<PAGE>
 
                    U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                  Form 10-QSB

[X]  QUARTERLY REPORT UNDER SECTION 13 OF 14(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

For quarterly period ended August 30, 1997
                           ---------------

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

     For the transition period from ___________________to____________________

                         Commission file number 0-21634
                                                -------

                            Metro Global Media, Inc.
        ---------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)

           Delaware                                      65-0025871
 ------------------------------                -------------------------------
(State or other jurisdiction of               (IRS Employer Identification No.)
 incorporation or organization)


                 1060 Park Avenue, Cranston, Rhode Island 02910
                 ----------------------------------------------
                    (Address of principal executive offices)

                                 (401)942-7876
                            -----------------------
                          (Issuer's telephone number)

--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last year)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 the past 90 days. Yes X  No 
                                                              -     --  

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

Check whether the registrant filed all documents and reports required to be
filed by Section 12,13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes      No 
    ---     ---
                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 3,558,168
<PAGE>
 
PART I - FINANCIAL INFORMATION

<TABLE> 
<CAPTION> 

Item 1.  Consolidated Financial Statements
      <S>                                                  <C>   
      Balance Sheets                                             F-1
      Statements of Income                                       F-2
      Statements of Cash Flows                                   F-3
      Notes to Consolidated Financial Statements           F-5 & F-6
 
</TABLE>
Item 2.  Management's Discussion and Analysis or Plan of Operation

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 30, 1997 VERSUS THREE
MONTHS ENDED AUGUST 31, 1996.


The Company's revenues decreased $292,191 to $4,096,221, for the three months
ended August 30, 1997. This represents a 6.7% decrease from revenues of
$4,388,412 for the three months ended August 31, 1996. Revenues consist
principally of sales of prerecorded videocassettes, magazines, electronic
software products and related items. Lower revenues were the result of the
Company's cessation of publication of its newsstand magazine during the quarter
ended August 30, 1997. This action accounted for approximately $155,600 of the
revenue decrease. This magazine will continue to be published, along with
others, under the new joint venture agreement signed in August, 1997 with
Salmill Enterprises, Inc. The Company, in the first quarter of fiscal 1997, did
some outside duplication which accounted for approximately $81,600 in revenue as
compared to no revenue in the same period in fiscal 1998. Additionally sales of
CD-Rom's, the Company's and all others, was approximately $51,300 lower in the
first quarter of fiscal 1998 as compared to the same period in fiscal 1997. New
feature releases during the quarter ended August 30, 1997, increased to 16 as
compared to 12 for the same period a year ago. This represents a 33% increase in
new feature titles released during the quarter ended August 30, 1997, as
compared to the same period in fiscal 1996.

Costs of revenues (including amortization of film costs) for the three month
period ended August 30, 1997 increased to $2,846,207 from $2,813,392 for the
corresponding period in the prior year. Costs of revenues as a percentage of
revenues in the first quarter of fiscal 1998 was 69.5% as compared to 64.1% in
the first quarter of fiscal 1997. The primary reason for this increase in the
cost of revenue was the following: (1) the Company incurred an additional
$95,000 in outside duplicating cost; (2) film amortization increased
approximately $50,000 due to fact that the films and videos which the Company
released in the first quarter of fiscal 1998 were $116,300 more expensive as
compared to the same period in fiscal 1997 (although video sales increased they
did not increase proportionately); and (3) freight costs increased
significantly, approximately $21,000, due to the UPS strike.

Selling, general and administrative (SG&A) expenses for the three months ended
August 30, 1997, decreased 4.4% to $1,527,257 from $1,597,640 for the three
months ended August 31, 1996 due to management's continuing efforts to control
costs. Selling, general, and administrative expenses, as a percentage of
revenue, increased to 37.3% in 1997 as compared to 36.4% in the three months
ended August 31, 1996 due to the aforementioned decrease in revenue.
<PAGE>
 
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED AUGUST 30, 1997 VERSUS THREE
MONTHS ENDED AUGUST 31, 1996 (CONTINUED)


Operating loss for the three month period ended August 30, 1997 was $(277,243)
as compared to operating loss of $(22,620) for the corresponding period in the
prior year. Net loss for the fiscal quarters ended August 30, 1997 and 1996 were
$(228,458) and $(41,245) respectively, resulting in loss per share of ($.06) for
the quarter ended August 30, 1997 and ($.01) for the quarter ended August 31,
1996.

LIQUIDITY AND CAPITAL RESOURCES AT AUGUST 30, 1997

Cash and cash equivalents amounted to $103,814 at quarter-end. Cash provided by
operating activities amounted to $415,842 for the three months ended August 30,
1997, whereas net cash of $568,010 was provided by operations for the same
period in the prior fiscal year. The Company's primary sources of cash in fiscal
1997 consisted of (1) funds provided from operations $415,842 and (2) net
proceeds from short-term borrowings of $221,953. The primary uses of cash in
fiscal 1997 consisted of (1) investments in motion pictures and other films
$479,896; (2) payments on capital lease obligations of $55,765; and (3)
purchases of property and equipment $56,044.

