ORGANIC FOOD PRODUCTS INC, SB-2/A, 1997-07-30

ORGANIC FOOD PRODUCTS INC
SB-2/A, 1997-07-30
CANNED, FRUITS, VEG, PRESERVES, JAMS & JELLIES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY , 1997.

REGISTRATION NO. 333-22997
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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------------

AMENDMENT NO. 2 TO

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AS AMENDED
------------------------
ORGANIC FOOD PRODUCTS, INC.

(Exact Name of Small Business Issuer As Specified In Its Charter)

<TABLE>
<S> <C> <C>
CALIFORNIA 2033 94-3076294
(State or other jurisdiction (Primary Standard Industrial (IRS Employer
of Classification Code No.) I.D. Number)
incorporation or organization)
</TABLE>

550 MONTEREY ROAD
MORGAN HILL, CA 95037
(408) 782-1133

(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)

FLOYD R. HILL, CHIEF EXECUTIVE OFFICER
ORGANIC FOOD PRODUCTS, INC.
550 MONTEREY ROAD
MORGAN HILL, CA 95037
(408) 782-1133
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

COPIES OF ALL COMMUNICATIONS TO:

Gary A. Agron, Esq. Dennis J. Doucette, Esq.
5445 DTC Parkway, Suite 520 Luce, Forward, Hamilton & Scripps LLP
Englewood, CO 80111 600 West Broadway, Suite 2600
(303) 770-7254 San Diego, CA 92101
(303) 770-7257 (Fax) (619) 236-1414
(619) 232-8311 (Fax)

APPROXIMATE DATE OF COMMENCEMENT OF THE OFFERING: AS SOON AS PRACTICABLE
AFTER THE DATE OF THE OFFERING.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the Prospectus is expected to be made pursuant to Rule 434,
check the following box: / /
------------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
TITLE OF EACH CLASS AMOUNT TO PROPOSED AMOUNT OF
OF SECURITIES BE MAXIMUM PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SECURITY PRICE FEE
<S> <C> <C> <C> <C>
Common Stock, no par value(1)............... 1,495,000 Shares $4.00 $5,980,000 $1,813
Representatives' Warrants(2)................ 130,000 Warrants $.0007 $100 $-0-
Common Stock, no par value, underlying
Representatives' Warrants(2).............. 130,000 Shares $4.80 $624,000 $189
Totals...................................... $6,604,000 $2,002(3)
</TABLE>

(1) Includes the overallotment option granted to the Representatives of 195,000
shares.

(2) Pursuant to Rule 416 of the Securities Act of 1933, as amended, the number
of shares issuable upon exercise of the Representatives' Warrants is subject
to adjustment in accordance with anti-dilution provisions of such Warrants.

(3) A fee of $2,309 was previously paid. Accordingly, no additional fee is
required.
------------------------------

THE REGISTRANT HEREBY AMENDS THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

(EXHIBIT INDEX LOCATED ON PAGE OF THIS FILING)

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<PAGE>

SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED JULY , 1997

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
1,300,000 SHARES OF COMMON STOCK

ORGANIC FOOD PRODUCTS, INC.

[LOGO]

Organic Food Products, Inc. (the "Company") is offering 1,300,000 shares of
its no par value common stock (the "Common Stock") at $4.00 per share (the
"Offering") through Sentra Securities Corporation, Spelman & Co., Inc. and
Paradise Valley Securities, Inc. as the representatives (the "Representatives")
of the underwriters named herein (the "Underwriters"). The initial offering
price of the Common Stock was determined by negotiations between the Company and
the Representatives, and such price is not necessarily related to the Company's
financial condition, net worth or other established criteria of value. See
"Underwriting."

There is no current trading market for the Company's Common Stock and no
assurance that a trading market will develop upon completion of the Offering.
The Company has applied to have the Common Stock listed on the NASDAQ SmallCap
Market (the "SmallCap Market").

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------

THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND SUBSTANTIAL
DILUTION AND SHOULD BE CONSIDERED ONLY BY PERSONS ABLE TO SUSTAIN A TOTAL LOSS
OF THEIR INVESTMENT. SEE "RISK FACTORS."

<TABLE>
<CAPTION>
UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE TO PUBLIC AND COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share................................ $4.00 $.40 $3.60
Total(3)................................. $5,200,000 $520,000 $4,680,000
</TABLE>

(1) Excludes a nonaccountable expense allowance payable to Sentra Securities
Corporation and Spelman & Co., Inc. of $156,000 ($179,400 if the
Overallotment Option is exercised) and the issuance of warrants to the
Representatives (the "Representatives' Warrants") to purchase up to 130,000
shares of Common Stock at a price of $4.80 per share. The Company has
granted certain registration rights with respect to the Common Stock
underlying the Representatives' Warrants and has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933 (the "1933 Act"). See "Underwriting."

(2) Before deducting costs of the Offering estimated to be $456,000, including
the nonaccountable expense allowance. See "Underwriting."

(3) Assumes no exercise of the Representatives' option (the "Overallotment
Option"), exercisable within 30 days from the date of this Prospectus, to
purchase from the Company up to 195,000 additional shares of Common Stock on
the same terms as the Common Stock offered hereby solely to cover
overallotments, if any. If the Overallotment Option is exercised in full,
the total Price to Public, Underwriting Discounts and Proceeds to Company
will be $5,980,000, $598,000 and $5,382,000, respectively. See
"Underwriting."
--------------------------

The shares of Common Stock are offered by the several Underwriters named
herein on a firm commitment basis, subject to prior sale, when, as and if
delivered to and accepted by the Underwriters and subject to certain conditions,
including the right of the Underwriters to reject orders in whole or in part.
The Underwriters are committed to purchase and pay for all shares of Common
Stock if any shares of Common Stock are taken. It is expected that delivery of
the certificates representing the Common Stock will be made against payment
therefor in San Diego, California, on or about three business days from the date
of this Prospectus.

<TABLE>
<S> <C> <C>
SENTRA PARADISE VALLEY
SECURITIES CORPORATION SPELMAN & CO., INC. SECURITIES, INC.
</TABLE>

The date of this Prospectus is 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND
FINANCIAL STATEMENTS THAT APPEAR ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES THAT THE OVERALLOTMENT
OPTION AND THE REPRESENTATIVES' WARRANTS HAVE NOT BEEN EXERCISED.

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS SET
FORTH IN THIS PROSPECTUS INCLUDE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. 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 PROSPECTUS AND WILL BE FURTHER
DISCUSSED FROM TIME TO TIME IN THE COMPANY'S PERIODIC REPORTS FILED WITH THE
COMMISSION. THE FORWARD-LOOKING STATEMENTS INCLUDED IN THE PROSPECTUS SPEAK ONLY
AS OF THE DATE HEREOF.

THE COMPANY

The Company was incorporated in California in July 1987 as S&D Foods, Inc.
In November 1995, it changed its name to Garden Valley Naturals, Inc. and
following its June 1996 merger with Organic Food Products, Inc. ("OFP"), changed
its name to Organic Food Products, Inc. The term "Company" used throughout this
Prospectus refers to the merged operations of Garden Valley Naturals, Inc. and
OFP.

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 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. See "Certain Transactions."

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 to its current products, the Company will
introduce a line of organic grill sauces and organic salad dressings in
September 1997. See "Business--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 "Business--Manufacturing Facilities and
Suppliers."

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. Proceeds
of the Offering will be used for these and other purposes. See
"Business--Strategy" and "Use of Proceeds."

The Company's executive offices are located at 550 Monterey Road, Morgan
Hill, CA 95037, telephone (408) 782-1133.

3
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Offering Price.................... $4.00 per share of Common Stock

Common Stock Outstanding(1)....... 5,297,913 shares

Common Stock Offered.............. 1,300,000 shares

Common Stock Outstanding after the
Offering(1)..................... 6,597,913 shares

Use of Proceeds................... The net proceeds of the Offering will be primarily used
to purchase raw materials and equipment, for repayment
of debt, for marketing expenses and working capital. See
"Use of Proceeds."

NASDAQ SmallCap Symbol............ OFPI

Transfer and Warrant Agent........ Corporate Stock Transfer, Inc.
</TABLE>

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(1) Excludes exercise of: (i) the Overallotment Option, (ii) the
Representatives' Warrants, (iii) outstanding stock options to purchase up to
625,000 shares of Common Stock issued under the Company's 1995 Stock Option
Plan, and (iv) common stock purchase warrants to purchase up to 600,000
shares of Common Stock. See "Dilution," "Capitalization," "Description of
Securities" and "Underwriting."

4
<PAGE>
SUMMARY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED MARCH
YEAR ENDED JUNE 30, 31,
--------------------------- --------------------------
1996 1995 1997 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................................... $ 7,641,539 $ 5,027,278 $ 9,067,049 $ 5,651,707
Gross profit............................................ 1,819,202 1,276,968 2,981,910 1,409,201
Operating income (loss)................................. (637,288) 134,515 588,140 100,069
Interest expense........................................ 349,560 121,704 152,340 167,892
Net income (loss)....................................... $ (983,462) $ 23,418 $ 343,422 $ (65,391)
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Weighted average shares outstanding..................... 5,792,663 5,792,663 5,792,663 5,792,663
Net income (loss) per share............................. $ (.17) $ -- $ .06 $ (.01)
</TABLE>

<TABLE>
<CAPTION>
UNAUDITED
AT MARCH 31, AS
1997 ADJUSTED(1)
------------ -------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)........................................................... $ (212,305) $ 3,843,975
Total assets........................................................................ 7,961,873 11,485,873
Long-term debt...................................................................... 409,974 409,974
Total liabilities................................................................... 5,057,140 4,357,140
Shareholders' equity................................................................ $2,904,733 $ 7,128,733
</TABLE>

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(1) As adjusted to give effect to the receipt and application of the estimated
net proceeds of the Offering without giving effect to exercise of the
Overallotment Option, the Representatives' Warrants or other outstanding
stock options or common stock purchase warrants. See "Use of Proceeds" and
"Description of Securities."

5
<PAGE>
RISK FACTORS

Prospective purchasers of the Common Stock should carefully consider the
following risk factors and other information contained in this Prospectus before
making an investment in the Common Stock. Information contained in this
Prospectus includes "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., "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Strategy." No assurance can be given that the future results
addressed 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 addressed in such forward-looking statements. Other factors could also
cause actual results to vary materially from the future results addressed in
such forward-looking statements.

LIMITED PROFITABILITY; SIGNIFICANT ACCUMULATED DEFICIT; NEGATIVE WORKING
CAPITAL; FUTURE OPERATING RESULTS. Although the Company achieved increasing
levels of revenues for the years ended June 30, 1995 and 1996 and the nine
months ended March 31, 1997, the Company reported a loss for the year ended June
30, 1996 and limited profitability in other periods. Moreover, at March 31, 1997
the Company had an accumulated deficit of $1,066,988 and negative working
capital of $212,305. Future events, including unanticipated expenses, increased
price competition, unfavorable general economic conditions or decreased consumer
demand for organic food products, could have a material adverse effect on the
Company's future operating results. There can be no assurance that the Company's
revenue growth will continue in the future or that its operations will be
profitable. See "Financial Statements."

COST OF RAW MATERIALS; RISK OF MARKET PRICE FLUCTUATIONS; DEPENDENCE UPON
SUPPLIERS. The Company's operating results and financial condition may be
adversely affected by market fluctuations in the cost and availability of its
raw materials, particularly whole and processed organic tomatoes. Raw materials
costs are determined by a constantly changing market upon which the Company has
no control. The Company often enters into fixed price contracts to purchase a
portion of its organic tomatoes. Nevertheless, cost fluctuations in the open
market could increase the Company's product costs (for products not covered by
fixed price contracts) and adversely affect its operations. Moreover, market
price declines for raw materials which are covered by fixed price contracts
would increase the Company's product costs relative to its competitors and
reduce its gross profits on finished goods. 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 each
accounted for 10% or more of the Company's total purchases for the nine months
ended March 31, 1997. Any interruption in raw materials supply (caused by
factors such as drought, insect infestation or the like) would interrupt the
Company's production and adversely affect its operations. Overcontracting for
organic tomatoes or other raw materials in order to fix prices could cause cash
flow difficulties until the excess raw materials are processed and sold. For
instance, a portion of the proceeds of the Offering has been allocated to pay
for tomato paste contracted in prior years. See "Use of Proceeds" and
"Business--Manufacturing Facilities and Suppliers."

COMPETITION. The organic food and health food industries in general and the
pasta sauce and pasta, salsa, condiment and fruit juice businesses in particular
are highly competitive, and there are numerous multinational, national, 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 cut pasta manufacturers such as RF,
Ronzoni and DeBoles, smaller organic or natural pasta sauce and organic salsa
competitors such as Simply Natural, Muir Glen and Enrico and smaller fruit juice
competitors such as Odwalla and Knudsen. Most of the

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<PAGE>
Company's competitors are larger than the Company and have more financial,
marketing and management resources, and brand name recognition, than the
Company. See "Business--Competition."

DEPENDENCE UPON MAJOR CUSTOMERS. One customer accounted for approximately
40% of the Company's revenues for the year ended June 30, 1996, and two
customers accounted for approximately 35% of the Company's revenues for the nine
months ended March 31, 1997. A loss of any of these customers would have a
material adverse effect on the Company's operations. See "Business--Distribution
and Marketing."

LIMITED EXPERIENCE WITH CLUB STORES AND CHAIN GROCERY STORES. Although the
Company has sold its products to health food stores since 1987, sales to club
stores and chain grocery stores commenced in December 1994 and August 1995,
respectively. There can be no assurance that (i) the Company will be able to
maintain or expand its sales to club stores and chain grocery stores or (ii)
sales will be sufficient to offset slotting fees or in-store demonstration fees
incurred to obtain shelf space in club stores and chain grocery stores. See
"Business--Distribution and Marketing."

PRODUCT LIABILITY. Food processors are subject to significant liability
should the consumption of their products cause injury, illness or death.
Although the Company carries product liability insurance, with limits per
occurrence of up to $2,000,000, there can be no assurance that this insurance
will be adequate to protect against product liability claims or that insurance
coverage will continue to be available at reasonable prices.

POSSIBLE FLUCTUATIONS IN OPERATING RESULTS. 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. See "Management's Discussion of Financial Condition
and Results of Operations-- Business and Organization."

GOVERNMENT REGULATION. The Company is subject to various federal, state and
local laws affecting its business. The Company's food processing facility is
subject to regulation by various governmental agencies, including state and
local licensing, zoning, land use, construction and environmental regulations
and various federal, state, and local health, sanitation, immigration, safety
and fire codes and standards. In order to offer organic food products, the
Company is also subject to inspection and regulation by the United States
Department of Agriculture ("USDA"). Suspension of any licenses or approvals, due
to failure to comply with applicable regulations, could interrupt the Company's
operations, cause a loss of its organic food designation, limit the number of
employees working within its facilities or otherwise materially and adversely
affect its business. 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, increases in the federal or California minimum
wage will result in increases in the Company's labor costs. See
"Business--Government Regulation."

GEOGRAPHIC CONCENTRATION. The Company distributes its products in a limited
number of markets, which exposes it to fluctuations caused by such factors as
adverse economic conditions and changing consumer preferences in these markets.
See "Business--Distribution and Marketing."

