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

(Mark One)

[X]  Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange
     Act Of 1934 For the Quarterly Period Ended October 1, 2005 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)

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

<TABLE>
<S>                                                             <C>
            1955 Field Court                                       60045
             Lake Forest, IL                                    (Zip Code)
(Address of principal executive offices)
</TABLE>

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

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

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

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

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

Indicate by the check mark whether the registrant is a Shell company (as defined
in Rule 12b-2 of the Exchange Act).

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of November 7, 2005,
13,522,712 shares of its $0.01 par value Common Stock.


                                        1

<PAGE>

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

          Item 1: Financial Statements

                  Condensed Consolidated Balance Sheets -
                  October 1, 2005 and July 2, 2005                          4

                  Condensed Consolidated Statements of Operations -
                  Thirteen weeks ended - October 1, 2005 and
                  October 2, 2004                                           5

                  Condensed Consolidated Statements of Cash Flows -
                  Thirteen weeks ended - October 1, 2005 and
                  October 2, 2004                                           6

                  Notes to Condensed Consolidated Financial
                  Statements                                                7

          Item 2: Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                      20

          Item 3: Quantitative and Qualitative Disclosures About
                  Market Risk                                              31

          Item 4: Controls and Procedures                                  31

PART II           OTHER INFORMATION

          Item 1: Legal Proceedings                                        32

          Item 6: Exhibits                                                 35

                  Signature                                                36
</TABLE>


                                        2

<PAGE>

                                  SALTON, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 OCTOBER 1,    JULY 2,
                                                                    2005        2005
                                                                 ----------   --------
(IN THOUSANDS EXCEPT SHARE DATA)
<S>                                                              <C>          <C>
ASSETS
CURRENT ASSETS:
   Cash                                                           $ 10,310    $ 14,857
   Compensating balances on deposit                                 38,779      34,355
   Restricted cash                                                  81,664          --
   Accounts receivable, less allowances                            146,213     140,179
   Inventories                                                     188,319     195,065
   Assets held for sale                                                 --         998
   Prepaid expenses and other current assets                        15,424      16,048
   Deferred income taxes                                             6,402       5,524
   Current assets of discontinued operations                            --     101,927
                                                                  --------    --------
      Total Current Assets                                         487,111     508,953
Property, Plant and Equipment, net                                  47,287      50,227
Tradenames                                                         179,941     180,041
Non-Current Deferred Tax Asset                                      27,239      49,275
Other Assets                                                        11,522      11,555
Non-current assets of discontinued operations                           --       7,737
                                                                  --------    --------
TOTAL ASSETS                                                      $753,100    $807,788
                                                                  ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Revolving line of credit and other current debt, including
      accrued interest of $9,713 and $0, respectively             $ 87,485    $ 70,730
   Senior subordinated notes due 2005 - current                     45,990      45,990
   Accounts payable                                                113,075      86,254
   Accrued expenses                                                 29,061      34,802
   Accrued interest                                                  7,577      13,589
   Income taxes payable                                              4,378       4,375
   Current liabilities of discontinued operations                       --      47,331
                                                                  --------    --------
      Total Current Liabilities                                    287,566     303,071
Non-Current Deferred Income Taxes                                    3,040       3,334
Senior Subordinated Notes Due 2005                                      --      79,010
Senior Subordinated Notes due 2008, including an adjustment of
   $2,578 and $7,082 to the carrying value related
   to interest rate swap agreements, respectively                   62,206     156,387
Second Lien Notes, including accrued interest
   of $18,756 and $0, respectively                                 121,933          --
Series C Preferred Stock                                             8,087          --
Term Loan and Other Notes Payable                                  100,050     100,050
Other Long Term Liabilities                                         20,134      20,283
Non-current liabilities of discontinued operations                      --       1,462
                                                                  --------    --------
TOTAL LIABILITIES                                                  603,016     663,597
Minority Interest in Discontinued Operations                            --      24,263
Convertible Preferred Stock, $0.01 par value; authorized,
   2,000,000 shares; 40,000 shares issued                           40,000      40,000
STOCKHOLDERS' EQUITY:
   Common Stock, $0.01 par value; authorized, 40,000,000
      shares; issued and outstanding: 2006-13,520,761 shares;
      2005-11,376,292 shares                                           170         148
   Treasury Stock - at cost                                        (65,793)    (65,793)
   Additional Paid-In Capital                                       62,356      55,441
   Accumulated Other Comprehensive Income                            5,068      11,513
   Retained Earnings                                               108,283      78,619
                                                                  --------    --------
      Total Stockholders' Equity                                   110,084      79,928
                                                                  --------    --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $753,100    $807,788
                                                                  ========    ========
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.


                                        3

<PAGE>

                                  SALTON, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               13 WEEKS ENDED
                                                         -------------------------
                                                          OCTOBER 1,    OCTOBER 2,
                                                             2005          2004
                                                         -----------   -----------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S>                                                      <C>           <C>
NET SALES                                                $   148,416   $   204,684
Cost of Goods Sold                                           108,371       137,986
Distribution Expenses                                         10,548        12,935
                                                         -----------   -----------
GROSS PROFIT                                                  29,497        53,763
Selling, General and Administrative Expenses                  40,418        46,854
Restructuring Costs                                              117           672
                                                         -----------   -----------
OPERATING (LOSS) INCOME                                      (11,038)        6,237
Interest Expense, net                                         11,049        12,879
Gain-Early Settlement of Debt                                (21,655)           --
                                                         -----------   -----------
(LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES           (432)       (6,642)
Income Taxes                                                    (545)       (2,197)
                                                         -----------   -----------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS                     113        (4,445)
Income from Discontinued Operations, Net of Tax                1,735         1,258
Gain on Sale of Discontinued Operations, Net of Tax           27,816            --
                                                         -----------   -----------
NET INCOME (LOSS)                                        $    29,664   $    (3,187)
                                                         ===========   ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                12,215,911    11,370,946
WEIGHTED AVERAGE COMMON AND COMMON
   EQUIVALENT SHARES OUTSTANDING                          16,249,880    11,370,946

Net Income (loss) per Common Share: Basic
   Income (loss) from continuing operations              $      0.01   $     (0.39)
   Income from discontinued operations, net of tax              0.14          0.11
   Gain on sale of discontinued operations, net of tax          2.28            --
                                                         -----------   -----------
Net Income (Loss) per Common Share: Basic                $      2.43   $     (0.28)
                                                         ===========   ===========

Net (Loss) per Common Share: Diluted
   Income (loss) from continuing operations              $      0.01   $     (0.39)
   Income from discontinued operations, net of tax              0.11          0.11
   Gain on sale of discontinued operations, net of tax          1.71            --
                                                         -----------   -----------
Net (Loss) per Common Share: Diluted                     $      1.83   $     (0.28)
                                                         ===========   ===========
</TABLE>

            See Notes to Condensed Consolidated Financial Statements.


                                        4

<PAGE>
                                  SALTON, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<Table>
<Caption>
(IN THOUSANDS)                                                                       13 WEEKS ENDED
                                                                           ------------------------------------
                                                                           OCTOBER 1, 2005      OCTOBER 2, 2004
                                                                           ---------------      ---------------
<S>                                                                        <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Income (Loss)                                                        $        29,664      $        (3,187)
  Adjustments to Reconcile Net Income (Loss) to Net Cash
       from Operating Activities:
    Imputed interest on notes payable and other non-cash items                        (332)                (458)
    Deferred income tax provision                                                     (475)              (1,784)
    Stock based compensation expense                                                   271                   --
    Depreciation and amortization                                                    5,340                5,968
    Bad debt (recovery) provision                                                       14               (1,634)
    Gain on sale of discontinued operations                                        (27,816)                  --
    (Gain) Loss on disposal of property and equipment                                 (729)                  52
    Inventory valuation adjustment                                                   3,292               (2,252)
    Impairment loss on goodwill and intangible assets
    Foreign currency gains                                                            (315)                (478)
    Gain - early settlement of debt                                                (21,655)                  --
    Minority interest                                                                1,381                1,056
    Changes in assets and liabilities:
       Accounts receivable                                                         (22,872)             (69,453)
       Inventories                                                                 (30,231)             (46,657)
       Prepaid expenses and other current assets                                    (2,402)                (489)
       Other non-current assets                                                      1,025                 (238)
       Accounts payable                                                             36,212               24,799
       Income taxes payable                                                          1,654                1,293
       Accrued expenses                                                             (4,933)              21,161
                                                                           ---------------      ---------------
       Other non-current assets
          NET CASH FROM OPERATING ACTIVITIES                                       (32,907)             (72,301)
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                                              (1,628)              (4,102)
  Proceeds from sale of assets and investments                                      15,245                    9
  Proceeds from sale of discontinued operations                                     80,936                   --
  Increase in restricted cash                                                      (81,664)                  --
  Acquisition of majority interest/business, net of cash acquired                   (4,525)                  --
  Increase in compensating balances on deposit                                      (4,424)                (451)
                                                                           ---------------      ---------------
          NET CASH FROM INVESTING ACTIVITIES                                         3,940               (4,544)
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from revolving line of credit and other short term debt               7,125               57,883
  Repayment of long term debt                                                         (196)                (220)
  Costs associated with refinancing                                                 (9,401)                  --
  Additional payment for tradenames                                                     --                 (126)
  Common stock issued                                                                  175                   18
                                                                           ---------------      ---------------
          NET CASH FROM FINANCING ACTIVITIES                                        (2,297)              57,555
                                                                           ---------------      ---------------
Effect of Exchange Rate Changes on Cash                                              1,781               (1,021)
                                                                           ---------------      ---------------
Decrease in Cash                                                                   (29,483)             (20,311)
Cash of Discontinued Operations                                                    (10,998)                  --
Cash, Beginning of Period                                                           50,791               46,847
                                                                           ---------------      ---------------
Cash, End of Period                                                        $        10,310      $        26,536
                                                                           ===============      ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid (Received) During the Period for:
  Interest                                                                 $        10,653      $         3,004
  Income taxes, net of (refunds)                                           $           554      $          (387)
NOTE: Cash flow activity includes discontinued operations
</Table>



            See Notes to Condensed Consolidated Financial Statements.


                                        5

<PAGE>

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

1.   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     In the opinion of management, the accompanying condensed consolidated
     balance sheets and related interim condensed consolidated statements of
     income and cash flows include all adjustments, consisting only of normal
     recurring items, necessary for their fair presentation in conformity with
     principles, generally accepted in the United States of America. Preparing
     financial statements requires management to make estimates and assumptions
     that affect the reported amounts of assets, liabilities, revenue and
     expenses. Actual results may differ from these estimates. The Company's
     business is highly seasonal, with operating results varying from quarter to
     quarter. Interim results are not necessarily indicative of results for a
     full year. The information included in this Form 10-Q should be read in
     conjunction with Management's Discussion and Analysis and consolidated
     financial statements and notes thereto included in the Salton, Inc. 2005
     Annual Report on Form 10-K.

2.   DISCONTINUED OPERATIONS

     On September 29, 2005, the Company completed the sale of its 52.6%
     ownership interest in Amalgamated Appliances Holdings Limited ("AMAP"), a
     leading distributor and marketer of small appliances and other products in
     South Africa, to a group of investors led by Interactive Capital
     (Proprietary) Limited. In the first quarter of fiscal 2006, the Company
     received proceeds, net of expenses, of approximately $81.0 million in
     connection with the transaction. The Company recorded a gain of $49.1
     million before taxes. The Company expects to license and sell its George
     Foreman(R), Russell Hobbs(R) and Carmen(R) branded products in South Africa
     following the transaction.

     The following is a summary of financial results included within
     discontinued operations:

<TABLE>
<CAPTION>
                                                                       THIRTEEN WEEKS ENDED
                                                                ---------------------------------
                                                                OCTOBER 1, 2005   OCTOBER 2, 2004
                                                                ---------------   ---------------
<S>                                                             <C>               <C>
Net sales from discontinued operations                              $68,798           $69,451
                                                                    -------           -------
Income from discontinued operations before income taxes             $ 5,477           $ 3,362
Income taxes                                                          2,338             1,048
Minority Interest                                                     1,404             1,056
                                                                    -------           -------
Income from discontinued operations, net of tax                     $ 1,735           $ 1,258
                                                                    =======           =======
</TABLE>


                                        6

<PAGE>

The following sets forth the carrying amounts of the major classes of assets and
liabilities classified as assets and liabilities of discontinued operations at
July 2, 2005, in the accompanying balance sheet:

<TABLE>
<CAPTION>
                                                    July 2, 2005
                                                    ------------
<S>                                                 <C>
ASSETS
Cash                                                  $ 35,934
Accounts receivable, net                                25,910
Inventories, net                                        38,349
Prepaid expenses and other current assets                1,038
Deferred tax asset                                         696
                                                      --------
Current assets of discontinued operations             $101,927
                                                      --------
Property, plant and equipment, net                    $  4,003
Tradenames                                               1,474
Other assets, net                                        2,260
                                                      --------
Noncurrent assets of discontinued operations          $  7,737
                                                      --------

LIABILITIES
Accounts payable                                      $ 30,955
Accrued expenses                                         9,334
Income taxes payable                                     7,042
                                                      --------
Current liabilities of discontinued operations        $ 47,331
                                                      --------
Other notes payable                                   $  1,462
                                                      --------
Noncurrent liabilities of discontinued operations     $  1,462
                                                      --------
</TABLE>

3.   SALE OF TABLETOP

     On September 16, 2005, the Company completed the sale of certain tabletop
     assets to Lifetime Brands, Inc. for $14.2 million, which approximates book
     value, and is subject to post-closing adjustments. In connection with this
     transaction, Salton divested the Block(R) and Sasaki(R) brands, licenses to
     Calvin Klein(R) and Napa Style(TM) tabletop products and distribution of
     upscale crystal products under the Atlantis(R) brand. In addition, the
     Company entered into a new license with Lifetime Brands enabling it to
     market tabletop products under the Stiffel(R) brand

4.   SENIOR SECURED CREDIT FACILITY, LETTERS OF CREDIT AND LONG-TERM DEBT

     THIRD AMENDMENT TO SENIOR SECURED CREDIT FACILITY - On July 11, 2005, the
     Company entered into a third amendment to, and waiver under, the senior
     secured credit facility (the "Third Amendment") dated as of July 8, 2005.

