<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 SEPTEMBER 30, 1997
                                              

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

              For the transition period from ________ to ________

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

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

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

          1800 Avenue of the Stars, Suite 480, Los Angeles, CA 90067
          ----------------------------------------------------------
                 (Address of principal executive offices)     
                                  (Zip Code)

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


Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act of 1934 of during the preceding twelve
months ended December 31, 1995 (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past ninety days.

     Yes:   X    No:
          -----      -----

The number of shares of the Registrant's Common Stock, par value $.0001 per
share outstanding on November 12, 1997 is 6,777,052.

                                       1
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION



                                   CONTENTS


                        PART I - FINANCIAL INFORMATION
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<C>          <S>                                                          <C>
ITEM 1.       Consolidated Financial Statements:
 
              Balance Sheets - September 30, 1997 and
              December 31, 1996 . . . . . . . . . . . . . . . . . . . .    3
 
              Statements of Operations -
              Three Month Periods Ended September 30, 1997 and 1996 and
              Nine Month Periods Ended September 30, 1997 and 1996. . .    5 

              Statement of Stockholders' Equity (Deficit)
              Nine Month Period Ended September 30, 1997. . . . . . . .    6
 
              Statements of Cash Flows -
              Nine Month Periods Ended September 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 . . . . . . . . . . . . . . . . . . . .    18
 
ITEM 4.       Submission of Matters of a Vote of Security Holders . . .    18
 
ITEM 6.       Exhibits and Reports on Form 8-K  . . . . . . . . . . . .    18
 
              Signatures  . . . . . . . . . . . . . . . . . . . . . . .    19
</TABLE>

                                       2
<PAGE>
 
                         PART I  FINANCIAL INFORMATION

                         ITEM 1.  FINANCIAL STATEMENTS

                      VITAFORT INTERNATIONAL CORPORATION
                          CONSOLIDATED BALANCE SHEETS

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

                                       3
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                          CONSOLIDATED BALANCE SHEETS

                 LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
                 ---------------------------------------------
<TABLE>
<CAPTION>
 
                                                                    September 30   December 31
                                                                        1997          1996
                                                                    ------------   -----------
                                                                     (unaudited)
<S>                                                                 <C>            <C>
 
Liabilities and Stockholders' Deficit
 
Current Liabilities:
     Notes payable                                                  $243,349       $  440,022
     Accounts payable                                                 52,322          921,919
     Accrued expenses                                                565,431          789,212
     Other current liabilities                                        37,859           37,859
                                                                    --------       ----------
         Total Current Liabilities                                   898,961        2,189,012
 
Stockholders' Equity(Deficit):
     Series A, 6% Cumulative Convertible Preferred Stock
      $0.01 par value, cumulative, 750 shares authorized,
      750 shares issued and outstanding at September 30, 
      1997 and none at December 31, 1996                                   8                0
     Series B, 10% Cumulative Convertible Preferred Stock
      $0.01 par value, cumulative, 110,000 shares authorized,
      1,000 shares issued and outstanding at September 30, 1997
      and December 31, 1996; aggregate liquidation
      preference of $50,000 at September 30, 1997 and
      December 31, 1996                                                   10               10
     Series C, Convertible Preferred stock, $0.01 par value,
      450 shares authorized, 50 shares issued and outstanding
      as of September 30, 1997 and December 31, 1996;
      aggregate liquidation preference of $1 at September 30,
      1997 and December 31, 1996                                           1                1
     Subscribed common stock, 76,906 shares at September 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 September 30, 1997 and 9,000,000 at
      December 31, 1996, issued and outstanding
      and 5,957,053 shares at September 30, 1997 and
      4,830,259 at December 31, 1996, respectively.                    9,093            8,886
     Additional paid-in capital                                   23,203,570       20,547,753
     Accumulated deficit                                         (18,900,472)     (21,050,479)
                                                                 -----------      -----------
         Total Stockholders' Equity(Deficit)                       4,389,115         (152,498)
                                                                 ===========      ===========
         Total Liabilities and Stockholders' Equity(Deficit)     $ 5,288,076      $ 2,036,514
                                                                 ===========      ===========
</TABLE>
       See accompanying notes to the consolidated financial statements.

