SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB/A

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee  Required] 
For the fiscal year ended June 30, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]
For the transition period from _______________ to________________

Commission File No. 333-22997


                          ORGANIC FOOD PRODUCTS, INC.
                  --------------------------------------------
                 (Name of Small Business Issuer in its Charter)


         California                                            94-30762-94
-------------------------------                           ----------------------
(State or other jurisdiction of                              (I.R.S. Employer 
incorporation or organization)                            Identification Number)


550 Monterrey Road
Morgan Hill, California                                                  95037
--------------------------------------------------------------------------------
(Address of principal executive offices)                              (Zip Code)



Issuer's telephone number:  (408) 782-1133

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:
                            No Par Value Common Stock
                                (Title of Class)


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<PAGE>



     Check whether the Registrant (1) filed all reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                                Yes  X     No
                                   -----     -----

     As of September 30, 1997, 6,770,113 shares of the Registrant's no par value
Common Stock were outstanding. As of September 30, 1997, the market value of the
Registrant's no par value Common Stock, excluding shares held by affiliates, was
$13,844,557 based upon a closing bid price of $4.15 per share of Common Stock on
the NASDAQ Smallcap Market.

     Check if there is no disclosure  contained  herein of delinquent  filers in
response to Item 405 of Regulation  S-B, and will not be contained,  to the best
of the Registrant's  knowledge,  in definitive  proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB.

     The   Registrant's   revenues  for  its  year  ended  June  30,  1997  were
$11,378,916.

     The following  documents are incorporated by reference into Part III, Items
9 through 12 hereof: None.



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<PAGE>



                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS
-------------------------------

Introduction

     The matters set forth in this Report  include  forward-looking  statements.
These forward-looking statements are subject to risks and uncertainties that may
cause actual results to differ  materially.  These risks and  uncertainties  are
detailed  throughout the Report and will be further  discussed from time to time
in  other  periodic  reports  filed by the  Company  with  the  Commission.  The
forward-looking  statements  included  in the  Report  speak only as of the date
hereof.

     Since 1987,  the  Company  has  manufactured  and  marketed  pesticide-free
("organic")  and  preservative-free  ("all  natural")  pasta sauces,  salsas and
condiments  under the brand names  "Garden  Valley  Naturals"  and "Parrot." The
Company  began  marketing  its Parrot line of salsas in 1987,  its Garden Valley
Naturals  line of  condiments  in 1991 and its Garden  Valley  Naturals  line of
pastas and salsas in 1994.  In June 1996,  the Company  merged with Organic Food
Products,  Inc.  ("OFP"),  which also  marketed a line of organic food  products
(including  pasta  sauces and salsas,  together  with dry cut pastas and organic
children's  meals) under the  "Millina's  Finest" brand name. In August 1997 the
Company  completed an initial public offering of its securities  ("IPO") selling
1,300,000 shares of its Common Stock to the public through three underwriters at
$4.00 per share for gross proceeds of $5,200,000.

     In June 1996, the Company  restructured its Garden Valley Naturals,  Parrot
and Millina's  Finest product lines by (i) eliminating all nonorganic  products,
(ii) eliminating salsas and ketchups sold under the Millina's Finest brand name,
and (iii) adding pasteurized  organic fruit juices and organic frozen entrees to
its product  offerings.  In addition,  in September 1997, the Company introduced
two new fruit  salsas and intends to introduce in the Spring of 1998 two organic
grill sauces and three organic salad dressings. See "Products."

     All of the Company's  products (with the exception of its organic mustards)
are  manufactured  at the Company's  24,000 square foot processing and warehouse
facility in Morgan Hill, California. See "Manufacturing Facilities."

     The Company sells its products either  directly or through  distributors or
independent  commissioned  food brokers and specialty food brokers to (i) health
food and specialty food stores,  (ii) club stores  (including  Price/Costco  and
BJ's), and (iii) retail chain and independent grocery stores (including Safeway,
A&P, Waldbaum's,  Trader Joe's, Stop 'N Shop, Edward's,  Lucky's and Big Y). See
"Distribution and Marketing."

Strategy

     The  Company's  business  strategy is to (i) increase  revenues by offering
additional  organic food products  through the Company's  existing  distribution
network,  (ii) reduce  costs and  improve  operating  efficiencies  by using the
Company's excess  manufacturing  capabilities to increase the volume of products
it  manufactures  for itself as well as for others,  (iii) expand the  Company's
current  geographic  and retail store  distribution  by offering  the  Company's
products in new markets and increasing  distribution  in existing  markets,  and
(iv) specialize exclusively in the marketing of organic food products.


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(i) Offer  Additional  Organic  Food  Products.  Since its merger with OFP,  the
Company has added organic fruit juices , organic grill sauces and organic frozen
entrees to its product offerings.  The Company believes that offering additional
products will increase revenues without proportionately increasing costs, due to
the  economies  of  scale  which  result  from  volume   product   manufacturing
efficiencies as well as the utilization of the Company's  existing  distribution
channels to offer new product lines.

(ii) Increase Manufacturing Volumes. The Company believes it can reduce per unit
manufacturing costs by using the Company's excess manufacturing  capabilities to
increase  manufacturing  volume.  The Company  seeks to  increase  the volume of
products it manufactures by increasing  sales of existing  products,  increasing
its new product  offerings  and by  manufacturing  food  products for other food
marketers on a contract basis. In this regard,  the Company  manufactures  pasta
sauces for Trader Joe's, but has no other pending  agreements or arrangements to
manufacture for others.

(iii) Expand Geographic and Retail Store Distribution.  Although the Company has
national  geographic  distribution  for its  products  in  health  food  stores,
distribution  of products  through  club stores and grocery  stores is primarily
limited to northern California and the northeast coast of the United States. The
Company  is  seeking  additional  regional  distributors  and  independent  food
brokers,  and  intends to offer  advertising  concessions  and pay retail  store
slotting  fees in order to  increase  its club  store and  grocery  store  sales
throughout the United States.

(iv) Specialize Exclusively in Organic Food Products.  Following its merger with
OFP,  the  Company  eliminated  all  nonorganic  food  lines  from  its  product
offerings.  The Company believes it can achieve superior product recognition and
customer  loyalty by promoting  awareness that the Company only markets  organic
foods.

Products

     The  Company  introduces  and  discontinues  products  on a regular  basis,
consistent  with  customary  practices  of  other  firms in the  processed  food
industry.  The  Company's  current  product lines (ranked by percentage of total
sales) are as follows:

Organic Pasta Sauces and Pastas

     The  Company  markets a line of 18 organic  pasta  sauces  under the Garden
Valley  Naturals and  Millina's  Finest  brand  names.  The pasta sauces are all
natural and most are fat-free.  Varieties  include garden  vegetable,  sun-dried
tomato, roasted garlic tomato, tomato mushroom, sweet pepper and onions, hot and
spicy,  smoked garlic and zesty basil.  The Company also offers uncooked organic
dry cut pastas including spaghetti,  linguini,  fettuccine,  angel hair, rotini,
penne and bow tie.

Organic Salsas

     The Company  markets a line of 16 organic and all natural  salsas under the
Garden  Valley  Naturals  brand name  including  five  varieties of fat-free and
vinegar-free salsas (sun-dried tomato,  roasted garlic tomato, black bean, black
bean and corn and chunky organic tomato) in three levels of heat,  mild,  medium
and hot. A medium  green  tomatillo  salsa is also  available.  The Company also
markets a line of ten organic  salsas  under the Parrot  brand  name.  Varieties
include chunky, black bean, tomatillo, spicy gourmet and enchilada sauce.


                                        4

<PAGE>



Organic Condiments

     The Company  offers two  varieties  of organic  catsups  and three  organic
mustards  under the Garden  Valley  Naturals  brand name.  The tomato catsup and
spicy garlic catsup are sweetened  with organic fruit juice.  All three mustards
use organic  mustard seed for flavoring  and are offered in yellow,  stoneground
and dijon. All condiments are fat-free and sugar-free.

     The Company also offers  under the Parrot  brand name an organic  enchilada
sauce which is fat free and low in sodium and two organic fruit based salsas and
intends to introduce two grill sauces used for barbecuing hamburgers,  hot dogs,
chicken and fish in September 1997.

Children's Meals

     The Company offers three canned organic children's meals, composed of pasta
O's in tomato sauce and tomato cheese sauce and beans with veggie franks.

Other New Products

     The Company  introduced  a line of four  pasteurized  organic  fruit juices
under  the  "Cinagro"  brand  name  in  apple-carrot,   tomato,   vegetable  and
carrot/lemon-lime  flavors in May 1997, and introduced an additional  four fruit
juices in July 1997. In September  1997,  the Company  introduced  three low fat
organic frozen entrees,  black bean and corn ravioli,  wild mushroom ravioli and
roasted  vegetable  ravioli.  The Company  intends to introduce in the Spring of
1998 three organic salad dressings and two organic grill sauces.

Distribution and Marketing

     The Company sells its products either  directly or through  distributors or
independent  commissioned  food brokers and specialty food brokers to (i) health
food and specialty food stores,  (ii) club stores  (including  Price/Costco  and
BJ's) and (iii) retail chain and independent  grocery stores (including Safeway,
A&P,  Waldbaum's,  Trader Joe's, Stop 'N Shop, Edward's and Lucky's).  Currently
the  Company's  products are offered in over 6,000 health food stores,  250 club
stores and 1,200  grocery  stores  located in all 50 states and in the Far East,
Middle East and Canada. The Company currently uses 12 specialty food brokers and
50 food distributors to sell to health food and other independent  retail stores
and eight food brokers to sell to club stores and certain  grocery store chains.
The Company  also sells  directly to other  grocery  store  chains.  In order to
increase its distribution and sales,  primarily to club stores and grocery store
chains,  the Company  pays  "slotting  fees",  which are  payments  made by food
processors  and  distributors  to retail stores in order to acquire retail shelf
space for their food products.

     The Company's  product  marketing  emphasizes the organic,  all natural and
generally  fat-free content of its products as a healthful and tasty alternative
to similar traditional food products.  The Company promotes its Millina's Finest
product line for sale to natural  food and health food stores and the  specialty
or "gourmet"  departments  of grocery  stores.  The Garden  Valley  Naturals and
Parrot  brands are targeted  primarily  for club stores and grocery  stores with
Garden Valley Naturals  representing the higher priced product line. The Company
also  promotes a pricing  strategy in which its organic  products are offered at
prices only slightly  higher than their  nonorganic  counterparts.  One customer
(Price/Costco)  accounted for 23.0% of the Company's revenues for the year ended
June 30, 1996,  and 20.9% of the Company's  revenues for the year ended June 30,
1997.  A loss of this  customer  would  have a  material  adverse  effect on the
Company's operations.

