<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C.  20549

                         ----------------------------

                                   FORM 10-Q

/X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

         For the quarterly period ended June 30, 1997

/ /  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

         For the transition period from          to 
                                        --------    --------

                       Commission file no. 0-23936 (CA)

                              JAVA CENTRALE, INC.
                      ----------------------------------
            (Exact name of registrant as specified in its charter)

              California                              68-0268780
---------------------------------------  ---------------------------------------
     (State of other jurisdiction                   (I.R.S. Employer
   of incorporation or organization)              Identification No.)

      1610 Arden Way, Suite 145
        Sacramento, California                           95815
---------------------------------------  ---------------------------------------
(Address of principal executive office)                (Zip Code)


Issuer's telephone number:        (916) 568-2310
                          --------------------------------------------

    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 the past 90 days. Yes  X.  No.     .
                                                  -----    -----

    State the number of shares outstanding of each of the issuer's classes of 
common equity, as of the latest practicable date. AS OF AUGUST 8, 1997, 
16,655,044 SHARES OF COMMON STOCK (NO PAR VALUE) WERE OUTSTANDING.


                                       1
<PAGE>

                      JAVA CENTRALE, INC., AND SUBSIDIARY

                          CONSOLIDATED BALANCE SHEETS

                                    ASSETS

<TABLE>
<CAPTION>
                                                   June 30,      March 31,
                                                     1997           1997
                                                 -----------    -----------
                                                 (Unaudited)
<S>                                              <C>            <C>
CURRENT ASSETS:
    Cash and cash equivalents                  $    381,274   $    350,608
    Notes receivable - current                      235,227        448,369
    Accounts receivable, net                        541,384        591,536
    Inventories                                     309,205        314,342
    Prepaid expenses and other                      324,219        397,322
                                               ------------   ------------
        Total current assets                      1,791,309      2,102,177

NOTES RECEIVABLE                                    681,310        989,603
PROPERTY AND EQUIPMENT, NET                       2,645,673      2,781,158
INTANGIBLE ASSETS                                 3,965,845      4,040,845
DEFERRED CHARGES AND OTHER                          307,598        316,775
NOTES RECEIVABLE-OFFICER                            224,447        240,766
INVESTMENT                                          546,666        546,666
                                               ------------   ------------
                                               $ 10,162,848   $ 11,017,990
                                               ------------   ------------
                                               ------------   ------------

                     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                           $    931,482   $  1,123,573
    Accrued liabilities                             766,005        620,424
    Due to related parties                          144,394         44,295
    Current maturities of long-term debt          1,781,044      1,945,488
    Convertible debt                              1,000,000      1,197,068
    Current capital lease obligations                27,768         27,768
                                               ------------   ------------
        Total current liabilities                 4,650,693      4,958,616

DEFERRED REVENUES                                   526,000        576,000
CONVERTIBLE DEBT                                    197,068        248,682
CAPITAL LEASES                                       89,815         95,667
OTHER LIABILITIES                                    88,169         69,573

STOCKHOLDERS' EQUITY:
    Series B Redeemable Preferred Stock, $.01
        per share per annum cumulative,
        convertible, no par 25,000,000 shares
        authorized                                        -              -
    Common stock, no par, 25,000,000 shares
        authorized, issued and outstanding
        shares; 15,604,015 at June  30, 1997,
        and 13,743,804 at March 31, 1997         18,860,934     18,507,874

    Accumulated deficit                         (14,249,831)   (13,438,422)
                                               ------------   ------------
                                                  4,611,103      5,069,452
                                               ------------   ------------
                                               $ 10,162,848   $ 11,017,990
                                               ------------   ------------
                                               ------------   ------------
</TABLE>

       The accompanying notes are an integral part of these statements.


                                       2
<PAGE>

                      JAVA CENTRALE, INC., AND SUBSIDIARY

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                  Three months ended
                                                       June 30,
                                                  1997             1996
                                              -----------      -----------
<S>                                           <C>              <C>
Revenue:
    Company cafe sales                        $ 2,184,837      $ 4,014,604
    Franchise operations                           50,000           80,000
    Royalties                                     297,601          297,276
    Sales of equipment and supplies                15,512           97,947
                                              -----------      -----------
        Total revenue                           2,547,950        4,489,827

Cost of company sales:
    Food and beverage                             744,298        1,421,894
    Labor                                         764,098        1,486,062
    Direct and occupancy                          496,813          862,855
    Cost of equipment and supplies                 18,135          101,445
    Depreciation                                  120,216          159,132
    Other                                               -           48,763
                                              -----------      -----------

        Total cost of company sales             2,143,560        4,080,151
                                              -----------      -----------

General and administrative expenses               939,604        1,103,190
Depreciation and amortization                     103,303          159,465
Bad debt expense                                   72,860                -
Loss associated with cafe closures                 25,000                -
Gain on sale of cafes                                   -          (66,398)
                                              -----------      -----------
        Operating loss                           (736,377)        (786,581)
                                              -----------      -----------
Other income (expense):
    Interest expense                             (108,671)         (87,941)
    Interest income                                28,816           22,262
    Other income                                    4,823           88,610
                                              -----------      -----------
        Net loss                              $  (811,409)     $  (763,650)
                                              -----------      -----------
                                              -----------      -----------
Net loss per weighted average equivalent
    common share outstanding                  $     (0.06)     $     (0.08)
                                              -----------      -----------
Equivalent common shares outstanding           14,377,880        8,994,033
                                              -----------      -----------
                                              -----------      -----------
</TABLE>

       The accompanying notes are an integral part of these statements.


