Edgar Filing: TURBOCHEF TECHNOLOGIES INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
Form 10-K

For Annual and Transition Reports pursuant to Sections 13 or 15(d) of the
Securities Exchange Act of 1934

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
___________ to ____________

Commission File Number 0-23478
_________________________

TurboChef Technologies, Inc.
(Exact name of Registrant as specified in its Charter)

DELAWARE 48-1100390
(State or other jurisdiction of (IRS employer
incorporation or organization) identification number)
10500 Metric Drive, Suite 128 75243
Dallas, Texas (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code:
(214) 341-9471
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ----------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:
Common Stock, $0.01 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 II of this Form 10-K or any amendment to this
Form 10-K. [_]

Aggregate Market Value of voting stock held by non-affiliates of the Registrant
at March 27, 2001: $16,007,890

Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock, as of the latest practicable date.

Number of Shares Outstanding
Title of Each Class at March 27, 2001
------------------- -----------------
Common Stock, $0.01 Par Value 15,728,423
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TURBOCHEF TECHNOLOGIES, INC.
TABLE OF CONTENTS

Form 10-K Item Page
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Part I.
Forward-looking Statements................................................................ 2

Item 1. Business.................................................................................. 2

Item 2. Properties................................................................................ 14

Item 3. Legal Proceedings......................................................................... 14

Item 4. Submission of Matters to a Vote of Security Holders....................................... 14

Part II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters..................... 15

Item 6. Selected Financial Data................................................................... 16

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 17

Item 7A. Quantitative and Qualitative Disclosures about Market Risk ............................... 30

Item 8. Financial Statements and Supplementary Data............................................... 31

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...... 31

Part III.
Item 10. Directors and Executive Officers of the Registrant........................................ 32

Item 11. Executive Compensation.................................................................... 33

Item 12. Security Ownership of Certain Beneficial Owners and Management............................ 37

Item 13. Certain Relationships and Related Transactions............................................ 39

Part IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......................... 40

Signatures................................................................................ 43

Part I

Forward-looking Statements

Certain statements in this Form 10-K constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of TurboChef Technologies, Inc. to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
the ability to obtain additional financing necessary to continue operations, the
uncertainty of consumer acceptance of new products or technologies that may be
offered by TurboChef, the need to hire and retain key personnel; relationships
with and dependence on third-party equipment manufacturers and suppliers,
uncertainties relating to business and economic conditions in markets in which
the Company operates; uncertainties relating to customer plans and commitments;
potential performance issues with suppliers; the highly competitive environment
in which TurboChef operates; potential entry of new, well-capitalized
competitors into the markets served by TurboChef; uncertainties inherent in
international sales including foreign currency fluctuations; uncertainty
regarding strategic relationships and alliances and ability to protect
TurboChef's proprietary information. The words "believe," "expect,"
"anticipate," "intend," and "plan" and similar expressions identify forward-
looking statements. Readers are cautioned not to place undue reliance on any of
these forward-looking statements, which speak only as of the date of the
statement was made. TurboChef undertakes no obligation to update any forward-
looking statement.

Item 1. Business
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General

TurboChef Technologies, Inc. ("TurboChef Technologies" or "the Company") is
a technology development company engaged primarily in designing, developing and
licensing its proprietary rapid cook technologies. The TurboChef rapid cook
system employs proprietary hardware and software technologies to "cook-to-order"
a variety of food products at faster speeds and to quality standards comparable,
and in many instances superior to, other conventional residential and commercial
ovens currently available.

The Company's commercial products and technologies have been validated
through utilization and extensive testing by both the Company and a variety of
foodservice operators around the world. The Company's commercial rapid cook
system, the C-3 commercial counter top, is smaller, less expensive and offers
more features than its predecessor, the D model commercial rapid cook systems.
The C-3 was recognized as the best innovative new product at the Hotelympia
international foodservice show in London in February 2000.

The Company launched the TurboChef C-3 counter top in the second quarter of
2000 with an initial sale to a fast food restaurant chain in the United Kingdom.
More recently, in January 2001, the Company received two prestigious awards at
the Horecava 2001 trade show in

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Amsterdam. Horecava is Europe's premier food service trade show and is attended
by over 50,000 people and 600 exhibitors associated with the European food
service industry. The judges selected the TurboChef oven as the winner in the
equipment category, as well as being selected as the winner of the gold medal
award for innovation for the entire show.

The Company intends to continue to build upon its core technology
competency, expand its technology portfolio by developing other innovative
products and increase market penetration through joint venture, strategic
alliance and/or licensing arrangements with companies already engaged in the
mass marketing and/or manufacture of foodservice products.

The Company's commercial cooking systems employ the Company's proprietary
cooking technologies to quickly, efficiently and evenly transfer, disperse and
control the heat used in the cooking process. The Company's proprietary
computerized control platform monitors the cooking process and automatically
adjusts cook settings during the cooking cycle for optimum performance. These
technologies provide foodservice operators the flexibility to "cook-to-order" a
variety of food items at speeds which the Company believes are significantly
faster than those permitted by conventional commercial ovens, grills, microwave
ovens, and other currently available high-speed ovens, without sacrificing
quality. For example, the commercial TurboChef system can cook an 18-ounce beef
tenderloin in 3 minutes (versus 40-45 minutes in a conventional commercial
oven), a 16-inch pizza in 3 minutes (versus 8-12 minutes) and a 7-ounce salmon
fillet in 55 seconds (versus 8-10 minutes).

In addition, because of the TurboChef cooking system's moisture retention,
browning and crisping capabilities, the Company believes that the
characteristics of most food items cooked in a TurboChef cooking system
(including their flavor, texture and appearance) are superior in quality to
those achieved using other rapid cook ovens, or microwave ovens, and are equal
to, or, in some cases, superior in quality to those achieved using conventional
ovens and grills.

In addition, the Company's rapid cook systems use a microprocessor to
control the cooking processes to ensure consistent quality and it also has the
ability to communicate with users and service personnel over computer networks
and the Internet. As a result of the explosion in the Internet and intelligent
appliance innovation, the Company has embarked on an internal development effort
to couple the computer intelligence and cooking performance of the Company's
proprietary rapid cook technologies with the Internet. The strategy behind this
product development effort is to provide lifestyle-changing benefits to
consumers that make cooking, shopping and meal planning a less time consuming
activity.

Recent Developments

Since entering into a Strategic Alliance, and related agreements with
Maytag Corporation ("Maytag") in September 1997, the Company has received
approximately $10.5 million in connection with product development and
technology transfer fees (approximately 27%, 50% and 57% of total revenues for
2000, 1999 and 1998, respectively).

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In January 2001, Maytag advised the Company that it was terminating distribution
of its Accellis 5XP residential oven that incorporated TurboChef rapid cook
technology. During the first quarter of 2001, Maytag took actions, which the
Company believes resulted in termination of the Commercial Cooking Appliance
Project Agreement ("CCAP") and associated License Agreement. As a result of
these actions, both Maytag and the Company have filed claims under the
arbitration provision of these agreements. One of the Company's claims is that,
as a result of its termination of the agreement, Maytag is required to pay to
the Company the remaining balance of minimum royalties that are due under the
License Agreement of $5.25 million. Although the Company believes that it will
prevail on its claims, the outcome of the arbitration proceeding is uncertain.
The termination of the Maytag agreement could have a material adverse effect on
the Company's financial position and results of operations. In addition,
Maytag's actions have delayed the Company's ability to realize economic value
from its rapid cook technologies. The Company intends in the future to seek to
enter into non-exclusive distribution arrangements with multiple parties in an
effort to lessen its reliance on any one single market partner.

In March 2001, the Company raised $2,000,000 through the sale of its 8%
Series B convertible preferred stock. The dividend on the preferred stock is
payable, at the Company's option, in either cash or shares of common stock. The
preferred stock is convertible to common stock at $1.00 per common share
(representing the closing sale price of the common stock on the date of
funding). In connection with this transaction, the Company also issued to the
investor warrants to purchase an additional 1,000,000 shares of common stock at
$1.20 per share. These warrants are exercisable in three equal annual
installments, commencing one year from the date of issuance and expire in 2011.

Rapid Cook Technology

Traditional cooking systems employ a wide range of processes for
transferring heat energy to food. These include: conduction (direct energy
transfer from a hot surface, as in a grill); natural convection (energy transfer
to and from naturally moving air, as in a typical home oven); forced convection
(energy transfer to and from mechanically circulated air, as in a typical
convection oven); air impingement (forced convection with rapidly moving air
directed at the food); induction (heating by the generation of electromagnetic
fields); microwave radiation (heating by the dissipation of microwave energy in
food); and infra-red radiation (heating by light whose wavelength falls below
that of the color red in the electromagnetic spectrum).

Newer cooking systems have begun to incorporate two or more of these
conventional sources of energy. For example, some cooking systems employ
microwaves and air impingement or microwave and halogen light. However, the
Company does not believe that these systems provide the speed or the tangible
quality results that are achieved in the TurboChef rapid cook systems.
Additionally, the Company, working with the Massachusetts Institute of
Technology staff, scientifically validated the TurboChef systems cooking
characteristics in order to provide an independent, scientific basis for food
quality and competitive product testing.

In its simplest form, the Company's unique, patented system couples hot air
with microwave energy. The close coupling of the two energy sources enables
faster cooking at higher quality levels than is possible by each energy source
operating independently. The air is forced down from the top of the oven and at
the same time pulled out through a return path that results in a tight air wrap
around food. This air wrap ensures that there is a constant interaction between
the heated air and the entire surface area of the food product in the cooking
cavity,

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resulting in not only evenly browned food products on the outside, but also
creates temperature and moisture gradients that enable precisely targeted
microwaves to energize water molecules that cook the food on the inside. The
microwave energy is introduced from a direction directly opposite that of the
direction of the airflow, thus capturing the food between the two opposing
energy gradients resulting in faster cooking times and enhanced quality in the
food products being cooked.

Other Products and Applications

The presence of the microprocessor as an intrinsic element of the cooking
system also gives TurboChef cooking systems a powerful tool to communicate with
its users. For example, cooking programs can be downloaded via computer modem
into the cooking system and the cooking system routinely monitors its own
performance and diagnoses possible problems. To facilitate this process, for its
commercial customers, the Company continues to develop, enhance and refine
ChefComm(TM), a software that enables executive chefs of foodservice chains to
program the cooking systems centrally. Thus, for most foodservice chains, the
use of this system can provide a higher level of cooking quality than is
currently possible. Planned enhancements to ChefComm(TM), are expected improve
oven reliability -- a critically important foodservice need. The Company is also
engaged in hardware and software development that is intended to enable the
TurboChef rapid cook system to leverage the Internet to further enhance and
simplify the cooking process. The Company intends to develop an open platform
system that is expected to enable its rapid cook system to communicate with
other appliances and computers, enabling users to better utilize the system's
communications capabilities and Internet connectivity.

Opportunities and Strategy

The Company believes that its long-term success is dependent upon the
successful commercialization of its cooking technologies in commercial and
residential products, upon leveraging its core competencies of developing new
innovative technologies and adding value to the consumer by enhancing these
technologies with Internet connectivity. The Company intends to pursue both
residential and commercial rapid cook opportunities nationally and
internationally, with the North American market as the launching point. The
Company's market research revealed that "time" and "quality" are two of the most
important considerations taken into account for food preparation, the Company
believes that its patented cooking technologies are well suited for adoption in
both the residential and commercial kitchens.

The Company's Next Generation Oven ("NGO") residential oven is expected to
reduce cooking times to as little as one-eighth of traditional cook times. For
example, a three-pound whole chicken can be cooked to perfection in 10 minutes,
a task that typically takes 1 hour and 15 minutes in a conventional oven. With
this speed in cooking it will enable the preparation of quality meals at the
spur of the moment. More importantly, the cooking system will bake, roast,
broil, brown and crisp while maintaining nutrition, taste, texture and
appearance that the Company believes is comparable, or better than food cooked
in conventional ovens.

Similarly, the commercial foodservice market continues to experience rising
real estate costs, increased food product costs and intense competition. These
factors have forced many

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commercial foodservice operators to rethink their operations and become more
efficient and cost effective in their food preparation. While many operators
have initiated cost saving mechanisms in their kitchens, their available options
have been somewhat limited. The Company believes that its patented technologies
not only provide operators the opportunity to achieve operating cost savings
(i.e., energy, ventilation, food waste and labor), but enables operators to
produce quality meals in less time from a smaller, more efficient and less labor
intensive kitchen.

TurboChef also believes that it is in a position to benefit from the
evolution from a `PC-based' technology standard to a `PC-plus' platform of on-
demand information access. The iAppliance application of TurboChef's cooking
technology represents a paradigm shift in the value of kitchen appliances, and
the Company believes that its web enabled, rapid-cook oven will elicit `want-in'
versus `wear-out' consumer demand and open many new avenues for product and
service revenues. The Company also believes that this `next generation' product
should reach a broader market, than existing products, through an open-platform
system supported by low-cost, high-volume OEM and branded OEM partners and that
its technologies may attract interest from both major international food
manufacturers trying to participate in the new economy and supermarkets seeking
new ways to capitalize on changes in the home meal replacement industry.

Strategy

The Company intends to continue its stated strategy of growing through
partnerships. The Company has targeted four primary partnership strategies that
it believes are essential to the success of the Company.

1. Market partners - The Company seeks to leverage the marketing and
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distribution capabilities of large appliance and consumer electronics
manufacturers to broadly distribute the Company's rapid cook technologies
worldwide. By entering into licensing, joint venture and marketing
alliances, the Company believes that it can realize the distribution of its
technologies without having to incur the huge costs generally associated
with this process. The Company believes that this is the best approach to
achieve broad acceptance of its technologies and to achieve the Company's
objective of becoming the dominant rapid cook platform in this newly
emerging cooking category.

The Company is seeking to expand its market partners in North America on a
non-exclusive basis. The Company also intends to extend its current "C"
model cooking system into a single phase and three phase electric powered
units. Additionally, the Company is seeking additional funding to build
upon prior investments made by the Gas Research Institute to commercialize
a natural gas fueled version of its "C" model oven. The Company believes
that a multiple partner, non-exclusive distribution strategy will be the
most effective strategy to protect the Company from over reliance on any
one single market partner.

2. Manufacturing partners - In the second quarter of 2000, the Company
----------------------
established a manufacturing venture with Shandong Xiaoya Group in China.
The Company expects that the Shandong Xiaoya Group will be producing the
"C" model commercial cooking system in the second quarter of 2001. The
Company is actively seeking other partnerships with large original
equipment manufacturers ("OEM's") and appliance manufacturers to set up
high volume, low cost, manufacturing

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facilities for components and/or entire systems, so that turnkey packages
can be offered to marketing partners. These partnerships are expected to
enable the Company to consolidate manufacturing efforts, thereby providing
economies of scale for potential market partners that may not have
appliance manufacturing facilities of their own. This strategy should
enable the Company to expand its channels to market and create a wider
distribution of the TurboChef rapid cook technologies. The strategy of
deploying a high quality low cost OEM to provide centralized manufacturing
combined with non-exclusive distribution has been received positively by
existing manufactures and appliance distributors.

3. Technology partners - The Company continues to seek out potential partners
-------------------
that have expertise, competencies and knowledge in particular areas, which
may complement the Company's technology offerings. The Company believes
that such partnerships could help to facilitate improvements to the
Company's core technologies, reduce manufacturing costs and expedite time
to market. Examples of these partners include the Gas Research Institute,
with whom the Company has a cooperative agreement to develop natural gas
fueled versions of TurboChef's rapid cook system for residential and
commercial markets. The Company is also working with the Massachusetts
Institute of Technology staff to scientifically quantify and validate the
performance characteristics of the Company's cooking technologies.

4. Consumables partners - The Company is in the process of developing
--------------------
relationships with consumer products companies to develop products that
compliment and expand the Company's technologies. Specifically, the Company
is targeting packaged food manufacturers and packaging companies to develop
TurboChef compatible products that will further assist in establishing the
Company's technologies as the standard in the rapid cooking market.

A strategic synopsis by region is as follows:

North America: As a result of the termination of its relationship with
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Maytag during the first quarter of 2001, the Company believes that entering into
non-exclusive distribution agreements with multiple partners will be the most
effective means of achieving distribution of the Company's "C" model cooking
system, as well as protecting the Company from over reliance on any one single
market partner. The Company is seeking, but has not yet obtained distribution
partners to replace the sales and marketing functions previously provided by
Maytag.

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Europe: Direct marketing efforts utilizing a consultative selling program
------
have been established and implemented in the United Kingdom, in part, by
leveraging the existing brand equity and reputation gained from the placement of
over 450 D-model cooking systems with Whitbread PLC ("Whitbread"). To date the
Company has an installed base of D-model units of approximately 1,100. In
addition, the Company sold 350 units of its C-3 rapid cook system, which
replaced the D-model, to a fast food restaurant chain in the United Kingdom in
the third quarter of 2000. As of December 31, 2000 the Company's install base
of C-3 units was approximately 400 units.

