SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2005.


[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO _____________


                          Commission File No. 333-22997

                         SPECTRUM ORGANIC PRODUCTS, INC.
                    ----------------------------------------
             (Exact name of Registrant as specified in its Charter)

      California                                                94-3076294
------------------------                                  ----------------------
(State of incorporation)                                     (I.R.S. Employer
                                                          Identification Number)

5341 Old Redwood Highway, Suite 400
Petaluma, California 94954                                   707-778-8900
-----------------------------------                  ---------------------------
(Address of executive offices)                       (Issuer's telephone number)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No | |

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes | | No |X|


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

Indicate by check mark whether the Registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan conformed by a court. Yes | | No | |


                      APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common Stock, no par value,
46,444,693 shares issued and outstanding as of May 6, 2005.

Transitional Small Business Disclosure Format: Yes | | No |X|

<PAGE>
<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
----------------------------

                                 SPECTRUM ORGANIC PRODUCTS, INC.
                                         BALANCE SHEETS

                                             ASSETS
                                                                   (Unaudited)
                                                                     March 31,     December 31,
                                                                       2005            2004
                                                                   ------------    ------------
Current Assets:
<S>                                                                <C>             <C>
   Cash                                                            $     13,800    $     11,000
   Accounts receivable, net                                           4,700,200       3,799,800
   Inventories, net                                                   8,564,600       9,564,800
   Deferred income taxes - current                                      610,200         630,000
   Prepaid expenses and other current assets                            269,900         141,400
                                                                   ------------    ------------
Total Current Assets                                                 14,158,700      14,147,000

Property and Equipment, net                                           3,929,400       3,990,200

Other Assets:
   Deferred income taxes - long-term                                  1,529,500       1,529,500
   Intangible assets, net                                               584,300         584,800
   Other assets                                                         251,300         251,200
                                                                   ------------    ------------
Total Assets                                                       $ 20,453,200    $ 20,502,700
                                                                   ============    ============

                              LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Bank overdraft                                                  $    200,900    $    843,300
   Line of credit                                                     7,103,700       6,984,400
   Accounts payable, trade                                            4,029,900       4,033,800
   Accrued expenses                                                   1,474,600         854,100
   Current maturities of term notes payable and capital lease
     obligations                                                        509,900         514,600
   Current maturities of notes payable, related parties                 169,500         228,200
                                                                   ------------    ------------
Total Current Liabilities                                            13,488,500      13,458,400

Notes payable and capitalized lease obligations, less
  current maturities                                                  1,250,000       1,375,000
Notes payable, related parties, less current maturities                 332,400         326,200
Deferred rent                                                            33,600          37,000
                                                                   ------------    ------------
Total Liabilities                                                    15,104,500      15,196,600
                                                                   ------------    ------------
Commitments and Contingencies (Note 7)

Stockholders' Equity:
   Preferred stock, 5,000,000 shares authorized, no shares
       issued or outstanding                                               --              --
   Common stock, no par value, 60,000,000 shares authorized,
       46,444,693 and 46,405,943 issued and outstanding at March
       31, 2005 and December 31, 2004, respectively                   9,644,300       9,631,400
   Accumulated deficit                                               (4,295,600)     (4,325,300)
                                                                   ------------    ------------
Total Stockholders' Equity                                            5,348,700       5,306,100
                                                                   ------------    ------------
Total Liabilities and Stockholders' Equity                         $ 20,453,200    $ 20,502,700
                                                                   ============    ============


                         See accompanying notes to financial statements.

                                                2
<PAGE>

                         SPECTRUM ORGANIC PRODUCTS, INC.
                            STATEMENTS OF OPERATIONS


                                                             (Unaudited)
                                                         Three Months Ended
                                                      March 31,       March 31,
                                                        2005            2004
                                                    ------------    ------------

Net Sales                                           $ 13,243,000    $ 12,733,100

Cost of Goods Sold                                    10,050,600       9,830,400
                                                    ------------    ------------
Gross Profit                                           3,192,400       2,902,700
                                                    ------------    ------------
Operating Expenses:
   Sales and Marketing                                 2,036,600       1,981,900

   General and Administrative                            972,200       1,029,400
                                                    ------------    ------------
   Total Operating Expenses                            3,008,800       3,011,300
                                                    ------------    ------------

Income (Loss) from Operations                            183,600        (108,600)

Other Income (Expense):
   Interest Expense                                     (133,900)        (74,000)

   Other, net                                               --             1,000
                                                    ------------    ------------
Income (Loss) Before Taxes                                49,700        (181,600)

(Provision) Benefit for Income Taxes                     (19,900)         72,600
                                                    ------------    ------------
Net Income (Loss)                                   $     29,800    $   (109,000)
                                                    ============    ============

Basic and Fully Diluted Income (Loss) Per Share     $       0.00    $      (0.00)
                                                    ============    ============

Basic Weighted Average Shares Outstanding             46,423,596      46,275,557
                                                    ============    ============

Fully Diluted Weighted Average Shares Outstanding     47,198,965      46,275,557
                                                    ============    ============


                 See accompanying notes to financial statements.

                                        3
<PAGE>

                         SPECTRUM ORGANIC PRODUCTS, INC.
                            STATEMENTS OF CASH FLOWS


                                                              (Unaudited)
                                                           Three Months Ended
                                                        March 31,      March 31,
                                                          2005           2004
Cash Flows from Operating Activities:                 -----------    -----------
 Net Income (Loss)                                    $    29,800    $  (109,000)
  Adjustments to Reconcile Net Income (Loss) to Net
   Cash Provided by Operating Activities:
  Depreciation and amortization expense                   157,400        148,200
  Provision for inventory obsolescence                     42,500         18,700
  Provision for uncollectible receivables                  16,000         18,800
  Imputed interest on note payable, related party           6,200          5,000
  Revaluation of derivative financial instruments          35,300           --

Changes in Assets and Liabilities:
  Accounts receivable                                    (916,500)      (251,400)
  Inventories                                             957,700      1,246,700
  Other assets                                           (108,800)      (160,000)
  Accounts payable                                        724,700        557,100
  Other liabilities                                      (146,800)      (491,400)
                                                      -----------    -----------
Net Cash Provided by Operating Activities                 797,500        982,700
                                                      -----------    -----------

Cash Flows from Investing Activities:
  Purchase of property and equipment                      (96,100)      (440,300)
                                                      -----------    -----------
Net Cash Used in Investing Activities                     (96,100)      (440,300)
                                                      -----------    -----------

Cash Flows from Financing Activities:
  Decrease in bank overdraft                             (642,400)      (513,800)
  Proceeds from line of credit                          5,825,400      5,483,300
  Repayment of line of credit                          (5,706,000)    (5,168,700)
  Repayment of notes payable, related parties             (58,800)       (70,100)
  Repayment of term notes payable                        (125,000)       (62,500)
  Repayment of capitalized lease obligations               (4,700)       (13,100)
  Proceeds from exercise of stock options                  12,900         13,600
                                                      -----------    -----------
Net Cash Used in Financing Activities                    (698,600)      (331,300)
                                                      -----------    -----------
Net Increase in Cash                                        2,800        211,100

Cash, beginning of the year                                11,000          7,300
                                                      -----------    -----------
Cash, end of the period                               $    13,800    $   218,400
                                                      ===========    ===========
Supplemental Disclosure of Cash Flow Information:
  Cash paid for income taxes                          $      --      $    16,000
  Cash paid for interest                              $   127,000    $    67,700


                 See accompanying notes to financial statements.

