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 SEPTEMBER 30, 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 November 7, 2005.

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

<PAGE>
<TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS
-----------------------------

                                   SPECTRUM ORGANIC PRODUCTS, INC.
                                           BALANCE SHEETS

                                               ASSETS
                                                                            (Unaudited)
                                                                            September 30,   December 31,
                                                                                2005            2004
                                                                            ------------    ------------
Current Assets:
<S>                                                                         <C>             <C>
   Cash                                                                     $     19,600    $     11,000
   Accounts receivable, net                                                    5,111,400       3,799,800
   Inventories, net                                                           11,594,700       9,564,800
   Deferred income taxes - current                                               581,200         630,000
   Prepaid expenses and other current assets                                     196,800         141,400
                                                                            ------------    ------------
Total Current Assets                                                          17,503,700      14,147,000

Property and Equipment, net                                                    3,775,800       3,990,200

Other Assets:
   Deferred income taxes - long-term                                           1,241,100       1,529,500
   Intangible assets, net                                                        583,300         584,800
   Other assets                                                                  252,700         251,200
                                                                            ------------    ------------
Total Assets                                                                $ 23,356,600    $ 20,502,700
                                                                            ============    ============

                                LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Bank overdraft                                                           $    436,800    $    843,300
   Line of credit                                                              8,803,300       6,984,400
   Accounts payable, trade                                                     4,803,000       3,305,200
   Accrued expenses                                                            1,521,800       1,582,700
   Current maturities of term notes payable and capital lease obligations        500,000         514,600
   Current maturities of notes payable, related parties                           51,100         228,200
                                                                            ------------    ------------
Total Current Liabilities                                                     16,116,000      13,458,400

Notes payable and capitalized lease obligations, less
  current maturities                                                           1,000,000       1,375,000
Notes payable, related parties, less current maturities                          345,300         326,200
Deferred rent                                                                     26,800          37,000
                                                                            ------------    ------------
Total Liabilities                                                             17,488,100      15,196,600
                                                                            ------------    ------------
Commitments and Contingencies (Note 8)

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
       September 30, 2005 and December 31, 2004, respectively                  9,644,300       9,631,400
   Accumulated deficit                                                        (3,775,800)     (4,325,300)
                                                                            ------------    ------------
Total Stockholders' Equity                                                     5,868,500       5,306,100
                                                                            ------------    ------------
Total Liabilities and Stockholders' Equity                                  $ 23,356,600    $ 20,502,700
                                                                            ============    ============

                           See accompanying notes to financial statements.

                                                 2
<PAGE>

                                             SPECTRUM ORGANIC PRODUCTS, INC.
                                                STATEMENTS OF OPERATIONS



                                                         (Unaudited)                              (Unaudited)
                                                      Three Months Ended                       Nine Months Ended
                                               September 30,      September 30,        September 30,       September 30,
                                                   2005                2004                2005                2004
                                               ------------        ------------        ------------        ------------

Net Sales                                      $ 14,801,500        $ 12,189,400        $ 42,453,900        $ 37,733,900

Cost of Goods Sold                               11,351,100           9,411,700          31,887,200          29,093,900
                                               ------------        ------------        ------------        ------------
Gross Profit                                      3,450,400           2,777,700          10,566,700           8,640,000
                                               ------------        ------------        ------------        ------------
Operating Expenses:

   Sales and Marketing                            1,794,900           1,697,000           5,822,100           5,401,900

   General and Administrative                     1,288,100             932,500           3,411,600           2,836,300
                                               ------------        ------------        ------------        ------------
Total Operating Expenses                          3,083,000           2,629,500           9,233,700           8,238,200
                                               ------------        ------------        ------------        ------------

Income from Operations                              367,400             148,200           1,333,000             401,800

Other Income (Expense):

   Interest Expense                                (161,700)            (98,300)           (435,900)           (250,100)
   Other                                               --                 3,900              18,700              17,700
                                               ------------        ------------        ------------        ------------

Income Before Income Taxes                          205,700              53,800             915,800             169,400

Provision for Income Taxes                           82,300              21,500             366,300              67,700
                                               ------------        ------------        ------------        ------------
Net Income                                     $    123,400        $     32,300        $    549,500        $    101,700
                                               ============        ============        ============        ============

Basic and Fully Diluted Income Per Share       $       0.00        $       0.00        $       0.01        $       0.00
                                               ============        ============        ============        ============

Weighted Average Shares Outstanding              46,444,693          46,386,943          46,437,738          46,328,147
                                               ============        ============        ============        ============

Fully Diluted Average Shares Outstanding         48,418,498          48,278,211          48,313,732          48,629,181
                                               ============        ============        ============        ============


                                    See accompanying notes to financial statements.

                                                           3
<PAGE>

                         SPECTRUM ORGANIC PRODUCTS, INC.
                            STATEMENTS OF CASH FLOWS


                                                            (Unaudited)
                                                         Nine months Ended
                                                    September 30,   September 30,
                                                        2005            2004
Cash Flows from Operating Activities:               ------------    ------------
Net Income                                          $    549,500    $    101,700
  Adjustments to Reconcile Net Income to Net
   Cash Used in Operating Activities:
  Depreciation and amortization expense                  478,500         460,900
  Provision for inventory obsolescence                   247,900         168,100
  Provision for allowances against receivables            48,500          38,700
  Imputed interest on note payable, related party         19,000          15,200
  Revaluation of derivative financial instruments         19,600            --

Changes in Assets and Liabilities:
  Accounts receivable                                 (1,360,100)       (311,800)
  Inventories                                         (2,277,800)     (2,003,900)
  Other assets                                           280,300        (161,500)
  Accounts payable                                     1,497,800       1,456,900
  Accrued expenses and other liabilities                 (90,700)       (533,400)
                                                    ------------    ------------
Net Cash Used in Operating Activities                   (587,500)       (769,100)
                                                    ------------    ------------

Cash Flows from Investing Activities:
  Purchase of property and equipment                    (262,600)       (962,100)
                                                    ------------    ------------
Net Cash Used in Investing Activities                   (262,600)       (962,100)
                                                    ------------    ------------

Cash Flows from Financing Activities:
  Decrease in bank overdraft                            (406,500)       (392,400)
  Proceeds from line of credit                        19,886,000      16,413,300
  Repayment of line of credit                        (18,066,900)    (14,454,200)
  Proceeds from note payable                                --           554,100
  Repayment of bank term notes payable                  (375,000)       (187,500)
  Repayment of capitalized lease obligations             (14,600)        (35,500)
  Repayment of notes payable, related parties           (177,200)       (212,300)
  Proceeds from exercise of stock options                 12,900          45,900
                                                    ------------    ------------
Net Cash Provided by Financing Activities                858,700       1,731,400
                                                    ------------    ------------
Net Increase in Cash                                       8,600             200

