<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                                   FORM 10-Q

(Mark One)
   [ X ]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended June 30, 1997

                                      OR

   [   ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                       For the transition period from to

Commission file number 1-13260

                             SILVERADO FOODS, INC.
            (Exact name of registrant as specified in its charter)

                 OKLAHOMA                          73-1369218
     (State or other jurisdiction of            (I.R.S. Employer
      incorporation or organization)           Identification No.)

             6846 SOUTH CANTON, SUITE 110, TULSA, OKLAHOMA  74136
                   (Address of principal executive offices)

                                (918) 496-2400
             (Registrant's telephone number, including area code)

                                NOT APPLICABLE
             (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to field such reports), and (2) has been subject to such filing
requirements of the past 90 days.

Yes  [ X ]  No  [   ]

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

            Class                               Outstanding at August 7, 1997
            -----                               -----------------------------
Common Stock, $.01 Par Value                              8,898,864
<PAGE>
 
                                     PART I



                                   FINANCIAL
                                  INFORMATION

                                       2
<PAGE>
                     SILVERADO FOODS, INC. AND SUBSIDIARIES
                     --------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
<TABLE>
<CAPTION>
                                                                                June 30,             December 31,
     ASSETS                                                                       1997                  1996
     ------                                                                   ------------          -------------
                                                                               (Unaudited)
<S>                                                                           <C>                   <C>   
CURRENT ASSETS:
     Cash                                                                          20,095               164,118
     Accounts receivable, net                                                   3,053,089             4,605,632
     Inventories, net                                                           4,525,030             5,974,719
     Prepaid expenses and other                                                   778,997               543,709
     Deferred tax assets                                                           16,663                16,663
     Net assets held for disposal                                               1,317,940               188,324
                                                                              -----------           -----------
          Total current assets                                                  9,711,814            11,493,165
                                                                              -----------           -----------

NOTES RECEIVABLE                                                                1,281,268             1,315,584

PROPERTY, PLANT AND EQUIPMENT, net                                             11,529,651            11,829,580
GOODWILL AND OTHER INTANGIBLES, net                                            10,554,128            13,137,613
                                                                              -----------           -----------

          Total assets                                                         33,076,861            37,775,942
                                                                              ===========           ===========

     LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
     Current maturities of long-term debt                                       7,438,869             8,637,272
     Trade accounts payable                                                     5,573,925             8,338,029
     Accrued liabilities                                                        2,458,444             2,324,039
     Other liabilities                                                            189,466               290,311
                                                                              -----------           -----------
          Total current liabilities                                            15,660,704            19,589,651
                                                                              -----------           -----------

LONG-TERM DEBT, less current maturities                                        15,306,211            13,442,197
DEFERRED TAX LIABILITIES                                                           16,663                16,663
CAPITALIZED LEASE OBLIGATIONS                                                   3,919,613             3,587,632

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY (DEFICIT)
     Common stock, $.01 par value, 20,000,000 shares authorized                    86,329                72,583
     Warrants                                                                      61,563                61,563
     Additional paid-in-capital                                                24,050,559            18,843,454
     Accumulated deficit                                                      (25,960,129)          (17,773,149)
                                                                              -----------           -----------
          Total shareholders' equity (deficit)                                 (1,761,678)            1,204,451
     Less treasury stock                                                          (64,652)              (64,652)
                                                                              -----------           -----------
                 Total shareholders' equity (deficit)                          (1,826,330)            1,139,799
                                                                              -----------           -----------
                 Total liabilities and shareholders' equity (deficit)          33,076,861            37,775,942
                                                                              ===========           ===========
</TABLE>

            See notes to unaudited consolidated financial statements.

