<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

(Mark One)

[X]      Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities
         Exchange Act Of 1934 For the Quarterly Period Ended September 27, 2003
         or

[ ]      Transition Report Pursuant To Section 13 Or 15(d) Of The Securities
         Exchange Act Of 1934 For the Transition Period From _______ to _______.

         Commission file number: 0-19557

                                  Salton, Inc.
             (Exact name of registrant as specified in its charter)

             Delaware                                       36-3777824
            ---------                                       ----------
    (State of other jurisdiction of                      (I.R.S. Employer
     Incorporation or organization)                   Identification Number)

             1955 Field Court                                 60045
             Lake Forest, IL                                (Zip Code)
(Address of principal executive offices)

                                 (847) 803-4600
              (Registrant's telephone number, including area code)

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

                               Yes [X]   No [ ]

Indicate by the check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                               Yes [X]   No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of November 10, 2003,
11,187,291 shares of its $.01 par value Common Stock.

                                       1
<PAGE>

<TABLE>
<CAPTION>
                                                                                            PAGE NO.
                                                                                            --------
<S>                                                                                         <C>
PART I                FINANCIAL INFORMATION

          Item 1:     Consolidated Financial Statements (Unaudited)

                      Consolidated Balance Sheets - September 27, 2003
                      and June 28, 2003                                                         3

                      Consolidated Statements of Income - Thirteen weeks
                      ended September 27, 2003 and September 28, 2002                           4

                      Consolidated Statements of Cash Flows - Thirteen
                      weeks ended September 27, 2003 and September 28,
                      2002                                                                      5

                      Notes to Consolidated Financial Statements                                6

          Item 2:     Management's Discussion and Analysis of Financial Condition and
                      Results of Operations                                                    15

          Item 3:     Quantitative and Qualitative Disclosures About Market Risk               20

          Item 4:     Controls and Procedures                                                  20

PART II               OTHER INFORMATION

          Item 1:     Legal Proceedings                                                        21

          Item 6:     Exhibits and Reports on Form 8-K                                         21

                      Signature                                                                22

                      Certifications                                                           25
</TABLE>

                                       2
<PAGE>

                                  SALTON, INC.
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                SEPTEMBER 27, 2003   JUNE 28, 2003
                                                                ------------------   -------------
<S>                                                             <C>                  <C>
ASSETS
CURRENT ASSETS:
 Cash                                                               $   53,693         $   53,102
 Accounts receivable, net of allowances                                242,742            198,511
 Inventories                                                           252,804            217,317
 Prepaid expenses and other current assets                              16,151             13,225
 Prepaid income taxes                                                    3,494              9,606
 Deferred income taxes                                                  12,874             12,825
                                                                    ----------         ----------
     Total Current Assets                                              581,758            504,586
Property, Plant and Equipment, net                                      71,982             69,970
Patents and Trademarks                                                 192,335            191,963
Cash in Escrow for Pifco Loan Notes                                      5,010              4,978
Goodwill                                                                27,029             26,953
Other Assets, net                                                       13,292             13,922
                                                                    ----------         ----------
TOTAL ASSETS                                                        $  891,406         $  812,372
                                                                    ==========         ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Current debt                                                       $    6,639         $   27,911
 Accounts payable                                                      109,356             73,548
 Accrued expenses                                                       62,907             54,613
                                                                    ----------         ----------
     Total Current Liabilities                                         178,902            156,072

Non-Current Deferred Income Taxes                                        8,618              8,311
Senior Subordinated Notes Due 2005                                     125,000            125,000
Senior Subordinated Notes due 2008, including an adjustment of
   $11,456 and $12,081 to the carrying value related
   to interest rate swap agreements, respectively                      160,332            160,896
Long Term Debt-Revolving Credit Agreement                              127,119             76,119
Other Notes Payable                                                        768                873
Other Long Term Liabilities                                             17,204             16,240
                                                                    ----------         ----------
                                                                       617,943            543,511
Minority Interest                                                       16,172             14,957
STOCKHOLDERS' EQUITY:
 Preferred Stock, $.01 par value; authorized, 2,000,000
   shares; 40,000 shares issued                                              -                  -
 Common Stock, $.01 par value; authorized, 40,000,000
   shares; issued and outstanding: 2004-11,187,291;
   2003-11,186,905                                                         148                148
 Treasury Stock - at cost                                              (67,019)           (67,019)
 Additional Paid-In Capital                                             96,197             96,179
 Accumulated Other Comprehensive Income                                  1,646               (982)
 Retained Earnings                                                     226,319            225,578
                                                                    ----------         ----------
      Total Stockholders' Equity                                       257,291            253,904
                                                                    ----------         ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $  891,406         $  812,372
                                                                    ==========         ==========
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       3
<PAGE>

                                  SALTON, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                              13 WEEKS ENDED
                                                                   ----------------------------------
                                                                   September 27,        September 28,
                                                                       2003                 2002
                                                                   -------------        -------------
<S>                                                                <C>                  <C>
NET SALES                                                          $     238,539        $    200,052
Cost of Goods Sold                                                       157,956             119,811
Distribution Expenses                                                     16,400              13,900
                                                                   -------------        ------------
GROSS PROFIT                                                              64,183              66,341
Selling, General and Administrative Expenses                              51,792              49,294
Impairment loss on intangible asset                                            -                 800
                                                                   -------------        ------------
OPERATING INCOME                                                          12,391              16,247
Interest Expense, net                                                      9,678              10,007
Fair market value adjustment on derivatives                                    -                 267
                                                                   -------------        ------------
INCOME BEFORE INCOME TAXES                                                 2,713               5,973
Income Tax Expense                                                           882               2,073
Minority Interest                                                          1,090                   -
                                                                   -------------        ------------
NET INCOME                                                         $         741        $      3,900
                                                                   =============        ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                            11,187,155          11,062,162

WEIGHTED AVERAGE COMMON AND COMMON
   EQUIVALENT SHARES OUTSTANDING                                      15,099,949          14,876,165

Net Income per Common Share: Basic                                 $        0.07        $       0.35

Net Income per Common Share: Diluted                               $        0.05        $       0.26
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                       4
<PAGE>

                                  SALTON, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                          13 WEEKS ENDED
                                                                                  -----------------------------
                                                                                  SEPTEMBER 27,   SEPTEMBER 28,
                                                                                       2003            2002
                                                                                  -------------   -------------
<S>                                                                               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income                                                                        $      741      $    3,900
  Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
    Imputed interest on notes payable and other non-cash items                            (447)            235
    Deferred income tax provision                                                          276             108
    Depreciation and amortization                                                        5,172           3,864
    Loss on disposal of equipment                                                           58              45
    Equity in net income of investee                                                         -             (92)
    Impairment loss on intangible asset                                                      -             800
    Fair value adjustment for derivatives                                                    -             267
    Foreign currency gains and losses                                                      551               -
    Minority interest                                                                    1,090               -
    Changes in assets and liabilities:
       Accounts receivable                                                             (44,043)        (12,395)
       Inventories                                                                     (34,698)        (32,197)
       Prepaid expenses and other current assets                                        (2,367)          2,608
       Accounts payable                                                                 35,016          14,691
       Taxes payable                                                                     6,092           2,113
       Accrued expenses                                                                  9,515           8,061
                                                                                    ----------      ----------
          NET CASH FROM OPERATING ACTIVITIES                                           (23,044)         (7,992)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                                                  (5,129)         (4,218)
  Increase in other non-current assets                                                    (328)           (250)
  Additional payment for patents and trademarks                                        (21,500)        (20,750)
                                                                                    ----------      ----------
          NET CASH FROM INVESTING ACTIVITIES                                           (26,957)        (25,218)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from revolving line of credit and other debt                             51,000          25,000
  Repayment of long-term debt                                                             (121)            (64)
  Proceeds from termination of Swap transaction                                              -           6,074
  Costs associated with refinancing                                                       (347)              -
  Common stock issued                                                                        4               3
                                                                                    ----------      ----------
          NET CASH FROM FINANCING ACTIVITIES                                            50,536          31,013
                                                                                    ----------      ----------
Effect of Exchange Rate Changes on Cash                                                     56            (634)
                                                                                    ----------      ----------
Net Change in Cash                                                                         591          (2,831)
Cash, Beginning of Period                                                               53,102          31,055
                                                                                    ----------      ----------
Cash, End of Period                                                                 $   53,693      $   28,224
                                                                                    ==========      ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid (Received) During the Period for:
  Interest                                                                          $      929      $    1,300
  Income taxes, net of (refunds)                                                    $   (5,417)     $      337
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

