SALTON MAXIM HOUSEWARES INC, 10-K405, 1996-09-27

SALTON MAXIM HOUSEWARES INC
10-K405, 1996-09-27
ELECTRIC HOUSEWARES & FANS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
- ACT OF 1934 [FEE REQUIRED]
For The Fiscal Year Ended June 29, 1996 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/MAXIM HOUSEWARES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 36-3777824
(State or other jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or organization
MOUNT PROSPECT, ILLINOIS 60056
(Address of principal executive offices (Zip Code)
</TABLE>

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

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

(Title of Class)

Indicate by check mark whether this registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No __

The aggregate market value of the Common Stock held by non-affiliates of
the Registrant as of September 23, 1996 was approximately $28,218,500,
computed on the basis of the last reported sale price per share ($7.25) of
such stock on the NASDAQ National Market. Shares of Common Stock held by
each officer and director and by each person who owns 5% or more of the
outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]

The number of shares of the Registrant's Common Stock outstanding as of
September 25, 1996 was 13,017,144.
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Documents Incorporated by Reference:

<TABLE>
<CAPTION>
PART OF FORM 10-K DOCUMENT INCORPORATED BY REFERENCE
- --------------------------------- --------------------------------------------------------
<S> <C>
Part III (Items 10, 11, 12 and Portions of the Registrant's Definitive Proxy Statement
13) to be used in connection with its 1996 Annual Meeting of
Stockholders.
</TABLE>

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PART I

ITEM 1. BUSINESS

GENERAL

Salton/Maxim Housewares, Inc. (the "Company") designs and markets a broad
range of small kitchen appliances, personal and beauty care appliances and
decorative quartz wall and alarm clocks under the brand names of Salton(R),
Maxim(R), Breadman(TM), Juiceman(TM), Salton Creations(TM), Salton Time(TM) and
White-Westinghouse(R). The kitchen appliances currently marketed by the Company
include espresso/cappuccino makers, waffle makers, rice cookers, coffee makers,
sandwich makers, toasters, bread makers, Hotray(R) Warming trays, juice
extractors, ice cream and yogurt makers, and a wide variety of other food
preparation appliances. The Company's personal and beauty care appliances
include hair dryers, Wet Tunes(R) shower radios, ProSteam(R) Irons, shavers,
curling irons and brushes, makeup mirrors, massagers, manicure systems and
facial saunas. The Company also markets, under a joint venture agreement, a
thermal household grill product under the name "George Foreman's Lean Mean Fat
Reducing Grilling Machine." Mr. Foreman is both a former Olympic champion and a
former World Boxing Organization's heavy weight champion of the world. The
Company contracts for the manufacture of most of its products with independent
manufacturers located overseas, primarily in the Far East and Europe. The
Company also manufactures and assembles certain appliances in its plant located
in Kenilworth, New Jersey.

On July 11, 1996, the Company consummated its previously announced
transaction with Windmere-Durable Holdings, Inc. ("Windmere"), pursuant to that
certain Stock Purchase Agreement dated February 27, 1996, as amended (the "Stock
Purchase Agreement"). Windmere is a corporation engaged principally in
manufacturing and distributing a wide variety of personal care products and
household appliances. Pursuant to the Stock Purchase Agreement, Windmere
purchased from the Company 6,508,572 newly issued shares of Common Stock (the
"Purchase"), which represented 50% of the outstanding shares of Common Stock of
the Company on February 27, 1996 after giving effect to the Purchase. As
consideration for the purchase, Windmere paid the Company: (i) $3,254,286 in
cash; (ii) a subordinated promissory note in the aggregate principal amount of
$10,847,620 (the "Note"), which Note is payable in five years and is secured by
certain assets of Windmere and its domestic subsidiaries and guaranteed by such
domestic subsidiaries; and (iii) 748,112 shares of Windmere's common stock.
Windmere's common stock is traded on the NYSE. Windmere was also granted an
option to purchase up to 485,000 shares of Common Stock at $4.83 per share,
which option is exercisable only if and to the extent that options to purchase
shares of Common Stock which were outstanding on February 27, 1996 are
exercised.

In connection with the Purchase, Windmere and the Company also entered into
a Stockholder Agreement (the "Stockholder Agreement") and a Registration Rights
Agreement (the "Registration Agreement"). Pursuant to the Stockholder Agreement,
Windmere is entitled to designate for election, so long as its ownership does
not fall below 15%, that percentage of the Company's directors as is
proportionate to its stock ownership percentage; provided that the number of
directors designated by Windmere will in no event exceed 50% of the total number
of directors. The following persons designated by Windmere were elected as
directors of the Company on July 11, 1996: David M. Friedson, Chairman of the
Board, President and Chief Executive Officer of Windmere; Harry D. Schulman,
Senior Vice President of Windmere; Laurence S. Chud, M.D., Vice President
Investment Banking of CP Banker & Company; and James Connolly, President of KQED
Books and Video. There is now a total of eight directors serving on the
Company's Board of Directors. The Stockholder Agreement also contains provisions
which, subject to specified time periods and exceptions, restrict the
disposition by Windmere of shares of Common Stock and restrict purchases by
Windmere of additional shares of Common Stock that would increase its percentage
ownership interest.

The Company and Windmere also entered into a Marketing Cooperation
Agreement (the "Marketing Cooperation Agreement"). Pursuant to the Marketing
Cooperation Agreement, until Windmere's interest in the Company is less than 30%
for at least ten consecutive days, each of the Company and Windmere has agreed
to participate in a variety of mutually satisfactory marketing cooperation
efforts designed to expand the market penetration of each party.

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The Company's product strategy focuses on developing new products and
enhancing existing products, then marketing those products under its and
licensed established brand names to service the needs of a broad range of
retailers and satisfy the different tastes, preferences and budgets of
consumers. The Company designs its products in many contemporary styles and
colors and with a wide variety of features. Management believes that the Company
has a reputation in the industry for excellence in design, creative packaging
and marketing of products, and innovative technology. It was the first to
introduce warming trays, a combination espresso/cappuccino/drip coffee maker,
shower radios, bread makers capable of using multiple grains of flours and
Cell-U-Memo,(TM) the first voice memo recorder for use on cellular phones. The
Company has had a number of products selected as top rated or best buy by
various consumer magazines.

The Company sells its products throughout the United States primarily to
department stores, gourmet and lifestyle merchants, upscale mass merchandisers
and through other direct distribution channels, direct mail catalogs and
showrooms, specialty stores, warehouse clubs and beauty supply distributors. The
Company markets through its own sales force and a network of approximately 145
independent commissioned sales representatives. Further, the Company sells
certain of its products, namely Juiceman(TM) and the George Foreman Grill,
direct to consumers through the use of paid half- hour television programs
commonly referred to as "infomercials." The Company believes that its principal
strengths include its marketing capabilities, its reputation with retailers, its
proven ability to develop new products and enhance existing products, and its
established brand names.

PRODUCTS

The marketing of small kitchen appliances under the Salton(R) and Maxim(R)
brand names permits the Company to service the needs of a broad range of
retailers and satisfy the different tastes, preferences and budgets of
consumers. Products marketed under the Salton(R) brand name are designed to meet
the needs of a broad range of consumers at a wide range of pricing points. These
products include full-featured models as well as models which are marketed to
budget conscious consumers. Small kitchen appliances marketed under the Maxim(R)
brand name also offer retailers and consumers a wide selection of products, but
with an emphasis on full-featured models, many of which are marketed at the
higher end of the retail price range. Breadman(TM) and Juiceman(TM) products are
included in the Maxim(R) brand name category. The Company's personal care
products marketed under the Salton Creations(TM) brand name offer customers
combinations of features, quality components and novel designs. For example,
certain of the Company's hair dryers offer nine temperature settings and
removable hair filters. Salton Time(TM) decorative quartz wall and alarm clocks
are also included in the Salton Creations(TM) brand name category.

The following table sets forth the approximate amounts and percentages of
the Company's net sales by brand name during the periods shown.

FISCAL YEAR ENDED
(Dollars in Thousands)

<TABLE>
<CAPTION>
JUNE 29, 1996 July 1, 1995
---------------------- ----------------------
PERCENT PERCENT
NET SALES OF TOTAL NET SALES OF TOTAL
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Salton(R)......................................... $31,005 31.3% $34,601 44.9%
Maxim(R).......................................... 60,265 60.7 35,567 46.2
Salton Creations(TM).............................. 7,932 8.0 6,823 8.9
------- ------- ------- -------
$99,202 100.0% $76,991 100.0%
======= ======= ======= =======
</TABLE>

Small kitchen appliances marketed by the Company fall within four product
categories: (i) coffee and tea related products, (ii) thermal products, (iii)
health conscious products and (iv) food preparation appliances. Coffee and tea
related products and thermal products are the Company's most significant
products. Sales of

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coffee and tea related products accounted for approximately 15% and 19% of the
Company's net sales for fiscal 1996 and fiscal 1995, respectively. Sales of
thermal products accounted for approximately 36% and 33% of the Company's net
sales for fiscal 1996 and fiscal 1995, respectively.

SALTON(R) BRAND NAME

The Salton(R) product line was first introduced in 1947 through the
Hotray(R), a product still marketed by the Company. Other Salton(R) product
introductions have featured innovative technology and design applications and
opened up new product classifications for household use. These introductions
include a yogurt maker, a peanut butter machine and the Wet Tunes(R) shower
radios. The Salton(R) brand name has been in continuous use since 1947.

Today, the Company designs and markets an extensive line of small kitchen
appliances under the Salton(R) brand name. Salton(R) small kitchen appliances
have helped establish fashion trends with all white and black appliances and now
stainless steel and chrome finishes.

The Company currently markets approximately 89 different models of small
kitchen appliances and related products under the Salton(R) brand name within
three product categories: (i) espresso/cappuccino/drip coffee makers and
coffee-related accessories, (ii) thermal products and (iii) health conscious
products. As used herein, the term "models" means stock-keeping units, which
term includes different products as well as similar products with different
features.

ESPRESSO/CAPPUCCINO/DRIP COFFEE MAKERS. Since Cafe Salton(TM) was
introduced in 1978 as the first triple function coffee appliance in the United
States, the Company has developed Salton(R) espresso/cappuccino/drip coffee
makers with a wide variety of features. These products include:

The Three For All(R), a combination espresso/cappuccino/drip coffee maker
with a patented 2 cup adapter for direct cappuccino-espresso brewing. The
Company believes that the Three For All(R) coffee/cappuccino maker resulted
in the creation of a new product category in the small kitchen appliance
industry.

The Cappuccino Expres(TM), a line of cappuccino espresso makers which make
two to four cups of espresso in minutes. The patented steam jet froths milk
for cappuccino while the coffee brews.

The Ice Tea/Ice Coffeemaker, a combination ice tea/ice coffee maker with a
patented brewing basket that makes quality ice tea or ice coffee.

The Company also designs and markets a broad range of coffee-related
accessories, including coffee mills and grinders, mug warmer sets, electric
kettles and replacement carafes.

THERMAL PRODUCTS. The Company offers customers a broad range of thermal
products under the Salton(R) brand name. These products include: the Snack 'N'
Sandwich maker series; Cool Touch Toasters; and a variety of waffle makers
including belgian, heartshape, and pizzelles.

