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

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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                                          
|For the Fiscal Year Ended December 31, 2003
|OR                                         
|o                                          

For the transition period from
to

Commission File Number 000-23478

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

|DELAWARE                                                               |  | 48-1100390                               
|---------------------------------------------------------------------- |  | -----------------------------------------
|(State or other jurisdiction of
  incorporation or organization)       |  | (IRS employer identification number)     
|                                                                       |  |                                          
|10500 Metric Drive, Suite 128 Dallas, Texas                            |  | 75243                                    
|(Address of principal executive offices)                               |  | (Zip Code)                               
|                                                                       |  |                                          
|Registrants telephone number, including area code:                   
|(214) 379-6000                                                        
|                                                                       |  |                                          
|SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
  EXCHANGE ACT:
|                                                                       |  |                                          
|Title of Each Class                                                    |  | Name of Each Exchange on Which Registered
|                                                                       |  |                                          
|None                                                                   |  | None                                     
|                                                                       |  |                                          
|SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
  EXCHANGE ACT:
|Common Stock, $0.01 Par Value                                         
|(Title of Class)                                                      

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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. YESxNO
o

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

Indicate
by check mark whether the Registrant is an accelerated filer (as defined in
rule 12b-2 of the Securities and Exchange Act of 1934). YesoNo
x

Aggregate Market Value of voting stock held by non-affiliates of the
Registrant at June 30, 2003: (the last business date of the Registrants most
recently completed second fiscal quarter) $3,837,407.

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

|Title of Each Class             |  | Number of Shares Outstanding
  at March 22, 2004
|------------------------------- |  | ------------------------------------------------
|                                |  |                                                 
|Common
  Stock, $0.01 Par Value |  | 26,190,957                                      

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TURBOCHEF TECHNOLOGIES, INC.
TABLE OF CONTENTS

|Form 10-K
  Item |                              | Page                                                                                   
|---------------- | ---------------------------- | ---------------------------------------------------------------------------------------
|                 |                              |                                                                                        
|Part I.          |                              |                                                                                        
|                 |                              |                                                                                        
|                 | Forward-looking
  Statements | 2                                                                                      
|                 |                              |                                                                                        
|                 | Item 1.                      | Business                                                                               
|                 |                              |                                                                                        
|                 | Item 2.                      | Properties                                                                             
|                 |                              |                                                                                        
|                 | Item 3.                      | Legal
  Proceedings                                                                    
|                 |                              |                                                                                        
|                 | Item 4.                      | Submission
  of Matters to a Vote of Security Holders                                  
|                 |                              |                                                                                        
|Part II.         |                              |                                                                                        
|                 |                              |                                                                                        
|                 | Item 5.                      | Market for
  Registrants Common Equity and Related Stockholder Matters                
|                 |                              |                                                                                        
|                 | Item 6.                      | Selected
  Financial Data                                                              
|                 |                              |                                                                                        
|                 | Item 7.                      | Managements
  Discussion and Analysis of Financial Condition and Results of Operations
|                 |                              |                                                                                        
|                 | Item 7A.                     | Quantitative
  and Qualitative Disclosures about Market Risk                           
|                 |                              |                                                                                        
|                 | Item 8.                      | Financial
  Statements and Supplementary Data                                          
|                 |                              |                                                                                        
|                 | Item 9.                      | Changes in
  and Disagreements with Accountants on Accounting and Financial Disclosure 
|                 |                              |                                                                                        
|                 | Item 9A.                     | Controls
  and Procedures                                                              
|                 |                              |                                                                                        
|Part III.        |                              |                                                                                        
|                 |                              |                                                                                        
|                 | Item 10.                     | Directors
  and Executive Officers of the Registrant                                   
|                 |                              |                                                                                        
|                 | Item 11.                     | Executive
  Compensation                                                               
|                 |                              |                                                                                        
|                 | Item 12.                     | Security
  Ownership of Certain Beneficial Owners and Management                       
|                 |                              |                                                                                        
|                 | Item 13.                     | Certain
  Relationships and Related Transactions                                       
|                 |                              |                                                                                        
|                 | Item 14.                     | Principal
  Accountant Fees and Services                                               
|                 |                              |                                                                                        
|Part IV.         |                              |                                                                                        
|                 |                              |                                                                                        
|                 | Item 15.                     | Exhibits,
  Financial Statement Schedules, and Reports on Form 8-K                     
|                 |                              |                                                                                        
|                 | Signatures                   | 46                                                                                     

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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. (TurboChef or the Company) 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: new management becoming familiar with the Companys business and
industry; the ability to obtain additional financing necessary to continue
operations; the likelihood of incurring future losses; the Companys
significant purchase commitments; the effect of the long manufacturing cycle on
cash flow; the uncertainty of the outcome of the arbitration proceeding with
Maytag; the uncertainty of consumer acceptance of new products or technologies
that may be offered by TurboChef; the dependence on a limited number of
customers; the success of the Companys marketing strategy; the uncertainty
inherent in new product development; potential liability for personal injury or
property damage; 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
TurboChef operates; changing technologies and evolving industry standards;
regulatory compliance burdens; the highly competitive environment in which
TurboChef operates; competition in the markets served by TurboChef; uncertainties
inherent in international manufacturing and sales including foreign currency
fluctuations; and uncertainty regarding strategic relationships and alliances
and the 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

General

We
are engaged primarily in designing, developing and marketing food service ovens
that embody our proprietary rapid cook technologies. Our rapid cook ovens,
which require no ventilation, employ a controlled combination of high speed
forced air convection heating and microwave energy to cook-to-order a variety
of food products at faster speeds and to quality standards comparable to, and
in many instances superior to, conventional commercial and residential ovens
currently available.

TurboChef
Technologies, Inc. was incorporated under the laws of the State of Delaware on
April 3, 1991. Our principal executive offices are located at 10500 Metric
Drive, Suite 128, Dallas, Texas 75243, and our telephone number is (214)
379-6000.

Our Strategy

The
commercial food service market continues to experience rising real estate
costs, increased food product costs, intense competition and a shortage of
qualified labor. These factors have forced many commercial food service
operators to 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. We believe
our existing patented technologies and know-how provide food service operators
the opportunity to achieve operating cost savings (i.e., energy, ventilation,
food waste and labor) while at the same time enabling them to produce quality
meals in less time from a smaller, more efficient

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and
less labor intensive kitchen.  Our goal
is to be one of the premier developers and providers of rapid cook technologies
to the marketplace.  Our principal
strategies to meet these objectives are:

Promote our Rapid Cook Ovens to New
Customers.  By expanding
our marketing and sales efforts, we intend to increase awareness of our
existing rapid cook oven products.  We
will leverage the success of early adopters in our marketing efforts and seek
opportunities to enlarge our brand awareness.

Maintain and Develop Successful
Manufacturing Relationships. 
We will continue to develop a supply chain that utilizes vendors with
the best combination of quality and value, and who provide the most efficient
manufacturing and assembly support possible. 
We strive to build the highest quality products, and we will look for
partners with the same goals.

Stay on the Cutting Edge for Rapid
Cook Technologies.  We
intend to continue to improve our products and to develop new technologies that
can be commercialized in the rapid cook industry, and we will be vigilant to
find complementary third-party technology to augment our own for the benefit
of our customers.  We expect to continue
to seek patent protection for our new contributions to the world of rapid
cooking, thereby expanding our already large number of patents in this field.

Protect our Intellectual Property.  We
intend to invest the resources necessary
to defend and protect our proprietary and patented technologies.

We
believe that our long-term success is dependent upon the effectiveness of our
marketing and sales efforts in demonstrating the versatility of our commercial
ovens in providing a solution to food service operators that seek top-line
revenue growth. We further believe that acceptance of our cooking technologies
in commercial products can be leveraged in the marketing of any future
residential products that we may introduce. Our market research has revealed
that time and quality are two of the most important considerations taken
into account for food preparation. We believe that our products have proven
that they can meet both the time and the quality demand of the commercial food
service marketplace. In addition, we believe that our patented cooking
technology can be adapted for use in residential ovens.

The successful implementation of our strategies
and business plan, and the success of our business in general, is subject to numerous risks and uncertainties, any one or a combination
of which could cause us not to meet our goals and have a material adverse effect on our business. See Risk Factors below.

Overview

Our
commercial ovens employ our proprietary cooking technologies to quickly,
efficiently and evenly transfer, disperse and control the heat used in the
cooking process. In addition, because of our ovens moisture retention,
browning, crisping and toasting capabilities, we believe 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
most other cooking methods.

Our
technology offers the following features to our customers, which we believe is
a unique combination in the industry:

| |  | Cooking speeds 5-10 times
  faster than a conventional oven                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | Quality equal to or higher
  than a conventional oven                                                                           
| |  | Maintains high consistency
  of cooked product                                                                                  
| |  | Versatility of cooking
  platform (bake, broil, grill, air fried, poached and steamed cooking
  profiles)                       
| |  | Vent-less operation                                                                                                             
| |  | Through our Menu in a
  Minute software technology, the menus and cook settings can be easily
  changed with minimal labor cost

Through
these unique features, the ovens offer food service operators the ability to
address many of the fundamental issues confronting the food service industry,
namely slow top line revenue growth, weak return on average equity, a shortage
of qualified labor and food waste.

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We
have been selling the current version of our proprietary commercial ovens since
the second quarter of 2000 to various quick service restaurants, convenience
stores, hotels and traditional restaurants in the United States, the United
Kingdom and other European countries. In addition, through sales of our ovens
we have provided cooking solutions to non-traditional operators in the food
service business such as stadiums, movie theaters and service stations.

After
a long testing and comprehensive evaluation process, Doctors Associates, Inc.,
the franchisor of the Subway® sandwich restaurant concept, agreed in March 2004
that we would be the exclusive manufacturer to supply rapid cook ovens to all
Subway franchise locations.  Subway
franchisees operate over 18,000 locations in the United States, Canada and
Puerto Rico, and more are added every year. 
In addition, we will be the sole supplier of the ovens to Subways
international locations as well, which currently number approximately 2,000
locations.  We have begun production of
the ovens for ultimate distribution to the Subway franchisees in the U.S.,
Canada and Puerto Rico.  See Subway
Restaurant Relationship below.

Our
agreement with the Subway chain limits us from selling the same oven to direct
competitors of Subway while we are the exclusive supplier and for a period of
two years thereafter.  However, if the
Subway franchisees  do not purchase a minimum of 20,000 ovens by March 31, 2005, this restriction
would expire as of that date. We are otherwise
free to sell our ovens to anyone.  See
Sales and Marketing below.

Rapid Cook Technology

Traditional
ovens 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
ovens have begun to incorporate two or more of these conventional sources of
energy. For example, some ovens employ microwaves and convection impingement or
microwave and halogen light (a form of infra-red radiation). However, we do not
believe that these systems provide the speed of cooking or achieve the same
quality of cooked food that is achieved by the TurboChef rapid cook ovens.

Our
unique, patented ovens couple rapidly circulating hot air, infrared heating and
microwave energy. The close coupling of these three energy sources controlled
by a microprocessor 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 the 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 that results in evenly browned
food products on the outside and temperature and moisture gradients that enable
precisely targeted microwaves to energize water molecules that cook the food on
the inside.  The infrared heating also
assures proper browning of the food. 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.

The
circulated air is recycled though a catalytic converter system that breaks down
the fumes and grease by-product resulting from the cooking process. This makes
the TurboChef oven a vent-less cooking solution. We have received Underwriters
Laboratory (UL®) approval to operate our oven as a vent-less
oven. We believe that the operational efficiencies of a vent-less solution are
an important distinguishing feature of the TurboChef ovens.

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Other Products and Services

We
have developed and offer our Menu in a Minute technology (MIMs), which when
combined with our ovens, offers a system by which a food service operator is
able to download menus and cook settings for use by that operators entire
chain of restaurants through the use of a computer chip card (and in the future
an internet connection). This MIMs technology will enable executive chefs of
food service chains to program new cooking settings centrally and make changes
to their menus with exact precision and very little added cost.

We
also separately offer to our customers fee-based consulting services such as
design, concept development and sourcing of food products.

We
currently offer certain consumables related to our ovens, such as ceramic
platters, cooking utensils and proprietary oven cleaner. To date, such sales
have not been material. We intend to expand these offerings as the base of
installed ovens increases. We also offer replacement parts for profit after the
expiration of the warranty period.

Sales and Marketing

We
are primarily focused on sales of our products for use by commercial customers
in the traditional and non-traditional food service markets. We currently sell
our ovens primarily through a direct sales force in North America and through
equipment distributors in the United Kingdom and other parts of Europe.  Currently there are nine non-exclusive
distributors of our ovens in European countries, including Finland, Sweden,
Iceland, Ireland, The Netherlands, Belgium, France, Spain, Greece, Switzerland
and Germany.  Our primary sales office
is located in Dallas, Texas. In addition, we have a sales office in The
Netherlands.

In
addition to our direct sales force, we are seeking to develop multiple
distribution channels through the use of third-party distributors,
manufacturers representatives, agents and wholesale food distributors. We also
are considering entering into strategic marketing alliances with third parties
who have established relationships or synergies with mutual prospective
customers.

In
March 2003, we signed an agreement with an exclusive distributor in the
United Kingdom. We intend to expand our relationships with manufacturers
representatives and equipment dealers and, to expand the direct sales and
marketing efforts worldwide. The strategy will target both the non-traditional
as well as the traditional food service markets.

Marketing,
sales and advertising costs for each of the three years ended December 31, 2003,
2002 and 2001 totaled $1.5 million, $2.9 million and $2.0 million,
respectively.

Non-Traditional
Food Service. The non-traditional food service market is represented by
food service operations where food is not the primary source of the operations
revenue. Our rapid cook ovens offer these customers a cooking platform to
support an additional revenue source while requiring little, if any, additional
investment in equipment (other than the oven itself), staff or training.
Customers in this segment have the opportunity to combine our oven with our
MIMs system and tap into our optional consulting services to create a
full-service cooked food offering. Our ovens offer speed, quality, and
consistency, and they can handle a wide variety of food offerings, allow for
the use of minimally skilled, inexpensive labor and offer the potential for
vent-less operation. Customers in this market include:

| |  | Hotels            
| | - | ------------------
| |  | Movie Theaters    
| |  | Airports          
| |  | Stadiums          
| |  | Supermarkets      
| |  | Convenience Stores

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Traditional
Food Service. The traditional food service market is represented by food
service operations where food is the operations primary source of revenue. We
believe that while many of the characteristics sought from a rapid cook oven by
a customer in the traditional food service business are identical to those in
the non-traditional food service business, the needs of a customer in the
traditional food service business tend to center more around an existing menu
and the cooking platform of the food service operation. Participants in this
market include:

| |  | Quick Service Restaurants
| | - | -------------------------
| |  | Fine Dining              

Production and Supply

The
oven contains raw materials such as fabricated stainless steel parts which has
experienced some price volatility over the past few years within the range of
5-10%. This volatility subsequently impacts the material cost of the unit by 1%
to 3%.

We
have been and will continue to be dependent on third parties for the supply and
manufacture of all of our 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 our ovens. We generally do
not maintain supply agreements with such third parties, but instead purchase
components and electronic parts pursuant to purchase orders in the ordinary
course of business.  Many of our parts
and components are available off the shelf from a number of different possible
vendors.  Specially designed component
parts could be produced by suppliers other than those from whom we are
currently purchasing, although time delays would be inherent in any change from
one component manufacturer to another. We are substantially dependent on the
ability of our manufacturers and suppliers to meet our design, performance and
quality specifications as well as delivery schedules. Failure by our manufacturers
and suppliers to comply with these and other requirements could have a material
adverse effect on us and our results of operations.

We
require that our contract manufacturers follow generally accepted industry
standard quality control procedures. In addition, we maintain our own quality
assurance personnel and testing capabilities to assist our contract
manufacturers with their respective quality programs, and we perform routine
audits both of manufacturing facilities and finished products to ensure the
highest quality and reliability.

Our
manufacturing cycle, which extends from the execution of a purchase order for
component parts until the actual shipment of finished product to the customer,
generally ranges from sixteen to twenty four weeks.  Final assembly of our ovens is accomplished at third-party
facilities both in North America and China.

The Subway® Restaurant Relationship

On
March 5, 2004 we entered into an agreement with Doctors Associates, Inc., the
franchisor of the Subway® restaurant concept in the U.S.  Under that agreement, TurboChef was named as
the sole approved vendor for the Subway franchisees of rapid cook ovens for use
in their restaurants.  Sales of ovens
resulting from that agreement will represent a material portion of our revenues
over the period of the initial rollout to the franchisees.  However, we have no commitment under that
agreement as to when purchases of ovens will begin or as to the number of ovens
that will be purchased, if any are purchased. 
The failure of any purchases to be made under this agreement, a delay or
extended period over which purchases are made, or the loss entirely of the
opportunity to sell ovens under this agreement would have a material adverse
effect on the anticipated revenues of TurboChef or the timing of those
revenues.  The loss of this customer
could also have a negative impact on the perceived market acceptance of our
products.

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Research and Development

We
carry out research and development efforts primarily through our
employees.  During the years ended
December 31, 2003, 2002, and 2001, we expended approximately $900,000, $400,000
and $800,000, respectively, on research and development activities.  We intend to continue to invest in the improvement
of the performance of our current commercial ovens, in the further development
of our core technologies and in the application of those technologies to new
commercial products.

Competition

The
commercial oven equipment market is characterized by intense competition. Our
rapid cook ovens compete with conventional cooking systems, such as commercial
ovens, grills and fryers, as well as equipment that cooks through the use of
conduction, convection, induction, air impingement, infrared, halogen and/or
microwave heating methods or combinations thereof, sold by numerous
well-established manufacturers and suppliers. In addition, we are aware that
others are developing, and in some cases have introduced, commercial ovens
based on high-speed heating methods and technologies. Most of our competitors
possess substantially greater financial, marketing, personnel and other
resources than we do and have established reputations relating to the
development, manufacture, marketing and service of cooking equipment. Among our
major competitors in the rapid cook segment of the foodservice equipment market
are: the commercial foodservice equipment division of Enodis LLP (a United
Kingdom company), including, Lincoln Foodservice Products, Inc. and MerryChef;
Quadlux, Inc.; Vulcan-Hart Corporation, an independent operating division of
Illinois Tool Works, Inc.; Groen, Inc., a subsidiary of Dover Corporation (and
one of the DI Foodservice Companies); Amana (a Maytag brand); Fujimak
Corporation (a Japanese company); Enersyst Development Center (a technology
licensing company); and Duke Manufacturing Company.

Our
principal methods of competing in commercial ovens are through our product
performance, warranty and service.  We
do not believe there are any competitive products currently being marketed which
are functionally equivalent to our cooking system (i.e., products that have the
same capabilities to cook a variety of food items to the same high quality
standards and speeds).  However, there
can be no assurance that other companies with greater financial resources are
not or will not develop functionally equivalent competitive products in the
near future.

Although
we currently do not have a residential product offering, we have developed a
prototype residential oven and continue to consider entering into the
residential oven appliance market. There can be no assurance that we will ever
enter the residential oven market, or if we do, that we can successfully market
a residential oven.  Competition is
growing in the emerging residential rapid cook sector. Certain companies have
already introduced products, including the General Electric Advantium®
and Trivection ovens (utilizing microwave and halogen light technology), the
Quadlux Flashbake wall oven (utilizing infrared and invisible light
technology), the Whirlpool g2microven SpeedCook Appliance (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 GE Rapid Cook Wall
Oven (utilizing microwave and other heat transfer technology).

Backlog

As
of December 31, 2003, the amount of backlog orders believed to be firm was
approximately $100,000, as compared to approximately $200,000 as of December
31, 2002. The December 2002 backlog was filled during the first quarter of
2003. As of March 1, 2004 the amount of backlog orders believed to be firm was
approximately $200,000, as compared to approximately $100,000 as of March 14,
2003. The backlog, as of March 1, 2004, is expected to be filled by year end.

Regulation and Accreditation

We
are 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

6

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Trade
(MITI) (including those regulations limiting radiated emissions from our
cooking system products), which impose significant compliance burdens on us.
Failure to comply with these regulatory requirements may subject us to civil
and criminal sanctions and penalties. While we believe that our products are in
compliance with all material applicable laws and regulations regulating such
products, there can be no assurance of such compliance. We test the ovens, from
time to time, 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 our future operations.

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
our operations, result in material capital expenditures, affect the
marketability of our existing products and technologies and/or could limit or
create opportunities for us with respect to modifications of our existing
products or with respect to our new or proposed products or technologies. In
addition, an expanded level of operations by us in the future could require us
to modify or alter our methods of operation at costs which could be substantial
and could subject us to increased regulation, and expansion of our operations
into additional foreign markets may require us to comply with additional
regulatory requirements.

We
have received certification under the Underwriters Laboratory accreditation
standards (UL®) relating to product safety and under the National
Sanitation Federation accreditation standards regarding sanitation and the
ability of our ovens to be cleaned. These agencies 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 us to comply with these accreditation standards in the
future could have a material adverse effect on our marketing efforts. In
addition, we have 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 our model C-3 TurboChef
cooking systems. Our
Tornado brand oven will also go through the CE accreditation process this
year.  As an equipment manufacturer, we
are allowed to self-certify compliance with this directive and we have had an
independent third party, TÜV America, a leading technical service company,
attest to the results. We are required by law to meet this European Community
Council directive in order to apply the CE mark and thereby sell our cooking
systems in the European Union.

Warranty and Service

We
generally offer purchasers a one-year limited warranty covering our ovens
workmanship and materials, during which period we or our authorized service
representative will make repairs and replace parts which become defective due
to normal use. Component parts furnished to us by our 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. There can be no assurance that future
warranty expenses incurred on the one-year warranty will not have a material
adverse effect upon us.

In
those areas where our ovens are located, we have established relationships with
independent factory authorized service representatives who provide installation
and/or repair services and carry a parts inventory. We expect our distributors
to establish parts and service capabilities in the markets in which they sell
our licensed products.

Patents and Proprietary Rights

We
hold patents that cover certain fundamental aspects of our rapid cook
technologies. We have issued patents and pending patent applications in at
least seven countries (including the United States,

7

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Japan
and various countries of the European Union). Our currently issued United States
patents will expire at various dates between 2011 and 2020. We believe that our
patents and patent applications provide us with a competitive advantage and
that patent protection is important to our business. There can be no assurance
as to the breadth or degree of protection which existing or future patents, if
any, may afford us, or that any patent applications will result in issued
patents, or that our 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 us.

There
is rapid technological development in our markets. Although we believe that our
technologies have been independently developed and do not infringe the patents
or intellectual property rights of others, should aspects of the technology or
design of our products be determined to infringe patents, either existing or
which may be issued in the future, then we may be required to modify our
designs or obtain a license. No assurance can be given that we 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
our business.

We
believe that product and brand name recognition is an important competitive
factor in the food service equipment industry. Accordingly, we promote the TurboChef® and Tornado names in connection with our marketing activities.
We hold registrations of our trademark TurboChef in the United States, the United
Kingdom, and the Republic of Ireland. In certain countries in Europe, we
license the TurboChefname from a
third party.

We
also rely on trade secrets and proprietary know-how outside of published
patents and typically enter into confidentiality agreements with our employees
and suppliers and manufacturers, as appropriate, to protect the concepts, ideas
and documentation relating to our proprietary technologies. However, such
methods may not afford us complete protection. There can be no assurance that
others will not independently obtain access to our trade secrets and know-how
or independently develop products or technologies similar to ours. Because we
believe our proprietary technologies are important to our business, our
inability to preclude public access to our trade secrets and know-how could
have a material adverse effect on our business.

Employees

As
of March 15, 2004 we employed 34 persons, of which 33 are full-time employees,
including 3 executive officers and 6 senior managers. Of our employees, 9 are
engaged in technological support and development, 12 in administration, and 13
in sales, marketing, and customer service. None of our employees are
represented by labor unions. We consider relations with our employees to be
good.

Item 2. Properties

We
own no real estate. We lease approximately 20,000 square feet of space at 10500
Metric Drive, Dallas, Texas, which we use for executive offices, technology
development, limited assembly and other purposes, under a lease agreement,
which expires on January 31, 2005. The annual base rental expense on this
property is $193,000.   We closed our
New York offices in 2003, but we leased new office space in New York in
2004.  We have recently entered into a
lease for executive offices in Atlanta, Georgia, where our headquarters will be
located.  The Atlanta lease includes
approximately 7,000 square feet, and the lease runs until 2009.  Annual base rental in Atlanta is
approximately $140,000.

We
believe that our facilities are generally well maintained, in good operating
condition and adequate for our current needs.

8

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Item 3. Legal Proceedings

TurboChef
filed for arbitration against Maytag Corporation (Maytag) in Dallas, Texas,
on February 2, 2001, in connection with a series of contracts for research,
development and commercialization of certain technology through a joint,
strategic relationship.  TurboChef
claims damages in excess of $300 million for various contractual breaches,
fraud, breach of the duty of good faith and fair dealing, bad faith, punitive
damages and attorney fees, and it seeks an injunction requiring Maytag to return
all rights in intellectual property owned by TurboChef under the parties
agreements.  In July 2002, in response
to an Iowa court proceeding brought by Maytag which is discussed below, we
filed an amended arbitration claim removing two of our pending claims from the
Texas arbitration. Those claims have been filed in the Boston arbitration
discussed below. Maytag has made certain counterclaims against us in the Texas
arbitration and is seeking in excess of $35 million in damages under its counterclaims.

We
believe that Maytags Texas claims are without merit, and we intend to
vigorously defend against Maytags allegations.

In
May 2002, Maytag filed a complaint in Iowa federal court seeking, among other
things, to require that two of our claims originally filed and pending in the
Texas arbitration be decided only in a separate arbitration proceeding in
Boston, Massachusetts. Maytags complaint in the Iowa proceeding also alleges
that we publicized false and misleading statements about Maytags use of our
intellectual property in its residential appliances in a January 2002 press
release and in certain other unidentified statements. Based upon this
allegation, Maytag asserts claims that we caused false advertising with respect
to Maytags goods and services, that we have intentionally interfered with
Maytags prospective business, that we have defamed Maytag and that we have
unfairly competed with Maytag. Unlike Maytags counterclaims in the Texas
arbitration proceeding, its complaint in the Iowa proceeding does not specify
the dollar amount of damages sought. In July 2002, we filed a motion to dismiss
the Maytag complaint or, in the alternative, stay the Iowa proceeding pending
resolution of the Texas arbitration. On July 30, 2002, Maytag filed a Motion
for Leave to File First Amended Complaint adding a claim that TurboChef failed
to pay a promissory note in the amount of $327,478. On January 6, 2003, the
Federal Court in the Iowa proceeding granted a summary judgment against TurboChef
in the amount of $359,372, which is accrued and included in notes payable
on the balance sheet at December 31, 2003 and stayed the remainder of Maytags
claims pending the final resolution of the Texas claims.  In March 2004, we tendered full payment of
the amount of the summary judgment.

