<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 November 30, 1996

                                       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 0-23036

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

               California                                     77-0096788
(State or other jurisdiction of incorporation or            (I.R.S. Employer 
              organization)                                 Identification No.)

                       120 Stone Pine Road, Half Moon Bay,
                        CA 94019 (Address and zip code of
                          principal executive offices)
                                 (415) 726-1888
                         (Registrant's telephone number)

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

Indicate by check mark whether the registrant (1) has filed all reports 
required to 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   / /

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

           Common Stock, no par value                  4,975,689 shares
           __________________________                  ________________
                 (Class)                      (Outstanding at January 9, 1997)
<PAGE>   2
                                  ODWALLA, INC.

                                    FORM 10-Q
                FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1996



                                      INDEX
<TABLE>
<CAPTION>

                                                                                                            PAGE
                                                                                                            ----
<S>               <C>                                                                                       <C>
PART I.           FINANCIAL INFORMATION

    Item 1.       Financial Statements:

                  Consolidated Balance Sheets as of August 31, 1996 and November 30, 1996 ...
                                                                                                              3
                  Consolidated Statements of Operations for the three-month periods ended November
                  30, 1995 and 1996 .............................................................             4
                  Consolidated Statements of Cash Flows for the three-month periods ended November
                  30, 1995 and 1996 .............................................................             5
                  Notes to Consolidated Financial Statements.....................................             6
    Item 2.       Management's Discussion and Analysis of Financial Condition and Results of
                  Operations.....................................................................             9
PART II.          OTHER INFORMATION
    Item 1.       Legal Proceedings..............................................................            15
    Item 6.       Exhibits.......................................................................            16

</TABLE>


                                       2.
<PAGE>   3
PART I - FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                                                                                          CONSOLIDATED BALANCE SHEETS
                                                                                                       (IN THOUSANDS)
---------------------------------------------------------------------------------------------------------------------

                                                                                  August 31,         NOVEMBER 30,
                                                                                      1996                 1996
---------------------------------------------------------------------------------------------------------------------
                                                                                                     (UNAUDITED)
<S>                                                                               <C>                <C>
ASSETS
CURRENT
     Cash and cash equivalents                                                         $ 5,975          $ 2,850
     Short term investments                                                              6,438            6,049
     Trade accounts receivable, less allowance for
         doubtful accounts of $306 and $550                                              5,302            3,557
     Inventories (Note 2)                                                                3,294            4,114
     Prepaid expenses and other                                                            964              638
     Deferred tax asset, net (Note 5)                                                      307            1,167
                                                                                       -------          -------
TOTAL CURRENT ASSETS                                                                    22,280           18,375
PLANT, PROPERTY AND EQUIPMENT, net (Note 3)                                             12,641           13,850
OTHER ASSETS
     Officer and shareholder loans                                                         117              117
     Excess of cost over net assets acquired                                             1,442            1,414
     Covenants not to compete                                                              874              840
     Other noncurrent                                                                      346              308
                                                                                       -------          -------
TOTAL ASSETS                                                                           $37,700          $34,904
                                                                                       =======          =======

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
     Accounts payable                                                                  $ 5,308          $ 5,388
     Accrued payroll and related items                                                   1,096            1,977
     Income taxes payable                                                                 281               78
     Other accruals                                                                        581            1,579
     Current maturities of capital lease obligations                                       210              212
     Current maturities of long-term debt                                                  149              141
                                                                                       -------          -------
TOTAL CURRENT LIABILITIES                                                                7,625            9,375
CAPITAL LEASE OBLIGATIONS, less current maturities                                         384              331
LONG-TERM DEBT, less current maturities                                                     90              307
OTHER                                                                                       27               30
                                                                                       -------          --------
TOTAL LIABILITIES                                                                        8,126           10,043
                                                                                       -------          -------

SHAREHOLDERS' EQUITY
  Common stock, no par value, shares authorized, 15,000,000; issued and
     outstanding, 4,945,095 and 4,972,355 shares, respectively                          28,813           28,943
  Retained earnings (deficit)                                                              761           (4,082)
                                                                                       -------          ------
TOTAL SHAREHOLDERS' EQUITY                                                              29,574           24,861
                                                                                       -------          ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                             $37,700          $34,904
                                                                                       =======          =======
</TABLE>

