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

FORM 10-K/A

Amendment No. 1

/X/
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended: September 30, 2001

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0- 20330

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

OREGON
(State or other jurisdiction
of incorporation or organization) 93-0886359
(I.R.S. Employer
Identification No.)

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 /X/    No / /

        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. / /

        The aggregate market value of the voting stock held by non-affiliates of the Registrant is $2,828,816 as of December 5, 2001 based upon the average bid and asked prices as reported by the NASD's OTC Bulletin Board ($0.40).

        The number of shares outstanding of the Registrant's Common Stock as of December 5, 2001 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 2002 Annual Meeting of Shareholders.

GARDENBURGER, INC.
2001 FORM 10-K/A ANNUAL REPORT
AMENDMENT NO. 1
TABLE OF CONTENTS

		Page
	PART I
Item 8.	Financial Statements and Supplementary Data	2
	PART IV
Item 14.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	3
Signatures		4

1

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 14 of Part IV of this document.

        Unaudited quarterly financial data for each of the eight quarters in the period ended September 30, 2001 is as follows:

In thousands, except per share data	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
2001
Net sales	$	12,603		$	12,725		$	19,020		$	15,209
Gross margin		5,945			5,252			9,395			6,407
Net income (loss)		(2,669	)		(3,651	)		322			(1,158	)
Basic and diluted net income (loss) per share		(0.30	)		(0.41	)		0.04			(0.13	)
2000
Net sales	$	18,750		$	14,361		$	21,333		$	16,599
Gross margin		9,969			6,652			10,377			7,908
Net loss(1)		(8,772	)		(2,791	)		(704	)		(20,386	)
Basic and diluted net loss per share		(0.99	)		(0.32	)		(0.08	)		(2.28	)

(1)

Included in net loss in the first quarter of fiscal 2000 is an $8.1 million non-cash charge related to the implied value of the Series B preferred stock beneficial conversion feature. Included in net loss in the fourth quarter of fiscal 2000 is a $17.5 million non-cash income tax valuation allowance against net deferred tax assets.

2

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)

Financial Statements and Schedules

	Page
Report of Arthur Andersen LLP	F-1
Balance Sheets—September 30, 2001 and 2000	F-2
Statements of Operations—Years ended September 30, 2001 and 2000 and nine months ended September 30, 1999	F-3
Statements of Shareholders' Equity (Deficit)—Years ended September 30, 2001 and 2000 and nine months ended September 30, 1999	F-4
Statements of Cash Flows—Years ended September 30, 2001 and 2000 and nine months ended September 30, 1999	F-5
Notes to Financial Statements	F-6
Report of Independent Public Accountants on Financial Statement Schedule	F-17
Schedule II Valuation and Qualifying Accounts	F-18

(b)

Reports on Form 8-K

There were no reports on Form 8-K filed during the quarter ended September 30, 2001.

(c)

Exhibits

The exhibits filed as part of this amendment are listed below and this list is intended to comprise the exhibit index:

23        Consent of Arthur Andersen LLP

3

SIGNATURES

        Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 17, 2002

GARDENBURGER, INC.
By:	/s/  LORRAINE CRAWFORD Lorraine Crawford Vice President, Finance and Corporate Controller (Principal Financial and Accounting Officer)

4

Report of Independent Public Accountants

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

        We have audited the accompanying balance sheets of Gardenburger, Inc. (an Oregon corporation) as of September 30, 2001 and 2000 and the related statements of operations, shareholders' equity (deficit) and cash flows for the years ended September 30, 2001 and 2000 and the nine months ended September 30, 1999. 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 2000, and the results of its operations and its cash flows for the years ended September 30, 2001 and 2000 and the nine months ended September 30, 1999, in conformity with accounting principles generally accepted in the United States.

/s/ ARTHUR ANDERSEN LLP

Portland, Oregon,
    November 2, 2001

GARDENBURGER, INC.
BALANCE SHEETS
(In thousands, except share amounts)

			September 30,
			2001			2000
Assets
Current Assets:
	Cash and cash equivalents		$	3,065		$	2,178
	Accounts receivable, net of allowances of $266 and $264			3,513			4,098
	Inventories, net			7,331			7,499
	Prepaid expenses			1,070			2,079
		Total Current Assets		14,979			15,854
Property, Plant and Equipment, net of accumulated depreciation of $5,696 and $5,235				5,520			7,342
Other Assets, net of accumulated amortization of $1,612 and $1,207				1,562			1,964
		Total Assets	$	22,061		$	25,160
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities:
	Short-term note payable		$	1,689		$	2,591
	Accounts payable			1,959			1,876
	Payroll and related liabilities payable			659			1,411
	Other current liabilities			815			1,918
		Total Current Liabilities		5,122			7,796
Other Long-Term Liabilities				126			162
Convertible Notes Payable				17,364			15,000
Convertible Redeemable Preferred Stock				40,880			36,513
Shareholders' Equity (Deficit):
	Preferred Stock, no par value, 5,000,000 shares authorized			—			—
	Common Stock, no par value, 25,000,000 shares authorized; shares issued and outstanding: 9,002,101 and 8,972,601			11,189			11,153
	Additional paid-in capital			12,405			12,405
	Retained deficit			(65,025	)		(57,869	)
		Total Shareholders' Equity (Deficit)		(41,431	)		(34,311	)
		Total Liabilities and Shareholders' Equity (Deficit)	$	22,061		$	25,160

