**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**Form
      10-K**





**For
      Annual and Transition Reports pursuant to Sections 13 or**


**15(d)
      of the Securities Exchange Act of 1934**




**(Mark
                One)**x
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934****For
                the Fiscal Year Ended December 31, 2005****OR**o
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934****For
                the transition period from ________
                to
                __________**




**Commission
      File Number 000-23478**





**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)****Six
                Concourse Parkway, Suite 1900, Atlanta, Georgia**
            
            **30328****(Address
                of principal executive offices)**
            
            **(Zip
                Code)****Registrant's
                telephone number, including area code:****(678)
                987-1700****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)**










Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. YES o NO x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. YES o NO x





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





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





Indicate
      by check mark whether the Registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x





Aggregate
      market value of voting and non-voting common equity held by non-affiliates
      of
      the Registrant at June 30, 2005: (the last business day of the Registrant's
      most
      recently completed second fiscal quarter) $143,843,016.





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 1, 2006**Common
                Stock, $0.01 Par Value
            
            28,693,516






















**TURBOCHEF
      TECHNOLOGIES, INC.**


**TABLEOF
      CONTENTS**




**Form
              10-K Item**
            
            
            
            **Page****Part
                I.**Forward-looking
                Statements
            
            1Item 1.
            
            Business
            
            1Item
                1A.
            
            Risk
                Factors
            
            10Item 2.
            
            Properties
            
            15Item 3.
            
            Legal
                Proceedings
            
            15Item 4.
            
            Submission
                of Matters to a Vote of Security Holders
            
            16**Part
                II.**Item
                5.
            
            Market
                for Registrant’s Common Equity and Related Stockholder
                Matters
            
            17Item
                6.
            
            Selected
                Financial Data
            
            17Item
                7.
            
            Management’s
                Discussion and Analysis of Financial Condition
                and Results of Operations
            
            19Item 7A.
            
            Quantitative
                and Qualitative Disclosures about Market
                Risk
            
            28Item
                8.
            
            Financial
                Statements and Supplementary Data
            
            29Item
                9.
            
            Changes
                in and Disagreements with Accountants on
                Accounting and Financial Disclosure
            
            29Item
                9A.
            
            Controls
                and Procedures
            
            29Item
                9B.
            
            Other
                Information
            
            29**Part
                III.**Item 10.
            
            Directors
                and Executive Officers of the Registrant
            
            30Item 11.
            
            Executive
                Compensation
            
            32Item 12.
            
            Security
                Ownership of Certain Beneficial Owners and
                Management
            
            35Item 13.
            
            Certain
                Relationships and Related Transactions
            
            37Item 14.
            
            Principal
                Accountant Fees and Services
            
            37**Part IV.**Item 15.
            
            Exhibits,
                Financial Statement Schedules, and Reports on
                Form 8-K
            
            38Signatures
            
            45














**PartI**





**Forward-looking
      Statements**







Certain
      statements in this Annual Report 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: the Company's history of losses; our dependence on a limited
      number of customers; the effect of our long sales cycle; our commercial oven
      products are offered to an emerging market segment requiring significant
      marketing efforts to achieve market acceptance; our planned entry into the
      residential oven market is subject to the risks inherent in establishing a
      new
      business enterprise; our rapid expansion and the potential difficulty in
      managing our growth; relationships with and dependence on third parties for
      raw
      materials or components; our reliance on our senior management team and the
      expertise of management personnel; the limited experience of some of our senior
      executive officers in our industry; potential liability for personal injury
      or
      property damage; the ability to protect our proprietary information and the
      uncertainty of the outcome of legal proceedings in which we are currently
      involved. Additional information and factors are set out in “Risk Factors” in
      Item 1A of this Annual Report. 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 the statement was
      made. We undertake no obligation to update any forward-looking
      statement.







**Item1.** **Business**





**General**





TurboChef
      Technologies, Inc. is a leading provider of equipment, technology and services
      focused on the high-speed preparation of food products. Our user-friendly speed
      cook ovens employ proprietary combinations of heating technologies, such as
      convection, air impingement, microwave energy and other advanced methods, to
      cook food products at speeds up to 12 times faster than, and to quality
      standards that we believe are comparable or superior to, that of conventional
      heating methods. We believe that one of our primary competitive advantages
      is
      the strength of our research and development capabilities and the breadth and
      depth of our portfolio of patents. Our staff o f
      18
      engineers has a long history of developing innovations in the foodservice
      industry. Our research and development focus combines the development of
      innovative cooking technologies with the commercialization of those technologies
      into finished products to meet specific market needs.





Currently,
      we focus our efforts on the approximately $4.0 billion annual worldwide
      commercial primary cooking equipment market with our three primary speed cook
      oven models, the C3, the TornadoTM and the High h Batch. The speed, quality,
      compact size, ease of use and ventless operation of our ovens provide
      significant advantages to a wide range of foodservice operators, including
      full-
      and quick-service restaurants, hotels, stadiums, convenience stores and coffee
      shops. These customers increasingly value the ability to cook food in a quick
      and high quality manner with minimal employee training. In addition, our ovens
      enable certain other customers to significantly broaden their foodservice
      offerings. We believe the advantages of our technologies were validated by
      our
      agreement in early 2004 to be the exclusive supplier of speed cook ovens to
      the
      more than 24,000 Subway ® franchise
      locations worldwide.





We
      offer
      our customers a high level of product service and support via a centralized
      call
      center and a network of certified third-party service technicians, which we
      believe significantly differentiates us from our competitors in the commercial
      cooking equipment market.





We
      currently sell our ovens through a broad sales organization that includes both
      internal direct salespeople as well as a network of manufacturer’s
      representatives and equipment distributors. In addition, we employ a flexible
      manufacturing model that relies on external suppliers of components for our
      ovens coupled
      with final assembly in our own facilities or through contract manufacturers
      as
      needed. This attractive operating model provides a level of operating leverage
      and capital efficiency within our business.





In
      order
      to leverage our success in the commercial cooking equipment market, we plan
      to
      enter the approximately $3.7 billion annual domestic residential oven market
      during 2006. Consumers increasingly value speed and convenience in home food
      preparation and continue to demand higher levels of quality and functionality
      in
      their kitchen appliances, resulting in a significant rise in the purchase of
      restaurant-caliber kitchen appliances for the home in recent years. We have
      demonstrated prototype double wall ovens with an original and unique design
      and
      control system to bring commercial speed cook technology right into the home.
      Our first residential products will target the premium segment of the
      residential oven market and will be introduced at a price point that we believe
      will be appropriate for consumer purchase. We expect to follow with other
      configurations over time to most successfully satisfy all consumer needs in
      the
      kitchen for residential oven appliances.





Our
      senior management team has a successful track record of improving operating
      results, building scale through organic growth and strategic acquisitions and
      enhancing stockholder returns ,
      and it
      is dedicated to accomplishing these same things for the Company. Since joining
      us in October 2003, our senior management team has made notable progress in
      developing the speed cook market and











positioning
      the Company as the foremost player in that field. A number of members of our
      management team have specific and significant experience in speed cook
      technology and the commercial foodservice industry in general. Since 2003,
      we
      have seen the development of a tremendous relationship with the Subway franchise
      restaurant system with our Tornado ovens that led to the Company’s first
      profitable year in 2004 and continued meaningful sales in 2005. The Company
      now
      has a solid sales and marketing effort and operates its own production line
      out
      of our new operations center in Dallas, Texas. In 2005 the Company added to
      its
      strong technology base through the acquisition of the assets of Global Appliance
      Technologies to continue to enhance our future product development capabilities.
      In 2005 the Company unveiled a working prototype of its first remarkable
      residential speed cook oven and was able to attract senior and experienced
      managers to our residential oven program. Assuming OvenWorks, LLLP, our majority
      stockholder, distributes its shares of our common stock to its limited partners,
      our executive officers collectively beneficially own
      approximately 17% of our
      common stock, based on shares outstanding at March 1, 2006 strongly aligning
      their interests with those of other stockholders.





**Our
      Technologies**





Speed
      cook technologies combine various heat transfer technologies, such as hot air
      convection, air impingement, induction and microwave energy, to cook food
      significantly faster than traditional heating methods. Our research and
      development team works continuously to design and test new combinations of
      these
      and other cooking methods, and our speed cook technologies are the primary
      subject of our more than 250 issued patents and patent applications worldwide.
      Through our acquisition of Enersyst Development Center, LLC (“Enersyst”) in
      2004, we
      brought in an experienced group of engineer/inventors and succeeded to their
      long history of impingement conveyor oven technology that is used widely in
      the
      industry today. Through our more recent acquisition in 2005 of the technologies
      and engineering expertise of Global Appliance Technologies (“Global”),
      we have
      expanded our ownership of core speed cook technology that will help us to
      continue to define speed cook technology applications today and for the
      future.





The
      core
      of the speed cook technology used in our currently-available commercial ovens
      is
      a proprietary combination of high-speed forced air convection and microwave
      energy or high-speed forced air convection alone. In our C-3 and Tornado models,
      a smooth-flowing field of heated air is circulated within the oven at speeds
      of
      up to 60 miles per hour to wrap the surface of food in a fast-moving shroud
      of
      hot air, while the food simultaneously is cooked with precisely controlled
      bursts of microwave energy. This system creates a unique set of temperature-
      and
      moisture-control conditions within the food that preserves and enhances flavor.
      Our High h Batch oven uses our air impingement cooking system — specially-placed
      nozzles that force high-velocity jets of heated air from above and below the
      food product to produce faster and more consistent cooking than conventional
      methods, but without microwave. We are applying a combination of these same
      technologies to our residential oven product. All of our commercially available
      ovens and the residential oven design include our patented system of scrubbing
      the circulating air using a catalytic converter. Heated air is circulated
      through the internal catalytic converter, instead of being vented outside the
      unit, as with a conventional oven, resulting in a ventless system. Our ovens
      employ this technology to cook food at high speeds with food quality we believe
      to be comparable, and in many instances superior, to both conventional methods
      and other speed cook methods.





Our
      commercial ovens employ a proprietary operating system, which incorporates
      our
      patented layered logic system of user controls. This system allows for
      step-by-step, intuitive operation of the ovens via a digital touchpad, enabling
      users to easily specify one of up to as many as 128 previously saved cooking
      profiles. These memorized settings allow operators of varying culinary skill
      levels to easily cook a variety of menu items in a consistent, high quality
      manner. In addition, our operating system allows users to create and save their
      own custom cooking settings. This system also tracks and records selected
      cooking data, allowing a commercial operator to review cook times, production
      volume and other characteristics. Our commercial ovens also incorporate our
      Menu-in-a-Minute technology, which offers users the ability to download
      additional menu selections and cooking cycles for their ovens through the use
      of
      a computer chip card. Menu-in-a-Minute technology enables foodservice chains
      to
      make changes to their menus and program new cook settings centrally, allowing
      these changes to be implemented quickly, consistently and cost-efficiently
      throughout an entire chain.





Some
      of
      our air impingement cooking system technologies, including those that employ
      a
      proprietary combination of air impingement and microwave energy, are the subject
      of licenses to third parties. In addition to these commercially-available
      technologies, we also have developed other proprietary speed cook technologies,
      incorporating various combinations of hot air convection, air impingement,
      microwave energy and other heating methods. We continue to work towards refining
      and developing these technologies and to explore ways in which they can be
      used
      for commercial and residential applications.





**Our
      Products and Services**





***Our
      Commercial Ovens***





We
      have
      t hree
      primary commercial oven models, our C3, Tornado and High h Batch
      ovens:





·
            *The
                TurboChef C3.*The
                C3 model uses a patented combination of high-speed forced air convection
                heating and microwave energy to cook up to 10 times faster than
                conventional methods. The C3 bakes, browns, broils and roasts with
                food
                quality that we believe to be comparable or superior to that of
                traditional cooking. The primary benefit of the C3 is its versatile
                capability to cook a wide spectrum of food, from dense proteins like
                filet
                mignon to delicate soufflés. Because it
                is





2








·
            certified
                by Underwriter’s Laboratory (UL®)
                to be operated in a ventless environment, the C3 does not require
                a hood,
                ventilation or a fire suppression system. Its preprogrammed, digital
                touchpad makes operation and training simple for any operator or
                chef.





·
            *The
                TurboChef Tornado.*Our
                Tornado oven has many of the same operational benefits as our C3,
                but is
                specifically designed to cook, toast and brown sandwiches, pizzas,
                appetizers and similar food products. The Tornado combines our patented
                ventless speed cook technology with a conventional wire baking rack
                and
                independently-controlled infrared browning element to cook up to
                12 times
                faster than conventional methods with food quality that we believe
                to be
                comparable or superior to that of traditional cooking. Like the C3,
                the
                Tornado is UL certified to be operated in a ventless environment.
                We
                believe the Subway system’s adoption of the Tornado as its exclusive speed
                cook oven validates the oven and its underlying technologies. While
                the
                bulk of our sales of Tornado ovens have gone to the Subway franchise
                system, in 2005 we began selling this model to other commercial customers.





·
            *The
                TurboChef High h Batch.*Our
                most recently introduced commercial oven is the High h Batch oven.
                We
                applied breakthrough impingement technology in a batch oven as an
                efficient alternative to currently-marketed commercial small conveyor
                ovens. The High h Batch oven also includes our patented ventless
                technology and bakes, browns and toasts with speeds up to twice that
                of
                tabletop conveyors and five times the speed of conventional equipment.
                This model utilizes heated air only with no microwave, and it is
                particularly suited for fresh dough pizzas, pasta entrees and appetizers,
                and raw dough and batter-based baked goods, and it can accommodate
                a full
                1⁄2 sheet pan.





We
      assemble our commercial ovens in our own assembly line at our facilities in
      Dallas, Texas, from parts and components sourced commercially. We maintain
      relationships with third-party assemblers who can augment our production
      capabilities as demand requires.





***Performance
      Characteristics of Our Commercial Ovens***





We
      believe the key performance characteristics of our C3 ,
      Tornado
      and High h Batch ovens provide a unique value proposition to our customers.
      These key performance characteristics include:





·
            *Speed.*Our
                C3 and Tornado ovens cook up to 10 and 12 times faster, respectively,
                than
                conventional ovens, and each are capable of cooking diverse items
                together
                or consecutively with no lag time. This capability results in
                significantly increased food throughput for users of our ovens. Our
                High h
                Batch oven, applying an advanced version of the heated air impingement
                technology commonly found in conveyor ovens, but in a batch configuration
                in our oven, can double the speed of tabletop conveyor cooking, and
                it can
                cook up to 5 times as fast as a conventional oven.





·
            *Quality
                and Versatility.*We
                believe that our ovens produce food that is comparable, and in many
                cases
                superior, in quality to conventional and other speed cook methods.
                Additionally, our ovens are able to bake, brown, broil or roast,
                allowing
                them to be used in a broad spectrum of venues, including fine dining
                establishments, quick-service restaurants, hotels, movie theaters,
                concessions,convenience stores, coffee shops and
                bakeries.





·
            *Ventless
                Cooking.*During
                the cooking process, air in our speed cook ovens is circulated through
                an
                air-scrubbing catalytic converter that breaks down fume and grease
                by-products of food, enabling the ovens to operate without venting
                these
                by-products into the air. This ventless system eliminates the need
                for
                commercial kitchen hood systems, allows our ovens to be installed
                in
                almost any location, and significantly reduces flavor transfer and
                odor
                transfer between different products cooked together or consecutively
                in
                the oven.





·
            *Ease
                of Use.*Our
                layered logic operating system allows for step-by-step, intuitive
                operation of our ovens via a digital touchpad, allowing users to
                easily
                specify one of up to as many as 128 pre-preprogrammed cooking profiles,
                depending on the oven model. These memorized settings allow operators
                of
                varying culinary skill levels to easily cook a variety of menu items
                in a
                consistent, high quality manner. In addition, our operatingsystemallows users to program their own custom cook settings. Our
                Menu-in-a-Minute technology allows users to download menu selections
                and
                cooking cycles for their ovens. This technology enables foodservice
                chains
                to make changes to their menus and program new cook settings centrally,
                allowing these changes to be implemented quickly, consistently and
                cost-efficiently throughout an entire
                chain.








***Future
      Oven Products***




We
      continue to develop new technologies and augment our existing technologies,
      and
      we are in various stages of development of new commercial ovens based on these
      technologies. Additionally, we have
      demonstrated a prototype oven for the premium segment of the residential oven
      market that incorporates our state-of-the-art speed cook technology. We expect
      to introduce our residential ovens to the market during 2006.





3








Our
      residential product offering will incorporate our commercially successful heated
      air impingement technology coupled with microwave pulses for superior cooking
      speed and finished food quality. The first product launch will be a double
      wall
      oven configuration incorporating a unique styling and advanced, user-friendly
      operating system.





***Licensing
      and Technologies***





Certain
      of our patented technologies gained
      through acquisitions in 2004 and 2005 are the subject of exclusive or
      non-exclusive licenses to third parties who have produced, and may continue
      to
      produce, commercial and residential ovens based on our technologies. Although
      we
      do not intend to continue to actively seek licensees for our technologies,
      these
      existing licenses will continue to provide a source of revenue for us until
      they
      expire or are terminated.





***Other
      Products and Services***





In
      addition to the primary products and services described above, we offer certain
      consumables related to our ovens, such as ceramic platters, cooking utensils
      and
      proprietary oven cleaners, and replacement parts for our ovens, in each case
      to
      support our customers’ use of our ovens. To date, such sales have not provided a
      material source of revenue.





**Our
      Strategy**





Our
      goal
      is to be the world leader in speed cook equipment, technology and services
      for
      both the commercial cooking and residential markets. The following are our
      principal strategies to achieve this goal.





***Penetrate
      Top Foodservice Chains***





Our
      national sales organization is actively
      engaged in discussions or negotiations with, or our ovens are in various stages
      of testing by, more than 30 of the top 100 foodservice chains. Based on the
      experience we gained from our relationship with the Subway system, we believe
      that we have the capability to provide customized cooking solutions and to
      manage the large-scale product roll-outs necessary to meet the needs of large
      foodservice chains. We intend to build upon the success of our relationship
      with
      the Subway system to market our integrated product and service offerings to
      these potential customers. Our ovens offer these large foodservice chains a
      high-quality, cost-efficient and easy-to-use alternative cooking method that
      can
      increase volume and revenue through faster preparation of existing menu items.
      Additionally, the space-conserving and ventless operation of our ovens will
      allow these foodservice chains to enhance or expand their existing menus, and
      will permit those with limited or cold food offerings to offer new heated or
      toasted food items. We believe that the enhanced or new food offerings
      facilitated by our ovens can help these chains increase same store sales by
      producing new sources of revenue.





***Enter
      Residential Oven Market***





We
      intend
      to use our state-of-the-art speed cook technologies, our experience and success
      in the commercial cooking equipment market and our product marketing expertise
      to enter the residential oven market. We estimate that the domestic market
      for
      residential ovens is  approximately
      $3.7 billion annually, and the global market is approximately $15.0 billion
      annually. Consumers continue to demand higher levels of quality and
      functionality in their kitchen appliances, and are willing to pay a premium
      for
      them, resulting in a significant rise in restaurant-caliber kitchen appliances
      being purchased for home use in recent years. In addition, consumers value
      the
      ability to shorten food preparation time in today’s increasingly busy society.
      In order to capitalize on these trends, we have demonstrated a prototype double
      wall oven which we intend to introduce to the premium segment of the residential
      oven market in 2006 at a price point that we believe will be appropriate for
      that market. We also are working to develop an appropriate distribution network
      and marketing campaign for the residential oven market and a customer support
      infrastructure to meet the anticipated demands of residential
      customers.





***Further
      Develop Our Commercial Product Portfolio and Proprietary
      Technologies***





We
      continue to work
      on
      developing new commercial products and technologies to augment our existing
      portfolio of products and proprietary technologies. Our staff of experienced
      research engineers includes several of the original developers of speed cook
      technology, with an average of over 20 years of experience in speed cooking.
      By
      acquiring Enersyst and the technologies and expertise of Global Appliance
      Technologies and combining their respective proprietary technologies with our
      existing intellectual property portfolio, we believe we are better positioned
      to
      develop the most technologically advanced speed cook products. We currently
      have
      a number of potential new products or innovations at various stages of
      development that utilize a variety of speed cook technologies.





***Leverage
      Our Global Distribution Network***





In
      addition to supporting our marketing efforts with top foodservice chains, we
      believe that our global network of manufacturer’s representatives and equipment
      distributors can provide new business opportunities from their relationships
      with potential customers. While we will continue to handle our sales efforts
      to
      major foodservice chains through our senior executives and corporate level
      sales





4





staff,
      we
      will also continue to rely on our distribution partners to service the remainder
      of the over 800,000 potential domestic foodservice venues that make up the
      commercial market for speed cook products, including approximately 250,000
      quick-service restaurant locations, 240,000 full-service restaurant locations,
      55,000 hotels and resorts, and other venues such as convenience stores, coffee
      shops, limited-service hotels, movie theaters, and bars and taverns. Our global
      network of representatives and distributors gives us increased access to the
      potential customers operating these venues, including smaller foodservice
      operators and operators of venues that are less efficient to target with
      company-level sales efforts.





***Provide
      High-Quality Customer Service and Support***





We
      believe that providing high-quality customer service and support gives us a
      competitive advantage and is an important element of our business strategy.
      Our
      experience has shown that our customers value the ongoing service that we
      provide beyond the point of purchase. To that end, we have developed an
      extensive service network for
      commercial customers that utilizes modern call center technologies,
      highly-trained service representatives and certified third-party technicians.
      We
      expect our high service standards to enhance our marketing efforts with new
      customers and to result in both positive word-of-mouth referrals and repeat
      business from our existing customers.





***Enhance
      Brand Awareness***





We
      are
      implementing a cohesive program designed to create a strong brand identity
      for
      TurboChef and to leverage the success and recognition we have received in the
      market related to our relationship with the Subway system. We advertise
      frequently in trade magazines, exhibit and demonstrate our products at trade
      shows, and regularly distribute print and electronic mailings to potential
      customers highlighting the benefits of our products. We continue to seek
      opportunities for media and public relations exposure and have built and refined
      our website to further this effort. Through these marketing programs we will
      continue to stress the benefits of our products and services and believe that
      these efforts will result in increased acceptance of speed cook technology,
      thereby expanding our potential customer base.





***Pursue
      Strategic Alliances and Acquisitions***





We
      intend
      to consider strategic alliances and continue to selectively pursue acquisitions
      in order to, among other things, increase our sales, marketing and distribution
      capabilities and augment our technologies. Management has had significant
      experience in successfully identifying, executing and implementing strategic
      acquisitions in other industries and believes it can leverage that experience
      in
      the commercial cooking equipment market and residential oven market. For
      example, in May 2004, we acquired Enersyst and its technologies which
      significantly expanded our research and development capabilities, positioning
      us
      well to continue to develop technologically advanced speed cook
      products. In
      September 2005 we acquired the technologies of Global, including innovative
      approaches to speed cooking, and augmented our engineering team with Global
      personnel as well.





**Sales
      and Marketing**





***Sales***





Currently,
      we focus on sales of our products to commercial foodservice operators. Our
      relationships with major foodservice chains typically are developed and
      maintained through an integrated effort of senior executives and corporate
      level
      sales management to best service these customers’ needs. To target other
      potential customers, we also have in
      place
      a three-tiered global sales and marketing network consisting of our internal
      corporate-level sales team, our external network of manufacturer’s
      representatives and foodservice equipment distributors, and those
      representatives’ and distributors’ sales personnel. We look for strategic
      marketing alliances with third parties, particularly food manufacturers, who
      have established relationships with mutual prospective customers. We utilize
      customer relationship management software applications that provide our sales
      force with tools for lead tracking, customer base forecasting and sales
      forecasting. Our primary sales office is located in Dallas, Texas.





Our
      corporate-level sales and marketing staff consist s
      of 25
      employees, including nine regional directors, five of whom are each
      responsible for a different domestic region, and one each in Europe, Europe
      & Middle East, Asia/Pacific and Latin America. Each of our regional
      directors manages a network of manufacturer’s representatives and foodservice
      equipment distributors within his region. Currently, our domestic regional
      directors manage a total of 25 manufacturer’s representatives and equipment
      distributors, and our European regional directors manage 43 different
      non-exclusive foodservice equipment distributors. In turn, each manufacturer’s
      representative and equipment distributor employs its own force of individual
      sales representatives. Currently, our manufacturer’s representatives and
      equipment distributors engage approximately **** 213
      sales
      representatives globally.





All
      members of our direct sales force, as well as selected representatives from
      our
      domestic manufacturer’s representatives and our international foodservice
      equipment distributors receive extensive training in the operation and service
      of our ovens and education in the overall benefits of our ovens through
      attendance at an intensive two- or three-day session. We have held these
      sessions in the U.S., Europe and Singapore, to reflect our strong commitment
      to
      making this training available to our representatives. Attendees of these
      programs see our ovens operate in a full spectrum of venues and are instructed
      on the numerous ways that our ovens can efficiently and cost-effectively provide
      high quality, speed cook alternatives to our potential customers. We believe
      that a sales force that is highly knowledgeable about our ovens and service
      offerings will be more effective in targeting its sales efforts to our various
      potential customers.





5








***Marketing***





We
      are
      committed to developing a strong, consistent brand identity for TurboChef.
      Through our marketing program, we will continue to educate the commercial,
      and we
      have
      begun to educate the residential, markets about the benefits of speed cooking
      and our position as a global leader in speed cook equipment, technology and
      services. To that end, we are committed to seeking opportunities for media
      and
      public relations exposure, including advertising in trade magazines, developing
      our website, and engaging in targeted print and electronic mail campaigns.
      In
      addition, we brand our oven products with the TurboChef name, and we will use
      the TurboChef name in connection with all trade shows, seminars and other
      expositions. We also recognize that providing potential customers with a
      first-hand experience of speed cooking is an important part of educating the
      market about speed cooking and the capabilities of our products. Therefore,
      we
      attend numerous trade shows and seek other opportunities to conduct
      demonstrations of our speed cook technologies. Our participation at trade shows
      allows us to market to other industry professionals, including equipment
      distributors, foodservice equipment manufacturers and foodservice industry
      consultants.