                                       3.
<PAGE>   4
CONSOLIDATED STATEMENTS OF OPERATIONS
                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------
                                                      Three Months Ended
                                                      ------------------ 
                                                          November 30,
                                                  1995                  1996
                                                  ----                  ----
--------------------------------------------------------------------------------
                                                                     (Unaudited)
<S>                                              <C>                 <C>
NET SALES                                        $12,394             $14,101
COST OF SALES                                      6,783               7,004
                                                 -------             -------
GROSS MARGIN                                       5,611               7,097
                                                 -------             -------
OPERATING EXPENSES                                            
     Sales and distribution                        4,335               6,239
     Marketing                                       413                 678
     General and administrative                    1,193               2,121
     Direct recall costs (Note 4)                     -                3,840
                                                 -------             -------
TOTAL OPERATING EXPENSES                           5,941              12,878
                                                              
LOSS FROM OPERATIONS                               (330)              (5,781)
OTHER INCOME (EXPENSE), net                         (21)                 (5)
INTEREST INCOME (EXPENSE), net                      158                   82
                                                 ------              -------
LOSS BEFORE INCOME TAXES                           (193)              (5,704)
                                                              
INCOME TAX BENEFIT                                   73                  860
                                                 ------              -------
NET LOSS                                         $ (120)             $(4,844)
                                                 ======              =======
                                                              
NET LOSS PER COMMON SHARE AND                                 
     COMMON EQUIVALENT SHARE                     $(0.02)             $ (0.98)
                                                 -------             -------
WEIGHTED AVERAGE COMMON EQUIVALENT AND                        
     COMMON EQUIVALENT SHARES OUTSTANDING          4,895               4,958
                                                 =======             =======
                                                          
</TABLE>

                                       4.
<PAGE>   5
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                  (IN THOUSANDS)
<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------
                                                              Three Months Ended
                                                                November 30,
                                                            1995                1996
                                                            ----                ----
---------------------------------------------------------------------------------------
                                                                  (Unaudited)
<S>                                                         <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                 $  (120)          $ (4,844)
   Adjustments to reconcile net income to net
       cash used in operating activities:
          Depreciation & amortization                           339                540
          Deferred income taxes                                 (73)              (860)
          Changes in assets and liabilities:
             Trade accounts receivable                         (986)             1,745
             Inventories                                       (394)              (820)
             Prepaid expenses and other current assets          (64)               326
             Other noncurrent assets                             11                 38
             Accounts payable                                  (484)                80
             Accrued payroll and related items                 (183)               882
             Other accruals and other liabilities                74              1,002
             Income taxes payable                              (410)              (203)
                                                            -------           --------
NET CASH USED IN OPERATING ACTIVITIES                        (2,290)            (2,114)
                                                            -------           --------
CASH FLOWS USED IN INVESTING ACTIVITIES
     Capital expenditures                                      (575)            (1,458)
     Sale of short-term investments, net                          -                389
                                                            --------          --------
NET CASH USED IN INVESTING ACTIVITIES                          (575)            (1,069)
                                                            -------           --------
CASH FLOWS FROM FINANCING ACTIVITIES
     Principal payments under long-term debt                    (10)               (22)
     Payments of obligations under capital leases               (91)               (50)
     Sale of common stock through option exercises              140                130
                                                            -------           --------
NET CASH PROVIDED BY FINANCING ACTIVITIES                        39                 58
                                                            --------          --------
NET DECREASE IN CASH AND CASH EQUIVALENTS                    (2,826)            (3,124)
CASH AND CASH EQUIVALENTS, beginning of period               11,786              5,975
                                                            -------           --------
CASH AND CASH EQUIVALENTS, end of period                    $ 8,960           $  2,850
                                                            =======           ========
</TABLE>

                                       5.
<PAGE>   6
                                  ODWALLA, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       BASIS OF PRESENTATION

         The accompanying consolidated balance sheet of Odwalla, Inc. and its
subsidiary (the "Company") as of November 30, 1996 and the related consolidated
statements of operations and cash flows for each of the three-month periods
ended November 30, 1995 and 1996 have not been audited by independent
accountants. However, in the opinion of management, they include all adjustments
necessary for a fair presentation of the financial position and the results of
operations for the periods presented. The statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosure normally
included in financial statements prepared in conformity with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The operating results for the interim periods are not necessarily
indicative of results to be expected for an entire year. The aforementioned
statements should be read in conjunction with the consolidated financial
statements for the year ended August 31, 1996 appearing in the Company's 1996
Annual Report on Form 10-K.