                                       3
<PAGE>

                      JAVA CENTRALE, INC., AND SUBSIDIARY

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                           Three months ended
                                                                 June 30,
                                                           1997             1996
                                                        ----------       ----------
<S>                                                     <C>              <C>
Increase (decrease) in cash

Net cash flows from operating activities:               $   77,321       $ (973,450)
                                                        ----------       ----------
Cash flows from investing activities:

    Purchase of furniture and equipment                    (13,572)        (184,544)
    Proceeds from the sale of assets                             -          325,100
    Increase (decrease) in other                                 -           48,412
                                                        ----------       ----------
        Net cash provided by (used in) 
          investing activities                             (13,572)         188,968
                                                        ----------       ----------
Cash flows from financing activities:
    Proceeds from warrant conversions                      141,680                -
    Proceeds from short term borrowing                     325,000          400,000
    Proceeds from capital lease obligations                      -           64,455
    Payment of notes payable                              (488,384)        (461,369)
    Repayment of capital lease                             (11,379)               -
                                                        ----------       ----------
        Net cash provided by (used in)
          financing activities                             (33,083)           3,086
                                                        ----------       ----------
        Net (decrease) in cash                              30,666         (781,396)

Cash and cash equivalents, beginning of period             350,608        1,182,078
                                                        ----------       ----------
Cash and cash equivalents, end of period                $  381,274       $  400,682
                                                        ----------       ----------
                                                        ----------       ----------
    Cash paid for:

        Interest                                        $   32,562       $  114,224
</TABLE>

       The accompanying notes are an integral part of these statements.


                                       4
<PAGE>

                      JAVA CENTRALE, INC., AND SUBSIDIARY

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited)


NON-CASH TRANSACTIONS:

    During the quarter ended June 30, 1997, the Company decreased deferred 
revenues through accounts and notes receivable totaling $10,000 and during 
the quarter ended June 30, 1996 the Company increased deferred revenues 
through accounts and notes receivables totaling $20,000.

    During the quarter ended June 30, 1997, the holders of the convertible 
debt converted $248,682 of the notes into 1,335,197 common shares of stock 
pursuant to the terms of the notes.  During the quarter ended June 30, 1996, 
the holders of the convertible debt converted $1,260,000 of the notes into 
1,549,393 common shares of stock pursuant to the terms of the notes.

    During the fiscal year ended March 31, 1997 the Company issued 200,000 
shares of common stock valued at $50,000 pursuant to a consulting agreement. 
During the quarter ended June 30, 1997 the Company recognized consulting 
expense of $25,396 as a result of issuance of these shares.

    During the fiscal year ended March 31, 1997, the Company issued warrants 
valued at $240,351 pursuant to consulting agreements.  During the quarter 
ended June 30, 1997 the Company recognized consulting expenses of $31,350 as 
a result of issuance of these warrants.

SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:

    Sale of certain assets of Java Centrale, Inc., and subsidiary for the 
quarter ended June 30, 1996.

<TABLE>

<S>                                              <C>
    Cash received                                $ 325,100
    Note receivable                                296,000
    Net book value of assets sold                 (554,702)
                                                 ----------
    Gain on sale of assets                         $66,398
                                                 ----------
</TABLE>


                                       5
<PAGE>

                      JAVA CENTRALE, INC., AND SUBSIDIARY

                    NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The financial statements have been prepared without audit and do not 
include certain notes and certain financial presentations normally required 
under generally accepted accounting principles and, therefore, should be read 
in conjunction with the Company's financial statements included with the 
Annual Report, on Form 10-K filed with the Security and Exchange Commission 
for the fiscal year ended March 31, 1997.  It should be understood that 
accounting measurements at interim dates inherently involve greater reliance 
on estimates than at year end.  The results of operation at the three months 
ended June 30, 1997 are not necessarily indicative of results that can be 
expected for the full fiscal year.

     The June 30, 1997 financial statements included herein are unaudited.  
They contain, however, all adjustments which, in opinion of management are 
necessary to present fairly the financial position of the Company at June 30, 
1997 and March 31, 1997; and the results of its operations and its cash flows 
for the three months ended June 30, 1997 and 1996 respectively.

     Certain reclassifications have been made to the 1996 financial statement 
to conform to the 1997 presentation.

NOTE 2 - STOCKHOLDERS' EQUITY

A. CONVERSION OF CONVERTIBLE DEBT.

     The Company issued through private placements, convertible notes in the 
amount of $3,500,000.  The first note in the amount of $2,000,000 is due at 
December 15, 1997 with interest payable quarterly beginning on March 15, 1996 
at the rate of 8% per year.  The note was convertible into common stock of the 
Company after February 26, 1996 under certain terms and conditions.  As of 
June 30, 1997, $1,000,000 had been converted into 1,846,394 common shares, 
leaving convertible notes payable of $1,000,000.  Additionally in July, 1997 
the Company agreed to restructure the remaining portion of the unconverted 
note totaling $1,000,000 into a note due no later than January 1998, pledging 
the Paradise Bakery, Inc. shares as collateral and added $250,000 to the 
balance of the note to eliminate the conversion feature of the note.

