<PAGE>   1
                                  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 December 30, 2000 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                             60056
         Mount Prospect, Illinois                           (Zip Code)
 (Address of principal executive 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 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of February 9, 2001,
11,908,275 shares of its $.01 par value Common Stock.

<PAGE>   2

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

          Item 1:   Consolidated Financial Statements

                    Consolidated Balance Sheets - December 30, 2000          3
                    (Unaudited) and July 1, 2000

                    Consolidated Statements of Earnings (Unaudited)          4
                    Thirteen weeks ended December 30, 2000 and
                    December 25, 1999 and Twenty-six weeks ended
                    December 30, 2000 and December 25, 1999

                    Consolidated Statements of Cash Flows (Unaudited)        5
                    Twenty-six weeks ended December 30, 2000 and
                    December 25, 1999

                    Notes to Consolidated Financial Statements (Unaudited)   6

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

PART II             OTHER INFORMATION

          Item 1:   Legal Proceedings                                        13

          Item 2:   Changes in Securities and Use of Proceeds                14

          Item 6:   Exhibits and Reports on Form 8-K                         15

                    Signature                                                15
</TABLE>





                                        2
<PAGE>   3


                                  SALTON, INC.
                           CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                        (UNAUDITED)
                                                                                        DEC 30, 2000   JULY 1, 2000
                                                                                        ------------   ------------
<S>                                                                                     <C>            <C>
ASSETS
CURRENT ASSETS:
  Cash                                                                                   $  20,267      $   7,606
  Accounts receivable, net of allowances                                                   203,533        129,850
  Inventories                                                                              216,122        219,230
  Prepaid expenses and other current assets                                                 10,814         10,146
  Prepaid income taxes                                                                       6,076              -
  Deferred income taxes                                                                      3,713          3,713
                                                                                         ---------      ---------
     Total current assets                                                                  460,525        370,545
Property Plant and Equipment:
  Land                                                                                       1,625          1,625
  Buildings                                                                                  8,079          8,079
  Molds and tooling                                                                         40,332         35,749
  Warehouse equipment                                                                        7,163          7,061
  Office furniture and equipment                                                            10,227          9,373
                                                                                         ---------      ---------
                                                                                            67,426         61,887
  Less accumulated depreciation                                                            (33,008)       (27,244)
                                                                                         ---------      ---------
                                                                                            34,418         34,643

Patents and Trademarks, net of accum amort                                                 133,058        127,073
Intangibles, net of accum amort and Other Non-current Assets                                45,454         32,015
                                                                                         ---------      ---------
TOTAL ASSETS                                                                             $ 673,455      $ 564,276
                                                                                         =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Revolving line of credit and other current debt                                        $ 145,434      $ 112,155
  Accounts payable                                                                          28,982         35,113
  Accrued expenses                                                                          21,811         21,028
  Income taxes payable                                                                           -          4,578
                                                                                         ---------      ---------
     Total current liabilities                                                             196,227        172,874
Non-current Deferred Income Taxes                                                            2,223          2,529
Long-term Debt                                                                             229,537        215,065
                                                                                         ---------      ---------
     Total liabilities                                                                     427,987        390,468
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,
2001-12,011,515 shares, 2000-11,351,927 shares                                                 143            135
Treasury stock - at cost                                                                   (35,562)       (30,211)
Additional paid-in capital                                                                  91,946         62,572
Accumulated other comprehensive income (loss)                                                 (443)             6
Retained earnings                                                                          189,384        141,306
                                                                                         ---------      ---------
     Total stockholders' equity                                                            245,468        173,808
                                                                                         ---------      ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                               $ 673,455      $ 564,276
                                                                                         =========      =========
</TABLE>



                 See Notes to Consolidated Financial Statements


                                       3
<PAGE>   4

                                  SALTON, INC.
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                   (UNAUDITED)