2.       INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>

                                                  AUGUST 31,     NOVEMBER 30,
                                                     1996            1996
                                                  ----------     ------------
<S>                                              <C>             <C>
          Raw materials                          $    2,793       $   3,741
          Packaging supplies and other                  151              46
          Finished product                              350             327
                                                 ----------       ---------

          Total                                  $    3,294       $   4,114
                                                 ==========       =========
</TABLE>

3.       PLANT, PROPERTY AND EQUIPMENT

Plant, property and equipment consist of the following (in thousands):


<TABLE>
<CAPTION>

                                                  AUGUST 31,     NOVEMBER 30,
                                                     1996            1996
                                                  ----------     ------------
<S>                                              <C>             <C>
         Land                                    $   411         $ 1,012
         Buildings and building
          improvements                             6,339           6,562
         Leasehold improvements                    2,287           2,575
         Machinery and equipment                   5,242           5,220
         Vehicles                                    619             626
         Other                                     2,693           3,269
                                                 -------         -------
                                                  17,591          19,264
</TABLE>

                                       6.
<PAGE>   7
<TABLE>
<S>                                              <C>             <C>
         Less accumulated depreciation and
         amortization                             (4,950)         (5,414)
                                                 -------         -------
                                                 $12,641         $13,850
                                                 =======         =======
</TABLE>


4.       PRODUCT RECALL

         On October 30, 1996, the Company was notified by the State of
Washington Environmental Health Services of an epidemiological link between
several cases of E. coli O157:H7 bacteria illness and Odwalla's apple juice
products. The Company immediately implemented a voluntary recall (the "Recall")
of all Odwalla products containing apple juice and, on October 31, 1996,
expanded the Recall to include its carrot and vegetable products because such
products were processed on the same production line as the apple juice.

         The Company experienced a significant reduction in sales of all of its
products following the Recall. Net sales in November 1996 were approximately 38%
of August 1996 sales levels. Beginning in early December 1996, the Company
reintroduced all apple juice-based products to the market using flash
pasteurization of its fresh apple juice. In addition, the Company incurred
significant direct Recall costs including: advertising and public relations
costs, legal and professional fees, cost of the product recalled (including the
labor and freight involved in the recall process), destruction of unsold product
and now obsolete packaging supplies, costs of leased sales and distribution
equipment in excess of current needs, and other costs. Direct Recall costs
totaled $3,840,000 million in the first quarter of fiscal 1997 and include
approximately $700,000 of estimated direct costs for the remainder of the
year.

         However, there can be no assurance that the actual direct costs for the
remainder of the year may not exceed the estimated amount.

         In keeping with long-term strategic objectives, the Company plans to
continue to invest in building an infrastructure capable of sustaining growth
and expansion. As a result of the plans for continued growth and infrastructure
development, the Company has not reduced costs commensurate with the reduction
of sales following the Recall. The Company expects the costs associated with the
Recall and disruption in sales will result in a significant loss for fiscal year
1997.

         The Company maintains insurance coverage for product recall, product
adulteration, lost income and other first party business risks and intends to
present claims to its insurance carriers under the appropriate policies.
However, there have been no claims prepared as of January 9, 1997, and the
amount and timing of proceeds, if any, from future insurance claims cannot be
presently determined.

         As of January 9, 1997, there have been seven personal injury claims and
legal proceedings seeking monetary damages and other relief filed against the
Company since the Recall. On January 9, 1997, two of the personal injury
lawsuits were settled. Two of the remaining claims are class action lawsuits and
three are personal injury lawsuits. In addition, there is one legal proceeding
alleging fraudulent business acts and practices relating to the recalled
products pending against the Company. The Company is currently working with its
insurance carrier and legal counsel to assess the total potential liability to
the Company. However, due to the short period of time since the Recall, the
Company is not able to determine whether the ultimate liability resulting from
these and potential future claims will exceed the coverage available under its
applicable insurance policies. See "Part II - Item 1. Legal Proceedings."