Maytag has also initiated arbitration in
Boston, claiming damages in the amount in excess of $1.3 million for failure to
pay for ovens. TurboChef has filed its counterclaim alleging that Maytag breached
its warranty and committed fraud and that TurboChef has been damaged in an
amount in excess of $1.5 million.

The parties had since January 2003 agreed to
stay the proceedings in Dallas and Boston pending the outcome of settlement
negotiations.  In March 2004 we notified
Maytag that we believed negotiations had not produced an acceptable offer of
settlement and we would, therefore, proceed with arbitration. The outcome of
any litigation is uncertain, and an unfavorable outcome could have a material adverse
effect on our operating results and future operations. Since the outcomes of
the arbitration proceedings are uncertain, no adjustments have been made to the
financial statements.

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

On December 2, 2003, the Company secured the
written consent of the holder of 1,917,650 shares of its Series D Convertible
Preferred Stock, constituting a majority of the outstanding shares of that
series and all of the shares the vote of which is necessary for adoption of
this action, to approve an increase in the size of the Companys Board of
Directors from six members to seven members.

9

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Part II

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

The
Companys common stock traded on the over-the counter market through the NASDAQ
National Market under the symbol TRBO from March 1, 1999 until July 11, 2001.
From July 12, 2001 until March 11, 2003 the Companys common stock was listed
on the NASDAQ Small Cap Market.  On
April 22, 2003 the Companys common stock was delisted from NASDAQ and began
trading on the OTC Bulletin Board under the symbol TRBO.OB. The following
table sets forth the high and low bid quotations for the common stock for the
periods indicated as reported by NASDAQ or posted on the OTC Bulletin Board.
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            |  
|                 |                  |                 |  
|Fiscal Year 2003 |                  |                 |  
|                 | First
  Quarter  |                 |  
|                 | Second
  Quarter |                 | $
|                 | Third
  Quarter  |                 | $
|                 | Fourth
  Quarter |                 | $
|                 |                  |                 |  
|Fiscal Year 2002 |                  |                 |  
|                 | First
  Quarter  |                 | $
|                 | Second
  Quarter |                 | $
|                 | Third
  Quarter  |                 | $
|                 | Fourth
  Quarter |                 | $
|                 |                  |                 |  

As
of March 22, 2004, there were 154 stockholders of record of the Companys
common stock.

Dividends

We
have not paid cash dividends on our common stock since our organization, and we
do not expect to pay any cash dividends on the common stock in the foreseeable
future. Rather, we intend to use all available funds for our operations and
planned expansion of its business. The payment of any future cash dividends is
at the discretion of our Board of Directors and will depend on future earnings,
capital requirements, our financial condition and other factors deemed relevant
by the Board of Directors.

10

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Equity Compensation Plan Table

See
Item 12 in Part III.

Sales of Securities

On
September 1, 2003, the Company transferred 100,000 shares of our Common Stock
to an officer of the Company for services in connection with his hiring.  We believe the individual was an executive
officer of the Company and therefore an accredited investor within the
meaning of Rule 501 promulgated under the Securities Act of 1933 (the Act).

On
October 28, 2003, the Company sold 2,132,650 shares of its Series D Preferred
Stock to OvenWorks, LLLP and other investors for approximately
$13,080,000.  Each share of Series D
Preferred Stock is convertible into twenty shares of Common Stock (subject to
adjustment) at any time that there are sufficient authorized shares
available.  Alternatively, Series D
holders have redemption rights after December 31, 2004 if they are unable to convert all or part of the shares into common stock.  OvenWorks,
LLLP and individual investors for
which it acted as nominee in the transaction have represented that
they are accredited investors.

On
October 29, 2003, the Company issued 2,433,333 and 366,667 shares of Common
Stock, respectively, to Messrs. J. Bogatin and D. Gogel, in consideration for
their non-competition and release agreements given in connection with their
resignations from the Board of Directors and officer positions with the
Company.

On
October 29, 2003, the Company issued 652,288 shares of Common Stock to Grand
Cheer Company Limited in connection with settlement of a note payable by
the Company to Grand Cheer and a release agreement given in connection
therewith.

On
November 1, 2003, the Company issued 35,000 shares of Common Stock to William
Blair & Company in consideration of that firms agreement to provide
financial advisory services to the Company.

On
March 10, 2004, the Company issued an aggregate of 312,500 shares of Common
Stock pursuant to the exercise of warrants. 
The shares were issued to two family trusts, the trustee of each of
which is Shirley Silver.  The purchase
price of the shares was $312,500.

We
believe our offering and sale of the shares in each transaction described above
is exempt from registration under Section 4(2) of the 1933 Securities Act (the
Act).  The certificates representing
the securities issued contain a legend to the effect that such securities were
not registered under the Act and may not be transferred except pursuant to an
effective registration statement or pursuant to an exemption from such
registration requirement.

Item 6. Selected Financial Data

The
following selected financial data as of December 31, 2003 and 2002, and for
each of the fiscal years ended December 31, 2003, 2002 and 2001 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 as of December 31, 2001, 2000 and 1999, and
for each of the fiscal years ended December 31, 2000 and 1999, 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.

11

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|                                                                                            |  | Year Ended December 31,                                 |           
|------------------------------------------------------------------------------------------- |  | ------------------------------------------------------- | ----------
|                                                                                            |  |                                                         |           
|                                                                                            |  | 2003                                                    |           
|                                                                                            |  |                                                         |           
|                                                                                            |  | (Amounts in Thousands, Except Share and Per Share Data) |           
|Statements
  of Operations
       Data:                                                     |  |                                                         |           
|Revenues                                                                                    |  | $                                                       | 4,340     
|                                                                                            |  |                                                         |           
|Operating loss                                                                              |  | $                                                       | (13,003   
|                                                                                            |  |                                                         |           
|Net loss                                                                                    |  | $                                                       | (14,091   
|                                                                                            |  |                                                         |           
|Per share data                                                                              |  |                                                         |           
|                                                                                            |  |                                                         |           
|Net loss per share
       applicable to common
       stockholdersbasic and
       diluted |  | $                                                       | (1.32     
|                                                                                            |  |                                                         |           
|Weighted Average Number
       of Shares Outstanding                                        |  |                                                         | 20,392,724
|                                                                                            |  |                                                         |           
|Balance
  Sheet Data:                                                                       |  |                                                         |           
|Working capital (deficit)                                                                   |  | $                                                       | 6,970     
|                                                                                            |  |                                                         |           
|Total assets                                                                                |  | $                                                       | 11,431    
|                                                                                            |  |                                                         |           
|Total
        liabilities, including mezzanine equity                                       |  | $                                                       | 16,808    
|                                                                                            |  |                                                         |           
|Accumulated deficit                                                                         |  | $                                                       | (60,598   
|                                                                                            |  |                                                         |           
|Total stockholders
             equity (deficit)                                           |  | $                                                       | (5,377    

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

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 Selected Financial Data and the financial statements and
notes thereto contained elsewhere in this annual report. The following
discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ from those discussed in
these forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed below and
elsewhere in this annual report.

Overview

The
Company is engaged primarily in designing, developing and marketing food
service ovens that embody our proprietary rapid cook technologies. TurboChefs
proprietary rapid cook ovens, which require no ventilation, employ a
combination of high speed forced air and microwave energy to cook-to-order a

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variety
of food products at faster speeds and to quality standards comparable, and in
many instances superior to, other conventional commercial and residential ovens
currently available.

The
Company launched the current version of its proprietary commercial oven in the
second quarter of 2000. To date, TurboChef has provided cooking solutions to
various quick service restaurants, convenience stores, hotels and traditional
restaurants in the United States, the United Kingdom and Europe. In addition,
the Company has provided cooking solutions to non-traditional operators in the
food service business such as stadiums, movie theatres and service stations.

After
a long testing and comprehensive evaluation process, Doctors Associates, Inc., the
franchisor of the Subway® sandwich restaurant concept, agreed in March 2004
that we would be the exclusive manufacturer to supply rapid cook ovens to all
Subway franchise locations.  Subway
franchisees operate over 18,000 locations in the United States, Canada and
Puerto Rico, and more are added every year. 
In addition, we will be the sole supplier of the ovens to Subways
international locations as well, which currently number approximately 2,000
locations.  We have begun production of
the ovens for ultimate distribution to the Subway franchisees in the U.S.,
Canada and Puerto Rico.

As
of March 1, 2004, there are approximately 1,300 ovens operating in the United
States, Canada and Puerto Rico and approximately 1,300 ovens operating in the
United Kingdom and Europe.

The
Company currently sells its rapid cook ovens primarily through a direct sales
force in North America, and through equipment distributors in Europe and the
United Kingdom. Currently there are nine non-exclusive distributors of our
proprietary commercial ovens in European countries including: Finland, Sweden,
Iceland, Ireland, The Netherlands, Belgium, France, Spain, Greece, Switzerland
and Germany. In March 2003, the Company signed a one-year agreement with an
exclusive distributor in the United Kingdom. Until May 2001, the Companys
ovens were marketed in the United States through Maytag and its subsidiary,
Blodgett, pursuant to the terms of a series of agreements in which the Company
granted them the exclusive right to sell its ovens in North America. Under the
agreements the Company retained the right to sell directly outside of North
America, with the exception of selling to U.S. based customers overseas. In the
first quarter of 2001, the Company and Maytag entered into arbitration with
respect to certain disputes under the agreements which arbitration is pending.
(See Item 3: Legal Proceedings). In May 2001, the Company regained from Maytag
and Blodgett the right to sell its oven products directly in the United States
and began building its own sales force to make direct oven sales. The Companys
primary sales office is located in Dallas, Texas. In addition, the Company has
a sales office in the Netherlands.

In
addition to its direct sales force, the Company is seeking to develop multiple
distribution channels through the use of third-party distributors,
manufacturers representatives, agents and wholesale food distributors. The
Company is also considering entering into strategic marketing alliances with
third parties who have established relationships or synergies with mutual
prospective customers.

In
the second quarter of 2000, TurboChef entered into an agreement granting
exclusive manufacturing rights for the current version of our commercial oven
to Xiaoya, a contract manufacturer located in China. In March 2002, TurboChef
signed a new agreement to purchase 5,000 ovens from Xiaoya by August 2003. In
December 2002, this purchase requirement was extended for an additional 12
months to August 2004 and the Company agreed to purchase a minimum of 200 ovens
per month. We were unable in 2003 to satisfy the minimum purchase requirements
and were, therefore, in breach of our agreement.  In conjunction with the October 2003 private placement described
below, we paid all outstanding amounts due Xiaoya and Xiaoya agreed to
resolution of any claims which might have arisen under the agreement and
reduced the minimum purchase commitment to a level more in keeping with
near-term sales expectations.

October 2003 Private Placement

On
October 28, 2003 we completed a private placement of 2,132,650 shares of our
new Series D Convertible Preferred Stock, par value $1.00 per share (the
Series D Preferred Stock) to OvenWorks, LLLP (OvenWorks) and to certain
other investors for whom OvenWorks served as nominee.  At the time

13

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of
issuance, the shares of Series D Preferred Stock issued in the private
placement were convertible into an aggregate of 42,653,000 shares of our common
stock, representing approximately 58% of our total equity on a fully diluted,
as converted basis (i.e. assuming that all outstanding options, warrants and
other rights for the purchase of our common stock were exercised, and all
outstanding shares of all series of the our preferred stock, including the
Series D Preferred Stock, were converted into common stock). Net proceeds of
the private placement were $12.6 million, which have and will be used to
satisfy existing obligations and to fund working capital needs, including
product development and manufacturing, sales and marketing and other general
corporate purposes.

Cash Flow and Liquidity

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 limited revenues generated to date from sales of ovens,
the Company has incurred substantial operating losses in each year of its
operations (including net losses available to common stockholders of $26.9
million, $5.9 million and $6.7 million for the years ended December 31, 2003,
2002 and 2001, respectively), resulting in an accumulated deficit of $60.6
million as of December 31, 2003.

Management
believes that the working capital provided by the October 2003 private
placement coupled with the significant positive cash flow potential of the
Subway restaurant relationship (assuming such potential is realized) should provide us the
resources to conduct normal operations and grow our business. If the cash flow from the Subway restaurant relationship is less than expected,
or its timing gets delayed, our ability to implement our business plan would be adversely and materially affected, and we may not have sufficient
 working capital to conduct normal operations and grow our business.

Application of Critical Accounting Policies

Generally
accepted accounting principles are complex and require management to apply
judgment to various accounting, reporting and disclosure matters. Management
must use assumptions and estimates to apply these principles where actual
measurement is not possible or practical.

For
a complete discussion of our significant accounting policies, see the footnotes
to the Financial Statements included in this annual report and discussion
throughout this document. Below is a discussion of our critical accounting
policies. These policies are critical because they are important to the
portrayal of our financial condition and/or are dependent on subjective or
complex judgments, assumptions and estimates. If actual results differ
significantly from managements estimates and projections, there could be a
significant impact on the financial statements. The impact of changes in key
assumptions may not be linear. Management has reviewed the application of these
policies with the Audit Committee of the Board of Directors.

Revenue Recognition -Revenue
is recognized when title and risk of loss are transferred to the customer,
substantially all obligations relating to a sale are completed, prices are
fixed or determinable and collection of the related receivable is reasonably
assured. If the terms of a sale require installation, the revenue cycle is
substantially complete after installation has occurred; therefore, revenue is
recognized upon installation. For sales where the customer has assumed the
installation responsibility and sales to designated agents, substantially all
obligations are completed at the time of shipment to the customer or the
customers designated agent. Revenue for sales of replacement parts, ceramic
platters, cooking utensils and proprietary oven cleaner is recognized upon
shipment to the customer.

We
provide for returns on product sales based on historical experience and adjust
such reserves as considered necessary. To date, there have been no significant
sales returns.

Product Warranty -The Companys ovens are under warranty against defects in material
and workmanship for a period of one year from the date of installation.
Anticipated future warranty costs are estimated, based upon historical
expenses, and are recorded in the period cooking systems are sold.
Periodically, the Companys warranty reserve is reviewed to determine if the
reserve is sufficient to cover the repair costs associated with the remaining
ovens under warranty. At this time, the Company believes that, based upon
historical data over the last 24 months, the current warranty reserve is
sufficient to cover the associated costs. If warranty costs trend higher, the
Company would need to record a higher initial

14

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reserve
as well as reserve the estimated amounts necessary to cover all ovens remaining
under warranty. For example, if the costs of actual product warranty are 10%
higher than we expect, our provision for warranties and net loss would be
approximately $20,000 higher. Any such additional reserves would be charged to
cost of goods sold and could have a material effect on the Companys financial
statements.

Stock-Based
Compensation and Other Equity Instruments 
-We follow
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations, in accounting for our
stock-based compensation plans, rather than the alternative fair value
accounting method provided for under Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, as amended.
Accordingly, we have not recorded stock-based compensation expense for stock
options issued to employees in fixed amounts with exercise prices at least
equal to the fair value of the underlying common stock on the date of grant. In
the notes to our financial statements we provide pro forma disclosures in
accordance with SFAS No. 123 and related pronouncements.

We
account for transactions in which services are received in exchange for equity
instruments issued based on the fair value of such services received from
non-employees or of the equity instruments issued, whichever is more reliably
measured, in accordance with SFAS No. 123 and Emerging Issues Task Force
(EITF) Issue No. 96-18, Accounting for Equity Instruments that are Issued to
Other than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services. We account for transactions in which we issue convertible
securities in accordance with EITF Issues No 98-5, Accounting for Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion
Ratios and No. 00-27,  Application
of Issue No. 98-5 to Certain Convertible Instruments and SFAS No.
150, Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and
Equity. The two factors which most affect charges or credits to
operations related to stock-based compensation are the fair value of the
underlying equity instruments and the volatility of such fair value. We believe
our prior and current estimates of these factors have been reasonable.

Foreign Exchange  
-During 2003,
approximately 37% of the Companys revenues were derived from sales outside of
the United States. These sales and subsequent accounts receivable, the salaries
of employees located outside of the United States and approximately 12% of
selling, general and administrative expenses are denominated in foreign
currencies, principally British Pounds and Euros. The Company is subject to
risk of financial loss resulting from fluctuations in exchange rates of these
currencies against the US dollar. In addition, trade terms with customers
outside of the United States generally are longer than with customers inside of the
United States, which increases the potential of foreign exchange gains or
losses. At this time, the Company does not engage in any foreign exchange
hedging activities.

Deferred
Taxes   - In preparing
our financial statements, we are required to estimate our income taxes in each
of the jurisdictions in which we operate. This process involves estimating
actual current tax exposure together with assessing temporary differences
resulting from differing treatment of items for tax and financial reporting
purposes. These differences result in deferred tax assets and liabilities. In
addition, as of December 31, 2003, we had net operating loss carryforwards
(NOLs) of $50.1 million, of which approximately $42.6 million are subject to annual
limitations resulting from the change in control provisions in Section 382 of
the Internal Revenue Service Code. 
These NOLs begin to expire in 2009. 
A valuation allowance is recorded to reduce deferred taxes to the amount
that is more likely than not to be realized. Based on our history of losses, we
have recorded a valuation allowance as of December 31, 2003, equal to the full
amount of our net deferred tax assets including those related to our NOLs.
Future profitable operations would permit recognition of these net deferred tax
assets, which would have the effect of reducing our income tax expense. Future
operations could demonstrate a return to profitability sufficient to warrant a
reversal of the valuation allowance which would positively impact our financial
statements.

Commitments
and Contingencies   -We evaluate contingent
liabilities including threatened or pending litigation in accordance with SFAS
No. 5, Accounting
for Contingencies, and record accruals when the outcome of these
matters is deemed probable and the liability is reasonably estimable. We make
these assessments based on facts and circumstances and in some instances based
in part on the advice of outside legal counsel.

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Results of Operations for the Year Ended December 31, 2003
Compared to the Year Ended December 31, 2002

Revenues
for the year ended December 31, 2003 were $4.3 million, compared to revenues of
$8.0 million for the year ended December 31, 2002. This decrease is primarily
attributable to a 48% decrease in the unit sales of ovens during fiscal
2003. This decline in unit sales is reflective of our cash and liquidity
position for much of 2003 which led to a significant curtailment of operations.
The average selling price per unit increased approximately 1% from the previous
period. This slight increase in the average selling price of ovens is due in
large part to moderation of the number of units sold to Subway franchisees
during 2003.  Subway franchisees
benefited from a favorable price as part of a major order initiated in 2002 and
sales to Subway franchisees represented 45% of sales in 2002 compared to 22% of
sales in 2003. Subway purchased these ovens as part of a market test of certain
new product initiatives and in March 2004 we were selected by Subway as its
exclusive provider of rapid cook ovens to its more than 20,000 locations
worldwide. The preliminary roll-out schedule calls for delivery of units to
franchisees to start in the second quarter of 2004 and be completed in the
first quarter of 2005. Terms of our agreement with Subway provide them
favorable pricing which will decrease our average unit sales price.

Cost
of sales for the year ended December 31, 2003 were $2.3 million, a decrease of
$2.4 million compared to $4.7 million for cost of sales for the year ended
December 31, 2002. The decrease is principally due to the 48% decrease in the
number of ovens sold during the year. The average unit cost per oven decreased approximately
5% percent in 2003. The decline resulted from favorable purchasing of component
parts coupled with a slight shift in mix between ovens sold in the US versus
Europe where the ovens are slightly more costly to produce. Cost of goods sold
for 2002 also included a $190,000 increase in the warranty reserve for
Whitbread Group PLC (Whitbread) due to the Companys default on an agreement
dated February 2002, between Whitbread and TurboChef to terminate an extended
warranty originally purchased in September 1999 (see Liquidity and Capital
Resources).

Cost
of sales are calculated based upon the actual cost of the oven, the cost of any
accessories supplied with the oven, an allocation of cost for freight, duties
and taxes for the importation of the oven and a reserve for warranty. Cost of
sales does not include any cost allocation for administrative and support
services required to deliver or install the oven or an allocation of costs
associated with the ongoing quality control of the Companys manufacturer in
China. These costs are recorded within selling, general and administrative
expenses.

Gross
profit on product sales for the year ended December 31, 2003 decreased $1.2
million to $2.1 million, when compared to gross profit on product sales of $3.3
million during the year ended December 31, 2002. This decrease is due primarily
to the significant decrease in the number of ovens sold during the year ended
December 31, 2003, partially offset by an increase in the average margin per unit.

Research
and development expenses for the year ended December 31, 2003 increased
$484,000 to $897,000, as compared to $413,000 for the year ended December 31,
2002. The increase in research and development expense principally relates to
an increase in payroll and related expenses of $312,000, an increase of
$133,000 related to the development of the next generation oven prototypes and
an increase in freight charges of $30,000.

Selling,
general and administrative expenses for the year ended December 31, 2003
decreased $2.0 million to $6.5 million from comparable expenses of $8.5 million
for the year ended December 31, 2002. This decrease is due primarily to a
decrease in sales and marketing related expenses of $1.4 million, including decreased
payroll of $668,000, travel of $472,000, trade shows of $197,000 and
advertising expenses of $30,000. In addition, general and administrative
expenses decreased by $629,000 net, including decreased payroll expenses of
$331,000 and lower occupancy costs of $387,000, reductions in consulting
services of $309,000, a $266,000 decrease in depreciation and amortization
charges, and decreases in insurance expense, printing and other administrative
expenses aggregating approximately $238,000. These decreases were partially
offset by an increase in compensation expense for stock and option awards of
$208,000 and a charge of $735,000 recorded in the fourth quarter of 2003, to
provide for the potential uncollectibility of a receivable from Maytag which is
part of our pending litigation.  The

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reductions in selling, general and administrative expenses were due
principally to concerted efforts to reduce expenses in light of our cash and
liquidity position through much of 2003. These efforts included reductions in
staff and closure of the offices in New York and the United Kingdom.

Concurrent
with the private placement of our Series D Preferred Stock in October 2003 and
the election of new officers and board members, we terminated four former
officers and/or directors. In this regard, we entered into various settlement
and release and severance agreements with these individuals under which cash
was given, common stock and/or options were issued and/or previously issued
equity instruments were modified. In connection with this, we recorded $7.6
million in compensation charges. Of this amount, $200,000 represents cash
severance and the balance is related to estimated fair value computations applied to
equity instruments received and/or modified.

Net
other (expense) income was ($1.1) million for the year ended December 31, 2003,
compared to $29,000 for the year ended December 31, 2002. The increase in other
expense was principally due to $1.1 million in interest expense and debt
extinguishment costs related to a settlement reached with Grand Cheer Company
Limited, holder of the Companys note payable (see Note 9 to the Financial
Statements) and $100,000 in foreign exchange losses for 2003 as compared to
($226,000) and $108,000, respectively for these items in 2002. Interest expense
in 2002 included a non-cash financing charge of $200,000 associated with the loan
from Grand Cheer.

Charges
related to preferred stock dividends decreased by $75,000 for the year ended
December 31, 2003, as compared to the year ended December 31, 2002. This was
due to the conversion of the Companys Series B and C Preferred Stock into
common stock in October 2003.

During
2003, the Company incurred a one-time, non-cash charge of $12.6 million to
record a deemed dividend in recognition of the beneficial conversion feature
intrinsic in the terms of conversion of its Series D Preferred Stock. These
securities are immediately convertible into common stock at the option of the holders
without additional consideration and the fair value of the underlying common stock
into which they are convertible exceeds the total proceeds from the Series D
Preferred Stock issuance.

Net
loss applicable to common stockholders increased by $21.0 million to $26.9
million for the year ended December 31, 2003, as compared to $5.9 million for
the year ended December 31, 2002. The net loss per share increased to $1.32
from $0.31 a share, based on the weighted average number of shares outstanding
of 20,392,724 and 18,903,708 for the years ended December 31, 2003 and 2002,
respectively. The increase in the net loss is principally due to the beneficial
conversion feature of the Series D Preferred Stock, the compensation and
severance related to termination of former officers and directors, together
with the decrease in oven sales during 2003. The decrease in margin from oven
sales was offset by a decrease in selling, general and administrative costs.

Results of Operations for the Year Ended December 31, 2002
Compared to the Year Ended December 31, 2001

Revenues
for the year ended December 31, 2002 were $8.0 million, compared to revenues of
$3.2 million for the year ended December 31, 2001. This increase is primarily
attributable to the increase in the unit sales of ovens during fiscal 2002. For
the year ended December 31, 2002, unit sales of ovens increased 149% over the
year ended December 31, 2001. The average unit sales price declined by
approximately 3% from the previous period. The decline in the average selling
price of ovens is due largely to a favorable sales price offered to Subway
franchisees, in connection with a significant purchase during 2002. This
customer represented approximately 45% of oven sales revenues in 2002. These
ovens were purchased as part of a market test of certain new product
initiatives. We sold additional units under this program in 2003 and in March
2004 announced that we were selected by Subway as its exclusive provider of
rapid cook ovens.

Cost
of sales for the year ended December 31, 2002 were $4.7 million, an increase of
$3.1 million compared to $1.6 million for the year ended December 31, 2001. The
increase is principally due to an increase in the number of ovens sold during
the year and a $190,000 increase in the warranty reserve

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associated
with a three-year upgrade and service agreement with Whitbread covering the
Companys earlier generation commercial ovens . The average cost of sales of
ovens declined approximately 3% percent in 2002. The decline resulted from
favorable purchasing of component parts, as well as a lower purchase price
negotiated from our third party manufacturer during 2002, partially offset by
higher installation and delivery costs. The increase in the warranty reserve
for Whitbread is due to the Companys having defaulted on an agreement dated
February 2002, between Whitbread and TurboChef to terminate an extended
warranty originally purchased in September 1999.

Cost
of sales are calculated based upon the actual cost of the oven, the cost of any
accessories supplied with the oven, an allocation of cost for freight, duties
and taxes for the importation of the oven and a reserve for warranty. Cost of
sales does not include any cost allocation for administrative and support
services required to deliver or install the oven or an allocation of costs
associated with the ongoing quality control of the Companys manufacturer in
China. These costs are recorded within selling, general and administrative
expenses.

