<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 SEPTEMBER 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 000-29642

                               FILM ROMAN, INC.
              (Exact name of registrant as specified in charter)

                 DELAWARE                          95-4585357                  
     (State or other jurisdiction of            (I.R.S. Employer
      incorporation or organization)          Identification Number)

               12020 CHANDLER BOULEVARD, SUITE 200
                   NORTH HOLLYWOOD, CALIFORNIA           91607
             (Address of principal executive offices)  (Zip Code)

      Registrant's telephone number, including area code:  (818) 761-2544


     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 file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.  YES [ X ]  NO [  ].

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                 PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

     Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.  YES [  ]  NO [  ].

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

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

     As of October 31, 1997, 8,454,690 shares of common stock, par value $.01
per share, were issued and outstanding.

===============================================================================

<PAGE>
 
                               TABLE OF CONTENTS



                        PART I.  FINANCIAL INFORMATION

<TABLE>
<C>     <S>                                                            <C>
Item 1.  Financial Statements .....................................       3
 
           Consolidated Balance Sheets as of December 31, 1996
           and September 30, 1997 (unaudited)......................       3
 
           Consolidated Statements of Operations for the Three 
           and Nine Months Ended September 30, 1996 and 
           September 30, 1997 (unaudited)..........................       4
 
           Consolidated Statements of Cash Flows for the Nine 
           Months Ended September 30, 1996 and September 30, 
           1997 (unaudited)........................................       5
 
           Notes to Consolidated Financial Statements..............       6
 
Item 2.  Management's Discussion and Analysis of Financial 
         Condition and Results of Operations.......................       8
 

                          PART II.  OTHER INFORMATION



Item 6.  Exhibits and Reports on Form 8-K .........................       12


Signatures ........................................................       S-1
</TABLE>

                                       2
<PAGE>
 
                        PART I.  FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


                               FILM ROMAN, INC.

                          CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                       December 31,    September 30,
                                                                                           1996             1997
                                                                                       -------------   --------------
                                                                                                         (unaudited)
<S>                                                                                   <C>              <C>
ASSETS
 
Cash and cash equivalents ..................................................           $ 13,738,927     $ 15,428,605
Accounts receivable ........................................................              6,956,409        3,857,799
Film costs, net of accumulated amortization of $169,094,868 (December                    
31, 1996) and $199,738,562 (September 30, 1997) ............................             21,268,945       19,711,792
Property and equipment, net of accumulated depreciation and                                 
amortization of $934,192 (December 31,1996) and $1,103,902  
(September 30, 1997) .......................................................                537,389          423,924
Deposits and other assets ..................................................                315,625          437,020
                                                                                       ------------     ------------
Total Assets ...............................................................           $ 42,817,295     $ 39,859,140
                                                                                       ============     ============
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Accounts payable ..........................................................            $  3,790,136     $  1,662,933
Accrued expenses ..........................................................               1,830,314        2,548,965
Deferred revenue ..........................................................              13,409,592       15,655,353
                                                                                       ------------     ------------
Total liabilities .........................................................              19,030,042       19,867,251
 
Stockholders' equity                                                                     

Preferred Stock, $0.01 par value, 5,000,000 shares authorized,
       none issued ........................................................                    ----             ----
 
Common stock, $0.01 par value, 20,000,000 shares authorized,                                 
8,449,690 shares issued and outstanding at December 31, 1996 and
8,454,690 shares issued and outstanding at September 30, 1997 .............                  84,498           84,548
Additional paid-in capital ................................................              36,305,684       36,305,684
Accumulated deficit .......................................................             (12,602,929)     (16,398,343)
                                                                                       ------------     ------------
      Total stockholders' equity ..........................................              23,787,253       19,991,889
                                                                                       ------------     ------------
      Total liabilities and stockholders' equity ..........................            $ 42,817,295     $ 39,859,140
                                                                                       ============     ============
 
</TABLE>

                            See accompanying notes.