Cash, beginning of the year                               11,000           7,300
                                                    ------------    ------------
Cash, end of the period                             $     19,600    $      7,500
                                                    ============    ============
Supplemental Disclosure of Cash Flow Information:
  Cash paid for income taxes                        $     29,000    $     16,000
  Cash paid for interest                            $    418,900    $    243,300


                 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 nine month period ended September 30, 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 financial
     statements to be consistent with the presentation at September 30, 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"), a California corporation, competes primarily in three business
     segments: natural and organic foods under the Spectrum Naturals(R) brand,
     essential fatty acid nutritional supplements 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 expeller-pressed
     oils, 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) 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 produced for and sold to major retailers.

     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

                                       5
<PAGE>

     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 September 30,
                                               2005           2004      % Change
                                            -----------   ------------   -------
Net Sales:
  Spectrum Naturals(R)                      $ 7,584,200   $  5,649,400     +34%
  Spectrum Essentials(R)                      2,099,800      2,281,100      -8%
  Spectrum Ingredients/Private Label          5,117,500      3,830,700     +34%
                                            -----------   ------------   -------
  Comparable Net Sales                       14,801,500     11,761,200     +26%
  Discontinued Product Lines                       --          428,200     N/A
                                            -----------   ------------   -------
  Total Net Sales                           $14,801,500   $ 12,189,400     +21%
                                            ===========   ============   =======
Gross Profit:
  Spectrum Naturals(R)                      $ 1,885,900   $  1,125,000     +68%
  Spectrum Essentials(R)                        965,000      1,082,900     -11%
  Spectrum Ingredients/Private Label            599,500        429,800     +39%
                                            -----------   ------------   -------
  Comparable Gross Profit                     3,450,400      2,637,700     +31%
  Discontinued Product Lines                       --          140,000     N/A
                                            -----------   ------------   -------
  Total Gross Profit                        $ 3,450,400   $  2,777,700     +24%
                                            ===========   ============   =======


                                               Nine months Ended September 30,
                                                2005           2004     % Change
                                             -----------   -----------   -------
Net Sales:
  Spectrum Naturals(R)                       $20,240,200   $16,899,700     +20%
  Spectrum Essentials(R)                       7,277,400     7,080,400      +3%
  Spectrum Ingredients/Private Label          14,638,900    12,634,100     +16%
                                             -----------   -----------   -------
  Comparable Net Sales                        42,156,500    36,614,200     +15%
  Discontinued Product Lines                     297,400     1,119,700     -73%
                                             -----------   -----------   -------
  Total Net Sales                            $42,453,900   $37,733,900     +13%
                                             ===========   ===========   =======
Gross Profit:
  Spectrum Naturals(R)                       $ 4,984,200   $ 3,828,700     +30%
  Spectrum Essentials(R)                       3,680,800     3,091,500     +19%
  Spectrum Ingredients/Private Label           1,800,700     1,337,300     +35%
                                             -----------   -----------   -------
  Comparable Gross Profit                     10,465,700     8,257,500     +27%
  Discontinued Product Lines                     101,000       382,500     -74%
                                             -----------   -----------   -------
  Total Gross Profit                         $10,566,700   $ 8,640,000     +22%
                                             ===========   ===========   =======


     The discontinued product lines consisted of the Individually Quick Frozen
     ("IQF") fruits and vegetables and the Running Stream Food and Beverage
     ("RSFB") private label fruit juice and tomato-based products, which were
     the final remaining product lines from the businesses acquired by Spectrum
     in the 1999 merger and subsequently sold in 2002. The IQF product line was
     discontinued effective January 1, 2005 and the Company sold off the
     remaining inventories during the six months ended June 30, 2005. The RSFB
     private label products were discontinued effective April 16, 2004 when that

                                        6
<PAGE>

     private label supply contract expired. The remaining inventories were sold
     off during 2004. Sales and gross profit of the IQF products were previously
     aggregated with the Spectrum Naturals(R) segment, while sales and gross
     profit of the RSFB products were previously aggregated with the Spectrum
     Ingredients/Private Label segment.

3.   Entry into a Definitive Merger Agreement:

     On August 23, 2005 Spectrum issued a press release announcing that it had
     entered into a definitive agreement and plan of merger (the "Merger
     Agreement") with The Hain Celestial Group, Inc. ("Hain"). The Merger
     Agreement provides that, upon the terms and subject to the conditions set
     forth in the Merger Agreement, Spectrum will merge with and into a
     wholly-owned direct subsidiary of Hain, with the direct subsidiary
     continuing as the surviving entity (the "Merger").

     At the effective time and as a result of the Merger, Hain will acquire all
     of the outstanding stock of Spectrum for total equity consideration to
     Spectrum shareholders of approximately $0.705 per share, adjusted to
     reflect Spectrum's estimate of its expenses and the price adjustment
     provision of the Merger Agreement. The total equity consideration is
     expected to be approximately $34,500,000 in a combination of 50% cash and
     50% Hain common stock. The value of the stock portion of the consideration
     is subject to adjustment based on the closing price of Hain common stock
     immediately prior to the closing of the Merger. The transaction, which was
     approved by the board of directors of both companies, is expected to close
     during the fourth quarter of 2005 and is subject to approval by Spectrum's
     shareholders. The Merger is intended to qualify for federal income tax
     purposes as a reorganization under the provisions of Section 368 of the
     Internal Revenue Code of 1986, as amended.

     Spectrum and Hain have each made customary representations, warranties and
     covenants in the Merger Agreement, including, among others, covenants by
     Spectrum not to solicit alternative transactions or, subject to certain
     exceptions, enter into discussions concerning, or provide confidential
     information in connection with, an alternative transaction.

     Consummation of the Merger is subject to customary conditions, including,
     among others, the approval of the Spectrum shareholders at a Special
     Meeting of Shareholders expected to be held in December 2005, the absence
     of any order or injunction prohibiting the consummation of the Merger, the
     shares of Hain common stock having been approved for listing on the
     National Market System of the NASDAQ Stock Market, Inc. and each of
     Spectrum and Hain having performed their respective obligations pursuant to
     the Merger Agreement.

