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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-K

Commission File Number: 0-20330

GARDENBURGER, INC.
(Exact name of registrant as specified in its charter)

1411 SW Morrison Street, Suite 400, Portland, Oregon 97205
(Address of principal executive offices)

Registrant's telephone number, including area code: (503) 205-1500

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of Class)

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

        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. ý

        The aggregate market value of the voting stock held by non-affiliates of the Registrant was $2,039,863 as of December 16, 2002 based upon the average bid and asked prices as reported by the NASD's OTC Bulletin Board ($0.28).

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o    No ý

        The aggregate market value of the voting and common equity held by non-affiliates of the Registrant was $8,013,746 computed by reference to the average of the bid and asked prices as reported by the NASD's OTC Bulletin Board ($1.10) as of the last business day of the Registrant's most recently completed second fiscal quarter, March 28, 2002.

        The number of shares outstanding of the Registrant's Common Stock as of December 16, 2002 was 9,002,101 shares.

Documents Incorporated by Reference

        The Registrant has incorporated into Part III of Form 10-K by reference portions of its Proxy Statement for its 2003 Annual Meeting of Shareholders.

GARDENBURGER, INC.
2002 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS

PART I

Item 1. Business

General

        Gardenburger, Inc. was organized in 1985 as an Oregon corporation under the name Wholesome & Hearty Foods, Inc. and completed its initial public offering in 1992. In October 1997 we changed our name to Gardenburger, Inc; and, as our product line expanded to include meat alternative offerings beyond veggie burgers, began doing business in 2002 as Gardenburger Authentic Foods. Until March 1, 2001, our common stock was traded on the National Market Tier of the Nasdaq Stock Market under the symbol "GBUR." Because we no longer met certain Nasdaq listing requirements, beginning March 1, 2001, our common stock began trading on the over-the-counter market and is quoted on the NASD's OTC Bulletin Board.

Overview

        We believe we are one of the leading producers and marketers of meat alternative products and branded veggie burgers. The Gardenburger® product line is a national brand in the retail grocery, food service, club store and natural foods channels of distribution and features core burger offerings such as the Original Gardenburger® veggie burger, analog soy burgers such as the Gardenburger Diner Deluxe, and innovative non-burger items such as the Gardenburger Riblets™ meat analog rib with sauce.

        Several factors beyond healthy eating have contributed to the growth of meat substitutes. Consumer reaction to bad publicity related to meat recalls and the heightened publicity surrounding meat farming practices and their effect on human health and the environment has fueled the growth of imitation meat sales in the United States and Canada. According to AC Nielsen data, annual grocery sales of imitation meat in the United States grew at a compounded annual growth rate of 23% between 1995 and 2002. Gardenburger was a pioneer in the meatless burger segment of the category and, in tandem with consumer trends, has expanded its product offerings to include center-of-the-plate meatless options such as a chicken fillet, pork ribs, and meatballs. In fiscal 2002, the Company launched its three newest products, a breakfast patty, a breaded cutlet and a crispy nugget.

        While we believe Gardenburger enjoys solid brand awareness, our industry is highly competitive and includes both large food companies and smaller independent manufacturers. In fiscal 2002, Gardenburger renewed its brand positioning with the legend "the authentic, environmentally aware brand that provides safe, high quality and good tasting meatless foods because eating meatless is better for you and for the planet." Our new message "Eat Positive" is supported by new packaging, coupons, a redesigned web site, and print advertising.

        We intend to continue as an innovative force in the meat alternative category with the objective of being a leading provider of meatless meal alternatives in the four primary distribution channels in which we distribute our products—retail grocery stores; food service, including restaurants, universities and other commercial outlets; club stores; and natural foods outlets. We currently distribute our products through more than 24,000 retail outlets, 30,000 food service outlets, 325 club store locations and 3,500 natural foods stores.

        Within the retail grocery channel, our largest channel of distribution, we have approximately 112,000 retail grocery placements of our products, representing an all commodity volume ("ACV")(1) penetration of approximately 74% as of September 30, 2002, with an average of 5 product variations available in each retail outlet. Each product line is commonly referred to as a stock keeping unit ("SKU").

(1)

All commodity volume ("ACV") calculates the percentage of U.S. stores that carry at least one Gardenburger product.

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Business Strategy

        In recent years, we have seen increased competition in the meat alternative category, including the veggie burger segment, and have seen our consumer penetration of meat alternative burgers decline due to heavy spending by competitors. Our business strategy consists of the following key elements:

        Focus on Achieving Profitability.    We are focused on achieving near-term profitability. To move towards this goal, we made substantial reductions in fixed overhead over the last two fiscal years as we shifted to an overhead structure that fits our current level of business yet provides an acceptable platform for future growth. Trade and marketing spending is focused on new product support and incentives to customers and end consumers. This new business model resulted in increased sales revenue and improved operating results in fiscal 2002. We plan to continue the drive towards profitability in fiscal 2003 and will manage each distribution channel with a goal of channel profitability for the year. There is no assurance that we will be able to successfully execute this strategy or maintain our market share in the veggie burger segment, particularly given the current highly competitive retail market.

        Introduce New Products Beyond Veggie Burgers.    In fiscal 2002, we continued to move beyond the veggie burger segment of the meat alternative category. Consumers are adding new items to their menu with increasing frequency and the meat alternative category growth is primarily in the non-burger segment. According to AC Nielsen data, Grocery unit sales in the veggie burger segment decreased approximately 1% in fiscal 2002; however, unit sales in the non-burger meat alternative segment increased approximately 11%. To take advantage of this trend, we launched Riblets, a meatless barbequed rib alternative, and Meatless Meatballs in the fourth quarter of fiscal 2001; Breakfast Sausage, a meatless sausage patty alternative, in March 2002; and Herb Crusted Cutlet, a breaded cutlet alternative, and Crispy Nuggets, a pizza spiced veggie nugget, in the fourth quarter of fiscal 2002. We believe that new product introductions in other segments of the meat alternative category will support our efforts to maintain a strong position in all channels and reinforce our brand.

        Increase Key Channel Penetration.    We believe that we are one of the leaders in the retail grocery, food service, club store and natural foods distribution channels. Our goal is to manage a strong brand position in these channels with profitability in all channels. We recognize that increased competition in the grocery channel may result in a loss of grocery market share. We are aggressively pursuing profitable growth in the food service channel where we have a strong market position across key business segments. We have been selected as a vendor of choice to participate in the Sysco Corporation launch of its Moonrose Vegetarian line, a private label brand of premium products targeted at the emergent food service natural foods segment. In fiscal 2001, we entered into a co-branding arrangement with Costco, the nation's largest club store chain, under which a special formula of our Gardenburger Original™ product is sold nationwide under the combined Gardenburger and Kirkland Signature names. In addition, we believe that other distribution channels, such as fast food chains and colleges and universities, present growth opportunities, and we continue to actively pursue these opportunities through sales calls to potential customers and research into product types that best suit the particular markets.