(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                        13 WEEKS ENDED                  26 WEEKS ENDED
                                                 ---------------------------     ---------------------------
                                                  12/30/2000      12/25/1999      12/30/2000      12/25/1999
                                                 -----------     -----------     -----------     -----------
<S>                                              <C>             <C>             <C>             <C>
NET SALES                                        $   262,197     $   292,767     $   469,443     $   489,107
Cost of goods sold                                   149,896         166,845         267,884         277,246
Distribution expenses                                 14,449           9,911          24,438          17,031
                                                 -----------     -----------     -----------     -----------
GROSS PROFIT                                          97,852         116,011         177,121         194,830
Selling, general and administrative expenses          45,136          30,684          80,719          81,174
                                                 -----------     -----------     -----------     -----------
OPERATING INCOME                                      52,716          85,327          96,402         113,656
Interest expense                                      10,189           9,244          19,472          14,721
                                                 -----------     -----------     -----------     -----------
INCOME BEFORE INCOME TAXES                            42,527          76,083          76,930          98,935
Income tax expense                                    15,948          28,525          28,850          37,479
                                                 -----------     -----------     -----------     -----------
NET INCOME                                       $    26,579     $    47,558     $    48,080     $    61,456
                                                 ===========     ===========     ===========     ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING        12,116,774      11,184,333      11,856,249      11,109,058

WEIGHTED AVERAGE COMMON AND COMMON
   EQUIVALENT SHARES OUTSTANDING                  16,656,653      15,457,776      16,289,880      15,378,315

Net income per common share: Basic               $      2.19     $      4.25     $      4.06     $      5.53

Net income per common share: Diluted             $      1.60     $      3.08     $      2.95     $      4.00
</TABLE>




                 See Notes to Consolidated Financial Statements


                                       4
<PAGE>   5

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

(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                       26 WEEKS ENDED
                                                                                 ------------------------
                                                                                   DEC 30,        DEC 25,
                                                                                    2000           1999
<S>                                                                              <C>            <C>
Cash flows from operating activities:
  Net income                                                                     $  48,080      $  61,456
  Adjustments to reconcile net income to net cash from operating activities:
    Imputed interest on notes payable                                                3,779          3,168
    Changes in deferred taxes                                                        1,113
    Depreciation and amortization                                                   11,809          8,729
    Loss on disposal of equipment                                                      315              -
    Purchase reduction of note payable and other non-cash items                        105           (221)
    Changes in assets and liabilities:
       Accounts receivable                                                         (73,849)      (112,625)
       Inventories                                                                   3,530         (5,818)
       Prepaid expenses and other current assets                                      (626)        (1,092)
       Accounts payable                                                             (6,294)       (12,745)
       Taxes payable                                                               (10,743)        19,752
       Accrued expenses                                                                750          3,700
       Other non-current assets                                                     (8,902)             -
                                                                                 ---------      ---------
          NET CASH USED IN OPERATING ACTIVITIES                                    (32,046)       (34,583)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                                              (4,474)        (4,439)
  Acquisition of business, net of cash acquired                                     (2,820)        (5,896)
  Additions to intangibles, patents and trademarks                                  (6,625)       (23,085)
                                                                                 ---------      ---------
          NET CASH USED IN INVESTING ACTIVITIES                                    (13,919)       (33,420)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from revolving line of credit and other debt                         55,957         61,308
  Repayment of long-term debt                                                      (64,250)          (255)
  Proceeds from long-term debt                                                      75,000              -
  Costs associated with refinancing                                                 (2,847)          (514)
  Common stock issued                                                                  131          1,002
  Purchase of treasury stock                                                        (5,351)             -
                                                                                 ---------      ---------
          NET CASH PROVIDED BY FINANCING ACTIVITIES                                 58,640         61,541
                                                                                 ---------      ---------
The effect of exchange rate changes on cash                                            (14)             2
                                                                                 ---------      ---------
Net change in cash                                                                  12,661         (6,460)
Cash, beginning of period                                                            7,606         11,240
                                                                                 ---------      ---------
Cash, end of period                                                              $  20,267      $   4,780
                                                                                 =========      =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
  Interest                                                                       $  15,093      $  14,091
  Income taxes                                                                   $  39,519      $  16,791
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In the quarter ended September 30, 2000, Salton acquired trademarks, other
intellectual property assets and molds of the Stiffel Company, a premier
designer of lamps and related products for $6,500. The purchase was paid by the
issuance of 200,000 shares of Salton, Inc. common stock. In addition, the
Company reached an agreement to satisfy $22,750 of payment obligations incurred
in connection with its acquisition of the "George Foreman" name by issuing
621,161 shares of Salton, Inc. common stock.