**Research
      and Development**





We
      believe that one of our competitive strengths is our highly capable research
      and
      development staff, which includes 18 of our 158 employees, with significant experience in the industry. Our research and
      development staff has a proven history of developing leading technological
      innovations in the foodservice industry.





The
      scientists and foodservice experts that comprise our research and development
      staff focus on enhancing our existing speed cook technologies, developing new
      speed cook technologies, and the practical application of our existing and
      new
      technologies to the commercial cooking equipment market and residential oven
      markets. Specifically, our research and development staff continually tests
      our
      existing products and technology against those of our competitors in the market
      and regularly communicates with our customers, our customer service and support
      staff and our sales representatives to ensure that our products and technologies
      continue to meet evolving market demands. We plan to continue to devote
      substantial resources on an ongoing basis to our research and development
      efforts.  We
      also
      offer a fully-equipped, state-of-the-art test kitchen facility available to
      clients for product demonstrations.





**Our
      Production Model**





We
      employ
      a flexible production model by outsourcing the manufacturing of components
      and
      using our own facilities to assemble our commercially available ovens (and
      to
      create prototypes of potential new ovens), as well as maintaining relationships
      with contract manufacturers for additional oven assembly, as needed. Our
      internal assembly operations rely primarily on hourly employees and require
      minimal fixed overhead costs, affording us the flexibility to efficiently scale
      our operations to the required production needs. We purchase raw materials,
      such
      as fabricated stainless steel, and components, such as circuit boards and wiring
      harnesses, for our ovens from a number of different vendors. We believe that
      there are multiple sources for each of our supply needs, and we do not maintain
      long-term agreements with our suppliers. We will continue our efforts to
      identify and ensure availability from alternative suppliers, particularly for
      components that come from a more limited number of sources.





We
      require that our manufacturing partners follow generally accepted industry
      standard quality control procedures. In addition, we employ our own quality
      assurance personnel and testing capabilities to assist our manufacturing
      partners with their respective quality programs, and we perform routine audits
      both of our assembly line and finished products to ensure high quality and
      reliability. We believe that we have good relationships with our contract
      manufacturers and consider our sources of supply and assembly to be adequate
      for
      present and anticipated future requirements.





**Backlog**





Backlog
      generally is not considered a significant factor in our business as relatively
      short delivery periods and rapid inventory turnover are characteristic of our
      current products.





**Our
      Customers**





Our
      commercial ovens are used by a diverse base of foodservice operators, including
      quick-service and full-service restaurants, hotels, concessions,
      coffee shops and convenience stores. While we often sell directly to operators
      in the foodservice industry, many of our sales are made through foodservice
      distributors, equipment dealers and foodservice industry consultants. We also
      license certain of our proprietary technology to foodservice equipment
      manufacturers.





6





In
      addition to the Subway system, some of the users of our ovens
      include:





Hotels
                and Resorts
            Hilton
                Hotels Corporation
              Starwood
                Hotels & Resorts Worldwide, Inc.Foodservice
                and Concessions
            Compass
                Group
              HMS
                Host CorporationMovie
                Theaters
            Loews
                Cineplex Entertainment CorporationTheme
                Parks
            The
                Walt Disney CompanyStadiums
            Lambeau
                Field (Green Bay, Wisconsin)
              Petco
                Park (San Diego, California)








***Subway
      Relationship***





In
      2004
      we were named the exclusive supplier of speed cook ovens to Subway franchise
      restaurants worldwide to support its toasted sandwich initiative. In 2005 we
      completed delivery of Tornado ovens to almost all Subway locations in the
      initial rollout. To support Subway’s highly successful toasted menu items, we
      continue to provide our speed cook ovens to the Subway system, both domestically
      and internationally, as new locations are opened and as existing franchisees
      purchase second units. According to Subway’s website, there are over 25,000
      Subway locations in 83 countries worldwide and we anticipate the Subway concept
      to continue for 2006 with the growth that it has shown in recent years - more
      than 2,000 new locations.





Our
      agreement with the Subway system generally restricts us from selling the Tornado
      oven to quick-service restaurant chains that are primarily engaged in the
      business of selling submarine-style sandwiches which are marketed or sold
      substantially in the same manner as Subway brand sandwiches. We are otherwise
      free to sell our Tornado ovens to quick-service restaurants and chains that
      are
      primarily engaged in selling other types of food, such as hamburgers, chicken
      and pizza (even if such establishments have submarine-style sandwiches on their
      menus).





**Service
      and Support**





We
      consider service and support for end-users of our ovens to be a top priority,
      and we believe that our service and support platform will set new standards
      in
      the commercial foodservice equipment industry, significantly differentiating
      TurboChef from its competitors. We also believe that our high level of service
      and support will be an important attribute in our planned entry into the
      residential oven market.





We
      have
      established a three-tiered service network to provide what we believe to be
      the
      fastest response time in our industry. At the corporate level, our 32 -person
      customer service staff is responsible for overseeing our customer service and
      support functions. Our customer service staff manages a network of over 200 independent service organizations throughout the United States and Canada,
      who
      in turn supervise approximately 3,000 employed
      or affiliated service technicians. Through this network we provide live response
      seven days a week.





We
      generally provide purchasers a one-year limited warranty covering each oven’s
      workmanship and materials, during which period we or one of our authorized
      service representatives will make repairs and replace defective parts.
      Components 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. In
      addition, we have incorporated a state-of-the-art online customer service
      program to manage service requests and to assist our service partners and
      customers. Service calls are entered into the system, where they are processed
      and ultimately assigned to our authorized service representatives, if an on-site
      visit is required. The system tracks all aspects of the service relationship,
      including call time to response time, and allows us to have real-time access
      to
      the status of all service calls. The system also allows our customers real-time
      online access to track the status of service calls and parts orders and allows
      our service partners to order replacement parts and view part
      specifications.





**Intellectual
      Property**





The
      growth, protection and maintenance of our intellectual property portfolio,
      especially our patent portfolio, are important to our business. Including
      acquired portfolios of Enersyst and Global, we have more than 250 issued patents
      and patent applications worldwide, primarily covering our speed cook
      technologies. We believe that, in breadth and scope, our patent portfolio is
      larger than that of any competitor in the speed cook sector of the commercial
      cooking equipment market, which we believe gives us a competitive advantage
      in
      our market. Our patents cover the fundamental aspects of our speed cook
      technologies, and we have issued patents and pending patent applications in
      over
      25 countries (including the United States, Japan and various countries of the
      European Union). Our currently issued United States patents will expire at
      various dates between 2006 and 2020.





We
      believe that product and brand name recognition is an important competitive
      factor in our market. Accordingly, we actively promote our brand names, and
      will
      actively promote our future brand 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, and have applied
      for registration of the trademark TornadoTM in the United States. In certain
      countries in Europe, we license the TurboChef name 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, suppliers
      and manufacturers, as appropriate, to protect the concepts, ideas and
      documentation relating to our proprietary technologies.





7





**Our
      Industry**





***Commercial
      Cooking Equipment Market***





According
      to the 2002 *Size
      and Shape of the Industry Study* conducted
      by the North American Association of Food Equipment Manufacturers (“NAFEM”), the
      North American market for commercial primary cooking equipment (including ovens,
      broilers, grills, toasters, and fryers) is approximately $1.5 billion annually.
      The oven component of this market is approximately $600 million annually. NAFEM
      estimates that the annual global market for commercial primary cooking equipment
      is 2.5 to 2.8 times the North American market, or approximately $4.0 billion.
      This market is driven in large part by the trends and growth of the restaurant
      foodservice industry. The National Restaurant Association (“NRA”) estimates that
      domestic restaurant industry sales will reach $440 billion in 2004, an increase
      of 4.4% over 2003, marking the 13 th consecutive
      year of real sales growth for the restaurant industry. The NRA defines the
      restaurant industry as all meals and snacks prepared away from home (including
      all takeout meals and beverages), and includes both commercial and institutional
      foodservice providers. Over the past 20 years, the restaurant industry has
      grown
      at a compound annual growth rate of 5.1%. According to the NRA, sales at
      full-service restaurants are projected to reach $158 billion in 2004, and sales
      at quick-service restaurants are projected to reach $124 billion in 2004. It
      is
      estimated that there are nearly 500,000 full-service and quick-service
      restaurant locations in the U.S. The balance of the restaurant industry consists
      of operations where food is not the primary source of the operation’s revenues,
      including convenience stores, lodging places, coffee shops, bars and taverns,
      recreation venues (such as movie theaters) and other institutions (such as
      military and educational facilities). It is estimated that there are between
      300,000 and 400,000 such locations in the U.S.





The
      restaurant industry is projected to continue this growth primarily as a result
      of population growth and consumer desire for food quality and convenience.
      Consumer demand for convenience, speed and product quality is shaping
      foodservice and operating model trends, resulting in concept growth in new
      venues and specifically in the fast-casual niche, a sub-sector of the
      full-service restaurant segment. This continued industry growth drives
      foodservice equipment sales based on new location openings and remodelings,
      new
      venues and concepts, menu and operational modifications and equipment
      obsolescence. Several industry trends are anticipated to have a favorable impact
      on speed cooking, including the increasing demand by consumers for speed and
      convenience without a loss of food quality and the rapidly growing integration
      by foodservice providers of new technologies into their businesses in order
      to
      improve efficiency, throughput and consistency of product. We believe that
      we
      are well-positioned to benefit from the following equipment trends in the
      commercial cooking equipment industry as highlighted by foodservice operators
      according to a NAFEM survey:





·
            multi-functional,
                multi-tasking equipment that fits in a small footprint, is easy to
                clean,
                and is fully mobile;





·
            energy
                efficient with minimal heat and fume
                emission;





·
            programmable
                via integrated memory storage devices or connected remotely by a
                modem;





·
            easy
                to train new employees to use, given high industry turnover rates
                and
                increasing number of non-English speaking
                employees;





·
            improved
                quality of equipment service; and





·
            accelerated
                cooking using specialized heat concentration
                technology.





In
      addition, we believe that speed cook technology is further expanding the market
      for primary cooking equipment beyond domestic full-service and quick-service
      restaurants to include other domestic foodservice venues such as convenience
      stores, coffee
      shops, bars and taverns, stadiums, schools and movie theaters. These other
      establishments now have the option to expand their food selection to encompass
      foods that previously took too long to cook for their time-constrained
      customers, and foods that were previously cooked in a conventional microwave
      oven at the expense of the food’s optimal flavor. Our speed cook ovens offer
      these other operations a cooking platform that provides an additional revenue
      source while requiring little, if any, additional investment in kitchen
      infrastructure, staff or training.





***Residential
      Oven Market***





We
      believe that the residential oven market represents a large, untapped
      opportunity for our business. According to industry sources, the domestic oven
      market (excluding microwaves) is approximately $3.7 billion annually,
      representing approximately 8.0 million units. The global market for residential
      ovens is approximately $15.0 billion.





The
      domestic market for premium residential ovens has been growing at a rate faster
      than the overall residential oven market, which growth is driven by several
      trends, including:





·
            consumer
                desire for speed and convenience in food preparation at
                home;





8





·
            increased
                demand for higher-end kitchen equipment driven by increases in the
                size of
                the average American home, new home construction and remodeling
                trends;





·
            emergence
                of premium kitchen equipment as a status symbol;
                and





·
            increasing
                consumer comfort with using technology in virtually every part of
                their
                daily lives.





We
      believe that by leveraging the advantages of our speed cook technologies,
      including our high cooking speed and food quality and our user-friendly
      operating system, as well as our marketing expertise, we are well-positioned
      to
      capitalize on these market trends.





**Competition**





***Commercial
      Cooking Equipment Market***





The
      speed
      cook oven sector of the commercial cooking equipment market is characterized
      by
      intense competition. Our speed 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 other industry participants are developing, and in some cases have
      introduced, commercial ovens based on speed cook methods and
      technologies.





Our
      principal methods of competing in the commercial cooking equipment market are
      through our product performance, our research and development
      capabilities and our
      service and warranty offerings. We do not believe there has been a significant
      introduction into the marketplace of any competitive products 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 at comparable speeds). Among our major competitors in the commercial cooking
      equipment market are:





·
            Amana
                (Maytag Corporation);





·
            Duke
                Manufacturing Company;





·
            Fujimak
                Corporation;





·
            Groen,
                Inc. (Dover Corporation);





·
            MerryChef
                and Lincoln Foodservice Products (Enodis,
                LLP);





·
            The
                Middleby Corporation; and





·
            Vulcan-Hart
                Corporation (Illinois Tool Works,
                Inc.).





We
      currently license certain technologies to some of these competitors who are
      currently producing, and may in the future produce, products that may be
      competitive with our speed cook ovens.





***Residential
      Oven Market***





Although
      we currently do not sell a residential speed cook oven, we have demonstrated
      a
      prototype residential oven and plan to enter the residential oven market.
      Competition is growing in the emerging residential speed cook sector of the
      residential oven market. However, we do not believe there are any speed cook
      products currently being sold in the residential oven market that possess the
      same combination of speed and quality as our prototype residential speed cook
      oven.





Certain
      companies have introduced speed cook residential ovens, including the General
      Electric Advantium ® and
      Trivection ® ovens
      (utilizing microwave and halogen light technology), the Whirlpool
      g2microven TM SpeedCook
      Appliance (utilizing convection, microwave and halogen light technology) and
      the
      Amana Lightwave TM (utilizing
      microwave and infrared light technology).





**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 Japan Ministry of International Trade (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. We test our ovens, from time to time, in order to confirm continued
      compliance with applicable regulatory requirements. We believe that compliance
      with these laws and regulations will not require substantial capital
      expenditures or have a material adverse effect on our future
      operations.





9








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 commercial foodservice equipment and
      residential oven markets 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 UL accreditation standards 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 C3 oven.
      Our
      Tornado oven received CE accreditation 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.





**Employees**





As
      of
      March 1, 200 6,
      we
      employed 158 persons, including personnel providing technological support and
      development, manufacturing, sales, marketing, customer service, and finance
      and
      administration support. None of our employees are represented by labor unions.
      We consider relations with our employees to be good.





**Available
      Information**





We
      make
      available free of charge on or through our Internet website our annual reports
      on Form 10- K,
      quarterly reports on Form 10-Q, current reports on Form 8-K and amendments
      to
      those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
      Securities Exchange Act of 1934 as soon as reasonably practicable after we
      electronically file such material with, or furnish it to, the SEC. Our Internet
      address is www.turbochef.com.





**Item1A.** **Risk
      Factors**





As
      previously discussed, our actual results could differ materially from our
      forward looking statements. Factors that might cause or contribute to such
      differences include, but are not limited to, those discussed below. These and
      many other factors described in this report could adversely affect our
      operations, performance and financial condition.





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





We
      had
      net losses applicable to common stockholders of $27.1 million for the fiscal
      year ended December 31, 2003. Although we were profitable during the fiscal
      year
      ended December 31, 2004, we had net losses applicable to common stockholders
      of
      $28.2 million for the fiscal year ended December 31, 2005, and our accumulated
      deficit as of that date was $80.4 million. Our future results will be affected
      by our ability to increase our Subway and non-Subway revenue in spite of price
      increases, reduce our product warranty charges and manage costs related to
      the
      residential product launch.  We can provide no assurance that our future
      operations will be profitable.





***We
      have depended, and will continue to depend, upon one customer for a material
      portion of our revenues, and if such customer significantly reduces its
      purchases of our ovens, our revenues would decrease and our financial
      performance would decline.***




In
      March
      2004, we were chosen to be the exclusive supplier of speed cook ovens to Subway
      franchise restaurants worldwide. Although the roll-out to existing Subway
      franchisees is substantially completed, we expect that sales to Subway
      franchisees will continue to constitute a significant portion of our revenues
      in
      the future as new Subway restaurants receive our ovens and existing restaurants
      purchase additional ovens. Our agreement with the Subway system does not specify
      a number of ovens that Subway franchisees must purchase in the future. If Subway
      franchisees discontinue or significantly reduce their purchases of our ovens,
      our revenues would decrease and our financial performance would
      decline.







10





***We
      continue to expand rapidly, and we may be unable to manage our
      growth.***





We
      intend
      to continue the rapid growth of our business, but we cannot be sure that we
      will
      successfully manage this growth. Continued growth could place a strain on our
      management, operations and financial resources. There also will be additional
      demands on our sales, marketing and information systems and on our
      administrative infrastructure as we develop and offer new and additional
      products and enter new markets. We cannot assure you that our operating and
      financial control systems, administrative infrastructure, outsourced and
      internal production capacity, 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.





***We
      have a long sales cycle that requires an extended sales effort and is difficult
      to predict.***





A
      customer's decision to purchase our commercial ovens often involves a lengthy
      evaluation and product qualification process, and selling our commercial ovens
      often requires us to educate potential customers about the uses and benefits
      of
      our speed cook technology and services. In addition, the integration of our
      ovens into a customer's business is often a company-wide initiative, which
      can
      include the development of new menus and food products and the launch of new
      marketing and advertising campaigns. These factors have made the sales cycles
      for our commercial ovens long, ranging from a few months to several years,
      making it difficult for us to predict when sales to potential customers may
      occur.




***We
      may not be able to disclose the identity of our customers or potential customers
      and their oven orders.***





We
      may
      not be able to disclose the identity of our existing and potential customers
      or
      any information about their plans for our products. Companies in the competitive
      restaurant and food service industry are secretive about their plans for new
      food concepts and expansion of menu items, and they usually do not approve
      of
      vendors disclosing information about equipment tests, orders or purchases that
      directly or indirectly expose their plans. Many also require that we enter
      into
      non-disclosure agreements prohibiting us from disclosing such information.
      We
      have an obligation to our stockholders not to risk the loss of new business
      because of our premature disclosure of the plans of our customers or potential
      customers against their wishes or in violation of our contractual commitments.
      Our inability to disclose this information could have a negative effect on
      the
      price of our common stock.




***Because
      the market for our commercial ovens is an emerging sector of the commercial
      cooking equipment market, we will be required to undertake significant marketing
      efforts to achieve market acceptance, the success of which we cannot
      predict.***





The
      market for our commercial ovens is a nascent sector of the commercial cooking
      equipment market. As is typical with new products based on innovative
      technologies, demand for and market acceptance of our commercial ovens are
      subject to a high level of uncertainty. Achieving market acceptance for our
      commercial ovens will require substantial marketing efforts and the expenditure
      of significant funds to increase public awareness of our brand and our products,
      and to educate potential customers as to the distinctive characteristics and
      benefits of our products and our technologies. There can be no assurance that
      our marketing efforts will result in significant market acceptance of our
      commercial ovens.





***The
      success of our planned entry into the residential oven market is subject to
      the
      risks inherent in establishing a new business enterprise, and we cannot assure
      you that we will be successful in this endeavor.***





An
      important part of our growth strategy includes the research, development and
      introduction of residential speed cook ovens. Historically, our expertise has
      been in the speed cook sector of the commercial cooking equipment market, and
      although we have developed technologies that currently are being licensed for
      use in certain existing residential ovens, we have no prior experience in the
      production, marketing and sale of products in the residential oven market.
      Our
      entry into the residential oven market will be subject to all of the risks
      inherent in the establishment of a new business enterprise, and acceptance
      of
      our speed cook products in this market will depend upon our ability to, among
      other things, successfully:





·
                refine
                    and adapt our technologies for residential
                    application;





·
            develop
                residential ovens based on our technologies at a competitive price
                point;





·
            create
                and develop demand for and market acceptance of our technologies
                in the
                residential oven market;





·
            market,
                promote and distribute our speed cook ovens, and establish public
                awareness of our brand, in the residential oven
                market;





·
            compete
                with the numerous, well-established manufacturers and suppliers of
                conventional and speed cook ovens already in the residential oven
                market;
                and





·
            establish
                and maintain sufficient internal research and development, marketing,
                sales, production and customer service infrastructures to support
                these
                efforts.





Although
      this new line of business is closely related to our commercial oven business,
      there can be no assurance that we will be able to successfully enter this
      market. We expect to devote considerable resources and expenditures to this
      new
      line of business, and we cannot assure you that we will be able to successfully
      commercialize and bring to market our residential ovens. If we cannot
      successfully bring to market our residential ovens, our financial performance
      may suffer and our business may be harmed.








11





***We
        are subject to risks associated with developing products and technologies,
        which
        could delay product introductions and result in significant
        expenditures.***
 
 We
        continually seek to refine and improve upon the physical attributes, utility
        and
        performance of our existing ovens and to develop new ovens. As a result,
        our
        business is subject to risks associated with new product and technological
        development, including unanticipated technical or other problems and the
        possible insufficiency of funds allocated for the completion of development
        of a
        particular product or technology. The occurrence of any of these risks could
        cause a substantial change in the design, delay in the development,
        or abandonment of new technologies and products. Consequently, there can
        be no
        assurance that we will develop oven technologies superior to our current
        technologies, successfully bring to market new commercial ovens, or develop
        and
        successfully commercialize a residential line of ovens. Additionally, there
        can
        be no assurance that, if developed, new technologies or products will meet
        our
        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 the development of a product, or a determination by
        us,
        for financial, technical or other reasons, not to complete development of
        a
        product, particularly in instances in which we have made significant
        expenditures, could have a material adverse effect on our operating
        results.





***If
      we are unable to keep up with evolving technology, our products may become
      obsolete.***





The
      market for our products and technologies is characterized by evolving
      technology. We will not be able to compete successfully unless we continually
      enhance and improve our existing products, complete development and introduce
      to
      the market in a timely manner our proposed products, adapt our products to
      the
      needs and standards of our customers and potential customers, 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.





***We
      may not be able to compete effectively because our target markets are highly
      competitive, and some of our competitors have greater financial or technological
      resources.***





Both
      the
      speed cook sector of the commercial cooking equipment market and the residential
      oven market are characterized by intense competition. We compete, and will
      in
      the future compete, with numerous well-established manufacturers and suppliers
      of commercial and residential ovens, including manufacturers and suppliers
      whose
      ovens have been developed under licenses of our proprietary speed cook
      technologies. We also are aware of others who are developing, and in some cases
      have introduced, new ovens based on other speed cook methods and technologies.
      There can be no assurance that other companies do not have or are not currently
      developing functionally equivalent products, or that functionally equivalent
      products will not become available in the near future. In addition, there can
      be
      no assurance that the products that we develop will be functionally superior
      to,
      or gain more commercial acceptance than, products currently being produced
      by
      third parties who have exclusive licenses to some of our proprietary
      technologies. 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, brand
      recognition, marketing and service of cooking equipment.





***The
      use of outsourced manufacturing subjects us to potential disruptions in product
      supply and other potential adverse effects.***





We
      do not
      maintain supply agreements with third parties for raw materials or components.
      Instead, we purchase these items pursuant to purchase orders in the ordinary
      course of business. We attempt to maintain multiple sources of supply for these
      items, but some of the specially-designed components used in our ovens are
      sourced from a limited number of suppliers. We may utilize contract
      manufacturers to fabricate components and assemble our residential oven, and
      we
      may outsource fabrication and assembly of ovens, parts or components to foreign
      operations.





We
      are
      and will continue to be dependent on the ability of these third parties to,
      among other things, meet our design, performance and quality specifications,
      provide components and produce finished ovens in a timely manner. Events beyond
      our control could have an adverse effect on the cost or availability of raw
      materials and components. Shipment delays, unexpected price increases or changes
      in payment terms from our suppliers of components could impact our ability
      to
      secure necessary components, and could adversely affect the ability of our
      contract manufacturers to produce finished ovens for shipment to our customers.
      Additionally, if any of our contract manufacturers experience delays,
      disruptions, capacity constraints or quality control problems in its operations,
      or negatively changes the payment or other terms under which it agrees to
      assemble ovens for us, we may be unable to replace the lost manufacturing
      capacity on a timely and cost-effective basis, product shipments to our
      customers could be delayed and we may experience an increase in our component
      part inventory levels. The occurrence of any of these events would have a
      material adverse effect on our financial performance, competitive position
      and
      reputation.





Outsourcing
      operations to foreign countries also subjects us 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, acts of terrorism and international political, regulatory and economic
      developments. Any of these risks could increase our costs of goods, interrupt
      our operations or have a significant impact on our foreign manufacturer's
      ability to deliver our products.








12




***We
        may need additional capital to finance growth and to execute our business
        plan,
        and we may be unable to obtain additional capital under terms acceptable
        to us
        or at all.***
 
 Our
        capital requirements in connection with the execution of our business plan,
        including our marketing and sales efforts, continuing commercial and residential
        product development and working capital needs, 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, resulting
        in the
        need for additional capital. Historically, cash generated from our operations
        was not sufficient to fund our capital requirements, and we relied upon proceeds
        from sales of our securities to fund our operations. We currently do not
        have a
        credit facility with a bank or other
        lending institution. While we believe that our present capital provides us
        the
        ability to execute our business plan, we cannot make assurances in this regard.
        Further, if we do not have sufficient funds available, or are unable to obtain
        capital necessary to meet our future requirements, we may be unable to fund
        the
        research, development and sale of ovens, and we may have to delay or abandon
        one
        or more aspects of our business plan, any of which could harm our
        business.





***Our
      financial performance is subject to significant
      fluctuations.***





Our
      financial performance is subject to quarterly and annual fluctuations due to
      a
      number of factors, including:





·
              our
                  lengthy, unpredictable sales cycle for commercial
                  ovens;





·
              the
                  gain or loss of significant
                  customers;





·
              unexpected
                  delays in new product
                  introductions;





·
              level
                  of market acceptance of new or enhanced versions of our
                  products;





·
                  unexpected
                      changes in the levels of our operating expenses including increased
                      research and development and sales and marketing expenses associated
                      with
                      new product
                      introductions;





·
              competitive
                  product offerings and pricing actions;
                  and





·
              general
                  economic conditions.








The
      occurrence of any of these factors could materially and adversely affect our
      operating results and the price of our common stock.




***The
        market price of our common stock has been volatile and difficult to predict
        and
        may continue to be volatile and difficult to predict.***
 
 The
        market price of our common stock has been volatile in the past and may continue
        to be volatile in the future. The market price of our common stock will be
        affected by, among other things:
 
 ·
            variations
                in quarterly operating results; ·
            potential
                initiation and subsequent changes in financial estimates by securities
                analysts; ·
            changes
                in general conditions in the economy or the financial
                markets; ·
            changes
                in accounting standards, policies or
                interpretations; ·
            other
                developments affecting us, our industry, clients or competitors;
                and ·
            the
                operating and stock price performance of companies that investors
                deem
                comparable to us. 
 Any
        of
        these factors could have a negative effect on the price of our common stock
        on
        the Nasdaq Stock Market, make it difficult to predict the market price for
        our
        common stock and cause the value of your investment to
        decline.
  ***We
      rely heavily on our senior management team 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 to execute our business
      plan,
      and any of our executive officers or senior management can terminate his
      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.





