SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)

[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004.


[ ]  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,
46,306,277 shares issued and outstanding as of May 10, 2004.

Transitional Small Business Disclosure Format:  Yes [ ]   No [X]

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PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
-----------------------------


                               SPECTRUM ORGANIC PRODUCTS, INC.
                                       BALANCE SHEETS


                                           ASSETS

                                                                 (Unaudited)
                                                                  March 31,     December 31,
                                                                    2004            2003
                                                                ------------    ------------
<S>                                                            <C>             <C>
Current Assets:
   Cash                                                         $    218,400    $      7,300
   Accounts receivable, net                                        4,395,800       4,163,200
   Inventories, net                                                6,741,800       8,007,200
   Deferred income taxes - current                                   592,900         514,200
   Prepaid expenses and other current assets                         378,800         297,500
                                                                ------------    ------------
Total Current Assets                                              12,327,700      12,989,400

Property and Equipment, net                                        4,631,200       4,338,700

Other Assets:
   Deferred income taxes - long-term                               1,087,700       1,087,700
   Intangible assets, net                                            586,300         586,800
   Other assets                                                      218,300         218,300
                                                                ------------    ------------
Total Assets                                                    $ 18,851,200    $ 19,220,900
                                                                ============    ============

                            LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Bank overdraft                                               $       --      $    513,800
   Line of credit                                                  5,147,600       4,833,000
   Accounts payable, trade                                         4,725,100       4,168,000
   Accrued expenses                                                  829,500       1,307,700
   Current maturities of term notes payable and capital lease
     obligations                                                     329,100         322,300
   Current maturities of notes payable, related parties              259,500         275,200
   Income taxes payable                                                 --             9,900
                                                                ------------    ------------
Total Current Liabilities                                         11,290,800      11,429,900

Notes payable and capitalized lease obligations, less
  current maturities                                               1,021,700       1,104,200
Notes payable, related parties, less current maturities              499,900         549,200
Deferred rent                                                         47,300          50,700
                                                                ------------    ------------
Total Liabilities                                                 12,859,700      13,134,000
                                                                ------------    ------------
Commitments and Contingencies

Stockholders' Equity:
   Preferred stock, 5,000,000 shares authorized, no shares
        issued or outstanding                                           --              --
   Common stock, no par value, 60,000,000 shares authorized,
        46,296,277 and 46,254,777 issued and outstanding at
        March 31, 2004 and December 31, 2003, respectively         9,593,100       9,579,500
   Accumulated deficit                                            (3,601,600)     (3,492,600)
                                                                ------------    ------------
Total Stockholders' Equity                                         5,991,500       6,086,900
                                                                ------------    ------------
Total Liabilities and Stockholders' Equity                      $ 18,851,200    $ 19,220,900
                                                                ============    ============


          The accompanying notes are an integral part of the financial statements.

                                             2
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                         SPECTRUM ORGANIC PRODUCTS, INC.
                            STATEMENTS OF OPERATIONS


                                                             (Unaudited)
                                                         Three Months Ended
                                                      March 31,       March 31,
                                                        2004           2003
                                                    ------------    ------------
<S>                                                 <C>             <C>
Net Sales                                           $ 12,733,100    $ 10,308,600
Cost of Goods Sold                                     9,830,400       7,235,800
                                                    ------------    ------------
Gross Profit                                           2,902,700       3,072,800
                                                    ------------    ------------
Operating Expenses:
   Sales and Marketing                                 1,981,900       1,432,600
   General and Administrative                          1,029,400         897,600
                                                    ------------    ------------
   Total Operating Expenses                            3,011,300       2,330,200
                                                    ------------    ------------
Income (Loss) from Operations                           (108,600)        742,600
                                                    ------------    ------------
Other Income (Expense):
   Interest Expense                                      (74,000)        (70,400)
   Other, net                                              1,000           1,200
                                                    ------------    ------------
Total Other Expenses                                     (73,000)        (69,200)
                                                    ------------    ------------

Income (Loss) Before Taxes                              (181,600)        673,400
Benefit (Provision) for Income Taxes                      72,600         (37,800)
                                                    ------------    ------------
Net Income (Loss)                                   $   (109,000)   $    635,600
                                                    ============    ============

Basic and Fully Diluted Income (Loss) Per Share     $      (0.00)   $       0.01
                                                    ============    ============

Basic Weighted Average Shares Outstanding             46,275,557      45,705,571
                                                    ============    ============

Fully Diluted Weighted Average Shares Outstanding     46,275,557      46,108,429
                                                    ============    ============


                   The accompanying notes are an integral part
                          of the financial statements.

                                       3
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<CAPTION>


                           SPECTRUM ORGANIC PRODUCTS, INC.
                              STATEMENTS OF CASH FLOWS


                                                               (Unaudited)
                                                            Three Months Ended
                                                        March 31,       March 31,
                                                          2004            2003
                                                      ------------    ------------
<S>                                                   <C>             <C>
Cash Flows from Operating Activities:
Net Income (Loss)                                     $   (109,000)   $    635,600
  Adjustments to Reconcile Net Income (Loss) to Net
   Cash Provided by (Used in) Operating Activities:
  Provision for uncollectible receivables                   18,800          21,300
  Provision for inventory obsolescence                      18,700          74,700
  Depreciation and amortization                            148,200         103,700
  Imputed interest on note payable, related party            5,000           4,700

Changes in Assets and Liabilities:
  Accounts receivable                                     (251,400)       (611,500)
  Inventories                                            1,246,700      (2,083,100)
  Other assets                                            (160,000)        (86,000)
  Accounts payable                                         557,100       1,003,400
  Income taxes payable                                      (9,900)       (138,200)
  Other liabilities                                       (481,500)         33,000
                                                      ------------    ------------
Net Cash Provided by (Used in) Operating Activities        982,700      (1,042,400)
                                                      ------------    ------------

Cash Flows from Investing Activities:
  Purchase of property and equipment                      (440,300)       (357,600)
                                                      ------------    ------------
Net Cash Used in Investing Activities                     (440,300)       (357,600)
                                                      ------------    ------------

Cash Flows from Financing Activities:
  Increase (Decrease) in bank overdraft                   (513,800)        165,400
  Proceeds from line of credit                           5,483,300      11,039,300
  Repayment of line of credit                           (5,168,700)     (9,679,100)
  Repayment of notes payable, related parties              (70,100)        (68,000)
  Repayment of term notes payable                          (62,500)        (51,600)
  Repayment of capitalized lease obligations               (13,100)        (11,500)
  Proceeds from exercise of stock options                   13,600            --
                                                      ------------    ------------
Net Cash Provided by (Used in) Financing Activities       (331,300)      1,394,500
                                                      ------------    ------------
Net Increase (Decrease) in Cash                            211,100          (5,500)

Cash, beginning of the year                                  7,300          12,700
                                                      ------------    ------------
Cash, end of the period                               $    218,400    $      7,200
                                                      ============    ============
Supplemental Disclosure of Cash Flow Information:
  Cash paid for income taxes                          $     16,000    $    176,000
  Cash paid for interest                              $     67,700    $     69,800


                     The accompanying notes are an integral part
                            of the financial statements.