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

F-2

GARDENBURGER, INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

		For the Year Ended September 30, 2001			For the Year Ended September 30, 2000			For the Nine Months Ended September 30, 1999
Net sales		$	59,557		$	71,043		$	60,106
Cost of goods sold			32,558			36,137			34,334
Gross margin			26,999			34,906			25,772
Operating expenses:
	Sales and marketing		22,392			28,288			48,021
	General and administrative		4,997			7,304			5,064
	Restructuring charge		—			—			2,684
			27,389			35,592			55,769
Operating loss			(390	)		(686	)		(29,997	)
Other income (expense):
	Interest income		91			125			197
	Interest expense		(2,433	)		(1,823	)		(1,596	)
	Other, net		(57	)		(303	)		7
			(2,399	)		(2,001	)		(1,392	)
Loss before income taxes			(2,789	)		(2,687	)		(31,389	)
Provision for (benefit from) income taxes			—			17,474			(11,223	)
Loss before preferred dividends			(2,789	)		(20,161	)		(20,166	)
Preferred dividends			(4,367	)		(12,492	)		(1,980	)
Net loss available for common shareholders		$	(7,156	)	$	(32,653	)	$	(22,146	)
Net loss per share—basic and diluted		$	(0.80	)	$	(3.67	)	$	(2.51	)
Shares used in per share calculations			9,000			8,891			8,812

The accompanying notes are an integral part of these statements.

F-3

GARDENBURGER, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
For the Years Ended September 30, 2001 and 2000 and the Nine Months Ended September 30, 1999
(In thousands, except share amounts)

	Common Stock
				Additional Paid-In Capital		Retained Earnings (Deficit)			Total Shareholders' Equity (Deficit)
	Shares	Amount
Balance at December 31, 1998	8,733,811	$	9,717	$	4,275	$	(3,066	)	$	10,926
Exercise of common stock options	55,660		377		—		—			377
Income tax benefit of non-qualified stock option exercises and disqualifying dispositions	—		—		2		—			2
Issuaance of shares in exchange for interest on convertible notes payable	51,980		525		—		—			525
Accrual of preferred dividends	—		—		—		(1,980	)		(1,980	)
Foreign currency translation	—		—		—		(3	)		(3	)
Loss before preferred dividends	—		—		—		(20,166	)		(20,166	)
Balance at September 30, 1999	8,841,451		10,619		4,277		(25,215	)		(10,319	)
Exercise of common stock options	55,600		115		—		—			115
Income tax benefit of non-qualified stock option exercises and disqualifying dispositions	—		—		3		—			3
Issuance of shares in exchange for interest on convertible notes payable	75,550		419		—		—			419
Reset of conversion price of Series B preferred stock	—		—		8,125		—			8,125
Accrual of preferred dividends	—		—		—		(12,492	)		(12,492	)
Foreign currency translation	—		—		—		(1	)		(1	)
Loss before preferred dividends	—		—		—		(20,161	)		(20,161	)
Balance at September 30, 2000	8,972,601		11,153		12,405		(57,869	)		(34,311	)
Exercise of common stock options	29,500		36		—		—			36
Accrual of preferred dividends	—		—		—		(4,367	)		(4,367	)
Loss before preferred dividends	—		—		—		(2,789	)		(2,789	)
Balance at September 30, 2001	9,002,101	$	11,189	$	12,405	$	(65,025	)	$	(41,431	)

The accompanying notes are in integral part of these statements.

F-4

GARDENBURGER, INC.
STATEMENTS OF CASH FLOWS
(In thousands)