In the quarter ended September 28, 2002, the Company incurred a capital lease
obligation of $418.

In the quarter ended September 28, 2002, the Company authorized the issuance of
184,980 shares of common stock for payment of executive bonuses.

                 See Notes to Consolidated Financial Statements.

                                       5
<PAGE>

                                  SALTON, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   CONSOLIDATED FINANCIAL STATEMENTS

     In the opinion of management, the accompanying consolidated balance sheets
     and related interim consolidated statements of income and cash flows
     include all adjustments, consisting only of normal recurring items,
     necessary for their fair presentation in conformity with U.S. generally
     accepted accounting principles. Preparing financial statements requires
     management to make estimates and assumptions that affect the reported
     amounts of assets, liabilities, revenue and expenses. Actual results may
     differ from these estimates. Our business is highly seasonal, with
     operating results varying from quarter to quarter. Interim results are not
     necessarily indicative of results for a full year. The information included
     in this Form 10-Q should be read in conjunction with Management's
     Discussion and Analysis and consolidated financial statements and notes
     thereto included in the Salton, Inc. 2003 Form 10-K. Certain
     reclassifications have been made for consistent presentation.

2.   ACQUISITION AND EXPANSION

     On May 16, 2003, the Company increased its 30.8% ownership interest in
     Amalgamated Appliance Holdings Limited (AMAP), a South African company, to
     a 52.6% interest. The accounts of AMAP have been included in the
     consolidated financial statements since that date. Prior to that date, the
     Company's investment in AMAP was accounted for on the equity method and was
     included in other assets.

     The following pro forma information presents the results of operations of
     the Company as if the increased ownership of AMAP had taken place at the
     beginning of fiscal 2003.

(In thousands except share data)

<TABLE>
<CAPTION>
                                               13 WEEKS ENDED
                                             SEPTEMBER 28, 2002
                                             ------------------
<S>                                          <C>
Revenues                                         $    226,185

Net income                                       $      4,038

Earnings per share:
   Basic                                         $       0.37
   Diluted                                       $       0.27
</TABLE>

     The pro forma results have been prepared for comparative purposes only and
     do not purport to be indicative of the results of operations that would
     have occurred had the increase in ownership of AMAP actually occurred at
     the beginning of fiscal 2003.

     On July 1, 2003, the Company started Salton Brasil Limited (Brasil).
     Brasil's results of operations are included in the fiscal 2004 consolidated
     financial statements.

3.   NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE

     Basic net income per common share is computed based upon the weighted
     average number of common shares outstanding. Diluted net income per common
     share is computed based upon the weighted average number of common shares
     outstanding, adjusted for dilutive common stock equivalents applying the
     treasury stock method for options and warrants and the if-converted method
     for convertible securities.

                                       6
<PAGE>

     Options to purchase 270,000 shares at a price of $29.25 per share were
     outstanding at September 27, 2003 and September 28, 2002 but were not
     included in the computation of diluted EPS because the options are
     contingent upon the Company's share price reaching specified targets for a
     specified period of time. Options and warrants to purchase 1,329,600 shares
     of common stock at a price range of $10.44 to $37.00 per share and
     1,392,463 shares of common stock at a price range of $9.84 to $37.00 per
     share were outstanding at September 27, 2003 and September 28, 2002,
     respectively, but were not included in the computation of diluted EPS
     because the exercise prices were greater than the average market price of
     the common shares.

4.   STOCK-BASED COMPENSATION

     At September 27, 2003, the Company had various stock-based employee
     compensation plans which are described more fully in Note 10 of the Notes
     to Consolidated Financial Statements in the Company's 2003 Annual Report on
     Form 10-K. The Company accounts for those plans in accordance with
     Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees" and related Interpretations. No stock-based employee
     compensation cost is reflected in net income, as no options granted under
     those plans had an exercise price less than the market value of the
     underlying common stock on the date of grant. The following table
     illustrates the effect on net income and earnings per share if the Company
     had applied the fair value recognition provisions of Statement of Financial
     Accounting Standards No. 123, "Accounting for Stock-Based Compensation."

(In thousands except share data)

<TABLE>
<CAPTION>
                                                                                      13 WEEKS ENDED
                                                                              -----------------------------
                                                                              September 27,   September 28,
                                                                                  2003            2002
                                                                              -------------   -------------
<S>                                                                           <C>             <C>
Net income - as reported                                                        $   741         $  3,900
Less:  Total stock-based employee compensation expense determined
  under fair value based method for all awards, net of related taxes                427              499
                                                                                ------------------------
Net income - pro forma                                                          $   314         $  3,401
                                                                                ========================
Earnings per share - basic
   As reported                                                                  $  0.07         $   0.35
   Pro forma                                                                       0.03             0.31
Earnings per share - diluted
   As reported                                                                  $  0.05         $   0.26
   Pro forma                                                                       0.02             0.23
</TABLE>

5.   DERIVATIVE FINANCIAL INSTRUMENTS

     The Company uses derivative financial instruments to manage interest rate
     and foreign currency risk. The Company does not enter into derivative
     financial instruments for trading purposes. Interest rate swap agreements
     are used as part of the Company's program to manage the fixed and floating
     interest rate mix of the Company's total debt portfolio and related overall
     cost of borrowing. The Company's European subsidiary uses forward exchange
     contracts to hedge foreign currency payables for periods consistent with
     the expected cash flow of the underlying transactions. The contracts
     generally mature within one year and are designed to limit exposure to
     exchange rate fluctuations, primarily related to the Great Britian pound.

     All foreign exchange contracts have been recorded on the balance sheet
     within accrued expenses at a fair value of $1.1 million. The change in the
     fair value of contracts in the first quarter was de minimis. The Company
     anticipates that all gains and losses in accumulated other comprehensive
     income related to foreign exchange contracts will be reclassified into
     earnings over the next twelve months. At September 27, 2003, the Company's
     European subsidiary had foreign exchange contracts for the

                                       7
<PAGE>

     purchase of 45.0 million U.S. dollars. No new contracts were entered into
     during the first quarter of fiscal 2004.

     On November 1, 2002, the existing interest rate swap contract was
     terminated. No additional interest rate swap agreements have been executed
     subsequently.