                                       4
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
 
 
                                                               Three Months Ended                   Nine Months Ended
                                                                  September 30,                       September 30,
                                                             -----------------------              ---------------------
                                                             1997               1996               1997           1996
                                                                   (unaudited)                         (unaudited)
<S>                                                         <C>                <C>              <C>            <C>
 
Net sales                                                    $  322,116         $ 2,104,314      $ 1,497,223    $ 4,408,665
Cost of sales                                                   196,226           1,912,734        1,078,854      3,988,128
                                                             ----------         -----------      -----------    -----------
Gross profit                                                    125,890             191,580          418,369        420,537
 
Operating expenses:
    Product development                                         123,137             247,061          179,268        693,389
    Sales and Marketing                                         257,016             580,798          996,242      1,690,024
    General and administrative                                    3,227             573,929        1,894,114      1,603,775
                                                             ----------         -----------      -----------    ----------- 
              Total operating expenses                          383,380           1,401,788        3,069,624      3,987,188
                                                             ----------         -----------      -----------    -----------
Operating loss                                                 (257,490)         (1,210,208)      (2,651,255)    (3,566,651)
Other income (expense)                                           (3,409)              2,758           19,710         11,793
Interest expense                                                (53,585)             (4,423)        (153,138)       (13,693)
Interest income                                                  47,742                   0           47,742              0
Litigation recovery, net of costs                             4,886,947                   0        4,886,947              0
                                                             ----------         -----------      -----------     ----------
              Income(Loss) before provision
                for income taxes                              4,620,205          (1,211,873)       2,150,006     (3,568,551)
Provision for income taxes                                            0               1,105                0          3,159
                                                             ----------         -----------       ----------     ----------
              Net Income(Loss)                               $4,620,205         $(1,212,978)     $ 2,150,006    $(3,571,710)
                                                             ==========         ===========      ===========    =========== 
              Net Income(Loss) per share                     $     0.73         $     (0.28)     $      0.40    $     (0.85)
                                                             ==========         ===========      ===========    =========== 
              Weighted Average Shares
                of Common Stock Outstanding                   6,315,582           4,339,878        5,318,992      4,215,668
                                                             ==========         ===========      ===========    ===========
</TABLE>
       See accompanying notes to the consolidated financial statements.


                                       5
<PAGE>

              VITAFORT INTERNATIONAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
                     NINE MONTHS ENDED SEPTEMBER 30, 1997
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                          
                                                                                          
                                              Series A        Series B        Series C        
                                             Convertible     Convertible     Convertible     
                                              Preferred       Preferred       Preferred      Subscribed 
                                                Stock           Stock           Stock           Stock
                                             -----------     -----------     -----------     ----------  
<S>                                          <C>             <C>             <C>             <C>            
Balance, January 1, 1997                      $       -       $       10      $        1      $ 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       
                                              ==========      ==========      ==========      =========  
                                                                                                            
Common stock - consulting                                                                                   
                                                                                                            
Exercise of stock options                                                                                   
                                                                                                            
Net income                                                                                                  
                                              ----------      ----------      ----------      ---------  
Balance, September 30, 1997                   $        8      $       10      $        1      $  76,905       
                                              ==========      ==========      ==========      =========  
</TABLE>

<TABLE>
<CAPTION>
                                                   Common Stock         Additional 
                                             -----------------------      Paid In          Accumulated
                                               Shares         Amount      Capital            Deficit            Total
                                             ---------        ------    -----------       -------------       -----------
<S>                                          <C>              <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)
                                             =========        ======    ===========        ============       ===========
                                             
Common stock - consulting                      773,686            78        763,284                               763,362
                                             
Exercise of stock options                       90,000             9         85,791                                85,800
                                             