                                       3
<PAGE>
 
                               FILM ROMAN, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
 
                                                 Three Months ended                 Nine Months ended
                                                    September 30,                     September 30,
                                           --------------------------------    --------------------------
                                              1996                 1997           1996           1997
                                           -----------          -----------    -----------    -----------
<S>                                        <C>                  <C>            <C>            <C> 
Revenue . . . . . . . . . . . . . . .      $11,108,312          $10,475,613    $24,824,010     29,717,115
Cost of revenue . . . . . . . . . . .       10,245,746           12,712,838     23,172,800     30,643,694
Selling, general and                         
  administrative expenses . . . . . .        1,002,187            1,142,930      2,596,659      3,318,752
                                           -----------          -----------    -----------    -----------
Operating loss  . . . . . . . . . . .         (139,621)          (3,380,155)      (945,449)    (4,245,331)
Interest income . . . . . . . . . . .           39,618              185,026        136,041        449,918
Interest expense  . . . . . . . . . .           (8,279)                ----        (41,045)          ----
                                           -----------          -----------    -----------    -----------
Loss before provision for                                       
  income taxes  . . . . . . . . . . .         (108,282)          (3,195,129)      (850,453)    (3,795,413)
Provision for income taxes  . . . . .             ----                 ----           ----           ----
                                           -----------          -----------    -----------    -----------
 
Net loss  . . . . . . . . . . . . . .      $  (108,282)         $(3,195,129)   $  (850,453)   $(3,795,413)
                                           ===========          ===========    ===========    =========== 
 
Accretion of the difference                   
  between the carrying value
  and the liquidation value of
  the Class A Redeemable
  Preferred Stock . . . . . . . . . .         (242,415)                ----       (727,245)          ---- 
Class A Redeemable                            
  Preferred Stock Dividend  . . . . .         (240,000)                ----       (720,000)          ----      
                                           -----------          -----------    -----------    -----------
Net loss attributable to                   
common stock  . . . . . . . . . . . .      $  (590,697)         $(3,195,129)   $(2,297,698)   $(3,795,413)
                                           ===========          ===========    ===========    ===========
Net loss per share  . . . . . . . . .      $     (0.12)         $     (0.38)   $     (0.48)   $     (0.45)
                                           ===========          ===========    ===========    ===========
Weighted average number of
  shares outstanding  . . . . . . . .        4,824,519            8,454,690      4,824,519      8,453,023
                                           ===========          ===========    ===========    ===========
 
 
</TABLE>


                            See accompanying notes.

                                       4
<PAGE>
 
                               FILM ROMAN, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                        NINE MONTHS ENDED
                                                                                                          SEPTEMBER 30,
                                                                                                   ----------------------------
                                                                                                         1996           1997
                                                                                                   ----------------------------
<S>                                                                                                <C>             <C> 
OPERATING ACTIVITIES:
Net loss  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $   (850,453)   $ (3,795,413)
Adjustments to reconcile net loss to net cash (used in) provided by
 operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           176,914         169,710
Amortization of film costs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        23,172,183      30,643,694
Issuance of New Warrants  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           225,000            ----
Changes in operating assets and liabilities:
  Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (247,355)      3,098,610
  Film costs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (38,612,519)    (29,086,541)
  Refundable income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           332,500             800
  Deposits and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (602,149)       (122,195)
  Accounts payable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         2,644,702      (2,127,203)
  Accrued expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           800,014         718,650
  Deferred revenue  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        12,368,938       2,245,761
                                                                                                   ------------    ------------
  Net cash (used in) provided by operating activities . . . . . . . . . . . . . . . . . . . .          (592,225)      1,745,873
INVESTING ACTIVITIES:
Additions to property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (671,195)        (56,245)
                                                                                                   ------------    ------------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (671,195)        (56,245)
FINANCING ACTIVITIES:
Proceeds from issuance of Class A Redeemable Preferred Stock and                                           
  Warrants, net of issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (1,628)           ----
Options Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .              ----              50
Borrowings under debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         4,660,000            ----
Repayments on debt  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (5,167,147)           ----
                                                                                                   ------------     -----------
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . .          (508,775)             50
Net (decrease) increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (1,772,195)      1,689,678
                                                                                                   ------------     -----------
Cash and cash equivalents at beginning of period  . . . . . . . . . . . . . . . . . . . . . .         5,176,090      13,738,927
Cash and cash equivalents at end of period  . . . . . . . . . . . . . . . . . . . . . . . . .      $  3,403,895    $ 15,428,605
                                                                                                   ============    ============
Supplemental disclosure of cash flow information:                                                    
  Cash paid during the period for:                                                                   
     Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $     41,045    $       ----
                                                                                                   ------------    ------------
     Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $       ----    $       ----
                                                                                                   ------------    ------------
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