Products

        Gardenburger is committed to offering great tasting, better for you, convenient meatless food choices to consumers. All of our products are frozen and include grain, vegetable and soy-based veggie burgers, which are offered in eight flavors, and include specialized burger products in certain channels, including Gardenburger Sub® and GardenVegan®. We also offer a variety of meat analog products including our Chik'n Grill™ product, which imitates the taste and texture of chicken, and Riblets™, which imitates the taste and texture of boneless ribs.

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        The recipes for our products are proprietary, although they contain commonly known ingredients. Veggie-grain based burgers contain fresh mushrooms, brown rice, onions, rolled oats, cheeses, bulgur wheat, natural seasonings and spices. Soy based products are seasoned to taste like chicken, pork or ground beef. All of our meat alternative products are considerably lower in fat and calories than respective meat products of comparable weight and are all natural.

        Our products are as follows:

Retail Grocery Veggie Grain Products

Retail Grocery Meat-Like Products

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Club Channel Products

Food Service Products

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Distribution

        We primarily distribute our products into four channels: retail grocery, food service, club stores and natural foods stores.

        Retail Grocery.    Gardenburger veggie burgers can now be found in more than 24,000 grocery stores with over 112,000 placements. Our ACV penetration in the U.S. retail grocery channel was approximately 74% as of September 30, 2002, with an average of 5 SKUs. Our products are currently carried in the majority of the major U.S. retail grocery chains.

        Food Service.    We distribute our products to more than 30,000 food service outlets throughout the U.S. and Canada, including restaurant chains such as Applebee's, Fuddruckers, Marie Callenders, Red Robin, Subway and T.G.I. Friday's. In many of these restaurants, the Gardenburger brand name appears on the menu. Additional points of food service distribution include academic institutions, hotels and other outlets, including amusement parks and sports stadiums. In the United States, there are approximately 800,000 outlets in the food service channel. We rely primarily on distributors such as Sysco for distribution to this channel.

        Club Stores.    Our products are distributed to club stores with over 325 locations, including Costco. Currently, these stores carry the Costco co-branded Gardenburger/Kirkland Signature or the Gardenburger Flame Grilled™ Hamburger Style veggie burger in the 3.4 ounce food service size.

        Natural Foods.    Our products are distributed to more than 3,500 natural food stores, including Whole Foods and Wild Oats. We utilize food brokers that specialize in natural foods stores.

        Our ability to expand distribution in each of the described channels will depend in part on consumer preferences, and to a certain extent on continuation of the current trends of health awareness, emphasis on reduced consumption of red meat, as well as safety concerns associated with red and white meat. There is always a risk that further development of low fat red or white meat products or technological advances that limit food-borne disease risks may lead to a change in consumer preferences and reduce demand for meat replacement products. Demand for our products may be adversely affected by such changes, which may occur rapidly and without warning. Because of our current primary dependence on a single product line any change in consumer preferences or increase in competition in the meat alternative market segment would adversely affect our business to a greater degree than if we had multiple significant product lines.

        We sell our products in North America, primarily through more than 100 independent, commissioned food brokers and 1,000 active distributors. The retail food brokers are independent sales organizations, which have close working relationships with the leading grocery chains, club stores and natural food stores. The food brokers arrange for sales of Gardenburger products, which we then ship and bill directly to the retailers. Products sold into the food service channel are purchased directly by distributors, which arrange for shipment by temperature-controlled truck to their frozen storage warehouses in principal cities throughout the U.S. for distribution to U.S. food service outlets and some Canadian grocery and food service outlets. Sales to distributors and retailers are final sales and, historically, we have not experienced significant levels of return product requests.

        We have no long-term contracts with our food brokers or distributors and occasionally change brokers or distributors in an effort to increase coverage in a geographic region. We could experience a substantial temporary or permanent decline in net sales if one or more of our major food brokers or distributors were to discontinue handling our products, go out of business, or decide to emphasize distributing products of our competitors.

        Contract Management Companies, which manage cafeterias and other institutional eating establishments, also purchase our products. Examples of the additional points of food service distribution reached through the Contract Management Companies include academic institutions, hotels, amusement parks and sports stadiums. Contract Management Companies typically purchase our products through distributors and provide us with an additional means to distribute our products.

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        The following table lists selected retailers, distributors and food service outlets that offer our products for sale to consumers:

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        Our sales by region are as follows:

        To date, we have focused our sales efforts primarily in North America, and international sales have not been material.

Sales and Marketing

        Sales.    Our sales objective is to manage a strong market position with our veggie burgers and other meat alternative products in the retail grocery, food service, club store and natural foods store channels and to continue our expansion beyond veggie burgers in the meat alternative category. Our use of regional food brokers as our representatives allows us to maintain contact with the nation's major retail grocery chains and food service outlets without a large internal sales force. Brokers are paid sales commissions on all products sold.

        Our Vice President of Grocery and Club Sales and our Senior Vice President of Food Service and International lead our internal sales efforts. Our regional sales force is located strategically in our primary geographic sales regions and in proximity to our brokers, and is divided into a food service division, a retail grocery division and a club division. The regional sales directors have substantial sales and industry experience. These regional sales directors coordinate the efforts of the food brokers and distributors.

        Marketing.    Our marketing efforts take advantage of key seasonal periods. Factors such as the aging population, news of meat recalls, and consumer interest in managing health through diet continue to stimulate positive consumer acceptance.

Research and Development

        Our research and development activities are focused on the development of new meat alternative products outside the veggie burger sub-category of the meat alternative market, as well as improvement and increased efficiency in the manufacturing process. We continue to develop non-burger items such as breakfast sausage, cutlets and nuggets to meet the needs of the variety-seeking consumer. We conduct our research and development activities at our facilities in Clearfield, Utah.

        In fiscal 2002, 2001 and 2000, we spent approximately $222,000, $188,000 and $319,000, respectively, on research and development activities, which are included in sales and marketing expense.

        Until fiscal 2000, we maintained a separate research and development facility in Portland, Oregon. In the second quarter of fiscal 2000, this location was closed and the activities were moved to our Clearfield, Utah production facility. The lower costs associated with research and development in 2002 and 2001 compared to 2000 are a result of savings from the elimination of the separate facility.

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Manufacturing

        Our 120,000 square-foot Clearfield facility handles multiple manufacturing lines for our products. We believe the Clearfield facility will be able to support our growth plans for the foreseeable future.

        The production process involves cleaning, chopping and mixing the ingredients; then forming, baking and quick-freezing the products and finally packaging them. The manufacturing process at our Clearfield facility is highly automated, mixing and baking products in assembly-line fashion with minimal human interaction. The Clearfield facility also utilizes newly-developed, proprietary ovens that quickly cook the products. Products are shipped, fully cooked, frozen and packaged, via temperature controlled trucks to distributors throughout North America.