Net income                                                                                    4,620,206         4,620,206
                                             ---------        ------    -----------        ------------       -----------
Balance, September 30, 1997                  6,897,645        $9,093    $23,203,570        $(18,900,472)      $ 4,389,115
                                             =========        ======    ===========        ============       ===========
</TABLE>

                                       6

<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
 
                                                                                   NINE MONTHS ENDED
                                                                                      SEPTEMBER 30,
                                                                               ---------------------------
                                                                                1997                  1996
<S>                                                                           <C>                   <C>
Increase (Decrease) In Cash:                                                           (unaudited)
 
Cash flows from operations:
     Net Income/(Loss)                                                        $2,150,006            $(3,571,710)
     Adjustments to reconcile net income/(loss) to net cash
       used in operating activities:
       Depreciation and amortization                                             124,708                 94,998
       Allowance for doubtful accounts                                           (12,250)                     0
       Inventory reserves                                                       (832,296)                     0
     (Increase) decrease in:
       Inventory                                                                 924,502             (1,516,839)
       Accounts receivable                                                       (69,640)            (1,150,328)
       Prepaids and other assets                                                  29,403               (477,613)
     Increase (decrease) in:
       Accounts payable                                                         (639,587)             1,325,140
       Accrued expenses                                                         (223,781)              (205,668)
                                                                              ----------            -----------
              Net cash provided by (used) in operating activities              1,451,065             (5,502,020)
                                                                              ----------            -----------
                                                                               
Cash flows from investing activities:
     Purchase of short-term investment                                                 0                (41,000)
     Purchase of property and equipment                                           (6,912)              (180,741)
                                                                              ----------            -----------
     Cash paid for acquisition                                                         0               (183,907)
                                                                              ----------            -----------
              Net cash provided by(used) in investing activities                  (6,912)              (405,648)
                                                                              ----------            -----------
Cash flows from financing activities:
     Proceeds from issuance of common and preferred stock, net                 2,391,607              5,118,501
     Proceeds from (repayment of) notes payable, short-term                            0                (75,000)
     (Repayment of) note payable - bank                                         (426,683)               896,587    
     Prepayment of long-term debt                                                      0               (164,505)
                                                                              ----------            -----------
              Net cash provided by financing activities                        1,964,924              5,775,583
                                                                              ----------            ----------- 
              Net increase(decrease) in cash                                   3,409,076               (132,085)
                                                                              ----------            ----------- 
              Cash at beginning of period                                        188,867              1,316,406
                                                                              ----------            ----------- 
              Cash at end of period                                           $3,597,944            $ 1,184,321
                                                                              ==========            =========== 
Supplemental disclosures of cash flow information:
     Cash paid during the period for interest                                 $   45,000            $     5,632
                                                                              ==========            ===========  
Supplemental disclosures of non-cash investing and financing
activities:
     Issuance of common stock for: Conversion of debt                         $        0            $   973,207
                                                                              ==========            ===========
</TABLE>
       See accompanying notes to the consolidated financial statements.

                                       7
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

(1)  General:

     The unaudited consolidated financial statements have been prepared on the
     same basis as the audited consolidated financial statements and, in the
     opinion of management, reflect all adjustments (consisting of normal
     recurring adjustments) necessary for a fair presentation for each of the
     periods presented. The results of operations for interim periods are not
     necessarily indicative of results to be achieved for full fiscal years.

     As contemplated by the Securities and Exchange Commission (SEC) under item
     310(b) of Regulation S-B, the accompanying consolidated financial
     statements and related footnotes have been and do not contain certain
     information that will be included in the Company's annual consolidated
     financial statements and footnotes thereto. For further information, refer
     to the consolidated financial statements and related footnotes for the year
     ended December 31, 1996 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 years or less.