                                       7.
<PAGE>   8
4.       PRODUCT RECALL (CONTINUED)

         The Company is developing plans to regain and build on its customer
base and anticipates that sales levels will improve throughout the remainder of
fiscal year 1997. There can be no assurance sales levels will continue to
improve and, in any event, the anticipated improvement in sales levels is not
expected to offset the effects of the lost sales and direct costs associated
with the Recall. While a significant loss is expected for fiscal year 1997, the
Company believes it will have sufficient cash to fund its operations and capital
expenditures through the end of fiscal year 1997. However, this belief is based,
in part, on future sales estimates which are inherently uncertain given the
disruption to the Company's business caused by the Recall.

5.       INCOME TAXES

         The Company's effective tax benefit rate differs from the federal
statutory rate at November 30, 1996, as follows:

<TABLE>
<S>                                                                                <C>
             Federal statutory tax rate                                            34%
             State income tax benefit due to net operating loss carryforward        3
             Permanent differences and other                                       (2)
             Valuation allowance                                                  (20)
                                                                                  ---
             Effective tax rate                                                    15%
                                                                                  ===
</TABLE>

         The deferred tax asset valuation allowance was established at November
30, 1996, to reduce the recorded net deferred tax asset to an amount estimated
as more likely than not to be realized. The deferred tax asset recorded consists
principally of the tax effect of the expected tax losses for fiscal 1997 that
will be carried back to prior years' taxable income as well as the future tax
benefits resulting from tax loss carryforwards. The Company will assess the
required valuation allowance as additional information regarding the impact of
the Recall is available.

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

         The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements relating
to future events or the future financial performance of the Company, which
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain important factors, including without limitation those set
forth in this section, in the Company's Annual Report on Form 10-K for the year
ended August 31, 1996, and in other documents the Company files from time to
time with the Securities and Exchange Commission. The following discussion and
analysis should be read in conjunction with the accompanying consolidated
financial statements and notes thereto and the financial statements and related
notes contained in the Company's Annual Report on Form 10-K.

OVERVIEW

         The Company's net sales are generated by sales to supermarkets,
specialty retail stores, natural food stores, warehouse outlets and
institutional food service trade partners, primarily restaurants. Net 

                                       8.
<PAGE>   9
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (CONTINUED)

sales are net of product returns and allowances. The Company sells products to
most of its trade partners on a guaranteed basis and takes back expiring or
expired product for credit. The Company's growth has come predominantly from
continued penetration in existing markets, sales of new products and expansion
into new markets. Prior to the Recall discussed below, the Company believes that
its sales had been positively affected by the Company's introduction of new
products, higher recognition of the Company's brand and products, better
placement on store shelves, increased placement of the Company's in-store
coolers and increased support for route sales persons.

         A significant portion of the Company's cost of sales is the cost of raw
materials. Although a portion of the cost of certain purees and other raw
materials is fixed on an annual basis, the majority of the Company's fresh fruit
and vegetable purchases are made on the open market. Consequently, the Company
is subject to wide fluctuations in prices for the fruits, vegetables and other
nutritious products it purchases.

         The Company distributes its products primarily through its
direct-store-delivery system, which is serviced by route sales people who
deliver products directly to and merchandise products directly in the retail
display shelves of the Company's trade partners, using primarily leased delivery
trucks. This distribution system, although more expensive than using independent
distributors, allows the Company to control the quality of service and product
mix, in-store stocking of the Company's coolers or shelf space and freshness of
products.

         The Company has experienced significant quarterly fluctuations in
operating results and anticipates that these fluctuations will continue in
future periods. These fluctuations have been the result of changes in the price
of fruit and vegetables due to seasonality and other factors, new product
introductions, start-up costs associated with new facilities, expansion into new
markets, sales promotions and competition. Excluding the impact of the Recall
discussed in the following paragraphs, future operating results may fluctuate as
a result of these and other factors, including increased energy costs, the
introduction of new products by the Company's competitors, changes in the
Company's customer mix, and overall trends in the economy. The Company's
business is also significantly affected by weather patterns, and unseasonably
cool or rainy weather can adversely impact the Company's sales.