                                       3
<PAGE>
                    SILVERADO FOODS, INC. AND SUBSIDIARIES
                    --------------------------------------

                     CONSOLIDTAED STATEMENTS OF OPERATIONS
                     -------------------------------------

                                  (Unaudited)

<TABLE>
<CAPTION>
                                       Three Months Ended              Six Months Ended
                                           June 30,                        June 30,
                                  ----------------------------    ---------------------------
                                      1997           1996           1997             1996
                                  -----------     ------------    ----------      -----------
<S>                               <C>             <C>             <C>             <C>
NET SALES                          11,801,513     $ 11,530,395    23,500,850      $21,456,443
COST OF SALES                       7,977,146        7,452,155    16,245,202       13,941,750
                                  -----------     ------------   -----------      -----------
     Gross profit                   3,824,367        4,078,240     7,255,648        7,514,693
                                  -----------     ------------   -----------      -----------
OPERATING EXPENSES:
     General and administrative     3,147,038        1,797,449     5,109,275        3,591,308
     Selling and marketing          2,828,577        2,477,251     5,680,061        4,577,143
     Depreciation                     127,805           60,188       248,313          136,809
     Amortization of goodwill
      and other intangibles           216,921          311,112       446,113          584,846
                                  -----------     ------------   -----------      -----------
                                    6,320,341        4,646,000    11,483,762        8,890,106
                                  -----------     ------------   -----------      -----------
OPERATING LOSS                     (2,495,974)        (567,760)   (4,228,114)      (1,375,413)

OTHER INCOME (EXPENSE):
     Interest                        (575,262)        (325,064)   (1,128,574)        (631,540)
     Accretion of debenture
      discount                              -                -    (1,150,000)               -
     Other, net                       (12,484)         (15,411)      (23,039)         (40,110)
                                  -----------     ------------   -----------      -----------
                                     (587,746)        (340,475)   (2,301,613)        (671,650)
                                  -----------     ------------   -----------      -----------
LOSS BEFORE INCOME TAXES           (3,083,720)        (908,235)   (6,529,727)      (2,047,063)
PROVISION FOR INCOME TAXES                  -                -             -                -
                                  -----------     ------------   -----------      -----------
     NET LOSS FROM CONTINUING
      OPERATIONS                   (3,083,720)        (908,235)   (6,529,727)      (2,047,063)
                                  -----------     ------------   -----------      -----------

DISCONTINUED OPERATIONS
     Operating Loss                  (119,582)        (175,683)     (277,277)        (314,847)
     Loss on Disposal              (1,379,976)               -    (1,379,976)               -
                                  -----------     ------------   -----------      -----------
     LOSS FROM DISCONTINUED
      OPERATIONS                   (1,499,558)        (175,683)   (1,657,253)        (314,847)
                                  -----------     ------------   -----------      -----------

     NET LOSS                      (4,583,278)      (1,083,918)   (8,186,980)      (2,361,910)
                                  ===========     ============   ===========      ===========

LOSS PER COMMON AND
  COMMON EQUIVALENT SHARE FROM
  CONTINUING OPERATIONS           $     (0.39)    $      (0.14)  $     (0.85)     $     (0.33)

LOSS FROM DISCONTINUED
  OPERATIONS                      $     (0.19)    $      (0.03)  $     (0.22)     $     (0.05)
                                  -----------     ------------   -----------      -----------
LOSS PER SHARE                    $     (0.58)    $      (0.17)  $     (1.07)     $     (0.38)
                                  ===========     ============   ===========      ===========

</TABLE>

           See notes to unaudited consolidated financial statements.

                                       4
<PAGE>
 
                    SILVERADO FOODS, INC. AND SUBSIDIARIES
                    --------------------------------------

           CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
           ---------------------------------------------------------
                   
                                  (Unaudited)
<TABLE> 
<CAPTION> 
                                  Common Stock        Treasury Stock      
                                -----------------    -------------------                 Additonal
                                  Number               Number                             Paid-in     Accumulated
                                of shares  Amount    of shares   Amount     Warrants      Capital       Deficit        Total
                                ---------  -------   ---------  --------    --------    -----------   -----------   -----------
<S>                             <C>        <C>       <C>        <C>         <C>         <C>           <C>           <C>

BALANCE, DECEMBER 31, 1996      7,258,243  $72,583   (26,995)   $(64,652)   $61,563     $18,843,454   $(17,773,149) $ 1,139,799
  Issuance of common stock in
    connection with debenture
    conversion                  1,374,569   13,746      -           -          -          1,461,504           -       1,475,250
  Contribution of capital            -        -         -           -          -          2,595,601           -       2,595,601
  Accretion of debenture
    discount                         -        -         -           -          -          1,150,000           -       1,150,000
  Net loss                           -        -         -           -          -               -        (8,186,980)  (8,186,980)
                                ---------  -------   --------   --------    -------     -----------   ------------  -----------
BALANCE, JUNE 30, 1997          8,632,812  $86,329   (26,995)   $(64,652)   $61,563     $24,050,559   $(25,960,129) $(1,826,330)

</TABLE> 
           See notes to unaudited consolidated financial statements.