        We consider food safety a high priority and have prepared, in conjunction with government agencies, a Hazard Analysis and Critical Control Point (HACCP) system and other programs directed at ensuring the safety of our products. HACCP is a comprehensive system that food companies use to monitor specific steps in food production to identify safety issues. Using this type of system, we can focus on the areas in which greatest risks exist and implement preventive measures.

        A significant disruption in our Clearfield facility's production capacity as a result of, for instance, fire, severe weather, regulatory actions, work stoppages or other factors, could disable our capacity to manufacture our products. If our meat alternative products become less available, consumers may switch to another brand of products and grocery stores may reduce shelf space allocated to our products. Any significant disruption in manufacturing would likely have a material adverse effect on our results of operations and financial condition.

Competition

        The market for veggie burgers and other meat alternative products is highly competitive. Our products compete primarily on the basis of brand preference, taste, innovation, quality of natural ingredients, ease of preparation, availability, price and consumer awareness. We believe that our products compare favorably to those offered by our competitors in all of these areas. We price our products competitively to our primary competitors. The calorie and fat content of Gardenburger® products is generally equivalent to that of competitors' products.

        We believe that our principal competitors are The Kellogg Company, which distributes its products under the "Morningstar Farms" and "Harvest Burger" brand names to the food service and retail grocery channels; and Philip Morris/Kraft Food Products, which distributes soy-based meat analog products primarily in the food service, retail grocery, club and natural food channels under the "Boca Burger" label. These companies have substantially greater financial and marketing resources than us. In addition, other major national food products companies could decide to produce meat alternative products at any time in the future.

        Our products also compete indirectly with low fat meat products, such as ConAgra's Healthy Choice 96 percent Extra Lean Ground Beef burger, and chicken or turkey based low fat products distributed by several large companies such as Tyson Foods, and with frozen, mass-produced low calorie/low fat entrees, including national brands such as Healthy Choice, Lean Cuisine and Weight Watchers. Large companies with substantially greater financial resources, name recognition and marketing resources than us produce these products.

Significant Customers

        Dot Foods, Costco Wholesale and Sysco Foods accounted for 12 percent, 11 percent and 10 percent, respectively, of our fiscal 2002 revenue. At September 30, 2002, Dot, Costco and Sysco accounted for 14 percent, 7 percent and 13 percent of the outstanding accounts receivable balance, respectively. Sysco is a food service distributor and sells our products to restaurants, hotels, and other

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food service customers. Dot is a redistributor; they sell our products to other, smaller distributors. The loss of these customers could have a material adverse effect on our business; however, there are competing food service distributors through which our products could be purchased by the end users.

Sources of Supply

        Gardenburger uses natural ingredients such as mushrooms, oats, rice, onions and soy protein. These are common agricultural items typically available in most parts of the United States. In addition, we use packaging and other materials that are common in the food industry. As a result, we believe, but cannot guarantee, that our sources of supply are reasonably reliable and that we are at no greater risk regarding supply issues than other similar food processors and producers.

Employees

        As of September 30, 2002, we had approximately 184 full-time equivalent employees, including 29 employees at our headquarters in Portland and 155 at our Clearfield facility. None of our employees are subject to a collective bargaining agreement, and we believe our relations with our employees to be good.

Intellectual Property

        We have approximately 25 U.S. registered trademarks, including "Gardenburger," "Gardenburger Hamburger Style," and "GardenSausage." We have registered certain trademarks in Australia, Canada, France, Germany, Japan, Mexico and the United Kingdom, along with other smaller countries.

        We actively monitor use of our trademarks by food service customers and others and take action we believe appropriate to halt infringement or improper usage. We defend our intellectual property aggressively and, from time to time, have been engaged in infringement protection activities. Nonetheless, in the event third parties infringe or misappropriate our trademarks, we may have to incur substantial costs to protect our intellectual property or risk losing our rights. Any large expenditure or loss of rights could have a material adverse effect on our results of operations, cash flows and financial position.

        We generally do not hold any patents covering our recipes or production methods and, therefore, can protect them only as trade secrets. Some or all of these trade secrets could be obtained by others or could enter the public domain, which could place us at a competitive disadvantage. In 2000, we applied for patent status for our Flame Grilled process and currently have a "Patent Pending" status.

        In an effort to protect our trade secrets, all of our employees sign an "Employees Proprietary Rights and Confidentiality Agreement," which states that they will not disclose our manufacturing processes, recipes, customer lists or other confidential material vital to our business. In addition, senior sales, marketing and administrative personnel sign non-compete agreements, which prohibit them from working for a competitor for specified periods of time upon the termination of their employment with Gardenburger.

Management Information Systems

        We utilize a single Baan enterprise resource planning system, which is expected to meet our information system needs for the foreseeable future. In addition to integrating manufacturing, sales and accounting functions, the Baan system provides real-time information for management analysis and use in operations. The Baan system aids management with production planning (planning of raw material purchases) and demand forecasting (matching supply to distribution centers with order volume) capabilities. The Baan system also includes pallet tagging, bar coding and scanning applications that facilitate tracking of raw materials and finished goods through our manufacturing operation. The Baan

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system enables us to use electronic data interchange ("EDI") if desired by customers and suppliers, which we believe expedites order entry, payment and cash collection processes.

Government Regulation

        The manufacturing, packaging, storage, distribution and labeling of food products are subject to extensive federal and state laws and regulations. The FDA has issued regulations governing the ingredients that may be used in food products, the content of labels on food products and the labeling claims that may be made for foods. Foods may only include additives, colors and ingredients that are either approved by the FDA or generally recognized as safe. Our products must be manufactured in compliance with the FDA's current Good Manufacturing Practice regulations applicable to food.

        Regulators have broad powers to protect public health, including the power to inspect our products and facilities, to order the shutdown of a facility or to seize or stop shipment of our products and order a recall of previously shipped products, as well as the power to impose substantial fines and seek criminal sanctions against us or our officers. While we currently carry $1 million of insurance against the cost of a product recall, a significant recall could have an adverse effect on our results of operations, cash flows and financial condition. In addition, negative publicity may result if regulators take any of the foregoing actions against us or if we were to voluntarily recall products to avoid regulatory enforcement.

Insurance

        We maintain insurance against various risks related to our business. This includes property and casualty, business interruption, director and officer liability, food spoilage, product liability, product recalls and workers' compensation insurance. We currently maintain $1 million of product recall insurance coverage, $2 million of product liability insurance coverage and $20 million of general umbrella coverage. We consider our policies adequate to cover the major risks in our business, but there can be no assurance that this coverage will be sufficient to cover the cost of defense or damages in the event of a significant product liability claim.