     The Third Amendment permitted the transactions contemplated by the
     Company's private debt exchange offer, discussed below. The Third Amendment
     also, among other things: (1) waived the Company's failure to present its
     financial statements in accordance with GAAP as reported in the Company's
     previously announced reclassification of its outstanding preferred stock to
     a line outside of permanent equity; (2) amended the maturity date of the
     Company's senior secured credit facility from June 15, 2007 to December 31,
     2007; (3) changed the maximum size of the facility from $275.0 million to
     the difference between $287.0 million and the principal amount of the new
     second lien notes, if any, issued in connection with the exchange offer;
     and (4) revised prepayment provisions triggered by certain future
     incurrences of debt and sales of assets, which transactions would each
     require the prior written consent of the lenders under the Company's senior
     secured credit facility.


                                        7

<PAGE>

     DEBT EXCHANGE - On August 26, 2005, the Company completed a private debt
     exchange offer for the outstanding Senior Subordinated Notes due December
     15, 2005 ("2005 Notes") and the outstanding Senior Subordinated Notes due
     April 15, 2008 ("2008 Notes"). The Company accepted for exchange an
     aggregate of approximately $75.0 million in principal amount of 2005 Notes
     (approximately 60.0% of the then outstanding 2005 Notes) and approximately
     $90.1 million in principal amount of 2008 Notes (approximately 60.1% of the
     outstanding 2008 Notes) that were validly tendered in the debt exchange
     offer.

     Upon closing of the debt exchange offer, the Company issued an aggregate of
     approximately $99.1 million of senior second lien notes (the "Second Lien
     Notes"), 2,039,469 shares of its common stock, and 135,088 shares of its
     Series C preferred stock with a total liquidation preference of $13.5
     million. The Second Lien Notes mature on March 31, 2008 and bear interest
     at LIBOR plus 7%, payable in cash on January 15th and July 15th of each
     year, with the first payment due on January 15, 2006. The Series C
     preferred stock is generally non-dividend bearing and is mandatorily
     redeemable by the Company in cash at the liquidation amount on August 26,
     2010. The Company also granted certain registration rights for
     approximately 1,837,455 shares of Salton common stock and 121,707 shares of
     Series C preferred stock received by certain former holders of Subordinated
     Notes.

     The debt exchange has been accounted for as a troubled debt restructuring
     in accordance with Statement of Financial Accounting Standards ("SFAS") No.
     15. Under SFAS No. 15, the Second Lien Notes were recorded at their
     principal amount plus the total estimated future interest payments of $28.5
     million, of which $9.7 million is included in other current debt.

     The Series C preferred stock has been recorded at its fair value of $8.0
     million, using an effective interest rate of 11.06%. The associated
     discount is being accreted to interest expense through the maturity date in
     2010.

     In connection with the debt exchange offer, the Company obtained the
     consent of the holders of a majority of the outstanding 2005 Notes and a
     majority of the outstanding 2008 Notes to amend the indentures governing
     such Subordinated Notes to eliminate substantially all of the restrictive
     covenants and certain events of default contained in such indentures. The
     Company has entered into supplements to the indentures governing the 2005
     Notes and the 2008 Notes to reflect such amendments.

     On September 28, 2005, the Company completed a private exchange transaction
     in which the Company issued an additional $4.1 million of Second Lien Notes
     in exchange for $4.0 million of 2005 Notes. There were no common or
     preferred shares issued in connection with this exchange.

     Subsequent to the quarter end, the Company repurchased $9.2 million in
     aggregate principal amount of the outstanding 2005 Notes for $9.1 million
     (see Note 15, "Subsequent Events").

     FOURTH AMENDMENT TO SENIOR SECURED CREDIT FACILITY - On September 23, 2005,
     the Company entered into a fourth amendment to the senior secured credit
     facility (the "Fourth Amendment") dated as of September 22, 2005. Under the
     terms of the Fourth Amendment, the Company is required to utilize the
     proceeds received in connection with the sale of certain of its tabletop
     assets and the sale of the 52.6% ownership interest in AMAP to prepay the
     outstanding principal amount of the original $100.0 million term loan
     included therein. As of October 1, 2005, the proceeds from the sale of the
     tabletop assets of $13.4 million had been applied against the term loan. As
     of October 1, 2005, the proceeds from the sale of AMAP were classified as
     restricted cash. The proceeds were subsequently applied against the term
     loan (see Note 15, "Subsequent Events").


                                        8

<PAGE>

     Under the terms of the senior secured credit facility, as amended by the
     Fourth Amendment, the Company is required to request one or more additional
     term loans on or prior to October 4, 2005; provided that the sum of the
     outstanding principal amount of the original term loan and these additional
     term loans must equal $100.0 million. The Company is required by the terms
     of the senior secured credit facility, as amended by the Fourth Amendment,
     to: (1) use the first $24.9 million of its borrowings under the additional
     term loan to prepay the outstanding amount of the revolving line of credit
     under the senior secured credit facility; and (2) place $50.0 million of
     such borrowings into an interest-bearing cash collateral account. Salton
     may use the remaining proceeds of the additional term loan for general
     corporate purposes.

     Subject to certain terms and conditions, including the absence of any
     default or event of default, the Company may use the $50.0 million cash
     collateral account to purchase, prepay or redeem the outstanding 2005
     Notes. To the extent that Salton issues Second Lien Notes and/or equity in
     exchange for 2005 Notes prior to the maturity of the 2005 Notes, the
     Company is permitted to obtain funds from the cash collateral account in an
     amount equal to the reduction of the principal amount of the 2005 Notes
     affected by such exchange.

     The Fourth Amendment also modified the financial covenants that require a
     minimum EBITDA and consolidated fixed charge coverage ratio, and eliminated
     the foreign leverage ratio. The Company was not in compliance with these
     covenants as of October 1, 2005 and does not anticipate that it will be in
     compliance with these covenants as of November 5, 2005. The Company
     received a waiver for noncompliance during these periods (see Note 15,
     "Subsequent Events").

     Subsequent to quarter end, the Company entered into an amendment and waiver
     to the senior secured credit facility which, among other things, waives the
     Company's compliance with the financial covenants for the twelve-month
     periods ending October 1, 2005 and November 5, 2005 and permits the Company
     to borrow up to $5.0 million beyond availability for inventory purchases
     for the build-up during the 2005 Holiday season (see Note 15, "Subsequent
     Events").

     LETTERS OF CREDIT - As of October 1, 2005 the Company had outstanding
     letters of credit of $9.8 million under the letter of credit subfacility of
     $10.0 million.

     Subsequent to quarter end, the senior secured credit facility was amended
     to increase the letter of credit subfacility to $15.0 million (see Note 15,
     "Subsequent Events").

5.   STOCK-BASED COMPENSATION

     At October 1, 2005, the Company had stock-based employee compensation plans
     that are described more fully in Note 12 of the Company's 2005 Annual
     Report on Form 10-K. Effective July 3, 2005, the Company adopted SFAS No.
     123(R), Share-Based Payment, which revises SFAS 123 and supercedes ABP 25.
     SFAS No. 123(R) requires all share-based payments to employees to be
     recognized in the financial statements based on their fair value using an
     option-pricing model at the date of grant. The Company has elected to use
     the modified prospective method for adoption, which requires compensation
     expense to be recorded for all unvested stock options beginning in the
     first year of adoption. For all unvested options outstanding as of July 3,
     2005, the previously measured but unrecognized compensation expense, based
     on the fair value at the original grant date, will be recognized over the
     remaining vesting period. For share-based payments granted subsequent to
     July 3, 2005, compensation expense, based on the fair value on the date of
     grant, will be recognized from the date of grant over the applicable
     vesting period. The Company uses the Black-Scholes' option-pricing model
     to determine fair value of awards on the date of grant.


                                        9

<PAGE>

     For the quarter ended October 1, 2005, total stock-based employee
     compensation expense was $0.2 million, net of related income tax of $0.1
     million. The impact on basic and diluted earnings per share was $(0.01).
     Compensation cost related to nonvested awards not yet recognized is $0.1
     million and will primarily be recognized in the quarter ending December 31,
     2005.

     For periods prior to July 3, 2005, the Company used the intrinsic value in
     accordance with APB No. 25, "Accounting for Stock Issued to Employees," and
     related Interpretations. No stock-based compensation is reflected in net
     income, as no options granted under those plans had an exercise price less
     than the market value of the underlying common stock on the date of grant.
     The following table illustrates the effect on net income and earnings per
     share if the Company had applied the fair value recognition provisions of
     SFAS No. 123(R).

<TABLE>
<CAPTION>
                                                              13 WEEKS ENDED
                                                                 10/2/2004
                                                              --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>
Net loss - as reported                                           $(3,187)
Less: Total stock-based employee compensation expense
   determined under fair value based method for all awards,
   net of related taxes                                              285
                                                                 -------
Net loss - pro forma                                             $(3,472)
                                                                 =======
Net loss per common share: Basic and diluted
   As reported                                                   $ (0.28)
   Pro forma                                                       (0.31)
</TABLE>

Activity in the Company's stock option plans for the thirteen weeks ended
October 1, 2005 was as follows:

<TABLE>
<CAPTION>
                                                 WEIGHTED
                                                  AVERAGE
                                       OPTIONS   EXERCISE
                                        (000)     PRICE
                                       -------   --------
<S>                                    <C>       <C>
Outstanding at beginning of year        2,603     $13.75
Granted                                    --
Exercised                                (105)      1.67
Expired or Canceled                       (88)     16.57
                                        -----     ------
Outstanding at end of period            2,410     $14.18
                                        =====     ======
Options exercisable at end of period    2,182     $14.72
</TABLE>


                                       10

<PAGE>

     The following information summarizes the stock options outstanding at
October 1, 2005:

<TABLE>
<CAPTION>
                            OPTIONS OUTSTANDING                OPTIONS EXERCISABLE
                           ---------------------               -------------------
                                      WEIGHTED-
                                       AVERAGE     WEIGHTED-             WEIGHTED-
                                      REMAINING     AVERAGE               AVERAGE
                           SHARES    CONTRACTUAL    EXERCISE    SHARES   EXERCISE
RANGE OF EXERCISE PRICES    (000)   LIFE (YEARS)     PRICE       (000)     PRICE
                           ------   ------------   ---------    ------   ---------
<S>                        <C>      <C>            <C>         <C>       <C>
$0.583 - $1.667               105       0.33         $ 1.67        105     $ 1.67
$2.292 - $5.833                21       1.90           5.53         21       5.53
$6.333 - $10.60             1,200       6.14           8.84        972       8.80
$13.917- $17.50               664       4.43          14.85        664      14.85
$18.95 - $37.00               420       4.33          31.92        420      31.92
                            -----       ----         ------      -----     ------
$0.583 - $37.00             2,410       5.06         $14.18      2,182     $14.72
                            =====       ====         ======      =====     ======
</TABLE>

6.   NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE

     Basic net income (loss) per common share is computed based upon the
     weighted average number of common shares outstanding. Diluted net income
     (loss) 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.

     A reconciliation of the denominator of basic and diluted net income (loss)
     per common share is as follows:

<TABLE>
<CAPTION>
                                                                          THIRTEEN WEEKS ENDED
                                                                   ---------------------------------
                                                                   OCTOBER 1, 2005   OCTOBER 2, 2004
                                                                   ---------------   ---------------
<S>                                                                <C>               <C>
Weighted average number of common shares outstanding
   (denominator for net income (loss) per common share, basic)        12,215,911        11,370,946
Effect of dilutive securities:
   Convertible Preferred Stock                                         3,529,412                --
   Contract Settlement                                                   456,560                --
   Stock Options                                                          47,997                --
                                                                      ----------        ----------
Weighted average number of common shares and potential
   common shares outstanding (denominator for net income (loss)
   per common share, diluted)                                         16,249,880        11,370,946
                                                                      ==========        ==========
</TABLE>

     Options and warrants to purchase 2,304,988 shares of common stock at a
     price range of $5.33 to $37.00 per share were not included in the
     computation of diluted earnings per share for the thirteen weeks ended
     October 1, 2005 because the exercise prices were greater than the average
     market price of the common shares during the period.

     For the thirteen weeks ended October 2, 2004, the dilutive effect of the
     Company's outstanding common stock equivalents, options and warrants were
     excluded from the computation of diluted earnings per share because they
     had an anti-dilutive effect due to the Company's loss in this period.


                                       11

<PAGE>

7.   DERIVATIVE FINANCIAL INSTRUMENTS

     The Company uses derivative financial instruments to manage foreign
     currency risk. The Company does not enter into derivative financial
     instruments for trading purposes. The Company uses forward exchange
     contracts to hedge foreign currency payables for periods consistent with
     the expected cash flow of the underlying transactions. The contracts
     generally mature within one year and are designed to limit exposure to
     exchange rate fluctuations, primarily related to the Great Britain Pound,
     the South African Rand, and the Australian Dollar to the U.S. Dollar.

     All foreign exchange contracts related to continuing operations have been
     recorded in the consolidated balance sheets within accrued expenses at de
     minimis fair values at October 1, 2005 and July 2, 2005, respectively.
     Foreign exchange contracts with a fair value of $2.3 million, related to
     discontinued operations, have been included in the consolidated balance
     sheets as a reduction of current liabilities of discontinued operations at
     July 2, 2005. A $2.3 million change in the fair value of contracts was
     recorded in discontinued operations in the first quarter. The change in the
     fair value of contracts related to continuing operations in the first
     quarter was insignificant. There was a de minimus amount at October 1, 2005
     and $1.4 million at July 2, 2005 recorded in accumulated other
     comprehensive income, net of tax, related to these contracts. The Company
     anticipates that all gains and losses deferred in accumulated other
     comprehensive income related to foreign exchange contracts will be
     reclassified into earnings within the next twelve months as the related
     inventories are sold. Contracts for the purchase of 7.2 million U.S.
     dollars were entered into during the first quarter of fiscal 2006. At
     October 1, 2005, the Company had foreign exchange forward contracts for the
     purchase of 4.5 million U.S. dollars.