                                        4
</TABLE>
<PAGE>

SPECTRUM ORGANIC PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS

1.   Basis of Presentation:

     These are unaudited interim financial statements and include all
     adjustments that, in the opinion of Management, are necessary in order to
     make the financial statements not misleading. The financial statements have
     been prepared in accordance with the instructions to Form 10-Q and do not
     include certain disclosures required by accounting principles generally
     accepted in the United States of America. Accordingly, the statements
     should be read in conjunction with Spectrum Organic Products, Inc.'s
     financial statements and notes thereto included in the Company's Annual
     Report on Form 10-K for the year ended December 31, 2004. Operating results
     for the three-month period ended March 31, 2005 are not necessarily
     indicative of the results that may be expected for the entire year ending
     December 31, 2005 or future periods.

     Certain reclassifications have been made to the prior year unaudited
     interim financial statements to be consistent with the presentation at
     March 31, 2005. These reclassifications had no impact on net income or
     retained earnings.

2.   Nature of Operations and Business Segments:

     Spectrum Organic Products, Inc. ("Spectrum", the "Registrant" or the
     "Company") is a California corporation that competes primarily in three
     business segments: natural and organic foods sold under the Spectrum
     Naturals(R) brand, essential fatty acid nutritional supplements sold under
     the Spectrum Essentials(R) brand, and industrial ingredients for use by
     other manufacturers sold under the Spectrum Ingredients name. The vast
     majority of the Company's products are oil-based and the Company has
     positioned itself as "The Good Fats Company."

     Within the natural and organic foods segment, the Company's products
     include olive oils and other culinary oils, salad dressings, condiments and
     butter-substitutes such as Spectrum Organic Margarine(R) and Spectrum
     Spread(R). All of the Company's culinary products feature healthy fats,
     contain no hydrogenated or trans fats and are offered in a variety of sizes
     and flavors in both organic and conventional, non-GMO offerings.

     Within the nutritional supplement segment, the Company's products include
     organic flax oils, evening primrose oil, borage oil, Norwegian fish oil and
     other essential fatty acids in both liquid and capsule forms. The Spectrum
     Essentials(R) products are cold-pressed, nutritionally rich sources of
     Omega-3 and Omega-6 essential fatty acids and are also offered in a variety
     of sizes and styles.

     The Spectrum Ingredients(R) (formerly known as Spectrum Commodities, Inc.)
     segment includes organic and conventional non-GMO culinary oils, organic
     vinegar, condiments and nutritional oils offered to other manufacturers for
     use in their products. In addition, they bring incremental purchasing power
     to the Company resulting in higher margins for the consumer branded
     products. Also included in this segment are private label products sold to
     major retailers.

                                       5
<PAGE>

     Operating data is captured by segment to the gross profit level. However,
     operating statement data below gross profit and balance sheet data have not
     been disaggregated and captured by business segment since the information
     is presently unavailable to the Company's chief operating decision maker.
     Accordingly, the following segment information is currently captured by the
     Company:
                                                 Three Months Ended March 31,
                                               2005            2004     % Change
                                            -----------    -----------  --------
     Net Sales:
       Spectrum Naturals(R)                 $ 6,041,800    $ 5,817,600     +4%
       Spectrum Essentials(R)                 2,772,700      2,668,800     +4%
       Spectrum Ingredients/Private Label     4,428,500      4,246,700     +4%
                                            -----------    -----------    ----
       Total Net Sales                      $13,243,000    $12,733,100     +4%
                                            ===========    ===========    ====
     Gross Profit:
       Spectrum Naturals(R)                 $ 1,345,400    $ 1,404,700     -4%
       Spectrum Essentials(R)                 1,289,000      1,066,200    +21%
       Spectrum Ingredients/Private Label       558,000        431,800    +29%
                                            -----------    -----------    ----
       Total Gross Profit                   $ 3,192,400    $ 2,902,700    +10%
                                            ===========    ===========    ====


3.   Derivative Financial Instruments:

     In January 2005 the Company began to utilize foreign currency forward
     contracts to minimize the volatility of foreign currency cash flows
     resulting from changes in exchange rates. Foreign currency forward
     contracts are entered into for firmly committed or anticipated raw material
     purchases. The use of these contracts enables the Company to reduce its
     exposure to foreign currency exchange rate movements since the gains and
     losses on the contracts substantially offset the gains and losses on the
     transactions being hedged.

     As of March 31, 2005 the Company had outstanding foreign currency forward
     contracts to purchase 1,034,100 euros at an average contractual exchange
     rate of $1.33 per euro. Included in cost of sales for the three months
     ended March 31, 2005 was an expense of $35,300 which represented the
     difference between the fair value of the forward contracts versus the
     contractual amount.

4.   Industrial Accident:

     On February 4, 2004 the Company pleaded no contest to two misdemeanor
     counts of violations under California Labor Code Section 6425, violation of
     a regulation issued by the California Occupational Health and Safety
     Administration ("CAL-OSHA"), requiring employers to provide, maintain and
     ensure employees use required confined space equipment. The plea arose in
     connection with a tragic industrial accident on April 25, 2002 that
     resulted in the death of two of the Company's employees. Under the Terms of
     Settlement and Probation entered into with the plea, the Company will pay a
     fine of $150,000 in three annual installments of $50,000 each on June 30,
     2004, 2005 and 2006. In addition the Company paid $150,000 in restitution
     to the California District Attorneys Association Workers Safety Training
     Account to assist in the prosecution of worker safety cases in the State of
     California. The Company also reimbursed costs of $25,000 each to the
     Petaluma Police Department, the Petaluma Fire Department and the Sonoma
     County District Attorney's Office. Finally, an additional fine of $250,000
     under California Labor Code Section 6425 was suspended conditioned upon the
     Company's compliance with the terms of court supervised probation for three
     years. Accordingly, the Company accrued an expense of $375,000 during the
     year ended December 31, 2003 to cover the net present value of the above
     payments, plus attorney's fees. Total payments made during the year ended
     December 31, 2004 in connection with the plea were $275,000.

                                       6
<PAGE>

     CAL-OSHA completed their investigation of the accident and issued their
     report and notice of proposed penalties on October 18, 2002. Their report
     included nine citations for safety violations with total proposed penalties
     of $137,900. There were no willful citations and the CAL-OSHA report
     acknowledged that all the safety violations had been 100% abated prior to
     the report's issuance. The Company filed a formal appeal and executed a
     verbal settlement agreement with CAL-OSHA on December 17, 2004 which calls
     for the Company to pay penalties totaling $70,500 to close the CAL-OSHA
     appeal. At the date of this report, the Company was awaiting the receipt of
     an Order from the CAL-OSHA Appeals Board, at which time the Company will
     remit the $70,500 to close this matter.

     The dependents of both deceased employees filed appeals with the Workers'
     Compensation Appeals Board of California for serious and willful misconduct
     penalties against Spectrum. On May 25, 2004 the Company settled one of the
     appeals for $35,000 which was paid on June 3, 2004 and charged against the
     industrial accident reserve.

     The remaining workers compensation appeal is for an additional death
     benefit equal to 50% of the eventual death benefit to be paid by the
     Company's workers' compensation insurance carrier at the time of the
     accident. That amount would be payable by the Company to the dependents of
     the deceased worker if the dependents successfully establish that the
     Company was guilty of serious and willful misconduct by allowing unsafe
     working conditions to exist. If actually litigated, the workers
     compensation appeal is an all-or-nothing proposition under which the
     Company will either be liable for 50% of the eventual insurance death
     benefit or nothing. Based on the advice of counsel, the Company expects the
     remaining workers compensation appeal to be settled rather than litigated.
     Management believes the remaining reserve of $190,400 as of March 31, 2005
     will be approximately adequate to cover the present value of the remaining
     two installments under the CLCS 6425 fine of $50,000 each, the settlement
     of the CAL-OSHA appeal for $70,500, and the remaining workers compensation
     appeal.

