 15,000 shares of common stock at a value of $1.00
          per share upon the exercise of an option granted a consultant in
          exchange for services rendered previously recorded as a liability. 
     
         
     (f)  The Company entered into a subscription agreement in March 1998 with
          an unrelated investor for $500,000 for 500 shares of 1997 Series A
          Preferred Stock. The preferred stock has a cumulative dividend of 6%
          with no voting rights. The preferred stock is convertible beginning
          August 10, 1998 at a 21.5% discount if the fair market value of the
          stock on the date of conversion is $0.6875 per share or less. If the
          fair market value of the stock on the      


                                      10
<PAGE>
 
               
          date of conversion is more than $0.6875 per share, the preferred stock
          is convertible at fair market value. However, if the preferred shares
          are converted at fair market value, the preferred shareholder will
          receive sufficient warrants upon conversion to purchase common stock
          at $0.6875 per share to generate a $275 profit per share of preferred
          stock converted.      
              
          As part of this transaction, the Company also issued 451 shares of
          preferred stock, as well as warrants to purchase 282,422 shares of
          common stock at $0.6875 per share to the holders of the 1997 Series A
          Preferred Stock in exchange for the preferred stockholders accepting
          an adjustment in the terms of the 1997 Series A Preferred Stock.  The
          warrants may be exercised over a five year period beginning August 10,
          1998.      
              
          For accounting purposes, the issuance of the warrants to the 1997
          Series A Preferred stockholders results in a deemed dividend of
          $147,381 which will be recognized as a deemed dividend at a rate of
          $24,564 per month through August 10, 1998.      
              
          In addition, the original issue discount of $411,128 related to the
          conversion terms of the 1997 Series A Preferred Stock is being treated
          as a deemed dividend which will be recognized at a rate of $68,521 per
          month through August 10, 1998.      

    
NOTE 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 in 1997, 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, 1997 indicating there is substantial doubt regarding the Company's ability
to continue as a going concern.  The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
any uncertainty.      

    
NOTE 10 - LITIGATION      
         
     The Company is subject to pending claims and litigation, the most
significant of which are discussed below.      
         
     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 `s losses might be as little as $15,000.      

                                      11
<PAGE>
 
          
     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, Auburn Farms and Mark Beychok alleging
various tort and contract claims.  The litigation is in the early stages and the
Company intends to vigorously pursue the same.      
         
     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 dismissed the complaint against Mark Beychok without leave to
amend. Mr. Ellis recently filed an amended complaint against the Company. The
Company is defending the action vigorously and trial is imminent. In a related
action, the Company filed a lawsuit against Ellis charging violations of Section
16(b) of the Securities Exchange Act of 1934 (short swing profits). Ellis sold
stock in violation of that section and, therefore, the profits, estimated at
$20,000, belong to the Company. In March 1998, the court ruled in favor of the
Company in this matter and awarded $21,260. On June 2, 1998, the parties
resolved both the Ellis issues. Under the terms of the agreement, the settlement
is treated as confidential and the public response has been agreed to as
follows: "The matter has been resolved."      


                                      12
<PAGE>
 
           ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AS RESULTS OF OPERATIONS
                                  (Unaudited)      

Three Months Ended March 30, 1998 and 1997
------------------------------------------

Results of Operations:

     The Company continues to focus on the development of new products and the
repair of customer relationships, especially in the northeast, where the
majority of the customers for Fudgets and Caketts were located and thus a
significant portion of the past problems and off-sets.  Progress was made in the
development area for new products to be introduced in the second and third
quarters of 1998.  However, the lack of sales velocity, especially in the
Fudgets and Caketts product lines, has negatively impacted the overall results.
Consolidation of the warehouse facilities was completed in the first quarter and
should bring the Company savings for the balance of the year compared to the
cost of maintaining separate facilities.  Additionally, the Company has
reestablished credit terms with the majority of its co-packers and has finalized
negotiations for payment schedules for some of its significant creditors.

     The proceeds from the Keebler Company arbitration continue to support the
Company's immediate cash requirements through the current period of product
development and customer reestablishment.  The new products, with targeted
improved margins, should improve the sales levels for the second quarter of 1998
and beyond, although there can be no assurance that the Company can maintain any
significant increased level of sales over any extended time periods.