     Investment banking, legal, accounting and tax consulting services incurred
     by the Company in connection with the merger were $421,300 for the nine
     months ended September 30, 2005 and were included with general and
     administrative expenses. The Merger Agreement includes a provision which
     limits Spectrum's expenses for third party services and certain fees
     incurred after March 31, 2005 to $725,000. Merger-related expenses in
     excess of that will result in a dollar-for-dollar reduction in the equity
     consideration to be paid to all shareholders.

4.   Amendment to Loan and Security Agreement:

     On June 24, 2005 the Company entered into the Second Amendment (the
     "Amendment") to its Loan and Security Agreement (the "Credit Facility")
     with its primary lender, Comerica Bank. The Amendment provides the Company
     with additional borrowing capacity and flexibility via four significant
     changes to the Credit Facility:

                                       7
<PAGE>

     a)  The maturity date of the Credit Facility was extended an additional
         twelve months to June 30, 2007.

     b)  The maximum borrowing available under the revolving line of credit was
         increased from $9,000,000 to $10,000,000, subject to eligible
         collateral levels.

     c)  The advance rate for eligible accounts receivable under the revolving
         line of credit was increased from 80% to 85%, subject to certain
         limitations on dilution rates.

     d)  A new variable rate term note has been made available to the Company
         for up to $1,000,000 of eligible expenditures on capital equipment. The
         new note features a twelve month drawdown period ending June 30, 2006
         followed by a 36 month amortization period and will bear interest at
         the prime rate plus 25 basis points (0.25%).

     The Amendment continues to require that the Company meet 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
     September 30, 2005 the Company was in compliance with all requirements
     under the Credit Facility, and had $996,700 of available borrowing capacity
     under the revolving line of credit.

5.   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 September 30, 2005 the Company had outstanding foreign currency
     forward contracts to purchase 665,000 euros at an average contractual
     exchange rate of $1.23 per euro. Included in cost of sales for the Spectrum
     Naturals(R) segment for the three months ended September 30, 2005 was an
     expense of $19,600 which was the difference between the estimated fair
     market value of the forward contracts at September 30, 2005 and the
     contractual amounts.








                                       8
<PAGE>

6.   Inventories:

     Inventories consisted of the following:

                                              September 30,   December 31,
                                                  2005            2004
                                              ------------    ------------
     Finished goods                           $ 10,081,800    $  7,590,100
     Raw materials                               1,267,200       2,170,200
     Deposits on inventory                         620,700         154,500
                                              ------------    ------------
     Total Inventories                          11,969,700       9,914,800
     Less: Reserve for obsolete inventory         (375,000)       (350,000)
                                              ------------    ------------
     Net Inventories                          $ 11,594,700    $  9,564,800
                                              ============    ============


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

7.   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 effective for the
     first fiscal quarter of 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.
     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 and nine
     month periods ended September 30, 2005 and 2004 would have been adjusted to
     the pro-forma amounts presented below:









                                        9
<PAGE>
<TABLE>
<CAPTION>

                                                     Three Months Ended        Nine Months Ended
                                                    ---------------------    ---------------------
                                                    Sept. 30,   Sept. 30,    Sept. 30,   Sept. 30,
                                                       2005        2004         2005        2004
                                                    ---------   ---------    ---------   ---------
<S>                                                 <C>         <C>          <C>         <C>
Net income as reported                              $ 123,400   $  32,300    $ 549,500   $ 101,700

Less: Total compensation expense under fair value
method for all stock-based awards, net of related
tax effects                                           106,600     105,100      308,900     270,600
                                                    ---------   ---------    ---------   ---------
Pro-Forma net income (loss)                         $  16,800   $ (72,800)   $ 240,600   $(168,900)
                                                    =========   =========    =========   =========
Basic and diluted income (loss) per share:
  As reported                                       $    0.00   $    0.00    $    0.01   $    0.00
  Pro-forma                                         $    0.00   $   (0.00)   $    0.01   $   (0.00)
</TABLE>

     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 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 2004 was $0.61 per share.

8.   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 several major retailers 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.

     The Company is a member of a Joint Defense Group established by attorneys
     representing several of the defendants in the Complaint. A mediation
     session was conducted on June 14, 2005 and a settlement was reached by all
     parties present at the mediation session on June 17, 2005. The total cost
     of the settlement to be borne by all members of the Joint Defense Group is
     $185,000. Spectrum's estimated share of that is expected to be
     approximately $15,500, which was included in general and administrative

                                       10
<PAGE>

     expense for the second quarter of fiscal 2005. Manufacturers and importers
     in the Joint Defense Group also agreed to provide certain warning notices
     under Proposition 65 to California retailers of vinegar products. Total
     attorney's fees incurred by the Company as a member of the Joint Defense
     Group during the nine months ended September 30, 2005 were $9,500. At the
     date of this report the Company was awaiting the execution of the
     settlement agreement.

     Pending Litigation - 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. Accordingly, the Company recorded an industrial accident
     reserve by accruing 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, which 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 on September 14, 2005 CAL-OSHA and the Company submitted
     a Stipulation and Settlement Agreement to the CAL-OSHA Appeals Board, which
     disposed of all the contested issues on appeal and calls for Spectrum to
     pay penalties of $70,500. On October 17, 2005 the CAL-OSHA Appeals Board
     issued its Order approving the terms of the Stipulation and Settlement
     Agreement and the Company paid the penalties to close this matter on
     October 28, 2005.

     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 and charged against the industrial
     accident reserve.

     The remaining workers' compensation appeal is for an additional death
     benefit equal to $87,500, which is 50% of the total death benefits 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 $87,500 or nothing. Based on the advice

                                       11
<PAGE>

     of counsel, the Company expects the remaining workers' compensation appeal
     to be settled rather than litigated. At the date of this report the Company
     was in negotiations to settle this matter. Management believes the
     remaining reserve of $139,800 as of September 30, 2005 will be
     approximately adequate to cover the present value of the remaining
     installment under the CLCS 6425 fine of $50,000 due on June 1, 2006, the
     settlement of the CAL-OSHA appeal for $70,500, and the remaining workers'
     compensation appeal.

     Court Supervised Probation

     Also in connection with the industrial accident, the Company received a
     suspended fine under CLCS 6425 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 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.


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.

                                       12
<PAGE>

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."

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 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 produced for and 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, management 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.

Management 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 $573,500 at September 30, 2005 on gross
trade accounts receivable of $5,661,500. 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.

                                       13
<PAGE>

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 $375,000 at September 30, 2005 on total gross
inventories of $11,969,700. 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.