***Many
      of our senior executive officers have limited prior experience in our
      industry.***





Many
      of
      our senior executive officers have limited experience in operating a business
      in
      our industry, and there is no guarantee that these persons will fully develop
      the necessary expertise to successfully execute our business plan. The failure
      of these senior executive officers to fully develop this expertise would have
      a
      significant impact on our ability to compete in this industry and to operate
      our
      business effectively.





***Our
      Chairman controls a significant interest in our common stock and may cause
      the
      shares to be voted in ways with which you may
      disagree.***





As
      of
      March 1, 2006, OvenWorks, LLLP owns, of record, 7,203,156 shares of our common
      stock, representing approximately 25%. of our outstanding common stock. The
      sole
      general partner of OvenWorks is Oven Management, Inc. Richard E. Perlman, our
      Chairman, is the sole stockholder, sole director and President of Oven
      Management, Inc. and also is a limited partner of OvenWorks. OvenWorks will
      be
      able to exercise significant influence over all matters requiring stockholder
      approval, including the election of directors and approval of significant
      corporate transactions. This concentration of ownership may also delay or
      prevent a change in control of us even if beneficial to our
      stockholders.





***The
      exercise of options or warrants will result in dilution to
      you.***





At
      March
      1, 2006, 3.5 million shares of our common stock were subject to issuance upon
      exercise of outstanding stock options, and 163,000 shares of our common stock
      were subject to issuance upon exercise of outstanding warrants. Your ownership
      will be diluted by the exercise of any of these outstanding stock options and
      warrants.





***We
      may not realize the potential benefit of our patents, trademarks and other
      intellectual property.***





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 patent applications, registered
      trademarks or service marks, pending trademark applications or trademarks 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 resources necessary to enforce
      or
      defend a patent infringement or proprietary rights violation
      action.





13








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.





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





If
      any of
      our existing or future products, trademarks, service marks or other proprietary
      rights infringe patents, trademarks, service marks or proprietary rights of
      others, including others to which we have exclusively licensed some of our
      proprietary cooking technologies, 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 would be able to make any of these modifications or changes 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.





***We
      are involved in legal proceedings which would adversely affect our operating
      results and future operations if the outcomes were
      unfavorable.***





We
        are
        engaged in arbitration proceedings with Maytag Corporation relating to certain
        sales of our ovens manufactured by Maytag. Maytag has claimed damages in
        excess
        of $1.3 million, and we have counterclaims of a similar amount. Maytag has
        also
        alleged 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, and has asserted claims
        in
        litigation that we caused false advertising with respect to Maytag's goods
        and
        services, that we intentionally interfered with Maytag's prospective business,
        that we defamed Maytag and that we unfairly competed with Maytag. The outcomes
        of these proceedings are uncertain, and an unfavorable outcome would have
        an
        adverse effect on our operating results and future
        operations





***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 administered by the United States
      Food and Drug Administration, the Federal Communications Commission, the
      European Community Council and the Japan Ministry of International Trade. These
      regulations impose significant compliance burdens on us and there can be no
      assurance that we will be able to comply with such regulations. Failure to
      comply with these regulatory requirements may subject us to civil and criminal
      sanctions and penalties. 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 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.





***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 foodservice 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. However, a material
      product liability or other claim could be brought against us in excess of our
      insurance coverage, or could not be covered by our then-existing insurance.
      Additionally, a material product liability or other claim could be brought
      against us that damages the reputation of our technologies or products in the
      market. Any of these types of claims could have a material adverse effect upon
      our business, operating results and financial condition.





***An
      increase in warranty expenses could adversely affect our financial
      performance.***





We
      offer
      purchasers of our ovens a one-year limited warranty covering workmanship and
      materials, during which period we or an authorized service representative will
      make repairs and replace parts that have become defective in the course of
      normal use. We estimate and record our future warranty costs based upon past
      experience. Future warranty expenses on the one-year warranty, however, may
      exceed our warranty reserves, which, in turn, could have a material adverse
      effect on our financial performance.





14




**Item2.** **Properties**
 
 We
        own no
        real estate. We currently lease one facility in Dallas, Texas, one in Atlanta,
        Georgia, and one in New York City, New York. In Dallas, we
        occupy
        approximately 61,000 square feet of space at 4240 International Parkway,
        which
        we use for administrative and sales offices, technology development, product
        assembly and distribution and other purposes. The lease agreement for this
        property provides for annual base rental of approximately $600,000 and will
        terminate in 2012.





We
      also
      lease office space in Atlanta, Georgia for our executive offices and
      headquarters and we lease office space in New York. The Atlanta lease includes
      approximately 7,000 square feet, the lease runs until 2009 and has annual base
      rental of approximately $140,000. The New York lease includes approximately
      3,000 square feet, runs until 2009 and has annual base rental of
      $180,000.





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





**Item3.** **Legal
      Proceedings**





***Maytag
      Corporation***


We
      filed
      for arbitration against Maytag Corporation 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.
      Hearings before the panel took place during 2005, with the final hearing on
      October 4, 2005. On March 1, 2006 the panel issued its decision in which it
      denied all monetary damage and other claims by both parties, except it did
      order
      Maytag to assign a fifty-percent interest to TurboChef in ten U.S. patents
      issued to Maytag.


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 in a January 2002 press release (and in certain other unidentified
        statements) we publicized false and misleading statements about Maytag’s use of
        our intellectual property in its residential appliances. 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. Magtag’s 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. In
        addition, on December 23, 2002, the Federal Court issued an order staying
        indefinitely the remainder of Maytag’s claims in the Iowa proceeding, pending
        the final resolution of the Texas arbitration.





Maytag
      has also initiated arbitration against us in Boston, claiming damages in excess
      of $1.3 million for failure to pay for ovens. Our financial statements include
      accounts payable of approximately $1.4 million in connection with this claim.
      We
      have filed a counterclaim alleging that Maytag breached its warranty and
      committed fraud and that we have been damaged in an amount in excess of $1.5
      million. We believe that these claims by Maytag are without merit, and we intend
      to vigorously defend against Maytag’s allegations. We have agreed to a
      scheduling order with Maytag that contemplates a hearing in the Boston
      arbitration sometime after the hearing on the Texas arbitration, which occurred
      in 2005.





***Duke
      Manufacturing Co.***





On
      January 26, 2005, Duke Manufacturing Co. filed a complaint against TurboChef
      in
      federal district court in St. Louis, Missouri, but we were never served. The
      complaint sought a declaration that Duke’s speed cook oven products do not
      violate two of our patents relating to the use of catalytic converters, and
      that
      those patents are invalid. Duke voluntarily dismissed its complaint in March
      2005.





***Food
      Automation-Service Techniques, Inc.***





On
      August
      8, 2005, Technology Licensing Corporation and Food Automation-Service
      Techniques, Inc. (“FAST”) filed suit against TurboChef in Federal District Court
      in Connecticut alleging infringement by the company’s three commercial oven
      products of U.S. Patent No. 4,920,948. FAST sought unspecified damages,
      injunction, attorneys’ fees and costs. In its press release of September 9,
      2005, FAST claimed it was seeking damages that could exceed $30 million.
      TurboChef filed its answer on August 30, 2005, among other things, denying
      any
      infringement. Management believes that these claims are without merit and
      vigorously defended itself. The parties reached agreement to settle the
      lawsuit effective as of February 21, 2006.





15





We
      also
      are party to other legal proceedings that have arisen in the ordinary course
      of
      our business, but we believe an unfavorable outcome of which would not have
      a
      material adverse affect on our operating results or future
      operations.





**Item4.** **Submission
      of Matters to a Vote of Security Holders**





Not
      applicable.




















16





**Part
      II**




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





On
      June
      20, 2005, our common stock commenced trading on the NASDAQ National Market
      under
      the symbol “OVEN.” From November 2, 2004 until June 20, 2005 our common stock
      traded on the American Stock Exchange under the trading symbol “TCF”. In 2004
      prior to the AMEX listing, our common stock traded in the over-the-counter
      market. The table below sets forth the high and low sales prices for our common
      stock for the periods indicated, as reported by NASDAQ or the American Stock
      Exchange or quoted through the OTC Bulletin Board. The per share quotations
      for
      the periods in which our common stock was traded in the over-the-counter market
      represent inter-dealer prices without adjustment for retail mark-ups, mark-downs
      or commissions and may not necessarily represent actual transactions. All sales
      prices have been adjusted retroactively to reflect the one-for-three reverse
      stock split completed December 27, 2004.




**Price
                Range of Common Stock****Period**
            
            
            **High**
            
            
            **Low****Year
                Ended December 31, 2004**First
                Quarter
            
            $
            15.81
            
            $
            9.00Second
                Quarter
            
            
            14.85
            
            
            8.55Third
                Quarter
            
            
            14.76
            
            
            11.10Fourth
                Quarter
            
            
            27.45
            
            
            12.57**Year
                Ended December 31, 2005**First
                Quarter
            
            $
            22.98
            
            $
            13.55Second
                Quarter
            
            
            20.01
            
            
            9.85Third
                Quarter
            
            
            19.60
            
            
            14.45Fourth
                Quarter
            
            
            15.80
            
            
            12.00








On
      December 27, 2004, we combined our outstanding shares in a one-for-three reverse
      stock split. Any holder who otherwise would have held a fractional share as
      a
      result of the reverse split instead only held a right to be paid a cash amount
      for that fraction. We paid approximately $1,400 in exchange for fractional
      share
      rights.





The
      number of record holders of our common stock as of March 1, 2006 was 146
      (excluding individual participants in nominee security position
      listings).





**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 our business. The payment of any future cash dividends
      is
      at the discretion of our Board of Directors and will depend on our future
      earnings, capital requirements and financial condition and other factors deemed
      relevant by the Board of Directors.




**Equity
      Compensation Plan Table**





See
      Item
      12 in Part III.





**Item6.** **Selected
      Financial Data**





The
      following selected financial data as of December 31, 2005 and 2004, and for
      each
      of the fiscal years ended December 31, 2005, 2004 and 2003 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, 2003, 2002 and 2001, and for each
      of
      the fiscal years ended December 31, 2002 and 2001, 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.








17








**Year
                Ended December 31,****2005(1)**
            
            
            **2004(2)**
            
            
            **2003**
            
            
            **2002**
            
            
            **2001****(In
                thousands except share and per share data)****Statements
                of Operations Data****:**Revenues
            
            $
            52,249
            
            $
            70,894
            
            $
            3,690
            
            $
            5,655
            
            $
            3,230Costs
                and expenses:Cost
                of product sales
            
            
            43,532
            
            
            44,047
            
            
            1,946
            
            
            3,474
            
            
            1,592Research
                and development expenses
            
            
            4,307
            
            
            1,202
            
            
            897
            
            
            413
            
            
            774Purchased
                research and development (1)
            
            
            6,285
            
            
            --
            
            
            --
            
            
            --
            
            
            --Selling,
                general and administrative expenses
            
            
            27,483
            
            
            15,826
            
            
            6,523
            
            
            8,481
            
            
            6,890Compensation
                and severance expenses related to termination of former officers and
                directors
            
            
            --
            
            
            --
            
            
            7,585
            
            
            --
            
            
            --Total
                costs and expenses
            
            
            81,607
            
            
            61,075
            
            
            16,951
            
            
            12,368
            
            
            9,256Operating
                (loss) income
            
            
            (29,358
            )
            
            9,819
            
            
            (13,261
            )
            
            (6,713
            )
            
            (6,026
            )Interest
                expense (3)
            
            
            (256
            )
            
            (8
            )
            
            (1,105
            )
            
            (226
            )
            
            (195
            )Interest
                and other income, net
            
            
            1,460
            
            
            169
            
            
            17
            
            
            255
            
            
            190Total
                other income (expense)
            
            
            1,204
            
            
            161
            
            
            (1,088
            )
            
            29
            
            
            (5
            )(Loss)
                income before taxes
            
            
            (28,154
            )
            
            9,980
            
            
            (14,349
            )
            
            (6,684
            )
            
            (6,031
            )Provision
                for income taxes
            
            
            --
            
            
            301
            
            
            --
            
            
            --
            
            
            --Net
                (loss) income
            
            
            (28,154
            )
            
            9,679
            
            
            (14,349
            )
            
            (6,684
            )
            
            (6,031
            )Preferred
                stock dividends
            
            
            --
            
            
            --
            
            
            (195
            )
            
            (270
            )
            
            (305
            )Beneficial
                conversion feature of preferred stock (4)
            
            
            --
            
            
            --
            
            
            (12,605
            )
            
            --
            
            
            (380
            )Net
                (loss) income applicable to common stockholders
            
            $
            (28,154
            )
            $
            9,679
            
            $
            (27,149
            )
            $
            (6,954
            )
            $
            (6,716
            )Net
                (loss) income per share applicable to common stockholders:Basic
            
            $
            (1.00
            )
            $
            0.79
            
            $
            (3.99
            )
            $
            (1.10
            )
            $
            (1.24
            )Diluted
            
            
            (1.00
            )
            
            0.37
            
            
            (3.99
            )
            
            (1.10
            )
            
            (1.24
            )Weighted
                Average Number of Shares Outstanding:Basic
            
            
            28,034,103
            
            
            12,256,686
            
            
            6,797,575
            
            
            6,301,236
            
            
            5,402,269Diluted
            
            
            28,034,103
            
            
            26,142,101
            
            
            6,797,575
            
            
            6,301,236
            
            
            5,402,269**As
                of December 31,****2005**
            
            
            **2004(2)**
            
            
            **2003**
            
            
            **2002**
            
            
            **2001****(In
                thousands)****Balance
                Sheet Data****:**Cash
                and cash equivalents
            
            $
            40,098
            
            $
            12,942
            
            $
            8,890
            
            $
            629
            
            $
            4,498Working
                capital (deficit)
            
            
            43,745
            
            
            17,399
            
            
            (5,685
            )
            
            (1,567
            )
            
            4,485Total
                assets
            
            
            86,067
            
            
            50,756
            
            
            11,420
            
            
            5,387
            
            
            8,672Total
                liabilities, including mezzanine equity (4)
            
            
            21,295
            
            
            16,977
            
            
            18,155
            
            
            6,646
            
            
            3,645Accumulated
                deficit
            
            
            (80,431
            )
            
            (52,277
            )
            
            (61,956
            )
            
            (47,412
            )
            
            (40,458
            )Total
                stockholders' equity (deficit)
            
            
            64,772
            
            
            33,779
            
            
            (6,735
            )
            
            (1,259
            )
            
            5,027







(1)
            
            During
                the year ended December 31, 2005, we purchased the patents and technology
                assets of Global Appliance Technologies, Inc. (Global). Approximately
                $6.3
                million of the purchase price was allocated to purchased research
                and
                development.(2)
            
            During
                the year ended December 31, 2004, we completed the acquisition of
                Enersyst
                Development Center, L.L.C. in a transaction accounted for as a purchase.
                The results of operations of Enersyst have been included in our
                consolidated results of operations since the May 21, 2004 purchase
                date.(3)
            
            Amount
                for 2003 primarily represents $1.1 million of debt extinguishment
                costs
                incurred in 2003.(4)
            
            During
                2003, we 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 our Series D Convertible Preferred Stock.
                The
                Series D Convertible Preferred was considered redeemable until July
                19,
                2004 when shareholders approved an amendment to increase the number
                of
                authorized shares of our common stock to 100,000,000 and a sufficient
                number of shares of common stock were subsequently reserved to permit
                the
                conversion of all outstanding shares of our Series D Convertible
                Preferred
                Stock into shares of common stock. As of October 28, 2004, all shares
                of
                Series D Convertible Preferred Stock had been converted to shares
                of
                common stock.








18







**Item7.** **Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations**





**Overview**





TurboChef
      Technologies, Inc. is a leading provider of equipment, technology and services
      focused on the high-speed preparation of food products for the speed cook sector
      of the commercial cooking equipment market. Our user-friendly speed cook ovens
      employ proprietary combinations of heating technologies such as convection,
      air
      impingement, microwave energy and other advanced methods to cook food products
      at high speeds with food quality that we believe to be comparable or superior
      to
      that of conventional heating methods. We currently offer three commercial ovens:
      the C3 oven, the Tornado oven and, introduced in the second quarter of 2005,
      our
      High h Batch oven. We are working to develop new ovens for the commercial
      cooking equipment market and to introduce speed cook ovens to the residential
      marketplace in early 2006.





We
      currently derive revenue primarily from the sale of our ovens to commercial
      foodservice operators throughout North America, Europe and Australia. In North
      America we sell our equipment through our internal sales force as well as
      through manufacturer's representatives. In Europe and Australia we utilize
      a network of equipment distributors. We are working to expand the market for
      our
      commercial ovens in Latin America and Asia. We also derive revenues from
      licensing our technologies to food service equipment manufacturers. We operate
      in one primary business segment.





We
      believe it is important to our success that we continue to sell to our existing
      base of commercial customers to meet their expansion or replacement needs,
      while
      at the same time we extend that customer base by concentrating our internal
      sales efforts on major foodservice operators and by supporting our networks
      of
      manufacturer’s representatives and equipment distributors. We must strive to do
      that while maintaining a cost structure for our products and controlling our
      operating expenses to provide a satisfactory return on sales. We must compete
      effectively in the marketplace on the basis of price, quality and product
      performance, and we must meet market demand through development and improvement
      of our speed cook ovens and introduction of new oven products. These same
      marketplace and product development factors will apply to our achieving success
      with the 2006 launch of our residential speed cook oven products; however,
      the
      residential market is new to us and there may be factors important to our
      success that are unknown to us at present. See “Risk Factors” in Section 1A of
      this annual report on Form 10-K.





Our
      financial results in 2005 as compared to 2004 and 2003 reflect our efforts
      to
      strengthen our operating systems and infrastructure, solidify our sales and
      marketing efforts, perform under our supply agreement with the Subway system,
      expand our non-Subway customer base, integrate our Enersyst and
      Global acquisitions and develop our residential oven and market strategy.
      Sales to Subway franchisees during the equipment rollout supporting their
      toasting initiative resulted in concentrated revenues and income in the quarters
      ended September 30, 2004, December 31, 2004 and, to a lesser extent, March
      31,
      2005. In 2005, we substantially completed the initial rollout with delivery
      of
      ovens to international Subway locations. However, the Subway relationship has
      and should continue to be a meaningful contributor to future revenues. Demand
      for equipment will continue from this major customer as new Subway restaurants
      are opened and existing restaurants seek additional ovens. In 2005, we focused
      our sales efforts on expanding our customer base and during 2006, we will
      continue to focus on generating revenues from other foodservice establishments,
      increasing the profitability of commercial products, introducing our residential
      oven products and developing enabling strategies.





The
      following sets forth, as a percentage of revenue, consolidated statements of
      operations data for the years ended December 31:




**2005**
              
              
              **2004**
              
              
              **2003**Revenues
              
              
              100
              %
              
              100
              %
              
              100
              %Cost
                  of product sales
              
              
              83
              
              
              62
              
              
              53Research
                  and development expenses
              
              
              8
              
              
              2
              
              
              24Purchased
                  research and development
              
              
              12
              
              
              --
              
              
              --Selling,
                  general and administrative expenses
              
              
              52
              
              
              22
              
              
              177Restructuring
                  charges
              
              
              1Compensation
                  and severance expenses related to termination of former officers and
                  directors
              
              
              --
              
              
              --
              
              
              206Total
                  costs and expenses
              
              
              156
              
              
              86
              
              
              460Operating
                  (loss) income
              
              
              (56
              )
              
              14
              
              
              (360
              )Interest
                  expense
              
              
              (1
              )
              
              --
              
              
              (30
              )Interest
                  and other income, net
              
              
              3
              
              
              --
              
              
              1Total
                  other income (expense)
              
              
              2
              
              
              --
              
              
              (29
              )(Loss)
                  income before taxes
              
              
              (54
              )
              
              14
              
              
              (389
              )Provision
                  for income taxes
              
              
              --
              
              
              --
              
              
              --Net
                  (loss) income
              
              
              (54
              ) %
              
              14
              %
              
              (389
              )%








19





We
      have
      observed the following trends and events that are likely to have an impact
      on
      our financial condition and results of operations in the future:


·
            During
                2004, we commenced the rollout of our Tornado oven to Subway franchisees.
                We completed the rollout in the first quarter of 2005. Subway sales
                accounted for 58% and 91% of our total revenues during 2005 and 2004,
                respectively. We expect Subway to be a meaningful contributor to
                future
                revenues.·
            During
                2005, our non-Subway revenue increased $14.8 million, or 244%, over
                2004.
                We expect our non-Subway revenue to continue to increase in 2006.
                No
                single customer, other than Subway, accounted for more than 10% of
                our
                total 2005 revenues. As our customer base continues to grow, we expect
                our
                customer concentration levels to decline.·
            During
                2005, we experienced an increase in our cost of product sales as
                a
                percentage of revenue (and gross margin percentage deterioration).
                The
                deterioration is primarily due to an increase in warranty related
                charges
                to address a longevity and reliability issue and, to a lesser extent,
                increases in component pricing. In 2005, we recorded a warranty charge
                of
                $9.6 million related to our Tornado oven sold to Subway. In 2005,
                we
                experienced an increase of 5% in our Tornado oven bill of materials
                due to
                increases in component pricing, primarily the result of increased
                stainless steel pricing. Additionally, we experienced increased freight
                and handling costs. In 2006, we expect gross profit percentages to
                improve
                as we anticipate no recurrence of product performance issues causing
                material warranty related charges, as we believe a favorable sales
                mix
                will result from continued expansion of our customer base and as
                we expect
                our recently instituted price increases to take full effect in early
                2006.·
            During
                2005, we increased our research and development expenditures primarily
                as
                the result of our residential oven initiative. In 2006, we expect
                our
                research and development expenditures to exceed the 2005 levels
                as we develop additional residential and commercial products.·
            During
                2005, we recorded a $6.3 million in-process research and development
                charge in connection with the acquisition of technology assets from
                Global*.*We
                expect to record additional charges in 2006 due to additional
                consideration payable provided certain contingencies associated with
                the
                acquisition are met.·
            During
                2005, we increased our selling, general and administrative expenses
                by
                $11.0 million over 2004. We expect an increase in 2006, primarily
                due to
                increased marketing costs related to the residential product launch.





Based
      on
      our analysis of the aforementioned trends and events, we expect to continue
      to
      generate net losses on a quarterly basis during 2006 primarily due to our
      continued investment in the residential product launch. Our future results
      will
      be affected by many factors, some of which are identified below and in Section
      1A of this report entitled “Risk Factors,” including our ability
      to:





·
            increase
                our Subway and non-Subway revenue in spite of the price
                increases;·
            reduce
                our product warranty charges;·
            manage
                costs related to the residential product launch;





As
      a
      result, there is no assurance that we will achieve our expected financial
      objectives.





**Application
      of Critical Accounting Policies**





***Overview
      and Definitions***





Our
      discussion and analysis of our financial condition and results of operations
      are
      based upon our consolidated financial statements, which have been prepared
      in
      accordance with accounting principles generally accepted in the United States
      of
      America which require us to make estimates and judgments that affect the
      reported amounts of assets, liabilities, revenue and expenses, cash flow and
      related disclosure of contingent assets and liabilities. Our estimates include
      those related to revenue recognition, warranty reserves, accounts receivable
      reserves, goodwill and other intangible assets, stock-based compensation other
      equity instruments, income and other taxes, and contingent obligations. We
      base
      our estimates on historical experience and on various other assumptions that
      we
      believe to be reasonable under the circumstances. Actual results may differ
      from
      these estimates, and the impact of changes in key assumptions may not be linear.
      Our management has reviewed the application of these policies with the audit
      committee of our board of directors. For a complete description of our
      significant accounting policies, see Note 2 to our consolidated financial
      statements included in this annual report on Form 10-K.





We
      define
      our “critical accounting policies” as those accounting principles generally
      accepted in the United States of America that require us to make highly
      judgmental estimates about matters that are uncertain and are likely to have
      a
      material impact on our financial position and results of operations as well
      as
      the specific manner in which we apply those principles. Our estimates are based
      upon assumptions and judgments about matters that are highly uncertain at the
      time the accounting estimate is made and require us to continually assess a
      range of potential outcomes.





20








***Revenue
      Recognition***





Revenue
      from product sales 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 for sales to designated agents,
      substantially all obligations are completed at the time of shipment to the
      customer or the customer's designated agent; therefore, revenue is recognized
      upon shipment. Revenue for sales of replacement parts and accessories is
      recognized upon shipment to the customer. Royalty revenues are recognized based
      on the sales dates of licensees' products, and services revenues are recorded
      based on attainment of scheduled performance milestones. Beginning in July
      2005,
      certain customers may purchase extended warranty coverage for a one-year period
      on their Tornado model oven. Revenue from sales of extended warranties is
      deferred and recognized in product sales on a straight-line basis over the
      term
      of the extended warranty contract.





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. In 2002 and 2003, we deferred approximately $2.7 million of
      revenue and approximately $1.6 million of costs of product sales related to
      ovens sold to franchisees of a major restaurant chain under a proposal which
      offered a future exchange for a new oven contingent on completion of a
      franchise-wide sale and roll-out of our new ovens. In the quarter ended March
      31, 2005, the exchange provisions contemplated by this transaction were largely
      satisfied and substantially all the deferred revenue and related cost was
      recognized in the results of operations for that period.





Deferred
      revenue includes amounts billed to customers for which revenue has not been
      recognized. Deferred revenue primarily consists of sales deposits, unearned
      revenue from extended warranty contracts and other amounts billed to customers
      where the sale transaction is not yet complete and, accordingly, revenue cannot
      be recognized.





***Product
      Warranty***





We
      warrant our ovens 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 experience and are recorded in the periods
      ovens
      are sold. Periodically, our warranty reserve is reviewed to determine if the
      reserve is sufficient to cover the repair costs associated with the remaining
      ovens under warranty. Because warranty estimates are forecasts that are based
      on
      the best available information, claims cost may differ from amounts provided,
      and these differences may be material.