     The second series of notes in the amount of $1,500,000 are due January 
29, 1998 with interest payable quarterly beginning on March 15, 1996 at the 
rate of 8% per year.  These are convertible into common stock of the Company 
after April 12, 1996 under certain terms and conditions.  As of June 30, 1997 
$1,302,932 had been converted into 2,800,000 common shares leaving 
convertible notes payable of $197,068.  In July 1997 the remaining $197,068 
of convertible debt was converted into 1,051,029 common shares. 

B. WARRANTS EXERCISED

     In May 1997 warrants were exercised for 575,000 common shares of stock 
for proceeds of $141,679.


                                       6
<PAGE>

C. SALE OF ASSETS

     In December of 1996, the Company sold the assets of Oh La La! to Good 
Food Fast Companies, Inc. "GFF" for $1,250,000 in cash, 233,333 shares of 
preferred stock and $750,000 in convertible notes receivable due in 1999.  On 
March 31, 1997, the Company agreed with GFF to exchange $250,000 of the 
convertible note receivable for the assumption of certain liabilities of the 
Company, exchange 233,333 preferred shares for 233,333 shares of common 
stock, accelerate a payment of $145,000 due under the note receivable to May 
1997 and convert the remaining $355,000 balance of the note into 40,000 
shares of GFF common stock. The common shares of GFF at June 30, 1997, have 
been valued at $2.00 per share based on the fair value of such shares. 


                                       7
<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS 
               OF FINANCIAL CONDITION AND RESULTS OF  OPERATIONS

GENERAL

     The Company began operations on March 5, 1992, and operated as a 
development stage enterprise through the end of its fiscal year ended March 
31, 1993.  As a development stage enterprise, the Company focused its efforts 
on financial planning, raising capital, research and development, 
establishing sources of supply, developing markets, organizing the 
corporation, acquiring assets, and developing its business plan.  During this 
time, the Company completed the filing of its Uniform Franchise Offering 
Circulars.  The Company also opened its training facility in Folsom, 
California, which is now being used to provide training to franchisees and 
their key employees in the operations of franchisee-owned Java Centrale cafes.

     The Company has never earned a profit in any fiscal year.  Since its 
incorporation in 1992, the Company's operations have required (rather than 
provided) cash every year.  In order to meet these cash requirements, the 
Company has from time to time sold common stock, borrowed short-term money, 
sold company assets and issued convertible debt.  The Company recorded a loss 
in the development stage during its first fiscal year of operation and since 
principal operations commenced and has recorded a loss for the fiscal years 
ended March 31, 1993, 1994, 1995, 1996 and 1997.  The net loss for fiscal 
1997 was $5,326,192 with an additional loss of $811,409 for the quarter ended 
June 30, 1997.  There can be no assurance that losses will not continue, or 
that the Company as currently constituted will become profitable in the 
future.  As of March 31, 1997, the Company had an accumulated deficit of 
$13,438,422 and as of June 30, 1997 the Company had an accumulated deficit of 
$14,249,831. In the fiscal year ended March 31, 1997, the Company sold 
assets, raised debt and equity, and reduced expenses to meet its ongoing 
liquidity needs.  In the quarter ended June 30, 1997 the Company had warrants 
exercised and borrowed short-term funds to meet on going liquidity needs.  
Currently the Company has a material working capital shortfall.

     During fiscal 1997 and to date, the Company has been operating at a loss 
primarily due to its administrative overhead and the under performance of the 
cafes in its Java Centrale system.  Commencing in April 1996, the Company 
instituted a plan to reduce its administrative expenses, but this plan has 
not been successful enough to cause the Company to become profitable.  
Further, the Company's Java Centrale system has in general not grown as fast 
or proved to be as profitable as expected, and the Company has experienced 
higher than anticipated expenses in pursuing the development of these cafes, 
the closing of certain outlets in this system and settling disputes with 
franchisees.

     The Company's financing plan over the last year to meet its ongoing 
liquidity needs has been to raise new equity through private placements, 
refinance or obtain new debt funding and sell assets of the Company's 
operation. The Company is maintaining its financing plan of seeking new 
equity, obtaining or refinancing debt and pursuing the sale of assets related 
to the Company's operation.  In February 1997, the Company hired an outside 
advisor to assist with the refinancing of the debt or the raising of new 
equity and to date there has been no financing completed.  In July, 1997 the 
Company entered into a letter of intent with a placement agent provided for 
the sale of the Company's common stock and warrants in a private placement on 
a best efforts basis to be completed by September 1997.  The Company can make 
no assurance as to the outcome of the private placement sale of its common 
stock.

     The Company's continuing operating losses have left it in a materially 
weak cash-flow position, one effect of which has been that the Company has 
been unable to develop its more profitable Paradise Bakery system as rapidly 
and extensively as it has planned to do.