6.   COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME

     For the thirteen weeks ended September 27, 2003 and September 28, 2002,
     components of other comprehensive income include foreign currency
     translation adjustments of $2.6 million and $0.9 million, respectively and
     derivative liability adjustments of $0 million and $0.1 million,
     respectively.

<TABLE>
<CAPTION>
                                                 13 Weeks Ended
                                           ---------------------------
(In thousands)                             9/27/2003         9/28/2002
                                           ---------         ---------
<S>                                        <C>               <C>
Net Income                                  $   741           $ 3,900
Other Comprehensive Income                    2,628             1,016
                                            -------           -------
Comprehensive Income                        $ 3,369           $ 4,916
                                            =======           =======
</TABLE>

     Accumulated other comprehensive income is comprised of the following:

<TABLE>
<CAPTION>
                                                      As Of
                                           ---------------------------
(In thousands)                             9/27/2003         6/28/2003
                                           ---------         ---------
<S>                                        <C>               <C>
Minimum Pension Liability                  $ (12,125)        $ (12,072)
Derivative Liability                            (697)             (649)
Foreign Currency Translation                  14,468            11,739
                                           ---------         ---------
                                           $   1,646         $    (982)
                                           =========         =========
</TABLE>

7.   OPERATING SEGMENTS AND MAJOR CUSTOMERS

     Salton consists of a single operating segment which designs, sources,
     markets and distributes a diversified product mix for use in the home. The
     product mix consists of small kitchen and home appliances, home decor
     (which includes tabletop products, time products, lighting products,
     picture frames) and personal care and wellness products. The Company
     believes this segmentation is appropriate based upon Management's operating
     decisions and performance assessment. Nearly all of the Company's products
     are consumer goods within the housewares market, procured through
     independent manufacturers, primarily in the Far East. Salton's products are
     distributed through similar distribution channels and customer base using
     the marketing efforts of its Global Marketing Team.

     Major Customers - One customer accounted for 12.3%, 12.0% and 10.9% of
     total net sales during the first quarter of fiscal 2003. No one customer
     accounted for more than 10% of net sales in first quarter of fiscal 2004.

8.   LEGAL PROCEEDINGS

     The Company received a letter from Philips Domestic Appliances and Personal
     Care B.V. (Philips) accusing Salton of interfering in a contractual
     relationship between Philips and a manufacturing source for Salton,
     Electrical & Electronics (E&E), misappropriating trade secrets and
     infringing other unspecified intellectual property rights in connection
     with our development and marketing of the One:One single serve coffee
     maker. On August 14, 2003, the Company filed a complaint in the United
     States District Court for the Northern District of Illinois seeking a
     declaratory judgment that we

                                       8
<PAGE>

     have not infringed the alleged trade secret rights of Philips and have not
     tortiously interfered with the contractual relationship between Philips and
     E&E.

     On October 23, 2003, Philips filed a counterclaim reiterating the
     allegations in its letter to the Company. The Company has denied each of
     these allegations. Philips is seeking to enjoin the Company from further
     importing, manufacturing, advertising, marketing or selling the One:One
     coffee maker and any monetary damages that the Court deems proper. This
     matter is set for hearing on December 16, 2003.

     The Company is a party to various other actions and proceedings incident to
     the Company's normal business operations. The Company believes that the
     outcome of such litigation will not have a material adverse effect on the
     Company's business, financial condition or results of operations. The
     Company also has product liability and general liability insurance policies
     in amounts the Company believes to be reasonable given the Company's
     current level of business. Although historically the Company has not had to
     pay any material product liability claims, it is conceivable that the
     Company could incur claims for which the Company is not insured.

9.   SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION

     The payment obligations of the Company under the 12 1/4% senior
     subordinated notes are guaranteed by certain of the Company's wholly-owned
     domestic subsidiaries (Subsidiary Guarantors). Such guarantees are full,
     unconditional and joint and several. Separate financial statements of the
     Subsidiary Guarantors are not presented because the Company's management
     has determined that they would not be material to investors. The following
     supplemental financial information sets forth, on a combined basis, balance
     sheets, statements of income and statements of cash flows for Salton, Inc.
     (Parent), the Guarantor Subsidiaries, and the Company's Non-Guarantor
     subsidiaries (Other Subsidiaries).

                                       9
<PAGE>

CONSOLIDATING BALANCE SHEET AS OF SEPTEMBER 27, 2003
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                      GUARANTOR                                OTHER      CONSOLIDATED  CONSOLIDATED
                                           PARENT   SUBSIDIARIES  ELIMINATIONS    TOTAL     SUBSIDIARIES  ELIMINATIONS     TOTALS
                                         ---------- ------------  ------------  ----------  ------------  ------------  -----------
<S>                                        <C>         <C>           <C>           <C>         <C>           <C>           <C>
                      ASSETS
Current Assets:
 Cash                                      $       2   $    4,463    $        -   $    4,465  $   49,228   $        -   $   53,693
 Accounts receivable, net of allowances           66      152,458             -      152,524      90,218            -      242,742
 Inventories                                  10,534      208,273       (43,874)     174,933      77,871            -      252,804
 Prepaid expenses and other current
 assets                                        3,217        5,758             -        8,975       7,176            -       16,151
 Intercompany                                169,866     (154,955)         (110)      14,801     (14,801)           -            -
 Prepaid income taxes                         21,431       (6,936)            -       14,495     (11,001)                    3,494
 Deferred income taxes                         1,938        6,773             -        8,711       4,163            -       12,874
                                           ---------   ----------    ----------   ----------  ----------   ----------   ----------
   Total Current Assets                      207,054      215,834       (43,984)     378,904     202,854            -      581,758
Property, Plant and Equipment,                15,040       17,725             -       32,765      39,217                    71,982
Investments in Subsidiaries                  450,773       52,200      (502,973)           -      95,877      (95,877)           -
Patents and Trademarks                       140,231       16,362             -      156,593      35,742            -      192,335
Cash in Escrow for Pifco Loan Notes                -            -             -            -       5,010            -        5,010
Goodwill                                           -       18,093             -       18,093       8,936            -       27,029
Other Assets, net                             10,641        1,461        (1,087)      11,015       2,277            -       13,292
                                           ---------   ----------    ----------   ----------  ----------   ----------   ----------
Total Assets                               $ 823,739   $  321,675    $ (548,044)  $  597,370  $  389,913   $  (95,877)  $  891,406
                                           =========   ==========    ==========   ==========  ==========   ==========   ==========
 LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
 Current debt                              $   1,375   $      559    $        -   $    1,934  $    4,705   $        -   $    6,639
 Accounts payable                                879        5,940            62        6,881     102,475            -      109,356
 Accrued expenses                             24,603       12,263             -       36,866      26,041            -       62,907
                                           ---------   ----------    ----------   ----------  ----------   ----------   ----------
   Total current liabilities                  26,857       18,762            62       45,681     133,221            -      178,902
Non-current Deferred Income Taxes              3,899         (662)            -        3,237       5,381            -        8,618
Senior subordinated notes due 2005           125,000            -             -      125,000           -            -      125,000
Senior subordinated notes due 2008,
 including an adjustment of $11,456 to
 the carrying value related to interest
 rate swap agreements                        160,332            -             -      160,332           -            -      160,332
Long Term Debt-Revolving Credit Agreement          -      127,119             -      127,119           -            -      127,119
Other Notes Payable                                -          195             -          195         573                       768
Other Long Term Liability                          -        5,417             -        5,417      11,787                    17,204
                                           ---------   ----------    ----------   ----------  ----------   ----------   ----------
   Total liabilities                         316,088      150,831            62      466,981     150,962            -      617,943
Minority interest                                  -            -             -            -      16,172                    16,172
Stockholders' Equity                         507,651      170,844      (548,106)     130,389     222,779      (95,877)     257,291
                                           ---------   ----------    ----------   ----------  ----------   ----------   ----------
Total Liabilities and Stockholders' Equity $ 823,739   $  321,675    $ (548,044)  $  597,370  $  389,913   $  (95,877)  $  891,406
                                           =========   ==========    ==========   ==========  ==========   ==========   ==========
</Table>
                                       10
<PAGE>