Working capital amounted to $1,941,686 in August, 1997 as compared to $2,489,792
in May, 1997. The net decrease in accounts receivable of $612,958 was primarily
due to the decrease of sales for the quarter. Inventory increased $259,852 due
to the decrease in sales. Accounts payable and accrued expenses increased
$268,774 due to improved vendor terms from tape supplies and the inclusion of a
$100,000 litigation settlement liability due November, 1997. Increased spending
for film production is another factor of the increase in accounts payable.

Of Metro's total accounts receivable at August 30, 1997, $1,332,621 (38%) as
compared to $1,711,443 (41.9%) at May 31, 1997 is owed by Capital Video
Corporation ("CVC"), a chain of retail stores of which a former
officer/shareholder of the Company is the sole shareholder. Because of the
amount of this receivable and the concentration of business with CVC, this
receivable is monitored very closely. Metro has the personal guaranty of its one
shareholder. Accordingly, no allowance for related party receivables and no
related party bad debt expense has been recorded in the Company's financial
statements.

At August 30, 1997 the Company had entered into agreements with producers to
finance 50 new feature films and videos which will be released during fiscal
1998. The completion of these movies will require approximately $1,000,000 to
$1,500,000. Financing for these activities has been and will continue to be
generated through operating cash flows as well as funds received from its line
of credit.

During June, 1997, Metro, Inc. entered into a line of credit agreement with a
finance company. Under the agreement, Metro, Inc. may borrow up to 75% of
assigned accounts receivable less than 90 days old, up to a maximum of
$1,500,000. The balance due under the line of credit bears interest at the prime
rate plus 5% per annum. In addition, Metro, Inc. shall pay the finance company a
collateral management or notification fee equal to 3/4 of 1% of sales submitted
to the finance company for inclusion in the net security value of accounts
receivable, but no more than $7,500 per month. The outstanding balance under the
line is secured by accounts receivable of Metro, Inc and guaranties of the
Company and certain officers/shareholders. The line of credit expires during
June, 1999, but includes an option for an additional year. As of August 30,
1997, the balance on the line of credit was $1,119,200.
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES AT AUGUST 30, 1997 (CONTINUED)

Capital Expenditures: Capital expenditures in the first quarter ended August 30,
1997 amounted to $56,044 as compared to $147,726 at May 31, 1997. The Company
anticipates that its capital expenditures for 1998 will be approximately
$300,000 to $400,000 primarily used for computer equipment, duplicating and
editing equipment. The company currently has a $500,000 lease line available for
its use which management believes is sufficient.

Management believes that funds provided by operations, existing and new line of
credit, are adequate to meet the anticipated short-term and long-term capital
needs. Management believes that inflation has not had a material effect on its
operations.

New Accounting Standards

          SFAS No. 128 has been issued effective for the years ending after
December 15, 1997. This statement establishes standards for computing and
presenting earnings per share and also establishes standards with respect to
disclosure of information about an entity's capital structure. Earnings per
share calculations should not be impacted if the Company adopted such standard
for the year ended May 31, 1997. The Company is required to adopt the provisions
of SFAS No. 128 in the third quarter of 1998 and does not expect adoption
thereof to have a material effect on the Company's financial position or results
of operations.

          Statement of Financial Accounting Standards No. 129 ("SFAS No. 129"),
"Disclosure of Information About Capital Structure" has been issued effective
for the years ending after December 15, 1997. This statement establishes
standards for disclosing information about an entity's capital structure. The
Company will be required to adopt the provisions of SFAS No. 129 in the third
quarter of 1998 and does not expect adoption thereof to have a material impact
on the Company's financial position, results of operations or cash flows.


<PAGE>
 
                   METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

                                    Assets
                                    ------

<TABLE> 
<CAPTION> 
                                                                              For the three          For the
                                                                               months ended         year ended
                                                                                August 31,            May 31,
                                                                                   1997                1997
Current assets                                                                 (Unaudited)          (Audited)
--------------                                                                  ---------            -------
<S>                                                                          <C>                   <C> 
 Cash                                                                        $   103,814           $    57,724 
 Accounts receivable, less allowance for doubtful accounts of
  $52,082 and $22,082, respectively                                            3,468,073             4,081,031
 Inventory                                                                     3,944,353             3,684,501
 Recoverable income tax                                                          287,000               287,000 
 Prepaid expenses and other current assets                                       128,874                41,460
 Deferred income taxes                                                           337,995               165,650
                                                                             -----------           -----------
     Total current assets                                                      8,270,109             8,317,366
     --------------------