                                       8
<PAGE>

     Since April of 1996, the Company has relied on a series of short-term 
loans from Alta Petroleum, Inc. in the aggregate amount of $775,000, sale of 
assets totaling $1,321,000, the raising of $900,000 in equity, and the 
exercising of warrants totaling $141,679 to finance its continuing cash flow 
shortfalls. There can be no assurance that any similar financing, asset sales 
or equity placements will continue to be available to the Company in the 
future.  Consequently, under current circumstances the Company does not 
anticipate that it will be able to continue existing operations in the future 
unless it can obtain new short-term or long-term financing, raise new equity 
or make a significant sale of assets. The Company's Board of Directors is 
currently evaluating a number of options for the resolution of its immediate 
and long-term financial needs, including among other potential alternatives 
the sale of its Java Centrale and/or Paradise Bakery systems, obtaining a 
long-term loan secured by its Paradise Bakery assets, a private and/or public 
sale of Company stock and/or other securities, and a strategic merger.  Some 
of the alternatives currently being studied by the Company's Board of 
Directors might result in a change in the management and/or control of the 
Company.  However, no final resolution of these issues has yet been arrived 
at. 

     As of June 30, 1997, the Company had operating 17 Company-owned 
locations and 65 franchisee-owned locations, as compared to 36 Company-owned 
locations, and 65 franchisee-owned locations as of June 30, 1996.

     The Company entered into agreements with franchisees to open no cafes 
during the quarter ended June 30, 1997, as compared to entering into 
agreements with franchisees to open three cafes during the quarter ended June 
30, 1996

     The Company opened two franchisee-owned cafes, and no Company-owned 
cafes, during the quarter ended June 30, 1997, as compared to opening one 
franchisee-owned cafe during the quarter ended June 30, 1996. 

     The Company closed one Company-owned cafe associated with the 
termination of a management agreement as a result of financial difficulties, 
and no franchisee-owned cafes in the quarter ended June 30, 1997 as compared 
to closing one Company-owned cafe and closing no franchisee-owned cafes 
during the quarter ended June 30, 1996.  These cafes closed primarily due to 
poor financial performance.

     The Company sold no Company-owned locations to franchisees during the 
quarter ended June 30, 1997, as compared to selling three Company-owned 
locations, and selling three Company-owned carts to a licensee for the 
quarter ended June 30, 1996.    

     In December of 1996, the Company sold the assets of Oh La La! to Good 
Food Fast Companies, Inc. "GFF" for $1,250,000 in cash, 233,333 shares of 
preferred stock and $750,000 in convertible notes receivable due in 1999.  On 
March 31, 1997, the Company agreed with GFF to exchange $250,000 of the 
convertible note receivable for the assumption of certain liabilities of the 
Company, exchange 233,333 preferred shares for 233,333 shares of common 
stock, accelerate a payment of $145,000 due under the note receivable to May 
1997 and convert the remaining $355,000 balance of the note into 40,000 
shares of GFF common stock. The common shares of GFF at June 30, 1997, have 
been valued at $2.00 per share based on the fair value of such shares.  As 
of June 30, 1997, following the related conversions, the Company owned 
approximately 30% of the outstanding common shares of GFF.  The Company did 
not recognize any earnings from GFF under the equity method of accounting due 
to immateriality.


                                       9
<PAGE>

     In August 1997, Directors Lyle Edwards and Kevin Baker resigned from the 
Board of Directors of Java Centrale, Inc.  The board has appointed Bradley B. 
Landin, the Senior Vice President of Operations for the Company, as a 
director to fill a vacancy.  The board is continuing to evaluate other 
candidates for the other vacancy. 

     RESULTS OF OPERATIONS

     The Company's revenues are currently derived primarily from 
Company-owned locations, initial franchise fees, resulting from cafe 
openings, franchise royalties, equipment sales, and product overrides on 
sales to its franchisees. Franchise fees range from $15,000 to $35,000 per 
cafe.  The Company is entitled to 4%-6% of the gross receipts from each 
franchised cafe and 2%-10% of the gross receipts from each franchised cart.  
Product overrides range from 3% to 10% of the total purchase of coffee from 
the Company's contract roaster.

     QUARTER 1997 AS COMPARED TO QUARTER 1996

     Total Company revenues for the quarter ended June 30, 1997 totaled 
$2,548,000, as compared to $4,490,000 for the quarter ended June 30, 1996, a 
decrease of $1,942,000, or 43%.  The principal components of this increase 
were:

     The Company's revenues from Company-owned retail operations decreased by 
$1,830,000, or 46%, to $2,185,000 for the quarter ended June 30, 1997, from 
$4,015,000 for the quarter ended June 30, 1996.  This decrease resulted 
primarily from a decrease of $953,000 associated with revenues from the Oh La 
La! Division, which was sold in December 1996, a decrease of $699,000 
associated with the revenues from the operations of Company-owned cafes which 
were closed or sold, during the fiscal year 1997 and a decrease in revenues 
from the Company-owned Paradise Bakery location of approximately $180,000. 

     Revenues from the Company's franchising operations decreased $30,000, or 
38% to $50,000 for the quarter ended June 30, 1997, from $80,000 for the 
quarter ended June 30, 1996.  This decrease is a result of recognized 
franchise fees totaling $50,000 associated with the opening of two Java 
Centrale franchisee-owned cafes for the quarter ended June 30, 1997, as 
compared to the recognition $80,000 in franchise fees associated with the 
opening of one Java Centrale franchise-owned cafe and the sale of one Java 
Centrale Company-owned cafe to a franchisee and two Paradise Bakery 
Company-owned cafes to a single franchisee during the quarter ended June 30, 
1996. 