The C-3 was awarded a gold medal for best innovative new product at the
Hotelympia foodservice show, held in London during February 2000. The Company
won this prestigious award while in competition against some of the top
foodservice companies in the world. More recently, in January 2001, the Company
received two prestigious awards at the Horecava 2001 trade show in Amsterdam.
Horecava is Europe's premier food service trade show and is attended by over
50,000 people and 600 exhibitors associated with the European food service
industry. The judges selected the TurboChef oven as the winner in the equipment
category, as well as being selected as the winner of the gold medal award for
innovation for the entire show.

The Company intends to expand the direct marketing efforts for commercial
rapid cook systems. The Company is currently seeking distributors and dealers to
market and distribute the Company's C-3 next generation rapid cook systems in
Europe. The Company will continue its efforts to attract additional partners and
pursue alliances in this region to ensure the broadest possible availability of
its technologies throughout this region.

Asia: The Company has initiated missionary marketing efforts in Asia and
----
intends to gather data from such beta test sites and incorporate such
information into future generations of the Company's technologies. During 2000,
the Company entered into a manufacturing arrangement in Asia for production of
its commercial counter top model. The Company expects that the Shandong Xiaoya
Group will be producing the "C" model commercial cooking system in the second
quarter of 2001.

Production and Supply

In the second quarter of 2000, the Company established a manufacturing
venture with Shandong Xiaoya Group in China. The Company expects that the
Shandong Xiaoya Group will be producing the "C" model commercial cooking system
in the second quarter of 2001. The agreement may be terminated by the Shandong
Xiaoya Group or the Company with thirty days written notice. Under this
agreement, the Company is required to purchase a minimum of 500 "C" model
cooking systems during fiscal 2001.

The Company has been and will continue to be dependent on third parties for
the supply and manufacture of all of its component and electronic parts,
including both standard components and specially-designed component parts, such
as the printed circuit computer boards and wiring harnesses used in the
TurboChef cooking systems. The Company generally does not

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maintain supply agreements with such third parties but instead purchases
components and electronic parts pursuant to purchase orders in the ordinary
course of business. The Company is substantially dependent on the ability of its
manufacturers and suppliers to, among other things, meet the Company's design,
performance and quality specifications. Failure by the Company's manufacturers
and suppliers to comply with these and other requirements could have a material
adverse effect on the Company.

The Company has required that its contract manufacturers follow generally
accepted industry standard quality control procedures. In addition, the Company
maintains its own quality assurance personnel and testing capabilities to assist
its contract manufacturers with their respective quality programs and to perform
periodic audits of manufacturing facilities and finished products to ensure the
integrity of the quality assurance procedures. Component parts furnished to the
Company by its suppliers and manufacturers are generally covered by a one-year
limited warranty and contract manufacturers furnish a limited warranty for any
of their manufacturing or assembly defects.

The Company's manufacturing cycle, which is the period from the execution
of a purchase order until actual shipment of the product to the customer,
generally ranges from two to six weeks for small volume cooking system sales and
up to one or two months longer for initial shipments to commence under large
multi-unit purchase contracts. Pursuant to the Company's warranty policy, the
Company will accept the return of a cooking system if the cooking system does
not perform according to product specifications, within one year of the date of
purchase. For certain potentially large customers, who wish to test and evaluate
a cooking system prior to purchase, the Company occasionally offers one or more
units at a reduced price for such evaluation.

Research and Development

During the years ended December 31, 2000, 1999, and 1998, the Company
incurred costs related to research and development activities in the amounts of
$3,731,000, $4,092,000 and $2,311,000, respectively, substantially all of which
was from third parties. It is the intention of the Company to continue to invest
in the continued development of its core technologies and related applications
to the extent needed to establish them as a major world wide cooking platform.
In particular, in the area of cooking, the Company plans to continue improving
the performance of its commercial system that embodies the core technologies in
a broader range of cooking appliances. After the Company completed the
development of its first residential cooking system it began to develop other
residential embodiments of its cooking technologies. In addition, the Company
plans to develop and enhance a range of software products for residential and
commercial kitchens to enable users to extract more value from their cooking
systems and achieve new levels of communication and connectivity through the
Internet.

Competition

The commercial cooking and warming segment of the foodservice equipment
market is characterized by intense competition. The Company competes with
numerous well-established manufacturers and suppliers of conventional commercial
ovens, grills and fryers (including those

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that cook through the use of conduction, convection, induction, air impingement,
infrared, halogen and/or microwave heating methods). In addition, the Company is
aware of others who are developing, and in some cases have introduced,
commercial ovens based on high-speed heating methods and technologies. Most of
the Company's competitors possess substantially greater financial, marketing,
personnel and other resources than TurboChef Technologies and have established
reputations relating to the development, manufacture, marketing and service of
cooking equipment. Among the Company's major competitors in the cooking and
warming segment of the foodservice equipment market are: The Middleby
Corporation and certain of its subsidiaries; the commercial foodservice
equipment division of Welbilt Corporation, including, Lincoln Foodservice
Products, Inc. and MerryChef; Quadlux, Inc.; Vulcan-Hart Corporation, a
subsidiary of Premark International, Inc.; Groen, Inc., a subsidiary of Dover
Corporation; Amana Fujimak and Energyst (a technology licensing company).

The competitive activity has also increased in the emerging residential
rapid cook sector, and there can be no assurance that other companies with
greater financial resources and expertise will not attempt to develop or are
currently developing functionally competitive products that may become available
in the near future. Certain competitors have already introduced products into
the rapid cook sector, including; the General Electric Advantium (utilizing
microwave and halogen light technology), the Quadlux Flashbake wall oven
(utilizing infrared and invisible light technology), the Whirlpool Speedcook
wall oven (utilizing convection, microwave and halogen light technology) and the
Amana Lightwave (utilizing microwave and infrared light technology). In
addition, other competitive products are scheduled to be launched in the near
future including the Thermador Jetdirect (utilizing microwave and air
impingement) and the General Electric wall oven (utilizing microwave and halogen
light technology). Although the Company is not aware of any competitive
products, either being marketed or under development, which it believes are
functionally equivalent to the TurboChef cooking system (i.e., that have the
similar computer capabilities, that can produce the variety of food items,
cooked to the same high quality standards, at the same speeds), there can be no
assurance that other companies with greater financial resources will not attempt
to develop functionally equivalent competitive products in the near future.

Regulation and Accreditation

The Company is subject to regulations administered by various federal,
state, local and international authorities, such as the United States Food and
Drug Administration, the Federal Communication Commission, the European
Community Council and the Japanese Government's Ministry of International Trade
(MITI) (including those regulations limiting radiated emissions from the
Company's cooking system products), which impose significant compliance burdens
on the Company. Failure to comply with these regulatory requirements may subject
the Company to civil and criminal sanctions and penalties. While the Company
believes that its products are in compliance in all material respects with all
material laws and regulations applicable to the Company and such products, there
can be no assurance of such compliance. The Company tests, from time to time,
the cooking systems in order to confirm continued compliance with applicable
regulatory requirements. Management believes that compliance with these laws and
regulations will not require substantial capital expenditures or have a material
adverse effect on the Company's future operations.

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New legislation and regulations, as well as revisions to existing laws and
regulations (at the federal, state and local levels, in the United States and/or
in foreign markets) affecting the foodservice equipment and residential
appliance industries may be proposed in the future. Such proposals could affect
the Company's operations, result in material capital expenditures, affect the
marketability of the Company's existing products and technologies and/or could
limit or create opportunities for the Company with respect to modifications of
its existing products or with respect to its new or proposed products or
technologies. In addition, an expanded level of operations of the Company in the
future could require the Company to modify or alter its methods of operation at
costs, which could be substantial and could subject the Company to increased
regulation, and expansion of the Company's operations into additional foreign
markets may require the Company to comply with additional regulatory
requirements.

The Company has received certification from Underwriter's Laboratories,
Inc. ("UL(R)") as to compliance of the Company's model "C" and "D" TurboChef
cooking systems with applicable UL(R) requirements relating to product safety
accreditation standards and with the applicable requirements of the National
Sanitation Federation ("NSF") relating to cleanability and sanitation
accreditation standards. UL(R) and NSF are agencies which have established
certain standards for a variety of categorized products and can be engaged to
inspect a manufacturer's products for compliance with the applicable standards.
Certification by each agency authorizes the marking of any such product with the
agency's labels, which indicates that the product is approved by the agency for
such use. Such certifications, which require periodic renewal, only represent
compliance with established standards and are not legally required. However,
failure by the Company to comply with these accreditation standards in the
future could have a material adverse effect on the Company's marketing efforts.
In addition, the Company has met the requirements necessary to apply the "CE"
mark (which indicates compliance with the European Community Council directive
relating to electromagnetic compatibility and low voltage) to its C and D Model
TurboChef cooking systems. As an equipment manufacturer, the Company is allowed
to "self-certify" compliance with this directive and has a third party attest to
the results. The Company is required by law to meet this European Community
Council directive in order to apply the "CE" mark and thereby sell its cooking
systems in the European Union.

Warranty and Service

The Company generally offers to purchasers a one-year limited warranty
covering the TurboChef cooking system's workmanship and materials, during which
period the Company or its authorized service representative will make repairs
and replace parts which become defective due to normal use. There can be no
assurance that future expenses incurred on the one-year warranty will not have a
material adverse effect upon the Company.

The Company did allow the purchase of an extended warranty program for a
particular customer during 1999 and 1998, which covered units that were older
than one year. The Company recorded revenues of $201,000 and $417,000 in 1999
and 1998,

-11-

respectively, for this extended warranty program. The costs associated with this
extended warranty program in excess of revenues were $150,000 and $462,000 for
the years ended December 31, 1999 and 1998, respectively. The results of
research associated with the extended warranty program coupled with research
findings from the Company's accelerated life cycle testing facility have lead to
design improvements that should improve both the durability and reliability of
the Company's products and will be incorporated into future products. The above
extended warranty program was completed in 1999.

On September 1, 1999, the Company entered into an agreement to upgrade and
warranty 262 cooking systems installed with Whitbread. The Company received
approximately $1.4 million from Whitbread to complete the upgrade and warranty
the cooking systems for a three-year period, beginning in September 1999. The
cooking system upgrades include design changes that should substantially
increase the life and durability of the cooking systems and were completed in
February 2000. The $1.4 million has been used to offset expenses relating to the
upgrade and warranty as incurred. During 2000 and 1999, the Company accrued an
additional $985,000 and $755,000, respectively, for expenses in excess of
payments from Whitbread, relating to the completion of the upgrade and remainder
of the warranty period. At this time, the Company believes that it has accrued
expenses sufficient to cover the total cost of the upgrades and any charges
arising during the three-year warranty period. However, there can be no
assurance that future expenses incurred on the upgrade and three-year warranty
will not have a material adverse effect upon the Company.

In those areas where TurboChef cooking systems are located, the Company has
established relationships with independent factory authorized service
representatives who provide installation and repair services and carry a parts
inventory. The Company expects its market partners to establish parts and
service capabilities in the markets in which they sell TurboChef licensed
products.

Insurance

The Company is engaged in a business which could expose it to possible
liability claims from others, including from foodservice operators and their
staffs, as well as from consumers, for personal injury or property damage due to
design or manufacturing defects of the Company's products or otherwise. The
Company maintains a general liability insurance policy, which the Company
believes is adequate coverage for the type of products currently marketed. In
addition, the Company believes that its third party manufacturer currently
maintains similar levels of liability insurance. No assurance can be given that
the Company's insurance coverage will be adequate to cover every claim against
the Company.

Patents and Proprietary Rights

The Company holds nine United States patents that cover certain fundamental
aspects of the Company's rapid cook technologies. Additionally, the Company has
received notification from the U.S. Patent and Trademark Office that another
patent application covering fundamental new aspects of the Company's residential
rapid cook technology has been allowed. The Company has pending patent
applications or patents corresponding to one or more of these United States
patents filed in at least seven countries (including the various countries of
the European Patent Convention). These United States patents expire between
2011-2018. The

-12-

Company further holds one pending United States patent application on a vent
catalytic converter for use in such rapid cook technologies and patent
applications covering other aspects of the Company's rapid cook technology. The
Company also holds one United States patent relating to the Company's "par-
baked" pizza dough setting technology, which patent expires in 2014. The patent
laws of other countries may differ from those of the United States as to the
patentability of the Company's technologies and products and the degree of
protection afforded. The Company believes that its patents and patent
applications provide it with a competitive advantage. Accordingly, in the event
the Company's products and technologies gain market acceptance, patent
protection would be important to the Company's business. There can be no
assurance as to the breadth or degree of protection which existing or future
patents, if any, may afford the Company, or that any patent applications will
result in issued patents, or that the Company's patent rights will be upheld if
challenged, or that competitors will not develop similar or superior methods or
products outside the protection of any patents issued to the Company.

There is rapid technological development in the Company's markets with
concurrent extensive patent filings and a rapid rate of issuance of new patents.
Although the Company believes that its technologies have been independently
developed and do not infringe the patents or intellectual property rights of
others, certain components of the Company's products could infringe patents,
either existing or which may be issued in the future, in which event the Company
may be required to modify its designs or obtain a license. No assurance can be
given that the Company will be able to do so in a timely manner or upon
acceptable terms and conditions; and the failure to do either of the foregoing
could have a material adverse effect upon the Company's business.

The Company believes that product and brand name recognition is an
important competitive factor in the foodservice equipment industry. Accordingly,
the Company promotes the TurboChef(R) name in connection with its marketing
activities. The Company holds a United States trademark for the TurboChef(R)
name and also a United States Trademark for TurboChef Technologies, Inc(R).

The Company also relies on trade secrets and proprietary know-how, and
typically enters into confidentiality and non-competition agreements with its
employees and appropriate suppliers and manufacturers, to protect the concepts,
ideas and documentation relating to its proprietary technologies. However, such
methods may not afford the Company complete protection. There can be no
assurance that others will not independently obtain access to the Company's
trade secrets and know-how or independently develop products or technologies
similar to those of the Company. Since the Company believes that its proprietary
technologies are important to its business, failure to protect such information
could have a material adverse effect on the Company.

Employees

As of March 27, 2001, the Company employed 28 persons, all of whom are
full-time employees, including one executive officer and four senior managers.
Of its employees, ten are engaged in technological development, seven in
administration, and eleven in sales, marketing,

-13-

and customer service. None of the Company's employees are represented by labor
unions. The Company considers its relations with its employees to be good.

Item 2 Properties
----------

The Company owns no real estate. The Company leases approximately 18,600
square feet of space at 10500 Metric Drive, Dallas, Texas, which it uses for
executive offices, technology development, limited assembly and other purposes,
under a lease agreement, which expires on January 31, 2002. The annual base
rental expense on this property is $152,000.

The Company leases approximately 1,000 square feet of general office space
at 660 Madison Avenue, New York, New York, pursuant to a lease that is scheduled
to expire on December 31, 2002. The annual base rental expense on this property
is $189,000.

The Company leases approximately 1,000 square feet of general office space
in the Cranfield Innovation Centre, in Cranfield, U.K. In addition, the Company
occupies approximately 1,000 square feet of office space, which is used as a
training facility, in Bedfordshire, U.K., pursuant to a month-to-month lease.
The annual base rental expense on this property is $34,000.

The Company believes that its facilities are generally well maintained, in
good operating condition and adequate for its current needs.

Item 3 Legal Proceedings
-----------------

During the first quarter of 2001, the Company and Maytag filed its Notice
of Claim of Arbitration, as provided for under the CCAP and related License
Agreement. Maytag has claimed that the Company has breached the CCAP and related
License Agreement, and is seeking to recover damages of approximately $4.2
million. One of the Company's claims is that, as a result of its termination of
the commercial License Agreement, Maytag is required to pay to the Company the
remaining balance of minimum royalties that are due of $5.25 million. The
Company believes that it will prevail on its claims, and expects the arbitration
to be complete prior to the end of fiscal 2001. Although the Company believes
that it will prevail on its claims, the outcome of the arbitration proceeding is
uncertain. In any event, even if the Company was to receive the balance of the
royalties it claims are owed to it, the termination of the Maytag agreements
could have a material adverse effect on the Company's financial position and
results of operations. Since the outcome of the arbitration proceeding is
uncertain, no adjustments have been made to the financial statements.

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

None.

-14-

Part II

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

The Company's common stock traded on the NASDAQ SmallCap Market under the
symbol "TRBO" from the Company's initial public offering in April 1994 until
February 1999. On March 1, 1999, the Company's stock began trading on the NASDAQ
National Market. The following table sets forth the high and low bid quotations
for the common stock for the periods indicated as reported by NASDAQ Small Cap
Market and the NASDAQ National Market, as applicable. The per share quotations
represent inter-dealer prices without adjustment for retail mark-ups, mark-downs
or commissions and may not necessarily represent actual transactions.