					For the Year Ended September 30, 2001			For the Year Ended September 30, 2000			For the Nine Months Ended September 30, 1999
Cash flows from operating activities:
	Loss before preferred dividends				$	(2,789	)	$	(20,161	)	$	(20,166	)
	Effect of exchange rate on operating accounts					—			(1	)		(3	)
	Adjustments to reconcile loss before preferred dividends to net cash flows provided by (used in) operating activities:
		Depreciation and amortization				2,068			2,235			1,600
		Non-cash portion of restructuring charge				—			—			1,584
		Other non-cash expenses				1,840			421			214
		Loss on sale of fixed assets				131			339			19
		Deferred income taxes				—			17,466			(11,235	)
		(Increase) decrease in:
			Accounts receivable, net			585			2,035			8,836
			Inventories, net			168			(231	)		5,189
			Prepaid expenses			1,009			128			2,308
		Increase (decrease) in:
			Accounts payable			83			(4,793	)		(3,039	)
			Payroll and related liabilities			(752	)		470			(881	)
			Other accrued liabilities			(578	)		(1,147	)		699
				Net cash provided by (used in) operating activities		1,765			(3,239	)		(14,875	)
Cash flows from investing activities:
	Payments for purchase of property and equipment					(683	)		(855	)		(1,031	)
	Proceeds from sale of property and equipment					675			1,580			33
	Other assets, net					(4	)		(47	)		42
				Net cash provided by (used in) investing activities		(12	)		678			(956	)
Cash flows from financing activities:
	Payments on line of credit, net					(902	)		(2,409	)		(10,000	)
	Issuance of preferred stock, net of issuance costs					—			—			30,167
	Proceeds from exercise of common stock options and warrants					36			115			377
				Net cash provided by (used in) financing activities		(866	)		(2,294	)		20,544
Increase (decrease) in cash and cash equivalents						887			(4,855	)		4,713
Cash and cash equivalents:
	Beginning of period					2,178			7,033			2,320
	End of period				$	3,065		$	2,178		$	7,033

The accompanying notes are an integral part of these statements.

F-5

GARDENBURGER, INC.
NOTES TO FINANCIAL STATEMENTS
(In thousands, except per share amounts and as otherwise indicated)

1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations

        Gardenburger, Inc. was incorporated in Oregon in 1985 to provide a line of meatless food products in response to the public's awareness of the importance of diet to overall health and fitness. Toward this end, the Company developed and now produces and distributes frozen, meatless food products, consisting of veggie burgers and soy-based chicken, pork, and meatball products. The Company's products are principally sold to retail and food service customers throughout the United States.

Change in Reporting Period

        In July 1999, the Company changed its fiscal year end to September 30. Fiscal 1999 ended on September 30, 1999 and fiscal 2000 began October 1, 1999. For purposes of these footnotes, the nine month period ended September 30, 1999 will be referred to herein as the year ended September 30, 1999 or fiscal 1999. See Note 8, Unaudited Fiscal Year Operating Results.

Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management believes that the estimates used are reasonable.

Cash Equivalents

        Cash equivalents consist of highly liquid investments with maturities at the date of purchase of 90 days or less.

Inventories

        Inventories are valued at standard cost, which approximates the lower of cost (using the first-in, first-out (FIFO) method), or market, and include materials, labor and manufacturing overhead.

Property, Plant and Equipment

        Property, plant and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the lease term or the estimated useful life of the asset, whichever is shorter. Estimated useful lives are as follows:

Buildings and improvements	3–40 years	Machinery and equipment	7–30 years
Office furniture and equipment	3–10 years	Vehicles	5 years

F-6

Other Assets

        Other assets primarily include deferred financing fees, goodwill and trademarks. Deferred financing fees are being amortized over the maturity period of the related debt, goodwill is being amortized using the straight-line method over ten years and trademarks are being amortized using the straight-line method over forty years.

Long-Lived Assets

        In accordance with SFAS 121, long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows of the asset.

Segment Reporting

        The Company discloses segment information in accordance with Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about Segments of an Enterprise and Related Information." Based upon definitions contained within SFAS 131, the Company has determined that it operates in one segment. In addition, virtually all sales are domestic.

Concentrations of Credit Risk and Significant Customers

        The Company invests its excess cash with high credit quality financial institutions, which bear minimal risk, and, by policy, limits the amount of credit exposure to any one financial institution.

        For fiscal 2001, two customers each accounted for approximately 10 percent of revenue and 18 percent and 13 percent of the accounts receivable balance at September 30, 2001, respectively.

        For fiscal 2000, one customer accounted for approximately 9 percent of revenue and 17 percent of the accounts receivable balance at September 30, 2000.

        For fiscal 1999, one customer accounted for approximately 11 percent of revenue and 5 percent of the accounts receivable balance at September 30, 1999.

        Historically, the Company has not incurred significant losses related to accounts receivable.

Revenue Recognition

        Revenue from the sale of products is generally recognized at time of shipment to the customer. Promotional and other discounts are accrued at time of shipment based on historical experience and recorded as a sales and marketing expense.

Advertising Costs

        Advertising costs, including media advertising, couponing and other advertising, which are included in sales and marketing expense, are expensed when the advertising first takes place. Advertising expense was approximately $1,065 in 2001, $316 in 2000, and $17,313 in 1999.

Slotting Fees

        Slotting fees associated with a new product or a new territory are initially recorded as an asset and the related expense is recognized ratably over the 12-month period beginning with the initial introduction of the product as a component of sales and marketing expense. Slotting agreements refer to oral arrangements pursuant to which the retail grocer allows the Company's products to be placed

F-7

on the store's shelves in exchange for a slotting fee. If a slotting fee agreement were breached, the Company would pursue available legal remedies to enforce the agreement as appropriate.