                 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. 2000 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.

     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

     On July 2, 2000 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," and No. 138 which amends certain provisions of SFAS 133. SFAS 133,
as amended by SFAS 138, did not impact the Company's consolidated results of
operations, financial position or cash flows as the Company did not have any
derivative instruments in place during the twenty-six weeks ended December 30,
2000.

4.   EVENTS OF THE TWENTY-SIX WEEKS ENDED DECEMBER 30, 2000

     Share Repurchase Program

     In the quarter ended December 30, 2000, the Board of Directors authorized
the purchase of up to $50 million of its common stock over an unspecified period
of time. The amount of shares purchased will depend on various factors,
including the price of the stock, market conditions and the availability of
funds. Through December 30, 2000, the Company had purchased 283,800 shares of
stock for $5.4 million.

     ePods

     The Company was a secured lender to ePods, Inc. In October, 2000, the
Company declared the ePods obligations to the Company of approximately $4.8
million in default and acquired the collateral at a public foreclosure sale held
on November 15, 2000.

     Coachmaster International Corporation

     The Company has a loan and security agreement with Coachmaster
International Corporation ("CMI"), whereby the Company may lend CMI up to $10
million. CMI has granted the Company a security interest in all of CMI's assets
to secure obligations owed by CMI to the Company. As of December 30, 2000, the
Company has recorded a $7.8 million note receivable in other non-current assets
under the agreement.



                                       6
<PAGE>   7

     Juiceman Trademark

     In the quarter ended December 30, 2000, the Company entered into an
agreement to buyout all claims to royalties under the Juiceman Royalty
Agreements. The Company agreed to pay a total of $5.3 million, including legal
fees.

     George Foreman Trademark

     In the quarter ended September 30, 2000, the Company reached an agreement
to satisfy $22.75 million of payment obligations incurred in connection with its
acquisition of the "George Foreman" name by issuing 621,161 shares of Salton
common stock to George Foreman and other venture participants. The Company has
agreed under certain circumstances to pay an amount of cash and/or issue
additional shares of common stock if the shares issued are sold for less than
$36.625 per share during a specified one-year period plus an amount for any
shares retained at the end of the one year period. George Foreman and the other
participants have agreed to pay the Company in cash 50% of the excess over
$22.75 million of the aggregate sales proceeds plus the market value of any
shares retained at the end of such one year period.

     Amended Credit Facility

     The Company amended and restated the Second Amended and Restated Credit
Agreement (the "Third Amended Credit Agreement") during the quarter ended
September 30, 2000. Salton increased its existing revolving credit facility from
$115.0 million to $160.0 million. The Third Amended Credit Agreement, among
Salton, Lehman Brothers Inc., as arranger, Firstar Bank, N.A., as syndication
agent and Lehman Commercial Paper Inc., as administrative agent, and a syndicate
of banks, provides for $235.0 million in a senior secured credit facility
consisting of a $75.0 million Term Loan (the "Term Loan") at an established base
rate (equivalent to the prime rate of interest) plus an applicable margin of 125
basis points or, at the Company's election, a eurodollar rate plus an applicable
margin of 225 basis points maturing in sixteen consecutive quarterly
installments commencing on March 31, 2001; and a $160.0 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 plus an applicable margin based on a range
of ratios of total debt to earnings before interest, taxes, depreciation and
amortization, maturing on January 7, 2004. The Third Amended Credit Agreement 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.