         A significant portion of the Company's expense levels is relatively
fixed, and the timing of increases in expense levels is based in large part on
the Company's forecasts of future sales. If sales are below expectations in any
given period, the adverse impact on results of operations may be magnified by
the Company's inability to adjust spending quickly enough to compensate for the
sales shortfall. The Company also may choose to reduce prices or increase
spending in response to competition, which may have an adverse effect on the
Company's results of operations.

         On October 30, 1996, the Company was notified by the State of
Washington Environmental Health Services of an epidemiological link between
several cases of E. coli O157:H7 and Odwalla's apple juice products. The Company
immediately implemented a voluntary recall of all Odwalla products containing
apple juice. On October 31, 1996, Odwalla expanded the Recall to include its
carrot and vegetable products because such products were processed on the same
production line as the apple juice. Net sales of fruit- and vegetable-based
beverage and water products in November 1996 were


                                       9.
<PAGE>   10
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (CONTINUED)

approximately 38% of August 1996 sales levels. New trade partner accounts were
opened at a significantly reduced rate during November 1996.

         To date, there have been seven personal injury claims and legal
proceedings seeking monetary damages and other relief relating to the Recall
filed against the Company. Two of these proceedings were settled in early
January 1997. In addition, there is one legal proceeding alleging fraudulent
business acts and practices relating to the recalled products pending against
the Company. Following the Recall, the Company formed the Odwalla Nourishment &
Food Safety Advisory Council to advise management in developing new industry
leadership and practices in the sourcing, production and distribution of
Nourishing Beverage products. Beginning in early December 1996, Odwalla
reintroduced all apple juice-based products to the market using a Hazard
Analysis Critical Control Point Plan, which includes the flash pasteurization
of fresh apple juice.  The flash pasteurization process rapidly heats the juice
for a short period of time to a temperature high enough to kill harmful bacteria
yet still retain vitamins, minerals and flavors that diminish in pasteurization
processes at higher temperatures and for longer periods of time.  The Company
incurred significant costs related to the Recall, including advertising and
public relations costs, legal and professional fees, cost of the product
recalled (including the labor and freight involved in the recall process),
destruction of unsold product and now obsolete packaging supplies, costs of
leased sales and distribution equipment in excess of current needs, costs of
reformulating products and costs associated with the flash pasteurization
process.

         In keeping with long-term strategic objectives, the Company plans to
continue to invest in building an infrastructure capable of sustaining growth
and expansion. In October 1996, the Company entered Texas with the introduction
of beverage products in Austin, Dallas and Houston. As a result of the plans for
continued growth and infrastructure development, the Company has not reduced
costs commensurate with the reduction of sales following the Recall. Although
the Company is still in the planning stages following the Recall, the Company
expects the costs associated with the Recall and disruption in sales will result
in continuing operating losses and will result in a significant loss for fiscal
year 1997.

         The Company maintains insurance coverage for first party business risks
and intends to present claims to its insurance carriers under the appropriate
policies. However, there have been no claims prepared to date and the amount and
timing of proceeds, if any, from future insurance claims is not known at this
time.

RESULTS OF OPERATIONS

         The following table sets forth, as a percentage of net sales, certain
consolidated statements of operations data for the three-month periods ended
November 30, 1995 and 1996. These operating results are not necessarily
indicative of the results for any future period.


                                      10.
<PAGE>   11
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (CONTINUED)


<TABLE>
<CAPTION>

                                                         Three Months Ended
                                                            November 30,

                                                       1995               1996
                                                       ----               ----
<S>                                                    <C>                <C>

Net sales                                              100.0%             100.0%
Cost of sales                                           54.7               49.7
                                                       -----             ------
Gross margin                                            45.3               50.3
                                                       -----             ------

Operating expenses
   Sales and distribution                               35.0               44.2
   Marketing                                             3.3                4.8
   General and administrative                            9.6               15.1
   Direct recall costs                                     -               27.2
                                                       -----             ------

Loss from operations                                    (2.7)             (41.0)
Interest income (expense), net                           1.3                0.6
Income tax benefit                                       0.6                6.1
                                                       -----             ------

Net loss                                                (1.0)%           (34.3)%
                                                       ======            ======
</TABLE>



         NET SALES. Net sales for the first quarter of fiscal 1997 increased 14%
to $14.1 million compared to $12.4 million for the same period during fiscal
1996. Net sales growth for the first quarter of fiscal 1997 was approximately
45% for each of September and October 1996 compared to the corresponding months
in fiscal 1996. Sales in November 1996 were substantially reduced from the first
two months of the quarter as a result of the Recall. The Company expects sales
in the second quarter of fiscal 1997 to decline substantially from the first
quarter sales level.