                                        5

<PAGE>



Manufacturing Facilities and Suppliers

     The  Company  manufactures  its  products  in a  24,000  square  foot  food
processing warehouse facility it leases in Morgan Hill, California.  Manufacture
involves  mixing the  product's  ingredients  in 1,000  gallon  kettles and then
bottling,  labeling  and casing the product for delivery to the  customer.  Some
products are packaged in  shrink-wrapped  combination packs consisting of two or
more  separate  products  in  one  tray.  The  Company  manufactures  all of its
products, except its three mustard condiments,  which are processed and packaged
for the Company by a  co-packer.  In addition to the Morgan Hill  facility,  the
Company uses public warehouse  facilities on the east coast of the United States
for inventory storage and distribution.

     While  many raw  materials  are  available  from a number of  sources,  the
Company  currently  purchases  its  organic  tomato  products  from  only  three
suppliers and has written agreements  covering only a portion of its anticipated
tomato product purchases.  Two suppliers,  Sun Garden Packing Company and Gilroy
Canning Company,  each accounted for 10% or more of the Company's  purchases for
the year ended June 30, 1997. The Company does not have a written agreement with
either  supplier but believes that similar  products are available from a number
of other suppliers for approximately the same prices.

Competition

     The natural food and health food industries in general and the pasta sauce,
salsa,   condiment  and  fruit  juice   businesses  in  particular   are  highly
competitive, and there are numerous multinational, regional and local firms that
currently compete, or are capable of competing, with the Company.  Multinational
nonorganic  (i) pasta  sauce  competitors  include  Prego,  Ragu,  Classico  and
Newman's  Own,  (ii) salsa  competitors  include  Pace, El Paso and La Victoria,
(iii)  condiment  competitors  include Heinz,  French's and Guilden's,  and (iv)
fruit juice  competitors  include  Minute Maid and Del Monte.  The Company  also
competes  with national  pasta  manufacturers  such as RF,  Ronzoni and DeBoles,
smaller  regional or local organic or natural pasta sauce and salsa  competitors
such as Simply Natural, Muir Glen and Enrico and smaller fruit juice competitors
such as Odwalla and Knudsen.  Most of the Company's  competitors are larger than
the Company and have more  financial,  marketing and management  resources,  and
brand name recognition, than the Company.

     Competitive  factors in the pasta sauce,  salsa and related specialty foods
industry include price,  quality and flavor.  The Company  positions its product
lines to be slightly more expensive than their nonorganic food  counterparts but
consistent  with prices  charged by other  organic food  marketers.  The Company
believes its products compete favorably against other organic foods with respect
to quality and flavor.

Trade Names and Trademarks

     The Company has registered its "Millina's  Finest" and Parrot trademarks in
California and has applied for federal trademark  registration.  The Company has
applied  for  California  trademark  and trade name  protection  for its "Garden
Valley  Naturals"  brand.  There can be no assurance that any trademark or trade
name  registrations  will be granted to the  Company,  or, if granted,  that the
trademarks or trade names will not be copied or challenged by others.






                                        6

<PAGE>



Government Regulation

     The  Company is subject to  various  federal,  state and local  regulations
relating to cleanliness,  maintenance of food production equipment, food storage
and food handling, and the Company is subject to unannounced on-site inspections
of its manufacturing facilities. As a manufacturer and distributor of foods, the
Company  is  subject  to  regulation  by the U.S.  Food and Drug  Administration
("FDA"), state food and health boards and local health boards in connection with
the manufacturing, handling, storage, transportation, labeling and processing of
food  products.  In order to offer  organic food  products,  the Company is also
subject to inspection and regulation by the USDA. Regulations in new markets and
future changes in the  regulations  may adversely  impact the Company by raising
the cost to manufacture  and deliver the Company's  products and/or by affecting
the perceived  healthfulness of the Company's products. A failure to comply with
one or more regulatory requirements could interrupt the Company's operations and
result in a variety of  sanctions,  including  fines and the  withdrawal  of the
Company's  products from store shelves.  The Company holds all material licenses
and permits required to conduct its operations.

     The Company is also subject to federal and state laws establishing  minimum
wages  and  regulating  overtime  and  working  conditions.  Since  some  of the
Company's  personnel  are paid at rates not far above the federal or  California
state  minimum  wage,  recent and future  increases in the federal or California
minimum wage have and will result in increases in the Company's labor costs.

Employees

     The Company employs 45 individuals  including its executive officers,  food
production,  processing and warehousing employees and administrative  personnel.
The Company's  employees are not covered by a collective  bargaining  agreement,
but the Company considers its employee relations to be satisfactory.

ITEM 2. DESCRIPTION OF PROPERTY
-------------------------------

     The Company  leases  approximately  24,000  square  feet for its  corporate
office,  manufacturing and warehouse facility in Morgan Hill,  California from a
non-affiliate on a seven-year lease expiring April 30, 2003, at a monthly rental
of $6,480.  As of March 1997, the rental rate increases 3% per year. The Company
also leases 800 square feet of temporary  office space at the same location on a
monthly basis for $350 per month.  The Company is negotiating  with its landlord
to lease to the Company an additional 26,000 square feet of space for additional
warehousing facilities, although no such lease has been executed. (STILL TRUE?)

ITEM 3. LEGAL PROCEEDINGS
-------------------------

     In May 1997 Gilroy  Canning  Company  brought an action against the Company
("Gilroy Canning Company vs. Organic Food Products, Inc. et al" Civil Action No.
97ASO2468 in the Superior Court of California)  alleging that the Company failed
to make a payment for tomato  products  in the amount of $398,000  due March 31,
1997 with an  additional  payment of  $386,775  due July 30,  1997.  The Company
subsequently paid the March 31, 1997 and July 30, 1997 payments,  and the action
was dismissed with prejudice.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------

     Not applicable.


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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
----------------------------------------------------------------

     The Company's  Common Stock has traded on the NASDAQ  Smallcap Market under
the symbol "OFPI" since August 1997.

     The following table sets forth for the quarter  indicated the range of high
and low closing  prices of the Company's  Common Stock as reported by NASDAQ but
does not include retail markup, markdown or commissions.

                                                                  Price
                                                              -------------
By Quarter Ended:                                             High      Low
-----------------                                             ----      ---

September 30, 1997.......................................    $4.50     $3.50

     As of September  30,  1997,  the Company had  approximately  320 record and
beneficial stockholders.

Dividend Policy

     The Company has not paid cash dividends on its Common Stock in the past and
does not  intend to do so in the near  future.  The  Company  intends  to retain
earnings,  if any, for use in the operation  and expansion of its business.  The
amount of future dividends, if any, will be determined by the Board of Directors
based upon the Company's earnings, financial condition, capital requirements and
other conditions.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS
--------------------------------------------------------------------------------
Introduction

     Since 1987,  the  Company  has  manufactured  and  marketed  pesticide-free
("organic")  and  preservative-free  ("all  natural")  pasta sauces,  salsas and
condiments  under the brand names  "Garden  Valley  Naturals"  and "Parrot." The
Company  began  marketing  its Parrot line of salsas in 1987,  its Garden Valley
Naturals  line of  condiments  in 1991 and its Garden  Valley  Naturals  line of
pastas and salsas in 1994. In June 1996, the Company merged with OFP, which also
marketed  (since 1988) a line of organic food products  (including  pasta sauces
and salsas, together with dry cut pastas and organic children's meals) under the
"Millina's Finest" brand name.

     The Company was  incorporated  in July 1987 as S&D Foods,  Inc. In November
1995,  the Company  changed its name to Garden Valley  Naturals,  Inc.  ("GVN").
Following  its June 1996  merger  with OFP,  the  Company's  name was changed to


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Organic Food Products,  Inc. In August 1997 the Company raised gross proceeds of
$5,200,000  through its IPO. The Company sells its products  either  directly or
through distributors or independent commissioned food brokers and specialty food
brokers  to (i)  health  food  and  specialty  food  stores,  (ii)  club  stores
(including  Price/Costco  and  BJ's),  and (iii)  retail  chain and  independent
grocery stores (including Safeway, A&P, Waldbaum's,  Trader Joe's, Stop 'N Shop,
Edward's, Lucky's and Big Y).

     The  Company's  operating  results  could  vary from  period to period as a
result of a number of factors,  including the purchasing patterns of significant
customers,  the  timing of new  product  introductions  by the  Company  and its
competitors,  the amount of slotting fees and new product  advertising  expenses
incurred  by  the  Company,   variations  in  sales  by  distribution   channel,
fluctuations in market prices of raw materials and competitive pricing policies.
These  factors  could cause the  Company's  performance  to differ from investor
expectations,  resulting  in  volatility  in  the  price  of the  Common  Stock.
Moreover,  the  amortization  of goodwill in  connection  with the OFP merger is
expected  to  result  in a  charge  against  the  Company's  operations  in  the
approximate amount of $100,000 per year.

     Investors  should carefully  consider the following  information as well as
other  information  contained in this Report  before making an investment in the
Company's   Common  Stock.   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.  See, e.g.,  "Item  1-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.

     During 1997,  marketing expenses were increased to (i) develop new channels
of  distribution,  (ii) expand existing  channels into new areas of the country,
(iii)  launch the  Company's  new juice and Kids Meals  lines;  and (iv)  pursue
additional co-pack customers. These activities required significant expenditures
for  personnel,  marketing  costs,  store  promotions,   samples,  and  in-store
demonstrations.

     The  following  discussion  of the  results  of  operations  and  financial
condition  of the  Company  should  be read in  conjunction  with the  Company's
financial  statements  and notes  thereto  included  elsewhere  in this  Report.
Historical  results  and  percentage   relationships   among  accounts  are  not
necessarily an indication of trends in operating  results for any future period.
The financial statements and the analysis set forth below present the historical
results of  operations  of OFP for the years  ended June 30,  1997 and 1996.  In
addition,  the analysis discusses the pro forma results of operations of OFP and
GVN on a pro forma combined basis for the year ended June 30, 1996.



                                        9

<PAGE>



Year Ended June 30, 1997 Compared to Year Ended June 30, 1996

Revenues

         OFP's  revenues  for  the  year  ended  June  30,  1997  ("1997")  were
$11,379,000  compared to  $7,642,000  in 1996,  an increase of  $3,737,000.  The
revenues for 1997 included the revenues of GVN for the entire period. The
decrease in revenues in 1997 was due to the phase out of the Company's  sales of
organic raw fruit and additional  focus by the Company in developing new product
lines and completing the IPO.

     On a  pro  forma  combined  basis,  revenues  for  OFP  and  GVN  decreased
$2,057,000, or 15.3% compared to 1996. The principal reason for this decline was
the decision to phase out the Company's sales of organic raw fruit, due to lower
profit  margins on bulk sales which  represented  a  substantial  portion of the
total decrease.