Motion pictures and other films at cost, less accumulated amortization
 of $5,295,253 and $5,085,183, respectively                                    3,623,569             3,353,743
Property and equipment at cost, less accumulated depreciation and 
 amortization of $1,397,864 and $1,303,939, respectively                       1,537,318             1,575,199

Other assets                                                                     294,654               292,235
                                                                             -----------           -----------

     Total assets                                                            $13,725,650           $13,538,543
     ------------                                                            ===========           ===========

                     Liabilities and Shareholders' Equity
                     ------------------------------------

Current liabilities
-------------------
 Current portion of long-term debt                                           $   168,749           $   137,651 
 Current portion of capital lease obligations                                    221,382               222,962
 Short-term borrowings                                                         1,119,200               897,247
 Accounts payable and accrued expenses                                         4,475,351             4,206,577
 Income taxes payable                                                            343,741               363,137
                                                                             -----------           -----------       
     Total current liabilities                                                 6,328,423             5,827,574
     -------------------------

Long-term debt, less current portion                                             364,890               395,988
Capital lease obligations, less current portion                                  307,406               361,591
Deferred income taxes                                                             35,700                35,700
                                                                             -----------           ----------- 
     Total liabilities                                                         7,036,419             6,620,853
     -----------------                                                       -----------           -----------

Commitments and contingencies

Shareholders' equity
--------------------
Preferred stock, no par value; authorized 2,000,000 shares; issued
 and outstanding, none
Common stock, $.0001 par value; authorized 10,000,000 shares;
 issued and outstanding, 3,558,168                                                   356                   356
Additional paid in capital                                                     5,542,761             5,542,762
Retained earnings                                                              1,146,114             1,374,572
                                                                             -----------           -----------

     Total shareholders' equity                                                6,689,231             6,917,690
     --------------------------                                              -----------           -----------

     Total liabilities and shareholders' equity                              $13,725,650            $13,538,543
     -----------------------------------------                               ===========            ===========

</TABLE> 
                See notes to consolidated financial statements

                                      F-1
<PAGE>
 
                   METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME


<TABLE> 
<CAPTION> 
                                                                                    Three months ended
                                                                                 August 31,       August 31,
                                                                                   1997             1996   
                                                                                (Unaudited)      (Unaudited)
                                                                                 ---------        ---------  
<S>                                                                             <C>              <C>   
Revenues                                                                        $4,096,221       $4,388,412

Cost of revenues, including amortization of motion pictures
  and other films                                                                2,846,207        2,813,392
                                                                                ----------       ----------  

                                                                                 1,250,014        1,575,020

Selling, general and administrative expenses                                     1,527,257        1,597,640
                                                                                ----------       ----------  

  Loss from operations                                                            (277,243)         (22,620)
  --------------------

Other income (expense), net                                                       (123,560)         (49,740)

  Loss before income taxes                                                        (400,803)         (72,360)
  ------------------------
 
Income tax benefit                                                                (172,345)         (31,115)

  Net loss                                                                     $  (228,458)      $  (41,245)   
  --------                                                                      ===========       ==========
 

Net loss per common and common equivalent
  share primary                                                                $     (0.06)     $     (0.01)
                                                                                ===========       ==========

Weighted average number of shares outstanding                                    3,758,168        3,613,379
</TABLE> 
                                  
                See notes to consolidated financial statements.

                                      F-2
<PAGE>
 
                   METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE> 
<CAPTION> 

                                                                                  August 31,       August 31,
                                                                                     1997             1996   
                                                                                  (Unaudited)      (Unaudited)
                                                                                ------------     ----------  
<S>                                                                             <C>              <C>   
Cash flows from (used by) operating activities:
---------------------------------------------- 
  Net income (loss)                                                             $   (228,458)    $ (41,245)
  Adjustments to reconcile net income to net cash                               ------------     ---------- 
    provided (used) by operating activities:                                                
    Depreciation and amortization                                                    303,995       226,987     
    Amortization of unearned compensation                                              -            18,750 
    Gain on disposal of asset                                                          -            (2,857) 
    (Increase) decrease in assets:                                                          
       Accounts receivable                                                           612,958       300,724  
   Inventory                                                                        (259,852)       (5,125)  
   Prepaid expenses and other current assets                                         (87,414)      (55,328)  
   Deferred Income Taxes                                                            (172,345)              
   Other assets                                                                       (2,420)      (27,030)  
    Increase (decrease) in liabilities:                                                                     
   Accounts payable and accrued expenses                                             268,774       242,549  
   Income taxes payable                                                              (19,396)      (89,415)  
                                                                                ------------     --------- 

  Total adjustments                                                                  644,300       609,255
  -----------------                                                             ------------     ---------
                                                                                                          
  Net cash provided by operating activities                                          415,842       568,010
  -----------------------------------------                                     ------------     --------- 
                                                                                