Per Share Price
---------------
Period High Low
------ ---- ---

Fiscal Year 2000
----------------

First Quarter $10.18 $5.37

Second Quarter $ 6.87 $3.63

Third Quarter $ 5.21 $2.28

Fourth Quarter $ 5.09 $1.25

Fiscal Year 1999
-----------------

First Quarter $13.88 $8.75

Second Quarter $12.88 $7.63

Third Quarter $ 9.94 $4.50

Fourth Quarter $ 8.94 $3.63

As of March 27, 2001, there were approximately 133 shareholders of record
of the Company's common stock. In addition, the Company believes that there are
approximately 3,475 shareholders whose shares are held in "street name".

Dividends

The Company has not paid cash dividends on the common stock since its
organization and does not expect to pay any cash dividends on the common stock
in the foreseeable future. Rather, the Company intends to continue a policy of
retaining earnings for the Company's operations and planned expansion of its
business. The payment of any future cash dividends would be at the discretion of
the Company's Board of Directors and would depend on future earnings, capital
requirements, the Company's financial condition and other factors deemed
relevant by the Board of Directors.

-15-

Item 6 Selected Financial Data
-----------------------

The following selected financial data for each of the fiscal years ended
December 31, 2000, 1999 and 1998 has been derived from the Company's audited
financial statements, and should be read in conjunction with those statements,
which are included in this Form 10-K. The following selected financial data for
each of the fiscal years ended December 31, 1997 and 1996, has been derived from
the Company's audited financial statements, and should be read in conjunction
with those statements, which are not included in this Form 10-K. The selected
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and notes thereto which are included elsewhere in this Form 10-K.

Year Ended December 31,
(Amounts in Thousands, Except Share and Per Share Data)
------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----

Statement of Operations
-----------------------
Data:
-----
Revenues $ 7,846 $ 7,063 $ 7,137 $ 4,222 $ 2,802
Operating Loss $ (7,674) $ (8,005) $ (4,152) $ (4,822) $ (3,197)
Net Loss $ (3,732) $ (8,779) $ (3,954) $ (4,662) $ (2,941)
Per Share Data (1)
Net Loss per Share - basic $ (0.24) $ (.59) $ (.27) $ (.33) $ (.22)
and diluted

Weighted Average Number of
Shares Outstanding 15,602,211 14,983,486 14,611,724 14,032,796 13,339,431

Balance Sheet Data:
-------------------
Working Capital $ 846 $ 14,484 $ 18,566 $ 9,527 $ 8,523
Total Assets $ 5,722 $ 21,069 $ 20,800 $ 16,440 $ 9,743
Total Liabilities $ 4,054 $ 11,218 $ 1,607 $ 811 $ 810
Accumulated Deficit $ (33,742) $ (30,010) $ (21,231) $ (17,277) $ (12,615)
Total Stockholders' Equity(2) $ 1,668 $ 9,851 $ 19,193 $ 15,629 $ (8,933)

(1) Share data is based upon the weighted average common shares and share
equivalents outstanding for each period, adjusted to reflect the
split.
(2) In March 2001, the Company raised $2,000,000 through the sale of its
8% Series B convertible stock.

-16-

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

General

The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's results
of operations and financial condition. The discussion should be read in
conjunction with the financial statements and notes thereto contained elsewhere
in this report.

From its inception in April 1991 until March 1994, the Company was engaged
primarily in research and development, limited production operations and test
marketing of its cooking systems. In March 1994, the Company introduced its
first commercial product, the Model D-1 cooking system. In June 1995, the
Company entered into its first major contract with Whitbread PLC ("Whitbread")
and introduced an enhanced product, the Model D-2 cooking system. The Company
concentrated its efforts on the Whitbread rollout throughout 1996. Upon the
completion of the secondary public offering of common stock in June 1996, the
Company began development of a direct sales organization. By the end of the
first quarter of 1997, the Company had substantially developed a U.S. direct
sales and European sales infrastructure and marketing programs. However, the
revolutionary nature of the Company's technologies, coupled with large
restaurant chain operators' historical resistance to change and the Company's
lack of brand strength has limited commercial sales.

During the first quarter of 2001, Maytag took action, which the Company
believes resulted in termination of the CCAP and association License Agreement.
As a result of these actions, both Maytag and the Company have filed claims
under the arbitration provision of these agreements. One of the Company's claims
is that, as a result of its termination of the agreement, Maytag is required to
pay to the Company the remaining balance of minimum royalties that are due under
the License Agreement of $5.25 million. Although the Company believes that it
will prevail on its claims, the outcome of the arbitration proceeding is
uncertain. The termination of the Maytag agreements could have a material
adverse effect on the Company's financial position and results of operations. In
addition, Maytag's actions have delayed the Company's ability to realize
economic value from its rapid cook technologies. The Company intends in the
future to seek to enter into non-exclusive distribution arrangements with
multiple parties in an effort to lessen its reliance on any one single market
partner.

-17-

The Company has invested heavily in research, prototype development,
strategic alliance development and sales and marketing personnel. As a result of
these investments, and the heretofore limited revenues generated through sales
of cooking systems, the Company has incurred substantial operating losses in
each year of its operations (including net losses of $3.7 million, $8.8 million
and $4.0 million for the years ended December 31, 2000, 1999 and 1998,
respectively) resulting in an accumulated deficit of $33.7 million as of
December 31, 2000.

Although the Company has historically incurred significant losses, the
Company expects to generate future cash flows from the direct sale of its
commercial and residential cooking systems, royalties from the sale of its
commercial and residential cooking systems, research and development fees for
product development and, as necessary, raising capital through future equity or
debt financing. As discussed elsewhere in this report, in January 2001, Maytag,
in an effort to restructure and return to its core appliance business,
discontinued its manufacturing and distribution of its Jenn-Air(R) Accellis(TM)
5XP rapid cook system, which incorporated the Company's rapid cook technologies.
Furthermore, as noted above, the Company believes that its relationship with
Maytag has terminated. The Company believes it will find other channels to
distribute its technology into the residential and commercial markets. In
particular, the Company intends initially to focus on the Southwest and West
Coast regions of the U.S. Furthermore, the Company intends to continue its
pursuit of potential marketing and manufacturing partners in Europe, Asia and
Latin America.

In the second quarter of 2000, the Company successfully established a
manufacturing venture with Shandong Xiaoya Group in China. The Company expects
that the Shandong Xiaoya Group will be producing the "C" model commercial
cooking system in the second quarter of 2001.

The Company intends to continue to pursue business growth through
implementation of the following strategies: (i) selling and marketing its model
"C" oven, which is manufactured in China, worldwide to restaurants, hotels,
convenience stores and other foodservice operators, (ii) licensing its next
generation technology for residential ovens to partners that have the capability
to commercialize it from its current proof of concept state and (iii) broadening
the "C" model platform beyond the single phase electric unit to include a three
phase electric and gas fueled version. The Company's future liquidity will
depend upon, among other things, the successful implementation of these
initiatives.

-18-

Results of Operations for the Year Ended December 31, 2000 Compared to the Year
Ended December 31, 1999

Revenues increased $783,000 to $7,846,000 for the year ended December 31,
2000 from $7,063,000 for the year ended December 31, 1999. This increase is due
to an increase in royalty revenues of $923,000 received under the Company's
commercial License Agreement with Maytag in the last half of 2000. This was
offset in part by a decrease in product sales of $322,000, which was primarily
the result of initial replacement parts inventory sold to the Company's oven
manufacturer in 1999.

Cost of sales for the year ended December 31, 2000, was $3,846,000 compared
to $3,267,000 for cost of sales in the prior year. Greater than expected
warranty expense related to initial manufacturing problems associated with the
production of the Company's C and D series ovens is the primary contributor to
an increase in costs. In addition, the Company has written down obsolete
inventory by approximately $215,000.

Gross profit (loss) on product sales for the year ended December 31, 2000
and December 31, 1999 was $(777,000) and $124,000, respectively. The reduction
in gross profit was principally due to the costs relating to the upgrade and
extended warranty on products sold and the inventory writedown adjustment, as
explained above.

Research and development expenses for the year ended December 31, 2000
decreased $361,000, to $3,731,000 from $4,092,000 for the year ended December
31, 1999. The decrease is the result of a decrease in engineering and technical
personnel to support the Company's commercial countertop product development
requirements associated with the Maytag commercial license and development
agreement. This decrease was offset by expenditures incurred in the development
of the Company's "next generation" residential cooking systems and the ongoing
operating costs associated with the Company's accelerated life cycle testing
facility, established for the durability and reliability testing of the
Company's products.

Selling, general and administrative expenses for the year ended December
31, 2000, increased $234,000 to $7,943,000 from $7,709,000 for the year ended
December 31, 1999. The increase over 1999 is primarily due to an increase in
operating costs of $455,000 related to the Company's manufacturing joint venture
in China. These increases were offset in part by a decrease of $241,000 in sales
and marketing expenses. Sales and marketing expenses were lower because the
Company transferred its North American sales and marketing operations to Maytag
in 1999 under the commercial License Agreement.

Other income/(expense) was $3,942,000 for the year ended December 31, 2000,
compared to ($774,000) for the year ended December 31, 1999. The increase is
primarily the result of the gain of $5,022,000 the Company recorded when it
liquidated its hedged invesment in Maytag common stock in the fourth quarter of
2000. This gain was offset in part by an increase in interest expense of
$305,000, which was the result of an increase in outstanding debt used to
finance working capital.

-19-

Results of Operations for the Year Ended December 31, 1999 Compared to the Year
Ended December 31, 1998

Revenues for the year ended December 31, 1999, were $7,063,000 and are
comparable to revenues of $7,137,000 for the year ended December 31, 1998. A
scheduled reduction in payments to the Company for research and development
activities under the Maytag Alliance was partially offset by an increase in
commercial cooking system sales during 1999.

Cost of sales for the year ended December 31, 1999, were $3,267,000, an
increase of $590,000 when compared to $2,677,000 for cost of sales in the prior
year. This increase is attributable to an increase in the sales of the Company's
commercial cooking systems and costs relating to the upgrade and extended
warranty on products sold to a major customer in Europe.

Gross profit on product sales for the year ended December 31, 1999,
decreased to $124,000, when compared to gross profit on sales of $385,000 during
the prior year. Gross margin for the year ended December 31, 1999, was 4% of
sales, compared to 13% of sales for the year ended December 31, 1998. The
reduction in gross profit was principally due to the costs relating to the
upgrade and extended warranty on products sold to a major customer in Europe.

Research and development expenses for the year ended December 31, 1999,
increased to $4,092,000. This represents an increase of $1,781,000 from
$2,311,000 for the year ended December 31, 1998. The increase is due to
additions of engineering and technical personnel to support the Company's
product development requirements, costs associated with the Maytag commercial
license and development agreement, development of "next generation" residential
cooking systems and the ongoing operating costs associated with the Company's
accelerated life cycle testing facility, established for the durability and
reliability testing of the Company's products.

Selling, general and administrative expenses for the year ended December
31, 1999, increased $1,408,000, to $7,709,000 from comparable expenses of
$6,301,000 for 1998. The increase over 1998 is due to the addition of executive
officers and other administrative support personnel and the expansion of the
Company's European sales and marketing organization.

Other expense was $774,000 for the year ended December 31, 1999, compared
to other income of $198,000 for the year ended December 31, 1998. The $972,000
increase in expenses is primarily due to accrued interest charges and the
amortization of the premium on the purchased put option purchased to hedge
against market value fluctuations of the Company's Maytag common stock. A
portion of such shares were collateral for the Company's long-term credit
facility. The increase in other expense was partially offset by the elimination
of expenses relating to the Company's interest in a former joint venture.

Liquidity and Capital Resources

The Company's capital requirements in connection with its product and
technology development and marketing efforts have been and will continue to be
significant. In addition, capital is required to operate and expand the
Company's operations. Since its inception, the

-20-

Company has incurred operating losses and has been substantially dependent on
loans and capital contributions from its principal stockholders, private
placements of its securities and the proceeds from stock offerings.

Over the past several years, the Company has primarily funded its capital
needs with monies received from Maytag, sales of securities and revenues
generated from operations. Since October 1997, Maytag has paid the Company an
aggregate of $10.5 million for technology transfer initiatives. As noted above,
the Company's relationship with Maytag has terminated.

Although the Company has historically incurred significant losses, the
Company expects to generate future cash flows from the direct sale of its
commercial cooking systems, royalties from the sale of its commercial cooking
systems, license fees for the non-exclusive licensing of its technologies,
research and development fees for product development and, as necessary and
available, raising capital through future equity or debt financing.

The Company anticipates that it will need to obtain additional sources of
funding in order to continue its ongoing operations according to its current
plans. Management believes that through sales of its commercial cooking systems,
technology transfer fees and the possibility of raising capital through debt and
equity financing, the Company will have adequate funding for its continued
operations and research and development efforts throughout 2001. However, if the
Company is unable to obtain additional financing, it will have to curtail its
current level of operations and research and development. No assurances can be
made that the Company will actually obtain the necessary funding to finance its
operations. The Company's financial statements have been prepared assuming that
the Company will continue as a going concern. All of the above factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

Cash used during fiscal 2000 exceeded the Company's original forecast,
primarily as a result of the following:

. The launch of the commercial counter top oven was delayed by about
three months from the date originally anticipated by the Company,
resulting in a delay in the realization of revenues from sales in
Europe and to the three-month deferral of the quarterly minimum
royalty payments from Maytag.

. The Company is applying staff resources and funding in connection
with the development of its Next Generation Oven ("NGO"). The
prototype NGO's completed by the Company are embodied in a full size
oven cavity, and may be sold as either a built in wall oven or a
freestanding range. The prototype NGO ovens cook food 7 to 8 times
faster than conventional ovens and can accommodate a 20+ pound
turkey.

. Certain funds were being applied to the development of the Company's
Internet strategy, the TurboChef rapid cook iAppliance and certain
marketing activities support management's efforts to procure
additional funding in the form of research and development
sponsorships, strategic alliances and/or equity investments .

-21-

In January 1999, the Company entered into an agreement
with Banque AIG, London Branch (an affiliate of American International Group,
Inc. ("AIG")). The AIG facility provided for the Company to pledge its Maytag
shares in the form of a "Variable Stock Transaction" and to receive cash
advances against the value of the Maytag shares. Interest was imputed at rates
ranging from 5.8% to 8.0%. The Company satisfied the then outstanding obligation
on November 13, 2000 by surrendering Maytag shares equal to the fair value of
the obligation.

In July 1999, the Company entered into a research and development agreement
with the Gas Research Institute ("GRI"). Through this agreement, the Company
received $2,000,000 in funding for the development of gas fueled cooking
platforms. In exchange for the funding, GRI received warrants to purchase 50,000
shares of the Company's common stock and a percentage of the royalty that the
Company receives on the sale of various commercial products containing
technology developed from the GRI funding in North America and Europe. The
maximum cumulative royalty that GRI will receive under this agreement is $4.0
million. During 2000, GRI earned royalties of $73,000 under this agreement.

-22-

In August 2000, the Company entered into another agreement with GRI in
which they purchased $2.1 million of the Company's Convertible Preferred Stock
for $100.00 per share. The 21,000 shares of Convertible Preferred Stock carries
a dividend of 7% per annum which is payable in common shares upon conversion of
the Convertible Preferred Stock into the Company's common stock. These
securities will be converted into shares of the Company's common stock on the
earlier of the Company's next generation residential oven becoming generally
available for delivery to consumers in the United States or March 31, 2002. The
conversion rate of the Convertible Preferred Stock will be dependent upon the
average closing price of the Company's common stock over a fixed period of time
prior to the conversion date.

At December 31, 2000, the Company had working capital of $846,000 as
compared to working capital of $14,484,000 at December 31, 1999. The $13,638,000
working capital decrease from December 31, 1999 resulted primarily from the sale
of the Company's marketable securities to repay its long-term debt and as a
result of negative operating cash flow during fiscal 2000.

Cash used in operating activities was $10,062,000 for the year ended
December 31, 2000, as compared to cash used in operating activities of
$4,308,000 for the year ended December 31, 1999. The net loss of $3,732,000 in
2000 included $1,107,000 of non-cash charges (depreciation, amortization, non-
cash interest and non-cash compensation expenses), compared to $1,524,000 in
1999. Net cash used in operating activities in 2000 was negatively impacted by a
$1,727,000 decrease in deferred revenue, a $904,000 increase in accounts
receivable and a $771,000 increase in inventory. These operating cash
requirements were partially offset by a $1,811,000 increase in accounts payable.