         COST OF SALES. Cost of sales increased to $7.0 million in the first
quarter of fiscal 1997 compared to $6.8 million for the same period during
fiscal 1996. Gross margin as a percentage of net sales was 50.3% in the first
quarter of fiscal 1997, an increase from 45.3% during the first quarter of
fiscal 1996. Gross margin increased primarily due to (a) better fruit yield due
to improvements installed during late fiscal 1996 at the production facility in
Dinuba, despite slightly higher prices for fruit, and (b) decreases in packaging
costs offset by increased costs due to a volume reduction in November 1996. The
Company anticipates that cost of sales will increase as a percentage of net
sales following the Recall due to reduced production levels compared to
September and October 1996 and production costs of the flash-pasteurized
products that were reintroduced to the market in early December 1996.

         SALES AND DISTRIBUTION. Sales and distribution expenses increased to
$6.2 million in the first quarter of fiscal 1997 compared to $4.3 million for
the same period during fiscal 1996, and increased as a percentage of net sales.
The increase in sales and distribution expenses as a percentage of net sales is
attributable primarily to the Recall as the sales and distribution structure in
place to support the expanding sales volume was not reduced to correspond with
the reduced sales volume in November. In an effort to reduce sales and
distribution expenses post-Recall, in late November, the Company completed a
reduction in force of approximately 50 employees primarily involved in sales and
distribution. In connection with 


                                      11.
<PAGE>   12
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (CONTINUED)

the reduction in force, the Company initiated a sales route restructuring plan
(which is not expected to be fully implemented until at least March 1997) and a
revised route sales person compensation plan. As a result of the reduction in
the work force, the route restructuring and the new compensation plan,
additional sales personnel chose to leave the Company, although most of those
personnel are expected to be replaced. There can be no assurance that these and
other cost control measures will return sales and distribution costs as a
percentage of net sales to pre-Recall levels. In addition, future decisions
regarding growth and expansion consistent with long-term strategic objectives
may increase sales and distribution costs as a percentage of net sales compared
to pre-Recall levels.

         MARKETING. Marketing expenses increased to $678,000 in the first
quarter of fiscal 1997 compared to $413,000 in the first quarter of fiscal 1996,
and increased as a percentage of net sales. Marketing costs increased in the
first quarter of fiscal 1997 and will continue to increase in fiscal 1997, in
both absolute dollars and as a percentage of net sales, as a result of the
Recall, planned expanded efforts to continue to enhance stakeholder awareness by
hiring additional personnel and increased professional services related to new
product development and communications. The increase in marketing costs as a
result of the Recall cannot be quantified at this time and will depend upon the
results of on-going consumer research, the response of consumers to the
reintroduced product line, and other factors affecting the restoration of
consumer confidence. The Company expects marketing expenses to continue to
increase in absolute dollars and to increase as a percentage of net sales for
the foreseeable future.

         GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased to $2.1 million in the first quarter of fiscal 1997 from $1.2 million
in the first quarter of fiscal 1996, and increased as a percentage of net sales,
primarily due to additions to the Company's management and administrative staff
and increases in professional services and lease expense. General and
administrative costs will increase in fiscal 1997 in both absolute dollars and
as a percentage of net sales. The Company will continue to invest in
infrastructure, particularly in information systems, to provide for sustainable
growth. The Company also expects to incur significant legal and other
professional fees associated with the Recall.

         DIRECT RECALL COSTS. The direct costs of the Recall were $3.8 million
in the first quarter of fiscal 1997. This total represents the costs directly
associated with the Recall, including: advertising and public relations costs;
legal and professional fees; costs of the product recalled, including the labor
and freight involved in the recall process; destruction of unsold product and
now obsolete packaging supplies; and costs of leased equipment in excess of
current volume requirements. Direct recall costs include approximately $700,000
of estimated direct costs for the remainder of the year, primarily legal and
professional fees. However, there can be no assurance that the actual direct
costs for the remainder of the year may not exceed the estimated amount.