8.   CAPITAL STOCK

     Activity in the Company's capital accounts for the thirteen weeks ended
     October 1, 2005 was as follows:

<TABLE>
<CAPTION>
                                               COMMON              ADDITIONAL
                                               SHARES     COMMON     PAID IN
                                            OUTSTANDING    STOCK     CAPITAL
                                            -----------   ------   ----------
(IN THOUSANDS)
<S>                                         <C>           <C>      <C>
Balance, July 3, 2005                          11,376      $148      $55,441
Stock issued - bond exchange, net of fees       2,040        21        6,271
Stock option exercise                             105         1          174
Foreman additional liability                       --        --          199
Share-based compensation cost                      --        --          271
                                               ------      ----      -------
Balance, October 1, 2005                       13,521      $170      $62,356
                                               ======      ====      =======
</TABLE>

9.   COMPREHENSIVE INCOME AND ACCUMULATED OTHER COMPREHENSIVE INCOME

     For the thirteen weeks ended October 1, 2005 and October 2, 2004,
     components of other comprehensive income include foreign currency
     translation adjustments of $(5.0) million and $(4.6) million, respectively
     and derivative liability adjustments of $(1.5) million and $5.7 million,
     respectively.


                                       12

<PAGE>

<TABLE>
<CAPTION>
                                                                                             13 WEEKS ENDED
                                                                                   ---------------------------------
                                                                                   OCTOBER 1, 2005   OCTOBER 2, 2004
                                                                                   ---------------   ---------------
(IN THOUSANDS)
<S>                                                                                <C>               <C>
Net Income (Loss)                                                                      $29,664           $(3,187)
Other Comprehensive (Loss) Income, net of tax of $(595) and $1,700, respectively        (6,445)            1,059
                                                                                       -------           -------
Comprehensive Income (Loss)                                                            $23,219           $(2,128)
                                                                                       =======           =======
</TABLE>

Accumulated other comprehensive income is comprised of the following:

<TABLE>
<CAPTION>
                                                                                             AS OF
                                                                               ---------------------------------
                                                                               OCTOBER 1, 2005   OCTOBER 2, 2004
                                                                               ---------------   ---------------
(IN THOUSANDS)
<S>                                                                            <C>               <C>
Minimum Pension Liability, net of tax of $(5,205) and $(5,207), respectively      $(10,926)         $(10,933)
Unrealized Loss on Derivative, net of tax of $(22) and $573, respectively              (54)            1,404
Foreign Currency Translation                                                        16,048            21,042
                                                                                  --------          --------
                                                                                  $  5,068          $ 11,513
                                                                                  ========          ========
</TABLE>

10.  PENSION BENEFIT PLANS

     The components of net periodic pension cost are as follows:

<TABLE>
<CAPTION>
                                                      DOMESTIC              SALTON EUROPE               TOTAL
                                                ---------------------   ---------------------   ---------------------
13 WEEKS ENDED:                                 10/1/2005   10/2/2004   10/1/2005   10/2/2004   10/1/2005   10/2/2004
---------------                                 ---------   ---------   ---------   ---------   ---------   ---------
(IN THOUSANDS)
<S>                                             <C>         <C>         <C>         <C>         <C>         <C>
Service cost-benefits earned during the year      $  42       $  42       $  70       $  77       $ 112       $ 119
Interest cost on projected benefit obligation       176         176         540         541         716         717
Actuarial return on plan assets                    (157)       (156)       (463)       (419)       (620)       (575)
Net amortization and deferral                        61          65         200         182         261         247
                                                  -----       -----       -----       -----       -----       -----
   Net pension cost                               $ 122       $ 127       $ 347       $ 381       $ 469       $ 508
                                                  =====       =====       =====       =====       =====       =====
</TABLE>

     The Company previously disclosed in its financial statements for the year
     ended July 2, 2005, that it expected to contribute $0.4 million to its
     domestic pension plans and $1.3 million to the Salton Europe pension plan
     in fiscal 2006. As of October 1, 2005, $0.2 million and $0.3 million of
     contributions have been made to the domestic and Europe plans,
     respectively.

11.  OPERATING SEGMENTS AND MAJOR CUSTOMERS

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

     Major Customers - For the thirteen weeks ended October 1, 2005 and October
     2, 2004, one customer accounted for 10.5% and 14.1% of net sales from
     continuing operations, respectively.


                                       13

<PAGE>

12.  LEGAL PROCEEDINGS

     SECURITIES CLASS ACTION LAWSUITS

     In May 2004, two stockholder lawsuits, named Mariss Partners, LLP v.
     Salton, Inc., Leonhard Dreimann and David M. Mulder, and Warren Beeler v.
     Salton, Inc., Leonhard Dreimann and David Mulder, were filed in the United
     States District Court for the Northern District of Illinois against the
     Company and certain Salton executives. The complaints allege that the
     defendants violated the federal securities laws, specifically Sections
     10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 of
     the Securities and Exchange Commission, by making certain alleged false and
     misleading statements. The plaintiffs seek unspecified damages on behalf of
     a purported class of purchasers of the Company's securities during the
     period from November 11, 2002 through May 11, 2004. The Company believes
     that these lawsuits are without merit and that it has compelling defenses
     to the allegations contained in the complaints. Salton intends to
     vigorously defend itself against these claims. The outcome of the class
     action lawsuits cannot be predicted with certainty, however, Salton does
     not believe that this matter will have a material adverse affect on its
     business, financial condition or results of operations. Therefore, no
     amounts have been accrued for such claims. The plaintiffs have voluntarily
     dismissed the Mariss Partners lawsuit on September 3, 2004.

     PRODUCT LIABILITY

     On or about October 27, 2004, a lawsuit entitled DiNatale vs. Salton was
     filed in the New York State Supreme Court against the Company. The
     plaintiffs, who seek unspecified damages, allege that they were injured by
     water contaminated with lead taken from a tea kettle sold by the Company
     under its Russell Hobbs brand. The plaintiffs' attorney had been seeking to
     convert the lawsuit into a class action suit; no class action suit has been
     filed to date. The manufacturer of the product and its insurer are
     defending this lawsuit. The Company's attorneys and its insurers are
     cooperating in the defense of the lawsuit.

     After receiving notice of a lawsuit, the Company voluntarily suspended
     selling the product. The Company believes that, at substantially the same
     time, the two retailers who had purchased the kettle from the Company also
     suspended selling the product. The Company believes that only a limited
     number of the kettles were sold to consumers.

     The Company voluntarily contacted the U.S. Food and Drug Administration
     ("FDA") and shared its information and test results concerning the product
     with the agency. The Company issued a recall of the product. The
     manufacturer has agreed to compensate the Company for its legal costs and
     out of pocket expenses in connection with the recall and to supply
     replacement products.

     In connection with the tea kettle matter, the Company reviewed other
     products received from the same manufacturer and subsequently notified the
     FDA that some manufacturing runs of another coffee maker product might have
     a lead content above FDA allowed standards. As a result, the FDA requested
     the Company to recall the product. The Company has done so, the retailer to
     whom the product was sold has cooperated in returning for credit its unsold
     units of the product. The manufacturer has agreed to compensate the Company
     for the costs that it may incur.


                                       14

<PAGE>

     JAY KORDICH V. SALTON, INC.

     On October 19, 2005, a lawsuit named Jay Kordich v. Salton, Inc. was filed
     in the United States District Court for the Southern District of
     California. The plaintiff in this action is seeking a judicial
     determination that a covenant not to compete in an agreement between him
     and Salton is invalid and unenforceable against him plus attorneys' fees
     and costs. Salton believes that the lawsuit is without merit.

     The outcome of the foregoing legal matters cannot be predicted with
     certainty, however Salton does not believe that these actions will have a
     material adverse affect on its business, financial condition or results of
     operations. Therefore, no amounts have been accrued for such claims.

     ENVIRONMENTAL

     The Company has accrued approximately $0.2 million for the anticipated
     costs of environmental remediation at four of its current and previously
     owned sites. Although such costs could exceed that amount, Salton believes
     any such excess will not have a material adverse effect on the financial
     condition or annual results of operations of the Company.

     OTHER

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

13.  RESTRUCTURING COSTS

     As a result of the U.S. restructuring plan, the Company incurred $0.1
     million in restructuring costs during the first quarter of fiscal 2006
     related to warehouse rationalization. Restructuring costs of $0.7 million
     in the first quarter of 2005 consist primarily of consulting, severance and
     legal costs.

14.  SUPPLEMENTAL CONSOLIDATING FINANCIAL INFORMATION

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


                                       15

<PAGE>

CONSOLIDATING BALANCE SHEET AS OF OCTOBER 1, 2005

<TABLE>
<CAPTION>
                                                     GUARANTOR                               OTHER     CONSOLIDATED  CONSOLIDATED
                                          PARENT   SUBSIDIARIES  ELIMINATIONS    TOTAL   SUBSIDIARIES  ELIMINATIONS     TOTALS
                                         --------  ------------  ------------  --------  ------------  ------------  ------------
(IN THOUSANDS)
<S>                                      <C>       <C>           <C>           <C>       <C>           <C>           <C>
                ASSETS
Current Assets:
   Cash                                  $     --    $    132     $      --    $    132    $ 10,178         $--        $ 10,310
   Compensating balances on deposits           --          --            --          --      38,779          --          38,779
   Restricted cash                             --          --            --          --      81,664          --          81,664
   Accounts receivable, net of
      allowances                              185      97,844            --      98,029      48,184          --         146,213
   Inventories                              3,177     125,514       (19,477)    109,214      79,105          --         188,319
   Prepaid expenses and other current
      assets                                1,674       4,980            --       6,654       8,770          --          15,424
   Intercompany                            79,074     (60,516)       (1,009)     17,549     (17,549)         --              --
   Deferred income taxes                   (3,942)      5,344            --       1,402       5,000                       6,402
                                         --------    --------     ---------    --------    --------         ---        --------
      Total Current Assets                 80,168     173,298       (20,486)    232,980     254,131          --         487,111
Property, Plant and Equipment, net          6,270       9,477            --      15,747      31,540          --          47,287
Investments in Subsidiaries               436,561      53,723      (490,284)         --          --          --              --
Tradenames                                133,242      10,312            --     143,554      36,387          --         179,941
Non-current deferred tax asset                 --          --        20,972      20,972       6,267          --          27,239
Other Assets                                8,161         787            --       8,948       2,574                      11,522
                                         --------    --------     ---------    --------    --------         ---        --------
Total Assets                             $664,402    $247,597     $(489,798)   $422,201    $330,899         $--        $753,100
                                         ========    ========     =========    ========    ========         ===        ========

 LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Revolving line of credit and other
      current debt including accrued
      interest of $9,713                 $  9,713    $ 52,553     $      --    $ 62,266    $ 25,219         $--        $ 87,485
   Senior subordinated notes due 2005 -
      current                              45,990          --            --      45,990          --          --          45,990
   Accounts payable                         4,552       6,839          (837)     10,554     102,521          --         113,075
   Accrued expenses                         6,237       7,165            --      13,402      15,659          --          29,061
   Accrued interest                         4,965       2,612            --       7,577          --                       7,577
   Income taxes payable                     4,149          --            --       4,149         229                       4,378
                                         --------    --------     ---------    --------    --------         ---        --------
      Total current liabilities            75,606      69,169          (837)    143,938     143,628          --         287,566
Non-current Deferred Income Taxes         (18,339)     (2,633)       20,972          --       3,040          --           3,040
Senior subordinated notes due 2008,
   including an adjustment of $2,578 to
   the carrying value related to
   interest rate swap agreements           62,206          --            --      62,206          --          --          62,206
Second Lien Notes, including accrued
   interest of $18,756                    121,933          --            --     121,933          --                     121,933
Series C Preferred Stock                    8,087          --            --       8,087          --                       8,087
Long term debt - revolving credit
   agreement                                   --     100,000            --     100,000          --                     100,000
Other notes payable                            --          50            --          50          --          --              50
Other Long Term Liability                   1,796       3,546            --       5,342      14,792                      20,134
                                         --------    --------     ---------    --------    --------         ---        --------
   Total liabilities                      251,289     170,132        20,135     441,556     161,460          --         603,016
Convertible Preferred Stock                40,000          --            --      40,000          --          --          40,000
Stockholders' Equity                      373,113      77,465      (509,933)    (59,355)    169,439          --         110,084
                                         --------    --------     ---------    --------    --------         ---        --------
Total Liabilities and Stockholders'
   Equity                                $664,402    $247,597     $(489,798)   $422,201    $330,899         $--        $753,100
                                         ========    ========     =========    ========    ========         ===        ========
</TABLE>


                                       16

<PAGE>

CONSOLIDATING BALANCE SHEET AS OF JULY 2, 2005

<TABLE>
<CAPTION>
                                                     GUARANTOR                               OTHER     CONSOLIDATED  CONSOLIDATED
                                          PARENT   SUBSIDIARIES  ELIMINATIONS    TOTAL   SUBSIDIARIES  ELIMINATIONS     TOTALS
                                         --------  ------------  ------------  --------  ------------  ------------  ------------
(IN THOUSANDS)
<S>                                      <C>       <C>           <C>           <C>       <C>           <C>           <C>
                 ASSETS
Current Assets:
   Cash                                  $     --    $    127     $      --    $    127    $ 14,730         $--        $ 14,857
      Compensating balances on deposit         --          --            --          --      34,355                      34,355
      Restricted cash                                                                                                        --
   Accounts receivable, net of
      allowances                              393      87,339            --      87,732      52,447          --         140,179
   Inventories                              2,761     141,573       (22,873)    121,461      73,604          --         195,065
   Assets held for sale                        --         998            --         998          --                         998
   Prepaid expenses and other current
      assets                                4,432       2,699            --       7,131       8,917          --          16,048
   Intercompany                            98,194     (62,146)         (240)     35,808     (35,808)         --              --
   Deferred income taxes                   (3,942)      5,344            --       1,402       4,122                       5,524
   Current assets of discontinued
      operations                               --          --            --          --     101,927                     101,927
                                         --------    --------     ---------    --------    --------         ---        --------
      Total current assets                101,838     175,934       (23,113)    254,659     254,294          --         508,953
Property, Plant and Equipment,
   Net of Accumulated Depreciation          7,075      10,538            --      17,613      32,614          --          50,227
Investments in Subsidiaries               362,149      53,699      (415,848)         --          --          --              --
Tradenames                                133,317      10,313            --     143,630      36,411          --         180,041
Non-current deferred tax asset                 --          --        45,618      45,618       3,657                      49,275
   Other Assets, net                        8,223         834            --       9,057       2,498          --          11,555
Non-current assets of discontinued
   operations                                  --          --            --          --       7,737                       7,737
                                         --------    --------     ---------    --------    --------         ---        --------
Total Assets                             $612,602    $251,318     $(393,343)   $470,577    $337,211         $--        $807,788
                                         ========    ========     =========    ========    ========         ===        ========

 LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Revolving line of credit and other
      current debt                       $     --    $ 47,748     $      --    $ 47,748    $ 22,982         $--        $ 70,730
   Senior subordinated notes - current     45,990          --            --      45,990          --                      45,990
   Accounts payable                         2,934       5,349           (68)      8,215      78,039          --          86,254
   Accrued expenses                         5,974       6,812            --      12,786      22,016          --          34,802
   Accrued interest                        11,535       2,054            --      13,589          --                      13,589
   Income taxes payable                     3,937          --            --       3,937         438          --           4,375
   Current liabilities of discontinued
      operations                               --          --            --          --      47,331                      47,331
                                         --------    --------     ---------    --------    --------         ---        --------
      Total current liabilities            70,370      61,963           (68)    132,265     170,806          --         303,071
Non-current Deferred tax liability -
   Domestic                               (42,985)     (2,633)       45,618          --          --          --              --
Non-current Deferred tax liability -
   Foreign                                     --          --            --          --       3,334                       3,334
Senior subordinated notes due 2005         79,010          --            --      79,010          --          --          79,010
Senior subordinated notes due 2008,
   including an adjustment of $7,082 to
   the carrying value related to
   interest rate swap agreements          156,387          --            --     156,387          --          --         156,387
Series C preferred stock
Term loan and other notes payable              --     100,050            --     100,050          --          --         100,050
Other long term liabilities                 1,995       3,588            --       5,583      14,700          --          20,283
Non-curent liabilities of discontinued
   opeartions                                  --          --            --          --       1,462                       1,462
                                         --------    --------     ---------    --------    --------         ---        --------
      Total liabilities                   264,777     162,968        45,550     473,295     190,302          --         663,597
Minority Interest in discontinued
   operations                                  --          --            --          --      24,263          --          24,263
Convertible Preferred Stock                40,000          --            --      40,000          --          --          40,000
Commitmetns and contingecies
   Stockholders' Equity                   307,825      88,350      (438,893)    (42,718)    122,646          --          79,928
                                         --------    --------     ---------    --------    --------         ---        --------
Total Liabilities and Stockholders'
   Equity                                $612,602    $251,318     $(393,343)   $470,577    $337,211         $--        $807,788
                                         ========    ========     =========    ========    ========         ===        ========
</TABLE>


                                       17

<PAGE>

CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED OCTOBER 1,
2005

<TABLE>
<CAPTION>
                                                  GUARANTOR                               OTHER     CONSOLIDATED  CONSOLIDATED
                                       PARENT   SUBSIDIARIES  ELIMINATIONS    TOTAL   SUBSIDIARIES  ELIMINATIONS     TOTALS
                                      --------  ------------  ------------  --------  ------------  ------------  ------------
(IN THOUSANDS)
<S>                                   <C>       <C>           <C>           <C>       <C>           <C>           <C>
Net Sales                             $ 31,049    $121,565       $(66,045)   $ 86,569    $120,720      $(58,873)     $148,416
Cost of Goods Sold                      25,454     110,391        (69,441)     66,404      99,541       (57,574)      108,371
Distribution Expenses                       --       6,225             --       6,225       4,323            --        10,548
                                      --------    --------       --------    --------    --------      --------      --------
   Gross Profit                          5,595       4,949          3,396      13,940      16,856        (1,299)       29,497
Selling, General and Administrative
   expenses                             10,448      11,831             --      22,279      19,438        (1,299)       40,418
Restructuring Costs                         26          91             --         117          --            --           117
                                      --------    --------       --------    --------    --------      --------      --------
   Operating(Loss) Income               (4,879)     (6,973)         3,396      (8,456)     (2,582)           --       (11,038)
Interest Expense, Net                    5,146       3,936             --       9,082       1,967            --        11,049
Gain-Early settlement of debt          (21,655)         --             --     (21,655)         --                     (21,655)
Equity in Earnings of Subsidiaries     (39,308)        (24)        39,332          --          --            --            --
                                      --------    --------       --------    --------    --------      --------      --------
  (Loss) Income from Continuing
      Operations Before Income
      Taxes                             50,938     (10,885)       (35,936)      4,117      (4,549)           --          (432)
Income Taxes                             3,323          --             --       3,323      (3,868)           --          (545)
                                      --------    --------       --------    --------    --------      --------      --------
   Net (Loss) Income from Continuing
      Operations                        47,615     (10,885)       (35,936)        794        (681)           --           113
Income (Loss) from Discontinued
   Operations, Net of Tax                   --          --             --                   1,735            --         1,735
Gain on Sale of Discontinued
   Operations, Net of Tax              (21,323)         --             --     (21,323)     49,139            --        27,816
                                      --------    --------       --------    --------    --------      --------      --------
Net Income (Loss)                     $ 26,292    $(10,885)      $(35,936)   $(20,529)   $ 50,193      $     --      $ 29,664
                                      ========    ========       ========    ========    ========      ========      ========
</TABLE>

CONSOLIDATING STATEMENT OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED OCTOBER 2,
2004

<TABLE>
<CAPTION>
                                                 GUARANTOR                               OTHER      CONSOLIDATED  CONSOLIDATED
                                       PARENT   SUBSIDIARIES  ELIMINATIONS    TOTAL   SUBSIDIARIES  ELIMINATIONS     TOTALS
                                      --------  ------------  ------------  --------  ------------  ------------  ------------
(IN THOUSANDS)
<S>                                   <C>       <C>           <C>           <C>       <C>           <C>           <C>
Net Sales                             $  48,080   $ 149,558      $(82,150)   $115,488    $167,362      $(78,166)     $204,684
Cost of Goods Sold                       39,341     124,289       (83,934)     79,696     132,172       (73,882)      137,986
Distribution Expenses                                 8,654            --       8,654       4,281                      12,935
                                      ---------   ---------      --------    --------    --------      --------      --------
   Gross Profit                           8,739      16,615         1,784      27,138      30,909        (4,284)       53,763
Selling, General and Administrative
  expenses                               14,342      10,285            --      24,627      26,511        (4,284)       46,854
Restructuring Costs                         455         217            --         672          --           672
                                      ---------   ---------      --------    --------    --------      --------      --------
   Operating (Loss) Income               (6,058)      6,113         1,784       1,839       4,398            --         6,237
Interest Expense, Net                     7,307       3,479            --      10,786       2,093            --        12,879
(Income) Loss from Subsidiary            (5,043)         (8)        5,051          --          --            --            --
                                      ---------   ---------      --------    --------    --------      --------      --------
  (Loss) Income from Continuing
    Operations
     Before Income Taxes                 (8,322)      2,642        (3,267)     (8,947)      2,305            --        (6,642)
Income Taxes                             (1,969)         --            --      (1,969)       (228)           --        (2,197)
                                      ---------   ---------      --------    --------    --------      --------      --------
   Net (Loss) Income from Continuing
      Operations                         (6,353)      2,642        (3,267)     (6,978)      2,533            --        (4,445)
Income from Discontinued
   Operations, Net of Tax                    --          --            --          --       1,258                       1,258
                                      ---------   ---------      --------    --------    --------      --------      --------
   Net Income (Loss)                  $  (6,353)  $   2,642      $ (3,267)   $ (6,978)   $  3,791      $     --      $ (3,187)
                                      =========   =========      ========    ========    ========      ========      ========
</TABLE>


                                       18

<PAGE>
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE THIRTEEN WEEKS ENDED OCTOBER 1,
2005 (IN THOUSANDS)

<Table>
<Caption>
                                                                        GUARANTOR
                                                           PARENT      SUBSIDIARIES   ELIMINATIONS       TOTAL
                                                        ------------   ------------   ------------   ------------
<S>                                                     <C>            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                    $     26,292   $    (10,885)  $    (35,936)  $    (20,529)
   Adjustments to reconcile net
     income (loss) to net cash
     from operating activities:
      Imputed interest on notes payable
           and other non-cash items                             (359)             5             --           (354)
      Deferred income tax provision                            3,322             --             --          3,322
      Stock based compensation expense                           271             --             --            271
      Depreciation and amortization                            1,966            682             --          2,648
      Bad debt (recovery) provision                               --             --             --             --
     Gain on sale of discontinued operations                  21,323             --             --         21,323
     (Gain) Loss on disposal of property
       and equipment                                              --           (746)            --           (746)
      Inventory valuation adjustment                              --          3,436             --          3,436
      Impairment loss on intangible asset                         --             --                            --
       Foreign currency gains                                     --           (315)            --           (315)
       Gain-early settlement of debt                         (21,655)            --             --        (21,655)
       Equity in net income of unconsolidated
         affiliate/consolidated subsidiaries                 (39,307)           (24)        39,331             --
      Minority interest                                           --             --             --             --
      Changes in assets and liabilities:
        Accounts receivable                                      208        (10,190)            --         (9,982)
        Inventories                                             (416)           (74)        (3,395)        (3,885)
        Prepaid expenses and other current assets                509         (2,535)            --         (2,026)
        Other non-current assets                                  --            (17)            --            (17)
        Accounts payable                                         850          1,488             --          2,338
        Income taxes payable                                     213             --             --            213
        Accrued expenses                                      16,201           (802)            --         15,399
                                                        ------------   ------------   ------------   ------------
            NET CASH FROM OPERATING ACTIVITIES                 9,418        (19,977)            --        (10,559)
                                                        ------------   ------------   ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
         Capital expenditures                                   (192)           (45)            --           (237)
         Proceeds from sale of assets and investments             --         15,222             --         15,222
         Proceeds from sale of discontinued operations            --             --             --             --
         Acquisition of business, net of cash acquired            --             --             --             --
         Increase in restricted cash                              --             --             --             --
         Increase in compensating balances on deposit             --             --             --             --
                                                        ------------   ------------   ------------   ------------
           NET CASH FROM INVESTING ACTIVITIES                   (192)        15,177             --         14,985
                                                        ------------   ------------   ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Net proceeds from revolving line of credit
           and other short term debt                              --          4,861             --          4,861
       Repayment of long-term debt                                --            (56)            --            (56)
       Costs associated with refinancing                      (9,401)            --             --         (9,401)
        Additional payment for trademarks                                                       --             --
       Common stock issued                                       175             --             --            175
                                                        ------------   ------------   ------------   ------------
        NET CASH FROM FINANCING ACTIVITIES                    (9,226)         4,805             --         (4,421)
                                                        ------------   ------------   ------------   ------------
Effect of Exchange Rate Changes on Cash                           --             --             --             --
                                                        ------------   ------------   ------------   ------------
Decrease in Cash                                                  --              5             --              5
Cash of discontinued operations                                   --             --             --
Cash, Beginning of Period                                         --            127             --            127
                                                        ------------   ------------   ------------   ------------
Cash, End of Period                                     $         --   $        132   $         --   $        132
                                                        ============   ============   ============   ============


<Caption>
                                                           OTHER       CONSOLIDATED   CONSOLIDATED
                                                        SUBSIDIARIES   ELIMINATIONS      TOTALS
                                                        ------------   ------------   ------------
<S>                                                     <C>            <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                    $     50,193   $         --         29,664
   Adjustments to reconcile net
     income (loss) to net cash
     from operating activities:
      Imputed interest on notes payable
           and other non-cash items                               22             --           (332)
      Deferred income tax provision                           (3,797)            --           (475)
      Stock based compensation expense                            --             --            271
      Depreciation and amortization                            2,692                         5,340
      Bad debt (recovery) provision                               14             --             14
     Gain on sale of discontinued operations                 (49,139)                      (27,816)
     (Gain) Loss on disposal of property
       and equipment                                              17             --           (729)
      Inventory valuation adjustment                            (144)                        3,292
      Impairment loss on intangible asset                         --             --             --
       Foreign currency gains                                     --             --           (315)
       Gain-early settlement of debt                              --             --        (21,655)
       Equity in net income of unconsolidated
         affiliate/consolidated subsidiaries                      --             --             --
      Minority interest                                        1,381             --          1,381
      Changes in assets and liabilities:
        Accounts receivable                                  (12,890)            --        (22,872)
        Inventories                                          (26,346)                      (30,231)
        Prepaid expenses and other current assets               (376)            --         (2,402)
        Other non-current assets                               1,042             --          1,025
        Accounts payable                                      33,874             --         36,212
        Income taxes payable                                   1,441             --          1,654
        Accrued expenses                                     (20,332)            --         (4,933)
                                                        ------------   ------------   ------------
            NET CASH FROM OPERATING ACTIVITIES               (22,348)            --        (32,907)
                                                        ------------   ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
         Capital expenditures                                 (1,391)            --         (1,628)
         Proceeds from sale of assets and investments             23             --         15,245
         Proceeds from sale of discontinued operations        80,936             --         80,936
         Acquisition of business, net of cash acquired        (4,525)                       (4,525)
         Increase in restricted cash                         (81,664)            --        (81,664)
         Increase in compensating balances on deposit         (4,424)            --         (4,424)
                                                        ------------   ------------   ------------
           NET CASH FROM INVESTING ACTIVITIES                (11,045)            --          3,940
                                                        ------------   ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Net proceeds from revolving line of credit
           and other short term debt                           2,264             --          7,125
       Repayment of long-term debt                              (140)            --           (196)
       Costs associated with refinancing                          --             --         (9,401)
        Additional payment for trademarks                         --                            --
       Common stock issued                                        --             --            175
                                                        ------------   ------------   ------------
        NET CASH FROM FINANCING ACTIVITIES                     2,124             --         (2,297)
                                                        ------------   ------------   ------------
Effect of Exchange Rate Changes on Cash                        1,781             --          1,781
                                                        ------------   ------------   ------------
Decrease in Cash                                             (29,488)            --        (29,483)
Cash of discontinued operations                              (10,998)                      (10,998)
Cash, Beginning of Period                                     50,664             --         50,791
                                                        ------------   ------------   ------------
Cash, End of Period                                     $     10,178   $         --   $     10,310
                                                        ============   ============   ============
</Table>