Research and Development Costs

        Research and development costs are expensed as incurred. Research and development expense was approximately $188 in 2001, $319 in 2000, and $553 in 1999 and is included in sales and marketing expenses in the accompanying statements of operations.

Net Loss Per Share

        Basic earnings (loss) per share (EPS) is calculated using the weighted average number of common shares outstanding for the period and diluted EPS is computed using the weighted average number of common shares and dilutive common equivalent shares outstanding.

        Basic EPS and diluted EPS are the same for all periods presented since the Company was in a loss position in all periods.

        Potentially dilutive securities that are not included in the diluted EPS calculation because they would be antidilutive are as follows:

		September 30,
		2001	2000	1999
Stock options		4,113	2,778	3,247
Convertible notes		1,709	1,313	1,237
Convertible preferred stock		4,062	4,062	3,250
	Total	9,884	8,153	7,734

New Accounting Pronouncements

        In May 2000, the Emerging Issues Task Force ("EITF"), a subcommittee of the Financial Accounting Standards Board, issued EITF No. 00-14 "Accounting for Certain Sales Incentives." The EITF subsequently amended the transition provisions of EITF 00-14 in November 2000 and in April 2001. EITF 00-14 prescribes guidance regarding timing of recognition and income statement classification of costs incurred for certain sales incentiveprograms. This guidance requires certain coupons, rebate offers and free products offered concurrently with a single exchange transaction to be recognized at the later of when the revenue is recognized or when the sales incentive is offered, and reported as a reduction of revenue. The Company is required to adopt EITF 00-14 in the second quarter of fiscal 2002. Upon application of EITF 00-14, comparative financial statements for prior periods will be reclassified to comply with the classification guidelines of EITF 00-14. While it is expected that EITF 00-14 will have an impact on the Company's financial statements, the impact is expected to be limited to the classification of revenue and expense items within the statements of operations. Currently, given the guidance of EITF 00-14, the Company anticipates reclassifying certain of its sales incentives, primarily consisting of coupon expense and other trade promotions, as a reduction of sales rather than as a sales and marketing expense.

        In April 2001, the EITF issued EITF No. 00-25 "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products." EITF No. 00-25 addresses the timing, recognition and classification in the income statement of certain promotional costs paid to a retailer or wholesaler by a vendor in connection with the sale of the vendor's products or promotion of sales of the vendor's products by the retailer or wholesaler. This guidance generally requires these costs to be recognized when incurred and reported as a reduction of revenue. The Company is required to adopt EITF 00-25 in the second quarter of fiscal 2002. Upon application of EITF 00-25, comparative financial

F-8

statements for prior periods will be reclassified to comply with the classification guidelines of EITF 00-25. While it is expected that EITF 00-25 will have an impact on the Company's financial statements, the impact is expected to be limited to the classification of revenue and expense items within the statements of operations. Currently, given the guidance of EITF 00-25, the Company anticipates reclassifying slotting expense, third party rebates and certain other trade promotion discounts as a reduction of sales rather than as a sales and marketing expense.

        The Company believes the adoption of EITF No. 00-14 and EITF No. 00-25 will result in a reclassification that will decrease previously reported net sales and previously reported sales and marketing expense by approximately $7.5–$10 million in 2001 and $8.5–$12 million in 2000. The Company does not believe that the adoption of EITF No. 00-14 and EITF No. 00-25 will otherwise have a material net effect on the results of operations of the Company.

2.    INVENTORIES

        Detail of inventories at September 30, 2001 and 2000 is as follows:

	2001		2000
Raw materials	$	1,243	$	1,126
Packaging and supplies		309		354
Finished goods		5,779		6,019
	$	7,331	$	7,499

3.    PROPERTY, PLANT AND EQUIPMENT

        Detail of property, plant and equipment at September 30, 2001 and 2000 is as follows:

	2001			2000
Land	$	—		$	131
Building and improvements		1,290			1,597
Machinery and equipment		5,665			6,472
Office furniture and equipment		4,261			4,377
		11,216			12,577
Less accumulated depreciation		(5,696	)		(5,235	)
	$	5,520		$	7,342

4.    LINE OF CREDIT

        In December 1999, the Company entered into a Loan and Security Agreement with Banc of America Commercial Finance Corporation (the "Agreement"). Effective October 2, 2000, Banc of America sold the loan under the existing agreement to Wells Fargo Business Credit, Inc. The Agreement provides for a line of credit based on eligible accounts receivable and inventories of up to $25.0 million (assuming 30 percent participation by another lender) and expires on December 23, 2002. The interest rate on the line is prime plus 0.125% or 6.125% at September 30, 2001. The Company had $1.7 million outstanding under this line at September 30, 2001 and additional borrowing availability of $4.6 million based on eligible accounts receivable and inventories. There is one financial covenant under the Agreement as follows: the Company must not have a cumulative cash loss in excess of $5.0 million from the origination date of the Agreement through the expiration date of the Agreement. At September 30, 2001, the Company was in compliance with this covenant.