                                       5
<PAGE>
                     SILVERADO FOODS, INC. AND SUBSIDIARIES
                     --------------------------------------

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                      -------------------------------------

                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                             Six Months Ended
                                                                                 June 30,
                                                                        -----------------------------
                                                                            1997             1996
                                                                        ------------     ------------
<S>                                                                     <C>              <C>   
CASH FLOWS FROM OPERATING ACTIVITIES
        Net loss                                                        $ (8,186,980)    $ (2,361,910)
                                                                        ------------     ------------

Adjustments to reconcile net loss to cash used in operating activities--
        Depreciation and amortization                                      1,127,779          937,401
        Accretion of debenture discount                                    1,150,000             -
        Increase in allowance for doubtful accounts                        1,000,000             -
        Loss on sale of assets                                             1,308,046             -
        Change in assets and liabilities, net of effect of acquisitions
           (Increase) decrease in accounts receivable                      1,428,505         (523,399)
           (Increase) decrease in inventory                                1,092,848         (823,474)
           (Increase) decrease in prepaid expenses and other                (185,288)         181,343
           Increase in assets held for disposal                             (388,573)            -
           Increase (decrease) in payables and accrued liabilities        (2,519,433)       1,571,970
           (Increase) decrease in intangibles and other                      231,136         (100,705)
                                                                        ------------     ------------
             Total adjustments                                             4,245,020        1,243,136
                                                                        ------------     ------------
             Cash used in operating activities                            (3,941,960)      (1,118,774)
                                                                        ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
        Capital expenditures                                                (938,525)      (1,007,523)
        Payments for acquisitions                                               -          (1,530,104)
                                                                        ------------     ------------
             Cash used in investing activities                              (938,525)      (2,537,627)
                                                                        ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
        Proceeds from exercise of warrants                                      -              49,609
        Borrowings from long-term debt                                    10,620,911        3,424,986
        Payments on notes payable                                         (5,884,449)         196,546
                                                                        ------------     ------------
             Cash provided by financing activities                         4,736,462        3,671,141
                                                                        ------------     ------------

NET INCREASE (DECREASE) IN CASH                                             (144,023)          14,740
CASH, beginning of period                                                    164,118          128,401
                                                                        ------------     ------------
CASH, end of period                                                     $     20,095     $    143,141
                                                                        ============     ============

Non-cash Financing Activities:
        Issuance of stock for acquisition                               $       -        $    600,000
        Issuance of stock for debenture conversion                         1,461,504             -
        Addition to paid-in-capital for debenture discount accretion       1,150,000             -
        Contribution of capital                                            2,595,601             -
        Capitalized Lease Obligation                                            -           3,589,293
        Receipt of Note Receivable for sale of assets                      1,012,383             -

SUPPLEMENTAL CASH FLOWS INFORMATION:

        Cash paid for-
             Interest                                                   $    572,213     $    440,754
             Income taxes                                                       -                -
</TABLE>
            See notes to unaudited consolidated financial statements.

                                       6
<PAGE>
 
                     SILVERADO FOODS, INC. AND SUBSIDIARIES
                     --------------------------------------

              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------


1.  GENERAL:

The accompanying consolidated financial statements have been prepared by
Silverado Foods, Inc. (the "Company") without audit and should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto included in the Company's annual report and Form 10-K as of December 31,
1996.  The foregoing financial statements include only normal recurring accruals
and all adjustments which the Company considers necessary for a fair
presentation.