HEALTH CONSCIOUS PRODUCTS. This Salton(R) category includes a wide
assortment of food preparation products targeted to health conscious consumers
who are interested in preparing foods such as yogurt, juices and ice cream from
natural ingredients. These products range from ice cream makers and yogurt
makers to a variety of juicers, juice extractors, rice cookers and vegetable
steamers. The principal products include: the Nutritionist(R) line of cool touch
sealed environment rice cookers; the Yogurt Maker, a thermostatically controlled
unit for producing homemade yogurt; the Big Chill(R), a frozen yogurt and ice
cream maker; and a series of automatic rice cookers and steamers. George
Foreman's Lean Mean Fat Reducing Grilling Machine(TM) is also included in this
category. This product, which has a unique, patented design, grills meat, fish,
chicken and vegetables evenly in minutes. The grill is double non-stick coated
and the sloped cooking surface with patented grooves channels away measurable
amounts of greasy fats into a separate tray.

MAXIM(R) Brand Name

The Maxim(R) product line has been in existence since the late 1970's. The
Company currently markets approximately 91 different models of small kitchen
appliances and related products under the Maxim(R) brand name within five
product categories: (i) espresso/cappuccino/drip coffee makers and
coffee-related accessories, (ii) thermal products, (iii) food preparation
appliances, (iv) Breadman(TM) and (v) Juiceman(TM).

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ESPRESSO/CAPPUCCINO/DRIP COFFEE MAKERS. Products marketed under the
Maxim(R) brand name include:

The Brewers' Choice(TM), an automatic coffee and tea maker with a re-usable
gold filter and two independent brewing systems to brew two different
beverages at the same time.

The Caffe Bar(TM), a European-style combination espresso/cappuccino/coffee
maker with separate controls for making coffee, espresso, cappuccino or
steam only.

THERMAL PRODUCTS. The Company markets a wide selection of toasters, waffle
makers and ovens under the Maxim(R) brand name. This category includes:

The Wide Mouth Toaster series, introduced in 1984, features microchip
control for even toasting, a cool touch body and space saving contemporary
designs.

The Maxim Combi-Oven, a euro-styled combination conventional and toaster
oven which bakes, broils, roasts, toasts and top browns with countertop
convenience.

The Convection Oven, a high efficiency air flow oven which cooks faster
than a conventional oven.

FOOD PREPARATION APPLIANCES. This Maxim(R) category offers customers a
broad range of food preparation appliances such as electric woks, crepe makers,
hand-held blenders, choppers and warming trays. Other food preparation
appliances include:

The Professional Wok, consisting of a 6- 1/2 quart capacity die-cast
aluminum body with heavy gauge aluminum dome cover. A patented 1600 watt
heating element design allows for even heat distribution for successful
cooking with an electric wok.

The Electric Brunch Pan, an electric pan with thick aluminum for uniform
heat distribution, an easy to clean non-stick coating and a ready light to
indicate proper cooking temperatures.

The Donut Bites(TM), an electric donut maker, makes six light, crispy baked
donuts, and other dessert creations. It has a cool touch housing and
non-stick surface for easy use.

The I Love Bagels, with patents pending for design and utility, "kettles"
and convection bakes four full size bagels utilizing a non-stick interior
and 1600 watts of power.

BREADMAN.(TM) This Maxim(R) thermal product category offers l-l/2 pound
capacity Breadmans(TM)and the 2 pound capacity Breadman Plus(TM), automatic
bread bakers. These bread machines are pre-programmed to know exactly how long
to mix, knead, rise and bake healthy, whole grain breads. The consumer just
needs to add the ingredients and set the proper cycle to bake the bread. A
window allows the consumer to see the entire bread making process without
opening the lid. The machines have a programmable timer that allows a preset
bake time up to twelve hours in advance. Additionally, the "Ultimate"
breadmaking machine, Breadman Ultimate(TM), was introduced in fiscal 1996 with
advanced software and patents pending features. It includes over 30 programs,
fuzzy programming, pause buttons and an integrated fruit, nut and herb
dispenser. Also, a full line of Breadman baking accessories was introduced in
fiscal 1996.

JUICEMAN.(TM) The products offered in this Maxim(R) food preparation
category are the Juiceman(R) Jr. and the Juiceman(R) II healthy juice
extractors.

The Juiceman(R) Jr , a l/4 horsepower juicer offered at a competitive
price. The machine is designed for fresh and healthy juicing using a wide
variety of fruits and vegetables.

The Juiceman(R) II, a preferred juicer used by serious health, fitness and
juicing advocates. It has a powerful 1/2 horsepower, 690 watt motor,
built-in speed control, and an extra large feed tube and pulp receptacle.

The Juiceman(R) 210 and the Juiceman(R) 410 are elite professional series
models with patented dual electronic speed. These products were introduced
in 1995.

The units come with a recipe planner and audio cassette.

SALTON CREATIONS(TM) BRAND NAME

The Company introduced personal and beauty care appliances under the Salton
Creations(TM)brand name in January 1989, and presently markets approximately 57
models of these and related products. Salton

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Creations(TM) hair dryers feature high quality materials, long life motors and
innovative design high air flow systems (which provide full drying power at
reduced noise levels) and comply with Underwriters Laboratories' electrical
standards. Hair dryers are offered in various sizes, shapes and colors and are
designed to mix form and function to enable beauty professionals and consumers
to correctly address power and heat to hair type and styling needs. These
products have included: the Crazy Duck(TM) Hair Dryer, a colorful hair dryer in
the shape of a duck featuring its own free-standing base; the Salton(TM) Turbo
1500, a hair dryer which offers 1500 watts of drying power and is made of
shatter-resistant Lexan(TM) plastic; the Salton(TM) ProAir 1500, a hair dryer
which features seven heat and speed settings, a removal hair trap filter and an
extra long power cord; and the Snoopy(TM) Hair Dryer.

The Company also offers a range of steam irons under the name ProSteam(R).
The five models range in price and features to service the needs of a broad
range of retailers and satisfy the different tastes, preferences and budgets of
consumers.

In addition to hair dryers and steam irons, the Company designs and markets
a variety of other personal and beauty care appliances under the Salton
Creations(TM) brand name, including curling irons and brushes, make-up mirrors,
massagers, manicure systems and shower radios. The Wet Tunes(R) series of shower
radios, introduced under the Salton(R) brand name in 1984, features an AM/FM
radio with waterproof mylar speakers and wall mount brackets. Wet Tunes(R)
radios are offered in several different shapes, sizes and colors, including Joe
Cool(R), a Snoopy(TM) shower radio. Also included in this series are the Wet
Reflections(TM), which has a light and fog-free mirror, the Wet Cassette(R) and
the Wet Lantern(TM).

The Company also has a "gifts" program designed for department stores.
Under this program, the Company provides department stores with practical,
special occasion, small gift products. The Company's gifts program for fiscal
1996 included five products, including a mini tool kit, calcutape, travel smoke
alarm, emergency auto flasher, and deluxe art kit.

The Company's Salton Time(TM) products, which are offered in the Salton
Creations(TM) category and include decorative quartz wall and alarm clocks, have
approximately 153 different models. Salton Time(TM) has introduced a number of
innovative products such as the waterproof Wet Times(TM)indoor/outdoor clock.

NEW PRODUCT DEVELOPMENT

Management believes that the enhancement and extension of the Company's
existing products and the development of new product categories are necessary
for the Company's continued success and growth. The Company directs the style
and content of its products to meet customer requirements for quality, product
mix and pricing. Company employees work closely with both retailers and
suppliers to identify trends in consumer preferences and to generate new product
ideas. The Company's product design and engineering department evaluates new
ideas and seeks to develop new products and improvements to existing products to
satisfy industry requirements and changing consumer preferences.

During fiscal 1996, the Company introduced 95 new product models, 24 under
the Salton(R)brand name, 21 under the Maxim(R) brand name and 50 under the
Salton Creations(TM) brand name, which included 45 quartz wall and alarm clocks
under Salton Time(TM). During fiscal 1995, the Company introduced 114 new
product models, 23 under the Salton(TM) brand name, 23 under the Maxim(R) brand
name and 68 under the Salton Creations(TM) brand name, which included 59 quartz
wall and alarm clocks under Salton Time(TM).

MARKETING AND DISTRIBUTION

The Company's products are marketed throughout the United States under its
trademarks Salton(R), Maxim(R), Breadman(TM), Juiceman(TM), Salton Creations(TM)
and Salton Time(TM) primarily through department stores, gourmet and lifestyle
merchants, upscale mass merchandisers, direct mail catalogs and showrooms,
national chains, specialty stores, warehouse clubs and beauty supply
distributors. The Company is also expanding its retailer base for certain of its
products to include drug stores, supermarkets and medium scale mass
merchandisers, as well as additional retailers within its existing channels of
distribution.

The Company's total net sales to its five largest customers during fiscal
1996 and 1995 were 55% and 52%, respectively. Two of the company's customers,
Federated Department Stores (including the merged operations of Macy's and its
affiliates) and Dayton Hudson and its affiliates, each accounted for in excess
of

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10% of the Company's net sales during fiscal 1996. The combined net sales to
these two entities, which consist of 8 distinct buying units for Federated
Department Stores and two distinct buying units for Dayton Hudson (including its
Target subsidiary), represented 28% of the Company's net sales during fiscal
1996. In fiscal 1995, two of the Company's customers, Macy's and its affiliates
and Dayton Hudson and its affiliates, each accounted for in excess of 10% of the
Company's net sales. The combined net sales to these two entities, which
consisted of two distinct buying units for Macy's and two distinct buying units
for Dayton Hudson (including its Target subsidiary), represented 26% of the
Company's net sales during fiscal 1995.

The Company closely manages credit policies with respect to its customer
base. Other than the Macy's bankruptcy, the Company has not suffered significant
credit losses to date, during a period of time when many major retailers,
including customers of the Company, experienced significant financial
difficulties, some filing for protection under bankruptcy laws. As such,
however, a significant concentration of the Company's business activity is with
entities whose ability to meet their obligations with the Company is dependent
upon prevailing economic conditions within the retail industry.

The Company relies on its management's ability to determine the existence
and extent of available markets for its products. Company management has
extensive marketing and sales background and devotes a significant portion of
its time to marketing-related activities. The Company markets both its small
kitchen appliances and personal and beauty care appliances primarily through its
own sales force and approximately 145 independent sales representatives. The
Company's representatives are located in all states and are paid a commission
based upon sales in their respective territories. The Company's sales
representative agreements are generally terminable by either party upon 30 days
notice.

Management directs its marketing efforts toward retailers and believes that
obtaining favorable product placement at the retail level is an important factor
in the small appliance market, especially when introducing new products. The
Company has an advanced electronic data interchange system to receive customer
orders and transmit shipping and invoice information electronically in response
to many retailers' preference for paperless order systems.

In addition to directing its marketing efforts toward retailers, the
Company provides promotional support for its products with the aid of national
television, radio and print advertising, cooperative advertising with retailers,
and in-store displays and product demonstrations. The Company believes that
these promotional activities are important to strengthening the Company's brand
name recognition.

The Company also emphasizes the design and packaging of its products in
order to increase their appeal to consumers and to stand out among other brands
on retailers' shelves. Management believes that distinctive packaging, designed
to answer consumers' questions concerning the Company's products, has resulted
in increased shelf space and greater sales. Many of the Company's products are
sold with instruction books and/or recipe books. Furthermore, the Company
includes VHS Video Manuals(TM) with selected espresso/cappuccino makers and
bread makers to provide step by step guidelines for the use and care of such
products.

SOURCES OF SUPPLY

Most of the Company's products are manufactured to the Company's
specifications by over 26 unaffiliated manufacturers located primarily in Far
East locations, such as Hong Kong, the People's Republic of China and Taiwan,
and in Europe. Management believes that the Company maintains good business
relationships with its overseas manufacturers. The Company also manufactures and
assembles woks and warming trays in its plant located in Kenilworth, New Jersey.

