<PAGE>   1


                       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 DECEMBER 25, 1999
         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)

     550 BUSINESS CENTER DRIVE
      MOUNT PROSPECT, ILLINOIS                                     60056
  (Address of principal executive                               (Zip Code)
             offices)

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

                          SALTON/MAXIM HOUSEWARES INC.

 Former name, former address and former fiscal year, if changed since last year

Indicate by check mark whether this 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of February 4, 2000
11,247,437 shares of its $.01 par value Common Stock.
<PAGE>   2



                                  SALTON, INC.
                                    FORM 10-Q
                         QUARTER ENDED DECEMBER 25, 1999

                                      INDEX

<TABLE>
<CAPTION>
                                                                                            PAGE NO.
<S>                 <C>                                                                     <C>

PART I              FINANCIAL INFORMATION

        Item 1:     Consolidated Financial Statements

                    Consolidated Balance Sheets-December 25, 1999
                    (Unaudited) and June 26, 1999                                                3

                    Consolidated Statements of Earnings (Unaudited)
                    Thirteen weeks ended December 25, 1999 and December 26, 1998
                    And Twenty-six weeks ended December 25, 1999 and December 26, 1998           4

                    Consolidated Statements of Cash Flows (Unaudited)
                    Twenty-six weeks ended December 25, 1999 and December 26, 1998               5

                    Notes to Consolidated Financial Statements (Unaudited)                       6

        Item 2:     Management's Discussion and Analysis of Financial Condition
                    and Results of Operations                                                    9

PART II             OTHER INFORMATION

        Item 1:     Legal Proceedings                                                           13

        Item 6:     Exhibits and Reports on Form 8-K                                            14

                    Signature                                                                   15

</TABLE>




                                      -2-
<PAGE>   3


                                  SALTON, INC.
                           CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                        (UNAUDITED)
                                                        DECEMBER 25,      JUNE 26,
ASSETS                                                     1999            1999
                                                           ----            ----
<S>                                                    <C>              <C>
Current Assets:
   Cash                                                $       4,780    $     11,240
   Accounts receivable, net of allowances                    208,804          96,179
   Inventories                                               149,942         144,124
   Prepaid expenses and other current assets                   7,442           6,350
   Deferred income taxes                                       2,021           3,134
                                                       -------------    ------------
         Total current assets                                372,989         261,027
Property Plant and Equipment:
   Land                                                          928             928
   Buildings                                                   4,696           4,696
   Molds and tooling                                          28,907          26,364
   Warehouse equipment                                         6,386           6,142
   Office furniture and equipment                              7,594           6,097
                                                       -------------    ------------
                                                              48,511          44,227
   Less accumulated depreciation                             (23,373)        (19,576)
                                                       -------------    ------------
                                                              25,138          24,651
Intangibles, net of accumulated amortization, and
       other non-current assets                              164,625          42,638
                                                       -------------    ------------
TOTAL ASSETS                                           $     562,752    $    328,316
                                                       =============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Revolving line of credit and other current debt     $     93,537     $     32,229
   Accounts payable                                          28,252           40,997
   Accrued expenses                                          25,515           21,865
   Income taxes payable                                      19,752
                                                       ------------     ------------
         Total current liabilities                          167,056           95,091
Non-current deferred income taxes                               157              157
Long-term debt                                              255,541          182,329
                                                       ------------     ------------
         Total liabilities                                  422,754          277,577
Stockholders' equity:
   Preferred stock, $.01 par value; authorized,
       2,000,000 shares, 40,000 shares issued
   Common stock, $.01 par value; authorized,
       20,000,000 shares; shares issued and outstanding:
       2000--11,239,437; 1999--10,251,828                       134              201
   Treasury stock - at cost                                 (30,961)         (90,804)
   Additional paid-in capital                                59,875           91,900
   Accumulated other comprehensive income (loss)                  4              (48)
   Retained earnings                                        110,946           49,490
                                                       -------------    ------------
         Total stockholders' equity                         139,998           50,739
                                                       ------------     ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY             $    562,752     $    328,316
                                                       ============     ============
</TABLE>

                 See Notes to Consolidated Financial Statements.

                                      -3-
<PAGE>   4



                                  SALTON, INC.
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

(IN THOUSANDS EXCEPT SHARE DATA)                                    13 WEEKS ENDED                 26 WEEKS ENDED
                                                                    --------------                 --------------
                                                             12/25/99          12/26/98        12/25/99         12/26/98
                                                             --------          --------        --------         --------
<S>                                                          <C>               <C>             <C>              <C>
Net sales                                                    $292,767          $142,684        $489,107         $247,072
Cost of goods sold                                            166,845            84,338         277,246          139,342
Distribution expenses                                           9,911             4,956          17,031            8,565
                                                              -------            ------          ------           ------
Gross profit                                                  116,011            53,390         194,830           99,165
Selling, general and administrative expenses                   30,684            31,969          81,174           59,749
                                                               ------            ------          ------           ------
Operating income                                               85,327            21,421         113,656           39,416
Interest expense                                                9,244             2,411          14,721            4,810
                                                               ------            ------          ------           ------
Income before income taxes                                     76,083            19,010          98,935           34,606
Income taxes                                                   28,525             7,328          37,479           12,105
                                                               ------            ------          ------          -------

Net income                                                   $ 47,558          $ 11,682        $ 61,456        $  22,501
                                                             ========          ========        ========        =========



Weighted average common shares outstanding                 11,184,333         9,855,147      11,109,058       11,523,084


Weighted average common and common
   equivalent shares outstanding                           15,457,776        14,035,043       15,378,315      15,061,670


Net income per common share: Basic                           $  4.25           $  1.19         $  5.53          $  1.95


Net income per common share: Diluted                         $  3.08            $ 0.83          $ 4.00          $  1.49

</TABLE>

                 See Notes to Consolidated Financial Statements.