     (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. As of September
     30, 1997, inventory consisted of the following:

     Finished Goods                                     $  68,390
     Packaging and Raw Material                           551,427
     Less: Reserves for slow moving and spoilage         (350,828)
                                                        ---------
                                                        $ 268,989
                                                        =========

(5)  Prepaid Expenses and Other Assets:

     Prepaid expenses and other current assets as of September 30, 1997 and
     December 31, 1996 consist of the following:
<TABLE>
<CAPTION>
                                                 September 30,      December 31,
                                                     1997              1996
                                                 -------------      ------------
<S>                                              <C>                <C>
     Deposits                                         $  1,600          $ 10,000
     Trade promotion expenses                           15,653           177,865
     Insurance                                          45,253            14,897
     Consulting (Current Portion)                      151,194                 0
     Other prepaids                                     48,973            68,969
                                                      --------          --------
     Total Prepaid and Other Current Assets           $262,673          $271,731
                                                      ========          ========
</TABLE> 
 
(6)  Accrued Expenses
 
     Accrued expenses and other current liabilities as of September 30, 1997 and
     December 31, 1996 are detailed as follows:
 
<TABLE> 
<CAPTION> 
                                              September 30,        December 31,
                                                  1997                1996
                                              ------------         -----------
<S>                                              <C>                <C> 
     Accrued Compensation                          $      0            $ 65,570
     Accrued Insurance                                    0                   0
     Accrued Interest Payable                             0                 436
     Accrued Legal Fees                                   0              70,811
     Accrued Consulting Fees                              0              22,500
     Accrued Commissions                             89,276                   0
     Accrued Advertising/Promotion                  272,716             407,359
     Other Accrued Expenses                         203,439             222,536
                                                   --------            --------
                                                   $565,431            $789,212
                                                   ========            ======== 
</TABLE>

 
                                       9
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

(7)  Notes Payable - Bank:
 
     The Company is no longer in default with respect to certain financial
     covenants under the terms of its agreement with the secured lender. For
     financial statement purposes, the entire amount is classified as a current
     liability, however, due to the financial uncertainty of the business.

(8)  Other Current Liabilities:
 
     Other current liabilities consists of a $37,859 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.

(9)  Stockholders' Equity:

     During the nine-month period ended September 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
         September 30, 1997, the Company reduced the exercise price of these
         options to $1.00.

     e.  The Company entered into a subscription agreement in April 1997 with an
         unrelated investor for $500,000 of 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.

                                       10
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)


     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% (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.

     i.  On July 16, the Company accepted a cashless exchange of expenses for
         options on 30,000 shares to a consultant.

     j.  The Company issued 418,086 shares at $1.25 per share to various
         providers of services under an S-8 filing.

     k.  100,000 shares at $.93 per share was issued to a professional firm for
         previous services rendered.

     l.  On August 28, the Company issued 255,600 shares at $.93 per share in
         compensation for services rendered.

     m.  The Company allowed a cashless option of 60,000 shares at $.93 per
         share for consulting services.

(10) Going Concern:

     The Company has prepared the financial statements included herewith
     assuming that the Company will continue as a going concern. At September
     30, 1997, total current liabilities were exceeded by current assets by
     $3,783,444 and the Company had a positive net worth of $4,389,115. Although
     the Company received $6,750,000 as proceeds from the Keebler arbitration,
     it must realize a satisfactory level of profitability from its current and
     future operations in order to remain a viable entity. The accompanying
     consolidated financial statements do not include any adjustments that might
     result from the outcome of any uncertainty.

                                       11
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

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

                                       12
<PAGE>
 
                      VITAFORT INTERNATIONAL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

                                  (Unaudited)

(14) Legal Proceedings

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

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

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

                                       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 September 30, 1997 and 1996
----------------------------------------------

Results of Operations:

     The net proceeds from the damage award in the Keebler Company arbitration
     has eliminated, at least in the short term, the liquidity problem that has
     plagued the Company over the past year. Currently, the Company is
     negotiating payout terms with certain vendors and reestablishing credit
     terms with its current co-packers to improve its inventory levels to meet
     customer requirements while at the same time prolonging its current cash
     position.