2.  DETAILS TO CONSOLIDATED BALANCE SHEETS:

Inventories consist primarily of finished goods and packaging supplies which are
stated at the lower of cost (first-in, first-out basis) or market as follows:
<TABLE>
<CAPTION>
                                     JUNE 30,    DECEMBER 31,
                                       1997          1996   
                                   -----------   ------------ 
<S>                                <C>           <C>
Raw Materials                       $1,675,857     $2,348,945
Finished Goods                       2,960,048      3,709,774
                                    ----------     ----------
                                     4,635,905      6,058,719
Less:  Allowance for excess and
        obsolete inventory            (110,875)       (84,000)
                                    ----------     ----------
 
                                    $4,525,030     $5,974,719
                                    ==========     ==========
</TABLE>

Inventories are reflected net of approximately $330,000 of inventories related
to the Company's catalog division which are classified as net assets held for
disposal, as discussed in Note 4.


3.  LOSS PER SHARE:

For the three months ended June 30, 1997 and June 30, 1996, the loss per share
calculation includes the weighted average number of shares outstanding for the
period which were 7,997,935 and 6,225,788, respectively.  For the six months
ended June 30, 1997 and June 30, 1996, the loss per share calculation includes
the weighted average number of shares outstanding for the period which were
7,664,689 and 6,199,487, respectively.

In March 1997, Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings per Share" was issued. SFAS No. 128 replaces primary earnings per
share with basic earnings per share, and diluted earnings per share with fully
diluted earnings per share. 

                                       7
<PAGE>
 
The earnings per share calculations for the three and six month periods ended
June 30, 1997 and 1996 would not change under SFAS No. 128.


3.  NOTES RECEIVABLE

In April 1996, the Company sold its Gift and Gourmet division in consideration
for a note receivable of $1,370,000 bearing interest at 11%.  The terms of the
note receivable call for interest only for the first two years and principal and
interest over the remaining four years.  No gain or loss was recognized on this
transaction.  During the second quarter of 1997, the Company provided a reserve
against this note receivable in the amount of $1,000,000 due to the
uncertainties surrounding the collection of this note receivable.

On June 6, 1997, the Company sold certain assets originally acquired from the
MarveLoaf Corp. for $1,062,000 including cash of $50,000 and a note receivable
for $1,012,000.  Interest is at 10% and is payable on March 31, 1998 and March
31, 1999.  In addition, principal payments of $12,500 plus interest will be due
quarterly beginning January 15, 2000 through 2006.  No gain or loss was
recognized on this sale.


4.  SUBSEQUENT EVENT

On July 1, 1997, the Company entered into a letter of intent to sell all of the
assets of its catalog division for $1,100,000, including an earn-out provision
for $100,000 if catalog sales during 1998 exceed a certain amount. Therefore, at
June 30, 1997, the Company has classified these assets as net assets held for
disposal and recognized a loss in connection with this proposed sale in the
amount of $1,380,000.


5.  SHAREHOLDERS' EQUITY (DEFICIT)

In connection with the acquisition of Nonni's in 1993, the Company entered into
a royalty agreement. This royalty agreement was terminated in July 1996 by
issuing 700,000 shares of common stock with a guaranteed market price of $5.71
per share for the period April 1, 1997 through December 31, 1997. Through June
30,1997, certain shares were sold at a price below the guaranteed market price.
The Company is now obligated to issue approximately 900,000 shares in connection
with such obligation.

                                       8
<PAGE>
 
                 ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
                 ----------------------------------------------

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                ------------------------------------------------
                                        
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and notes thereto.  The following
table presents, as a percentage of net sales, certain selected financial data
for the Company for the periods indicated:
<TABLE>
<CAPTION>
                                                    THREE MONTHS          SIX MONTHS       
                                                       ENDED                ENDED    
                                                      JUNE 30,             JUNE 30,
                                                -------------------   -------------------
                                                  1997       1996       1997       1996
                                                --------   --------   --------   -------- 
<S>                                             <C>        <C>        <C>        <C>
Net Sales                                         100%       100%       100%       100%
Gross Profit                                       32         35         31         35
General and Administrative                         27         16         22         17
Selling and Marketing                              24         22         24         21
Depreciation and Amortization of Intangibles        3          3          3          3
Interest & Other                                    5          3         10          3
Loss from Continuing Operations                   (26)        (8)       (28)       (10)
Loss from Discontinued Operations                 (13)        (2)        (7)        (2)
Net Loss                                          (39)        (9)       (35)       (11)
</TABLE>

RESULTS OF OPERATIONS

The continuing operations information excludes the results from operations of
the Company's non-snack tray direct store delivery business located in southern
California and the Company's catalog division, both of which have been
discontinued.  No income tax benefit has been recognized in connection with
these discontinued operations due to the Company's net operating loss carry
forward position.