CONSOLIDATING BALANCE SHEET AS OF JUNE 28, 2003
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                        GUARANTOR                             OTHER      CONSOLIDATED  CONSOLIDATED
                                             PARENT    SUBSIDIARIES ELIMINATIONS    TOTAL   SUBSIDIARIES ELIMINATIONS     TOTALS
                                             ------    ------------ ------------    -----   ------------ ------------- -----------
<S>                                         <C>         <C>         <C>           <C>       <C>          <C>          <C>
                   ASSETS
Current Assets:
  Cash                                      $       -   $   8,972    $        -   $   8,972  $  44,130     $       -   $   53,102
  Accounts receivable, net of allowances           66     127,888             -     127,954     70,557             -      198,511
  Inventories                                   2,110     187,078       (39,676)    149,512     67,805             -      217,317
  Prepaid expenses and other current assets     3,358       3,958             -       7,316      5,909             -       13,225
  Intercompany                                184,039    (152,539)            -      31,500    (31,500)            -            -
  Prepaid income taxes                         27,197     (10,494)            -      16,703     (7,097)            -        9,606
  Deferred income taxes                         1,938       6,774             -       8,712      4,113             -       12,825
                                            ---------   ---------    ----------   ---------  ---------     ---------   ----------
     Total current assets                     218,708     171,637       (39,676)    350,669    153,917             -      504,586
Property, Plant and Equipment,
   Net of Accumulated Depreciation             15,547      16,854                    32,401     37,569             -       69,970
Investments in Subsidiaries                   441,521      52,585      (494,106)          -          -             -            -
Patents and Trademarks                        140,106      16,359                   156,465     35,498             -      191,963
Cash in escrow for Pifco loan notes                 -           -                         -      4,978             -        4,978
Goodwill                                            -      18,093                    18,093      8,860             -       26,953
 Other Assets, net                             11,152         172           (11)     11,313      2,609             -       13,922
                                            ---------   ---------    ----------   ---------  ---------     ---------   ----------
Total Assets                                $ 827,034   $ 275,700    $ (533,793)  $ 568,941    243,431             -   $  812,372
                                            =========   =========    ==========   =========  =========     =========   ==========

    LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current debt                              $  22,750   $     595    $        -   $  23,345  $   4,566             -   $   27,911
  Accounts payable                               (789)      5,272             -       4,483     69,065             -       73,548
  Accrued expenses                             16,246      11,862             -      28,108     26,505             -       54,613
                                            ---------   ---------    ----------   ---------  ---------     ---------   ----------
     Total current liabilities                 38,207      17,729             -      55,936    100,136             -      156,072
Non-current Deferred Income Taxes               3,899        (662)            -       3,237      5,074             -        8,311
Senior subordinated notes due 2005            125,000           -             -     125,000          -             -      125,000
Senior subordinated notes due 2008,
  including an adjustment of $12,081 to the
  carrying value related to interest rate
  swap agreements                             160,896           -             -     160,896          -             -      160,896
Long-term debt-revolving credit agreement           -      76,119             -      76,119          -             -       76,119
Other notes payable                                 -         281             -         281        592             -          873
Other long term liabilities                         -       4,528             -       4,528     11,712             -       16,240
                                            ---------   ---------    ----------   ---------  ---------     ---------   ----------
     Total liabilities                        328,002      97,995             -     425,997    117,514             -      543,511
Minority Interest                                   -           -             -           -     14,957             -       14,957
Stockholders' Equity                          499,032     177,705      (533,793)    142,944    110,960             -      253,904
                                            ---------   ---------    ----------   ---------  ---------     ---------   ----------
Total Liabilities and Stockholders' Equity  $ 827,034   $ 275,700    $ (533,793)  $ 568,941  $ 243,431     $       -   $  812,372
                                            =========   =========    ==========   =========  =========     =========   ==========
</TABLE>

                                       11

<PAGE>
CONSOLIDATING STATEMENT OF INCOME FOR THE THIRTEEN WEEKS ENDED SEPTEMBER
27, 2003
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     GUARANTOR                                  OTHER     CONSOLIDATED  CONSOLIDATED
                                         PARENT    SUBSIDIARIES  ELIMINATIONS     TOTAL     SUBSIDIARIES  ELIMINATIONS     TOTALS
                                         ------    ------------  ------------     -----     ------------  ------------  ------------
<S>                                     <C>        <C>           <C>            <C>         <C>           <C>           <C>
Net Sales                               $ 72,640    $ 175,878     $ (120,774)   $  127,744   $ 206,827    $ (96,032)      $ 238,539
Cost of Goods Sold                        55,898      151,057       (116,576)       90,379     162,109      (94,532)        157,956
Distribution Expenses                          -       10,981              -        10,981       5,419            -          16,400
                                        --------    ---------     ----------    ----------   ---------    ---------       ---------
    Gross Profit                          16,742       13,840         (4,198)       26,384      39,299       (1,500)         64,183
Selling, General and Administrative
 Expenses                                 11,247       23,318              -        34,565      18,727       (1,500)         51,792
Impairment Loss on Intangible Asset            -            -              -             -           -                            -
                                        --------    ---------     ----------    ----------   ---------    ---------       ---------
    Operating Income (Loss)                5,495       (9,478)        (4,198)       (8,181)     20,572            -          12,391
Interest Expense, Net                      7,232          916              -         8,148       1,530            -           9,678
Fair Market Value Adjustment on
 Derivatives                                   -            -              -             -           -            -               -
(Income) loss from subsidiary             (5,914)         392          5,522             -           -            -               -
                                        --------    ---------     ----------    ----------   ---------    ---------       ---------
  Income (Loss) Before Income Taxes        4,177      (10,786)        (9,720)      (16,329)     19,042            -           2,713
Income Tax (Benefit) Expense                (370)      (2,839)             -        (3,209)      4,091            -             882
Minority interest                              -            -                                    1,090                        1,090
                                        --------    ---------     ----------    ----------   ---------    ---------       ---------
     Net Income (Loss)                  $  4,547    $  (7,947)    $   (9,720)   $  (13,120)  $  13,861    $       -       $     741
                                        ========    =========     ==========    ==========   =========    =========       =========
</TABLE>