Cash provided by/(used) in investing activities for the year ended December
31, 2000, was $15,255,000 and primarily resulted from the sale of the Company's
Maytag common stock and associated purchased put option for $15,723,000. This
was partially offset by equipment and leasehold improvement purchases of
$332,000 and capitalized patent costs of $136,000.

Cash used in financing activities was $5,704,000 for the year ended
December 31, 2000, of which $14,674,000 was used to repay the Company's long-
term credit agreement with AIG. The Company received $6,795,000 through its
long-term credit agreement with AIG in fiscal year 2000, prior to its repayment
of the facility in November 2000. The Company also received $2,100,000 due to
the sale of preferred stock during fiscal 2000.

At December 31, 2000, the Company had cash and cash equivalents of
$1,417,000, compared to cash and cash equivalents of $1,928,000 at December 31,
1999.

Management continually evaluates its liquidity position. During the fourth
quarter of 2000 and first quarter of 2001, the Company decreased non-core
business spending and implemented cost-cutting measures. The Company

-23-

anticipates that it will need to obtain additional sources of funding in order
to continue its ongoing operations according to is current plans. Management
believes that through sales of its commercial rapid cook systems, minimum
royalties, technology transfer fees and the possibility of raising capital
through debt and equity financing, the Company will have adequate funding for
its continued operations and research and development efforts throughout 2001.
However, if the Company is unable to obtain additional financing, it will have
to curtail its current level of operations. No assurances can be made that the
Company will actually obtain the necessary funding to finance its operations.

Backlog

As of December 31, 2000, the amount of backlog orders believed to be firm
was approximately $0.3 million, as compared to approximately $0.2 million as of
December 31, 1999. The Company anticipates that the majority of this backlog
will be filled during the current year. The December 31, 2000, backlog was
positively impacted by the Company's transition from marketing its model "D"
cooking system to the model "C" cooking system, which was introduced in the
third quarter of 2000.

Authoritative Pronouncements

In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements". This SAB does not change any existing rules on revenue recognition,
rather it provides guidance based on interpretations and practices followed by
the SEC. The Company's implementation of SAB 101 during the fourth quarter of
2000 did not have a material impact on its financial position or results of
operations.

In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation ("FIN") No. 44, "Accounting for Certain Transactions Involving
Stock Compensation", an interpretation of Accounting Principles Board ("APB")
No. 25. FIN No. 44 clarifies the application of APB No. 25 for the definition of
an employee for the purposes of applying APB No. 25, the criteria for
determining whether a plan qualifies as a non-compensatory plan, the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award and the accounting for an exchange of stock compensation awards
in a business combination. The Company adopted FIN No. 44 effective July 1,
2000, but certain conclusions cover specific events that occur after either
December 15, 1998, or January 1, 2000. The

-24-

Company's implementation of FIN No. 44 did not have a material impact on its
financial position or results of operations.

In June 1998, the FASB issued Statement of Financial Accounting Standard
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. Implementation of this standard was delayed by
the FASB for a 12-month period through the issuance of SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities -deferral of effective date of
FASB Statement No. 133". In additional, SFAS No. 133 was amended by SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activity." The Company will adopt SFAS No. 133 as of January 1, 2001, as
amended, as required for its first quarterly filing of fiscal year 2001. We do
not believe that this will have a material impact on the Company's financial
statements.

Risk factors

The Company operates in a changing environment that involves numerous known
and unknown risks and uncertainties that could materially adversely affect the
Company's operations. The following highlights some of the factors that have
affected, and in the future could affect, the Company's operations.

Auditors' Report. The auditors have included an explanatory paragraph in
their audit opinion with respect to the Company's consolidated financial
statements at December 31, 2000. The paragraph states that the Company's
recurring losses from operations and resulting continued dependence on access to
external financing sources raise substantial doubt about its ability to
continue as a going concern. Furthermore, the factors leading to and the
existence of the explanatory paragraph may adversely affect the Company's
relationship with customers and suppliers and have an adverse effect on its
ability to obtain additional financing.

Significant Capital Requirements; Need for Additional Financing. To date
the Company's capital requirements in connection with its technology and product
development have been significant and are expected to continue to be significant
for the foreseeable future. The Company may also have to expend significant
monies for marketing and additional financing will be required to fund
anticipated future operating losses. As a result of the $2.0 million in gross
proceeds the Company raised through the sales of its Series B convertible stock
in March 2001, anticipated sales of its commercial rapid cook systems, minimum
royalties technology transfer fees and the possibility of raising additional
capital through debt and equity financing, the Company believes that it will
have adequate funding for its continued operations throughout 2001. However, if
the Company's plans change, or anticipated revenues do not materialize, or
actual expenses exceed estimated expenses the Company could be required to
obtain additional financing sooner. The Company has no current arrangements with
respect to, or sources of, additional financing. Even if additional funds are
available, the Company may not be able to obtain them on a timely basis, or on
terms acceptable to it. Failure to obtain additional funds when required could
result in the Company curtailing or ceasing its operations.

History of Losses and Expectation of Future Losses; Accumulated Deficit;
Uncertainty of Future Profitability. The Company has incurred losses of $8.8
million and $3.7 million during the years ended December 31, 1999 and 2000,
respectively. The Company had an accumulated

-25-

deficit of approximately $33.7 million at December 31, 2000. There can be no
assurance that the Company will be able to achieve profitable operations in the
future.

Uncertainty of Market Acceptance; Dependence Upon Third-Party Marketing
Arrangements; Business Factors. The high-speed commercial oven segment of the
foodservice equipment industry is an emerging market, characterized by an
increasing number of market entrants. As is typical with new products based on
innovative technologies, demand for and market acceptance of the TurboChef ovens
are subject to a high level of uncertainty. Achieving market acceptance for the
TurboChef ovens will require substantial marketing efforts and the expenditure
of significant funds to increase the foodservice industry's familiarity with the
Company and to educate potential customers as to the distinctive characteristics
and perceived benefits of the TurboChef ovens and the Company's technologies.
There can be no assurance that the Company will have available the funds
necessary to achieve such acceptance. Moreover, to date, the Company has
primarily relied upon third parties for its marketing needs. In addition, the
Company's future performance will be subject to a number of business factors,
including those beyond the Company's control, such as economic downturns and
evolving industry needs and preferences.

Uncertainty of Strategic Alliances. In the past the Company has pursued a
strategy of outsourcing its manufacturing and marketing requirements by entering
into strategic alliance with other entities. While the Company believes that any
independent distributors, representatives and/or licensees with which it enters
into such arrangements will have an economic motivation to commercialize the
Company's products, the time and resources devoted to these activities generally
will be contributed and controlled by such entities and not by the Company. A
decline in the financial prospects of particular distributors, representatives
or licensees or of any of their customers could have an adverse effect on the
Company. In addition, joint venture or similar arrangements may require
financial or other commitments by the Company. There can be no assurance that
the Company will be able, for financial or other reasons, to finalize any third-
party distribution or marketing arrangements or that such arrangements, if
finalized, will result in the successful commercialization of any of the
Company's products.

Uncertainty of New Product Development. Although the Company's research and
development efforts relating to the technological aspects of its next generation
oven are substantially completed, the Company is continually seeking to refine
and improve upon the physical attributes and utility of the TurboChef oven.
There can be no assurance that the next generation oven or any future TurboChef
ovens developed will satisfactorily perform to customer expectations. Moreover,
the Company is subject to many risks associated with the development of new
products based on innovative technologies, including unanticipated technical or
other problems and the possible insufficiency of the funds allocated for the
completion of such development, which could result in a substantial change in
the design, delay in the development, or abandonment of such applications and
products. Consequently, there can be no assurance that the next generation oven
will be successfully commercialized or that additional products will be
successfully developed or that if developed they will meet current price or
performance objectives, be developed on a timely basis or prove to be as
effective as products based on other technologies. The inability to successfully
complete development of a product or application or a determination by the
Company, for financial, technical or other reasons, not to complete development
of any product or application, particularly in instances in which the Company
has made significant capital expenditures, could have a material adverse effect
on the Company.

-26-

Dependence on Third-Party Suppliers and Manufacturers. The Company
generally does not maintain supply agreements with such third parties but
instead purchases components and electronic parts pursuant to purchase orders in
the ordinary course of business. The Company will be substantially dependent on
the ability of its manufacturers and suppliers to, among other things, meet the
Company's design, performance and quality specifications. Failure by the
Company's manufacturers and suppliers to comply with these and other
requirements could have a material adverse effect on the Company. Furthermore,
there can be no assurance that the Company's manufacturers and suppliers will
dedicate sufficient production capacity to meet the Company's scheduled delivery
requirements or that the Company's suppliers or manufacturers will have
sufficient production capacity to satisfy the Company's requirements during any
period of sustained demand. Their failure to supply, or delay in supplying, the
Company with ovens or components could adversely affect the Company's profit
margin and the Company's ability to meet its own delivery schedules on a timely
and competitive basis. In addition, although the Company owns the designs for
its specially-designed components and believes that alternative sources of
supply are available, the Company currently purchases all of its specially-
designed components from a limited number of suppliers and failure by such
suppliers to continue to supply the Company with these components, on
commercially reasonable terms or at all, in the absence of readily available
alternative sources, would have a material adverse effect on the Company.

Industry Competition; Technological Obsolescence. The cooking and warming
segment of the foodservice equipment market is characterized by intense
competition. The Company competes with numerous well-established manufacturers
and suppliers of commercial ovens, grills and fryers (including those which cook
through the use of conduction, convection, induction, air impingement, infrared,
and/or microwave heating methods). In addition, the Company is aware of others
who are developing, and in some cases have introduced, new ovens based on high-
speed heating methods and technologies. Although the Company is not aware of any
competitive products, either being marketed or under development, which it
believes are functionally equivalent to the TurboChef oven (i.e. that can
produce the variety of food items, cooked to the same high quality standards, at
the same speeds), there can be no assurance that other companies with the
financial resources and expertise that would encourage them to attempt to
develop competitive products, do not have or are not currently developing
functionally equivalent products, or that functionally equivalent products will
not become available in the near future. Most of the Company's competitors
possess substantially greater financial, marketing, personnel and other
resources than the Company and have established reputations relating to product
design, development, manufacture, marketing and service of cooking equipment. In
addition, the market for the Company's products and technologies is
characterized by changing technology and evolving industry standards.
Accordingly, the Company's ability to compete successfully will depend, in large
part, on its ability to continually enhance and improve its existing products,
complete development and introduce to the marketplace in a timely manner its
proposed products, adapt its products to the needs of its customers and
potential customers, successfully develop and market new products, and continue
to improve operating efficiencies and lower manufacturing costs. There can be no
assurance that the Company will be able to compete successfully, that
competitors will not develop technologies or products that render the Company's
products obsolete or less marketable or that the Company will be able to
successfully enhance or adapt its products, develop new products or lower costs.

-27-

Potential Products Liability; Warranty Expense. The Company is engaged in a
business which could expose it to possible liability claims from others,
including from foodservice operators and their staffs, as well as from
consumers, for personal injury or property damage due to design or manufacturing
defects or otherwise. The Company maintains a general liability insurance policy
(which includes products liability coverage) that is subject to a $5,000,000 per
occurrence limit with a $5,000,000 aggregate limit and a $25,000,000 umbrella
liability insurance policy to cover claims in excess of the limits of its
liability insurance. There can be no assurance, however, that the Company's
insurance or that of any third-party manufacturer will be sufficient to cover
potential claims or that an adequate level of coverage will be available in the
future at reasonable cost. A partially insured or a completely uninsured
successful claim against the Company could have a material adverse effect on the
Company. In addition, if the Company is successful in its efforts to obtain
significant orders for TurboChef ovens, the Company may be required to install
and service, on a timely basis, large numbers of TurboChef ovens at its
customers' locations. There can be no assurance that the Company will be able to
provide such services on acceptable terms or conditions, or at all. Furthermore,
the Company generally warrants its products to be free from defects in
workmanship and materials for 1 year. There can be no assurance that future
warranty expenses will not have an adverse effect on the Company.

Patents and Proprietary Rights. The Company holds certain United States and
foreign patents which cover certain fundamental aspects of the Company's high-
speed cooking technologies. There can be no assurance as to the breadth or
degree of protection which existing or future patents, if any, may afford the
Company, that any patent applications will result in issued patents, that the
Company's patents, pending patents, registered trademark or registered
servicemark will be upheld if challenged or that competitors will not develop
similar or superior methods or products outside the protection of any patent
issued to the Company. Although the Company believes that its patents, the
TurboChef oven, its trademark and its servicemark do not and will not infringe
patents, trademarks or servicemarks or violate proprietary rights of others, it
is possible that its existing patent, trademark or servicemark rights may not be
valid or that infringement of existing or future patents, trademarks,
servicemarks or proprietary rights may occur. In the event the Company's
products infringe patents, trademarks, servicemarks or proprietary rights of
others, the Company may be required to modify the design of its products, change
the name of its products or obtain a license. There can be no assurance that the
Company will be able to do so in a timely manner, upon acceptable terms and
conditions, or at all. The failure to do any of the foregoing could have a
material adverse effect upon the Company. Although the Company has patent
insurance to protect and defend its patents, there can be no assurance that the
Company will have all of the financial or other resources necessary to enforce
or defend a patent infringement or proprietary rights violation action.
Moreover, if the Company's products infringe patents, trademarks, servicemarks
or proprietary rights of others, the Company could, under certain circumstances,
become liable for damages, which could have a material adverse effect on the
Company.

The Company also relies on trade secrets and proprietary know-how and
employs various methods to protect the concepts, ideas and documentation of its
proprietary technologies. However, such methods may not afford complete
protection and there can be no assurance that others will not independently
develop similar know-how or obtain access to the Company's know-how, concepts,
ideas and documentation. Furthermore, although the Company has and expects to
have confidentiality and non-competition agreements with its employees and
appropriate suppliers and manufacturers, there can be no assurance that such
arrangements will adequately protect the

-28-

Company's trade secrets or that others will not independently develop products
or technologies similar to those of the Company.

Possible Fluctuations in Operating Results. The Company's operating results
could vary from period to period as a result of factors such as fluctuations in
the length of the Company's sales cycle (the time between a customer expressing
interest in a product and placing an order) , as well as from fluctuations in
the Company's manufacturing cycle (the time between the placement of a customer
order and the Company's ability to fill the order), the purchasing patterns of
potential customers, the timing of introduction of new products and product
enhancements by the Company and its competitors, technological factors,
variations in sales by distribution channels and generally non-recurring product
sales.

Regulation and Accreditation. The Company is subject to regulations
administered by various federal, state, local and international authorities,
including those limiting radiated emissions from oven products, which impose
significant compliance burdens on the Company. Failure to comply with these
regulatory requirements may subject the Company to civil and criminal sanctions
and penalties. While the Company believes that it and its products are in
compliance in all material respects with all laws and regulations applicable to
such models, including those administered by the United States Food and Drug
Administration, the Federal Communications Commission, the European Community
Council and the Japanese Government's Ministry of International Trade there can
be no assurance of such compliance. Moreover, new legislation and regulations,
as well as revisions to existing laws and regulations, at the federal, state,
local and international levels may be proposed in the future affecting the
foodservice equipment industry. Such proposals could affect the Company's
operations, result in material capital expenditures, affect the marketability of
the Company's existing products and technologies and/or could limit
opportunities for the Company with respect to modifications of its existing
products or with respect to its new or proposed products or technologies. In
addition, expansion of the Company's operations into new markets may require the
Company to comply with additional regulatory requirements. There can be no
assurance that the Company will be able to comply with additional applicable
laws and regulations without excessive cost or business interruption, and
failure to comply could have a material adverse effect on the Company.

Possible Volatility of Stock Price. The market price for the Company's
Common Stock has been subject to volatility and may continue to be highly
volatile as has been the case with the securities of other small capitalization
companies. Factors such as the Company's financial results, introduction of new
products by the Company's competitors and various industry factors generally may
have a significant impact on the market price of the Company's securities.
Additionally, in recent years, the stock market has experienced a high level of
price and volume volatility and, accordingly, the market prices for many
companies, particularly small capitalization companies, the common stock of
which trades in the over-the-counter market, have experienced wide price
fluctuations not necessarily related to the operating performance of such
companies.