     Sonex

     On July 19, 2000 the Company acquired Sonex International Corporation, a
designer and distributor of electrically operated toothbrushes, flossers and
related products. Under the terms of the agreement, Salton acquired Sonex for
approximately $2.6 million in cash, plus an additional cash performance
incentive, based on future sales of Sonex products. The acquisition was
accounted for as a purchase. The financial statements of Sonex are included in
the consolidated financial statements.

     Stiffel

     On August 10, 2000 the Company acquired the trademarks, other intellectual
property assets and molds of the Stiffel Company, a designer of lamps and
related products, for $6.5 million by issuing 200,000 shares of Salton common
stock. Salton did not assume any liabilities of the Stiffel Company. The
purchase price was allocated between property, patents and trademarks. Pursuant
to the Purchase Agreement, if the shares of stock were sold for less than $6.5
million, the Company would make up the



                                       7
<PAGE>   8

shortfall. In January 2001, the Company paid $2.0 million in settlement of the
balance of the purchase price.

     Relaxor

     On September 21, 2000 the Company acquired the Relaxor brand business and
inventory, a full line of personal massagers and other personal care items, from
JB Research, Inc. The purchase price is comprised of the book value of inventory
plus future payments for the going business and trademarks (the "Going Business
Payment"). The "Going Business Payment" will be based on the gross margin of the
Relaxor brand business as defined in the purchase agreement.

5.   COMPREHENSIVE INCOME

     For the 13 weeks and the 26 weeks ended December 30, 2000 and December 25,
1999 components of other comprehensive income include foreign currency
translation charges.

<TABLE>
<CAPTION>
                                          13 Weeks Ended            26 Weeks Ended
                                      ---------------------     ----------------------
(Dollars in Thousands)                12/30/00     12/25/99     12/30/00      12/25/99
                                      --------     --------     --------      --------
<S>                                   <C>          <C>          <C>           <C>
Net Income                            $ 26,579     $ 47,558     $ 48,080      $ 61,456
Other comprehensive income (loss)            6            2         (449)            2
                                      --------     --------     --------      --------
                                      $ 26,585     $ 47,560     $ 47,631      $ 61,458
                                      ========     ========     ========      ========
</TABLE>

     Accumulated other comprehensive income (loss) is comprised of foreign
currency translation charges of $(449) and $6 as of December 30, 2000 and July
1, 2000.

6.   OPERATING SEGMENTS

     The Company 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 the
Company 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 the Company'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)                12/30/00     12/25/99     12/30/00     12/25/99
                                      --------     --------     --------     --------
<S>                                   <C>          <C>          <C>          <C>
Small appliances                      $234,145     $259,045     $423,729     $427,990
Tabletop products                        7,980        7,783       14,638       13,239
Personal care/time products             20,072       25,939       31,076       47,878
                                      --------     --------     --------     --------
Total                                 $262,197     $292,767     $469,443     $489,107
                                      ========     ========     ========     ========
</TABLE>



                                       8
<PAGE>   9

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

RESULTS OF OPERATIONS

THIRTEEN WEEKS ENDED DECEMBER 30, 2000 COMPARED WITH THIRTEEN WEEKS ENDED
DECEMBER 25, 1999.

     Net Sales. Net sales in the quarter ended December 30, 2000 ("second
quarter of fiscal 2001") were $262.2 million, a decrease of approximately $30.6
million or 10.5%, compared to net sales of $292.8 million in the quarter ended
December 25, 1999 ("second quarter of fiscal 2000"). Sales increases from the
Foreman line, as well as the new Melitta and Relaxor brands were more than
offset by decreased sales of Rejuvenique, White-Westinghouse, Breadman and
Farberware product lines. Sales of White-Westinghouse(R) products to Kmart and
Zellers approximated 5% of net sales in the second quarter of fiscal 2001
compared to 8% of net sales in the second quarter of fiscal 2000.