F-9

5.    LEASE COMMITMENTS

        Future minimum lease payments at September 30, 2001 are as follows:

Year Ended September 30,
2002		$	3,738
2003			3,331
2004			3,260
2005			2,913
2006			1,222
Thereafter			54
	Total	$	14,518

        Rental expense for the years ended September 30, 2001, 2000 and 1999 was $3,780, $3,711 and $2,355, respectively.

6.    CONVERTIBLE NOTES PAYABLE

        At September 30, 2001, the Company had outstanding $17.4 million of 7 percent Convertible Senior Subordinated Notes (the "Notes") held by Dresdner Kleinwort Benson Private Equity Partners L.P. ("Dresdner"). The Notes are convertible into shares of the Company's Common Stock at the option of the holder until maturity in 2003, at which time they will be due in full if not previously converted. The Company may also elect to redeem the Notes, if not previously converted, at any time. The conversion price of the Notes at September 30, 2001 was $10.16 per share.

        In December 2000, the Company and Dresdner agreed to amend the Notes to provide an additional alternative for interest payments. The Company may elect, with prior written consent from Dresdner, to satisfy its semiannual obligation to pay interest on the Notes by increasing the then unpaid principal amount of the Notes by an amount equal to the interest then payable. Under this alternative, the interest payable shall be calculated at an annual interest rate of 10% rather than 7%. The Company, with Dresdner's consent, elected to use the new alternative for the interest payable at September 30, 2000, March 31, 2001, and September 30, 2001 and, as such, the total principal amount of the Notes has been increased to $17.4 million.

        Under the terms of the Note Purchase Agreement, as amended, relating to the Notes, the Company must comply with one financial covenant as follows: the Company must not have a cumulative cash loss in excess of $5.0 million from December 23, 1999 through December 23, 2002. At September 30, 2001, the Company was in compliance with this covenant.

7.    INCOME TAXES

        The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes"("SFAS 109"). The Company realizes tax benefits as a result of the exercise of non-qualified stock options and the exercise and subsequent sale of certain incentive stock options (disqualifying dispositions). For financial reporting purposes, any reduction in income tax obligations as a result of these tax benefits is credited to additional paid-in capital. Tax benefits of $0,

F-10

$3 and $2 were credited to additional paid-in capital in 2001, 2000 and 1999, respectively. The provision for (benefit from) income taxes is as follows:

		September 30,
		2001		1999		2000
CURRENT:
	Federal	$	—	$	—	$	—
	State		—		8		12
			—		8		12
DEFERRED			—		17,466		(11,235	)
		$	—	$	17,474	$	(11,223	)

        Total deferred income tax assets were $21,511 and $20,525 and liabilities were $833 and $832 at September 30, 2001 and 2000, respectively, prior to the consideration of any valuation allowance. Individually significant temporary differences are as follows:

	September 30,
	2001		2000
Net operating loss carryforwards	$	19,497	$	17,416
Provision for trade promotions and discounts		642		926

        Total net deferred tax assets were $20,678 and $19,693 as of September 30, 2001 and 2000, respectively. In accordance with SFAS 109, the Company has recorded a valuation allowance against the entire amount of net deferred tax assets as of September 30, 2001 and 2000 as a result of recurring operating losses in recent years.

        The Company has tax net operating loss carryforwards, totaling $50.8 million, which expire as follows: 2012: $1.4 million, 2018–$10.4 million, 2019–$31.6 million, 2020–$3.0 million and 2021–$4.4 million.

        The reconciliation between the effective tax rate and the statutory federal income tax rate is as follows:

	September 30,
	2001		2000		1999
Statutory federal income tax rate	(34.0	)%	(34.0	)%	(34.0	)%
State taxes, net of federal income tax benefit	(4.4	)	(2.7	)	(1.3	)
Trademark and goodwill amortization	0.5		0.9		0.1
Meals and entertainment	0.2		1.1		0.1
Effect of change in valuation allowance	37.6		685.3		—
Other	0.1		(0.3	)	(0.7	)
Effective tax rate	0.0	%	650.3	%	(35.8	)%

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8.    UNAUDITED FISCAL YEAR OPERATING RESULTS

        The following statement of operations data is included for informational purposes only and is unaudited for fiscal years 1997 through 1999.