DEPENDENCE UPON EXECUTIVE OFFICERS. The Company's operations depend upon
its ability to hire and retain qualified personnel. There is competition for
such personnel, and there can be no assurance that the Company will be
successful in this regard. The Company's operations are also dependent upon the
continued services of its executive officers. The loss of the services of any of
these executive officers, whether as a result of death, disability or otherwise,
would have a material adverse effect upon the business

7
<PAGE>
of the Company. The Company has employment agreements with its Chief Executive
Officer and its President, and has agreed to purchase key person life insurance
on the life of its Chief Executive Officer in the face amount of $1,000,000. The
Company does not carry key person life insurance on the lives of any other
executive officers. See "Management--Directors and Executive Officers."

OFFERING TO BENEFIT PRINCIPAL STOCKHOLDERS. The Company intends to repay
from proceeds of the Offering $700,000 of debt (16.6% of the net proceeds of the
Offering) due to two of the Company's principal shareholders. See "Use of
Proceeds."

LACK OF PUBLIC MARKET; DETERMINATION OF OFFERING PRICE. Prior to the
Offering, there has been no public trading market for the Company's Common
Stock. The initial public offering price of the Common Stock has been determined
by negotiations between the Company and the Representatives and does not
necessarily bear any relationship to recognized criteria for the valuation of
such securities. There can be no assurance that a regular trading market for the
Company's Common Stock will develop or continue after the Offering or, if such a
market develops, that the market price of the Common Stock will exceed the
Offering price. See "Underwriting."

IMMEDIATE SUBSTANTIAL DILUTION. The Offering involves an immediate and
substantial dilution of $3.27 per share of Common Stock, an 82% difference
between the public offering price of $4.00 per share of Common Stock and the net
tangible book value of $.73 per share of Common Stock upon completion of the
Offering, assuming no exercise of the Overallotment Option, the Representatives'
Warrants or other outstanding stock options or common stock purchase warrants of
the Company. See "Dilution."

NO DIVIDENDS. The Company has not paid any dividends on its Common Stock
and does not intend to pay dividends in the foreseeable future. See "Description
of Securities--Dividends."

POSSIBLE VOLATILITY OF SECURITIES PRICES. The market price of the Company's
Common Stock following the Offering may be highly volatile, as has been the case
with the securities of other companies completing initial public offerings.
Factors such as the Company's operating results or announcements by the Company
or its competitors may have a significant effect on the market price of the
Company's securities. In addition, market prices for securities of many emerging
and small capitalization companies have experienced wide fluctuations in
response to variations in quarterly operating results and general economic
indicators and conditions, as well as other factors beyond the control of the
Company.

SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of Common
Stock in the open market or the availability of such shares for sale following
the Offering could adversely affect the market price for the Common Stock.
Following the Offering, the 1,300,000 shares of Common Stock offered by the
Company may be sold in the open market. The remaining 5,297,913 shares of the
Company's Common Stock are currently eligible for sale under Rule 144 ("Rule
144") promulgated under the 1933 Act. Notwithstanding the above, all of the
Company's shareholders have agreed with Sentra Securities Corporation not to
sell or otherwise dispose of their shares of Common Stock without the prior
written consent of the Representatives for a period of 12 months from the date
of this Prospectus. See "Description of Securities--Common Stock Eligible for
Future Sale" and "Underwriting."

UNDERWRITERS' INFLUENCE ON THE MARKET. A significant amount of the Common
Stock offered hereby may be sold to customers of the Representatives and the
Underwriters. Such customers subsequently may engage in transactions for the
sale or purchase of Common Stock through or with the Underwriters. Although they
have no obligation to do so, the Representatives intend to make a market in the
Company's Common Stock and may otherwise effect transactions in the Common
Stock. This market-making activity may terminate at any time. If they
participate in the market, the Representatives may exert a dominating influence
on the market, if one develops, for the Common Stock. The price and liquidity of
the Common Stock may be significantly affected by the degree, if any, of the
Underwriters' participation in such market.

CONTROL BY MANAGEMENT; AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK;
PREVENTION OF CHANGES IN CONTROL. Upon completion of the Offering, the
Company's officers and directors will own approximately

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<PAGE>
41.0% of the then issued and outstanding shares of Common Stock (assuming no
exercise of the Overallotment Option, the Representatives' Warrants or other
outstanding stock options or common stock purchase warrants not exercisable
within 60 days from the date hereof) and will continue to elect a majority of
the Company's directors and control the affairs of the Company. The Company's
Articles of Incorporation authorize the issuance of up to 5,000,000 shares of
Preferred Stock with such rights and preferences as may be determined from time
to time by the Board of Directors. Accordingly, under the Articles of
Incorporation, the Board of Directors may, without shareholder approval, issue
Preferred Stock with dividend, liquidation, conversion, voting, redemption or
other rights which could adversely affect the voting power or other rights of
the holders of the Common Stock. The issuance of any shares of Preferred Stock
having rights superior to those of the Common Stock may result in a decrease of
the value or market price of the Common Stock and could further be used by the
Board of Directors as a device to prevent a change in control of the Company.
The Company has no other anti-takeover provisions in its Articles of
Incorporation or Bylaws. Holders of Preferred Stock may also be granted the
right to receive dividends, certain preferences in liquidation, and conversion
rights. See "Description of Securities."

LIMITATIONS ON LIABILITY OF DIRECTORS. The Company's Articles of
Incorporation substantially limit the liability of the Company's directors to
the Company and its shareholders for breach of fiduciary or other duties to the
Company. See "Description of Securities--Limitation on Liabilities."

MAINTENANCE CRITERIA FOR THE SMALLCAP MARKET SECURITIES. The National
Association of Securities Dealers, Inc. ("the NASD"), which administers the
SmallCap Market, sets the criteria for continued eligibility on The NASDAQ
SmallCap Market. In order to continue to be included on the SmallCap Market, a
company must maintain $2 million in total assets, a $200,000 market value of its
public float and $1 million in total capital and surplus. In addition, continued
inclusion requires two market-makers, at least 300 holders of the Common Stock
and a minimum bid price of $1 per share; provided, however, that if a company
falls below such minimum bid price, it will remain eligible for continued
inclusion in the SmallCap Market if the market value of the public float is at
least $1 million and the company has $2 million in capital and surplus. The
Company's failure to meet these maintenance criteria in the future or future
maintenance requirements imposed by the SmallCap Market may result in the
discontinuance of the inclusion of its securities in the SmallCap Market. In
such event, trading, if any, in the securities may then continue to be conducted
in the non-NASDAQ over-the-counter market in what are commonly referred to as
the electronic bulletin board or the "pink sheets." As a result, an investor may
find it more difficult to dispose of or to obtain accurate quotations as to the
market value of the securities. In addition, the Company would be subject to
Rule 15g (the "Rule") promulgated under the Exchange Act which imposes various
sales practice requirements on broker-dealers who sell securities governed by
the Rule to persons other than established customers and accredited investors.
For these types of transactions, the broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transactions prior to sale. Consequently, the Rule may
have an adverse effect on the ability of broker-dealers to sell the securities,
which may affect the ability of purchasers in the Offering to sell the
securities in the secondary market. The NASD recently proposed significantly
more stringent maintenance requirements which require $2 million in net tangible
assets, 500,000 shares in the public float and elimination of the exception to
the $1 per share bid price requirement. Should these new maintenance
requirements be adopted, it will be progressively more difficult for the Company
to remain on the SmallCap Market.

DISCLOSURE RELATED TO PENNY STOCKS. The Commission has adopted rules that
define a "penny stock" as equity securities priced at under $5.00 per share
which are not listed for trading on NASDAQ unless (i) the issuer has a net worth
of $2,000,000 if in business for more than three years or $5,000,000 if in
business for less than three years or (ii) the issuer has had average annual
revenues of $6,000,000 for the prior three years. In the event that any of the
Company's securities are characterized in the future as penny stock,
broker-dealers dealing in the securities will be subject to the disclosure rules
for transactions involving penny stocks which require the broker-dealer among
other things to (i) determine the suitability of

9
<PAGE>
purchasers of the securities and obtain the written consent of purchasers to
purchase such securities and (ii) disclose the best (inside) bid and offer
prices for such securities and the price at which the broker-dealer last
purchased or sold the securities. The additional burdens imposed upon
broker-dealers may discourage them from effecting transactions in penny stocks,
which could reduce the liquidity of the securities offered hereby.

DILUTION

At March 31, 1997, the net tangible book value of the Company was $291,734
(unaudited), or $.06 per share of Common Stock. "Net tangible book value" per
share represents the total amount of tangible assets of the Company, less the
total amount of liabilities of the Company, divided by the number of shares of
Common Stock outstanding. Without taking into account any changes in net
tangible book value after March 31, 1997, other than to give effect to the sale
by the Company of the 1,300,000 shares of Common Stock offered hereby, less
underwriting discounts and commissions and estimated costs of the Offering not
recorded as deferred costs as of March 31, 1997, the net tangible book value of
the Company at March 31, 1997 would have been $4,798,014, or approximately $.73
per share. This represents an immediate increase in net tangible book value of
$.67 per share of Common Stock to existing shareholders and an immediate
dilution of $3.27 per share to new shareholders. "Dilution" per share represents
the difference between the price to be paid by the new shareholders and the net
tangible book value per share of Common Stock immediately after this Offering.

The foregoing is illustrated in the following table:

<TABLE>
<S> <C> <C>
Public offering price per share................................ $ 4.00
Net tangible book value per share before Offering.............. $ .06
Increase in net tangible book value per share attributable to
new investors purchasing in the Offering..................... $ .67
Net tangible book value per share after the Offering........... $ .73
---------
Dilution of net tangible book value per share to new
investors.................................................... $ 3.27
---------
Percent reduction of net tangible book value to new
investors.................................................... 82%
</TABLE>

The following table sets forth the number of shares of Common Stock
purchased, the total consideration paid and the average price per share paid by
existing shareholders as of March 31, 1997 and new investors purchasing Common
Stock in the Offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- ---------------------------- PRICE PER
NUMBER PERCENTAGE AMOUNT PERCENTAGE SHARE
---------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
New investors................. 1,300,000 19.7% $ 5,200,000 52.2% $ 4.00
Existing shareholders......... 5,297,913 80.3% $ 4,768,433 47.8% $ .90
---------- ----- ------------- -----
Totals........................ 6,597,913 100.0% $ 9,968,433 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>

The preceding discussion and the accompanying tables assume no exercise of
(i) the Overallotment Option, (ii) the Representatives' Warrants, (iii)
outstanding stock options to purchase up to 625,000 shares of Common Stock
issued under the Company's 1995 Stock Option Plan, or (iv) common stock purchase
warrants to purchase up to 600,000 shares of Common Stock. To the extent that
these or future stock options or common stock purchase warrants are exercised
there will be additional dilution to new investors. See "Capitalization,"
"Description of Securities" and "Underwriting."

10
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1997 and as adjusted to give effect to the sale by the Company of 1,300,000
shares of Common Stock offered hereby, without giving effect to the exercise of
the Overallotment Option, the Representatives' Warrants or other outstanding
stock options or common stock purchase warrants.

<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED(1)
------------- --------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
Current liabilities................................................................ $ 4,647,166 $ 3,947,166
------------- --------------
Long-term liabilities.............................................................. 409,974 409,974
------------- --------------
Shareholders' equity
Preferred Stock, 5,000,000 no par value shares authorized, none issued........... -0- -0-
Common Stock, 20,000,000 no par value shares authorized, 5,297,913 shares
outstanding, and 6,597,913 shares outstanding, as adjusted..................... 3,971,721 8,195,721
Accumulated deficit.............................................................. (1,066,988) (1,066,988)
------------- --------------
Total shareholders' equity..................................................... 2,904,733 7,128,733
------------- --------------
Total capitalization......................................................... $ 7,961,873 $ 11,485,873
------------- --------------
------------- --------------
</TABLE>

- ------------------------

(1) As adjusted to give effect to the receipt and application of the estimated
net proceeds of the Offering. See "Use of Proceeds."

11
<PAGE>
USE OF PROCEEDS

The net proceeds to be received by the Company from the Offering are
estimated to be $4,224,000 ($4,902,600 if the Overallotment Option is
exercised). The Company intends to use the net proceeds of the Offering as set
forth in the table below:

<TABLE>
<CAPTION>
PERCENT OF NET
PURPOSE AMOUNT PROCEEDS
- ------------------------------------------------------------------ ------------ --------------
<S> <C> <C>
Purchase of raw materials(1)...................................... $ 1,350,000 32.0
Purchase of equipment............................................. 450,000 10.6
Repayment of debt(2).............................................. 1,300,000 30.8
Marketing expenses................................................ 950,000 22.5
Working capital................................................... 174,000 4.1
------------ -----
Total......................................................... $ 4,224,000 100.0%
</TABLE>

- ------------------------

(1) Represents the purchase of organic tomato products ($386,775 of which was
previously contracted) and other organic vegetables and fruits to support
the Company's plan to expand product offerings and increase manufacturing
volumes. See "Business--Strategy" and "Business--Manufacturing Facilities
and Suppliers."

(2) Represents (i) a $700,000 principal reduction on an unsecured promissory
note in the principal amount of $1,560,000 issued to two principal
shareholders (and former officers and directors) in connection with the
Company's October 1995 purchase of 1,100,000 shares of the Company's Common
Stock from these two individuals at $2.00 per share (the balance of $860,000
is payable in installments of $40,000 per month and bears interest at 6% per
annum), and (ii) repayment of a bridge loan in the amount of $600,000 used
by the Company for working capital, bearing interest at 10% per annum due
the earlier of the closing of the Offering or May 1998. See "Certain
Transactions."

The Company estimates, but cannot assure, that the net proceeds of the
Offering, together with existing cash resources and available credit facilities,
will be sufficient to fund the Company's estimated cash requirements for at
least 12 months following the Offering. Pending application, the net proceeds
may be invested in short-term interest bearing obligations. Any funds received
by the Company from exercise of the Overallotment Option or the Representatives'
Warrants will be added to working capital.

12
<PAGE>
SELECTED FINANCIAL DATA

The financial information of the Company set forth below for the two years
ended June 30, 1995 and 1996 has been derived from the Company's audited
financial statements included herein. Interim information for the nine months
ended March 31, 1996 and 1997 has been derived from unaudited financial
statements which are also included herein. The results of operations for the
nine months ended March 31, 1997 are not necessarily indicative of the results
to be expected for the year ending June 30, 1997. The financial information
should be read in conjunction with the financial statements, related notes and
other financial information included elsewhere in this Prospectus. In the
opinion of management of the Company, the unaudited financial statements have
been prepared on the same basis as the audited financial statements and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial position and the results of operations for
these periods. This data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes thereto included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
UNAUDITED
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
--------------------------- ------------------------------
1996 1995 1997 1996
------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................................... $ 7,641,539 $ 5,027,278 $ 9,067,049 $ 5,651,707
Gross profit........................................ 1,819,202 1,276,968 2,981,910 1,409,201
Operating income (loss)............................. (637,288) 134,515 588,140 100,069
Interest expense.................................... 349,560 121,704 152,340 167,892
Net income (loss)................................... $ (983,462) $ 23,418 $ 343,422 $ (65,391)
------------- ------------ --------------- -------------
------------- ------------ --------------- -------------
Weighted average shares outstanding................. 5,792,663 5,792,663 5,792,663 5,792,663
Net income (loss) per share......................... $ (.17) $ -- $ .06 $ (.01)
</TABLE>

<TABLE>
<CAPTION>
UNAUDITED
AT MARCH 31, AS
1997 ADJUSTED(1)
--------------- -------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)......................................................... $ (212,305) $ 3,843,975
Total assets...................................................................... 7,961,873 11,485,873
Long-term debt.................................................................... 409,974 409,974
Total liabilities................................................................. 5,057,140 4,357,140
Shareholders' equity.............................................................. 2,904,733 7,128,733
</TABLE>

- ------------------------

13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS AND ORGANIZATION

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
Organic Food Products, Inc.