     Revenues from the Company's royalties of $297,600 for the quarter ended 
June 30, 1997 and $297,300 for the fiscal year ended June 30, 1997 remained 
virtually the same.  Royalties associated with Java Centrale decreased 
$27,000 to $79,000 for the quarter ended June 30, 1997  as compared to 
$106,000 for the quarter ended June 30, 1996 due to the closure of 
franchisee-owned cafes. Additionally royalties associated with Paradise 
Bakery increased $28,000 to $219,000 for the quarter ended June 30, 1997 as 
compared to $191,000 for the quarter ended June 30, 1996 due to the increases 
in revenues from franchisee-owed cafes.

     Revenues from the Company's equipment sales decreased $82,000, or 84%, 
to $16,000 for the quarter ended June 30, 1997 from $98,000 for the quarter 
ended June 30, 1996.  This decrease resulted from discontinuing the sale of 
equipment directly to franchisees in May of 1996.

     Total expenses for the quarter ended June 30, 1997 were $3,284,000, an 
decrease of $1,992,000, or 38%, over expenses of $5,276,000 for the quarter 
ended June 30, 1996.  The principal components of the increase in expenses 
resulted from:


                                      10
<PAGE>

     The cost of food and beverage, labor and operating costs for the 
Company's retail operations decreased $1,854,000 for the quarter ended June 
30, 1997, to $2,125,000 as compared to $3,979,000 for the quarter ended June 
30, 1996.  This decrease results primarily from a decrease of $834,000 in 
expenses associated with the operating Oh La La! Division, which was sold in 
December 1996, a decrease in expenses of $923,000 associated with the 
operations of Company-owned cafes, which was sold or closed during the fiscal 
year ended March 31, 1997, and approximately $90,000 associated with 
decreased operating costs associated with the operation of the Paradise 
Bakery Company-owned locations. 

     The Company's cost of equipment decreased by $18,000, or 18%, in the 
quarter ended June 30, 1997, to $83,000, as compared to $101,000 for the 
quarter ended June 30, 1996.  This decrease resulted from discontinuing the 
sale of equipment directly to franchisees in May of 1996.

     Selling, general, and administrative expenses decreased $163,000 or 15%, 
during the quarter ended June 30, 1997, to $940,000 from $1,103,000 during 
the quarter ended June 30, 1996.  This decrease results from decreased 
expenses associated with the operations of the Oh La La! Division, which sold 
in December 1996, totaling $57,000, decreased personnel cost of $163,000, 
decreased travel expense of $32,000, decreased marketing costs of $13,000 and 
decreased legal and accounting fees of $11,000.  Additionally, there were 
increased consulting fees of $106,000, of which $64,900 was associated with 
the Companies capital raising efforts.

     For the quarter ended June 30, 1997, the Company had an operating loss 
of $736,000, a net loss of $811,000, and a loss per share of $.06, as 
compared to an operating loss of $787,000, a net loss of $764,000, and a loss 
per share of $.08 for the quarter ended June 30, 1996.  

     The operating loss decreased $51,000 to $736,000 during the quarter 
ended June 30, 1997 as compared to $787,000 during the quarter ended June 30, 
1996. The decrease is primarily a result of lower general and administrative 
expenses totaling $164,000, decreased depreciation and amortization of 
$56,000 from the sale of the Oh La La! Division, increased losses associated 
with a cafe closure of $25,000, bad debt expense of $73,000 associated with 
certain franchisees related notes and royalties, and no gain from the sale of 
assets during the quarter ended June 30, 1997 as compared to a gain from the 
sale of assets of $66,000 during the quarter ended June 30, 1996. 

     The net loss increased $47,000 to $811,000 during the quarter ended June 
30, 1997 as compared to $764,000 during the quarter ended June 30, 1996.  The 
increased net loss of  is primarily a result of the above decreased operating 
loss of $51,000, and an increase in interest expense and fees associated with 
the Company's financing of $20,000, and associated with both the sale of the 
Oh La La! Division and the sale and closure of cafes interest income 
increased $6,500 and other income decreased $84,000. 

     LIQUIDITY AND CAPITAL RESOURCES

     The Company's initial capitalization was obtained through the issuance 
of 2,500,000 shares of no par common stock for $10,000 on March 5, 1992.  In 
addition, the Company issued 2,950,000 shares of Series A cumulative 
preferred stock, in exchange for 2,950,000 shares of no par cumulative 
preferred stock, which were subscribed for on March 5, 1992 for proceeds of 
$590,000, on March 12, 1993.  On March 30, 1993, the Company sold 5,000,000 
shares of no par value redeemable Series B cumulative preferred stock for 
$1,000,000.  The proceeds from the issuance of all such stock were used for 
capital acquisitions and operating costs of the Company during its 
development stage.  On May 19, 1994, the Company raised $7,288,000 in net 
proceeds from an initial public offering of 1,500,000 shares of common stock. 
Of the 4,291,820 shares outstanding after the offering, 855,300 


                                      11
<PAGE>

were placed in escrow and are subject to an Escrow Agreement which provides 
for the release of such shares on or before March 31, 1999, with earlier 
release based upon the financial performance of the Company.  