Twelve Months Ended September 30,	2001			2000			1999			1998			1997
Net sales	$	59,557		$	71,043		$	88,817		$	88,406		$	48,144
Cost of goods sold		32,558			36,137			48,141			44,295			23,888
Gross margin		26,999			34,906			40,676			44,111			24,256
Operating expenses		27,389			35,592			69,639			57,755			28,465
Operating loss		(390	)		(686	)		(28,963	)		(13,644	)		(4,209	)
Net loss available for common shareholders	$	(7,156	)	$	(32,653	)	$	(21,826	)	$	(9,384	)	$	(2,667	)

9.    CONVERTIBLE REDEEMABLE PREFERRED STOCK

        In April 1999, the Company closed a stock purchase agreement selling $32.5 million of convertible redeemable preferred stock to several investors. Under the terms of the agreement, the Company sold an aggregate of 2,763 shares of Series A preferred stock and 487 shares of Series B preferred stock to members of the investor group, at a price of $10.00 per share for each series, or an aggregate consideration of $32.5 million, and received net proceeds of $30.2 million. The difference between the aggregate consideration and the net proceeds of the convertible redeemable preferred stock is being accreted as additional preferred dividends over the period until redemption. At September 30, 2001, the Series A preferred shares were convertible at a price of $10.00 per share and the Series B preferred shares were convertible at $3.75 per share (subject to antidilution adjustments) at any time at the discretion of the holder. The Company did not meet certain performance targets for the twelve months ended December 31, 1999 specified in the terms of the Series B preferred stock, triggering an adjustment in the Series B conversion price to $3.75 per share from $10.00 per share. As a result of the adjustment, the Company recorded an approximately $8.1 million non-cash charge for additional preferred dividends to account for the implied value of the beneficial conversion feature. 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. Shares may not be redeemed until December 31, 2004, following which time they may be redeemed at the election of the holders or, under certain conditions, at the discretion of the Company.

10.  SHAREHOLDERS' EQUITY

Preferred Stock

        The Company has authorized 5,000 shares of preferred stock, of which 3,250 shares have been issued (see Note 9). Such stock may be issued by the Board of Directors in one or more series, with the preferences, limitations and rights of each series to be determined by the Board of Directors.

Preferred Share Purchase Rights

        In April 1996, the Company declared a dividend distribution of one preferred share purchase right on each outstanding share of the Company's Common Stock. Each right, when exercisable, will entitle shareholders to buy one one-hundredth of a share of Series A Junior Participating Preferred Stock of the Company at an exercise price of $47 per share. The rights will become exercisable if a person or group (an "Acquiring Person") acquires 15 percent or more of the Company's Common Stock (with certain exceptions) or announces a tender offer for 15 percent or more of the Common Stock. With the exception of certain cash tender offers, if a person becomes an Acquiring Person, or in the event of certain mergers of the Company with an Acquiring Person, the rights will become exercisable for    shares of Common Stock with a market value of two times the exercise price of the right. The

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Company's Board of Directors is entitled to redeem the rights at $.01 per right at any time before an Acquiring Person has acquired 15 percent or more of the outstanding Common Stock.

Restrictions on Dividends

        No cash dividends may be paid on the Company's Common Stock unless dividends have been paid on all outstanding shares of the Company's Series A and Series B 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.

Stock Plan Options

        In February 2001, the Company's shareholders approved the 2001 Stock Incentive Plan (the "2001 Plan") to replace the Company's 1992 First Amended and Restated Combination Stock Option Plan (the "1992 Plan"), which was scheduled to expire in January 2002. The 2001 Plan provides for stock-based awards to employees, officers, directors and consultants of the Company. Awards that may be granted under the 2001 Plan include stock options, in the form of incentive stock options ("ISOs") and non-statutory stock options ("NSOs"), stock appreciation rights, restricted awards, performance awards, and other stock-based awards. The exercise price per share generally must be at least 100 percent of the fair market value of a share of Common Stock on the date the option is granted for ISOs, 75 percent for NSOs and 25 percent for deferred compensation options. The Stock-Based Awards Committee of the Company's Board of Directors determines the vesting and other terms of the awards under the 2001 Plan. Vesting for certain options may accelerate upon a change in control of the Company.

        The 2001 Plan permits the issuance of up to 1,400 shares of the Company's Common Stock plus shares available under the 1992 Plan. In addition, if awards granted under the 1992 Plan are forfeited or expire, shares of Common Stock reserved for such forfeited or expired awards become available for issuance under the 2001 Plan. As of September 30, 2001, the Company had 1,903 shares reserved for issuance under the 2001 Plan.

        Prior to the approval of the 2001 Plan, the Company's 1992 Plan provided for the issuance of ISOs to employees and officers of the Company and NSOs to employees, officers, directors and consultants of the Company. Under the 1992 Plan, the exercise price of an ISO could not be less than the fair market value on the date of grant and the exercise price of an NSO could not be less than 85 percent of fair market value on the date of grant. Options granted under the 1992 Plan generally vest three to five years from the date of grant and generally expire ten years from the date of grant. Vesting may accelerate upon a change in control of the Company. As a result of approval of the 2001 Plan in February 2001, no additional awards will be made under the 1992 Plan, all shares available for grant have been added to the shares available under the 2001 Plan, and cancellations under the 1992 Plan are being added to the pool of available shares under the 2001 Plan. The Company had 1,448 shares of Common Stock reserved for issuance under the 1992 Plan at September 30, 2001.