    For the nine months ended September 30, 1996 the Company accrued dividends
of $720,000 on the outstanding shares of its Class A Redeemable Preferred Stock
and $450,000 on the outstanding shares of its Class B Convertible Preferred
Stock. In addition, the Company recorded accretion of the difference between the
carrying value and the liquidation value of $727,245 on the outstanding shares
of its Class A Redeemable Preferred Stock.

                            See accompanying notes.

                                       5
<PAGE>
 
                               FILM ROMAN, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) - BASIS OF PRESENTATION

    Film Roman, Inc., a Delaware corporation (the "Company"), currently conducts
all of its operations through its wholly owned subsidiary Film Roman, Inc., a
California corporation ("Film Roman California"). The accompanying consolidated
unaudited financial statements of the Company have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting only of normal
recurring accruals necessary to present fairly the financial position of the
Company as of September 30, 1997 and the results of its operations for the three
and nine months ended September 30, 1996 and 1997, and the cash flows for the
nine months ended September 30, 1996 and 1997 have been included. The results of
operations for interim periods are not necessarily indicative of the results
which may be realized for the full year. For further information, refer to the
financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 filed with the
Securities and Exchange Commission.

(2) - NET LOSS PER COMMON SHARE

    For the three months and the nine months ended September 30, 1996, per share
data is based on the weighted average number of common and common equivalent
shares outstanding during the period, and is calculated in accordance with a
Staff Accounting Bulletin of the Securities and Exchange Commission whereby
common and common share equivalents issued within a 12-month period prior to an
initial public offering are treated as outstanding for all periods presented if
the issue price was less than the proposed initial public offering price. In
addition, shares issuable upon the exercise of options and warrants and
convertible preferred stock within the 12-month period are considered to have
been outstanding since inception of the Company. For the three months and the
nine months ended September 30, 1996, the net loss per common share gives effect
to the accretion of the difference between the carrying value and the
liquidation value of the Class A Redeemable Preferred Stock of $242,414, and
$727,245 respectively, and to the accrual of dividends of $240,000 and $720,000
respectively, on the Class A Redeemable Preferred Stock.

    For the three months and the nine months ended September 30, 1997, the per
share data is based on the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares,
consisting of outstanding stock options, are not included since they are
antidilutive.

    In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 128, Earnings Per Share ("SFAS
No. 128"), which is effective for annual and interim financial statements issued
for periods ending after December 15, 1997 and early adoption is not permitted.
When adopted, SFAS No. 128 will require restatement of prior years' earnings per
share ("EPS"). SFAS No. 128 was issued to simplify the standards for calculating
EPS previously in APB No. 15, Earnings Per Share. SFAS No. 128 replaces the
presentation of primary EPS with a presentation of basic EPS. The new rules also
require dual presentation of basic and diluted EPS on the face of the statement
of operations for companies with a complex capital structure. For the Company,
basic EPS will exclude the dilutive effects of stock options and warrants.
Diluted EPS for the Company will reflect all potential dilutive securities.
Under the provisions of SFAS No. 128, basic and diluted EPS would have been the
same for the three months and the nine months ended September 30, 1996 and 1997
as the reported amounts for such periods.

                                       6
<PAGE>
 
  In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income ("Statement No. 130"). Statement No. 130 establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general purpose financial statements. Statement No. 130 applies to all
enterprises that provide a full set of general purpose financial statements.
Statement No. 130 becomes effective for all financial statements for fiscal
years beginning after December 15, 1997, with earlier application permitted.
Further, in June 1997, the FASB issued Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information ("Statement No. 131").
Statement No. 131 changes the way public companies report segment information in
annual financial statements and also requires those companies to report selected
segment information in interim financial reports to shareholders. The proposal
supersedes FASB Statement 14 on segments and does not apply to nonpublic
enterprises or to not-for-profit organizations. Statement No. 131 becomes
effective for all financial statements for fiscal years beginning after December
15, 1997, with earlier adoption permitted. The Company believes that Statements
No. 130 and 131 will not have a material effect on its financial statements.