     The Company  placed  marketing  emphasis on expanding its Millina's  Finest
brand in health food stores,  while reducing  expenditures  for slotting fees in
GVN's club and grocery store markets.  Salsa lines were  consolidated  under the
Parrot brand,  other duplicating  product lines were simplified and unprofitable
products  were   eliminated.   Management   believes  these  decisions   reduced
redundancies   and   competitiveness   in  each  market  and  promoted   product
recognition.  The Company plans to reinstitute slotting fees in markets where it
believes payment of the fees will be offset by increased sales.

Cost of Goods Sold

     OFP's cost of goods sold for 1997 was $7,530,000 or 66.2% of sales,  versus
$5,822,000, or 76.2% of sales for 1996. The cost of goods sold for 1997 included
the cost of goods sold of GVN for the entire period.

     On a pro forma combined basis,  cost of goods sold for OFP and GVN for 1996
was  $10,521,000,  which is $2,991,000  more than 1997. The reduction in 1997 is
partly due to the  decision  to promote  sales of products  with  higher  profit
margins, but is also due to increased efficiency at the manufacturing level, and
an elimination of the use of co-packer relationships. Costs were also reduced by
the June 1996  merger  with GVN,  which  resulted  in  economies  of scale  from
combined  operations and greater leverage in negotiating  purchase contracts and
pricing.  The  cost of  goods in 1997 was  substantially  lower  than the  costs
associated with either company's pre-merger costs of production.

Sales and Marketing Expenses

     OFP's  sales and  marketing  expense for 1997 was  $2,409,000,  or 21.2% of
sales,  versus  $954,000  or 12.5% of sales  for 1996.  The sales and  marketing
expense for 1997 included the sales and marketing  expense of GVN for the entire
period.

                                       10

<PAGE>



     On a pro forma combined basis,  sales and marketing  expense of OFP and GVN
for 1996 was $2,186,000,  a decrease of $223,000 over 1997.  During 1997,  OFP's
marketing  expenses  were  increased  in order to (i)  develop  new  channels of
distribution (ii) expand existing channels into new areas of the country,  (iii)
launch the Company's new juice and Kids Meals lines; and (iv) pursue  additional
co-pack customers.

General and Administrative Expenses

     OFP's general and administrative expenses for 1997 were $1,119,000, or 9.8%
of  sales,  versus  $1,245,000  or 16.3% of sales  for  1996.  The  general  and
administrative  expenses  for  1997  included  the  general  and  administrative
expenses of GVN for the entire year.

     On a pro forma combined basis, the general and administrative  expenses for
1996 were $1,245,000,  which is $126,000 more than 1997. The combined  companies
reduced  general  and   administrative   overhead  through  the  elimination  of
redundancies and enhanced operating efficiency. Duplicated staff was eliminated,
and office space,  insurance and  professional  services were revised.  Controls
have been installed to monitor expenditures.

Interest Expense

     OFP's interest  expense for 1997 was $261,000 versus $349,000 for 1996. The
interest  expense for 1997  includes the interest  expense of GVN for the entire
period.

     On a pro forma  combined  basis,  the interest  expense for OFP and GVN for
1996 was $404,000,  which is $143,000 more than 1997.  The interest  expense for
1997 included  approximately $118,000 of interest related to $1,560,000 of notes
payable from two shareholders of which a portion of the proceeds of the IPO were
used to pay off a substantial amount of the outstanding  balance. The balance of
the interest expense is the result of the Company's revolving line of credit. In
1997, this line of credit was renegotiated,  providing the Company with a larger
and more diversified  facility,  at an interest rate of prime plus 1%. A portion
of the reduction in interest expense is due to the  renegotiated  lower interest
rate.

Seasonality

     Historically,  GVN and OFP have experienced little seasonal  fluctuation in
revenues.  In  relation  to product  purchasing,  the  Company  will  seasonally
contract for certain  product for the entire year at harvest time or at planting
time to secure  raw  materials  through  the year.  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 or shortages in inventory. The Company's intention to sell certain bulk
raw  materials  to other  manufacturers  may assist in reducing any overages and
should allow for more effective purchasing of the required raw materials.


                                       11

<PAGE>



Liquidity and Capital Resources

     The Company  used  proceeds  from the IPO to  purchase  raw  materials  and
equipment,  to repay  debt and to  provide  marketing  funds  to  introduce  new
products and introduce existing products into new markets.  Equipment  purchases
were used for retooling and to acquire additional packaging equipment to convert
production from boxed cases to shrink wrap cases.

     During 1997, the Company financed its operations from current sales and the
resulting net profit,  the sale of stock,  and the securing of debt. In February
1997,  the  Company  established  a new credit  facility  of  $2,000,000,  which
included  a working  capital  line of  $1,700,000  and a new  equipment  line of
$300,000,  at an annual  rate of prime plus 1%.  Notes  payable  increased  from
$1,049,107  at June 30, 1996 to  $1,825,000  at June 30, 1997,  reflecting  this
increased credit facility. The Company also generated net proceeds of $1,700,000
from  additional  equity sold in a private  placement in July 1996.  These funds
were used to purchase inventory, for working capital and to retire Common Stock.
Subsequent  to the IPO,  these  lines  were paid to zero,  however,  the  credit
facility is still available.

     During  1997,  capital  equipment  was  purchased  increasing  property  by
$383,000  to  $1,194,000.  Debt to related  parties  was  reduced  by  $373,000,
payables  were  increased  by $44,000 and $78,000 of Common  Stock was  retired.
Additional  capital was used to promote new product lines,  and improve  markets
for  existing  lines.  Receivables  increased  by  $525,000 to  $1,344,000,  and
inventories  increased by  $2,022,000 to  $3,452,000.  Deferred  offering  costs
increased by $350,000 to $421,000.

     As of June 30, 1997, the Company's cash position was limited. Investment in
equipment, inventory buildup and prepaid IPO expenses created cash shortages. As
of September 1997, the Company's cash position had improved.

     The Company  believes  that existing  cash  resources and available  credit
facilities will be sufficient to fund the Company's  estimated cash requirements
for the year ending June 30, 1998. The Company,  however, may also raise capital
through  the  issuance  of  long-term  or  short-term  debt or the  issuance  of
securities  in  private  or public  transactions  if  necessary  to fund  future
expansion of its business.  There can be no assurance that acceptable  financing
for  future  transactions  can be  obtained.  If such  financing  is sought  and
obtained by the Company,  it may be necessary to encumber the  Company's  assets
which could be lost in the event of any default by the Company.  Moreover, there
can be no assurance that the Company would be able to generate  sufficient funds
to satisfy interest payments due on any such financing.

     The Company's  future results of operations  and the other  forward-looking
statements contained in this document,  in particular the statements  concerning
plant efficiencies and capacities,  capital spending,  research and development,
competition,  marketing  and  manufacturing  operations  and  other  information
provided herein involve a number of risks and uncertainties.  In addition to the
factors discussed above, among the other factors that could cause actual results
to differ  materially are general  business  conditions and the general economy;
competitors' pricing and marketing efforts; availability of third-party material
products at reasonable prices; risk of nonpayment of accounts receivable;  risks
of  inventory  obsolescence  due to shifts in market  demand;  timing of product
introductions; and litigation involving product liabilities and consumer issues.




                                       12








                                       

<PAGE>



ITEM 7. FINANCIAL STATEMENTS
----------------------------

To The Shareholders and Board of Directors of
Organic Food Products, Inc.


We have audited the accompanying balance sheet of Organic Food Products, Inc. as
of  June  30,  1997,  and the  related  statements  of  operations,  changes  in
shareholders' equity, and cash flows for the years ended June 30, 1997 and 1996.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Organic Food Products,  Inc. as
of June 30, 1997, and the results of its  operations,  changes in  shareholders'
equity,  and its cash  flows  for the years  ended  June 30,  1997 and 1996,  in
conformity with generally accepted accounting principles.


Certified Public Accountants

Phoenix, Arizona
September 24, 1997











                                       F-1


<PAGE>



                           ORGANIC FOOD PRODUCTS, INC.
                                  BALANCE SHEET
                                  June 30, 1997

                                     ASSETS


Current Assets:
   Cash                                                           $   62,925
   Accounts receivable, net (Notes 1 and 4)                        1,343,891
   Inventory, net (Notes 1, 2, 4 and 6)                            3,451,698
   Prepaid expenses                                                   35,447
   Advances to shareholder (Note 3)                                   84,000
   Income tax refund receivable                                      167,694
   Deferred tax asset (Notes 1 and 9)                                 86,000
                                                                  ----------

          Total Current Assets                                     5,231,655
                                                                  ----------


Property and Equipment: (Notes 1, 4 and 5)
   Computer software                                                  71,008
   Leasehold improvements                                            151,668
   Machinery and equipment                                           884,240
   Office equipment                                                   61,256
   Printing plates                                                    12,997
   Vehicles                                                           13,314
                                                                  ----------
                                                                   1,194,483
   Less: accumulated depreciation                                   (182,057)
                                                                  ----------

                                                                   1,012,426
                                                                  ----------

Other Assets:
   Deposits and other                                                  8,378
   Deferred offering costs (Note 1)                                  421,338
   Goodwill, net (Note 1)                                          2,277,288
                                                                  ----------

                                                                   2,707,004
                                                                  ----------

        Total Assets                                              $8,951,085
                                                                  ==========







                   The Accompanying Notes are an Integral Part
                           of the Financial Statements

                                       F-2


<PAGE>



                           ORGANIC FOOD PRODUCTS, INC.
                            BALANCE SHEET (Continued)
                                  June 30, 1997

                      LIABILITIES AND SHAREHOLDERS' EQUITY


Current Liabilities:
   Notes payable (Note 4)                                     $1,824,938
   Notes payable - related parties -
     current portion (Note 3)                                  1,749,323
   Capital lease obligations - current
     portion (Notes 1 and 5)                                       6,033
   Accounts payable                                            2,074,506
   Accrued wages and taxes                                        22,867
   Accrued commissions                                            40,610
                                                              ----------

          Total Current Liabilities                            5,718,277
                                                              ----------

Long-Term Liabilities:
   Notes payable - related parties
     - long-term portion (Note 3)                                497,237
   Capital lease obligations - long-term
     portion (Notes 1 and 5)                                      17,094
   Deferred income taxes payable (Notes 1 and 9)                 102,000
                                                              ----------

                                                                 616,331
                                                              ----------


Commitments (Notes 3 and 6)                                         -


Shareholders' Equity: (Note 8)
   Common stock                                                3,971,720
   Accumulated deficit from S Corporation                     (1,410,410)
   Retained earnings                                              55,167
                                                              ----------

                                                               2,616,477
                                                              ----------

       Total Liabilities and Shareholders' Equity             $8,951,085
                                                              ==========