                                      -4-
<PAGE>   5


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

<TABLE>
<CAPTION>

(IN THOUSANDS EXCEPT SHARE DATA)                                                                   26 WEEKS ENDED
                                                                                                   --------------
                                                                                           DECEMBER 25,      DECEMBER 26,
                                                                                               1999              1998
                                                                                               ----              ----
<S>                                                                                         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                              $ 61,456         $ 22,501
   Adjustments to reconcile net income to net cash from operating activities:
      Changes in deferred taxes                                                                1,113             (158)
      Depreciation and amortization                                                            8,729            2,309
      Imputed interest on note payable                                                         3,168
      Purchase reduction of note payable and other non-cash items                               (221)              12
        Changes in assets and liabilities:
           Accounts receivable                                                              (112,625)         (39,588)
           Inventories                                                                        (5,818)          (4,749)
           Prepaid expenses and other current assets                                          (1,092)            (493)
           Accounts payable                                                                  (12,745)            (644)
           Taxes payable                                                                      19,752             (496)
           Accrued expenses                                                                    3,700              647
                                                                                               -----         --------
               Net cash from operating activities:                                           (34,583)         (20,659)
CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of George Foreman Trademark                                                   (22,750)
   Additions to intangibles for patents/trademarks                                              (335)
   Equity investment in Amalgamated Appliance Holdings Limited                                (5,896)
   Capital expenditures                                                                       (4,439)            (970)
                                                                                             --------          -------
               Net cash from investing activities:                                           (33,420)            (970)
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds(repayment)from revolving line of credit and other debt                            61,308          (50,475)
   Repayment of long-term debt                                                                  (255)         (90,000)
   Proceeds from long-term debt                                                                                90,000
   Proceeds from subordinated notes                                                                           125,000
   Costs associated with refinancing                                                            (514)          (7,943)
   Common stock issuance                                                                       1,002               40
   Preferred stock issuance                                                                                    40,000
   Purchase of treasury stock                                                                                 (70,799)
   Costs associated with preferred stock issuance                                                              (2,999)
                                                                                          ----------         ---------
               Net cash from financing activities:                                            61,541           32,824
The effect of exchange rate changes on cash                                                        2                -
                                                                                          ----------       ----------
Net change in cash                                                                            (6,460)          11,195
Cash, beginning of period                                                                     11,240              661
                                                                                              ------         --------
Cash, end of period                                                                         $  4,780      $    11,856
                                                                                            ========      ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:

Interest                                                                                    $ 14,091         $  4,182
   Income taxes                                                                             $ 16,791         $ 12,601

</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
      In the quarter ended December 25,1999, Salton acquired, effective July 1,
1999, the right to use in perpetuity and worldwide the name "George Foreman" in
connection with the marketing and sale of food preparation and non-alcoholic
drink preparation and serving appliances. The aggregate purchase price payable
to George Foreman and other participants was $137,500, of which $113,750 is
payable in five annual cash installments, and the remaining $23,750 was paid
through the issuance of 779,191 shares of Salton, Inc. common stock issued out
of treasury. The first cash installment of $22,750 was previously paid during
the first half of fiscal 2000. In connection with the transaction Salton issued
a five-year $91,000 non-interest bearing subordinated promissory note initially
recorded at its present value of $74,520 which accreted to a present value of
$77,688 as of December 25, 1999.

      In the quarter ended September 26, 1998, Salton repurchased 6,535,072
shares of Salton's common stock from Windmere-Durable Holdings Inc.("Windmere")
for a total purchase price of $90,804. The purchase price included the issuance
of a six and one-half year $15,000 subordinated promissory note which bears
interest at 4% per annum recorded at its fair value of $9,096 and the effective
repayment of Windmere's promissory note to Salton for the principal amount of
$10,848.
                 See Notes to Consolidated Financial Statements.

                                      -5-
<PAGE>   6


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

1.       CONSOLIDATED FINANCIAL STATEMENTS.

         The consolidated financial statements have been prepared from Salton's
records without audit and are subject to year end adjustments. The interim
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of financial information. The interim consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Salton, Inc. 1999 Annual
Report to Shareholders and the Annual Report on Form 10-K. The results of
operations for the interim periods should not be considered indicative of
results to be expected for the full year.

2.       NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE.

         On June 28, 1999, the Company's Board of Directors authorized a 3-for-2
split of its common stock effective July 28, 1999, for stockholders of record at
the close of business on July 14, 1999. The stock split was effected through the
issuance of treasury shares, and accordingly, the cost attributable to those
shares of $47.5 million was transferred from treasury stock to additional
paid-in capital. Such treasury shares were not subject to the stock split. The
December 25, 1999 share and per-share amounts in the accompanying financial
statements give effect to the split.

         During the second quarter of fiscal 2000, the acquisition of the George
Foreman Trademark was completed. All share and per-share amounts have been
updated to give effect to this transaction as of July 1, 1999.