In
      the
      second quarter of 2005, the Company identified a potential longevity and
      reliability issue with the Tornado oven. The success of the toasting initiative
      implemented by Subway, our largest customer, had resulted in higher use of
      the
      Tornado oven and more cook cycles than anticipated. We experienced increasing
      warranty calls from the Subway installed base, as certain components degraded
      under the high usage much earlier than expected. We determined that we could
      improve the longevity and reliability of the ovens through a change in the
      oven’s software (or operating system). We incorporated the software change in
      production and launched a voluntary and proactive software upgrade program
      for
      installed units. This program also included replacement of certain components
      in
      the ovens to ensure that the installed base of Tornado ovens would benefit
      from
      the latest enhancements to the ovens. For the year ended 2005, we recorded
      a
      charge aggregating $9.6 million (or $0.34 per share) to increase the warranty
      reserve as our best estimate to address costs of warranty claims incurred,
      estimated future warranty claims, and the voluntary upgrade. Extensive
      engineering tests of the revised software provide evidence that leads us to
      believe that the longevity and reliability issue with Subway’s Tornado ovens has
      been satisfactorily resolved. Substantially all of the ovens have been upgraded.
      Additionally, the one-year warranty expired for approximately 70% of the
      affected Tornado oven base on December 31, 2005.





At
      this
      time, we believe that, based upon historical data, the current warranty reserve
      is sufficient to cover the associated costs. If warranty costs trend higher,
      we
      would need to record a higher initial reserve as well as reserve the estimated
      amounts necessary to cover all ovens remaining under warranty. Any such
      additional reserves would be charged to cost of goods sold and could have a
      material effect on our financial statements.





***Goodwill
      and Other Intangible Assets***





Goodwill
      represents the excess purchase price of net tangible and intangible assets
      acquired in business combinations over their estimated fair values. Statement
      of
      Financial Accounting Standards (“SFAS”) No. 142, *Goodwill and Other Intangible Assets,* requires
      goodwill and other acquired intangible assets that have an indefinite useful
      life no longer to be amortized; however, these assets must undergo an impairment
      test at least annually. We completed our annual goodwill impairment test in
      October 2005 and determined that the carrying amount of goodwill was not
      impaired, and there have been no developments subsequently that would indicate
      an impairment exists. We will continue to perform our goodwill impairment review
      annually or more frequently if facts and circumstances warrant.





21








SFAS No.
      142 also requires that intangible assets with definite lives be amortized over
      their estimated useful life and reviewed for impairment in accordance with
      SFAS
      No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets* .
      We are
      currently amortizing acquired developed technology and covenants not-to-compete
      using the straight line method over estimated useful lives of 10
      years.





***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
      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.





In
      December 2004, the Financial Accounting Standards Board (FASB) issued SFAS
      No.
      123 (revised 2004), *Share-Based
      Payment* ,
      which
      is a revision of SFAS 123 ("SFAS 123R"). SFAS 123R eliminates the ability to
      account for share-based compensation under the intrinsic value method permitted
      by APB 25. This will require us to adopt the fair value model for recognizing
      compensation expense for employee stock options, and would have the effect
      of
      reducing our reported net income and net income per share. SFAS 123R is required
      to be adopted as of January 1, 2006.





In
      December 2005, in response to SFAS 123R, the Board of Directors of the Company,
      upon recommendation of its Compensation Committee, approved an acceleration
      of
      all unvested options granted to employees and directors under the Company's
      2003
      Stock Incentive Plan. As a result of the acceleration, options to acquire
      approximately 1.8 million shares of the Company's common stock became
      immediately exercisable. The decision to accelerate vesting of these options
      was
      made primarily to minimize future compensation expense that we would otherwise
      recognize in our consolidated statements of operations upon the effectiveness
      of
      SFAS 123R. As a result of the acceleration, we expect to reduce the stock option
      expense we otherwise would be required to record in connection with accelerated
      options by approximately $5.7 million in 2006, $2.4 million in 2007 and
      $800,000 in 2008. In connection with the acceleration and in order to prevent
      unintended personal benefit to the holders of these options, the optionees
      agreed to certain restrictions on any shares received through the exercise
      of
      accelerated options. These restrictions generally prevent the sale of stock
      obtained through exercise of an accelerated option prior to the original vesting
      date. All other provisions of the original option grants remain. Employees
      who
      terminate prior to their original vesting date ostensibly receive a benefit
      from
      the acceleration of options measured by the differences in the estimated fair
      value of the options pre- and post-acceleration. We estimate the benefit
      associated with possible future employee terminations is approximately $100,000
      and, accordingly, recorded a one-time non-cash compensation charge in the fourth
      quarter of 2005 as a result of the acceleration.





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.





***Deferred
      Income 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 income tax assets
      and
      liabilities. In addition, as of December 31, 2005, we have net operating losses
      (“NOLs”) of approximately $62.4 million, of which $31.4 million are subject to
      annual limitations resulting from the change in control provisions in Section
      382 of the Internal Revenue Code. These NOLs begin to expire in 2010.
      Additionally, we have $8.9 million 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.





We
      currently have significant deferred tax assets, including those resulting from
      NOLs, tax credit carryforwards and deductible temporary differences. We provide
      a full valuation allowance against our deferred tax assets. Management weighs
      the positive and negative evidence to determine if it is more likely than not
      that some or all of the deferred tax assets will be realized. Forming a
      conclusion that a valuation allowance is not needed is difficult when there
      is
      negative evidence such as cumulative losses in past years. Despite our
      profitability in 2004 and our future plans and prospects, we have continued
      to
      maintain a full valuation allowance on our tax benefits until profitability
      has
      been sustained over a time period and in amounts that are sufficient to support
      a conclusion that it is more likely than not that a portion or all of the
      deferred tax assets will be realized. A decrease in our valuation allowance
      would result in an immediate material income tax benefit, an increase in total
      assets and stockholder’s equity, and could have a significant impact on earnings
      in future periods.





22








***Loss
      Contingencies***





We
      define
      a loss contingency as a condition involving uncertainty as to a possible loss
      related to a previous event that will not be resolved until one or more future
      events occur or fail to occur. Our primary loss contingencies relate to pending
      or threatened litigation. We record a liability for a loss contingency when
      we
      believe that it is probable that a loss has been incurred and the amount of
      the
      loss can be reasonably estimated. When we believe the likelihood of a loss
      is
      less than probable and more than remote, we do not record a liability but we
      disclose material loss contingencies in the notes to the consolidated financial
      statements. We make these assessments based on facts and circumstances and
      in
      some instances based in part on the advice of outside legal
      counsel.





**Enersyst
      Acquisition**





On
      May
      21, 2004, we acquired Enersyst Development Center, L.L.C. (“Enersyst”),
      a leading
      provider and source of innovations to the foodservice industry. Historically,
      Enersyst researched, developed and licensed its proprietary foodservice
      technologies to foodservice equipment manufacturers, and provided fee-based
      consulting services to members of the foodservice industry to test and develop
      products for the foodservice market. Enersyst holds more than 180 issued patents
      and patent applications worldwide related to heat transfer, air impingement
      and
      associated food technologies. As a result of this acquisition, we believe we
      are
      better positioned to deliver the most advanced speed cook equipment, technology
      and services to customers worldwide. The results of Enersyst's operations have
      been included in our consolidated financial statements since the acquisition
      date.




Total
      consideration for this transaction, $14.2 million, consisted of $7.9 million
      cash, including transaction costs, and $6.3 million equity in the form of
      Enersyst preferred membership units exchangeable in the future, at the
      discretion of the holders, for approximately 611,000 shares of our common stock.
      As of December 31, 2005, approximately 93,000 shares have yet to be exchanged.
      The cash portion of the acquisition was funded by a May 2004 private placement
      of common stock. Total goodwill recorded was $5.9 million, none of which is
      deductible for income tax purposes.





**Purchase
      of Patent and Technology Assets and Research and
      Development**





On
      September 12, 2005, we entered into an Asset Purchase Agreement (the “Purchase
      Agreement”) with Global Appliance Technologies, Inc. (“Global”) and stockholders
      of Global. Pursuant to the Purchase Agreement, we acquired the patent and
      technology assets of Global further expanding our ownership of proprietary
      commercial and residential speed cook technologies. These technologies will
      allow us to enhance our products with additional or different features as well
      as enable us to expand the range of product offerings. In exchange, Global
      received $5.0 million in cash and 60,838 shares of our common stock with a
      fair
      value of approximately $993,000 at the date of acquisition. This acquisition
      was
      accounted for as an asset acquisition. The aggregate consideration for the
      assets acquired was $6.3 million including the fair value of the common stock
      and transaction costs, all of which was expensed as purchase of in-process
      research and development (“IPRD”).





Amounts
      allocated to IPRD include
      the value of products in the development stage that are not considered to have
      reached technological feasibility or to have alternative future use.
      Accordingly, this item was expensed as research and development in the
      consolidated statement of operations for the quarter ended September 30, 2005,
      upon the completion of the asset acquisition. T echnology
      development and IPRD were
      identified and valued by an independent valuation firm through extensive
      interviews, analysis of data provided by Global concerning development projects,
      their stage of development, the time and resources needed to complete them,
      if
      applicable, and their expected income generating ability and associated risks.
      No development projects had reached technological feasibility; therefore, all
      the intangible assets were deemed to be purchase of IPRD. The income approach,
      which includes an analysis of the cash flows and risks associated with achieving
      such cash flows, was the primary technique utilized in valuing acquired IPRD.
      Key
      assumptions for IPRD
      included a discount rate of 34% and estimates of revenue growth, cost of sales,
      operating expenses and taxes. The purchase allocation is based on a preliminary
      valuation and is subject to change based on completion of the final valuation.
      Any changes could be material to our consolidated statement of
      operations.




We
      also
      entered into services agreements with the principals of Global which provided,
      among other things, for delivery of three patent applications by the end of
      the
      first year, and two additional patent applications by the end of the eighteenth
      month, following closing. If these patent applications are timely delivered,
      we
      are obligated to pay Global contingent consideration in the form of three
      nearly-equal installment payments totaling $8.0 million, payable on each of
      the
      first three anniversaries of the closing date (which payments will be made
      38%
      in cash and 62% in stock).





In
      connection with this transaction, we also entered into Restrictive Covenant
      Agreements (the “Restrictive Covenant Agreements”) with each of the two
      principals of Global. Under the Restrictive Covenant Agreements, the principals
      agreed to certain covenants regarding the disclosure of trade secrets and
      confidential information, and to covenants restricting their ability to compete
      with us. As consideration for these covenants, each principal received $1.0
      million in cash at closing, and each can receive additional cash payments
      totaling $2.0 million, which are payable in equal portions on the first three
      anniversaries of the closing date. The estimated fair value of these agreements,
      $5.6 million, will be amortized over the agreements’ ten-year term.





23








The
      Purchase Agreement provides that if the patent applications are not timely
      delivered, or if during the eighteen-month period following closing we terminate
      the services agreements for a material breach of the confidentiality obligations
      or a breach of the restrictive covenants therein, and all required patent
      applications have not been delivered to the Registrant, any then-unpaid
      installment payments due to Global will be forfeited. Further, the Purchase
      Agreement provides us certain indemnifications.





**Results
      of Operations**








***Revenues***





Total
      revenues decreased 26%, or $18.7 million, to $52.2 million for 2005 as
      compared to $70.9 million for 2004. Total revenues increased $67.2 million
      for
      2004, from $3.7 million for 2003. The fluctuation in total revenues from 2003
      to
      2005 is attributable to the initial system-wide rollout of our Tornado model
      oven to Subway franchisees which commenced in 2004 and was completed in 2005.
      The increase in total revenues for 2004 as compared to 2003 was attributable
      to
      increased oven sales of $64.4 million related to sales to Subway franchisees.
      In
      2005, increased oven sales to other customers combined with increased sales
      of
      parts and consumables and revenue from extended warranty contracts accounted
      for
      an increase of $14.8 million in total revenues, but did not offset the reduced
      sales to Subway following completion of the rollout. Subway sales accounted
      for
      58% of our revenue in 2005, 91% in 2004 and 19% in 2003. The Subway rollout
      was,
      in our opinion, unusual in several respects. The Subway system comprises one
      of
      the largest foodservice operations in the U.S. Additionally, a rollout of such
      magnitude would not typically be completed over such a short time. Subway will
      continue to be an important contributor to our revenues as we supply ovens
      for
      new stores and as existing stores evaluate their needs for additional ovens.
      We
      expect continued growth in commercial oven sales as we expand our customer
      base.
      However, we do not expect future transactions with large foodservice operators
      to impact the timing and magnitude of oven sales in the same way the Subway
      transaction has done.





Royalty
      and services revenue, which consists principally of revenue from licensing
      our
      technology to third parties, was $2.0 million for the year ended
      December 31, 2005 as compared to $1.2 million for the year ended
      December 31, 2004. We had no revenue from royalty and services revenue in
      2003 and only a partial year of such revenue in 2004 since these activities
      are
      associated primarily with the Enersyst acquisition which was completed in May
      2004. We expect further diminution in services revenue as the resources which
      generate this revenue are repurposed to support our commercial oven business
      and
      to benefit our residential speed cook oven initiative.





***Cost
      of Product Sales and Gross Profit***





Cost
      of
      product sales for 2005 was $43.5 million, a decrease of $515,000 compared to
      $44.0 million for 2004. Cost of product sales increased $42.1 million for 2004,
      from $1.9 million for 2003. The variability in cost of product sales was due
      primarily to the number of ovens sold. In 2005, cost of product sales also
      included a charge of approximately $9.6 million to increase the warranty reserve
      related to a potential longevity and reliability issue we identified in our
      Tornado model oven installed for Subway franchisees. This issue was addressed
      in
      2005 and we believe satisfactorily resolved. In addition, we experienced
      increases in 2005 in costs related to materials and component parts, primarily
      stainless steel, and in freight and handling charges which have increased our
      cost of manufacturing. Much of our sales volume is presently based on contracts
      with somewhat fixed pricing which constrains our ability to pass on these
      increased manufacturing costs. We did institute price increases late in 2005
      for
      our non-contract customers and we have reached agreement with our major contract
      customers on price increases expected to be fully effective in early 2006
      that will help mitigate these increased costs. These factors coupled with the
      expected lower overall margins on sales to Subway franchisees resulted in
      increased cost of product sales as a percentage of related product sales from
      2003 to 2005.





Cost
      of
      product sales includes 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 ovens imported and a reserve for warranty. Cost of product 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 our manufacturers. These costs are recorded within
      selling, general and administrative expenses. Cost of product sales also does
      not attribute any allocation of compensation or general and administrative
      expenses to royalty and services revenues. Cost of product sales also includes
      labor, parts and payments to third party service agents in connection with
      fulfilling extended warranty contracts.





Gross
      profit on product sales for 2005 was $6.7 million, a decrease of $19.0 million,
      compared to gross profit on product sales of $25.7 million for 2004. Gross
      profit on product sales increased $24.0 million for 2004 as compared to $1.7
      million for 2003. The variation in gross profit for the three-year period is
      directly related to the variability in unit sales as the Subway rollout
      commenced in 2004 and was completed in 2005. Gross profit on product sales
      as a
      percentage of product sales revenue decreased due to the warranty charge
      described above and volume pricing on sales to Subway franchisees. Barring
      any
      future warranty charges in excess of reserves provided and barring continued
      pricing pressures on materials and components, we expect improvement in gross
      margins on commercial oven sales as the impact of price adjustments take effect
      and as the sales mix shifts to include relatively fewer sales from lower margin
      contracts.








24





***Research
      and Development***





Research
      and development expenses consist primarily of payroll and benefits, consulting
      services paid to third parties, supplies, facilities and other administrative
      costs for support of the engineers, scientists and other research and
      development personnel who design, develop, test and enhance our ovens and
      oven-related services. Research and development costs are expensed as
      incurred.





Research
      and development expenses increased 258%, or $3.1 million, to $4.3 million
      for 2005 as compared to $1.2 million for 2004. Research and development
      expenses increased 34% or $305,000 for 2004 as compared to $897,000 for 2003.
      The increase in 2005 as compared to 2004, as well as 2004 as compared to 2003,
      was attributable to an expanded scope of research activities to support new
      product development, including most recently the development of our residential
      speed cook ovens. Additionally, in 2004, the Enersyst acquisition increased
      the
      headcount and resources committed to research activities.





The
      following table quantifies the net increase in research and development expenses
      over periods presented (in thousands):





**Increase
                (Decrease) in****Research
                and Development****Expenses****2005
                to 2004**
            
            
            **2004
                to 2003**Payroll
                and related expenses
            
            $
            518
            
            
            $
            347General
                and administrative expenses
            
            
            30
            
            
            
            121Design,
                prototype and other related expenses
            
            
            2,557
            
            
            
            (163
            )Total
                increase
            
            $
            3,105
            
            
            $
            305





We
      believe that research and development expenses for 2006
      will exceed 2005 levels, as we continue our development efforts for
      residential speed cook ovens and related products and for new commercial ovens
      planned for introduction in late 2006 or early 2007.





***Purchased
      Research and Development***





Purchased
      research and development expenses for 2005 were $6.3 million and related to
      the
      acquisition of technology assets from Global *.* This charge is an allocation of the purchase price, based on a valuation, to
      recognize the fair value of in-process research and development for new products
      and modifications to existing products that have not reached technological
      feasibility or were not ready for commercial production. The agreement regarding
      acquisition of these assets provides for additional consideration aggregating
      $8.0 million to be paid contingent upon delivery
      of three patent applications by the end of the first year, and two additional
      patent applications by the end of the eighteenth month, following closing. We
      expect
      to record additional charges for purchased research and development if these
      contingencies are resolved.





***Selling,
      General and Administrative***





Selling,
      general and administrative expenses, or SG&A, consist primarily of payroll
      and related costs; variable commissions and bonuses for personnel and
      third-party representatives engaged in sales functions; marketing, advertising
      and promotional expenses; legal and professional fees; travel; communications;
      facilities; insurance and other administrative expenses; depreciation of
      equipment and amortization of intangible assets. These expenses are incurred
      to
      support our sales and marketing activities and our executive, finance, legal,
      business applications, human resources and other administrative functions.





SG&A
      expenses increased 70%, or $11.0 million to $26.8 for 2005 as compared to $15.8
      million for 2004. SG&A increased $9.3 million for 2004, from $6.5 million
      for 2003. These increases were due to the required expansion of operations
      to
      support the increased level of sales activity stemming primarily from the Subway
      relationship, increased activity driven by non-Subway related business and,
      most
      recently, the residential oven initiative. The more significant items of
      increase for 2005 included increased selling, marketing and related expenses
      of
      $2.9 million, equally attributable to increased sales commissions resulting
      from
      sales by our manufacturer’s representative network and increased marketing and
      advertising expenses related to our comprehensive branding campaign and the
      launch of new commercial product. Additionally, legal and professional fees
      increased $2.9 million primarily attributable to the Maytag and other
      litigation. Rent and occupancy costs increased $1.5 million attributable to
      our
      offices in Atlanta and New York and new operations center in Dallas. Payroll
      and
      related expenses increased $1.4 million, net, due to increased headcount for
      our
      commercial business and our residential initiative which was partly offset
      by a
      $900,000 reduction in incentive compensation related to 2005 performance.
      Depreciation and amortization expense increased $1.7 million related to
      leasehold improvements and equipment in the new facilities and, to a lesser
      extent, increased amortization related to the Enersyst acquisition and the
      acquisition of technology assets from Global.





For
      2004
      compared to 2003, the more significant items of increase included payroll and
      related expenses of $4.1 million, including incentive pay of $1.1 million
      related to 2004 performance, travel and related expenses of $1.1 million and
      marketing and related expenses of $1.1 million. Additionally, legal and
      professional fees increased $1.8 million primarily attributable to the Maytag
      litigation and significant professional fees associated with our Sarbanes-Oxley
      compliance. Rent and occupancy costs increased





25





$363,000
      attributable to our new offices in Atlanta and New York. Non-employee
      compensation related to charges for stock-based compensation decreased $297,000.
      Additionally, we recorded a charge of $735,000 in the fourth quarter of 2003
      to
      provide for the potential uncollectibility of a receivable from Maytag. The
      Enersyst acquisition in May 2004 added SG&A expenses of $1.8 million related
      to the costs of additional personnel and facilities and increased amortization
      related to acquired intangibles. Depreciation and amortization expense also
      increased, to a lesser extent, related to tooling and other equipment purchases
      made to support activity from the Subway relationship and leasehold improvements
      in new facilities. The 2003 amounts were also reflective of a curtailment of
      activity in the business early in the year as financial resources became
      scarce.





The
      following table quantifies the net increase in general and administrative
      expenses for the periods presented (in thousands):





**Increase
                (Decrease) in****General
                and Administrative****Expenses****2005
                to 2004**
            
            
            **2004
                to 2003**Selling,
                marketing and related expenses
            
            $
            3,159
            
            
            $
            1,127Legal
                and professional fees
            
            
            2,669
            
            
            
            1,820Depreciation
                and amortization
            
            
            1,744
            
            
            
            285Rent
                and occupancy costs
            
            
            1,478
            
            
            
            364Payroll
                and related expenses
            
            
            1,374
            
            
            
            4,069Travel
                and related expenses
            
            
            553
            
            
            
            1,068Enersyst
                acquisition
            
            
            --
            
            
            
            1,841Non-cash
                compensation
            
            
            87
            
            
            
            (297
            )Receivable
                write-off
            
            
            --
            
            
            
            (735
            )Other
            
            
            (28
            )
            
            
            (239
            )Total
                increase
            
            $
            11,036
            
            
            $
            9,303





For
      2005,
      we have augmented our SG&A infrastructure in contemplation of the launch of
      our residential speed cook oven products in 2006 resulting in an increase of
      SG&A expenses. We expect a continuation of this trend as the marketing and
      promotion plans are finalized and the product launch is executed; however,
      the
      extent of the investment required to launch this new product in, what will
      be to
      us, a new market is difficult to quantify. We also expect increased sales and
      marketing expenses in 2006 as compared to 2005 due to an expected increase
      in
      commissions as a result of higher forecasted sales and an increase the volume
      of
      sales generated by our networks of manufacturer’s representatives and food
      equipment distributors. Overall, we expect SG&A to increase in 2006 as
      compared to 2005, principally the result of increased selling, marketing and
      related costs resulting from the launch of our residential oven model.





***Restructuring
      Charges***





In
      the
      fourth quarter of 2005, we initiated a restructuring plan to close our
      underperforming operation in the Netherlands and re-align the resources and
      cost
      structure. We now direct the activities of all of our international distributors
      directly from our domestic operations center. Since we continue to have a
      presence in the markets previously managed by our Netherlands operation, the
      results of that unit’s operations are included in continuing operations. The
      closing of the Netherlands operations resulted in restructuring charges of
      $621,000 including $321,000 of employee severance benefits, $75,000 attributable
      to professional and other related fees, $100,000 attributable to facility leases
      and other costs and $125,000 of non-cash charges related to impairment of
      leasehold improvements, a long-lived asset. We have estimated the amount of
      restructuring liabilities associated with real estate leases based on the most
      recent available market data and discussions with our lessors and real estate
      advisors.





The
      restructuring liabilities will be fully paid through May 2010. We do not
      anticipate significant restructuring charges in the future.





***Compensation
      and Severance Related to Termination of Former Officers and
      Directors***





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 in 2003. Of this amount, $200,000 represented cash
      severance and the balance was related to estimated fair value computations
      applied to equity instruments received and/or modified.





***Interest
      Income***





Interest
      income includes amounts earned on invested cash balances. Interest income was
      $1.5 million for 2005 representing earnings on proceeds from the February
      2005 public offering of our common stock. Interest income was insignificant
      in
      2004 and 2003 as we had limited resources to invest.





26








***Interest
      Expense***





Interest
      expense includes interest and other costs paid and incurred on our debt
      obligations as well as amortization of deferred financing costs. We have a
      credit facility which has been in place for most of 2005. Although we have
      not
      accessed the facility, there are fees and availability costs associated with
      having the facility in place. Interest expense was $332,000 for 2005 as compared
      to a negligible amount for 2004. In 2003, interest expense included debt
      extinguishment costs of $1.1 million related to retirement of a note
      payable.





***Other
      Income (Expense)***





Net
      other
      income (expense) represents foreign exchange gains and losses incurred
      during the periods presented. Variations during the periods are attributable
      to
      exchange rate fluctuations and the volume of transactions denominated in foreign
      currencies. Net other income (expense) may fluctuate in the future based
      upon the movement in foreign exchange rates.





***Provision
      for Income Taxes***





Our
      provision for income taxes in 2004 was $301,000 and consists of estimated
      Federal Alternative Minimum Tax and estimated state and local taxes. This tax
      provision is an effective tax rate of 3% and reflects utilization of
      approximately $9.0 million in NOLs carried forward from prior years which
      reduced our taxable income in 2004. As of December 31, 2005, we have available
      approximately $62.4 million in remaining NOL carryforwards, of which $31.4
      million are subject to annual limitations resulting from the change in control
      provisions in Section 382 of the Internal Revenue Code. These NOLs begin to
      expire in 2010. Additionally, we have $8.9 million 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. As described in Note
      10 to
      the Consolidated Financial Statements, a valuation allowance has been recorded
      to reduce our net deferred income tax assets to the amount that is more likely
      than not to be realized. Based on our previous history of losses, we have
      recorded a valuation allowance as of December 31, 2005, equal to the full amount
      of our net deferred income tax assets including those related to our NOLs.
      Future profitable operations would permit recognition of these net deferred
      income tax assets, which would have the effect of reducing our income tax
      expense. Future operations could also demonstrate a return to profitability
      sufficient to warrant a reversal of the valuation allowance, which would
      positively impact our financial statements.





***Preferred
      Stock Dividends***





In
      2003,
      we recorded a non-cash charge of $12.6 million to recognize as a deemed dividend
      the beneficial conversion feature related to our Series D Convertible Preferred
      Stock, all of which converted into common stock by October 28,
      2004.





**Liquidity
      and Capital Resources**





Our
      capital requirements in connection with our product and technology development
      and marketing efforts have been significant. In light of the planned launch
      in
      2006 of our residential speed cook ovens, the capital requirements for these
      efforts likely will continue to be significant.