Item 2. Properties

        We lease approximately 19,000 square feet of administrative office space at 1411 SW Morrison Street, Suite 400 in Portland, Oregon, pursuant to a second two-year extension to our original lease that terminates on December 31, 2002. We have one additional two-year extension option, which would extend the termination of the lease to December 31, 2004. Current monthly rent is approximately $24,100. We do not anticipate exercising the additional two-year extension option. We plan to lease our current office space on a month-to-month basis while we look for office space that better suits our current requirements.

        We lease 120,000 square feet of production space at Freeport Center, Building A-16, in Clearfield, Utah, pursuant to a lease that will terminate on December 31, 2007. We have the option to renew the lease for one additional five-year term commencing January 1, 2008. The monthly rent on this facility beginning January 1, 2003 will be $33,500. Our Clearfield, Utah production facility can support sales levels of approximately $220 million at current pricing levels. Given our current level of sales, we are operating the facility at approximately 29 percent of overall capacity.

        We also lease 22,000 square feet of storage space at the Freeport Center in Clearfield. The lease commenced February 1, 2001 and will expire December 31, 2002. We plan to lease this space on a month-to-month basis after December 31, 2002. The monthly rent for the storage space is $6,600.

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Item 3. Legal Proceedings

        There are currently no material, pending legal proceedings to which we or our subsidiaries are a party. From time to time, we become involved in ordinary, routine or regulatory legal proceedings incidental to our business.

Item 4. Submission of Matters to a Vote of Security Holders

        No matters were submitted to a vote of security holders during the quarter ended September 30, 2002.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

        Prior to March 1, 2001, our common stock traded on the National Market tier of The Nasdaq Stock Market under the symbol GBUR. Due to our failure to meet certain Nasdaq listing requirements, beginning March 1, 2001, our common stock began trading on the over-the-counter market and is quoted on the NASD's OTC Bulletin Board. Over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The high and low sales prices (bid quotations after March 1, 2001) for the two years in the period ended September 30, 2002 were as follows:

        The number of shareholders of record and approximate number of beneficial owners of our common stock at December 9, 2002 were 579 and 6,800, respectively.

        There were no cash dividends declared or paid in 2002 or 2001 on our common stock and we do not anticipate declaring cash dividends on our common stock in the foreseeable future. Under the terms of our loan agreement with CapitalSource Finance LLC, we may not pay any cash dividends or other distributions with respect to, or redeem, any of our capital stock. We also may not, without the consent of Dresdner Kleinwort Benson Private Equity Partners, LP ("Dresdner"), declare or pay any cash dividends or make any distributions with respect to our capital stock or other equity securities to the extent that at least $5 million in principal amount remains outstanding under our convertible senior subordinated notes and Dresdner owns a majority of the then outstanding principal amount of such notes.

        In addition, no cash dividends may be paid on our common stock unless dividends have been paid on all outstanding shares of our Series C and Series D Convertible Preferred Stock in an amount equal to 12% cumulative dividends accrued on such preferred shares through the record date for the common stock dividend (or, if greater, the amount of the common stock dividend payable on the preferred shares on an as-converted basis). The quarterly dividend accruing on the preferred shares is $975,000.

        The following table sets forth additional information, as of September 30, 2002, about shares of our common stock that may be issued upon the exercise of options granted under our equity

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compensation plans and arrangements, divided between plans approved by our shareholders and plans or arrangements not submitted to our shareholders for approval.

        See Note 9 to the Financial Statements under the heading "Nonplan Options" for a description of the material terms of options granted without shareholder approval and not requiring shareholder approval.

Item 6. Selected Financial Data

(1)

Statement of operations data for 1999 includes only nine months of activity due to the change in our fiscal year during 1999 from a calendar year to a fiscal year ended September 30.

(2)

Revenues and sales and marketing expenses each decreased by $8,806 and $9,930, respectively, in fiscal 2001 and 2000 upon adoption of EITF 00-14 and EITF 00-25 (see Note 2 of Notes to Financial Statements). Fiscal 1999 and 1998 were not adjusted as to do so would be impracticable due to the way data was recorded in the system at that time.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

        This report contains certain forward-looking statements that involve known and unknown risks and uncertainties. Our actual results, performance, or achievements could differ materially from historical results or from any future results anticipated by the forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers should consider statements containing words like "believes," "expects," "intends," "anticipates" or "plans" to be uncertain and forward-looking. Important risks that could cause actual results, performance or achievements to differ from those expressed or implied by the forward-looking statements are described below and elsewhere in this Form 10-K. Investors are cautioned not to place undue reliance on the forward-looking statements.

General

        Approximately 84 percent of our net sales are attributable to the Gardenburger® veggie burger and soy burger products. However, consumers are quickly moving to the wider range of meat alternative products rapidly becoming available in the marketplace. In response to this development in consumer tastes, we expanded our product line in fiscal 2002 to include a breakfast sausage alternative, a cutlet alternative, and a crispy nugget. The addition of these innovative products joins our meat alternative products released in fiscal 2000 and 2001, Riblets, Meatless Meatballs, and Chik'n Grill.

Results of Operations

        The following table is derived from our Statements of Operations for the periods indicated and presents the results of operations as a percentage of net sales.

2002 Compared to 2001

        Net sales.    Net sales for fiscal 2002 increased $3.8 million to $54.6 million from $50.8 million for fiscal 2001. Fiscal 2002 sales included approximately $7.1 million attributable to gross sales of products introduced during late fiscal 2001 or in fiscal 2002. The increased sales from new products were partially offset by the loss of approximately $1.9 million of revenue from Sam's Club due to the cessation of sales of our products in 215 Sam's Club stores during fiscal 2002. We currently sell to 35 Sam's Club stores.

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        Our new products are representative of our offerings of meat alternative products beyond veggie burgers. We plan additional expansion into this growing part of the meat alternative market. Additionally, we experienced a disruption of our Canadian distribution in the first quarter of fiscal 2001 due to the financial difficulties of our distributor in that country, which decreased sales in fiscal 2001 by approximately $340,000.

        Gross margin.    Gross margin increased to $22.9 million (42.0 percent of net sales) for fiscal 2002 from $18.2 million (35.8 percent of net sales) for fiscal 2001. The increases in gross margin are due to an increase in sales and an increase in the gross margin percentage. The improved gross margin percentage is attributable to reduced selling discounts, reduced lease expense due to the elimination of the equipment operating leases in early January 2002 and increased operating efficiencies at the Company's Clearfield, Utah manufacturing facility, offset in part by increased depreciation due to the acquisition of the Clearfield manufacturing equipment.

        Sales and marketing expense.    Sales and marketing expense remained relatively flat at $13.7 million (25.1 percent of net sales) for fiscal 2002 compared to $13.6 million (26.8 percent of net sales) for fiscal 2001. The decrease as a percentage of sales is due to increased sales in fiscal 2002 compared to fiscal 2001.