NASDAQ Listing. The Company's common stock is listed on the NASDAQ National
Market, which requires maintenance of certain quantitative and other standards
for continual listing. If the Company's common stock were delisted from the
NASDAQ National Market, and if the Company meets the continued listing
requirements for the NASDAQ SmallCap Market, the Company will apply for
continued listing on the NASDAQ SmallCap Market and trading

-29-

would continue in this market. However, if the common stock were delisted from
the NASDAQ SmallCap Market, trading, if any, would likely be conducted in the
over-the-counter market on the National Association of Securities Dealers' OTC
Bulletin Board and/or on the pink sheets of the National Quotation Bureau. As a
result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the price of our common stock. In addition, the common
stock would be subject to rules promulgated under the Securities Exchange Act of
1934 applicable to "penny stocks." The Securities and Exchange Commission has
adopted regulations that generally define a "penny stock" to be an equity
security that has a market price (as determined pursuant to regulations adopted
by the Commission) or exercise price of less than $5.00 per share, subject to
certain exceptions. By virtue of being listed on the NASDAQ, the Company's
common stock will be exempt from the definition of "penny stock." If, however,
the Company's common stock is removed from NASDAQ, its securities may become
subject to the penny stock rules that impose additional sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors. Consequently, the penny stock
rules may adversely affect the ability of broker-dealers to sell the Company's
common stock and may affect the ability of purchasers of the Company's common
stock to sell such securities in the secondary market.

Dependence on Key Personnel. The Company believes that its ability to
successfully implement its business strategy is dependent on its management. The
loss of services of one or more of these individuals might hinder the
achievement of the Company's development objectives. There can be no assurance
that the Company will continue to be able to hire and retain the qualified
personnel needed for its business. The loss of the services of or the failure to
recruit key technical personnel could adversely affect its business, operating
results and financial condition.

Item 7A Quantitative and Qualitative Disclosures about Market Risk
----------------------------------------------------------

In the fourth quarter of 2000, the Company sold its investment in Maytag
common stock and paid the outstanding principal and interest due on the AIG
credit facility. The purchase put option, which was an integral part of the AIG
credit facility was terminated at the same time. As of December 31, 2000, the
Company does not have any assets or liabilities that have the potential for
market risk that would affect the operating results or cash flow of the Company
and is not engaged in any hedging activity.

-30-

Item 8 Financial Statements and Supplementary Data
-------------------------------------------

The financial statements set forth herein commence on page F- 1 of this
report.

Item 9 Changes In and Disagreements with Accountants on Accounting and
----------------------------------------------------------------
Financial Disclosure
--------------------

Arthur Andersen LLP resigned as the Company's independent auditor on June
5, 2000. On October 17, 2000, the Company's board of directors, by unanimous
consent, approved the engagement of BDO Seidman LLP, as its independent auditor
for the fiscal year ending December 31, 2000, to replace the firm of Arthur
Andersen LLP.

The audit reports of Arthur Andersen LLP on the Company's financial
statements for the past two fiscal years did not contain an adverse opinion or a
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with the audits of the
Company's financial statements for each of the two fiscal years ended December
31, 1999, and December 31, 1998, and the subsequent interim period through June
5, 2000, there were no disagreements with Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement disclosures, or auditing
scope procedure which, if not resolved to the satisfaction of Arthur Andersen
LLP, would have caused Arthur Andersen LLP to make reference to the subject
matter in its reports.

-31-

Part III

Item 10 Directors and Executive Officers of the Registrant
--------------------------------------------------

The executive officers of the Company as of March 30, 2001, are as follows:

Name Age Position(s)
---- --- ----------

Jeffrey B. Bogatin......................... 52 Chairman of the Board of Directors

Richard N. Caron........................... 44 President, Chief Executive Officer and
Director

Donald J. Gogel............................ 51 Director

John C. Shortley........................... 32 Chief Accounting Officer, Controller,
Treasurer and Assistant Secretary

Jeffrey B. Bogatin is a co-founder of the Company, has been a director of
the Company since its inception in 1991 and served as Chairman of the Board of
Directors until April 1998. Mr. Bogatin was re-appointed as Chairman of the
Board of Directors on March 5, 2000. Mr. Bogatin has also served as Treasurer of
the Company from inception until June 1996. Since 1975, Mr. Bogatin has served
as President of Whitemarsh Industries, Inc., which was engaged in manufacturing
and importing ladies apparel and is now involved with making venture capital
investments.

Richard N. Caron was elected President and Chief Executive Officer and
appointed to the TurboChef Technologies Board in September 1998. Mr. Caron was
employed by Arthur D. Little, Inc., an international technology and innovation
consulting firm, from 1979 to 1998, holding the title of Director from 1991 and
Practice Leader for Consumer Goods in North America from 1997 until he joined
the Company.

Donald J. Gogel has been a director of the Company since April 1993. Since
February 1989, Mr. Gogel has been a principal of Clayton, Dubilier & Rice, Inc.,
a private investment firm, and has served as President and Chief Executive
Officer since January 1997. Mr. Gogel is a director of Jafra Cosmetics, Inc.

John C. Shortley has been employed by the Company as its Controller since
September 1998. Mr. Shortley currently serves in the capacity of Chief
Accounting Officer, Controller, Treasurer and Assistant Secretary. Mr. Shortley
was employed by PS Trading, Inc., a fuel storage and distribution company, from
1996 to 1998, holding the title of Controller.

Directors serve until the next Annual Meeting of Stockholders or their
resignation. Officers serve the Company at the discretion of the Board of
Directors.

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Item 11 Executive Compensation
----------------------

Summary Compensation Table

The following table sets forth information concerning total compensation
earned by or paid to the Company's Chief Executive Officer and the other most
highly compensated executive officers of the Company who served in such
capacities during the fiscal year ended December 31, 2000 (collectively, the
"Named Executive Officers") for services rendered to the Company during each of
the last three fiscal years. No other officers of the Company received
compensation in excess of $100,000 during fiscal year 2000.

Annual Compensation
-------------------

Long Term No. of Stock
Name and Principal Fiscal All Other Compensation Options
Position Year Salary ($) Bonus ($) $Compensation($) Awards($) Granted
-------- ---- ---------- ----------- ---------------- -------- --------

Richard N. Caron 2000 $287,761 $ -0- $-0- $-0- 100,000
President and Chief 1999 298,434 125,000/(2)/ -0- -0- -0-
Executive Officer/(1)/ 1998 92,308 30,000/(2)/ -0- -0- 200,000

Marc Jacobson 2000 $134,598 $ -0- $-0- $-0- 100,000
Chief Financial Officer/(3)/

Dennis J. Jameson 2000 $167,069 $ -0- $-0- $-0- 100,000
Executive Vice President, 1999 $173,372 25,000 -0- -0- -0-
Chief Financial Officer, 1998 160,000 33,750 -0- -0- 20,000
Secretary and Treasurer/(4)/

/(1)/ Mr. Caron was employed by the Company in September 1998, at which time he
was elected President and Chief Executive Officer of the Company.

/(2)/ Upon being employed by the Company, Mr. Caron was entitled to receive a
signing bonus of $60,000, of which $30,000 was paid in each of 1999 and
2000.

/(3)/ Mr. Jacobson was elected interim Chief Financial Officer in May 1, 2000.
Mr. Jacobson resigned as interim Chief Financial Officer effective
December 15, 2000.

/(4)/ Mr. Jameson was employed by the Company in December 1995, at which time he
was elected Executive Vice President and Chief Financial Officer and
served as Chief Financial Officer until April 2000. Mr. Jameson`s tenure
as an employee and executive officer of the Company terminated effective
May 26, 2000. Effective May 1, 2000, Marc Jacobson was retained by the
Company to assume the position of interim Chief Financial Officer.

-33-

Executive Employment Agreements

In August 1998, the Company entered into an employment agreement with
Richard N. Caron providing for his employment as President and Chief Executive
Officer of the Company effective in September 1998. Pursuant to such employment
agreement, Mr. Caron is entitled to receive an annual base salary of $300,000
plus an annual bonus of up to 50% of his base salary, as determined by the Board
of Directors. Mr. Caron also received a signing bonus of $60,000, with 50% of
such amount being paid on October 1, 1998, and the remainder being paid on March
1, 1999. Pursuant to his employment agreement, Mr. Caron has been granted
options to acquire 200,000 shares of Common Stock at a price of $4.75 per share,
which will vest in equal amounts over a three-year period. The employment
agreement does not specify any term of employment. In the event that the Company
terminates Mr. Caron's employment for any reason, Mr. Caron is entitled to
twelve months severance pay equal to his salary in effect at the termination
date.

On June 1, 1999, the Company entered into an employment agreement with
Dennis J. Jameson, providing for his employment as Chief Financial Officer.
Pursuant to such employment agreement, Mr. Jameson was entitled to receive an
annual base salary of $175,000, plus an annual bonus of up to 50% of his base
salary, as determined by the Board of Directors in a manner consistent with
other management personnel of the Company. Mr. Jameson's termination was
effective May 26, 2000. Pursuant to a termination agreement, Mr. Jameson
received severance of approximately $102,000; received non-qualified stock
option to purchase 100,000 shares of the Company's common stock at an exercise
price equal to $5.00 per share in accordance with the Company's 1994 Stock
Option Plan, as amended, exercisable by Mr. Jameson on or before December 31,
2001; and maintenance of his group health benefits in effect at the time of
termination for a period of twelve months.

Compensation Committee Interlocks and Insider Participation

The Company has a Compensation Committee whose members are, and during
fiscal 2000 were, Mr. Caron, the Company's President and Chief Executive Officer
and Mr. Gogel. During 2000, none of the executive officers of the Company served
on the Board of Directors or Compensation Committee of any other entity. See
Item 13 - Certain Relationships and Related Transactions for a description of
certain transactions between the Company and Mr. Gogel.

-34-

Option Grants for Fiscal 2000

The following table sets forth information with respect to stock option
grants to the Named Executive Officers during fiscal 2000 and the potential
realizable value of such option grants.

Option Grants in Last Fiscal Year
---------------------------------

Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants/(1)/ Option Term (2)
--------------------- ---------------
Number of
Securities % of Total
Underlying Options Exercise
Options Granted to Price Per Expiration
Name Granted Employees Share Date 5% 10%
---- -------- ---------- --------- ---------- -------- --------

Richard N. Caron 100,000/(3)/ 6.51% $1.32 12/27/10 $ 83,000 $210,000

Marc Jacobson/(4)/ 100,000/(5)/ 6.51% $5.00 4/19/10/(5)/ $314,000 $797,000

Dennis J. Jameson/(6)/ 100,000/(6)/ 6.51% $5.00 12/31/01 $ 40,000 $ 82,000

/(1)/ These are options granted under the Company's 1994 Stock Option Plan, as
amended, to acquire shares of Common Stock.

/(2)/ The potential realizable value of the options, if any, granted in 2000 to
each of the Named Executive Officers was calculated by multiplying those
options by the excess of (a) the assumed market value of Common Stock, at
the end of option term, if the market value of Common Stock were to
increase 5% or 10% in each year of the option's term over (b) the exercise
price shown. This calculation does not take into account any taxes or
other expenses which might be owed. The 5% and 10% appreciated rates are
set forth in the SEC rules and no representation is made that the Common
Stock will appreciate at these assumed rates or at all.

/(3)/ Mr. Caron's options grant vests as follows: one-third in December 2000,
one-third in December 2001 and one-third in December 2002.

/(4)/ Mr. Jacobson was elected interim Chief Financial Officer in May 1, 2000.
Mr. Jacobson resigned as interim Chief Financial Officer effective
December 15, 2000.

/(5)/ Mr. Jacobson's options grant vests as follows: one-fourth in each March
2001, March 2002, March 2003 and March 2004. Mr. Jacobson's option grant
was terminated upon his resignation from the Company, effective December
15, 2000.

/(6)/ Mr. Jameson's option grant in 2000 was immediately vested, per his
separation agreement. Mr. Jameson's tenure as an employee and executive
officer of the Company terminated effective May 26, 2000.

-35-

Option Exercises and Values for Fiscal 2000

The table below sets forth the following information with respect to option
exercises during fiscal 2000 by each of the named executive officers and the
status of their options at December 31, 2000:

Aggregated Option Exercises in
Last Fiscal Year and Fiscal Year End Option Value

Value Realized Number of Unexercised Value of Unexercised In-
Shares (Market Price Options the-Money Options at
Acquired on at Exercise Less at Fiscal Year-End Fiscal year-End /(1)/
------------------ ---------------------
Name Exercise Exercise Price) Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------------- ----------- ------------- ----------- -------------

Richard N. Caron -0- -0- 166,667 133,333 $10,167 $20,333
Marc Jacobson/(2)/ -0- -0- -0- -0- $ -0- $ -0-
Dennis J. Jameson/(3)/ -0- -0- 100,000 -0- $ -0- $ -0-

(1) Options are "in the money" if the fiscal year end fair market value of the
Common Stock exceeds the option exercise price.

(2) Mr. Jacobson was elected interim Chief Financial Officer in May 1, 2000.
Mr. Jacobson resigned as interim Chief Financial Officer effective December
15, 2000.

(3) Mr. Jameson's tenure as an employee and executive officer of the Company
terminated effective May 26, 2000.

-36-

Item 12 Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------

The following table sets forth certain information as of March 27, 2001,
based on information obtained from the persons named below, relating to the
beneficial ownership of shares of Common Stock (unless otherwise indicated) by
(i) each beneficial owner of more than five percent (5%) of the outstanding
Common Stock, (ii) each director, (iii) each Named Executive Officer and (iv)
all current executive officers and directors of the Company as a group.

Amount and Nature Percent
Name of of Beneficial of
Beneficial Owner Ownership/(1)/ Class
---------------- ------------- ------

Jeffrey B. Bogatin........................... 6,126,135/(2)/ 38.12%

Grand Cheer Company Limited.................. 2,405,800/(3)/ 15.30%

Jack Silver.................................. 791,000/(4)/ 5.03%

Donald J. Gogel.............................. 569,418/(5)/ 3.59%

Richard N. Caron............................. 169,167/(6)/ 1.05%

Dennis J. Jameson............................ 100,000/(7)/ *

Marc Jacobson .............................. 900 *

All current directors and executive
officers as a group (4 persons) ............. 6,904,786/(8)/ 42.08%

* Less than 1%

(1) Unless otherwise indicated, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them. A person is deemed to be the
beneficial owner of securities that can be acquired by such person within
sixty (60) days upon the exercise of preferred stock, stock options and
warrants. Each beneficial owner's percentage ownership is determined by
assuming that options and warrants that are held by such person (but not
those held by any other person) and which are exercisable within sixty (60)
days have been exercised. Percentages herein assume a base of 15,728,423
shares of Common Stock outstanding, before any consideration is given to
outstanding options or warrants. Certain of the Company's directors
disclaim beneficial ownership of some of the shares included in the table.

(2) Includes 341,667 shares issuable upon exercise of immediately exercisable
options granted under the Company's 1994 Stock Option Plan, as amended (the
"Option Plan"). Includes 955,000 shares held in a charitable foundation.
Mr. Bogatin disclaims beneficial ownership of these shares. The address of
Mr. Bogatin is c/o TurboChef Technologies, Inc., 660 Madison Avenue, New
York, New York 10021.

-37-

(3) Includes 2,000,000 shares of issuable upon the conversion of the Company's
Series B Convertible Preferred Stock. The address of Grand Cheer Company
Limited is 13 F Gloucester Tower, The Landmark, 11 Pedder Street, Central,
Hong Kong.

(4) The address of Mr. Silver is 660 Madison Avenue, 15th Floor, New York,
New York 10021.

(5) Includes 146,250 shares issuable upon exercise of immediately exercisable
options granted under the Option Plan. Includes 83,000 shares held in a
charitable foundation. Mr. Gogel disclaims beneficial ownership of these
shares.

(6) Includes 166,667 shares issuable upon the exercise of immediately
exercisable options granted under the Option Plan.

(7) Includes 100,000 shares issuable upon exercise of immediately exercisable
options granted under the Option Plan. Mr. Jameson's tenure as an employee
and as an executive officer of the Company terminated on May 26, 2000.

(8) Includes 654,584 shares issuable upon the exercise of immediately
exercisable options granted under the Option Plan.

-38-

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who beneficially own
more than ten percent (10%) of a registered class of the Company's equity
securities ("ten percent stockholders") to file initial reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC").
Executive officers, directors and ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.

Based solely upon review of the copies of such forms furnished to the
Company, or written representations from certain reporting persons, the Company
believes that during the fiscal year ended December 31, 2000, all filing
requirements applicable to its executive officers, directors and ten percent
stockholders were fulfilled on a timely basis, except for Mr. Jacobson, the
Company's former Chief Financial Officer, who failed to timely file a Form 3, as
well as a Form 4 for the month of May 2000, to report the purchase of the
Company's Common Stock.