                   The Accompanying Notes are an Integral Part
                           of the Financial Statements

                                       F-3


<PAGE>
<TABLE>
<CAPTION>



                              ORGANIC FOOD PRODUCTS, INC.
                               STATEMENTS OF OPERATIONS
                      For The Years Ended June 30, 1997 and 1996

                                                            1997                1996
                                                            ----                ----

<S>                                                     <C>                  <C>       
Revenues                                                $11,378,916          $7,641,539

Cost of Goods Sold                                        7,530,270           5,822,337
                                                        -----------          ----------

Gross Profit                                              3,848,646           1,819,202
                                                        -----------          ----------
Sales and Marketing Expense                               2,408,864             954,108

General and Administrative Expenses                       1,118,686           1,244,914

Restructuring Charge (Note 11)                                 -                257,468
                                                        -----------          ----------

                                                          3,527,550           2,456,490
                                                        -----------          ----------

Income (Loss) from Operations                               321,096            (637,288)

Interest Income (Expense), Net                             (261,376)           (349,122)

Other Income (Expense), Net                                  11,447               2,948
                                                        -----------          ----------

Income (Loss) before Provision for Income Taxes              71,167            (983,462)

Provision for Deferred Income Tax Expense: (Note 1)          16,000                -
                                                        -----------          ----------

Net Income (Loss)                                       $    55,167            (983,462)
                                                        ===========

Proforma Income Tax Benefit                                                     334,400
                                                                             ----------

Net Loss after Pro forma Income Tax Adjustment                               $ (649,062)
                                                                             ==========

Earnings per Share (Note 1)                             $       .01
                                                        ===========

Pro forma Net Loss per Share (Note 1)                                        $     (.11)
                                                                             ==========

Weighted Average Number of Shares Outstanding             5,692,830           5,717,663
                                                        ===========          ==========








                     The Accompanying Notes are an Integral Part
                             of the Financial Statements

                                         F-4

</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                                    ORGANIC FOOD PRODUCTS, INC.
                                            STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                                             For The Years Ended June 30, 1997 and 1996


                                                                                   Accumulated                            Total
                                                                 Additional          Deficit                          Shareholders'
                                      Common Stock                Paid-in             From S          Retained           Equity
                                Shares            Amount          Capital          Corporation        Earnings          (Deficit)
                                ------            ------          -------          -----------        --------          ---------

<S>                           <C>              <C>              <C>               <C>               <C>               <C>
Balance at June 30,
  1995                        2,250,000        $   67,400       $     8,571       $  (435,519)      $     -           $ (359,548)

Reverse merger and
  conversion of S
  Corporation losses          2,250,000         2,250,000            (8,571)            8,571             -            2,250,000

Net loss for the
  year ended June 30,
  1996                             -                 -                 -             (983,462)            -             (983,462)
                              ---------        ----------       -----------       -----------       ----------        ----------

Balance at June 30,
  1996                        4,500,000         2,317,400              -           (1,410,410)            -              906,990

Proceeds from private
  offering, net of
  costs of $340,462             823,500         1,718,288              -                 -                -            1,718,288

Purchase and
  retirement of
  treasury stock                (31,250)          (78,125)             -                 -                -              (78,125)

Stock issued for
  director expenses               5,663            14,157              -                 -                -               14,157

Net loss for the
  year ended June 30,
  1997                             -                 -                 -                 -              55,167            55,167
                              ---------        ----------       ----------        -----------       ----------        ----------
Balance at June 30,
  1997                        5,297,913        $3,971,720       $      -          $(1,410,410)      $   55,167        $2,616,477
                              =========        ==========       ==========        ===========       ==========        ==========




                                          The Accompanying Notes are an Integral Part
                                                  of the Financial Statements

                                                              F-5

</TABLE>

<PAGE>




                           ORGANIC FOOD PRODUCTS, INC.
                            STATEMENTS OF CASH FLOWS
                   For The Years Ended June 30, 1997 and 1996

                                                    1997               1996
                                                    ----               ----
Increase (Decrease) in Cash:

Cash flows from operating activities:
    Cash received from customers                $10,745,430        $ 7,164,566
    Cash paid to suppliers and employees        (12,449,168)        (7,834,712)
    Interest paid                                  (142,966)          (319,879)
    Interest received                                  -                   438
    Net liabilities acquired in merger                 -               717,591
    Income taxes received                            91,753               -
                                                -----------        -----------
      Net cash used by operating
        activities                               (1,754,951)          (271,996)
                                                -----------        -----------

Cash flows from investing activities:
    Purchase of fixed assets                       (243,596)           (17,135)
    Advances to shareholder                         (84,000)              -
    Cash received from sale of fixed assets           5,483               -
                                                -----------        -----------
      Net cash used by investing
        activities                                 (322,113)           (17,135)
                                                -----------        -----------

Cash flows from financing activities:
    Repayment of capital lease                       (7,132)            (4,532)
    Repayment of notes payable                     (133,495)           (11,847)
    Repayment of notes payable
      - related parties                            (257,685)           (65,781)
    Proceeds from notes payable                   1,057,178            509,395
    Proceeds from notes payable
      - related party                                  -                52,169
    Proceeds from issuance of stock               1,718,288               -
    Purchase of treasury stock                      (78,125)              -
    Deferred offering costs                        (350,113)              -
                                                -----------        -----------
      Net cash provided by financing
        activities                                1,948,916            479,404
                                                -----------        -----------
Net increase (decrease) in cash                    (128,148)           190,273

Cash at beginning of period                         191,073                800
                                                -----------        -----------

Cash at end of period                           $    62,925        $   191,073
                                                ===========        ===========










                   The Accompanying Notes are an Integral Part
                           of the Financial Statements

                                       F-6


<PAGE>



                           ORGANIC FOOD PRODUCTS, INC.
                      STATEMENTS OF CASH FLOWS (Continued)
                   For The Years Ended June 30, 1997 and 1996

                                                       1997             1996
                                                       ----             ----
Reconciliation of Net Income (Loss) to Net Cash 
  Used by Operating Activities:

Net Income (Loss)                                  $    55,167       $ (983,462)
                                                   -----------       ----------

  Adjustments to reconcile net income (loss)
    to net cash used by operating activities:

      Depreciation and amortization                    235,875           18,875
      Loan discount amortization                       118,410             -
      Accrued interest added to note principal            -              29,681
      Net liabilities acquired in merger                  -             717,591
      Inventory financed through notes payable         222,523             -
      Stock issued for director's expenses, net         14,157             -

  Changes in Assets and Liabilities:
      Accounts receivable, net                        (525,549)        (245,424)
      Inventory                                     (2,021,955)      (1,167,388)
      Prepaid expenses                                 (10,207)          (2,077)
      Income tax refund receivable                      91,753         (259,447)
      Deferred tax asset                               (86,000)            -
      Deposits and other                                15,625          (24,003)
      Accounts payable                                  44,272        1,599,404
      Accrued wages and taxes                          (51,632)          44,254
      Accrued commissions                               40,610             -
      Deferred income taxes payable                    102,000
                                                   -----------       ----------

                                                    (1,810,118)         711,466
                                                   -----------       ----------

Net cash used by operating activities              $(1,754,951)      $ (271,996)
                                                   ===========       ==========








                   The Accompanying Notes are an Integral Part
                           of the Financial Statements

                                       F-7


<PAGE>



                           ORGANIC FOOD PRODUCTS, INC.
                          NOTES TO FINANCIAL STATEMENTS

1.   Summary of Significant Accounting Policies, Nature of Operations and Use of
     Estimates:

     Nature of Operations:

     Organic Food Products,  Inc.  (formerly Garden Valley Naturals,  Inc.) is a
     Corporation which was duly formed and organized under the laws of the State
     of  California.  The  Corporation  was  incorporated  on July 7, 1987.  The
     principal   business   purpose  of  the  Company  is  the   production  and
     distribution of organic food products throughout the United States.

     Acquisition and Merger:

     As of June 28, 1996, Garden Valley Naturals, Inc. (GVN) acquired all of the
     outstanding common stock of Organic Food Products, Inc. (OFP) for 2,250,000
     shares of GVN's  common  stock.  Under the  terms of the  acquisition,  OFP
     obtained fifty percent (50%) of the voting control of GVN.  Although GVN is
     the parent company of OFP following the  transaction,  the  transaction was
     accounted for as a recapitalization of OFP and a purchase by OFP of GVN, as
     the principal  shareholder of OFP obtained  forty-nine and one-half percent
     (49.5%) of the voting  rights,  and,  as the  single  largest  shareholder,
     effectively controls the post-merger  company.  The accompanying  financial
     statements  of OFP include the  accounts of OFP for all periods  presented,
     and the  accounts  of GVN from June 28,  1996,  the  effective  date of the
     acquisition.

     Pervasiveness of Estimates:

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.

     Stock-Based Compensation:

     Statements  of Financial  Accounting  Standards  No. 123,  "Accounting  for
     Stock-Based Compensation" (SFAS No. 123) establishes a fair value method of
     accounting for stock-based compensation plans and for transactions in which
     an entity  acquires  goods or services from  non-employees  in exchange for
     equity  instruments.  The Company adopted this accounting standard in 1996.
     SFAS 123 encourages,  but does not require companies to record compensation
     cost for  stock-based  employee  compensation.  The  Company  has chosen to
     continue to account for  stock-based  compensation  utilizing the intrinsic
     value method  prescribed  in  Accounting  Principles  Board Opinion No. 25,
     "Accounting for Stock Issued to Employees." Accordingly,  compensation cost
     for 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.

     Accounts Receivable:

     The  Company  follows the  allowance  method of  recognizing  uncollectible
     accounts receivable.  The allowance method recognizes bad debt expense as a
     percentage  of  accounts  receivable  based on a review  of the  individual
     accounts  outstanding,  and the Company's  prior  history of  uncollectible
     accounts  receivable.  At June 30, 1997,  an allowance of $163,512 has been
     established for potentially uncollectible accounts receivable.

     Inventory:

     Inventory  quantities and valuations are determined by a physical count and
     pricing  of same.  Inventory  is  stated  at the  lower of cost,  first-in,
     first-out method,  or market. At June 30, 1997,  inventory is stated net of
     an allowance for obsolete inventory, in the amount of $40,000.