(3) - FILM COSTS
 
  The components of unamortized film costs consist of the following:

<TABLE>
<CAPTION>
 
 
                                                                 As of               As of
                                                           December 30, 1996   September 30, 1997
                                                           -----------------      (unaudited)
                                                                               ------------------
<S>                                                        <C>                 <C>
Animated film productions released, less amortization...         $ 7,946,483          $ 6,469,469
 
Animated film productions in process....................          13,069,981           13,000,594
 
Animated film productions in development................             252,481              241,729
                                                                 -----------          -----------
 
                                                                 $21,268,945          $19,711,792
                                                                 ===========          ===========
</TABLE>
(4) - BLUES BROTHERS:  THE ANIMATED SERIES

  The Company put its proprietary production of "Blues Brothers: The Animated
Series" (the "Blues Brothers") into hiatus in March 1997 following discussions
between the Company and United Paramount Network ("UPN") with respect to certain
creative aspects of the project.  Although in August 1997 UPN announced its
intention to run the series in the fall of 1998, the network subsequently
changed its programming strategy to de-emphasize prime time animation, which led
to UPN's decision in September 1997 to cancel its plans to air the Blues
Brothers.  In September 1997, UPN and the Company entered into a settlement
whereby UPN compensated the Company for a portion of the costs associated with
the production of the show.  The Company's investment amounted to approximately
$6.0 million as of September 30, 1997,  and the Company recorded a write off in
the quarter ended September 30, 1997, of approximately $2.0 million.

                                       7
<PAGE>
 
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This Form 10-Q contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended.  Such forward-looking statements
relate to, among other things, the Company's future production and delivery
schedule (including the number of episodes of programming to be produced and
delivered in 1997 and 1998); production fees, services and costs; and liquidity.
These forward-looking statements are based largely on the Company's current
expectations and are subject to a number of risks and uncertainties, including
without limitation, those described under the caption "Risks Related to the
Business" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.  Actual results could differ materially from these forward-
looking statements.


GENERAL

  The Company creates, develops, produces and distributes high quality, family-
oriented animated television programming.  Historically, the Company has
produced substantially all of its programming for third parties on a "fee-for-
services" basis.  Fees paid to the Company for these production services
generally range from $300,000 to $600,000 per episode and typically cover all
direct production costs plus a profit margin.  The Company has begun to produce
programming for which it controls some of the "proprietary rights" associated
with such programming (including, for example, international distribution and
licensing and merchandising rights).  Fees paid to the Company for these
production services typically do not cover all direct production costs.
Generally, the Company seeks to cover at least 50% of its production costs prior
to production of its proprietary programs and seeks to cover the remaining
production costs through the exploitation of the proprietary rights associated
with these programs.  As a result, the Company may recognize revenue associated
with its proprietary programming over a period of years.

  The Company produces a limited number of television series in any year and is
substantially dependent on revenues from licensing these programs to
broadcasters.  The Company's future performance will be affected by issues
facing all producers of animated programming, including risks related to the
limited number of time slots allocated to children's and/or animated television
programming, the intense competition for those time slots, the limited access to
distribution channels (particularly for programs produced by independent
studios), the declining license fees paid to producers of programming by
broadcasters and the regulations implemented by the Federal Communications
Commission governing program content.  While the Company seeks to limit its
financial risk associated with its proprietary programming by obtaining
commitments prior to production to cover at least 50% of its direct production
costs, there can be no assurance that the Company will be able to cover the
balance of its production costs and overhead costs relating to production,
licensing and distribution through the exploitation of its proprietary rights.
As a result of the foregoing risks, there can be no assurance that the Company
will be able to generate revenues that exceed its costs.  The Company expects to
report a loss for the year ended December 31, 1997.

1997 AND 1998 PRODUCTION AND DELIVERIES

  The Company has completed production of  all of the 159 episodes of
programming that it committed to produce and deliver for the 1996-97 broadcast
season.  The Company has begun production of 56 episodes of fee-for-services
programming which are currently scheduled to air during the 1997-98 season.  As
of September 30, 1997, the Company had no commitments to produce or deliver any
new episodes of proprietary programming for the 1997-98 season.