CONSOLIDATING STATEMENT OF INCOME FOR THE THIRTEEN WEEKS ENDED SEPTEMBER
28, 2002
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     GUARANTOR                                OTHER       CONSOLIDATED  CONSOLIDATED
                                         PARENT    SUBSIDIARIES  ELIMINATIONS   TOTAL      SUBSIDIARIES   ELIMINATIONS     TOTALS
                                         ------    ------------  ------------   -----      ------------   ------------  ------------
<S>                                    <C>         <C>           <C>           <C>         <C>            <C>           <C>
Net Sales                              $ 127,482    $ 233,840    $(219,380)    $ 141,942    $ 162,929      $ (104,819)     $ 200,052
Cost of Goods Sold                        61,429      182,179     (148,283)       95,325      127,805        (103,319)       119,811
Distribution Expenses                          -       11,861            -        11,861        2,039                         13,900
                                       ---------    ---------    ---------     ---------    ---------      ----------      ---------
    Gross Profit                          66,053       39,800      (71,097)       34,756       33,085          (1,500)        66,341
Selling, General and Administrative
 expenses                                 15,034       26,736         (425)       41,345        9,449          (1,500)        49,294
Intanbile impairment Loss                    800            -            -           800            -               -            800
                                       ---------    ---------    ---------     ---------    ---------      ----------      ---------
    Operating Income (Loss)               50,219       13,064      (70,672)       (7,389)      23,636               -         16,247
Interest Expense, Net                      7,259        1,725            -         8,984        1,023               -         10,007
Fair Market Value Adjustment on
 Deriviatives                                  -                                                  267                            267
(Income) Loss from Subsidiaries          (32,369)         167       32,202             -            -               -              -
                                       ---------    ---------    ---------     ---------    ---------      ----------      ---------
    Income (Loss) Before Income Taxes     75,329       11,172     (102,874)      (16,373)      22,346               -          5,973
Income Tax (Benefit) Expense                 924          (95)           -           829        1,244               -          2,073
Minority Interest                              -            -            -             -            -               -              -
                                       ---------    ---------    ---------     ---------    ---------      ----------      ---------
    Net Income (Loss)                  $  74,405    $  11,267    $(102,874)    $ (17,202)   $  21,102      $        -      $   3,900
                                       =========    =========    =========     =========    =========      ==========      =========
</TABLE>

                                       12

<PAGE>

CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE THIRTEEN WEEKS ENDED SEPTEMBER
27, 2003
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                             GUARANTOR                            OTHER    CONSOLIDATED CONSOLIDATED
                                                    PARENT  SUBSIDIARIES  ELIMINATIONS  TOTAL SUBSIDIARIES ELIMINATIONS    TOTALS
                                                    ------  ------------  ------------  ----- ------------ ------------ ------------
<S>                                              <C>        <C>           <C>          <C>        <C>          <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                               $    4,547  $   (7,947)  $  (9,720) $  (13,120)    13,861   $     -    $      741
  Adjustments to reconcile net income (loss) to                                                                                   -
   net cash used in operating activities:                                                                                         -
    Imputed interest on notes payable and other                                                         118         -          (447)
     non-cash items                                     (565)          -           -        (565)
    Deferred income tax provision                          1           -           -           1        275         -           276
    Foreign currency gains and lossess                     -         551           -         551          -         -           551
    Depreciation and amortization                      2,340         842           -       3,182      1,990         -         5,172
    Loss on disposal of equipment                          -           -           -           -         58         -            58
    Equity in net income of unconsolidated
     affilate/ consolidated subsidiaries              (5,914)        392       5,522           -          -         -             -
    Minority interest                                      -           -           -           -      1,090         -         1,090
    Changes in assets and liabilities:
     Accounts receivable                                   0     (25,120)          -     (25,120)   (18,923)        -       (44,043)
     Inventories                                      (8,426)    (21,193)      4,198     (25,421)    (9,277)        -       (34,698)
     Prepaid expenses and other current assets           140      (1,800)          -      (1,660)      (707)        -        (2,367)
     Accounts payable                                  1,223         684           -       1,907     33,109         -        35,016
     Taxes payable                                     5,765      (3,558)          -       2,207      3,885         -         6,092
     Accrued expenses                                 23,762       2,859           -      26,621    (17,106)        -         9,515
                                                  ----------  ----------   ---------  ---------- ----------   -------    ----------
       NET CASH FROM OPERATING ACTIVITIES             22,873     (54,290)          -     (31,417)     8,373         -       (23,044)
                                                  ----------  ----------   ---------  ---------- ----------   -------    ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures                                (957)       (841)          -      (1,798)    (3,331)        -        (5,129)
    Increase in other non-current assets                 (71)       (257)          -        (328)         -         -          (328)
    Additional payment for patents and trademarks    (21,500)          -           -     (21,500)         -         -       (21,500)
                                                  ----------  ----------   ---------  ---------- ----------   -------    ----------
       NET CASH FROM INVESTING ACTIVITIES            (22,528)     (1,098)          -     (23,626)    (3,331)        -       (26,957)
                                                  ----------  ----------   ---------  ---------- ----------   -------    ----------
CASH FLOWS FROM FINANCING ACTIVITIES:

    Net proceeds from revolving line of credit             -      51,000           -      51,000          -         -        51,000
     and other debt
    Repayment of long-term debt                            -        (121)          -        (121)         -         -          (121)
    Costs associated with refinancing                   (347)          -           -        (347)         -         -          (347)
    Common stock issued                                    4           -           -           4          -         -             4
                                                  ----------  ----------   ---------  ---------- ----------   -------    ----------
    NET CASH FROM FINANCING ACTIVITIES                  (343)     50,879           -      50,536          -         -        50,536
                                                  ----------  ----------   ---------  ---------- ----------   -------    ----------
Effect of Exchange Rate Changes on Cash                    -           -           -           -         56         -            56
                                                  ----------  ----------   ---------  ---------- ----------   -------    ----------

Net Change in Cash                                         2      (4,509)          -      (4,507)     5,098         -           591

Cash, Beginning of Period                                  -       8,972           -       8,972     44,130         -        53,102
                                                  ----------  ----------   ---------  ---------- ----------   -------    ----------
Cash, End of Period                               $        2  $    4,463   $       -  $    4,465 $   49,228   $     -    $   53,693
                                                  ==========  ==========   =========  ========== ==========   =======    ==========
</TABLE>

                                       13

<PAGE>

CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE THIRTEEN WEEKS ENDED SEPTEMBER
28 ,2002
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                            GUARANTOR                            OTHER     CONSOLIDATED CONSOLIDATED
                                                 PARENT    SUBSIDIARIES ELIMINATIONS   TOTAL  SUBSIDIARIES ELIMINATIONS     TOTAL
                                                 ------    ------------ ------------   -----  ------------ ------------ ------------
<S>                                              <C>       <C>          <C>            <C>    <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                      $ 74,405   $   11,267  $ (102,874) $ (17,202)  $   21,102   $      -    $    3,900
 Adjustments to reconcile net income (loss) to                                              -
   net cash used in operating activities:                                                   -                       -             -
  Imputed interest on notes payable and other
   non-cash items                                     123            -           -        123          112          -           235
  Deferred income tax provision                                                                        108                      108
  Depreciation and amortization                     2,066          890           -      2,956          908          -         3,864
  Loss on disposal of equipment                         -            -           -          -           45          -            45
  Equity in net income of unconsolidated                                                    -
   affilate/ consolidated subsidiaries            (32,367)         167      32,200          -          (92)         -           (92)
  Impairment loss on intangible asset                 800            -           -        800            -          -           800
  Fair value adjustment for derivatives                 -            -           -          -          267                      267
  Changes in assets and liabilities:                                                                                -             -
  Accounts receivable                                 774          875           -      1,649      (14,044)         -       (12,395)
  Inventories                                     (13,744)     (91,368)     70,674    (34,438)       2,241          -       (32,197)
  Prepaid expenses and other current assets         2,105         (977)          -      1,128        1,480          -         2,608
  Intercompany                                    (12,004)      39,076           -     27,072      (27,072)         -             -
  Accounts payable                                (12,183)       7,652           -     (4,531)      19,222          -        14,691
  Taxes payable                                     1,164         (250)          -        914        1,199          -         2,113
  Accrued expenses                                  6,582        4,603           -     11,185       (3,124)         -         8,061
                                                 --------   ----------  ----------  ---------   ----------   --------    ----------
   NET CASH FROM OPERATING ACTIVITIES              17,721      (28,065)          -    (10,344)       2,352          -        (7,992)
                                                 --------   ----------  ----------  ---------   ----------   --------    ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                              (741)      (1,368)          -     (2,109)      (2,109)          -        (4,218)
  Increase in other non-current assets              (250)           -           -       (250)           -           -          (250)
  Additional payment for patents and trademarks   20,750)           -           -    (20,750)           -           -       (20,750)
                                                --------   ----------  ----------  ---------   ----------    --------    ----------
   NET CASH FROM INVESTING ACTIVITIES             21,741)      (1,368)          -    (23,109)      (2,109)          -       (25,218)
                                                --------   ----------  ----------  ---------   ----------    --------    ----------
CASH FLOWS FROM FINANCING ACTIVITIES:

  Net proceeds from revolving line of credit
   and other debt                                      -       25,000           -      25,000           -           -        25,000
  Repayment of long-term debt                          -          (64)          -        (64)           -           -           (64)
  Common stock issued                                  3            -           -          3            -           -             3
  Proceeds from termination of swap transaction    6,074            -           -      6,074            -           -         6,074
                                                --------   ----------  ----------  ---------   ----------    --------    ----------
   NET CASH FROM FINANCING ACTIVITIES              6,077       24,936           -     31,013            -           -        31,013
                                                --------   ----------  ----------  ---------   ----------    --------    ----------
Effect of Exchange Rate Changes on Cash           (4,854)           -           -     (4,854)       4,220           -          (634)
                                                --------   ----------  ----------  ---------   ----------    --------    ----------
Net Change in Cash                                (2,797)      (4,497)          -     (7,294)       4,463           -        (2,831)

Cash, Beginning of Period                          2,797        7,931           -     10,728       20,327           -        31,055
                                                --------   ----------  ----------  ---------   ----------    --------    ----------
Cash, End of Period                             $      -   $    3,434  $        -  $   3,434   $   24,790    $      -    $   28,224
                                                ========   ==========  ==========  =========   ==========    ========    ==========
</TABLE>


                                       14

<PAGE>

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

     As used in this quarterly report on Form 10-Q, "we," "us," "our," "Salton"
     and "the Company" refer to Salton, Inc and our subsidiaries, unless the
     context otherwise requires.

     INTRODUCTION

     Salton designs, sources, markets and distributes small home appliances,
     home decor and personal care products under recognized brand names in the
     International Housewares Industry. Our product mix consists of kitchen and
     home appliances, tabletop products, time products, lighting products,
     picture frames and personal care and wellness products. In recent years, we
     have expanded our international presence in Western Europe, South Africa,
     Australia and Brazil through strategic acquisitions, alliances and
     internally developed start-up organizations. In addition, we have managed
     to generate organic international growth and strengthen our domestic
     product offerings through these acquisitions, alliances and start-ups.

     ACQUISITIONS & EXPANSIONS

     On July 1, 2003, we started Salton Brasil Limited. Salton Brasil plans to
     begin shipments in the second quarter of fiscal 2004.

     BASIS FOR PRESENTATION

     The consolidated financial statements for the quarter ended September 27,
     2003 include the accounts of Amalgamated Appliances Limited (AMAP),
     reflecting the controlling ownership interest acquired on May 16, 2003.
     Accounting principles generally accepted in the United States of America
     (GAAP) require results for the periods ended prior to May 16, 2003,
     including results of operations and cash flows for the quarter ended
     September 28, 2002 be presented on a historical basis with Salton's
     investment in AMAP accounted for under the equity method of accounting. Pro
     forma results for the first quarter of 2003, as if the increase in
     ownership of AMAP had taken place at the beginning of 2003, are presented
     in Note 2 of the Financial Statements.

     DISCUSSION OF CRITICAL ACCOUNTING POLICIES

     Our financial statements have been prepared in accordance with accounting
     principles generally accepted in the United States of America, which
     require us to make estimates and judgments that significantly affect the
     reported amounts of assets, liabilities, revenues and expenses and related
     disclosure of contingent assets and liabilities. We regularly evaluate
     these estimates, including those related to our allowance for doubtful
     accounts, reserve for inventory valuation, commitments and contingencies,
     reserve for returns and allowances, valuation of reporting units with
     goodwill, valuation of intangible assets having indefinite lives,
     cooperative advertising accruals, pension benefits and depreciation and
     amortization. We base these estimates on historical experience and on
     assumptions that are believed by management to be reasonable under the
     circumstances. Actual results may differ from these estimates, which may
     impact the carrying value of assets and liabilities.

     The following critical accounting policies required the most significant
     estimates used in the preparation of our consolidated financial statements:

                                       15

<PAGE>

     ALLOWANCE FOR DOUBTFUL ACCOUNTS - We record allowances for estimated losses
     resulting from the inability of our customers to make required payments. We
     assess the credit worthiness of our customers based on multiple sources of
     information and analyze such factors as our historical bad debt
     experiences, publicly available information regarding our customers and the
     inherent credit risk related to them, information from subscription based
     credit reporting companies, trade association data and reports, current
     economic trends and changes in customer payment terms or payment patterns.
     This assessment requires significant judgment. If the financial condition
     of our customers were to worsen, additional write-offs may be required,
     resulting in write-offs that are not included in the allowance for doubtful
     accounts at September 27, 2003.

     INVENTORY VALUATION - Our inventories are generally determined using the
     last-in, first-out (LIFO) cost method. We value our inventory at the lower
     of cost or market, and regularly review the book value of discontinued
     product lines and stock keeping units (SKUs) to determine if these items
     are properly valued. If market value is less than cost, we write down the
     related inventory to the lower of market or net realizable value. We
     regularly evaluate the composition of our inventory to identify slow-moving
     and obsolete inventories to determine if additional write-offs are
     required. Changes in consumer purchasing patterns, however, could result in
     the need for additional write-offs.

     COMMITMENTS AND CONTINGENCIES - We are subject to lawsuits and other claims
     related to product and other matters that are being defended and handled in
     the ordinary course of business. We maintain reserves and or accruals for
     such costs that may be incurred, which are determined on a case-by-case
     basis, taking into consideration the likelihood of adverse judgments or
     outcomes, as well as the potential range of probable loss. The reserves and
     accruals are monitored on an ongoing basis and are updated for new
     developments or new information as appropriate.

     INTANGIBLE ASSETS - We record intangible assets through transactions and
     acquisitions. The cost of acquisition is allocated to the assets and
     liabilities acquired, including identifiable intangible assets, with the
     remaining amount being classified as goodwill. Under current accounting
     guidelines that became effective on July 1, 2001, goodwill arising from
     transactions occurring after July 1, 2001 and any existing goodwill as of
     June 30, 2002 are not amortized to expense but rather periodically assessed
     for impairment. Intangible assets that have an indefinite life are also
     periodically assessed for impairment.