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        Activity under the 1992 Plan and the 2001 Plan is summarized as follows:

	Shares Available for Grant		Shares Subject to Options		Weighted Average Exercise Price
Balances, December 31, 1998	578		1,439		$	9.24
Options granted	(516	)	516			9.96
Options canceled	57		(57	)		8.90
Options exercised	—		(56	)		7.18
Balances, September 30, 1999	119		1,842			9.51
Options granted	(246	)	246			6.40
Options canceled	673		(673	)		9.80
Options exercised	—		(10	)		6.50
Balances, September 30, 2000	546		1,405			8.86
Additional shares reserved	1,400		—			—
Options granted	(1,943	)	1,943			0.80
Options canceled	535		(535	)		7.33
Balances, September 30, 2001	538		2,813		$	3.58

Non-Plan Options

        On March 10, 1992, the Company granted a non-statutory stock option to its then Chief Executive Officer exercisable for 1,650 shares of the Company's Common Stock. Such option was exercisable for a period of ten years from the date of grant at an exercise price of $1.00 per share, the fair market value of the Company's Common Stock on the date of grant. On May 8, 2001, the Company extended the exercise period of the non-statutory stock option period for an additional two years. During 1996, a portion of the option covering 625 of the shares was exercised, during fiscal 2000, a portion of the option covering 45 shares was exercised and during fiscal 2001, a portion of the option covering 30 shares was exercised. At September 30, 2001, an option to purchase 950 shares of Common Stock remained outstanding and exercisable in full and 950 shares of the Company's Common Stock were reserved for issuance under this option grant.

        On April 14, 1996, the Company granted an option to its then Chief Executive Officer exercisable for 300 shares of the Company's Common Stock. Pursuant to the terms of the original grant, such option is exercisable for a period of five years from the Chief Executive Officer's termination date of August 4, 2000 at an exercise price of $8.69 per share. At September 30, 2001, the entire option remained outstanding and the Company had 300 shares reserved for issuance under this option grant.

        During 1999, the Company granted options to certain employees and two consultants covering a total of 80 shares of the Company's Common Stock at an average exercise price of $11.16 per share. During fiscal 2000, options covering 15 shares at an average exercise price of $11.63 were canceled and during fiscal 2001, options covering 22 shares at an average exercise price of $11.35 were canceled. At September 30, 2001, options covering 43 shares were outstanding at an average exercise price of $10.84 and 43 shares of the Company's Common Stock were reserved for issuance under these options. The fair value of options granted to non-employees was not material.

        On March 1, 2000, the Company granted options to the members of its Board of Directors covering a total of 14 shares of the Company's Common Stock. Such options are exercisable for a period of ten years from the date of grant at an exercise price of $5.69 per share, subject to vesting provisions over a one-year period. During fiscal 2001, options covering 7 shares were canceled and at September 30, 2001, options covering 7 shares were outstanding. At September 30, 2001 the Company had 7 shares of its Common Stock reserved for issuance under these option grants.

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Statement of Financial Accounting Standards No. 123

        During 1995, the Financial Accounting Standards Board issued SFAS 123 which defines a fair value based method of accounting for employee stock options and similar equity instruments and encourages all entities to adopt that method of accounting for all of their employee stock compensation plans. However, it also allows an entity to continue to measure compensation cost for those plans using the method of accounting prescribed by APB 25. Entities electing to continue to use the accounting treatment in APB 25 must make pro forma disclosures of net income and, if presented, earnings per share, as if the fair value based method of accounting defined in SFAS 123 had been adopted.

        The Company has elected to account for its stock-based compensation plans under APB 25; however, the Company has computed, for pro forma disclosure purposes, the value of all options granted during fiscal 2001, 2000 and 1999 using the Black-Scholes option pricing model as prescribed by SFAS 123 using the following weighted average assumptions for grants:

	2001		2000		1999
Risk-free interest rate	5.00	%	6.50	%	6.00	%
Expected dividend yield	0	%	0	%	0	%
Expected lives	6.0 years		6.5 years		6.5 years
Expected volatility	78.26	%	80.77	%	61.49	%

        Using the Black-Scholes methodology, the total value of options granted during 2001, 2000 and 1999 was $1,055, $1,117 and $3,816, respectively, which would be amortized on a pro forma basis over the vesting period of the options (typically three to five years). The weighted average per share fair value of options granted during 2001, 2000 and 1999 was $0.54, $4.30 and $6.41, respectively.