  The Company presently expects to deliver approximately 66 episodes of
programming in 1997.  Of these 66 episodes, 31 are fee-for-services programs for
airing during the 1996-97 season, 10 are proprietary 

                                       8
<PAGE>
 
programs, also airing during the 1996-97 season, and the remaining 25 are fee-
for-services programs which are currently scheduled to air during the 1997-98
season. Some of the 25 episodes for the 1997-98 season which are currently
expected to be delivered in 1997 may be delivered in 1998. Similarly, some of
the episodes for the 1997-98 season which the Company presently expects to
deliver in 1998 may be delivered in 1997. The estimated delivery of 66 episodes
in 1997 represents a decrease of 75 episodes (or 53%) from the number of
episodes delivered in 1996.


BLUES BROTHERS:  THE ANIMATED SERIES

  The Company put its proprietary production of the "Blues Brothers" into hiatus
in March 1997 following discussions between the Company and UPN with respect to
certain creative aspects of the project. Although in August 1997 UPN announced
its intention to run the series in the fall of 1998, the network subsequently
changed its programming strategy to de-emphasize prime time animation, which led
to UPN's decision in September 1997 to cancel its plans to air the Blues
Brothers. In September 1997, UPN and the Company entered into a settlement
whereby UPN compensated the Company for a portion of the costs associated with
the production of the show. The Company's investment amounted to approximately
$6.0 million as of September 30, 1997, and the Company recorded a write off in
the quarter ended September 30, 1997, of approximately $2.0 million.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996

  Total revenue decreased by 6%, or $0.6 million, to $10.5 million for the three
months ended September 30, 1997, from $11.1 million for the comparable period in
the prior year.  The total decrease in revenue is primarily a result of the
absence of any interactive revenue in the current quarter compared to the
comparable quarter in the prior year because the Company shut down its
Interactive Department in 1997.   The Company delivered 11 episodes of
programming during the three months ended September 30, 1997  compared to 32
episodes delivered during the three months ended September 30, 1996.
 
  The Company delivered 11 "fee-for-services" episodes during the three months
ended September 30, 1997, compared with 25 episodes in the comparable period in
1996.  Fee-for-services revenue decreased 33%, or $2.7 million, to $5.3 million
from $8.0 million during the respective periods.

  The Company delivered no "proprietary" episodes during the three-month period
ended September 30, 1997,compared with seven episodes in the comparable period
in 1996.  "Proprietary revenue" consists of revenue derived from the U.S.
license fees paid upon the initial delivery of a new episode of proprietary
programming to a U.S. broadcaster and from the exploitation of the proprietary
rights (e.g., merchandising, licensing and/or international distribution rights)
associated with the proprietary episodes in the Company's library that were
initially delivered in prior periods.  Although the Company did not deliver any
proprietary episodes during the quarter ended September 30, 1997, total
proprietary revenue increased by 133% or $2.8 million, to $4.9 million from $2.1
million during the comparable quarter in 1996, as a result of the "Blues
Brothers" settlement and an increase in revenue from the exploitation of the
proprietary rights associated with the programs in the Company's library.

  Other revenue decreased by approximately $0.7 million during the three months
ended September 30, 1997 as compared to the same period of the prior year, due
primarily to a $0.4 million decrease in revenue resulting from the shutdown of
the Interactive Department as well as a $0.3 million decrease in revenue from
commercials and specials.

                                       9
<PAGE>
 
  Total cost of revenue increased by 24%, or $2.5 million, to $12.7 million for
the three months ended September 30, 1997, from $10.2 million for the three
months ended September 30, 1996. Total cost of revenue, as a percentage of
sales, increased by 29% to 121% for the three months ended September 30, 1997,
as compared to 92% for the three months ended September 30, 1996, primarily as a
result of the "Blues Brothers" settlement, lower "proprietary" margins, and an
additional write down to net realizable value as a result of changes in the
Company's estimated future revenues from certain of its episodic programming.