     The allocation of the acquisition cost to intangible assets and goodwill
     therefore has a significant impact on our future operating results. The
     allocation process requires the extensive use of estimates and assumptions,
     including estimates of future cash flows expected to be generated by the
     acquired assets. Further, when impairment indicators are identified with
     respect to previously recorded intangible assets, the values of the assets
     are determined using discounted future cash flow techniques, which are
     based on estimated future operating results. Significant management
     judgment is required in the forecasting of future operating results which
     are used in the preparation of projected discounted cash flows.

     As of June 28, 2003, the Company prepared estimates of the fair values of
     those reporting units having recorded goodwill amounts. Such estimates
     exceeded the carrying values of the reporting units, however, shortfalls in
     future operating results and/or application of more conservative market
     assumptions could have an adverse impact on the comparison of fair value to
     carrying value. If these conditions arise, and a shortfall in fair value
     versus carrying value results, further analysis of intangibles at the unit
     level could result in an impairment charge of a material portion of the
     $27.0 million of goodwill.

                                       16

<PAGE>

     QUARTER IN REVIEW

     Salton's international expansion increased net sales by 19.2% despite a
     10.0% decline in domestic revenues. Planned product acquisition cost
     improvements were also a key driver in Salton's return to profitability
     from the prior trended quarter.

     RESULTS OF OPERATIONS

     The following table sets forth our results of operations as a percentage of
     net sales for the periods indicated:

<TABLE>
<CAPTION>
                                                           13 WEEKS ENDED
                                                  -----------------------------
                                                  SEPTEMBER 27,   SEPTEMBER 28,
                                                      2003             2002
                                                  -------------   -------------
<S>                                               <C>             <C>
Net sales                                             100.0%          100.0%
Cost of goods sold                                     66.2            59.9
Distribution expenses                                   6.9             6.9
                                                      -----           -----
      Gross profit                                     26.9            33.2
Selling, general and administrative expense            21.7            24.6
Impairment loss on intangible asset                     0.0             0.4
                                                      -----           -----
Operating income                                        5.2%            8.2%
                                                      =====           =====
</TABLE>

     2004 COMPARED TO 2003

     NET SALES AND GROSS PROFIT

     Salton's net sales for the thirteen weeks ended September 27, 2003 were
     $238.5 million. This represented an increase in revenues of 19.2% compared
     to the same period in 2003. This increase was primarily from the Company's
     inclusion of sales of AMAP as a result of our increased ownership interest.
     Worldwide sales of George Foreman are down, primarily in the domestic
     market partially offset by an increase in the international market.
     Russell Hobbs sales were up in comparison to prior year due to its
     introduction in Australia and increased recognition in the domestic market.
     In addition, our strong portfolio of brand names contributed to our success
     internationally with sales in Australia nearly triple that of the thirteen
     weeks ended September 28, 2002. The effect of foreign exchange fluctuations
     accounted for nearly $2.8 million of the increases in net sales during the
     first thirteen weeks.

     Gross profit in first quarter of 2004 decreased to $64.2 million or 26.9%
     of net sales as compared to $66.3 million or 33.2% of net sales in first
     quarter of 2003. The gross profit decrease was primarily a result of
     ongoing price reductions across brands introduced in advance of cost
     reductions in the domestic market.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses decreased to 21.7% of net
     sales or $51.8 million in first quarter of 2004 compared to 24.6% of net
     sales or $49.3 million for first quarter of 2003. The increase in dollars
     is primarily due to the inclusion of AMAP while as a percent of sales,
     selling, general and administrative expenses declined.

     NET INTEREST EXPENSE

     Net interest expense was $9.7 million for the first quarter of fiscal 2004
     compared to $10.0 million in the first quarter of fiscal 2003. Our rate of
     interest on amounts outstanding under the revolver, term loan and senior
     subordinated debt was a weighted average annual rate of 9.5% in the first
     quarter of fiscal 2004 compared to 8.5% in the same period in fiscal 2003.
     The increase in our weighted average annual interest rate is primarily due
     to a higher proportion of fixed rate debt. The average

                                       17

<PAGE>

     amount of all debt outstanding, excluding adjustments to the carrying value
     of the senior subordinated notes due 2008 related to interest rate swap
     agreements, was $390.9 million for the first quarter of fiscal 2004
     compared to $465.5 million for the same period in fiscal 2003.

     INCOME TAXES

     Income tax expense was $0.9 million in the first quarter of fiscal 2004 as
     compared to income tax expense of $2.1 million in the same period in fiscal
     2003. The effective tax rate for federal, state and foreign income taxes
     was approximately 32.5% for the first quarter of fiscal 2004 versus
     approximately 34.7% for the first quarter of fiscal 2003. The Company's
     income tax rate for 2004 was favorably impacted due to a disproportionately
     greater amount of income subject to lower foreign tax rates and a taxable
     loss in the domestic entities.

     NET INCOME

     The Company reported net income of $0.7 million or basic earnings per
     common share of $0.07 per share for the first quarter of 2004 compared with
     net income of $3.9 million or basic earnings per common share of $0.35 per
     share for the first quarter of 2003.

     LIQUIDITY AND CAPITAL RESOURCES

     OVERVIEW

     Our primary sources of liquidity are our cash flow from operations and
     borrowings under our senior secured revolving credit facility. During the
     first quarter of fiscal 2004, we used net cash of $23.0 million in
     operating activities and $27.0 million in investing activities. The cash
     used in operating activities was primarily due to seasonal increases in
     accounts receivable and inventory, net of increases in trade payables. The
     cash used in investing activities was primarily related to the final
     payment to George Foreman in connection with the obligation under the note
     payable to him, as well as, capital expenditures.

     Our results of operations for the periods discussed have not been
     significantly affected by inflation or foreign currency fluctuation. We
     generally negotiate our purchase orders with our foreign manufacturers in
     United States dollars. Thus, our cost under any purchase order is not
     subject to change after the time the order is placed due to exchange rate
     fluctuations. However, the weakening of the United States dollar against
     local currencies could result in certain manufacturers increasing the
     United States dollar prices for future product purchases.

     Salton Europe currently uses foreign exchange contracts to hedge
     anticipated foreign currency transactions, primarily U.S. dollar inventory
     purchases. The contracts generally mature within one year and are designed
     to limit exposure to exchange rate fluctuations, primarily the British
     Pound Sterling against United States dollars.

     We incurred approximately $5.1 million for capital expenditures during the
     first quarter of 2004.

     REVOLVING CREDIT FACILITY

     Our senior indebtedness contains a number of significant covenants that,
     among other things, restrict our ability to dispose of assets, incur
     additional indebtedness, prepay other indebtedness, pay dividends,
     repurchase or redeem capital stock, enter into certain investments, enter
     into sale and lease-back transactions, make certain acquisitions, engage in
     mergers and consolidations, create liens, or engage in certain transactions
     with affiliates and otherwise restrict our corporate and business
     activities.

     In addition, under our senior secured revolving credit facility, we are
     required to comply with a minimum domestic and consolidated fixed charge
     coverage ratio. In addition to the above, the

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<PAGE>

     Company is required to maintain a minimum level of availability of $25.0
     million for the period July 1st - December 31st and $35.0 million for the
     period January 1st - June 30th of any given year. If the Company fails to
     maintain these minimum availability levels, all proceeds from the sale of
     collateral (including working capital) must be deposited for the benefit of
     the Agent and released to the Company at the discretion and consent of the
     Required Lenders.