                                       F-8


<PAGE>



                           ORGANIC FOOD PRODUCTS, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)

1.   Summary of Significant Accounting Policies, Nature of Operations and Use of
     Estimates: (Continued)

     Earnings Per Share:

     Earnings  per share are based upon the  weighted  average  number of shares
     outstanding for each of the respective  periods,  after giving  retroactive
     effect to the  2,250,000  shares  issued in the  purchase  transaction.  In
     addition,  for  purposes of this  computation,  the stock split and private
     offering  (as  described  in Note 8) have been  given  retroactive  effect.
     Subsequent  to the balance  sheet date,  the Company  completed  an initial
     public  offering of its common stock.  Pursuant to Securities  and Exchange
     Commission rules, shares of common stock issued for consideration below the
     anticipated  offering  price per share prior to filing of the  registration
     statement have been included in the calculation of common stock  equivalent
     shares  as if they had  been  outstanding  for all  periods  presented.  In
     addition,  shares of common  stock that are subject to options and warrants
     having exercise  prices that are below the  anticipated  offering price per
     share,  whether or not exercisable,  have been included in the earnings per
     share calculation, using the treasury stock method.

     Property and Equipment:

     Property and equipment are recorded at cost.  Depreciation  is provided for
     using the  straight-line  method  over the  estimated  useful  lives of the
     assets. Maintenance and repairs that neither materially add to the value of
     the  property  nor  appreciably  prolong its life are charged to expense as
     incurred.  Betterments or renewals are capitalized  when incurred.  For the
     years ended June 30, 1997 and 1996,  depreciation  expense was $140,988 and
     $18,875, respectively.

     A summary of the estimated useful lives is as follows:

            Computer software                                5 years
            Leasehold improvements                           7 years
            Machinery and equipment                     7 - 20 years
            Office equipment                                 5 years
            Printing plates                                  7 years
            Vehicles                                         5 years

     The Company is the lessee of vehicles and  equipment  under  capital  lease
     agreements  expiring  through  December,  2000. The assets and  liabilities
     under the capital  leases are recorded at the lower of the present value of
     the minimum  lease  payments or the fair  market  value of the assets.  The
     assets are depreciated over their estimated productive lives.  Depreciation
     of the assets under the capital leases is included in depreciation expense,
     as noted above, for the years ended June 30, 1997 and 1996.

     Deferred Offering Costs:

     Deferred  offering costs  represent  costs incurred in connection  with the
     Company's equity offering  subsequent to the balance sheet date. As of June
     30, 1997,  the Company had incurred  $421,338 in relation to this activity.
     Deferred  offering costs will be charged  against the net proceeds from the
     offering.

     Income Taxes:

     Prior to the  merger,  OFP had  elected  to be treated  as a  Subchapter  S
     Corporation  for federal and state tax  reporting  purposes.  As such,  all
     taxable  income and  available  tax credits  are passed from the  corporate
     entity to the  individual  shareholders.  It is the  responsibility  of the
     individual  shareholders to report the taxable income and tax credits,  and
     pay the resulting  taxes.  Effective June 28, 1996, the date of the merger,
     the Subchapter S election was revoked.

     Deferred income taxes arise from timing differences resulting from revenues
     and expenses reported for financial  accounting and tax reporting  purposes
     in different  periods.  Deferred  income taxes  represent the estimated tax
     asset or liability from different  depreciation  methods used for financial
     accounting  and tax reporting  purposes and for timing  differences  in the
     utilization of net operating loss carryforwards and valuation allowances.

                                       F-9


<PAGE>



                           ORGANIC FOOD PRODUCTS, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)

1.   Summary of Significant Accounting Policies, Nature of Operations and Use of
     Estimates: (Continued)

     Goodwill:

     Goodwill represents the excess of the cost of the Company acquired over the
     fair  value of their net  assets at the date of  acquisition,  and is being
     amortized  on  the  straight-line   method  over  twenty-five  (25)  years.
     Amortization expense charged to operations for the year ended June 30, 1997
     was $94,887.  The Company  evaluates the estimated net realizable  value of
     its goodwill at each balance sheet date, and records  writedowns if the net
     book value exceeds net realizable value.

     Fair Value of Financial Instruments:

     The fair value of the Company's notes payable,  capital lease  obligations,
     and notes payable - related parties is based on rates  currently  available
     from the bank for debt with similar terms and maturities. The fair value of
     the Company's  commitments to purchase inventory is based on current market
     prices  available  to  the  Company.   The  carrying  amounts  of  accounts
     receivable,  advances  to  shareholders,  and income tax refund  receivable
     approximate fair value because of the short maturity of these items.

2.   Inventory:

     As of June 30, 1997, inventory consisted of the following:

            Raw materials                                            $1,762,290
            Finished goods                                            1,729,408
                                                                     ----------
                                                                      3,491,698
            Less: provision for obsolete inventory                      (40,000)
                                                                     ----------

                                                                     $3,451,698
                                                                     ==========

3.   Related Party Transactions:

     Advances to Shareholder:

     As of June 30, 1997, the Company has advanced $84,000 to a shareholder. The
     advance is unsecured,  non-interest  bearing, and considered  short-term in
     nature.

     Notes Payable - Related Parties:

     At  June  30,  1997,  notes  payable  -  related  parties,  consist  of the
     following:

     Two (2) 6% interest  bearing  $780,000  notes payable to two
     (2) corporate  shareholders,  $700,000 due on the completion
     of an  initial  public  offering,  in  addition  to  monthly
     payments of $20,000,  including principal and interest until
     paid in full; unsecured.                                        $1,560,000

     8% note  payable to a corporate  shareholder,  with  monthly
     payments of $7,292,  including  principal and interest,  due
     August, 1998; unsecured.                                            84,477

     Various 10% notes  payable to corporate  shareholders,  with
     principal  and interest due the earlier of (i) one year from
     the date of note or (ii) the  effective  date of any initial
     public offering;  unsecured.                                       602,083 
                                                                     ----------
                                                                      2,246,560
     Less: current portion                                           (1,749,323)
                                                                     ----------

                                                                     $  497,237
                                                                     ==========


                                      F-10


<PAGE>



                           ORGANIC FOOD PRODUCTS, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)

3.   Related Party Transactions: (Continued)

     Notes Payable - Related Parties: (Continued)

     A  schedule  of future  minimum  principal  payments  due on notes  payable
     outstanding at June 30, 1997, is as follows:

                   Year Ending
                    June 30,                                           Amount
                    --------                                           ------

                     1998                                            $1,749,323
                     1999                                               462,754
                     2000                                                34,483
                                                                     ----------

                                                                     $2,246,560
                                                                     ==========

4.   Notes Payable:

     At June 30, 1997, notes payable consist of the following:

     Revolving   line  of  credit   with  Wells  Fargo  Bank  for
     $1,700,000,  interest  at the bank's  prime rate plus 1% per
     annum, interest due monthly, with $500,000 due August, 1997,
     and the outstanding  principal balance due in full November,
     1997; collateralized by various corporate assets.               $1,501,912

     Loan  commitment  note with Wells  Fargo Bank for  $300,000,
     interest  at the  bank's  prime  rate plus  1.5% per  annum,
     interest due monthly, with the outstanding principal balance
     due in full  November,  1997;  collateralized  by equipment.       141,186
                                                                       

     Non-interest  bearing  note  payable to a  supplier  in five
     monthly  installments  of $44,505,  commencing June 1, 1997;
     unsecured.                                                         181,840
                                                                     ----------
                                                                      1,824,938
                                                                     ==========

5.   Obligations Under Capital Leases:

     The Company is the lessee of vehicles and equipment, with an aggregate cost
     of $49,811,  under capital lease agreements which expire through  December,
     2001.  As of June 30, 1997,  minimum  future  lease  payments due under the
     capital lease agreements, are as follows:

                   Year Ending
                    June 30,                                            Amount
                    --------                                            ------

                     1998                                            $    7,671
                     1999                                                 5,952
                     2000                                                 5,952
                     2001                                                 5,952
                     2002                                                 1,695
                                                                     ----------
        Total minimum lease payments                                     27,222
        Less: amount representing interest                               (4,095)
                                                                     ----------
        Present value of net minimum lease payments                      23,127
        Less: current maturities of capital lease obligations            (6,033)
                                                                     ----------
        Non-current maturities of capital lease obligations          $   17,094
                                                                     ==========

                                      F-11


<PAGE>



                           ORGANIC FOOD PRODUCTS, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)

5.   Obligations Under Capital Leases: (Continued)

     Interest rates under the capital lease obligations range from eight percent
     (8%) to twenty-one  percent  (21%) per annum,  and are imputed based on the
     lessor's implicit rate of return at the inception of the lease.

6.   Commitments:

     Inventory Purchases:

     The Company is committed to purchase  raw  materials  over the next year at
     contracted  prices.  At June 30,  1997,  these future  committed  purchases
     aggregated  approximately  $1,599,000,  based  on  the  contracted  prices.
     Subsequent to June 30, 1997, the Company  committed to purchase  additional
     raw materials in the aggregate amount of approximately $946,000.

     Lease Obligations:

     The Company leases office,  warehouse and production  space in Morgan Hill,
     California  under a  non-cancellable  operating lease  agreement,  expiring
     April,  2003.  The Company  leased office space in Santa Cruz,  California,
     under a  non-cancellable  operating  lease  agreement that expired in June,
     1996.  Rent expense under these lease  agreements  for the years ended June
     30, 1997 and 1996 was $112,012 and $90,074, respectively.

     In  addition,   the  Company  is  currently   leasing  a  vehicle  under  a
     non-cancellable  operating lease  agreement,  expiring  August,  1997. Rent
     expense  under the lease  agreement  for the years  ended June 30, 1997 and
     1996 was $8,889 for each year.

     A schedule of future minimum lease  payments due under the  non-cancellable
     operating leases at June 30, 1997, is as follows:

                    Year
                   Ending

                    1998                               $   87,794
                    1999                                   83,585
                    2000                                   83,545
                    2001                                   85,820
                    2002                                   88,395
                 Subsequent                                60,097
                                                       ----------

                                                       $  489,236
                                                       ==========

     Employment Contracts:

     The  Company  has  entered  into  employment  contracts  with  two  (2) key
     employees.  The contracts expire through July, 1999 and provide for minimum
     annual salaries,  adjusted for cost-of-living changes, and incentives based
     on the Company's  attainment of specified levels of sales and earnings.  As
     of  June  30,  1997,  the  total  commitment,   excluding  incentives,  was
     approximately $440,000.














                                      F-12


<PAGE>



                           ORGANIC FOOD PRODUCTS, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)

7.   Economic Dependency:

     For the  years  ended  June 30,  1997 and  1996,  the  Company  had one (1)
     customer which  accounted for  approximately  twenty-one  percent (21%) and
     twenty-three  percent (23%),  respectively,  of the total sales volume.  At
     June 30,  1997 and 1996,  the  amounts  due from the  customer  included in
     accounts receivable were $374,591 and $60,947, respectively.

     For the year ended June 30, 1997,  the Company had two (2) suppliers  which
     accounted for an aggregate of approximately thirty-one percent (31%) of the
     total purchases.  For the year ended June 30, 1996, the Company had one (1)
     supplier which accounted for approximately  sixty-five percent (65%) of the
     total  purchases.  At June  30,  1997  and  1996,  the  amounts  due to the
     suppliers   included  in  accounts  payable  were  $473,658  and  $357,570,
     respectively.