Gross
profit on product sales for the year ended December 31, 2002 increased $1.7
million to $3.3 million, when compared to gross profit on product sales of $1.6
million for the year ended December 31, 2001. This increase is due primarily to
the increase in the number of ovens sold during the year ended December 31,
2002, partially offset by an increase in the warranty reserve associated with
our default under the Whitbread agreement.

Research
and development expenses for the year ended December 31, 2002 decreased
$361,000 to $413,000, compared to $774,000 for the year ended December 31,
2001. The decrease in research and development expense principally relates to a
reduction in payroll and related expenses of $241,000, a reduction in
depreciation and amortization of equipment of $46,000 and a reduction of
$58,000 related to the development of next generation oven prototypes.

Selling,
general and administrative expenses for the year ended December 31, 2002
increased $1.6 million to $8.5 million from comparable expenses of $6.9 million
for the year ended December 31, 2001. This increase is due primarily to an
increase in sales and marketing related expenses of $875,000, including
increased payroll totaling $485,000, travel of $431,000 and advertising
expenses totaling $25,000. In addition, general and administrative expenses
increased $652,000, principally relating to increase in legal costs of $278,000
(predominantly related to the Maytag litigationSee Item 3: Legal Proceedings),
a $178,000 increase in manufacturing support costs, a $125,000 increase in
regulatory and accounting costs associated with managing a public company, a
$100,000 general increase in the Companys bad debt reserve, a $52,000 increase
in occupancy expenses and a $46,000 increase in depreciation and amortization charges.
These increases were partially offset by reductions in corporate insurance
costs and payroll of $131,000 and $103,000, respectively.

Net
other income (expense) was $29,000 for the year ended December 31, 2002,
compared to ($5,000) for the year ended December 31, 2001. The increase in
other income was principally due to a $100,000 increase in foreign exchange
gains. This was partially offset by a $31,000 increase in interest expense and
a $23,000 decrease in interest income. The increase in interest expense
included a non-cash financing charge of $200,000 associated with a loan from
Grand Cheer. The decrease in interest income is due to lower cash balances
during 2002.

Charges
related to preferred stock dividends decreased by $35,000 for the year ended
December 31, 2002, as compared to the year ended December 31, 2001. This was
due to the conversion of the Companys Series A Preferred Stock into common
stock in March 2002.

The
Company did not incur any charges associated with the conversion of its
preferred stock during the year ended December 31, 2002.

Net
loss decreased by $862,000 to $5.9 million for the year ended December 31,
2002, as compared to $6.7 million for the year ended December 31, 2001. The net
loss per share declined to $0.31 from $0.41 a share, based on the weighted
average number of shares outstanding of 18,903,708 and 16,206,808 for the

18

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years
ended December 31, 2002 and 2001, respectively. The decrease in the net loss is
principally due to the significant increase in unit sales of ovens during
Fiscal 2002. The increase in oven sales was partially offset by an increase in
selling, general and administrative costs.

Liquidity and Capital Resources

TurboChefs
capital requirements in connection with its product and technology development
and marketing efforts have and will continue to be significant. Additional
capital will be required to conduct normal business operations and to expand
the Companys operations. Since its inception, the Company has incurred
significant operating losses and the losses may continue.

Revenues
from oven sales improved in 2002 and through the first quarter of 2003. However
the Company had difficulty during this period in raising the necessary capital
to continue normal business operations and expand the Companys operations. As
a result, normal operations were constrained and the business suffered
accordingly.

On
October 28, 2003 we completed a private placement of 2,132,650 shares of our
new Series D Convertible Preferred Stock, par value $1.00 per share (the
Series D Preferred Stock) to OvenWorks, LLLP (OvenWorks) and to certain
other investors for whom OvenWorks served as nominee.  At the time of issuance, the shares of Series D Preferred Stock
issued in the private placement were convertible into an aggregate of
42,653,000 shares of our common stock, representing approximately 58% of our
total equity on a fully diluted, as converted basis (i.e. assuming that all
outstanding options, warrants and other rights for the purchase of our common
stock were exercised, and all outstanding shares of all series of the our
preferred stock, including the Series D Preferred Stock, were converted into
common stock). Net proceeds of the private placement were $12.6 million, which
have and will be used to satisfy existing obligations and to fund working
capital needs, including product development and manufacturing, sales and
marketing and other general corporate purposes.

After
a long testing and comprehensive evaluation process, Doctors Associates, Inc., the
franchisor of the Subway sandwich restaurant concept, agreed in March 2004
that we would be the exclusive manufacturer to supply rapid cook ovens to all
Subway franchise locations.  Subway franchisees
operate over 18,000 locations in the United States, Canada and Puerto Rico, and
more are added every year.  In addition,
we will be the sole supplier of the ovens to Subways international locations
as well, which currently number approximately 2,000 locations.  We have begun production of the ovens for
ultimate distribution to the Subway franchisees in the U.S., Canada and Puerto
Rico.

The
Company anticipates that its current cash on hand, collections of its accounts
receivable and cash from anticipated sales of ovens, particularly in light of
the significant potential represented by the Subway agreement, enable it to
now conduct normal operations, expand its business as needed and generate
operating profit in 2004. The Company will also explore financing alternatives
to provide stand-by credit availability to augment the cash flow anticipated
from operations if and when the distribution plan for roll-out of ovens to
Subway franchisees is fully implemented. The Company further anticipates that
existing cash on hand is sufficient to sustain normal operations until then.
Our projected attainment of profits from operations, as well as our ability to
sustain normal operations and grow our business, is dependent on the Subway
arrangement and the currently anticipated rate of sales contemplated by the
preliminary roll-out schedule. However, no assurance can be made that the
Company will generate the anticipated level sales of ovens under the Subway
agreement or that the timing of such sales will not be delayed.

The
Company has, and will continue to hold inventory, due to its long manufacturing
cycle. As of December 31, 2003, the Company held $371,000 of finished goods
inventory (ovens), $70,000 of demonstration inventory (ovens used for customer
demonstrations, tests and pilot programs) and $1.0 million of parts inventory
(used for manufacturing and service). The Company offers demonstration
inventory free of charge or at reduced prices to certain potentially large
customers, who wish to test and evaluate an oven prior to purchase. In March
2002, the Company agreed to purchase 5,000 ovens from Xiaoya over a
seventeen-month period. In December 2002, this purchase requirement was
extended for an

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additional
12 months to August 2004 and the Company agreed to monthly purchase minimum
reduced to 200 ovens. The previously mentioned difficulty in obtaining capital
caused us to fall behind in our purchase commitment and we were in default
under this agreement for much of 2003. Contemporaneously with the October 2003
private placement, the Company entered into a Settlement, Release Agreement and
Third Amendment to its manufacturing agreement with Xiaoya to resolve potential
claims and further reduce the monthly purchase commitment. Pursuant to this
agreement the Company made a payment in full satisfaction of all amounts then
due to Xiaoya. In exchange, Xiaoya agreed to release the Company from any
claims Xiaoya may have had as of the signing of the agreement and reduce the
Companys monthly minimum purchase requirement of ovens to a level more in line
with near-term sales expectations. Under the present terms of the agreement,
the Company is committed to minimum purchases of approximately $250,000 per
month. In addition, in connection with the manufacturing agreement the Company
is required to use working capital to purchase certain component parts supplied
to Xiaoya for use in the ovens.

In
September 1999, the Company entered into an agreement to upgrade and warranty
262 ovens installed with Whitbread. The Company received approximately $1.4
million from Whitbread to complete the upgrade and provide a three-year
extended warranty to each of the ovens. The oven upgrades include design
changes that were to substantially increase the life and durability of the
ovens. These upgrades were completed in February 2000. The $1.4 million had
been used to offset expenses relating to the upgrade and warranty as incurred.
Through 2000, the Company incurred an additional $1.7 million for expenses in
excess of payments from Whitbread, relating to the completion of the upgrade and
remainder of the warranty period. No additional costs have been incurred since
2000. In February 2002, the Company and Whitbread entered into an agreement to
terminate the September 1999 upgrade and extended warranty agreement. Under the
new agreement, TurboChef was required to pay Whitbread £460,000 (approximately
$670,000) plus VAT (value added tax) over a 24 month-period. In return,
Whitbread would release TurboChef from its obligation to continue its warranty.
Upon entering into this agreement, the Company
recorded an adjustment to reduce the warranty liability by $190,000, the amount
by which the amount of the warranty liability related to Whitbread exceeded the
amount to be paid under the agreement. On signing the agreement, TurboChef made
an initial payment to Whitbread of £50,000 (approximately $72,000) plus VAT and
is further required to pay £15,000 (approximately $22,000) plus VAT a month for
the next 24 months, with a final payment of £50,000 plus VAT due the final
month. The Company has not made the November 2002 through April 2003 payments
and is currently in default of the agreement. As a result of the default, an
estimated warranty liability of $190,000 was recorded as of December 31,
2002.  Other than a provision for the
estimated effects of foreign exchange, there was no activity in the Companys
liability related to the Whitbread agreement in 2003.

In
November 2001, the Company purchased $504,000 of parts and oven inventory from
Maytag. The Company paid $177,000 in cash and issued a promissory note in the
amount of $327,000 for the remaining balance of this purchase. The note was
payable in two installments of $131,000 payable in May 2002 and $196,000
payable in November 2002 plus accrued interest. The interest rate of this note
is the prime rate as published in The Wall
Street Journal plus 2% (6.25% as of December 31, 2002). The Company
did not make any payments on the note and was in default as of December 31, 2003. From and
after the occurrence of a default, the interest rate of this note is the prime
rate as published in The Wall Street Journal
plus 5%. On January 6, 2003, Maytag obtained a summary judgment against
TurboChef is the amount of $359,372. In March 2004, the Company remitted
$380,000 to Maytag for payment of the summary judgment including estimated
additional costs. Maytag and the Company have been conducting negotiations to
settle other outstanding arbitrations; however, the Company recently notified
Maytag that those negotiations had not been productive and that it would
proceed with the arbitrations. There can be no assurance that we will be
successful in the arbitrations, or alternatively, that a settlement will be
reached, or that if reached, the settlement will be favorable to the Company
(See Item 3: Legal Proceedings).

In
the first quarter of 2002, the Company expanded its direct sales and marketing
efforts. As a result of slower than anticipated sales of ovens the Company took
actions to reduce the level of fixed overhead. In the second quarter of 2002,
the Company closed its United Kingdom office and reduced its sales personnel.
During the third quarter of 2002, the Company made the decision to close its
New York office, which was closed on January 31, 2003, and consolidate all
activities into the Companys Dallas office. These changes were expected to
result in annual cost savings of approximately $1.5 million. With the October
2003

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private
placement and the recently completed Subway agreement, the Company has
implemented plans, including establishing an office in Atlanta and
re-establishing an office in New York, to increase expenditures in marketing,
advertising and promotion, research and development and customer support to
serve the growth in activity anticipated from the Subway franchisees and take
advantage of other market opportunities. This increase in operating
expenditures will be made, to the extent possible, in concert with growth in
activity but could aggregate an incremental $5.0 million in 2004.

At
December 31, 2003, the Company had working capital of $7.0 million as compared
to a working capital deficit of ($467,000) at December 31, 2002. The $7.5
million net increase in working capital resulted primarily from the effects of
the October 2003 private placement which provided $12.6 million net cash
proceeds. Prior to completion of the private placement, our available resources
were severely limited and operations had been curtailed. The funding from the
private placement has enabled us to return to normal operations and proceed
with plans to grow our business.

Cash
used in operating activities was $3.4 million for the year ended December 31,
2003 as compared to cash used in operations of $4.8 million for the year ended
December 31, 2002. The net loss of $14.1 million in 2003 included $9.1 million
of net non-cash charges (depreciation, amortization, non-cash interest and debt
extinguishment costs, and non-cash compensation expenses), compared to $708,000
(depreciation, amortization, non-cash interest and non-cash compensation expense)
in 2002. Net cash used in operating activities in 2003 was negatively impacted
by a $258,000 increase in prepaid expenses and other assets, primarily related
to procuring appropriate levels of business insurance, and an $809,000 decrease
in accounts payable, related to bringing our vendor accounts current. These
operating cash requirements were partially offset by a decrease of $1.1 million
in accounts receivable as we focused efforts on collections, a $360,000
decrease in inventories as production of finished ovens was curtailed and a
$295,000 increase in deferred revenue from the sale of 50 ovens to a major
customer in March 2003 who paid for the ovens but requested delayed shipment to
meet their needs.

Cash
used in investing activities for the year ended December 31, 2003, was $33,000
compared to $113,000 for the year ended December 31, 2002. This decrease
resulted from a reduction in capital expenditures due to cost cutting measures
put in place commencing in late 2002. The Company anticipates an increase in
capital expenditures to approximately $1.0 million during fiscal 2004, in order
to build its sales and marketing infrastructure and provide the tooling
necessary to produce the ovens for the Subway order. It is anticipated that
capital expenditures will be funded from existing working capital.

Cash
provided by financing activities for the year ended December 31, 2003 was $11.7
million as compared to $1.0 million for the year ended December 31, 2002. In
2003, the $12.6 million net proceeds from the sales of our Series D Preferred
Stock provided our cash from financing activities and we repaid a $1.0 million
loan with these proceeds. In 2002, the primary source of cash from financing
activities was from a loan from a stockholder of $1,000,000.

At
December 31, 2003, the Company had cash and cash equivalents of $8.9 million
compared to cash and equivalents of $629,000 at December 31, 2002.

Contractual Cash Obligations

As of December 31, 2003, our
future contractual cash obligations, excluding interest, are as follows (in
thousands):

|                     |  | Payments
  due by period |      
|-------------------- |  | ------------------------ | -----
|                     |  |                          |      
|                     |  | Total                    |      
|                     |  |                          |      
|Notes
  payable      |  | $                        | 380  
|Operating
  leases   |  |                          | 358  
|Purchase commitments |  |                          | 2,000
|                     |  |                          |      
|Total                |  | $                        | 2,738

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We
believe that existing working capital and cumulative cash flow from operations
combined with future financing opportunities will provide sufficient cash flow
to meet our contractual obligations. We intend to seek financing for any
amounts that we are unable to pay from operating cash flows. New financing
alternatives are routinely evaluated to determine their practicality and
availability in order to provide the Company with sufficient and timely funding
at the least possible costs. However, if financing is not available or
available under unfavorable terms, we may not be able to increase our sales and
marketing and research and development investments which may hamper our ability
to grow our business or compete effectively in any of our markets which could
materially harm our business, financial condition and results of operations.

We
believe that our existing cash and anticipated future operating cash flows will
be sufficient to fund our cash requirements needs for working capital and
capital investment requirements in the short term, which means the next twelve
months, and for a reasonable period of time thereafter. We believe that, based
on the anticipated cash flows from the Subway agreement, financing will be
available as required for acquisition and other financing needs.

Authoritative Pronouncements

In
December 2002, the Financial Accounting Standards Board (FASB) issued SFAS
No. 148, which amended SFAS No. 123. The Standard provides alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. Additionally, the statement
amends the disclosure requirements of SFAS No. 123 to require prominent
disclosures in the annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. The Statement is effective for financial statements
with fiscal years ending after December 15, 2002. In compliance with SFAS 148,
the Company has elected to continue to follow the intrinsic value method in
accounting for our stock-based employee compensation arrangement as defined by
APB Opinion No. 25 and has made the applicable disclosures.

In
January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable
Interest Entities, an interpretation of Accounting Research Bulletin No. 51,
Consolidated Financial Statements (FIN No. 46). FIN No. 46 explains how to
identify variable interest entities and how an enterprise assesses its
interests in a variable interest entity, to decide whether to consolidate that
entity for financial reporting purposes. The Interpretation requires existing
unconsolidated variable interest entities to be consolidated by their primary
beneficiaries if the entities do not effectively disperse risks among parties
involved. FIN No. 46 is effective immediately for variable interest entities
created after January 31, 2003, and to variable interest entities in which an
enterprise obtains an interest after that date. The Interpretation applies in
the first fiscal year or interim period beginning after June 15, 2003, to
variable interest entities in which an enterprise holds a variable interest
that it acquired before February 1, 2003. 
Adoption of this Standard did not have a material effect on the
Companys financial statements.

In
May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity.  SFAS No. 150 establishes standards on the
classification and measurement of certain financial instruments with
characteristics of both liabilities and equity.  The provisions of SFAS No. 150 are effective for financial
instruments entered into or modified after May 31, 2003 and to all other
instruments that exist as of the beginning of the first interim financial
reporting period beginning after June 15, 2003. The adoption of SFAS No. 150 did not materially impact the Companys results of operations
or financial position, and SFAS No. 150 does not impact the Series D Preferred Stock as it is not mandatorily redeemable.

Risk Factors

We have a history of losses, we could
continue to incur losses in the future, and we may never achieve or maintain
profitability.

We
had net losses applicable to common stockholders of $26.9 million, $5.9 million and $6.7 million for the fiscal
years ended December 31, 2003, 2002 and 2001, respectively.  Our accumulated deficit as of December 31,
2003 was approximately $60.6 million. 
We were not profitable during the last three fiscal years, and although we

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expect to be profitable in fiscal 2004, uncertainties still exist regarding our
attainment of profitability.  We can
provide no assurance that we will be able to achieve profitable operations in
the future.

We may need additional capital to finance
existing obligations and to fund our operations and growth, and we may be
unable to obtain additional capital under terms acceptable to us or at all.

Our
capital requirements in connection with our marketing efforts, continuing
product development and purchases of inventory and parts are expected to be
significant for the foreseeable future. 
In addition, unanticipated events could cause our revenues to be lower
and our costs to be higher than expected, therefore creating the need for
additional capital.  Historically, cash
generated from operations has not been sufficient to fund our capital requirements,
and we have relied upon sales of securities to fund our operations.  We have no current arrangements with respect
to, or sources of, additional financing, and we cannot assure you that we will
have sufficient funds available to meet our working capital requirements, or
that we will be able to obtain capital to finance operations on favorable terms
or at all.  If we do not have, or are
otherwise unable to secure, necessary working capital, we may be unable to fund
the manufacture of ovens, and we may have to delay or abandon some or all of our
development and expansion plans or otherwise forego market opportunities, any
of which could harm our business.

We may need additional capital to finance
the redemption of the outstanding shares of Series D Convertible Preferred
Stock, and we may be unable to obtain additional capital under terms acceptable
to us or at all..

Each
of the outstanding shares of our Series D Convertible Preferred Stock is
convertible, at the election of the holder, into 20 shares of our common stock
(subject to adjustment).  Currently, we
do not have available enough authorized but unissued shares of common stock to
permit reservation of a sufficient number of shares of common stock to permit
conversion of all outstanding shares of Series D Convertible Preferred Stock.  In accordance with the terms of the
Certificate of Designations, Powers, Rights and Preferences that established
our Series D Convertible Preferred Stock, if, at our next meeting of
stockholders, our stockholders do not approve an amendment to our Certificate
of Incorporation that increases the number of authorized shares of our common
stock to permit reservation of a sufficient number of shares of common stock to
allow conversion of all outstanding shares of Series D Convertible Preferred
Stock, we will, upon receipt of a written request delivered by a majority of
the Series D Convertible Preferred Stock at any time after December 31, 2004,
be required to redeem such number of shares of Series D Preferred Stock as
would correspond, on an as-converted basis, to the corresponding number of
shares of our common stock that could not be reserved and made available for
conversion.

Assuming
that at the time of such redemption, shares of our common stock are still
publicly traded, the redemption price for each redeemed share of Series D
Convertible Preferred Stock would be equal to the greater of:

| |  | the consideration paid for
  the share, plus accrued and unpaid dividends, if any, or                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | the average closing sales
  price per share of our common stock in the open market during the 10 trading
  days preceding the redemption date multiplied by the number of shares of
  common stock the holder of such share of Series D Convertible Preferred Stock
  would have been entitled to receive for such share if it had exercised its
  conversion rights immediately prior to the redemption.

We
cannot assure you that we will have sufficient funds available to pay our
redemption obligations or that we will be able to obtain capital to finance our
redemption obligations on favorable terms or at all.  If we are unable to do so, we may have to delay or abandon some
or all of our development and expansion plans or otherwise forego market
opportunities, any of which could harm our business.  In addition, the equity position of our common stockholders would
be materially affected as a result of a default in our redemption obligation.

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In 2004, we are expected to depend upon one
customer for a significant portion of our revenue, and if that customer
terminates its contract with us, does not order any product or does not timely
make payments to us, our revenues and financial performance would decline.

In
March 2004, we entered into an Equipment Supplier Approval Agreement with
Doctors Associates, Inc. and Independent Purchasing Cooperative, Inc. to supply
rapid cook ovens to Subway restaurants worldwide.  We expect revenues from the sale of ovens to Subway restaurants
to constitute a material portion of our total revenues in 2004.  If this customer terminates the Equipment
Supplier Approval Agreement or otherwise discontinue or significantly reduce
their purchases of ovens, we may not generate sufficient revenues to offset
this loss of revenues and our revenues will decrease.  Furthermore, the
Subway agreement does not specify the number of ovens to be purchased or a minimum number
of ovens to be purchased, if any. In addition, the non-payment or late payment of amounts due from
these customers could adversely affect our revenues and financial performance.

The exercise of options or warrants, or the
conversion of preferred stock, may result in dilution to you.

At December 31, 2003,
2,236,269 shares of our common stock were subject to issuance upon exercise of
outstanding warrants, and 8,968,420 shares of our common stock were subject to
issuance upon exercise of outstanding stock options.  As of December 31, 2003, options and warrants to purchase
approximately 4.8 million of shares of our common stock were exercisable at a
weighted average exercise price of $2.13 per share.  In addition, each of the outstanding shares of our Series D
Convertible Preferred Stock is convertible, at the election of the holder, into
20 shares of our common stock (subject to adjustment).  Accordingly, your ownership will be diluted
by the exercise of outstanding stock options and warrants, or the conversion of
outstanding shares of our Series D Convertible Preferred Stock.

Because of our long manufacturing cycle, we
hold significant levels of inventory prior to making sales, which requires us
to use cash in advance of sales and could adversely affect our operating
results and cash flows if sales are generated at a slower rate than anticipated.

Due
to the long manufacturing cycle for our ovens, we hold a significant level of
inventory.  As of December 31, 2003, we
held $371,000 of finished goods inventory (ovens) and $1.1 million of parts and
demonstration inventory.  This process
requires us to use working capital early in the manufacturing cycle and without
any certainty of corresponding sales being made.  In addition, we are party to a contract with our manufacturer of
ovens which requires us Company to purchase a fixed number of ovens.  Should sales of ovens fail to materialize,
or materialize at slower than anticipated rates, additional working capital
will be required to hold component parts and purchase completed ovens and our
operating results will be adversely affected.

We have committed to purchase a fixed
number of ovens from a single manufacturing source, regardless of whether we
have customers for these ovens.

Under
our manufacturing agreement with Shandong Xiaoya Group, which we amended in
October 2003, we are committed to purchase a fixed number of ovens.  We are committed to purchase these ovens,
regardless of whether we have made corresponding sales.  If we are forced to acquire excess inventory
without having made corresponding sales, we may not have the funds necessary to
make the purchases required under the agreement.  If we were to breach the agreement Xiaoya could terminate the
agreement at any time and seek monetary damages.

Our dependence upon outside suppliers and
manufacturers leaves us subject to price increases and delays in receiving
materials or parts.

We
generally do not maintain supply agreements with third parties but instead
purchase components and electronic parts pursuant to purchase orders in the
ordinary course of business.  Some of
our specially-designed components used in our ovens are sourced from a limited
number of suppliers.  We are and will
continue to be substantially dependent on the ability of our suppliers to,
among other things, meet our design, performance and quality specifications,
and will be subject to price increases and failures or delays in receiving
supplies of such components and parts. 
There can be no assurance that we will be

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able
to pass any price increase on to our customers.  Although we believe that our suppliers will continue to meet our
requirements and specifications, and that alternative sources of supply are
available, events beyond our control could have an adverse effect on the cost
or availability of components and electronic parts.  A failure or delay in our supply of components or parts could
adversely affect our profit margin and our ability to meet our delivery
schedules on a timely and competitive basis.

We are subject to the risks and
uncertainties of foreign manufacturing which could interrupt our operations.

All
of our current ovens are manufactured in China.  We are subject to various risks inherent in foreign
manufacturing, including:

| |  | increased credit risks;                                         
| | - | ----------------------------------------------------------------
| |   |                                                                 
| |  | tariffs, duties and other
  trade barriers;                     
| |   |                                                                 
| |  | fluctuations in foreign
  currency exchange rates;              
| |   |                                                                 
| |  | shipping delays; and                                            
| |   |                                                                 
| |  | international political,
  regulatory and economic developments.

Any of these developments
could have a significant impact on our manufacturers ability to deliver our
products, increase our costs of goods and/or interrupt our operations.  If these goods were destroyed or damaged
during shipment, we could lose sales opportunities and our operations and
financial position could be adversely affected.  We are in the process of starting to manufacture some of our
products in the United States as a result of our Subway restaurants
relationship.

We rely heavily
on our senior management and the expertise of management personnel.

Our
operations will depend for the foreseeable future on the efforts of our
executive officers and our other senior management, and any of our executive
officers or senior management can terminate his or her relationship with us at
any time.  Our business and prospects
could be adversely affected if these persons, in significant numbers, do not
perform their key roles as expected, or terminate their relationships with us,
and we are unable to attract and retain qualified replacements.

We may have
trouble integrating new members of senior management team in our organization
and with our existing personnel.

In
connection with the sale of our Series D Convertible Preferred Stock in October
2003, we appointed new officers, including our President and Chief Executive
Officer and our Chief Financial Officer. 
As a result, the members of our senior management team have been with us
for less than a year.  Given the limited
time that our new management team has been part of our company, it is possible
that they will not integrate well within our organization and with our existing
personnel.  In addition, there is no
guarantee that any additional officers that we appoint will integrate well with
these new members of management.  The
failure of our new senior management team to integrate well within our
organization and with our existing personnel would have a significant effect on
our future operations.

The members of our new senior management do
not have prior experience in our industry.

None
of the members of our new executive management team has experience in operating
a business in the rapid cook commercial oven segment of the food service
equipment industry.  There is no
guarantee that these persons will develop the necessary expertise to successfully
operate a business in this industry.  The
failure of our new executive management team to develop this expertise would
have a significant impact on our ability to compete in this industry and to
operate our business effectively.

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We plan to expand rapidly and we may be
unable to manage our growth.