On
      February 8, 2005, we closed a public offering of 5,000,000 shares of our common
      stock at $20.50 before discounts and commissions to underwriters and other
      offering expenses. Of the shares sold, 2,925,000 were sold by the Company and
      2,075,000 were sold by certain selling stockholders. We are using the
      net proceeds, approximately $54.8 million, to finance the development and
      introduction of our residential speed cook ovens, to pursue possible
      acquisitions or strategic investments and for working capital and other general
      corporate purposes.





Our
      management anticipates that current cash on hand, including the balance of
      the
      proceeds of our public offering, provide sufficient liquidity for us to execute
      our business plan and expand our business as needed in the near term.
      Additionally, we are currently in negotiations to renew our credit facility
      with
      Bank of America which expired on February 28, 2006. This facility would provide
      stand-by credit availability to augment the cash flow anticipated from
      operations. However, should the launch of our residential speed cook oven
      products or a significant increase in demand for commercial products engender
      significant expansion of our operations, we may require additional capital
      in
      future periods.





Cash
      (used in) operating activities was $(20.2) million for the year ended December
      31, 2005 as compared to cash provided by operating activities of $3.6 million
      for the year ended December 30, 2004. Net cash used in operating activities
      for
      2005 resulted from our net loss of $(28.2) million less non-cash charges of
      $9.7
      million (including IPRD charge of $6.3 million and $2.8 million in deprecation
      and amortization), offset by an increased investment in working capital of
      $1.7
      million. The change in working capital items included cash used for increases
      in
      inventories, prepaid expenses and other receivables (primarily the amount due
      from one of our contract assemblers for our consigned inventory lost in a fire
      at one of its plants) and to reduce trade accounts payable; offset by cash
      provided by reductions in restricted cash and trade accounts receivable. Net
      cash provided by operating activities for 2004 resulted from our net income
      of
      $9.7 million plus non-cash charges of $1.2 million (principally depreciation
      and
      amortization) offset by an increased investment in working capital of $7.3
      million. The working capital investment was largely due to increases of $8.6
      million in accounts receivable and $6.8 million in inventory, offset by
      increases of $7.7 million in accounts payable and $3.8 million





27





in
      accrued expenses and warranty resulting, in large part, from current sales
      to
      Subway franchisees and the inventory requirements to accommodate the anticipated
      level of future orders. Pursuant to terms of the initial agreement under which
      the Company provided ovens to Subway restaurants, the Company segregated funds
      for estimated warranty costs for the Subway ovens. The estimated warranty cost
      was deposited to a separate account and withdrawals for the cost of warranty
      parts and labor are made periodically, as incurred, up to the amount initially
      deposited. As of December 31, 2005 and 2004, the amount of these segregated
      funds totaled nil and $3.2 million, respectively.





Cash
      used
      in investing activities for the year ended December 31, 2005 was $10.5 million
      compared to $10.9 million for the year ended December 31, 2004. In 2005, we
      expended $7.3 million of net cash for the acquisition of technology assets
      from
      Global and $3.1 million for capital expenditures, primarily related to our
      new
      operations center in Dallas. In 2004, we expended $7.7 million of net cash
      for
      the acquisition of Enersyst and $2.9 million for capital expenditures, primarily
      related to tooling and other equipment purchases made to support activity from
      our relationship with the Subway system and to establish offices in Atlanta
      and
      New York. We anticipate capital expenditures of approximately $4.0 million
      during 2006, including anticipated capital expenditures in connection with
      the
      introduction of our residential oven. We also anticipate expenditures of
      approximately $2.3 million related to the Global asset acquisition. We
      anticipate funding these expenditures from working capital.





Cash
      provided by financing activities for the year ended December 31, 2005 was $57.8
      million compared to $11.4 million for the year ended December 31, 2004. In
      2005,
      we received net proceeds of $54.8 million from a public offering of 2,925,000
      shares of our common stock and $3.1 million in proceeds from the exercise of
      options and warrants. In 2004, we received net proceeds of $10.0 million from
      the May 2004 private placement and $1.8 million in proceeds from the exercise
      of
      options and warrants, and we paid $380,000 in notes payable.





At
      December 31, 2005, we had cash and cash equivalents of $40.1 million and working
      capital of $43.7 million as compared to cash and cash equivalents of $12.9
      million and working capital of $17.4 million at December 31, 2004.





**Contractual
      Cash Obligations**





As
      of
      December 31, 2005, our future contractual cash obligations are as follows (in
      thousands):





**Payments
                Due By Period****Total**
            
            **2006**
            
            **2007**
            
            **2008**
            
            **2009**
            
            **2010**
            
            **Thereafter**Installment
                Payments for Covenants Not-to-Compete
            
            
            
            $
            4,000
            
            
            $
            1,333
            
            
            $
            1,333
            
            
            $
            1,334
            
            
            $
            --
            
            
            $
            --
            
            
            $
            --Operating
                Leases
            
            
            
            
            5,972
            
            
            
            1,130
            
            
            
            1,072
            
            
            
            997
            
            
            
            914
            
            
            
            633
            
            
            
            1,226Total
            
            
            
            $
            9,972
            
            
            $
            2,463
            
            
            $
            2,405
            
            
            $
            2,331
            
            
            $
            914
            
            
            $
            633
            
            
            $
            1,226








In
      addition, we are contingently liable for additional consideration aggregating
      $8.0 million that may become payable in connection with the Global asset
      acquisition. The purchase agreement provides that nearly-equal installments
      of
      $2.6 million are payable over the next three years provided that applications
      for a specific number of patents are delivered within 18 months of the
      transaction’s closing. We are unable to predict the resolution of these
      contingencies with certainty and will record such consideration if and when
      they
      are resolved. Such consideration, if payable, is to be paid 38% in cash and
      62%
      in shares of our common stock.




We
      believe that existing working capital and anticipated future cash flows from
      operations will be sufficient to meet our contractual obligations. We intend
      to
      seek financing for any amounts that we are unable to pay from operating cash
      flows and are in negotiations to renew our credit facility with Bank of America
      which expired February 28, 2006. Financing alternatives are routinely evaluated
      to determine their practicality and availability in order to provide us with
      additional funding at the least possible cost.





We
      believe that our existing cash, and anticipated future cash flows from
      operations will be sufficient to fund our working capital and capital investment
      requirements for the next twelve months and a reasonable period of time
      thereafter.





**Item7A.** **Quantitative
      and Qualitative Disclosures about Market Risk**





We
      conduct business in several foreign countries. As a result, we are exposed
      to
      fluctuations in foreign exchange rates. Additionally, we may continue to expand
      our operations globally, which may increase our exposure to foreign exchange
      fluctuations.








28





**Item8.** **Financial
      Statements and Supplementary Data**





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




**Item9.** **Changes
      In and Disagreements with Accountants on Accounting and Financial
      Disclosure**





Not
      applicable.




**Item9A.****Controls
      and
      Procedures**





**Controls
      and Procedures**





Based
      on
      their evaluation as of December 31, 2005, our Chief Executive Officer and
      Chief Financial Officer have concluded that our disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
      Securities Exchange Act of 1934, as amended) were sufficiently effective to
      ensure that the information required to be disclosed by us in this Annual Report
      on Form 10-K was recorded, processed, summarized and reported within the
      time periods specified in the SEC's rules and instructions for
      Form 10-K.




**Management's
      Responsibility for Maintaining Internal Controls**





Our
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting (as defined in Rule 13a-15(f) under the
      Securities Exchange Act of 1934, as amended). Our management assessed the
      effectiveness of our internal control over financial reporting as of
      December 31, 2005. In making this assessment, our management used the
      criteria set forth by the Committee of Sponsoring Organizations of the Treadway
      Commission ("COSO") in Internal Control-Integrated Framework. Our management
      has
      concluded that, as of December 31, 2005, our internal control over
      financial reporting is effective based on these criteria. Our independent
      registered public accounting firm, Ernst & Young LLP, has issued an audit
      report on our assessment of our internal control over financial reporting.
      Our
      report on internal controls and the internal control report of our independent
      registered public accounting firm, Ernst & Young LLP, are included on pages
      F-5 and F-3 of this report, respectively.




**Item9B.    Other
      Information**





None.































29





**PartIII**


**Item10.** **Directors
      and Executive Officers of the Registrant**




The
      directors and executive officers of TurboChef are as follows:





**Name**
            
            
            ****
            **Age**
            ****
            **Position**
            ****Richard
                E. Perlman
            
            
            
            59
            
            Chairman
                of the Board of DirectorsJames
                K. Price
            
            
            
            47
            
            President,
                Chief Executive Officer and DirectorJames
                A. Cochran
            
            
            
            58
            
            Senior
                Vice President and Chief Financial OfficerPaul
                P. Lehr
            
            
            
            59
            
            Vice
                President and Chief Operating OfficerJoseph
                T. McGrain
            
            
            
            58
            
            Vice
                President and President, Residential Oven DivisionWilliam
                A. Shutzer
            
            
            
            58
            
            DirectorRaymond
                H. Welsh
            
            
            
            74
            
            DirectorJ.
                Thomas Presby
            
            
            
            66
            
            DirectorSir
                Anthony Jolliffe
            
            
            
            67
            
            DirectorJames
                W. DeYoung
            
            
            
            62
            
            Director





***Richard
      E. Perlman*** has been
      Chairman of the Board since October 2003. He was formerly chairman of
      PracticeWorks, Inc. from March 2001 until its acquisition by The Eastman Kodak
      Company in October 2003. Mr. Perlman served as chairman and treasurer of AMICAS,
      Inc. (formerly VitalWorks Inc.) from January 1998 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, Inc. 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*** has been
      our President and Chief Executive Officer and a director since October 2003.
      From March 2001 until its acquisition by The Eastman Kodak Company in October
      2003, Mr. Price was the president and 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.





***James
      A. Cochran*** has
      served as our Senior Vice President 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 of PracticeWorks from VitalWorks. From 1992 until
      joining VitalWorks, Mr. Cochran was a member of the accounting firm of BDO
      Seidman, LLP, serving as a partner since 1995. He is a Certified Public
      Accountant and received a B.B.A. in Accounting and an M.B.A. in Corporate
      Finance from Georgia State University.




***Paul
        P. Lehr*** has
        served as our Vice President and Chief Operating Officer since October 2004,
        and
        from November 2003 to October 2004, Mr. Lehr served as our Vice President
        of
        Operations. From December 2001 until joining us in November 2003, Mr. Lehr
        was
        self-employed. Mr. Lehr also served as executive vice president -- commercial
        sales of CSK Auto, Inc., a publicly traded automotive parts distribution
        company, from February 2000 to December 2001. Before joining CSK Auto, in
        1980
        Mr. Lehr founded Motor Age, Inc., a distributor of automotive replacement
        parts.
        Motor Age became part of Parts Plus Group, Inc. in 1997, and Mr. Lehr served
        as
        president and chief executive officer of that industry roll-up until he joined
        CSK Auto in February 2000. He received a B.S. in Economics and an M.B.A.
        from
        City University of New York.




***Joseph
      T. McGrain*** became a
      Vice President and President of our Residential Oven Division in April, 2005.
      Formerly, since 1998, Mr. McGrain was President of Wolf Range Company LLC,
      a
      division of ITW Food Equipment Group and a U.S. manufacturer of commercial
      cooking equipment, marketing to commercial dealers and national chain accounts
      in the U.S. and export markets in Asia, South America and Europe. From 1995
      to
      1998 he was President of Gaggenau USA Corporation, a subsidiary of Bosch Siemens
      Group and a distributor of high quality European residential cooking equipment.
      Mr. McGrain had other management positions with Bosch Siemens from 1987 to
      1995.




***William
      A. Shutzer*** has been
      a director of TurboChef since October 2003. Mr. Shutzer is a senior managing
      director of Evercore Partners, a financial advisory and private equity firm.
      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





30





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., CSK Auto, Inc., and Jupitermedia Corp. Mr.
      Shutzer received a B.A. from Harvard University and an M.B.A. from Harvard
      Business School.





***Raymond
      H. Welsh*** has been
      a director of TurboChef since October 2003. Since January 1995, Mr. Welsh has
      been a senior vice president of UBS Financial Services, Inc. From March 2001
      to
      October 2003 he was a director of PracticeWorks, Inc. Mr. Welsh is a Trustee
      of
      the University of Pennsylvania and PennMedicine. He is chairman of the board
      of
      Bancroft NeuroHealth, a trustee of the Bancroft Foundation, and a Trustee of
      Episcopal Community Services. Mr. Welsh received a B.S. in Economics from the
      Wharton School of the University of Pennsylvania.





***J.
      Thomas Presby*** became a
      director of TurboChef in December 2003. In June 2002 he retired as a partner
      with Deloitte Touche Tohmatsu, an international accounting and consulting firm.
      Over a period of 30 years, Mr. Presby held many positions with Deloitte in
      the
      United States and abroad, including deputy chairman and chief operating officer
      from 1995 until his retirement. Mr. Presby also served as the chief executive
      officer of Deloitte & Touche in Europe and 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.
      Mr. Presby served as a director of PracticeWorks, Inc. from September 2002
      until
      its October 2003 sale to Eastman Kodak. He also served as a director of
      GreenPoint Financial from January 2003 until its October 2004 sale to North
      Fork
      Bank. Mr. Presby currently serves as a director of Tiffany & Co., AMVESCAP
      PLC, American Eagle Outfitters Inc. and World Fuel Services Corporation. Mr.
      Presby received a B.S. in Electrical Engineering from Rutgers University, and
      an
      M.S. in Industrial Administration from the Carnegie Mellon University Graduate
      School of Business. He is a Certified Public Accountant in New York and
      Ohio.





***Sir
      Anthony Jolliffe*** 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. Until his
      retirement from the accounting profession in 1982, Sir Anthony Jolliffe was
      a
      Chartered Accountant in the United Kingdom for 18 years, during which time
      he
      grew his accounting firm into a multi-national operation with offices in 44
      countries with over 200 partners. His firm eventually merged with Coopers &
Lybrand and Grant Thornton. He remained with Grant Thornton for two years until
      he retired. Since that time, Sir Anthony has built a number of businesses,
      two
      of which have been listed on the London Stock Exchange. He is currently involved
      in several business projects in China, the Middle East, the United States and
      the United Kingdom. Sir Anthony has held, and currently holds, numerous
      positions with governmental and charitable entities in the United Kingdom and
      China, including being the former Lord Mayor of London and the chairman of
      the
      Special Advisory Board to the Governor of Yunnan Province in China and advisor
      to the Governor of Shandong Province in China.





***James
      W. DeYoung*** became a
      director of TurboChef in December 2003. Mr. DeYoung is the founder and President
      of Winston Partners Incorporated, which provides strategic corporate advisory,
      corporate disclosure and investor relations services to select private and
      publicly-owned companies. Mr. DeYoung also is a general partner of Resource
      Ventures L.P., a private equity/venture fund. Prior to forming Winston Partners
      in 1984, Mr. DeYoung spent 14 years with Baxter International, Inc., serving
      in
      a senior capacity in marketing, investor relations, public relations and
      corporate financial management functions. Mr. DeYoung is currently a director
      of
      several private companies and is involved with numerous not-for-profit
      organizations in the Chicago, Illinois area, including as a trustee of Rush
      University Medical Center and Rush North Shore Medical Center. Mr. DeYoung
      is
      also vice chairman and a director of the Chicago Horticultural Society. Mr.
      DeYoung received a B.A. degree from Washington and Lee University and a J.D.
      degree from Northwestern University School of Law.





**Audit
      Committee Financial Expert**





We
      have a
      standing audit committee of our Board of Directors established in accordance
      with section 3(a)(58)(A) of the Securities Exchange Act. The following
      directors, all of whom are independent, comprise our audit committee: Messrs.
      Presby, Shutzer and DeYoung. 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 registered public accounting firm (“accounting
      firm”), the scope of our annual audits, fees to be paid to our accounting firm,
      the performance of our accounting firm 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 a review of the copies of such forms furnished to the Company,
      the
      Company believes that during the fiscal year ended December 31, 2005, no filings
      applicable to its executive officers, directors and ten percent stockholders
      were late.





31







**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, which we call the “Guide for
      Business Conduct” (the “Ethics Code”) is available on the Company's website
      ( www.turbochef.com ). 
      We will post any amendment to or waiver from the Ethics Code on the Company's
      website as well. We will provide a copy of our Ethics Code without charge upon
      written request to Secretary, TurboChef Technologies, Inc., Suite 1900, Six
      Concourse Parkway, Atlanta, Georgia 30328.




**Item11.** **Executive
      Compensation**





**Compensation**





*Director
      Compensation*





TurboChef's
      directors do not currently receive cash compensation for their services as
      directors, but they 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 nevertheless 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 33,333 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 8,333, 8,333 and 16,667
      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; and (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 3,333 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.  In addition,
      each Board member is granted options to purchase 8,333 shares of common stock
      each year of service, and committee chairmen are granted options on an
      additional 3,333 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 Chief Executive Officer 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. The Company
      had no other executive officers at December 31, 2005.








**Annual
      Compensation**


**Name
                and Principal Position**
            
            **Fiscal
                Year**
            
            **Salary
                ($)**
            
            **Bonus
                ($)**
            
            **Other
                ($)**
            
            **Long-Term**
              **Compensation****Awards**
              **Securities**
              **Underlying
                Options (# )**Richard
                E. Perlman
            
            
            2005
            
            $
            365,000
            
            $
            -0-
            
            $
            -0-
            
            
            -0-Chairman(1)
            
            
            2004
            
            
            365,000
            
            
            191,630
            
            
            -0-
            
            
            -0-2003
            
            
            56,154
            
            
            -0-
            
            
            -0-
            
            
            416,666James
                K. Price
            
            
            2005
            
            
            365,000
            
            
            -0-
            
            
            -0-
            
            
            -0-Chief
                Executive Officer(2)
            
            
            2004
            
            
            365,000
            
            
            191,630
            
            
            -0-
            
            
            -0-2003
            
            
            56,154
            
            
            -0-
            
            
            -0-
            
            
            416,666James
                A. Cochran
            
            
            2005
            
            
            243,000
            
            
            -0-
            
            
            -0-
            
            
            15,000Chief
                Financial Officer(3)
            
            
            2004
            
            
            243,000
            
            
            60,545
            
            
            -0-
            
            
            -0-2003
            
            
            18,692
            
            
            -0-
            
            
            -0-
            
            
            133,333Paul
                P. Lehr
            
            
            2005
            
            
            193,450
            
            
            -0-
            
            
            -0-
            
            
            40,000Chief
                Operating Officer(4)
            
            
            2004
            
            
            175,814
            
            
            18,318
            
            
            75,000
            (6)
            
            16,6662003
            
            
            9,231
            
            
            -0-
            
            
            -0-
            
            
            116,666Joseph
                T. McGrain
            
            
            2005
            
            
            129,483
            
            
            -0-
            
            
            -0-
            
            
            133,333President,
                Residential Oven Division(5)
            
            
            2004
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-2003
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-








32








(1)
            Mr.
                Perlman began serving as Chairman on October 28, 2003.(2)
            Mr.
                Price began serving as Chief Executive Officer on October 28,
                2003.(3)
            Mr. Cochran
              began
              serving as Chief Financial Officer on October 28, 2003.(4)
            Mr.
                Lehr began serving as Chief Operating Officer on May 24, 2004 and
                from
                November 24, 2003 through May 24, 2004 he served as our Vice President
                of
                Operations.(5)
            Mr.
                  McGrain began serving as President, Residential Oven Division on
                  April 25,
                  2005.(6)
            The
                amounts presented for 2004 include a relocation payment of $75,000
                to Mr.
                Lehr. The compensation set forth in this column does not include
                compensation in the form of perquisites or other personal benefits
                for
                Messrs. Perlman, Price, and Cochran in fiscal years 2005, 2004 and
                2003
                because such perquisites and other personal benefits did not exceed
                the
                lesser of $50,000 or 10% of the total annual salary and bonus for
                these
                individuals for such years.





**Executive
      Agreements**




TurboChef
      entered into a three-year employment agreement with each of Richard E. Perlman,
      James K. Price and James A. Cochran on substantially the terms described
      below.  The agreements automatically renew 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
      for Messrs. Perlman and Price 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 employment agreement for Mr. Cochran provides for an initial annual
      base salary of $243,000 with a discretionary bonus based upon performance and
      achievement of key Company objectives. The base salary in each case 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.





TurboChef
      and Paul P. Lehr entered into an employment agreement for two years, effective
      October 29, 2003, which automatically renews for an additional year at the
      end
      of the initial term and at the end of each renewal year unless notice of
      non-renewal is given at least six months in advance. The employment agreement
      provides for an annual base salary of $200,000 and severance compensation equal
      to one-half the annual base salary. Mr. Lehr is eligible for a discretionary
      bonus based upon performance and achievement of key Company objectives. The
      employment agreement provides 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 agreement prohibits 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 and Joseph T. McGrain entered into an employment agreement for two
      years, beginning April 25, 2005, which automatically renews for an additional
      year at the end of the initial term and at the end of each renewal year unless
      notice of non-renewal is given at least six months in advance. The employment
      agreement provides for an annual base salary of $200,000 and severance
      compensation equal to one-half the annual base salary. Mr. McGrain is eligible
      for a discretionary bonus based upon performance and achievement of key Company
      objectives. The employment agreement provides 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
      agreement prohibits 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.





Effective
      December 31, 2005, the Company agreed to accelerate the vesting of all
      outstanding options, including those held by the executive officers, in exchange
      for the option holders’ agreement not to sell the underlying shares until such
      time as the options would have vested, if they had not been accelerated. All
      executive officers executed the lock-up agreement.








33





**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 2005**





The
      following table sets forth information concerning stock options granted by
      the
      Company to the named executive officers during fiscal 2005 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
                2005**
            
            **Exercise**
              **Price**
              **($/Share)**
            
            **Expiration**
              **Date**
            
            **Potential
                Realizable Value at**
              **Assumed
                Annual Rates of Stock**
              **Price
                Appreciation for**
              **Option
                Term(1)****5%**
            
            **10%**James
                A. Cochran
            
            
            15,000
            
            
            
            1.55
            
            
            
            10.35
            
            
            5/3/2015
            
            
            97,636
            
            
            247,429Paul
                P. Lehr
            
            
            40,000
            
            
            
            4.14
            
            
            
            10.35
            
            
            5/3/2015
            
            
            260,362
            
            
            659,809Joseph
                T. McGrain
            
            
            133,333
            
            
            
            13.79
            %
            
            $
            10.35
            
            
            4/25/2015
            
            $
            867,872
            
            $
            2,199,359







(1)
            The
                potential realizable value of the options, if any, granted in 2005
                to each
                of the named executive officers was calculated by multiplying those
                options by the excess of (a) the assumed market value of Common Stock,
                at
                the end of option term, if the market value of Common Stock were
                to
                increase 5% or 10% in each year of the option's term over (b) the
                exercise
                price shown. This calculation does not take into account any taxes
                or
                other expenses which might be owed. The 5% and 10% appreciated rates
                are
                set forth in the SEC rules and no representation is made that the
                Common
                Stock will appreciate at these assumed rates or at all.








**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 2005 for the named executive officers. Effective on December
        31, 2005, and subject to an agreement by each option holder with the Company,
        the Company made all outstanding stock options, including those held by the
        named executive officers, immediately exercisable. The table shows the aggregate
        gains that would have been realized had all exercisable options been exercised
        on December 31, 2005, even though these options were not exercised by any
        of
        these officers.


**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**Richard
                E. Perlman
            
            
            --
            
            
            
            $
            --
            
            
            
            416,633
            
            
            
            
            --
            
            
            
            $
            3,795,527
            
            
            
            $
            --James
                K. Price
            
            
            --
            
            
            
            
            --
            
            
            
            416,666
            
            
            
            
            --
            
            
            
            
            3,795,827
            
            
            
            
            --James
                A. Cochran
            
            
            --
            
            
            
            
            --
            
            
            
            148,333
            
            
            
            
            --
            
            
            
            
            1,274,814
            
            
            
            
            --Paul
                P. Lehr
            
            
            28,000
            
            
            
            
            202,256
            
            
            
            106,444
            
            
            
            
            --
            
            
            
            
            683,208
            
            
            
            
            --Joseph
                T. McGrain
            
            
            --
            
            
            
            
            --
            
            
            
            133,333
            
            
            
            
            --
            
            
            
            
            534,665
            
            
            
            
            --








(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 30, 2005, TurboChef
                common stock's closing sales price was
                $14.36.








34








**Item12.** **Security
      Ownership of Certain Beneficial Owners and Management**





**Security
      Ownership**





***Five
      Percent Owners***





The
      following table sets forth information, as of March 1, 2006, 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:







**Title
                of Class**
            
            **Name
                and Address of**
              **Beneficial
                Owner of Class**
            
            **Amount
                of Beneficial Ownership**
            
            **Percent
                of**
              **Class(1)**Common
            
            OvenWorks,
                LLLP
              655
                Madison Avenue
              Suite
                1500
              New
                York, NY  10021
            
            7,203,156
            (2)
            
            25.1
            %Common
            
            Jeffrey
                B. Bogatin
              888
                Park Avenue
              New
                York, NY  10021
            
            1,948,867
            (3)
            
            6.8
            %








(1)
            Based
                upon 28,693,516 shares outstanding on March 1, 2006.(2)
            Shares
                of common stock held by OvenWorks were issued upon the conversion
                of
                shares of Series D Convertible Preferred Stock that were issued in
                connection with a private placement to OvenWorks. Oven Management,
                Inc. is
                the sole general partner of OvenWorks, LLLP.  Richard Perlman, our
                Chairman, is the sole shareholder, sole director and President of
                Oven
                Management, Inc. and also a limited partner of
                OvenWorks.(3)
            Based
                upon ownership reported in a Schedule 13D filed on July 20,
                2004.








***Officers
      and Directors***





The
      following table sets forth information concerning the shares of TurboChef Common
      Stock 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, 2006. 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, 2006. In calculating
      the
      percentage owned by each beneficial owner, the Company assumed that all stock
      options that are exercisable by that person on or prior to April 30, 2006 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 and no exchange of any preferred
      units of membership interest of Enersyst Development Center, L.L.C. 
Likewise, beneficial ownership of certain officers and directors is shown as
      if
      shares of common stock have been distributed by OvenWorks, LLLP to its
      partners.