                                         4
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<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, 2003. Operating results
     for the three-month period ended March 31, 2004 are not necessarily
     indicative of the results that may be expected for the entire year ending
     December 31, 2004 or future periods.

     Certain reclassifications have been made to the prior year unaudited
     interim financial statements to be consistent with the presentation at
     March 31, 2004. 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") 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 healthy fats,
     contain no hydrogenated or trans fats and are offered in a variety of sizes
     and flavors in both organic and conventional, non-GMO offerings.

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

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

     Operating data is captured by segment to the gross profit level. However,
     operating statement data below gross profit and balance sheet data have not
     been disaggregated and captured by business segment since the information
     is presently unavailable to the Company's chief operating decision maker.
     Accordingly, the following segment information is currently captured by the
     Company:

                                       5

<PAGE>


                                              Three Months Ended March 31,
                                          2004             2003       % Change
                                       -----------      -----------      ----
Net Sales:
  Spectrum Naturals(R)                 $ 5,817,600      $ 4,598,100      +27%
  Spectrum Essentials(R)                 2,668,800        2,446,300      + 9%
  Spectrum Ingredients/Other             4,246,700        3,264,200      +30%
                                       -----------      -----------      ----
  Total Net Sales                      $12,733,100      $10,308,600      +24%
                                       ===========      ===========     ====
Gross Profit:
  Spectrum Naturals(R)                 $ 1,404,700      $ 1,353,600      + 4%
  Spectrum Essentials(R)                 1,066,200        1,199,300      -11%
  Spectrum Ingredients/Other               431,800          519,900      -17%
                                       -----------      -----------      ----
  Total Gross Profit                   $ 2,902,700      $ 3,072,800      - 6%
                                       ===========      ===========      ====


3.   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 will pay a fine under CLCS 6425 of $150,000 in three
     annual installments of $50,000 each on June 30, 2004, 2005 and 2006. In
     addition the Company paid $150,000 in restitution to the California
     District Attorneys Association Workers Safety Training Account to assist in
     the prosecution of worker safety cases in the State of California. The
     Company also reimbursed costs of $25,000 each to the Petaluma Police
     Department, the Petaluma Fire Department and the Sonoma County District
     Attorney's Office. Finally, an additional fine of $250,000 under CLCS 6425
     was suspended conditioned upon the Company's compliance with the terms of
     court supervised probation for three years. Accordingly, the Company
     accrued an expense of $375,000 against 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 three months ended March 31, 2004 in
     connection with the plea were $225,000.

     As of March 31, 2004 the Company has a remaining reserve of $286,600 to
     cover the fine under CLCS 6425, anticipated penalties from CAL-OSHA,
     appeals filed by the dependants of the two employees with the Workers
     Compensation Appeals Board of California, and related attorney's fees.
     CAL-OSHA has completed their investigation of the accident and issued their
     report and notice of proposed penalties on October 18, 2002. Their report
     included nine citations for safety violations with total proposed penalties
     of $137,900. There were no willful citations and the CAL-OSHA report
     acknowledged that all the safety violations had been 100% abated prior to
     the report's issuance. The Company has filed a formal appeal with CAL-OSHA
     in the hopes of reducing the citations and proposed penalties. The workers
     compensation appeals are for an additional death benefit of $107,500 in
     total, payable by the Company to the dependents of the deceased workers if
     the dependents successfully establish that the Company was guilty of
     serious and willful misconduct by allowing unsafe working conditions to
     exist. The Company intends to defend itself vigorously and believes it has
     meritorious defenses. If actually litigated, the workers compensation
     appeals are an all-or-nothing proposition under which the Company will

                                       6

<PAGE>


     either be liable for $107,500 or nothing. Based on the advice of counsel,
     the Company expects the workers compensation appeals to be settled rather
     than litigated. Management believes the remaining reserve of $286,600 will
     be adequate to cover the CLCS 6425 fine, the settlement of the CAL-OSHA
     penalties, the workers compensation appeals and related attorney's fees.

4.   Manufacturing Facility Relocation and Reconfiguration:

     During the first quarter of 2004, the Company began the implementation of
     its plan to relocate its SpectraVac manufacturing operation from its leased
     facility at 133 Copeland Street, Petaluma, California to a leased facility
     located in Cherokee, Iowa managed by American Natural Soy Processors, LLC
     ("ANS"). The SpectraVac operation utilizes the Company's intellectual
     property purchased on April 15, 2003 for the benign extraction of oil from
     vegetable seeds, and is currently used primarily for the production of flax
     oil.

     The Company is replacing most of the equipment currently used in the
     SpectraVac operation in Petaluma with new, more efficient equipment in
     Cherokee and will operate both facilities in parallel prior to shutting
     down the Petaluma facility. The Company plans to disassemble and relocate
     most of the Petaluma equipment to Cherokee after the shutdown.

     ANS will provide labor and management services to the Company for the
     SpectraVac operation in Cherokee under contract. The Company will continue
     to own the equipment and also intends to enter into other oil seed crushing
     arrangements with ANS under a strategic alliance.

     During the first quarter, capital spending in Cherokee associated with the
     Iowa relocation was $317,600. The Company anticipates additional capital
     spending of approximately $400,000 and moving expenses of approximately
     $75,000 will be incurred during the third and fourth quarters to complete
     the relocation to Iowa. Additionally, the Company incurred $47,200 in
     project management fees and consulting fees associated with the relocation
     to Iowa, which was included in general and administrative expense.