     Gross Profit. Gross profit in the second quarter of fiscal 2001 was $97.9
million or 37.3% of net sales as compared to $116 million or 39.6% of net sales
in the same period in fiscal 2000. Cost of goods sold during the second quarter
of fiscal 2001 was relatively unchanged at 57.2% of net sales compared to 57.0%
in the same period in fiscal 2000. Distribution expenses were $14.4 million or
5.5% of net sales in the second quarter of fiscal 2001 compared to $9.9 million
or 3.4% of net sales in the same period in fiscal 2000. Gross profit in the
second quarter of fiscal 2001, as a percentage of net sales, decreased primarily
due to higher distribution costs when compared to the same period in fiscal
2000. Distribution expenses increased as a percentage of net sales due to
increased sales to customers with prepaid freight terms, higher rates on prepaid
freight resulting from fuel price surcharges and the costs associated with
additional warehouse facilities required to support the sales growth of the
Company.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to 17.2% of net sales or $45.1 million in the
second quarter of fiscal 2001 compared to 10.5% of net sales or $30.7 million
for the same period in fiscal 2000. Expenditures for television, royalty
expenses, certain other media and cooperative advertising and trade show
expenses were 9.0% of net sales or $23.5 million in the second quarter of fiscal
2001 when compared to 4.6% of net sales or $13.4 million in the same period in
fiscal 2000. The increase in these expenses from the prior year is primarily
related to the elimination of $14.6 million in royalties, net of amortization of
trademark, associated with the first quarter of fiscal 2000 that were recognized
in the second quarter of fiscal 2000. Royalty payments were no longer required
after the completion of the George Foreman name acquisition in the second
quarter of fiscal 2000. The remaining selling, general and administrative costs
increased to 8.2% of net sales or $21.6 million in the second quarter of fiscal
2001 compared to 5.9% of net sales or $17.3 million in the second quarter of
fiscal 2000. The increase in these expenses is primarily from increased legal
fees associated with various corporate matters, as well as the reduction of
pension expense in the second quarter of fiscal 2000 due to the recognition of a
curtailment gain from the freezing of the Toastmaster pension plan.

     Operating Income. As a result of the foregoing, operating income decreased
by $32.6 million or 38.2%, to $52.7 million in the second quarter of fiscal 2001
from $85.3 million in the same period in fiscal 2000. Operating income as a
percentage of net sales decreased to 20.1% in the second quarter of fiscal 2001
from 29.1% in the same period of fiscal 2000.

     Net Interest Expense. Net interest expense was approximately $10.2 million
for the second quarter of fiscal 2001 compared to $9.2 million in the second
quarter of fiscal 2000. Interest expense includes approximately $.9 million of
imputed interest related to the note payable associated with the George Foreman
name acquisition. Salton's rate of interest on amounts outstanding under the
revolver, term loan and senior subordinated debt was a weighted average annual
rate of 9.7% in the second quarter of fiscal


                                       9
<PAGE>   10

2001 compared to 9.5% in fiscal 2000. The average amount of all debt outstanding
was $382.4 million for the second quarter of fiscal 2001 compared to $241.0
million for the same period in fiscal 2000. This increase was used to finance
the working capital needed to support the growth of the business, complete the
Sonex International and Relaxor brand acquisitions and purchase stock of the
Company under the Company's share repurchase program.

     Income Tax Expense. Salton had tax expense of $15.9 million in the second
quarter of fiscal 2001 as compared to tax expense of $28.5 million in fiscal
2000.

     Net income. Net income decreased 44.1% to $26.6 million in the second
quarter of fiscal 2001, compared to $47.6 million in the second quarter of
fiscal 2000.