Deferred Tax Asset Valuation Allowance - As of September 30, 2005 the Company
had net deferred tax assets of $1,865,900 primarily resulting from net operating
loss carryforwards ("NOLs"), which consisted of $5,491,100 of Federal NOLs that
expire at various times through 2021, and $3,486,400 of state NOLs that expire
at various times through 2011. The majority of the NOLs originated from the
pre-merger operations of Organic Food Products, Inc. ("OFPI"), the Company's
predecessor legal entity. As a result of OFPI's acquisition by Spectrum in 1999,
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 an industrial accident in 2002.
As of September 30, 2005 the balance remaining in the industrial accident
reserve was $139,800 which covers the present value of the remaining installment
payment of $50,000 due on June 1, 2006 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. The balance of $30,000
in the reserve is approximately adequate to cover the one remaining outstanding
issue with regards to the industrial accident, plus related attorney's fees.

The remaining outstanding 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 $87,500, which is 50% of the death
benefits 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 $87,500 or nothing. Based on the advice of counsel, the Company
expects the remaining workers' compensation appeal to be settled rather than
litigated. At the date of this report the Company was in negotiations to settle
this matter. Accordingly, management considers the industrial accident reserve
relating to this issue 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.


                                       14
<PAGE>

--------------------------------------------------------------------------------
Results of Operations for the Three Month Periods Ending September 30, 2005 and
September 30, 2004
--------------------------------------------------------------------------------

Summary Discussion:

In general, the Company continued to benefit from the ongoing trend away from
hydrogenated culinary oils towards a healthier alternative during the third
quarter. The Company's Spectrum Naturals(R) brand of expeller-pressed oils,
condiments and butter substitutes delivered 34% net sales growth in the third
quarter. 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 up 34% versus the prior year.

The Spectrum Essentials(R) brand of nutritional supplements posted a decline in
net sales of 8% versus the prior year due to increased competition from fish oil
products as an alternate source of omega 3 essential fatty acid supplementation.
Several influential health practitioners have recently endorsed fish oil
products, which continue to gain favor versus flax oil.

The Company reported net income of $123,400 for the third quarter, versus
$32,300 for the prior year. The increased profitability was driven by higher
margins in the Company's culinary and ingredient business segments. Gross margin
(gross profit as a percentage of net sales) was up 5 points in the Spectrum
Naturals(R) culinary segment as a result of price increases taken by the Company
during 2005 and a stronger U.S. dollar versus the euro, which lowered the cost
of imported olive oil and vinegar from Europe. Gross margin in the Spectrum
Ingredients/Private Label segment increased by half a point 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.

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 September 30, 2005 EBITDA was $528,700 compared to $310,800 for the prior
year, an increase of $217,900 or 70%. The improved performance in 2005 is
discussed in detail below, but was primarily attributable to the increased gross
profit, partially offset by increased operating expenses.

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.





                                       15
<PAGE>

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

                                                    Three Months Ended Sept. 30,
                                                         2005         2004
                                                       --------     --------
Net income                                             $123,400     $ 32,300
Add back:  Provision for income taxes                    82,300       21,500
           Interest expense                             161,700       98,300
           Depreciation and amortization expense        161,300      158,700
                                                       --------     --------
EBITDA                                                 $528,700     $310,800
                                                       ========     ========

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 September 30, 2005 were a new
quarterly record of $14,801,500 compared to $12,189,400 for 2004, an increase of
$2,612,100 or 21%. The increase is detailed by segment in the following table:

                                              Three Months Ended September 30,
                                                 2005          2004     % Change
                                             -----------   -----------   -------
Net Sales:
  Spectrum Naturals(R)                       $ 7,584,200   $ 5,649,400     +34%
  Spectrum Essentials(R)                       2,099,800     2,281,100      -8%
  Spectrum Ingredients/Private Label           5,117,500     3,830,700     +34%
                                             -----------   -----------   -------
  Comparable Net Sales                        14,801,500    11,761,200     +26%
  Discontinued Product Lines                        --         428,200     N/A
                                             -----------   -----------   -------
  Total Net Sales                            $14,801,500   $12,189,400     +21%
                                             ===========   ===========   =======


Within the Spectrum Naturals(R) culinary products, sales were significantly
higher than prior year in olive oil (+60%), other culinary oils (+26%), vinegar
(+69%) and packaged mayonnaise (+31%). The Company's culinary oils continued to
benefit from increased consumer awareness of the importance of avoiding
hydrogenated oils and the health benefits of the Mediterranean diet. Partially
offsetting those product lines were lower sales in salad dressings (-32%) and
food service culinary oils (-3%). The Spectrum Naturals(R) salad dressing line
is currently in the process of being revamped with new packaging and
positioning.

Spectrum Essentials(R) nutritional supplement sales decreased by 8% versus the
prior year, primarily as a result of increased competition from fish oil
products as an alternate source of omega 3 essential fatty acid supplementation.
Sales of encapsulated nutritional supplements were down 24%, while sales of
liquid flax oil (which comprise the majority of the Spectrum Essentials(R) line)
were flat versus the prior year. Sales of dry nutritional supplements (whole and
ground flaxseed) increased by 21% versus the prior year.

Spectrum Ingredients/Private Label sales increased by 34% versus the prior year
on the strength of a 32% increase in industrial quantities of culinary oils,
which comprise the majority of the Spectrum Ingredients sales. Also contributing
to the increase was a new relationship in 2005 with a major specialty retailer
for the supply of private label organic flax oil.

                                       16
<PAGE>

Cost of Goods Sold:

The Company's cost of goods sold for the three months ended September 30, 2005
was $11,351,100 versus $9,411,700 for the prior year, an increase of 21%. The
increase was primarily volume-related with respect to the Spectrum Essentials(R)
and Ingredients segments and both volume and rate driven in the Spectrum
Naturals(R) segment, as detailed in the following table:

                                              Three Months Ended September 30,
                                                2005           2004     % Change
                                             -----------   -----------   -------
Costs of Goods Sold:
  Spectrum Naturals(R)                       $ 5,698,300   $ 4,524,400     +26%
  Spectrum Essentials(R)                       1,134,800     1,198,200      -5%
  Spectrum Ingredients/Private Label           4,518,000     3,400,900     +33%
                                             -----------   -----------   -------
  Comparable Cost of Goods Sold               11,351,100     9,123,500     +24%
  Discontinued Product Lines                        --         288,200     N/A
                                             -----------   -----------   -------
  Total Cost of Goods Sold                   $11,351,100   $ 9,411,700     +21%
                                             ===========   ===========   =======


Cost of goods sold as a percent of net sales decreased to 76.7% in 2005 versus
77.2% in 2004. The decrease was primarily attributable to price increases taken
on certain products within the Spectrum Naturals(R) segment and the stronger
dollar, which served to lower the cost of olive oils and vinegar imported from
Europe and canola oil from Canada, a key raw material in many of the Spectrum
Naturals(R) culinary products.