35








**Name
                of Beneficial Owner**
            
            **Amount and Nature**
              **of
                Beneficial**
              **Ownership
                (1)**
            
            **Percent
                of**
              **Class**Richard
                E. Perlman
            
            
            8,212,707
            (2)
            
            
            28.2%James
                K. Price
            
            
            2,197,202
            (3)
            
            
            7.6%J.
                Thomas Presby
            
            
            188,572
            (4)
            
            
            *William
                A. Shutzer
            
            
            1,886,063
            (5)
            
            
            1.0%Raymond
                H. Welsh
            
            
            299,483
            (6)
            
            
            1.0%Sir
                Anthony Jolliffe
            
            
            194,869
            (7)
            
            
            *James
                W. DeYoung
            
            
            361,839
            (8)
            
            
            1.3%James
                A. Cochran
            
            
            418,255
            (9)
            
            
            1.5%Paul
                P. Lehr
            
            
            106,444
            (10)
            
            
            *Joseph
                T. McGrain
            
            
            133,333
            (11)
            
            
            *All
                current directors and executive officers as a group (10persons)
            
            
            10,913,205
            (2)(12)
            
            
            36.0%








*
              
              Less
                  than 1%(1)
              
              Unless
                  otherwise indicated, the Company believes that all persons named
                  in the
                  table have sole voting and investment power with respect to all
                  shares of
                  common stock beneficially owned by them. Percentages herein assume
                  a base
                  of 28,693,516 shares of common stock outstanding as of March 1,
                  2006.(2)
              
              Includes
                  416,633 shares of common stock issuable upon exercise of options
                  and
                  7,203,156 shares of common stock (or 25.1%) currently owned by
                  OvenWorks,
                  LLLP, which is controlled by Mr. Perlman. Current directors and
                  executive
                  officers (or their affiliates) would have beneficial ownership
                  of an
                  aggregate of 4,273,180 shares of the Company's common stock if
                  OvenWorks
                  distributed such shares to its partners.(3)
              
              Includes
                  416,666 shares of common stock issuable upon exercise of options
                  and
                  1,187,618 shares of common stock currently owned by OvenWorks,
                  LLLP.(4)
              
              Includes
                  68,333 shares of common stock issuable upon exercise of options
                  and 80,199
                  shares of common stock currently owned by OvenWorks,
                  LLLP.(5)
              
              Includes
                  68,333 shares of common stock issuable upon exercise of options
                  and
                  1,212,426 shares of common stock currently owned by OvenWorks,
                  LLLP.(6)
              
              Includes
                  53,333 shares of common stock issuable upon exercise of options
                  and
                  176,813 shares of common stock currently owned by OvenWorks,
                  LLLP.(7)
              
              Includes
                  139,999 shares of common stock issuable upon exercise of options
                  and
                  36,598 shares of common stock currently owned by OvenWorks,
                  LLLP.(8)
              
              Includes
                  61,666 shares of common stock issuable upon exercise of options
                  and
                  211,870 shares of common stock currently owned by OvenWorks,
                  LLLP.(9)
              
              Includes
                  148,333 shares of common stock issuable upon exercise of options
                  and
                  180,038 shares of common stock currently owned by OvenWorks,
                  LLLP.(10)
              
              Shares
                  issuable upon exercise of options.(11)
              
              Shares
                  issuable upon exercise of options.(12)
              
              Includes
                  1,613,073 shares issuable upon exercise of options and 7,203,156
                  shares of
                  common stock currently owned by OvenWorks, LLLP.

















36





**EQUITY
      COMPENSATION PLAN INFORMATION**





The
      following table sets forth as of December 31, 2005, 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
            
            3,694,187
            
            
            $
            8.70
            
            
            2,958,534Equity
                compensation
              plans
                not approved
              by
                security holders
            
            --
            
            
            
            --
            
            
            --Total
            
            3,694,187
            
            
            $
            8.70
            
            
            2,958,534







**Item13.** **Certain
      Relationships and Related Transactions**





None




**Item14.** **Principal
      Accountant Fees and Services**





Audit
      Fees and All Other Fees





*Audit
      Fees*





Fees
      for
      audit services totaled approximately $746,000 in 2005 and approximately $568,000
      in 2004, including fees associated with the annual audit and internal control
      report, the public offering completed in February 2005, 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 $18,000 in 2005 and approximately
      $62,000 in 2004. Audit related services principally include accounting
      consultations and other attest services.





*Tax
      Fees*





Fees
      for
      tax services totaled approximately $288,000 in 2005 and $22,000 in 2004,
      including tax compliance, tax advice and tax planning.





*All
      Other Fees*





The
      Company did not pay its principal accountant any other fees in 2005 or in
      2004.





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.





37





**PartIV**


**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**Reports
                of Independent Registered Public Accounting Firm
            
            F-2Managements
                Responsibility for Financial Reporting
            
            F-5Consolidated
                Balance Sheets as of December 31, 2005 and 2004
            
            F-6Consolidated
                Statements of Operations for the years ended December 31, 2005, 2004
                and
                2003
            
            F-7Consolidated
                Statements of Changes in Stockholders' Equity (Deficit) for the years
                ended December 31, 2005, 2004 and 2003
            
            F-8Consolidated
                Statements of Cash Flows for the years ended December 31, 2005, 2004
                and
                2003
            
            F-10Notes
                to Consolidated Financial Statements
            
            F-11







**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
            
            --
            
            Stock
                Purchase Agreement dated as of October 28, 2003 by and between the
                Registrant and OvenWorks, LLLP (incorporated by reference to Exhibit
                2.1
                to the Registrant's Current Report on Form 8-K, filed with the Commission
                on November 10, 2003)2.2
            
            --
            
            Contribution
                Agreement, dated May 21, 2004 by and among the Registrant, Enersyst
                Development Center LLC and its members (incorporated by reference
                to
                Exhibit 2.1 to the Registrant's Current Report on Form 8-K, filed
                with the
                Commission on May 28, 2004)2.3
            
            
            
            Asset
                Purchase Agreement, dated September 12, 2005, among TurboChef
                Technologies, Inc., Global Appliance Technologies, Inc. and stockholders
                of Global Appliance Technologies (incorporated by reference to Exhibit
                2.1
                to theRegistrant's
                Current Report on Form 8-K, filed with the Commission on September
                13,
                2005)3.1
            
            --
            
            Restated
                Certificate of Incorporation (incorporated by reference to Exhibit
                3.1.2
                to the Registrant's Registration Statement on Form SB-2, Registration
                No.
                33-75008)3.2
            
            --
            
            Amendment
                to Certificate of Incorporation - Certificate of Designation of Series
                A
                Convertible Preferred Stock (incorporated by reference to Exhibit
                3.1 to
                the Registrant's Quarterly Report on Form 10-Q for the quarter ended
                September 30, 2000, filed with the Commission on November 14,
                2000)3.3
            
            --
            
            Amendment
                to Certificate of Incorporation - Certificate of Designation of Series
                B
                Convertible Preferred Stock (incorporated by reference to Exhibit
                3.3 to
                the Registrant's Annual Report on Form 10-K for the fiscal year ended
                December 31, 2000, filed with the Commission on April 16,
                2001)





38




**Exhibit
                  No.**
              
              
              
              **Description**3.4
              
              --
              
              Amendment
                  to Certificate of Incorporation - Certificate of Designation of
                  Series C
                  Convertible Preferred Stock (incorporated by reference to Exhibit
                  3.1 to
                  the Registrant's Quarterly Report on Form 10-Q for the quarter
                  ended March
                  31, 2002, filed with the Commission on May 15, 2002)3.5
              
              --
              
              Amendment
                  to Certificate of Incorporation - Certificate of Designation of
                  Series D
                  Convertible Preferred Stock (incorporated by reference to Exhibit
                  3(i) to
                  the Registrant's Current Report on Form 8-K, filed with the Commission
                  on
                  November 10, 2003)3.6
              
              --
              
              Certificate
                  of Amendment to the Restated Certificate of Incorporation of TurboChef
                  Technologies, Inc., as amended (incorporated by reference to Exhibit
                  99.1
                  to the Registrant's Current Report on Form 8-K, filed with the
                  Commission
                  on July 20, 2004)3.7
              
              --
              
              Certificate
                  of Amendment to the Restated Certificate of Incorporation of TurboChef
                  Technologies, Inc., as amended (incorporated by reference to Exhibit
                  99.1
                  to the Registrant's Current Report on Form 8-K, filed with the
                  Commission
                  on December 23, 2004)3.8
              
              --
              
              Restated
                  By-Laws (incorporated by reference to Exhibit 3.2.2 to the Registrant's
                  Registration Statement on Form SB-2, Registration No.
                  33-75008)4.1
              
              --
              
              Specimen
                  Common Stock certificate (incorporated by reference to Exhibit
                  4.2 to the
                  Registrant's Registration Statement on Form SB-2, Registration
                  No.
                  33-75008)4.2
              
              --
              
              Specimen
                  Common Stock certificate (incorporated by reference to Exhibit
                  4.11 to the
                  Registrant's Registration Statement on Form S-3, Registration No.
                  333-121818)4.3
              
              --
              
              See
                  Exhibits 3.1 through 3.8 for provisions of the Certificate of
                  Incorporation and Bylaws of the Registrant defining the rights
                  of holders
                  of the Registrant's Common Stock10.1
              
              --
              
              1994
                  Stock Option Plan, as amended (incorporated by reference to Exhibit
                  10.14.2 to the Registrant's Registration Statement on Form SB-2,
                  Registration No. 33-75008)10.2
              
              --
              
              Strategic
                  Alliance Agreement dated as of September 26, 1997 by and between
                  the
                  Registrant and Maytag Corporation (incorporated by reference to
                  Exhibit
                  10.26 to the Registrant's Quarterly Report on Form 10-Q for the
                  quarter
                  ended September 30, 1997, filed with the Commission on November
                  14,
                  1997)10.3
              
              --
              
              First
                  Extension of the Project Agreement (RCAP-II) dated March 4, 1998
                  by and
                  between the Registrant and Maytag Corporation (incorporated by
                  reference
                  to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K
                  for the
                  fiscal year ended December 31, 1997, filed with the Commission
                  on March
                  31, 1998)10.4
              
              --
              
              Commercial
                  Cooking Appliance Project Agreement dated as of July 29, 1998 by
                  and
                  between TurboChef Technologies, Inc. and Maytag Corporation (incorporated
                  by reference to Exhibit 10.30 to the Registrant's Quarterly Report
                  on Form
                  10-Q for the quarter ended June 30, 1998, filed with the Commission
                  on
                  August 14, 1998)10.5
              
              --
              
              License
                  Agreement dated as of October 28, 1999 by and between the Registrant
                  and
                  Maytag Corporation (incorporated by reference to Exhibit 10.37
                  to the
                  Registrant's Quarterly Report on Form 10-Q for the quarter ended
                  September
                  30, 1999, filed with the Commission on November 15,
                  1999)10.6*
              
              --
              
              OEM
                  Contract dated May 19, 2000 between the Registrant and Shandong
                  Xiaoya
                  Group (incorporated by reference to Exhibit 10.12 to the Registrant's
                  Annual Report on Form 10-K for the fiscal year ended December 31,
                  2001,
                  filed with the Commission on April 15, 2002)10.7
              
              --
              
              Settlement
                  Agreement dated February 28, 2002 between the Registrant and Whitbread
                  PLC
                  (incorporated by reference to Exhibit 10.21 to the Registrant's
                  Annual
                  Report on Form 10-K for the fiscal year ended December 31, 2001,
                  filed
                  with the Commission on April 15, 2002)










39




**Exhibit
                    No.**
                
                
                
                **Description**10.8*
                
                --
                
                Supplementary
                    Agreement to the OEM Manufacturing Contract executed on March
                    27, 2002
                    between the Registrant and Shandong Xiaoya Group (incorporated
                    by
                    reference to Exhibit 10.22 to the Registrant's Annual Report
                    on Form 10-K
                    for the fiscal year ended December 31, 2001, filed with the Commission
                    on
                    April 15, 2002)10.9
                
                --
                
                Amendment
                    #2 to Supplementary Agreement to the OEM Manufacturing Contract
                    executed
                    on December 12, 2002 between the Registrant and Shandong Xiaoya
                    Group
                    (incorporated by reference to Exhibit 10.13 to the Registrant's
                    Annual
                    Report on Form 10-K for the fiscal year ended December 31, 2002,
                    filed
                    with the Commission on April 16, 2003)10.10
                
                --
                
                Stockholders'
                    Agreement dated as of October 28, 2003 by and among the Registrant,
                    OvenWorks, LLLP, Jeffrey Bogatin and Donald Gogel (incorporated
                    by
                    reference to Exhibit 10.1 to the Registrant's Current Report
                    on Form 8-K,
                    filed with the Commission on November 10, 2003)10.11
                
                --
                
                Voting
                    Agreement dated as of October 28, 2003 by and among OvenWorks,
                    LLLP,
                    Jeffrey Bogatin and Donald Gogel (incorporated by reference to
                    Exhibit
                    99.1 to the Registrant's Current Report on Form 8-K, filed with
                    the
                    Commission on November 10, 2003)10.12
                
                --
                
                Settlement
                    and Release Agreement dated as of October 28, 2003 by and between
                    the
                    Registrant and Grand Cheer Company Limited (incorporated by reference
                    to
                    Exhibit 10.2 to the Registrant's Current Report on Form 8-K,
                    filed with
                    the Commission on November 10, 2003)10.13
                
                --
                
                Voting
                    Agreement dated as of October 28, 2003 by and between OvenWorks,
                    LLLP and
                    Grand Cheer Company Limited (incorporated by reference to Exhibit
                    99.2 to
                    the Registrant's Current Report on Form 8-K, filed with the Commission
                    on
                    November 10, 2003)10.14*
                
                --
                
                Equipment
                    Supplier Approval Agreement dated as of March 5, 2004 by and
                    among the
                    Registrant, Doctor's Associates, Inc. and Independent Purchasing
                    Cooperative, Inc. (incorporated by reference to Exhibit 10.19
                    to the
                    Registrant's Annual Report on Form 10-K for the fiscal year ended
                    December
                    31, 2003, filed with the Commission on March 30, 2004)10.15
                
                --
                
                Consent
                    to Transfer and First Amendment to Stockholders' Agreement dated
                    as of
                    November 21, 2003 by and among the Registrant, OvenWorks, LLLP,
                    Jeffrey
                    Bogatin and Donald Gogel (incorporated by reference to Exhibit
                    10.20 to
                    the Registrant's Annual Report on Form 10-K for the fiscal year
                    ended
                    December 31, 2003, filed with the Commission on March 30,
                    2004)10.16
                
                --
                
                TurboChef
                    Technologies, Inc. 2003 Stock Incentive Plan (incorporated by
                    reference to
                    Exhibit 10.21 to the Registrant's Annual Report on Form 10-K
                    for the
                    fiscal year ended December 31, 2003, filed with the Commission
                    on March
                    30, 2004)10.17
                
                --
                
                Form
                    of Incentive Stock Option Agreement under the 2003 Stock Incentive
                    Plan
                    (incorporated by reference to Exhibit 10.22 to the Registrant's
                    Annual
                    Report on Form 10-K for the fiscal year ended December 31, 2003,
                    filed
                    with the Commission on March 30, 2004)10.18
                
                --
                
                Form
                    of Non-Qualified Stock Option Agreement under the 2003 Stock
                    Incentive
                    Plan (incorporated by reference to Exhibit 10.23 to the Registrant's
                    Annual Report on Form 10-K for the fiscal year ended December
                    31, 2003,
                    filed with the Commission on March 30, 2004)10.19
                
                --
                
                Form
                    of Non-Qualified Stock Option Agreement for Consultants under
                    the 2003
                    Stock Incentive Plan (incorporated by reference to Exhibit 10.24
                    to the
                    Registrant's Annual Report on Form 10-K for the fiscal year ended
                    December
                    31, 2003, filed with the Commission on March 30, 2004)10.20
                
                --
                
                Employment
                    Agreement, dated as of February 9, 2004, by and between the Registrant
                    and
                    Richard E. Perlman (incorporated by reference to Exhibit 10.25
                    to the
                    Registrant's Annual Report on Form 10-K for the fiscal year ended
                    December
                    31, 2003, filed with the Commission on March 30,
                    2004)




40








**Exhibit
                  No.**
              
              
              
              **Description**10.21
              
              --
              
              Employment
                  Agreement, dated as of February 9, 2004, by and between the Registrant
                  and
                  James K. Price (incorporated by reference to Exhibit 10.26 to the
                  Registrant's Annual Report on Form 10-K for the fiscal year ended
                  December
                  31, 2003, filed with the Commission on March 30, 2004)10.22
              
              --
              
              Employment
                  Agreement, dated as of February 9, 2004, by and between the Registrant
                  and
                  James A. Cochran (incorporated by reference to Exhibit 10.27 to
                  the
                  Registrant's Annual Report on Form 10-K for the fiscal year ended
                  December
                  31, 2003, filed with the Commission on March 30, 2004)10.23
              
              --
              
              Preferred
                  Unit Exchange Agreement, dated May 21, 2004, by and among the Registrant
                  and the members of Enersyst (incorporated by reference to Exhibit
                  10.1 to
                  the Registrant's Current Report on Form 8-K, filed with the Commission
                  on
                  May 28, 2004)10.24
              
              --
              
              Form
                  of Subscription Agreement entered into as of May 21, 2004 by the
                  Registrant and each of the Investors (incorporated by reference
                  to Exhibit
                  10.2 to the Registrant's Current Report on Form 8-K, filed with
                  the
                  Commission on May 28, 2004)10.25
              
              --
              
              Form
                  of Registration Rights Agreement, dated May 21, 2004, by and among
                  the
                  Registrant and the Investors (incorporated by reference to Exhibit
                  10.3 to
                  the Registrant's Current Report on Form 8-K, filed with the Commission
                  on
                  May 28, 2004)10.26
              
              --
              
              Amended
                  and Restated Operating Agreement of Enersyst, dated May 21, 2004
                  (incorporated by reference to Exhibit 10.4 to the Registrant's
                  Current
                  Report on Form 8-K, filed with the Commission on May 28,
                  2004)10.27
              
              --
              
              Amendment
                  to TurboChef Technologies, Inc. 2003 Stock Incentive Plan (incorporated
                  by
                  reference to Exhibit 10.1 to the Registrant's Quarterly Report
                  on Form
                  10-Q for the quarter ended March 31, 2004, filed with the Commission
                  on
                  May 12, 2004, as amended on November 22, 2004)10.28
              
              --
              
              Warrant,
                  dated December 13, 2002, issued to Banc of America Securities LLC
                  (incorporated by reference to Exhibit 4.14 to the Registrant's
                  Registration Statement on Form S-3, Registration No.
                  333-117806)10.29
              
              --
              
              Warrant
                  Certificate, dated March 19, 2001, issued to Grand Cheer Company
                  Limited
                  (incorporated by reference to Exhibit 4.15 to the Registrant's
                  Registration Statement on Form S-3, Registration No.
                  333-117806)10.30
              
              --
              
              Employment
                  Agreement, dated as of September 14, 2004, by and between the Registrant
                  and Paul P. Lehr (incorporated by reference to Exhibit 10.1 to
                  the
                  Registrant's Current Report on Form 8-K, filed with the Commission
                  on
                  November 1, 2004)10.31
              
              --
              
              Credit
                  Agreement dated as of February 28, 2005 among TurboChef Technologies,
                  Inc., its subsidiaries and Bank of America, N.A. (incorporated
                  by
                  reference to Exhibit 99.1 to the Registrant's Current Report on
                  Form 8-K,
                  filed with the Commission on March 3, 2005)10.32
              
              --
              
              Employment
                  Agreement, effective as of April 25, 2005, by and between TurboChef
                  Technologies, Inc. and Joseph T. McGrain (incorporated by reference
                  to
                  Exhibit 10.1 to theRegistrant's
                  Current Report on Form 8-K, filed with the Commission on May 5,
                  2005)10.33
              
              --
              
              Restrictive
                  Covenant Agreement, dated September 12, 2005, between TurboChef
                  Technologies, Inc. and David H. McFadden (incorporated by reference
                  to
                  Exhibit 10.1 to theRegistrant's
                  Current Report on Form 8-K, filed with the Commission on September
                  13,
                  2005)10.34
              
              --
              
              Restrictive
                  Covenant Agreement, dated September 12, 2005, between TurboChef
                  Technologies, Inc. and David A. Bolton (incorporated by reference
                  to
                  Exhibit 10.2 to theRegistrant's
                  Current Report on Form 8-K, filed with the Commission on September
                  13,
                  2005)












41




**Exhibit
                  No.**
              
              
              
              **Description**23.1
              
              --
              
              Consent
                  of Independent Registered Public Accounting Firm24.1
              
              --
              
              Power
                  of Attorney (see signature page)31.1
              
              --
              
              Certification
                  of Principal Executive Officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 200231.2
              
              --
              
              Certification
                  of Principal Financial Officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 200232.1
              
              --
              
              Certification
                  of the Principal Executive Officer and Principal Financial Officer
                  pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002
 
 
 
 
 
 
 *
              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.








42














**(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
                2, 2005
            
            Item
                2.02 -
            Results
                of Operations and Financial ConditionItem
                9.01 -
            Financial
                Statements and Exhibits
            
            NoneDecember
                30, 2005
            
            Item
                1.01 -
            Entry
                Into a Material Definitive AgreementItem
                  9.01 -
            Financial
                  Statements and Exhibits
            
            None














43

















**SCHEDULE
      II**


**TURBOCHEF
      TECHNOLOGIES, INC.**


**VALUATION
      AND QUALIFYING ACCOUNTS**





**Balance
                at**
              **Beginning**
              **of
                Year**
            
            **Charged
                to**
              **Costs
                and**
              **Expenses**
            
            **Charged
                to**
              **Other**
              **Accounts**
            
            **Deductions**
            
            **Balance
                at**
              **End
                of**
              **Year****(In
                thousands)**Allowance
                for Doubtful AccountsYear
                ended December 31, 2005
            
            
            $
            197
            
            $
            98
            
            $
            (48
            )
            $
            (70
            )
            $
            177Year
                ended December 31, 2004
            
            
            
            219
            
            
            46
            
            
            58
            
            
            (126
            )
            
            197Year
                ended December 31, 2003
            
            
            
            169
            
            
            101
            
            
            --
            
            
            (51
            )
            
            219Deferred
                Income Tax Asset Valuation AllowanceYear
                ended December 31, 2005
            
            
            
            15,946
            
            
            11,933
            
            
            996
            
            
            --
            
            
            28,875Year
                ended December 31, 2004
            
            
            
            19,624
            
            
            --
            
            
            --
            
            
            (3,678
            )
            
            15,946Year
                ended December 31, 2003
            
            
            
            14,747
            
            
            4,877
            
            
            --
            
            
            --
            
            
            19,624














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 Annual Report on form 10-K for
      the
      year ended December 31, 2005 to be signed on its behalf by the undersigned,
      thereunto duly authorized on this 7th day of March, 2006.




TURBOCHEFTECHNOLOGIES,INC.By:
                /s/ James K.
                PriceJames
                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. PerlmanRichard
                E. Perlman
            
            Chairman
                of the Board and Director
            
            March
              7, 2006/s/
                James K. PriceJames
                K. Price
            
            Chief
                Executive Officer, President and Director (Principal
              Executive
                Officer)
            
            March
              7, 2006/s/
                James A. CochranJames
                A. Cochran
            
            Senior
                Vice President, Assistant Secretary and Chief
              Financial
                Officer (Principal Financial and Accounting
              Officer)
            
            March
              7, 2006/s/
                William A. ShutzerWilliam
                A. Shutzer
            
            Director
            
            March
              7, 2006/s/
                Raymond H. Welsh
            
            
            
            March
              7, 2006Raymond
                H. Welsh
            
            DirectorMarch 7, 2006/s/
                J. Thomas PresbyJ.
                Thomas Presby
            
            Director
            
            March 7, 2006/s/
                James W. DeYoungJames
                W. DeYoung
            
            Director
            
            March 7,
              2006/s/
                Anthony JolliffeSir
                Anthony Jolliffe
            
            Director
            
            March 7,
              2006











45





**INDEX
      TO CONSOLIDATED FINANCIAL STATEMENTS**





Reports
                of Independent Registered Public Accounting Firm
            F-2Managements'
                Report on Internal Control over Financial Reporting
            F-4Consolidated
                Financial Statements:Balance
                Sheets as of December 31, 2005 and 2004
            F-5Statements
                of Operations for the years ended December 31, 2005, 2004 and
                2003
            F-6Statements
                of Changes in Stockholders' Equity for the years ended December 31,
                2005,
                2004 and 2003
            F-7Statements
                of Cash Flows for the years ended December 31, 2005, 2004 and
                2003
            F-9Notes
                to Financial Statements
            F-10





























F-1










**Report
      of Independent Registered Public Accounting Firm**











The
      Board
      of Directors and Shareholders


TurboChef
      Technologies, Inc.








We
      have
      audited the accompanying consolidated balance sheets of TurboChef Technologies,
      Inc. as of December 31, 2005 and 2004, and the related consolidated statements
      of operations, stockholders' equity, and cash flows for each of the three years
      in the period ended December 31, 2005. Our audits also included the financial
      statement schedule listed in the Index at Item 15(a). These consolidated
      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 audits.





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





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the consolidated financial position of TurboChef
      Technologies, Inc. at December 31, 2005 and 2004, and the consolidated results
      of its operations and its cash flows for each of the three years in the period
      ended December 31, 2005, in conformity with U.S. generally accepted accounting
      principles. 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.





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of TurboChef Technologies,
      Inc.'s internal control over financial reporting as of December 31, 2005, based
      on criteria established in Internal Control-Integrated Framework issued by
      the
      Committee of Sponsoring Organizations of the Treadway Commission and our report
      dated March 2, 2006 expressed an unqualified opinion thereon.








/s/
      Ernst
& Young
      LLP





Atlanta,
      Georgia


March
      2,
      2006















































F-2








**Report
      of Independent Registered Public Accounting Firm**











The
      Board
      of Directors and Shareholders


TurboChef
      Technologies, Inc.