Item 13 Certain Relationships and Related Transactions
----------------------------------------------

In April 1999 and March 2000, Mr. Bogatin exercised certain stock options
to purchase 200,000 and 600,000 shares, respectively of Common Stock. As payment
for the aggregate exercise price of such options, Mr. Bogatin tendered to the
Company promissory notes in the principal amounts of $500,000 and $1,500,000,
respectively. The principal amount of each promissory note, together with all
accrued interest, is due and payable on April 6, 2004 and March 15, 2005,
respectively. These notes bear interest rates of 4.8% and 6.7%, respectively. In
addition, in April 1999, Mr. Gogel exercised certain stock options to purchase
40,000 shares of Common Stock. As payment for the aggregate exercise price of
such options, Mr. Gogel tendered to the Company a promissory note in the
principal amount of $100,000. The principal amount of the promissory note,
together with all accrued interest, is due and payable on April 6, 2004. This
note bears an interest rate of 4.8%. The amounts due pursuant to the promissory
notes are full-recourse obligations, which are secured by separate pledge
agreements between the Company and each of Mr. Bogatin and Mr. Gogel. Pursuant
to such pledge agreements, all of the shares of Common Stock purchased by Mr.
Bogatin and Mr. Gogel upon exercise of their respective stock options were
pledged as collateral for the debts evidenced by their respective promissory
notes.

-39-

Part IV

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

(a) The following documents are filed as part of this report:

1. Financial Statements
2. List of Financial Statement Schedules (None)
3. List of Exhibits

Exhibit No. Description

3.1 Restated Certificate of Incorporation. (1)

3.2 Amendment to Certificate of Incorporation - Certificate of
Designation of Series A Convertible Preferred Stock. (12)

3.3 Amendment to Certificate of Incorporation - Certificate of
Designation of Series B Convertible Preferred Stock. (13)

3.4 Restated By-Laws. (1)

10.1 1994 Stock Option Plan, as amended. (1)

10.2 Amendment No. 1 dated as of June 12, 1996 to the Warrant
Agreement between the Company and Whale Securities Co., L.P.
dated as of April 14, 1996. (3)

10.3 Warrant Agreement between the Company and Whale
Securities Co., L.P. dated as of June 17, 1996. (4)

10.4 Option Agreement between the Company and Acadia International
Limited dated as of March 31, 1995. (2)

10.5 Strategic Alliance Agreement dated as of September 26, 1997, by and
between TurboChef Technologies, Inc. and Maytag Corporation. (5)

10.6 First Extension of the Project Agreement
(RCAP-II) dated March 4, 1998 by and between TurboChef Technologies,
Inc. and Maytag Corporation (6)

10.7 Commercial Cooking Appliance Project Agreement dated as of July 29,
1998 by and between TurboChef Technologies, Inc. and Maytag
Corporation. (7)

10.8 Employment Letter between Richard N. Caron and TurboChef
Technologies, Inc. dated September 2, 1998. (8)

10.9 Master Agreement dated January 11, 1999 by and between TurboChef
Technologies, Inc. and AIG Financial Securities Corp. (9)

10.10 Variable Stock Agreement dated January 14, 1999 by and between
TurboChef Technologies, Inc. and AIG Financial Securities Corp. (10)

-40-

10.11 Pledge Agreement dated January 11, 1999 by and between TurboChef
Technologies, Inc. and AIG Financial Securities Corp. (9)

10.12 Research and Development Contract dated July 29, 1999 by and between
Gas Research Institute and TurboChef Technologies, Inc. (10)

10.13 License Agreement dated as of October 28, 1999 by and between Maytag
Corporation and TurboChef Technologies, Inc. (10)

10.14 Promissory Note dated March 15, 2000 executed by Jeffrey B. Bogatin in
favor of TurboChef Technologies, Inc. (11)

10.15 Pledge Agreement dated as of March 15, 2000 by and between Jeffrey B.
Bogatin and TurboChef Technologies, Inc. (11)

10.16 Securities Purchase Agreement dated as of March 19, 2001. (13)

10.17 Warrant Certificate dated as of March 19, 2001. (13)

11 Statement Re: Computation of Per Share Earnings is not necessary
because the computation of per share earnings on both a basic and
diluted basis can be clearly determined from this report.

21 Subsidiaries of the Company. (6)

23.1 Consent of Arthur Andersen LLP (13)

23.2 Consent of BDO Seidman, LLP (13)

_____________

(1) Filed as an exhibit to the Company's Registration Statement on Form SB-
2 (File No. 33-75008), and incorporated herein by reference.

(2) Filed as an exhibit to the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 1995, and incorporated herein by
reference.

(3) Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB
for the quarter ended June 30, 1996, and incorporated herein by
reference.

(4) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year December 31, 1996, and incorporated herein by reference.

(5) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997, and incorporated herein by
reference.

(6) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, and incorporated herein by
reference.

-41-

(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998, and incorporated herein by reference.

(8) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998, and incorporated herein by
reference.

(9) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, and incorporated herein by
reference.

(10) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1999, and incorporated herein by
reference.

(11) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, and incorporated herein by
reference.

(12) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000, and incorporated by reference.

(13) Filed herewith.

(b) Reports on Form 8-K

The Company filed a Form 8-K on October 23, 2000 to report the
engagement of BDO Seidman, LLP as the Company's independent accountants
under Item 4.

-42-

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.

TURBOCHEF TECHNOLOGIES, INC.

By:/s/ Richard N. Caron
----------------------------
Richard N. Caron
President, Chief Executive Officer
and Director (Principal Financial Officer)

By:/s/ John C. Shortley
----------------------------
John C. Shortley
Chief Accounting Officer, Controller,
Treasurer and Assistant Secretary
(Principal Accounting Officer)

Dated April 16, 2001

-43-

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

Name Title Date
---- ----- ----

/s/ Jeffrey B. Bogatin Chairman of the Board of Directors April 16, 2001
Jeffrey B. Bogatin

/s/ Richard N. Caron President, Chief Executive Officer April 16, 2001
Richard N. Caron and Director (Principal Executive
Officer and Principle Financial Officer)

/s/ Donald J. Gogel Director April 16, 2001
Donald J. Gogel

-44-

INDEX TO FINANCIAL STATEMENTS

Report of Independent Certified Public Accountants F-2
Report of Independent Public Accountants F-3

Financial Statements:
Balance Sheets as of December 31, 2000 and 1999 F-4
Statements of Operations for the years ended December 31, 2000, 1999 and 1998 F-5
Statements of Stockholders' Equity for the years ended
December 31, 2000, 1999 and 1998 F-6 & F-7
Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 F-8
Notes to Financial Statements for the years ended December 31, 2000, 1999 and 1998 F-9

All financial statement schedules are omitted since the required information is
not present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.

F-1

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders
TurboChef Technologies, Inc.
Dallas, Texas

We have audited the accompanying balance sheet of TurboChef Technologies, Inc.
as of December 31, 2000, and the related statements of operations, stockholders'
equity, 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.

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 financial statements referred to above present fairly, in
all material respects, the financial position of TurboChef Technologies, Inc. as
of December 31, 2000, 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.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, the Company's
recurring losses from operations and its continued dependence on access to
external financing sources raise substantial doubt about its ability to continue
as a going concern. Management plans in regard to these matters are also
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

BDO Seidman, LLP

Dallas, Texas
March 27, 2001

F-2

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders
TurboChef Technologies, Inc.

We have audited the accompanying balance sheet of TurboChef Technologies, Inc.
as of December 31, 1999 and the related statements of operations, stockholders'
equity, and cash flows for each of the two years 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 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 TurboChef Technologies, Inc. as
of December 31, 1999 and the results of its operations and its cash flows for
each of the two years then ended in conformity with auditing standards generally
accepted in the United States.

Arthur Andersen LLP

Dallas, Texas
March 30, 2000

F-3

TurboChef Technologies, Inc.

Balance Sheets

(Amounts in Thousands, Except Share Data)

At December 31,
2000 1999
---- ----

Assets
------
Current assets:
Cash and cash equivalents $ 1,417 $ 1,928
Marketable securities available for sale, at fair value - 7,335
Marketable securities - pledged, at fair value - 7,920
Accounts receivable net of allowance for doubtful accounts of
$86 and $117 at December 31, 2000 and 1999, respectively 2,154 1,280
Inventory 1,023 252
Prepaid expenses 306 209
-------- --------
Total current assets 4,900 18,924
-------- --------

Property and equipment, net 602 731

Premium on purchased put option, net - 1,295
Other assets 220 119
-------- --------
Total assets $ 5,722 $ 21,069
======== ========

Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 2,811 $ 1,000
Accrued expenses 352 644
Accrued upgrade and warranty costs 891 1,069
Deferred revenue - 1,727
-------- --------
Total current liabilities 4,054 4,440

Long-term liabilities:
Long-term debt - 6,406
Accrued interest - 372
-------- --------
Total long-term liabilities - 6,778

Commitments and contingencies

Stockholders' equity:
Preferred stock, $100 par value. Authorized 5,000,000 shares.
21,000 and 0 issued at December 31, 2000 and 1999, respectively 2,100 -
Common stock, $.01 par value. Authorized 50,000,000 shares.
Issued 15,728,423 and 15,090,373 shares at December 31,
2000 and 1999, respectively 157 151
Additional paid-in capital 35,878 34,119
Accumulated deficit (33,742) (30,010)
Notes receivable from stock issuances (2,274) (685)
Accumulated comprehensive income - 6,727
Treasury stock - at cost 32,130 shares in 2000 and 1999 (451) (451)
-------- --------
Total stockholders' equity 1,668 9,851
-------- --------

Total liabilities and stockholders' equity $ 5,722 $ 21,069
======== ========

The accompanying notes are an integral part of these financial statements.

F-4

TurboChef Technologies, Inc.
Statements of Operations
(Amounts in Thousands, Except Share Data)

Years Ended December 31,
2000 1999 1998
---- ---- ----

Revenues:
Product sales $ 3,069 $ 3,391 $ 3,062
Research and development fees 3,827 3,645 4,075
Royalties 950 27 -
----------- ----------- -----------
Total revenues 7,846 7,063 7,137

Costs and expenses:
Cost of goods sold 3,846 3,267 2,677
Research and development expenses 3,731 4,092 2,311
Selling, general and administrative expenses 7,943 7,709 6,301
----------- ----------- -----------
Total costs and expenses 15,520 15,068 11,289
----------- ----------- -----------

Operating loss (7,674) (8,005) (4,152)
----------- ----------- -----------

Other income (expense):
Interest income 187 79 92
Interest expense (677) (372) -
Dividend income 157 206 200
Amortization of purchased put option premium (594) (647) -
Gain on the sale of purchased put option 5,022 - -
Loss on disposal of assets (126) - -
Other income (expense) (27) (40) (94)
----------- ----------- -----------
3,942 (774) 198
----------- ----------- -----------

Net loss $ (3,732) $ (8,779) $ (3,954)
=========== =========== ===========

Loss per common share - basic and diluted $(0.24) $(0.59) $(0.27)
=========== =========== ===========

Weighted average number of common
shares outstanding - basic and diluted 15,602,211 14,983,486 14,611,724
=========== =========== ===========

The accompanying notes are an integral part of these financial statements.

F-5

TurboChef Technologies, Inc.
Statements of Stockholders' Equity
(Amounts in Thousands, Except Share Data)

Preferred Stock Common stock Additional paid- Accumulated
--------------- ------------ ---------------- -----------
Shares Amount Shares Amount in capital deficit
----- ------ ------ ------ ---------- -------

Balance, December 31, 1997 - $ - 14,551,294 $146 $32,130 $(17,277)

Net loss - - - - - (3,954)
Net unrealized gain on marketable securities - - - - - -

Comprehensive income (loss)

Exercise of warrants - - 51,014 1 164 -
Exercise of stock options - - 56,826 1 141 -
Purchase of treasury stock (14,748 shares) - - - - - -
----------------------------------------------------------------------
Balance, December 31, 1998 - $ - 14,659,134 $148 $32,435 $(21,231)

Net loss - - - - - (8,779)
Net unrealized loss on marketable securities - - - - - -
Net unrealized gain on purchased put option - - - - - -

Comprehensive income (loss)

Compensation expense - - - - 374 -
Notes receivable for stock issuances - - - - - -
Issuance of warrants - - - - 153 -
Exercise of warrants - - 121,172 1 392 -
Exercise of stock options - - 310,067 2 765 -
----------------------------------------------------------------------
Balance, December 31, 1999 - $ - 15,090,373 $151 $34,119 $(30,010)

Net loss - - - - - (3,732)
Realized gain on marketable securities - - - - - -
Realized gain on purchased put option - - - - - -

Comprehensive income (loss) - - - - -

Compensation expense - - - - 269 -
Notes receivable for stock issuances - - - - - -
Issuance of preferred stock 21,000 2,100 - - - -
Preferred stock dividend - - - - (57) -
Exercise of stock options - - 638,050 6 1,547 -
----------------------------------------------------------------------
Balance, December 31, 2000 21,000 $2,100 15,728,423 $157 $35,878 $(33,742)
======================================================================

The accompanying notes are an integral part of these financial statements.

F-6

TurboChef Technologies, Inc.
Statements of Stockholders' Equity
(Amounts in Thousands, Except Share Data)

Accumulated
-----------
Notes receivable other Total
---------------- ----- -----
for comprehensive Treasury stockholders'
--- ------------- -------- ------------
stock issuances income stock equity
--------------- ------ ----- ------

Balance, December 31, 1997 $ - $ 964 $ (334) $ 15,629

Net loss - - - (3,954)
Net unrealized gain on marketable securities - 7,328 - 7,328
-----------
Comprehensive income (loss) 3,374

Exercise of warrants - - - 165
Exercise of stock options - - - 142
Purchase of treasury stock (14,748 shares) - - (117) (117)
-------------------------------------------------------------
Balance, December 31, 1998 $ - $ 8,292 $ (451) $ 19,193

Net loss - - - (8,779)
Net unrealized loss on marketable securities - (4,188) - (4,188)
Net unrealized gain on purchased put option - 2,623 - 2,623
------------
Comprehensive income (loss) (10,344)

Compensation expense - - - 374
Notes receivable for stock issuances (685) - - (685)
Issuance of warrants - - - 153
Exercise of warrants - - - 393
Exercise of stock options - - - 767
-------------------------------------------------------------
Balance, December 31, 1999 $ (685) $ 6,727 $ (451) $ 9,851

Net loss - - - (3,732)
Realized gain on marketable securities - (4,104) - (4,104)
Realized gain on purchased put option - (2,623) - (2,623)
------------
Comprehensive income (loss) (10,459)

Compensation expense - - - 269
Notes receivable for stock issuances (1,589) - - (1,589)
Issuance of preferred stock - - - 2,100
Preferred stock dividend - - - (57)
Exercise of stock options - - - 1,553
-------------------------------------------------------------
Balance, December 31, 2000 $ (2,274) $ - $ (451) $ 1,668
=============================================================

The accompanying notes are an integral part of these financial statements.

F-7

TurboChef Technologies, Inc.
Statements of Cash Flows
(Amounts in Thousands)

Years Ended December 31,
----------------------------------------
2000 1999 1998
---- ---- ----

Cash flows from operating activities:
Net loss $ (3,732) $(8,779) $(3,954)
Adjustments to reconcile net loss to net cash used in
operating activities:
Equity in loss of joint venture - - 105
Gain on sale of purchased put option (5,022) - -
Depreciation and amortization 354 503 505
Amortization of premium on purchased put option 594 647 -
Non-cash interest on notes receivable from employees and directors (110) - -
Non-cash compensation expense 269 374 15
Provision for doubtful accounts 30 25 76
Loss on disposal of assets 126 - -
Changes in operating assets and liabilities:
Accounts receivable (904) (391) (365)
Inventories (771) 266 (130)
Prepaid expenses and other assets (81) (158) 65
Accounts payable 1,811 429 52
Accrued expenses (527) 726 717
Deferred revenue (1,727) 1,678 27
Accrued interest (372) 372 -
-------- ------- -------
Net cash used in operating activities (10,062) (4,308) (2,887)
-------- ------- -------

Cash flows from investing activities:
Sales of marketable securities and purchased put option 15,723 - 1,795
Premium on purchased put option - (1,943) -
Purchase of equipment and leasehold improvements (332) (492) (186)
Capitalization of patent costs (136) - -
Investment in joint venture - - (145)
-------- ------- -------
Net cash provided by (used in) investing activities 15,255 (2,435) 1,464
-------- ------- -------

Cash flows from financing activities:
Borrowings under long-term debt 6,795 7,879 -
Payments on long-term debt (14,674) - -
Repayments of notes receivable from employees 36 - -
Proceeds for the sale of preferred stock 2,100 - -
Proceeds from the exercise of stock options 39 82 26
Proceeds from the issuance of warrants - 153 -
Proceeds from the exercise of warrants - 393 164
-------- ------- -------
Net cash (used in) provided by financing activities (5,704) 8,507 190
-------- ------- -------

Net increase (decrease) in cash and cash equivalents (511) 1,764 (1,233)
Cash and cash equivalents at beginning of period 1,928 164 1,397
-------- ------- -------
Cash and cash equivalents at end of period $ 1,417 $ 1,928 $ 164
======== ======= =======

Supplemental disclosures of noncash activities:
Noncash investing activity - net unrealized gain/(loss)
on marketable securities $ - $(4,188) $ 7,328
======== ======= =======
Noncash investing activity - net unrealized gain
on purchased put option $ - $ 2,623 $ -
======== ======= =======
Noncash investing activity - accrued preferred
stock dividend $ 57 $ - $ -
======== ======= =======
Noncash investing activity - exercise of options
for note receivable from employees and directors $ (1,514) $ (685) $ -
======== ======= =======

The accompanying notes are an integral part of these financial statements.