Gross Profit:

Gross profit for the three months ended September 30, 2005 was $3,450,400 versus
$2,777,700 for the prior year, an increase of 24%. The increase was primarily
attributable to the significant volume increases in the Spectrum Naturals(R) and
Spectrum Ingredients segments, as detailed in the following table:

                                               Three Months Ended September 30,
                                                2005          2004      % Change
                                             ----------    ----------    -------
Gross Profit:
  Spectrum Naturals(R)                       $1,885,900    $1,125,000      +68%
  Spectrum Essentials(R)                        965,000     1,082,900      -11%
  Spectrum Ingredients/Private Label            599,500       429,800      +39%
                                             ----------    ----------    -------
  Comparable Gross Profit                     3,450,400     2,637,700      +31%
  Discontinued Product Lines                       --         140,000      N/A
                                             ----------    ----------    -------
  Total Gross Profit                         $3,450,400    $2,777,700      +24%
                                             ==========    ==========    =======


Gross profit as a percent of net sales (gross margin) was 23.3% for 2005 versus
22.8% for 2004, primarily as a result of the improvements described above in the
Company's Spectrum Naturals(R) segment and increased profits from private label
product offerings. Gross margins improved in most of the Company's business
segments, as detailed in the following table:

                                       17
<PAGE>

                                                Three Months Ended September 30,
                                                   2005      2004    Change
                                                  -------  -------  ---------
   Gross Margin:
     Spectrum Naturals(R)                           24.9%    19.9%  +5.0 pts.
     Spectrum Essentials(R)                         46.0%    47.5%  -1.5 pts.
     Spectrum Ingredients/Private Label             11.7%    11.2%  +0.5 pts.
                                                  -------  -------  ---------
     Comparable Gross Margin                        23.3%    22.4%  +0.9 pts.
     Discontinued Product Lines                      --      32.7%     N/A
                                                  -------  -------  ---------
     Total Gross Margin                             23.3%    22.8%  +0.5 pts.
                                                  =======  =======  =========


Sales and Marketing Expenses:

The Company's sales and marketing expenses for the three months ended September
30, 2005 were $1,794,900 or 12.1% of net sales, versus $1,697,000 or 13.9% of
net sales for the prior year. The increase in spending of $97,900 is detailed in
the following table which reconciles sales and marketing spending for the third
quarter of 2005 versus 2004, and discloses the significant variances by spending
category:

   Total sales and marketing expenses, third quarter 2004        $ 1,697,000
      Increased compensation and benefits                             65,400
      Increased trade show expenses                                   26,200
      All other, net                                                  (6,300)
                                                                 -----------
   Total sales and marketing expenses, third quarter 2005        $ 1,794,900
                                                                 ===========


The increased compensation and benefits was primarily associated with additional
hires in branded sales and marketing since October 1, 2004 and higher incentive
compensation accruals as of a result of the improved EBITDA performance in 2005.
The increased trade show expenses were primarily associated with the Natural
Products Expo East trade show held in September.

General and Administrative Expenses:

The Company's general and administrative expenses for the three months ended
September 30, 2005 were $1,288,100 or 8.7% of net sales, versus $932,500 or 7.7%
of net sales for the prior year. The increase in spending of $355,600 is
detailed in the following table which reconciles general and administrative
spending for the third quarter of 2005 versus 2004, and discloses significant
variances by spending category:

   Total general and administrative expenses, third quarter 2004   $   932,500
     Merger-related expenses                                           323,700
     Increased compensation and benefits expense                        61,000
     Iowa relocation expenses incurred in the prior year               (56,200)
     All other, net                                                     27,100
                                                                   -----------
   Total general and administrative expenses, third quarter 2005   $ 1,288,100
                                                                   ===========


The Merger-related expenses were primarily investment banking, legal, accounting
and tax consulting services associated with the negotiation of the Merger
Agreement entered into with Hain on August 23, 2005. The increased compensation
and benefits expense was primarily associated with higher incentive compensation
accruals as a result of the improved EBITDA performance in 2005.

                                       18
<PAGE>

Interest Expense:

The Company's interest expense for the three months ended September 30, 2005 was
$161,700 versus $98,300 for the prior year. The increase of $63,400 is detailed
in the following table which reconciles interest expense for 2005 versus 2004,
and discloses the significant variances by type of debt:

   Total interest expense, third quarter 2004                      $  98,300
      Increased interest on revolving line of credit                  59,100
      Increased interest on bank term notes payable                    6,800
      All other, net                                                  (2,500)
                                                                   ---------
   Total interest expense, third quarter 2005                      $ 161,700
                                                                   =========


The increased interest on the revolving line of credit was primarily due to
higher average borrowing levels in 2005 to support the increased inventories on
hand at September 30, 2005 versus September 30, 2004. Average borrowings
outstanding under the revolving line of credit for the third quarter were
$8,493,600 versus $6,665,300 for the third quarter of 2004. Also contributing
was higher interest rates in the United States as a result of increases in the
federal funds rate over the last year by the Federal Reserve. The Company's
weighted average effective interest rate on the revolving line of credit for the
third quarter was 5.9% per annum versus 4.1% in 2004.

The increased interest on the bank term notes payable was also due to increases
in the prime rate over the last year as well as additional advances to the
Company during the second half of 2004 under the first capital expenditure note
with Comerica Bank.

Provision for Income Taxes:

The Company recorded a provision for income taxes of $82,300 for the three
months ended September 30, 2005 versus a provision for income taxes of $21,500
for the prior year. The provision for both years was estimated at 40% of the
Company's income before income taxes.

--------------------------------------------------------------------------------
Results of Operations for the Nine Month Periods Ending September 30, 2005 and
September 30, 2004
--------------------------------------------------------------------------------

Summary Discussion:

For the nine months ended September 30, 2005 Spectrum delivered strong overall
sales growth of 13%, driven by increased consumer demand for expeller-pressed
culinary oils that are free from hydrogenation and genetically-modified
ingredients. The Company's Spectrum Naturals(R) brand of culinary oils,
condiments and butter substitutes sales grew by 20%, while the Spectrum
Ingredients/Private Label segment sales increased by 16%.