        General and administrative expense.    General and administrative expense ("G&A") decreased to $4.2 million (7.7 percent of net sales) for fiscal 2002 from $5.0 million (9.8 percent of net sales) for fiscal 2001. The decrease is primarily due to $700,000 of savings due to cost reduction initiatives at our Portland, Oregon Support Center, which houses our executive and administrative staff.

        Legal settlement.    Legal settlement of $108,000 in fiscal 2002 relates to a settlement received from a raw material supplier as a result of an August 2001 recall of our Chik'n Grill product due to the omission of sulfites, which are known allergens, from the ingredient label. The raw material supplier reimbursed us for lost operating profits associated with the recall. This is a final settlement and no further amounts will be received from this supplier related to this recall.

        Other general (income) expense, net.    Other general income in fiscal 2002 includes $303,000 related to the reversal of restructuring reserves, which were established in fiscal 1999 and, in the first quarter of fiscal 2002, were determined to no longer be required, and $117,000 related to the recognition of the remaining deferred gain on the disposal of fixed assets. Other general expenses in fiscal 2001 represents losses on the disposal of fixed assets.

        Income (loss) from operations.    Income from operations was $5.5 million in fiscal 2002 compared to a loss from operations of $447,000 for fiscal 2001. The improvement in operating results in fiscal 2002 compared to fiscal 2001 is primarily a result of the increased revenue, increased gross margin percentage and decreased expenses discussed above.

        Interest expense.    Interest expense was $3.8 million for fiscal 2002, compared to $2.4 million for fiscal 2001. The increase is primarily a result of increased outstanding debt balances and increases in the effective interest rates of previously outstanding debt.

        Debt restructuring costs.    Debt restructuring costs of $716,000 in fiscal 2002 include an early termination fee of $175,000 for our previous line of credit facility, the write-off of $279,000 of unamortized financing fees, $95,000 for the value of common stock warrants issued in connection with the restructuring of our Convertible Notes and preferred stock and $167,000 of legal fees.

        Income taxes.    A valuation allowance has been recorded for the full amount of deferred tax assets due to the uncertainty regarding the realization of the net deferred tax assets consisting primarily of net operating loss and credit carryforwards.

16

        Preferred dividends.    Preferred dividends were $5.0 million during fiscal 2002 compared to $4.4 million in fiscal 2001. Due to the addition of a 10 percent exit premium in conjunction with the changes made to the outstanding preferred stock during the second quarter of fiscal 2002, the quarterly dividend charge increased from $1.1 million to $1.3 million.

        Net loss available for common shareholders.    Net loss available for common shareholders was $3.9 million in fiscal 2002 compared to $7.2 million in fiscal 2001 due to the line item changes discussed above.

        The Company believes that the impact of inflation was not material for fiscal years 2002 and 2001.

2001 Compared to 2000

        Net sales.    Net sales for fiscal 2001 decreased to $50.8 million from $61.1 million for fiscal 2000. The decrease is primarily due to lower unit sales due to competition and consumer preference for meat alternative choices beyond burgers. In response to this development in consumer tastes, we expanded our product line in fiscal 2001 to include a chicken fillet alternative, a pork rib alternative, an imitation meatball, and a crumbles or ground meat alternative. Additionally, we experienced a disruption of our Canadian distribution in the first quarter of fiscal 2001 due to the financial difficulties of our distributor in that country. During the second quarter of fiscal 2001, we began utilizing a new Canadian distributor.

        Gross margin.    Gross margin decreased to $18.2 million (35.8 percent of net sales) for fiscal 2001 from $25.0 million (40.9 percent of net sales) for fiscal 2000. The decrease in the gross margin is primarily a result of lower sales and a decreased gross margin percentage. The decrease in the gross margin percentage is primarily due to decreased production levels as a result of lower sales of veggie burgers and costs related to the start-up of production of the new Chik'n Grill product in the first half of fiscal 2001 and the start-up of Meatless Meatballs and Riblets in the fourth quarter of fiscal 2001.

        Sales and marketing expense.    Sales and marketing expense decreased to $13.6 million (26.8 percent of net sales) for fiscal 2001 from $18.4 million (30.0 percent of net sales) for fiscal 2000. The decrease in sales and marketing expenditures is primarily due to reduced fixed selling overhead and reduced variable selling costs such as freight and commissions. These cost reductions are associated with lower sales levels as well as cost saving measures implemented in fiscal 2001.

        General and administrative expense.    General and administrative expense ("G&A") decreased to $5.0 million (9.8 percent of net sales) for fiscal 2001 from $7.3 million (12.0 percent of net sales) for fiscal 2000. The decrease is primarily the result of reduced headcount and certain other overhead cost reductions at our Portland, Oregon facility in fiscal 2001. In addition, certain one-time costs related to severance and strategic initiatives occurred in fiscal 2000, and were not duplicated in fiscal 2001.

        Other general (income) expense, net.    Other general expense of $57,000 in fiscal 2001 and of $303,000 in fiscal 2000 represents losses on the disposal of fixed assets.

        Loss from operations.    Loss from operations was $447,000 in fiscal 2001 compared to $989,000 for fiscal 2000. The improvement in operating results primarily reflects the lower operating expenses, offset in part by the lower sales and gross margin.

        Interest expense.    Interest expense was $2.4 million for fiscal 2001, compared to $1.8 million for fiscal 2000. The increase is a result of the increase in the interest rate to 10% from 7% on the Convertible Notes for fiscal 2001, as well as an increase in the outstanding balance of the Convertible Notes, partially offset by a decrease in the balance outstanding and the interest rate on our line of credit.

17

        Income taxes.    We did not record any tax benefit in fiscal 2001. Income tax expense was $17.5 million in fiscal 2000, which consists of a $17.5 million valuation reserve against our entire deferred income tax asset balance. Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109") requires that the tax benefit of net operating losses and other deductible temporary differences be recorded as an asset to the extent that management assesses the utilization of such benefits to be reasonably assured in the near future. Otherwise, a valuation reserve is required to be recorded. Such a reserve was recorded in the fourth quarter of fiscal 2000 as a result of recurring operating losses and increased competition leading to poorer than expected results for fiscal 2000.

        Preferred dividends.    Preferred dividends were $4.4 million during fiscal 2001 compared to $12.5 million in fiscal 2000. In the first quarter of fiscal 2000, due to an adjustment in the conversion price of the then outstanding Series B preferred stock to $3.75 per share from $10.00 per share, we recorded a non-cash charge of $8.1 million related to the implied value of the beneficial conversion feature.

        Net loss available for common shareholders.    Net loss available for common shareholders was $7.2 million in fiscal 2001 compared to $32.7 million in fiscal 2000. The $32.7 million loss available for common shareholders for fiscal 2000 includes the additional $8.1 million non-cash preferred dividends charge in the first quarter of fiscal 2000 as well as the $17.5 million valuation reserve against our net deferred tax assets as discussed above.