     Earnings per Share. Basic earnings per common share were $2.19 per share on
weighted average common shares outstanding of 12,116,774 in the second quarter
of fiscal 2001 compared to earnings of $4.25 per share on weighted average
common shares outstanding of 11,184,333 in the same period in fiscal 2000.
Diluted earnings per common share were $1.60 per share on weighted average
common shares outstanding, including dilutive common stock equivalents, of
16,656,653 in the second quarter of fiscal 2001 compared to earnings of $3.08
per share on weighted average common shares outstanding, including dilutive
common stock equivalents, of 15,457,776 in the same period in fiscal 2000. All
share counts for the second quarter of fiscal 2001 reflect the issuance of
shares and contingent shares issuable related to the payment on the note payable
associated with the George Foreman name acquisition and the acquisition of the
assets of the Stiffel Company, as well as the repurchase of 283,800 shares of
the Company's stock. 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.

TWENTY-SIX WEEKS ENDED DECEMBER 30, 2000 COMPARED WITH TWENTY-SIX WEEKS ENDED
DECEMBER 25, 1999.

     Net Sales. Net sales in the twenty-six weeks ended December 30, 2000
("first half of fiscal 2001") were $469.4 million, a decrease of approximately
$19.7 million or 4.0%, compared to net sales of $489.1 million in the twenty-six
weeks ended December 25, 1999 ("first half of fiscal 2000"). Sales increases
from the Foreman line, as well as the new Melitta and Relaxor brands were more
than offset by decreased sales of Rejuvenique, White-Westinghouse, Breadman and
Farberware product lines. Sales of White-Westinghouse(R) products to Kmart and
Zellers approximated 6% of net sales in the first half of fiscal 2001 compared
to 7% of net sales in the first half of fiscal 2000.

     Gross Profit. Gross profit in the first half of fiscal 2001 was $177.1
million or 37.7% of net sales as compared to $194.8 million or 39.8% in the same
period in fiscal 2000. Cost of goods sold during the first half of fiscal 2001
increased to 57.1% of net sales compared to 56.7% in the same period in fiscal
2000. Distribution expenses were $24.4 million or 5.2% of net sales in the first
half of fiscal 2001 compared to $17.0 million or 3.5% of net sales in the same
period in fiscal 2000. Gross profit in the first half of fiscal 2001 as a
percentage of net sales decreased partially due to a higher percentage of
Toastmaster products being sold and lower sales of the higher gross-margin
Rejuvenique facial toning system when compared to the first half of 2000. In
addition, the Company incurred higher distribution costs when compared to the
same period in fiscal 2000. Distribution expenses increased as a percentage of
net sales due to increased sales to customers with prepaid freight terms, higher
rates on prepaid freight resulting from fuel price surcharges and the costs
associated with additional warehouse facilities required to support the sales
growth of the Company.

     Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to 17.2% of net sales or $80.7 million in the
first half of fiscal 2001 compared to 16.6% of net sales or $81.2 million for
the same period in fiscal 2000. Expenditures for television, royalty expenses,
certain other media and cooperative advertising and trade show expenses were
9.2% of net sales or $43.2


                                       10
<PAGE>   11

million in the first half of fiscal 2001 when compared to 10.0% of net sales or
$49.0 million in the same period in fiscal 2000. The decrease in these expenses
is primarily related to lower infomercial spending in the period. The remaining
selling, general and administrative costs increased to 8.0% of net sales or
$37.5 million in the first half of fiscal 2001 compared to 6.6% of net sales or
$32.2 million in the first half of fiscal 2000. The increase in these expenses
is primarily from increased legal fees associated with various corporate
matters, as well as the reduction of pension expense in the first half of fiscal
2000 due to the recognition of a curtailment gain from the freezing of the
Toastmaster pension plan.

     Operating Income. As a result of the foregoing, operating income decreased
by $17.3 million or 15.2%, to $96.4 million in the first half of fiscal 2001
from $113.7 million in the same period in fiscal 2000. Operating income as a
percentage of net sales decreased to 20.5% in the first half of fiscal 2001 from
23.2% in the same period of fiscal 2000.