        INTEREST. Odwalla had net interest income of $82,000 in the first
quarter of fiscal 1997 compared to $158,000 in the first quarter of fiscal 1996.
Gross interest income of $99,000 in the first quarter of fiscal 1997 resulted
primarily from the Company's investment of the proceeds of its public offering
in May 1996. Gross interest expense of $17,000 in the first quarter of fiscal
1997 resulted from interest on capital leases and other long-term debt. Gross
interest income of $185,000 in the first quarter of fiscal 1996 was offset by
interest expense of $27,000. Interest income is expected to decrease in future
periods as the Company utilizes a portion of its cash equivalents and short-term
investments. See "Liquidity and 

                                      12.
<PAGE>   13
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (CONTINUED)



Capital Resources.

         INCOME TAXES. The $860,000 income tax benefit for the first quarter of
fiscal 1997 resulted from the tax benefit associated with the loss for the
quarter resulting from the Recall. The 15% effective tax benefit rate varies
from the federal statutory tax rate primarily due to the effect of establishing
a deferred tax asset valuation allowance. The Company will assess the valuation
allowance as additional information regarding the impact of the Recall is
available during fiscal 1997. The $73,000 income tax benefit for the first
quarter of fiscal 1996 resulted from the tax benefit of the loss for that
quarter. The effective tax rate of 38% for the first quarter of fiscal 1996
varied from the federal statutory tax rate primarily due to California and other
state income taxes.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has financed its operations through three primary sources:
private and public sales of equity securities, bank debt and capital lease
financing. At November 30, 1996, the Company had working capital of $9.0 million
compared to working capital of $14.7 million at August 31, 1996. The decrease
resulted primarily from operating losses and capital expenditures of $1.5
million. At November 30, 1996, the Company had cash, cash equivalents and short
term investments of $8.9 million compared to $12.4 million at August 31, 1996.

         Net cash used in operating activities for the first quarter of fiscal
1997 was $2.1 million. This consisted of the net loss plus depreciation and
amortization, decreases in accounts receivable (due to significantly reduced
November 1996 sales volume) and increases in accounts payable and other accrued
expenses offset by an increase in the deferred income tax asset (due primarily
to tax benefits of the net operating loss) and in inventory due to favorably
priced cash purchases of frozen purees in the first quarter of fiscal 1997 based
upon commitments from fiscal 1996. Net cash used in investing activities for the
first quarter of fiscal 1997 was $1.1 million, consisting primarily of capital
expenditures for production equipment at the Dinuba plant and, to a lesser
extent, computer equipment and coolers. Net cash provided by financing
activities for the first quarter of fiscal 1997 was $58,000, consisting
primarily of $130,000 for the sale of common stock through the exercise of stock
warrants and options offset by payments of long-term debt and capital lease
obligations.

         In October 1996, the Company completed two land purchases contracted in
fiscal 1996. The first was for a parcel of land adjacent to the Dinuba
production facility which resulted in payments of $10,000 when the contract was
signed in April 1996 and $205,000 upon closing in October. The second was to
complete an agreement reached in May 1996 to purchase land adjacent to its Half
Moon Bay administrative offices and, upon closing on the land purchase, to
extend its lease on the administrative offices. The Company completed the
transaction in October 1996 at a cost of $395,000, of which $230,000 represents
assumption of the existing mortgage (interest at 8.75% per annum, monthly
principal and interest payments until maturity in 1999 when the remaining
balance of approximately $220,000 is due) on the property.

                                      13.
<PAGE>   14
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS (CONTINUED)

         At November 30, 1996, the Company had $543,000 outstanding in capital
lease obligations, primarily related to leasing of production equipment,
delivery vehicles and in-store coolers. The Company has used, and expects to
continue to use, capital lease financing as necessary to obtain needed
production assets, primarily equipment. However, as a result of the Recall, the
leasing company used for computer and cooler financing has notified the Company
that it has placed a hold on future lease commitments. The Company is currently
working with that leasing company and other equipment leasing companies to
obtain future lease commitments. There can be no assurance that the Company will
be able to use or continue to use such capital lease financing and the failure
to do so may have an adverse effect on the Company's business or results of
operations.

         The Company is currently seeking to obtain a working capital line of
credit. However, there can be no assurance that the Company will be able to
obtain such a credit facility from its prior lender or another financial
institution at favorable terms, if at all.