The Company reported net income of $549,500, which was better than a five-fold
increase versus net income of $101,700 for the same nine month period of the
prior year. The improved profitability in 2005 was driven by a 22% increase in
gross profit, partially offset by higher operating expenses and increased
interest expense.

                                       19
<PAGE>

Management believes that Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA") is an important measure of the Company's operating
performance. For the nine months ended September 30, 2005 EBITDA was $1,830,200
compared to $880,400 for the prior year, an increase of $949,800 or 108%. The
improved performance in 2005 is discussed in detail below, but was primarily
attributable to increased gross profit, partially offset by increased operating
expenses.

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:
                                                    Nine months Ended Sept. 30,
                                                         2005          2004
                                                      ----------    ----------
Net income                                            $  549,500    $  101,700
Add back:  Provision for income taxes                    366,300        67,700
           Interest expense                              435,900       250,100
           Depreciation and amortization expense         478,500       460,900
                                                      ----------    ----------
EBITDA                                                $1,830,200    $  880,400
                                                      ==========    ==========


The following is Management's 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 nine months ended September 30, 2005 were
$42,453,900 compared to $37,733,900 for 2004, an increase of $4,720,000 or 13%.
The increase is detailed by segment in the following table:

                                            Nine months Ended September 30,
                                             2005           2004     % Change
                                          -----------   -----------   -------
   Net Sales:
     Spectrum Naturals(R)                 $20,240,200   $16,899,700     +20%
     Spectrum Essentials(R)                 7,277,400     7,080,400      +3%
     Spectrum Ingredients/Private Label    14,638,900    12,634,100     +16%
                                          -----------   -----------   -------
     Comparable Net Sales                  42,156,500    36,614,200     +15%
     Discontinued Product Lines               297,400     1,119,700     -73%
                                          -----------   -----------   -------
     Total Net Sales                      $42,453,900   $37,733,900     +13%
                                          ===========   ===========   =======


Within the Spectrum Naturals(R) culinary products, sales were significantly
higher than prior year in olive oil (+37%), other packaged culinary oils (+22%)
and packaged vinegar (+43%). Partially offsetting those product lines were lower
sales in salad dressings (-36%). The Company's culinary oils continued to
benefit from increased consumer awareness of the importance of avoiding
hydrogenated oils.

                                       20
<PAGE>

Spectrum Essentials(R) nutritional supplement sales increased 3% versus the
prior year. However, the prior year period included the launch of the Company's
Fresh and Cold Program, which included a reduction in trade inventories of
liquid flax oil products. Consequently, the Spectrum Essentials performance was
soft as a result of increased competition from fish oil products, which are an
alternate source of omega 3 essential fatty acid supplementation. Packaged
liquid supplements, which encompass the majority of the Spectrum Essentials(R)
line, increased by 3% versus the prior year. Sales of encapsulated nutritional
supplements, primarily flax and fish oil, decreased 4% versus the prior year;
while sales of dry supplements (primarily whole and ground flaxseed) increased
56% versus the prior year, albeit from a small base.

The Spectrum Ingredients/Private Label sales increased 16% versus the prior
year, partially due to new distribution in 2005. Sales of industrial quantities
of culinary oils, the largest product line for Spectrum Ingredients, increased
by 8% versus the prior year as some early oils from the 2005 crop became
available for sale in September. Sales of private label nutritional supplements
increased by 97%, primarily as a result of a new relationship in 2005 with a
major specialty retailer for private label organic flax oil. Sales of industrial
quantities of flax oil increased by 19% as a result of additional distribution
in Canada and Switzerland.

Cost of Goods Sold:

The Company's cost of goods sold for the nine months ended September 30, 2005
was $31,887,200 versus $29,093,900 for the prior year, an increase of 10%. The
increase was primarily volume-related with respect to the Spectrum Ingredients
segment and both volume and rate driven with respect to the Spectrum Naturals(R)
and Spectrum Essentials(R) segments, as detailed in the following table:
<TABLE>
<CAPTION>

                                                    Nine months Ended September 30,
                                                    2005           2004     % Change
                                                 -----------   -----------   -------
<S>                                              <C>           <C>              <C>
Spectrum Naturals(R) Culinary Products           $15,256,000   $13,071,000     +17%
Spectrum Essentials(R) Nutritional Supplements     3,596,600     3,988,900     -10%
Spectrum Ingredients/Private Label                12,838,200    11,296,800     +14%
                                                 -----------   -----------   -------
Comparable Cost of Goods Sold                     31,690,800    28,356,700     +12%
Discontinued Product Lines                           196,400       737,200     -73%
                                                 -----------   -----------   -------
  Total Cost of Goods Sold                       $31,887,200   $29,093,900     +10%
                                                 ===========   ===========   =======
</TABLE>

Cost of goods sold as a percent of net sales decreased to 75.1% in 2005 versus
77.1% in 2004. The decrease was primarily due to decreased raw material costs in
most of the Company's consumer packaged product lines. The stronger U.S. dollar
helped to reduce the cost of imported olive oil and vinegar from Europe in the
Spectrum Naturals(R) segment. The cost of flaxseed was lower in 2005 as prices
for the 2004 crop represented a return to historic norms after the
drought-plagued 2003 crop. Production efficiencies realized at the Company's
Iowa production facility also contributed to lower costs for the Spectrum
Essentials(R) segment.

                                       21
<PAGE>

Gross Profit:

Gross profit for the nine months ended September 30, 2005 was $10,566,700 versus
$8,640,000 for the prior year, an increase of 22%. The increase was primarily
attributable to the raw material cost decreases described above, and the volume
increases in all three of the Company's business segments, as detailed in the
following table:
                                             Nine months Ended September 30,
                                             2005           2004     % Change
                                          -----------   -----------   -------
   Gross Profit:
     Spectrum Naturals(R)                 $ 4,984,200   $ 3,828,700     +30%
     Spectrum Essentials(R)                 3,680,800     3,091,500     +19%
     Spectrum Ingredients/Private Label     1,800,700     1,337,300     +35%
                                          -----------   -----------   -------
     Comparable Gross Profit               10,465,700     8,257,500     +27%
     Discontinued Product Lines               101,000       382,500     -74%
                                          -----------   -----------   -------
     Total Gross Profit                   $10,566,700   $ 8,640,000     +22%
                                          ===========   ===========   =======