5.   Inventories:

     Inventories consisted of the following:

                                                 March 31,     December 31,
                                                   2005            2004
                                                -----------    -----------
     Finished goods                             $ 6,975,900    $ 7,590,100
     Raw materials                                1,699,200      2,170,200
     Deposits on inventory                          222,500        154,500
                                                -----------    -----------
     Total Inventories                            8,897,600      9,914,800
     Less: Reserve for obsolete inventory          (333,000)      (350,000)
                                                -----------    -----------
     Net Inventories                            $ 8,564,600    $ 9,564,800
                                                ===========    ===========

                                       7
<PAGE>

     Deposits on inventory primarily represent flaxseed paid for prior to its
     receipt at the Company's production facility.

6.   Stock-based Compensation:

     Statement of Financial Accounting Standards ("SFAS") No. 123R, "Share Based
     Payment" ("SFAS 123R") issued in December 2004 will require the Company to
     record an expense associated with stock option grants, based on the fair
     value method, in the Company's statements of operations for fiscal year
     2006. Meanwhile, as currently permitted under SFAS 123, the Company has
     chosen to continue to account for employee stock-based compensation using
     the intrinsic value method prescribed in Accounting Principles Board
     Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
     Accordingly, compensation expense for employee stock options is measured as
     the excess, if any, of the fair market price of the Company's stock at the
     date of grant over the amount an employee must pay to acquire the stock.
     Options granted to non-employees are recorded over the service period at
     the estimated fair value of the option granted.

     All stock options issued to employees have an exercise price not less than
     the fair market value of the Company's common stock on the date of grant.
     Under these circumstances, in accordance with the accounting for such
     options utilizing the intrinsic value method prescribed in APB 25, there is
     no related compensation expense recorded in the Company's financial
     statements. Had compensation cost for stock-based compensation been
     determined based on the fair value of the options at the grant dates
     consistent with SFAS 123, the Company's net income or loss and net income
     or loss per share for the three months ended March 31, 2005 and 2004 would
     have been adjusted to the pro-forma amounts presented below:

                                                    Three months ended March 31,
                                                         2005         2004
                                                       --------    ---------
     Net income (loss) as reported                     $ 29,800    $(109,000)
     Less: Total compensation expense under
       fair value method for all stock-based
       awards, net of related tax effects               (95,300)     (70,300)
                                                       --------    ---------
     Pro-forma net income (loss)                       $(65,500)   $(179,300)
                                                       ========    =========
     Basic and diluted income (loss) per share:
       As reported                                     $   0.00    $   (0.00)
       Pro-forma                                       $  (0.00)   $   (0.00)


     The fair value of the option grants for 2005 was estimated on the date of
     grant utilizing the Black-Scholes option pricing model, with the following
     assumptions: expected life of five years, risk-free interest rate of 3.0%,
     no dividend yield and volatility of 65%. The weighted average fair value of
     the option grants during the first quarter of 2005 was $0.29 per share.

     The fair value of the option grants for 2004 was estimated on the date of
     grant utilizing the Black-Scholes option pricing model, with the following
     assumptions: expected life of five years, risk-free interest rate of 2.0%,
     no dividend yield and volatility of 95%. The weighted average fair value of
     the option grants during the first quarter of 2004 was $0.61 per share.

                                       8
<PAGE>

7.   Commitments and Contingencies:

     Pending Litigation - Proposition 65 Complaint

     On November 26, 2003 the Company was notified by attorneys for the
     Environmental Law Foundation (the "ELF") that the Spectrum Naturals(R)
     Organic Balsamic Vinegar contains lead in excess of the allowable
     quantities under the Safe Drinking Water and Toxic Enforcement Act of 1986,
     also known as Proposition 65. The ELF is a California non-profit
     organization that represents itself as dedicated to the preservation of
     human health and the environment.

     ELF's attorneys filed a Complaint for Civil Penalties, Statutory, Equitable
     and Injunctive Relief (the "Complaint") against Cost Plus, Inc., Safeway,
     Inc., Trader Joe's Company, Williams-Sonoma, Inc., Whole Foods, Inc. and
     unspecified defendants one through 100 in the Superior Court of the State
     of California on May 20, 2003 alleging violation of Proposition 65 for the
     sale of various products that contain lead in excess of the allowable
     limits without the required warning label. ELF's attorneys later notified
     Spectrum and dozens of other retailers, importers and manufacturers of
     vinegar that they would be included as one of the 100 unspecified
     defendants in the Complaint.

     While lead has been shown to cause cancer and reproductive toxicity in
     humans, the Proposition 65 consumption quantity defined as no significant
     risk level for cancer was set at 15 micrograms per day. Lead is a naturally
     occurring element in some wine and balsamic vinegars. Based on the
     Company's tests, a person would need to consume somewhere between 1.3-2.6
     cups (270-630ml) daily of the Company's various vinegar products to reach
     the Proposition 65 lead level. The small lead content in vinegar occurs
     naturally in the soil and is absorbed by the grapes used to make vinegar.
     The level of lead in vinegar is not affected by the manufacturing process
     and, therefore, is not subject to regulation under Proposition 65.

     The Spectrum Naturals(R) brand was built on the premise of providing
     consumers with organic healthy oils and condiments. Management does not
     believe the consumption of its various vinegar products as condiments or
     salad dressings poses any increased risk for cancer or reproductive
     toxicity.

     The Company joined a Joint Defense Group in February 2004 which was
     established by attorneys representing several of the defendants in the
     Complaint. Total attorney's fees incurred by the Company as a member of the
     Joint Defense Group since its inception were $15,300. Management believes
     the Complaint will eventually be settled for an insignificant sum.
     Accordingly, no provision for loss has been recorded at March 31, 2005.

     Court Supervised Probation

     In connection with the industrial accident on April 25, 2002 the Company
     entered a plea on February 4, 2004 of no contest to two misdemeanor counts
     of violations under CLCS 6425, violation of a regulation issued by the
     California Occupational Health and Safety Administration requiring
     employers to provide, maintain and ensure employees use required confined
     space equipment. Under the Terms of Settlement and Probation entered into
     with the plea, the Company received a suspended fine of $250,000
     conditioned upon the Company's compliance with the terms of court
     supervised probation for three years. The probation terms require that the
     Company submit to a warrant-less search of its premises during business

                                       9
<PAGE>

     hours by any local or state law enforcement, safety or health officer; and
     that the Company shall be of good conduct and obey all laws, particularly
     those laws relating to worker safety and health. Should the Company fail to
     honor the probation terms, the suspended fine of $250,000 may be reimposed
     by the Sonoma County District Attorney.

     Contingent Guarantee

     The Company was a guarantor in the amount of $25,000 for that portion of
     the outstanding borrowings under a line of credit for the Olive Press, LLC
     a third party that the Company held an investment in of $15,000 at March
     31, 2005. In the event of a default by the Olive Press of its obligations
     under its line of credit, Spectrum would be liable for an amount not to
     exceed $25,000.