The Company does not maintain long-term purchase contracts with
manufacturers and operates principally on a purchase order basis. The Company
believes that it is not currently dependent on any single manufacturer for any
of its products. However, during fiscal 1996, two manufacturers located in Hong
Kong accounted for approximately 26% and 15%, respectively of the Company's
product purchases. During fiscal 1995, two manufacturers accounted for
approximately 17% and 11% of the Company's product purchases. The Company
believes that the loss of any one manufacturer would not have a long-term
material adverse effect on the Company because other manufacturers with whom the
Company does business would be able to increase

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production to fulfill the Company's requirements. However, the loss of a
supplier could, in the short-term, adversely effect the Company's business until
alternative supply arrangements were secured.

Because of the overseas locations of its manufacturers, the Company is
subject to the risk of production delays due to the unavailability of parts and
components, transportation delays due to strikes and work stoppages, political
unrest, import restrictions and other factors which could have an adverse effect
on the business of the Company.

The Company's purchase orders are generally made in United States dollars
in order to maintain continuity in the Company's pricing structure and to limit
exposure to currency fluctuations. The Company's policy is to maintain an
inventory base to service the seasonal demands of its customers. In certain
instances, the Company places firm commitments for products from six to twelve
months in advance of receipt of firm orders from customers.

The Company believes that it has enjoyed good working relations with its
manufacturers located in the People's Republic of China. Management believes
that production currently conducted in the People's Republic of China could be
relocated to other low cost Far East manufacturing locations, including Hong
Kong, with only temporary disruption and delay. However, the Company could be
adversely affected if demand for its products decreases due to a disruption in
production and delivery, or due to higher prices which result from increased
manufacturing costs or unfavorable changes in trade policy.

Quality assurance is particularly important to the Company and its product
shipments are required to satisfy quality control tests established by its
internal product design and engineering department. The Company employs an
independent agent in Hong Kong to perform quality control inspections at the
manufacturers' factories during the manufacturing process and prior to
acceptance of goods.

COMPETITION

The small appliance industry is mature and highly competitive. Competition
is based upon price and quality, as well as innovation in the design of
replacement models and in marketing and distribution approaches. The Company
competes with established companies with substantially greater facilities,
personnel, financial and other resources than those of the Company. In the sale
of small kitchen appliances, the Company competes with, among others, Braun,
Inc. (a wholly owned subsidiary of the Gillette Company), Krups, Rowenta, Inc.
and Sunbeam/Oster. In the sale of personal care small appliances, the Company
principally competes with Clairol, Inc. (wholly-owned subsidiary of
Bristol-Myers Squibb Company), Conair Corporation, Vidal Sassoon and Andis.

Management believes that the success of the Company is dependent on the
ability of the Company to offer a broad range of existing products and to
continually introduce new products and enhancements to existing products which
have substantial consumer appeal based upon price, design, performance and
features. The Company also believes that its trademarks, particularly Salton(R),
Maxim(R), Breadman(TM), Juiceman(TM), Salton Creations(TM) and Salton Time(R),
are important to the Company's ability to compete effectively.

EMPLOYEES

As of June 29, 1996, the Company employed 122 persons, of whom
approximately 31 persons, who work at the Company's Kenilworth, New Jersey
facility, were covered by a collective bargaining agreement which expires
February 28, 1999. The Company generally considers its relationship with
employees to be satisfactory and has never experienced a work stoppage.

REGULATION

The Company is subject to federal, state and local regulations concerning
the environment, occupational safety and health, and consumer products safety.
In general, the Company has not experienced difficulty complying with such
regulations and compliance has not had an adverse effect on the Company's
business. Most of the Company's products are listed by Underwriters
Laboratories, Inc. ("UL"), an independent, not-for-profit corporation engaged in
the testing of products for compliance with certain public safety standards.
Satisfaction of the standards of UL for the Company's consumer electrical
appliances is important to the Company; however, the Company has not experienced
difficulty in satisfying such standards.

9
<PAGE> 10

BACKLOG

Orders for the Company's products are typically subject to cancellation
until shipment. Customer order patterns vary from year to year, largely because
of annual differences in consumer acceptance of product lines, product
availability, marketing strategies, inventory levels of retailers and
differences in overall economic conditions. As a result, comparisons of backlog
as of any date in a given year with backlog at the same date in a prior year are
not necessarily indicative of sales for that entire given year. As of June 29,
1996, the Company had a backlog of approximately $60 million compared to
approximately $40 million as of July 1, 1995. The Company does not believe that
backlog is necessarily indicative of the Company's future results of operations
or prospects.

SEASONALITY

The Company believes that sales of its products are seasonal, with higher
sales during the months of August through November.

TRADEMARKS, PATENTS AND LICENSING ARRANGEMENTS

The Company holds a number of patents and trademarks registered in the
United States and foreign countries for various products and processes. The
Company has registered its trademarks with the United States Patent and
Trademark Office. The Company considers these trademarks to be of considerable
value and of material importance to its business.

The Company holds numerous domestic and international patents, including
design patents. The Company believes that none of the Company's product lines is
dependent upon any single patent or group of patents.

During 1996, the Company entered into license agreements with
White-Consolidated Industries, Inc. for use of the White-Westinghouse(R)
trademark for small kitchen appliances, personal care products, fans, heaters,
air cleaners and humidifiers. The license agreements grant the Company the
exclusive right and license to use the White-Westinghouse(R) trademark in the
United States and Canada in exchange for certain license fees, royalties and
minimum royalties. The license agreements also contain minimum sales
requirements which, if not satisfied, may result in the termination of the
agreements. The license agreements are also terminable upon a breach by the
Company.

In 1995, the Company entered into a joint venture agreement (the "Joint
Venture") with George Foreman Products, Inc., a Nevada corporation, and Benjamin
H., a California corporation. The name of the Joint Venture is "Salton/Maxim
Presents George Foreman, A Joint Venture." The Joint Venture is engaged solely
in the business of acquiring, selling and distributing a thermal household grill
product under the name "George Foreman's Lean Mean Fat Reducing Grilling
Machine." Each "Joint Venture" partner has certain percentage ownership
interests in the venture. Mr. Foreman is both a former Olympic champion and a
former World Boxing Organization's heavy weight champion of the world.

WARRANTIES

The Company's products are generally sold with a limited one-year warranty
from the date of purchase. In the case of defects in material or workmanship,
the Company agrees to replace or repair the defective product without charge. To
date, the Company has not experienced significant warranty claims.

10
<PAGE> 11

ITEM 2. PROPERTIES

The Company does not own any facilities. A summary of the Company's leased
properties is as follows:

<TABLE>
<CAPTION>
LOCATION DESCRIPTION AREA (SQ. FT.) EXPIRATION
- ------------------------------ --------------- -------------- -----------------
<S> <C> <C> <C> <C>
Mt. Prospect, IL.............. Executive
offices,
warehousing and
repair facility 34,600 June 30, 1999
Kenilworth, NJ................ Manufacturing
and
warehouse/distribution
facilities 78,000 March 31, 2000
Long Beach, CA................ Warehouse and
distribution
facility 34,328 March 14, 1998
Mt. Prospect, IL.............. Consumer
Service office 3,018 June 30, 1999
Gurnee, IL.................... Retail outlet 1,995 October 18, 1997
North Bergen, NJ.............. Block
warehousing and
distribution
facility 56,000 July 1, 1997
Long Branch, NJ............... Block retail
outlet 1,200 Month-to-month
New York, NY.................. Block office 11,500 December 31, 1996
</TABLE>

Facilities in public warehouses have been used to service the Company's
needs during the last twelve months.

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to various actions and proceedings incident to its
normal business operations. The Company believes that the outcome of such
litigation will not have a material adverse effect on the financial condition or
results of operations of the Company. The Company also has product liability and
general liability insurance policies in amounts it believes 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 it is not insured.

The Company was named as a defendant in DEERFIELD HOUSEWARES, INC. F.K.A.
SALTON, INC. V. SALTON HOUSEWARES, INC. N.K.A. SALTON/MAXIM HOUSEWARES GROUP,
which was filed on or about October 28, 1991 in the Circuit Court of Cook
County, Illinois. The complaint claimed $815,000 in damages from an alleged
failure of the Company to assist in the collection of certain receivables
alleged to have been outstanding at the time of the Company's acquisition of
assets of Salton, Inc. in September, 1988. The Company had filed a counter claim
against Deerfield Housewares, Inc. seeking indemnification of defense costs and
any liability judgments entered against the Company in the ULLMAN-BRIGGS, INC.
V. SALTON/MAXIM HOUSEWARES, INC. lawsuit described below. The case was settled
in June, 1996 for an insignificant amount.

The Company has also been named as a defendant in ULLMAN-BRIGGS, INC. V.
SALTON/MAXIM HOUSEWARES, INC., which was filed on or about November 6, 1991 in
the United States District Court for the District of New Jersey. Ullman Briggs
was awarded a judgment in the amount of approximately $645,641 plus interest
against Salton, Inc. The action alleges that the Company is liable to
Ullman-Briggs for such amount because the sale of assets of Salton, Inc. to the
Company in 1988 was a fraudulent conveyance. The action seeks damages in the
amount of approximately $645,641 plus interest and punitive damages in the
amount of $500,000, and costs and disbursements occasioned as a result of the
action. The Company expects this case to go to trial in calendar year 1996. The
Company believes this action to be without merit.

11
<PAGE> 12

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

(a) The Company held a Special Meeting of Stockholders on July 10, 1996.

(b) Not applicable.

(c) At the Company's Special Meeting of Stockholders, the stockholders
approved the terms of the Company's Stock Purchase Agreement with
Windmere-Durable Holdings, Inc. ("Windmere"), and the transactions
contemplated thereby, including: (i) the issuance and sale by the
Company to Windmere of 6,508,572 shares of newly issued common stock,
par value $.01 per share, of the Company (the "Common Stock") (50% of
the outstanding Common Stock after such issuance) for $3,254,286 in
cash, a promissory note in the amount of $10,847,620 and 748,112 shares
of common stock, par value $.10 per share, of Windmere; and (ii) the
grant to Windmere of the rights, preferences and privileges and
acceptance and performance by the Company of the restrictions and
obligations contained in the Stock Purchase Agreement and the exhibits
thereto, including the Stockholder Agreement and the Registration Rights
Agreement. The aggregate number of votes cast for, against or withhold
for the Stock Purchase Agreement was 4,017,021, 23,929, and 9,475,
respectively.

(d) Not applicable.

EXECUTIVE OFFICERS OF THE REGISTRANT1

The following is a list of the executive officers of the Company. The
executive officers are elected each year and serve at the pleasure of the Board
of Directors.

<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICE HELD
- ------------------------------------------ --- --------------------------------------------------
<S> <C> <C>
Leonhard Dreimann......................... 48 President and Chief Executive Officer
David C. Sabin............................ 46 Chairman of the Board and Secretary
William B. Rue............................ 49 Chief Operating Officer and Senior Vice President
</TABLE>

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

1 The description of Executive Officers called for in this item is included
pursuant to Instruction 3 to Section (b) of Item 401 of Regulation SK.

Set forth below is a brief description of the background of those executive
officers of the Company who are not also Directors of the Company. Information
with respect to the background of those executive officers who are also
Directors of the Company is incorporated herein by reference as set forth in
Part III, Item 10, of the Company's Annual Report on Form 10-K.

WILLIAM B. RUE has served as Chief Operating Officer and Senior Vice
President since December, 1994 and as Chief Financial Officer, Vice President
and Treasurer of the Company since September, 1988. From 1985 to 1988, he was
treasurer of SEVKO, Inc. From 1982 to 1984, he was vice president-finance of
Detroit Tool Industries Corporation. Prior to that time, Mr. Rue had been
employed since 1974 by the accounting firm of Touche Ross & Co.