        We believe that the impact of inflation was not material for fiscal years 2001 and 2000.

Liquidity and Capital Resources

        At September 30, 2002, working capital was $10.2 million, including $2.8 million of cash and cash equivalents. In fiscal 2002, working capital increased by $388,000 compared to September 30, 2001 and the current ratio decreased to 2.6:1 from 2.9:1.

        Cash and cash equivalents decreased $305,000 from September 30, 2001, primarily due to $10.1 million used for the purchase of property and equipment and $643,000 used for the payment of financing fees, offset by $7.1 million of proceeds from short and long-term debt, net of payments made, and $3.1 million provided by operations.

        Accounts receivable decreased $386,000 to $3.1 million at September 30, 2002 from $3.5 million at September 30, 2001. Days sales outstanding were approximately 23 days at September 30, 2002 compared to approximately 26 days at September 30, 2001.

        Inventories increased $1.8 million to $9.1 million at September 30, 2002 from $7.3 million at September 30, 2001, primarily as a result of increased production in late fiscal 2002 in anticipation of planned maintenance work at the Clearfield, Utah production facility in the first quarter of fiscal 2003. Inventory turned 4.0 times on an annualized basis in the fourth quarter of fiscal 2002 compared to 4.9 times in the corresponding period of fiscal 2001.

        Accounts payable increased $381,000 to $2.3 million at September 30, 2002 from $2.0 million at September 30, 2001, primarily as a result of increased production and the timing of certain purchases.

        Capital expenditures were $10.1 million during fiscal 2002 compared to $683,000 in fiscal 2001. Expenditures in fiscal 2002 were primarily for manufacturing equipment that we had previously been leasing. In January 2002, we utilized the proceeds of an $8.0 million term loan plus $1.05 million of proceeds from a new line of credit to purchase the food processing, production and other equipment used at our Clearfield, Utah production facility. Capital expenditures are estimated to total approximately $1.5 million in fiscal 2003, primarily for manufacturing equipment. Our loan agreement

18

limits our capital expenditures to $1.1 million in fiscal 2003, but we plan to negotiate waivers of this requirement in order to purchase certain equipment beneficial to our production process.

        In January 2002, we entered into a Revolving Credit and Term Loan Agreement (the "Loan Agreement") with CapitalSource Finance LLC ("CapitalSource"). The Loan Agreement provides for an $8.0 million term loan and a $7.0 million line of credit (together, "the Loans"). At September 30, 2002, there was $5.9 million remaining available on the CapitalSource line of credit (subject to limitations on the borrowing base), which will be used as needed for working capital. We paid and capitalized a closing fee of $300,000 in January 2002 to CapitalSource. See also Note 12 to the Financial Statements for a discussion of related party matters.

        We also have approximately $17.3 million of principal and $0.8 million of accrued exit fees due to Dresdner under an Amended and Restated Convertible Senior Subordinated Note (the "Convertible Note"), which is due March 31, 2005. The Convertible Note bears interest at 10 percent per annum and bears a 20 percent premium on the principal plus accrued but unpaid interest at repayment or maturity. The Convertible Note is convertible into common stock at the election of the holder; the conversion price at September 30, 2002 was $9.78 per share. Interest is payable in cash semi-annually to the extent of availability under the CapitalSource line of credit.

        In accordance with excess cash flow provisions in the Loan Agreement and the Convertible Note, approximately $184,000 and $550,000, respectively, of additional principal are due in fiscal 2003, the sum of which is reflected on the balance sheet in the current portion of long-term debt balance.

        Principal payments under our long-term debt obligations and on our operating leases are significant. A schedule of our payments on long-term debt and operating lease obligations over the next five years is as follows:

        See Note 6 of Notes to Financial Statements included in Part II, Item 8 of this report on Form 10-K for a discussion of the material terms of the Loan Agreement and of the Convertible Notes and amendments thereto.

        Pursuant to the CapitalSource Loan Agreement and Convertible Notes, we record quarterly interest expense of $75,000 and $269,000, respectively, related to exit fees. These amounts are added to the long-term debt and convertible note balances, respectively.

        We have 552,500 shares of Series C Preferred Stock and 97,500 shares of Series D Preferred Stock outstanding. The Series C preferred shares are convertible at a price of $10 per share and the Series D preferred shares are convertible at $3.75 per share (subject to antidilution adjustments), in each case based on a base price of $50.00 per share, at any time at the discretion of the holder. Both series of preferred stock are entitled to a 12 percent cumulative annual dividend payable upon redemption of the stock or in the event of a sale or liquidation of the Company. The terms of the Series C Stock and Series D Stock provide for a 10 percent premium on any liquidation or redemption and for an earliest date on which holders may require redemption of their shares of March 31, 2006, at which point they may be redeemed at the election of the holders or, under certain conditions, at our discretion. The

19

10 percent redemption premium is being accreted over the redemption period. The liquidation preference of the Series C and Series D stock was $50.3 million at September 30, 2002.

Seasonality

        The third and fourth quarters of our fiscal year typically have stronger sales due to the summer grilling season. We typically build inventories during the first and second quarters of each fiscal year in anticipation of increased sales in the third and fourth fiscal quarters.

New Accounting Pronouncements

        See Note 2 of Notes to Financial Statements included in Part II, Item 8 of this report on Form 10-K for a discussion of the adoption of new accounting pronouncements.

Critical Accounting Policies and Estimates

        The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates, including those related to inventory reserves and allowance for doubtful accounts. We base our estimates on historical experience and on various other assumptions. Actual results may differ from these estimates if conditions turn out differently from our assumptions. We believe the following critical accounting policies and the related judgments and estimates affect the preparation of our financial statements.

Revenue Recognition

        Revenue from the sale of products is generally recognized at time of shipment to the customer. Our revenue arrangements with our customers often include sales incentives and other promotional costs such as coupons, volume based discounts and off invoice discounts. These costs are typically referred to collectively as "trade spending" pursuant to EITF 00-14, EITF 00-25 and EITF 01-09. These costs are recorded at the later of when revenue is recognized or when the sales incentive is offered and are generally classified as a reduction of revenue.

Inventory Reserves

        We regularly evaluate the realizability of our inventory based on a combination of factors including the following: historical usage rates, forecasted sales or usage, historical spoilage rates and other factors. Raw materials are reviewed periodically by our operating personnel for spoilage. Finished goods are reviewed periodically by operating personnel to determine if inventory carrying costs exceed market selling prices. If circumstances related to our inventories change, our estimates of the realizability of inventory could materially change. We have not experienced material losses related to our inventories in the past and believe that current levels of reserves are adequate.