5.   Inventories:

     Inventories consisted of the following:

                                                   March 31,      December 31,
                                                     2004             2003
                                                  ----------       ----------
     Finished goods                               $5,779,400       $6,853,400
     Raw materials                                   733,200        1,166,100
     Deposits on inventory                           485,600          236,200
                                                  ----------       ----------
     Total Inventories                             6,998,200        8,255,700
     Less: Reserve for obsolete inventory            256,400          248,500
                                                  ----------       ----------
     Net Inventories                              $6,741,800       $8,007,200
                                                  ==========       ==========

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

                                       7

<PAGE>


6.   Intellectual Property Purchase:

     On April 15, 2003 the Company entered into an intellectual property
     purchase agreement (the "IP Agreement") with Tenere Life Sciences, Inc.
     ("Tenere") and Mr. Rees Moerman, both unaffiliated third parties. Mr.
     Moerman is an engineer and lipid scientist who developed proprietary
     techniques for the benign extraction of oil from vegetable seeds. The
     Company has utilized Mr. Moerman's techniques under the SpectraVac and
     LOCET Technology License Agreement (the "License Agreement") for the
     production of flax oil and other nutritional oils since 1990. Under the
     License Agreement, the Company paid royalties to Mr. Moerman on its sales
     of products that were manufactured utilizing the intellectual property. Mr.
     Moerman assigned his rights to the intellectual property to Tenere on
     January 21, 2003.

     In accordance with the IP Agreement, the Company purchased the intellectual
     property for $550,000 which was paid in two equal installments on April 30,
     2003 and October 7, 2003. As a result, the Company is no longer obligated
     to pay royalties to Tenere effective April 1, 2003. Royalties paid during
     the three months ended March 31, 2003 were $50,700.

     In accordance with Statement of Financial Accounting Standard No. 142,
     "Goodwill and Other Intangible Assets" ("SFAS 142"), the Company has
     determined that the IP Agreement has an indefinite useful life since it
     represents trade secrets utilized in the manufacture of flax oil and other
     nutritional oils. Accordingly, there is no periodic amortization expense.
     The Company evaluates the intangible asset carrying value of $550,000 for
     impairment in relation to the anticipated future cash flows of its
     nutritional oils at least annually. No impairment charges have been
     required to date.

7.   Commitments and Contingencies:

     Pending Litigation

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

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

     While lead has been shown to cause cancer and reproductive toxicity in
     humans, the Proposition 65 consumption quantity defined as no significant
     risk level for cancer was set at 15 micrograms per day. Lead is a naturally
     occurring element in all vinegars. Based on the Company's tests, a person
     would need to consume somewhere between 1.3-2.6 cups (270-630ml) daily of
     the Company's various vinegar products to reach the Proposition 65 lead

                                       8

<PAGE>


     level. The small lead content in vinegar occurs naturally in the soil and
     is absorbed by the grapes used to make vinegar. The level of lead in
     vinegar is not affected by the manufacturing process and, therefore, is not
     subject to regulation under Proposition 65.

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

     The Company has joined a Joint Defense Group established by attorneys
     representing several of the defendants in the Complaint. The initial fee to
     join was a $5,000 retainer, which the Company paid on February 17, 2004.
     Management believes the Complaint will eventually be shown to be without
     merit. Accordingly, no provision for loss or future attorney's fees has
     been recorded at March 31, 2004.

     In October 2000 the Company was notified by counsel for GFA Brands, Inc.
     ("GFA") that nutritional claims pertaining to Spectrum Naturals(R) Organic
     Margarine were infringing upon two patents (the "first patents") issued in
     the United States that pertain to particular fat compositions suitable for
     human consumption. The patent holder, Brandeis University, exclusively
     licensed each of these patents to GFA. GFA demanded that the Company cease
     the manufacture and sale of the margarine and threatened legal action if
     the Company failed to comply.

     It has always been Management's view that the formula for Spectrum Naturals
     Organic Margarine(R) fell outside the claims made in the Brandeis
     University patents. Despite numerous attempts, the Company was unable to
     convince GFA that its formula for the margarine fell outside the claims of
     the first patents. Therefore, the Company filed a complaint against GFA for
     declaratory judgment of non-infringement and invalidity of the two patents
     on August 28, 2001. The complaint requested a declaratory judgment that the
     margarine does not infringe either patent, a declaratory judgment that both
     patents are invalid, that GFA be enjoined from threatening or asserting any
     action for infringement of either patent, and attorney's fees.

     Markman briefs, in which each side presents its arguments on how the patent
     claims should be construed, were submitted by both GFA and Spectrum in July
     2003. In most patent infringement cases, the court's determination of how
     the patent claims should be interpreted is the central issue. A Markman
     hearing was held by the court on October 16, 2003. The court issued its
     ruling on the Markman hearing on December 3, 2003 in favor of the Company's
     interpretation of the patent claims. The favorable ruling will assist the
     Company in settling the complaint with respect to the first patents.

     Meanwhile, unbeknownst to the Company, Brandeis University had filed for an
     additional patent (the "second patent") with the U.S. Patent Office which
     included patent claims that did encompass the Company's formula for
     Spectrum Naturals Organic Margarine(R). Unlike trademark law, patents are
     issued in the United States without pre-publication or notice which would
     allow for comment or appeal by potentially affected parties. On October 7,
     2003 the U.S. Patent Office granted the second patent to Brandeis
     University. On the advice of counsel, the Company ceased the production of
     the margarine immediately thereafter and is currently evaluating its
     options with regards to the second patent.

     Management believes the Company has meritorious defenses and that a loss is
     not probable on the patent infringement complaint with regard to the first
     patents at this time. There is no infringement by the Company of the second

                                       9

<PAGE>


     patent since the Company immediately ceased the production of the margarine
     upon notification of the patent's issuance. Accordingly, no provision for
     loss has been recorded at March 31, 2004.

     Safety Violations and Workers' Compensation Appeals

     In connection with the industrial accident that occurred on April 25, 2002
     the Company received nine citations from CAL-OSHA for safety violations
     with total proposed penalties of $137,900. The Company has filed an appeal
     with CAL-OSHA in the hopes of reducing the citations and proposed
     penalties. Also, the estates of the deceased employees have both filed
     applications to the Workers' Compensation Appeals Board of the State of
     California for an increased death benefit for serious and willful
     misconduct by the Company. These two applications are for a total
     additional death benefit of $107,500 to be paid by the Company, should the
     estates successfully establish that the Company intentionally and willfully
     allowed unsafe working conditions to exist. The Company intends to defend
     itself vigorously and believes it has meritorious defenses. As of March 31,
     2004 the Company had a reserve of $286,600 to cover the anticipated
     settlement of these issues plus attorney's fees and the CLCS 6425 fine.