12
<PAGE> 13

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

The registrant's Common Stock is traded on the NASDAQ National Market under
the symbol "SALT". The following table sets forth the range of high and low bid
prices of the Common Stock for the years ended June 29, 1996 and July 1, 1995 as
reported by the NASDAQ system.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
YEAR ENDED JUNE 29, 1996
First Quarter............................................ 3 3/8 1 5/8
Second Quarter........................................... 4 1/8 2 1/2
Third Quarter............................................ 4 2 1/2
Fourth Quarter........................................... 5 1/4 2 1/4
YEAR ENDED JULY 1, 1995
First Quarter............................................ 2 3/8 1 3/4
Second Quarter........................................... 3 1/2 2
Third Quarter............................................ 4 1/2 2 3/4
Fourth Quarter........................................... 3 5/8 2 1/16
</TABLE>

As of September 18, 1996, there were approximately 462 holders of record of
the common stock of the Company. The Company has paid no dividends on the Common
stock and it is the Company's present intention to retain earnings to finance
the expansion of its business. The Company's current lending agreement further
restricts its ability to pay dividends.

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data presented below for Salton/Maxim Housewares, Inc.
are derived from the Company's audited financial statements. The following
selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the audited financial statements and related notes thereto. (In thousands,
except per share data.)

13
<PAGE> 14

STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
JUNE JUNE JUNE
29, JULY 1, JULY 2, 26, 27,
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net sales.............................. $99,202 $76,991 $48,807 $50,661 $48,699
Cost of sales.......................... 66,923 55,552 37,333 39,814 37,711
Distribution expenses.................. 5,856 4,569 3,412 3,746 3,323
------- ------- ------- ------- -------
Gross profit........................... 26,423 16,870 8,062 7,101 7,665
Selling, general, and administrative
expenses............................. 21,343 13,142 8,470 8,467 9,525
------- ------- ------- ------- -------
Operating income (loss)................ 5,080 3,728 (408) (1,366) (1,860)
Interest expense....................... 3,934 3,057 2,047 1,643 2,258
Class action lawsuit expense........... 489 142 749
------- ------- ------- ------- -------
Income (loss) before taxes............. 1,146 671 (2,944) (3,151) (4,867)
------- ------- ------- ------- -------
Income tax benefit (expense)........... 3,450 (20)
------- ------- ------- ------- -------
Net income (loss)...................... $ 4,596 $ 651 $(2,944) $(3,151) $(4,867)
======= ======= ======= =======
Increase in value of Westinghouse
warrant.............................. 3,286
-------
Net loss to stockholders after
repurchase of warrant................ $(8,153)
=======
Weighted average shares outstanding.... 6,628 5,901 5,050 4,950 4,115
Net income (loss) per share............ $ 0.69 $ 0.11 $ (0.58) $ (0.64) $ (1.18)
Net income (loss) available to
stockholders after repurchase of
warrant.............................. $ 0.69 $ 0.11 $ (0.58) $ (0.64) $ (1.98)
Balance Sheet Data:
Working capital...................... $12,244 $ 9,072 $ 9,290 $10,768 $15,127
Total assets......................... 59,481 41,121 38,635 35,797 40,652
Long-term debt....................... 3,754 900 4,374 974 2,974
Stockholders' equity................. 19,925 15,329 10,736 13,638 16,789
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

FISCAL 1996 COMPARED TO FISCAL 1995

Net sales for the fiscal year ended June 29, 1996 were $99.2 million as
compared to net sales of $77 million for the fiscal year ended July 1, 1995, an
increase of 28.8% or $22.2 million. This increase in sales was primarily
attributable to increased sales of the Breadman(TM) and Juiceman(TM) products.

Gross profit in 1996 was $26.4 million or 26.6% of net sales as compared to
$16.9 million or 21.9% of net sales in 1995. Cost of goods sold decreased during
the period to 67.5% of net sales compared to 72.2% in 1995. Distribution
expenses were approximately $5.9 million or 5.9% of net sales in 1996 as
compared to $4.6 million or 5.9% of net sales in 1995. Freight out expenses
increased to $2.9 million or 3.0% of net sales in 1996 from $2.3 million or 3.0%
of net sales in 1995 due to the increase in net sales. However, gross profit and
cost of goods sold in 1996 as a percentage of net sales were improved primarily
due to a continuing shift towards more favorable mix of sales of higher gross
margin items when compared to 1995.

14
<PAGE> 15

Selling, general and administrative expenses increased to $21.3 million or
21.5% of net sales in 1996 compared to $13.1 million or 17.1% of net sales in
1995. Expenditures for television, certain media and cooperative advertising
coverages of the Company and its products increased about $5.4 million in 1996
compared to 1995. Sales commissions in 1996 were $1.2 million or 1.2% of net
sales compared to $1.2 million or 1.5% of net sales in 1995. Variable costs
associated with selling activities increased to $3.6 million or 3.6% of net
sales in 1996 compared to $1.8 million or 2.4% of net sales in 1995. This
increase is primarily attributable to increases of royalties on sales of
licensed products and selling and administrative costs associated with the
Company's direct television sales programs. All other costs were $6.3 million or
6.4% of net sales in 1996 compared to $5.2 million or 6.8% of net sales in 1995.

Interest expense in 1996 was approximately $3.9 million as compared to $3.1
million a year ago. The Company's rate of interest on amounts outstanding was
a weighted average annual rate of 11.1% in 1996 compared to 11.2% in 1995. The
average amount outstanding under the Company's revolving line of credit
increased about $7.4 million when compared to the average amount outstanding in
the same period a year ago. This and other working capital increases were used
primarily to finance higher net sales and higher levels of inventory and
accounts receivable in 1996 when compared to 1995.

The Company had net income after income taxes of $4.6 million or $0.69 per
share in 1996 compared to net income after income taxes of $651,000 or $0.11 per
share in 1995. The Company accounts for income taxes using the asset and
liability approach prescribed by Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes." The Company has re-assessed the measurement
of deferred tax assets based on available evidence and concluded that these
assets at June 29, 1996 are anticipated to be realized. Accordingly, the Company
released previously recorded valuation allowances which resulted in an income
tax benefit of $3.5 million in 1996 compared to an income tax expense of $20,000
in 1995. Excluding the effect of this income tax benefit, net income after
income taxes would have been $1.1 million in 1996 compared to net income after
income taxes of $651,000 in 1995. Net operating loss carryforwards were used in
1996 and 1995 to significantly offset the income taxes payable. Weighted average
common shares outstanding were 6,628,236 in 1996 and 5,901,133 in 1995.

FISCAL 1995 COMPARED TO FISCAL 1994

Net sales for the fiscal year ended July 1, 1995 were $77 million as
compared to net sales of $48.8 million for the fiscal year ended July 2, 1994,
an increase of 57.8% or $28.2 million. This increase in sales was primarily
attributable to increased sales of the Breadman(TM) bread makers, Juiceman(TM)
juice extractors and the Popeil Pasta Maker(TM). These Salton/Maxim products
commenced shipping in the second half of fiscal 1994.

Gross profit in 1995 was $16.9 million or 21.9% of net sales as compared to
$8.1 million or 16.5% of net sales in 1994. Cost of goods sold decreased during
the period to 72.2% of net sales compared to 76.5% in 1994. Distribution
expenses were approximately $4.6 million or 5.9% of net sales in 1995 as
compared to $3.4 million or 7% of net sales in the same period in 1994.
Distribution costs, as a percentage of net sales, decreased mainly because of
certain costs which were fixed or did not increase in proportion to the increase
in net sales. Freight out expenses increased to $2.3 million or 3.0% of net
sales in 1995 from $1.5 million or 3.1% of net sales in 1994 due to the increase
in net sales. However, gross profit and cost of goods sold in 1995 as a
percentage of net sales were improved primarily due to cost reductions obtained
on certain products and a more favorable mix of sales of higher gross margin
items when compared to 1994.

Selling, general and administrative expenses increased to $13.1 million or
17.1% of net sales in 1995 compared to $8.5 million or 17.4% of net sales in
1994. Advertising expenditures for television, certain media and cooperative
coverages of the Company and its products increased about $2.7 million in 1995
compared to 1994. In 1995, the Company adopted a change in accounting for
advertising costs. This change increased advertising expense and reduced net
income by approximately $553,000. Sales commissions in 1995 were approximately
$287,000 higher than 1994 as a result of the increase in net sales. All other
selling, general and administrative expenses were 9.2% of net sales in 1995
compared to 11.1% last year. This 2.1% decrease was attributable to higher net
sales and certain costs which were fixed or did not increase in proportion to
the increase in net sales.

15
<PAGE> 16

Interest expense in 1995 was approximately $3.1 million as compared to $2.0
million in 1994. The average amount outstanding under the Company's revolving
line of credit increased about $2.6 million when compared to the average amount
outstanding in the same period in 1994. This and other working capital
increases were used primarily to finance higher net sales. The Company's rate of
interest on these amounts outstanding increased to a weighted average annual
rate of about 11.2% in 1995 compared to 8.7% in 1994. In 1995, the Company's
borrowing rate was 2- 1/2% over the prime rate of interest compared to a 2% over
the prime rate in 1994. This borrowing rate increase contributed to the weighted
average annual rate increases, however, the higher weighted average rate is
primarily due to increases in the prime rate of interest during 1995 when
compared to 1994. The remaining increase was mainly the result of the
amortization of purchase discount associated with payments related to the
Breadman(TM) and Juiceman(TM) product line acquisition and amortization of loan
origination fees associated with the Company's new revolving credit agreement.

There was no class action lawsuit settlement expense in 1995 compared to
expense of $489,000 in 1994. The Company completed the settlement process for
its class action lawsuit by issuing 394,520 shares of the Company's common stock
in the third quarter ended April 1, 1995. The issuance of these shares increased
weighted average shares outstanding in 1995, thereby diluting earnings per
share.

The Company had net income before income taxes of $671,000 or $0.11 per
share in 1995 compared to a net loss of $2.9 million or $0.58 per share in 1994.
Net income after income taxes in 1995 was $651,000 or $0.11 per share compared
to a net loss of $2.9 million or $0.58 per share in 1994. Net operating loss
carryforwards were used in 1995 to significantly offset the income taxes
payable. Weighted average common shares outstanding were 5,901,133 in 1995 and
5,050,270 in 1994.

LIQUIDITY AND CAPITAL RESOURCES

In fiscal 1996, the Company used net cash of $3.6 million in operating
activities and net cash of $4.3 million in investing activities. This resulted
primarily from the growth in sales in the period and higher levels of inventory
and receivables, as well as increased investment in capital assets, primarily
tooling. Financing activities provided cash of $7.8 million for these purposes
and for the repayments of subordinated debt and payments for product-line
acquisitions aggregating $1.4 million. At June 29, 1996, the Company had
approximately $24.1 million outstanding as drawings under its revolving line of
credit (the "Facility"). Typically, given the seasonal nature of the Company's
business, the Company's borrowings tend to be the highest in mid-summer to
fall. Under the terms of the Facility, the Company had the ability at June 29,
1996 to borrow a total of approximately $26.7 million. The Company will
continue to incur short-term borrowings in order to finance working capital
requirements. The Company's ability to fund its operating activities is
directly dependent upon its rate of growth, ability to effectively manage its
inventory, the terms under which it extends credit to its customers and its
ability to collect under such terms and its ability to access external sources
of financing. The Company believes that its internally generated funds,
together with funds available under the Facility and other potential external
financing sources, will provide sufficient funding to meet the Company's
capital requirements and its operating needs for at least the next 12 months.
The Company currently has budgeted approximately $2.0 million in capital
expenditures for the fiscal year ending June 28, 1997.