  Total selling, general and administrative expenses for the three months ended
September 30, 1997 increased by $0.1 million to $1.1 million for the three
months ended September 30, 1997 from $1.0 million for the comparable period in
1996.

  Operating loss increased to $3.4 million for the three months ended September
30, 1997, as compared to $0.1 million for the comparable period in 1996, as a
result of the "Blues Brothers" settlement and lower "proprietary" margins.

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996.

  Total revenue increased by 20%, or $4.9 million, to $29.7 million for the nine
months ended September 30, 1997, from $24.8 million for the comparable period in
the prior year.  Total revenue increased primarily as a result of the "Blues
Brothers" settlement.  The Company delivered a total of 48 episodes of
programming for the nine months ended September 30, 1997 as compared to 49
episodes delivered for the comparable period in 1996.
 
  The Company delivered 38 "fee-for-services" episodes during the nine months
ended September 30, 1997, compared to 39 episodes in the comparable period in
1996.  Fee-for-services revenue increased 28%, or $4.3 million, to $19.7 million
for the nine months ended September 30, 1997, from $15.4 million during the
comparable period in 1996 primarily as a result of delivering more Prime Time
episodes which generally generate higher per-episode fees than Saturday morning
episodes.

  The Company delivered 10 "proprietary" episodes during each of the nine month
periods ended September 30, 1997 and 1996.  "Proprietary" revenue increased by
52%, or $2.5 million, to $7.3 million for the nine months ended September 30,
1997, from $4.8 million for the comparable period in 1996.  This increase was
due primarily to an increase in revenue from the settlement of the "Blues
Brothers" which was partially offset by the fact that the proprietary episodes
delivered in 1997 were syndicated episodes that generated a lower fee per
episode than the episodes delivered to major networks in 1996.
 
  Other revenue decreased by approximately $1.9 million during the nine months
ended September 30, 1997, as compared to the same period of the prior year, due
primarily to a combined decrease of approximately $2.5 million in revenue
generated by the Company's participation in net profits from certain of its fee-
for-services series and revenue from commercials and specials.  This decrease
was offset by an increase in revenue of approximately $0.6 million from the
creative services division and the Company's Interactive Department, which was
subsequently shut down in the first quarter of 1997.

  Total cost of revenue increased by 32%, or $7.4 million, to $30.6 million for
the nine months ended September 30, 1997, from $23.2 million for the nine months
ended September 30, 1996.  Total cost of revenue, as a percentage of sales,
increased by 10% to 103% for the nine months ended September 30, 1997, as
compared to 93% for the nine months ended September 30, 1996, primarily as a
result of the "Blues Brothers" settlement,  lower "proprietary" margins, and an
additional write down to net realizable value as a result of changes in the
Company's estimated future revenues from certain of its episodic programming.

                                       10
<PAGE>
 
  Total selling, general and administrative expenses for the nine months ended
September 30, 1997 increased by $0.7 million to $3.3 million from $2.6 million
for the comparable period in 1996, due primarily to increased professional fees,
the write off of certain development costs and ongoing costs of operating a
public company.

  Operating loss was $4.2 million for the nine months ended September 30, 1997,
as compared to a loss of $0.9 million for the nine months ended September 30,
1996.

LIQUIDITY AND CAPITAL RESOURCES

  Greater capital resources are required for the Company to develop and produce
proprietary programs, retain the proprietary rights associated with such
programs, and increase it presence in the licensing and merchandising and
international distribution markets.  The Company seeks to limit the financial
risk associated with its proprietary programming by obtaining commitments prior
to production to cover at least 50% of its direct production costs, but the
Company must utilize its own funds to cover remaining production costs and
overhead costs relating to production, licensing and distribution.  The Company
seeks to cover the remaining production costs through the exploitation of the
proprietary rights associated with the programs in its library (e.g.,
merchandising, licensing and/or international distribution rights).
Historically, in the fourth quarter, and to a lesser extent the third quarter,
cash used in operations typically exceeded cash generated by operations as
completed shows were delivered to broadcasters.  However, the Company has begun
to exploit, to a greater extent, the international distribution rights
associated with the proprietary programs in its library.  As a result, the
Company expects that cash used in or provided by operations will fluctuate
greatly from quarter to quarter, due in part, to the international sales and
collections cycle related to the programs in its library.