We
intend to rapidly grow our business, but we cannot be sure that we will
successfully manage our growth.  In
order to successfully manage our growth, we must:

| |  | expand and enhance our
  administrative infrastructure;                  
| | - | -------------------------------------------------------------------------
| |   |                                                                          
| |  | improve our management,
  financial and information systems and controls;
| |   |                                                                          
| |  | expand, train and manage
  our employees effectively; and                
| |   |                                                                          
| |  | successfully retain and
  recruit additional employees.                  

Continued growth could place
a further strain on our management, operations and financial resources.  There will also be additional demands on our
sales, marketing, information systems and administrative resources as we
develop and offer new and additional products. 
We cannot assure you that our operating and financial control systems,
administrative infrastructure, facilities and personnel will be adequate to
support our future operations or to effectively adapt to future growth.  If we cannot manage our growth effectively,
our business may be harmed.

Because the market for our products is an
emerging market, we will be required to undertake significant marketing efforts
to achieve market acceptance, the success of which can not be predicted.

The
rapid cook commercial oven segment of the food service equipment industry is an
emerging market.  As is typical with new
products based on innovative technologies, demand for and market acceptance of
our ovens are subject to a high level of uncertainty.  Achieving market acceptance for our ovens will require
substantial marketing efforts and the expenditure of significant funds to
increase the food service industrys familiarity with us and to educate
potential customers as to the distinctive characteristics and perceived
benefits of our ovens and our technologies. 
There can be no assurance that we will have available the funds
necessary to achieve such acceptance or that our efforts will result in
significant commercial acceptance.

If our marketing strategy is not
successful, we will incur significant expenses and our operating results will
be adversely affected.

Historically,
we have engaged a limited direct sales force. 
We intend to incur significant expense to expand our direct sales force.  If our efforts are unsuccessful or our
direct sales force is unable to generate significant additional revenue, we
will incur significant cash expenditures, without achieving a corresponding
increase in revenues, which will adversely affect our operating results and
future prospects.

We are subject to risks associated with developing
products based on innovative technologies, which could delay product
introductions and result in significant capital expenditures.

We
continually seek to refine and improve upon the physical attributes, utility
and performance of our ovens.  Moreover,
we are 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 new applications and
products.  Consequently, there can be no
assurance that we will develop or successfully commercialize ovens incorporating
technology superior to our current oven technology, 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 us, for financial, technical or other
reasons, not to complete development of any product or application, particularly
in instances in which we have made significant capital expenditures, could have
a material adverse effect on our operating results and operations.

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If we are unable to keep up with changing
technology and evolving industry standards, our products may become obsolete.

The
market for our products and technologies is characterized by changing
technology and evolving industry standards. 
We will not be able to compete successfully unless we continually
enhance and improve our existing products, complete development and introduce
to the marketplace in a timely manner our proposed products, adapt our products
to the needs of our customers and potential customers and evolving industry
standards, and continue to improve operating efficiencies and lower
manufacturing costs.  Moreover,
competitors may develop technologies or products that render our products
obsolete or less marketable.

Because of the intense competition in the
market in which we compete and the strength of some of our competitors, we may
not be able to compete effectively.

The
rapid cook segment of the food service equipment market is characterized by
intense competition.  We compete 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, we are aware of
others who are developing, and in some cases have introduced, new ovens based
on high-speed heating methods and technologies.  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
our competitors possess substantially greater financial, marketing, personnel
and other resources than we do, and have established reputations relating to
product design, development, manufacture, marketing and service of cooking
equipment.

A product liability claim in excess of our
insurance coverage or an inability to acquire insurance at commercially
reasonable rates could have a material adverse effect upon our business.

We
are engaged in a business which could expose us to various claims, including
claims by food service operators and their staffs, as well as by consumers, for
personal injury or property damage due to design or manufacturing defects or
otherwise.  We maintain reserves and
liability insurance coverage at levels based upon commercial norms and our
historical claims experience.  A
successful product liability or other claim brought against us in excess of our
insurance coverage or the inability of us to acquire insurance at commercially
reasonable rates could have a material adverse effect upon our business,
operating results and financial condition.

An increase in warranty expenses could
adversely affect our operating results.

We
offer purchasers of our ovens a one-year limited warranty covering the systems
workmanship and materials, during which period we or our authorized service
representative will make repairs and replace parts that have become defective
due to normal use.  We estimate for and
record our future warranty costs based upon past expenses.  Future warranty expenses on the one-year
warranty, however, may exceed our estimates, which, in turn, could have a
material adverse effect on our results of operations.

If we are unable to protect our patents,
trademarks and other intellectual property, our business could be materially
adversely affected.

There
can be no assurance as to the breadth or degree of protection which existing or
future patents, if any, may afford us, that any patent applications will result
in issued patents, that our 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 us.  There can be
no assurance that we will have all of the financial or other resources
necessary to enforce or defend a patent infringement or proprietary rights
violation action.

27

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We
also rely on trade secrets and proprietary know-how and employ various methods
to protect the concepts, ideas and documentation of our proprietary
technologies.  However, those 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 our
know-how, concepts, ideas and documentation.

Furthermore,
although we have and expect to have confidentiality and non-competition
agreements with our employees and appropriate suppliers and manufacturers,
there can be no assurance that these arrangements will adequately protect our
trade secrets or that others will not independently develop products or
technologies similar to ours.

If our products or intellectual property
violate the rights of others, we may become liable for damages.

In
the event our existing or any future products, trademarks, servicemarks, other
proprietary rights infringe patents, trademarks, servicemarks or proprietary
rights of others, we could become liable for damages and may be required to
modify the design of our products, change the name of our products or obtain a
license for the use of our products. 
There can be no assurance that we 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 our ability to manufacture and market our
products.

Our business subjects us to significant
regulatory compliance burdens.

We
are 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 us.  Failure to comply with these regulatory
requirements may subject us to civil and criminal sanctions and penalties.  While we believe that we and our 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.  These
proposals could affect our operations, result in material capital expenditures,
affect the marketability of our existing products and technologies and/or could
limit opportunities for us with respect to modifications of our existing
products or with respect to our new or proposed products or technologies.  In addition, expansion of our operations
into new markets may require us to comply with additional regulatory
requirements.  There can be no assurance
that we 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 us.

We are subject to the risk of financial
loss from foreign currency fluctuations.

Approximately
37% of our revenues are derived from sales outside of the United States.  These sales, as well as salaries of
employees located outside of the United States and approximately 12% of our
other expenses, are denominated in foreign currencies, including British pounds
and the Euro.  We are subject to risk of
financial loss resulting from fluctuations in exchange rates of these
currencies against the U.S. dollar.

We are involved in an arbitration
proceeding which, if the outcome were unfavorable, would adversely affect our
operating results and future operations.

TurboChef filed
for arbitration against Maytag Corporation (Maytag) in Dallas, Texas, on February 2, 2001, in connection with
a series of contracts for research, development and commercialization of certain technology through a joint,
strategic relationship. TurboChef claims damages in excess of $300 million for various contractual breaches, fraud, breach
of the duty of good faith and fair dealing, bad faith, punitive damages and attorney fees, and it seeks an injunction
requiring Maytag to return all rights in intellectual property owned by TurboChef under the parties agreements. In
July 2002, in response to an Iowa court proceeding brought by Maytag which is discussed below, we
filed an amended arbitration claim removing two of our pending claims from the
Texas arbitration. Those claims have been filed in the Boston arbitration
discussed below. Maytag has made certain counterclaims against us in the Texas
arbitration and is seeking in excess of $35 million in damages under its
counterclaims.

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We
believe that Maytags Texas claims are without merit, and we intend to
vigorously defend against Maytags allegations.

In
May 2002, Maytag filed a complaint in Iowa federal court seeking, among other
things, to require that two of our claims originally filed and pending in the
Texas arbitration be decided only in a separate arbitration proceeding in
Boston, Massachusetts. Maytags complaint in the Iowa proceeding also alleges
that we publicized false and misleading statements about Maytags use of our
intellectual property in its residential appliances in a January 2002 press
release and in certain other unidentified statements. Based upon this
allegation, Maytag asserts claims that we caused false advertising with respect
to Maytags goods and services, that we have intentionally interfered with
Maytags prospective business, that we have defamed Maytag and that we have
unfairly competed with Maytag. Unlike Maytags counterclaims in the Texas
arbitration proceeding, its complaint in the Iowa proceeding does not specify
the dollar amount of damages sought. In July 2002, we filed a motion to dismiss
the Maytag complaint or, in the alternative, stay the Iowa proceeding pending
resolution of the Texas arbitration. On July 30, 2002, Maytag filed a Motion
for Leave to File First Amended Complaint adding a claim that TurboChef failed
to pay a promissory note in the amount of $327,478. On January 6, 2003, the
Federal Court in the Iowa proceeding granted a summary judgment against
TurboChef in the amount of $359,372, which is accrued and included in notes
payable on the balance sheet at December 31, 2003 and stayed the remainder
of Maytags claims pending the final resolution of the Texas claims.  In March 2004, we tendered full payment of
the amount of the summary judgment.

Maytag has also initiated arbitration in
Boston, claiming damages in the amount in excess of $1.3 million for failure to
pay for ovens. TurboChef has filed its counterclaim alleging that Maytag
breached its warranty and committed fraud and that TurboChef has been damaged
in an amount in excess of $1.5 million.

The parties had since January 2003 agreed to
stay the proceedings in Dallas and Boston pending the outcome of settlement
negotiations.  In March 2004 we notified
Maytag that we believed negotiations had not produced an acceptable offer of
settlement and we would, therefore, proceed with arbitration. The outcome of
any litigation is uncertain, and an unfavorable outcome could have an adverse
effect on our operating results and future operations. Since the outcomes of
the arbitration proceedings are uncertain, no adjustments have been made to the
financial statements.

Item 7A. Quantitative
and Qualitative Disclosures about Market Risk

For
the years ended December 31, 2003 and 2002, approximately 37% and 26%,
respectively, of the Companys revenues were derived from sales outside of the
United States. These sales and subsequent accounts receivable, the salaries of
employees located outside of the United States and approximately 12% and 15%,
respectively, of selling, general and administrative expenses are denominated
in foreign currencies, principally British Pounds and Euros. The Company is
subject to risk of financial loss resulting from fluctuations in exchange rates
of these currencies against the US dollar. In addition, trade terms with
customers outside of the United States are longer than with customers inside of
the United States, which increases the potential of foreign exchange gains or
losses.

The
Company believes that revenues from sources outside of the United States will
increase during 2004. There is no assurance that the Company will not be subject
to foreign exchange losses in the future.

As
of December 31, 2003, the Company does not have any assets or liabilities other
than those discussed above 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 foreign currency hedging activity.

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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

The
disclosures required have been previously reported on a Form 8-K dated December
30, 2003.

Item 9A. Controls and Procedures

The
Chief Executive Officer (CEO) and the Chief Financial Officer (CFO)
maintain controls and procedures designed to ensure that they are able to
collect the information which is required to be disclosed in reports filed with
the SEC, and to process, summarize and disclose this information within the
time periods specified in the rules of the SEC. The CEO and CFO are responsible
for establishing and maintaining these procedures, and, as required by the
rules of the SEC, evaluate their effectiveness.  An evaluation was carried out under the supervision and with the
participation of the Companys management, including the CEO and CFO, of the
effectiveness of the Companys disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15.  Based on their
evaluation of our disclosure controls and procedures, the CEO and CFO believe
that these procedures are effective to ensure that we are able to collect,
process, and disclose the information we are required to disclose in the
reports we file with the SEC within the required time periods.

Part III

Item 10. Directors and Executive Officers of the
Registrant

Directors

The directors of TurboChef Technologies, Inc. are
as follows:

Richard E. Perlman

Richard
E. Perlman, age 57, has been Chairman of the Board since October 2003.  He was formerly chairman of PracticeWorks,
Inc. from its formation in August 2000 until its acquisition by The Eastman
Kodak Company in October 2003.  Mr.
Perlman served as chairman and treasurer of VitalWorks Inc. from December 1997
and as a director from March 1997 to March 2001, when he resigned from all
positions with that company upon completion of the spin-off of PracticeWorks
from VitalWorks. From December 1997 until October 1998, Mr. Perlman also served
as VitalWorks chief financial officer. Mr. Perlman is the founder of Compass
Partners, L.L.C., a merchant banking and financial advisory firm specializing
in corporate restructuring and middle market companies, and has served as its
president since its inception in May 1995. From 1991 to 1995, Mr. Perlman was
executive vice president of Matthew Stuart & Co., Inc., an investment
banking firm. Mr. Perlman received a B.S. in Economics from the Wharton School
of the University of Pennsylvania and a Masters in Business Administration from
the Columbia University Graduate School of Business.

James K. Price

James K. Price, age 45, has been our President and
Chief Executive Officer and a director since October 2003.  From August 2000 until its acquisition by
The Eastman Kodak Company in October 2003, Mr. Price was the chief executive
officer and a director of PracticeWorks, Inc. Mr. Price was a founder of
VitalWorks Inc. and served as its executive vice president and secretary from
its inception in November 1996 to March 2001, when he resigned from all
positions with VitalWorks upon completion of the spin-off of PracticeWorks from
VitalWorks. Mr. Price served as an executive officer of American Medcare from
1993 and co-founded and served as an executive officer of International Computer
Solutions from 1985, in each instance until American Medcare and International
Computer Solutions merged into VitalWorks in July 1997.  Mr. Price holds a B.A. in Marketing from the
University of Georgia.

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William A. Shutzer

William A. Shutzer, age 57, has been a director of
TurboChef since October 2003. Mr. Shutzer is currently a private investor and financial consultant. Previously, Mr. Shutzer was a Managing
Director of Lehman Brothers, Inc. from October 2000 to November 2003 and a Partner in Thomas Weisel Partners, LLC, an investment banking
firm from September 1999 to October 2000. From March 1994 until October 1996 Mr. Shutzer was Executive Vice President of
Furman Selz, Inc. and thereafter until the end of December 1997, he was its
President.  From January 1998 until September
1999, he was chairman of ING Barings LLCs Investment Banking Group.  From September 1978 until February 1994, Mr.
Shutzer was a Managing Director of Lehman Brothers and its predecessors. From March 2001 to October 2003 he was a director of PracticeWorks, Inc. Mr.
Shutzer is currently a director of Tiffany & Co., Blount International,
Inc., American Financial Group, CSK Auto, Inc., and Jupitermedia Corp. Mr. Shutzer received a B.A. from Harvard
University and an MBA from the Harvard Graduate School of Business.

Raymond H. Welsh

Raymond H. Welsh, age 72,
has been a director of TurboChef since October 2003. Since January 1995, Mr. Welsh has been a Senior
Vice President of UBS/PaineWebber, Incorporated. From March 2001 to October 2003 he was a director of
PracticeWorks, Inc. Mr. Welsh is a Trustee of the University of Pennsylvania, The University of Pennsylvania Health System, and
Chairman of the Medical Center and HealthSystems creating the Future of Medicine
Campaign. Mr. Welsh received a B.S. in Economics from the Wharton School of the
University of Pennsylvania.

J. Thomas Presby

J. Thomas Presby, age 64, became a director of
TurboChef in December 2003.  In June
2002 he retired as a partner with Deloitte & Touche, an international
accounting and consulting firm.  Over a
period of thirty years, Mr. Presby held many positions with Deloitte &
Touche in the United States and Europe, most recently as Deputy Chief Executive
Officer of the U.S. practice of Deloitte Touche Tohmatsu, the global
professional services organization providing accounting advisory, tax and
consulting services, during 2001 and until his retirement in 2002, and before
that as global Deputy Chairman and Chief Operating Officer from 1995.  Mr. Presby served as the Chief Executive
Officer of Deloitte & Touche Central Europe between 1990 and 1995.  During the 1980s, Mr. Presby launched and
served as the Managing Partner of the Financial Services Center, an
industry-focused practice unit of the firm. 
From September 2002 to October 2003 Mr. Presby was a director of PracticeWorks, Inc. He currently is a director of Tiffany & Co.,
Greenpoint Financial Corp. and World Fuel Services Corporation. 
Mr. Presby received a B.S. Electrical Engineering degree from Rutgers,
and a M.S. Industrial Administration degree from Carnegie Mellon University
Graduate School of Business.  He is a
Certified Public Accountant in New York and Ohio.

Sir Anthony
Jolliffe

Sir
Anthony Jolliffe, age 65, became a director of TurboChef in December 2003.  He was previously a director from November
1998 until 2001.  Sir Anthony Jolliffe
is a citizen of the United Kingdom and an independent international business
consultant.  He has an office in China,
where he was appointed Chairman of Special Advisory Board to the Governor of Yunnan
Province.

James W.
DeYoung

James
W. DeYoung, age 60, became a director of TurboChef in December 2003.  Mr. DeYoung is the founder and President of
Winston Partners Incorporated, a corporate and investor relations consulting
firm that was begun in 1984, and a general partner of Resource Ventures L.P., a
private equity/venture fund.  He also is
a Trustee of Rush University Medical Center and Rush North Shore
Medical Center.

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Executive Officers

The executive officers of TurboChef are as
follows:

| | Name                 |  | Position                                           
| | -------------------- |  | ---------------------------------------------------
| |                      |  |                                                    
| | Richard
  E. Perlman |  | Chairman
  of the Board of Directors               
| | James
  K. Price     |  | President
  and Chief Executive Officer            
| | James
  A. Cochran   |  | Senior
  Vice President and Chief Financial Officer

James A. Cochran, age 56, has served as our Senior
Vice President, Assistant Secretary and Chief Financial Officer since October
2003. He served as Chief Financial Officer of PracticeWorks, Inc. from
its formation in August 2000 until its acquisition by The Eastman Kodak Company
in October 2003. He was VitalWorks Inc.s
chief financial officer from August 1999 to March 2001, when he resigned from
all positions with VitalWorks upon completion of the spin-off. From 1992 until
joining VitalWorks, Mr. Cochran was a member of the accounting firm of BDO
Seidman, LLP, serving as a partner since 1995. Mr. Cochran is a Certified
Public Accountant. Mr. Cochran received a B.B.A. in Accounting and an M.B.A. in
Corporate Finance from Georgia State University.

For more information with respect to Messrs.
Perlman and Price, please see the section entitled Directors above.

Audit Committee Financial Expert

Our audit committee consists of Messrs. Presby,
Shutzer and DeYoung, all of whom are independent directors. The audit committee
reviews, acts on and reports to our board of directors on various auditing and
accounting matters, including the election of our independent accountants, the
scope of our annual audits, fees to be paid to the independent accountants, the
performance of our independent accountants and our accounting practices and
internal controls.  The Board of
Directors has determined that J. Thomas Presby, chairman of the Audit
Committee, is an audit committee financial expert and is an independent member
of the Board.

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

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, the
Company believes that during the fiscal year ended December 31, 2003, the
following filings applicable to its executive officers, directors and ten
percent stockholders were late:

Jeffrey
B. Bogatin, a former director and executive officer of the Company and a ten
percent stockholder, filed two late reports on Form 4 for 2003 reporting twenty
six non-derivative transactions and four derivative transactions.

Grand
Cheer Co. Ltd, a ten percent stockholder, filed one late report on Form 4 for
2003 reporting one non-derivative transaction.

OvenWorks,
LLLP, a ten percent stockholder, filed one late report on Form 4 for 2003
reporting one non-derivative transaction.

Oven
Management, Inc., a ten percent stockholder, filed one late report on Form 4
for 2003 reporting one non-derivative transaction.

32

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---

Messrs.
J. Thomas Presby, James W. DeYoung and Sir Anthony Jolliffe, appointed as
directors of the Company in 2003, filed Forms 3 late.

Mr.
Perlman, a director and executive officer, filed one late report on Form 4 for
2003 reporting one derivative transaction (option grant) and one non-derivative
transaction.

Mr.
Price, an executive officer and director, Messrs. Shutzer and Welsh, directors,
and Mr. Cochran, an executive officer, each filed one late report on Form 4
reporting one derivative transaction (option grant).

Code of Ethics

The
Company has adopted a code of ethics that applies to our executive officers,
including our Chairman, Chief Executive Officer, Chief Financial Officer and
Controller.  The Companys code of
ethics (the Ethics Code) is available on the Companys website (www.turbochef.com).  Any amendment to or waiver from the Ethics
Code will be posted on the Companys website as well.

Item 11. Executive Compensation

Compensation

Director Compensation

TurboChefs directors do not currently
receive cash compensation for their services as directors, but are reimbursed
for their reasonable and necessary expenses for attending board and board
committee meetings. Members of the board, who are not TurboChef employees, or
employees of any parent, subsidiary or affiliate of TurboChef, are eligible to
participate in TurboChefs stock option plan. 
Directors who are not employees receive the following one-time grants under the
Companys director compensation plan: 
(1) for membership on the Board each member is granted options to
purchase 100,000 shares of common stock of the Company, the grant of which is
effective on and priced as of the date the director agrees to join the Board; (2) a
director who is a chairman of the Audit Committee, the Compensation Committee
or the Global Initiatives Committee of the Board is granted options to purchase
25,000, 25,000 and 50,000 shares of common stock of the Company, respectively,
the grant of which is effective on and priced as of the date the director agrees to be
appointed chairman; (3) each director who is a member of a committee
constituted by the Board but who is not a chairman is granted options to
purchase 10,000 shares of common stock of the Company, the grant of which is
effective on and priced as of the date the director begins service on the
committee; and (4) options granted under the Board compensation plan shall vest
50% on each of the two anniversaries following their grant date.  In addition,
each Board member is granted options to purchase 25,000 shares of common stock each
year of service, and committee chairman are granted options on an additional 10,000
shares each year. Annual grants are effective on and priced as of the anniversary date of service.

The
following table summarizes compensation awarded to, earned by or paid to the
Companys former and current Chief Executive Officers and its other most highly
compensated executive officers (collectively, the Named Executive Officers)
for services rendered to the Company during each of the last three fiscal
years. No other executive officers of the Company at December 31, 2003 received
compensation in excess of $100,000 during fiscal year 2003.

Annual Compensation

|Name and Principal Position                                         |  | Fiscal Year |      | Salary ($) |         | Bonus ($) |   | Long-Term CompensationAwardsSecurities Underlying Options (# ) |    
|------------------------------------------------------------------- |  | ----------- | ---- | ---------- | ------- | --------- | - | -------------------------------------------------------------- | ---
|                                                                    |  |             |      |            |         |           |   |                                                                |    
|Jeffrey B. Bogatin 
  Former Chairman Chief
  Executive Officer (1) |  |             | 2003 |            | $       | 42,000    |   | $                                                              | -0-
|                                                                    |  | 2002        |      | $          | 153,930 |           | $ | -0-                                                            |    
|                                                                    |  |             | 2001 |            | $       | -0-       |   | $                                                              | -0-
|                                                                    |  |             |      |            |         |           |   |                                                                |    
|Vincent A. GennaroFormer Chief
  Executive Officer (2)              |  |             | 2003 |            | $       | 106,615   |   | $                                                              | -0-
|                                                                    |  | 2002        |      | $          | 36,000  |           | $ | -0-                                                            |    
|                                                                    |  |             | 2001 |            | $       | -0-       |   | $                                                              | -0-
|                                                                    |  |             |      |            |         |           |   |                                                                |    
|Richard E. PerlmanChairman(3)                                       |  |             | 2003 |            | $       | 56,154    |   | $                                                              | -0-
|                                                                    |  |             |      |            |         |           |   |                                                                |    
|James K. Price 
  Chief Executive Officer(4)                        |  |             | 2003 |            | $       | 56,154    |   | $                                                              | -0-
|                                                                    |  |             |      |            |         |           |   |                                                                |    
|Mark C. Mirken 
  Former President  Commercial Sales(5)            |  |             | 2003 |            | $       | 159,231   |   | $                                                              | -0-
|                                                                    |  | 2002        |      | $          | -0      |           | $ | -0-                                                            |    
|                                                                    |  |             | 2001 |            | $       | -0        |   | $                                                              | -0-

|(1) | Mr. Bogatin served as
  Chairman of the Board until October 28, 2003 and principal executive officer
  of the Company from April 15, 2003 to October 28, 2003.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                               
|(2) | Mr. Gennaro served as
  Chief Executive Officer of the Company until April 15, 2003.                                                                          
|    |                                                                                                                                                               
|(3) | Mr. Perlman began serving
  as Chairman on October 28, 2003.                                                                                                  
|    |                                                                                                                                                               
|(4) | Mr. Price began serving as
  Chief Executive Officer on October 28, 2003.                                                                                     
|    |                                                                                                                                                               
|(5) | Mr. Mirken served as an
  executive officer until December 8, 2003.                                                                                           

Executive Agreements

TurboChef
entered into a three-year employment agreement with each of Richard E. Perlman
and James K. Price on substantially the terms described below.  The agreement automatically renews for
additional one-year periods at the end of the initial period and each renewal
period unless notice of non-renewal is given at least six months in
advance.  The employment agreements
provide for an initial annual base salary of $365,000 with a bonus of 2% of
pre-tax profit (but limited to 100% of base salary).  The base salary is subject to an annual adjustment for changes in
the Consumer Price Index. The agreements also provide for a severance payment
equal to three times the executives then current total annual compensation
(base salary, bonus and benefits) upon the termination of the executives
employment by TurboChef without cause or by the executive for good reason or in
the event of a change in control. The employment agreements entitle the
executive to participate in our employee benefit programs and provide for
other customary benefits. In addition, the employment agreements provided for
the grant of stock options on the first day of the executives employment. The
employment agreements provide for 100% vesting of all outstanding stock options
upon a change in control. The employment agreements also provide for an
additional, tax gross-up payment to be made by the Company to the executive in
the event that, upon a change in control, any payments made to the executive
are subject to an excise tax under Section 4999 of the Internal Revenue Code.
Finally, the employment agreements prohibit the executive from engaging in
certain activities which compete with the Company, seeks to recruit its
employees or disclose any of its trade secrets or otherwise confidential
information.

The
Company entered into a written separation agreement with Mr. Mirken in
connection with his termination of employment on December 8, 2003.  Under that agreement, Mr. Mirken is
receiving twelve months of severance at an annual rate of $200,000, and he was
awarded options to purchase 200,000 shares of the Companys Common Stock at an
exercise price of $0.31 per share.  The
options vest one-half on December 8, 2004 and the balance at the second
anniversary.  The agreement includes
certain restrictive covenants applicable against Mr. Mirken.  Severance benefits under this agreement are
subject to forfeiture and repayment for breach of the agreement.