8.   Shareholders' Equity:

     Common Stock and Stock Split:

     On October 3, 1995,  GVN  increased  its  authorized  capital from 1,000 to
     20,000,000  shares of no par value common stock, and declared a 2,000 for 1
     split of its common  stock.  At June 30,  1997 and 1996,  the  Company  had
     5,297,913 and 4,500,000 shares issued and outstanding, respectively.

     Private Offering and Warrants:

     GVN issued  1,350,000  shares (after 2,000 for 1 split) of common stock for
     $2,700,000  through a private offering during the year ended June 30, 1996,
     including the issuance of 250,000  shares for the conversion of a loan from
     a director. The net proceeds were $2,238,225, of which $640,000 was used as
     a down  payment to purchase  1,100,000  shares of common  stock held by the
     principal  shareholders.  In  connection  with this  offering,  the Company
     issued  warrants to purchase up to 150,000 shares of common stock at $2 per
     share to an underwriter.  These options are exercisable at any time through
     December 31, 2002. As of June 30, 1997, no warrants have been exercised.

     In addition,  GVN had a second private  offering during the year ended June
     30, 1997. The proceeds from the offering of 823,500 shares were $1,718,288,
     net of costs of $340,462.

     Preferred Stock:

     On October 3, 1995, the corporate Articles of Incorporation were amended to
     authorize  the issuance of  5,000,000  shares of  preferred  stock,  no par
     value.  The Board of Directors are authorized to issue preferred stock with
     such  rights,  privileges,  preferences  and  restrictions,  as  they  deem
     appropriate. As of June 30, 1997, no preferred stock has been issued.

     Stock Options and Stock Option Plan:

     Effective November,  1995, the Company's Board of Directors adopted a stock
     option plan.  The Company has 625,000  reserved  shares of common stock for
     issuance  under the Plan,  pending Board  approval.  The Board of Directors
     determines which individuals shall receive options,  the time period during
     which the options may be partially or fully exercised, the number of shares
     of common  stock that may be purchased  under each  option,  and the option
     price. As of June 30, 1997,  625,000 options were granted under the Plan at
     exercise prices of $2.00 to $2.50 per share,  exercisable until November 1,
     2003. As of June 30, 1997, none of the options have been exercised.










                                      F-13


<PAGE>




                           ORGANIC FOOD PRODUCTS, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)

9.   Income Taxes and Deferred Income Taxes:

     For the years ended June 30, 1997 and 1996,  components of deferred  income
     taxes, are as follows:

                                                      1997        
                                                      ----        
         Current Assets:
            Allowances                             $   86,000     
            Asset valuation allowance                    -        
                                                   ----------     

                                                   $   86,000     
                                                   ==========     
         Long-Term Asset (Liability):
            Depreciation                           $ (117,800)    
            Net operating loss carryforward           158,300     
                                                   ----------     
            Total net deferred tax asset
              (liability)                              40,500     
            Less: valuation allowance                (142,500)    
                                                   ----------     
                                                   $ (102,000)    
                                                   ==========     

     A reconciliation  of the federal statutory rate to the tax provision of the
     corresponding years, is as follows:

                                                      1997              1996
                                                      ----              ----
         Tax benefit (expense) at effective
           statutory rates                         $   (8,800)      $  334,400

         Non deductible expense                        (2,600)            -

         Net operating loss carryforwards                -              59,000

         Valuation limitation on net
           operating loss                                -             (59,000)

         State income taxes                            (4,600)            -
                                                   ----------       ----------
                                                   $  (16,000)      $  334,400
                                                   ==========       ==========

     At June 30,  1997,  the Company had  federal and state net  operating  loss
     carryforwards  available to offset future federal and state taxable income,
     in the  approximate  amounts of $345,000 and $492,000,  expiring  primarily
     through June 30, 2012 and 2002, respectively.

10.  Statements of Cash Flows:

     Non-Cash Investing and Financing Activities:

          The  Company  recognized   investing  and  financing  activities  that
          affected assets and  liabilities,  but did not result in cash receipts
          or payments:

     For the year ended June 30, 1997, these non-cash activities are as follows:

          Asset  additions in the amount of $141,186 were  financed  through the
          issuance of notes payable.

          Asset additions in the amount of $23,752 were financed through capital
          lease obligations.

          Interest in the amount of $118,410  was imputed on a  discounted  note
          payable

          Stock in the amount of $14,157 was issued for director expenses.

          Inventory in the amount of $222,523 was financed  through the issuance
          of a note payable.

                                      F-14


<PAGE>




                           ORGANIC FOOD PRODUCTS, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)

10.  Statements of Cash Flows: (Continued)

     Non-Cash Investing and Financing Activities: (Continued)

     For the year ended June 30, 1996, these non-cash activities are as follows:

          Accrued  interest on notes payable was added to the principal  portion
          of the loan, in the amount of $29,681.

          The Company financed the purchase of two (2) vehicles, with a recorded
          cost of $7,331, through a capital lease obligation in the same amount.

11.  Restructuring Charge:

     In June, 1996, the Company adopted a restructuring plan to eliminate excess
     equipment,  personnel and inventory,  that  represented  redundancies  as a
     result  of the  merger.  For the year  ended  June 30,  1996,  the  Company
     reported a  restructuring  charge of $257,468,  which was  comprised of the
     following:

                   Redundant inventory                $  177,515
                   Disposal of equipment                  21,329
                   Other                                  58,624
                                                      ----------

                                                      $  257,468
                                                      ==========

12.  Compensation from Options and Warrants:

     The Company has a stock option plan  pursuant to which  options to purchase
     shares of the Company's common stock may be granted to employees.  The plan
     provides that the option price shall not be less than the fair market value
     of the shares on the date of grant,  and that the options  expire ten years
     after  grant.  Options  vest  ratably  over  four or five year  periods  as
     provided for in each employee's option  agreement.  At June 30, 1997, there
     were 625,000 shares reserved for options to be granted under the plan.

     The Company has issued warrants to an underwriter in connection with one of
     their  two  private  placement  offerings.  As of June  30,  1997,  150,000
     warrants  have been issued at  exercise  prices of $2.00 to $2.50 per share
     and expire in approximately five years.

     In addition,  the Company has issued  warrants to individuals in connection
     with various ten percent (10%) promissory note  agreements.  As of June 30,
     1997,  200,666  warrants have been issued at an exercise price of $3.00 per
     share  and  expire in  approximately  two and  one-half  (2.5)  years.  The
     following summarizes stock options and warrant transactions:

                                        Stock
                                       Options      Warrants    Price per Share
                                       -------      --------    ---------------

     Outstanding at July 1, 1995          -            -        $       -
       Granted                         483,000      150,000     $ 2.00 to $ 2.50
       Exercised                          -            -        $       -
       Expired                            -            -        $       -
                                       -------      -------     ----------------

     Outstanding at June 30, 1996      483,000      150,000     $ 2.00 to $ 2.50
       Granted                         142,000      200,666     $ 2.50 to $ 3.00
       Exercised                          -            -        $       -
       Expired                            -            -        $       -
                                       -------      -------     ----------------
     Outstanding at June 30,
      1997                             625,000      350,666     $ 2.00 to $ 3.00
                                       =======      =======     ================



                                      F-15


<PAGE>




                           ORGANIC FOOD PRODUCTS, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)

13.  Compensation from Options and Warrants: (Continued)

     Information  relating  to stock  options  and  warrants  at June 30,  1997,
     summarized by exercise price are as follows:

                                  Outstanding                      Exercisable
                       ----------------------------------          -----------
          Exercise
           Price
         Per Share            Shares         Life (Years)            Shares
         ---------            ------         ------------            ------

           $2.00              433,000             5.0                401,000
            2.50              342,000             5.0                101,000
            3.00              200,666             2.5                200,666


     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,
     and in accordance with accounting for such options  utilizing the intrinsic
     value  method,  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 grant  dates
     consistent  with the  method of SFAS 123,  the  Company's  net  income  and
     earnings  per share for the years ended June 30, 1997 and 1996,  would have
     been reduced to the pro forma amounts presented below:

                                          June 30,               June 30,
                                           1997                   1996
                                           ----                   ----

        Net income (loss)
          As reported                   $   55,167             $ (649,062)
          Pro forma                         13,987               (735,500)

        Earnings (loss) per share
          As reported                   $      .01             $     (.11)
          Pro forma                            -                     (.13)

     The fair value of option and warrant  grants are  estimated  on the date of
     grant utilizing the Black-Scholes  option-pricing model, with the following
     assumptions  for  grants  in the  years  ended  June  30,  1997  and  1996,
     respectively;  expected life of options of five years,  expected volatility
     of 14.4% and 19.3%, risk-free interest rates of 8% and a 0% dividend yield.
     The  fair  value  at  date  of  grant  for  options  and  warrants  for the
     aforementioned years approximated $.29 and $.23 per option, respectively.

14.  Subsequent Events:

     The Company  completed its initial public  offering of 1,300,000  shares of
     its no par value  common stock at a price of $4.00 per share sold under its
     Registration  Statement and Prospectus dated August 8, 1997. Gross proceeds
     of approximately $5,200,000 were received by the Company.

     Subsequent  to June 30, 1997,  the Company  issued  130,000  warrants to an
     underwriter in connection  with its initial public  offering.  The warrants
     are exercisable at a price of $4.80 per share,  and expire in approximately
     two and one-half (2.5) years.

15.  Pro Forma Financial Information:

     The following  unaudited  pro forma  condensed  consolidated  statements of
     operations gives effect to the merger by the Company with GVN,  pursuant to
     the Agreement and Plan of Reorganization  between the parties, and is based
     on  estimates  and  assumptions  set forth  herein and in the notes to such
     statements.  This pro forma  information has been prepared by utilizing the
     historical financial  statements and notes thereto,  which are incorporated
     by reference  herein.  The pro forma  financial data does not purport to be
     indicative of the results which  actually  would have been obtained had the
     purchase been  effected on the dates  indicated or of the results which may
     be obtained in the future.



                                      F-16


<PAGE>




                           ORGANIC FOOD PRODUCTS, INC.
                    NOTES TO FINANCIAL STATEMENTS (Continued)

15.  Pro Forma Financial Information: (Continued)

     The pro forma  financial  information  is based on the  purchase  method of
     accounting  for the merger with GVN. The pro forma entries are described in
     the   accompanying   footnotes  to  the  unaudited   pro  forma   condensed
     consolidated  statements of operations.  The unaudited pro forma  condensed
     consolidated statements of operations assumes the acquisition took place on
     the first day of the period presented.