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.

Prospective purchasers of the Common Stock should carefully consider the
following information as well as other information contained in this Prospectus
before making an investment in the Common Stock. Information contained in this
Prospectus 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.,
"Business--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, such as the information
contained in "Risk Factors," could also cause actual results to vary materially
from the future results covered in such forward-looking statements.

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 Prospectus.
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

14
<PAGE>

forth below present the historical results of operations of OFP for the years
ended June 30, 1996 and 1995. In addition, the analysis discusses the pro forma
results of operations of OFP and GVN on a pro forma combined basis for the years
ended June 30, 1996 and 1995, and for the nine month period ended March 31,
1996.

YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995

REVENUES

OFP sales increased from $5,027,000 in 1995 to $7,642,000 in 1996, a 52.0%
increase. OFP's sales increased due to further penetration of its branded
products into health food stores, and the introduction of three new product
categories. The new product categories were a canned tomato line, introduced in
September, 1995, a dried boxed cut pasta line, introduced in May, 1995, and a
line of organic canned meals for children introduced in March, 1995. OFP also
had an approximately $1,000,000 increase in industrial sales of organic fruit
raw materials. The Company, in the current fiscal year, has phased out the sale
of organic fruit, and in the future will be offering only raw materials that are
consistent with food ingredients used in its own products.

On a pro forma basis, for the combined operations of OFP and GVN, revenues
increased 65.2% from $8,133,000 in 1995 to $13,436,000 in 1996. GVN's sales
increased from $3,106,000 to $5,794,000, an 86.5% increase. GVN's sales
increased due to further penetration of its branded products into club stores
and chain grocery stores occasioned by expanded marketing efforts which were
funded by equity financings. GVN also increased its number of product offerings,
which increased its shelf space in retail stores.

COST OF GOODS SOLD

OFP's cost of goods sold increased to $5,822,000, 76.2% of sales in 1996,
from $3,750,000, 74.6% of sales in 1995. This percentage increase was related to
sales of a higher proportion of lower gross profit bulk products sold in 1996
and a co-packer relationship change which resulted in higher co-packer charges.

On a pro forma basis the combined cost of goods sold of OFP and GVN
increased to $10,521,000 or 78.3% of sales in 1996 from $6,079,000 or 74.7% of
sales in 1995. GVN's cost of goods sold increased to $4,669,000, 81.1% of sales
in 1996, from $2,329,000, 75.0% of sales in 1995. This percentage increase was
related to the reformulating of GVN's pasta sauces to provide a more marketable
product, the relocation of GVN's factory and certain retooling of its
manufacturing process.

SALES AND MARKETING EXPENSES

OFP's selling and marketing expenses increased $509,000 in 1996 from
$445,000 in 1995 to $954,000, an increase of 114.5%. OFP's increase in selling
and marketing expenses related to expenses for advertising, product development,
samples and sales materials. In addition, OFP incurred manufacturer's
chargebacks of $424,000, which represent reductions in product prices to
customers in order to encourage increased product purchases in new markets.

On a pro forma basis, the combined sales and marketing expenses of OFP and
GVN were $2,186,000, or 16.3% of sales in 1996 versus $666,000, or 8.2% in 1995.
The percentage increase was primarily due to the implementation of a new
marketing program by GVN in 1996 which included the payment of slotting fees
(payments to retailers to obtain store shelf space for products), totaling
approximately $473,000, in-store food demonstration fees of approximately
$200,000, and increases in broker commissions and sales and marketing salaries
of approximately $330,000 together with the additional costs discussed above.

GENERAL AND ADMINISTRATIVE EXPENSES

OFP's general and administrative expenses increased $547,000 or 78.4% from
$698,000 in 1995, to $1,245,000 in 1996. The increase is primarily attributed to
salary increases for existing personnel and

15
<PAGE>

additions of personnel for expansion purposes. OFP also incurred significant
professional fees as a result of due diligence efforts to analyze other merger
and acquisition candidates prior to its June, 1996 merger with the Company.

On a pro forma basis, the combined general and administrative expenses of
OFP and GVN increased to $1,878,000, or 14.0% of sales in 1996 from $900,000, or
11.1% of sales in 1995. In addition to the increases in costs discussed above,
these expenses included the pro forma amortization of goodwill in the
approximate amount of $118,000 per year.

RESTRUCTURING CHARGE

OFP's restructuring charges were $258,000 in 1996, which were comprised of
costs incurred in eliminating duplicate product, personnel, property, and
equipment expenses following the June, 1996 merger. The principal costs included
$178,000 for elimination of redundant inventory, $59,000 in severance pay
benefits and $21,000 for disposal of excess equipment and miscellaneous
expenses.

On a pro forma basis, combined restructuring charges of OFP and GVN totaled
$451,000 in 1996. This was comprised of $183,000 for elimination of redundant
inventory, $190,000 in severance pay benefits, and $78,000 for disposal of
excess equipment and miscellaneous expenses.

INTEREST EXPENSE

OFP's interest expense increased $227,000 to $349,000 in 1996 from $122,000
in 1995. This increase was due to a change in the co-packer relationship by OFP,
wherein the co-packer charged a financing fee for carrying product it
manufactured on behalf of OFP. This financing fee amounted to approximately
$230,000 in 1996.

On a pro forma basis, combined interest expense of OFP and GVN totaled
$404,000 in 1996 versus $125,000 in 1995. In addition to the $230,000 increase
in OFP's interest expense, GVN's interest expense increase by approximately
$50,000 due to debt incurred in the repurchase of 1,100,000 shares of Common
Stock prior to the June, 1996 merger with the Company. See "Certain
Transactions."

NINE MONTH PERIOD ENDED MARCH 31, 1997 COMPARED TO NINE MONTH
PERIOD ENDED MARCH 31, 1996

REVENUES

OFP's revenues for the nine month period ended March 31, 1997 were
$9,067,000 compared to $5,652,000 in 1996, an increase of $3,415,000. The
revenues for the nine month period ended March 31, 1997 include the revenues of
GVN for the entire period.

On a pro forma combined basis, revenues for OFP and GVN decreased $773,000,
or 8% for the nine month period ended March 31, 1997 versus 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. 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.

16
<PAGE>
COST OF GOODS SOLD

OFP's cost of goods sold for the nine month period ended March 31, 1997 was
$6,085,000, or 67.1% of sales, versus $4,243,000, or 75.1% of sales for the same
period in 1996. The cost of goods sold for the nine month period ended March 31,
1997 include 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 the
nine month period ended March 31, 1996 was $7,681,000, which is $1,596,000 more
than the same period in 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 the nine month period ended March 31,
1997 was $1,497,000, or 16.5% of sales, versus $464,000, or 8.2% of sales for
the same period in 1996. The sales and marketing expense for the nine month
period ended March 31, 1997 include the sales and marketing expense of GVN for
the entire period.

On a pro forma combined basis, sales and marketing expense of OFP and GVN
for the nine month period ended March 31, 1996 was $996,000, a decrease of
$501,000 over the same period in 1997. This appears to be an increase of
$501,000 in expenses in 1997 over 1996 however, it is important to note that
these expenses were higher in the fourth quarter of the year ended June 30,
1996. Sales and marketing expenses were 16.3% of sales for the year ended June
30, 1996 versus the current rate of 16.5%. Accordingly, the current year's
expenses are consistent with the prior year's expenses.

GENERAL AND ADMINISTRATIVE EXPENSES

OFP's general and administrative expenses for the nine month period ended
March 31, 1997 were $897,000, or 9.9% of sales, versus $845,000, or 15.0% of
sales for the same period in 1996. The general and administrative expenses for
the nine month period ended March 31, 1997 include the general and
administrative expenses of GVN for the entire period.

On a pro forma combined basis, the general and administrative expenses for
the nine month period ended March 31, 1996 were $1,198,000, which is $301,000
more than the same period in 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. Management anticipates increases general and
administrative expenses to support expansion into new markets and new product
lines.

INTEREST EXPENSE

OFP's interest expense for the nine month period ended March 31, 1997 was
$152,000 versus $167,000 for the same period in 1996. The interest expense for
the nine month period ended March 31, 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 the
nine month period ended March 31, 1996 was $205,000, which is $53,000 more than
the same period in 1997. The interest expense for the nine month period ended
March 31, 1997 includes approximately $60,000 of interest related to $700,000 of
notes payable which are scheduled to be repaid from the proceeds of the Offering
(see "Use of Proceeds"). The balance of the interest expense is the result of
the Company's revolving line

17
<PAGE>

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.

LIQUIDITY AND CAPITAL RESOURCES

The Company will use capital raised from the Offering 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. In
addition, capital will be used to reduce existing debt and provide cost savings
related thereto.

Equipment purchases will be used for retooling and to acquire additional
packaging equipment to convert production from boxed cases to shrink wrap cases.

During the nine-month period ended March 31, 1997, the Company financed its
operations from current sales and the resulting net profit. 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 $1,688,923 at March 31, 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, as discussed
above.

During the nine-month period March 31, 1997, capital equipment was purchased
increasing property by $280,000 to $1,091,082. Debt to related parties was
reduced by $322,000, payables were reduced by $423,000 and $78,000 of Common
Stock was retired. See "Certain Transactions". Also, $211,000 was expended in
connection with the Offering. Additional capital was used to promote new product
lines, and improve markets for existing lines. Receivables increased by $327,000
to $1,145,252, and inventories increased by $1,580,000 to $3,014,630. The
Company has entered into fixed price contracts covering approximately 2,000,000
pounds of organic tomatoes, which required payments of approximately $900,000,
of which $386,775 remains due and payable on or before July 30, 1997. See
"Business--Litigation."

The Company believes that the net proceeds of this Offering, together with
its existing cash resources and available credit facilities, will be sufficient
to fund the Company's estimated cash requirements for at least 12 months
following the Offering. 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.

18
<PAGE>
BUSINESS

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 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. See "Certain
Transactions."

STRATEGY

(i) OFFER ADDITIONAL ORGANIC FOOD PRODUCTS. Since its merger with OFP, the
Company has added organic fruit juices and will add organic grill sauces and
organic frozen entrees to its product offerings in September 1997. 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. Although it has done so in the past,
the Company does not currently manufacture food products for others and has no
pending agreements or arrangements to do so.

(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. Upon completion of the Offering, the Company intends to select
additional regional distributors and

19
<PAGE>
independent food brokers, offer advertising concessions and pay retail store
slotting fees in order to increase its club store and grocery store sales
throughout the United States. See "Use of Proceeds."

(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, fettucini, 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.

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 will introduce 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. The Company will introduce (i) three low fat organic frozen
entrees, black bean and corn ravioli, wild mushroom ravioli and roasted
vegetable ravioli in August 1997, (ii) three organic salad dressings, sesame
seed, sun dried tomato and roasted garlic in September 1997 (iii) two organic
fruit based salsas, roasted pineapple and tropical mango in September 1997 and
(iv) two organic grill sauces, hot dog and hamburger sauce and roasted pineapple
sauce in September 1997.

20
<PAGE>
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 two customers (Price/Costco and Stow Mills) accounted for
20.6% and 10.4%, respectively of the Company's revenues for the nine months
ended March 31, 1997. A loss of any of these customers would have a material
adverse effect on the Company's operations.

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. The Company previously contracted for 2,000,000 pounds of organic
tomatoes and is required to pay the remaining $386,775 on the contract by July
30, 1997. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Litigation."

Two suppliers, Sun Garden Packing Company and Gilroy Canning Company, each
accounted for 10% or more of the Company's purchases for the nine months ended
March 31, 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

21
<PAGE>
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.

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.

PROPERTIES

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. Commencing in March 1997, the rental rate will increase 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.

22
<PAGE>
LITIGATION

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.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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

<TABLE>
<CAPTION>
OFFICER
OR
DIRECTOR
NAME POSITION HELD WITH THE COMPANY AGE SINCE
- --------------------------------------------------- ----------------------------------------- --- -----------
<S> <C> <C> <C>
Floyd R. Hill(1)................................... Chief Executive Officer and Director 53 1995

John Battendieri(1)................................ President and Director 50 1996

Donald L. Ladwig................................... Vice President--Marketing and Sales 49 1995

Perry T. Valassis.................................. Chief Financial Officer 52 1997

Kenneth A. Steel Jr.(1)(2)......................... Director 39 1996

Charles B. Bonner(2)............................... Director 55 1996

Charles R. Dyer(2)................................. Director 53 1996
</TABLE>

- ------------------------

(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.

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
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.

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,

23
<PAGE>
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.

EXECUTIVE COMPENSATION

The following table discloses compensation paid to certain of the Company's
executive officers for the years ended June 30, 1995 and 1996.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------------------
AWARDS
ANNUAL COMPENSATION --------------- PAYOUTS
----------------------------------------- -------------
(E) (F)
(A) OTHER ANNUAL RESTRICTED (G) (H)
NAME AND (B) (C) (D) COMPEN- STOCK OPTIONS/ LTIP
PRINCIPAL POSITION YEAR SALARY($) BONUS($) SATION($) AWARD(S)($) SARS(#) PAYOUTS($)
- -------------------------- --------- ------------ ------------- ------------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Floyd R. Hill............. 1995 $ 85,000 -0- -0- -0- -0- -0-
Chief Executive Officer 1996 $ 110,000 -0- -0- -0- 200,000(1) -0-
John Battendieri.......... 1995 $ 220,000(2) -0- -0- -0- -0- -0-
President 1996 $ 110,000(2) -0- -0- -0- -0-

(I)
(A) ALL OTHER
NAME AND COMPEN-
PRINCIPAL POSITION SATION($)
- -------------------------- -----------
<S> <C>
Floyd R. Hill............. -0-
Chief Executive Officer -0-
John Battendieri.......... -0-
President 250,000(3)
</TABLE>

- --------------------------

(1) See "--1995 Stock Option Plan" and "Principal Shareholders."

(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

24
<PAGE>
Common Stock at $2.50 per share exercisable until July 2003. Options to purchase
a total of 100,000 of such shares vest in June 1997, 50,000 options vest in June
1998, and the remaining 50,000 options vest in June 1999.

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 March 31, 1997, an
aggregate of $64,900 had been loaned to Mr. Battendieri. The Company agreed to
the loan arrangement as a negotiated part of its merger with OFP.

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 the date of this Prospectus, 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.

25
<PAGE>
PRINCIPAL SHAREHOLDERS

The following table sets forth certain information with respect to the
ownership of the Company's Common Stock as of May 31, 1997 by (i) each person
who is known by the Company to own of record or beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors and (iii) all
directors and officers of the Company as a group. The persons listed in the
table have sole voting and investment powers with respect to the shares of
Common Stock, and the address of each person is in care of the Company at 550
Monterey Road, Morgan Hill, California 95037.