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

Introduction:

The following discussion should be read in conjunction with the financial
statements and related notes and other information included in this report. The
financial results reported herein are not necessarily indicative of the
financial results that may be achieved by the Company in any future period.

The Company's operating results could vary from period to period as a result of
a number of factors. These factors include, but are not limited to, the
purchasing patterns of significant customers, the timing of new product
introductions by the Company and its competitors, the amount of slotting fees,
new product development and advertising expenses incurred by the Company,
variations in sales by distribution channel, fluctuations in market prices and
availability of raw materials, competitive pricing policies and situations that
the Company cannot foresee. These factors could cause the Company's performance
to differ from investor expectations, resulting in volatility in the price of
the common stock.

Investors should carefully consider the following information as well as other
information contained in this report. Information included in this report
contains "forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "should" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. No assurance can be given that the
future results covered by the forward-looking statements will be achieved. The
following matters constitute cautionary statements identifying important factors
with respect to such forward-looking statements, including certain risks and
uncertainties that could cause actual results to vary materially from the future
results covered in such forward-looking statements. Other factors could also
cause actual results to vary materially from the future results covered in such
forward-looking statements.

Overview:

Spectrum Organic Products, Inc. ("Spectrum", the "Company", or the "Registrant")
competes primarily in three segments: natural and organic foods sold under the
Spectrum Naturals(R) brand, nutritional supplements sold under the Spectrum
Essentials(R) brand, and industrial ingredients sold by the Spectrum Ingredients
sales force for use by other manufacturers. The vast majority of the Company's
products are oil-based and the Company has positioned itself as "The Good Fats
Company."

                                       10
<PAGE>

Within the Spectrum Naturals(R) brand, the Company's products include olive oils
and other culinary oils, salad dressings, condiments and butter-substitutes such
as Spectrum Organic Margarine(R) and Spectrum Spread(R). All of the Company's
culinary products feature healthy oils, contain no hydrogenated fats and are
offered in a variety of sizes and flavors in both organic and conventional
offerings.

Within the Spectrum Essentials(R) brand, the Company's products include organic
flax oil, borage oil, Norwegian fish oil and other essential fatty acids in both
liquid and capsule forms. The Spectrum Essentials(R) products are cold-pressed,
nutritionally rich sources of Omega-3 and Omega-6 essential fatty acids and are
also offered in a variety of sizes and styles.

The Spectrum Ingredients (formerly known as Spectrum Commodities, Inc.) sales
force offers organic culinary oils, vinegar and nutritional oils to other
manufacturers for use in their products. In addition, they bring incremental
purchasing power to the Company resulting in higher margins for the consumer
branded product lines. Also included in this segment are private label products
sold to major retailers.

Critical Accounting Policies and Estimates:

The following discussion and analysis of the Company's financial condition and
results of operations is based upon the Company's financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. The Company bases its
estimates on historical experience and various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for the carrying values of assets and liabilities that are not readily
apparent from other sources. On an on-going basis, the Company re-evaluates all
of its estimates, including those related to accounts receivable allowances,
inventory reserves, the industrial accident reserve and the deferred tax asset
valuation allowance. Actual results may differ materially from these estimates
under different assumptions or conditions and as additional information becomes
available in future periods.

The Company believes the following are the more significant judgments and
estimates used in the preparation of its financial statements:

Accounts Receivable Allowances - The Company provides allowances against
accounts receivable for estimated bad debts, returns and deductions by customers
for trade promotions and programs. These allowances are based upon the Company's
historical experience with bad debt write-offs and customer deductions, customer
creditworthiness, payment trends and general economic conditions. Allowances for
bad debts and customer deductions were $516,000 at March 31, 2005 on gross trade
accounts receivable of $5,181,100. While this estimate is one of the more
significant estimates the Company makes in the preparation of its financial
statements, management does not consider it to be highly uncertain.

Inventory Reserves - The Company establishes reserves for obsolete, excess and
slow-moving inventories in order to properly value its inventory at the lower of
cost or market. The reserve estimates are based upon historical inventory usage,
spoilage, current market conditions, and anticipated future demand. Reserves for
obsolete inventories were $333,000 at March 31, 2005 on total gross inventories
of $8,897,600. While this estimate is one of the more significant estimates the
Company makes in the preparation of its financial statements, management does
not consider it to be highly uncertain.

                                       11
<PAGE>

Deferred Tax Asset Valuation Allowance - As of March 31, 2005 the Company had
net deferred tax assets of $2,139,700 primarily resulting from net operating
loss carryforwards ("NOLs"), which consisted of $5,735,000 of Federal NOLs that
expire at various times through 2021, and $3,833,000 of state NOLs that expire
at various times through 2011. The majority of the NOLs originated from the
pre-merger operations of OFPI. As a result of OFPI's acquisition by SNI, OFPI
experienced an ownership change in excess of 50% for federal and state income
tax purposes. Therefore, an annual limitation is placed by the taxing
authorities on the Company's right to realize the benefit of the pre-merger
NOLs. Management continues to believe that it is more likely than not that the
Company will continue to report sufficient taxable income in the foreseeable
future, allowing utilization of 100% of its deferred tax assets. Management will
continue to evaluate the Company's deferred tax assets in the future to
determine whether a deferred tax asset reserve should be reinstated at some
future point.

Industrial Accident Reserve - The Company has an industrial accident reserve to
cover future payments anticipated as a result of the industrial accident in
2002. As of March 31, 2005 the balance remaining in the industrial accident
reserve was $190,400 which covers the present value of the remaining two
installment payments of $50,000 each under the Terms of Settlement and Probation
entered into on February 4, 2004 with the Sonoma County District Attorney's
Office, and the settlement of the appeal filed by the Company with CAL-OSHA
regarding their citations and fines for $70,500. That will leave approximately
$30,000 in the reserve to cover the one remaining unsettled issue with regards
to the industrial accident, plus related attorney's fees.

The remaining unsettled issue is an appeal filed by dependents of one of the
deceased employees with the Workers Compensation Appeals Board of California for
an additional death benefit equal to 50% of the eventual death benefit to be
paid by the Company's workers' compensation insurance carrier at the time of the
accident. That amount would be payable by the Company to the dependents of the
deceased employee if the dependents successfully establish that the Company was
guilty of serious and willful misconduct by allowing unsafe working conditions
to exist. If actually litigated, the workers compensation appeal is an
all-or-nothing proposition under which the Company will either be liable for 50%
of the eventual insurance death benefit or nothing. Based on the advice of
counsel, the Company expects the remaining workers compensation appeal to be
settled rather than litigated. However, management considers the remaining
unsettled workers compensation appeal to be uncertain since expenses in excess
of the remaining reserve could be incurred regardless of whether the workers
compensation appeal is litigated or settled.


--------------------------------------------------------------------------------
Results of Operations for the Three Month Periods Ending March 31, 2005 and
March 31, 2004
--------------------------------------------------------------------------------

Summary Discussion:

In general, the Company continued to grow its business at a moderate rate during
the first quarter of 2005. Overall net sales growth was 4% as the Company
continued to benefit from increased consumer awareness of the importance of
healthy oils to overall health and nutrition. Additionally, small and medium
sized food manufacturers continued their push to eliminate partially
hydrogenated oils from their products which drove the Spectrum Ingredients
industrial sales higher.

                                       12
<PAGE>

The Company reported net income for the quarter of $29,800 which was an
improvement over the prior year's net loss of $109,000. The improved
profitability was primarily attributable to higher gross profit in the Spectrum
Essentials segment as flaxseed costs returned to their historic norms during the
latter half of 2004. Also contributing to the improved results in 2005 was
higher gross profit in the Spectrum Ingredients/Private Label segment as a
result of a new supply relationship for private label organic flax oil with a
major specialty retailer.