         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.

3.       EFFECT OF NEW ACCOUNTING STANDARDS AND STATEMENTS

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", which was
amended in June 1999 with the issuance of SFAS No. 137. SFAS No. 137 delayed the
effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000.
SFAS No. 133 will change accounting and disclosure requirements for derivative
instruments and hedging activities. Salton is in the process of determining the
effect that this new standard will have on its consolidated financial statements
and/or disclosures.

4.       EVENTS OF THE TWENTY-SIX WEEKS ENDED DECEMBER 25, 1999

George Foreman Trademark

      In the quarter ended December 25,1999, Salton acquired, effective July 1,
1999, the right to use in perpetuity and worldwide the name "George Foreman" in
connection with the marketing and sale of food preparation and non-alcoholic
drink preparation and serving appliances. The aggregate purchase price payable
to George Foreman and other participants was $137.5 million, of which $113.75
million is payable in five annual cash installments, and the remaining $23.75
million was paid through the issuance of 779,191 shares of Salton, Inc. common
stock issued out of treasury. The first cash installment of $22.75 million was
previously paid during the first half of fiscal 2000. In connection with the
transaction Salton issued a five-year $91.0 million non-interest bearing
subordinated promissory note recorded at its present value initially of $74.5
million accreted to the present value of $77.7 million as of December 25, 1999.
The effect of the George Foreman transaction was an elimination of $16.6 million
in royalty expense, partially offset by the recording of amortization of $4.0
million and imputed interest of $3.2 million. The per diluted share effect of
the George Foreman transaction was an increase of $0.52.

         The results of the transactions have been included in the consolidated
statements of earnings as of July 1, 1999. The following unaudited pro forma
results of operations assume the transaction occurred at the beginning of the
earliest period presented:


                                      -6-
<PAGE>   7


<TABLE>
<CAPTION>
                                             13 WEEKS ENDED      26 WEEKS ENDED
                                            DECEMBER 26, 1998   DECEMBER 26,1998
                                            -----------------   ----------------
                                                      (IN THOUSANDS)
<S>                                         <C>                  <C>
Net sales...............................    $     142,684        $     247,072
Operating income........................           29,772               54,563
Net income..............................           15,810               29,808
Net income per share:
     Basic..............................    $        1.49        $        2.42
     Diluted............................    $        1.07        $        1.88
</TABLE>

         The pro forma results are for informational purposes only and do not
purport to represent what Salton's results of operations would have actually
been had the transaction been consummated for the periods indicated.

TMI Acquisition Note Payable

         On October 29, 1999, Salton retired the $4.0 million note payable
recorded associated with the acquisition of Toastmaster Inc. by issuing 109,090
shares of common stock out of treasury.


Amalgamated Appliance Holdings Limited

         On October 6, 1999, Salton purchased approximately 21% of the
outstanding shares of Amalgamated Appliance Holdings Limited ("Amalgamated'), a
leading manufacturer and distributor of a wide range of branded consumer
electronics and appliances in South Africa, for approximately $6 million. Based
in South Africa, Amalgamated is a publicly held company, listed on the
Johannesburg Stock Exchange, which owns the rights to the Salton brand name in
South Africa. In conjunction with this transaction, the Chief Executive Officer
of Salton, Inc., was added to Amalgamated's Board of Directors.

Amended Credit Facility

         Salton amended and restated the New Credit Agreement (the "Amended
Credit Agreement") during the quarter ended December 25, 1999. Salton increased
its existing revolving credit facility from $80.0 million to $115.0 million. The
Amended Credit Agreement, among Salton, Lehman Brothers Inc., as arranger,
Lehman Commercial Paper Inc., as syndication agent and administration agent, and
a syndicate of banks, provides for $160.0 million in a senior secured credit
facility consisting of a $45.0 million Term Loan (the "Term Loan") at an
established base rate (equivalent to the prime rate of interest) plus an
applicable margin of 225 basis points or, at the Company's election, a
eurodollar rate (equivalent to the LIBOR rate) plus an applicable margin of 325
basis points maturing in twenty-four consecutive quarterly installments
commencing on March 26, 1999; and a $115.0 million revolving credit facility
(the "Revolving Credit Facility") at an established base rate (equivalent to the
prime rate of interest) plus an applicable margin or, at the Company's election,
a eurodollar rate (equivalent to the LIBOR rate) based on a range of ratios of
total debt to earnings before interest, taxes, depreciation and amortization
maturing on March 26, 2003. The Amended Credit Facility is secured by a first
lien on substantially all the Company's assets. Credit availability is based on
a formula related to trade accounts receivable, inventories and outstanding
letters of credit.

5.       COMPREHENSIVE INCOME

         For the 13 weeks and the 26 weeks ended December 25, 1999 and December
26, 1998 components of other comprehensive income include foreign currency
translation adjustments, net of tax.

<TABLE>
<CAPTION>
                                                          13 WEEKS ENDED                      26 WEEKS ENDED
                                                          --------------                      --------------
<S>                                                  <C>               <C>              <C>               <C>
         (DOLLARS IN THOUSANDS)                      12/25/99          12/26/98         12/25/99          12/26/98
                                                     --------          --------         --------          --------

         Net income                                  $ 47,558          $11,682          $ 61,456          $ 22,501
         Other comprehensive income                         2                                  2
                                                    ---------          -------          --------          --------

                                                     $ 47,560          $ 11,682         $ 61,558          $ 22,501
                                                     =========         ========         ========          ========
</TABLE>

         Accumulated other comprehensive income is comprised of foreign currency
translation adjustments of $4 as of December 25, 1999 and foreign currency
translation adjustments of $2 and a minimum pension liability charge of $50 as
of June 26, 1999.