F-8

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------

General
-------

TurboChef Technologies, Inc. ("the Company") was incorporated in the State
of Delaware on April 3, 1991. Prior to its name change in July 1998, the
Company operated under the name TurboChef, Inc. The Company is a foodservice
technology company engaged primarily in designing, developing and marketing
high-speed cooking systems. The Company believes its primary markets are
with both residential and commercial food service operators throughout North
America, Europe and Asia. Management believes that the Company operates in
one primary business segment.

Cash Equivalents
----------------

For the purpose of these statements, the Company considers all highly liquid
debt instruments with original maturities of three months or less to be cash
equivalents.

Financial Instruments
---------------------

Investments in marketable securities at December 31, 1999, consisted of
Maytag common stock. All Maytag common stock is considered available for
sale under Statement of Financial Accounting Standards No. 115, Accounting
for Certain Investments in Debt and Equity Securities, and is stated at fair
value, adjusted as described below. Unrealized holding gains and losses on
available for sale securities are excluded from earnings and are reported as
accumulated comprehension income, a separate component of stockholders'
equity, until realized. Realized gains and losses from the sale of available
for sale securities are determined on a specific identification basis.

During 1999, the Company entered into a secured borrowing agreement and a
purchased put option. The unrealized gains on the purchased put options are
excluded from earnings and are reported as accumulated comprehensive income,
a separate component of stockholders' equity, until realized. Unrealized
gains related to marketable securities pledged under the secured borrowing
agreement are recorded as a reduction to long-term debt and unrealized gains
related to marketable equity securities that are not pledged are recorded as
an increase to the value of such securities.

The investment in Maytag common stock was liquidated in the fourth quarter
of 2000 and the related borrowings were repaid in full.

Inventories
-----------

Inventories are valued at the lower of cost or market and primarily consist
of completed cooking systems and replacement parts. The Company determines
cost for cooking systems by the specific cost method. Freight costs are
included in costs of goods sold. Cooking systems used for demonstration and
testing (demo systems) are generally depreciated over a one-year period.
Depreciation for demo systems was $22,000, $244,000 and $303,000 for the
years ended December 31, 2000, 1999, and 1998 respectively.

Property and Equipment
----------------------

Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the respective
assets and accelerated methods for income tax purposes. Computer equipment
is generally depreciated over a three-year period. All other property and
equipment are generally depreciated over a five-year period.

F-9

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

Sales Deposits
--------------

Sales deposits consist of amounts received from customers for future
purchases of cooking systems. Deferred amounts will be recognized as revenue
when the cooking systems are installed for the customer.

Revenue Recognition
-------------------

The Company records product sales when the product is installed for the
customer. Fees for research and development services or technology transfers
are recorded as earned on a proportional performance basis. Royalty revenues
consist of royalties received from the sale of products embodying the
Company's technologies. Royalty revenues are recorded when earned which is
the period in which the products are sold. Reserves for sales returns and
allowances are recorded in the same accounting period as the related
revenues. As of December 31, 2000 and 1999, there were no reserves
established as sales returns and allowances were not significant.

Other Assets
------------

Other assets consist primarily of capitalized patent costs, which include
outside legal fees incurred in the registration of the Company's patents.
These costs are amortized over the economic life of the patents, ranging from
four to ten years. Patent amortization was $19,000, $13,000 and $23,000 for
the years ended December 31, 2000, 1999 and 1998, respectively.

Research and Development Expenses
---------------------------------

Research and development expenses consist of all costs incurred in planning,
design and testing of the high-speed commercial cooking systems, including
salary costs related to research and development, and are expensed as
incurred.

Product Warranty
----------------

The Company's cooking systems are under warranty against defects in material
and workmanship for a period of one year. Anticipated future warranty costs
are estimated, based upon historical expenses, and are recorded in the period
cooking systems are sold (see Note 8).

Income Taxes
------------

The Company accounts for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss carryforwards. Deferred tax assets and liabilities
are measured using enacted rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment
date. The Company adjusts the deferred tax asset valuation allowance based
upon judgements as to future realization of the deferred tax benefits
supported by demonstrated trends in the Company's operating results.

F-10

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

Loss Per Common Share
---------------------

The Company provides basic and dilutive loss per common share information for
each year presented. The basic net loss per common share is computed by
dividing the net loss, plus the dividends on preferred stock, by the weighted
average number of common shares outstanding. For the years ended December 31,
2000, 1999 and 1998, net loss applicable to common stockholders is as
follows:

(in thousands)
2000 1999 1998
---- ---- ----

Net loss...................................... $(3,732) $ (8,779) $ (3,954)
Dividends on preferred stock.................. (57) - -
------- -------- --------

Net loss applicable to common stockholders.... $(3,789) $ (8,779) $ (3,954)
======= ======== ========

Diluted net loss per common share is computed by dividing the net loss,
adjusted on an "as if converted" basis, by the weighted average number of
common shares outstanding plus potential dilutive securities. For the years
ended December 31, 2000, 1999 and 1998, potential dilutive securities had an
anti-dilutive effect and were not included in the calculation of diluted net
loss per common share. For the year ended December 31, 2000, the potential
dilutive securities include options and warrants, which are convertible into
3,499,000 shares of common stock and $2,100,000 of convertible preferred
stock, which conversion rate is dependent upon the average market price of
the Company's common stock (see Note 10). For the years ended December 31,
1999 and 1998, the potential dilutive securities included options and
warrants on 3,145,000 and 3,278,239 shares of common stock, respectively.

Stock Option Plans
------------------

The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board Opinion No. 25 ("APB 25"),
Accounting for Stock Issued to Employees, and related technical
interpretations. Compensation expense for options granted to employees is
recorded on the date of grant only if the market price of the underlying
stock exceeds the exercise price. Since the Company grants substantially all
stock options with an exercise price equal to or greater than the current
market price of the stock on the grant date, no compensation expense is
recorded. The Company has also adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation ("SFAS 123").
Under SFAS 123 the Company has elected the disclosure provisions, rather than
the recognition provisions, and will continue to account for stock-based
compensation under APB 25.

Use of Estimates
----------------

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and 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.

F-11

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

Fair Value of Financial Instruments
-----------------------------------

The carrying amount of cash and cash equivalents, pledged marketable
securities, accounts receivable, note receivable from employees and
directors, accounts payable and accrued expenses approximates fair value due
to the short maturity of these instruments.

The Company liquidated its investment in Maytag stock in November 2000. The
proceeds were used to pay the related long-term debt.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
-----------------------------------------------------------------------

The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If
such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value, less estimated sales expenses.
Management believes no impairment exists as of December 31, 2000.

Reclassifications
-----------------

Certain amounts in prior periods financial statements have been reclassified
to conform to current year presentation.

New Accounting Pronouncements
-----------------------------

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements". This SAB does not change any existing rules on revenue
recognition, rather it provides guidance based on interpretations and
practices followed by the SEC. The Company's implementation of SAB 101
during the fourth quarter of 2000 did not have a material impact on its
financial position or results of operations.

In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation ("FIN") No. 44, "Accounting for Certain Transactions Involving
Stock Compensation", an interpretation of Accounting Principles Board ("APB")
No. 25. FIN No. 44 clarifies the application of APB No. 25 for the
definition of an employee for the purposes of applying APB No. 25, the
criteria for determining whether a plan qualifies as a non-compensatory plan,
the accounting consequence of various modifications to the terms of a
previously fixed stock option or award and the accounting for an exchange of
stock compensation awards in a business combination. The Company adopted FIN
No. 44 effective July 1, 2000, but certain conclusions cover specific events
that occur after either December 15, 1998, or January 1, 2000. The Company's
implementation of FIN No. 44 did not have a material impact on its financial
position or results of operations.

F-12

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

Activities - deferral of effective date of FASB Statement No. 133". In
additional, SFAS No. 133 was amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activity." The Company will adopt
SFAS No. 133 as of January 1, 2001, as amended, as required for its first
quarterly filing of fiscal year 2001. The Company does not believe that this
will have a material impact on the Company's financial statements.

2. LIQUIDITY
---------

As discussed in Note 4 of the consolidated financial statements, Maytag has
put its residential Jenn-Air(R) Accellis(TM) 5XP wall oven, which
incorporated the Company's rapid cook technologies, on hold and does not have
any plans on releasing this unit beyond its pilot program stages during
fiscal 2001. This event makes it unlikely that Maytag will fund additional
research and development for residential products. If revenues from cooking
system sales, cash from its financing agreements and external financing are
not sufficient, the Company will be required to revise its plan of operations
and engineering activities and reduce other general and
administrative expenses. There is no assurance that the Company will be able
to find alternative sources of funding which could have a significant adverse
effect on the Company's current and future operations.

3. LONG-TERM CONTRACTS
-------------------

In September 1997, the Company and Maytag Corporation ("Maytag") entered into
a "Strategic Alliance Agreement" ("Alliance") for the purpose of the
development and commercialization of innovative products based on new
technologies in the areas of heat transfer and thermodynamics. In connection
with the Alliance, the Company issued 564,668 shares of common stock with an
aggregate fair market value of approximately $10.0 million for 293,846 shares
of Maytag common stock at the same aggregate market value. In addition, the
Company received fees from Maytag for product development activities. These
fees totaled $4,075,000 in 1998.

In October 1999, the Company entered into a commercial License
Agreement with Maytag that broadened their distribution rights with respect
to commercial cooking products utilizing the Company's rapid cook
technologies. Pursuant to the terms of the agreement, Maytag now has
exclusive rights to market and sell throughout North America and certain
worldwide rights to sell

F-13

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

to North American based chains with international locations. This
exclusivity extends until March 2002, with certain applications extending
until March 2003. In consideration for these rights, Maytag agreed to pay the
Company per unit royalties of approximately $500. In the event that actual
gross margins exceed target levels, the Company will share equally in the
incremental margin. Maytag has also agreed to establish $5.75 million as the
minimum royalty threshold over the first twenty-four months of exclusivity,
which was amended to begin in the third quarter of 2000, with minimum royalty
payments of $1.0 million in 2000, $2.9 million in 2001 and $1.9 million in
2002. Maytag also provided the Company with $2.5 million in 1999 and $2.1
million in 2000, for the research and development of prototype units relating
to this agreement, which are included in research and development fees in
each respective year. However, of the $1.0 million of minimum royalties
earned in 2000, Maytag did not pay the $500,000 payment due on February 14,
2001. As a result, the Company, as provided under the License Agreement,
cancelled the agreement and is currently in arbitration with Maytag for non-
payment of minimum royalties due the Company under the License Agreement (see
Note 13).

During the second half of 1999, the Company completed the transition of its
North American Sales and Marketing responsibilities to G.S. Blodgett
Corporation ("Blodgett"), a wholly owned subsidiary of Maytag, engaging in
the manufacturing and sales of commercial foodservice equipment. In
addition, Blodgett has also adopted the responsibility of manufacturing of
the Company's commercial products. Blodgett is currently the Company's sole
source of supply for its cooking systems. In January 2001, Blodgett demanded
that the Company renegotiate the terms of the License Agreement, which were
unfavorable to the Company. As a result, the Company filed for arbitration,
as provided for under the License Agreement (see Note 13).

In its efforts to find potential marketing and manufacturing partners in
Europe and Asia, the Company established a manufacturing venture with
Shandong Xiaoya Group in China in the second quarter of 2000. The Company
expects that the Shandong Xiaoya Group will be producing the "C" model
commercial cooking system in the second quarter of 2001. The Company has
committed to purchase 500 units from the Shandong Xiaoya Group during fiscal
2001.

In July 1999, the Company entered into an agreement with the Gas Research
Institute ("GRI") to develop natural gas-fueled versions of the Company's
commercial and residential cooking systems. The agreement provided the
Company with $2 million in funding during 1999, of which $1,847,000 was
recorded as deferred revenue and recognized as income on a proportional
performance basis as costs are incurred on the commercial countertop rapid
cook systems. In addition to the funding, the Company is allowed access to
GRI's extensive patent portfolio and years of experience with natural gas
related products. In exchange for the funding, GRI received 50,000 warrants
to purchase the Company's common stock, which were valued at $153,000, and a
defined percentage of the royalty that the Company receives on the sale of
various commercial products in North America and Europe. Such payments
terminate upon the cumulative payments of $4,000,000 to GRI. The Company
began paying royalties to GRI in fiscal year 2000. As of December 31, 2000,
the Company has paid royalties to GRI totaling $37,000 and has accrued an
additional $37,000 due to GRI.

4. CONCENTRATION OF BUSINESS RISKS
-------------------------------

For the years ended December 31, 2000, 1999 and 1998, the Company received
$2,100,000, $3,525,000 and $4,075,000, respectively, in fees for product
development services and technology transfers from the Maytag Alliance. This
represents 27%, 50% and 57% of the Company's total revenues for the years
ended December 31, 2000, 1999 and 1998, respectively.

F-14

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

Maytag introduced the Company's high-speed cooking technologies to the US
residential market, when it launched the Jenn-Air(R) Accellis(TM) 5XP wall
oven. However, due to recent strategy and leadership changes in the Maytag
organization, Maytag announced on January 25, 2001 that the Accellis 5XP oven
is currently on hold and does not have any plans on releasing this unit
beyond its pilot program stage. This product was not subject to minimum
royalty agreement between the Company and Maytag.

As of December 31, 1999, 100% of marketable equity securities and their
related unrealized gain on the purchased put options and 81% of current
assets are comprised of Maytag common stock and related purchase put value.
The Company liquidated its investment in Maytag stock in November 2000 and
recognized a gain of $5,022,000 relating to these securities. The Company
used these proceeds to repay its long-term debt agreements.

During fiscal year 2000, 71% the Company's direct sales were to one customer.
During fiscal year 1999, 42% the Company's direct sales were to two customers
and in fiscal year 1998, the Company did not have any one customer who
accounted for 10% or more of the Company's direct sales.

5. DEBT
----

In January 1999, the Company terminated an existing revolving credit
agreement with its bank and entered into a secured borrowing agreement with
Banque AIG, London Branch (an affiliate of American International Group, Inc.
("AIG Facility")). The AIG Facility provided for the Company to pledge its
Maytag shares in the form of a "Variable Stock Transaction" and to receive
cash advances against the value of the Maytag shares. All advances were
scheduled to mature on January 14, 2002. Interest was imputed at rates
ranging from 5.8% to 8.0%. The Company satisfied the outstanding obligation
by surrendering Maytag shares equal to the fair value of the obligation in
November 2000.

F-15

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

6. PROPERTY AND EQUIPMENT
----------------------

At December 31, 2000 and 1999, property and equipment consisted of:

2000 1999
---- ----
(Dollars in thousands)
Leasehold improvements $ 257 $ 315
Furniture and fixtures 764 720
Equipment 263 518
--------------------
1,284 1,553
Less accumulated depreciation (682) (822)
--------------------

$ 602 $ 731
====================

Depreciation expense was $337,000, $259,000 and $179,000 for the years ended
December 31, 2000, 1999 and 1998, respectively.

7. CERTAIN TRANSACTIONS WITH STOCKHOLDERS
--------------------------------------

Notes Receivable
----------------

In 1999, the Company loaned an aggregate of $710,000 to three of its
employees and two of the Company's directors. The loaned amounts were used
by such employees and directors to exercise 284,000 stock options at an
exercise price of $2.50 per share. All such loans are full-recourse and are
secured by the underlying securities and the general assets of the respective
borrower. Four of the loans have a term of two years and are payable, along
with accrued interest, in February, March and April 2001. One of the loans
has a term of five years and is payable, along with accrued interest, on
April 2004. All of the notes are recorded as a reduction to Stockholders'
Equity. The notes bear interest at a rate of 4.8%. The market rate of
interest on March 31, 1999 was 7.0%, based upon margin rates obtained through
various discount brokers. The difference between interest earned by the
Company on the notes and the market rate of interest is recorded as
compensation expense. In November 2000, a loan amount of $35,000, plus
accrued interest, was repaid in full. In December 1999, the loan amount of
$37,500 plus accrued interest was repaid in full.

In March 2001, the Company extended two of the notes, totaling $138,000, due
in March/April 2001 until March/April 2004.