     In the 1996 fiscal year the Company issued 1,604,692 common shares for 
$3,540,722 in proceeds in a series of private placements.  The Company also 
issued convertible debt in three separate private transactions totaling 
$3,500,000.  As of March 31, 1997 $2,054,250 had been converted into 
3,311,183 common shares.  During the quarter ended June 30, 1997 an 
additional $248,682 of convertible debt had been converted into 1,335,197 
shares of the Company's common stock.  As of June 30, 1997, $2,302,932 of 
convertible debt had been converted into 4,646,394 shares of the Company's 
common stock.

         From July 1, 1997, to August 8, 1997, an additional $197,068 of 
convertible debt has been converted into 2,386,226 shares.  Additionally, in 
July 1997, the Company has agreed to restructure the remaining portion of the 
unconverted note totaling $1,000,000, into a note due no later than January 
1998, pledging of the Paradise Bakery, Inc. shares as collateral and adding 
$250,000 to the balance of the note to eliminate the conversion feature of 
the note.  The Company will recognize the $250,000 as additional interest 
expense over the remaining life of the note.

     In December of 1996, the Company sold the assets of Oh La La! to Good 
Food Fast Companies, Inc. "GFF" for $1,250,000 in cash, 233,333 shares of 
preferred stock and $750,000 in convertible notes receivable due in 1999.  On 
March 31, 1997, the Company agreed with GFF to exchange $250,000 of the 
convertible note receivable for the assumption of certain liabilities of the 
Company, exchange 233,333 preferred shares for 233,333 shares of common 
stock, accelerate a payment of $145,000 due under the note receivable to May 
1997 and convert the remaining $355,000 balance of the note into 40,000 
shares of GFF common stock. The common shares of GFF at June 30, 1997, have 
been valued at $2.00 per share based on the fair value of such shares.  As 
of June 30, 1997, following the related conversions, the Company owned 
approximately 30% of the outstanding common shares of GFF.  The Company did 
not recognize any earnings from GFF under the equity method of accounting due 
to immateriality. 

     In July 1996, the Company borrowed $350,000 under a note due in April 
1997.  This note was paid with the proceeds of the long-term debt in November 
1996, when the Company completed a financing of $779,000 in long-term debt, 
pledging the assets of Paradise Bakery.  Although the Company is currently in 
default of certain financial covenants under this note, it is current with 
the required monthly payments under the note.  The Company also used proceeds 
of the $779,000 to pay a note due Chart House Enterprises in the amount of 
$330,000.

     In May 1996, the Company completed the sale of two Company-owned 
Paradise Bakery cafes to a franchisee for proceeds of $280,000, which were 
applied to the note due Sanwa Bank from the merger of Founders Venture, Inc.

     In April 1996, the Company completed a financing for $400,000, which 
pledged the assets of Oh La La!.  This note was paid from the proceeds of the 
cash portion on the sale of Oh La La! in December 1996.

     As of March 31, 1997, the Company had the $175,000 management line of 
credit available to it. In July 1996, Baycor, Gary Nelson, 

                                      12
<PAGE>

President and Chief Executive Officer, and Steven J. Orlando, Chief Financial 
Officer, agreed to loan the Company $175,000 from time to time as needed 
until April 1997, when the line of credit will be due and payable.  The 
lenders would receive a general lien on Java Centrale assets and will be at 
an interest rate of prime plus 2% per annum. In replacement of the line of 
credit, in April of 1997 Gary Nelson advanced the Company $50,000 and Steven 
Orlando deferred $28,000 in salary due from December 1996 through April 1997 
and Baycor deferred the receipt of salary and expenses, without interest, 
during the 1997 fiscal year.  The amount remaining unpaid as of June 30, 1997 
was $94,394.

     The Company currently has no available credit lines.  During the quarter 
ended June 30, 1997 the Company borrowed an additional $275,000 thereby 
increasing the balance on the note to Alta Petroleum, Inc. to $575,000.  Alta 
Petroleum has extended the due date of the note to September 30, 1997.

     The Company has never earned a profit in any fiscal year.  Since its 
incorporation in 1992, the Company's operations have required (rather than 
provided) cash every year.  In order to meet these cash requirements, the 
Company has from time to time sold common stock, borrowed short-term money, 
sold company assets and issued convertible debt.  The Company recorded a loss 
in the development stage during its first fiscal year of operation and since 
principal operations commenced and has recorded a loss for the fiscal years 
ended March 31, 1993, 1994, 1995, 1996 and 1997.  The net loss for fiscal 
1997 was $5,326,192 with an additional loss of $811,409 for the quarter ended 
June 30, 1997.  There can be no assurance that losses will not continue, or 
that the Company as currently constituted will become profitable in the 
future.  As of March 31, 1997, the Company had an accumulated deficit of 
$13,438,422 and at June 30, 1997 had an accumulated deficit of $14,249,831. 
In the quarter ended June 30, 1997 the Company had warrants exercised and 
borrowed short-term funds to meet on going liquidity needs.  Currently the 
Company has a material working capital shortfall.