Cash flows from (used by) financing activities:                                             
----------------------------------------------                                              
  Proceeds from capital leases                                                         -            40,784  
  Payments on notes payable                                                            -           (47,973)
  Payments on capital leases                                                         (55,765)      (32,518)
  Net proceeds from line of credit                                                   221,953         -      
                                                                                ------------     ---------
                                                                                                 
  Net cash provided (used) by financing activities                                   166,188       (39,707)        
  ------------------------------------------------                              ------------     --------- 
                                                                                
Cash flows from (used by) investing activities:                                             
----------------------------------------------                                              
  Investments in motion pictures and other films                                    (479,896)     (505,051)
  Purchase of property and equipment                                                 (56,044)      (22,369)
                                                                                ------------     --------- 
                                                                                                          
  Net cash used by investing activities                                             (535,940)     (527,420)        
  -------------------------------------                                         ------------     --------- 
                                                                                
  Increase in cash                                                                    46,090           883       
  ----------------                                                                                        
                                                                                      57,724       360,671
Cash, beginning of period                                                       ------------     --------- 
                                                                                            
Cash, end of period                                                             $    103,814     $ 361,554
                                                                                ============     ========= 
</TABLE> 

                See notes to consolidated financial statements.

                                      F-3
<PAGE>
 
                   METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE> 
<CAPTION> 
                                                            Three months ended
                                                         August 31,       August 31,
                                                            1997             1996   
                                                            ----             ----    
<S>                                                      <C>                <C>  
Supplemental disclosures of cash flow information:

  Cash paid during the period for:

    Interest                                             $101,869           $47,205
                                                         ========           =======
                                                                                   
    Income taxes                                         $ 14,210           $58,300        
                                                         ========           =======  
</TABLE> 
                                                                            
                See notes to consolidated financial statements.

                                      F-4
<PAGE>
 
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 30, 1997 AND 1996
(Unaudited)


1.  Summary of Significant Accounting Policies

Consolidation

The consolidated financial statements include the accounts of Metro Global
Media, Inc. ("Metro Global") and its wholly-owned subsidiaries (collectively the
"Company").  All intercompany balances and transactions have been eliminated in
consolidation.

Financial Statements

The interim financial statements are prepared pursuant to the requirements for
reporting on Form 10-QSB.  The May 31, 1997 balance sheet data was derived from
audited financial statements but does not include all disclosures required by
generally accepted accounting principles.  The interim financial information
included herein is unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) that are, in the opinion of
management, necessary to a fair presentation of the financial position, results
of operation, and changes in financial position for the interim periods.  The
interim financial statements and notes thereto should be read in conjunction
with the financial statements and notes included in the Company's latest annual
report.  Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.  The current period results of
operations are not necessarily indicative of results which ultimately will be
reported for the full year ending May 31, 1997.

Earnings Per Share (EPS)

Earnings per common and common equivalent share are based on the average number
of common shares outstanding during each period, assuming exercise of all
options have exercise prices less than the average market price of the common
stock using the treasury stock method.  Fully diluted computations reflect the
additional dilutive effect of using period-end prices under the treasury stock
method.

The weighted average number of common shares and common stock equivalent shares
utilized in computing earnings per share were 3,758,168 and 3,613,379 for
primary and fully diluted earnings per share for the quarters ended August 30,
1997 and 1996 respectively.

Notes Payable

During June, 1997, Metro, Inc. entered into a line of credit agreement with a
finance company.  Under the agreement, Metro, Inc. may borrow up to 75% of
assigned accounts receivable less than 90 days old, up to a maximum of
$1,500,000.  The balance due under the line of credit bears interest at the
prime rate plus 5% per annum.  In addition, Metro, Inc. shall pay the finance
company a collateral management or notification fee equal to 3/4 of 1% of sales
submitted to the finance company for inclusion in the net security value of
accounts receivable, but no more than $7,500 per month.  The outstanding balance
under the line is secured by accounts receivable of Metro, Inc and guaranties of
the Company and certain officers/shareholders.  The line of credit expires
during June, 1999, but includes an option for an additional year.  As of August
30, 1997, the balance on the line of credit was $1,119,200.

                                      F-5
<PAGE>
 
PART II - OTHER INFORMATION

Item 1.   Legal Proceedings
          -----------------

          None


Item 2.   Changes in Securities
          ---------------------

          None


Item 3.   Defaults upon Senior Securities
          -------------------------------

          None


Item 4.   Submission of Matters to a Vote of Security Holders
          ---------------------------------------------------

          None


Item 5.   Other information
          -----------------

          None


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

          None



SIGNATURE

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.

                                    METRO GLOBAL MEDIA, INC.



                                 By:
                                    -------------------------------
                                     T. James Blair, Treasurer
                                      (duly authorized, principal financial
                                       and chief accounting officer)