The Company from time to time explores additional or new sources of
financing. While the Company has been able to maintain access to external
financing sources, no assurance can be given that such access will continue or
that the Company will be successful in obtaining new or replacement sources of
financing.

On September 19, 1995, the Company and its lender amended the Facility to
increase the Facility from $25,000,000 to $45,000,000 on substantially the same
terms as the old Facility. The new Facility has a stated maturity date of
September 30, 1997, whereupon it can be renewed successively on an annual basis.
The Company paid a one time closing fee of $200,000 to the lender for the new
Facility. Further, since the Company achieved minimum operating income of at
least $3,000,000 for the year ended July 1, 1995, the new Facility has an
interest rate per annum of 2% over the prime rate.

16
<PAGE> 17

Common Stock (the "Purchase"), which represented 50% of the outstanding shares
of Common Stock of the Company on February 27, 1996 after giving effect to the
Purchase. As consideration for the Purchase, Windmere paid the Company: (i)
$3,254,286 in cash, as described below; (ii) a subordinated promissory note in
the aggregate principal amount of $10,847,620 (the "Note"), which Note is
secured by certain assets of Windmere and its domestic subsidiaries and
guaranteed by such domestic subsidiaries; and (iii) 748,112 shares of Windmere's
common stock. Windmere's common stock is traded on the NYSE. The cash portion of
the consideration for the Purchase was paid by the cancellation of the Company's
obligation to repay a loan in the principal amount of $3,254,286 which Windmere
had made to the Company in April 1996. The Note is payable five years from the
closing date of the purchase and bears interest at 8% per annum payable
quarterly. Windmere was also granted an option to purchase up to 485,000 shares
of Common Stock at $4.83 per share, which option is exercisable only if and to
the extent that options to purchase shares of Common Stock which were
outstanding on February 27, 1996 are exercised.

On July 1, 1996, the Company acquired substantially all of the assets and
certain liabilities of Block China Corporation. Block China designs and markets
table top products, including china, crystal and glassware. The consideration
paid by the Company consisted of $1,485,000 in cash and a warrant to purchase
25,000 shares of Common Stock with an exercise price equal to the fair market
value of the Common Stock on the closing date of the acquisition. The
consideration also included an earn-out of up to $500,000 and 150,000 shares of
Common Stock based on Block China's financial performance over a three-year
period.

ACCOUNTING PRONOUNCEMENTS

The Company's trade names and, in some instances, specific products, are
promoted from time to time through television and print media advertising
purchased directly by the Company. During fiscal year 1995, the Company adopted
Statement of Position 93-7, "Reporting on Advertising Costs," issued by the
American Institute of Certified Public Accountants. This statement requires the
Company to recognize advertising and promotion costs as expense in the period
incurred. Prior to fiscal year 1995, such costs were generally deferred and
amortized over the period of anticipated promotional benefit, not exceeding 24
months.

The effect of this accounting change was to decrease net income and net
income per common and common equivalent share by approximately $1,374,000 and
$0.21, respectively, for the year ended June 29, 1996 and $553,000 and $0.09,
respectively, for the year ended July 1, 1995.

The Company will be required to adopt Statement of Financial Accounting
Standards ("SFAS") No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of" and SFAS No. 123 "Accounting for
Stock-Based Compensation" in fiscal year 1997. The Company believes that the
adoption of these statements will not have a material effect on the Company's
financial statements.

EFFECTS OF INFLATION AND FOREIGN CURRENCY EXCHANGE

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following pages contain the Financial Statements and Supplementary Data
as specified by Item 8 of Part II of Form 10-K.

17
<PAGE> 18
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Salton/Maxim Housewares, Inc.
Mount Prospect, Illinois

We have audited the accompanying balance sheets of Salton/Maxim Housewares, Inc.
as of June 29, 1996 and July 1, 1995 and the related statements of operations,
of stockholders' equity and of cash flows for each of the three years in the
period ended June 29, 1996. Our audits also included the financial statement
schedule listed in the Index at Item 14 of the Annual Report on Form 10-K. These
financial statements and the financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Salton/Maxim Housewares, Inc. as of June 29,
1996 and July 1, 1995 and the results of its operations and its cash flows for
each of the three years in the period ended June 29, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.

As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for advertising costs in 1995.

Deloitte & Touche LLP

September 20, 1996
Chicago, Illinois

18
<PAGE> 19

SALTON/MAXIM HOUSEWARES, INC.

BALANCE SHEETS
JUNE 29, 1996 AND JULY 1, 1995

<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.......................................................... $ 3,983 $ 5,849
Accounts receivable, less allowance:
1996--$1,900,000; 1995--$1,900,000......................... 15,870,626 13,475,451
Inventories................................................... 28,287,965 19,440,832
Prepaid expenses and other current assets..................... 1,934,006 1,041,664
Deferred tax assets........................................... 1,949,315 --
---------- ----------
Total current assets 48,045,895 33,963,796
PROPERTY, PLANT AND EQUIPMENT:
Molds and tooling............................................. 12,373,478 8,412,410
Warehouse equipment........................................... 296,168 277,015
Office furniture and equipment................................ 1,929,683 1,650,250
---------- ----------
14,599,329 10,339,675
Less accumulated depreciation................................. (8,367,736) (6,784,559)
---------- ----------
6,231,593 3,555,116
INTANGILES, NET OF ACCUMULATED AMORTIZATION................... 3,670,533 3,602,232
NON-CURRENT DEFERRED TAX ASSETS............................... 1,533,069
TOTAL ASSETS.................................................... $59,481,090 $41,121,144
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit...................................... $24,095,382 $17,860,444
Accounts payable.............................................. 10,057,195 5,407,169
Accrued expenses.............................................. 1,164,851 618,636
Accrued interest payable...................................... 67,932 8,726
Current portion--Subordinated Debt............................ 416,669 600,000
Other current liabilities .................................... -- 396,878
---------- ----------
Total current liabilities 35,802,029 24,891,853
LONG-TERM PORTION SUBORDINATED DEBT............................. 500,000 900,000
DUE TO WINDMERE................................................. 3,254,286
Total Liabilities.......................................... 39,556,315 25,791,853
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized,
2,000,000 shares, no shares issued
Common Stock, $.01 par value; authorized,
20,000,000 shares; shares issued and outstanding:
1996--6,508,572; 1995--6,508,572........................... 65,086 65,086
Additional paid-in capital.................................... 29,292,946 29,292,946
Accumulated deficit........................................... (9,433,257) (14,028,741)
---------- ----------
Total stockholders' equity 19,924,775 15,329,291
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................... $59,481,090 $41,121,144
=========== ===========
</TABLE>

See notes to financial statements.

19
<PAGE> 20

SALTON/MAXIM HOUSEWARES, INC.

STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 29, 1996, JULY 1, 1995 AND JULY 2, 1994

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net sales........................................... $99,202,415 $76,991,270 $48,807,136
Cost of goods sold.................................. 66,923,141 55,551,782 37,332,662
Distribution expenses............................... 5,856,477 4,569,681 3,412,533
----------- ----------- -----------
Gross profit........................................ 26,422,797 16,869,807 8,061,941
Selling, general and administrative expenses........ 21,342,872 13,142,207 8,470,268
----------- ----------- -----------
Operating income (loss)............................. 5,079,925 3,727,600 (408,327)
Interest expense.................................... 3,934,325 3,056,570 2,046,385
Class action lawsuit expense........................ 489,000
----------- ----------- -----------
Income (loss) before income taxes................... 1,145,600 671,030 (2,943,712)
Income tax benefit (expense)........................ 3,449,884 (20,000)
----------- ----------- -----------
Net income (loss)................................... $ 4,595,484 $ 651,030 $(2,943,712)
=========== =========== ===========
Weighted average common and common equivalent shares
outstanding....................................... 6,628,236 5,901,133 5,050,270
Net income (loss) per common and common equivalent
share:
Net income (loss)................................. $ 0.69 $ 0.11 $ (0.58)
</TABLE>

See Notes To Financial Statements

SALTON/MAXIM HOUSEWARES, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED JUNE 29, 1996, JULY 1, 1995, AND JULY 2, 1994

<TABLE>
<CAPTION>
TOTAL
ADDITIONAL ACCUMULATED STOCKHOLDER'S
SHARES COMMON STOCK PAID-IN CAPITAL DEFICIT EQUITY
--------- ------------ --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 26, 1993........ $4,950,000 $ 49,500 $25,324,292 $(11,736,059) $ 13,637,733
Loan guarantee shares issued
to Mesirow/Duquesne...... 150,000 1,500 40,583 42,083
Net loss for fiscal 1994.... (2,943,712) (2,943,712)
---------- -------- ----------- ----------- ------------
BALANCE, JULY 2, 1994......... 5,100,000 51,000 25,364,875 (14,679,771) 10,736,104
Class action lawsuit
settlement............... 394,520 3,945 896,055 900,000
Conversion of subordinated
debt and related accrued
interest to equity....... 1,014,052 10,141 3,032,016 3,042,157
Net income for fiscal
1995..................... 651,030 651,030
---------- -------- ----------- ----------- ------------
BALANCE, JULY 1, 1995......... 6,508,572 65,086 29,292,946 (14,028,741) 15,329,291
Net income for fiscal
1996..................... 4,595,484 4,595,484
---------- -------- ----------- ----------- ------------
BALANCE, JUNE 29, 1996........ $6,508,572 $ 65,086 $29,292,946 $(9,433,257) $ 19,924,775
========== ======== =========== =========== ============
</TABLE>

See notes to financial statements.

20
<PAGE> 21

SALTON/MAXIM HOUSEWARES, INC.

STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 29, 1996, JULY 1, 1995 AND JULY 2, 1994

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss)................................. $4,595,484 $ 651,030 $(2,943,712)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Change in deferred taxes........................ (3,482,384)
Depreciation and amortization................... 2,195,510 1,986,369 1,549,787
Noncash class action lawsuit expense............ 489,000
Noncash loan guarantee expense.................. 42,083
Changes in assets and liabilities:
Accounts receivable.......................... (2,395,175) (2,323,909) (1,937,516)
Inventories.................................. (8,847,133) 617,614 1,382,509
Prepaid expansion and other current assets... (892,342) 562,545 (306,860)
Accounts payable............................. 4,650,026 2,056,488 (44,885)
Accrued expenses............................. 546,215 39,134 182,131
Accrued class action lawsuit settlement
fees....................................... (100,000) (5,705)
Accrued interest............................. 59,206 44,186 224,033
---------- --------- ---------
Net cash provided by (used in) operating
activities............................ (3,570,593) 3,533,457 (1,369,135)
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................ (4,279,838) (2,327,490) (404,930)
---------- --------- ---------
Net cash used in investing activities... (4,279,838) (2,327,490) (404,930)
---------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from revolving line of credit...... 6,234,938 1,071,384 2,221,817
Repayment of subordinated note payable to
bank......................................... (583,331)
Proceeds from subordinated debt and due to
Windmere..................................... 3,254,286 1,000,000
Payment for product line acquisitions........... (814,939) (2,529,571) (447,752)

Financing costs................................. (242,389) (743,431)
---------- --------- ---------

Net cash provided by (used in) financing
activities............................ 7,848,565 (1,201,618) 1,774,065
---------- --------- ---------

NET INCREASE (DECREASE) IN CASH................... (1,866) 4,349
CASH -- Beginning of Period....................... 5,849 1,500 1,500
---------- --------- ---------
CASH -- End of Period............................. $ 3,983 $ 5,849 $ 1,500
========== ========== ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest..................................... $3,510,123 $2,780,008 $1,651,397
Income taxes................................. 10,000 20,000 (14,400)
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
A long-term debt obligation of $3,121,000 was
incurred in conjunction with a product-line
acquisition in fiscal 1994.
</TABLE>

See notes to financial statements.