<TABLE>
<CAPTION>
PERCENT PERCENT
AMOUNT OF OF CLASS OF CLASS
NAME OWNERSHIP PRIOR TO OFFERING AFTER OFFERING
- -------------------------------------------------------------------- ---------- ------------------- ---------------
<S> <C> <C> <C>
Floyd R. Hill(1).................................................... 351,200 6.0 4.9
John Battendieri.................................................... 2,102,499 35.7 29.3
Kenneth A. Steel(2)................................................. 304,163 5.2 4.2
Charles B. Bonner(3)................................................ 5,000 * *
Charles R. Dyer(4).................................................. 32,000 * *
Dean E. Nicholson................................................... 450,000 7.6 6.3
Steven A. Reedy..................................................... 450,000 7.6 6.3
Spelman & Co., Inc.(5).............................................. 400,000 7.0 5.7
All officers and directors as
a group (7 persons)(1)(2)(3)(4)................................... 2,804,862 50.7 41.0
</TABLE>

- ------------------------

* 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. Does not include options
issued in connection with Mr. Hill's employment agreement to purchase an
additional 200,000 shares of Common Stock at $2.50 per share at various
times until July 2003, which options have not yet vested. See
"Management--Executive Compensation."

(2) Includes options to purchase 30,000 shares of Common Stock at $2.00 per
share until March 2001. Does not include stock options to purchase an
additional 20,000 shares of Common Stock at $2.50 per share at any time
through May 2002, which options have not yet vested. See "Management--Stock
Option Plan" and "Certain Transactions."

(3) Includes stock options to purchase 5,000 shares of Common Stock at $2.00 per
share at any time until March 2001. Does not include options to purchase an
additional 20,000 shares of Common Stock at any time through May 2002, which
options have not yet vested. See "Management--Stock Option Plan."

(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, which options have not yet
vested. See "Management--Stock Option Plan."

(5) Represents common stock purchase warrants to purchase (i) 200,000 shares of
Common Stock at $2.00 per share at any time until December 31, 2002 and (ii)
200,000 shares at $2.50 per share at any time until July 31, 2003. See
"Underwriting."

26
<PAGE>
CERTAIN 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 is required to pay an
additional $700,000 of the purchase price the earlier of November 1997 or the
closing of the Offering. The balance of $860,000 is payable in installments of
$40,000 per month with interest at the rate of 6% per annum. See "Use of
Proceeds."

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.

The Company previously leased certain machinery and equipment from Messrs.
Nicholson and Reedy, paying to them an aggregate of $81,596 and $71,992 for the
years ending June 30, 1995 and 1994, respectively. In July 1995, Messrs. Reedy
and Nicholson gratuitously contributed the machinery and equipment to the
Company's capital.

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 "Management--Executive Compensation."

In June 1996, the Company cancelled 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 March 31, 1997, the balance due to Mr. Nicholson under the promissory note
was $110,851.

In May 1997, the Company borrowed $600,000 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 Offering or May 1998. As additional
consideration for the loans, the Company issued to the lenders 200,000 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. If the
loans are not paid by December 1, 1997, each month thereafter 20% of the
warrants convert into Common Stock at no cost to the lenders. The lenders have
the option to waive interest on the loans in exchange for an additional
aggregate of 20,000 warrants carrying the same terms as the initial 200,000
warrants. The loans will be repaid with proceeds of the Offering. See "Use of
Proceeds."

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.

27
<PAGE>
DESCRIPTION OF SECURITIES

COMMON STOCK

The Company is authorized to issue 20,000,000 shares of no par value Common
Stock. Upon issuance, the shares of Common Stock are not subject to further
assessment or call. The holders of Common Stock are entitled to one vote for
each share held of record on each matter submitted to a vote of shareholders.
Cumulative voting for election of directors is permitted. Subject to the prior
rights of any series of Preferred Stock which may be issued by the Company in
the future, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor, and, in the event of the liquidation, dissolution or winding
up of the Company, are entitled to share ratably in all assets remaining after
payment of liabilities. Holders of Common Stock have no preemptive rights and
have no rights to convert their Common Stock into any other securities. The
outstanding Common Stock is, and the Common Stock to be outstanding upon
completion of the Offering will be, validly issued, fully paid and
nonassessable.

PREFERRED STOCK

The Company is authorized to issue 5,000,000 shares of no par value
preferred stock (the "Preferred Stock"). The Preferred Stock may, without action
by the shareholders of the Company, be issued by the Board of Directors
("Board") from time to time in one or more series for such consideration and
with such relative rights, privileges and preferences as the Board may
determine. Accordingly, the Board has the power to fix the dividend rate and to
establish the provisions, if any, relating to voting rights, redemption rates,
sinking funds, liquidation preferences and conversion rights for any series of
Preferred Stock issued in the future.

It is not possible to state the actual effect of any other authorization of
Preferred Stock upon the rights of holders of Common Stock until the Board
determines the specific rights of the holders of any other series of Preferred
Stock. The Board's authority to issue Preferred Stock also provides a convenient
vehicle in connection with possible acquisitions and other corporate purposes
but could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock. Accordingly, the issuance of
Preferred Stock may be used as an "anti-takeover" device without further action
on the part of the shareholders of the Company and may adversely affect the
holders of the Common Stock. See "Risk Factors--Control by Management;
Authorization and Issuance of Preferred Stock; Prevention of Changes in
Control."

COMMON STOCK ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, there will be 6,597,913 shares of Common
Stock outstanding, of which 1,300,000 shares have been registered in the
Offering, and the remaining 5,297,913 shares have not been registered in the
Offering and are "restricted securities" under Rule 144 of the 1933 Act. In
general, under Rule 144, a person (or persons whose shares are aggregated) who
has satisfied a one-year holding period may, under certain circumstances, sell
within any three-month period the number of shares which does not exceed the
greater of one percent of the then outstanding shares of Common Stock
(approximately 65,979 shares immediately after the Offering assuming no exercise
of the Representatives' Warrants, the Overallotment Option, or other outstanding
stock options or common stock purchase warrants) or the average weekly trading
volume during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of shares by a person without any quantity
limitation after the securities have been held for two years. All 5,297,913
shares of Common Stock are restricted securities but may be sold under Rule 144,
commencing 90 days after the effective date of the Offering. The Company is
unable to predict the effect that any sales, under Rule 144 or otherwise, may
have on the then prevailing market price of the Common Stock. All of the
Company's shareholders have agreed not to sell or otherwise dispose of any of
their shares of Common Stock for a period of 12 months from the date of

28
<PAGE>
this Prospectus, without the prior written consent of the Representatives. The
Company has also granted certain demand and piggy-back registration rights to
the Representatives with respect to the Representatives' Warrants as well as the
Common Stock issuable upon exercise of the Representatives' Warrants.

TRANSFER AGENT

The Company has appointed Corporate Stock Transfer, Inc., 370 17th Street,
Suite 2350, Denver, Colorado 80202, as the transfer agent for the Common Stock.

DIVIDENDS

The Company has not paid dividends on its Common Stock since inception and
does not plan to pay dividends in the foreseeable future. Earnings, if any, will
be retained to finance growth.

LIMITATION ON LIABILITIES

The Company's Articles of Incorporation provide that liability of directors
to the Company for monetary damages is eliminated to the full extent provided by
California law. Under California law, a director is not personally liable to the
Company or its shareholders for monetary damages for breach of fiduciary duty as
a director except for liability (i) for any breach of the director's duty of
loyalty to the Company or its shareholders, (ii) for acts or omissions not in
good faith or that involve intentional misconduct or a knowing violation of law,
(iii) for authorizing the unlawful payment of a dividend or other distribution
on the Company's capital stock or the unlawful purchases of its capital stock,
or (iv) for any transaction from which the director derived any improper
personal benefit.

The effect of this provision in the Articles of Incorporation is to
eliminate the rights of the Company and its shareholders (through shareholders'
derivative suits on behalf of the Company) to recover monetary damages from a
director for breach of the fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior) except in the
situations described in clauses (i) through (iv) above. This provision does not
limit or eliminate the rights of the Company or any shareholder to seek
non-monetary relief, such as an injunction or rescission, in the event of a
breach of a director's duty of care or any liability for violation of the
federal securities laws.

29
<PAGE>
UNDERWRITING

The Underwriters named below have severally agreed, subject to the terms and
conditions of the Underwriting Agreement, to purchase from the Company the
number of shares set forth opposite their names.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Sentra Securities Corporation....................................................
Spelman & Co., Inc...............................................................
Paradise Valley Securities, Inc..................................................

----------
Total........................................................................ 1,300,000
----------
----------
</TABLE>

The Company has been advised by the Representatives that the Underwriters
propose to offer the Common Stock purchased by them directly to the public at
the public offering price set forth on the cover page of this Prospectus and to
certain dealers at a price that represents a concession of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession within the
discretion of the Representatives. The Underwriters are committed to purchase
and pay for all of the Common Stock if any Common Stock is taken. After the
initial public offering of the Common Stock, the offering price and the selling
terms may be changed by the Underwriters.

The Company has granted the Representatives an Overallotment Option,
exercisable within 30 days from the date of this Prospectus, to purchase up to
195,000 shares of Common Stock solely to cover overallotments.

The Underwriters will purchase the Common Stock (including Common Stock
subject to the Overallotment Option) from the Company at a price of $3.60 per
share. In addition, the Company has agreed to pay to Sentra Securities
Corporation and Spelman & Co., Inc. a 3% nonaccountable expense allowance on the
aggregate initial public offering price of the shares of Common Stock, including
shares subject to the Overallotment Option, none of which has been paid.

The Company has agreed to issue the Representatives' Warrants to the
Representatives for a consideration of $100. The Representatives' Warrants are
exercisable at any time in the four-year period commencing one year from the
date of this Prospectus to purchase up to 130,000 shares of Common Stock for
$4.80 per share. The Representatives' Warrants are not transferable (nor may
they be sold, hypothecated or pledged) for one year from the date of this
Prospectus except (i) to an Underwriter or a partner or officer of an
Underwriter or (ii) by will or operation of law. During the term of the
Representatives'

30
<PAGE>
Warrants, the holder thereof is given the opportunity to profit from a rise in
the market price of the Company's securities. The Company may find it more
difficult to raise additional equity capital while the Representatives' Warrants
are outstanding. At any time at which the Representatives' Warrants are likely
to be exercised, the Company would probably be able to obtain additional equity
capital on more favorable terms. The Company has registered the Common Stock
underlying the Representatives' Warrants under the 1933 Act. If the Company
files a registration statement relating to an equity offering under the
provisions of the 1933 Act at any time during the five-year period following the
date of this Prospectus, the holders of the Representatives' Warrants or
underlying Common Stock will have the right, subject to certain conditions, to
include in such registration statement, at the Company's expense, all or part of
the underlying Common Stock at the request of the holders. Additionally, the
Company has agreed, for a period of five years commencing on the date of this
Prospectus, on demand of the holders of a majority of the Representatives'
Warrants or the Common Stock issued or issuable thereunder, to register the
Common Stock underlying the Representatives' Warrants one time at the Company's
expense. The registration of securities pursuant to the Representatives'
Warrants may result in substantial expense to the Company at a time when it may
not be able to afford such expense and may impede future financing. The Company
may find that the terms on which it could obtain additional capital may be
adversely affected while the Representatives' Warrants are outstanding. The
number of shares of Common Stock covered by the Representatives' Warrants and
the exercise price are subject to adjustment under certain events to prevent
dilution.

In connection with the Offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. Stabilizing transactions consist of
certain bids or purchases for the purposes of preventing or retarding a decline
in the market price of the Common Stock; and syndicate short positions involve
the sale by the Underwriters of a greater number of shares of Common Stock than
they are required to purchase from the Company in the Offering. The Underwriters
also may impose a penalty bid, whereby selling concessions allowed to syndicate
members of other broker-dealers in respect of the Common Stock sold in the
Offering for their account may be reclaimed by the syndicate if such securities
are repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Stock, which may be higher than the price that might otherwise prevail in
the open market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected on the SmallCap Market.

The initial public offering price of the Common Stock was determined by
negotiations between the Company and the Representatives and does not
necessarily bear any relationship to recognized criteria for the valuation of
such securities. Factors considered in such negotiations included the Company's
current level of revenues and earnings, its prospects for future growth based
upon proceeds of the Offering, the nature of the Company's products, the organic
food products industry in general and the level of competition within the
industry. There can be no assurance that a regular trading market for the Common
Stock will develop or continue after the Offering or, if such a market develops,
that the market price will exceed the offering price.

Spelman & Co., Inc. ("Spelman") acted as the Company's Placement Agent in
two prior private placements of the Company's securities pursuant to which
Spelman sold (i) 1,350,000 shares of the Company's Common Stock at $2.00 per
share and (ii) 823,500 shares of the Company's Common Stock at $2.50 per share.
In connection with the first private placement completed in November 1995, the
Company paid Spelman an aggregate of $351,000 in cash and issued to it common
stock purchase warrants to purchase 200,000 shares at $2.00 per share
exercisable at any time until December 31, 2002. In connection with the second
private placement completed in July 1996, the Company paid Spelman an aggregate
of $267,638 in cash and issued to it common stock purchase warrants to purchase
an additional 200,000 shares at $2.50 per share exercisable at any time until
July 31, 2003. See "Principal Shareholders."

31
<PAGE>
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the 1933 Act, or to contribute to
payments that any Underwriter may be required to make in respect thereof. The
Representatives do not intend to sell any of the Common Stock to accounts over
which they exercise discretionary authority.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Gary A. Agron, Englewood, Colorado. Certain legal
matters in connection with the Offering will be passed upon for the
Representatives by Luce, Forward, Hamilton & Scripps LLP, San Diego, California.

EXPERTS

The financial statements of the Company for the years ended June 30, 1995
and 1996, appearing in this Prospectus, have been audited by Semple & Cooper
LLP, independent certified public accountants, as stated in their report
appearing herein, and have been so included herein in reliance upon such report
given upon the authority of that firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (the "Registration
Statement") under the 1933 Act with respect to the securities offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain items of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered by this Prospectus, reference
is made to such Registration Statement and the exhibits thereto which may be
inspected without charge at the public reference facilities of the Commission at
Judiciary Plaza, 450 Fifth Street N.W., Washington, DC 20549; Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661; 7 World Trade
Center, New York, NY 10048; and 5670 Wilshire Boulevard, Los Angeles, CA 90036.

The Company will be subject to the informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and, in accordance therewith,
will file reports, proxy statements and other information with the Commission.
Such reports, proxy statements and other information may be inspected at public
reference facilities of the Commission at Judiciary Plaza, 450 Fifth Street
N.W., Washington, DC 20549; Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, IL 60661; 7 World Trade Center, New York, NY 10048; and
5670 Wilshire Boulevard, Los Angeles, CA 90036. Copies of such material can be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street N.W., Washington, DC 20549 at prescribed rates.

The Company will furnish annual reports to its shareholders which will
include year end audited financial statements. The Company will also furnish to
its shareholders quarterly reports and such other reports as may be authorized
by its Board of Directors.