     The Company's financing plan over the last year to meet its ongoing 
liquidity needs has been to raise new equity through private placements, 
refinance or obtain new debt funding and sell assets of the Company's 
operation. The Company is maintaining its financing plan of seeking new 
equity, obtaining or refinancing debt and pursuing the sale of assets related 
to the Company's operation.  In February 1997, the Company hired an outside 
advisor to assist with the refinancing of the debt or the raising of new 
equity and to date there has been no financing completed. In July, 1997 the 
Company entered into a letter of intent with a placement agent provided for 
the sale of the Company's common stock and warrants in a private placement on 
a best efforts basis to be completed by September 1997.  The Company can make 
no assurance as to the outcome of the private placement sale of its common 
stock.

     During fiscal 1997 and to date, the Company has been operating at a loss 
primarily due to its administrative overhead and the under performance of the 
cafes in its Java Centrale system.  Commencing in April 1996 the Company 
instituted a plan to reduce its administrative expenses, but this plan has 
not been successful enough to cause the Company to become profitable. 
Further, the Company's Java Centrale system has in general not grown as fast 
or proved to be as profitable as expected, and the Company has experienced 
higher than anticipated expenses in pursuing the development of these cafes, 
the closing of certain outlets in this system and settling disputes with 
franchisees.

     The Company's continuing operating losses have left it in a materially 
weak cash-flow position, one effect of which has been that the Company has 
been unable to develop its more profitable Paradise Bakery system as rapidly 
and extensively as it has planned to do.

     Since April of 1996, the Company has relied on a series of short-term 
loans from Alta Petroleum, Inc. in the aggregate amount of $775,000, sale of 
assets totaling $1,321,000, the raising of $900,000 in equity, and the 
exercising of warrants totaling $141,679 to finance its continuing cash flow 


                                      13
<PAGE>

shortfalls. There can be no assurance that any similar financing, asset sales 
or equity placements will continue to be available to the Company in the 
future. Consequently, under current circumstances the Company does not 
anticipate that it will be able to continue existing operations in the future 
unless it can obtain new short-term or long-term financing, raise new equity 
or make a significant sale of assets. The Company's Board of Directors is 
currently evaluating a number of options for the resolution of the Company's 
immediate and long-term financial needs, including among other potential 
alternatives the sale of its Java Centrale and/or Paradise Bakery systems, 
obtaining a long-term loan secured by its Paradise Bakery assets, a private 
and/or public sale of Company stock and/or other securities, and a strategic 
merger.  Some of the alternatives currently being studied by the Company's 
Board of Directors might result in a change in the management and/or control 
of the Company.  However, no final resolution of these issues has yet been 
arrived at. 

     During the quarter ended June 30, 1997 the Company incurred a net loss 
of $811,000 and provided net cash of $77,321 from operations, $303,035 
resulted from the Company receiving balloon note payments from two 
franchisees during the quarter. To fund its operations, the Company requires 
either additional financing, significant sales of additional franchises, or a 
substantial increase in its network of Company-owned cafes. 

     The Company had developed a specific operating plan to meet the ongoing 
liquidity needs of the Company's operations for the fiscal year ended March 
31, 1997 and thereafter.  During the fiscal year ended March 31, 1997, the 
Company reduced administrative salaries, certain employee benefit costs, and 
marketing expenses.  The Company also sold 20 of its existing Company-owned 
cafes and carts for proceeds of $1,321,000 in cash and is actively pursing 
the sale of additional assets.  Despite the sale (and possible future sales) 
of these assets, the Company does intend to operate Company-owned locations.  
 The Company also completed a number of debt financing totaling $1,729,000 
the sale of equity for $900,000 to meet its ongoing liquidity needs in the 
fiscal year ended March 31, 1997.  Additionally during the quarter ended June 
30, 1997 the Company borrowed $275,000 in short-term loans and had warrants 
exercised in the amount of $141,679 to meet its ongoing liquidity needs.

     Based on the Company's current cost structure and other expense 
calculations, and the Company's current and anticipated revenue streams, 
including sales of new Java Centrale franchises and the operating income 
expected to be produced by the Company's Paradise Bakery system, the Company 
cannot estimate that it will break even on cash flow in the current fiscal 
year. The Company does not expect to achieve profitability until after March 
31, 1998 and then only if the Company's growth projections can be met and its 
cost structure remains stable. There can be no assurance that enough new 
franchises will be sold to provide the necessary liquidity, or that the 
Company's liquidity goals will be reached in the immediate future if ever.  
The Company has certain debt obligations that are in default for 
non-compliance with financial covenants and non-payment to the scheduled 
required payments.  These obligations have been classified as currently due 
in the financial statements and the Company cannot make any assurances as to 
the ultimate disposition of these debt obligations which total approximately 
$1,097,621 as of August 1997. The Company's plan of operation to provide 
ongoing liquidity continues to include the sale of certain operating assets, 
the active pursuit of debt and equity and the restructure of debt.  The 
Company can not make any assurance that this plan will be achieved.


                                      14
<PAGE>

PART II

ITEM 1.  LEGAL PROCEEDINGS

         On June 27, 1997 Mr. Peter Merganthaler, an individual resident of 
the State of Florida, filed suit against the Company in the 15th Judicial 
Circuit Court in Palm Beach Country, Florida alleging breach of two 1995 
financial consulting agreements.  The relief sought by Mr. Merganthaler 
includes payment of approximately $30,000 in consulting fees, $20,000 in out 
of pocket expenses and $500,000 in commissions on private placements of the 
Company's Common Stock. The Company believes that the Company has substantial 
defenses to all of the claims asserted by Mr. Merganthaler, and it intends to 
deny the allegation made in his complaint.  On that basis, the Company 
believes that the ultimate disposition of this lawsuit will not have a 
material adverse effect on the Company's financial condition or operating 
results.