Gross profit as a percent of net sales (gross margin) was 24.9% for 2005 versus
22.9% for 2004, primarily as a result of the decreased flaxseed costs and
production efficiencies in the Spectrum Essentials(R) segment and price
increases taken by the Company in the Spectrum Naturals(R) culinary segment in
February and April. Gross margins improved in all three of the Company's
business segments, as detailed in the following table:

                                                 Nine months Ended September 30,
                                                    2005     2004    Change
                                                    ----     ----   ---------
   Gross Margin:
     Spectrum Naturals(R)                           24.6%    22.7%  +1.9 pts.
     Spectrum Essentials(R)                         50.6%    43.7%  +6.9 pts.
     Spectrum Ingredients/Private Label             12.3%    10.6%  +1.7 pts.
                                                    ----     ----   ---------
     Comparable Gross Margin                        24.8%    22.6%  +2.2 pts.
     Discontinued Product Lines                     34.0%    34.2%  -0.2 pts.
                                                    ----     ----   ---------
     Total Gross Margin                             24.9%    22.9%  +2.0 pts.
                                                    ====     ====   =========

Sales and Marketing Expenses:

The Company's sales and marketing expenses for the nine months ended September
30, 2005 were $5,822,100 or 13.7% of net sales, versus $5,401,900 or 14.3% of
net sales for the prior year. The increase in spending of $420,200 is detailed
in the following table which reconciles sales and marketing spending for 2005
versus 2004, and discloses the significant variances by spending category:

   Total sales and marketing expenses, first nine months 2004    $ 5,401,900
      Increased compensation and benefits                            360,100
      Increased sponsorships                                          75,900
      All other, net                                                 (15,800)
                                                                 -----------
   Total sales and marketing expenses, first nine months 2005    $ 5,822,100
                                                                 ===========


The increased compensation and benefits was primarily associated with increased
staffing of five positions in the branded Sales and Marketing Departments and
higher incentive compensation accruals as a result of the improved EBITDA
performance in 2005. The increased sponsorships was primarily attributable to
the Company's sponsorship of Dr. Andrew Weil's annual nutrition conference at
the University of Arizona.

                                       22
<PAGE>

General and Administrative Expenses:

The Company's general and administrative expenses for the nine months ended
September 30, 2005 were $3,411,600 or 8.0% of net sales, versus $2,836,300 or
7.5% of net sales for the prior year. The increase in spending of $575,300 is
detailed in the following table which reconciles general and administrative
spending for 2005 versus 2004, and discloses significant variances by spending
category:

   Total G & A expenses, first nine months of 2004               $ 2,836,300
     Merger-related expenses                                         421,300
     Increased compensation and benefits expense                     258,500
     Iowa relocation expenses incurred in 2004                      (137,300)
     All other, net                                                   32,800
                                                                 -----------
   Total G & A expenses, first nine months of 2005               $ 3,411,600
                                                                 ===========


The Merger-related expenses were associated with investment banking, legal,
accounting and tax consulting services incurred in connection with the
negotiation of the merger agreement entered into with Hain on August 23, 2005.
The increased compensation and benefits expense was primarily associated with
two new hires and higher incentive compensation accruals as a result of the
improved EBITDA performance in 2005. The Iowa relocation expenses were primarily
associated with consulting and project management expenses for the Company's
manufacturing facility relocation in 2004.

Interest Expense:

The Company's interest expense for the nine months ended September 30, 2005 was
$435,900 versus $250,100 for the prior year. The increase of $185,800 is
detailed in the following table which reconciles interest expense for 2005
versus 2004, and discloses the significant variances by type of debt:

   Total interest expense, first nine months 2004                  $ 250,100
      Increased interest on revolving line of credit                 165,800
      Increased interest on bank term notes payable                   29,100
      All other, net                                                  (9,100)
                                                                   ---------
   Total interest expense, first nine months 2005                  $ 435,900
                                                                   =========


The increased interest on the revolving line of credit was primarily due to
higher average borrowing levels in 2005 to support the increased inventories on
hand at September 30, 2005 versus September 30, 2004. Average borrowings
outstanding under the revolving line of credit for the nine months ended
September 30, 2005 were $7,755,500 versus $5,641,500 for the same period in
2004. Also contributing was higher interest rates in the United States as a
result of increases in the federal funds rate over the last year by the Federal
Reserve. The Company's weighted average effective interest rate on the revolving
line of credit for the nine months ended September 30, 2005 was 5.5% per annum
versus 3.8% in 2004.

                                       23
<PAGE>

The increased interest on the bank term notes payable was also due to increases
in the prime rate over the last year as well as additional advances to the
Company under the first capital expenditure note with Comerica Bank.

Provision for Income Taxes:

The Company recorded a provision for income taxes of $366,300 for the nine
months ended September 30, 2005 versus a provision for income taxes of $67,800
for the prior year. The provision for both years was estimated at 40% of the
Company's income before income taxes.

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 affected 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 24, 2005 the Company entered into the Second Amendment to its Credit
Facility with Comerica Bank ("Comerica"), which extends the maturity date of the
Credit Facility to June 30, 2007. The Amendment also increases the revolving
line of credit up to a maximum of $10,000,000, subject to eligible collateral
levels, and provides for an additional variable rate term loan for up to
$1,000,000 of eligible expenditures on capital equipment until June 30, 2006.
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.

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 September 30, 2005 the Company was in compliance
with all requirements under the Credit Facility.

At September 30, 2005 the Company had working capital of $1,387,700 which
reflected a decrease of $143,700 versus September 30, 2004. The decrease was
primarily attributable to increased borrowings outstanding under the line of
credit to finance the higher levels of inventories and accounts receivable in
2005.

During 2005 the Company used $587,500 in cash from operating activities,
compared to using $769,100 in cash in 2004. The decrease in cash used in 2005
was primarily due to the increased profitability in 2005.

Cash used in investing activities was $262,600 in 2005 compared to $962,100 in
2004. In both years the cash was primarily invested in the new production
facility in Iowa. The Iowa investment was much greater in 2004 during the
construction phase of the facility.

Cash provided by financing activities was $858,700 in 2005 compared to
$1,731,400 in 2004. During both years the cash provided was primarily from net
borrowings under the line of credit, partially offset by principal payments
against long-term debt.

                                       24
<PAGE>

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. Excess borrowing capacity under the revolving line of credit was
$996,700 at September 30, 2005, versus $900,300 at September 30, 2004.

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 at fair value. 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 required to adopt the standard
effective for its fiscal year 2006.