                                      -7-
<PAGE>   8


6.       OPERATING SEGMENTS

         Salton consists of a single operating segment that designs, markets and
distributes housewares, including small appliances, tabletop products and
personal care/time products. This segmentation is appropriate because Salton
makes operating decisions and assesses performance based upon brand management,
and such brand management encompasses a wide variety of products and types of
customers. Most of Salton's products are procured through independent
manufacturers, primarily in the Far East, and are distributed through similar
distribution channels.

Product Information - Net Sales

<TABLE>
<CAPTION>

                                                          13 WEEKS ENDED                      26 WEEKS ENDED
                                                         ----------------                     --------------
(DOLLARS IN THOUSANDS)                               12/25/99          12/26/98         12/25/99          12/26/98
                                                     --------          --------         --------          --------
<S>                                                  <C>               <C>              <C>               <C>
Small kitchen appliances                             $ 259,045         $ 134,077        $ 427,990         $ 230,696
Tabletop products                                       25,939             1,161           47,878             2,785
Personal care & time products                            7,783             7,446           13,239            13,591
                                                     ---------         ---------        ---------         ---------
Total                                                $ 292,767         $ 142,684        $ 489,107         $ 247,072
                                                     =========         =========        ==========        =========
</TABLE>

7.       ACQUISITION

         On January 7, 1999, Salton acquired the stock of Toastmaster Inc.
("Toastmaster"), a Columbia, Missouri based manufacturer and marketer of kitchen
and small household electrical appliances and time products (the "Toastmaster
Acquisition"). Salton paid Toastmaster shareholders $7.00 per share in cash, for
a total purchase price of approximately $53.2 million. In addition,
Toastmaster's outstanding debt of $57.8 million was paid by Salton in connection
with the acquisition. The acquisition was accounted for as a purchase. The
purchase price has been preliminarily allocated based upon estimated fair market
values of the acquired assets and liabilities at the date of acquisition,
pending final determination of certain acquired assets and liabilities.
Accordingly, the purchase price allocation may change in subsequent periods. The
excess of the purchase price over the fair values of the net assets acquired has
been recorded as goodwill and is being preliminarily amortized on a
straight-line basis over forty years.

         The operating results of Toastmaster have been included in the
consolidated statements of earnings from the date of acquisition. The following
unaudited pro forma results of operations assume the transaction occurred at the
beginning of the period presented:

<TABLE>
<CAPTION>                                                              13 WEEKS ENDED      26 WEEKS ENDED
                                                                     DECEMBER 26, 1998    DECEMBER 26,1998
                                                                     -----------------    ----------------
                                                                                 (IN THOUSANDS)
<S>                                                                    <C>                  <C>
Net sales........................................................      $     194,833        $     338,096
Operating income.................................................             20,698               37,385
Net income.......................................................              7,837               16,091
Net income per share:
     Basic.......................................................      $        0.79        $        1.40
     Diluted.....................................................      $        0.56        $        1.07

</TABLE>

         The pro forma results are for informational purposes only and do not
purport to represent what Salton's results of operations would have actually
been had the transaction been consummated for the periods indicated.

8.       SUBSEQUENT EVENTS

          On January 14, 2000, Salton entered into a strategic alliance with
ePods, Inc., an Internet company. Salton will become the exclusive distributor
of ePods products in the U.S., Canada and Mexico. As part of this alliance,
Salton has invested approximately $2 million in convertible preferred stock of
ePods.

                                      -8-
<PAGE>   9
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

THIRTEEN WEEKS ENDED DECEMBER 25, 1999 COMPARED WITH THIRTEEN WEEKS ENDED
DECEMBER 26, 1998.

         Net Sales. Net sales in the quarter ended December 25, 1999 ("second
quarter of fiscal 2000") were $292.8 million, an increase of approximately
$150.1 million or 105.2%, compared to net sales of $142.7 million in the quarter
ended December 26, 1998 ("second quarter of fiscal 1999"). This increase is
primarily attributable to increased sales of products within the George
Foreman(R) product line, sales by our wholly-owned subsidiary Toastmaster
acquired in January 1999, and sales of Rejuvenique(R) and Juiceman(R) products.
Net sales of White-Westinghouse(R) products to Kmart and Zellers approximated 8%
of net sales in the second quarter of fiscal 2000 compared to 15% of net sales
in the second quarter of fiscal 1999.

         Gross Profit. Gross profit in the second quarter of fiscal 2000 was
$116.0 million or 39.6% of net sales as compared to $53.4 million or 37.4% of
net sales in the same period in fiscal 1999. Cost of goods sold during the
second quarter of fiscal 2000 decreased to 57.0% of net sales compared to 59.1%
in the same period in fiscal 1999. Distribution expenses were $9.9 million or
3.4% of net sales in the second quarter of fiscal 2000 compared to $5.0 million
or 3.5% of net sales in the same period in fiscal 1999. Gross profit in the
second quarter of fiscal 2000 as a percentage of net sales increased primarily
due to a more favorable mix of sales with lower costs in their respective
channels of distribution when compared to the same period in fiscal 1999.

          Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to 10.5% of net sales or $30.7 million in the
second quarter of fiscal 2000 compared to 22.4% of net sales or $32.0 million
for the same period in fiscal 1999. Expenditures for television, royalty
expenses, certain other media and cooperative advertising and trade show
expenses were 4.6% of net sales or $13.4 million in the second quarter of fiscal
2000 when compared to 16.5% of net sales or $23.5 million in the same period in
fiscal 1999. The effect of the George Foreman transaction in the second quarter
of fiscal 2000 was an elimination of $16.6 million in royalties associated with
the first quarter of fiscal 2000 partially offset by amortization of $4.0
million ($2.0 million was associated with the first quarter of fiscal 2000),
compared to payments of royalties of $10.4 million in the second quarter of
fiscal 1999. The remaining selling, general and administrative costs increased
to $17.2 million or 5.9% of net sales in the second quarter of fiscal 2000
compared to $8.5 million or 5.9% of net sales in the second quarter of fiscal
1999, primarily attributable to higher costs related to the higher level of
sales and increases due to the acquisition of Toastmaster.

         Operating Income. As a result of the foregoing, operating income
increased by $63.9 million or 298.3%, to $85.3 million in the second quarter of
fiscal 2000 from $21.4 million in the same period in fiscal 1999. Operating
income as a percentage of net sales increased to 29.1% in the second quarter of
fiscal 2000 from 15.0% in the same period of fiscal 1999.

         Net Interest Expense. Net interest expense was approximately $9.2
million for the second quarter of fiscal 2000 compared to $2.4 million in the
second quarter of fiscal 1999. The increase is primarily attributable to imputed
interest of $3.2 million on the George Foreman note payable of which $1.6
million was related to the first quarter of 2000. Salton's rate of interest on
amounts outstanding was a weighted average annual rate of 9.5% in fiscal 2000
compared to 7.7% in fiscal 1999. The average amount of all debt outstanding was
$241.0 million for the second quarter of fiscal 2000 compared to $117.9 million
for the same period in fiscal 1999. The increases are primarily attributable
higher interest rates and increased borrowings used to complete the acquisition
of Toastmaster and to provide working capital necessary to support the growth in
sales.

         Income Tax Expense.  Salton had tax expense of  $28.5 million  in the
second quarter of fiscal 2000 as compared to tax expense of $7.3 million in the
second quarter of fiscal 1999.

         Net income. Net income increased 307.1% to $47.6 million in the second
quarter of fiscal 2000, compared to $11.7 million in the second quarter of
fiscal 1999.

         Earnings per Share. Basic earnings per common share were $4.25 per
share on weighted average common shares outstanding of 11,184,333 in the second
quarter of fiscal 2000 compared to earnings of $1.19 per share on weighted
average common shares outstanding of 9,855,147 in the same period in fiscal
1999. Diluted earnings per common share were $3.08 per share on weighted average
common shares outstanding, including dilutive common stock equivalents, of
15,457,776 in the second quarter of fiscal 2000 compared to earnings of $0.83
per share on weighted average common shares outstanding, including dilutive
common stock equivalents, of 14,035,043 in the same period in fiscal 1999. All
share counts reflect a 3-for-2 split of Salton's common stock effective July 28,
1999, for stockholders of record at the close of business on July 14, 1999.


                                      -9-
<PAGE>   10
         TWENTY-SIX WEEKS ENDED DECEMBER 25, 1999 COMPARED WITH TWENTY-SIX WEEKS
ENDED DECEMBER 26, 1998.

                  Net Sales. Net sales in the twenty-six weeks ended December
25, 1999 ("first half of fiscal 2000") were $489.1 million, an increase of
approximately $242.0 million or 98.0%, compared to net sales of $247.1 million
in the twenty-six weeks ended December 26, 1998 ("first half of fiscal 1999").
This increase is primarily attributable to increased sales of products within
the George Foreman(R) product line, sales by our wholly-owned subsidiary
Toastmaster acquired in January 1999, and sales of Rejuvenique(R) and
Juiceman(R) products. Net sales of White-Westinghouse(R) products to Kmart and
Zellers approximated 7% of net sales in the first half of fiscal 2000 compared
to 15% of net sales in the first half of fiscal 1999.

         Gross Profit. Gross profit in the first half of fiscal 2000 was $194.8
million or 39.8% of net sales as compared to $99.2 million or 40.1% of net sales
in the same period in fiscal 1999. Cost of goods sold during the first half of
fiscal 2000 increased to 56.7% of net sales compared to 56.4% in the same period
in fiscal 1999. Distribution expenses were $17.0 million or 3.5% of net sales in
the first half of fiscal 2000 compared to $8.6 million or 3.5% of net sales in
the same period in fiscal 1999. Gross profit in the first half of fiscal 2000 as
a percentage of net sales decreased primarily due to higher costs of Toastmaster
products. Excluding the cost of Toastmaster products, Salton had a more
favorable mix of sales with lower costs in their respective channels of
distribution when compared to the same period in fiscal 1999.

          Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased to 16.6% of net sales or $81.2 million in the
first half of fiscal 2000 compared to 24.2% of net sales or $59.7 million for
the same period in fiscal 1999. Expenditures for television, royalty expenses,
certain other media and cooperative advertising and trade show expenses were
10.0% of net sales or $49.0 million in the first half of fiscal 2000 when
compared to 17.2% of net sales or $42.5 million in the same period in fiscal
1999. The effect of the George Foreman transaction related to the first half was
an elimination of $16.6 million in royalties partially offset by amortization of
$4.0 million, compared to payments of royalties of $19.2 million in the second
half of fiscal 1999. The remaining selling, general and administrative costs
increased to $32.2 million or 6.6% of net sales in the first half of fiscal 2000
compared to $17.3 million or 7.0% of net sales in the first half of fiscal 1999,
primarily attributable to higher costs related to the higher level of sales and
increases due to the acquisition of Toastmaster.

         Operating Income. As a result of the foregoing, operating income
increased by $74.2 million or 188.4%, to $113.7 million in the first half of
fiscal 2000 from $39.4 million in the same period in fiscal 1999. Operating
income as a percentage of net sales increased to 23.2% in the first half of
fiscal 2000 from 16.0% in the same period of fiscal 1999.

         Net Interest Expense. Net interest expense was approximately $14.7
million for the first half of fiscal 2000 compared to $4.8 million in the first
half of fiscal 1999. The increase is primarily attributable to imputed interest
of $3.2 million on the George Foreman note payable. Salton's rate of interest on
amounts outstanding was a weighted average annual rate of 9.4% in fiscal 2000
compared to 8.2% in fiscal 1999. The average amount of all debt outstanding was
$225.0 million for the first half of fiscal 2000 compared to $108.2 million for
the same period in fiscal 1999. The increases are primarily attributable to
higher interest rates and increased borrowings used to complete the acquisition
of Toastmaster, and to provide working capital necessary to support the growth
in sales.

         Income Tax Expense.  Salton had tax expense of  $37.5 million  in the
first half of fiscal 2000 as compared to tax expense of $12.1 million in the
first half of fiscal 1999.

         Net income. Net income increased 173.1% to $61.5 million in the first
half of fiscal 2000, compared to $22.5 million in the first half of fiscal 1999.

         Earnings per Share. Basic earnings per common share were $5.53 per
share on weighted average common shares outstanding of 11,109,058 in the first
half of fiscal 2000 compared to earnings of $1.95 per share on weighted average
common shares outstanding of 11,523,084 in the same period in fiscal 1999.
Diluted earnings per common share were $4.00 per share on weighted average
common shares outstanding, including dilutive common stock equivalents, of
15,378,315 in the first half of fiscal 2000 compared to earnings of $1.49 per
share on weighted average common shares outstanding, including dilutive common
stock equivalents, of 15,061,670 in the same period in fiscal 1999. All share
counts reflect a 3-for-2 split of Salton's common stock effective July 28, 1999,
for stockholders of record at the close of business on July 14, 1999.


                                      -10-
<PAGE>   11


LIQUIDITY AND CAPITAL RESOURCES

         During the first half of fiscal 2000, Salton used net cash of $34.6
million in operating activities and $33.9 million in investing activities. This
resulted primarily from the growth in sales in the period and higher levels of
receivables and inventory, the George Foreman transaction, an equity investment
in Amalgamated, as well as, increased investment in capital assets, primarily
tooling. Financing activities provided cash of $62.1 million. This resulted
primarily from draws of $61.0 million under the revolving line of credit.

           In the quarter ended December 25,1999, Salton acquired, effective
July 1, 1999, the right to use in perpetuity and worldwide the name "George
Foreman" in connection with the marketing and sale of food preparation and
non-alcoholic drink preparation and serving appliances. The aggregate purchase
price payable to George Foreman and other participants was $137.5 million, of
which $113.75 million is payable in five annual cash installments and the
remaining $23.75 million was paid through the issuance of 779,191 shares of
Salton, Inc. common stock issued out of treasury. The first cash installment of
$22,750 million was previously paid during the first half of fiscal 2000. In
connection with the transaction Salton issued a five-year $91.0 million
non-interest bearing subordinated promissory note recorded at its present value
of $74,520 million accreted to the present value of $77.7 million as of December
25, 1999. The effect of the George Foreman transaction was an elimination of
$16.6 million in royalty expense, partially offset by the recording of
amortization of $4.0 million and imputed interest of $3.2 million.

         At December 25, 1999, Salton had debt outstanding of $349.1 million and
had the ability to borrow up to an additional $22.0 million under the revolving
credit facility. Typically, given the seasonal nature of Salton's business,
Salton's borrowings tend to be the highest in mid-fall and early winter.

         Salton amended and restated the New Credit Agreement (the "Amended
Credit Agreement") during the quarter ended December 25, 1999. Salton increased
its existing revolving credit facility from $80.0 million to $115.0 million. The
Amended Credit Agreement, among Salton, Lehman Brothers Inc., as arranger,
Lehman Commercial Paper Inc., as syndication agent and administration agent, and
a syndicate of banks, provides for $160.0 million in a senior secured credit
facility consisting of a $45.0 million Term Loan (the "Term Loan") at an
established base rate (equivalent to the prime rate of interest) plus an
applicable margin of 225 basis points or, at the Company's election, a
eurodollar rate (equivalent to the LIBOR rate) plus an applicable margin of 325
basis points maturing in twenty-four consecutive quarterly installments
commencing on March 26, 1999; and a $115.0 million revolving credit facility
(the "Revolving Credit Facility") at an established base rate (equivalent to the
prime rate of interest) plus an applicable margin or, at the Company's election,
a eurodollar rate (equivalent to the LIBOR rate) based on a range of ratios of
total debt to earnings before interest, taxes, depreciation and amortization
maturing on March 26, 2003. The Amended Credit Facility is secured by a first
lien on substantially all the Company's assets. Credit availability is based on
a formula related to trade accounts receivable, inventories and outstanding
letters of credit.