  For the nine months ended September 30, 1997, net cash provided by operating
activities was approximately $1.7 million due to an increase in deferred revenue
as well as a decrease in accounts receivable, offset by cash used in connection
with film production activities and fluctuations in other operating assets and
liabilities.
 
  Management believes that the Company's cash and cash equivalents and
anticipated cash flow from operations will be sufficient to fund the Company's
operating requirements for at least the next year.

                                       11
<PAGE>
 
                          PART II.  OTHER INFORMATION

 
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
 
(A)                                                                    EXHIBITS
<S>                    <C>
 
INDEX TO EXHIBITS
 
EXHIBIT
NUMBER                 DESCRIPTION
-------                --------------------------------------------------------------------------------------------------------
 
  +2.1                 Plan of Reorganization Agreement dated as of May 15, 1996 by and among the Registrant, Film
                       Roman, Inc., a California corporation ("Film Roman California"), and certain stockholders party thereto
 
  +2.2                 First Amendment to Plan of Reorganization Agreement dated as of September 9, 1996
 
  +3.1                 Certificate of Incorporation of Registrant
 
  +3.2                 Bylaws of Registrant
 
   3.3                 Amendment to Bylaws of Registrant dated as of August 5, 1997
 
  +4.1                 Specimen Stock Certificate
 
+*10.1                 Employment Agreement dated as of August 7, 1995 by and between Film Roman California and Mr.
                       Phil Roman
 
  10.2                 Intentionally Omitted
 
  10.3                 Intentionally Omitted
 
+*10.4                 Employment Agreement dated as of December 15, 1995 by and between Film Roman California and
                       Ms. Jacqueline Blum
 
+*10.5                 Employment Agreement dated as of January 2, 1996 by and between Film Roman California
                       and Mr. Gregory Arsenault
 
+*10.7                 Stock Option Plan of Registrant
 
+*10.8                 Form of Non-Qualified Stock Option Agreement for Employees
 
+*10.9                 Form of Incentive Stock Option Agreement for Employees
 
  10.10                Intentionally Omitted
 
 +10.11                Lease for Registrant's headquarters and studio in North Hollywood, California
 
 +10.12                Promissory Note for $1,230,000 between Film Roman, Inc and First Charter Bank, N.A.
 
 +10.13                Rights Agreement dated May 30, 1995 between Daniel Aykroyd, Judith Belushi Pisano and
                       Film Roman, Inc.
 
 +10.14                Agreement dated December 11, 1990, between Film Roman, Inc. and Alevy Productions, Inc.
 
 +10.15                Series Production Agreement dated as of April 27, 1990 between Fox Children's Network and
                       Film Roman, Inc.
 
 +10.16                Agreement dated as of June 20, 1995, between Film Roman, Inc. and Starstream Limited
 
 +10.17                Amendment dated December 18, 1992 between Film Roman, Inc. and Fox Children's Network
 
 +10.18                Amendment dated March 22, 1994 between Film Roman, Inc. and Fox Children's Network
 
 +10.19                Agreement dated October 5, 1994 between Flying Heart, Inc. and Film Roman, Inc.
 
 +10.20                Agreement dated February 20, 1996 with Live Film and Mediaworks, Inc. and Film Roman, Inc.
 
 +10.21                Letter Agreement dated January 9, 1995 with Agreement dated November 22, 1993, revised December
                       9, 1994, December 13, 1993, June 23, 1994 and August 1, 1994 between Fox Children's Network
                       ("FCN") and Film Roman, Inc.
</TABLE> 

                                       12
<PAGE>
 
<TABLE>
<CAPTION> 

EXHIBIT
NUMBER     DESCRIPTION
-------    ----------------------------------------------------------------------------------------------- 
<C>        <S>  
+10.22     Agreement dated June 1, 1995, between Fox Children's Network and Film Roman, Inc.
           
+10.23     Amendment dated March 1, 1996 to the Agreement dated as of November 22, 1993 between Fox
           Children Network and Film Roman, Inc.
           
+10.24     Agreement dated September 12, 1994 between Film Roman, Inc. and Tone Loc, Inc.
           