34

---

---

In
connection with the Companys change of control on October 28, 2003, the
Company entered into a series of agreements with Mr. Bogatin under which (1)
the former executive gave certain releases of the Company in exchange for
600,000 shares of Common Stock, (2) the Company accepted for cancellation
800,000 shares of its Common Stock pledged by Mr. Bogatin as collateral for
notes to the Company in the aggregate amount of $2,000,000 plus interest in
exchange for cancellation of the notes, (3) Mr. Bogatin agreed to the
cancellation of 1,503,000 options to purchase Common Stock, comprising all of
his outstanding stock options in the Company, and (4) the Company issued an
additional 1,833,333 shares of Common Stock to Mr. Bogatin in consideration of
his agreement to certain restrictive covenants.

Compensation Committee Interlocks and Insider Participation

The
Company has a Compensation Committee the members of which are Messrs. Shutzer and Welsh, both of whom are
independent directors. Our compensation committee establishes salaries,
incentives and other forms of compensation for officers and other employees.
This committee also administers our incentive compensation and benefit plans.

No
interlocking relationships currently exist, or have existed between our
compensation committee and the board of directors or compensation committee of
any other company.

Option Grants for Fiscal 2003

The
following table sets forth information concerning stock options granted by the
Company to the named executive officers during fiscal 2003 and the potential
realizable value of such option grants. 
The Company has granted no stock appreciation rights.

INDIVIDUAL
GRANTS

|Name                 |  | Number of
  Shares of
  Common Stock Underlying
  Options Granted |           | % of Total
  Options
  Granted to
  Employees
  in 2003 |  | Exercise
  Price
  $/Share) |       | Expiration
  Date |  | Potential Realizable Value at
  Assumed Annual Rates of Stock
  Price Appreciation for
  Option Term(1) |     
|-------------------- |  | ----------------------------------------------------------------- | --------- | ------------------------------------------------------- |  | --------------------------- | ----- | ----------------- |  | ------------------------------------------------------------------------------------------------------- | ----
|                     | 
|5%                   |  | 10%                                                               |          
|                     |  |                                                                   |           |                                                         |  |                             |       |                   |  |                                                                                                         |     
|                     |  |                                                                   |           |                                                         |  |                             |       |                   |  |                                                                                                         |     
|Jeffrey B.
  Bogatin |  |                                                                   | -0-       |                                                         |  |                             | -0-   |                   |  |                                                                                                         |     
|                     |  |                                                                   |           |                                                         |  |                             |       |                   |  |                                                                                                         |     
|Vincent A. Gennaro   |  |                                                                   | -0-       |                                                         |  |                             | -0-   |                   |  |                                                                                                         |     
|                     |  |                                                                   |           |                                                         |  |                             |       |                   |  |                                                                                                         |     
|Richard
  E. Perlman |  |                                                                   | 1,250,000 | (2)                                                     |  |                             | 18.42 | %                 |  |                                                                                                         | 1.75
|                     |  |                                                                   |           |                                                         |  |                             |       |                   |  |                                                                                                         |     
|James
  K. Price     |  |                                                                   | 1,250,000 | (2)                                                     |  |                             | 18.42 | %                 |  |                                                                                                         | 1.75
|                     |  |                                                                   |           |                                                         |  |                             |       |                   |  |                                                                                                         |     
|Mark
  C. Mirken     |  |                                                                   | 200,000   | (3)                                                     |  |                             | 2.95  |                   |  |                                                                                                         | 0.31

| |    
| | ---
| |    
| | (1)
| | (2)

35

---

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| | (3) | The
  options vest one half on December 8, 2004 and the other half on December 8,
  2005.  Market value of the Common
  Stock on the grant date was $3.30.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

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

Shown
below is information with respect to the number of TurboChef common shares
acquired upon exercise of stock options and the aggregate gains realized on
exercises during 2003 for the named executive officers. The table also sets
forth the number of shares covered by exercisable and unexercisable options
held by these executive officers on December 31, 2003 and the aggregate gains
that would have been realized had these options been exercised on December 31,
2003, even though these options were not exercised, and the unexercisable
options could not have been exercised at that time.

Aggregated Option Exercises in

Last Fiscal Year and Fiscal Year End Option Value

|Name                   |  | Shares
  Acquired
  on Exercise |   | Value Realized
  (Market Price
  at Exercise Less
  Exercise Price) |  | Number of Unexercised Options
  At Fiscal Year-End |   | Value of Unexercised In-The-Money Options At Fiscal Year-
  End (1) | 
|---------------------- |  | ------------------------------- | - | ------------------------------------------------------------------- |  | -------------------------------------------------- | - | ------------------------------------------------------------------- | 
|                       |  |                                 |  
|Exercisable            |  | Unexercisable                   |   | Exercisable                                                         |  | Unexercisable                                      |  
|                       |  |                                 |   |                                                                     |  |                                                    |   |                                                                     | 
|Jeffrey B. Bogatin (2) |  |                                 |  |                                                                     |  |                                                    | $ | -0-                                                                 | 
|Vincent A. Gennaro     |  |                                 |  |                                                                     |  |                                                    | $ | -0-                                                                 | 
|Richard E. Perlman     |  |                                 |  |                                                                     |  |                                                    | $ | -0-                                                                 | 
|James K. Price         |  |                                 |  |                                                                     |  |                                                    | $ | -0-                                                                 | 
|Mark C. Mirken         |  |                                 |  |                                                                     |  |                                                    | $ | -0-                                                                 | 
|                       |  |                                 |   |                                                                     |  |                                                    |   |                                                                     | 

| | (1) | Options are in the money
  if the fiscal year-end fair market value of the Common Stock exceeds the
  option exercise price. At December 31, 2003, TurboChef common stocks closing
  bid was $3.10
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                      
| | (2) | Mr. Bogatin resigned as a
  Director and Chairman on October 28, 2003. All outstanding options were
  cancelled in connection with his separation.                                                   

Item 12. Security Ownership of Certain Beneficial
Owners and Management

Security Ownership

Five Percent
Owners

The
following table sets forth information, as of March 1, 2004, as to shares of
our capital stock held by persons known to us to be the beneficial owners of
more than five percent of any class of our capital stock based upon information
publicly filed by such persons:

36

---

---

|Title of Class                |  | Name and Address ofBeneficial Owner of Class                                                                     |  | Amount of Beneficial Ownership |           | Percent ofClass
|----------------------------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | --------- | ---------------
|                              |  |                                                                                                                  |  |                                |           |                
|Common                        |  | Jeffrey
  B. Bogatin 
  888 Park
  Avenue New York,
  NY  10021                                                  |  | 5,086,201                      | (1)       |                
|Common                        |  | Grand
  Cheer Co. Ltd.
  16F Standard Chartered 
  Bank Bldg 
  4-4A Des
  Voeux Road Central Hong
  Kong K3     |  | 3,663,589                      | (2)       |                
|Common                        |  | Donald
  J. Gogel 
  c/o
  Clayton, Dubilier &
  Rice, Inc. 375 Park Avenue
  18th
  Floor New York,
  NY  10152 |  | 2,097,744                      | (3)       |                
|Series D Preferred
  (Common) |  | OvenWorks, LLLP 
  645
  Madison Avenue Suite 1500
  New York, NY  10022                                         |  | 1,917,650
  (50,766,379)       | (4)
  (5) |                

| | (1) | Based
  upon ownership reported in a Form 4 filed on February 13, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | Based
  upon ownership reported in a Form 4 filed on March 5, 2004.  Includes 800,000 shares issuable upon
  exercise of a warrant.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (3) | Based
  upon ownership reported in a Form 4 filed on October 30, 2003.  Includes 264,550 shares issuable upon
  exercise of warrants. Includes 83,000 shares held in a family trust of which.
  Mr. Gogel is a trustee. Mr. Gogel disclaims beneficial ownership of the
  shares held by the family trust.                                                                                                                                                                                                                                                                                                                                                                            
| | (4) | Based
  upon a Schedule 13D filed on November 7, 2003.  Oven Management, Inc. is the sole general partner of OvenWorks,
  LLLP.  Richard Perlman, Chairman of
  the Company, is the sole shareholder, sole director and President of Oven
  Management, Inc.  By its terms, the
  Series D Preferred stock is convertible at any time (subject to adjustment)
  into 20 shares of Company Common Stock for each preferred share.  The Company currently does not have
  sufficient authorized Common Stock to reserve for conversion of all
  outstanding shares of Series D Preferred Stock.  The preferred stock held would be convertible into 38,353,000
  shares of Common Stock.
| | (5) | Includes
  the following shares of Common Stock over which OvenWorks, LLLP has the right
  to vote, for limited purposes, pursuant to voting agreements:  8,749,790 shares beneficially owned by
  Messrs. Bogatin and Gogel (or their transferees) and 3,663,589 shares beneficially owned by Grand
  Cheer Co. Ltd. (or its transferee) (see footnotes 1, 2 and 3 and accompanying table entries).                                                                                                                                                                                                                                                                                  

Officers and Directors

The
following table sets forth information concerning the shares of TurboChef
Common Stock (and Series D Preferred Stock, where indicated) that are
beneficially owned by the following individuals:

| |  | each of TurboChefs
  directors;                                 
| | - | -----------------------------------------------------------------
| |   |                                                                  
| |  | each of TurboChefs named
  executive officers; and              
| |   |                                                                  
| |  | all of TurboChefs
  directors and executive officers as a group.

Unless
otherwise indicated, the listing is based on the number of TurboChef common
shares held by such beneficial owners as of March 1, 2004. Unless otherwise
indicated in the footnotes to this table and subject to community property laws
where applicable, the Company believes that each of the stockholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned.

The
number of shares shown as beneficially owned by each beneficial owner in the
table below includes shares that can be acquired by that beneficial owner
through stock option exercises on or prior to April 30, 2004. In calculating
the percentage owned by each beneficial owner, the Company assumed that all
stock options that are exercisable by that

37

---

---

person
on or prior to April 30, 2004 are exercised by that person and the underlying
shares issued. The total number of shares outstanding used in calculating the
percentage owned assumes no exercise of options held by other beneficial
owners.  Likewise, beneficial ownership
of certain officers and directors is shown as if shares of Series D Preferred
Stock has been distributed by OvenWorks, LLLP to its partners, and the
officer or director (but no one else) has converted such preferred shares into
shares of Common Stock.

|Name
        of Beneficial Owner                                                       |  | Amount and Nature
        of Beneficial
        Ownership (1) |           | Percent
        of
        Class
|-------------------------------------------------------------------------------------- |  | ------------------------------------------------------------- | --------- | --------------------------------
|                                                                                       |  |                                                               |           |                                 
|Richard
        E. Perlman                                                             |  |                                                               | 6,352,591 | (2)                             
|James
        K. Price                                                                 |  |                                                               | 6,352,591 | (3)                             
|J.
        Thomas Presby                                                               |  |                                                               | 425,000   | (4)                             
|William
        A. Shutzer                                                             |  |                                                               | 6,142,215 | (5)                             
|Raymond
        H. Welsh                                                               |  |                                                               | 717,205   | (6)                             
|Sir
        Anthony Jolliffe                                                           |  |                                                               | 362,505   | (7)                             
|James
        W. DeYoung                                                               |  |                                                               | 717,205   | (8)                             
|Mark
        C. Mirken                                                                 |  |                                                               | 613,846   | (9)                             
|Jeffrey
        B. Bogatin                                                             |  |                                                               | 5,086,201 | (10)                            
|Vincent
        A. Gennaro                                                             |  |                                                               | -0-       |                                 
|All
        current directors and executive officers as a group (8
           persons) |  |                                                               | 9,586,371 | (11)                            

|(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. Percentages herein assume a base of
  25,726,541 shares of common stock outstanding as of March 1, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  |  | Includes 208,333 shares of
  Common Stock issuable upon exercise of options and 6,042,092 shares issuable upon
  conversion of 302,105 shares of Series D Preferred Stock currently owned by OvenWorks, LLLP 
  and 102,166 shares issuable upon conversion of 5,108 shares of Series D Preferred Stock currently
  owned by Oven Management Inc., the general partner of OvenWorks. Excludes
  all other shares issuable upon conversion of Series D Preferred Stock held by
  OvenWorks, LLLP, although Mr. Perlman is the sole stockholder of Oven Management Inc., the general
  partner of OvenWorks. OvenWorks owns and controls an aggregate of 1,917,650
  shares of Series D Preferred Stock convertible into 38,353,000 shares of
  common stock.  On a fully converted
  basis, OvenWorks would own and control 59.85% of the Common Stock and Mr.
  Perlman would control 59.98%. Current directors and executive officers (or their affiliates) would have
  beneficial ownership of an aggregate of 21,356,763 shares of the Companys
  common stock if OvenWorks distributed such shares to its partners.
|(3)  |  | Includes 208,333 shares of
  Common Stock issuable upon exercise of options and 6,144,258 shares issuable
  upon conversion of 307,213 shares of Series D Preferred Stock currently owned
  by OvenWorks, LLLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(4)  |  | Shares issuable upon
  conversion of 21,251 shares of Series D Preferred Stock currently owned by OvenWorks, LLLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(5)  |  | Shares issuable upon
  conversion of 307,111 shares of Series D Preferred Stock currently owned by OvenWorks, LLLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(6)  |  | Shares issuable upon
  conversion of 35,860 shares of Series D Preferred Stock currently owned by OvenWorks, LLLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(7)  |  | Includes 150,000 shares of
  Common Stock issuable upon exercise of options and 212,505 shares issuable
  upon conversion of 10,625 shares of Series D Preferred Stock currently owned
   by OvenWorks, LLLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(8)  |  | Shares issuable upon
  conversion of 35,860 shares of Series D Preferred Stock currently owned by OvenWorks, LLLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(9)  |  | Shares issuable upon
  exercise of options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(10) |  | See footnote
  1 to 5% ownership table above and accompanying table entries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(11) |  | Includes 633,333 shares
  issuable upon exercise of options and 8,953,038 shares issuable upon
  conversion of shares of Series D Preferred Stock currently owned by
  OvenWorks, LLLP.  Excludes 12,258,833
  shares that would be issuable upon conversion of additional shares of Series
  D Preferred Stock that would be beneficially owned by all current directors and executive
  officers as a group (or their affiliates) if OvenWorks distributed such stock to its partners
  and the Company had sufficient authorized Common Stock to issue in conversion.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

38

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EQUITY COMPENSATION PLAN INFORMATION

The
following table sets forth as of December 31, 2003, information about our
equity compensation plans.

|Plan category                                                                |  | Number of securities
  to be issued upon
  exercise of outstanding
  options, warrants and
  rights |           | Weighted-average
  exercise price of
  outstanding options,
  warrants and rights |  | Number of securities
  remaining available for
  future issuance under
  equity compensation plans
  (excluding securities
  reflected in first column) |  
|---------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------- | --------- | --------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------- | -
|Equity
  compensation 
       plans approved by 
       security holders     |  |                                                                                                     | 2,273,920 |                                                                                   |  |                                                                                                                                                         | $
|                                                                             |  |                                                                                                     |           |                                                                                   |  |                                                                                                                                                         |  
|Equity
  compensation 
       plans not approved 
       by security holders |  |                                                                                                     | 6,411,000 |                                                                                   |  |                                                                                                                                                         |  
|Total                                                                        |  |                                                                                                     | 8,684,920 |                                                                                   |  |                                                                                                                                                         | $

Item 13. Certain Relationships and Related Transactions

In
July 2002, the Company issued a non-interest bearing promissory note in the
amount of $1,000,000 to Grand Cheer Company Limited (Grand Cheer), a
principal stockholder of the Company, which was secured by 350 ovens. The
Company agreed to pay approximately $2,800 per oven upon five days of receipt
of cash from the sale of the ovens. All of the ovens were sold and cash was
received but no payment was made to Grand Cheer. The note was due on October
15, 2002. The note also provided that if the Company did not repay the note in
full by October 15, 2002, all remaining unvested warrants (666,667 warrants)
previously issued to Grand Cheer would immediately vest. The Company incurred a
non-cash finance charge of $200,000 which was payable by offsetting the
exercise price of the 1,000,000 warrants previously issued to Grand Cheer upon
its purchase of the Companys Series B Convertible Preferred Stock. The
$200,000 finance charge was recorded as interest expense during the third
quarter of 2002. Contemporaneously
with its October 2003 private placement, the Company entered into a Settlement
and Release Agreement with Grand Cheer to resolve claims relating to the note.
In connection therewith, Grand Cheer exercised its rights to convert all of its
shares of the Companys Series B Preferred Stock, plus all accrued and unpaid
dividends thereon, into 2,024,986 shares of the Company's Common Stock, agreed
to reduce from 1,000,000 to 800,000 the number of shares of the Company's
common stock issuable upon exercise of Grand Cheer's warrants and the Company
agreed to pay Grand Cheer $1,200,000 in cash from the proceeds of the
transaction, and issue to Grand Cheer 652,288 shares of its Common Stock. On
November 4, 2003 the Company paid Grand Cheer $1,200,000 to settle its
obligations under the note.

39

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---

On
October 28, 2003, OvenWorks, LLLP entered into a Stock Purchase Agreement with
TurboChef (the Stock Purchase Agreement), for the purchase of 1,932,650
shares of the Companys Series D Preferred Stock.  The source of funds used for the acquisition of shares of Series
D Preferred Stock by OvenWorks was capital contributions from the funds of the
limited partners of OvenWorks, who include all of the current directors of the
Company as well as James A. Cochran, an executive officer of the Company.  The general partner of OvenWorks is Oven
Management, Inc., a corporation controlled by Richard Perlman, Chairman of the
Company.  Percentage interests in
OvenWorks by each of the directors and Mr. Cochran are detailed below.

Ownership
Interest in OvenWorks, LLLP

|Name of
  Management Member      |  | Ownership
  Percentage in OvenWorks, LLLP
  (approximate)
|-------------------------------- |  | ---------------------------------------------------------
|                                 |  |                                                          
|Richard E. Perlman,
  Chairman   |  | 16.02                                                    
|James K. Price, CEO              |  | 16.02                                                    
|William A. Shutzer,
  director   |  | 16.01                                                    
|Raymond Welsh, director          |  | 1.87                                                     
|J. Thomas Presby, director       |  | 1.11                                                     
|James DeYoung, director          |  | 1.87                                                     
|Sir Anthony Jolliffe,
  director |  | 0.55                                                     
|James A. Cochran, CFO            |  | 2.49                                                     

______________

*   Includes the interest held by Oven Management Inc.

As
a condition to OvenWorks entering into the Stock Purchase Agreement, Jeffrey J.
Bogatin and Donald J. Gogel, each a holder of more than 5% of the Companys
Common Stock and former Chairman and director, respectively, of the Company,
and Grand Cheer Company Limited, a holder of more than 5% of the Companys
Common Stock, each entered into a Voting Agreement with OvenWorks (together,
the Voting Agreements).  Pursuant to
the terms of the Voting Agreements, and the accompanying irrevocable proxies of
each of Messrs. Bogatin and Gogel and Grand Cheer delivered pursuant thereto,
OvenWorks and Oven Management, Inc. have been appointed as proxies and
attorneys-in-fact to exercise certain limited voting and related rights with
respect to the respective shares of Common Stock owned by each such stockholder
and the shares of Common Stock which may thereafter be beneficially owned by
each of them.  The voting rights granted
under the Voting Agreements are limited to matters that may be voted upon in
support of the preferred stock purchase and any vote for an amendment to the
Companys Certificate of Incorporation to increase the number of shares of
authorized Common Stock. The Voting Agreements will terminate on the date of
approval by the Companys stockholders of such an amendment that increases the
number of authorized shares of Common Stock to a number that permits the
reservation by the Company, pursuant to the terms of the Certificate of
Incorporation, of a sufficient number of shares of Common Stock to permit the
conversion of all shares of Series D Preferred Stock held by OvenWorks.

In
connection with the Stock Purchase Agreement, the Company, OvenWorks, and
Messrs. Bogatin and Gogel entered into a Stockholders Agreement dated as of
October 28, 2003, which was amended on November 21, 2003 (the Stockholders
Agreement).  Pursuant to the terms of
the Stockholders Agreement:  (a)
Messrs. Bogatin and Gogel agreed to a general 18-month prohibition on the
transfer of their shares of capital stock of the Company and to a right of
first refusal in favor of the Company and OvenWorks, subject to certain
exceptions, including a quarterly trading allowance of 100,000 shares per
calendar quarter for Mr. Bogatin and a monthly trading allowance of 10% of the
average daily trading volume of the Companys Common Stock for Mr. Gogel; (b)
upon the request of holders of at least 20% of the shares of Series D Preferred
Stock, the holders of shares of Series D Preferred Stock may make two demands
on the Company to register all or a portion of the Series D Preferred Stock, or
the Common Stock into which the shares of Series D Preferred Stock may be
converted; and (c) the holders of shares of Series D Preferred Stock and Mr.
Bogatin are entitled to unlimited piggy-back registration rights on registrations
of the Company.

40

---

---

Item 14. Principal Accountant Fees and Services

Audit
Fees and All Other Fees

Audit Fees

Fees
for audit services totaled approximately $165,000 in 2003 and approximately
$109,000 in 2002, including fees associated with the annual audit, the reviews
of the Companys quarterly reports on Form 10-Q and annual reports on Form
10-K.

Audit-Related Fees

Fees
for audit related services totaled approximately $12,000 in 2003 and
approximately $28,000 in 2002. Audit related services principally include accounting consultations.

Tax Fees

The
Company did not pay its principal accountant any fees for tax services,
including tax compliance, tax advice and tax planning, in 2003 or in 2002.

All Other Fees

The
Company did not pay its principal accountant any other fees in 2003 or in 2002.

The Audit Committee pre-approves all services for which the principal accountant is engaged.

We have been advised by Ernst & Young LLP
that neither the firm, nor any member of the firm, has any financial interest,
direct or indirect, in any capacity in the Company or its subsidiaries.

Part IV

PART IV

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

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

1.     Financial
Statements.

|Description                                                                                         |  | Page
|--------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                    |  |     
|                                                                                                    |  |     
|Report
  of Independent Auditors                                                                    |  | F-2 
|Report
  of Independent Certified Public Accountants                                                |  | F-3 
|Balance
  Sheets as of December 31, 2003 and 2002                                                   |  | F-4 
|Statements
  of Operations for the years ended December 31, 2003, 2002 and 2001                     |  | F-5 
|Statements
  of Stockholders Equity (Deficit) for the years ended December 31, 2003, 2002 and 2001 |  | F-6 
|Statements
  of Cash Flows for the years ended December 31, 2003, 2002 and 2001                     |  | F-8 
|Notes
  to Consolidated Financial Statements                                                        |  | F-9 

41

---

---

2.     Financial
Statement Schedules.

The
following Financial Statement Schedule for the Registrant is filed as part of
this Report and should be read in conjunction with the Registrants Financial
Statements:

|Description                                       |  | Page
|------------------------------------------------- |  | ----
|                                                  |  |     
|Schedule
  II  Valuation and Qualifying Accounts |  | S-1 

Schedules
other than the one listed above are omitted as the required information is
inapplicable or the information is presented in the consolidated financial
statements or related notes.

3.     Exhibits.

The
following exhibits are required to be filed with this Report by Item 601 of
Regulation S-K:

|Exhibit No. |      |  |   | Description
|----------- | ---- |  | - | -----------
|            |      |  |   |            
|            | 2.1  |  |  |            
|            |      |  |   |            
|            | 3.1  |  |  |            
|            |      |  |   |            
|            | 3.2  |  |  |            
|            |      |  |   |            
|            | 3.3  |  |  |            
|            |      |  |   |            
|            | 3.4  |  |  |            
|            |      |  |   |            
|            | 3.5  |  |  |            
|            |      |  |   |            
|            | 3.6  |  |  |            
|            |      |  |   |            
|            | 4.1  |  |  |            
|            |      |  |   |            
|            | 4.2  |  |  |            
|            |      |  |   |            
|            | 10.1 |  |  |            

42

---

---

|              |        |  |            
|------------- | ------ |  | -----------
|Exhibit
  No. |        |  | Description
|              |        |  |            
|              |        |  |            
|              | 10.2   |  |           
|              |        |  |            
|              | 10.3   |  |           
|              |        |  |            
|              | 10.4   |  |           
|              |        |  |            
|              | 10.5   |  |           
|              |        |  |            
|              | 10.6   |  |           
|              |        |  |            
|              | 10.7   |  |           
|              |        |  |            
|              | 10.8   |  |           
|              |        |  |            
|              | 10.9*  |  |           
|              |        |  |            
|              | 10.10  |  |           
|              |        |  |            
|              | 10.11* |  |           
|              |        |  |            
|              | 10.12  |  |           
|              |        |  |            
|              | 10.13  |  |           

43

---

---

|              |        |  |            
|------------- | ------ |  | -----------
|Exhibit
  No. |        |  | Description
|              |        |  |            
|              |        |  |            
|              | 10.14  |  |           
|              |        |  |            
|              | 10.15  |  |           
|              |        |  |            
|              | 10.16  |  |           
|              |        |  |            
|              | 10.17  |  |           
|              |        |  |            
|              | 10.18  |  |           
|              |        |  |            
|              | 10.19* |  |           
|              |        |  |            
|              | 10.20  |  |           
|              |        |  |            
|              | 10.21  |  |           
|              |        |  |            
|              | 10.22  |  |           
|              |        |  |            
|              | 10.23  |  |           
|              |        |  |            
|              | 10.24  |  |           
|              |        |  |            
|              | 10.25  |  |           
|              |        |  |            
|              | 10.26  |  |           
|              |        |  |            
|              | 10.27  |  |           
|              |        |  |            
|              |        |  |            
|              | 23.1   |  |           
|              |        |  |            
|              | 23.2   |  |           
|              |        |  |            
|              | 24.1   |  |           

44

---

---

|              |      |  |            
|------------- | ---- |  | -----------
|Exhibit
  No. |      |  | Description
|              |      |  |            
|              |      |  |            
|              | 31.1 |  |           
|              |      |  |            
|              | 31.2 |  |           
|              |      |  |            
|              | 32.1 |  |           
|              |      |  |            
|              | 32.2 |  |           
|              |      |  |            

---

|* | Portions of these
  documents have been omitted and filed separately with the Securities and
  Exchange Commission pursuant to a request for confidential treatment of the
  omitted portions.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  |                                                                                                                                                                                               

(b)          Reports
on Form 8-K:

The
following reports on Form 8-K were filed or furnished by the Registrant during
the fourth quarter of the fiscal year covered by this Report:

|Date
  Filed      |  | Items
  Reported |                                             | Financial Statements Filed
|----------------- |  | ---------------- | ------------------------------------------- | --------------------------
|                  |  |                  |                                             |                           
|November 10, 2003 |  | Item 1          | Changes in Control of
  Registrant          |                           
|                  |  | Item 5          | Other Events                                |                           
|                  |  | Item 7          | Financial Statements, Pro
  Forma Financial |                           
|                  |  |                  | Information and Exhibits                    |                           
|                  |  | Item 9          | Regulation FD Disclosure                    |                           

45

---

---

SCHEDULE
IITURBOCHEF
TECHNOLOGIES, INC.VALUATION AND
QUALIFYING ACCOUNTS

|                                              | Balance atBeginningof Year |  | Charged toCosts andExpenses |        | Charged toOtherAccounts |   | Deductions |  | Balance atEnd ofYear |  
|--------------------------------------------- | -------------------------- |  | --------------------------- | ------ | ----------------------- | - | ---------- |  | -------------------- | -
|
|Allowance for Doubtful Accounts               |                            |  |                             |        |                         |   |            |  |                      |  
|Year ended December 31, 2003                  |                            |  | $                           | 169    |                         | $ | 101        |  | $                    | 
|Year ended December 31, 2002                  |                            |  |                             | 70     |                         |   | 100        |  |                      | 
|Year ended December 31, 2001                  |                            |  |                             | 86     |                         |   |           |  |                      | 
|Deferred Income Tax Asset Valuation Allowance |                            | 
|Year ended December 31, 2003                  |                            |  |                             | 14,373 |                         |   | 4,789      |  |                      | 
|Year ended December 31, 2002                  |                            |  |                             | 12,454 |                         |   | 1,919      |  |                      | 
|Year ended December 31, 2001                  |                            |  |                             | 10,548 |                         |   | 1,906      |  |                      | 

---

All
financial statement schedules not listed are omitted because they are
inapplicable or the requested information is shown in the financial statements
of the Registrant or in the related notes to the consolidated financial
statements.