         Capital improvements necessary for flash pasteurization and other plant
modifications are currently expected to cost less than $2 million in fiscal
1997. The improvements will be largely financed through available cash resources
or, if available, debt or lease financing.

         The Company anticipates that the increased costs associated with the
Recall, including equipment and plant modifications required for flash
pasteurization and legal and marketing costs, may cause the Company to pursue
additional financing that may be dilutive to current investors or result in a
higher debt-to-equity ratio than would otherwise be the case. There can be no
assurance that such financing will be available on terms favorable to the
Company, if at all. If adequate financing is not available, the Company may be
required to reduce planned expenditures, particularly in the areas of
advertising and marketing, in order to conserve cash.

         While the Company expects a significant loss for fiscal year 1997, the
Company believes it will have sufficient cash to fund its operations and capital
expenditures through November 1997. However, this belief is based in part on
future sales estimates which are inherently uncertain given the disruption to
the Company's business caused by the Recall.



                                      14.
<PAGE>   15
PART II - OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS.

         The following personal injury claims and legal proceedings seeking
monetary damages and other relief relating to the Recall are pending against the
Company:

         1.       The Ishida Case:  A class action lawsuit filed in King County
                  Superior Court, Seattle, Washington and served on November 
                  12, 1996.

         2.       The Curtis Case:  A class action lawsuit filed in the United
                  States District Court, Western District of Washington and
                  served on November 15, 1996.

         3.       The Azzizi Case:  A personal injury lawsuit filed in Alameda 
                  County Superior Court, Alameda, California and served on
                  November 20, 1996.

         4.       The Beverly Case:  A personal injury lawsuit filed in the 
                  United States District Court, Western District of Washington
                  and served on December 3, 1996.

         5.       The Starmack Case:  A personal injury lawsuit filed in San 
                  Diego County Superior Court, San Diego, California on January
                  3, 1997; not yet served on the Company.

         In addition, the following claim was filed under California Business
and Professions Code Section 17200 et seq. alleging fraudulent business acts and
practices of the Company relating to the recalled products:

         Roderick P. Bushnell v. Odwalla, Inc.: A lawsuit filed in San Francisco
         County Superior Court, San Francisco, California and served on November
         13, 1996.

         The Company currently maintains commercial general liability insurance
totaling $27,000,000. The Company has notified its insurance carrier of these
events. At this time, no discovery has commenced with respect to the
above-described legal proceedings and the Company is unable to determine the
potential liability on all such lawsuits and claims.

         The following legal proceedings have been settled:

         1.       The Kim Case:  A personal injury lawsuit filed in King County
                  Superior Court, Seattle, Washington, served on November 15,
                  1996 and settled on January 9, 1997.

         2.       The Webb Case:  A personal injury lawsuit filed in King County
                  Superior Court, Seattle, Washington, served on December 9,
                  1996 and settled on January 9, 1997.

         The settlement of the above legal proceedings was covered under the
Company's commercial general liability insurance policy and did not result in
any additional costs to the Company.



                                      15.
<PAGE>   16
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a.       EXHIBITS

         Exhibit 11.1 -  Statement of Computation of Per Share Earnings
         Exhibit 27.1 - Financial Data Schedule

         b.       REPORTS ON FORM 8-K

         The Company filed a current report on Form 8-K (the "Report") (File No.
0-23036) with the Securities and Exchange Commission on November 5, 1996. The
Report contained information regarding the Recall.


                                      16.
<PAGE>   17
                                    SIGNATURE


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


                                        ODWALLA, INC.
                                         (Registrant)




Date: January 15, 1997                  By:  /s/  D. STEPHEN C. WILLIAMSON
                                           ------------------------------------
                                            D. Stephen C. Williamson
                                            Chief Executive Officer
                                            (Principal Executive Officer)



Date: January 15, 1997                  By:  /s/  JAMES R. STEICHEN
                                           ------------------------------------
                                            James R. Steichen
                                            Chief Financial Officer
                                            (Principal Financial and
                                            Accounting Officer)



                                      17.
<PAGE>   18
                                 EXHIBIT INDEX


EXHIBIT         DESCRIPTION
-------         -----------

 11.1           Statement of Computation of Per Share Earnings

 27.1           Financial Data Schedule