32
<PAGE>
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, 1996, and the related statements of operations, changes in
shareholders' equity, and cash flows for the years ended June 30, 1996 and 1995.
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, 1996, and the results of its operations, changes in shareholders'
equity, and its cash flows for the years ended June 30, 1996 and 1995, in
conformity with generally accepted accounting principles.

SEMPLE & COOPER, LLP

Certified Public Accountants

Phoenix, Arizona
February 28, 1997

F-1
<PAGE>
ORGANIC FOOD PRODUCTS, INC.
BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
JUNE 30,
1996
------------ MARCH 31,
1997
------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Current Assets:
Cash................................................................................ $ 191,073 $ 200
Accounts receivable, net (Notes 1 and 4)............................................ 818,342 1,145,252
Inventory (Notes 1, 2, 4 and 6) 1,429,743 3,014,630
Prepaid expenses.................................................................... 25,240 28,010
Advances to shareholder (Note 3).................................................... -- 64,914
Income tax refund receivable........................................................ 259,447 134,355
Deferred tax asset (Note 9) -- 47,500
------------ ------------
Total Current Assets.............................................................. 2,723,845 4,434,861
------------ ------------
Property and Equipment: (Notes 1, 4 and 5)............................................
Computer software................................................................... 24,431 57,757
Leasehold improvements.............................................................. 109,182 150,471
Machinery and equipment............................................................. 595,396 795,997
Office equipment.................................................................... 51,781 61,256
Printing plates..................................................................... 12,738 12,997
Vehicles............................................................................ 16,088 12,604
------------ ------------
809,616 1,091,082
Less: accumulated depreciation...................................................... (59,030) (138,947)
------------ ------------
750,586 952,135
------------ ------------
Other Assets:
Deposits and other.................................................................. 24,003 9,378
Deferred offering costs (Notes 1 and 14)............................................ 71,225 282,280
Goodwill, net (Note 1).............................................................. 2,372,175 2,283,219
------------ ------------
2,467,403 2,574,877
------------ ------------
Total Assets...................................................................... $ 5,941,834 $ 7,961,873
------------ ------------
------------ ------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

F-2
<PAGE>
ORGANIC FOOD PRODUCTS, INC.
BALANCE SHEETS (CONTINUED)

LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1997
------------- -------------
<S> <C> <C>
(UNAUDITED)
Current Liabilities:
Notes payable--current portion (Note 4)........................................... $ 1,048,595 $ 1,688,923
Notes payable--related parties--current portion (Note 3).......................... 333,732 1,251,609
Capital lease obligations--current portion (Notes 1 and 5)........................ 5,323 7,752
Accounts payable.................................................................. 2,030,234 1,606,934
Accrued wages and taxes........................................................... 74,499 91,948
------------- -------------
Total Current Liabilities....................................................... 3,492,383 4,647,166
------------- -------------
Long-Term Liabilities:
Notes payable--long-term portion (Note 4)......................................... 512 --
Notes payable--related parties--long-term portion (Note 3)........................ 1,540,541 361,729
Capital lease obligations--long-term portion (Notes 1 and 5)...................... 1,408 18,745
Deferred income taxes payable (Note 9)............................................ -- 29,500
------------- -------------
1,542,461 409,974
------------- -------------
Commitments (Notes 3 and 6)......................................................... -- --

Shareholders' Equity: (Note 8)......................................................
Common stock...................................................................... 2,317,400 3,971,721
Accumulated deficit from S Corporation............................................ (1,410,410) (1,410,410)
Retained earnings................................................................. -- 343,422
------------- -------------
906,990 2,904,733
------------- -------------
Total Liabilities and Shareholders' Equity...................................... $ 5,941,834 $ 7,961,873
------------- -------------
------------- -------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

F-3
<PAGE>
ORGANIC FOOD PRODUCTS, INC.
STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTH PERIODS ENDED
-------------------------- --------------------------
JUNE 30, JUNE 30, MARCH 31, MARCH 31,
1996 1995 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Revenues................................................. $ 7,641,539 $ 5,027,278 $ 9,067,049 $ 5,651,707
Cost of Goods Sold....................................... 5,822,337 3,750,310 6,085,139 4,242,506
------------ ------------ ------------ ------------
Gross Profit............................................. 1,819,202 1,276,968 2,981,910 1,409,201
------------ ------------ ------------ ------------
Sales and Marketing Expense.............................. 954,108 444,862 1,497,059 464,083
General and Administrative Expenses...................... 1,244,914 697,591 896,711 845,049
Restructuring charge (Note 13)........................... 257,468 -- -- --
------------ ------------ ------------ ------------
2,456,490 1,142,453 2,393,770 1,309,132
------------ ------------ ------------ ------------
Income (Loss) from Operations............................ (637,288) 134,515 588,140 100,069
Interest Income (Expense), Net........................... (349,122) (121,704) (151,338) (167,454)
Other Income (Expense), Net.............................. 2,948 10,607 13,712 1,994
------------ ------------ ------------ ------------
Income (Loss) before Provision for Income Taxes.......... (983,462) 23,418 450,514 (65,391)
------------ ------------ ------------ ------------
Provision for Income Tax Benefit (Expense):
(Note 1)
--current............................................ -- -- (125,092) --
--deferred........................................... -- -- 18,000 --
------------ ------------ ------------ ------------
-- -- (107,092) --
------------ ------------ ------------ ------------
Net Income (Loss)........................................ (983,462) 23,418 $ 343,422 (65,391)
------------
------------
Pro forma income tax (expense) benefit
(unaudited)............................................. 334,400 (5,600) 15,000
------------ ------------ ------------
Pro forma Net Income (Loss) after Income Tax Adjustment
(unaudited)............................................. $ (649,062) $ 17,818 $ (50,391)
------------ ------------ ------------
------------ ------------ ------------
Earnings (Loss) per Share (Note 1)....................... $ .06
Pro forma Net Income (Loss) per Share (unaudited)........ $ (.11) $ -- $ (.01)
------------ ------------ ------------
------------ ------------ ------------
Weighted Average Number of Shares Outstanding............ 5,792,663 5,792,663 5,792,663 5,792,663
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

F-4
<PAGE>
ORGANIC FOOD PRODUCTS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995 AND
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL DEFICIT RETAINED SHAREHOLDERS'
------------------------ PAID-IN FROM S EARNINGS EQUITY
SHARES AMOUNT CAPITAL CORPORATION (DEFICIT) (DEFICIT)
---------- ------------ ----------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994......... 2,250,000 $ 67,400 $ 8,571 $ (458,937) $ -- $ (382,966)
Net income for the year ended
June 30, 1995.................. -- -- -- 23,418 -- 23,418
---------- ------------ ----------- ------------ ---------- -------------
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 14,158 -- -- -- 14,158
Net income for the nine month
period ended March 31, 1997
(unaudited).................... -- -- -- -- 343,422 343,422
---------- ------------ ----------- ------------ ---------- -------------
Balance at March 31, 1997........ 5,297,913 $ 3,971,721 $ -- $ (1,410,410) $ 343,422 $ 2,904,733
---------- ------------ ----------- ------------ ---------- -------------
---------- ------------ ----------- ------------ ---------- -------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

F-5
<PAGE>
ORGANIC FOOD PRODUCTS, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTH PERIODS ENDED
---------------------------- -----------------------------
JUNE 30, JUNE 30, MARCH 31,
1996 1995 MARCH 31, 1997 1996
------------- ------------- -------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Increase (Decrease) in Cash:
Cash flows from operating activities:
Cash received from customers...................... $ 7,164,566 $ 4,736,771 $ 8,771,812 $ 5,138,654
Cash paid to suppliers and employees.............. (7,834,712) (4,411,400) (10,033,456) (5,343,288)
Interest paid..................................... (319,879) (92,023) (91,443) (167,892)
Interest received................................. 438 -- 1,002 438
Net liabilities acquired in merger................ 717,591 -- -- --
------------- ------------- -------------- -------------
Net cash provided (used) by operating
activities.................................... (271,996) 233,348 (1,352,085) (372,088)
------------- ------------- -------------- -------------
Cash flows from investing activities:
Purchase of fixed assets.......................... (17,135) (9,824) (294,457) (49,011)
Advances to shareholder........................... -- -- (64,914) --
------------- ------------- -------------- -------------
Net cash used by investing activities........... (17,135) (9,824) (359,371) (49,011)
------------- ------------- -------------- -------------
Cash flows from financing activities:
Repayment of capital lease........................ (4,532) (2,142) (3,986) (3,103)
Repayment of notes payable........................ (11,847) (170,467) (2,290) (196,267)
Repayment of notes payable--related parties....... (65,781) (173,875) (321,832) (57,299)
Proceeds from notes payable....................... 509,395 9,936 419,583 632,768
Proceeds from notes payable--related party........ 52,169 111,000 -- 44,500
Proceeds from issuance of stock................... -- -- 1,718,288 --
Purchase of treasury stock........................ -- -- (78,125) --
Deferred offering costs........................... -- -- (211,055) --
------------- ------------- -------------- -------------
Net cash provided (used) by financing
activities.................................... 479,404 (225,548) 1,520,583 420,599
------------- ------------- -------------- -------------
Net increase (decrease) in cash..................... 190,273 (2,024) (190,873) (500)
Cash at beginning of period......................... 800 2,824 191,073 800
------------- ------------- -------------- -------------
Cash at end of period............................... $ 191,073 $ 800 $ 200 $ 300
------------- ------------- -------------- -------------
------------- ------------- -------------- -------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

F-6
<PAGE>
ORGANIC FOOD PRODUCTS, INC.
STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTH PERIODS ENDED
-------------------------- --------------------------
JUNE 30, JUNE 30, MARCH 31, MARCH 31,
1996 1995 1997 1996
------------- ----------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Reconciliation of Net Income (Loss) to Net Cash Provided
(Used) by Operating Activities:
Net Income (Loss)........................................ $ (983,462) $ 23,418 $ 343,422 $ (65,391)
------------- ----------- ------------- -----------
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization........................ 18,875 13,785 207,655 20,766
Loan discount amortization........................... -- -- 60,897 --
Accrued interest added to note principal............. 29,681 29,681 -- 22,261
(Gain) loss on sale of assets........................ -- -- (2,039) --
Employment contract settlement....................... -- -- -- --
Net liabilities acquired in merger................... 717,591 -- -- --
Inventory financed through notes payable............. -- -- 222,523 --
Stock issued for director's expenses, net............ -- -- 14,158 --
Changes in Assets and Liabilities:
Accounts receivable, net............................. (245,424) (264,319) (326,910) (515,047)
Inventory............................................ (1,167,388) 340,964 (1,584,887) (600,201)
Prepaid expenses..................................... (2,077) (15,593) (2,770) (58,456)
Income tax refund receivable......................... (259,447) -- 125,092 --
Deferred tax asset................................... -- -- (47,500) --
Refundable deposits.................................. (24,003) -- 14,625 --
Accounts payable..................................... 1,599,404 75,167 (423,300) 821,113
Accrued wages and taxes.............................. 44,254 30,245 17,449 2,867
Income taxes payable--deferred....................... -- -- 29,500 --
------------- ----------- ------------- -----------
711,466 209,930 (1,695,507) (306,697)
------------- ----------- ------------- -----------
Net cash provided (used) by operating activities......... $ (271,996) $ 233,348 $ (1,352,085) $ (372,088)
------------- ----------- ------------- -----------
------------- ----------- ------------- -----------
</TABLE>

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 in the State of California 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.

INTERIM FINANCIAL STATEMENTS:

The interim financial statements for the nine month periods ended March 31,
1997 and 1996 are unaudited. In the opinion of management, such statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair representation of the results of the interim periods. The
results of operations for the nine month period ended March 31, 1997 are not
necessarily indicative of the results for the entire year.

STOCK-BASED COMPENSATION:

In 1996, the Company adopted for footnote disclosure purposes only, SFAS No.
123, "Accounting for Stock-Based Compensation", which requires that companies
measure the cost of stock-based employee compensation at the grant date based on
the value of the award and recognize this cost over the service period. The
value of the stock-based award is determined using the intrinsic value method
whereby compensation cost is the excess of the market prices of the stock at
grant date or other measurement date 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

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)
the individual accounts outstanding, and the Company's prior history of
uncollectible accounts receivable. At June 30, 1996 and March 31, 1997, an
allowance of $89,983 and $40,000 (unaudited), respectively, 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, 1996 and March 31, 1997, inventory is stated net
of an allowance for obsolete inventory, in the amounts of $107,072 and $70,000
(unaudited), respectively.

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. The Company has proposed 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, 1996 and
1995, and for the nine month periods ended March 31, 1997 and 1996, depreciation
expense was $18,875, $13,785, $118,699 (unaudited) and $20,766 (unaudited),
respectively.

A summary of the estimated useful lives is as follows:

<TABLE>
<S> <C>
Computer software.............................................. 5 years
Leasehold improvements......................................... 7 years
7 - 20
Machinery and equipment........................................ years
Office equipment............................................... 5 years
Printing plates................................................ 7 years
Vehicles....................................................... 5 years
</TABLE>

The Company is the lessee of vehicles and equipment under capital lease
agreements expiring through October, 1997. 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

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)
depreciation expense, as noted above, for the years ended June 30, 1996 and
1995, and for the nine month periods ended March 31, 1997 and 1996.

DEFERRED OFFERING COSTS:

Deferred offering costs represent costs incurred in connection with the
Company's equity offerings subsequent to the respective balance sheet dates. As
of June 30, 1996 and March 31, 1997, the Company had incurred $71,225 and
$282,280 (unaudited), respectively, in relation to these activities. Deferred
offering costs will be charged against the net proceeds from the offerings.

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 shareholder. 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.

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 nine month period ended March 31, 1997 was
$88,956. 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 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 committments to
purchase inventory is based on current market prices available to the Company.

F-10
<PAGE>
ORGANIC FOOD PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. INVENTORY:

As of June 30, 1996 and March 31, 1997, inventory consisted of the
following:

<TABLE>
<CAPTION>
JUNE 30,
1996
------------ MARCH 31,
1997
------------
(UNAUDITED)
<S> <C> <C>
Raw materials.................................................... $ 678,034 $1,854,984
Finished goods................................................... 858,781 1,229,646
------------ ------------
1,536,815 3,084,630
Less: provision for obsolete inventory........................... (107,072) (70,000)
------------ ------------
$ 1,429,743 $3,014,630
------------ ------------
------------ ------------
</TABLE>

3. RELATED PARTY TRANSACTIONS:

ADVANCES TO SHAREHOLDER:

As of March 31, 1997, the Company has advanced $64,914 to a shareholder. The
advance is unsecured, non-interest bearing, and considered short-term in nature.