S-1

---

---

SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on this 29th day of March, 2004.

| | TURBOCHEF TECHNOLOGIES, INC.         
| | -------------------------------------
| |                                      
| | By: /s/ James K. Price               
| |                                      
| | James K. Price                       
| | President and Chief Executive Officer

POWER OF ATTORNEY

KNOW
ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints James K. Price and Richard E. Perlman, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Annual Report on
Form 10-K, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
his or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof. Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant in the capacities and on the dates indicated.

|Signature              |  | Title                                                                                                                     |  | Date          
|---------------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | --------------
|                       |  |                                                                                                                           |  |               
|                       |  |                                                                                                                           |  |               
|/s/ Richard E. Perlman |  |                                                                                                                           |  |               
|Richard E. Perlman     |  | Chairman
  of the Board and Director                                                                                      |  | March 29, 2004
|                       |  |                                                                                                                           |  |               
|/s/ James K. Price     |  |                                                                                                                           |  |               
|James K. Price         |  | Chief
  Executive Officer, President and Director (Principal
  Executive Officer)                                         |  | March 29, 2004
|/s/ James A. Cochran   |  |                                                                                                                           |  |               
|James A. Cochran       |  | Senior
  Vice President, Assistant Secretary and Chief
  Financial Officer (Principal Financial and Accounting
  Officer) |  | March 29, 2004
|/s/ William A. Shutzer |  |                                                                                                                           |  |               
|William A. Shutzer     |  | Director                                                                                                                  |  | March 29, 2004
|                       |  |                                                                                                                           |  |               
|/s/ Raymond H. Welsh   |  |                                                                                                                           |  |               
|Raymond H. Welsh       |  | Director                                                                                                                  |  | March 29, 2004
|                       |  |                                                                                                                           |  |               
|/s/ J. Thomas Presby   |  |                                                                                                                           |  |               
|J. Thomas Presby       |  | Director                                                                                                                  |  | March 29, 2004
|                       |  |                                                                                                                           |  |               
|/s/ James W. DeYoung   |  |                                                                                                                           |  |               
|James W. DeYoung       |  | Director                                                                                                                  |  | March 29, 2004
|                       |  |                                                                                                                           |  |               
|/s/ Anthony Jolliffe   |  |                                                                                                                           |  |               
|Sir Anthony Jolliffe   |  | Director                                                                                                                  |  | March 29, 2004

46

---

---

INDEX TO FINANCIAL STATEMENTS

|Report of
  Independent Auditors                     | F-2                                                                                                       
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------------
|Report of Independent
  Certified Public Accountants | F-3                                                                                                       
|                                                     |                                                                                                           
|Financial Statements:                                |                                                                                                           
|                                                     | Balance
  Sheets as of December 31, 2003 and 2002                                                         
|                                                     | Statements
  of Operations for the years ended December 31, 2003, 2002 and 2001                           
|                                                     | Statements
  of Stockholders Equity (Deficit) for the years ended December 31, 2003,
       2002 and 2001
|                                                     | Statements
  of Cash Flows for the years ended December 31, 2003, 2002 and 2001                           
|                                                     | Notes to
  Financial Statements                                                                           

F-1

---

---

Report of Independent Auditors

We have audited the balance sheet of TurboChef Technologies, Inc. as of
December 31, 2003, and the related statements of operations, stockholders
equity (deficit), and cash flows for the year then ended.  Our audit also included the financial statement schedule listed
in the Index at Item 15(a)2. These financial statements and schedule are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the 2003 financial statements referred to above present
fairly in all material respects, the consolidated financial position of
TurboChef Technologies, Inc. at December 31, 2003 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. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

/s/ Ernst & Young LLP

Atlanta, Georgia
March 19, 2004

F-2

---

---

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, 2002, and the related statements of
operations, stockholders equity (deficit), and cash flows for each of the two
years in the period ended December 31, 2002. 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 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 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, 2002, and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
2002 in conformity with accounting principles generally accepted in the United
States of America.

The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 1, the Companys
recurring losses from operations, default on certain of its debts and its
continued dependence on access to external financing and need for additional
sales raise substantial doubt about its ability to continue as a going concern.
Management plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

BDO Seidman, LLP

Dallas, Texas
March 15, 2003

F-3

---

---

TurboChef Technologies, Inc.
Balance Sheets
(In thousands, except share data)

|                                                                                                                                                    |  | December 31, |        
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | -------
|                                                                                                                                                    |  |              |        
|                                                                                                                                                    |  | 2003         |        
|                                                                                                                                                    |  |              |        
|Assets                                                                                                                                              |  |              |        
|                                                                                                                                                    |  |              |        
|Current
  assets:                                                                                                                                   |  |              |        
|Cash and
  cash equivalents                                                                                                                         |  | $            | 8,890  
|Accounts
  receivable, net of allowance of $219 and $169, respectively                                                                              |  |              | 515    
|Other
  receivables, net                                                                                                                            |  |              | 8      
|Inventory                                                                                                                                           |  |              | 1,470  
|Prepaid
  expenses                                                                                                                                  |  |              | 290    
|                                                                                                                                                    |  |              |        
|                                                                                                                                                    |  |              |        
|Total
  current assets                                                                                                                              |  |              | 11,173 
|                                                                                                                                                    |  |              |        
|Property and
  equipment, net                                                                                                                       |  |              | 101    
|                                                                                                                                                    |  |              |        
|Other assets                                                                                                                                        |  |              | 157    
|                                                                                                                                                    |  |              |        
|                                                                                                                                                    |  |              |        
|Total assets                                                                                                                                        |  | $            | 11,431 
|                                                                                                                                                    |  |              |        
|                                                                                                                                                    |  |              |        
|Liabilities and Stockholders Equity (Deficit)                                                                                                      |  |              |        
|                                                                                                                                                    |  |              |        
|Current
  liabilities:                                                                                                                              |  |              |        
|Accounts
  payable                                                                                                                                  |  | $            | 314    
|Other
  payables                                                                                                                                    |  |              | 1,445  
|Accrued
  expenses                                                                                                                                  |  |              | 841    
|Notes
  payable                                                                                                                                     |  |              | 380    
|Deferred
  revenue                                                                                                                                  |  |              | 295    
|Accrued
  warranty and upgrade costs                                                                                                                |  |              | 928    
|                                                                                                                                                    |  |              |        
|                                                                                                                                                    |  |              |        
|Total
  current liabilities                                                                                                                         |  |              | 4,203  
|                                                                                                                                                    |  |              |        
|Commitments
  and contingencies                                                                                                                     |  |              |        
|                                                                                                                                                    |  |              |        
|Convertible,
  redeemable preferred stock                                                                                                           |  |              | 12,605 
|                                                                                                                                                    |  |              |        
|Stockholders
  equity (deficit):                                                                                                                   |  |              |        
|Preferred
  stock, $1 par value, authorized 5,000,000 shares, issued 30,000 shares at
  December 31, 2002                                           |  |              |       
|Common
  stock, $.01 par value, authorized 50,000,000 shares, issued 25,474,018 and
  19,058,526 shares at December 31, 2003 and 2002, respectively |  |              | 255    
|Additional
  paid-in capital                                                                                                                        |  |              | 55,460 
|Accumulated
  deficit                                                                                                                               |  |              | (60,598
|Notes
  receivable for stock issuances                                                                                                              |  |              | (43    
|Treasury
  stockat cost 32,130 shares                                                                                                              |  |              | (451   
|                                                                                                                                                    |  |              |        
|                                                                                                                                                    |  |              |        
|Total
  stockholders deficit                                                                                                                       |  |              | (5,377 
|                                                                                                                                                    |  |              |        
|                                                                                                                                                    |  |              |        
|Total
  liabilities and stockholders deficit                                                                                                       |  | $            | 11,431 
|                                                                                                                                                    |  |              |        

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

F-4

---

---

TurboChef Technologies, Inc.
Statements of Operations
(In thousands, except share data)

|                                                                                     |  | Years Ended December 31, |           
|------------------------------------------------------------------------------------ |  | ------------------------ | ----------
|                                                                                     |  |                          |           
|                                                                                     |  | 2003                     |           
|                                                                                     |  |                          |           
|                                                                                     |  |                          |           
|Revenues                                                                             |  | $                        | 4,340     
|                                                                                     |  |                          |           
|                                                                                     |  |                          |           
|Costs and
  expenses:                                                                |  |                          |           
|Cost of
  goods sold                                                                 |  |                          | 2,338     
|Research and
  development expenses                                                  |  |                          | 897       
|Selling,
  general and administrative expenses                                       |  |                          | 6,523     
|Compensation
  and severance related to termination of former officers and directors |  |                          | 7,585     
|                                                                                     |  |                          |           
|                                                                                     |  |                          |           
|Total costs
  and expenses                                                           |  |                          | 17,343    
|                                                                                     |  |                          |           
|                                                                                     |  |                          |           
|Operating
  loss                                                                     |  |                          | (13,003   
|                                                                                     |  |                          |           
|                                                                                     |  |                          |           
|Other income
  (expense):                                                            |  |                          |           
|Interest
  income                                                                    |  |                          | 128       
|Interest
  expense and debt extinguishment costs                                     |  |                          | (1,105    
|Gain on
  disposal of assets                                                         |  |                          |          
|Other
  (expense) income                                                             |  |                          | (111      
|                                                                                     |  |                          |           
|                                                                                     |  |                          | (1,088    
|                                                                                     |  |                          |           
|                                                                                     |  |                          |           
|Net loss                                                                             |  | $                        | (14,091   
|                                                                                     |  |                          |           
|                                                                                     |  |                          |           
|Preferred
  stock dividends                                                          |  |                          | (195      
|Beneficial
  conversion feature of Series D preferred stock                          |  |                          | (12,605   
|Beneficial
  conversion feature of Series B preferred stock                          |  |                          |          
|                                                                                     |  |                          |           
|                                                                                     |  |                          |           
|Net loss
  applicable to common stockholders                                         |  | $                        | (26,891   
|                                                                                     |  |                          |           
|Loss per
  common sharebasic and diluted                                            |  | $                        | (1.32     
|                                                                                     |  |                          |           
|                                                                                     |  |                          |           
|Weighted
  average number of common shares outstandingbasic and diluted             |  |                          | 20,392,724
|                                                                                     |  |                          |           

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

F-5

---

---

TurboChef Technologies, Inc.
Statements of Stockholders Equity (Deficit)
(In thousands, except share data)

|                                                                              |  | Preferred Stock |         | Common stock |   | Additional paid-
  in capital |   | Accumulated
  deficit |           
|----------------------------------------------------------------------------- |  | --------------- | ------- | ------------ | - | ----------------------------- | - | --------------------- | ----------
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|                                                                              |  | Shares          |         | Amount       |   | Shares                        |   | Amount                |           
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|Balance, January 1, 2001                                                      |  |                 | 21,000  |              | $ | 2,100                         |   |                       | 15,728,423
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|Net loss                                                                      |  |                 |        |              |   |                              |   |                       |          
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|Compensation expense                                                          |  |                 |        |              |   |                              |   |                       |          
|Interest on notes receivable for stock issuances                              |  |                 |        |              |   |                              |   |                       |          
|Issuance of preferred stock                                                   |  |                 | 30,000  |              |   | 2,430                         |   |                       |          
|Preferred stock dividend                                                      |  |                 |        |              |   |                              |   |                       |          
|Beneficial conversion of preferred stock                                      |  |                 |        |              |   |                              |   |                       |          
|Issuance of warrants                                                          |  |                 |        |              |   |                              |   |                       |          
|Issuance of common stock                                                      |  |                 |        |              |   |                              |   |                       | 2,689,790 
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|Balance, December 31, 2001                                                    |  |                 | 51,000  |              |   | 4,530                         |   |                       | 18,418,213
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|Net loss                                                                      |  |                 |        |              |   |                              |   |                       |          
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|Compensation expense, primarily related to stock options granted for services |  |                 |        |              |   |                              |   |                       |          
|Notes receivable for stock issuances                                          |  |                 |        |              |   |                              |   |                       |          
|Interest on notes receivable for stock issuances                              |  |                 |        |              |   |                              |   |                       |          
|Preferred stock dividend                                                      |  |                 |        |              |   |                              |   |                       |          
|Conversion of preferred stock to common stock                                 |  |                 | (21,000 | )            |   | (2,100                        | ) |                       | 459,821   
|Issuance of warrants                                                          |  |                 |        |              |   |                              |   |                       |          
|Issuance of common stock                                                      |  |                 |        |              |   |                              |   |                       | 36,332    
|Preferred stock dividends paid through issuance of common stock               |  |                 |        |              |   |                              |   |                       | 144,160   
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|Balance, December 31, 2002                                                    |  |                 | 30,000  |              |   | 2,430                         |   |                       | 19,058,526
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|Net loss                                                                      |  |                 |        |              |   |                              |   |                       |          
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|Compensation expense, primarily related to stock options granted for services |  |                 |        |              |   |                              |   |                       |          
|Cancellation of notes receivable for stock issuances                          |  |                 |        |              |   |                              |   |                       | (840,000  
|Interest on notes receivable for stock issuances                              |  |                 |        |              |   |                              |   |                       |          
|Beneficial conversion of Series D preferred stock                             |  |                 |        |              |   |                              |   |                       |          
|Deemed dividend for beneficial conversion feature                             |  |                 |        |              |   |                              |   |                       |          
|Conversion of preferred stock to common stock                                 |  |                 | (30,000 | )            |   | (2,430                        | ) |                       | 2,793,650 
|Preferred stock dividends paid through issuance of common stock               |  |                 |        |              |   |                              |   |                       | 773,696   
|Issuance of common stock for non-compete and release agreements               |  |                 |        |              |   |                              |   |                       | 3,452,300 
|Other issuances of common stock                                               |  |                 |         |              |   |                               |   |                       | 235,846   
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|                                                                              |  |                 |         |              |   |                               |   |                       |           
|Balance, December 31, 2003                                                    |  |                 |        |              | $ |                              |   |                       | 25,474,018
|                                                                              |  |                 |         |              |   |                               |   |                       |           

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

F-6

---

---

TurboChef Technologies, Inc.
Statements of Stockholders Equity (Deficit)(In thousands, except share data)

|                                                                              |  | Notes receivable
  for
  stock issuances |   | Treasury 
  stock |   | Total 
  stockholders equity | 
|----------------------------------------------------------------------------- |  | ---------------------------------------- | - | ----------------- | - | ----------------------------- | 
|                                                                              |  |                                          |   |                   |   |                               | 
|Balance, January 1, 2001                                                      |  |                                          | $ | (2,274            | ) |                               | 
|                                                                              |  |                                          |   |                   |   |                               | 
|Net loss                                                                      |  |                                          |   |                  |   |                               | 
|                                                                              |  |                                          |   |                   |   |                               | 
|Compensation expense                                                          |  |                                          |   |                  |   |                               | 
|Interest on notes
  receivable for stock issuances                            |  |                                          |   | (132              | ) |                               | 
|Issuance of preferred stock                                                   |  |                                          |   |                  |   |                               | 
|Preferred stock dividend                                                      |  |                                          |   |                  |   |                               | 
|Beneficial conversion of
  preferred stock                                    |  |                                          |   |                  |   |                               | 
|Issuance of warrants                                                          |  |                                          |   |                  |   |                               | 
|Issuance of common stock                                                      |  |                                          |   |                  |   |                               | 
|                                                                              |  |                                          |   |                   |   |                               | 
|Balance, December 31, 2001                                                    |  |                                          |   | (2,406            | ) |                               | 
|                                                                              |  |                                          |   |                   |   |                               | 
|Net loss                                                                      |  |                                          |   |                  |   |                               | 
|                                                                              |  |                                          |   |                   |   |                               | 
|Compensation expense                                                          |  |                                          |   |                  |   |                               | 
|Notes receivable for stock
  issuances                                        |  |                                          |   | 8                 |   |                               | 
|Interest on notes
  receivable for stock issuances                            |  |                                          |   | (132              | ) |                               | 
|Preferred stock dividend                                                      |  |                                          |   |                  |   |                               | 
|Conversion of preferred
  stock to common stock                               |  |                                          |   |                  |   |                               | 
|Issuance of warrants                                                          |  |                                          |   |                  |   |                               | 
|Issuance of common stock                                                      |  |                                          |   |                  |   |                               | 
|Preferred stock dividends
  paid through issuance of common stock             |  |                                          |   |                  |   |                               | 
|                                                                              |  |                                          |   |                   |   |                               | 
|Balance, December 31, 2002                                                    |  |                                          |   | (2,530            | ) |                               | 
|                                                                              |  |                                          |   |                   |   |                               | 
|Net loss                                                                      |  |                                          |   |                  |   |                               | 
|                                                                              |  |                                          |   |                   |   |                               | 
|Compensation expense, primarily related to stock options granted for services |  |                                          |   |                  |   |                               | 
|Cancellation of notes
  receivable for stock issuances                        |  |                                          |   | 2,596             |   |                               | 
|Interest on notes
  receivable for stock issuances                            |  |                                          |   | (109              | ) |                               | 
|Beneficial conversion of
  preferred stock                                    |  |                                          |   |                  |   |                               | 
|Deemed dividend for beneficial
  conversion feature                           |  |                                          |   |                  |   |                               | 
|Conversion of preferred
  stock to common stock                               |  |                                          |   |                  |   |                               | 
|Preferred stock dividends
  paid through issuance of common stock             |  |                                          |   |                  |   |                               | 
|Issuance of common stock
  for non-compete and release agreements             |  |                                          |   |                  |   |                               | 
|Other issuances of common
  stock                                             |  |                                          |   |                  |   |                               | 
|                                                                              |  |                                          |   |                   |   |                               | 
|Balance, December 31, 2003                                                    |  |                                          | $ | (43               | ) |                               | 
|                                                                              |  |                                          |   |                   |   |                               | 

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

F-7

---

---

TurboChef Technologies, Inc.
Statements of Cash Flows
(In thousands)

|                                                                                                 |                                                                                        | Years Ended December 31, |        
|------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------- | ------------------------ | -------
|                                                                                                 |                                                                                        |                          |        
|                                                                                                 |                                                                                        | 2003                     |        
|                                                                                                 |                                                                                        |                          |        
|                                                                                                 |                                                                                        |                          |        
|Cash flows
  from operating activities:                                                          |                                                                                        |                          |        
|Net loss                                                                                         |                                                                                        | $                        | (14,091
|                                                                                                 | Adjustments to reconcile net loss to net cash used in operating activities:            |                          |        
|                                                                                                 | Depreciation and amortization                                                          |                          |        
|                                                                                                 | Discount on convertible note                                                           |                          |        
|                                                                                                 | Non-cash interest on notes receivable from employees and directors                     |                          |        
|                                                                                                 | Non-cash interest and debt extinguishment costs on non-interest bearingpromissory note |                          |        
|                                                                                                 | Non-cash compensation expense                                                          |                          |        
|                                                                                                 | Provision for doubtful accounts                                                        |                          |        
|                                                                                                 | Provision for uncollectible other receivables                                          |                          |        
|                                                                                                 | Foreign exchange loss                                                                  |                          |        
|                                                                                                 | Gain on disposal of assets                                                             |                          |        
|                                                                                                 | Changes in operating assets and liabilities:                                           |                          |        
|                                                                                                 | Accounts receivable                                                                    |                          |        
|                                                                                                 | Inventories                                                                            |                          |        
|                                                                                                 | Prepaid expenses and other assets                                                      |                          |        
|                                                                                                 | Accounts payable                                                                       |                          |        
|                                                                                                 | Accrued expenses                                                                       |                          |        
|                                                                                                 | Deferred revenue                                                                       |                          |        
|                                                                                                 |                                                                                        |                          |        
|                                                                                                 |                                                                                        |                          |        
|Net cash
  used in operating activities                                                          |                                                                                        |                          | (3,398 
|                                                                                                 |                                                                                        |                          |        
|Cash flows
  from investing activities:                                                          |                                                                                        |                          |        
|Purchase of
  equipment and leasehold improvements, net                                          |                                                                                        |                          | (33    
|                                                                                                 |                                                                                        |                          |        
|Cash flows
  from financing activities:                                                          |                                                                                        |                          |        
|Proceeds
  from the sale of preferred stock, net                                                 |                                                                                        |                          | 12,605 
|Issuance of
  convertible note                                                                   |                                                                                        |                          |       
|Proceeds
  from note payable                                                                     |                                                                                        |                          |       
|Payment of
  note payable                                                                        |                                                                                        |                          | (1,000 
|Payment of
  broker commission on the sale of common stock                                       |                                                                                        |                          |       
|Proceeds
  from the sale of common stock                                                         |                                                                                        |                          |       
|Proceeds
  from the exercise of stock options                                                    |                                                                                        |                          | 87     
|Repayments
  of notes receivable from employees                                                  |                                                                                        |                          |       
|                                                                                                 |                                                                                        |                          |        
|                                                                                                 |                                                                                        |                          |        
|Net cash
  provided by financing activities                                                      |                                                                                        |                          | 11,692 
|                                                                                                 |                                                                                        |                          |        
|Net increase
  (decrease) in cash and cash equivalents                                           |                                                                                        |                          | 8,261  
|Cash and
  cash equivalents at beginning of year                                                 |                                                                                        |                          | 629    
|                                                                                                 |                                                                                        |                          |        
|                                                                                                 |                                                                                        |                          |        
|Cash and
  cash equivalents at end of year                                                       |                                                                                        | $                        | 8,890  
|                                                                                                 |                                                                                        |                          |        
|Supplemental disclosures of
  noncash activities:                                                |                                                                                        |                          |        
|Noncash financing
  activitybeneficial conversion of preferred stock                            |                                                                                        | $                        | 12,605 
|                                                                                                 |                                                                                        |                          |        
|Noncash financing
  activityconversion of preferred stock to common stock                       |                                                                                        | $                        | 2,430  
|                                                                                                 |                                                                                        |                          |        
|Noncash financing
  activityconversion of note payable to preferred stock                       |                                                                                        | $                        |       
|                                                                                                 |                                                                                        |                          |        
|Noncash financing
  activityinterest on notes receivable from stock issuances                   |                                                                                        | $                        | 109    
|                                                                                                 |                                                                                        |                          |        
|Noncash financing
  activityaccrued preferred stock dividend                                    |                                                                                        | $                        |       
|                                                                                                 |                                                                                        |                          |        
|Noncash financing
  activitypreferred stock dividends paid through the issuance of common stock |                                                                                        | $                        | 396    
|                                                                                                 |                                                                                        |                          |        
|Noncash investing
  activitycancellation of note receivable for stock issuance                  |                                                                                        | $                        | 2,596  
|                                                                                                 |                                                                                        |                          |        
|                                                                                                 |                                                                                        |                          |        

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

F-8

---

---

TurboChef Technologies, Inc.
Notes to Financial Statements

|1.                                                      | NATURE OF OPERATIONS AND GENERAL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------------------------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                        | TurboChef
  Technologies, Inc. (the Company) was incorporated in the State of Delaware
  on April 3, 1991. The Company is engaged in designing, developing and
  marketing its proprietary rapid cook technologies. The Companys primary
  markets are with commercial food service operators throughout North America,
  the United Kingdom, Europe and Asia. Management believes that the Company
  operates in one primary business segment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                        | TurboChefs
  capital requirements in connection with its product and technology
  development and marketing efforts have been and will continue to be
  significant. Since its inception, the Company has incurred significant
  operating losses. As shown in the financial statements, the Company incurred
  a net loss applicable to common stockholders of $26.9 million for 2003 and
  has an accumulated deficit of $60.6 million as of December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                        | As of
  December 31, 2002, and through much of 2003, the Company had been unable to
  raise the necessary capital to continue normal business operations and expand
  the Companys operations. The Companys working capital as of December 31,
  2002 and during much of 2003 was severely limited and the Company delayed
  payments to critical suppliers of parts, delayed purchases of ovens and
  extended other accounts payables to preserve cash. As of December 31, 2002,
  the Company required additional financing to support operations and, in the
  event the Companys cash position did not improve, the Company might not have
  been able to meet its critical obligations. Taken together as of December 31,
  2002, these factors impacted the Companys ability to operate as a going
  concern as of that date. As a result of these conditions, the independent
  certified public accountants report on the Companys financial statements
  for the year ended December 31, 2002 contains an explanatory paragraph
  regarding the Companys ability to continue as a going concern.
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                        | In October
  2003, the Company received $12.6 million net proceeds from the sale of
  preferred stock in a private placement (Note 9). In March 2004, the Company
  announced that it had been selected as the exclusive worldwide supplier of
  rapid cook ovens to one of the worlds largest quick service restaurant
  franchises (Note 3). Management believes that the working capital provided by
  the private placement and the cash flows from this major new agreement enable
  the Company to adequately fund its operations and growth.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2.                                                      | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                        | The accompanying
  financial statements reflect the application of certain accounting policies
  described below and elsewhere in the notes to the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Cash Equivalents                                       
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                        | The Company
  considers all highly liquid investments with original maturities of three
  months or less to be cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Accounts Receivable and Allowance for Doubtful Accounts
|                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|                                                        | Accounts
  receivable consist of amounts owed to the Company for the sale of its
  products in the normal course of business. Accounts receivable consist of
  monies owed in US Dollars, British Pounds and Euros. Accounts receivable
  originally denominated in British Pounds and Euros are translated into US
  Dollars with a transaction gain or loss recorded at such time. Accounts
  receivable is reported net of allowance for doubtful accounts. Additions to
  the allowance are based on ongoing credit evaluations of customers and
  general credit experience has been within the range of managements
  expectations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-9