     Net Interest Expense. Net interest expense was approximately $19.5 million
for the first half of fiscal 2001 compared to $14.7 million in the first half of
fiscal 2000. Interest expense includes approximately $3.4 million of imputed
interest related to the note payable associated with the George Foreman name
acquisition, which includes the early payment of the July 2001 note payment to
George Foreman made using the Company's common stock on September 11, 2000.
Salton's rate of interest on amounts outstanding under the revolver, term loan
and senior subordinated debt was a weighted average annual rate of 9.86% in the
first half of fiscal 2001 compared to 9.4% in fiscal 2000. The average amount of
all debt outstanding was $361.9 million for the first half of fiscal 2001
compared to $225.0 million for the same period in fiscal 2000. This increase was
used to finance the working capital needed to support the growth of the
business, complete the Sonex International and Relaxor brand acquisitions and
purchase stock of the Company under the Company's share repurchase program.

     Income Tax Expense. Salton had tax expense of $28.9 million in the first
half of fiscal 2001 as compared to tax expense of $37.5 million in fiscal 2000.

     Net income. Net income decreased 21.8% to $48.1 million in the first half
of fiscal 2001, compared to $61.5 million in the first half of fiscal 2000.

     Earnings per Share. Basic earnings per common share were $4.06 per share on
weighted average common shares outstanding of 11,856,249 in the first half of
fiscal 2001 compared to earnings of $5.53 per share on weighted average common
shares outstanding of 11,109,058 in the same period in fiscal 2000. Diluted
earnings per common share were $2.95 per share on weighted average common shares
outstanding, including dilutive common stock equivalents, of 16,289,880 in the
first half of fiscal 2001 compared to earnings of $4.00 per share on weighted
average common shares outstanding, including dilutive common stock equivalents,
of 15,378,315 in the same period in fiscal 2000. All share counts for the first
half of fiscal 2001 reflect the issuance of shares and contingent shares
issuable related to the payment on the note payable associated with the George
Foreman name acquisition and the acquisition of the assets of the Stiffel
Company, as well as the repurchase of 283,800 shares of the Company's stock. 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.

LIQUIDITY AND CAPITAL RESOURCES

     During the first half of fiscal 2001, Salton used net cash of $32.0 million
in operating activities and $13.9 million in investing activities. This resulted
primarily from the seasonal growth in sales in the period resulting in higher
levels of receivables, income tax payments, payments to CMI under the loan and
security agreement, the buyout of the Juiceman royalty agreements, cash payments
related to the acquisition of Sonex International, as well as increased
investment in capital assets, primarily tooling. Financing activities provided
cash of $58.6 million. On September 26, 2000 the Company amended and restated
the Second Amended and Restated Credit Agreement (the "Second Amended Credit
Agreement") with the Third Amended and Restated Credit Agreement (the "Third
Amended Credit Agreement"). Salton increased its


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existing revolving credit facility from $115.0 million to $160.0 million. The
Third Amended Credit Agreement provides for $235.0 million in a senior secured
credit facility consisting of a $75.0 million Term Loan (the "Term Loan") at an
established base rate (equivalent to the prime rate of interest) plus an
applicable margin of 125 basis points or, at the Company's election, a
eurodollar rate plus an applicable margin of 225 basis points maturing in
sixteen consecutive quarterly installments commencing on March 31, 2001; and a
$160.0 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 plus an
applicable margin based on a range of ratios of total debt to earnings before
interest, taxes, depreciation and amortization maturing on January 7, 2004. The
Third Amended Credit Agreement 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. Proceeds
from the Third Amended Credit Agreement were used to repay existing amounts
under the Second Amended Credit Agreement and fund ongoing operations of the
Company.

     At December 30, 2000, Salton had debt outstanding of $199.0 million under
the Third Amended Credit Agreement and had the ability to borrow up to an
additional $31.9 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's Third Amended 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. These agreements do allow, under certain
circumstances, for the Company to repurchase or redeem capital stock and/or pay
dividends up to $50.0 million and make acquisitions for up to $40.0 million in
cash. 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.