         Salton's credit agreement and senior subordinated notes contain a
number of significant covenants that, among other things, restrict the ability
of Salton 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 that will otherwise restrict corporate
and business activities. In addition, under the credit agreement, Salton is
required to comply with specified financial ratios and tests, including a
minimum net worth test, a fixed charge coverage ratio, an interest coverage
ratio and a leverage ratio.

         Salton's ability to make scheduled payments of principal of, or to pay
the interest on, or to refinance, its indebtedness, or to fund planned capital
expenditures will depend upon its future performance, which is subject to
general economic, financial, competitive and other factors that are beyond its
control. Salton's ability to fund its operating activities is also dependent
upon its rate of growth, ability to effectively manage its inventory, the terms
under which it extends credit to customers and its ability to collect under such
terms and its ability to access external sources of financing. Based upon the
current level of operations and anticipated growth, management believes that
future cash flow from operations, together with available borrowings under the
New Credit Agreement and funds anticipated to be available from the issuance of
additional debt and/or equity securities, will be adequate to meet Salton's
anticipated requirements for capital expenditures, working capital, interest
payments and scheduled principal payments over the next 12 months. There can be
no assurance, however, that Salton's business will continue to generate
sufficient cash flow from operations in the future to service its debt and make
necessary capital expenditures after satisfying certain liabilities arising in
the ordinary course of business. If unable to do so, Salton may be required to
refinance all or a portion of its existing debt, to sell assets or to obtain
additional financing. There can be no assurance that any such refinancing would
be available or that any such sales of assets or additional financing could be
obtained.


                                      -11-
<PAGE>   12
SEASONALITY

         Salton's business is highly seasonal, with operating results varying
from quarter to quarter. Salton has historically experienced higher sales during
the months of August through November primarily due to increased demand by
customers for Salton's products attributable to holiday sales. This seasonality
has also resulted in additional interest expense to Salton during this period
due to an increased need to borrow funds to maintain sufficient working capital
to finance product purchases and customer receivables for the seasonal period.

FORWARD LOOKING STATEMENTS

         Certain statements in this Quarterly Report on Form 10-Q constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of Salton, or industry results, to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: Salton's degree of leverage; economic conditions
and retail environment; the timely development, introduction and customer
acceptance of Salton's products; competitive products and pricing; dependence on
foreign suppliers and supply and manufacturing constraints; Salton's
relationship and contractual arrangements with key customers, suppliers and
licensors; cancellation or reduction of orders; the integration of Toastmaster,
including the failure to realize anticipated revenue enhancements and cost
savings; the risks relating to pending legal proceedings and other factors both
referenced and not referenced in Salton's filings with the Securities and
Exchange Commission. When used in this Quarterly Report on Form 10-Q, the words
"estimate," "project," "anticipated," "expect," "intend," "believe," and similar
expressions are intended to identify forward-looking statements.

EFFECTS OF INFLATION AND FOREIGN CURRENCY EXCHANGE

         The results of operations for the periods discussed have not been
significantly affected by inflation or foreign currency fluctuation. Salton
generally negotiates its purchase orders with its foreign manufacturers in
United States dollars. Thus, Salton's 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.

YEAR 2000 ISSUES

         The Year 2000 issue is the result of computer programs being written to
use two digits to define year dates. Computer programs running date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This could result in systems failure or miscalculations causing
disruptions of operations. Salton currently uses information technology
throughout its operations.

         Salton has completed implementation of our Year 2000 remediation plan
on a timely basis, and such remediation plan as implemented addresses all
mission critical systems. Although Salton believes it has completed its Year
2000 project by upgrading its systems, Salton cannot make any assurances that
the upgraded systems will be free of defects. If any such risks materialize,
Salton could experience material adverse consequences to its business, financial
condition and results of operations. As of February 4, 2000 Salton has not
experienced any consequences to its business, financial condition and results of
operations.

         Year 2000 compliance may also adversely affect Salton's business,
financial condition and results of operations indirectly by causing
complications of, or otherwise affecting, the operations of any one or more of
its suppliers and customers. Salton has contacted its significant suppliers and
certain of its customers in an attempt to identify any potential Year 2000
compliance issues with them. Salton currently believes that its major suppliers
have made significant progress with respect to Year 2000 compliance issues.
Salton is currently unable to anticipate the magnitude of the operational or
financial impact on it of Year 2000 compliance issues with its customers even
though Salton believes that these customers have implemented significant
programs with respect to Year 2000 compliance issues. Salton has no information
that indicates that significant suppliers may be unable to sell to Salton or
that significant customers may be unable to receive or pay for Salton's
products, in each case because of Year 2000 compliance problems.

         Notwithstanding Salton's progress to date, there are several ways in
which its systems could still be affected by the Year 2000 problem. First, the
software code Salton uses in its information systems may not in fact be Year
2000 compliant in all


                                      -12-
<PAGE>   13


instances. Second, Salton may be unable to fully test and monitor the upgrades,
making it difficult for Salton to identify and remedy any problems that might
exist. Third, Salton's customers, suppliers and shippers may not be Year 2000
compliant.