---

---

|Inventories
|-----------
|           
|           

| |                                |  | 2003           |       | 2002 |  
| | ------------------------------ |  | -------------- | ----- | ---- | -
| |                                |  |                |       |      |  
| |                                |  |                |       |      |  
| |                                |  | (In thousands) |      
| | Finished
  goodsovens         |  | $              | 371   |      | $
| | Demonstration
  inventory, net |  |                | 70    |      |  
| | Parts
  inventory, net         |  |                | 1,029 |      |  
| |                                |  |                |       |      |  
| |                                |  |                |       |      |  
| |                                |  | $              | 1,470 |      | $
| |                                |  |                |       |      |  

|Property and Equipment           
|---------------------------------
|                                 
|                                 
|                                 
|Deferred Revenue                 
|                                 
|                                 
|                                 
|Other Assets                     
|                                 
|                                 
|                                 
|Research and Development Expenses
|                                 
|                                 
|                                 
|Product Warranty                 
|                                 
|                                 

F-10

---

---

|Revenue Recognition        
|---------------------------
|                           
|                           
|                           
|Cost of Goods Sold         
|                           
|                           
|                           
|Shipping and Handling Costs
|                           
|                           
|                           
|Advertising Expenses       
|                           
|                           
|                           
|Foreign Exchange           
|                           
|                           
|                           
|Income Taxes               
|                           
|                           

F-11

---

---

Loss Per Common Share

| | Basic net
  loss per common share is computed by dividing net loss, plus the dividends
  and dividend equivalents on preferred stock, by the weighted average number
  of common shares outstanding. For the years ended December 31, 2003, 2002 and
  2001, net loss applicable to common stockholders is as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                              |  | 2003           |         | 2002 |   | 2001   |  
| | -------------------------------------------- |  | -------------- | ------- | ---- | - | ------ | -
| |                                              |  |                |         |      |   |        |  
| |                                              |  |                |         |      |   |        |  
| |                                              |  |                |        
| |                                              |  | (In thousands) |        
| | Net loss                                     |  | $              | (14,091 | )    | $ | (5,584 | )
| | Beneficial
  conversion of preferred stock   |  |                | (12,605 | )    |   |       |  
| | Preferred
  stock dividends                  |  |                | (195    | )    |   | (270   | )
| |                                              |  |                |         |      |   |        |  
| |                                              |  |                |         |      |   |        |  
| | Net loss
  applicable to common stockholders |  | $              | (26,891 | )    | $ | (5,854 | )
| |                                              |  |                |         |      |   |        |  
| |                                              |  |                |         |      |   |        |  

| | Diluted net
  loss per common share is computed by dividing net loss, adjusted on an as if
  converted basis, by the weighted average number of common shares outstanding
  plus potentially dilutive securities. For the years ended December 31, 2003,
  2002 and 2001, potentially 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, 2003, the potentially dilutive
  securities include options and warrants, which are convertible into
  11,204,690 shares of common stock and 2,132,650 of convertible preferred
  stock, which was convertible into 42,653,000 shares of common stock dependent
  upon the Companys ability to secure shareholder approval to increase the
  number of authorized common shares. 
  For the year ended December 31, 2002, the potential dilutive
  securities included 8,454,696 shares for options and warrants and 2,793,651
  shares attributable to convertible preferred stock. For the year ended
  December 31, 2001, the potential dilutive securities include 5,986,977 shares
  for options and warrants and 3,306,118 shares attributable to convertible
  preferred stock.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Stock-Based Employee Compensation

| | The Company
  accounts for its stock-based employee compensation utilizing the intrinsic
  value method in accordance with the provisions of Accounting Principles Board
  (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related
  technical interpretations. Statement of Financial Accounting Standards
  (SFAS) No. 123, Accounting for Stock-Based Compensation requires companies
  that elect not to account for stock-based compensation as prescribed by that
  statement to disclose, among other things, the pro forma effects on
  operations as if SFAS No. 123 had been adopted. SFAS No. 148, Accounting for
  Stock-Based Compensation  Transition and Disclosure provides for alternative
  methods of   transitioning to SFAS No. 123. It also amends the disclosure
  provisions of SFAS No. 123 and APB No. 28, Interim Financial Reporting, to
  require disclosure in the summary of significant accounting policies of the
  effects of an entitys accounting policy with respect to stock-based
  compensation on reported net income and earnings per share in annual and
  interim financial statements. SFAS No. 148s amendment of the transition and
  annual disclosure requirements are effective for fiscal years ending after
  December 15, 2002. The amendment of disclosure requirements of APB Opinion
  No. 28 is effective for interim periods beginning after December 15, 2002.
  The Company will continue to use the intrinsic value method of accounting for
  stock-based compensation as allowed by SFAS No. 148 and make the appropriate
  disclosures.  Accordingly, no
  compensation expense is recognized for fixed option plans because the
  exercise prices of employee stock options equals or exceeds the market value
  of the underlying stock on the dates of grant.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-12

---

---

| | For purposes
  of pro forma disclosures, the estimated fair value of the options is
  amortized to expense over the options vesting period. The Companys pro
  forma information, based on the options held by the Companys employees, is
  as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                                                                    |  | 2003                                    |         | 2002 |   | 2001   |  
| | ---------------------------------------------------------------------------------- |  | --------------------------------------- | ------- | ---- | - | ------ | -
| |                                                                                    |  |                                         |         |      |   |        |  
| |                                                                                    |  | (In thousands except per share amounts) |        
| | Net loss
  applicable to common stockholders, as reported                          |  | $                                       | (26,891 | )    | $ | (5,854 | )
| |                                                                                    |  |                                         |         |      |   |        |  
| | Deduct:
  Employee stock-based compensation income
  (expense), net of forfeitures |  |                                         | 1,749   |      |   | (1,344 | )
| |                                                                                    |  |                                         |         |      |   |        |  
| |                                                                                    |  |                                         |         |      |   |        |  
| | Pro forma net loss applicable to common
        stockholders                       |  | $                                       | (25,142 | )    | $ | (7,198 | )
| |                                                                                    |  |                                         |         |      |   |        |  
| |                                                                                    |  |                                         |         |      |   |        |  
| | Net loss applicable
  to common stockholders per share  basic
  and diluted:      |  |                                         |         |      |   |        |  
| | As reported                                                                        |  | $                                       | (1.32   | )    | $ | (.31   | )
| |                                                                                    |  |                                         |         |      |   |        |  
| | Pro forma                                                                          |  | $                                       | (1.23   | )    | $ | (.38   | )

| | The per
  share weighted-average fair value of stock options granted during 2003, 2002
  and 2001 was $1.57, $0.97 and  $1.67,
  respectively, on the date of grant using the Black-Scholes option-pricing
  model with the following weighted-average assumptions: For 2003, a risk-free
  interest rate, ranging from 3.65% to 4.31%; expected life, ranging from one
  to three years; expected dividend yield 0%; and volatility, ranging from 51%
  to 174%.  For 2002, a risk-free
  interest rate, ranging from 4.24% to 5.22%; expected life, ten years;
  expected dividend yield 0%; and volatility, 40%. For 2001, a risk-free
  interest rate, ranging from 4.25% to 5.30%; expected life, ten years;
  expected dividend yield, 0%; and volatility, 41%.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Use of Estimates

| | The
  preparation of the financial statements in conformity with accounting
  principles generally accepted in the United States of America 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. The more significant estimates reflected in these financial
  statements include the beneficial conversion feature applicable to the
  Companys issuance of convertible preferred stock, accrued expenses and
  valuation of stock-based compensation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fair Value of Financial Instruments

| | The carrying
  amount of cash and cash equivalents, accounts receivable, note receivable
  from employees and directors, accounts payable, accrued expenses, and note
  payable approximates fair value due to the short maturity of these
  instruments. The fair value of the mezzanine equity represented by
  convertible, redeemable preferred stock approximates its carrying value at
  December 31, 2003 based on the value of the consideration paid and the
  conversion and redemption terms as outlined in the certificate of
  designations for this instrument.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, 2003.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Reclassifications

| | Certain
  amounts in prior period financial statements have been reclassified to
  conform to current year presentation.
| | ------------------------------------------------------------------------------------------------------------------------

F-13

---

---

New Accounting Pronouncements

|   | In December
  2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 148,
  which amended SFAS No. 123. The Standard provides alternative methods of
  transition for a voluntary change to the fair value based method of
  accounting for stock-based employee compensation. Additionally, the Statement
  amends the disclosure requirements of SFAS No. 123 to require prominent disclosures
  in the annual and interim financial statements about the method of accounting
  for stock-based employee compensation and the effect of the method used on
  reported results. The Statement is effective for financial statements with
  fiscal years ending after December 15, 2002. In compliance with SFAS 148, the
  Company has elected to continue to follow the intrinsic value method in
  accounting for our stock-based employee compensation arrangements as defined
  by APB Opinion No. 25 and will make the applicable disclosures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In January
  2003, the FASB issued Interpretation No. 46, Consolidation of Variable
  Interest Entities, an interpretation of Accounting Research Bulletin No. 51,
  Consolidated Financial Statements (FIN No. 46). FIN No. 46 explains how to
  identify variable interest entities and how an enterprise assesses its
  interests in a variable interest entity, to decide whether to consolidate
  that entity for financial reporting purposes. The Interpretation requires
  existing unconsolidated variable interest entities to be consolidated by
  their primary beneficiaries if the entities do not effectively disperse risks
  among parties involved. FIN No. 46 is effective immediately for variable
  interest entities created after January 31, 2003, and to variable interest
  entities in which an enterprise obtains an interest after that date. The
  Interpretation applies in the first fiscal year or interim period beginning
  after December 15, 2003, to variable interest entities in which an enterprise
  holds a variable interest that it acquired before February 1, 2003.  Adoption of this Standard did not have a
  material effect on the Companys financial statements.                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In May 2003,
  the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments
  with Characteristics of Both Liabilities and Equity.  SFAS No. 150 establishes standards on the
  classification and measurement of certain financial instruments with
  characteristics of both liabilities and equity.  The provisions of SFAS No. 150 are effective for financial
  instruments entered into or modified after May 31, 2003 and to all other
  instruments that exist as of the beginning of the first interim financial
  reporting period beginning after June 15, 2003. The adoption of SFAS No. 150 did not materially impact the Companys results of
  operations or financial position and SFAS No. 150 does not impact the Series D Preferred Stock as it is not mandatorily redeemable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|3. | LONG-TERM CONTRACTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | In the
  second quarter of 2000, the Company entered into a manufacturing agreement
  with the Shandong Xiaoya Group, Ltd. (Xiaoya) in China in which Xiaoya was granted
  the exclusive manufacturing rights for the Companys current oven. In March
  2002, the Company agreed to purchase 5,000 ovens from Xiaoya over a
  seventeen-month period. In December 2002, this purchase requirement was
  extended for an additional 12 months to August 2004 and the purchase minimum
  reduced to 200 ovens per month. Contemporaneously with the October 2003
  private placement, the Company entered into a Settlement, Release Agreement
  and Third Amendment to its manufacturing agreement with Xiaoya to resolve
  potential claims and further reduce the monthly purchase commitment. Pursuant
  to this agreement the Company made a payment in full satisfaction of all
  amounts then due to Xiaoya. In exchange, Xiaoya agreed to release the Company
  from any claims Xiaoya may have had as of the signing of the agreement and
  reduced the Companys monthly minimum purchase requirement of ovens to a
  level more in line with near-term sales expectations. Under the present terms
  of the agreement, the Company is committed to minimum purchases of
  approximately $250,000 per month. In addition, in connection with the
  manufacturing agreement the Company is required to use working capital to
  purchase certain component parts supplied to Xiaoya for use in the ovens.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | On March 8, 2004,
  the Company announced that it had reached agreement with Subway Restaurants
  to be the exclusive supplier of rapid cook ovens to more than 20,000 Subway®
  franchisees worldwide. TurboChef expects to start delivering ovens to Subway®
  restaurants in the U.S. during the second quarter of 2004. The Company has
  also entered into an agreement with a domestic contract manufacturer for
  production of these ovens.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-14

---

---

|4. | CONCENTRATION OF BUSINESS RISKS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company
  is generally subject to the financial well being of the business of
  commercial food service operators and related equipment; however, management
  does not believe that there is significant credit risk with respect to trade
  receivables. For the year ended December 31, 2003, 38% of the Companys sales
  were made to two customers.  For the
  years ended December 31, 2002 and 2001, respectively, 45% and 35% of the
  Companys direct sales were made to one customer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|5. | DEBT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In January 2003, Maytag obtained a summary judgment against TurboChef in the
amount of $359,372 related to debt arising from a 2001 purchase of oven
and parts inventory. The note, which bore interest at the prime rate plus 2%,
was not paid according to its terms, has been in default since November 2002 and
is recorded as a liability as of December 31, 2003 in the amount of approximately $380,000 including estimated additional interest.
In March 2004, the Company remitted to Maytag payment for the summary judgment and estimated additional interest. In addition, the
Company had $1.4 million of other payables on its balance sheets at December 31, 2003 and 2002 related to amounts due to Maytag for parts purchases.
The Company believes that ultimately these obligations will be incorporated into
resolution of the litigation issues between the parties which are now under
arbitration (Note 13).                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In July
  2002, the Company issued a non-interest bearing promissory note in the amount
  of $1.0 million to Grand Cheer Company Limited (Grand Cheer), a principal
  stockholder of the Company, which was secured by proceeds from the future
  sale of 350 ovens.  All of the ovens
  were sold and the cash was received but no payment was made to Grand Cheer.
  The note was due on October 15, 2002. The note provided that if the Company
  did not repay the note in full by October 15, 2002, all remaining unvested
  warrants for the purchase of the Companys common stock (666,667 warrants)
  previously issued to Grand Cheer would immediately vest. In connection with
  the issuance of the note, the Company incurred a non-cash finance charge of
  $200,000 which was payable by offsetting the exercise price of the 1,000,000
  warrants previously issued to Grand Cheer upon its purchase of the Companys
  Series B Convertible Preferred Stock.                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Contemporaneously
  with the October 2003 private placement (Note 9), the Company entered into a
  Settlement and Release Agreement with Grand Cheer to resolve claims relating
  to the note. In connection therewith, Grand Cheer (i) exercised its rights to
  convert all of its shares of the Companys Series B Convertible Preferred
  Stock, plus all accrued and unpaid dividends thereon, into 2,024,986 shares
  of the Companys Common Stock and (ii) agreed to reduce from 1,000,000 to
  800,000 the number of shares of the Companys common stock issuable upon
  exercise of Grand Cheers warrants. The Company agreed to pay Grand Cheer
  $1.2 million in cash from the proceeds of the sale of its Series D preferred
  stock to settle its obligations under the note and issue Grand Cheer 652,288
  shares of its Common Stock. Grand Cheer also entered into a voting agreement
  granting its irrevocable proxy with respect to certain transactions to the
  investor in the private placement. The $1.1 million fair value of the
  aggregate consideration in the exchange in excess of the face value of the
  obligation was recorded as interest and debt extinguishment costs in the 2003
  statement of operations.

F-15

---

---

|6. | PROPERTY AND EQUIPMENT                                             
|-- | -------------------------------------------------------------------
|   |                                                                    
|   | Property and
  equipment consisted of the following at December 31:

| |                                 |  | 2003           |        | 2002 |  
| | ------------------------------- |  | -------------- | ------ | ---- | -
| |                                 |  |                |        |      |  
| |                                 |  |                |        |      |  
| |                                 |  | (In thousands) |       
| | Leasehold
  improvements        |  | $              | 235    |      | $
| | Furniture
  and fixtures        |  |                | 685    |      |  
| | Equipment                       |  |                | 345    |      |  
| |                                 |  |                |        |      |  
| |                                 |  |                |        |      |  
| |                                 |  |                | 1,265  |      |  
| |                                 |  |                |        |      |  
| | Less
  accumulated depreciation |  |                | (1,164 | )    |  
| |                                 |  |                |        |      |  
| |                                 |  |                |        |      |  
| |                                 |  | $              | 101    |      | $
| |                                 |  |                |        |      |  

|   | Depreciation
  expense was $112,000, $323,000 and $315,000 for the years ended December 31,
  2003, 2002 and 2001, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|7. | ACCRUED WARRANTY AND UPGRADE COSTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | The Company
  generally provides a one-year parts and labor warranty on its ovens.
  Provisions for warranty claims are recorded at the time products are sold and
  are reviewed and adjusted periodically by management to reflect actual and
  anticipated experience.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   | In September
  1999, the Company entered into an agreement to upgrade and warranty 262 ovens
  installed for Whitbread. The Company received approximately $1.4 million from
  Whitbread to complete the upgrade and provide a three-year extended warranty
  to each of the ovens. The oven upgrades included design changes that were to
  substantially increase the life and durability of the ovens. These upgrades
  were completed in February 2000. The $1.4 million had been used to offset
  expenses relating to the upgrade and warranty as incurred. Through 2000, the
  Company incurred $1.7 million for expenses in excess of payments from
  Whitbread, relating to the completion of the upgrade and repairs during the
  remainder of the warranty period. No additional costs have been incurred
  since 2000. In February 2002, the Company and Whitbread entered into a new
  agreement to terminate the September 1999 upgrade and extended warranty
  agreement. Under the new agreement, TurboChef was required to pay Whitbread
  £460,000 (approximately $670,000) plus VAT (value added tax) over a 24-month
  period. In return, Whitbread would release TurboChef from its obligation to
  continue its warranty.  On signing the
  agreement, TurboChef made an initial payment to Whitbread of £50,000
  (approximately $72,000) plus VAT and committed to pay £15,000 (approximately
  $22,000) plus VAT per month for the next 24 months, with a final payment of
  £50,000 plus VAT due the final month. Upon entering into this agreement, the
  Company recorded an adjustment to reduce the warranty liability by $190,000,
  the amount by which the amount of the warranty liability related to Whitbread
  exceeded the amount to be paid under the agreement. The Company has not made
  any payments since November 2002 and is currently in default of the
  agreement. As a result of the default, an estimated warranty liability of
  $190,000 was recorded as of December 31, 2002. Other than a provision for the
  estimated effects of foreign exchange, there was no activity in the Companys
  liability related to the Whitbread agreement in 2003.

F-16

---

---

| | An analysis
  of changes in the liability for product warranty claims, including amounts
  related to Whitbread (as adjusted for the impact of foreign exchange), is as
  follows for the years ended December 31:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                |  | 2003           |      | 2002 |   | 2001  |  
| | ------------------------------ |  | -------------- | ---- | ---- | - | ----- | -
| |                                |  |                |      |      |   |       |  
| |                                |  |                |     
| |                                |  | (In thousands) |     
| | Whitbread:                     |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| | Balance at
  beginning of year |  | $              | 612  |      | $ | 670   |  
| | Provision
  for warranties     |  |                |     |      |   |      |  
| | Warranty
  expenditures        |  |                |     |      |   | (248  | )
| | Adjustments                    |  |                |     |      |   | 190   |  
| | Currency
  fluctuations        |  |                | 117  |      |   |      |  
| |                                |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| | Balance at
  end of year       |  |                | 729  |      |   | 612   |  
| |                                |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| | Other:                         |  |                |      |      |   |       |  
| | Balance at
  beginning of year |  |                | 434  |      |   | 368   |  
| | Provision
  for warranties     |  |                | 274  |      |   | 290   |  
| | Warranty
  expenditures        |  |                | (509 | )    |   | (224  | )
| |                                |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| | Balance at
  end of year       |  |                | 199  |      |   | 434   |  
| |                                |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| | Total:                         |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| | Whitbread                      |  |                | 729  |      |   | 612   |  
| |                                |  |                |      |      |   |       |  
| | Other                          |  |                | 199  |      |   | 434   |  
| |                                |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  
| | Balance at
  end of year       |  | $              | 928  |      | $ | 1,046 |  
| |                                |  |                |      |      |   |       |  
| |                                |  |                |      |      |   |       |  

F-17

---

---

|8. | 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 for the years ended December 31:

| |                                                            |  | 2003           |        | 2002 |   | 2001   |  
| | ---------------------------------------------------------- |  | -------------- | ------ | ---- | - | ------ | -
| |                                                            |  |                |        |      |   |        |  
| |                                                            |  |                |       
| |                                                            |  | (In thousands) |       
| | Expected
  income tax benefit                              |  | $              | (4,791 | )    | $ | (1,899 | )
| | Other                                                      |  |                | 2      |      |   | (20    | )
| | Changes in
  deferred income tax asset valuation allowance |  |                | 4,789  |      |   | 1,919  |  
| |                                                            |  |                |        |      |   |        |  
| |                                                            |  |                |        |      |   |        |  
| |                                                            |  |                |        |      |   |        |  
| | Benefit for
  income taxes                                 |  | $              |       |      | $ |       |  
| |                                                            |  |                |        |      |   |        |  
| |                                                            |  |                |        |      |   |        |  

| | The
  components of the Companys net deferred tax assets were as follows:
| | --------------------------------------------------------------------------

| |                                                      |                                                | December 31    |        
| | ---------------------------------------------------- | ---------------------------------------------- | -------------- | -------
| |                                                      |                                                |                |        
| |                                                      |                                                |                |        
| |                                                      |                                                | 2003           |        
| |                                                      |                                                |                |        
| |                                                      |                                                |                |        
| |                                                      |                                                | (In thousands) |        
| | Deferred
  income tax assets:                        |                                                |                |        
| |                                                      |                                                |                |        
| | Warranty
  reserves                                  |                                                | $              | 315    
| | Basis
  difference of other current assets           |                                                |                | 180    
| |                                                      |                                                |                |        
| |                                                      |                                                |                |        
| |                                                      |                                                |                |        
| |                                                      | Total
  current deferred income tax assets     |                |        
| |                                                      |                                                |                |        
| | Net
  operating loss carryforwards                   |                                                |                | 17,031 
| | Basis
  difference of intangible assets              |                                                |                | 1,349  
| | Research and
  development credit carryforwards      |                                                |                | 245    
| | Basis
  difference of other long-term assets         |                                                |                | 42     
| |                                                      |                                                |                |        
| |                                                      |                                                |                |        
| |                                                      |                                                |                |        
| |                                                      | Total
  non-current deferred income tax assets |                |        
| |                                                      |                                                |                |        
| | Total gross
  deferred income tax assets             |                                                |                | 19,162 
| | Less
  deferred income tax asset valuation allowance |                                                |                | (19,162
| |                                                      |                                                |                |        
| |                                                      |                                                |                |        
| | Net deferred
  income tax assets                     |                                                | $              |       
| |                                                      |                                                |                |        
| |                                                      |                                                |                |        
| |                                                      |                                                |                |        

F-18

---

---

|   | 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 the deferred income tax assets
  will be realized. Accordingly, the Company recorded a valuation allowance
  equal to 100% of the net deferred income tax assets at December 31, 2003 and
  2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | At December
  31, 2003, the Company has net operating loss carryforwards for federal income
  tax purposes of $50.1 million, which may be used against future taxable
  income, if any, and which expire in years 2009 to 2023.  Additionally, the Company has $220,000 in
  income tax deductions related to stock option exercises the tax effect of
  which will be reflected as a credit to additional paid-in capital when
  realized.  In October 2003 a change in
  ownership took place (Note 9), which for income tax purposes under Internal
  Revenue Code Section 382, limits the annual utilization of approximately
  $42.6 million of these carryforwards and could cause some amount of the
  carryforwards to expire before they are utilized.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company
  also has research and development credit carryforwards of approximately
  $245,000, which may be used to offset future federal tax liability, if any. Such credit also may be subject to limitations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|9. | PRIVATE PLACEMENT OF SERIES D PREFERRED STOCK AND RELATED EVENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | On October
  28, 2003, the Company completed a private placement of 2,132,650 shares of
  its new Series D Convertible Preferred Stock, par value $1.00 per share (the
  Series D Preferred Stock) to OvenWorks, LLLP (OvenWorks) and to certain
  other investors for whom OvenWorks served as nominee.  At the time of issuance, the shares of
  Series D Preferred Stock issued in the private placement were convertible
  into an aggregate of 42,653,000 shares of the Companys common stock, which
  represented approximately 58% of the Companys total equity on a fully
  diluted, as converted basis (i.e. assuming that all outstanding options,
  warrants and other rights for the purchase of common stock would have been
  exercised, and all outstanding shares of all series of the Companys
  preferred stock, including the Series D Preferred Stock, would have been
  converted into common stock). Net proceeds to the Company of $12.6 million
  have and will be used to satisfy existing obligations and to fund the
  Companys working capital needs, including product development and
  manufacturing, sales and marketing and other general corporate purposes.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | OvenWorks is
  a newly formed Georgia limited liability limited partnership of which Oven
  Management, Inc., a Georgia corporation controlled by Richard E. Perlman,
  serves as the general partner. OvenWorks funding for purchase of the Series
  D Preferred Stock was obtained through the sale of interests in OvenWorks,
  LLLP to individual investors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | In
  connection with the private placement, Jeffrey B. Bogatin and Donald J. Gogel
  resigned from their board and officer positions with the Company. The Company
  appointed new officers and directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Shares of
  the Series D Preferred Stock rank senior to all other classes of stock of the
  Company as to liquidation, dividends, redemption and other payments or
  distributions. Holders of Series D Preferred Stock also have redemption
  rights (to the extent they are unable to convert all or part of their shares
  to common stock of the Company at December 31, 2004), preemptive rights, and
  demand and piggy-back registration rights with respect to their shares.
  Holders of Series D Preferred Stock are entitled to vote as a class in
  connection with certain matters, are generally entitled to vote together with
  the holders of the Companys common stock on an as converted basis, and are
  also entitled to elect two-thirds of the members of the Companys Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | At December
  31, 2003, the Company did not have enough shares of authorized but unissued
  common stock to permit conversion of all of the shares of Series D Preferred
  Stock. Accordingly, the Series D Preferred Stock is considered redeemable preferred
  stock until a formal proxy statement is filed to approve the authorization of
  additional shares of the Companys common stock. Therefore, the Company has
  recorded $12.6 million; the aggregate consideration paid for such shares, as
  mezzanine equity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-19