+10.25     Agreement dated as of May 7, 1993 between Film Roman, Inc. and Adelaide Productions, Inc.
           
+10.26     Amendment dated as of May 18, 1994 revised as of June 14, 1994 between Film Roman, Inc. and
           Adelaide Productions, Inc.
           
+10.27     Amendment dated as of June 20, 1994 revised as of July 7, 1994 between Film Roman, Inc. and
           Adelaide Productions, Inc.
           
+10.28     Agreement dated November 9, 1993 between Film Roman, Inc. and Felix The Cat Creations, Inc.
           
+10.29     Agreement dated as of June 28, 1994 between CBS Entertainment and Film Roman, Inc.
           
+10.30     Agreement dated September 27, 1994 between Felix The Cat Creations, Inc. and Film Roman, Inc.
           
+10.31     Letter Agreement dated June 6, 1995 between Felix The Cat Corporation and Film Roman, Inc.
           
+10.32     Agreement dated September 1, 1995 between Felix Comics, Inc. and Film Roman, Inc.
           
+10.33     Agreement dated November 20, 1995 between Felix The Cat Creations, Inc. and Film Roman
           
+10.34     Amendment to Output Distribution Agreement dated February 1, 1994 between Film Roman,
           Inc. and Taurus Film GmbH & Company
           
+10.35     Output Distribution Agreement dated as of September 1, 1994 between Film Roman, Inc. and
           Taurus Film GmbH & Company
           
+10.36     Agreement dated April 1, 1991 between United Media/Mendelson Production and Film Roman, Inc.
           re: Prime Time Television special
           
+10.37     Agreement dated April 1, 1991 between United Media/Mendelson Production and Film Roman, Inc.
           re: Saturday Morning Series
           
+10.38     Co-Production Agreement dated June 11, 1993 between Canal Plus and Bluebird Toys (the
           U.K.) Limited and Film Roman, Inc. regarding Mighty Max
           
+10.39     Agreement dated April 12, 1994 between Canal Plus and Bohbot Entertainment Worldwide, Inc. and
           Film Roman, Inc
           
+10.40     Form of Agreement between Film Roman, Inc. and Threshold Entertainment
           
+10.41     Agreement dated as of March 30, 1995 as revised May 10, 1995 between Film Roman, Inc. and
           Greengrass Productions, Inc.
           
+10.42     Agreement dated as of April 15, 1996 between Film Roman, Inc. and The Harvey Entertainment
           Company
           
+10.43     Agreement dated as of January 29, 1992 between Film Roman, Inc. and 20th Television
           
+10.44     Agreement dated as of March 7, 1996, between Film Roman, Inc. and LUK International
           
+10.45     Agreement dated as of May 22, 1996, between Film Roman, Inc. and Canal-Plus--Spain
           
+10.46     Co-Production Agreement between Television Espanola, S.A. and Film Roman, Inc.
           
+10.47     Commitment Letter dated September 9, 1996 from certain stockholders of Film Roman California
           
*10.48     Employment Agreement dated as of August 1, 1997 by and between  Film Roman California and Mr.
           Jon Vein
           
 11        Earnings Per Share
           
+21.1      Subsidiaries of the Registrant
           
 27        Financial Data Schedule
           
 99.1      Press Release dated August 27, 1997 re:  appointment of David B. Pritchard
</TABLE>
--------------------

                                       13

 
<PAGE>
 
+    Incorporated by reference to the similarly numbered exhibit to the
     Company's Registration Statement on Form S-1 (Registration No. 333-03987)
     as filed with the Securities and Exchange Commission on September 30, 1996.

*    Management contract or other compensation plan or arrangement.


(B)  REPORTS ON FORM 8-K.

     No reports on Form 8-K were filed by the Company during the quarter ended
September 30, 1997.

                                       14
<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.


Dated: November 14, 1997


                         FILM ROMAN, INC.
                    
                    
                    
                         By:  /s/ Phil Roman
                              --------------
                              Phil Roman
                              President, Chief Executive Officer and Director
                    
                    
                    
                         By:  /s/ Greg Arsenault
                              ------------------
                              Greg Arsenault
                              Senior Vice President - Finance and Administration

                                      S-1