Allowance for Doubtful Accounts

        Credit limits are established through a process of reviewing the financial history and stability of each customer. We regularly evaluate the collectability of our trade receivable balances by monitoring past due balances. If it is determined that a customer will be unable to meet its financial obligation, we record a specific reserve for bad debt to reduce the related receivable to the amount we expect to recover. Bad debts have not historically had a material effect on us. If circumstances related to specific customers deteriorate, our estimates of the recoverability of receivables associated with those customers could materially change.

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Trade Spending Reserves

        Certain trade spending items are subject to estimation (i.e. volume discounts). Reserves related to estimated trade spending are reviewed and recorded on a monthly basis based on information provided by our regional sales managers as to the types of arrangements that have been made with our customers and are recorded on the balance sheet as an offset to trade receivables. Actual dollar amounts associated with trade spending can vary with sales volumes achieved and other factors. Accordingly, the ultimate liabilities associated with trade spending may differ from those recorded due to changes in estimates and actual results achieved.

Slotting Fees

        Slotting agreements refer to oral arrangements pursuant to which the retail grocer allows our products to be placed on the store's shelves in exchange for a slotting fee. Slotting fees associated with a new product or a new territory are initially recorded as a prepaid asset and the related expense is recognized ratably over the 12-month period beginning with the initial introduction of the product as an offset to sales. We believe that 12 months is the minimum period during which a retailer agrees to allocate shelf space. If a slotting fee agreement were breached, we would pursue available legal remedies to enforce the agreement as appropriate. Total slotting included in prepaid assets at September 30, 2002 and 2001 was $934,000 and $460,000, respectively.

21

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

        In January 2002, we entered into a loan agreement with CapitalSource and terminated our existing equipment lease agreements and line of credit facility. Amounts outstanding under this new loan agreement bear interest at variable rates tied to the prime rate. At September 30, 2002, we had $7.7 million outstanding at an interest rate of 10% and $1.1 million outstanding at an interest rate of 8%. A hypothetical 10% increase in interest rates would increase interest expense by approximately $88,000 annually assuming the amounts outstanding remained constant.

        We do not currently utilize, nor do we anticipate utilizing, derivative securities.

Item 8. Financial Statements and Supplementary Data

        The financial statements and notes thereto required by this item begin on page F-1 as listed in Item 15 of Part IV of this document. Unaudited quarterly financial data for each of the eight quarters in the period ended September 30, 2002 is as follows:

(1)

Net sales and gross margin differ from amounts previously reported for the first quarter of fiscal 2002 and all four quarters of fiscal 2001 due to the reclassification of costs incurred for certain sales incentive programs and promotional costs as a reduction of revenue rather than as sales and marketing expense. See Note 2 of the Notes to Financial Statements appearing in this report as described above.

Risk Relating To Arthur Andersen LLP'S Lack Of Consent

        Arthur Andersen LLP were the independent accountants for Gardenburger, Inc. until May 16, 2002. Representatives of Arthur Andersen LLP are not available to provide the consent required for the incorporation by reference of their report on the financial statements of Gardenburger, Inc. appearing in this Annual Report on Form 10-K into registration statements filed by Gardenburger, Inc. with the Securities and Exchange Commission and currently effective under the Securities Act of 1933, and we have dispensed with the requirement to file their consent in reliance upon rule 437a under the Securities Act of 1933. Because Arthur Andersen LLP have not consented to the incorporation by reference of their report, investors will not be able to recover against Arthur Andersen LLP under Section 11 of the Securities Act of 1933 for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen LLP that are included in this report or any omissions to state a material fact required to be stated therein.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        On May 16, 2002, based on a recommendation of the Audit Committee, our Board of Directors approved the dismissal of our independent public accountants, Arthur Andersen LLP. Arthur Andersen

22

LLP's reports on our financial statements for each of the last two fiscal years did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During our two most recent fiscal years and during the subsequent interim period through the date of dismissal, May 16, 2002, there were not any disagreements between us and Arthur Andersen LLP on any matters of accounting principles or practices, financial statement disclosure or auditing scope or procedure, or any reportable events as defined under Item 304(a)(1)(v) of Regulation S-K promulgated by the Securities and Exchange Commission.

        A copy of a letter addressed to the Securities and Exchange Commission from Arthur Andersen LLP stating that it agrees with the above statements is incorporated by reference into this Form 10-K as exhibit 16.

        Also on May 16, 2002, based upon a recommendation of the Audit Committee and approval of the Board of Directors, we engaged the firm of KPMG LLP to be our independent public accountants. We did not consult KPMG LLP prior to May 16, 2002 with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, or concerning any disagreement or reportable event with Arthur Andersen LLP.

PART III

Item 10. Directors and Executive Officers of the Registrant

        Information required by this item is included under the captions Election of Directors, Executive Officers and Section 16(a) Beneficial Ownership Reporting Compliance, in the Proxy Statement for our 2003 Annual Meeting of Shareholders and is incorporated herein by reference.

Item 11. Executive Compensation

        Information required by this item is included under the captions Executive Compensation, Director Compensation, Employment Contracts and Severance and Change-in-Control Arrangements and Compensation Committee Interlocks and Insider Participation in Compensation Decisions in the Proxy Statement for our 2003 Annual Meeting of Shareholders and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        Information required by this item is included under the caption Security Ownership of Certain Beneficial Owners and Management in the Proxy Statement for our 2003 Annual Meeting of Shareholders and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

        Information required by this item is included under the caption Compensation Committee Interlocks and Insider Participation in Compensation Decisions and Management Transactions in the Proxy Statement for our 2003 Annual Meeting of Shareholders and is incorporated herein by reference.

PART IV

Item 14. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

        Our Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 240.13a-14(c) and 15d-14(c) under the under the Securities Exchange Act of 1934 (Exchange Act), as of a date within ninety days before the filing date of this annual report. Based on that evaluation, the Chief Executive Officer and

23

the Chief Financial Officer have concluded that our disclosure controls and procedures are adequate and effective to ensure that information we are required to disclose under the Exchange Act is recorded, processed, summarized and reported on a timely basis.

Changes in Internal Controls

        There have not been any significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)    Financial Statements and Schedules

(b)    Reports on Form 8-K

        There were no reports on Form 8-K filed during the quarter ended September 30, 2002.

(c)    Exhibits

        Exhibits are listed on the Index to Exhibits following the financial statements included in this report.

24

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.

        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 December 19, 2002.

25

CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

        I, Scott C. Wallace, certify that:

1.

I have reviewed this annual report on Form 10-K of Gardenburger, Inc.;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

26

CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

        I, Lorraine Crawford, certify that:

1.

I have reviewed this annual report on Form 10-K of Gardenburger, Inc.;

2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and

c)

presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

27

Exhibit Index

E-1

E-2

(1)

Incorporated by reference to the Company's Form S-1 Registration Statement (Commission File No. 33-46623) filed May 6, 1992.