---

---

| | The shares
  of Series D Preferred Stock are immediately convertible, and such shares also
  have beneficial conversion characteristics. In accordance with the guidance
  of Emerging Issues Task Force No. 98-5, Accounting for Convertible Securities
  with Beneficial Conversion Features or Contingently Adjustable Conversion
  Ratios, and No. 00-27, Application of Issue No. 98-5 to Certain Convertible
  Instruments,  the Company recorded
  $12.6 million as a deemed dividend representing the estimated value of the
  beneficial conversion feature.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | In
  connection with the private placement, Messrs. Bogatin and Gogel agreed to a
  general 18-month prohibition on the transfer of their shares of capital stock
  of the Company, and to a right of first refusal in favor of the Company and
  OvenWorks, subject to a monthly trading allowance based on the average daily
  trading volume of the Companys common stock. Messrs. Bogatin and Gogel also
  entered into voting agreements pursuant to which they agreed to vote all
  their shares of the Companys common stock in favor of, among other things,
  any proposal to amend the Companys Certificate of Incorporation to increase
  the amount of the Companys authorized capital stock.  Mr. Gogel exercised his right to convert
  all of his shares of the Companys Series C Preferred Stock, plus all accrued
  and unpaid dividends thereon, into 803,565 shares of the Companys common
  stock. Messrs. Bogatin and Gogel also have each entered into a
  non-competition agreement and a release agreement in favor of the Company in
  consideration for which Messrs. Bogatin and Gogel received an aggregate of
  2,433,333 and 366,667 shares of the Companys common stock, respectively. The
  $5.6 million fair value of the shares issued for the non-compete agreements
  and the release agreements is deemed compensation with no benefit to future
  periods and is included in compensation and severance related to termination of former
  officers and directors in the statement of operations for the year ended December 31, 2003.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Prior to the
  private placement, Messrs. Bogatin and Gogel agreed to the termination of all
  of their outstanding options to purchase the Companys common stock.
  Additionally, the Company agreed to cancel the obligations of Messrs. Bogatin
  and Gogel to pay the Company $2,000,000 and $100,000, respectively, under
  certain promissory notes delivered by them to the Company in connection with
  their exercise of stock options in 1999 and 2000. In return, Messrs. Bogatin
  and Gogel agreed to the cancellation of the 800,000 and 40,000 shares
  respectively, of the Companys common stock acquired by them in connection
  with such option exercises. The transactions resulted in a $916,000
  compensation charge which is also included in compensation and
  severance related to termination of former officers and directors in the statement
  of operations for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | In connection
  with the appointment of new officers and directors resulting from the private
  placement transaction, the Company also terminated the employment of two
  other former officers. The terms of the severance arrangements entered into
  included a commitment for future cash payments and, for one former officer, a
  grant of options to purchase 200,000 shares of the Companys common stock at
  less than fair market value at the grant date and, for the other former
  officer, modifications of vesting for options previously granted. These
  transactions resulted in a compensation charge which, together with the cash
  severance, aggregated $1.1 million and is included in compensation and severance related to termination of former
  officers and directors in the statement of operations for the year ended December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | In
  connection with the private placement, the Company also entered into a
  Settlement and Release Agreement with Grand Cheer, a principal stockholder of
  the Company and the holder of the Companys promissory note which was in
  default. The agreement provided resolution of all claims under the note and
  under its terms Grand Cheer exercised its rights to convert all of its shares
  of the Companys Series B Preferred Stock, plus all accrued and unpaid
  dividends thereon, into 2,024,986 shares of the Companys Common Stock and
  agreed to reduce from 1,000,000 to 800,000 the number of shares of the
  Companys common stock issuable upon exercise of warrants held by Grand Cheer
  and the Company agreed to pay Grand Cheer $1,200,000 in cash from the
  proceeds of the transaction, and issue to Grand Cheer 652,288 shares of its
  Common Stock. Grand Cheer also entered into a voting agreement granting its
  irrevocable proxy with respect to certain transactions to the investor in the
  private placement. On November 4, 2003 the Company paid Grand Cheer
  $1,200,000 to settle its obligations under the note. The $1.1 million fair
  value of the aggregate consideration in the exchange in excess of the face
  value of the obligation was recorded as interest and debt extinguishment
  costs in the statement of operations for the year ended December 31, 2003.                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Additionally,
  in connection with the private placement, the Company entered a Settlement,
  Release Agreement and Third Amendment to its manufacturing agreement with
  Xiaoya which was in default to resolve potential claims and reduce the
  monthly purchase commitment. Pursuant to this agreement the Company agreed to
  make a payment of $244,000 in full satisfaction of all amounts then due to
  Xiaoya.  In exchange, Xiaoya agreed to
  release the Company from any claims Xiaoya may have as of the signing of the
  agreement and reduce the monthly minimum purchase requirement of ovens that
  the Company must make from Xiaoya. On November 12, 2003 the Company made the
  payment of $244,000 that was owed to Xiaoya.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

F-20

---

---

|10. | STOCKHOLDERS EQUITY
|--- | --------------------

Stock Option Plans

| | The Company
  has stock option plans that provide for the grant of incentive and
  nonqualified options to purchase the Companys stock to eligible officers,
  key employees, directors and consultants. These plans include the 1994 Stock
  Option Plan (the 1994 Plan) and 2003 Stock Incentive Plan (the 2003
  Plan).                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The 1994
  Plan, as amended, provided that an aggregate of 7,650,000 shares of the
  Companys common stock be reserved for grants to eligible participants. The
  2003 Plan reserved up to 6,000,000 shares of the Companys common stock for
  issuance to eligible participants. Options awarded under these plans (i) are
  generally granted at exercise prices equal to or above quoted market prices
  on the dates of the grant; (ii) generally become exercisable over a period of
  one to four years; and (iii) generally expire seven or ten years subsequent
  to award. At December 31, 2003, there was an aggregate maximum of 2.8 million
  shares available for grant under both of these plans.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | A summary of
  stock option activity follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

| |                                            |  | Number of
  Shares |            | Weighted
  Average
  Exercise
  Price
| | ------------------------------------------ |  | ------------------ | ---------- | -------------------------------------
| |                                            |  |                    |            |                                      
| |                                            |  |                    |            |                                      
| | Options
  outstanding at January 1, 2001   |  |                    | 2,814,500  |                                      
| |                                            |  |                    |            |                                      
| |                                            |  |                    |            |                                      
| | Options
  granted                          |  |                    | 1,707,000  |                                      
| | Options
  exercised                        |  |                    | (342,458   | )                                    
| | Options
  expired or canceled              |  |                    | (969,876   | )                                    
| |                                            |  |                    |            |                                      
| |                                            |  |                    |            |                                      
| | Options
  outstanding at December 31, 2001 |  |                    | 3,209,166  |                                      
| |                                            |  |                    |            |                                      
| |                                            |  |                    |            |                                      
| | Options
  granted                          |  |                    | 1,141,134  |                                      
| | Options
  exercised                        |  |                    | (36,332    | )                                    
| | Options
  expired or canceled              |  |                    | (118,416   | )                                    
| |                                            |  |                    |            |                                      
| |                                            |  |                    |            |                                      
| | Options
  outstanding at December 31, 2002 |  |                    | 4,195,552  |                                      
| |                                            |  |                    |            |                                      
| |                                            |  |                    |            |                                      
| | Options
  granted                          |  |                    | 6,786,384  |                                      
| | Options
  exercised                        |  |                    | (100,846   | )                                    
| | Options
  expired or canceled              |  |                    | (2,196,170 | )                                    
| |                                            |  |                    |            |                                      
| |                                            |  |                    |            |                                      
| | Options
  outstanding at December 31, 2003 |  |                    | 8,684,920  |                                      
| |                                            |  |                    |            |                                      
| |                                            |  |                    |            |                                      
| |                                            |  |                    |            |                                      
| | Options
  exercisable at December 31, 2001 |  |                    | 1,537,917  |                                      
| |                                            |  |                    |            |                                      
| | Options
  exercisable at December 31, 2002 |  |                    | 2,594,214  |                                      
| |                                            |  |                    |            |                                      
| | Options
  exercisable at December 31, 2003 |  |                    | 2,273,920  |                                      
| |                                            |  |                    |            |                                      

F-21

---

---

| | The
  following table summarizes information about the Companys stock options
  outstanding at December 31, 2003:
| | ------------------------------------------------------------------------------------------------------------------

|                         |  | Options Outstanding                     |  | Weighted
  Average
  Exercise Price           |  | Options Exercisable
|------------------------ |  | --------------------------------------- |  | --------------------------------------------- |  | -------------------
|                         |  |                                         |  |                                               |  |                    
|Range of Exercise Prices |  | Outstanding as
  of December 31,
  2003 |  | Weighted Average Remaining
  Contractual Life |  |                    
|                         |  |                                         |  |                                               |  |                    
|                         |  |                                         |  |                                               |  |                    
|$0.31$2.50              |  |                                         |  | 7,002,005                                     |  |                    
|$2.51$5.00              |  |                                         |  | 1,354,165                                     |  |                    
|$5.01 $7.50             |  |                                         |  | 127,750                                       |  |                    
|$7.51  $9.50            |  |                                         |  | 201,000                                       |  |                    
|                         |  |                                         |  |                                               |  |                    
|                         |  |                                         |  |                                               |  |                    
|                         |  |                                         |  | 8,684,920                                     |  |                    
|                         |  |                                         |  |                                               |  |                    

| | In addition,
  the Company grants, from time to time, non-plan stock options.  The following table summarizes all option
  grants outside of the 1994 Plan. No option grants have been made outside of
  the 2003 Plan.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Grant Year |  | Shares Granted |  | Exercise Price |  | Remaining Life
  (in years) |  | Shares Exercisable as
  of December 31, 2003
|---------- |  | -------------- |  | -------------- |  | --------------------------- |  | --------------------------------------------
|           |  |                |  |                |  |                             |  |                                             
|           |  |                |  |                |  |                             |  |                                             
|2002       |  |                |  | 1,475,000      |  |                             |  | $                                           
|1997       |  |                |  | 165,000        |  |                             |  | $                                           
|1995       |  |                |  | 262,500        |  |                             |  | $                                           
|1995       |  |                |  | 21,000         |  |                             |  | $                                           

| | *
  Expired or cancelled in 2003                                                                                                                                                                                                                                                                                                                                                                                       
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 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 which expire on December 27, 2005
  and March 31, 2006, respectively. Compensation expense relating to these
  options in the amount of $12,000 was recorded in 2002 and is included in
  selling, general and administrative expense of the Companys statement of
  operations.
| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | In 2003, the
  Company recorded compensation expense of $255,000 included in selling,
  general and administrative expense in connection with options given in
  payment for consulting services. The number of shares of common stock which
  can be purchased under these grants aggregated 150,000 exercisable at $1.75.
  These options expire in 2013.                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                        
| | As of
  December 31, 2003, none of these options have been exercised.                                                                                                                                                                                                                                                                                                                                                  

Stock Issuances

| | 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 was payable,
  at the Companys option, in either cash or shares of common stock. The
  preferred stock was convertible to common stock at $1.00 per common share
  (representing the closing sale price of the common stock on the date of such
  funding). The conversion feature was valued at $380,000 and a deemed dividend
  for $380,000 was recorded at the time of issue. On October 29, 2003, these
  securities were converted into 2,024,986 shares of the Companys common
  stock, including shares applicable to accumulated dividends.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | In April
  2001, the Company raised $1,000,000 through the issuance of an 8%
  Non-Negotiable Promissory Note due April 20, 2003 provided that upon the
  approval of the stockholders of the Company, which was obtained in August
  2001, the entire outstanding principal amount of this note was converted into
  the Companys Series C Convertible Preferred Stock. On October 29, 2003,
  these securities were converted into 803,565 shares of common stock,
  including shares applicable to accumulated dividends.                                                                                                                                                                               

F-22

---

---

| | During 2001,
  the Company raised $5.8 million through the sales of 1,924,823 shares of its
  $.01 per share par value common stock.                                                                                                                        
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                             
| | In April
  2002, the Company issued 57,985 and 33,529 shares of common stock as payment
  of accrued dividends on the Companys Series B and Series C convertible
  preferred stock, respectively.                                                          
| |                                                                                                                                                                                                                                                             
| | In April
  2003, the Company issued 240,476 and 120,238 shares of common stock as
  payment of accrued dividends on the Companys Series B and Series C
  convertible preferred stock, respectively.                                                        
| |                                                                                                                                                                                                                                                             
| | In October
  2003, the Company issued 277,041 and 135,942 shares of common stock as
  payment of accrued dividends on the Companys Series B and Series C
  convertible preferred stock, respectively.                                                      
| |                                                                                                                                                                                                                                                             
| | In 2003, the
  Company issued an aggregate of 135,000 shares of common stock in exchange for
  services. The fair value of these shares totaled $132,250 and the Company
  included this compensation charge in selling, general and administrative expense.

Stock Warrants

| | In March
  2001, the Company issued investor warrants to purchase 1,000,000 shares of
  common stock at $1.20 per share, in connection to the sale of its Series B
  Convertible Preferred Stock. These warrants were exercisable in three equal
  annual installments, commencing one year from the date of issuance and expire
  in 2011. These warrants were valued at $380,000 and were recorded in
  stockholders equity in the accompanying financial statements. In October
  2003 and as described in Notes 5 and 9, these warrants were modified to
  reduce the number of warrants to 800,000 in conjunction with a settlement
  with the investor. The fair value ascribed to this modification was $400,000
  and is included as a reduction in interest and debt extinguishment costs
  related to the overall Grand Cheer settlement.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | In June
  2001, the Company issued investor warrants to purchase an additional 312,500
  shares of common stock at $1.00 per share, in connection with the sale of
  625,000 shares of common stock. These warrants vest ratably over three years.
  These warrants were valued at $158,000 at issuance and are recorded in
  stockholders equity in the accompanying financial statements. These warrants
  were exercised in March 2004.                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | In August
  2001, the Company converted a $1,000,000 convertible note into its Series C
  Convertible Preferred Stock. A total of 396,825 warrants to purchase the
  Companys common stock at $1.51 per share were issued along with the
  preferred stock. These warrants vest ratably over three years. These warrants
  were valued at $235,000 at issuance and are recorded in stockholders equity
  in the accompanying financial statements.                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | In October
  2001, the Company issued investor warrants to purchase an additional 250,000
  shares of common stock at $2.25 per share, in connection to the sale of
  250,000 shares of common stock. The warrants are exercisable immediately and
  expire in 2011. These warrants were valued at $489,000 at issuance and are
  recorded in stockholders equity in the accompanying financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | In
  connection with the sale of 1,049,823 shares of common stock in December
  2001, the Company issued warrants to purchase an additional 83,986 shares and
  92,958 shares of common stock at $4.10 and $5.34 per share, respectively. The
  warrants are exercisable immediately and expire in 2006. These warrants were
  valued at $230,000 at issuance and are recorded in stockholders equity in
  the accompanying financial statements.                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | In December
  2002, the Company issued 250,000 warrants to purchase common stock at $1.03
  per share in connection with an agreement with Bank of America to assist in
  raising capital for the Company. The warrants are exercisable immediately and
  expire in December 2007. These warrants were valued at $72,000 at issuance
  and are recorded in stockholders equity in the accompanying financial
  statements. These warrants were exercised in January 2004.                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | At December
  31, 2003, warrants remained outstanding for purchase of an aggregate of
  2,236,269 shares of the Companys common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-23

---

---

|11. | RELATED-PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In July
  2002, the Company issued a non-interest bearing promissory note in the amount
  of $1,000,000 to Grand Cheer Company Limited, a principal stockholder of the
  Company, which was secured by proceeds from sale of 350 ovens. All of the
  ovens were sold and cash received but no payment was made to Grand Cheer. The
  note was due on October 15, 2002. The note provided that if the Company did
  not repay the note in full by October 15, 2002, all remaining unvested
  warrants (666,667 warrants) previously issued to Grand Cheer would
  immediately vest. In connection with issuance of the note, the Company
  incurred a non-cash finance charge of $200,000 which was payable by
  offsetting the exercise price of the 1,000,000 warrants previously issued to
  Grand Cheer upon its purchase of the Companys Series B Convertible Preferred
  Stock. The $200,000 finance charge was recorded as interest expense during
  the third quarter of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In
  connection with the foregoing transaction, a question arose as to whether
  Jeffrey B. Bogatin, Chairman at the time, or a member of his family had a
  direct or indirect ownership interest in or control of Grand Cheer, a Hong
  Kong company which is a principal stockholder and creditor of the Company.
  Mr. Bogatin had an outside business relationship with a principal of Grand
  Cheer. Mr. Bogatin provided the Company with an affidavit stating that
  neither he nor any member of his family nor any entity in which any of them
  had an interest (i) in the past had any direct or indirect interest in or
  beneficial ownership of Grand Cheer, (ii) in the past has been an affiliate
  of Grand Cheer, (iii) in the past held any director, executive or officer
  position with Grand Cheer or (iv) was in a position to influence the
  day-to-day business operations of Grand Cheer. In addition, Grand Cheer
  represented to the Company that Mr. Bogatin had not held any direct or
  indirect interest in Grand Cheer and had not held any director, executive,
  officer or other control position in Grand Cheer. If Mr. Bogatin had been
  determined to have an interest in or control of Grand Cheer, the investment
  in the Company and loan made to the Company by Grand Cheer, which had been
  negotiated on behalf of the Company by Mr. Bogatin, would not have been arms
  length transactions. In addition, if Mr. Bogatin had been deemed to
  beneficially own the securities of the Company held by Grand Cheer, Mr.
  Bogatins ownership as reflected in the table included under Item 2.
  Security Ownership of Certain Beneficial Owners and Management, would not
  have been accurately reflected in the Companys 2002 Annual Report on Form
  10-K. This matter was reviewed by the Audit Committee of the Company at the
  time which determined that future transactions with Grand Cheer, including
  any amendment or modification to the loan, would be subject to their
  approval. As described in Notes 5 and 9, the Grand Cheer loan was paid in
  full and the Company settled all its related obligations thereunder in
  connection with the October 2003 private placement transaction.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | During 2002,
  the Company leased office space in New York at 660 Madison Avenue through
  January 31, 2003. This building is owned by a limited liability company
  controlled by an individual who joined the Companys Board of Directors in
  March 2002 but subsequently resigned in August 2002. The Company paid
  approximately $185,000 in base rental charges during 2002 for this office
  space. The Company believed that, at the time of the lease, these were the
  prevailing market rates for similar office space in New York. In addition,
  Mr. Bogatin, at the time an officer of the Company, owned a minority interest
  in the limited liability corporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | In April
  2001, the Company raised $1,000,000 through the issuance of an 8% Non-Negotiable
  Promissory Note due April 20, 2003 from Donald J. Gogel, at the time a
  director of the Company. The entire outstanding principal amount of this note
  was to be converted into preferred stock of the Company upon the approval of
  the stockholders. This was approved by the stockholders of the Company in
  August 2001 and the note was converted into Series C Convertible Preferred
  Stock. In addition, the Company issued 396,825 warrants to purchase shares of
  its common stock. The warrants have a term of 10 years at an exercise price
  of $1.51 per share and were valued at $190,000. This amount was treated as
  unamortized discount charged to interest expense. Each share of the preferred
  stock has (i) a liquidation value of $100 per share, (ii) is entitled to a
  dividend of $8.00 per share, payable semi-annually in cash or in shares of
  the common stock at the then fair market value and are (iii) convertible into
  shares of Common Stock at a conversion price of $1.26. As described in Note
  9, these securities were converted into common stock in connection with the
  October 2003 private placement transaction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-24

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|12. | COMMITMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | 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 $224,000,
  $126,000, and $8,000 in 2004, 2005 and 2006, respectively. Rent expense for
  each of the years ended December 31, 2003, 2002 and 2001 was $271,000,
  $407,000 and $375,000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|13. | LITIGATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | TurboChef filed for arbitration against Maytag Corporation (Maytag) in
Dallas, Texas, on February 2, 2001, in connection with a series of contracts for research, development and commercialization of certain technology
through a joint, strategic relationship. TurboChef claims damages in excess of $300 million for various contractual breaches, fraud, breach of the
duty of good faith and fair dealing, bad faith, punitive damages and attorney fees, and it seeks an injunction requiring Maytag to
return all rights in intellectual property owned by TurboChef under the parties agreements. In July 2002, in
response to an Iowa court proceeding brought by Maytag which is discussed
below, we filed an amended arbitration claim removing two of our pending claims
from the Texas arbitration. Those claims have been filed in the Boston
arbitration discussed below. Maytag has made certain counterclaims against us
in the Texas arbitration and is seeking in excess of $35 million in damages
under its counterclaims.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | We believe that Maytags Texas claims are without merit, and we intend
to vigorously defend against Maytags allegations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In May 2002, Maytag filed a complaint in Iowa federal court seeking,
among other things, to require that two of our claims originally filed and
pending in the Texas arbitration be decided only in a separate arbitration
proceeding in Boston, Massachusetts. Maytags complaint in the Iowa proceeding
also alleges that we publicized false and misleading statements about Maytags
use of our intellectual property in its residential appliances in a January
2002 press release and in certain other unidentified statements. Based upon
this allegation, Maytag asserts claims that we caused false advertising with
respect to Maytags goods and services, that we have intentionally interfered
with Maytags prospective business, that we have defamed Maytag and that we
have unfairly competed with Maytag. Unlike Maytags counterclaims in the Texas
arbitration proceeding, its complaint in the Iowa proceeding does not specify
the dollar amount of damages sought. In July 2002, we filed a motion to dismiss
the Maytag complaint or, in the alternative, stay the Iowa proceeding pending
resolution of the Texas arbitration. On July 30, 2002, Maytag filed a Motion
for Leave to File First Amended Complaint adding a claim that TurboChef failed
to pay a promissory note in the amount of $327,478. On January 6, 2003, the
Federal Court in the Iowa proceeding granted a summary judgment against
TurboChef in the amount of $359,372, which is accrued and included in notes
payable on the balance sheet at December 31, 2003 and stayed the remainder
of Maytags claims pending the final resolution of the Texas claims.  In
March 2004, we tendered full payment of the amount of the summary judgment.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Maytag has also initiated an arbitration in Boston, claiming damages in
the amount in excess of $1.3 million for failure to pay for ovens. TurboChef has
filed its counterclaim alleging that Maytag breached its warranty and committed
fraud and that TurboChef has been damaged in an amount in excess of $1.5 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The parties had since January 2003 agreed to stay the proceedings in
Dallas and Boston pending the outcome of settlement negotiations.  In
March 2004 we notified Maytag that we believed negotiations had not produced an
acceptable offer of settlement and we would, therefore, proceed with
arbitration. The outcome of any litigation, is uncertain, and an unfavorable
outcome could have a material adverse effect on our operating results and future
operations. Since the outcomes of the arbitration proceedings are uncertain, no
adjustments have been made to the financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-25

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|14. | QUARTERLY FINANCIAL INFORMATION (UNAUDITED)                                              
|--- | -----------------------------------------------------------------------------------------
|    |                                                                                          
|    | Unaudited
  quarterly financial information follows (in thousands except per share data):

|2003                                                            |  | First |            | Second |   | Third      |   | Fourth |            | Fiscal Year |  
|--------------------------------------------------------------- |  | ----- | ---------- | ------ | - | ---------- | - | ------ | ---------- | ----------- | -
|                                                                |  |       |            |        |   |            |   |        |            |             |  
|                                                                |  |       |            |        |   |            |   |        |            |             |  
|Total
  revenues                                                |  | $     | 2,224      | *      | $ | 612        |   | $      | 533        |             | $
|Gross profit                                                    |  |       | 1,050      | *      |   | 265        |   |        | 278        |             |  
|Net loss
  available to
     common stockholders                |  |       | (794       | )*     |   | (1,674     | ) |        | (628       | )*          |  
|Basic and
  diluted loss pershare                               |  | $     | (0.04      | )*     | $ | (0.09      | ) | $      | (0.03      | )*          | $
|Number of
  shares used in the 
  computation of loss per share |  |       | 19,062,534 |        |   | 19,419,240 |   |        | 19,419,240 |             |  
|                                                                |  |       |            |        |   |            |   |        |            |             |  
|2002                                                            |  |       |            |        |   |            |   |        |            |             |  
|                                                                |  |       |            |        |   |            |   |        |            |             |  
|                                                                |  |       |            |        |   |            |   |        |            |             |  
|Total
  revenues                                                |  | $     | 1,829      |        | $ | 905        |   | $      | 2,477      |             | $
|Gross profit                                                    |  |       | 830        |        |   | 491        |   |        | 1,062      |             |  
|Net loss
  available to
      common stockholders               |  |       | (1,330     | )      |   | (1,836     | ) |        | (1,746     | )           |  
|Basic and
  diluted loss pershare                               |  | $     | (0.07      | )      | $ | (0.10      | ) | $      | (0.09      | )           | $
|Number of
  shares used in the 
  computation of loss per share |  |       | 18,442,666 |        |   | 19,046,644 |   |        | 19,058,526 |             |  

|    | * As
  restated  on March 30, 2004, the Company amended it quarterly reports on
  Form 10Q to revise recognition of revenue for a transaction entered into in
  the first quarter of 2003 and to revise interest expense recorded in the
  third quarter for a debt extinguishment which was completed in October 2003.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                         
|15. | REVENUE BY GEOGRAPHIC AREA                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                         
|    | The Company
  currently derives primarily all its revenues from the sale of ovens. The Company does not have significant assets outside the United States.
  Revenues by geographic region for each of the three years ended December 31, 2003 is
  as follows:                                                         

| | REGION            |  | 2003           |       | 2002 |   | 2001  | 
| | ----------------- |  | -------------- | ----- | ---- | - | ----- | 
| |                   |  |                |       |      |   |       | 
| |                   |  | (In thousands) |      
| | North
  America   |  | $              | 2,746 |      | $ | 5,917 | 
| | United
  Kingdom  |  |                | 970   |      |   | 1,703 | 
| | Europe and
  Asia |  |                | 624   |      |   | 376   | 
| |                   |  |                |       |      |   |       | 
| |                   |  |                |       |      |   |       | 
| | Totals            |  | $              | 4,340 |      | $ | 7,996 | 

F-26

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