     Court Supervised Probation

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

8.   Stock-based Compensation:

     Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting
     for Stock-Based Compensation-Transition and Disclosure" ("SFAS 148") issued
     in December 2002 provides alternative methods of accounting for a voluntary
     transition to the fair value method of accounting for stock-based employee
     compensation as prescribed in SFAS 123, "Accounting for Stock-Based
     Compensation" ("SFAS 123"). Additionally, SFAS 148 requires more prominent
     and more frequent disclosures in financial statements of the effects of
     stock based compensation effective for fiscal years ending after December
     15, 2002. As 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.

                                       10

<PAGE>


     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 month periods
     ended March 31, 2004 and 2003 would have been adjusted to the pro-forma
     amounts presented below:
                                                    Three months ended March 31,
                                                        2004           2003
                                                      ---------      ---------
     Net income (loss) as reported                    $(109,000)     $ 635,600
     Less: Total compensation expense under
       fair value method for all stock-based
       awards, net of related tax effects
                                                        (70,300)       (68,000)
                                                      ---------      ---------
     Pro-forma net income (loss)                      $(179,300)     $ 567,600
                                                      =========      =========
     Basic and diluted income (loss) per share:
       As reported                                    $   (0.00)     $    0.01
       Pro-forma                                      $   (0.00)     $    0.01

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

     The fair value of the option grants for 2003 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 2.5%,
     no dividend yield and volatility of 115%. The weighted average fair value
     of the option grants during the first quarter of 2003 was $0.25 per share.


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

General:

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.

                                       11

<PAGE>


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.

Introduction:

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 (formerly known as Spectrum Commodities, Inc.) sales
force offers organic culinary oils, vinegar and nutritional oils to other
manufacturers for use in their products. In addition, they bring incremental
purchasing power to the Company resulting in higher margins for the consumer
branded product lines.

Critical Accounting Policies and Estimates:

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

                                       12

<PAGE>


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

Accounts Receivable Allowances - The Company provides allowances against
accounts receivable for estimated bad debts, returns and deductions by customers
for trade promotions and programs. These allowances are based upon the Company's
historical experience with bad debt write-offs and customer deductions, customer
creditworthiness, payment trends and general economic conditions. Allowances for
bad debts and customer deductions were $468,800 at March 31, 2004 on gross trade
accounts receivable of $4,862,000. While this estimate is one of the more
significant estimates the Company makes in the preparation of its financial
statements, Management does not consider it to be highly uncertain.

Inventory Reserves - The Company establishes reserves for obsolete, excess and
slow-moving inventories in order to properly value its inventory at the lower of
cost or market. The reserve estimates are based upon historical inventory usage,
spoilage, current market conditions, and anticipated future demand. Reserves for
obsolete inventories were $256,400 at March 31, 2004 on total gross inventories
of $6,998,200. 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.

Industrial Accident Reserve - During the fourth quarter of 2003 the Company
accrued an expense of $375,000 to record the Terms of Settlement and Probation
(the "Settlement") entered into on February 4, 2004 with the Sonoma County
District Attorney's Office with regards to an industrial accident that occurred
on April 25, 2002 (see Note 3 to the financial statements). As of March 31, 2004
the industrial accident reserve was $286,600. In addition to covering the
Settlement, the reserve also covers the estimated settlement of citations and
fines from CAL-OSHA, applications to the Workers' Compensation Appeals Board of
the State of California for serious and willful misconduct penalties to be
levied against the Company, and attorney's fees. This reserve is somewhat
uncertain because the CAL-OSHA proposed fines of $137,900 have been appealed and
the applications to the Workers' Compensation Appeals Board for serious and
willful misconduct penalties, if litigated, are an all-or-nothing proposition
under which the Company will either be liable for $107,500 in total or nothing.
The Company does not anticipate that the Workers' Compensation Appeals will be
litigated, based upon the advice of its attorneys, however expenses in excess of
the reserve could be incurred if the Worker's Compensation Appeals are
litigated.

Deferred Tax Asset Valuation Allowance - As of December 31, 2003 the Company had
net deferred tax assets of $1,601,900 primarily resulting from net operating
loss carryforwards ("NOLs"), which consisted of $4,431,000 of Federal NOLs that
expire at various times through 2020, and $3,150,000 of state NOLs that expire
at various times through 2010. The majority of the NOLs originated from the
pre-merger operations of OFPI. As a result of OFPI's acquisition by SNI, OFPI
experienced an ownership change in excess of 50% for federal and state income
tax purposes. Therefore, an annual limitation is placed by the taxing
authorities on the Company's right to realize the benefit of the pre-merger
NOLs. Management eliminated the deferred tax asset valuation reserve that had
been maintained since the 1999 merger as of December 31, 2003. The Company has
reported taxable income to the various taxing authorities for 2001 and 2002 and
will do so again for 2003. The reserve was reversed because Management believes
that it is more likely than not that the Company will continue to report

                                       13

<PAGE>


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.


--------------------------------------------------------------------------------
Results of Operations for the Three Month Periods Ending March 31, 2004 and
March 31, 2003
--------------------------------------------------------------------------------

Summary Discussion:

In general, the Company continued to grow its business at a brisk rate during
the first quarter of 2004. Overall net sales growth was 24% as the Company
continued to benefit from increased consumer awareness of the importance of
healthy oils to overall health and nutrition. Additionally, small and medium
sized food manufacturers continued their push to eliminate partially
hydrogenated oils from their products which drove the Spectrum Ingredients
industrial sales to record levels.

The Company reported a net loss for the quarter, which was primarily
attributable to margin pressure on the Company's consumer product lines as a
result of increased raw material costs for certain key organic raw materials
such as olive oil, canola oil and flaxseed. The increased raw material costs
were primarily associated with increased demand and an organic commodity cycle
that is currently at a high point. Indeed, the Trade News Service "Edible Fats
and Oils Index" has almost doubled over the past two years from an index of 81
to 156, with a base index of 100 established in 1976. The Company has increased
its selling prices in certain culinary oil product lines effective April 1, 2004
in order to pass on some of these increased costs to consumers.