PERIOD TO PERIOD COMPARISONS FOR THE THREE MONTHS ENDED JUNE 30, 1997 COMPARED
TO THE THREE MONTHS ENDED JUNE 30, 1996

Net Sales.     Total net sales for the three month period ended June 30, 1997
increased 2% to $11,802,000, versus $11,530,000 for the same period of 1996.
The snack tray segment's net sales decreased from $6,194,000 to $5,987,000 and
accounted for 50% of total sales for the quarter ending June 30, 1997 compared
to 54% for the same period of 1996.  Sales in the specialty baked goods segment
increased 9% to $5,815,000 during the second quarter of 1997 versus $5,337,000
for the same period of 1996 driven primarily by sales increases in the bagel bar
product line.

Gross Profit.     Gross profit for the three months ended June 30, 1997 was
$3,824,000, a 6% decrease over the comparable period in 1996 of $4,078,000.
Gross profit as a percentage of net sales decreased from 35% to 32%.  Total
gross profit in the snack tray segment was $2,708,000, an increase of  3% over
the prior year quarter and increased as a 

                                       9
<PAGE>
 
percentage of net sales from 42% to 44%. This increase in gross margin was a
result of lower purchased product cost for the snack tray segment when compared
to the same period of 1996. In the specialty baked goods segment, gross profit
decreased $345,000, from $1,461,000 to $1,116,000. This decline in gross profit
was due to a decline of approximately $254,000 in the Mom's Best and Maxi-Crisp
product lines and a decline of approximately $293,000 in the Nonni's biscotti
product lines, which was offset by an increase of approximately $202,000 in the
bagel bar product line.

The decline in Mom's Best gross profit was due primarily to declining sales
volumes. The decline in Maxi-Crisp was due to declining sales volumes and higher
costs. Approximately 40% of the Nonni's gross profit decline was due to lower
sales and 60% of the decline was due to higher costs related to the initial
production of certain private-label biscotti products, and the installation of
additional production improvements. The increase in the bagel bar product line
was due to increased sales volumes offset by lower margins due to new production
start-up in the Santa Ana manufacturing facility and lower plant efficiency
prior to outsourcing the Company's traditional round bagel production.

General and Administrative.     General and administrative expenses increased
from $1,797,000 to $3,147,000, an increase of $1,350,000 and increased as a
percentage of net sales from 16% to 27%. The majority of this increase was due
to a reserve provision of $1,000,000 related to a note receivable that occurred
as a result of the 1996 sale of the Company's Gift and Gourmet division.  The
snack tray segment's general and administrative expenses increased by $205,000
or 24% due to higher payroll and other corporate expenses in the day to day
operations.

Selling and Marketing.     Selling and marketing expenses increased  as planned
from $2,477,000 to $2,829,000, an increase of 14% over the comparable period of
1996 and increased as a percentage of net sales from 22% to 24%.  This increase
was due to increased sales and marketing expenses associated with the specialty
baked goods segment for demonstrations of the Company's bagel bar product and
increased sales expenses associated with development of new accounts in the
snack tray segment. Expenses for the second half of 1997 are planned to show a
decrease versus the prior year to balance total year spending.

Depreciation and Amortization of Intangibles.     Depreciation and amortization
of goodwill and other intangibles decreased from $371,000 to $345,000, a
decrease of 7% over the same period of 1996.  Of this amount, $128,000 and
$60,000 represented depreciation for the three months ended June 30, 1997 and
1996, respectively.  In addition, there was an additional $170,000 and $69,000
of depreciation included in cost of goods sold for the three months ended June
30, 1997 and 1996, respectively.

Interest and Other.     Interest and other expense increased from $341,000 to
$588,000, an increase of $247,000.  The increase was due to increased debt
outstanding as compared to the prior year quarter for the funding of working
capital requirements.