        If the Company had accounted for its stock-based compensation plans in accordance with SFAS 123, the Company's net loss available to common shareholders and net loss per share would approximate the pro forma disclosures below:

	2001						2000						1999
	As Reported			Pro Forma			As Reported			Pro Forma			As Reported			Pro Forma
Net loss available to common shareholders	$	(7,156	)	$	(8,859	)	$	(32,653	)	$	(34,279	)	$	(22,146	)	$	(24,404	)
Basic and diluted net loss per share	$	(0.80	)	$	(0.98	)	$	(3.67	)	$	(3.86	)	$	(2.51	)	$	(2.77	)

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        The following table summarizes information about all stock options outstanding at September 30, 2001:

Options Outstanding
						Options Exercisable
			Weighted Average Remaining Contractual Life—Years
Range of Exercise Prices		Number Outstanding at 9/30/01		Weighted Average Exercise Price		Number of Shares Exercisable at 9/30/01	Weighted Average Exercise Price
$	0.4150—$  1.3563	2,465	6.2	$	0.7200	950	$	1.0000
	1.3564—    2.7125	289	9.1		1.7185	—		—
	5.4251—    6.7813	270	6.8		6.4548	194		6.4929
	6.7814—    8.1375	245	4.0		7.5924	245		7.5924
	8.1376—    9.4938	522	4.0		8.7272	509		8.7213
	9.4939—  10.8500	47	7.5		10.0625	38		10.0625
	10.8501—  12.2063	225	4.2		11.5196	201		11.5395
	12.2064—  13.2500	50	5.2		12.7500	46		12.7479
$	0.4150—$13.2500	4,113	5.9	$	3.4357	2,183	$	5.4026

        At September 30, 2000 and 1999, options covering 2,356 and 2,257 shares of the Company's Common Stock, respectively, were exercisable at weighted average exercise prices of $5.78 per share and $5.58 per share, respectively.

11.  401(k) PLAN

        The Company has a 401(k) Salary Deferral Plan, which covers all employees who have reached the age of 18. The covered employees may elect to have an amount deducted from their wages for investment in a retirement plan. The Company matches 100 percent of employee contributions up to two percent of compensation. The Company's contribution to this plan was approximately $124 in 2001, $137 in 2000 and $112 in 1999.

12.  SUPPLEMENTAL CASH FLOW INFORMATION

        Supplemental disclosure of cash flow information is as follows:

	2001		2000		1999
Cash paid during the period for interest	$	322	$	455	$	637
Cash paid during the period for income taxes		5		6		10
Issuance of Common Stock in exchange for interest expense on Convertible Notes		—		419		525
Issuance of additional Convertible Notes in lieu of cash payment of interest expense on Convertible Notes		2,364		—		—
Non-cash preferred dividends		4,367		12,492		1,980

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Report of Independent Public Accountants
on Financial Statement Schedule

        We have audited, in accordance with auditing standards generally accepted in the United States, the financial statements included in Gardenburger, Inc.'s Form 10-K, and have issued our report thereon dated November 2, 2001. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule included on page F-18 is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, fairly states, in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.

	ARTHUR ANDERSEN LLP
Portland, Oregon, November 2, 2001

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SCHEDULE II

GARDENBURGER, INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 2001 AND 2000 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(In thousands)

Column A	Column B		Column C				Column D		Column E
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts Describe		Deductions— Describe(a)		Balance at End of Period
Nine Months Ended September 30, 1999:
Reserves deducted from asset accounts:
Allowance for uncollectible accounts	$	148	$	190	$	—	$	37	$	301
Year Ended September 30, 2000:
Reserves deducted from asset accounts:
Allowance for uncollectible accounts	$	301	$	20	$	—	$	57	$	264
Year Ended September 30, 2001:
Reserves deducted from asset accounts:
Allowance for uncollectible accounts	$	264	$	40	$	—	$	38	$	266

(a)

Charges to the account included in this column are for the purposes for which the reserve was created as well as a reduction in the reserve to levels estimated to be appropriate by the Company.

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QuickLinks

GARDENBURGER, INC. 2001 FORM 10-K/A ANNUAL REPORT AMENDMENT NO. 1 TABLE OF CONTENTS

Item 8. Financial Statements and Supplementary Data

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

SIGNATURES

Report of Independent Public Accountants
GARDENBURGER, INC. BALANCE SHEETS (In thousands, except share amounts)
GARDENBURGER, INC. STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
GARDENBURGER, INC. STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) For the Years Ended September 30, 2001 and 2000 and the Nine Months Ended September 30, 1999 (In thousands, except share amounts)
GARDENBURGER, INC. STATEMENTS OF CASH FLOWS (In thousands)
GARDENBURGER, INC. NOTES TO FINANCIAL STATEMENTS (In thousands, except per share amounts and as otherwise indicated)
Report of Independent Public Accountants on Financial Statement Schedule

SCHEDULE II

GARDENBURGER, INC. VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED SEPTEMBER 30, 2001 AND 2000 AND THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (In thousands)