Also contributing to the operating loss for the first quarter was increased
spending behind several new sales and marketing initiatives in 2004. In
particular, there was heavy spending to launch the Company's new advertising
campaign, as well as a new Company logo, a completely redesigned website and an
increased presence at industry trade shows and events.

Management believes that Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA") is an important measure of the Company's operating
performance. Management incentive compensation is earned, in part, based on the
achievement of EBITDA targets that are established and approved by the Company's
Board of Directors prior to the beginning of the year. For the three months
ended March 31, 2004 EBITDA was $40,600 compared to $847,500 for the prior year,
a decrease of $806,900 or 95%. The reduced performance in 2004 is discussed in
detail below, but was primarily attributable to decreased gross profit and
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.

                                       14

<PAGE>
<TABLE>
<CAPTION>


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

                                                             Three Months
                                                            Ended March 31,
                                                           2004         2003
                                                        ---------    ---------
Net income (loss)                                       $(109,000)   $ 635,600
Add back: Provision (benefit) for income taxes            (72,600)      37,800
          Interest expense                                 74,000       70,400
          Depreciation and amortization                   148,200      103,700
                                                        ---------    ---------
EBITDA                                                  $  40,600    $ 847,500
                                                        =========    =========

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

Revenues:

Spectrum's net sales for the three months ended March 31, 2004 were $12,733,100
compared to $10,308,600 for 2003, an increase of $2,424,500 or 24%. The increase
is detailed by segment in the following table:
                                                    Three Months Ended March 31,
                                                   2004           2003      % Change
                                                -----------   -----------     ----
<S>                                             <C>           <C>              <C>
Spectrum Naturals(R)Culinary Products           $ 5,817,600   $ 4,598,100     +27%
Spectrum Essentials(R)Nutritional Supplements     2,668,800     2,446,300     + 9%
Spectrum Ingredients/Other                        4,246,700     3,264,200     +30%
                                                -----------   -----------     ----
  Total Net Sales                               $12,733,100   $10,308,600     +24%
                                                ===========   ===========     ====

Within the Spectrum Naturals(R) culinary products, sales were significantly
higher than prior year in packaged oils (+39%), food service oils (+31%) and
packaged mayonnaise (+17%). The Company's culinary oils continued to benefit
from increased consumer awareness of the importance of healthy fats in one's
diet. The Company implemented price increases on certain culinary products
effective April 1, 2004 and first quarter sales were also impacted by certain
customers buying forward in advance of the price increases.

Spectrum Essentials(R) nutritional supplement sales increased 9% versus the
prior year, primarily on the strength of increased sales of encapsulated
products (+27%) and dry flaxseed products (+67%). Packaged liquid supplements,
which encompass the majority of the Spectrum Essentials(R) line, increased by 3%
versus the prior year.

The Spectrum Ingredients sales were up 30% versus the prior year on the strength
of increased customer demand for trans fat free oils. Many small and mid-sized
food manufacturers are eliminating partially hydrogenated oils from their
products, which lends itself directly to the Spectrum Ingredients product
offerings.

Cost of Goods Sold:

The Company's cost of goods sold for the three months ended March 31, 2004 was
$9,830,400 versus $7,235,800 for the prior year, an increase of 36%. The
increase was primarily volume-related with respect to the Spectrum Ingredients
segment and both volume and rate driven in the Spectrum Naturals(R) and Spectrum
Essentials(R) segments, as detailed in the following table:

                                       15
</TABLE>

<PAGE>


                                                 Three Months Ended March 31,
                                                   2004         2003    % Change
                                                ----------   ----------   ----

Spectrum Naturals(R)Culinary Products           $4,412,900   $3,244,500   +36%
Spectrum Essentials(R)Nutritional Supplements    1,602,600    1,247,000   +29%
Spectrum Ingredients/Other                       3,814,900    2,744,300   +39%
                                                ----------   ----------   ----
  Total Cost of Goods Sold                      $9,830,400   $7,235,800   +36%
                                                ==========   ==========   ====

Cost of goods sold as a percent of net sales increased to 77.2% in 2004 versus
70.2% in 2003. The increase was due to increased raw material costs in most of
the Company's consumer packaged product lines and an unfavorable sales mix that
featured a higher concentration of Spectrum Ingredients products, the Company's
lowest margin items. Raw material costs were higher in the Company's Spectrum
Essentials(R) products as the remaining high cost flaxseed purchased from China
in 2003 worked its way through the production facility. Imported olive oil from
Europe was sharply higher than the prior year as a result of the dollar's
weakness versus the euro, which drove the cost of the Spectrum Naturals(R)
packaged olive oils up. Finally, organic canola oil, a key raw material in many
of the culinary products, was also higher as a result of increased demand and
the dollar's weakness versus the Canadian dollar.

Gross Profit:

Gross profit for the three months ended March 31, 2004 was $2,902,700 versus
$3,072,800 for the prior year, a decrease of 6%. The decrease was primarily
attributable to the raw material cost increases described above, partially
offset by significant volume increases in all three segments, as detailed in the
following table:
                                                 Three Months Ended March 31,
                                                   2004         2003    % Change
                                                   ----         ----      ----

Spectrum Naturals(R)Culinary Products           $1,404,700   $1,353,600   + 4%
Spectrum Essentials(R)Nutritional Supplements    1,066,200    1,199,300   -11%
Spectrum Ingredients/Other                         431,800      519,900   -17%
                                                ----------   ----------   ----
  Total Gross Profit                            $2,902,700   $3,072,800   - 6%
                                                ==========   ==========   ====

Gross profit as a percent of net sales (gross margin) was 22.8% for 2004 versus
29.8% for 2003, primarily as a result of the increased raw material costs in the
Company's consumer packaged product lines and the unfavorable sales mix.