                                      F-17


<PAGE>
<TABLE>
<CAPTION>



                           ORGANIC FOOD PRODUCTS, INC.
      PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                        For The Year Ended June 30, 1996

The following represents an unaudited pro forma condensed consolidated statement
of operations for the year ended June 30, 1996,  assuming the Company's  reverse
acquisition of Garden Valley  Naturals,  Inc.  through the issuance of 2,250,000
shares of stock, and is accounted for under the purchase method of accounting.


                                 Garden Valley        Organic Food                               Pro Forma
                                   Naturals,           Products,           Pro Forma            Consolidated
                                     Inc.                Inc.             Adjustments              Amounts
                                     ----                ----             -----------              -------

<S>                              <C>                  <C>                 <C>                   <C>        
Revenues                         $5,794,095           $7,641,539                                $13,435,634
Cost of Revenues                  4,698,579            5,822,337                                 10,520,916
                                 ----------           ----------                                -----------

Gross Profit                      1,095,516            1,819,202                                  2,914,718

Sales and Marketing
  Expenses                        1,231,904              954,108                                  2,186,012

General and Adminis-
  trative Expenses                  514,702            1,244,914          $  118,600 (2)          1,878,216

Restructuring
  Charge                            194,032              257,468                                    451,500
                                 ----------           ----------                                -----------

     Income (Loss) from
       Operations                  (845,122)            (637,288)                                (1,601,010)

Other Income (Expense),
  Net                                (7,678)               2,948                                     (4,730)

Interest Income (Expense),
  Net                               (44,068)            (349,122)                                  (393,190)
                                 ----------           ----------                                -----------
      Net Income (Loss)
        before Income
        Taxes                      (896,868)            (983,462)                                (1,998,930)

Income Tax (Expense)
  Benefits                          176,023                 -                334,400 (1)            510,423
                                 ----------           ----------                                -----------
      Net Income (Loss)
        after Income Tax         $ (720,845)          $ (983,462)                               $(1,488,507)
                                 ==========           ==========                                ===========

Net Loss per Share               $     (.12)                                                    $      (.21)
                                 ==========                                                     ===========

Weighted Average Number
  of Shares Outstanding           5,717,663                                                       7,017,665
                                 ==========                                                     ===========







(1)  Pro forma  income  tax  adjustment  to record  the income tax effect of the
     conversion of Organic Food Products, Inc. to a C Corporation.

(2)  Amortization of goodwill recorded in the merger.


                                      F-18

</TABLE>

<PAGE>



ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------

     There  have  been  no  changes  in or  disagreements  with  accountants  on
accounting or financial disclosure.

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT
--------------------------------------------------------------------------------

Directors and Executive Officers

     The  name,  age,  position,  and term of  office  of each of the  Company's
executive officers and directors are set forth below:

                                                                         Held
                                                                       Position
            Name               Age                    Position          Since
            ----               ---                    --------          -----
Floyd R. Hill(1)               54        Chief Executive Officer 
                                         and Director                    1995
John Battendieri(1)            50        President and Director          1996
Donald L. Ladwig               49        Vice President-Marketing
                                         and Sales                       1995
Perry T. Valassis              52        Chief Financial Officer         1997
Kenneth A. Steel Jr.(1)(2)     39        Director                        1996
Charles B. Bonner(2)           55        Director                        1996
Charles R. Dyer(2)             53        Director                        1996

----------

(1)  Member of the Audit Committee.

(2)  Member of the Compensation Committee.

     Directors  hold office for a period of one year from their  election at the
annual meeting of  shareholders  or until their  successors are duly elected and
qualified.  Officers of the Company are elected by, and serve at the  discretion
of, the Board of  Directors.  Mr.  Ladwig  resigned as an officer  and  director
effective October 31, 1997.

Background

     The  following is a summary of the business  experience  of each  executive
officer and director of the Company for at least the last five years:

     Floyd R. Hill joined the Company in  November  1995 as its Chief  Operating
Officer and a director,  and was appointed Chief  Executive  Officer in December


                                       13

<PAGE>



1995. In 1989, Mr. Hill co-founded Monterey Pasta, Inc. ("Monterey"), a publicly
traded  pasta and salsa  manufacturer.  Mr.  Hill  served  as  Monterey's  Chief
Executive  Officer from 1989 to 1993, and its senior vice president from 1993 to
November  1995.  From 1969 to 1989,  Mr. Hill was employed by Eli Lilly & Co. in
various marketing and product development positions.

     John Battendieri  founded OFP in 1988 and was its President until it merged
with the  Company in June 1996.  In 1987,  he founded  Santa Cruz  Naturals,  an
organic fruit juice company,  which he sold to Smuckers Corporation in 1992. For
more than 25 years,  Mr.  Battendieri  has grown,  developed and marketed a wide
variety of natural food products.  Mr. Battendieri sells organic  ingredients to
the Company through Organic Ingredients, Inc., a company in which he holds a 50%
ownership interest. See "Item 12."

     Donald  L.   Ladwig   joined   the   Company  in  June  1995  as  its  Vice
President-Marketing and Sales. From 1992 to May 1995, Mr. Ladwig was employed by
Del Monte Foods  Corporation as a Vice President of Sales. From 1974 to 1992, he
was  employed  by Proctor and Gamble  Corporation  in various  sales  positions,
including his last position as Customer Business Development Manager. Mr. Ladwig
earned a Masters in Business Administration degree from Pepperdine University.

     Perry T. Valassis joined the Company in January 1997 as its Chief Financial
Officer.  From 1990 through 1996, he was employed by Western Microwave,  Inc. as
its Controller.  He has more than 20 years experience in financial reporting for
private industry and earned a Masters degree in Business Administration from the
University of Southern California.

     Kenneth A. Steel,  Jr. has been  employed  by K.A.  Steel  Chemicals,  Inc.
("K.A.  Steel") since 1978 and has been its Executive Vice President since 1979.
K.A. Steel is a privately-held Chicago, Illinois based chemical company in which
Mr. Steel holds primary  responsibilities  for sales,  marketing and  operations
management.  Mr. Steel is also the acting Chief Executive Officer and a director
of Monterey Pasta, Inc., a publicly traded pasta and salsa manufacturer.

     Charles B. Bonner has been President and majority shareholder since 1990 of
Pacific  Resources  Inc., a Fresno,  California  merger/acquisition  and venture
capital firm. From 1975 to 1989, he was President of Bonner Packing  Company,  a
California  dried fruit  producer and  marketer.  Mr. Bonner has been a director
(since  1993) and an officer  (from 1993 to 1994) of  Monterey  Pasta,  Inc.,  a
publicly  traded pasta and salsa  manufacturer.  Mr. Bonner earned a Bachelor of
Arts degree from Stanford University.

     Charles R. Dyer founded and has been an executive  officer and principal of
Monterey Bay Food Group,  a marketing  consultant  to the food  industry,  since
1979.  Mr.  Dyer  earned  a  Bachelor  of Arts  degree  from the  University  of
California.





                                       14

<PAGE>
<TABLE>
<CAPTION>



ITEM 10. EXECUTIVE COMPENSATION
-------------------------------

     The following table discloses compensation paid to certain of the Company's
executive officers for the years ended June 30, 1996, and 1997.



                                          Summary Compensation Table

                                                                                           
                                                                            
                                                      Other     Restricted        
Name and                                              Annual      Stock                  LTIP     All Other
Principal                                   Bonus    Compen-      Awards     Options/   Payouts    Compen-
Position             Year       Salary($)    ($)     sation($)     ($)       SARS(#)      ($)     sation($)
--------             ----       ---------    ---     ---------     ---       -------      ---     ---------
     (a)             (b)           (c)       (d)       (e)         (f)         (g)         (h)        (i)
                                                                  Awards                Payouts
                                                                  ------                -------
                                       Annual Compensation                                       
                                       -------------------                                       
                                                                      Long Term Compensation
                                                                      ----------------------
<S>                  <C>          <C>         <C>       <C>         <C>         <C>         <C>        <C>
Floyd R. Hill        1996         $85,000    -0-       -0-         -0-         -0-         -0-        -0-
Chief Executive  
  Officer            1997        $110,000    -0-       -0-         -0-       200,000(1)    -0-        -0-
John Battendieri     1996     $220,000(2)    -0-       -0-         -0-         -0-         -0-        -0-
President            1997     $110,000(2)    -0-       -0-         -0-         -0-         -0-      250,000(3)

----------

(1)  See "-1995 Stock Option Plan" and "Item 11."

(2)  Represents  salary paid Mr.  Battendieri  by OFP in 1995 and  through  June
     1996, the date of the Company's merger with OFP. From June through December
     1996, the Company paid Mr. Battendieri a salary of $55,000.

(3)  Represents  the  assumption  of a $250,000  obligation  due from OFP to Mr.
     Battendieri,  which was assumed and paid by the Company in connection  with
     the OFP merger.

     The Company has entered into an employment agreement with Mr. Hill expiring
July  1999  which  provides  for an  annual  salary of  $110,000.  Mr.  Hill was
initially  granted stock options to purchase  200,000  shares of Common Stock at
$2.00  per  share in  connection  with his  November  1995  employment  with the
Company, all of which are fully vested. Subsequently, as a part of his July 1996
employment  agreement,  Mr.  Hill  was  issued  stock  options  to  purchase  an
additional  200,000  shares  of the  Company's  Common  Stock at $2.50 per share
exercisable until July 2003, all of which have vested.

     Upon  completion  of the merger with OFP,  the Company and Mr.  Battendieri
(OFP's then President) entered into a three-year  employment  agreement expiring
June  1999,  which  provides  for an  annual  salary  of  $110,000  and  monthly
non-interest  bearing  loans of $7,500  during  the full term of the  employment
agreement,  repayable the earlier of two years from the date of this  Prospectus
or upon  termination  of the  employment  agreement.  As of June  30,  1997,  an
aggregate of $84,000 had been loaned to Mr.  Battendieri.  The Company agreed to
the loan arrangement as a negotiated part of its merger with OFP.


                                       15
</TABLE>

<PAGE>




     The Company's nonsalaried directors do not receive any cash compensation as
directors,  although they are reimbursed for out-of-pocket expenses in attending
Board of Directors' meetings and have been granted an aggregate of 100,000 stock
options  under the  Company's  1995 Stock Option Plan  exercisable  at prices of
$2.00 to $2.50 per share.

1995 Stock Option Plan

     In November  1995,  the Company  adopted a stock  option plan (the  "Plan")
which provides for the grant of stock options  intended to qualify as "incentive
stock options" or "nonqualified stock options" within the meaning of Section 422
of the United States Internal Revenue Code of 1986 (the "Code"). Incentive stock
options are issuable only to eligible  officers,  directors and key employees of
the Company.