                                       10
<PAGE>
 
Loss from Continuing Operations.     Losses from continuing operations increased
from $908,000 to $3,084,000, an increase of $2,176,000.  This increase came from
both the snack tray segment and the specialty baked goods segment and was due to
the reserve provision of $1,000,000 discussed above and higher operating
expenses from both segments as discussed above as compared to the previous
period of 1996.

Loss from Discontinued Operations.     During the second quarter, the Company
made the decision to sell its catalog division located in Palestine, Texas and,
therefore, has accounted for the net assets of this division as discontinued at
June 30, 1997.  Related to this decision, the Company has provided a reserve of
$1,380,000 for a loss on sale of this division in the second quarter of 1997.
The Company anticipates closing this sale in August 1997.

Net Loss.     The Company's net loss increased from $1,084,000 to $4,583,000, an
increase of $3,499,000 over the comparable period for 1996.  Of this amount,
$1,000,000 relates to the reserve provision for the note receivable discussed in
general and administrative expenses above, and $1,380,000 relates to the loss
from discontinued operations from the sale of the Company's catalog division.


PERIOD TO PERIOD COMPARISONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO
THE SIX MONTHS ENDED JUNE 30, 1996

Net Sales.        Total net sales increased 10% from $21,456,000 to $23,501,000.
Sales in the snack tray segment decreased by $66,000 to $12,075,000 or 1% while
sales in the specialty baked goods segment increased by $2,307,000 or 24%. The
increase in the specialty baked goods segment was due to higher sales from the
Company's bagel related products which increased 185% over the same period of
1996, but was offset by lower sales from the Maxi-Crisp product lines which
decreased 56% compared to the same six month period of 1996.

Gross Profit.     Gross profit decreased from $7,515,000 to $7,256,000, a
decrease of 3%.  Gross profit as a percentage of net sales decreased from 35% to
31%.  The decrease in gross profit as a percentage of net sales was due to lower
margin sales from warehouse clubs for the Company's bagel product lines and the
biscotti product lines, offset by higher gross margins from the snack tray
segment where gross margins increased from 41% to 44%.

General and Administrative.     General and administrative expenses increased
from $3,591,000 to $5,109,000, an increase of 42% and increased as a percentage
of net sales from 17% to 22%.  A portion of this increase was due to higher
general and administrative expenses from the snack tray segment which increased
by $266,000 due to higher payroll and other corporate expenses.  The food sales
segment's general and administrative expenses decreased while corporate expenses
increased as certain functions were 

                                       11
<PAGE>
 
centralized as the Company closed three manufacturing facilities during the last
six months of 1996.

Selling and Marketing.     Selling and marketing expenses increased from
$4,577,000 to $5,680,000 a increase of 24% and increased as a percentage of net
sales from 21% to 24%.  The increase in selling and marketing expenses was due
to higher demonstration expenses associated with the bagel related product lines
and higher expenses associated with the snack tray segment as the Company incurs
expenses associated with maintaining customer accounts.

Depreciation and Amortization of Intangibles.     Amortization of goodwill and
other intangibles decreased by $27,000, a decrease of 4%.  The majority of this
decrease was in the snack tray segment and related to route development costs
previously capitalized but now these costs are expensed on a current basis.

Interest and Other.     Interest and other expenses increased from $672,000 to
$2,307,000, an increase of $1,635,000. Of this amount, $1,150,000 related to a
charge from the issuance of certain Regulation S debentures that occurred in the
first quarter of 1997 that had a convertible feature at a discount to the market
price of the common stock of the Company. This intrinsic value associated with
the discount must be charged to interest expense over the holding period.

Loss from Continuing Operations.     Losses from continuing operations increased
from $2,047,000 to $6,530,000, an increase of $4,483,000.  Of this amount,
$1,000,000 related to the reserve provision against notes receivable arising
from the sale of the Gift and Gourmet division and $1,150,000 due to an interest
expense charge related to certain Regulation S debentures.

Loss from Discontinued Operations.     Losses from discontinued operations
increased from $315,000 to $1,657,000, an increase of $1,342,000. This related
to the decision to sell the catalog division located in Palestine, Texas.