Sales and Marketing Expenses:

The Company's sales and marketing expenses for the three months ended March 31,
2004 were $1,981,900 or 15.6% of net sales, versus $1,432,600 or 13.9% of net
sales for the prior year. The increase in spending of $549,300 is detailed in
the following table which reconciles sales and marketing spending for the first
quarter of 2004 versus 2003, and discloses the significant variances by spending
category:

                                       16

<PAGE>


     Total sales and marketing expenses, first quarter 2003      $ 1,432,600
        Increased advertising                                        246,900
        Increased compensation and benefits                           96,800
        Increased broker commissions                                  96,700
        Increased spending on trade shows                             65,200
        Increased spending on website                                 37,200
        All other, net                                                 6,500
                                                                 -----------
     Total sales and marketing expenses, first quarter 2004      $ 1,981,900
                                                                 ===========

The increased advertising spending was related to the launch of the new "I am
Spectrum" campaign for 2004. The increased compensation and benefits was
primarily associated with increased staffing of three positions in the Marketing
Department. The increased broker commissions were related to the increased sales
of the branded consumer product lines. The increased trade show spending was
primarily associated with the Natural Products Expo show held in Anaheim in
March at which the Company maintained a higher profile than prior years. The
increased spending on the website was primarily associated with the complete
redesign and repopulation of the website data.

General and Administrative Expenses:

The Company's general and administrative expenses for the three months ended
March 31, 2004 were $1,029,400 or 8.1% of net sales, versus $897,600 or 8.7% of
net sales for the prior year. The increase in spending of $131,800 is detailed
in the following table which reconciles general and administrative spending for
the first quarter of 2004 versus 2003, and discloses significant variances by
spending category:

     Total general and administrative expenses, first quarter 2003  $   897,600
       Iowa relocation expenses                                          47,200
       Increased professional fees                                       39,400
       Increased insurance costs                                         15,000
       All other, net                                                    30,200
                                                                    -----------
     Total general and administrative expenses, first
     quarter 2004                                                   $ 1,029,400
                                                                    ===========

The Iowa relocation expenses were primarily associated with project management
and consulting in conjunction with the Company's upcoming relocation of its
manufacturing facility to Cherokee, Iowa. The increased professional fees were
primarily associated with increased legal and tax consulting services. The
increased insurance costs were primarily associated with higher premiums for
property and liability insurance in 2004.

Interest Expense:

The Company's interest expense for the three months ended March 31, 2004 was
$74,000 versus $70,400 for the prior year. The increase of $3,600 or 5% is
detailed in the following table which reconciles interest expense for the first
quarter of 2004 versus 2003, and discloses the significant variances by type of
debt:

                                       17

<PAGE>


      Total interest expense, first quarter 2003                    $ 70,400
         Increased interest on bank term notes payable                 9,100
         Decreased interest on revolving line of credit               (7,100)
         All other, net                                                1,600
                                                                    --------
      Total interest expense, first quarter 2004                    $ 74,000
                                                                    ========

The increased interest on the bank term notes payable was the result of the
refinancing of the Company's variable-rate term debt effective July 11, 2003
with the change in primary lenders to Comerica Bank. The decreased interest on
the revolving line of credit was due to the lower rates available to the Company
under the Comerica relationship, partially offset by higher average borrowings
in 2004 to support the increased level of operations. The Company's weighted
average effective interest rate under the line of credit was 3.5% in 2004 versus
5.5% in 2003.

Provision for Income Taxes:

The Company recorded a net benefit for income taxes of $72,600 for the three
months ended March 31, 2004 versus a provision for state income taxes of $37,800
for the prior year. The benefit for 2004 was estimated at 40% of the Company's
loss 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 effected to reduce the risk of price swings due to demand
fluctuations. These annual purchases can create overages and shortages in
inventory.

Liquidity and Capital Resources:

On July 11, 2003 the Company entered into a new Credit Facility with Comerica
Bank ("Comerica") that expires on June 30, 2005 unless renewed earlier. The new
Credit Facility includes a revolving line of credit up to a maximum of
$7,000,000, a term loan for $1,250,000 and a capital expenditure term loan of
$1,000,000. The new 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 new Credit Facility with Comerica has substantially enhanced the Company's
available borrowing capacity as a result of refinancing the previously existing
term debt and more liberal definitions of eligible inventory to secure the
borrowing base under the revolving line of credit.

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 2004 and beyond related to
profitability levels, debt service coverage, and the ratio of total liabilities
to tangible net worth. As of March 31, 2004 the Company was in technical default
of the minimum profitability level financial covenant due to the net loss
incurred during the first quarter. Comerica has granted the Company a waiver of
this technical default.

                                       18

<PAGE>


At March 31, 2004 the Company had working capital of $1,036,900 which reflected
an improvement of $152,500 versus the prior year. The increase was primarily
attributable to higher accounts receivable as a result of the double-digit sales
growth and the reinstatement of $514,200 of net short-term deferred tax assets,
partially offset by increased levels of trade payables and borrowings
outstanding under the line of credit to finance the higher levels of operations
in general.

During 2004 the Company generated $982,700 in cash from operating activities,
compared to using $1,042,400 in cash in 2003. The cash generated in 2004 was
primarily due to reductions in inventory levels as the Company no longer needed
to hold significant quantities of flaxseed in inventory prior to production, and
reduced safety stocks in general. Partially offsetting the cash generated from
the reduced inventory levels was the operating loss in 2004. The cash used in
2003 was primarily associated with increased inventory levels of flaxseed and
finished goods in anticipation of relocating the Company's bottling equipment in
July 2003.

Cash used in investing activities was $440,300 in 2004 compared to $357,600 in
2003. In 2004 the cash was primarily invested in the new production facility in
Iowa. In 2003 the cash was invested by the Company in machinery and equipment,
primarily for a new rotary labeler and six used expeller presses, which were
subsequently installed in the new Iowa facility.

Cash used in financing activities was $331,300 in 2004 compared to cash provided
of $1,394,500 in 2003. The cash used in 2004 was primarily for payments against
long-term debt. The cash provided in 2003 was primarily increased borrowing
under the revolving line of credit to finance the equipment purchases and the
cash used for operating activities.

Management believes that future cash flows from operations and available
borrowing capacity under the revolving line of credit should provide adequate
funds to meet the Company's estimated cash requirements for the foreseeable
future. Available borrowing capacity under the revolving line of credit was
$1,852,400 and $1,908,500 at March 31, 2004 and 2003, respectively.

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.

Related Party Transactions and Other Relationships:

There was one significant transaction with a related party during the three
months ended March 31, 2004. The Company paid consulting fees of $24,800, plus
expenses incurred, to Running Stream Food and Beverage, Inc. ("RSFB"). RSFB
provides private label consulting and management services to the Company and is
owned and operated by John R. Battendieri, a non-executive Director of the
Company until his resignation from the Board of Directors effective April 1,
2004 (see Item 5 - Other Information in this report). In the opinion of
Management, the consulting fees paid to RSFB were fair, reasonable and
consistent with terms the Company could have obtained from an unaffiliated third
party.