     On March 30, 1995, the Company issued to Oh La La!, Inc, Debtor-in 
Possession, a promissory note in principal amount of $932,342 (the "Note").  
The Note was convertible into shares of the Company's common stock, at its 
option and under certain circumstances.  In September of 1995 the Company 
notified representatives of PSSS, Inc., successor in interest to Oh La La!, 
Inc., that the required circumstances had been met and that it intended to 
convert the note into shares of its common stock, and a number of shares 
sufficient to convert the outstanding principal balance of the Note was 
delivered to representatives of PSSS, Inc.  In November of 1996, PSSS, Inc. 
notified the Company that it rejected the September 1995 conversion because 
the shares delivered to it were not sufficient to convert the 
then-outstanding interest due on the Note, and on May 28, 1997, PSSS, Inc. 
sent Java a formal demand letter for the immediate payment of the principal 
amount of the Note plus $122,602.97 in accrued interest to date of such 
letter.  To date, there has been no formal resolution of the claim asserted 
by PSSS, Inc.  The Company's management believes that the Company has 
substantial defenses to the claim that the September 1995 conversion was 
ineffective, and on that basis believes that the ultimate disposition of the 
claims asserted by PSSS, Inc. in this matter will not have a material adverse 
effect on the Company's financial condition or operating results.

ITEM 2.  CHANGES IN SECURITIES

         NONE.


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         a.   The Company is in default on the payment of interest due on a
              note payable in the aggregate principal amount of $417,412. 
              Principal of $246,250 and interest of $18,469 was due and payable
              on June 30, 1997.  The Company has not received a demand for
              acceleration of payment.  The principal holder of this note is
              Chart House Enterprises, Inc.  A note receivable that is held by
              Paradise Bakery from a franchisee secures this note payable.

              The Company's subsidiary Paradise Bakery, Inc. is in default of
              certain financial covenants on a loan payable in the amount of
              $680,209.  The Company has not received a demand for
              acceleration of payment.  Monthly scheduled payments are current. 
              The principal holder of this loan is Imperial Business Credit and
              is secured by substantially all Paradise Bakery assets.


                                      15
<PAGE>

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

         NONE.

ITEM 5.  OTHER INFORMATION

         NONE.

ITEM 6.  EXHIBITS; REPORTS OF FORM 8-K

         A.  EXHIBITS
         
         The Company is filing herewith the Exhibits listed on Schedule I
         attached hereto.
         
         B.  REPORTS ON FORM 8-K
    
         During the quarter ended June 30, 1997 the Company filed a Form 8-K/A
         in regards to the sale of the Oh La La! Division to Good Foods Fast
         Companies, Inc. 


                                      16
<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.

                                  JAVA CENTRALE, INC.
                                      (Registrant)

Date:  August 14, 1997

                                  By:
                                     ------------------------------------------
                                                   Gary C. Nelson
                                     President and Chief Executive Officer

                                  By:
                                     ------------------------------------------
                                                Steven J. Orlando
                                     Vice President and Chief Financial Officer
                                            (Principal Financial and 
                                                Accounting Officer)


                                      17
<PAGE>

                               INDEX TO EXHIBITS

Exhibits marked with an asterisk (*) represent management contracts or 
compensatory plans or arrangements.

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER          DESCRIPTION
 -------         -----------
<S>              <C>

  4.49*          Cancellation of stock options and warrants dated July 31, 1997
                 between the registrant and Richard D. Shannon for 450,000
                 commons shares at $.75 per share.

  4.50*          Cancellation of stock options and warrants dated July 31, 1997
                 between the registrant and Gary C. Nelson for 450,000 commons
                 shares at $.75 per share.  This agreement is omitted, as it is
                 identical to the one above in exhibit 4.49.

  4.51*          Cancellation of stock options and warrants dated July 31, 1997
                 between the registrant and Steven J. Orlando for 450,000
                 commons shares at $.75 per share.  This agreement is omitted,
                 as it is identical to the one above in exhibit 4.49.

  4.52*          Cancellation of stock options and warrants dated July 31, 1997
                 between the registrant and Thomas A. Craig for 150,000 commons
                 shares at $.75 per share.  This agreement is omitted, as it is
                 identical to the one above in exhibit 4.49.

  4.53*          Cancellation of stock options and warrants dated July 31, 1997
                 between the registrant and Bradley B. Landin for 150,000
                 commons shares at $.75 per share.  This agreement is omitted,
                 as it is identical to the one above in exhibit 4.49.

  4.54*          Cancellation of stock options and warrants dated July 31, 1997
                 between the registrant and Lyle Edwards for 50,000 commons
                 shares at $.75 per share.  This agreement is omitted, as it is
                 identical to the one above in exhibit 4.49.

  4.55*          Cancellation of stock options and warrants dated July 31, 1997
                 between the registrant and Kevin Baker for 100,000 commons
                 shares at $.75 per share.  This agreement is omitted, as it is
                 identical to the one above in exhibit 4.49.

     11          Statement re:  Computation of Per share Earnings (Loss)

     27          Financial Data Schedule
</TABLE>


                                      18