We
      have
      audited management's assessment, included in the accompanying Management's
      Report on Internal Controls that TurboChef Technologies, Inc. maintained
      effective internal control over financial reporting as of December 31, 2005,
      based on criteria established in Internal Control--Integrated Framework issued
      by the Committee of Sponsoring Organizations of the Treadway Commission (the
      COSO criteria). TurboChef Technologies, Inc.'s management is responsible for
      maintaining effective internal control over financial reporting and for its
      assessment of the effectiveness of internal control over financial reporting.
      Our responsibility is to express an opinion on management's assessment and
      an
      opinion on the effectiveness of the company's internal control over financial
      reporting based on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management's assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.





A
      company's internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company's internal control
      over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company's
      assets that could have a material effect on the financial
      statements.





Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.





In
      our
      opinion, management's assessment that TurboChef Technologies, Inc. maintained
      effective internal control over financial reporting as of December 31, 2005,
      is
      fairly stated, in all material respects, based on the COSO criteria. Also,
      in
      our opinion, TurboChef Technologies, Inc. maintained, in all material respects,
      effective internal control over financial reporting as of December 31, 2005,
      based on **** the
      COSO
      criteria **.**





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the consolidated balance sheets of TurboChef
      Technologies, Inc. as of December 31, 2005 and 2004, and the related
      consolidated statements of operations, stockholders' equity, and cash flows
      for
      each of the three years in the period ended December 31, 2005 and our report
      dated March 2, 2006 **** expressed
      an unqualified opinion thereon.








/s/
      Ernst
& Young
      LLP




Atlanta,
      Georgia


March
      2,
      2006









































F-3







**Management's
      Report on Internal Controls**




The
      management of TurboChef Technologies Inc. is responsible for establishing and
      maintaining adequate internal control over financial reporting. TurboChef's
      internal control system was designed to provide reasonable assurance to our
      management and the board of directors regarding preparation and fair
      presentation of published financial statements. All internal control systems,
      no
      matter how well designed, have inherent limitations. Therefore, even those
      systems determined to be effective can provide only reasonable assurance with
      respect to financial statement preparation and presentation.





Management
      assessed the effectiveness of the Company's internal control over financial
      reporting as of December 31, 2005. In making this assessment, we used the
      criteria set forth by the Committee of Sponsoring Organizations of the Treadway
      Commission (COSO) in Internal Control-Integrated Framework. Based on our
      assessment, management believes that, as of December 31, 2005, the Company's
      internal control over financial reporting is effective based on those
      criteria.





The
      Company's independent registered public accounting firm has issued an audit
      report on our assessment of the Company's internal control over financial
      reporting. This report appears on page F-3.








/s/
      JAMES
      K. PRICE


James
      K.
      Price


President
      and


Chief
      Executive Officer








/s/
      JAMES
      A. COCHRAN


James
      A.
      Cochran


Senior
      Vice President and


Chief
      Financial Officer

















































































































F-4





**TURBOCHEF
      TECHNOLOGIES, INC.**


**CONSOLIDATED
      BALANCE SHEETS**


**(IN
      THOUSANDS, EXCEPT SHARE DATA)**


**December
                31,****2005**
            
            **2004****Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            40,098
            
            $
            12,942Restricted
                cash
            
            
            --
            
            
            3,196Accounts
                receivable, net of allowance of $177 and $197,
                respectively
            
            
            7,314
            
            
            9,542Other
                receivables
            
            
            2,003
            
            
            43Inventory,
                net
            
            
            10,994
            
            
            8,155Prepaid
                expenses
            
            
            724
            
            
            426Total
                current assets
            
            
            61,133
            
            
            34,304Property
                and equipment, net
            
            
            6,482
            
            
            2,678Developed
                technology, net of accumulated amortization of $1,300 and
                $493
            
            
            6,770
            
            
            7,577Goodwill
            
            
            5,934
            
            
            5,808Covenants
                not-to-compete, net of accumulated amortization of $166 in
                2005
            
            
            5,434
            
            
            --Other
                assets
            
            
            314
            
            
            389Total
                assets
            
            $
            86,067
            
            $
            50,756**Liabilities
                and Stockholders' Equity**Current
                liabilities:Accounts
                payable
            
            $
            6,166
            
            $
            8,401Other
                payables
            
            
            1,445
            
            
            1,445Accrued
                expenses
            
            
            3,484
            
            
            3,135Future
                installments due on covenants not-to-compete
            
            
            1,286
            
            
            --Deferred
                revenue
            
            
            2,278
            
            
            1,338Accrued
                warranty
            
            
            2,482
            
            
            2,586Deferred
                rent
            
            
            247
            
            
            --Total
                current liabilities
            
            
            17,388
            
            
            16,905Future
                installments due on covenants not-to-compete, non-current
            
            
            2,363
            
            
            --Deferred
                rent, non-current
            
            
            1,463
            
            
            --Other
                liabilities
            
            
            81
            
            
            72Total
                liabilities
            
            
            21,295
            
            
            16,977Commitments
                and contingenciesStockholders'
                equity:Preferred
                stock, $1 par value, authorized 5,000,000 shares, 0 shares
                issued
            
            
            --
            
            
            --Preferred
                membership units exchangeable for shares of TurboChef common
                stock
            
            
            967
            
            
            6,351Common
                stock, $.01 par value, authorized 100,000,000 shares; issued 28,624,247
                and24,313,158
                shares at December 31, 2005 and 2004, respectively
            
            
            286
            
            
            243Additional
                paid-in capital
            
            
            143,950
            
            
            79,508Accumulated
                deficit
            
            
            (80,431
            )
            
            (52,277
            )Notes
                receivable for stock issuances
            
            
            --
            
            
            (46
            )Total
                stockholders' equity
            
            
            64,772
            
            
            33,779Total
                liabilities and stockholders' equity
            
            $
            86,067
            
            $
            50,756







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








F-5








**TURBOCHEF
      TECHNOLOGIES, INC.**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(IN
      THOUSANDS, EXCEPT SHARE DATA)**





**Years
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Revenues:Product
                sales
            
            $
            50,239
            
            $
            69,707
            
            $
            3,690Royalties
                and services
            
            
            2,010
            
            
            1,187
            
            
            --Total
                revenues
            
            
            52,249
            
            
            70,894
            
            
            3,690Costs
                and expenses:Cost
                of product sales
            
            
            43,532
            
            
            44,047
            
            
            1,946Research
                and development expenses
            
            
            4,307
            
            
            1,202
            
            
            897Purchased
                research and development
            
            
            6,285
            
            
            --
            
            
            --Selling,
                general and administrative expenses
            
            
            26,862
            
            
            15,826
            
            
            6,523Restructuring
                charges
            
            
            621
            
            
            --
            
            
            --Compensation
                and severance related to termination offormer
                officers and directors
            
            
            --
            
            
            --
            
            
            7,585Total
                costs and expenses
            
            
            81,607
            
            
            61,075
            
            
            16,951Operating
                (loss) income
            
            
            (29,358
            )
            
            9,819
            
            
            (13,261
            )Other
                income (expense):Interest
                income
            
            
            1,536
            
            
            63
            
            
            128Interest
                expense and, in 2003, debt extinguishment costs
            
            
            (256
            )
            
            (8
            )
            
            (1,105
            )Other
                (expense) income
            
            
            (76
            )
            
            106
            
            
            (111
            )1,204
            
            
            161
            
            
            (1,088
            )(Loss)
                income before income taxes
            
            
            (28,154
            )
            
            9,980
            
            
            (14,349
            )Provision
                for income taxes
            
            
            --
            
            
            301
            
            
            --Net
                (loss) income
            
            
            (28,154
            )
            
            9,679
            
            
            (14,349
            )Preferred
                stock dividends
            
            
            --
            
            
            --
            
            
            (12,800
            )Net
                (loss) income applicable to common stockholders
            
            $
            (28,154
            )
            $
            9,679
            
            $
            (27,149
            )**Per
                share data:****Basic:**Net
                (loss) income
            
            $
            (1.00
            )
            $
            0.79
            
            $
            (2.11
            )Preferred
                stock dividends
            
            
            --
            
            
            --
            
            
            (1.88
            )Net
                (loss) income applicable to common stockholders
            
            $
            (1.00
            )
            $
            0.79
            
            $
            (3.99
            )Weighted
                average number of common shares outstanding - basic
            
            
            28,034,103
            
            
            12,256,686
            
            
            6,797,575**Diluted:**Net
                (loss) income
            
            $
            (1.00
            )
            $
            0.37
            
            $
            (2.11
            )Preferred
                stock dividends
            
            
            --
            
            
            --
            
            
            (1.88
            )Net
                (loss) income applicable to common stockholders
            
            $
            (1.00
            )
            $
            0.37
            
            $
            (3.99
            )Weighted
                average number of common shares outstanding - diluted
            
            
            28,034,103
            
            
            26,142,101
            
            
            6,797,575










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








F-6





**TURBOCHEF
      TECHNOLOGIES, INC.**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**


**(IN
      THOUSANDS, EXCEPT SHARE DATA)**





**Preferred
                Stock**
            
            
            **Preferred**
              **Membership**
              **Units**
            
            **Common
                Stock****Shares**
            
            
            **Amount**
            
            
            
            
            
            **Shares**
            
            
            **Amount**
            
            
            **Additional
                Paid-in Capital**
            
            
            **Accumulated
                Deficit**Balance,
                January 1, 2003
            
            
            30,000
            
            $
            2,430
            
            
            --
            
            
            6,352,842
            
            $
            64
            
            $
            46,640
            
            $
            (47,412
            )Net
                loss
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            (14,349
            )Compensation
                expense, primarily related tostock
                options granted for services
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            1,142
            
            
            --Cancellation
                of notes receivable for stock issuances
            
            
            --
            
            
            --
            
            
            --
            
            
            (280,000
            )
            
            (3
            )
            
            (1,677
            )
            
            --Interest
                on notes receivable for stock issuances
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Beneficial
                conversion of Series Dpreferred
                stock
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            12,605
            
            
            --Deemed
                dividend for beneficialconversion
                feature
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            (12,605
            )
            
            --Conversion
                of preferred stock to common stock
            
            
            (30,000
            )
            
            (2,430
            )
            
            --
            
            
            931,217
            
            
            9
            
            
            2,421
            
            
            --Preferred
                stock dividends paid throughissuance
                of common stock
            
            
            --
            
            
            --
            
            
            --
            
            
            257,899
            
            
            3
            
            
            393
            
            
            (195
            )Issuance
                of common stock for non-compete
                and release agreements
            
            
            --
            
            
            --
            
            
            --
            
            
            1,150,766
            
            
            12
            
            
            6,492
            
            
            --Other
                issuances of common stock
            
            
            
            
            
            
            
            
            --
            
            
            78,615
            
            
            --
            
            
            219
            
            
            --Balance,
                December 31, 2003
            
            
            --
            
            
            --
            
            
            --
            
            
            8,491,339
            
            
            85
            
            
            55,630
            
            
            (61,956
            )Net
                income
            
            
            
            
            
            
            
            
            
            
            
            --
            
            
            
            
            
            --
            
            
            9,679Issuance
                of preferred membership units
            
            
            --
            
            
            --
            
            
            6,351
            
            
            --
            
            
            --
            
            
            --
            
            
            --Conversion
                of Series D preferred stock
            
            
            --
            
            
            --
            
            
            --
            
            
            14,217,666
            
            
            142
            
            
            12,463
            
            
            --Compensation
                expense, primarily related tostock
                options granted for services
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            113
            
            
            --Exercise
                of options and warrantsfor
                common stock
            
            
            --
            
            
            --
            
            
            --
            
            
            464,
                032
            
            
            5
            
            
            1,757
            
            
            --Issuance
                of common stock in privateplacement,
                net of issuance costs
            
            
            --
            
            
            --
            
            
            --
            
            
            1,151,209
            
            
            11
            
            
            9,996
            
            
            --Cancellation
                of treasury shares and other
            
            
            --
            
            
            --
            
            
            --
            
            
            (11,088
            )
            
            --
            
            
            (451
            )
            
            --Interest
                on notes receivable for stock issuances
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Balance,
                December 31, 2004
            
            
            --
            
            
            --
            
            
            6,351
            
            
            24,313,158
            
            
            243
            
            
            79,508
            
            
            (52,277
            )Net
                loss
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            (28,154
            )Issuance
                of common stock in public offering,net
                of issuance costs
            
            
            --
            
            
            --
            
            
            --
            
            
            2,925,000
            
            
            29
            
            
            54,810
            
            
            --Issuance
                of common stock in exchange forEnersyst
                preferred membership units
            
            
            --
            
            
            --
            
            
            (5,384
            )
            
            518,032
            
            
            5
            
            
            5,379
            
            
            --Exercise
                of options and warrantsfor
                common stock
            
            
            --
            
            
            --
            
            
            --
            
            
            807,278
            
            
            8
            
            
            3,064
            
            
            --Issuance
                of common stock for acquisitionof
                intangible assets
            
            
            --
            
            
            --
            
            
            --
            
            
            60,838
            
            
            1
            
            
            992
            
            
            --Proceeds
                from notes receivable forstock
                issuances
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --Compensation
                expense, primarily related tostock
                options granted for services
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            --
            
            
            200
            
            
            --Other
            
            
            --
            
            
            --
            
            
            --
            
            
            (59
            )
            
            --
            
            
            (3
            )
            
            --Balance,
                December 31, 2005
            
            
            --
            
            
            --
            
            $
            967
            
            
            28,624,247
            
            $
            286
            
            $
            143,950
            
            $
            (80,431
            )





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





F-7











**TURBOCHEF
      TECHNOLOGIES, INC.**


**CONSOLIDATED
      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)**


**(IN
      THOUSANDS, EXCEPT SHARE DATA)**





**Notes
                Receivable**
              **For**
              **Stock
                Issuances**
            
            **Treasury**
              **Stock**
            
            **Total**
              **Stockholders'**
              **Equity**Balance,
                January 1, 2003
            
            $
            (2,530
            )
            $
            (451
            )
            $
            (1,259
            )Net
                loss
            
            
            --
            
            
            --
            
            
            (14,349
            )Compensation
                expense, primarily related to stock
                options granted for services
            
            
            --
            
            
            --
            
            
            1,142Cancellation
                of notes receivable for stockissuances
            
            
            2,596
            
            
            --
            
            
            916Interest
                on notes receivable for stock issuances
            
            
            (109
            )
            
            --
            
            
            (109
            )Beneficial
                conversion of Series D preferred
                stock
            
            
            --
            
            
            --
            
            
            12,605Deemed
                dividend for beneficial conversion
                feature
            
            
            --
            
            
            --
            
            
            (12,605
            )Conversion
                of preferred stock to common stock
            
            
            --
            
            
            --
            
            
            --Preferred
                stock dividends paid through issuance
                of common stock
            
            
            --
            
            
            --
            
            
            201Issuance
                of common stock for non-compete
                and release agreements
            
            
            --
            
            
            --
            
            
            6,504Other
                issuances of common stock
            
            
            --
            
            
            --
            
            
            219Balance,
                December 31, 2003
            
            
            (43
            )
            
            (451
            )
            
            (6,735
            )Net
                income
            
            
            --
            
            
            --
            
            
            9,679Issuance
                of preferred membership units
            
            
            --
            
            
            --
            
            
            6,351Conversion
                of Series D preferred stock
            
            
            --
            
            
            --
            
            
            12,605Compensation
                expense, primarily related tostock
                options granted for services
            
            
            --
            
            
            --
            
            
            113Exercise
                of options and warrantsfor
                common stock
            
            
            --
            
            
            --
            
            
            1,762Issuance
                of common stock in privateplacement,
                net of issuance costs
            
            
            --
            
            
            --
            
            
            10,007Cancellation
                of treasury shares and other
            
            
            --
            
            
            451
            
            
            --Interest
                on notes receivable for stock issuances
            
            
            (3
            )
            
            --
            
            
            (3
            )Balance,
                December 31, 2004
            
            
            (46
            )
            
            --
            
            
            33,779Net
                loss
            
            
            --
            
            
            --
            
            
            (28,154
            )Issuance
                of common stock in public offering,net
                of issuance costs
            
            
            --
            
            
            --
            
            
            54,839Issuance
                of common stock in exchange forEnersyst
                preferred membership units
            
            
            --
            
            
            --
            
            
            --Exercise
                of options and warrantsfor
                common stock
            
            
            --
            
            
            --
            
            
            3,072Issuance
                of common stock for acquisitionof
                intangible assets
            
            
            --
            
            
            --
            
            
            993Proceeds
                from notes receivable forstock
                issuances
            
            
            46
            
            
            --
            
            
            46Compensation
                expense, primarily related tostock
                options granted for services
            
            
            --
            
            
            --
            
            
            200Other
            
            
            --
            
            
            --
            
            
            (3
            )Balance,
                December 31, 2005
            
            $
            --
            
            $
            --
            
            $
            64,772




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







F-8








**TURBOCHEF
      TECHNOLOGIES, INC.**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


**(IN
      THOUSANDS)**


**Years
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Cash
                flows from operating activities:Net
                (loss) income
            
            $
            (28,154
            )
            $
            9,679
            
            $
            (14,349
            )Adjustments
                to reconcile net (loss) income to net cash (used in) provided by
                operating
              activities:Purchased
                research and development
            
            
            6,285
            
            
            --
            
            
            --Depreciation
                and amortization
            
            
            2,796
            
            
            1,052
            
            
            264Non-cash
                interest on notes receivable from employees and directors
            
            
            --
            
            
            (3
            )
            
            (109
            )Non-cash
                interest and debt extinguishment costs on non-interest bearing promissory
                note
            
            
            203
            
            
            8
            
            
            904Non-cash
                compensation expense
            
            
            200
            
            
            113
            
            
            7,995Amortization
                of deferred rent
            
            
            (122
            )
            
            --
            
            
            --Non-cash
                restructuring costs
            
            
            125
            
            
            --
            
            
            --Provision
                for doubtful accounts
            
            
            98
            
            
            46
            
            
            101Provision
                for uncollectible other receivables
            
            
            --
            
            
            --
            
            
            735Foreign
                exchange loss (gain)
            
            
            76
            
            
            (44
            )
            
            117Changes
                in operating assets and liabilities, net of effects of
                acquisition:Restricted
                cash
            
            
            3,196
            
            
            (3,196
            )
            
            --Accounts
                receivable
            
            
            2,196
            
            
            (8,603
            )
            
            1,109Inventories
            
            
            (3,619
            )
            
            (6,822
            )
            
            360Prepaid
                expenses and other assets
            
            
            (2,342
            )
            
            (136
            )
            
            (258
            )Accounts
                payable
            
            
            (2,311
            )
            
            7,731
            
            
            (809
            )Accrued
                expenses and warranty
            
            
            245
            
            
            3,791
            
            
            (11
            )Deferred
                revenue
            
            
            940
            
            
            (27
            )
            
            553Net
                cash (used in) provided by operating activities
            
            
            (20,188
            )
            
            3,589
            
            
            (3,398
            )Cash
                flows from investing activities:Acquisition
                of business, net of cash acquired
            
            
            (192
            )
            
            (7,683
            )
            
            --Acquisition
                of intangible assets
            
            
            (7,292
            )
            
            --
            
            
            --Purchase
                of property and equipment, net
            
            
            (3,098
            )
            
            (2,913
            )
            
            (33
            )Other
            
            
            128
            
            
            (330
            )
            
            --Net
                cash used in investing activities
            
            
            (10,454
            )
            
            (10,926
            )
            
            (33
            )Cash
                flows from financing activities:Proceeds
                from the sale of common stock, net
            
            
            54,839
            
            
            10,007
            
            
            --Proceeds
                from the sale of preferred stock, net
            
            
            --
            
            
            --
            
            
            12,605Proceeds
                from the exercise of stock options and warrants
            
            
            3,072
            
            
            1,762
            
            
            87Payment
                of note payable
            
            
            --
            
            
            (380
            )
            
            (1,000
            )Payment
                of deferred loan costs
            
            
            (156
            )
            
            --
            
            
            --Other
            
            
            43
            
            
            --
            
            
            --Net
                cash provided by financing activities
            
            
            57,798
            
            
            11,389
            
            
            11,692Net
                increase in cash and cash equivalents
            
            
            27,156
            
            
            4,052
            
            
            8,261Cash
                and cash equivalents at beginning of year
            
            
            12,942
            
            
            8,890
            
            
            629Cash
                and cash equivalents at end of year
            
            $
            40,098
            
            $
            12,942
            
            $
            8,890Supplemental
                disclosures of noncash activities:Noncash
                investing activity -- landlord funded leasehold
                improvements
            
            $
            1,832
            
            $
            --
            
            $
            --Noncash
                investing and financing activity - liability recorded in connection
                with
                intangible asset
            
            
            3,600
            
            
            --
            
            
            --Noncash
                investing activity -- issuance of common stock in exchange for intangible
                assets
            
            
            993
            
            
            --
            
            
            --Noncash
                investing activity -- cancellation of note receivable for stock
                issuance
            
            
            --
            
            
            --
            
            
            2,596Noncash
                financing activity -- beneficial conversion of preferred
                stock
            
            
            --
            
            
            --
            
            
            12,605Noncash
                financing activity -- conversion of preferred stock to common
                stock
            
            
            --
            
            
            12,605
            
            
            2,430Noncash
                financing activity -- issuance of preferred membership units
                exchangeable forTurboChef
                common stock in connection with Enersyst acquisition
            
            
            --
            
            
            6,351
            
            
            --Noncash
                financing activity -- issuance of common stock in exchange for preferredmembership
                units
            
            
            5,384
            
            
            --
            
            
            --Noncash
                financing activity -- interest on notes receivable from stock
                issuances
            
            
            --
            
            
            --
            
            
            109Noncash
                financing activity -- preferred stock dividends paid through the
                issuanceof
                common stock
            
            
            --
            
            
            --
            
            
            396Supplemental
                disclosures of cash flow information:Cash
                paid for income taxes
            
            $
            236
            
            
            --
            
            
            --Cash
                paid for interest
            
            $
            50
            
            
            --
            
            
            --





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




F-9





**TURBOCHEF
      TECHNOLOGIES, INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





**NOTE
                1.**
            **NATURE
                OF OPERATIONS AND GENERAL**








TurboChef
      Technologies, Inc. (the “Company”) was incorporated in 1991 and became a
      Delaware corporation in 1993. The Company is a leading provider of equipment,
      technology and services focused on the high speed preparation of food products.
      The Company's customizable speed cook ovens, the C3, the Tornado and the
      recently-introduced High h Batch, cook food products at high speeds with food
      quality comparable, and in many cases superior, to conventional heating methods.
      Through 2005, the Company's primary markets were with commercial food service
      operators throughout North America, Europe and Australia and management believes
      that, for 2005, the Company operated in one primary business segment. However,
      during 2005, the Company took several steps designed to take its technologies
      to
      consumers, including market research, related industrial design research and
      product development and exploration of distribution channels for a proposed
      residential oven product line. The launch of the consumer product line, planned
      for 2006, may create an additional business segment for the Company.








**NOTE
                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.





***Basis
      of Consolidation and Presentation***


The
      consolidated financial statements include the accounts of TurboChef Technologies
      Inc. and its majority-owned and controlled company. Significant intercompany
      accounts and transactions have been eliminated in consolidation. Certain prior
      year amounts have been reclassified to conform to the current year presentation.




***Reverse
      Stock Split***


All
      share
      and per share data for 2004 and 2003 has been retroactively restated to reflect
      the one-for-three reverse stock split approved November 30, 2004 and which
      became effective December 27, 2004.





***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. Management bases its estimates on certain
      assumptions, which they believe are reasonable in the circumstances and actual
      results could differ from those estimates. The more significant estimates
      reflected in these financial statements include warranty and accrued expenses,
      the beneficial conversion feature applicable to the Company's issuance of
      convertible preferred stock and valuation of stock-based
      compensation.




***Cash
      Equivalents***


The
      Company considers all highly liquid investments with original maturities of
      three months or less, when purchased, to be cash equivalents.





***Accounts
      Receivable and Allowance for Doubtful Accounts***


Accounts
      receivable consists 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 and Euros. Accounts receivable originally denominated in 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.
      Generally, no collateral is received from customers and additions to the
      allowance are based on ongoing credit evaluations of customers with general
      credit experience being within the range of management's
      expectations.





***Inventories***


Inventories
      are valued at the lower of cost, determined using the average cost method,
      or
      market and primarily consist of ovens (finished goods) and parts for use in
      production or as replacements. The Company establishes reserves for inventory
      estimated to be obsolete, unmarketable or slow moving on a case by case basis,
      equal to the difference between the cost of inventory and estimated market
      value
      based upon assumptions about future demand, technology changes and market
      conditions. Ovens used for demonstration and testing are generally depreciated
      over a one-year period. Depreciation for demonstration ovens was $780,000,
      $188,000 and $124,000 for the years ended December 31, 2005, 2004 and 2003
      respectively. Inventory consists of the following at December 31:





**2005**
            
            **2004****(In
                thousands)**Finished
                goods - ovens
            
            $
            3,891
            
            $
            3,547Demonstration
                inventory, net
            
            
            468
            
            
            259Parts
                inventory, net
            
            
            6,635
            
            
            4,349$
            10,994
            
            $
            8,155








F-10








***Property
      and Equipment***


Property
      and equipment are recorded at cost. Depreciation is computed using the
      straight-line method over the estimated useful lives of the respective assets
      and accelerated methods for income tax purposes. Leasehold
      improvements are depreciated over the lesser of their expected useful life
      and
      the remaining lease term.





***Goodwill
      and Other Intangible Assets***


Goodwill
      represents the excess purchase price of net tangible and intangible assets
      acquired in business combinations over their estimated fair values. Statement
      of
      Financial Accounting Standards (“SFAS”) No. 142, *Goodwill and Other Intangible Assets* ,
      requires goodwill and other acquired intangible assets that have an indefinite
      useful life to no longer be amortized; however, these assets must undergo an
      impairment test at least annually.  The annual goodwill impairment test,
      completed in October 2005, determined that the carrying amount of goodwill
      was
      not impaired and there have been no developments subsequent to October 2005
      that
      would indicate impairment exists. The goodwill impairment review will continue
      to be performed annually or more frequently if facts and circumstances warrant
      a
      review.




SFAS No.
      142 also requires that intangible assets with definite lives be amortized over
      their estimated useful life and reviewed for impairment in accordance with
      SFAS
      No. 144, *Accounting for the Impairment or Disposal of Long-Lived Assets* .
      Currently, acquired developed technology and covenants not-to-compete are both
      amortized using the straight line method over estimated useful lives of 10
      years
      and the Company recorded $973,000 and $493,000, in the aggregate, of
      amortization expense for 2005 and 2004 for these long-lived intangible assets.
      Annual amortization for each of the next five years will approximate $1.4
      million.