NOTES PAYABLE-RELATED PARTIES:

At June 30, 1996 and March 31, 1997, notes payable-related parties, consist
of the following:

<TABLE>
<CAPTION>
JUNE 30,
1996
------------ MARCH 31,
1997
-------------
(UNAUDITED)
<S> <C> <C>
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 $40,000, including principal and interest until paid in full,
net of imputed discount of $118,411 and $57,513, (unaudited), respectively......... $ 1,441,589 $ 1,502,487
8% note payable to a corporate shareholder, with monthly payments of $7,292,
including principal and interest, due August, 1998; unsecured...................... 175,000 110,851
Various non-interest bearing notes payable to a corporate shareholder, due January,
1997; unsecured.................................................................... 10,349 --
12% note payable to a corporate shareholder, due in full January, 1997; unsecured.... 247,335 --
------------ -------------
1,874,273 1,613,338
Less: current portion................................................................ (333,732) (1,251,609)
------------ -------------
$ 1,540,541 $ 361,729
------------ -------------
------------ -------------
</TABLE>

F-11
<PAGE>
ORGANIC FOOD PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. RELATED PARTY TRANSACTIONS: (CONTINUED)
A schedule of future minimum principal payments due on notes payable
outstanding at June 30, 1996 and March 31, 1997, is as follows:

<TABLE>
<CAPTION>
YEAR ENDING
YEAR JUNE 30,
- ----------------------------------------------------------------- ------------ YEAR ENDING
MARCH 31,
------------
(UNAUDITED)
<S> <C> <C>
1997............................................................. $ 333,732 $ --
1998............................................................. 1,524,157 1,251,609
1999............................................................. 16,384 361,729
------------ ------------
$ 1,874,273 $1,613,338
------------ ------------
------------ ------------
</TABLE>

COMMITMENTS:

The Company was leasing facilities from a related party. The lease was
cancelled during February, 1996. The terms of the lease agreement required the
Company to pay common area maintenance, taxes and other costs, as well as a
discretionary base rent of approximately $4,500 per month. Rent expense under
the operating lease agreement for the nine month period ended March 31, 1996 was
$14,500 (unaudited).

4. NOTES PAYABLE:

At June 30, 1996 and March 31, 1997, notes payable consist of the following:

<TABLE>
<CAPTION>
JUNE 30, 1996
------------- MARCH 31,
1997
-------------
(UNAUDITED)
<S> <C> <C>
A 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 the outstanding
principal balance due in full November 1, 1997; collateralized by various
corporate assets.................................................................. $ -- $ 1,466,400
Non-interest bearing note payable to a supplier in five monthly installments of
$44,505, commencing June 1, 1997; unsecured....................................... -- 222,523
Three (3) lines of credit with Wells Fargo Bank totalling $1,178,000 ($546,000,
$500,000 and $132,000), interest at the bank's prime rate plus .75%, 2%, and 2%,
respectively, per annum, interest due monthly, with $1,046,000 expiring October,
1996, and the remaining $132,000 expiring February, 2001; collateralized by
various corporate assets and the personal guarantee of the corporate
shareholder....................................................................... 1,046,818 --
9.5% note payable to GMAC in monthly installments of $173, including principal and
interest, due in full September, 1997; collateralized by a vehicle................ 2,289 --
------------- -------------
1,049,107 1,688,923
Less: current portion of long-term notes payable.................................... (1,048,595) (1,688,923)
------------- -------------
$ 512 $ --
------------- -------------
------------- -------------
</TABLE>

F-12
<PAGE>
ORGANIC FOOD PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. NOTES PAYABLE: (CONTINUED)
A schedule of future minimum principal payments due on notes payable
outstanding at June 30, 1996 and March 31, 1997, is as follows:

<TABLE>
<CAPTION>
YEAR ENDING
YEAR JUNE 30,
- --------------------------------------------------------------------------- ------------ YEAR ENDING
MARCH 31,
------------
(UNAUDITED)
<S> <C> <C>
1997....................................................................... $ 1,048,595 $ --
1998....................................................................... 512 1,688,923
------------ ------------
$ 1,049,107 $1,688,923
------------ ------------
------------ ------------
</TABLE>

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 September, 1997.
As of June 30, 1996 and March 31, 1997, minimum future lease payments due under
the capital lease agreements, are as follows:

<TABLE>
<CAPTION>
YEAR
ENDING
YEAR JUNE 30,
- ------------------------------------------------------------------------------- --------- YEAR ENDING
MARCH 31,
------------
(UNAUDITED)
<S> <C> <C>
1997........................................................................... $ 7,972 $ --
1998........................................................................... 2,208 10,226
1999........................................................................... -- 5,952
2000........................................................................... -- 5,952
2001........................................................................... -- 5,952
2002........................................................................... -- 4,464
--------- ------------
Total minimum lease payments................................................... 10,180 32,546
Less: amount representing interest............................................. (3,449) (6,049)
--------- ------------
Present value of net minimum lease payments.................................... 6,731 26,497
Less: current maturities of capital lease obligations.......................... (5,323) (7,752)
--------- ------------
Non-current maturities of capital lease obligations............................ $ 1,408 $ 18,745
--------- ------------
--------- ------------
</TABLE>

Interest rates under the capital lease obligations range from ten percent
(10%) 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 tomatoes over the next year at
contracted prices. At March 31, 1997, these future committed purchases
aggregated approximately $387,000 (unaudited), based on the contracted prices.

F-13
<PAGE>
ORGANIC FOOD PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. COMMITMENTS: (CONTINUED)
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.

In addition, the Company is currently leasing a vehicle under a
non-cancellable operating lease agreement, expiring August, 1997. Rent expense
under the lease agreements for the years ended June 30, 1996 and 1995, and for
the nine month periods ended March 31, 1997 and 1996 was $8,889, $8,889, $6,667
(unaudited), and $6,667 (unaudited), respectively.

A schedule of future minimum lease payments due under the non-cancellable
operating leases at June 30, 1996 and March 31, 1997, is as follows:

<TABLE>
<CAPTION>
YEAR
ENDING YEAR ENDING
YEAR JUNE 30, MARCH 31,
- ----------------------------------------------------------------------------- ---------- ------------
<S> <C> <C>
(UNAUDITED)
1997......................................................................... $ 86,649 $ --
1998......................................................................... 80,020 84,027
1999......................................................................... 80,896 77,955
2000......................................................................... 83,320.... 80,297
2001......................................................................... 85,820 82,701
2002......................................................................... -- 85,183
Subsequent................................................................... 148,492 170,372
---------- ------------
$ 565,197 $ 580,535
---------- ------------
---------- ------------
</TABLE>

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 March
31, 1997, the total commitment, excluding incentives, was approximately $467,500
(unaudited).

7. ECONOMIC DEPENDENCY:

For the years ended June 30, 1996 and 1995, the Company had one (1) customer
which accounted for approximately twenty-three (23%) of the total sales volume.
For the nine month period ended March 31, 1997, the Company had two (2)
customers which accounted for an aggregate of approximately thirty-one percent
(31%) (unaudited) of the total sales volume. At June 30, 1996 and March 31,
1997, the amounts due from the customers included in accounts receivable was
$60,947 and $367,521 (unaudited), respectively.

For the years ended June 30, 1996 and 1995, the Company had one (1) supplier
which accounted for approximately sixty-five percent (65%) and forty-seven
percent (47%), respectively, of the total purchases. For the nine month period
ended March 31, 1997, the Company had two (2) suppliers which accounted for
approximately twenty-three percent (23%) of the total purchases. At June 30,
1996 and March 31, 1997,

F-14
<PAGE>
ORGANIC FOOD PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. ECONOMIC DEPENDENCY: (CONTINUED)
the amounts due to the suppliers included in accounts payable were $357,570 and
$540,630 (unaudited), respectively.

8. STOCKHOLDERS' EQUITY:

COMMON STOCK AND STOCK SPLIT:

On October 3, 1995, the 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, 1996, the Company had 4,500,000 shares issued
and outstanding. At March 31, 1997, the Company had 5,297,913 (unaudited) shares
issued and outstanding.

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 200,000 shares of common stock at $2 per share to an underwriter.
These options are exercisable at any time through December 31, 2002. As of March
31, 1997, no warrants have been exercised.

In addition, GVN had a second private offering in the nine month period
ended March 31, 1997. The proceeds from the offering of 823,500 shares were
$1,718,288, net of costs of $340,462 (unaudited). In connection with this
offering, the Company issued warrants to purchase up to 200,000 shares of common
stock at $2.50 per share to an underwriter. As of March 31, 1997, none of the
warrants have been exercised.

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, 1996 and March 31, 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 March
31, 1997, 538,000 (unaudited) options were granted under the Plan at exercise
prices of $2.00 to $2.50 per share, exercisable until November 1, 2003. As of
March 31, 1997, none of the options have been exercised. (See Note 14--
Subsequent Events).

F-15
<PAGE>
ORGANIC FOOD PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES AND DEFERRED INCOME TAXES:

For the year ended June 30, 1996 and for the nine month period ended March
31, 1997, components of deferred income taxes, are as follows:

<TABLE>
<CAPTION>
JUNE 30,
1996
---------- MARCH 31,
1997
-----------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Allowances.................................................................. $ 68,298 $ 47,500
Asset valuation allowance................................................... (68,298) --
---------- -----------
$ -- $ 47,500
---------- -----------
---------- -----------
Long-Term Asset (Liability):
Depreciation................................................................ $ (16,466) $ (29,500)
Net operating loss carryforward............................................. 114,000
---
----------
-----------
Total net deferred tax asset (liability).................................... 97,534 (29,500)
Less: valuation allowance................................................... (97,534) --
---------- -----------
$ -- $ (29,500)
---------- -----------
---------- -----------
</TABLE>

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

<TABLE>
<CAPTION>
NINE MONTH PERIODS
ENDED
YEARS ENDED JUNE 30, MARCH 31,
------------------------ -----------------------
1996 1995 1997 1996
----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Tax benefit (expense) at effective statutory
rates............................................. $ 630,000 $ (168,000) $ (183,500) $ 76,000
S-Corporation loss.................................. (340,000) -- -- (71,100)
Valuation limitation on net operating loss.......... (114,000) -- -- --
State income taxes.................................. -- (33,000) (14,500) --
Net operating loss carry-forward.................... -- -- 91,000 --
----------- ----------- ----------- ----------
$ 176,000 $ (201,000) $ (107,000) $ 4,900
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>

10. STATEMENTS OF CASH FLOWS:

NON-CASH INVESTING AND FINANCING ACTIVITIES:

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

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.

F-16
<PAGE>
ORGANIC FOOD PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

10. STATEMENTS OF CASH FLOWS: (CONTINUED)
For the year ended June 30, 1995, 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.

For the nine month period ended March 31, 1997, these non-cash activities
are as follows:

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

Interest in the amount of $60,897 was imputed on a discounted note
payable.

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

Stock in the amount of $14,158 was issued to a director as reimbursement
for expenses.

For the nine month period ended March 31, 1996, these non-cash activities
are as follows:

Accrued interest on a note payable was added to the principal portion of
the loan, in the amount of $22,261.

Asset additions in the amount of $7,331 were financed through capital
lease obligations.

11. CONCENTRATION OF CREDIT RISK:

The Company maintains cash balances at Wells Fargo Bank. Deposits not to
exceed $100,000 at the institution are insured by the Federal Deposit Insurance
Corporation. At March 31, 1997, the Company had uninsured cash in the
approximate amount of $20,000 (unaudited).

12. 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:

<TABLE>
<S> <C>
Redundant inventory....................................................... $ 177,515
Disposal of equipment..................................................... 21,329
Other..................................................................... 58,624
---------
$ 257,468
---------
---------
</TABLE>

13. 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 March 31, 1997, there were 625,000
(unaudited) shares reserved for options to be granted under the plan.

In addition, the Company has issued warrants to an underwriter in connection
with their two private placement offerings. As of March 31, 1997, 350,000
(unaudited) warrants have been issued at exercise

F-17
<PAGE>
ORGANIC FOOD PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

13. COMPENSATION FROM OPTIONS AND WARRANTS: (CONTINUED)
prices of $2.00 to $2.50 per share and expire in approximately five years. The
following summarizes stock options and warrant transactions:

<TABLE>
<CAPTION>
STOCK
OPTIONS WARRANTS PRICE PER SHARE
--------- --------- ----------------
<S> <C> <C> <C>
Outstanding at July 1, 1995................. -- -- $ --
Granted................................... 483,000 200,000 $ 2.00 to $2.50
Exercised................................. -- -- $ --
Expired................................... -- -- $ --
--------- --------- ----------------
Outstanding at June 30, 1996................ 483,000 200,000 $ 2.00 to $2.50
Granted................................... 55,000 200,000 $ 2.50
Exercised................................. -- -- $ --
Expired................................... -- -- $ --
--------- --------- ----------------
Outstanding at March 31, 1997............... 538,000 400,000 $ 2.00 to $2.50
--------- --------- ----------------
--------- --------- ----------------
</TABLE>

Information relating to stock options and warrants at March 31, 1997,
summarized by exercise price are as follows:

<TABLE>
<CAPTION>
EXERCISE OUTSTANDING EXERCISABLE
PRICE ---------------------------- -----------
PER SHARE SHARES LIFE (YEARS) SHARES
- --------- --------- ----------------- -----------
<S> <C> <C> <C>
$2.00 483,000 5 483,000
2.50 455,000 5 200,000
</TABLE>

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 options on the grant dates consistent
with the method of SFAS 123, the Company's net income and earnings per share for
the year ended June 30, 1996 and for the nine month period ended March 31, 1997,
would have been reduced to the pro forma amounts presented below:

<TABLE>
<CAPTION>
MARCH 31,
JUNE 30, 1996 1997
------------- -----------
<S> <C> <C>
(UNAUDITED)
Net income (loss)
As reported..................................................... $ (649,062) $ 343,422
Pro forma....................................................... (735,500) 297,000
Earnings (loss) per share
As reported..................................................... $ (.11) $ .06
Pro forma....................................................... (.13) .05
</TABLE>

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 periods ended June 30, 1996 and March 31, 1997,
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
periods approximated $.23 and $.33 per option.

F-18
<PAGE>
ORGANIC FOOD PRODUCTS, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

14. SUBSEQUENT EVENTS:

The Company's Board of Directors has resolved to proceed with a proposed
initial public offering of its common stock to the public. The Company is
currently in the process of filing a Form SB-2 Registration Statement with the
Securities and Exchange Commission to register its common stock for sale to the
public. The proposed offering is intended to issue 1,300,000 common shares at
four dollars ($4.00) per share.

The Company entered into various ten percent (10%) promissory notes payable
agreements, in the aggregate amount of $600,000, due the earlier of the
completion of an initial public offering or May, 1998, to provide working
capital. In relation to the promissory notes 200,000 common stock purchase
warrants were issued. The warrants have an exercise price of $3.00 per share
exercisable at any time until December 31, 1999.

Subsequent to March 31, 1997, the Company entered into an agreement with a
supplier to purchase product in the approximate amount of $222,000. The
accompanying financial statements reflect this transaction, in addition to an
allowance of approximately $30,000 for obsolescence related to the product
purchased.

Subsequent to March 31, 1997 the Company granted an additional 87,000
options to purchase the Company's stock under their stock option plan. The
options are exercisable over various vesting schedules at an exercise price of
$2.50 per share.

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.

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-19
<PAGE>
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.

<TABLE>
<CAPTION>
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 Administrative 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........ 5,792,663 7,092,663
------------- -------------
------------- -------------
</TABLE>

- ------------------------

(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-20
<PAGE>
To The Shareholders and Board of Directors of
Garden Valley Naturals, Inc.