                                       19

<PAGE>
CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE THIRTEEN WEEKS ENDED OCTOBER 2,
2004 (IN THOUSANDS)

<Table>
<Caption>
                                                                             GUARANTOR
                                                               PARENT      SUBSIDIARIES   ELIMINATIONS       TOTAL
                                                            ------------   ------------   ------------   ------------
<S>                                                         <C>            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net (loss) income                                        $     (6,353)  $      2,642   $     (3,267)  $     (6,978)
   Adjustments to reconcile net income (loss) to net cash
   from operating activities:
      Imputed interest on notes payable and non-cash items          (564)            --             --           (564)
      Deferred income tax provision                               (1,968)            --             --         (1,968)
      Depreciation and amortization                                2,461            834             --          3,295
      Bad debt (recovery) provision                                   --         (1,694)            --         (1,694)
      (Gain) Loss on disposal of property and equipment               --             54             --             54
      Inventory valuation adjustment                                  --         (2,252)            --         (2,252)
      Equity in net income of unconsolidated affiliate/
        consolidated subsidiaries                                 (5,043)            (8)         5,051             --
      Foreign currency gains and losses                               --           (478)            --           (478)
      Minority interest                                               --             --             --             --
      Changes in assets and liabilities:
        Accounts receivable                                           (3)       (23,654)            --        (23,657)
        Inventories                                              (11,205)         1,252         (1,784)       (11,737)
        Prepaid expenses and other current assets                  1,790            (81)            --          1,709
        Other non-current assets                                      --           (177)            --           (177)
        Accounts payable                                            (934)         3,468             --          2,534
        Income taxes payable                                          54              1             --             55
        Accrued expenses                                          22,123        (14,959)            --          7,164
                                                            ------------   ------------   ------------   ------------
            NET CASH FROM OPERATING ACTIVITIES                       358        (35,052)            --        (34,694)
                                                            ------------   ------------   ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
        Capital expenditures                                         (64)          (255)            --           (319)
        Proceeds from sale of assets and investments                  --             --             --             --
        Increase in compensating balances on deposit                  --             --             --             --
                                                            ------------   ------------   ------------   ------------
           NET CASH FROM INVESTING ACTIVITIES                        (64)          (255)            --           (319)
                                                            ------------   ------------   ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Net proceeds from revolving line of credit
           and other short term debt                                  --         35,119             --         35,119
        Repayment of long-term debt                                   --           (178)            --           (178)
        Additional payment for tradenames                           (126)            --             --           (126)
        Common stock issued                                           18             --             --             18
                                                            ------------   ------------   ------------   ------------
        NET CASH FROM FINANCING ACTIVITIES                          (108)        34,941             --         34,833
                                                            ------------   ------------   ------------   ------------
Effect of Exchange Rate Changes on Cash                               --             --             --             --
Decrease in Cash                                                     186           (366)            --           (180)
Cash of Discontinued Operations                                       --             --             --             --
Cash, Beginning of Period                                              1            903             --            904
                                                            ------------   ------------   ------------   ------------
Cash, End of Period                                         $        187   $        538   $         --   $        725
                                                            ============   ============   ============   ============




<Caption>
                                                                OTHER       CONSOLIDATED  CONSOLIDATED
                                                             SUBSIDIARIES   ELIMINATIONS     TOTALS
                                                             ------------   ------------  ------------
<S>                                                          <C>            <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net (loss) income                                         $      3,791   $         --  $     (3,187)
   Adjustments to reconcile net income (loss) to net cash
   from operating activities:
      Imputed interest on notes payable and non-cash items            106             --          (458)
      Deferred income tax provision                                   184             --        (1,784)
      Depreciation and amortization                                 2,673             --         5,968
      Bad debt (recovery) provision                                    60             --        (1,634)
      (Gain) Loss on disposal of property and equipment                (2)            --            52
      Inventory valuation adjustment                                   --             --        (2,252)
      Equity in net income of unconsolidated affiliate/
        consolidated subsidiaries                                      --             --            --
      Foreign currency gains and losses                                --             --          (478)
      Minority interest                                             1,056             --         1,056
      Changes in assets and liabilities:
        Accounts receivable                                       (45,796)            --       (69,453)
        Inventories                                               (34,920)            --       (46,657)
        Prepaid expenses and other current assets                  (2,198)            --          (489)
        Other non-current assets                                      (61)            --          (238)
        Accounts payable                                           22,265             --        24,799
        Income taxes payable                                        1,238             --         1,293
        Accrued expenses                                           13,997             --        21,161
                                                             ------------   ------------  ------------
            NET CASH FROM OPERATING ACTIVITIES                    (37,607)            --       (72,301)
                                                             ------------   ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
        Capital expenditures                                       (3,783)            --        (4,102)
        Proceeds from sale of assets and investments                    9             --             9
        Increase in compensating balances on deposit                 (451)            --          (451)
                                                             ------------   ------------  ------------
           NET CASH FROM INVESTING ACTIVITIES                      (4,225)            --        (4,544)
                                                             ------------   ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
       Net proceeds from revolving line of credit
           and other short term debt                               22,764             --        57,883
        Repayment of long-term debt                                   (42)            --          (220)
        Additional payment for tradenames                              --             --          (126)
        Common stock issued                                            --             --            18
                                                             ------------   ------------  ------------
        NET CASH FROM FINANCING ACTIVITIES                         22,722             --        57,555
                                                             ------------   ------------  ------------
Effect of Exchange Rate Changes on Cash                            (1,021)            --        (1,021)
Decrease in Cash                                                  (20,131)            --       (20,311)
Cash of Discontinued Operations                                        --             --            --
Cash, Beginning of Period                                          45,943             --        46,847
                                                             ------------   ------------  ------------
Cash, End of Period                                          $     25,811   $         --  $     26,536
                                                             ============   ============  ============
</Table>
                                       20

<PAGE>

15.  SUBSEQUENT EVENTS

     PREPAYMENTS AND BORROWINGS PURSUANT TO FOURTH AMENDMENT - On October 5,
     2005, in accordance with the terms of the Fourth Amendment, the Company: 1)
     applied $80.8 million of proceeds from the sale of AMAP against the
     original term loan under the senior secured credit facility; and 2)
     borrowed $80.8 million under additional term loans under the senior secured
     credit facility. As required by the Fourth Amendment, the Company: 1) used
     the first $24.9 million of borrowings under the additional term loan to
     repay outstanding revolving line of credit borrowings under the senior
     secured credit facility; and 2) placed $50.0 million of such borrowings
     into an interest-bearing cash collateral account which, subject to certain
     conditions, may be used to purchase, prepay or redeem the outstanding 2005
     Notes.

     FIFTH AMENDMENT TO SENIOR SECURED CREDIT FACILITY - On October 7, 2005, the
     Company entered into a fifth amendment to the senior secured credit
     facility (the "Fifth Amendment") dated as of October 7, 2005. The Fifth
     Amendment increases the letter of credit subfacility from $10.0 million to
     $15.0 million.

     SIXTH AMENDMENT TO AND WAIVER UNDER, SENIOR SECURED CREDIT FACILITY - On
     November 9, 2005, the Company entered into a sixth amendment to, and
     waiver under, the senior secured credit facility (the "Sixth Amendment")
     dated as of November 9, 2005.

     The Sixth Amendment, among other things: 1) waives the Company's compliance
     with the financial covenants for the twelve-month periods ending October 1,
     2005 and November 5, 2005; and 2) permits the Company to borrow up to $5.0
     million beyond availability for inventory purchases for the build-up during
     the 2005 Holiday season.

     REPURCHASES OF 2005 NOTES - Subsequent to the quarter end, the Company
     repurchased $9.2 million in aggregate principal amount of the outstanding
     2005 Notes for $9.1 million. The $50.0 million cash collateral account
     established pursuant to the Fourth Amendment for use by the Company solely
     for purchases, prepayments or redemptions of outstanding 2005 Notes has
     been reduced by this $9.2 million plus the $4.0 million of 2005 Notes
     acquired by the Company in the previously disclosed private exchange
     transaction for Second Lien Notes on September 28, 2005.


                                       21

<PAGE>

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

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

This quarterly report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including without limitation the statements
under "Risk Factors," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The words "believes," "anticipates,"
"plans," "expects," "intends," "estimates" and similar expressions are intended
to identify forward-looking statements. These forward-looking statements involve
known and unknown risks, uncertainties and other factors, which may cause our
actual results, performance or achievements, 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:

-    our ability to repay the outstanding 103/4% senior subordinated notes due
     December 15, 2005;

-    our ability to realize the benefits we expect from our U.S. restructuring
     plan;

-    our substantial indebtedness and our ability to comply with restrictive
     covenants in our debt instruments;

-    our ability to access the capital markets on attractive terms or at all;

-    our relationship and contractual arrangements with key customers,
     suppliers, strategic partners and licensors;

-    unfavorable outcomes from pending legal proceedings;

-    cancellation or reduction of orders;

-    the timely development, introduction and customer acceptance of our
     products;

-    dependence on foreign suppliers and supply and marketing constraints;

-    competitive products and pricing;

-    economic conditions and the retail environment;

-    international business activities;

-    the cost and availability of raw materials and purchased components for our
     products;

-    the risks related to intellectual property rights; and

-    the risks relating to regulatory matters and other risks and uncertainties
     detailed from time to time in our Securities and Exchange Commission
     Filings


                                       22

<PAGE>

All forward looking statements included in this quarterly report on Form 10-Q
are based on information available to us on the date of this quarterly report.
We undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
All subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained throughout this quarterly report on Form 10-Q.

INTRODUCTION

Salton designs, markets and distributes small home appliances and electronics
for the home, home decor and personal care products under recognized brand names
in the International Housewares Industry. Our product mix consists of kitchen
and home appliances, electronics, time products, lighting products, picture
frames and personal care and wellness products. In recent years, we have
expanded our international presence and strengthened our product offerings
through strategic acquisitions and alliances as well as internal international
growth.

CONSOLIDATED RESULTS OF OPERATIONS

The unaudited information included in this Form 10-Q should be read in
conjunction with the Consolidated Financial Statements contained in our 2005
Annual Report on Form 10-K. Interim results are not necessarily indicative of
results for a full year. We report discontinued operations in accordance with
the guidance from SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." Accordingly, we have reported the sale of Amalgamated
Appliance Holdings ("AMAP") as discontinued operations for the periods
presented.

SIGNIFICANT EVENTS AND RECENT DEVELOPMENTS DURING THE QUARTER

PRIVATE DEBT EXCHANGE

On August 26, 2005, we completed a private debt exchange offer for the
outstanding 2005 Notes and the outstanding 2008 Notes. We accepted for exchange
an aggregate of approximately $75.0 million in principal amount of 2005 Notes
(approximately 60.0% of the then outstanding 2005 Notes) and approximately $90.1
million in principal amount of 2008 Notes (approximately 60.1% of the
outstanding 2008 Notes) that were validly tendered in the debt exchange offer.

Upon closing of the debt exchange offer, we issued an aggregate of approximately
$99.1 million in principal amount of senior second lien notes (the "Second Lien
Notes"), 2,039,469 shares of Salton common stock and 135,088 shares of Series C
preferred stock with a total liquidation preference of $13.5 million. The Second
Lien Notes mature on March 31, 2008 and bear interest at LIBOR plus 7.0%,
payable in cash on January 15th and July 15th of each year, with the first
payment due on January 15, 2006. The Series C preferred stock is generally
non-dividend bearing and is mandatorily redeemable by us in cash at the
liquidation amount on August 26, 2010. We also granted certain registration
rights for approximately 1,837,455 shares of Salton common stock and 121,707
shares of Series C preferred stock received by certain former holders of
Subordinated Notes.

In connection with the debt exchange offer, we obtained the consent of the
holders of a majority of the outstanding 2005 Notes and a majority of the
outstanding 2008 Notes to amend the indentures governing such Subordinated Notes
to eliminate substantially all of the restrictive covenants and certain events
of default contained in such indentures. We have entered into supplements to the
indentures governing the 2005 Notes and the 2008 Notes to reflect such
amendments.


                                       23

<PAGE>

As a consequence of the debt exchange offer:

-    We reduced our total interest-bearing debt by approximately $66.0 million;

-    We reduced the aggregate principal amount of 2005 Notes outstanding
     immediately after the closing of the debt exchange offer to approximately
     $50 million;

-    We increased the aggregate number of outstanding shares of common stock by
     2,039,469 or approximately 18% of the 11,376,292 shares of common stock
     outstanding immediately prior to the debt exchange offer;

-    We issued 135,088 shares of Series C preferred stock with a total
     liquidation preference of $13.5 million;

-    Mr. Lester C. Lee, a new independent director designated by certain former
     holders of the Subordinated Notes, was elected to serve on our board of
     directors; and

-    In the first quarter of fiscal 2006 we recorded a pre-tax gain on
     cancellation of indebtedness of approximately $21.7 million.

SALE OF AMAP AND TABLETOP

On September 29, 2005, we completed the sale of our 52.6% ownership interest in
AMAP, a leading distributor and marketer of small appliances and other products
in South Africa, to a group of investors led by Interactive Capital
(Proprietary) Limited. In the first quarter of fiscal 2006, we received
proceeds, net of expenses, of $81.0 million in connection with the transaction.
In the first quarter of fiscal 2006, we recorded a gain of approximately $49.1
million before taxes. We expect to license and sell our George Foreman(R),
Russell Hobbs(R) and Carmen(R) branded products in South Africa following the
transaction.