Management believes that Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA") is an important measure of the Company's operating
performance. Management incentive compensation is earned, in part, based on the
achievement of EBITDA targets that are established and approved by the Company's
Board of Directors prior to the beginning of the year. For the three months
ended March 31, 2005 EBITDA was $341,000 compared to $40,600 for the prior year,
an increase of $300,400. The improved performance in 2005 is discussed in detail
below, but was primarily attributable to increased gross profit.

While Management believes that EBITDA is a useful measure of the Company's
financial performance, it should not be construed as an alternative to income
from operations, net income or cash flows from operating activities as
determined in accordance with accounting principles generally accepted in the
United States of America. Furthermore, the Company's calculation of EBITDA may
be different from the calculation used by other companies, thereby limiting
comparability.

The Company's calculations to arrive at EBITDA are detailed in the following
table:

                                                   Three Months Ended March 31,
                                                        2005          2004
                                                     ---------     ---------
Net income (loss)                                    $  29,800     $(109,000)
Add back: Provision (benefit) for income taxes          19,900       (72,600)
          Interest expense                             133,900        74,000
          Depreciation and amortization                157,400       148,200
                                                     ---------     ---------
EBITDA                                               $ 341,000     $  40,600
                                                     =========     =========


The following is Managements' discussion and analysis of the significant line
items within the financial statements and the reasons behind the trends and
variances versus the prior year.

Revenues:

Spectrum's net sales for the three months ended March 31, 2005 were $13,243,000
compared to $12,733,100 for 2004, an increase of $509,900 or 4%. The increase is
detailed by segment in the following table:

                                       13
<PAGE>

                                                 Three Months Ended March 31,
                                                   2005         2004    % Change
                                               -----------  ----------- --------

Spectrum Naturals(R) Culinary Products         $ 6,041,800  $ 5,817,600    +4%
Spectrum Essentials(R) Nutritional Supplements   2,772,700    2,668,800    +4%
Spectrum Ingredients/Private Label               4,428,500    4,246,700    +4%
                                               -----------  -----------    ---
  Total Net Sales                              $13,243,000  $12,733,100    +4%
                                               ===========  ===========    ===


Within the Spectrum Naturals(R) culinary products, sales were significantly
higher than prior year in packaged oils (+12%), olive oils (+8%) and packaged
vinegar (+28%). Partially offsetting those product lines were lower sales in
salad dressings (-37%), foodservice oils (-6%), and foodservice mayonnaise
(-9%). In general the Company's culinary oils continued to benefit from
increased consumer awareness of the importance of healthy fats in one's diet.
The Company implemented price increases on certain culinary products effective
February 1, 2005 and the prior year first quarter sales were positively impacted
by certain customers buying forward in advance of a price increase taken on
April 1, 2004.

Spectrum Essentials(R) nutritional supplement sales increased 4% versus the
prior year, primarily on the strength of increased sales of liquid supplement
products (+8%) and coconut oil sold as a health and beauty aid (+104%).
Partially offsetting those product lines were lower sales of encapsulated
products, which were off 4% versus prior year.

The Spectrum Ingredients/Private Label sales were also up 4% versus the prior
year primarily as a result of a new relationship with a major specialty retailer
for the supply of private label organic flax oil. Partially offsetting that was
lower sales in industrial culinary oils, which were off 3% versus the prior
year, largely due to supply constraints for canola oil.

Cost of Goods Sold:

The Company's cost of goods sold for the three months ended March 31, 2005 was
$10,050,600 versus $9,830,400 for the prior year, an increase of 2%. The
increase was primarily volume-related with respect to the Spectrum
Ingredients/Private Label segment and both volume and rate driven in the
Spectrum Naturals(R) and Spectrum Essentials(R) segments, as detailed in the
following table:
                                                 Three Months Ended March 31,
                                                   2005         2004    % Change
                                               -----------  ----------- --------

Spectrum Naturals(R) Culinary Products         $ 4,696,400  $ 4,412,900    +6%
Spectrum Essentials(R) Nutritional Supplements   1,483,700    1,602,600    -7%
Spectrum Ingredients/Private Label               3,870,500    3,814,900    +1%
                                               -----------  -----------    ---
  Total Cost of Goods Sold                     $10,050,600  $ 9,830,400    +2%
                                               ===========  ===========    ===


Cost of goods sold as a percent of net sales decreased to 75.9% in 2005 versus
77.2% in 2004. The decrease was primarily due to reduced flaxseed costs in 2005
versus 2004. During 2004 the remaining high cost flaxseed imported from China
during the drought in Canada and the northern plains states was crushed and
sold. Partially offsetting the favorable flaxseed costs were unfavorable costs
in olive oil and canola oil, primarily as a result of the weak dollar versus the
euro and the Canadian dollar.

                                       14
<PAGE>

Gross Profit:

Gross profit for the three months ended March 31, 2005 was $3,192,400 versus
$2,902,700 for the prior year, an increase of 10%. The increase was primarily
attributable to 4% sales growth in all three segments and the raw material cost
changes described above. The following table discloses gross profit by segment:

                                                  Three Months Ended March 31,
                                                   2005         2004    % Change
                                                ----------   ---------- --------

Spectrum Naturals(R) Culinary Products          $1,345,400   $1,404,700    -4%
Spectrum Essentials(R) Nutritional Supplements   1,289,000    1,066,200   +21%
Spectrum Ingredients/Private Label                 558,000      431,800   +29%
                                                ----------   ----------   ----
  Total Gross Profit                            $3,192,400   $2,902,700   +10%
                                                ==========   ==========   ====


Gross profit as a percent of net sales (gross margin) was 24.1% for 2005 versus
22.8% for 2004, primarily as a result of the decreased flaxseed costs in 2005
and the addition of a new relationship with a major specialty retailer for
private label organic flax oil.

Sales and Marketing Expenses:

The Company's sales and marketing expenses for the three months ended March 31,
2005 were $2,036,600 or 15.4% of net sales, versus $1,981,900 or 15.6% of net
sales for the prior year. The increase in spending of $54,700 is detailed in the
following table which reconciles sales and marketing spending for the first
quarter of 2005 versus 2004, and discloses the significant variances by spending
category:

     Total sales and marketing expenses, first quarter 2004   $ 1,981,900
        Increased sponsorships                                     93,400
        Increased compensation and benefits                        70,000
        Increased market research & development                    28,500
        Decreased broker commissions                              (88,900)
        Decreased advertising                                     (40,300)
        Decreased website development expenses                    (33,900)
        All other, net                                             25,900
                                                              -----------
     Total sales and marketing expenses, first quarter 2005   $ 2,036,600
                                                              ===========


The increased sponsorships was primarily attributable to the Company's
involvement with Dr. Andrew Weil and his annual nutrition conference at the
University of Arizona. The increased compensation and benefits was primarily
associated with increased staffing in the sales and marketing departments. The
Company recently hired two new sales professionals to improve sales execution on
the Spectrum Essentials segment. The increased research and development was
primarily associated with new product development. The decrease in broker
commissions was primarily due to changes effected in 2005 to the broker
incentive plan. The decrease in advertising was primarily attributable to heavy
spending during the prior year for the launch of the Company's new "I am
Spectrum" advertising campaign which did not need to be repeated in 2005.
Finally, the decrease in the website development expenses was a return to normal
levels versus the prior year during which the website was completely redesigned
and repopulated with data.