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

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

Net Sales:

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

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

                                  (Unaudited)

Gross Profit:

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

Operating Expenses:

     Overall expenses have been reduced due to the cost control procedures
     implemented by the Company. In addition, the reimbursement of $ 767,000 in
     this quarter of legal fees and costs associated with the Keebler
     arbitration award is reflected in the reduction in general and
     administrative expenses. The reduction in both product development and
     sales and marketing expenses reflects the effort by the Company in these
     areas to increase performance without significant expenditures of
     resources. The reduction in general and administrative expenses would have
     been greater had the final legal fees and associated costs relating to the
     Keebler arbitration not been included. Since the award, the Company is
     beginning to both refocus its efforts in the product development area to
     introduce new products and in the sales and marketing area as it
     reestablishes its customer, broker, and support organizations.
 
Product Development:

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

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

                                  (Unaudited)


Sales and Marketing:

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

General and Administrative:

     For the nine months ended September 30, 1997, expenses were $1,894,114
     compared to $1,603,775 for the nine months ended September 30, 1996, an
     increase of $290,339. The majority of the increase in expenses are in the
     professional services area, particularly legal expenses totaling $1,183,718
     less the Keebler arbitration reimbursement of $767,000; insurance of $
     80,759; and amortization and depreciation of $52,154. The professional
     services increase is almost directly related to the litigation defenses of
     the Company, primarily for the Keebler arbitration. For the three months
     ended September 30, 1997 expenses were $770,227 before the award of
     $767,000 which resulted in a balance of $(3,227) compared to $573,929 for
     the three month period ended September 30, 1996. The increases in 1997 over
     1996 of $192,298 are in the areas of amortization and depreciation of
     $30,564; an increase in bad debts of $45,000 from an employee due to the
     filing of personal bankruptcy; and the increase in insurance cost of
     $65,666.

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

     Interest expenses reflects the continuing cost of the line of credit with
     Coast Business Credit, the primary lender. Upon receipt of the Keebler
     arbitration, the Company immediately invested the proceeds in short-term
     government securities, with the approval of the Board of Directors. The
     interest income for the three months ended September 30, 1997 reflects the
     receipts from these short term investments.

     Upon the Keebler arbitration award, the Company has recorded the $5,983,000
     as income under the heading litigation recovery, net of costs. In addition,
     the Company was able to cancel outstanding debt in the amount of $140,829
     due to the Keebler Company and incurred and paid $1,236,883 to ATCOLP
     INVESTMENT PARTNERS under the existing agreement with them for the
     advancement of certain funds to pay the litigation expenses.

                                       16
<PAGE>

          ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AS RESULTS OF OPERATIONS

                                  (Unaudited)

Liquidity and Capital Resources:

<TABLE>
<CAPTION>
                                                      Nine Months Ended 
                                                         September 30,
                                                    1997               1996
                                                 ----------        -----------
<S>                                              <C>               <C>
Net Cash Generated (Used) for Operations         $1,451,065        $(5,502,020)
Net Cash Used for Investing Activities                6,912           (405,648)
Net Cash Provided by Financing Activities         1,964,924          5,775,583
Working Capital (Deficit)                         3,783,444           (875,965)
 
</TABLE>


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

                                       17
<PAGE>
 
                          PART II  OTHER INFORMATION

                          ITEM 1.  LEGAL PROCEEDINGS
                                   

In December 1994, Lloyd Gaunt, who invested an aggregate of $75,000 in certain
of the Company's private placements, initiated an action in Superior Court,
Orange County, California against his stockbroker, two national brokerage firms,
several companies in which he had invested; and, certain of those company's
officers. Included among the defendants 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 connection with the acquisition of assets of Auburn Farms, Inc., (AFI) under
the FPA, the Company acquired certain rights of AFI against its co-packer and
against Barbara's Bakery. The Company is pursuing these rights, and in May 1996,
initiated an action alleging Lanham Act violations, misappropriation of trade
secrets, unfair competition and related claims. The defendants have filed
counterclaims against the Company and Auburn Farms alleging various tort and
contract claims. Counsel for Vitafort is reviewing the case to determine the
best course of action to continue forward.

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

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

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

                   ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits.  None

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

                                       18
<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: November 14, 1997


                                       19