On September 16, 2005, we completed the sale of certain tabletop assets to
Lifetime Brands, Inc. for $14.2 million, which approximates book value, and is
subject to post-closing adjustments. In connection with this transaction, we
divested our Block(R) and Sasaki(R) brands, licenses to Calvin Klein(R) and Napa
Style(TM) tabletop products and distribution of upscale crystal products under
the Atlantis(R) brand. In addition, we entered into a new license with Lifetime
Brands enabling it to market tabletop products under the Stiffel(R) brand.

PRIVATE EXCHANGE

On September 28, 2005, we completed a private exchange transaction with FMA CBO
Funding III, LTD, in which we issued $4.1 million of Second Lien Notes in
exchange for $4.0 million of 2005 Notes.

SUBSEQUENT REPURCHASES OF OUTSTANDING SUBORDINATED NOTES

During the second quarter of fiscal 2006, we purchased an aggregate of $9.2
million of our 2005 Notes for $9.1 million. Approximately $36.8 million in
aggregate principal amounts remain outstanding as of November 10, 2005.


                                       24

<PAGE>

OTHER STRATEGIC OPTIONS

As previously disclosed in an 8-K filed on August 30, 2005, we continue to
explore strategic options to satisfy our liquidity needs and improve our overall
balance sheet position. These strategic options include potential sales of
assets or businesses, the creation of new foreign debt, repurchases of
outstanding Subordinated Notes in the open market and/or through privately
negotiated transactions for cash or other securities (including Second Lien
Notes, common stock and/or Series C preferred stock) and further reductions in
expenses.

QUARTER IN REVIEW

For the first quarter of fiscal 2006 (thirteen weeks ended October 1, 2005),
Salton focused its efforts on re-building confidence among our suppliers and
customers. Cost reductions continue to create significant savings domestically.
However, sales in the quarter were adversely impacted by the uncertainty
surrounding our restructuring efforts, which created a delay in customer orders
and product shortages. Additionally, foreign sales were impacted by a weak
consumer demand in Europe as well as some product shortages.

U.S. RESTRUCTURING PLAN

As part of an effort to improve our domestic operations, we have successfully
implemented our U.S. restructuring plan in an effort to better align domestic
operating costs with current sales levels. Through our cost reduction programs
and consolidation of U.S. operations, we have reduced domestic expenses by more
than $55.0 million. As announced in the fourth quarter of fiscal 2005, we plan
to continue our cost reduction efforts through a second U.S. cost reduction
program which is expected to reduce domestic operations by an additional $25.0
million above the initial $40 million with $15.0 million to be realized in 2006
and $10.0 million to be realized in 2007.

RESULTS OF OPERATIONS

The following table sets forth our results of operations as a percentage of net
sales for the thirteen weeks ended:

<TABLE>
<CAPTION>
                                                     THIRTEEN WEEKS ENDED
                                              ---------------------------------
                                              OCTOBER 1, 2005   OCTOBER 2, 2004
                                              ---------------   ---------------
<S>                                           <C>               <C>
Net sales                                          100.0%            100.0%
Cost of goods sold                                  73.0              67.5
Distribution expenses                                7.1               6.3
                                                   -----             -----
   Gross profit                                     19.9              26.2
Selling, general and administrative expense         27.2              22.9
Restructuring costs                                  0.1               0.3
                                                   -----             -----
   Operating (loss) income                          -7.4%              3.0%
                                                   =====             =====
</TABLE>


                                       25


<PAGE>

     FIRST QUARTER 2006 COMPARED TO FIRST QUARTER 2005

     NET SALES AND GROSS PROFIT

     Salton's worldwide sales were $148.4 million in first quarter of fiscal
     2006 versus $204.7 million in the first quarter of fiscal 2005. Net sales
     decreased domestically by $47.0 million as a result of restructuring and
     the uncertainty it created among one of our large suppliers and a few
     customers. This uncertainty impacted product availability and demand for
     the first quarter. Foreign sales declined by $9.2 million. The foreign
     sales were impacted by weak consumer demand and some product shortages in
     the United Kingdom.

     Gross profit for the first quarter of fiscal 2006 declined $24.3 million
     from $53.8 million in 2005 to $29.5 million in 2006. As a percent of net
     sales, gross profit was 19.9% in the first quarter of fiscal 2006 compared
     to 26.3% in the first quarter of 2006, a decrease of 6.4%. These decreases
     are primarily a result of an inventory shortage of higher margin products
     and increased closeouts in the domestic market as well as global material
     cost increases in plastics, steel and corrugated materials. These decreases
     in gross profit were partially offset by a $2.4 million domestic decline in
     distribution expenses primarily as a result of our U.S. cost reduction
     programs. We continue to move inventory at lower margins in a continued
     effort to rationalize product lines and realign our business. The outlook
     for material costs remains uncertain. Although we have recently implemented
     price increases on certain products to compensate for higher material
     costs, the impact of the price increases is uncertain due to potential
     reactions of our competitors and the uncertainty of consumer acceptance.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Selling, general and administrative expenses decreased to $40.4 million for
     first quarter of fiscal 2006 compared to $46.9 million for first quarter of
     fiscal 2005. U.S. operations reduced selling, general and administrative
     expenses by $5.4 million primarily driven by a $5.0 million decline in
     promotional expenditures for television, royalty expense, certain other
     media and cooperative advertising, and trade show expenses as a result of
     our U.S. cost reduction plan.

     RESTRUCTURING COSTS

     As a result of our U.S. restructuring plan, we incurred $0.1 million in
     restructuring costs during the first quarter of fiscal 2006 related to
     warehouse rationalization. Restructuring costs of $0.7 million in the first
     quarter of 2005 consist primarily of consulting, severance and legal costs.

     NET INTEREST EXPENSE

     Net interest expense was $11.0 million for the first quarter of fiscal 2006
     and $12.9 million for the first quarter of fiscal 2005. Our rate of
     interest on amounts outstanding under the revolver, term loan and senior
     subordinated debt was a weighted average annual rate of 8.9% in the first
     quarter of fiscal 2006 compared to 9.6% in fiscal 2005. The average amount
     of all debt outstanding was $434.9 million for the first quarter of fiscal
     2006 compared to $465.4 million for the first quarter of fiscal 2005.

     INCOME TAXES

     The effective tax rate (benefit) for federal, state, and foreign income
     taxes was approximately (126.2)% for the first quarter of fiscal 2006
     versus approximately (35.0)% for the first quarter of fiscal 2005. The
     Company's provision for income taxes is based upon estimated annual tax
     rates for the year applied to federal, state, and foreign income. The
     Company expects its effective tax rate (benefit) for fiscal 2006 to be
     significantly higher than the fiscal 2005 annual effective rate, due to the
     reversal of a substantial deferred tax asset valuation allowance resulting
     from an increase in domestic taxable income from one-time gains.


                                       26

<PAGE>

     DISCONTINUED OPERATIONS

     On September 29, 2005, the Company completed the sale of its 52.6%
     ownership interest in Amalgamated Appliances Holdings Limited ("AMAP"), a
     leading distributor and marketer of small appliances and other products in
     South Africa, to a group of investors led by Interactive Capital
     (Proprietary) Limited. In the first quarter of fiscal 2006, the Company
     received proceeds, net of expenses, of approximately $81.0 million in
     connection with the transaction. The Company recorded a gain of $49.1
     million before taxes, $28.9 million net of tax. The Company expects to
     license and sell its George Foreman(R), Russell Hobbs(R) and Carmen(R)
     branded products in South Africa following the transaction.

     The following is a summary of financial results included within
     discontinued operations:

<TABLE>
<CAPTION>
                                                                 Thirteen Weeks Ended
                                                          ---------------------------------
                                                          October 1, 2005   October 2, 2004
                                                          ---------------   ---------------
<S>                                                       <C>               <C>
Net sales from discontinued operations                        $68,798           $69,451
                                                              -------           -------
Income from discontinued operations before income taxes       $ 5,477           $ 3,362
Income taxes                                                    2,338             1,048
Minority Interest                                               1,404             1,056
                                                              -------           -------
Income from discontinued operations, net of tax               $ 1,735           $ 1,258
                                                              =======           =======
</TABLE>

     The following sets forth the carrying amounts of the major classes of
     assets and liabilities classified as assets and liabilities of discontinued
     operations at July 2, 2005, in the accompanying balance sheet:

<TABLE>
<CAPTION>
                                                    JULY 2, 2005
                                                    ------------
<S>                                                 <C>
ASSETS
Cash                                                  $ 35,934
Accounts receivable, net                                25,910
Inventories, net                                        38,349
Prepaid expenses and other current assets                1,038
Deferred tax asset                                         696
                                                      --------
Current assets of discontinued operations             $101,927
                                                      --------
Property, plant and equipment, net                    $  4,003
Tradenames                                               1,474
Other assets, net                                        2,260
                                                      --------
Noncurrent assets of discontinued operations          $  7,737
                                                      --------
LIABILITIES
Accounts payable                                      $ 30,955
Accrued expenses                                         9,334
Income taxes payable                                     7,042
                                                      --------
Current liabilities of discontinued operations        $ 47,331
                                                      --------
Other notes payable                                   $  1,462
                                                      --------
Noncurrent liabilities of discontinued operations     $  1,462
                                                      --------
</TABLE>


                                       27

<PAGE>

     LIQUIDITY AND CAPITAL RESOURCES

     CASH FLOW FROM CONTINUING OPERATIONS

     The following discussion excludes the impact on cash flows from
     discontinued operations.

     Our primary sources of liquidity are our cash flow from continuing
     operations and borrowings under our senior secured credit facility. In the
     first quarter of fiscal 2006, Salton's continuing operations used $11.1
     million in cash flow, compared with a use of $40.7 million in first quarter
     of fiscal 2005. Our accounts receivable balances reflect lower sales as a
     result of the uncertainties surrounding the Company's restructuring
     activities. We concluded a major portion of our restructuring efforts
     during the first quarter of fiscal 2006.

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

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

     INVESTING ACTIVITIES

     In the first quarter of fiscal 2006, we had $80.9 million in proceeds from
     the sale of discontinued operations as a result of the AMAP transaction and
     $15.2 million in proceeds from the sale of assets and investments,
     primarily from the sale of our tabletop division and a warehouse
     distribution facility in the U.S.

     FINANCING ACTIVITIES

     We had net proceeds from worldwide credit facilities of $7.1 million. These
     proceeds were offset by $9.4 million of financing costs associated with our
     debt restructuring during the first quarter.

     SENIOR SECURED CREDIT FACILITY

     On June 15, 2004, we entered into amended and restated senior secured
     credit facility with Silver Point Finance, LLC which currently provides us
     with the ability to borrow up to approximately $188 million pursuant to a
     revolving line of credit, letters of credit and a $100.0 million term loan.
     Advances under the revolving line of credit are primarily based upon
     percentages of eligible accounts receivable and inventories. The facility
     has a maturity date of December 31, 2007 and is subject to a prepayment
     premium of 4.50% if the facility is repaid by June 15, 2006 and 3.50% if
     the facility is repaid thereafter.

     As of November 8, 2005, we had borrowed $144.7 million under the senior
     secured credit facility and had approximately $12.3 million available under
     this facility for future borrowings.


                                       28

<PAGE>

     Borrowings under our senior secured credit facility accrue interest, at our
     option, at either: LIBOR, plus 6.0% (or 5.0% after March 31, 2006),
     equaling 9.76% at November 4, 2005; or the Base Rate (prime rate), plus
     4.0% (or 3.0% after March 31, 2006), equaling 11.00% at November 4, 2005.
     The Company has the option to convert any base rate loan to LIBOR rate
     loan. LIBOR rate loans are to be no lower than a rate of 7.0%.

     Our senior indebtedness contains a number of significant covenants that,
     among other things, restrict our ability to dispose of assets, incur
     additional indebtedness, prepay other indebtedness, pay dividends,
     repurchase or redeem capital stock, enter into certain investments, enter
     into sale and lease-back transactions, make certain acquisitions, engage in
     mergers and consolidations, create liens, or engage in certain transactions
     with affiliates and otherwise restrict our corporate and business
     activities. In addition, under our senior secured credit facility, we are
     required to comply with a minimum EBITDA and consolidated fixed charge
     coverage ratio. We are also required to deposit all proceeds from
     collection of accounts receivable and sale of collateral with an account
     under the exclusive dominion and control of the senior lenders.

     On September 23, 2005, the Company entered into a fourth amendment to the
     senior secured credit facility (the "Fourth Amendment") dated as of
     September 22, 2005. Under the terms of the Fourth Amendment, the Company is
     required to utilize the proceeds received in connection with the sale of
     certain of its tabletop assets and the sale of the 52.6% ownership interest
     in AMAP to prepay the outstanding principal amount of the original $100.0
     million term loan included therein. As of October 1, 2005, the proceeds
     from the sale of the tabletop assets of $13.4 million had been applied
     against the term loan. As of October 1, 2005, the proceeds from the sale of
     AMAP were classified as restricted cash.

     On October 5, 2005, in accordance with the terms of the Fourth Amendment,
     the Company: 1) applied $80.8 million of proceeds from the sale of AMAP
     against the original term loan under the senior secured credit facility;
     and 2) borrowed $80.8 million under additional term loans under the senior
     secured credit facility. As required by the Fourth Amendment, the Company:
     1) used the first $24.9 million of borrowings under the additional term
     loan to repay outstanding revolving line of credit borrowings under the
     senior secured credit facility; and 2) placed $50.0 million of such
     borrowings into an interest-bearing cash collateral account which, subject
     to certain conditions, may be used to purchase, prepay or redeem the
     outstanding 2005 Notes.

     The Fourth Amendment also modified the financial covenants that require a
     minimum EBITDA and consolidated fixed charge coverage ratio, and eliminated
     the foreign leverage ratio. The Company was not in compliance with these
     covenants as of October 1, 2005 and does not anticipate that it will be in
     compliance with these covenants as of November 5, 2005. The Company
     received an amendment (see "The Sixth Amendment") and a waiver to the
     senior secured credit facility.