21
<PAGE> 22

SALTON/MAXIM HOUSEWARES, INC.

NOTES TO FINANCIAL STATEMENTS

Years ended June 29, 1996, July 1, 1995 and July 2, 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Salton/Maxim Housewares, Inc. ("SMHI" or the "Company") principally
imports, distributes and sells small electrical appliances for the home through
major retail markets and direct marketing distribution channels in the United
States.

USE OF ESTIMATES -- In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.

ACCOUNTING PERIOD -- The Company's fiscal year ends on the Saturday closest
to June 30. The fiscal years ended June 29, 1996 and July 1,1995
consisted of 52 weeks. The year ended July 2, 1994 consisted of 53 weeks.

INVENTORIES -- Inventories are stated at the lower of cost or market. Cost
is determined on the first-in, first-out basis.

PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated
at cost. Expenditures for maintenance costs and repairs are charged against
income. Depreciation is provided on the straight-line basis over the estimated
useful lives of the assets, not to exceed 5 years. For tax purposes, assets are
depreciated using accelerated methods.

INTANGIBLE ASSETS -- Intangible assets, which are amortized over their
estimated useful lives, consist of:

<TABLE>
<CAPTION>
USEFUL LIFE JUNE 29, JULY 1,
(IN YEARS) 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Goodwill................................................ 40 $ 295,238 $ 308,789
Financing and organization costs........................ 2-5 411,129 519,449
Patents and trademarks.................................. 5-20 2,964,166 2,773,994
--------- ---------
Intangible assets, net.................................. $3,670,533 $3,602,232
========== ==========

</TABLE>

Accumulated amortization of intangible assets was $2,951,087 at June 29,
1996, and $2,338,755 at July 1, 1995.

REVENUE RECOGNITION -- The Company recognizes revenues when goods are
shipped to its customers.

DISTRIBUTION EXPENSES -- Distribution expenses consist primarily of
freight, warehousing, and handling cost of goods sold.

ADVERTISING -- The Company sponsors various programs under which it
participates in the cost of advertising and other promotional efforts for
Company products undertaken by its retail customers. Advertising and promotion
costs associated with these programs are recognized in the period in which the
advertising or other promotion is performed by the retailer.

The Company's tradenames and, in some instances, specific products, also
are promoted from time to time through television and print media advertising
purchased directly by the Company. During fiscal year 1995, the Company adopted
Statement of Position 93-7, "Reporting on Advertising Costs," issued by the
American Institute of Certified Public Accountants. This statement requires the
Company to recognize advertising and promotion costs as expense in the period
incurred. Prior to fiscal year 1995, such costs were generally deferred and
amortized over the period of anticipated promotional benefit, not exceeding 24
months. The effect of this accounting change was to decrease net income and net
income per common and common equivalent share by approximately $1,374,000 and
$.21 in fiscal year 1996 and $553,000 and $0.09 in fiscal year 1995
respectively.

22
<PAGE> 23

INCOME TAXES -- The Company accounts for income taxes using the asset and
liability approach prescribed by Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." The measurement of deferred tax
assets is reduced, if necessary, by the amount of any tax benefits that, based
on available evidence, management does not expect to be realized.

NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE -- Net income per common
share is computed based upon the weighted average number of common and common
equivalent shares (which include stock options) outstanding. Net loss per common
share excludes the effect of antidilutive stock options.

ACCOUNTING PRONOUNCEMENTS -- The Company will be required to adopt
Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" and
SFAS No. 123 "Accounting for Stock-Based Compensation" in fiscal year 1997. The
Company believes that the adoption of these statements will not have a material
effect on the Company's financial statements.

2. REVOLVING LINE OF CREDIT AND LETTERS OF CREDIT

The Company has a $45,000,000 revolving line of credit (the "Facility")
with a commercial lender (the "Lender"). The Facility is secured by a first lien
on substantially all the Company's assets. Credit availability is based on a
formula related to trade accounts receivable, inventories and outstanding
letters of credit. Borrowings under the Facility bear interest at 2% over the
Lender's established prime rate, but in no event less than 7.75% per annum,
payable monthly. The Facility contains restrictive financial covenants, the more
significant of which require the Company to maintain specified ratios of debt to
net worth, minimum tangible net worth, working capital and minimum current
ratio. Other covenants also limit the Company's activities in mergers or
acquisitions and sales of substantial assets. Compliance with these covenants
effectively restricts the ability of the Company to pay dividends, and also
requires the Company to apply cash receipts to pay down borrowings under the
Facility. The Company received a waiver at June 29, 1996 from the Lender for
having capital expenditures in fiscal 1996 in excess of permitted amounts.
The Facility has a stated maturity date of September 30, 1997, whereupon it can
be renewed successively on an annual basis.

Information regarding short-term borrowings under revolving lines of credit
is as follows:

<TABLE>
<CAPTION>
JUNE 29, JULY 1,
1996 1995
---------- ----------
<S> <C> <C>
Balance at end of fiscal period................................... $24,095,382 $17,860,444
Interest rate at end of fiscal period............................. 10.25% 11.50%
Maximum amount outstanding at any month-end....................... $37,494,590 $26,075,490
Average amount outstanding........................................ $25,891,256 $18,501,208
Weighted average interest rate during fiscal period............... 11.1% 11.2%
Outstanding letters of credit at end of fiscal period............. $1,242,335 $1,482,605
</TABLE>

3. SUBORDINATED DEBT AND DUE TO WINDMERE

SUBORDINATED DEBT

The Company had a $1,000,000 promissory note payable at the prime rate of
interest to a bank. The note is subordinated to the commercial lender and is
secured by subordinated liens on substantially all of the Company's assets. It
is to be paid in twelve equal monthly installments commencing on January 1,
1996, and is guaranteed by certain stockholders and officers of the Company. At
June 29, 1996, approximately $417,000 remained outstanding under the note.

As of July 2, 1994, the Company had 10% subordinated notes payable
aggregating $500,000 outstanding in equal amounts to Allied Capital Corporation
and Financo-Maxim, Inc. (the "holders"). The holders agreed to a standstill
period on June 30, 1993, in which the Company is prohibited from making
principal payments on the notes payable. During the standstill period, the
holders are required to refrain from accelerating the maturity of all or any
portion of the indebtedness represented by their respective debt instruments.
The notes have an effective maturity date of September 1, 1997.

23
<PAGE> 24

On February 24, 1995, the Company redeemed certain of the 10% Subordinated
Debentures due September 1, 1996 (the "Subordinated Debentures") with a face
amount of $1,750,000 (and accrued interest of $364,864) held by Dominator
Investors Group ("Dominator") in exchange for 704,955 shares of Common Stock of
the Company; and $723,916 of the Financo-Maxim, Inc. 10% subordinated note
payable (the "Note") (and $203,376 of accrued interest thereon) held by Financo
Investors Fund, L.P. ("Financo Fund"), in exchange for 309,097 shares of Common
Stock of the Company.

Dominator, which is controlled by the Company's President and its Chief
Operating Officer, had acquired the Subordinated Debentures and 964,965 shares
of Common Stock of the Company from various affiliates of Mesirow Financial in
December, 1994. The Financo-Maxim, Inc. Subordinated Note held by Financo Fund,
a significant stockholder of the Company, had an original principal amount of
$973,916, which was reduced to $250,000 in connection with the redemption by the
Company on February 24, 1995.

Annual maturities of subordinated debt are as follows:

<TABLE>
<S> <C>
Fiscal year ending:
1997.......................................................................... $416,669
1998.......................................................................... 500,000
Total........................................................................... $916,669
</TABLE>

DUE TO WINDMERE

Windmere-Durable Holdings, Inc. ("Windmere") and the Company entered into a
loan agreement dated April 8, 1996 pursuant to which Windmere loaned $3,254,286
to the Company (the "Loan"). The principal balance of the Loan, together with
all interest accrued thereon at 8% per annum, was due and payable upon the
closing of the transaction (the "Windmere Transaction") described in Note 12
"Subsequent Events" on July 11, 1996; provided, however, that upon the request
of the Company, Windmere agreed that the $3,254,286 cash portion of the
consideration payable by Windmere in the Windmere Transaction would be applied
against the total amount outstanding and due under the Loan.

On July 11, 1996, the Company requested that the cash portion of the
Windmere Transaction be applied to the Loan, thereby effectively canceling the
Loan. In addition, the Company paid Windmere approximately $54,000 in interest
at that date under the Loan.

4. CAPITAL STOCK

The Company has authorized 20,000,000 shares of $.01 par value common
stock. At June 29, 1996 and July 1, 1995, there were 6,508,572 shares issued and
outstanding. As more fully described in Note 12 "Subsequent Events" on July 11,
1996, the Company consummated the Windmere Transaction pursuant to that certain
Stock Purchase Agreement dated February 27, 1996, as amended (the "Stock
Purchase Agreement"). Pursuant to the Stock Purchase Agreement, Windmere
purchased from the Company 6,508,572 newly issued shares of common stock which
represented 50% of the outstanding shares of common stock of the Company on
February 27, 1996 after giving effect to the transaction.

The Company has authorized 2,000,000 shares of $.01 par value preferred
stock. To date, no shares of preferred stock have been issued. The preferred
stock may be issued from time to time in one or more series. The Board of
Directors is authorized to determine the rights, preferences, privileges, and
restrictions, including dividend rights, conversion rights, voting rights, terms
of redemption (including sinking fund provisions, if any), and liquidation,
granted to and imposed upon any wholly unissued series of preferred stock and to
fix the number of shares of any series of preferred stock and the designation of
any such series, without any vote or action by stockholders.

On September 14, 1993, the Company and a bank amended the revolving credit
agreement to provide for a seasonal overadvance facility (the "Overadvance
Facility") through January 31, 1994 of up to $2,000,000. The Overadvance
Facility was guaranteed by Duquesne Financial Corporation ("Duquesne") and
Mesirow Capital Partners V ("Mesirow"), which at the time were each affiliates
of major stockholders of the Company. In consideration for the guarantees, on

24
<PAGE> 25

October 27, 1993, the Company agreed to issue 75,000 shares of
restricted common stock each to Duquesne and Mesirow.

The Company issued 394,520 shares of Common Stock in the third quarter of
1995 to complete the settlement process of various class action lawsuits arising
out of the Company's initial public offering in 1991.

As more fully described in Note 3, on February 24, 1995, the Company
redeemed and converted to equity Subordinated Debentures of the Company with a
face amount of $1,750,000 and accrued interest of $364,864 held by Dominator
Investors Group in exchange for 704,955 shares of Common Stock of the Company;
and $723,916 of the Financo-Maxim, Inc. 10% subordinated note payable and
$203,376 of accrued interest thereon held by Financo Investors Fund, L.P.
("Financo Fund"), in exchange for 309,097 shares of Common Stock of the Company.

In connection with the Company's redemption of the Subordinated Debentures
and $723,916 of the Subordinated Note, the Company registered under the
Securities Act of 1933 the shares issued to each of Dominator and Financo Fund.

5. STOCK OPTION PLAN

On December 20, 1995, the stockholders approved and adopted the
Salton/Maxim Housewares, Inc. 1995 Employee Stock Option Plan (the "1995 Stock
Option Plan"). The 1995 Stock Option Plan replaced the 1992 Stock Option Plan.
Under the 1992 plan, 465,000 shares of common stock were reserved for issuance
upon exercise of stock options. Options to purchase 271,000 shares of common
stock were outstanding under the 1992 plan at a weighted average exercise price
of $6.66 per share. The termination of the 1992 plan had no effect on the
options outstanding on the termination date.