     In the quarter ended September 30, 2000, the Company reached an agreement
to satisfy $22.75 million of payment obligations incurred in connection with its
acquisition of the "George Foreman" name by issuing 621,161 shares of Salton
common stock to George Foreman and other venture participants. The Company has
agreed under certain circumstances to pay an amount of cash and/or issue
additional shares of common stock if the shares issued are sold for less than
$36.625 per share during a specified one-year period plus an amount for any
shares retained at the end of the one year period. George Foreman and the other
participants have agreed to pay the Company in cash 50% of the excess over
$22.75 million of the aggregate sales proceeds plus the market value of any
shares retained at the end of such one year period.

     Salton's ability to make scheduled principal and interest payments 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 Third Amended
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


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<PAGE>   13

financing. There can be no assurance that any such refinancing would be
available or that any such sale of assets or additional financing could be
obtained.

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.

                           PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

     On or about February 1, 2001, Advantage Partners LLC filed a lawsuit
against the Company and certain other defendants in the United States District
for the Central District of California. The lawsuit alleges that a food basket
accessory on George Foreman "Big George" and George Foreman Jr. Rotisseries
infringes a patent owned by the plaintiff. The lawsuit seeks a judicial
determination of infringement, compensatory and punitive damages, attorneys fees
and costs and a temporary restraining order, preliminary injunction and
permanent injunction ordering each defendant to, among other things, refrain
from making or selling any product which infringes the patent and to remove all
such products from stores.


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<PAGE>   14

     On January 23, 2001, the Company filed a lawsuit against Applica, Inc.
(formerly known as Windmere-Durable Holdings, Inc.) and its affiliate in the
United States District Court for the Northern District of Illinois. The lawsuit
alleges that Applica intentionally, willfully and maliciously breached its
noncompetition agreement with the Company, attempted to conceal such breach,
tortuously interfered with the Company's business and contractual relationships
and breached its duty of good faith and fair dealing. The lawsuit seeks
compensatory damages, punitive damages and attorneys' fees and costs. As a
result of Applica's actions, the Company has terminated an agreement which
requires it to pay Applica a fee based upon the Company's net sales less
specified costs and expenses relating to the Company's supply agreement with
K-Mart. The terms of the agreement between the Company and Applica expressly
provide for such termination upon a violation by Applica of its noncompetition
provisions.

     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 30, 2000, Salton has accrued
approximately $150,000 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.

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 2: CHANGES IN SECURITIES AND USE OF PROCEEDS

(c) During the twenty-six weeks ended December 30, 2000, the Company issued an
aggregate of approximately 821,161 shares of its common stock in connection with
the payment on the note payable associated with the George Foreman name
acquisition and the acquisition of the assets of the Stiffel Company. The shares
were issued pursuant to exemptions by reason of Section 4(2) of the Securities
Act of 1933, as amended. These sales were made without general solicitation or
advertising. Each purchaser was an accredited investor or a sophisticated
investor with access to all relevant information necessary. The Company has
filed Registration Statements on Form S-3 covering the resale of such
securities.


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ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     None

(b)  Reports on Form 8-K

     A current report on Form 8-K was filed on November 8, 2000 reporting, under
Item 5 Other Events, the Company's announcement of its fiscal 2001 first quarter
earnings results.






                                   SIGNATURES

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


Date: February 12, 2001              SALTON, INC.

                                     /s/ JOHN E. THOMPSON
                                     John E. Thompson
                                     Chief Financial Officer and
                                     Senior Vice-President
                                     (Duly Authorized Officer of the Registrant)




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                                  EXHIBIT INDEX

EXHIBIT NUMBER               DESCRIPTION OF DOCUMENT
--------------               -----------------------

     12                      Computation of Ratio of Earnings to Fixed Charges






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