     The acquisition of Global International Sourcing at March 31, 1998 should
improve the Company's access to overseas products.  It should also result in
improved gross profit margins to the Company's ongoing operations.
Additionally, Global brings its own customers and sales level to the Company,
although functioning primarily as a broker, it does not provide the same gross
profit levels targeted for the Company's current business areas.

     The development programs for new products continue, with certain of these
products scheduled for release in the second and third quarters of 1998.  While
such introductions may have little, if any, impact in the quarter the product is
introduced due to the amount of time required for distribution into the
channels, it should provide a cascading effect over future periods.

Net Revenues:

     For the three months ended March 31, 1998, net sales were $346,836 compared
to $765,239 for the same period in 1997, a decrease of $418,403 or approximately
54.7%.  The loss of Fudgets and Caketts sales, which in the three months ended
March 31, 1997 were $361,701, were not replaced by any other of the Company's
other products.  In May 1998, the Company discontinued the Caketts line of three

                                      13
<PAGE>
 
products and two of the three Fudget products.  The introduction of Juliette's
Private Collection chocolate truffles in the last quarter of 1997 continued in
this first quarter of 1998 where sales were $70,091 for the three months ended
March 31, 1998 compared to no sales for the same period in 1997.  The Auburn
Farms/Natures Warehouse product lines weakened somewhat in the quarter ended
March 31, 1998 where sales were $210,371 compared to $362,021 for the same
period in 1997.  The loss of Auburn Farms sales reflects the Company's opinion
that consumer tastes are shifting from the no fat products, which are usually
associated with no taste, to reduced fat products which do provide the consumer
with reasonably good taste.  Most of the new products scheduled for introduction
are either reduced fat or low fat.

Gross Profit:

     Gross profit decreased from $216,951 for the three months ended March 31,
1997 to $78,264 for the three months ended March 31, 1998, a decrease of
$138,687.  Gross profit was 22.6% of net revenues for the quarter ended March
31, 1998, compared to 28.4% for the same period of 1997.  The Company wrote off
from inventory packaging for certain of its products where the labeling no
longer complied with the Food and Drug Administration guidelines for ingredient
listing.  This listing guideline, revised as of January 1, 1998, required the
disclosure of the presence of folic acid in ingredient listing.  Prior to that
time, no such labeling disclosure had been required.  The impact to the
Company's processing was minimal since the requirement pertained only to the
labeling on packaging, not to the actual formulations of the products
themselves.  The Company does not expect this law to have any impact on the
Company's business operations.  For the quarter ended March 31, 1998, the
Company charged approximately $49,362 to cost of sales for this labeling change.
Excluding this charge, the gross profit margin in the current quarter would have
been $127,625 or 36.7%, which is closer to Vitafort's gross profit margin
target.

Operating Expenses:

     Overall operating expenses have increased over the previous year due to
overall staff increases as the Company again begins to increase its efforts in
the sales and marketing area and in administrative functions to improve support
for the overall anticipated increase in volume.  The anticipated decrease in
legal expenses has not occurred due to the concentration of effort in the
defense of the Ellis case and the increasing effort in the Barbara's/New Life
litigation.  Finally, the other professional fees associated with the audit for
December 31, 1997 were primarily incurred in the quarter ended March 31, 1998
while in 1997 the majority of costs and expenses were incurred in the second
calendar quarter.  The Company is hopeful that the level of professional fees
will decline in the subsequent quarters. The legal expenses, however, may
continue for some time in the future, although the Company is searching for off
balance sheet financing of the Barbara's/New Life litigation.

Research and Development:

     Total expenses for product development in the quarter ended March 31, 1998
were $61,359 compared to $39,350 for the same period in 1997, an increase of
$22,009.  The majority of the increase in expenses was related to the employment
of outside consultants to assist the staff in insuring development of new
formulations.  In addition, these consultants were working with the Company's 
co-packers to maintain acceptable quality assurance and to insure that quality
control measures are in place during the manufacturing process of the Company's
products.  The cost for the three months ended March 31, 1998

                                      14
<PAGE>
 
for outside consultants was $51,750 compared to $24,371 for the same period in
1997, an increase of $27,379.