     As of September 27, 2003, we had borrowings of approximately $127.1 million
     outstanding under our senior secured revolving credit facility. Advances
     under the senior secured credit facility are primarily based upon
     percentages of eligible accounts receivable and inventories. As of
     September 27, 2003, we had approximately $41.0 million available for future
     cash borrowings. Typically, given the seasonal nature of our business,
     borrowings and availability tend to be highest in mid-Fall and early
     Winter.

     Borrowings under our senior secured credit facility accrue interest, at our
     option, at either: LIBOR, plus a specified margin, which is determined by
     our consolidated fixed charge coverage ratio, and totals approximately 3.4%
     at September 27, 2003; or the Base Rate (Wachovia Bank's prime rate), plus
     a specified margin, which is determined by our consolidated fixed charge
     coverage ratio, and is currently set at 0.0%, and totals 4.0% at September
     27, 2003.

     SENIOR SUBORDINATED NOTES

     In addition to borrowings under our senior secured revolving credit
     facility, we had $125.0 million of 10 3/4% senior subordinated notes due
     2005 outstanding and $150.0 million of 12 1/4% senior subordinated notes
     due 2008 outstanding (excluding $11.5 million related to the fair value of
     interest rate swap agreements that have been monetized).

     The indenture governing our 12 1/4% senior subordinated notes due 2008 and
     10 3/4% senior subordinated notes due 2005 contains covenants that, among
     other things, limit our ability and the ability of our restricted
     subsidiaries to incur additional indebtedness and issue preferred stock,
     pay dividends or make certain other restricted payments, create certain
     liens, enter into certain transactions with affiliates, enter into sale and
     lease-back transactions, sell assets or enter into certain mergers and
     consolidations.

     OTHER CREDIT FACILITIES

     We maintain credit facilities out of the United States that locally support
     our foreign subsidiaries operations and working capital requirements. These
     facilities are at current market rates in those localities and at certain
     peak periods of the year, are secured by various assets.

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<PAGE>

     FORWARD LOOKING

     We anticipate capital expenditures on an ongoing basis to be approximately
     2.0% of net sales.

     We believe that future cash flow from operations based on our current level
     of operations and anticipated growth, together with our strengthened
     balance sheet and available borrowings under our senior secured revolving
     credit facility and other sources of debt funding, will be adequate to meet
     our anticipated requirements for current capital expenditures, potential
     acquisitions and alliances, working capital requirements, interest and
     income tax payments and scheduled debt payments. Our anticipated earnings
     and growth are subject to general economic, financial, competitive and
     other factors that are beyond our control. We cannot assure you that our
     business will continue to generate sufficient cash flow from operations in
     the future to service our debt and make necessary capital expenditures
     after satisfying certain liabilities arising in the ordinary course of
     business. If unable to do so, we may be required to refinance all or a
     portion of our existing debt, including the notes, sell assets or obtain
     additional financing. We cannot assure you that any refinancing would be
     available or that any sales of assets or additional financing could be
     obtained.

     ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     We use derivative financial instruments to manage interest rate and foreign
     currency risk. Our objectives in managing our exposure to interest rate
     changes are to limit the impact of interest rate changes on earnings and
     cash flows and to lower our overall borrowing costs through the use of
     interest rate swaps. Our objectives in managing our exposure to foreign
     currency fluctuations is to reduce the impact of changes in foreign
     exchange rates on consolidated results of operations and future foreign
     currency denominated cash flows. We do not enter into derivative financial
     instruments for trading purposes. Our policy is to manage interest rate
     risk through the use of a combination of fixed and variable rate debt and
     hedge foreign currency commitments of future payments and receipts by
     purchasing foreign currency forward contracts.

     All foreign exchange contracts have been recorded on the balance sheet at
     fair value of $1.1 million classified within accrued expenses. The change
     in the fair value of contracts in the first quarter that qualify as foreign
     currency cash flow hedges and are highly effective was de minimis. The
     Company anticipates that all gains and losses in accumulated other
     comprehensive income related to foreign exchange contracts will be
     reclassified into earnings over the next twelve months. At September 27,
     2003, the Company's European subsidiary had foreign exchange contracts for
     the purchase of 45.0 million U.S. dollars. No new contracts were entered
     into during the first quarter of fiscal 2004.

     ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures. Based on their evaluation
     as of a date within 90 days of the filing date of this Quarterly Report on
     Form 10-Q, the Company's principal executive officer and principal
     financial officer have concluded that the Company's disclosure controls and
     procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
     Securities Exchange Act of 1934 (the "Exchange Act")) are effective to
     ensure that information required to be disclosed by the Company in reports
     that it files or submits under the Exchange Act is recorded, processed,
     summarized and reported within the time periods specified in Securities and
     Exchange Commission rules and forms.

(b)  Changes in internal controls. There were no significant changes in the
     Company's internal controls or in other factors that could significantly
     affect these controls subsequent to the date of their evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

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<PAGE>

                           PART II: OTHER INFORMATION

     ITEM 1: LEGAL PROCEEDINGS

     The Company received a letter from Philips Domestic Appliances and Personal
     Care B.V. (Philips) accusing Salton of interfering in a contractual
     relationship between Philips and a manufacturing source for Salton,
     Electrical & Electronics (E&E), misappropriating trade secrets and
     infringing other unspecified intellectual property rights in connection
     with its development and marketing of the One:One single serve coffee
     maker. On August 14, 2003, the Company filed a complaint in the United
     States District Court for the Northern District of Illinois seeking a
     declaratory judgment that the Company has not infringed the alleged trade
     secret rights of Philips and have not tortiously interfered with the
     contractual relationship between Philips and E&E.

     On October 23, 2003, Philips filed a counterclaim reiterating the
     allegations in its letter to the Company. The Company has denied each of
     these allegations. Philips is seeking to enjoin the Company from further
     importing, manufacturing, advertising, marketing or selling the One:One
     coffee maker and any monetary damages that the Court deems proper. This
     matter is set for hearing on December 16, 2003.

     We are a party to various other actions and proceedings incident to our
     normal business operations. We believe that the outcome of such litigation
     will not have a material adverse effect on our financial condition or
     annual results of operations. We also have product liability and general
     liability insurance policies in amounts we believe are reasonable given our
     current level of business. Although historically we have not had to pay any
     material product liability claims, it is conceivable that we could incur
     claims for which we are not insured.

     ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a)  Reports on Form 8-K

     A current report on Form 8-K was filed on November 6, 2003 reporting under
     Item 9, Regulation FD Disclosure and Item 12, Results of Operations and
     Financial Condition, our results of operations for the first quarter of
     fiscal 2004.

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<PAGE>

                               SIGNATURE

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

Date: November 12, 2003           SALTON, INC.

                                  /s/  DAVID M. MULDER
                                  David M. Mulder
                                  Executive Vice President, Chief Administrative
                                  Officer and Senior Financial Officer
                                  (Duly Authorized Officer of the Registrant)

                                       22

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER                     DESCRIPTION OF DOCUMENT
--------------                     -----------------------
<S>                 <C>
12(A)               Computation of Ratio of Earnings to Fixed Charges

31.1                Certification By The Chief Executive Officer Pursuant To
                    Section 302 Of The Sarbanes-Oxley Act Of 2002

31.2                Certification By The Chief Financial Officer Pursuant To
                    Section 302 Of The Sarbanes-Oxley Act Of 2002

32.1                Certification of Chief Executive Officer Pursuant to
                    18 U.S.C. 1350, as Adopted Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002

32.2                Certification of Chief Financial Officer Pursuant to 18.
                    U.S.C. 1350, as Adopted Pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002
</TABLE>

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