Net Loss.     The Company's net loss increased from $2,362,000 to $8,187,000, an
increase of $5,825,000 due to the reasons discussed above.

                                       12
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

     Net cash used in operations was $3,942,000 for the six months ended June
30, 1997 compared to $1,119,000 for the six months ended June 30, 1996.  Net
cash used in investing activities was $938,000 compared to $2,538,000 for the
comparable period in 1996.  Net cash generated from financing activities during
the first six months ended June 30, 1997 totaled $4,736,000 from net borrowings
on long term debt.

The Company has a revolving credit facility of $7 million with a bank of which
$7 million was drawn as of June 30, 1997.  Borrowings are based upon 80% of
eligible accounts receivable and 50% of eligible inventories.  The term of this
revolver is for a period of three years (due in 1998) with interest at Wall
Street Journal-Southwest Edition prime payable monthly and principal due at
maturity.  At June 30, 1997, the Company's borrowings under this line of credit
exceeded the amounts available based upon the borrowing  base of eligible
accounts receivable and inventories.  Borrowings under this facility are
guaranteed by the Company's chairman and his spouse.

In addition, the Company has a $6 million note payable with another bank due in
two years.  The terms of this note call for interest only during the first year
with principal and interest during the second year on a five year amortization.
This note payable is collateralized by certain assets of the Company and is
guaranteed by the Company's chairman and his spouse along with another family
member of the Company's chairman.

Currently, the Company is reviewing alternatives to refinance the working
capital revolver and the note payable with other financial institutions.  The
$7,000,000 revolver is classified as current in the financial statements as of
June 30, 1997.  In the event that the Company is unable to close a financing
transaction, the Company's chairman has agreed to fund any capital and operating
requirements during 1997.

The Company is subject to various covenants associated with its revolving line
of credit and term note, such as limitations on payments of dividends and on the
sale of a substantial portion of assets and on future indebtedness.

The Company curently does not meet all of the American Stock Exchange's listing 
guidelines to be listed on the stock exchange and there can be no assurance in
the future that the Company's common shares will continue to be listed on the
American Stock Exchange. The Company is taking actions to address these
requirements.

FORWARD LOOKING STATEMENTS

This Management's Discussion and analysis of  Financial Condition and Results of
Operations include certain statements that may be "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. All
statements in this Form 10-Q, other than statements of historical facts, that
address activities, events or developments that the Company expects, believes or
anticipates will or may occur in the future are forward looking statements.
Although the Company believes the expectations expressed in such forward-looking
statements are based on reasonable assumptions within the bounds of its
knowledge of its business, such statements are not guarantees of future
performance and actual results or developments may differ materially from those
in the forward looking statements. Forward-looking statements involve risks and
uncertainties including, but not limited to, general economic trends, continued
acceptance of the 

                                       13
<PAGE>
 
Company's product in the marketplace, competitive factors, manufacturing and raw
material costs, the Company's dependence upon third-party suppliers, and other
risks detailed from time to time in the Company's periodic reports filed with
the Securities and Exchange Commission. The Company undertakes no obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.

                                       14
<PAGE>
 
                         PART II.     OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS
 
          Not applicable

ITEM 2.   CHANGES IN SECURITIES

          During the second quarter of 1997, the Company issued a total of
946,305 shares of common stock in connection with the conversion of convertible
debentures previously issued by the Company in transactions effected pursuant to
Regulation S promulgated under the Securities Act of 1933, as amended ( the
"Act"). The recipients of such shares of common stock were accredited investors
(as defined in Regulation D promulgated under the Act). The shares of common
stock issued upon such conversion were exempt from registration under the Act
pursuant to Section 3(a)(9) of the Act. No commission or other remuneration was
paid to a broker or placement agent in connection with such conversion. The
dates of the Company's issuance instructions to its transfer agent and the
conversion price per shares for each of such conversions is as follows:
<TABLE>
<CAPTION>
Date                  Conversion Price          Number of Shares
<S>                   <C>                       <C>
April 4, 1997                1.35                      44,527
April 11, 1997               1.15                     123,004
May 1, 1997                  1.03                       8,715
May 16, 1997                 1.20                      13,011
May 21, 1997                 1.06                      47,220
May 28, 1997                  .88                      30,550
June 3, 1997                  .83                      45,108
June 5, 1997                  .79                     126,984
June 5, 1997                  .88                      91,428
June 6, 1997                  .82                     142,248
June 18, 1997                 .76                      27,585
June 19, 1997                 .70                      99,144
June 24, 1997                 .70                     102,855
June 30, 1997                 .70                      43,926
</TABLE>