                                       15
<PAGE>

General and Administrative Expenses:

The Company's general and administrative expenses for the three months ended
March 31, 2005 were $972,200 or 7.1% of net sales, versus $1,029,400 or 8.1% of
net sales for the prior year. The decrease in spending of $57,200 is detailed in
the following table which reconciles general and administrative spending for the
first quarter of 2005 versus 2004, and discloses significant variances by
spending category:

      Total general and admin. expenses, first quarter 2004   $ 1,029,400
        Increased professional fees                                57,100
        Decreased relocation expenses                             (48,400)
        Decreased rent expenses                                   (24,800)
        All other, net                                            (41,100)
                                                              -----------
      Total general and admin. expenses, first quarter 2005   $   972,200
                                                              ===========


The increased professional fees were primarily associated with increased
consulting and accounting services. The decreased relocation expenses were
primarily associated with project management and consulting incurred during 2004
in conjunction with the Company's relocation of its manufacturing facility to
Cherokee, Iowa. The decreased rent expenses were primarily associated with rent
no longer incurred for the Company's previous office space in the Petaluma
production facility, which was closed in November 2004.

Interest Expense:

The Company's interest expense for the three months ended March 31, 2005 was
$133,900 versus $74,000 for the prior year. The increase of $59,900 or 81% is
detailed in the following table which reconciles interest expense for the first
quarter of 2005 versus 2004, and discloses the significant variances by type of
debt:

         Total interest expense, first quarter 2004          $  74,000
            Increased interest on revolving line of credit      52,500
            Increased interest on bank term notes payable       11,500
            All other, net                                      (4,100)
                                                             ---------
         Total interest expense, first quarter 2005          $ 133,900
                                                             =========


The increased interest on the revolving line of credit was due to higher average
borrowings in 2005 to support the increased level of operations and higher
interest rates during 2005 versus 2004. The Company's weighted average effective
interest rate under the line of credit was 5.2% in 2005 versus 3.5% in 2004. The
increased interest on the bank term notes payable was the result of additional
principal drawdowns against the Company's variable-rate term debt during 2004
and increases in the prime rate versus the prior year.

Provision for Income Taxes:

The Company recorded a provision for income taxes of $19,900 for the three
months ended March 31, 2005 versus a net benefit for income taxes of $72,600 for
the prior year. The accrual for both years was estimated at 40% of the Company's
income or loss before taxes, which was the Company's estimated effective tax
rate.

                                       16
<PAGE>

Seasonality:

Historically, the Company has experienced little seasonal fluctuation in
revenues. With regards to product purchasing, the Company will seasonally
contract for certain raw materials for the entire year at harvest time or at
planting time. These purchases take place annually from early spring to
mid-summer and are effected to reduce the risk of price swings due to demand
fluctuations. These annual purchases can create overages and shortages in
inventory.

Liquidity and Capital Resources:

On June 4, 2004 the Company entered into the First Amendment to its Credit
Facility with Comerica Bank ("Comerica") which extended the maturity date of the
Credit Facility to June 30, 2006. The Amendment also increased the revolving
line of credit up to a maximum of $9,000,000, and extended the drawdown period
under the capital expenditure term loan of $1,000,000 by six months to December
31, 2004. The Credit Facility is secured by substantially all assets of the
Company and enables the Company to borrow below prime, using a LIBOR rate
option. As of March 31, 2005 the Company had $6,000,000 of its outstanding
borrowings under the revolving line of credit locked in at a fixed weighted
average LIBOR interest rate of 5.35%.

The Company could not operate its business without the Credit Facility with
Comerica or one similar to it. The Credit Facility calls for continued
satisfaction of various financial covenants for 2005 and beyond related to
profitability levels, debt service coverage, and the ratio of total liabilities
to tangible net worth. As of March 31, 2005 the Company was in technical default
of the liabilities to tangible net worth ratio due to the expenses associated
with the manufacturing facility relocation incurred during 2004. Comerica has
granted the Company a waiver for the covenant violation.

At March 31, 2005 the Company had working capital of $670,200 which reflected a
decrease of $366,700 versus the prior year. The decrease was primarily
attributable to increased borrowings outstanding under the line of credit to
finance the manufacturing facility relocation during 2004 and the higher levels
of operations in general.

During 2005 the Company generated $797,500 in cash from operating activities,
compared to $982,700 in 2004. The cash generated for both years was primarily
due to reductions in inventory levels as the Company sold off inventories built
during the prior year's fourth quarter.

Cash used in investing activities was $96,100 in 2005 compared to $440,300 in
2004. For both years the cash was primarily invested in the new production
facility in Iowa. The greater spending during the prior year occurred during the
initial construction phase of the project.

Cash used in financing activities was $698,600 in 2005 compared to $331,300 in
2004. The cash used for both years was primarily for principal payments against
long-term debt, partially offset by increased borrowing under the revolving line
of credit.

Management believes that future cash flows from operations and available
borrowing capacity under the revolving line of credit should provide adequate
funds to meet the Company's estimated cash requirements for the foreseeable
future. Available borrowing capacity under the revolving line of credit was
$1,305,200 and $1,852,400 at March 31, 2005 and 2004, respectively.

                                       17
<PAGE>

The Company does not utilize off-balance sheet financing arrangements. There
were no transactions with special purpose entities that give the Company access
to assets or additional financing or carry debt that is secured by the Company.

New Applicable Accounting Pronouncements:

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
123R, "Share-Based Payment," a revision of SFAS No. 123, "Accounting for
Stock-Based Compensation" and superseding APB Opinion No. 25, "Accounting for
Stock Issued to Employees." SFAS 123R requires the Company to expense grants
made under the Company's stock option program. That cost will be recognized over
the vesting period of the stock option grants. SFAS 123R is effective for fiscal
years beginning after June 15, 2005. Upon adoption of SFAS 123R, amounts
previously disclosed under SFAS No. 123 will be recorded in the Company's
statement of operations. The Company is evaluating the alternatives allowed
under the standard, which the Company is required to adopt effective for its
fiscal year 2006.

In November 2004, the FASB issued SFAS No. 151, "Inventory Costs," an amendment
to ARB No. 43, Chapter 4, "Inventory Pricing." SFAS No. 151 is effective for
inventory costs incurred during fiscal years beginning after June 15, 2005. The
Company believes there will be no material effect on its financial statements
upon adoption of this standard.

During 2004 the FASB published a revision to Interpretation 46 ("46R") to
clarify some of the provisions of FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities", and to exempt certain entities from its
requirements. The additional guidance is being issued in response to input
received from constituents regarding certain issues arising in implementing
Interpretation 46.

Under the new guidance, special effective date provisions apply to enterprises
that have fully or partially applied Interpretation 46 prior to issuance of this
revised Interpretation. Otherwise, application of Interpretation 46R (or
Interpretation 46) is required in financial statements of public entities that
have interests in structures that are commonly referred to as special-purpose
entities for periods ending after December 15, 2003. Application by public
entities, other than small business issuers, for all other types of variable
interest entities is required in financial statements for periods ending after
March 15, 2004. Application by small business issuers to variable interest
entities other than special-purpose entities and by nonpublic entities to all
types of variable interest entities is required at various dates in 2004 and
2005. In some instances, enterprises have the option of applying or continuing
to apply Interpretation 46 for a short period of time before applying this
revised Interpretation. The Company believes that adoption of Interpretation 46R
(or Interpretation 46) will have no effect on its financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("SFAS 150").
SFAS 150 provides new rules on the accounting for certain financial instruments
that, under previous guidance, would be accounted for as equity. It requires
that an issuer classify a financial instrument that is within its scope as a
liability. Such financial instruments include mandatorily redeemable shares,
instruments that require the issuer to buy back some of its shares in exchange
for cash or other assets, or obligations that can be settled with shares, the
monetary value of which is fixed. SFAS 150 shall be effective for financial
instruments entered into or modified after May 31, 2003 and otherwise shall be
effective at the beginning of the first interim period beginning after June 15,
2003. However certain modifications and FASB Staff Positions relating to SFAS
150 are being deliberated. The adoption of SFAS 150 has no effect on the
Company's financial statements.