In 2000, the Company loaned an aggregate of $1,513,500 to two of its
employees and one of its directors. Of this amount $13,500 was used by such
employees to exercise 9,000 stock options at an exercise price of $1.50 per
share in February 2000. The remainder of $1,500,000 was used by such
director to exercise 600,000 stock options at an exercise price of $2.50 per
share in March 2000. All such loans are full recourse and are secured by the
underlying securities. Each loan has a term of five years and is payable,
along with accrued interest in February and March 2005. The notes are
recorded as a reduction to Stockholders' Equity. The notes bear interest at a
rate of 6.7%. The market rates of interest in February and March 2000 was
7.5%, based upon margin rates obtained through various discount brokers. The
difference between interest earned by the Company on the notes and the market
rate of interest is recorded as compensation expense.

F-16

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

Total compensation expense related to notes receivable from such employees
and directors was $24,000 and $11,000 for the years ended December 31, 2000
and 1999, respectively.

8. ACCRUED WARRANTY AND UPGRADE COSTS
----------------------------------

The Company generally provides a one-year parts and labor warranty on its
cooking systems. Warranty costs under this program were $282,000, $161,000
and $130,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.

On September 1, 1999, the Company entered into an agreement to upgrade and
warranty 262 cooking systems installed for Whitbread PLC. The Company
received approximately $1.4 million from Whitbread PLC to complete the
upgrade and warranty the cooking systems for a three-year period, beginning
in September 1999. The cooking system upgrades included design changes that
should substantially increase the life and durability of the cooking systems.
The Company recorded a corresponding liability of $1.4 million representing
the estimated cost of upgrade and warranty. The liability is reduced as
services related to the upgrade and warranty are incurred. During 2000 and
1999, the Company accrued an additional $985,000 and $755,000, respectively,
for expenses relating to the completion of the upgrade and remainder of the
warranty period. The cooking system upgrades were completed in February 2000.
Based upon historical experience, the Company believes that it has accrued
expenses sufficient to cover the total cost of the upgrades and any charges
arising during the three-year warranty period. There can be no assurance that
future expenses incurred on the upgrade and three-year warranty will not have
a material adverse effect upon the Company.

9. INCOME TAXES
------------

The following is a reconciliation of the provision (benefit) for income taxes
at the U.S. federal income tax rate to the income taxes reflected in the
Statements of Operations:

2000 1999 1998
---- ---- ----

Computed "expected" tax benefit $(1,354) $(2,917) $(1,344)
Research and development credit - - (98)
Other (85) (205) 83
Valuation Allowance 1,439 3,122 1,359
------- ------- -------
Income tax benefit $ -- $ -- $ --
======= ======= =======

F-17

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

The components of the Company's net deferred tax assets were as follows:

December 31
-----------------------------------
2000 1999
---- ----

Deferred tax assets:
Warranty reserves $ 388 $ 363
Amortization of premium on purchased put option - 220
Research and development credit carryforwards 245 245
Net operating loss carryforwards 9,862 8,180
Other 102 150
-------- -------
Total gross deferred tax assets 10,597 9,158
Less valuation allowance (10,597) (9,158)
-------- -------
Net deferred tax assets - -
-------- -------
Deferred tax liabilities: - -
-------- -------
Net $ - $ -
======== =======

In assessing the realizability of deferred income tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred income tax assets will not be realized. The ultimate
realization of deferred income tax assets is dependent upon the generation
of future taxable income during the periods in which those temporary
differences become deductible. Due to the historical operating results of
the Company, management is unable to conclude on a more likely than not
basis that deferred income tax assets will be realized. Accordingly, the
Company recorded a valuation allowance equal to 100% of the deferred tax
assets at December 31, 2000 and 1999.

At December 31, 2000, the Company has net operating loss carryforwards for
federal income tax purposes of $29.0 million, which may be used against
future taxable income, if any, and which expire in years 2009 to 2015. Any
change in ownership under Internal Revenue Code Section 382 could limit the
annual utilization of these carryforwards and cause some amount of the
carryforwards to expire unutilized.

The Company also has research and development credit carryforwards of
approximately $720,000, which may be used to offset future federal tax
liability, if any.

10. STOCKHOLDERS' EQUITY
--------------------

Stock Option Plan
-----------------

The Company adopted the 1994 Stock Option Plan ("the Stock Option Plan"),
which was amended in March 1994, June 1995, February 1997, June 1997, June
1998, October 1998 and July 2000, pursuant to which stock options covering
an aggregate of 4,650,000 shares of the Company's common stock may be
granted. Options awarded under the Stock Option Plan (i) are generally
granted at exercise prices which equate to or are above quoted market price
on the date of the grant; (ii) generally become exercisable over a period
of one to four years; and (iii) generally expire five, seven or ten years
subsequent to award.

At December 31, 2000, there were 402,784 shares available for grant under
the Plan. The per share weighted-average fair value of stock options
granted during 2000, 1999 and 1998 was $1.06, $4.25 and $3.28,
respectively, on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions: For 2000, Risk-free
interest rate, ranging from 5.73% to 6.79%; expected life, ten years;
expected dividend yield, 0%; and volatility, 38%. For 1999, Risk-free
interest rate, ranging from 5.19% to 6.24%; expected life, seven to ten
years; expected dividend

F-18

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

yield, 0%; and volatility, 39%. For 1998, Risk-free interest rate, ranging
from 4.02% to 5.63%; expected life, seven years; expected dividend yield,
0%; and volatility, 41%.

The Company applies APB Opinion 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock options
in the financial statements. Had the Company determined compensation cost
based on the fair value at the grant date for its stock options under SFAS
No. 123, the Company's net loss would have been increased to the pro forma
amounts indicated below (Amounts shown in thousands except share amounts).

2000 1999 1998
---- ---- ----

Net loss:
As reported $ (3,732) $ (8,779) $ (3,954)
Loss per common share - basic
and diluted $ (.24) $ (.59) $ (.27)
Pro forma $ (4,085) $ (8,403) $ (5,448)
Loss per common share - basic
and diluted $ (.26) $ (.58) $ (.37)

Pro forma net loss reflects only options granted since January 1, 1995.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net loss
amounts presented above because compensation cost is reflected over the
options vesting period of up to four years and compensation cost for
options granted prior to January 1, 1995, is not considered.

A summary of stock option activity follows:

Weighted
Number of Average
Shares Exercise Price
------ --------------

Options outstanding at December 31, 1997 2,110,893 $ 6.87
========= ======

Options granted 1,245,000 6.40
Options exercised (56,826) 2.50
Options canceled (222,000) 9.51
--------- ------
Options outstanding at December 31, 1998 3,077,067 $ 6.57
========= ======

Options granted 422,500 8.14
Options exercised (310,067) 2.47
Options canceled (458,000) 12.73
--------- ------
Options outstanding at December 31, 1999 2,731,500 $ 6.13
========= ======

Options granted 1,535,000 2.57
Options exercised (638,050) 2.44
Options canceled (813,950) 7.63
--------- ------
Options outstanding at December 31, 2000 2,814,500 $ 4.77
========= ======

F-19

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

At December 31, 2000, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $1.32 - $9.63 and 6.6
years, respectively. The following table summarizes information about the
Company's stock options outstanding at December 31, 2000:

Options Outstanding Options Exercisable
------------------- -------------------

Weighted Weighted
Outstanding as of Average Weighted Exercisable as Average
Range of Exercise December 31, Remaining Average of December 31, Exercise
Prices 2000 Contractual Life Exercise Price 2000 Price
-------------------------------------------------------------------------------------------------------------------------

$1.32 - $5.00 1,432,500 8.6 $ 2.13 545,418 $ 2.86
$5.01 - $9.63 1,382,000 4.9 $ 7.13 744,500 $ 7.01

At December 31, 2000, 1999 and 1998, the number of options exercisable was
1,289,918, 1,435,000 and 1,291,566, respectively, and the weighted-average
exercise price of those options was $5.25, $5.32 and $4.22, respectively.

Two former joint venture partners have options to purchase 262,500 and
21,000 shares of common stock at $2.50 and $9.00 per share, respectively.
These options expire on December 27, 2005 and March 31, 2006. In addition,
the Company's former US Sales & Marketing employees, and certain other
employees, have been extended their options to purchase 271,000 shares of
common stock at prices ranging from $1.32 share to $9.25 share. These
options expire at various dates in 2001, 2004, 2005, 2006 and 2010.
Compensation expense in the amount of $245,000 has been recorded and is
included in selling, general and administrative expense of the Company's
statement of operations. As of December 31, 2000, none of these options
have been exercised.

Authorized Shares
-----------------

In June 1999, the Board of Directors of the Company approved a proposal to
authorize the issuance of up to 5,000,000 shares of Preferred Stock.

Stock Issuances
---------------

In August 2000, the Company entered into another agreement with GRI in
which they purchased $2.1 million of the Company's Convertible Preferred
Stock for $100.00 per share. The 21,000 shares of Convertible Preferred
Stock carry a dividend of 7% per annum which is payable in common shares
upon conversion of the Convertible Preferred Stock into the Company's
common stock. These securities will be converted into shares of the
Company's common stock on the earlier of the Company's next generation
residential oven becoming generally available for delivery to consumers in
the United States or March 31, 2002. The conversion rate of the Convertible
Preferred Stock will be dependent upon the average closing price of the
Company's common stock over a fixed period of time prior to the conversion
date.

F-20

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

Treasury Stock
--------------

During 1998, the Company accepted issued shares of stock, at market value,
as payment to exercise vested stock options at their granted price. These
treasury stock transactions totaled $117,000. There were no treasury stock
transactions during 1999 or 2000.

Stock Warrants
--------------

In connection with the Company's initial public offering, the Company sold
the underwriters warrants to purchase 260,000 shares at $3.25 per share
(the IPO Warrants) of which 121,172 warrants were exercised in 1999 and
51,014 warrants were exercised in 1998. As of December 31, 1999, all of the
IPO Warrants had been exercised.

In June 1996, the Company sold the underwriters of the secondary public
offering warrants to purchase 80,000 shares at $24.00 per share (the June
1996 Warrants). None of the June 1996 Warrants had been exercised as of
December 31, 2000.

In July 1999, the Company issued warrants to GRI, in accordance with a
research and development agreement, to purchase 50,000 shares at $13.87 per
share (the GRI Warrants). None of the GRI Warrants had been exercised as of
December 31, 2000. The Company valued the warrants at $153,000 and is
recorded in stockholders' equity in the accompanying financial statements.

11. RELATED-PARTY TRANSACTIONS
--------------------------

Since inception of the Company, an entity (which was founded and is
principally owned by the Company's former Vice President - Engineering) has
performed engineering and development work for the Company. During the
years ended December 31, 2000, 1999 and 1998, the Company paid the entity
fees of $18,000, $172,000 and $112,000, respectively, relating primarily to
research and development charges incurred on behalf of the Company.

For the year ended December 31, 2000 and 1999, the Company made net
purchases of cooking system inventory and related equipment from Blodgett,
a North American foodservice equipment manufacturer, in the amount of
$1,553,000 and $918,000, respectively. The Company did not purchase any
cooking equipment from Blodgett during fiscal 1998. Blodgett is a wholly
owned subsidiary of Maytag Corporation.

For the year ended December 31, 2000 and 1999, the Company earned
$1,021,000 and $27,000, respectively, in royalties from Blodgett for sales
of cooking systems that utilized the Company's licensed technology and for
minimum royalties pursuant to the commercial License Agreement. At December
31, 2000, in connection with agreement, the Company has accrued minimum
royalties due from Blodgett of $500,000. In addition, as of December 31,
2000, the Company has recorded a receivable for reimbursement of expenses
due from Blodgett of $252,000 and a payable for oven purchases due to
Blodgett of $1,370,000. These balances will be settled in connection with
the Company's demand for arbitration under the commercial License Agreement
for the cancellation of the agreement and non-payment of minimum royalties
(see Note 13). For the year ended December 31, 1998, there were no royalty
payments from Blodgett.

In fiscal year 2000 under its long-term agreement with GRI (see Note 3),
the Company paid GRI $37,000 for its share of royalty revenue received
under the Company's commercial License Agreement with Blodgett. In
addition, the Company has accrued an additional $37,000 to GRI.

F-21

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

For the years ended December 31, 1999 and 1998, the Company made net
purchases of cooking system inventory and related equipment from Techniform
Waterford Ltd. ("Techniform"), an Ireland based manufacturer, in the
amounts of $773,000 and $1,523,000, respectively. The manufacturing
relationship with Techniform was terminated in March 1999. Techniform is
owned and operated by The Queally Group, a 50% owner of the Company's
former joint venture, TurboChef Europe. No such purchases were made in
2000.

For the years ended December 31, 1998, the Company had net cooking system
sales of $572,000 to its European joint venture, TurboChef Europe. This
joint venture was terminated in June 1998.

The Company has notes receivable with shareholders and directors (see Note
7).

12. COMMITMENTS AND CONTINGENCIES
-----------------------------

Under the terms of a three-year upgrade and extended warranty agreement,
the Company has committed to upgrade and warranty 262 cooking systems
installed for a European customer prior to September 1999. At December 31,
2000 the Company has accrued $891,000 in connection with this warranty
agreement (see Note 8).

The Company is obligated under certain non-cancelable leases for office
space and equipment, the majority of which have remaining terms of less
than one year. Obligations for office space, which extends beyond one year,
are $341,000 and $202,000 in 2001 and 2002 respectively.

The Company, under its long-term agreement with GRI, is required to pay a
defined percentage of the royalty the Company receives on the sale of its
commercial products in North America and Europe to GRI. These payments
terminate upon the cumulative payments to GRI of $4,000,000.

The Company, under its joint venture agreement with the Shandong Xiaoya
Group, has committed to purchase a minimum of 500 model C-3 units during
2001.

13. SUBSEQUENT EVENTS
-----------------

During the first quarter of 2001, Maytag took action, which the Company
believes resulted in termination of the Commercial Appliance Project
Agreement ("CCAP") and associated License Agreement. As a result of these
actions, both Maytag and the Company have filed claims under the
arbitration provision of these agreements. Maytag has claimed that the
Company has breached the CCAP and related License Agreement, and is seeking
to recover damages of approximately $4.2 million. One of the Company's
claims is that, as a result of its termination of the agreement, Maytag is
required to pay to the Company the remaining balance of minimum royalties
that are due under the License Agreement of $5.25 million, of which
$500,000 was accrued as of December 31, 2000. Although the Company believes
that it will prevail on its claims, the outcome of the arbitration
proceeding is uncertain. The termination of the Maytag agreements could
have a material adverse effect on the Company's financial position and
results of operations. Since the outcome of the arbitration proceeding is
uncertain, no adjustments have been made to the financial statements.

In March 2001, the Company raised $2,000,000 through the sale of its 8%
Series B convertible preferred stock. The dividend on the preferred stock
is payable, at the Company's option, in either cash or shares of common
stock. The preferred stock is convertible to common stock at $1.00 per
common share (representing the closing sale price of the common stock on
the date of funding). In connection with this transaction, the Company also
issued to the investor warrants to purchase an additional 1,000,000 shares
of common stock at $1.20 per share. These warrants are exercisable in three
equal annual installments, commencing one year from the date of issuance
and expire in 2011.

F-22

TurboChef Technologies, Inc.
Notes to Financial Statements
December 31, 2000, 1999 and 1998

14. QUARTERLY FINANCIAL INFORMATION (unaudited)
-------------------------------------------

Unaudited quarterly financial information follows (in millions except per
share data):

Fiscal
2000 First Second Third Fourth/(1)/ Year
---- ----- ------ ----- ----------- ----

Total revenues $ 2,237 $ 502 $ 2,706 $ 2,401 $ 7,846
Operating loss (1,658) (3,329) (1,364) (1,323) (7,674)
Net (loss) income (1,841) (3,622) (1,616) 3,347 (3,732)
Basic and diluted loss per share $ (0.12) $ (0.23) $ (0.10) $ 0.21 $ (0.24)
Number of shares used in the
computation of loss per share 15,220,802 15,728,423 15,728,423 15,728,423 15,602,211

1999
----

Total revenues $ 1,699 $ 1,352 $ 540 $ 3,472 $ 7,063
Operating loss (1,310) (2,627) (2,754) (1,314) (8,005)
Net loss (1,466) (2,810) (3,015) (1,488) (8,778)
Basic and diluted loss per share $ (0.10) $ (0.19) $ (0.20) $ (0.10) $ (0.59)
Number of shares used in the
computation of loss per share 14,675,572 15,071,893 15,090,373 15,090,373 14,983,486

/(1)/ The Company's net income increased in the fourth quarter of 2000
because of the gain recognized on the sale of marketable securities
of $5,022 in November 2000. In addition, the Company completed the
amortization into revenue of approximately $1,300 deferred revenue
related to the completion of the commercial development of its C-3
oven in the fourth quarter of 2000 resulting in the writedown of
obsolete inventory of approximately $215,000.

F-23