                                       15
<PAGE>
 
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          As of June 30, 1997, the Company's borrowings on its bank revolving
credit facility exceeded the borrowing base of eligible accounts receivable and
inventories. The principal amount owed by the Company under such revolving
credit facility is $7,000,000. The Company is current with respect to its
required payments under such revolving credit facility.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

          The Annual Meeting of shareholders of the Company (the "Annual
Meeting") was held on May 9, 1997, in Tulsa, Oklahoma.  At the Annual Meeting,
the shareholders of the Company elected Lawrence D. Field, Timothy G. Bruer,
Gerald E. Milton, James K. Tolbert, Milton D. McKenzie, Sam L. Susser, and James
H. Bankard as directors of the Company for one-year terms.  The shareholders
also considered and approved the appointment of Arthur Andersen LLP as the
independent auditors of the Company for the fiscal year ending December 31,
1997.

There were present at the Annual Meeting, in person or by proxy, shareholders
holding 5,277,363 shares of the common stock of the Company, or 68.9% of the
total stock outstanding and entitled to vote at the Annual Meeting.  The table
below describes the results of voting at the Annual Meeting:

                                       16
<PAGE>
 
<TABLE>
<CAPTION>
                                          Votes
                                         Against
                                            or
1.  Election of Directors:    Votes For  Withheld  Abstentions  Non-Votes
                              ---------  --------  -----------  ---------
<S>                           <C>        <C>       <C>          <C>
     Lawrence D. Field        5,273,263    4,100        -0-         -0-
     Timothy G. Bruer         5,273,263    4,100        -0-         -0-
     Gerald E. Milton         5,273,263    4,100        -0-         -0-
     James K. Tolbert         5,273,263    4,100        -0-         -0-
     Milton D. McKenzie       5,273,263    4,100        -0-         -0-
     Sam L. Susser            5,273,263    4,100        -0-         -0-
     James H. Bankard         5,273,263    4,100        -0-         -0-
                                                                  
2.  Ratification of Arthur    5,273,263               4,100         -0-
     Andersen LLP as
     independent auditors
     of the Company for
     fiscal 1997
</TABLE>

          Not applicable

ITEM 5.   OTHER INFORMATION

          Not applicable

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a)  Exhibits:
                 10.1  Promissory Note dated April 29,1997 in the original
                         principal amount of $6,000,000 payable to Bank of
                         Oklahoma, N. A.
                 10.2  Security Agreement dated April 29,1997, from the company
                         to Bank of Oklahoma, N. A.
                 27.0  Financial Data Schedule

          (b)  Reports on Form 8-K

                None

                                       17
<PAGE>
 
SIGNATURES

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

                                 Silverado Foods, Inc.
                                 ---------------------
                                    Registrant

                                 By:/s/ Dorvin D. Lively
                                 -----------------------
                                   Dorvin D. Lively
                                   Vice President, Chief Financial Officer
                                   and Secretary  (Duly Authorized
                                   Officer and Principal
                                   Accounting Officer)

Date:  August 14, 1997

                                       18
<PAGE>
 
                               INDEX TO EXHIBITS

          The following documents are included as exhibits to this Form 10-Q.
Those exhibits below incorporated by reference herein are indicated as such by
the information supplied in the parenthetical thereafter.  If no parenthetical
appears after an exhibit, such exhibit is filed herewith.
 

10.1  Promissory Note dated April 29,1997, in the original principal amount of
            $6,000,000 payable to Bank of Oklahoma, N. A.
10.2  Security Agreement dated April 29,1997, from the Company to Bank of
            Oklahoma, N. A.
27.0  Financial Data Schedule