We have audited the accompanying statements of operations, changes in
stockholders' equity, and cash flows of Garden Valley Naturals, Inc. for the
years ended June 30, 1996 and 1995. 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.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations, changes in stockholders'
equity, and cash flows of Garden Valley Naturals, Inc. for the years ended June
30, 1996 and 1995, in conformity with generally accepted accounting principles.

SEMPLE & COOPER LLP

Certified Public Accountants

Phoenix, Arizona
February 28, 1997

F-21
<PAGE>
GARDEN VALLEY NATURALS, INC.

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30, 1996 AND 1995 AND
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1995*
------------ ------------ MARCH 31,
1996
------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues................................................................ $ 5,794,095 $ 3,106,227 $ 4,188,481
Cost of Goods Sold...................................................... 4,698,579 2,328,882 3,448,314
------------ ------------ ------------
Gross Profit............................................................ 1,095,516 777,345 740,167
------------ ------------ ------------
Sales and Marketing Expense............................................. 1,231,904 220,788 532,048
General and Administrative Expenses..................................... 514,702 84,326 353,205
Restructuring Charge.................................................... 194,032 -- --
------------ ------------ ------------
1,940,638 305,114 885,253
------------ ------------ ------------
Income (Loss) from Operations........................................... (845,122) 472,231 (145,086)
------------ ------------ ------------
Other Income (Expense):
Loss on sale of fixed asset........................................... (7,678) -- 14,791
Interest income....................................................... 9,938 518 9,938
Interest expense...................................................... (54,007) (3,082) (36,719)
------------ ------------ ------------
(51,747) (2,564) (11,990)
------------ ------------ ------------
Income (Loss) before Provision for Income Taxes......................... (896,869) 469,667 (157,076)
------------ ------------ ------------
Provision for Income Tax Benefit (Expense): (Note 1)
--current............................................................. 176,023 (200,602) 15,659
--deferred............................................................ -- -- (10,750)
------------ ------------ ------------
176,023 (200,602) 4,909
------------ ------------ ------------
Net Income (Loss)....................................................... $ (720,846) $ 269,065 $ (152,167)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

*As restated, for comparative purposes only.

The Accompanying Notes are an Integral Part of the Financial Statements

F-22
<PAGE>
GARDEN VALLEY NATURALS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1996 AND 1995

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED STOCKHOLDERS'
-------------------------- PAID-IN EARNINGS EQUITY
SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1994..................... 2,000,000 $ 13,000 $ -- $ 100,990 $ 113,990
Net income for the year ended June 30,
1995....................................... -- -- -- 269,065 269,065
----------- ------------- ----------- ----------- -------------
Balance at June 30, 1995..................... 2,000,000 13,000 -- 370,055 383,055
Contribution of equipment by stockholders
(Notes 2 and 6)............................ -- -- 15,000 -- 15,000
Proceeds from private offering, net of costs
of $461,775................................ 1,350,000 2,238,225 -- -- 2,238,225
Execution of stock purchase agreement........ (1,100,000) (2,022,609) (15,000) -- (2,037,609)
Net loss for the year ended June 30, 1996.... -- -- -- (720,846) (720,846)
----------- ------------- ----------- ----------- -------------
Balance at June 30, 1996..................... 2,250,000 $ 228,616 $ -- $ (350,791) $ (122,175)
----------- ------------- ----------- ----------- -------------
----------- ------------- ----------- ----------- -------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

F-23
<PAGE>
GARDEN VALLEY NATURALS, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 1996 AND 1995 AND
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
------------- ------------- MARCH 31,
1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash flows from operating activities:
Cash received from customers...................................... $ 5,918,884 $ 2,683,438 $ 4,254,490
Cash paid to suppliers and employees.............................. (6,384,020) (2,760,808) (4,531,020)
Interest paid..................................................... (10,026) (3,082) (36,719)
Interest received................................................. 9,938 518 9,938
Income taxes paid................................................. (74,977) (865) (235,341)
------------- ------------- -------------
Net cash used by operating activities........................... (540,201) (80,799) (538,652)
------------- ------------- -------------
Cash flows for investing activities:
Purchase of fixed assets.......................................... (690,523) (26,766) (395,364)
Advances for notes receivable..................................... (15,484) -- --
Collection of notes receivable.................................... 15,484 -- --
Advances to shareholder........................................... -- -- (15,484)
------------- ------------- -------------
Net cash used by investing activities........................... (690,523) (26,766) (410,848)
------------- ------------- -------------
Cash flows from financing activities:
Repayment of debt................................................. (250,512) (32,018) (403,817)
Repayment of debt--related parties................................ (649,353) -- (640,000)
Proceeds from debt--related parties............................... 1,140,000 -- --
Proceeds from debt financing...................................... 106,406 176,124 250,358
Proceeds from issuance of stock................................... 1,667,000 -- 2,238,225
Repurchase of stock............................................... (640,000) -- --
------------- ------------- -------------
Net cash provided by financing activities....................... 1,373,541 144,106 1,444,766
------------- ------------- -------------
Net increase in cash and cash equivalents........................... 142,817 36,541 495,266
Cash and cash equivalents at beginning of year...................... 48,246 11,705 48,246
------------- ------------- -------------
Cash and cash equivalents at end of year............................ $ 191,063 $ 48,246 $ 543,512
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

F-24
<PAGE>
GARDEN VALLEY NATURALS, INC.

STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEARS ENDED JUNE 30, 1996 AND 1995 AND
FOR THE NINE MONTH PERIOD ENDED MARCH 31, 1996 (UNAUDITED)

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
------------ ------------ MARCH 31,
1996
------------
(UNAUDITED)
<S> <C> <C> <C>
Reconciliation of Net Income to Net Cash Used by Operating Activities:
Net Income (Loss)....................................................... $ (720,846) $ 269,065 $ (152,167)
------------ ------------ ------------
Adjustments to reconcile net income to net cash used by operating
activities:
Depreciation.......................................................... 23,923 3,728 10,948
Loss on sale of fixed asset........................................... 7,678 -- --
Loan discount amortization............................................ 43,980 -- 23,682
Employment contract settlement........................................ 175,000 -- --
Changes in Assets and Liabilities:
Accounts receivable................................................... 178,112 (422,789) 51,218
Inventory............................................................. (232,177) (430,897) (18,682)
Prepaid expenses...................................................... (5,366) 2,268 (245,738)
Income tax refund receivable.......................................... (259,447) -- (111,024)
Refundable deposits................................................... (22,105) (71) (6,480)
Accounts payable...................................................... 473,133 295,129 154,495
Accrued expenses...................................................... 48,914 3,031 (4,654)
Income taxes payable
--current........................................................... (251,000) 199,737 (251,000)
--deferred.......................................................... -- -- 10,750
------------ ------------ ------------
180,645 (349,864) (386,485)
------------ ------------ ------------
Net cash used by operating activities................................... $ (540,201) $ (80,799) $ (538,652)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

The Accompanying Notes are an Integral Part of the Financial Statements

F-25
<PAGE>
GARDEN VALLEY NATURALS, INC.
NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES:

OPERATIONS:

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 in the State of California on July 7, 1987. The principal business
purpose of the Company is the production and distribution of organic food
products throughout the United States.

NAME CHANGE:

Pursuant to a vote of the Board of Directors, the Company amended the
Corporation's Articles of Incorporation to change the Corporation's name to
Garden Valley Naturals, Inc. as of November, 1995. The financial statements give
retroactive effect to this change.

ACQUISITION AND MERGER:

As of June 28, 1996, Garden Valley Naturals, Inc. acquired all of the
outstanding common stock of Organic Food Products, Inc. for 2,250,000 shares of
the Company's common stock, merged the companies into one surviving corporation,
and subsequently changed the name from Garden Valley Naturals, Inc. to Organic
Food Products, Inc. The financial statements do not give effect to the name
change.

For financial accounting purposes, the acquisition was accounted for under
the purchase method in accordance with Accounting Principles Board Opinion No.
16. The accompanying financial statements for the year ended June 30, 1996
reflect only the activity of Garden Valley Naturals, Inc. through the date of
the merger.

PERVASIVENESS OF ESTIMATES:

INTERIM FINANCIAL STATEMENTS:

The interim financial statement for the nine month period ended March 31,
1996 is unaudited. In the opinion of management, such statement reflects all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair representation of the results of the interim period, and are not
necessarily indicative of the results for the entire year.

STOCK-BASED COMPENSATION:

In 1996, the Company adopted for footnote disclosure purposes only, SFAS No.
123, "Accounting for Stock-Based Compensation," which requires that companies
measure the cost of stock-based employee compensation at the grant date based on
the value of the award and recognize this cost over the service period. The
value of the stock-based award is determined using the intrinsic value method,
whereby compensation cost is the excess of the market prices of the stock at
grant date or other measurement date over the amount an employee must pay to
acquire the stock.

F-26
<PAGE>
GARDEN VALLEY NATURALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE OF
ESTIMATES: (CONTINUED)
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, 1996 and
1995, and for the nine month period ended March 31, 1996, depreciation expense
was $23,923, $3,728, and $10,948 (unaudited), respectively.

A summary of the estimated useful lives is as follows:

<TABLE>
<S> <C>
Computer software.............................................. 5 years
7 - 20
Machinery and equipment........................................ years
Office equipment............................................... 5 years
</TABLE>

INCOME TAXES:

For financial accounting and tax reporting purposes, the Company reports
revenue and expenses based on the accrual method of accounting. For the years
ended June 30, 1996 and 1995, provisions were made for federal and state income
tax expense (benefit) in the amounts of $(176,023) and $200,602, respectively.

DEFERRED INCOME TAXES:

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 liability
from different depreciation methods used for financial accounting and tax
reporting purposes.

2. RELATED PARTY TRANSACTIONS:

ADVANCES TO STOCKHOLDER:

As of March 31, 1996, advances to shareholder consist of a $15,484
(unaudited) advance to a shareholder. The advance is non-interest bearing and is
expected to be collected in the current year.

COMMITMENTS:

The Company was leasing facilities from a related party. The lease was
cancelled during February, 1996. The terms of the lease agreement required the
Company to pay common area maintenance, taxes and other costs, as well as a
discretionary base rent of approximately $4,500 per month. Rent expense under
the foregoing operating lease agreement for the years ended June 30, 1996 and
1995, and for the nine month period ended March 31, 1996, was $14,500, $50,217,
and $15,091 (unaudited), respectively.

The Company was leasing machinery and equipment from a related party. The
lease was cancelled as of July 1, 1995. Rent expense under the foregoing lease
agreement for the year ended June 30, 1995 was $72,996.

F-27
<PAGE>
GARDEN VALLEY NATURALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. RELATED PARTY TRANSACTIONS: (CONTINUED)
PRIVATE OFFERING:

The Company issued 1,100,000 shares (after 2 for 1 split) of common stock
for $2,200,000 through a private offering in November, 1995. The net proceeds
were $1,803,225, of which $640,000 was used to retire 1,100,000 shares of common
stock held by the principal shareholders (See Note 8).

3. NOTE PAYABLE:

As of June 30, 1996 and 1995, the note payable consists of the following:

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1996 1995
----------- -----------
<S> <C> <C>
$200,000 revolving line of credit with Wells Fargo Bank. The line of credit is due and
payable on March 10, 1996, with an interest rate of prime plus 1.5%. Borrowings are
collateralized by accounts receivable and
inventory............................................................................. $ -- $ 144,106
Less: current portion of long-term note payable......................................... -- (144,106)
----------- -----------
$ -- $ --
----------- -----------
----------- -----------
</TABLE>

As of the effective date of the private offering, November 15, 1995, the
revolving line of credit was cancelled.

4. ECONOMIC DEPENDENCY:

For the years ended June 30, 1996 and 1995, the Company had one and two
customers, respectively, which accounted for approximately 23% and 43%,
respectively, of the total sales volume. At June 30, 1996 and 1995, the amounts
due from these customers included in accounts receivable were $89,842 and
$332,379, respectively.

For the nine month period ended March 31, 1996, the Company had one customer
which accounted for approximately 23% (unaudited) of the total sales volume. At
March 31, 1996, the amount due from this customer included in accounts
receivable was $122,529 (unaudited), respectively.

For the years ended June 30, 1996 and 1995, the Company had two suppliers
which accounted for approximately 43% of the total purchases. At June 30, 1996
and 1995, amounts due these suppliers included in accounts payable were $250,284
and $79,755, respectively.

For the nine month period ended March 31, 1996, the Company had two
suppliers which accounted for approximately 50% (unaudited) of the total
purchases. At March 31, 1996, amounts due these suppliers included in accounts
payable were $217,792 (unaudited), respectively.

5. COMMITMENTS:

INVENTORY PURCHASES:

The Company is committed to purchase tomatoes over the next year at
contracted prices. At June 30, 1996, these future committed purchases aggregated
approximately $1,370,000, based on contracted prices.

F-28
<PAGE>
GARDEN VALLEY NATURALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. COMMITMENTS: (CONTINUED)
LEASE OBLIGATIONS:

The Company is currently leasing office space in Morgan Hill, California
under a non-cancellable operating lease agreement, expiring April, 2003. For the
year ended June 30, 1996 and for the nine month period ended March 31, 1996,
rent expense under the aforementioned non-cancellable operating lease agreement
was $31,766 and $12,326 (unaudited), respectively.

A schedule of future minimum lease payments due under the non-cancellable
operating lease, is as follows:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
- -------------------------------------------------------------- ----------
<S> <C>
1997........................................................ $ 86,649
1998........................................................ 80,020
1999........................................................ 80,896
2000........................................................ 83,320
2001........................................................ 85,820
Subsequent.................................................. 148,492
----------
$ 565,197
----------
----------
</TABLE>

6. STATEMENTS OF CASH FLOWS:

NON-CASH INVESTING AND FINANCING ACTIVITIES:

During the years ended June 30, 1996 and 1995, and for the nine month period
ended March 31, 1996, the Company recognized investing and financing activities
that affected assets, liabilities and equity, but did not result in cash
receipts or payments.

For the year ended June 30, 1996, these non-cash activities consisted of the
following:

The Company financed $1,560,000 of the purchase of treasury stock in the
amount of $2,200,000. The note has been recorded net of imputed interest.

The Company repaid notes payable to related parties in the amount of
$175,000, through the settlement of an employment contract.

Accrued interest on notes payable was added to the principal portion of
the loan, in the amount of $43,980.

The Company repaid notes payable in the amount of $500,000, with proceeds
from a private placement.

For the year ended June 30, 1995, 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.

For the nine month period ended March 31, 1996, these non-cash activities
are as follows:

The Company financed $1,560,000 (unaudited) of the purchase of treasury
stock in the amount of $2,200,000. The note has been recorded net of
imputed interest.

F-29
<PAGE>
GARDEN VALLEY NATURALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. STOCKHOLDERS' EQUITY:

COMMON STOCK AND STOCK SPLIT:

On October 3, 1995, the Company 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.

PRIVATE OFFERING AND WARRANTS:

The Company 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 200,000 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, 1996, no warrants have been exercised.

In addition, the Company had a second private offering subsequent to June
30, 1996. The proceeds from the offering of 823,500 shares were $1,718,288, net
of costs of $340,462 (unaudited). In connection with this offering, the Company
issued warrants to purchase up to 200,000 shares of common stock at $2.50 per
share to an underwriter.

PREFERRED STOCK:

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, 1996, 483,000 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,
1996, none of the options have been exercised.