                                       18
<PAGE>

Related Party Transactions and Other Relationships:

There were no significant transactions with related parties during the three
months ended March 31, 2005. However, there were cross-memberships between
members of the Company's Board of Directors and the boards of certain key
wholesalers and retailers within the industry, as follows:

Mr. Thomas B. Simone is one of the Company's external Directors and also serves
on the Board of United Natural Foods, Inc. ("UNFI"). UNFI is the Company's
largest customer, representing approximately 42% of the Company's net sales for
the year ended December 31, 2004.

Dr. John B. Elstrott is one of the Company's external Directors and also serves
on the Board of Whole Foods Market, Inc. Whole Foods is the largest retailer in
the natural products industry; however, sales made by the Company directly to
Whole Foods were insignificant.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
------------------------------------------------------------------

Exchange Rates:

The Company is exposed to market risk from changes in foreign currency exchange
rates and interest rates that could impact its results of operations and
financial position. The Company manages its exposure to these risks through
financing activities and foreign currency forward contracts, when deemed
appropriate. The Company utilizes foreign currency forward contracts as risk
management tools and not for speculative purposes. Spectrum's risk management
objective is to minimize the volatility on its cash flows by identifying the
forecasted transactions exposed to these risks and hedging them appropriately.

In January 2005 the Company began utilizing foreign currency forward contracts
to minimize the volatility of foreign currency cash flows resulting from changes
in exchange rates. Foreign currency forward contracts are entered into for
firmly committed or anticipated raw material purchases. The intent of these
contracts is to reduce the Company's exposure to foreign currency exchange rate
movements, with any gains or losses on the contracts designed to offset any
gains or losses on the transactions being hedged. As of March 31, 2005 the
Company's primary foreign currency exchange rate exposures were the euro and
Canadian dollar. Forward contracts to hedge anticipated euro purchases during
2005 were entered into beginning in January 2005.

The table below provides information about the Company's foreign currency
forward contracts outstanding as of March 31, 2005. All foreign currency
contracts were for euros and are expected to mature during 2005.

                                               Contracted Amounts   Fair Value
                                               ------------------   ----------
Foreign Currency Forward Contracts:
(Pay euros / receive U.S. $)
      Euros                                      (euro)1,034,100
      Average Contractual Exchange Rate               $1.33
      U.S. Dollars                                  $1,375,300      $1,340,000


                                       19
<PAGE>

Included in cost of sales for the three months ended March 31, 2005 was an
expense of $35,300 to value the foreign currency forward contracts at the
euro/U.S. dollar spot rate of $1.296 at March 31, 2005.

Interest Rates:

Throughout the course of its fiscal year, the Company utilizes a variable
interest rate line of credit at various borrowing levels. For the three months
ended March 31, 2005 the average outstanding balance under the line of credit
was approximately $7,261,300 with a weighted average effective interest rate of
5.2% per annum. For the three months ended March 31, 2004 the average
outstanding balance under the line of credit was approximately $4,746,500 with a
weighted average effective interest rate of 3.5% per annum. The increased
average borrowing levels in 2005 reflect the funds necessary to finance the
increased inventory levels and increased level of operations in general. The
line of credit agreement calls for the interest rate to float at the prime rate
or LIBOR plus 2.25%, at the Company's option.

Certain other debt items are also sensitive to changes in interest rates. The
following table summarizes future cash flows and related weighted average
interest rates by expected maturity date for long-term debt outstanding as of
March 31, 2005, excluding capital lease obligations (dollars in thousands):
<TABLE>
<CAPTION>

                                      Expected Future Principal Payments
                                          (Periods Ended December 31)

                       2005    2006     2007     2008    2009    2010    Total    Fair Value
                       ----    ----     ----     ----    ----    ----    -----    ----------
<S>                  <C>       <C>      <C>       <C>    <C>     <C>    <C>        <C>
Long Term Debt:
Fixed Rate           $169.4     --       --       --      --      --    $  169.4   $  169.4
  Avg. Int. Rate        9.2%    --       --       --      --      --         9.2%
Variable Rate        $375.0   $500.0   $500.0   $375.0    --      --    $1,750.0   $1,750.0
  Avg. Int. Rate      var.     var.     var.     var.     --      --       var.
Imputed Rate            --      --       --       --      --   $513.3   $  513.3   $  332.4
  Avg. Int. Rate        --      --       --       --      --      6.5%       6.5%
</TABLE>

The fair value of all long-term debt is equal to the sum of the expected future
principal payments with the exception of the non-interest bearing note payable
due in one lump sum of $513,300 on December 31, 2010. Interest has been imputed
on that note at an effective rate of 6.5% per annum, leaving a fair value at
March 31, 2005 of $332,400.

Purchase Commitments:

In the ordinary course of its business the Company enters into commitments to
purchase raw materials over a period of time, generally six months to one year,
at contracted prices. At March 31, 2005 these future commitments approximated
fair value because they were not at prices in excess of current market, nor in
quantities in excess of normal requirements. The Company does not utilize
derivative contracts either to hedge existing risks or for speculative purposes.

Other Risks:

The Company is subject to a wide variety of other risks in the ordinary course
of its business. Some of the more significant of these risks include heavy
concentrations of sales with a few key customers; heavy concentrations of raw
material supply with a few key suppliers; heavy reliance on several key
processors for its dressings, condiments and butter substitutes; reliance on one
processor for bottling of its oils as well as warehousing and distribution of
its finished case goods; regulation by various federal, state and local agencies

                                       20
<PAGE>

with regards to the manufacture, handling, storage and safety of food products;
regulation of its manufacturing facilities for cleanliness and employee safety;
and regulation by various agencies with regards to the labeling and
certification of organic and kosher foods. The Company is also subject to
competition from other food companies, the risk of crop shortages due to weather
or other factors, and is dependant on the continued demand for healthy oils and
nutritional supplements by consumers.


Item 4. DISCLOSURE CONTROLS AND PROCEDURES
------------------------------------------

The Company's Chief Executive Officer and Chief Financial Officer have evaluated
the effectiveness of both the design and the operation of its disclosure
controls and procedures and have found them to be adequate. The Company has
formed a Disclosure Review Committee (the "DRC") which consists of various
senior managers from each functional area of the Company. The DRC considers the
materiality of new information and reports to the Company's Chief Financial
Officer.

There were no material changes in the Company's internal control system during
the three months ended March 31, 2005. Management is not aware of any material
weaknesses in the Company's internal control system.