Sales and Marketing:

     Total sales and marketing expenses for the quarter ended March 31, 1998
were $258,097 compared to $379,797 for the three months ended March 31, 1997, a
decrease of $121,700.  The decrease in Vitafort expenses were primarily in the
areas of commissions, $20,833, sales promotion expenses, $55,088 and product
introduction fees, $95,546, all of which are related to the decline in overall
sales volume.  These reductions were offset by the $43,417 increase in staffing
costs to support the introduction of new products and the increase in customer
service.

General and Administrative:

     For the quarter ended March 31, 1998, total general and administrative
expenses were $723,491 compared to $586,232 for the same quarter ended March 31,
1997 an increase of $137,259. Staff increases and related expenses increased by
$122,044 for the three months ended March 31, 1998 compared to the three months
ended March 31, 1997 due to the addition of a new Chief Operating Officer and
the conversion of certain staff positions from temporary consulting
classifications to permanent employees.  The Company also incurred an increase
in the building lease of its facilities when the lease expired in August 1997.

Other Income (Expense):

     The interest income continues to reflect the Company's investment of excess
cash in short term investment instruments.  As the amount of the total
investment declines due to cash requirements, the amount of income will also
decline.
 
Liquidity and Capital Resources:

<TABLE>
<CAPTION>
                                                       Three Months Ended     
                                                            March 31,

                                                       1998          1997
                                                    -----------   -----------
<S>                                                 <C>           <C>
Net Cash Used for Operations                        $(1,452,177)  $  (517,198)
Net Cash Used for Investing Activities                   66,705             -
Net Cash Provided by Financing Activities               255,379       721,745
Working Capital (Deficit)                             1,178,066      (953,002)
</TABLE>

                                      15
<PAGE>
 
     The Company continues to expend resources in the product development area
for the scheduled introduction of new products.  However, there is no guarantee
that these products, once introduced in the market, will achieve the anticipated
level of sales forecast by the Company nor reach the gross profit margin
targeted by the Company for each of the products.  In addition, while the
Company's financial condition has improved over the past twelve months, there is
no guarantee that new co-packers will provide the Company with credit terms.
Nor is there any assurance that the Company will be able to meet its future cash
obligations without additional external funding and improved sales.  Neither
additional financing nor improved sales can be guaranteed to occur in the
future.  While the Company has made significant improvement in rebuilding
customer relationships, the process has been slow and costly, and there is no
guarantee that these customers will purchase products from the Company with the
same enthusiasm that they have in the past.
         
     The Company has suffered recurring losses from operations as of March 31,
1998.  Although the Company has raised additional capital, it has not generated
sufficient revenue-producing activity to sustain its operations.  The Company's
independent certified public accountants have included a modification to their
opinion which indicates there is substantial doubt about the Company's ability
to continue as a going concern.  See "Note 9" to the consolidated financial
statements for additional information.  The Company is attempting to raise
additional capital to meet future working capital requirements, but may not be
able to do so.  Should the Company not be able to raise additional capital, it
may have to curtail operations.
 

                                      16
<PAGE>
 
                                
                           Item 2. Other Information      
                           
                       VITAFORT INTERNATIONAL CORPORATION
                                   LITIGATION      

         
     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's losses might be as little as $15,000.      
         
     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, Auburn Farms and Mark Beychok alleging
various tort and contract claims.  The litigation is in the early stages and the
Company intends to vigorously pursue the same.      
         
     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 dismissed the complaint against Mark Beychok without leave to
amend. Mr. Ellis recently filed an amended complaint against the Company. The
Company is defending the action vigorously and trial is imminent.      
         
     The Company filed a counter-claim against Ellis charging violations of
Section 16(b) of the Securities Exchange Act of 1934 (short swing profits).
Ellis sold stock in violation of that section and, therefore, the profits,
estimated at $20,000, belong to the Company. In March 1998, the court ruled in
favor of the Company in this matter and awarded $21,260.      
         
     On June 2, 1998, the parties resolved both the Ellis issues. Under the
terms of the agreement, the settlement is treated as confidential and the public
response has been agreed to as follows: "The matter has been resolved."      


                                      17
<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 14, 1998      



                                      18