F-30
<PAGE>
GARDEN VALLEY NATURALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. INCOME TAXES AND DEFERRED INCOME TAXES:

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

<TABLE>
<S> <C>
Current Assets:
Allowances..................................................... $ 68,298
Asset valuation allowance...................................... (68,298)
---------
$ --
---------
---------
Long-Term Asset (Liability):
Depreciation................................................... $ (16,466)
Net operating loss carryforward................................ 149,104
---------
Total net deferred tax asset (liability)....................... 132,638
Less: valuation allowance...................................... (132,638)
---------
$ --
---------
---------
</TABLE>

A reconciliation of income tax benefit (expense) at the statutory rate to
the Company's effective rate, is as follows:

<TABLE>
<CAPTION>
JUNE 30,
1996 JUNE 30, 1995
------------ ------------- MARCH 31, 1996
---------------
(UNAUDITED)
<S> <C> <C> <C>
Benefit (Expense) Computed at the Expected Statutory Rate... 34% (34)% 34%
State Income Taxes.......................................... 9 (9) 9
Surtax Exemption............................................ -- -- (11)
Deferred Tax Asset Valuation Allowance...................... (23) -- (28)
--
--- ---
20% (43)% 4%
--
--
--- ---
--- ---
</TABLE>

For the year ended June 30, 1996, the Company has net operating losses
available to offset federal and state taxable income in the approximate amounts
of $127,000 and $344,000, respectively.

9. 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, 1996, there were 625,000 shares
reserved for options to be granted under the plan.

In addition, the Company has issued warrants to an underwriter in connection
with the private placement offering. As of June 30, 1996, 200,000 warrants have
been issued at an exercise price of $2.00

F-31
<PAGE>
GARDEN VALLEY NATURALS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

9. COMPENSATION FROM OPTIONS AND WARRANTS: (CONTINUED)
per share and expire in approximately five years. The following summarizes stock
options and warrant transactions:

<TABLE>
<CAPTION>
STOCK
OPTIONS WARRANTS PRICE PER SHARE
--------- --------- ----------------
<S> <C> <C> <C>
Outstanding at June 30, 1995.......................... -- -- $ --
Granted............................................. 483,000 200,000 $ 2.00 to $2.50
Exercised........................................... -- -- $ --
Expired............................................. -- -- $ --
--------- --------- ----------------
Outstanding at June 30, 1996.......................... 483,000 200,000 $ 2.00 to $2.50
--------- --------- ----------------
--------- --------- ----------------
</TABLE>

Information relating to stock options and warrants at June 30, 1996,
summarized by exercise price, are as follows:

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 loss for the year ended June 30, 1996 would have
been reduced to the pro forma amounts presented below:

<TABLE>
<CAPTION>
NET LOSS
-----------
<S> <C>
As reported...................................................................... $ (720,846)
Pro forma........................................................................ (634,500)
</TABLE>

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 year ended June 30, 1996; expected life of options
of five years, expected volatility of 14.4% 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 year approximated $.23 per option.

In addition, the Company granted 200,000 additional warrants to an
underwriter in relation to the second private placement offering.

F-32
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR THE SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Dilution....................................... 10
Capitalization................................. 11
Use of Proceeds................................ 12
Selected Financial Data........................ 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 14
Business....................................... 19
Management..................................... 23
Principal Shareholders......................... 26
Certain Transactions........................... 27
Description of Securities...................... 28
Underwriting................................... 30
Legal Matters.................................. 32
Experts........................................ 32
Available Information.......................... 32
Financial Statements........................... F-1
</TABLE>

------------------------

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

1,300,000 SHARES
OF COMMON STOCK

ORGANIC FOOD
PRODUCTS, INC.
---------------------

PROSPECTUS

---------------------

SENTRA
SECURITIES CORPORATION

SPELMAN & CO., INC.

PARADISE VALLEY
SECURITIES, INC.

, 1997

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article IV of the Registrant's Articles of Incorporation provides as
follows:

"The liabilities of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law."

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be permitted to officers, directors or
persons controlling the Company, the Company has been advised that, in the
opinion of the Securities and Exchange Commission, Washington, D.C. 20549, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the officer, director or controlling person of the
Company in the successful defense of any action, suit or proceeding) is asserted
by such officer, director or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.(1)(2)

<TABLE>
<S> <C>
SEC Registration Fee........................................... $ 2,309
NASD Filing Fee................................................ 1,262
Blue Sky Filing Fees........................................... 12,000
Blue Sky Legal Fees............................................ 25,000
Printing Expenses.............................................. 60,000
Legal Fees and Expenses........................................ 85,000
Accounting Fees................................................ 80,000
Transfer Agent................................................. 3,000
NASDAQ Application Fee......................................... 25,000
Miscellaneous Expenses......................................... 6,429
-----------
TOTAL...................................................... $ 300,000(1)
-----------
-----------
</TABLE>

- ------------------------

(1) Does not include the Representatives' commission and expenses of $676,000
($777,400 if the Overallotment Option is exercised).

(2) All expenses, except the SEC registration fee and NASD filing fee, are
estimated.

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES

During the last three years, the Registrant sold the following shares of its
Common Stock which were not registered under the Securities Act of 1933, as
amended (the "1933 Act"):

(i) In November 1995, the Registrant sold 1,100,000 shares of its Common
Stock at $2.00 per share to the following persons:

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ----------------------------------------------------------------------------------- -----------
<S> <C>
Jack London/Life O Boston Insurance................................................ 250,000
Enrique Feldman.................................................................... 175,000
Floyd Hill......................................................................... 151,200
</TABLE>

II-1
<PAGE>
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ----------------------------------------------------------------------------------- -----------
<S> <C>
Paul and Becky Sigfusson........................................................... 77,750
Lyonshare Venture Capital.......................................................... 62,500
Leslie Farkas...................................................................... 50,000
William Maines..................................................................... 50,000
Richard Froehlich MD, IRA.......................................................... 25,000
William Hay........................................................................ 25,000
Jane Zivney Interiors Pension Trust................................................ 25,000
Paul and Anne Janssens Lens........................................................ 25,000
James and Jane Zivney.............................................................. 17,500
Barry Donner....................................................................... 15,800
Alfred Zacher Profit Sharing Plan.................................................. 12,500
Glenn C. Cook and R. Cook.......................................................... 12,500
Delaware Charter G&T FBO........................................................... 12,500
Froelich Family Trust.............................................................. 12,500
Marvin and Pearl Stumpf............................................................ 12,500
Elliot Wagner...................................................................... 12,500
L. Stuart and Naomi Nagasawa....................................................... 12,500
Hirn Doheny Reed & Harper PS Trust................................................. 12,500
William Schlueter.................................................................. 12,500
John and Mary Jane Scott........................................................... 12,500
Kenneth Depersio................................................................... 6,250
Michael and Susan Gernant.......................................................... 6,250
Jerrold and Carolyn Johnson........................................................ 6,250
Kenneth Steel...................................................................... 6,500
</TABLE>

(ii) In February 1996, the Registrant sold 250,000 shares of its Common
Stock to Kenneth A. Steel, Jr. at $2.00 per share.

(iii) In July 1996, the Registrant sold 823,500 shares of its Common
Stock at $2.50 per share to the following individuals.

<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ----------------------------------------------------------------------------------- -----------
<S> <C>
Rizzo Trust........................................................................ 20,000
Lori Rizzo......................................................................... 15,000
Steven and Faith Chinskey.......................................................... 5,000
James R. Barge..................................................................... 5,000
Thomas and Susan Lusty............................................................. 10,000
Jerry and Jean Mikus............................................................... 20,000
Michael J. Mehalko................................................................. 5,000
Jane Chu........................................................................... 5,000
Sunbeam Ventures................................................................... 40,000
Glenn C. Cook...................................................................... 20,000
TBP Investments.................................................................... 14,000
Enrique Feldman.................................................................... 140,000
Jeff and Adelynn Barteir........................................................... 10,000
J. Michael Turley.................................................................. 10,000
Monica Koechlin.................................................................... 40,000
Paul and Becky Sigfusson........................................................... 100,000
Vern and Grace Thomsen............................................................. 40,000
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ----------------------------------------------------------------------------------- -----------
<S> <C>
Lawrence Cannizzaro................................................................ 20,000
Hooman Nikzad...................................................................... 4,000
Fred Djshandideh................................................................... 4,000
Harvey Belfer...................................................................... 10,000
Satoru Nilmoto..................................................................... 10,000
Lanny and Mariane Lahr............................................................. 10,000
William R. Maines.................................................................. 20,000
Ronald J. Faust.................................................................... 16,000
Lyonshare Venture Capital.......................................................... 25,500
Vestal Venture Capital............................................................. 15,000
Carroll and Joseph Dilustro........................................................ 10,000
Sylvanus V. Tunstall............................................................... 40,000
Donald L. Ladwig................................................................... 20,000
Mateo Lettunich.................................................................... 20,000
Marvin Stumpf...................................................................... 10,000
Donahue Bunch...................................................................... 10,000
Nathaniel and Mildred Orme......................................................... 10,000
Don Zinman......................................................................... 10,000
Kevin and Tracy McGovern........................................................... 5,000
Felicia Choi....................................................................... 10,000
John Jensen........................................................................ 15,000
Herman Kahan, Trustee.............................................................. 10,000
Poseidon Capital................................................................... 10,000
John Nelson........................................................................ 10,000
</TABLE>

(iv) In connection with the sales of Common Stock set forth in
subparagraph (i), (ii) and (iii) above, the Registrant issued to Spelman &
Co., Inc., its placement agent and one of the Representatives of the
Offering, 150,000 common stock purchase warrants exercisable at $2.00 per
share until December 31, 2002 and 200,000 common stock purchase warrants
exercisable at $2.50 per share until July 31, 2003.

(v) In July 1996 the Registrant issued 2,227,499 shares of its Common
Stock to John Battendieri and 22,501 shares to Casey Adams in connection
with the OFP merger.

(vi) From time to time, the Registrant has issued stock options
(currently aggregating 625,000 such stock options) to employees, officers
and directors under its 1995 Stock Option Plan.

(vii) In May 1997 the Registrant borrowed an aggregate of $600,000 from
the following individuals and issued to them as additional consideration for
the loans an aggregate of 200,000 common stock

II-3
<PAGE>
purchase warrants, each warrant exercisable to purchase one share of the
Registrant's Common Stock at any time until December 31, 1999.

<TABLE>
<CAPTION>
NAME NUMBER OF WARRANTS
- ---------------------------------------------------------------------------------------------
<S> <C>
Todd Belfer TPB Inv. Ltd. Partnership........................................................ 20,000
Harvey Belfer................................................................................ 20,000
Lanny Lahr................................................................................... 20,000
Ronald Faust................................................................................. 20,000
Robert Mapes................................................................................. 10,000
Eliot Ellefson............................................................................... 10,000
Bruce Ungerleider............................................................................ 10,000
William Hay.................................................................................. 20,000
William Schlueter............................................................................ 20,000
Kenneth Hersh................................................................................ 16,666
Sherri Rizzo Trust........................................................................... 16,666
Rizzo Trust.................................................................................. 16,667
-------
200,000
</TABLE>

With respect to the sales made, including the private placements set forth
in sub-paragraphs (i) and (iii), above, the Registrant relied on Section 4(2) of
the 1933 Act, and/or Regulation D, Rule 506. No advertising or general
solicitation was employed in offering the securities. The securities were
offered to a limited number of individuals all of whom were accredited investors
as that term is defined under Regulation D under the 1933 Act and were
experienced and sophisticated investors capable of analyzing the merits and
risks of their investment. All such investors acknowledged in writing that they
were acquiring the securities for investment and not with a view toward
distribution or resale and understood the speculative nature of their
investment. The transfer of the securities was appropriately restricted from
sale by the Registrant. The Registrant complied with all of the requirements of
Regulation D, Rule 506 and filed a Form D with the Commission within 15 days
from the first sale date in each such private placement.

II-4
<PAGE>
ITEM 27. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------- ------------------------------------------------------------------------------------------------
<C> <S>
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)

5.01 Opinion of Gary A. Agron, regarding legality of the Common Stock (includes Consent) (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)

11.02 Computation of Earnings Per Share (1)

23.01 Consent of Semple & Cooper LLP (1)

23.02 Consent of Gary A. Agron (See 5.01, above) (1)

23.04 Consent of Semple and Cooper LLP

27.01 Financial Data Schedule (1)

27.02 Financial Data Schedule (1)
</TABLE>

- ------------------------

(1) Previously filed

ITEM 28. UNDERTAKINGS.

The Registrant hereby undertakes:

(a) That insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer

II-5
<PAGE>
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(b) That subject to the terms and conditions of Section 13(a) of the
Securities Exchange Act of 1934, it will file with the Securities and Exchange
Commission such supplementary and periodic information, documents and reports as
may be prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.

(c) That any post-effective amendment filed will comply with the applicable
forms, rules and regulations of the Commission in effect at the time such
post-effective amendment is filed.

(d) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the 1933 Act;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;

(e) That, for the purpose of determining any liability under the 1933 Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.

(f) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
Offering.

(g) To provide to the Underwriter at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the 1933 Act, as amended, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2 and has caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Morgan Hill, California, on July 25, 1997.

<TABLE>
<S> <C> <C>
ORGANIC FOOD PRODUCTS, INC.

BY: /S/ FLOYD R. HILL
-----------------------------------------
Floyd R. Hill
CHIEF EXECUTIVE OFFICER
</TABLE>

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

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------------- ---------------
<C> <S> <C>

/s/ FLOYD R. HILL
------------------------------------------- Chief Executive Officer and Director July 25, 1997
Floyd R. Hill

/s/ JOHN BATTENDIERI
------------------------------------------- President and Director July 25, 1997
John Battendieri

/s/ DONALD L. LADWIG
------------------------------------------- Vice President--Marketing and Sales July 25, 1997
Donald L. Ladwig

/s/ PERRY T. VALASSIS
------------------------------------------- Chief Financial Officer and Principal July 25, 1997
Perry T. Valassis Accounting Officer

/s/ KENNETH A. STEEL, JR.
------------------------------------------- Director July 25, 1997
Kenneth A. Steel, Jr.

/s/ CHARLES B. BONNER
------------------------------------------- Director July 25, 1997
Charles B. Bonner

/s/ CHARLES R. DYER
------------------------------------------- Director July 25, 1997
Charles R. Dyer
</TABLE>

II-7
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ------------- -----------------------------------------------------------------------------------------------------

<C> <S>
23.04 Consent of Semple & Cooper LLP
</TABLE>

<PAGE>

SEMPLE & COOPER, LLP
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS [LOGO]
- -------------------------------------------------------------------------------
2700 NORTH CENTRAL AVENUE, ELEVENTH FLOOR, PHOENIX, ARIZONA 85004
TEL 602-241-1500 - FAX 602-234-1867

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in Amendment No. 2 of the Form SB-2 Registration
Statement of Organic Food Products, Inc. of our report dated February 28,
1997 appearing in the Prospectus which is part of this Registration Statement
and to the reference to us under the heading "Experts" in such document.

/s/ Semple & Cooper, L.L.P.
Semple & Cooper, LLP

Phoenix, Arizona
July 28, 1997

INDEPENDENT MEMBER OF THE BDO SEIDMAN ALLIANCE