The maximum number of shares of common stock that may be issued under the
1995 Stock Option Plan is 400,000. Unexercised options that expire or terminate
for any reason without having been exercised in full (including a cancellation
and regrant of an option) become again available for other awards under the
stock option plan. There are 210,000 options outstanding which became
immediately exercisable under this plan as a result of the Windmere Transaction
at an exercise price of $2.50 per share to the Company's executive officers.

There have been no stock options exercised under these plans.

The compensation committee of the Board of Directors administers and
interprets the 1995 Stock Option Plan and is authorized to grant options
thereunder to employees (including officers) or consultants to the Company. The
exercise price of each incentive stock option granted under the 1995 Stock
Option Plan must be at least equal to the fair market value of the underlying
common stock on the date the incentive stock option is granted, and no incentive
stock option may be exercisable later than ten years from the date of grant.
However, the exercise price of an incentive stock option granted to an employee
who owns stock possessing more than 10% of the voting power of the Company's
outstanding stock must be at least equal to 110% of the fair market value of the
common stock on the date of grant, and the maximum term of such an option may
not exceed five years. The exercise price of all nonqualified stock options
granted under the 1995 Stock Option Plan must be at least equal to 85% of the
fair market value of the underlying shares of common stock on the date of grant.

6. NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN

On December 20, 1995, the stockholders approved and adopted the
Salton/Maxim Housewares, Inc. Non-Employee Directors Stock Option Plan (the
"Directors Plan"). Under the Directors Plan, each year on the date of the
Company's annual meeting of stockholders, the Company will grant options to
purchase 2,000 shares of common stock to each member of the Board of Directors
who is not an employee of the Company or any of its subsidiaries. The exercise
price of each option will be 100% of the fair market value of the Common Stock
on the grant date.

Each option has a term of ten years from its grant date and vests and
becomes exercisable on the first anniversary of the grant date. Any option that
has become exercisable remains exercisable for one year after a grantee ceases
to be a director, but not beyond the ten year term of the option.

25
<PAGE> 26

A maximum of 60,000 shares of Common Stock are available for awards under
the Director's Plan subject to anti-dilution adjustments. On December 20, 1995,
option grants aggregating 4,000 shares of common stock were issued at an
exercise price of $3-7/16 under the Directors Plan.

7. RELATED PARTY TRANSACTIONS

During fiscal year 1996, the Company recorded sales to Duquesne Financial
Corporation ("Duquesne") of approximately $919,000. The Chairman of the Company
is an executive officer of Duquesne. As of June 29, 1996, the Company owed
Duquesne approximately $256,000 related to inventory purchases and Duquesne owed
the Company approximately $220,000 with respect to the sales to it.

The Company recorded inventory purchases and commissions with Markpeak,
Ltd., a Hong Kong company, of $10,233,239 and $739,152, respectively in 1996,
$8,314,309 and $563,120, respectively in 1995, and $3,812,768 and $270,774,
respectively in 1994. At June 29, 1996, the Company owed Markpeak, Ltd. $557,330
for current charges. A director of the Company is the Managing Director of
Markpeak, Ltd.

The Company purchased inventory from Durable Electrical Metal Factory,
Ltd., a wholly owned subsidiary of Windmere of $3,199,649, $2,088,811 and
$1,251,213 in 1996, 1995 and 1994, respectively. The Company owed Durable
$558,443 at June 29, 1996 for current charges.

The Company paid Shapiro, Devine and Craparo, Inc. ("SDC"), a manufacturers
representation firm, commissions of $160,279 and $195,580 in 1996 and 1995,
respectively. A director of the Company was a co-founder of SDC. At June 29,
1996, the Company owed SDC $32,671 for current commissions.

8. COMMITMENTS AND CONTINGENCIES

The Company leases certain facilities and equipment under long-term
operating leases. Rental expense under all leases was $665,208, $633,387 and
$742,922, for the fiscal periods ended June 29, 1996, July 1, 1995, and July 2,
1994, respectively.

The future minimum rental commitments as of June 29, 1996 were as follows:

<TABLE>
<S> <C>
Fiscal Year Ending
1997........................................................................... $ 678,581
1998........................................................................... 611,914
1999........................................................................... 481,912
2000........................................................................... 96,198
---------
Total.......................................................................... $1,868,605
=========
</TABLE>

The Company has employment agreements with its three executive officers
which are in effect until December 15, 1997.

The Company has license agreements with White Consolidated Industries,
Inc., which require minimum royalty payments through the year 2011.

9. LEGAL PROCEEDINGS

The Company was named as defendant in a suit brought by the original seller
of Salton's assets to the Company. The complaint claimed $815,000 in damages
from an alleged failure of the Company to assist in the collection of certain
receivables alleged to have been outstanding at the time of the Company's
acquisition of assets of Salton, Inc. in September 1988. The Company settled
this lawsuit in June, 1996 for an insignificant amount.

The Company has also been named as a defendant in a suit brought by a
former sales representative of Salton, Inc. the seller of assets to the Company
in 1988. The plaintiff was awarded a judgment in the amount of approximately
$645,641 plus interest against Salton, Inc. The action alleges that the Company
is liable to the plaintiff for such amount because the sale of assets of Salton,
Inc. to the Company in 1988 was a fraudulent conveyance. The action seeks
damages in the amount of approximately $645,641 plus interest and punitive
damages in the amount of $500,000, and costs and disbursements occasioned as a
result of the action. The Company expects the case to go to trial in fiscal year
1997 and believes this action to be without merit.

26
<PAGE> 27

The Company is a party to various other legal actions and proceedings
incident to its normal business operations. Management believes that the outcome
of all the Company's litigation will not have a material adverse effect on its
financial condition or results of operations.

10. MAJOR CUSTOMERS

The Company's net sales in the aggregate to its five largest customers
during the fiscal years ended June 29, 1996, July 1, 1995 and July 2, 1994 were
55%, 52% and 55% of total net sales in these periods, respectively. One customer
accounted for 15%, 11% and 18% of total net sales during the fiscal years ended
June 29, 1996, July 1, 1995 and July 2, 1994, respectively. Another customer
accounted for 13%, 15% and 14%, respectively, over the same fiscal years.

Although the Company has long-established relationships with many of its
customers, the Company does not have long-term contracts with any of its
customers. A significant concentration of the Company's business activity is
with department stores, upscale mass merchandisers, specialty stores, and
warehouse clubs whose ability to meet their obligations with the Company is
dependent upon prevailing economic conditions within the retail industry.

11. INCOME TAXES

At June 29, 1996, deferred taxes based upon differences between the
financial statement and tax bases of assets and liabilities and available tax
carryforwards consisted of:

<TABLE>
<S> <C>
Allowance for doubtful accounts................................................ $ 776,340
Depreciation and amortization.................................................. (759,000)
Other deferred items, net...................................................... (208,282)
Net operating loss carry-forwards.............................................. 2,659,323
Inventory reserves and capitalization.......................................... 1,014,003
---------
Total.......................................................................... $3,482,384
=========
</TABLE>

The Company has re-assessed the measurement of deferred tax assets based on
available evidence and concluded that a valuation allowance is presently
unnecessary. Accordingly, the valuation allowance of $3,463,066 was eliminated
in the fourth quarter of fiscal 1996.

The Company has net loss carry-forwards at June 29, 1996 expiring as
follows:

<TABLE>
<CAPTION>
YEAR CARRY-FORWARD EXPIRES AMOUNT
- --------------------------------------------------------------------------------- ---------
<S> <C>
2007............................................................................. $1,321,000
2008............................................................................. 2,336,000
2009............................................................................. 2,851,000
---------
Total............................................................................ $6,508,000
=========
</TABLE>

As a result of certain transactions, beginning in fiscal 1997, the
Company's ability to utilize its net operating loss carryforwards to offset
otherwise taxable income will be limited annually under Internal Revenue Code
Section 382. The amount of such annual limitation will be approximately
$2,000,000.

A reconciliation of the statutory federal income tax rate to the effective
rate was as follows:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------
JUNE 29, JULY 1, JULY 2,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Statutory federal income tax rate (benefit)...................... 35.0% 35.0% (35.0)%
Utilization of operating loss carryforwards...................... (29.8)% (32.0)%
Change in valuation allowance.................................... (296.9)% 35.0%
Other............................................................ (9.4)% % %
-------- ------- ------
Effective income tax rate........................................ (301.1)% 3.0% %
======== ======= ======

</TABLE>

27
<PAGE> 28

12. SUBSEQUENT EVENTS

On July 11, 1996, the Company consummated its previously announced
transaction with Windmere-Durable Holdings, Inc., pursuant to the Stock Purchase
Agreement. Windmere is a corporation engaged principally in manufacturing and
distributing a wide variety of personal care products and household appliances.
Pursuant to the Stock Purchase Agreement, Windmere purchased from the Company
6,508,572 newly issued shares of Common Stock (the "Purchase"), which
represented 50% of the outstanding shares of Common Stock of the Company on
February 27, 1996 after giving effect to the Purchase. As consideration for the
purchase, Windmere paid the Company: (i) $3,254,286 in cash, as described below;
(ii) a subordinated promissory note in the aggregate principal amount of
$10,847,620 (the Note), which Note is secured by certain assets of Windmere and
its domestic subsidiaries and guaranteed by such domestic subsidiaries; and
(iii) 748,112 shares of Windmere's common stock. Windmere's common stock is
traded on the NYSE. The cash portion of the consideration for the Purchase was
paid by the cancellation of the Company's obligation to repay the loan in the
principal amount of $3,254,286 which Windmere had made to the Company in April
1996. The Note is payable five years from the closing date of the purchase and
bears interest at 8% per annum payable quarterly. Windmere was also granted an
option to purchase up to 485,000 shares of Common Stock at $4.83 per share,
which option is exercisable only if and to the extent that options to purchase
shares of Common Stock which were outstanding on February 27, 1996 are
exercised.

The Stockholder Agreement also contains provisions which, subject to
specified time periods and exceptions, restrict the disposition by Windmere of
shares of Common Stock and restrict purchases by Windmere of additional shares
of Common Stock that would increase its percentage ownership interest. Subject
to the foregoing restrictions on disposition of shares, the Registration
Agreement gives Windmere certain demand and piggyback registration rights with
respect to its shares of Common Stock.

28
<PAGE> 29

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE

None

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item 10 as to the Directors of the Company
is incorporated herein by referenced to the information set forth under the
caption "Election of Directors" in the Company's definitive Proxy Statement for
the 1996 Annual Meeting of Stockholders, since such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the end of the Company's fiscal year pursuant to Regulation 14A. Information
required by this Item 10 as to the executive officers of the Company is included
in Part I of this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item 11 is incorporated by reference to
the information set forth under the caption "Compensation of Directors and
Executive Officers" in the Company's definitive Proxy Statement for the 1996
Annual Meeting of Stockholders, since such Proxy Statement will be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the Company's fiscal year pursuant to Regulation 14A.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item 12 is incorporated by reference to
the information set forth under the caption "Stock Ownership of Principal
Holders and Management" in the Company's definitive Proxy Statement for the 1996
Annual Meeting of Stockholders, since such Proxy Statement will be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the Company's fiscal year pursuant to Regulation 14A.

ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS

The information required by this Item 13 is incorporated by reference to
the information set forth under the caption "Certain Transactions" in the
Company's definitive Proxy Statement for the 1996 Annual Meeting of
Stockholders, since such Proxy Statement will be filed with the Securities and
Exchange Commission not later than 120 days after the end of the Company's
fiscal year pursuant to Regulation 14A.