(2)

Incorporated by reference to the Company's 1992 Form 10-K Annual Report, filed March 23, 1993 (Commission File No. 0-20330).

(3)

Incorporated by reference to the Company's Form 10-Q Quarterly Report for the quarter ended June 30, 1997, filed August 14, 1997.

(4)

Incorporated by reference to the Company's 1996 Form 10-K Annual Report, filed March 25, 1997.

E-3

(5)

Incorporated by reference to the Company's 1997 Form 10-K Annual Report, filed March 31, 1998.

(6)

Incorporated by reference to the Company's Form 10-Q for the quarter ended March 31, 1998, filed May 15, 1998.

(7)

Incorporated by reference to the Company's Form 10-Q for the quarter ended September 30, 1998, filed November 5, 1998.

(8)

Management contract or compensatory plan or arrangement.

(9)

Incorporated by reference to the Company's Form 8-K Current Report, filed April 1, 1999.

(10)

Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1998, filed March 31, 1999.

(11)

Incorporated by reference to the Company's Form 10-Q for the quarter ended March 31, 1999, filed May 17, 1999.

(12)

Incorporated by reference to the Company's Form 10-Q for the quarter ended June 30, 1999, filed August 13, 1999.

(13)

Incorporated by reference to the Company's Registration Statement on Form S-8 (No. 333-92665), filed December 13, 1999.

(14)

Incorporated by reference to the Company's Form 10-K for the nine-month transition period ended September 30, 1999, filed December 27, 1999.

(15)

Incorporated by reference to the Company's Form 10-Q for the quarter ended December 31, 1999, filed February 9, 2000.

(16)

Incorporated by reference to the Company's 2000 Form 10-K Annual Report, filed December 26, 2000.

(17)

Incorporated by reference to the Company's Form 10-Q for the quarter ended December 31, 2000, filed February 14, 2001.

(18)

Incorporated by reference to the Company's Form 10-Q for the quarter ended March 31, 2001, filed May 14, 2001.

(19)

Incorporated by reference to the Company's Form 10-Q for the quarter ended December 31, 2001, filed February 13, 2002.

(20)

Incorporated by reference to the Company's Form 10-Q for the quarter ended June 30, 2002, filed August 9, 2002.

(21)

Incorporated by reference to the Company's Form 8-K/A dated May 16, 2002 and filed May 30, 2002.

(22)

Incorporated by reference to the Company's Form 8-K dated January 10, 2002 and filed January 17, 2002.

(23)

Incorporated by reference to the Company's 2001 Form 10-K Annual Report, filed December 10, 2001.

E-4

Independent Auditors' Report

The Board of Directors
Gardenburger, Inc.:

        We have audited the accompanying balance sheet of Gardenburger, Inc. (an Oregon corporation) as of September 30, 2002, and the related statements of operations, shareholders' deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Gardenburger, Inc. as of September 30, 2001, and for each of the two years ended September 30, 2001 were audited by other auditors who have ceased operations. Those auditors expressed an unqualified opinion on those financial statements, before the restatement described in Note 2 to the financial statements, in their report dated November 2, 2001.

        We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 audit provides a reasonable basis for our opinion.

        In our opinion, the 2002 financial statements referred to above present fairly, in all material respects, the financial position of Gardenburger, Inc. as of September 30, 2002, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

        As discussed above, the financial statements of Gardenburger, Inc. as of September 30, 2001, and for each of the two years ended September 30, 2001 were audited by other auditors who have ceased operations. As described in Note 2 to the financial statements, those financial statements have been restated. We audited the adjustments described in Note 2 to the financial statements that were applied to restate the 2001 and 2000 financial statements. In our opinion, such adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 financial statements of Gardenburger, Inc. other than with respect to such adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2001 and 2000 financial statements taken as a whole.

/s/ KPMG LLP
Portland, Oregon
November 8, 2002, except as to Note 2 to the financial statements, which is as of November 25, 2002.

F-1

THIS REPORT IS A CONFORMED COPY
OF THE REPORT PREVIOUSLY ISSUED BY
ARTHUR ANDERSEN LLP AND HAS NOT BEEN REISSUED BY THAT FIRM.

Report of Independent Public Accountants

To the Board of Directors and Shareholders of
Gardenburger, Inc.:

        We have audited the accompanying balance sheet of Gardenburger, Inc. (an Oregon corporation) as of September 30, 2001 and the related statements of operations, shareholders' equity (deficit) and cash flows for the years ended September 30, 2001 and 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. 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, the financial statements referred to above present fairly, in all material respects, the financial position of Gardenburger, Inc. as of September 30, 2001 and the results of its operations and its cash flows for the years ended September 30, 2001 and 2000, in conformity with accounting principles generally accepted in the United States.

/s/Arthur Andersen LLP
Portland, Oregon,
November 2, 2001

        ARTHUR ANDERSEN LLP WERE THE INDEPENDENT ACCOUNTANTS FOR GARDENBURGER, INC. UNTIL MAY 16, 2002. REPRESENTATIVES OF ARTHUR ANDERSEN LLP ARE NOT AVAILABLE TO PROVIDE THE CONSENT REQUIRED FOR THE INCORPORATION BY REFERENCE OF THEIR REPORT ON THE FINANCIAL STATEMENTS OF GARDENBURGER, INC. APPEARING IN THIS ANNUAL REPORT INTO REGISTRATION STATEMENTS FILED BY GARDENBURGER, INC. WITH THE SECURITIES AND EXCHANGE COMMISSION AND CURRENTLY EFFECTIVE UNDER THE SECURITIES ACT OF 1933. BECAUSE ARTHUR ANDERSEN LLP HAVE NOT CONSENTED TO THE INCORPORATION BY REFERENCE OF THEIR REPORT, THE INVESTOR WILL NOT BE ABLE TO RECOVER AGAINST ARTHUR ANDERSEN LLP UNDER SECTION 11 OF THE SECURITIES ACT OF 1933 FOR ANY UNTRUE STATEMENTS OF A MATERIAL FACT CONTAINED IN THE FINANCIAL STATEMENTS AUDITED BY ARTHUR ANDERSEN LLP THAT ARE CONTAINED IN THIS REPORT OR ANY OMISSIONS TO STATE A MATERIAL FACT REQUIRED TO BE STATED THEREIN.

F-2

GARDENBURGER, INC.

BALANCE SHEETS

(In thousands, except share amounts)

The accompanying notes are an integral part of these balance sheets.

F-3

GARDENBURGER, INC.

STATEMENS OF OPERATIONS

(In thousands, except per share amounts)

The accompanying notes are an integral part of these statements.

F-4

GARDENBURGER, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

For the Years Ended September 30, 2002, 2001 and 2000

(In thousands, except share amounts)

The accompanying notes are an integral part of these statements.

F-5

GARDENBURGER, INC.

STATEMENTS OF CASH FLOWS

(In thousands)