Mr. Thomas Simone is one of the Company's external Directors and also sits on
the Board of United Natural Foods, Inc. ("UNFI"). UNFI is the Company's largest
customer, representing approximately 36% of the Company's net sales for the year
ended December 31, 2003.

                                       19

<PAGE>
<TABLE>
<CAPTION>


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

The Company does not hold market risk sensitive trading instruments, nor does it
use financial instruments for trading purposes. All sales, operating items and
balance sheet data are denominated in U.S. dollars, therefore, the Company has
no foreign currency exchange rate risk. The book value of all financial
instruments approximates fair value. For trade accounts receivable and trade
accounts payable, the book value approximates fair value due to the short-term
maturity of these items. The Company's interest-bearing term notes payable and
capital lease obligations approximate fair value based on rates currently
available for debt with similar terms and maturities. The fair value of the line
of credit approximates book value because the interest rate fluctuates with
changes in the LIBOR or prime rate.


Throughout the course of its fiscal year, the Company utilizes a variable
interest rate line of credit at various borrowing levels. For the three months
ended March 31, 2004 the average outstanding balance under the line of credit
was $4,746,500 with a weighted average effective interest rate of 3.5% per
annum. For the three months ended March 31, 2003 the average outstanding balance
under the line of credit was $3,614,000 with a weighted average effective
interest rate of 5.5% per annum. Effective July 11, 2003 the line of credit
agreement called for the interest rate to float at the prime rate or LIBOR plus
2.25%, at the Company's option.

Certain other debt items are also sensitive to changes in interest rates. The
following table summarizes estimated fair values, future principal payments and
related weighted average interest rates by expected maturity date for long-term
debt, excluding capital leases ($ thousands):

                                                    Expected Future Principal Payments
                                                        (Years Ended December 31)

                                                                                                              Fair
                                2004       2005       2006       2007       2008       2011        Total      Value
                                ----       ----       ----       ----       ----       ----        -----      ------
<S>                          <C>         <C>        <C>         <C>        <C>       <C>        <C>          <C>
Long Term Debt:
Fixed Rate                    $205.1     $228.2     $ 15.6        --         --         --      $  448.9     $  448.9
  Avg. Int. Rate                 9.3%       9.2%       9.0%       --         --         --           9.2%
Variable Rate                 $218.2     $311.3     $311.3      $311.3     $155.6       --      $1,307.7     $1,307.7
  Avg. Int. Rate                Var.       Var.       Var.       Var.       Var.        --          Var.
Imputed Rate                     --         --         --         --         --      $513.3     $  513.3     $  310.4
  Avg. Int. Rate                 --         --         --         --         --         6.5%         6.5%

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, 2011.  Interest has been imputed
on the note at an effective rate of 6.5% per annum, leaving a fair value at
March 31, 2004 of $310,400.

In the ordinary course of its business the Company enters into commitments to
purchase raw materials over a period of time, generally six months to one year,
at contracted prices. At March 31, 2004 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.

The Company is subject to a wide variety of risks in the ordinary course of its
business. Some of the more significant 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;

                                       20
</TABLE>

<PAGE>


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.  DISCLOSURE CONTROLS AND PROCEDURES
-------------------------------------------

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

There were no material changes in the Company's internal control system during
the three months ended March 31, 2004. Management is not aware of any
significant deficiencies in the design or operation of internal controls.

                                       21

<PAGE>


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

Industrial Accident

On February 4, 2004 the Company pleaded no contest to two misdemeanor counts of
violations under 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 will pay a fine
of $150,000 in three annual installments of $50,000 each on June 30, 2004, 2005
and 2006. In addition the Company paid $150,000 in restitution to the California
District Attorneys Association Workers Safety Training Account to assist in the
prosecution of worker safety cases in the State of California. The Company also
reimbursed costs of $25,000 each to the Petaluma Police Department, the Petaluma
Fire Dept. and the Sonoma County District Attorney's Office. Finally, an
additional fine of $250,000 under CLCS 6425 was suspended conditioned upon the
Company's compliance with the terms of court supervised probation for three
years. Accordingly, the Company accrued an expense of $375,000 against the year
ended December 31, 2003 to cover the net present value of the above payments,
plus estimated attorney's fees to reach agreement on the plea with the District
Attorney's Office. Total payments made in connection with the plea during the
three months ended March 31, 2004 were $225,000.

At March 31, 2004 the remaining outstanding issues in connection with the
industrial accident were the CAL-OSHA proposed penalties of $137,900 which have
been appealed by the Company, and appeals filed by the estates of the two
employees with the Workers Compensation Appeals Board of California for serious
and willful misconduct penalties of $107,500 in total. The Company intends to
defend itself vigorously and believes it has meritorious defenses, since the
CAL-OSHA citations did not include any willful penalties. It actually litigated,
the workers compensation appeals are an all-or-nothing proposition under which
the Company will either be liable for $107,500 or nothing. Based on the advice
of counsel, the Company expects the workers compensation appeals to be settled
rather than litigated. The Company had a reserve of $286,600 at March 31, 2004
to cover the anticipated settlement of these outstanding issues plus attorney's
fees and the CLCS 6425 fine, which Management believes will be adequate.

Proposition 65 Complaint

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

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

                                       22

<PAGE>


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

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

The Company has joined a Joint Defense Group established by attorneys
representing several of the defendants in the Complaint. The initial fee to join
was a $5,000 retainer, which the Company paid on February 17, 2004. Management
believes the Complaint will eventually be shown to be without merit.
Accordingly, no provision for loss or future attorney's fees has been recorded
at March 31, 2004.

Patent Infringement Complaint

In October 2000 the Company was notified by counsel for GFA Brands, Inc. ("GFA")
that nutritional claims pertaining to Spectrum Naturals(R) Organic Margarine
were infringing upon two patents (the "first patents") issued in the United
States that pertain to particular fat compositions suitable for human
consumption. The patent holder, Brandeis University, exclusively licensed each
of these patents to GFA. GFA demanded that the Company cease the manufacture and
sale of the margarine and threatened legal action if the Company failed to
comply.