29
<PAGE> 30

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON REPORT 8-K

(a)(1) FINANCIAL STATEMENTS

The following Financial Statements of the registrant and its subsidiaries
are included in Part II, Item 8:

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................................. 18
Balance Sheets June 29, 1996 and July 1, 1995................................ 19
Statements of Operations for the Years Ended June 29, 1996, July 1, 1995 and
July 2, 1994............................................................... 20
Statements of Stockholders' Equity for the Years Ended June 29, 1996, July 1,
1995 and July 2, 1994...................................................... 20
Statements of Cash Flows for the Years Ended June 29, 1996, July 1, 1995 and
July 2, 1994............................................................... 21
Notes to the Financial Statements............................................ 22
</TABLE>

(a)(2) FINANCIAL STATEMENTS SCHEDULES

The following Financial Statement Schedules of the Registrant are included
in Item 14 hereof.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule VIII-Valuation and Qualifying Accounts.............................. 32
</TABLE>

All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.

(a)(3) EXHIBITS

(b) No reports on Form 8-K were filed during the quarter ended June 29,
1996.
30
<PAGE> 31

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 on the 26th day of
September, 1996.

SALTON/MAXIM HOUSEWARES, INC.

By: /s/ LEONHARD DREIMANN
Leonhard Dreimann
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on September 26, 1996:

<TABLE>
<CAPTION>
SIGNATURE
- -------------------------------------
<C> <S>
/s/ LEONHARD DREIMANN President, Chief Executive Officer and Director
- ------------------------------------- (Principal Executive Officer)
Leonhard Dreimann

/s/ WILLIAM B. RUE Senior Vice President, Chief Operating Officer,
- ------------------------------------- Treasurer and Chief Financial Officer (Principal
William B. Rue Accounting and Financial Officer)

/s/ DAVID C. SABIN
- ------------------------------------- Director
David C. Sabin

/s/ FRANK DEVINE Director
- -------------------------------------
Frank Devine

/s/ BERT DOORNMALEN Director
- -------------------------------------
Bert Doornmalen

/s/ DAVID M. FRIEDSON Director
- -------------------------------------
David M. Friedson

/s/ HARRY D. SCHULMAN Director
- -------------------------------------
Harry D. Schulman

Director
- -------------------------------------
Laurence S. Chud, M.D.

Director
- -------------------------------------
James Connolly
</TABLE>

31
<PAGE> 32

The following page contains the Financial Statement Schedules as specified
by Item 14(a)(2) of Part IV of Form 10-K. The report of Deloitte & Touche LLP
thereon appears at page 18 of this Form 10-K.

SALTON/MAXIM HOUSEWARES, INC.

VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED JUNE 29, 1996

<TABLE>
<CAPTION>
CHARGED TO
BEGINNING COSTS AND ENDING
BALANCE EXPENSES DEDUCTIONS BALANCE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED JULY 2, 1994:
Allowance for returns,
allowances and doubtful accounts........ $1,700,000 $1,672,299 $(1,472,299) $1,900,000
YEAR ENDED JULY 1, 1995:
Allowance for returns,
allowances and doubtful accounts........ $1,900,000 $2,567,270 $(2,567,270) $1,900,000
YEAR ENDED JUNE 29, 1996:
Allowance for returns,
allowances and doubtful accounts........ $1,900,000 $5,213,815 $(5,213,815) $1,900,000
</TABLE>

32
<PAGE> 33

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- --------------------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of Registrant. Incorporated by
reference to the Registrant's Registration Statement on Form S-1 (Registration
No. 33-42097).
3.2 By-laws of the Registrant. Incorporated by reference to the Registrant's
Registration Statement on Form S-1 (Registration No. 33-42097).
4.1 Third Amended and Restated Promissory Note, dated July 28, 1994, payable to
Financo Investor Fund, L.P. Incorporated by reference to the Registrant's Annual
Report on Form 10-K for the fiscal year ended July 2, 1994.
4.2 Specimen Certificate for shares of Common Stock, $.01 par value, of the
Registrant. Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-42097).
10.1 Loan and Security Agreement dated December 20, 1991 by and between LaSalle
National Bank and the Registrant. Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended December 28, 1991.
10.2 Amendment No. 1 to the Loan and Security Agreement by and between LaSalle
National Bank and the Registrant dated May 6, 1992. Incorporated by reference to
the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 28, 1992.
10.3 Waiver Letter dated September 24, 1992, to the Loan and Security Agreement by
and between LaSalle National Bank and the Registrant. Incorporated by reference
to the Registrant's Annual Report on Form 10-K for the fiscal year ended June
27, 1992.
10.4 Waiver and Amendments No. 3, 4 and 5, dated as of May 28, June 30, and September
14, 1993, respectively, to the Loan and Security Agreement by and between
LaSalle National Bank and the Registrant. Incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year ended June 26, 1993.
10.5 Waiver and Amendment No. 6, dated as of March 15, 1994, to the Loan and Security
Agreement by and between LaSalle National Bank and the Registrant. Incorporated
by reference to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 26, 1994.
10.6 Amendment No. 7, dated as of July 28, 1994, to the Loan and Security Agreement
by and between LaSalle National Bank and the Registrant. Incorporated by
reference to the Registrant's Annual Report on Form 10-K for the fiscal year
ended July 2, 1994.
10.7 Standstill Agreement, dated July 28, 1994, between Financo Investors Fund, L.P.
and the Registrant. Incorporated by reference to the Registrant's Annual Report
on Form 10-K for the fiscal year ended July 2, 1994.
10.9 Substitute and Amended Note, dated as of August 4, 1994, payable to LaSalle
National Bank. Incorporated by reference to the Registrant's Annual Report on
Form 10-K for the fiscal year ended July 2, 1994.
10.10 Loan and Security Agreement, dated as of July 28, 1994, by and between the
Registrant and the Foothill Capital Corporation. Incorporated by reference to
the Registrant's Annual Report on Form 10-K for the fiscal year ended July 2,
1994.
10.11 Salton/Maxim Housewares, Inc. Stock Option Plan. Incorporated by reference to
the Registrant's Registration Statement on form S-1 (Registration No. 33-42097).
</TABLE>

33
<PAGE> 34

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- --------------------------------------------------------------------------------
<C> <S>
10.12 Stockholders Agreement, dated August 6, 1991, by and among the Registrant,
Braddock Financial Corporation, Financo Investors Fund, L.P., and Mesirow
Private Equity, Inc. (successor to Mesirow Venture Capital, Inc.) as the
authorized representative of Mesirow Capital Partners III, Mesirow Capital
Partners IV, Mesirow Capital Partners V and Allied Investment Corporation.
Incorporated by reference to the Registrant's Registration Statement on Form S-1
(Registration No. 33-42097).
10.13 Lease, dated January 30, 1990, by and between 164 Delaney Street Partnership and
the Registrant, as amended by a First Amendment to Lease Agreement and Second
Amendment to Lease Agreement and Second Amendment to Lease Agreement.
Incorporated by reference to the Registrant's Registration Statement on Form S-1
(Registration No. 33-42097).
10.14 Lease, dated April 23, 1984, by and between OTR, as agent for the State Teachers
Retirement Board of Ohio, and the Registrant, as assignee under an Assignment
and Assumption of Lessee's Interest under Lease Agreement dated September 30,
1988. Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-42097).
10.15 Form of Sales Representative Agreement generally used by and between the
Registrant and its sales representatives. Incorporated by reference to the
Registrant's Registration Statement on Form S-1 (Registration No. 33-42097).
10.16 Stock Registration Rights Agreement, dated as of August 6, 1991, by and between
the Registrant, Braddock Financial Corporation, Financo Investors Fund, L.P.,
Mesirow Capital Partners II, Mesirow Capital Partners IV, Mesirow Capital
Partners V and Allied Investment Corporation. Incorporated by reference to the
Registrant's Registration Statement on Form S-1 (Registration No. 33-42097).
10.17 Employment Agreement dated October 17, 1991 between the Registrant and Leonhard
Dreimann. Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-42097).
10.18 Employment Agreement dated October 17, 1991 between the Registrant and David C.
Sabin. Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-42097).2
10.19 Employment Agreement dated October 17, 1991 between the Registrant and William
B. Rue. Incorporated by reference to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-42097).
10.20 Salton/Maxim Housewares, Inc. Incentive Bonus Plan. Incorporated by reference to
the Registrant's Registration Statement on Form S-1 (Registration No. 33-42097).
10.21 Fourth Amendment to Loan and Security Agreement dated as of September 19, 1995
between the Registrant and the Foothill Capital Corporation. Incorporated by
reference to the Registrant's Annual Report on Form 10-K for the fiscal year
ended July 1, 1995.
10.22 Salton/Maxim Housewares, Inc. 1995 Employee Stock Option Plan. Incorporated by
reference to the Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended December 30, 1995.
10.23 Salton/Maxim Housewares, Inc. Non-Employee Directors Stock Option Plan.
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for
the fiscal quarter ended December 30, 1995.
10.24 Asset Purchase Agreement dated July 1, 1996 by and among the Registrant, Block
China Corporation and Robert C. Block Incorporated by reference from the
Company's Current Report on Form 8-K dated July 1, 1996.
</TABLE>

34
<PAGE> 35

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- --------------------------------------------------------------------------------
<C> <S>
10.25 Stock Purchase Agreement, dated as of February 27, 1996, by and between the
Registrant and Windmere-Durable Holdings, Inc. Incorporated by reference to the
Registrant's Current Report on Form 8-K dated February 27, 1996.
10.26 Subordinated Promissory Note dated July 11, 1996 in the principal amount of
$10,847,620 issued by Windmere-Durable Holdings, Inc. to the Registrant.
Incorporated by reference to the Registrant's Current Report on Form 8-K dated
July 11, 1996.
10.27 Stockholder Agreement dated July 11, 1996 between the Registrant and
Windmere-Durable Holdings, Inc. Incorporated by reference to the Registrant's
Current Report on Form 8-K dated July 11, 1996.
10.28 Registration Rights Agreement dated July 11, 1994 between the Registrant and
Windmere-Durable Holdings, Inc. Incorporated by reference to the Registrant's
Current Report on Form 8-K dated July 11, 1996.
10.29 Marketing Cooperation Agreement dated July 11, 1996 between the Registrant and
Windmere-Durable Holdings, Inc. Incorporated by reference to the Registrant's
Current Report on Form 8-K dated July 11, 1996.
</TABLE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FISCAL YEAR ENDED JUNE 29, 1996 10K
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US. DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> JUL-02-1995
<PERIOD-END> JUN-29-1996
<EXCHANGE-RATE> 1
<CASH> 4
<SECURITIES> 0
<RECEIVABLES> 15,871
<ALLOWANCES> 1,900
<INVENTORY> 28,288
<CURRENT-ASSETS> 48,046
<PP&E> 14,599
<DEPRECIATION> 8,368
<TOTAL-ASSETS> 59,481
<CURRENT-LIABILITIES> 35,802
<BONDS> 3,754
0
0
<COMMON> 65
<OTHER-SE> 19,860
<TOTAL-LIABILITY-AND-EQUITY> 59,481
<SALES> 99,202
<TOTAL-REVENUES> 99,202
<CGS> 66,923
<TOTAL-COSTS> 72,780
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,934
<INCOME-PRETAX> 1,146
<INCOME-TAX> (3,450)
<INCOME-CONTINUING> 4,596
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,596
<EPS-PRIMARY> 69
<EPS-DILUTED> 69

</TABLE>