         The most reasonably likely worst-case scenario resulting from Salton's
inability, or the inability of its suppliers, customers or shippers, to become
Year 2000 compliant, includes the following adverse effects:

   -     Salton would be unable to receive products due to Year 2000-related
         failure on the part of its suppliers causing Salton to be unable to
         fulfill the orders of many of its customers for Salton's products.
   -     Salton's customers would be unable to place their orders with Salton
         because of Salton's own system failure or those of its customers
         resulting in delayed or potentially lost orders for Salton's products.
   -     Salton would be unable to deliver ordered products to its customers on
         a timely basis due to a system failure at Salton or at one of its
         product shippers leading to delays in arrival of Salton's products and
         possibly dissatisfied customers.
   -     Salton's customers would be unable to receive and/or pay for Salton
         products on a timely basis.

         Prior to January 1, 2000 Salton had incurred approximately $1,000,000
to resolve and test Salton's Year 2000 compliance issues. All expenses incurred
in connection with Year 2000 compliance were expensed as incurred, other than
acquisitions of new software or hardware, which are capitalized.

         Salton's assessment of its Year 2000 compliance is based on numerous
assumptions about future events, including third party modification plans and
other factors. However, there can be no guarantee that this assessment is
correct and actual results could differ materially from those anticipated.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant computer codes and similar
uncertainties.


                           PART II: OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS

Trademark Litigation

         In September, 1999, Linda Evans Fitness Centers, Inc. (the "Fitness
Centers"), Mark Golub and Thomas Gergley filed suit against Salton and its
principal executive officers alleging that Salton tortiously interfered with a
contract between the Fitness Centers and Ms. Evans by hiring Ms. Evans to act as
a spokesperson for the Rejuvenique(TM) facial toning system. Before Ms. Evans
was hired by Salton, Ms. Evans had brought suit against the Fitness Centers
seeking a determination that her contract with the Fitness Centers had been
terminated on the basis of fraud and the failure of the Fitness Centers to make
certain payments. Salton believes that it has valid defenses against the claims
made against it by the Fitness Centers. Ms. Evans has agreed to indemnify Salton
against matters relating to her services to Salton.

 Environmental

         Salton is participating in environmental remediation activities at four
sites which it owns or operates. As of December 25, 1999, Salton has accrued
approximately $225,000 for the anticipated costs of investigation, remediation
and/or operation and maintenance costs at these sites. Although such costs could
exceed that amount, Salton believes that any such excess will not have a
material adverse effect on the financial condition or annual results of
operations of Salton.

  Arbitration

         On April 20, 1999, an individual filed a notice of arbitration
asserting a breach of contract claim against Salton due to Salton's alleged
failure to pay royalties to this individual for the sale of certain juice
extractors and related health products. This individual also asserts various
other causes of action for an accounting, breach of covenant of good faith and
fair dealing, forgery, trademark infringement, unfair competition, permanent
injunction, fraud, negligent misrepresentation, age discrimination, Lanham Act
violations, breach of fiduciary duty and rescission of contract, and is seeking
compensatory and punitive damages of $15 million. An arbitration hearing solely
with respect the forgery claim was held in October 1999 and the arbitrator ruled
in favor of Salton.


                                      -13-
<PAGE>   14

         Salton believes that these claims are without merit, and Salton intends
to vigorously defend itself in the arbitration proceeding.

Other

         Salton is a party to various other actions and proceedings incident to
its normal business operations. Salton believes that the outcome of such
litigation will not have a material adverse effect on the financial condition or
annual results of operations of Salton. Salton also has product liability and
general liability insurance policies in amounts it believes to be reasonable
given its current level of business.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

10.21    Agreement effective as of July 1, 1999 between Salton and George
         Foreman. Incorporated by reference to the current report on form 8-K
         dated December 9, 1999
10.22    Agreement effective as July 1, 1999 between Salton and Sam Perlmutter.
         Incorporated by reference to the current report on form 8-K dated
         December 9, 1999
10.23    Agreement effective as of July 1, 1999 between Salton and Michael
         Srednick Incorporated by reference to the current report on form 8-K
         dated December 9, 1999
10.24    Second amended and restated credit agreement, among Salton, Inc., as
         borrower, the several lenders from time to time parties hereto, Lehman
         Brothers Inc., as arranger, Lehman Commercial Paper Inc., as
         syndication agent, and administrative agent and Fleet National Bank as
         documentation agent dated as of December 10, 1999.


(b)      Reports on Form 8-K
         (i)      Current Report on Form 8-K dated December 9, 1999 regarding
                  George Foreman transaction.




                                      -14-
<PAGE>   15




                                   SIGNATURES

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



                                               SALTON, INC.

Date: February 2, 2000                /s/      JOHN E. THOMPSON
                                               John E. Thompson
                                               Chief Financial Officer and
                                               Senior Vice-President
                                               (Duly Authorized Officer
                                               of the Registrant)





                                      -15-
<PAGE>   16



                                  EXHIBIT INDEX

EXHIBIT NUMBER                DESCRIPTION OF DOCUMENT
--------------                -----------------------
     12                       Computation of Ratio of Earnings to Fixed Charges
     27                       Financial Data Schedule






                                      -16-