Also in December 2004, the FASB issued Staff Position SFAS No. 109-1,
"Application of FASB Statement No. 109, Accounting for Income Taxes" ("FSP No.
109-1") with respect to the special tax deduction on qualified production
activities provided by the American Jobs Creation Act of 2004, which was signed
into law on October 22, 2004. Under FSP No. 109-1, companies that qualify for
the recent tax law's deduction for domestic production activities must account
for it as a special deduction under SFAS No. 109 and reduce their tax expense in
the period or periods the amounts are deductible. FSP No. 109-1 is effective for
the Company in its fiscal year 2006. FSP No. 109-1 is not expected to have a
material impact on the Company's financial results.

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.

Related Party Transactions and Other Relationships:

There were no significant transactions with related parties during the nine
months ended September 30, 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.

                                       25
<PAGE>

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 September 30, 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 September 30, 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)665,000
      Average Contractual Exchange Rate               $1.23
      U.S. Dollars                                   $821,200          $801,600

Included in cost of sales for the Spectrum Naturals(R) segment for the three
months ended September 30, 2005 was a non-cash expense of $19,600 which was the
difference between the estimated fair market value of the forward contracts at
September 30, 2005 and the contractual amounts.

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 nine months
ended September 30, 2005 the average outstanding balance under the line of
credit was $7,755,500 with a weighted average effective interest rate of 5.5%
per annum. For the nine months ended September 30, 2004 the average outstanding
balance under the line of credit was $5,641,500 with a weighted average
effective interest rate of 3.8% 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 for
portions of the outstanding borrowings to be locked in at LIBOR rates plus
2.25%, for up to one year, at the Company's discretion. As of September 30, 2005
the Company had $4,000,000 of its outstanding borrowings locked in at a weighted
average LIBOR rate of 5.44%.

                                       26
<PAGE>

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
September 30, 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          $ 51.1       --        --         --         --         --      $   51.1      $   51.1
  Avg. Int. Rate       9.1%      --        --         --         --         --           9.1%
Variable Rate       $125.0    $500.0     $500.0     $375.0       --         --      $1,500.0      $1,500.0
  Avg. Int. Rate      Var.      Var.      Var.       Var.        --         --          Var.
Imputed Rate           --        --        --         --         --      $513.3     $  513.3      $  345.3
  Avg. Int. Rate       --        --        --         --         --         7.6%         7.6%

</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 7.6% per annum, leaving a fair value at
September 30, 2005 of $345,300.

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 September 30, 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
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. CONTROLS AND PROCEDURES
-------------------------------

Evaluation of Disclosure Controls and Procedures:

Our Chief Executive Officer and Chief Financial Officer are responsible for
establishing and maintaining "disclosure controls and procedures" (as defined in
rules promulgated under the Securities Exchange Act of 1934, as amended) for the

                                       27
<PAGE>

Company. Based on their evaluation as of the end of the period covered by this
report, our Chief Executive Officer and Chief Financial Officer have concluded
that our disclosure controls and procedures were effective to ensure that the
information required to be disclosed by us in this Quarterly Report on Form 10-Q
was (i) recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and (ii) accumulated
and communicated to our management, including our principal executive and
principal financial officers, to allow timely decisions regarding required
disclosure.

Changes in Internal Control over Financial Reporting:

During the third quarter of our fiscal year ending December 31, 2005, there were
no changes in our internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.















                                       28
<PAGE>

PART II - OTHER INFORMATION

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

In the ordinary course of business the Company is involved in litigation, most
of which is not expected to have a material adverse effect on Spectrum's
business, results of operations or financial position. The following summarizes
the status of the two significant legal proceedings that were not completely
resolved at the date of this report:

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 created an industrial accident reserve by
accruing 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,
which 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 on
September 14, 2005 CAL-OSHA and the Company submitted a Stipulation and
Settlement Agreement to the CAL-OSHA Appeals Board, which disposed of all the
contested issues on appeal and calls for Spectrum to pay penalties of $70,500.
On October 17, 2005 the CAL-OSHA Appeals Board issued its Order approving the
terms of the Stipulation and Settlement Agreement and the Company paid the
penalties to close this matter on October 28, 2005.

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 and charged against the industrial accident
reserve.

The remaining workers' compensation appeal is for an additional death benefit
equal to $87,500, which is 50% of the total death benefits 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

                                       29
<PAGE>

litigated, the workers' compensation appeal is an all-or-nothing proposition
under which the Company will either be liable for $87,500 or nothing. Based on
the advice of counsel, the Company expects the remaining workers' compensation
appeal to be settled rather than litigated. At the date of this report the
Company was in negotiations to settle this matter. Management believes the
remaining reserve of $139,800 as of September 30, 2005 will be approximately
adequate to cover the present value of the remaining installment under the CLCS
6425 fine of $50,000 due on June 1, 2006, the settlement of the CAL-OSHA appeal
for $70,500, and the remaining workers' compensation appeal.

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 several major retailers 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.

The Company is a member of a Joint Defense Group established by attorneys
representing several of the defendants in the Complaint. A mediation session was
conducted on June 14, 2005 and a settlement was reached by all parties present
at the mediation session on June 17, 2005. The total cost of the settlement to
be borne by all members of the Joint Defense Group is $185,000. Spectrum's
estimated share of that is expected to be approximately $15,500, which was
included in general and administrative expense for the second quarter of fiscal
2005. Manufacturers and importers of the Joint Defense Group also agreed to
provide certain warning notices under Proposition 65 to California retailers of
vinegar. Total attorney's fees incurred by the Company as a member of the Joint
Defense Group during the nine months ended September 30, 2005 were $9,500. At
the date of this report the Company was awaiting the execution of the settlement
agreement.


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

During the nine months ended September 30, 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 was applied against the outstanding
borrowings under the Company's line of credit.

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.

                                       30
<PAGE>

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

None.


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

None.


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

None.


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

(a)  Exhibits:

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

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

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

     32.02 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 September 30, 2005:

     The Company filed a Current Report on Form 8-K on August 29, 2005
     disclosing that it had entered into a definitive Merger Agreement to be
     acquired by The Hain Celestial Group, Inc., subject to the conditions set
     forth in the Merger Agreement.

     The Company filed a Current Report on Form 8-K on August 5, 2005 disclosing
     the Company's unaudited financial position and results of operations as of
     and for the three months ended June 30, 2005.










                                       31
<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: November 7, 2005                       SPECTRUM ORGANIC PRODUCTS, INC.

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









                                       32