     As of October 1, 2005 the Company had outstanding letters of credit of $9.8
     million under the letter of credit subfacility of $10.0 million. The senior
     secured credit facility was amended ("The Fifth Amendment") on October 7,
     2005 to increase the letter of credit subfacility to $15.0 million.

     On November 9, 2005, the Company entered into a sixth amendment to, and
     waiver under, the senior secured credit facility (the "Sixth Amendment")
     dated as of November 9, 2005. The Sixth Amendment, among other things: 1)
     waives the Company's compliance with the financial covenants for the
     12-month periods ending October 1, 2005 and November 5, 2005; and 2)
     permits the Company to borrow up to $5.0 million beyond availability for
     inventory purchases for the build-up during the 2005 Holiday season.


                                       29

<PAGE>

     Events of default under our senior secured credit facility include, but are
     not limited to: (a) our failure to pay principal or interest when due; (b)
     our material breach of any representation or warranty; (c) covenant
     defaults; (d) our default with respect to any other debt with an
     outstanding principal amount in excess of $1.0 million if the effect
     thereof is to accelerate or permit the acceleration of such debt; and (e)
     events of bankruptcy.

     The senior secured credit facility is secured by all of our tangible and
     intangible assets and all of the tangible and intangible assets of our
     domestic subsidiaries and a pledge of the capital stock of our domestic
     subsidiaries and the capital stock of certain of our foreign subsidiaries.
     The senior secured credit facility is unconditionally guaranteed by each of
     our direct and indirect domestic subsidiaries.

     SECOND LIEN CREDIT AGREEMENT

     On August 26, 2005, in connection with the closing of our debt exchange
     offer, we entered into a second lien credit agreement with The Bank of New
     York, as agent, which provides for the issuance of up to $110 million
     aggregate principal amount of Second Lien Notes. We issued approximately
     $99.1 million of Second Lien Notes in connection with our debt exchange
     offer. We subsequently issued an additional $4.1 million of Second Lien
     Notes in connection with our private exchange We may add additional lenders
     under the second lien credit agreement through the issuance of additional
     Second Lien Notes as long as the aggregate principal amount of the Second
     Lien Notes does not exceed $110 million.

     The second lien credit agreement and the Second Lien Notes have a maturity
     date of March 31, 2008. The interest rate with respect to the Second Lien
     Notes is the six month LIBOR plus 7%, equaling 11.06125% for the first
     interest period after the closing of the debt exchange offer, payable in
     cash on January 15th and July 15th of each year, commencing January 15,
     2006. The default rate is LIBOR plus 10%.

     The Second Lien Notes are redeemable by us at our option, in whole or in
     part, at any time at a redemption price equal to the following percentage
     of the principal amount so redeemed, plus accrued and unpaid interest up to
     the redemption date:

     -    if the redemption occurs prior to the first anniversary of the
          consummation of the debt exchange offer, 102%;

     -    if the redemption occurs between the first anniversary and second
          anniversary of the closing of the debt exchange offer, 101%; and
          thereafter, 100%.

     The second lien credit agreement contains covenants that are substantially
     the same as the covenants contained in our senior secured credit facility.
     Under the terms of the second lien credit agreement, to the extent that the
     lenders under our senior secured credit facility amend or modify the
     covenants under such facility, the parallel covenants under the second lien
     credit agreement shall be automatically deemed amended or modified;
     provided that the lenders under our senior secured credit facility may not
     amend or modify the covenant limiting the maximum amount of our senior
     secured credit facility to the difference between (x) $287 million and (y)
     the aggregate principal amount of Second Lien Notes issued in connection
     with our debt exchange offer.


                                       30

<PAGE>

     The second lien credit agreement allows us, subject to the conditions in
     our senior secured credit facility, to purchase, prepay or redeem
     Subordinated Notes at any time after the debt exchange offer; provided
     that, with respect to 2008 Notes, (1) we must have a minimum level of
     availability under our senior secured credit facility of at least $4
     million after giving effect to any such purchases and (2) the aggregate
     amount spent by us to purchase 2008 Notes does not exceed $11 million.

     Notwithstanding the foregoing, we may spend more than $11 million in the
     aggregate to purchase 2008 Notes if we meet the foregoing conditions and we
     optionally prepay or redeem on a ratable basis a cumulative portion of the
     Second Lien Notes as follows (percentages and amounts assume that we issued
     $110 million of aggregate principal amount of Second Lien Notes in
     connection with the debt exchange offer):

<TABLE>
<CAPTION>
                                    Permitted Additional
      Cumulative Percentage         Amounts Available to
of the Second Lien Notes Redeemed    Purchase 2008 Notes
---------------------------------   --------------------
<S>                                 <C>
                 9%                      $ 2 million
                18%                      $ 5 million
                27%                      $ 9 million
                36%                      $14 million
                45%                      $20 million
                54%                      $27 million
                63%                      $35 million
                72%                      $44 million
                81%                      $54 million
                90%                      $66 million
               100%                      $78 million
</TABLE>

     Subject to the Intercreditor Agreement described below, if an event of
     default (other than an event of default resulting from certain events of
     bankruptcy, insolvency or reorganization) occurs and is continuing, the
     second lien agent and the holders of at least 66-2/3% in principal amount
     of Second Lien Notes then outstanding may declare the principal of and
     accrued but unpaid interest on all of the Second Lien Notes to be due and
     payable. If an event of default relating to certain events of bankruptcy,
     insolvency or reorganization occurs and is continuing, the principal of and
     interest on all of the Second Lien Notes shall automatically become
     immediately due and payable without notice or demand of any kind.

     The Second Lien Notes are our senior secured obligations and rank: (a)
     senior in right of payment to all of our existing and future subordinated
     debt, including the Subordinated Notes; and (b) equal in right of payment
     with all of our other existing and future senior debt, including
     indebtedness outstanding under our senior secured credit facility.

     The Second Lien Notes are secured by a second-priority lien on
     substantially all of our domestic assets and a pledge of the capital stock
     of our domestic subsidiaries and certain of our foreign subsidiaries. The
     Second Lien Notes are also unconditionally guaranteed by each of direct and
     indirect domestic subsidiaries.


                                       31

<PAGE>

     INTERCREDITOR AGREEMENT

     The agent and co-agent for our senior secured credit facility, and the
     second lien agent for our second lien credit agreement entered into an
     intercreditor agreement dated as of August 26, 2005 which provides that,
     among other things, any lien on collateral held by or on behalf of the
     second lien agent or any holder of the Second Lien Notes that secures all
     or any portion of the Second Lien Notes will in all respects be junior and
     subordinate to all liens granted to the lenders under our senior secured
     credit facility. At any time that the agent or co-agent under our senior
     secured credit facility notifies the second lien agent in writing that an
     event of default has occurred and is continuing under such facility, then
     the second lien agent and the holders of the Second Lien Notes will not
     have any right to exercise any secured creditor remedies (including without
     limitation, foreclosing or otherwise realizing upon collateral) or take
     certain other actions (including, without limitation, commencing or causing
     to be commenced or joining with any creditor in commencing any insolvency
     proceeding) until the first to occur of (a) payment in full in cash of all
     obligations under our senior secured credit facility after or concurrently
     with termination of all commitments to extend credit thereunder, (b) the
     date upon which the agent or co-agent under our senior secured credit
     facility shall have waived or acknowledged in writing the termination of
     such event of default or (c) 270 days following receipt of such notice by
     the second lien agent (a "standstill period"). Only two standstill periods
     may be commenced within any 360 day period, and no subsequent standstill
     period may be commenced within 60 days after the termination of the
     immediately preceding standstill period.

     The intercreditor agreement also substantially limits the rights of the
     second lien agent and the holders of the Second Lien Notes in an insolvency
     proceeding. The intercreditor agreement requires the net proceeds from the
     sale of collateral to be applied first to our obligations under our senior
     secured credit facility and then to our obligations under the second lien
     credit agreement.

     SENIOR SUBORDINATED NOTES

     In addition to borrowings under our senior secured credit facility, we
     issued $125.0 million of 2005 Notes and $150.0 million of 2008 Notes.

     In connection with our debt exchange offer, on August 26, 2005 we accepted
     for exchange an aggregate of approximately $75.0 million in principal
     amount of 2005 Notes (approximately 60.0% of the outstanding 2005 Notes)
     and approximately $90.1 million in principal amount of 2008 Notes
     (approximately 60.1% of the outstanding 2008 Notes) that were validly
     tendered in the debt exchange offer. Subsequent to the quarter end, the
     Company repurchased $9.2 million in aggregate principal amount of the
     outstanding 2005 Notes for $9.1 million. The $50.0 million cash collateral
     account established pursuant to the Fourth Amendment for use by the Company
     solely for purchases, prepayments or redemptions of outstanding 2005 Notes
     has been reduced by this $9.2 million plus the $4.0 million of 2005 Notes
     acquired by the Company in the previously disclosed private exchange
     transaction for Second Lien Notes on September 28, 2005.

     Interest is payable on the 2005 Notes on June 15th and December 15th of
     each year. Interest is payable on the 2008 Notes on April 15th and October
     15th of each year.


                                       32

<PAGE>

     In connection with our debt exchange offer, we obtained the consent of the
     holders of a majority of the outstanding 2005 Notes and a majority of the
     outstanding 2008 Notes to amend the indentures governing such Subordinated
     Notes to eliminate substantially all of the substantive covenants (other
     than these dealing with certain asset sales and the application of proceeds
     therefrom and changes of control) and certain events of default (other than
     these dealing with the payment of interest and principal when due)
     contained in such indentures. We have entered into supplements to the
     indentures governing the 2005 Notes and 2008 Notes to reflect such
     amendments.

     Our Subordinated Notes are general unsecured obligations and are
     subordinated to all our current and future senior debt, including all
     borrowings under our senior secured credit facility and the Second Lien
     Notes. The Subordinated Notes rank equally with all our other existing and
     future senior subordinated indebtedness.

     Our current and future domestic restricted subsidiaries jointly and
     severally guarantee our payment obligations under the Subordinated Notes on
     a senior subordinated basis. The guarantees rank junior to all senior debt
     of the guarantors (including guarantees under our senior secured credit
     facility) and equally with all other senior subordinated indebtedness of
     the guarantors.

     OTHER CREDIT FACILITIES

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

     SERIES C PREFERRED STOCK

     On August 26, 2005, we issued 135, 088 shares of our Series C preferred
     stock with a total liquidation preference of $13.5 million. Our restated
     certificate of incorporation authorizes us to issue up to 150,000 shares of
     Series C preferred stock.

     The Series C preferred stock is non-dividend bearing and ranks, as to
     distribution of assets upon our liquidation, dissolution or winding up,
     whether voluntary or involuntary, (a) prior to all shares of convertible
     preferred stock from time to time outstanding, (b) senior, in preference
     of, and prior to all other classes and series our preferred stock and (c)
     senior, in preference of, and prior to all of our now or hereafter issued
     common stock.

     Except as required by law or by certain protective provisions in our
     restated certificate of incorporation, the holders of shares of Series C
     preferred stock, by virtue of their ownership thereof, have no voting
     rights.

     In the event of our liquidation, dissolution or winding up, whether
     voluntary or involuntary, holders of the Series C preferred stock will be
     paid out of our assets available for distribution to our stockholders an
     amount in cash equal to $100 per share (the "Series C Preferred Liquidation
     Preference"), before any distribution is made to the holders of our
     convertible preferred stock, our common stock or any other of our capital
     stock ranking junior as to liquidation rights to the Series C preferred
     stock.


                                       33

<PAGE>

     In the event of a change of control (as defined in our restated certificate
     of incorporation), each holder of shares of Series C preferred stock will
     have the right to require us to redeem such shares at a redemption price
     equal to the Series C Preferred Liquidation Preference plus an amount
     equivalent to interest accrued thereon at a rate of 5% per annum compounded
     annually on each anniversary date of the issuance date for the period from
     the issuance date through the change of control. The redemption price is
     payable on a date after a change of control that is 91 days after the
     earlier of (x) the date on which specified debt (including indebtedness
     under our senior secured credit facility, the second lien credit agreement,
     the indentures under which the Subordinated Notes were issued, and
     restatements and refinancings of the foregoing) matures and (y) the date on
     which all such specified debt is repaid in full, in an amount equal to the
     Series C Preferred Liquidation Preference plus an amount equivalent to
     interest accrued thereon at a rate of 5% per annum compounded annually on
     each anniversary date of the issuance date for the period from the issuance
     date through such change of control payment date. The certificate of
     designation for the Series C preferred stock provides that, in the event of
     a change of control, we shall purchase all outstanding shares of Series C
     preferred stock with respect to which the holder has validly exercised the
     redemption right before any payment with respect to the redemption of
     convertible preferred stock upon such change of control.

     We may optionally redeem, in whole or in part, the Series C preferred stock
     at any time at a cash price per share of 100% of the then effective Series
     C Preferred Liquidation Preference per share. On the fifth anniversary of
     the issuing date, we will be required to redeem all outstanding shares of
     Series C preferred stock at a price equal to the Series C Preferred
     Liquidation Preference per share, payable in cash.

     CONVERTIBLE PREFERRED STOCK

     On July 28, 1998, we issued $40.0 million of convertible preferred stock in
     connection with a Stock Purchase Agreement dated July 15, 1998. The
     convertible preferred stock is non-dividend bearing except if we breach, in
     any material respect, any of the material obligations in the preferred
     stock agreement or our restated certificate of incorporation relating to
     the convertible preferred stock, the holders of the convertible preferred
     stock are entitled to receive quarterly cash dividends on each share from
     the date of the breach until it is cured at a rate per annum equal to 12
     -1/2% of the Liquidation Preference (defined below). The preferred shares
     are convertible into 3,529,411 shares of our common stock (reflecting an
     $11.33 per share conversion price). The holders of the convertible
     preferred stock are entitled to one vote for each share of our common stock
     that the holder would receive upon conversion of the convertible preferred
     stock. In connection with the convertible preferred stock issuance, two
     individuals representing the purchasers of the preferred stock were
     appointed to serve on our Board of Directors.

     In the event of a change in control, each preferred shareholder has the
     right to require to redeem the shares at a redemption price equal to the
     Liquidation Preference (defined below) plus interest accrued thereon at a
     rate of 7% per annum compounded annually each anniversary date from July
     28, 1998 through the earlier of the date of such redemption or July 28,
     2003.