                                       21
<PAGE>

PART II - OTHER INFORMATION

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

Industrial Accident

On February 4, 2004 the Company pleaded no contest to two misdemeanor counts of
violations under California Labor Code Section 6425 ("CLCS 6425"), violation of
a regulation issued by the California Occupational Health and Safety
Administration ("CAL-OSHA"), requiring employers to provide, maintain and ensure
employees use required confined space equipment. The plea arose in connection
with a tragic production accident on April 25, 2002 that resulted in the death
of two of the Company's employees. Under the Terms of Settlement and Probation
entered into with the plea, the Company agreed to pay a fine under CLCS 6425 of
$150,000 in three annual installments of $50,000 each on June 1, 2004, 2005 and
2006. In addition the Company paid $150,000 in restitution to the California
District Attorneys Association Workers Safety Training Account to assist in the
prosecution of worker safety cases in the State of California. The Company also
reimbursed costs of $25,000 each to the Petaluma Police Department, the Petaluma
Fire Department and the Sonoma County District Attorney's Office. Finally, an
additional fine of $250,000 under CLCS 6425 was suspended conditioned upon the
Company's compliance with the terms of court supervised probation for three
years. Accordingly, the Company accrued an expense of $375,000 during the year
ended December 31, 2003 to cover the net present value of the above payments,
plus attorney's fees. Total payments made during the year ended December 31,
2004 in connection with the plea were $275,000.

CAL-OSHA completed their investigation of the accident and issued their report
and notice of proposed penalties on October 18, 2002. Their report included nine
citations for safety violations with total proposed penalties of $137,900. There
were no willful citations and the CAL-OSHA report acknowledged that all the
safety violations had been 100% abated prior to the report's issuance. The
Company filed a formal appeal with CAL-OSHA and reached a verbal settlement
agreement with CAL-OSHA on December 17, 2004 which calls for the Company to pay
penalties totaling $70,500 to close the CAL-OSHA appeal. At the date of this
report, the Company was awaiting receipt of an Order from the CAL-OSHA Appeals
Board, at which time the Company will remit the $70,500 to close this matter.

The dependents of both deceased employees filed appeals with the Workers'
Compensation Appeals Board of California for serious and willful misconduct
penalties against Spectrum. On May 25, 2004 the Company settled one of the
appeals for $35,000 which was paid on June 3, 2004 and charged against the
industrial accident reserve.

The remaining workers compensation appeal is for an additional death benefit
equal to 50% of the eventual death benefit to be paid by the Company's workers'
compensation insurance carrier at the time of the accident. That amount would be
payable by the Company to the dependents of the deceased worker if the
dependents successfully establish that the Company was guilty of serious and
willful misconduct by allowing unsafe working conditions to exist. If actually
litigated, the workers compensation appeal is an all-or-nothing proposition
under which the Company will either be liable for 50% of the eventual insurance
death benefit or nothing. Based on the advice of counsel, the Company expects
the remaining workers compensation appeal to be settled rather than litigated.
Management believes the remaining reserve of $190,400 as of March 31, 2005 will
be approximately adequate to cover the present value of the remaining two
installments under the CLCS 6425 fine of $50,000 each, the settlement of the
CAL-OSHA appeal for $70,500, and the remaining workers compensation appeal.

                                       22
<PAGE>

Proposition 65 Complaint

On November 26, 2003 the Company was notified by attorneys for the Environmental
Law Foundation (the "ELF") that the Spectrum Naturals(R) Organic Balsamic
Vinegar contains lead in excess of the allowable quantities under the Safe
Drinking Water and Toxic Enforcement Act of 1986, also known as Proposition 65.
The ELF is a California non-profit organization that represents itself as
dedicated to the preservation of human health and the environment.

ELF's attorneys filed a Complaint for Civil Penalties, Statutory, Equitable and
Injunctive Relief (the "Complaint") against Cost Plus, Inc., Safeway, Inc.,
Trader Joe's Company, Williams-Sonoma, Inc., Whole Foods, Inc. and unspecified
defendants one through 100 in the Superior Court of the State of California on
May 20, 2003 alleging violation of Proposition 65 for the sale of various
products that contain lead in excess of the allowable limits without the
required warning label. ELF's attorneys later notified Spectrum and dozens of
other retailers, importers and manufacturers of vinegar that they would be
included as one of the 100 unspecified defendants included in the Complaint.

While lead has been shown to cause cancer and reproductive toxicity in humans,
the Proposition 65 consumption quantity defined as no significant risk level for
cancer was set at 15 micrograms per day. Lead is a naturally occurring element
in all vinegars. Based on the Company's tests, a person would need to consume
somewhere between 1.3-2.6 cups (270-630ml) daily of the Company's various
vinegar products to reach the Proposition 65 lead level. The small lead content
in vinegar occurs naturally in the soil and is absorbed by the grapes used to
make vinegar. The level of lead in vinegar is not affected by the manufacturing
process and, therefore, is not subject to regulation under Proposition 65.

The Spectrum Naturals(R) brand was built on the premise of providing consumers
with organic healthy oils and condiments. Management does not believe the
consumption of its various vinegar products as condiments or salad dressings
poses any increased risk for cancer or reproductive toxicity.

The Company joined a Joint Defense Group in February 2004 which was established
by attorneys representing several of the defendants in the Complaint. Total
attorney's fees incurred by the Company as a member of the Joint Defense Group
since its inception were $15,300. Management believes the Complaint will
eventually be settled for an insignificant sum. Accordingly, no provision for
loss or future attorney's fees has been recorded at March 31, 2005.


Item 2. Changes in Securities and Use of Proceeds
-------------------------------------------------

During the three months ended March 31, 2005 the Company issued 38,750 shares of
its common stock for the exercise of incentive stock options. Total proceeds
received by the Company were $12,900 which were applied against the outstanding
borrowings under the Company's line of credit.

                                       23
<PAGE>

The Company has not in the past nor does it intend to pay cash dividends on its
common stock in the future. The Company intends to retain earnings, if any, for
use in the operation and expansion of its business.


Item 3. Defaults Upon Senior Securities
---------------------------------------

As of March 31, 2005 the Company was in technical default of one of the
financial covenants called for under the Credit Agreement with Comerica. That
covenant called for a maximum ratio of total liabilities to tangible net worth
ratio of 2.75 to one. Due to the expenses incurred during 2004 in connection
with the manufacturing facility relocation, which included a non-cash reduction
of $1,156,600 to the Company's tangible net worth, the Company continued to be
in technical default of that covenant as of March 31, 2005.

As a result of the technical default, Comerica has certain rights under the
Credit Agreement including the right to raise the interest rates on the
Company's indebtedness to Comerica by 3% per annum. Comerica has granted the
Company a waiver of its rights as a result of this covenant violation.


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

None.


Item 5. Other Information
-------------------------

None.


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

(a)  Exhibits:

     31.12 Certification of Chief Executive Officer pursuant to Section 302 of
     the Sarbanes-Oxley Act of 2002.

     31.13 Certification of Chief Financial Officer pursuant to Section 302 of
     the Sarbanes-Oxley Act of 2002.

     32.12 Certification of Chief Executive Officer pursuant to Section 906 of
     the Sarbanes-Oxley Act of 2002.

     32.13 Certification of Chief Financial Officer pursuant to Section 906 of
     the Sarbanes-Oxley Act of 2002.

(b)  Reports on Form 8-K during the quarter ended March 31, 2005

     The Company filed a Current Report on Form 8-K on March 8, 2005 disclosing
     the Company's final audited financial position and results of operations as
     of and for the year ended December 31, 2004.

                                       24
<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.

Date: May 6, 2005                       SPECTRUM ORGANIC PRODUCTS, INC.

                                        By: /s/ Robert B. Fowles
                                        ----------------------------------------
                                        Robert B. Fowles
                                        Duly Authorized Officer &
                                        Chief Financial Officer












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