It has always been Management's view that the formula for Spectrum Naturals
Organic Margarine(R) fell outside the claims made in the Brandeis University
patents. Despite numerous attempts, the Company was unable to convince GFA that
its formula for the margarine fell outside the claims of the first patents.
Therefore, the Company filed a complaint against GFA for declaratory judgment of
non-infringement and invalidity of the two patents on August 28, 2001. The
complaint requested a declaratory judgment that the margarine does not infringe
either patent, a declaratory judgment that both patents are invalid, that GFA be
enjoined from threatening or asserting any action for infringement of either
patent, and attorney's fees.

Markman briefs, in which each side presents its arguments on how the patent
claims should be construed, were submitted by both GFA and Spectrum in July
2003. In most patent infringement cases, the court's determination of how the
patent claims should be interpreted is the central issue. A Markman hearing was
held by the court on October 16, 2003. The court issued its ruling on the
Markman hearing on December 3, 2003 in favor of the Company's interpretation of
the patent claims. The favorable ruling will assist the Company in settling the
complaint with respect to the first patents.

Meanwhile, unbeknownst to the Company, Brandeis University had filed for an
additional patent (the "second patent") with the U.S. Patent Office which
included patent claims that did encompass the Company's formula for Spectrum
Naturals Organic Margarine(R). Unlike trademark law, patents are issued in the
United States without pre-publication or notice which would allow for comment or
appeal by potentially affected parties. On October 7, 2003 the U.S. Patent

                                       23

<PAGE>


Office granted the second patent to Brandeis University. On the advice of
counsel, the Company ceased the production of the margarine immediately
thereafter and is currently evaluating its options with regards to the second
patent.

Management believes the Company has meritorious defenses and that a loss is not
probable on the patent infringement complaint with regard to the first patents
at this time. There is no infringement by the Company of the second patent since
the Company immediately ceased the production of the margarine upon notification
of the patent's issuance. Accordingly, no provision for loss has been recorded
at March 31, 2004.


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

During the three months ended March 31, 2004 the Company issued 41,500 shares of
its common stock for the exercise of incentive stock options. Total proceeds
received by the Company were $13,600 which were 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.


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

As of March 31, 2004 the Company was in technical default of one of the
financial covenants called for under the Credit Agreement with Comerica. That
covenant called for minimum quarterly net income of not less than one dollar.
Due to the net loss incurred for the first quarter, the Company was in technical
default of that covenant as of March 31, 2004.

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


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

An annual meeting of shareholders was held on April 29, 2004 at the Company's
headquarters in Petaluma, California. A definitive Proxy Statement was filed
with the SEC on April 1, 2004 and is incorporated herein by reference.

There were four matters brought before the shareholders for their approval:

     1.   To elect six Director Nominees to another term.

     2.   To amend the Company's Amended and Restated Articles of Incorporation
          to increase the number of common shares authorized for issuance from
          60,000,000 to 100,000,000 and to increase the number of preferred
          shares authorized for issuance from 5,000,000 to 10,000,000.

     3.   To amend the Company's Amended and Restated Articles of Incorporation
          to effect a reverse stock split at one of two ratios, to be selected
          by the Board of Directors, in order to reduce the aggregate number of
          shares of common stock outstanding:

                                       24

<PAGE>
<TABLE>
<CAPTION>


               A)   One new share for each five currently held
               B)   One new share for each ten currently held

     4.   To ratify the appointment of Grant Thornton, LLP as the Company's
          independent certified public accountants for the current fiscal year.

All four matters were approved by the shareholders. The following table
summarizes the results of the voting:

                                                              For            Against       Abstain           Total Votes
                                                          ----------        ---------       ------            ---------
<S>                                                       <C>               <C>             <C>               <C>
1. Election of Director Nominees:
     Jethren P. Phillips                                  38,260,679        1,517,976       12,000            39,790,655
     Neil G. Blomquist                                    38,260,679        1,517,976       12,000            39,790,655
     Phillip L. Moore                                     38,264,081        1,514,574       12,000            39,790,655
     Charles A. Lynch                                     38,260,679        1,517,976       12,000            39,790,655
     Thomas B. Simone                                     38,260,679        1,517,976       12,000            39,790,655
     Conrad W. Hewitt                                     38,260,679        1,517,976       12,000            39,790,655

2. Increase Shares Authorized for Issuance                32,861,288        1,537,900         --              34,399,188

3. Reverse Stock Split:
   A) one-for-five                                        38,252,255        1,538,400         --              39,790,655
   B) one-for-ten                                         38,253,255        1,537,400         --              39,790,655

4. Ratification of Grant Thornton, LLP                    39,778,655           12,000         --              39,790,655

Mr. John R. Battendieri was included in the definitive Proxy Statement as a
Director Nominee, however, Mr. Battendieri elected to resign from the Company's
Board of Directors effective April 1, 2004.


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

Effective April 1, 2004 Mr. John R. Battendieri resigned as a non-executive
Director of the Company's Board of Directors. Mr. Battendieri's decision to
resign was not the result of any disagreement between himself and the Company or
the Company's other Board members. Mr. Battendieri has also served the Company
as a consultant for the past two years, managing the Company's private label
product offerings. As a result, Mr. Battendieri does not meet the requirements
of the Securities and Exchange Commission as an independent director, and would
be required to meet a three year "cooling off" period, during which time he
could not be compensated in any way by the Company beyond board fees. The
Company intends to upgrade its stock listing to an AMEX or NASDAQ small-cap
listing as soon as it meets the requirements for such. An independent Board of
Directors is required by both exchanges and Mr. Battendieri's resignation will
assist the Company toward meeting that requirement.

                                       25
</TABLE>

<PAGE>


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

(a) Exhibits:

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

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

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

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

(b) Reports on Form 8-K during the quarter ended March 31, 2004:

     The Company filed a Current Report on Form 8-K on February 5, 2004
     disclosing the Settlement and Terms of Probation reached with the Sonoma
     County District Attorney's Office on February 4, 2004 in connection with
     the industrial accident that occurred on April 25, 2002.

     The Company filed a Current Report on Form 8-K on March 2, 2004 disclosing
     the Company's final audited financial position and results of operations as
     of and for the year ended December 31, 2003.


SIGNATURES

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

Date: May 10, 2004                          SPECTRUM ORGANIC PRODUCTS, INC.

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

                                       26