     In the event of a liquidation, dissolution or winding up, whether voluntary
     or involuntary, holders of the convertible preferred stock are entitled to
     be paid out of the assets of the Company available for distribution to its
     stockholders an amount in cash equal to $1,000 per share, plus the amount
     of any accrued and unpaid dividends thereon (the "Liquidation Preference"),
     before any distribution is made to the holders of any our common stock or
     any other of its capital stock ranking junior as to liquidation rights to
     the convertible preferred stock.


                                       34

<PAGE>

     We may optionally convert in whole or in part, the convertible preferred
     stock at any time on and after July 15, 2003 at a cash price per share of
     100% of the then effective Liquidation Preference per share, if the daily
     closing price per share of our common stock for a specified 20 consecutive
     trading day period is greater than or equal to 200% of the then current
     conversion price. On September 15, 2008, we will be required to exchange
     all outstanding shares of convertible preferred stock at a price equal to
     the Liquidation Preference per share, payable at the Company's option in
     cash or shares of our common stock.

     DISCUSSION OF CRITICAL ACCOUNTING POLICIES

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

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

     ALLOWANCE FOR DOUBTFUL ACCOUNTS - We calculate allowances for estimated
     losses resulting from the inability of our customers to make required
     payments. We utilize a number of tools to evaluate and mitigate our
     customer credit risk. Management evaluates each new customer account using
     a combination of some or all of the following sources of information:
     credit bureau reports, industry credit group reports, customer financial
     statement analysis, customer supplied credit references and bank
     references. Appropriate credit limits are set in accordance with our credit
     risk policy and monitored on an on-going basis. Existing customers are
     monitored and credit limits are adjusted according to changes in their
     financial condition. Based on the procedures outlined herein, and the fact
     that no customer accounted for 10.0% or more of the gross accounts
     receivable at October 1, 2005 and July 2, 2005, we believe there is no
     concentration of credit risk.

     Our exposure to credit loss on our foreign currency forward contracts in
     the event of non-performance by the counterparties is believed to be remote
     due to the requirements that the counterparties consist only of major
     financial institutions that have a long-term credit rating of single-A or
     better from both Moody's and Standard& Poor's. Additionally, our foreign
     currency forward contracts generally have a term of one year or less.

     INVENTORY VALUATION - The Company values inventory at the lower of cost or
     market, and regularly reviews the book value of discontinued product lines
     and stock keeping units (SKUs) to determine if these items are properly
     valued. If market value is less than cost, the Company writes down the
     related inventory to the estimated net realizable value. The Company
     regularly evaluates the composition of inventory to identify slow-moving
     and obsolete inventories to determine if additional write-downs are
     required. The Company's domestic inventories are generally determined by
     the last-in, first-out (LIFO) method. These inventories account for
     approximately 56.1% and 60.7% of the Company's inventories as of October 1,
     2005 and July 2, 2005, respectively. All remaining inventory cost is
     determined on the first-in, first-out basis.


                                       35

<PAGE>

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

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

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

     STOCK-BASED COMPENSATION - The Company adopted SFAS No. 123(R), Share-Based
     Payment, as of the beginning of the first quarter of fiscal 2006 using the
     modified prospective method. SFAS No. 123(R) requires all share-based
     payments to employees to be recognized in the financial statements based on
     their fair value using an option-pricing model at the date of grant. The
     Company determines fair value of such awards using the Black-Scholes option
     pricing model. The Black-Sholes option pricing model incorporated certain
     assumptions, such as risk-free interest rate, expected volatility, and
     expected life of options, in order to arrive at a fair value estimate.

     FORWARD LOOKING

     We anticipate capital expenditures on an ongoing basis to be at historical
     levels in relation to net sales.

     We believe that (a) future cash flow from operations based on our current
     level of operations, (b) available borrowings under our senior secured
     credit facility, second lien credit agreement and other sources of debt
     funding and (c) funds from the sale or monetization of certain assets will
     be adequate to meet our anticipated requirements for current capital
     expenditures, working capital requirements, interest and income tax
     payments and scheduled debt payments, including the remaining outstanding
     2005 Notes, for the next twelve months. Our ability to satisfy our
     anticipated liquidity requirements, however, is subject to several
     assumptions, some of which are beyond our control, including: (a) general
     economic, financial, competitive and other factors; (b) our continued
     compliance with covenants in our debt instruments; and (c) our ability to
     repurchase Subordinated Notes in the open market and/or through privately
     negotiated transactions for cash or other securities (including Second Lien
     Notes, common stock and/or Series C preferred stock). If we are unable to
     satisfy our liquidity needs, we could be required to adopt one or more
     alternatives, such as reducing or delaying capital expenditures, borrowing
     additional funds, restructuring indebtedness, selling other assets or
     operations and/or reducing expenditures for new product development,
     cutting other costs, and some or such actions would require the consent of
     our senior lenders, holders of Second Lien


                                       36

<PAGE>

     Notes and/or the holders of our Subordinated Notes. We cannot assure you
     that any of such actions could be effected, or if so, on terms favorable to
     us, that such actions would enable us to continue to satisfy our liquidity
     needs and/or that such actions would be permitted under the terms of our
     senior secured credit facility, the second lien credit agreement or the
     indentures governing our Subordinated Notes.

     In addition, we have required amendments and waivers to our senior debt
     during recent periods due to our failure to remain in compliance with
     financial covenants in our senior debt. We cannot assure you that we will
     be able to comply with the financial covenants and other covenants in our
     debt instruments or that, if we fail to comply, our debt holders would
     waive our compliance or forbear from exercising their remedies.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

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

     All foreign exchange contracts related to continuing operations have been
     recorded in the consolidated balance sheets within accrued expenses at de
     minimis fair values at October 1, 2005 and July 2, 2005, respectively.
     Foreign exchange contracts with a fair value of $2.3 million, related to
     discontinued operations, have been included in the consolidated balance
     sheets as a reduction of current liabilities of discontinued operations at
     July 2, 2005. A $2.3 million change in the fair value of contracts was
     recorded in discontinued operations in the first quarter. The change in the
     fair value of contracts related to continuing operations in the first
     quarter was insignificant. There was a de minimus amount at October 1, 2005
     and $1.4 million at July 2, 2005 recorded in accumulated other
     comprehensive income, net of tax, related to these contracts. We anticipate
     that all gains and losses deferred in accumulated other comprehensive
     income related to foreign exchange contracts will be reclassified into
     earnings within the next twelve months as the related inventories are sold.
     At October 1, 2005, we had foreign exchange forward contracts for the
     purchase of $4.5 million U.S. dollars. Contracts for the purchase of $7.2
     million U.S. dollars were entered into during the first quarter of fiscal
     2006.

ITEM 4. CONTROLS AND PROCEDURES

     (a) Evaluation of disclosure controls and procedures. Based on their
     evaluation the Company's principal executive officer and principal
     financial officer concluded that the Company's disclosure controls and
     procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the
     Securities Exchange Act of 1934 (the Exchange Act)) were effective as of
     October 1 2005 to ensure that information required to be disclosed by the
     Company in reports that it files or submits under the Exchange Act was
     recorded, processed, summarized and reported within the time periods
     specified in the Securities and Exchange Commission rules and forms.


                                       37

<PAGE>

     (b) Changes in internal controls. As reported in the Company's Fiscal 2005
     Annual Report on Form 10-K, management determined that, as of July 2, 2005,
     there was an internal controls deficiency related to the Company's
     preparation and review of its income tax provision and related income tax
     accounting procedures, which constituted a material weakness. To address
     this material weakness, the Company began, prior to year end and continued
     throughout the first fiscal quarter, the remediation process, including:

          1.   Hiring additional staff with significant domestic and
               international tax experience;

          2.   Retaining external resources to supplement the Company's tax
               personnel;

          3.   Additional training of finance and tax personnel; and

          4.   Implementing additional policies and interim reporting
               requirements to ensure the accuracy of accounting and tax
               calculations supporting the amounts reflected in our financial
               statements and to ensure all significant accounts are properly
               reconciled on a frequent and timely basis.

     These remediation plans will continue to be implemented and monitored
     during the second and third quarters of this fiscal year. The material
     weakness will not be considered remediated until the remedial procedures
     operate for a period of time, are subsequently tested and management has
     concluded that the procedures are operating effectively.

     Except as described above, there were no significant changes in the
     Company's internal control during the quarter ended October 1, 2005 or
     other factors that could significantly affect these controls subsequent to
     the date of their evaluation, including any corrective actions with regard
     to significant deficiencies and material weaknesses.


                                       38

<PAGE>

                           PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS

     SECURITIES CLASS ACTION LAWSUITS

     In May 2004, two stockholder lawsuits, named Mariss Partners, LLP v.
     Salton, Inc., Leonhard Dreimann and David M. Mulder, and Warren Beeler v.
     Salton, Inc., Leonhard Dreimann and David Mulder, were filed in the United
     States District Court for the Northern District of Illinois against the
     Company and certain Salton executives. The complaints allege that the
     defendants violated the federal securities laws, specifically Sections
     10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 of
     the Securities and Exchange Commission, by making certain alleged false and
     misleading statements. The plaintiffs seek unspecified damages on behalf of
     a purported class of purchasers of the Company's securities during the
     period from November 11, 2002 through May 11, 2004. The Company believes
     that these lawsuits are without merit and that it has compelling defenses
     to the allegations contained in the complaints. Salton intends to
     vigorously defend itself against these claims. The outcome of the class
     action lawsuits cannot be predicted with certainty, however, Salton does
     not believe that this matter will have a material adverse affect on its
     business, financial condition or results of operations. Therefore, no
     amounts have been accrued for such claims. The plaintiffs have voluntarily
     dismissed the Mariss Partners lawsuit on September 3, 2004.

     PRODUCT LIABILITY

     On or about October 27, 2004, a lawsuit entitled DiNatale vs. Salton was
     filed in the New York State Supreme Court against the Company. The
     plaintiffs, who seek unspecified damages, allege that they were injured by
     water contaminated with lead taken from a tea kettle sold by the Company
     under its Russell Hobbs brand. The plaintiffs' attorney had been seeking to
     convert the lawsuit into a class action suit; no class action suit has been
     filed to date. The manufacturer of the product and its insurer are
     defending this lawsuit. The Company's attorneys and its insurers are
     cooperating in the defense of the lawsuit.

     After receiving notice of a lawsuit, the Company voluntarily suspended
     selling the product. The Company believes that, at substantially the same
     time, the two retailers who had purchased the kettle from the Company also
     suspended selling the product. The Company believes that only a limited
     number of the kettles were sold to consumers.

     The Company voluntarily contacted the U.S. Food and Drug Administration
     ("FDA") and shared its information and test results concerning the product
     with the agency. The Company issued a recall of the product. The
     manufacturer has agreed to compensate the Company for its legal costs and
     out of pocket expenses in connection with the recall and to supply
     replacement products.

     In connection with the tea kettle matter, the Company reviewed other
     products received from the same manufacturer and subsequently notified the
     FDA that some manufacturing runs of another coffee maker product might have
     a lead content above FDA allowed standards. As a result, the FDA requested
     the Company to recall the product. The Company has done so, the retailer to
     whom the product was sold has cooperated in returning for credit its unsold
     units of the product. The manufacturer has agreed to compensate the Company
     for the costs that it may incur.


                                       39

<PAGE>

     JAY KORDICH V. SALTON, INC.

     On October 19, 2005, a lawsuit named Jay Kordich v. Salton, Inc. was filed
     in the United States District Court for the Southern District of
     California. The plaintiff in this action is seeking a judicial
     determination that a covenant not to compete in an agreement between him
     and Salton is invalid and unenforceable against him plus attorneys' fees
     and costs. Salton believes that the lawsuit is without merit.

     The outcome of the foregoing legal matters cannot be predicted with
     certainty, however Salton does not believe that these actions will have a
     material adverse affect on its business, financial condition or results of
     operations. Therefore, no amounts have been accrued for such claims.

     ENVIRONMENTAL

     The Company has accrued approximately $0.2 million for the anticipated
     costs of environmental remediation at four of its current and previously
     owned sites. Although such costs could exceed that amount, Salton believes
     any such excess will not have a material adverse effect on the financial
     condition or annual results of operations of the Company.

     OTHER

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

ITEM. 6 EXHIBITS.

     The exhibits listed on the accompanying Index to Exhibits are filed as part
     of this Form 10-Q.


                                       40

<PAGE>

                                    SIGNATURE

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

Date: November 10, 2005                 SALTON, INC.


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


                                       41

<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NUMBER                       DESCRIPTION OF DOCUMENT
--------------                       -----------------------
<S>              <C>
     10.41       Fifth Amendment to Amended and Restated Credit Agreement dated
                 as of October 7, 2005 by and among the Lenders, Wells Fargo
                 Foothill, Inc., as administrative agent, and collateral agent
                 for the Lenders, Silver Point Finance, LLC, as co-agent,
                 syndication agent, documentation agent, arranger and book
                 runner, Salton, Inc., each of Salton's Subsidiaries identified
                 on the signature pages thereof as Borrowers and each of
                 Salton's Subsidiaries identified on the signature pages thereof
                 as Guarantors. Incorporated by reference to the Registrant's
                 Current Report on Form 8-K dated October 7, 2005.

     10.42       Sixth Amendment to Amedment to, and Waiver Under, Amended and
                 Restated Credit Agreement dated as of November 9, 2005 by and
                 among the Lenders, Wells Fargo Foothill, Inc., as
                 administrative agent, and collateral agent for the Lenders,
                 Silver Point Finance, LLC, as co-agent, syndication agent,
                 documentation agent, arranger and book runner, Salton, Inc.,
                 each of Salton's Subsidiaries identified on the signature pages
                 thereof as Borrowers and each of Salton's Subsidiaries
                 identified on the signature pages thereof as Guarantors.
                 Incorporated by reference to the Registrant's Current Report on
                 Form 8-K dated November 9, 2005.

     12(A)       Computation of Ratio of Earnings to Fixed Charges

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

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

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

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


                                       42