     The  Plan is  administered  by the  Board of  Directors.  The  Company  had
reserved  625,000 shares of Common Stock for issuance under the Plan.  Under the
Plan, the Board of Directors  determines which  individuals  shall receive stock
options,  the time period  during  which the options may be  partially  or fully
exercised, the number of shares of Common Stock that may be purchased under each
option and the option price.

     For incentive  stock options (i) the per share exercise price of the Common
Stock may not be less than the fair market value of the Common Stock on the date
the option is granted and (ii) no person who owns,  directly or  indirectly,  at
the time of the  granting of an  incentive  stock  option,  more than 10% of the
total  combined  voting power of all classes of stock of the Company is eligible
to receive  stock  options  unless the option price is at least 110% of the fair
market value of the Common Stock subject to the option on the date of grant.

     No stock options may be  transferred  by an optionee  other than by will or
the laws of descent and  distribution,  and during the  lifetime of an optionee,
the  option  may only be  exercisable  by the  optionee.  Stock  options  may be
exercised only if the option holder  remains  continuously  associated  with the
Company from the date of grant to the date of exercise.  Stock options under the
Plan must be granted  within ten years from the effective  date of the Plan. The
exercise date of a stock option  granted under the Plan cannot be later than ten
years  from the date of grant.  Any  options  that  expire  unexercised  or that
terminate  upon an  optionee's  ceasing to be  employed  by the  Company  become
available once again for issuance. Shares issued upon exercise of an option will
rank equally with other shares then outstanding.

     As of September 30, 1997, 625,000 stock options have been granted under the
Plan to officers,  directors and employees at exercise prices of either $2.00 or
$2.50 per share  including an aggregate of 555,000  options granted to executive
officers and directors.


                                       16

<PAGE>




ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

     The  following  table sets forth  information  concerning  the  holdings of
Common Stock by each person who, as of the date  September  30,  1997,  holds of
record or is known by the Company to hold  beneficially or of record,  more than
5% of the Company's  Common Stock,  by each  director,  and by all directors and
executive  officers as a group. All shares are owned beneficially and of record.
The address of all persons (unless otherwise noted in the footnotes below) is in
care of the Company at 550 Monterrey Road, Morgan Hill, California.


   Name                           Amount of Ownership           Percent of Class
   ----                           -------------------           ----------------
   Floyd R. Hill(1)                     551,200                      7.9
   John Battendieri                   2,102,499                     31.4
   Kenneth A. Steel(2)                  319,363                      4.7
   Charles B. Bonner(3)                  15,000                       *
   Charles R. Dyer(4)                    47,000                       *
   Dean E. Nicholson                    450,000                      6.6
   Steven A. Reedy                      450,000                      6.6
   All officers and directors
   as a group (7 persons)
   (1)(2)(3)(4)                       2,936,862                     40.1

----------

*    Less than 1%

(1)  Includes stock options to purchase  200,000 shares of Common Stock at $2.00
     per share at any time until  November 1, 2000 and 200,000  shares of Common
     Stock at $2.50 per share at various times until July 2003.

(2)  Includes  options to purchase  40,000  shares of Common  Stock at $2.00 per
     share  until  March 2001.  Does not  include  stock  options to purchase an
     additional  10,000  shares of  Common  Stock at $2.50 per share at any time
     through May 2002, which options have not yet vested.

(3)  Includes  stock options to purchase  15,000 shares of Common Stock at $2.00
     per  share at any time  until  March  2001.  Does not  include  options  to
     purchase an  additional  10,000  shares of Common Stock at any time through
     May 2002, which 15,000 have vested, and 10,000 have not yet vested.

(4)  Does not include stock options to purchase 25,000 shares of Common Stock at
     $2.50 per share at any time through May 2002,  of which 15,000 have vested,
     and 10,000 have not yet vested.

                                       17

<PAGE>




ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

     In  October  1995,  the  Company  entered  into an  agreement  with Dean E.
Nicholson  and Steven A. Reedy,  former  officers  and  directors  and  founding
shareholders  of the  Company,  pursuant to which it agreed to  repurchase  from
these individuals an aggregate of 1,100,000 shares of the Company's Common Stock
at $2.00 per share for a total purchase  price of  $2,200,000.  The Company paid
Messrs.  Nicholson and Reedy an aggregate of $640,000 and an additional $700,000
of the  purchase  price  was paid at the  closing  of the IPO.  The  balance  of
$860,000 is payable in  installments  of $40,000 per month with  interest at the
rate of 6% per annum.

     In October  1995,  the Company  entered into an  agreement  with Kenneth A.
Steel,  a director of the  Company,  under which it borrowed  $500,000  from Mr.
Steel for working  capital.  The loan bore  interest at 10.25% per annum and was
due March 31, 1996. In February 1996, Mr. Steel  converted the principal  amount
of the loan into  250,000  shares  of the  Company's  Common  Stock at $2.00 per
share.

     In June 1996,  the Company  entered  into a merger  agreement  (the "Merger
Agreement")  with OFP  pursuant  to which  the two  companies  merged,  with the
Company becoming the surviving entity.  Under the terms of the Merger Agreement,
the Company (i) issued  2,250,000 shares of its Common Stock to the shareholders
of OFP in exchange for all 606,061 shares of OFP's outstanding  Common Stock and
(ii) assumed all of the  obligations of OFP including a $250,000  obligation due
to John  Battendieri  (OFP's then  President  and  currently the President and a
director  of the  Company),  and a revolving  line of credit in the  approximate
aggregate  amount  of  $1,100,000  due  to  a  commercial  bank  and  personally
guaranteed by Mr. Battendieri.

     Under the terms of Mr.  Battendieri's June 1996 employment  agreement,  the
Company is required to advance to Mr. Battendieri  non-interest bearing loans of
$7,500 per month during the full term of his employment agreement, which expires
in June 1999. See "Item 10-Executive Compensation."

     In June 1996,  the  Company  canceled  its  employment  agreement  with Mr.
Nicholson  and agreed to pay him a  termination  fee of $175,000  evidenced by a
promissory note in like amount,  bearing interest at 8% per annum payable $7,292
per month with the balance of principal and interest due in full in August 1998.
At June 30, 1997, the balance due to Mr. Nicholson under the promissory note was
$84,478.

     In May 1997, the Company borrowed $602,000 for working capital from a group
of lenders  evidenced by promissory  notes bearing interest at 10% per annum due
the earlier of the closing of the IPO or May 1998. As  additional  consideration
for the loans,  the Company issued to the lenders  200,600 common stock purchase
warrants,  each  warrant  entitling  the holder to purchase  one share of Common
Stock at $3.00 per share at any time until  December  31,  1999.  The loans were
repaid with proceeds of the IPO.

                                       18

<PAGE>



     Organic Ingredients,  Inc. ("OGI"), a company 50% owned by Mr. Battendieri,
the Company's President,  supplies certain organic ingredients used primarily in
the Company's  fruit juice  products.  Total purchases from OGI amounted to less
than 5% of the  Company's  total  product  purchases in 1997.  The price of, and
terms for, the ingredients  are fair,  reasonable and consistent with prices and
terms which would be available to the Company from third parties.

     The  Company   believes  that  the  terms  and   conditions  of  the  above
transactions  were fair,  reasonable and consistent with terms the Company could
have obtained from unaffiliated third parties.  Any future transactions with the
Company's executive officers or directors will be entered into on terms that are
no less favorable to the Company than those that are available from unaffiliated
third parties,  and all such  transactions will be approved by a majority of the
Company's disinterested directors.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

     (a) Exhibits:

Exhibit No.     Title
-----------     -----

      1.01      Form of Underwriting Agreement (1)
      1.02      Form of Selected Dealer Agreement (1)
      1.03      Form of Representatives' Warrant (1)
      1.04      Form of Amended Underwriting Agreement (1)
      1.05      Form of Amended Selected Dealer Agreement (1)
      1.06      Form of Amended Representatives' Warrant (1)
      1.07      Form of Lock-Up Agreement (1)
      3.01      Articles of Incorporation of the Registrant, as amended (1)
      3.02      Bylaws of the Registrant (1)
     10.01      1995 Employee Stock Option Plan (1)
     10.02      Office and Warehouse Lease (Morgan Hill, California) (1)
     10.03      Employment Agreement with Mr. Hill (1)
     10.04      Employment Agreement with Mr. Battendieri (1)
     10.05      Merger Agreement between the Registrant (Garden Valley Naturals,
                Inc.) And Organic Food Products, Inc. (1)
     10.06      Loan Agreement with Mr. Steel (1)
     10.07      Stock Redemption Agreement with Messrs. Nicholson and Reedy (1)
     10.08      Settlement Agreement with Mr. Nicholson (1)
     10.09      First Amendment to Stock Redemption Agreement (1)
     10.10      Amendment to Promissory Notes issued to Messrs. Nicholson and
                Reedy (1)
     10.11      Form of Subscription Agreement, Promissory Note and Warrant for
                Bridge Loan (1)
     11.01      Computation of Earnings Per Share (1)

                                       19

<PAGE>



     11.02      Computation of Earnings Per Share (1)
     11.03      Computation of Earnings Per Share
     27.01      Financial Data Schedule (1)
     27.02      Financial Data Schedule (1)
     27.03      Financial Data Schedule

(1)  Incorporated  by reference to the  Registrant's  Registration  Statement on
     Form SB-2, File No. 333-22997, declared effective on August 11, 1997.

     (b) Reports on Form 8-K: None.











                                       20

<PAGE>




                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly  caused  this  Report to be signed  on its  behalf by the  undersigned,
thereunto duly authorized, in Morgan Hill, California, on October 8, 1997.

                                   ORGANIC FOOD PRODUCTS, INC.



                                   By: /s/ Floyd R. Hill
                                      ------------------------------------------
                                      Floyd R. Hill
                                      Chief Executive Officer

     Pursuant to the  requirements  of the  Securities  Act of 1933, as amended,
this  Report  has  been  signed  below by the  following  persons  on the  dates
indicated.

         Signature                       Title                        Date
         ---------                       -----                        ----


/s/ Floyd R. Hill                Chief Executive Officer         October 8, 1997
-----------------------------    and Director
Floyd R. Hill                    

/s/ John Battendieri             President and Director          October 8, 1997
-----------------------------
John Battendieri

/s/ Donald L. Ladwig             Vice President-Marketing        October 8, 1997
-----------------------------    & Sales
Donald L. Ladwig

/s/ Perry T. Valassis            Chief Financial Officer         October 8, 1997
-----------------------------
Perry T. Valassis

/s/ Kenneth A. Steel Jr.         Director                        October 8, 1997
Kenneth A. Steel, Jr.

/s/ Charles B. Bonner            Director                        October 8, 1997
-----------------------------
Charles B. Bonner

/s/ Charles R. Dyer              Director                        October 8, 1997
--------------------------------------------
Charles R. Dyer



                                       21