***Other
      Assets***


Other
      assets consist primarily of deferred financing costs for transactions completed
      in 2005 and capitalized patent costs, which include outside legal fees incurred
      in the registration of the Company's patents. These costs are amortized over
      their economic lives, ranging from four to ten years. Amortization of other
      assets was $42,000, $16,000 and $28,000 for the years ended December 31, 2005,
      2004 and 2003 respectively.





***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, 2005.





***Deferred
      Revenue***


Deposits
      received from customers for future purchases of ovens, payments for extended
      warranty coverage and any other amounts received in advance of completion of
      the
      earning process are recorded as deferred revenue. Deferred revenue amounts
      related to oven sales will be recognized when the ovens are delivered and/or
      installed for the customer as required by the specific nature of the sales
      transaction. Deferred revenue for extended warranty will be recognized ratably
      over the warranty term. In 2003, approximately $650,000 of revenue and
      approximately $400,000 of cost of product sales was deferred because it related
      to ovens sold in 2003, to franchisees of a major restaurant chain under a
      proposal which offered a future exchange for a new oven contingent on completion
      of a franchise-wide sale and roll-out of the new ovens.




***Product
      Warranty***


The
      Company's ovens are warranted against defects in material and workmanship for
      a
      period of one year. Anticipated future warranty costs are estimated, based
      upon
      historical expenses, and are recorded in the period cooking systems are sold.
      Periodically, the Company's warranty reserve is reviewed to determine if the
      reserve is sufficient to cover estimated repair costs associated with the
      remaining ovens under warranty. See Note 8 for a discussion of warranty issues
      addressed by the Company during 2005. At this time, the Company believes that,
      based upon historical data, the current warranty reserve is sufficient to cover
      the estimated costs. If warranty costs trend higher, the Company would need
      to
      recognize a higher initial reserve as well as adjust the estimated amounts
      necessary to cover all ovens remaining under warranty. Any such additional
      reserves would be charged to cost of product sales.





***Fair
      Value of Financial Instruments***


The
      carrying amount of cash and cash equivalents, accounts receivable, accounts
      payable and accrued expenses approximates fair value due to the short-term
      maturity of these instruments.





***Revenue
      Recognition***


Revenue
      from product sales is recognized when substantially all obligations relating
      to
      a sale are completed. If the terms of a sale require installation, the revenue
      cycle is substantially complete after installation has occurred, accordingly,
      in
      such cases revenue is recognized once the installation is complete. For sales
      where the customer has assumed the installation responsibility or for sales
      to
      designated agents, substantially all obligations are complete at the time of
      shipment to the customer or the customer's designated agent. Revenue for the
      sale of replacement parts and accessories is recognized upon shipment to the
      customer. Royalty revenues are recognized based on the sales dates of licensees'
      products and services revenues are recorded based on attainment of scheduled
      performance milestones. Beginning in July 2005, certain customers were offered
      the opportunity to purchase an additional one-year extended warranty on one
      oven
      model. Revenue from these extended warranties is deferred and recognized in
      product sales on a straight-line basis over the extended warranty
      term.





F-11











Reserves
      for sales returns and allowances are recorded in the same accounting period
      as
      the related revenues and are not significant for any of the periods presented.
      The Company had previously deferred revenue of approximately $650,000 and cost
      of product sales of approximately $400,000 related to ovens sold in 2003, to
      franchisees of a major restaurant chain under a proposal which offered a future
      exchange for a new oven contingent on completion of a franchise-wide sale and
      roll-out of the new ovens. The exchange provisions contemplated by this
      transaction were satisfied in 2005 and all the deferred revenue and related
      costs have now been recognized.





***Cost
      of Product Sales***


Cost
      of
      product sales is calculated based upon the cost of the oven, the cost of any
      accessories supplied with the oven, an allocation of cost for applicable
      delivery, duties and taxes and a reserve for warranty. Cost of product sales
      also includes labor and parts in connection with service under our newly
      introduced extended warranty program. Cost of product 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 quality control
      of the Company's contract manufacturers. These costs are recorded within
      selling, general and administrative expenses. Cost of product sales also does
      not attribute any allocation of compensation or general and administrative
      expenses to royalty and services revenues.





***Shipping
      and Handling Costs***


Shipping
      and handling charges billed to customers are recorded as revenues, the
      corresponding costs are included in cost of goods sold.





***Research
      and Development Expenses***


Research
      and development expenses consist of salaries and other related costs incurred
      for personnel and departmental operations in planning, design and testing of
      the
      speed cook ovens. Research and development expenditures are charged to
      operations as incurred.





***Purchase
      of In-Process Research and Development***


Amounts
      allocated to the purchase of in-process research and development (“IPRD”) include
      the value of products in the development stage that are not considered to have
      reached technological feasibility or to have alternative future use.





***Advertising
      Expenses***


Advertising
      and promotion costs are expensed as incurred and amounted to $1.7 million and
      $834,000 for the years ended December 31, 2005 and 2004, respectively, and
      were
      negligible for the year ended December 31, 2003.





***Foreign
      Exchange***


For
      the
      year ended December 31, 2005, approximately 22% of our revenues were derived
      from sales outside of the United States. For the years ended December 31, 2004
      and 2003, approximately 2% and 43%, 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 less than 10% of selling, general and administrative expenses for
      the
      years ended December 31, 2005 and 2004 and approximately 12% for the year ended
      December 31, 2003 are denominated in foreign currencies, principally 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. At this time, the Company does not engage in any hedging
      activities.





***Restructuring
      Charges***


The
      Company classified certain expenses in 2005 related to a restructuring plan
      to
      reorganize its international operations and re-align the related resources
      and
      cost structure as restructuring charges. The expenses related to the closing
      of
      a location that served markets where the Company continues to have a presence
      and, accordingly, the results of those operations are included in continuing
      operations. Restructuring expenses included severance, lease termination,
      professional fees and write-off of leasehold improvements.





***Accounting
      for Leases***


The
      Company leases office and warehouse space under operating lease agreements
      with
      original lease periods up to 7.5 years.  Certain of the lease agreements
      contain renewal and rent escalation provisions.  Rent escalation provisions
      are considered in determining straight-line rent expense to be recorded over
      the
      lease term.  The lease term begins on the date of initial possession of the
      lease property for purposes of recognizing lease expense on a straight-line
      basis over the term of the lease.  Lease renewal periods are considered on
      a lease-by-lease basis and are generally not included in the initial lease
      term. Landlord
      allowances for improvements to leaseholds are included in property and equipment
      and offset by a corresponding deferred rent credit. The Company amortizes the
      leasehold improvements over the shorter of the life of the improvements or
      the
      life of the lease. The deferred rent credit is included in other liabilities
      (current and long term) in the accompanying balance sheet and will be amortized
      as a reduction of rent expense over the term of the applicable
      lease.





F-12








***Income
      Taxes***


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





***(Loss)
      Income Per Common Share***


Basic
      earnings per share is computed by dividing net (loss) income by the
      weighted-average number of common shares outstanding during each period. Diluted
      earnings per common share is calculated by dividing net income, adjusted on
      an
“as if converted” basis, by the weighted-average number of actual shares
      outstanding and, when dilutive, the share equivalents that would arise from
      the
      assumed conversion of convertible instruments. The per share amounts presented
      in the consolidated statements of operations for the years ended December 31,
      are based on the following:





**2005**
            
            **2004**
            
            **2003****(In
                thousands)**Numerator
                for basic and diluted earnings per share available tocommon
                stockholders:Net
                (loss) income applicable to common stockholders
            
            $
            (28,154
            )
            $
            9,679
            
            $
            (27,149
            )Denominator:*Denominator
                for basic (loss) income per share available to common**Stockholders*Weighted
                average common shares outstanding
            
            
            28,034
            
            
            12,257
            
            
            6,798*Effect
                of potentially dilutive securities*Convertible
                preferred stock
            
            
            --
            
            
            11,417
            
            
            --Preferred
                membership interests exchangeable for common stock
            
            
            --
            
            
            375
            
            
            --Dilutive
                stock options and warrants
            
            
            --
            
            
            2,093
            
            
            --Shares
                applicable to diluted (loss) income per share applicable tocommon
                stockholders
            
            
            28,034
            
            
            26,142
            
            
            6,798





The
      effect of potentially dilutive stock options and warrants is calculated using
      the treasury stock method. For the year ended December 31, 2005, the potentially
      dilutive securities include options and warrants, which are convertible into
      3.7
      million shares of common stock, and Enersyst Development Center, LLC
      (“Enersyst”) preferred membership units exchangeable for 93,000 shares of common
      stock. For the year ended December 31, 2004, there were 192,000 shares of
      options and warrants excluded from the calculation because the average market
      price of the Company's stock during the period did not exceed the exercise
      price
      of those instruments. However, some or all of these instruments may be
      potentially dilutive in the future. For the year ended December 31, 2003, the
      potentially dilutive securities include options and warrants, which are
      convertible into 3.7 million shares of common stock and 2.1 million shares
      of
      convertible preferred stock, which was convertible into 14.2 million shares
      of
      common stock. For the years ended December 31, 2005 and 2003, potentially
      dilutive securities had an anti-dilutive effect due to the Company’s net loss
      and were not included in the calculation of diluted net loss per common
      share.




***Stock-Based
      Employee Compensation***


The
      Company uses the intrinsic value method, as opposed to the fair value method,
      in
      accounting for stock options. Under the intrinsic value method, no compensation
      expense has been recognized for stock options granted to employees because
      the
      exercise prices of employee stock options equals or exceeds the market value
      of
      the underlying stock on the dates of grant. The table below presents a
      reconciliation of the Company's pro forma net income (loss) giving effect to
      the
      estimated compensation expense related to stock options that would have been
      reported if the Company utilized the fair value method for the years ended
      December 31:





F-13








**2005**
            
            **2004**
            
            **2003****(In
                thousands except per share amounts)**Net
                (loss) income applicable to common stockholders, as
                reported
            
            $
            (28,154
            )
            $
            9,679
            
            $
            (27,149
            )Add:
                Employee stock-based compensation expense
            
            
            (100
            )
            
            --
            
            
            --Deduct:
                Employee stock-based compensation (expense) income,net
                of forfeitures
            
            
            (13,837
            )
            
            (3,909
            )
            
            1,749Pro
                forma net (loss) income applicable to common stockholders
            
            $
            (41,891
            )
            $
            5,770
            
            $
            (25,400
            )Net
                (loss) income applicable to common stockholders per share --
                basic:As
                reported
            
            $
            (1.00
            )
            $
            0.79
            
            $
            (3.99
            )Pro
                forma
            
            
            (1.49
            )
            
            0.47
            
            
            (3.74
            )Net
                (loss) income applicable to common stockholders per share --
                diluted:As
                reported
            
            $
            (1.00
            )
            $
            0.37
            
            $
            (3.99
            )Pro
                forma
            
            
            (1.49
            )
            
            0.22
            
            
            (3.74
            )





For
      purposes of computing pro forma net income (loss), we estimate the fair value
      of
      option grants using the Black-Scholes option pricing model. The Black-Scholes
      option-pricing model was developed for use in estimating the fair value of
      traded options that have no vesting restrictions and are fully transferable,
      characteristics not present in our employee stock options. Additionally, option
      valuation models require the input of highly subjective assumptions, including
      the expected volatility of the stock price. Because our employee stock options
      have characteristics significantly different from those of traded options and
      because changes in the subjective input assumptions can materially affect the
      fair value estimates, in management's opinion, the existing models may not
      provide a reliable single measure of the fair value of its stock-based
      awards.





For
      purposes of the pro forma disclosures, the assumptions used to value the option
      grants are stated as follows for the years ended December 31:





**2005**
            
            **2004**
            
            **2003**Expected
                life (in years)
            
            
            2-3
            
            
            2-3
            
            
            1
                -
                3Volatility
            
            
            63
            %
            
            65
                - 168
            %
            
            51
                - 174
            %Risk
                free interest rate—options
            
            
            4.07
                - 4.61
            %
            
            3.86
                - 4.74
            %
            
            3.65
                - 4.31
            %Dividend
                yield
            
            
            0.0
            %
            
            0.0
            %
            
            0.0
            %Weighted
                average fair value of option grants - Black-Scholes model
            
            $
            5.53
            
            $
            7.56
            
            $
            14.13





In
      December 2004, the Financial Accounting Standards Board (FASB) issued SFAS
      No.
      123 (revised 2004), *Share-Based
      Payment* ,
      which
      is a revision of SFAS 123 ("SFAS 123R"). SFAS 123R eliminates the ability to
      account for share-based compensation under the intrinsic value method permitted
      by APB 25. This will require the Company to adopt the fair value model for
      recognizing compensation expense for employee stock options, and would have
      the
      effect of reducing the Company's reported net income and net income per share.
      SFAS 123R is required to be adopted by the Company as of January 1, 2006.





In
      December 2005, in response to SFAS 123R, the Board of Directors of the Company,
      upon recommendation of its Compensation Committee, approved an acceleration
      of
      all unvested options granted to employees and directors under the Company's
      2003
      Stock Incentive Plan. As a result of the acceleration, options to acquire 1.8
      million shares of the Company's common stock became immediately exercisable.
      The
      decision to accelerate vesting of these options was made primarily to minimize
      future compensation expense that the Company would otherwise recognize in its
      consolidated statements of operations upon the effectiveness of SFAS 123R.
      As a
      result of the acceleration, the Company expects to reduce the stock option
      expense it otherwise would be required to record in connection with accelerated
      options by approximately $5.7 million in 2006, $2.4 million in 2007 and
      $800,000 in 2008. In connection with the acceleration and in order to prevent
      unintended personal benefit to the holders of these options, the optionees
      agreed to certain restrictions on any shares received through the exercise
      of
      accelerated options. These restrictions generally prevent the sale of stock
      obtained through exercise of an accelerated option prior to the original vesting
      date. All other provisions of the original option grants remain. Employees
      who
      terminate prior to their original vesting date ostensibly receive a benefit
      from
      the acceleration of options measured by the differences in the estimated fair
      value of the options pre- and post-acceleration. The Company’s estimate of the
      benefit associated with possible future employee terminations is approximately
      $100,000 and, accordingly, recorded a one-time non-cash compensation charge
      in
      the fourth quarter of 2005 as a result of the acceleration.





In
      determining the equity component of its future compensation structure, the
      Company will take into account the impact of SFAS 123R on its operating
      results.








F-14








**NOTE
                3.**
            **ACQUISITION
                OF BUSINESS AND INTANGIBLE
                ASSETS**





***Enersyst
      Acquisition***


On
      May
      21, 2004, the Company acquired Enersyst Development Center, L.L.C. (“Enersyst”),
      a leading provider and critical source of innovations to the food service
      industry. Enersyst researches, develops and licenses patented technology that
      enables food service equipment manufacturers to test, develop and provide
      advanced products to the marketplace. Enersyst holds over 180 issued patents
      and
      patent applications worldwide related to heat transfer, air impingement and
      associated food technologies. As a result of this acquisition, the Company
      believes it increased its leadership position in delivering the most advanced
      innovations in speed cooking solutions to customers worldwide. The results
      of
      Enersyst's operations have been included in the consolidated financial
      statements since the acquisition date.





Total
      consideration for this transaction, $14.2 million, consisted of $7.9 million
      cash, including transaction costs, and $6.3 million equity in the form of
      Enersyst preferred membership units exchangeable in the future, at the
      discretion of the holders, for 611,096 shares of TurboChef common stock. The
      cash portion of the acquisition was paid with funds raised in a private
      placement (see Note 13). Acquired developed technology has an estimated useful
      life of 10 years and is being amortized using the straight-line method. Annual
      amortization for each of the next five years will approximate $807,000. Total
      goodwill recorded was $5.9 million, none of which is deductible for income
      tax
      purposes.





The
      following information summarizes the purchase price allocation (in
      thousands):





Current
                assets
            
            $
            559Property
                and equipment
            
            
            20Developed
                technology
            
            
            8,070Goodwill
            
            
            5,934Current
                liabilities
            
            
            (337
            )Net
                assets acquired
            
            $
            14,246




The
      following unaudited pro forma information presents the results of operations
      of
      the Company as if the acquisition had occurred as of the beginning of the
      immediately preceding period. The pro forma information is not necessarily
      indicative of what would have occurred had the acquisition been made as of
      such
      periods, nor is it indicative of future results of operations. The pro forma
      amounts give effect to appropriate adjustments for the fair value of the assets
      acquired, amortization of intangibles and interest expense.





**2004**
            
            **2003****(In
                thousands except per share amounts)**Revenues
            
            $
            72,343
            
            $
            7,481Net
                income (loss)
            
            
            9,814
            
            
            (14,025
            )Net
                income (loss) applicable to common stockholders
            
            
            9,814
            
            
            (26,825
            )Net
                income (loss) applicable to common stockholdersper
                share:Basic
            
            $
            0.73
            
            $
            (3.49
            )Diluted
            
            
            0.36
            
            
            (3.49
            )





***Purchase
      of Patent and Technology Assets and Research and
      Development***


On
      September 12, 2005, the Company entered into an Asset Purchase Agreement (the
      “Purchase Agreement”) with Global Appliance Technologies, Inc. (“Global”) and
      stockholders of Global. Pursuant to the Purchase Agreement, the Company acquired
      the patent and technology assets of Global further expanding TurboChef's
      ownership of proprietary commercial and residential speed cook technologies.
      These technologies will allow TurboChef to enhance its products with additional
      or different features as well as enable the Company to expand the range of
      its
      product offerings. In exchange, Global received $5.0 million in cash and 60,838
      shares of the Company’s common stock with a value of $993,000 at the date of
      acquisition. This transaction was accounted for as an asset acquisition. The
      aggregate consideration for the assets acquired was $6.3 million including
      the
      fair value of the common stock and transaction costs, all of which was expensed
      as IPRD.





Amounts
      allocated to IPRD include
      the value of products in the development stage that are not considered to have
      reached technological feasibility or to have alternative future use.
      Accordingly, this item was expensed as research and development in the
      consolidated statement of operations upon the completion of the asset
      acquisition. T echnology
      development and IPRD were
      identified and valued by an independent valuation firm through extensive
      interviews, analysis of data provided by Global concerning development projects,
      their stage of development, the time and resources needed to complete them,
      if
      applicable, and their expected income generating ability and associated risks.
      No development projects had reached technological feasibility; therefore, all
      the intangible assets were deemed to be purchase of IPRD. The income approach,
      which includes an analysis of the cash flows and risks associated with achieving
      such cash flows, was the primary technique utilized in valuing acquired IPRD.
      Key assumptions for IPRD included a discount rate of 34% and estimates of
      revenue growth, cost of sales, operating expenses and taxes. The purchase
      allocation is based on a preliminary valuation and is subject to change based
      on
      completion of the final valuation. Any changes could be material to the
      Company’s consolidated statement of operations.







F-15










The
      Company also entered into services agreements with the principals of Global
      which provided, among other things, for delivery of three patent applications
      by
      the end of the first year, and two additional patent applications by the end
      of
      the eighteenth month, following closing. If these patent applications are timely
      delivered, the Company is obligated to pay Global contingent consideration
      in
      the form of three nearly-equal installment payments totaling $8.0 million,
      payable on each of the first three anniversaries of the closing date (which
      payments will be made 38% in cash and 62% in stock).





In
      connection with this transaction, the Company also entered into Restrictive
      Covenant Agreements (the “Restrictive Covenant Agreements”) with each of the two
      principals of Global. Under the Restrictive Covenant Agreements, the principals
      agreed to certain covenants regarding the disclosure of trade secrets and
      confidential information, and to covenants restricting their ability to compete
      with the Company. As consideration for these covenants, each principal received
      $1.0 million in cash at closing, and each can receive additional cash payments
      totaling $2.0 million, which are payable in equal portions on the first three
      anniversaries of the closing date. The estimated fair value of these agreements,
      $5.6 million, will be amortized over the agreements’ ten-year term. Annual
      amortization for
      each
      of the next five years will approximate $560,000.





The
      Purchase Agreement provides that if the patent applications are not timely
      delivered, or if during the eighteen-month period following closing the Company
      terminates the services agreements for a material breach of the confidentiality
      obligations or a breach of the restrictive covenants therein, and all required
      patent applications have not been delivered to the Registrant, any then-unpaid
      installment payments due to Global will be forfeited. Further, the Purchase
      Agreement provides for certain indemnifications of the Company.





**NOTE
                4.**
            **OTHER
                RECEIVABLES**





The
      Company entered into a favorable final settlement in the second quarter of
      2005
      with a contract assembler related to consigned inventory lost in a fire suffered
      at one of the assembler's plants. The amount due under the settlement is
      included in other receivables in the accompanying consolidated balance
      sheets.








**NOTE
                5.**
            **CONCENTRATION
                OF CREDIT 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. 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 commenced the system-wide delivery of ovens
      to
      Subway ® restaurants in the U.S. during the third quarter of 2004. For the years ended
      December 31, 2005 and 2004, respectively, 58% and 91% of the Company's sales
      were made to Subway. For the year ended December 31, 2003, 19% of the Company's
      direct sales were made to Subway. As of December 31, 2005 and 2004,
      respectively, 15% and 83% of the outstanding accounts receivable were from
      one
      customer. No other single customers accounted for more than 10% of the Company’s
      sales during the three years ended December 31, 2005.








**NOTE
                6.**
            **PROPERTY
                AND EQUIPMENT**





Property
      and equipment consisted of the following at December 31:





**2005**
            
            **2004****Estimated
                Useful Lives**
              **(years)**
            
            **(In
                thousands)**Leasehold
                improvements
            
            
            5-7.5
            
            $
            2,945
            
            $
            222Furniture
                and fixtures
            
            
            5
            
            
            1,465
            
            
            579Equipment
            
            
            3-7
            
            
            3,533
            
            
            2,2997,943
            
            
            3,100Less
                accumulated depreciation
            
            
            
            
            
            (1,461
            )
            
            (422
            )$
            6,482
            
            $
            2,678





Depreciation
      expense was $1.0 million, $355,000, and $112,000 for the years ended December
      31, 2005, 2004 and 2003, respectively.








F-16








**NOTE
                7.**
            **ACCRUED
                EXPENSES**








Accrued
      expenses consisted of the following as of December 31 (in
      thousands):





**2005**
            
            
            **2004**Accrued
                compensation and benefits
            
            $
            837
            
            $
            1,889Professional
                and accounting fees
            
            
            1,333
            
            
            557Sales
                and marketing
            
            
            791
            
            
            205Accrued
                restructuring
            
            
            100
            
            
            --Accrued
                taxes and other
            
            
            423
            
            
            484Total
                accrued expenses
            
            $
            3,484
            
            $
            3,135








**NOTE
                8.**
            **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. Because warranty estimates are forecasts that are based
      on the best available information, claims costs may differ from amounts
      provided, and these differences may be material.





In
      the
      second quarter of 2005, the Company identified a potential longevity and
      reliability issue with the Tornado oven. The success of the toasted menu
      offerings for Subway, the Company’s largest customer, resulted in higher use of
      the Tornado oven and more cook cycles than had been anticipated. Increased
      warranty calls from the Subway installed base occurred as certain components
      degraded under the high usage much earlier than expected. The Company determined
      that it could improve the longevity and reliability of the ovens through a
      change in the oven’s software (or operating system). This software change was
      incorporated in production and a voluntary and proactive software upgrade
      program launched for installed units. This program also included replacement
      of
      certain components in the ovens to ensure that the installed base of Tornado
      ovens would benefit from the latest enhancements to the ovens. For the quarter
      ended June 30, 2005, the Company recorded a $2.8 million increase to the
      warranty reserve as the Company's best estimate at the time to address costs
      of
      warranty claims incurred, estimated future warranty claims, and the voluntary
      upgrade. In the third quarter of 2005, the volume of warranty claims related
      to
      this issue accelerated beyond previously anticipated levels. The increased
      pace
      of warranty claims precluded the Company from performing as many of the upgrades
      on a lower-cost, proactive basis as had been expected. The Company also found
      that parts replacement during upgrades was needed in a greater number of units
      than had been previously expected. The increased volume and cost of warranty
      claims together with the increased cost of dealing with them reactively rather
      than proactively required an additional increase in the warranty provision.
      The
      Company recorded an additional $6.8 million as its best estimate to address
      the
      present and future warranty and upgrade costs related to this component failure
      issue. Extensive engineering tests of the revised software provide evidence
      that
      leads the Company to believe that the longevity and reliability issue with
      Subway’s Tornado ovens has been satisfactorily resolved and substantially all of
      the ovens were upgraded as of December 31, 2005. Additionally, the one-year
      warranty expired for approximately 70% of the affected Tornado oven base at
      December 31, 2005. Additions to the warranty reserve to address this issue
      aggregated $9.6 million or $0.34 per share for 2005.





Pursuant
      to terms of the initial agreement under which the Company provided ovens to
      Subway ® restaurants, the Company segregated funds for estimated warranty costs for
      the
      Subway ovens. The estimated warranty cost was deposited to a separate account
      and withdrawals for the cost of warranty parts and labor are made periodically,
      as incurred, up to the amount initially deposited. As of December 31, 2005
      and
      2004, the amount of these segregated funds totaled nil and $3.2 million,
      respectively.





In
      November 2004, the Company settled a liability related to an upgrade and
      extended warranty agreement with a customer which originated in 1999. The
      Company had been in default of certain provisions of this agreement since
      November 2002. In connection with the settlement the Company paid the customer
      approximately $280,000 and recorded an adjustment to its warranty reserve of
      approximately $405,000.





An
      analysis of changes in the liability for product warranty claims is as follows
      for the years ended December 31:





**2005**
            
            **2004**
            
            **2003****(In
                thousands)**Balance
                at beginning of year
            
            $
            2,586
            
            $
            928
            
            $
            $1,046Provision
                for warranties
            
            
            3,997
            
            
            3,296
            
            
            274Warranty
                expenditures
            
            
            (13,682
            )
            
            (1,189
            )
            
            (509
            )Other
                adjustments to provision for warranties
            
            
            9,581
            
            
            (405
            )Currency
                fluctuations
            
            
            --
            
            
            (44
            )
            
            117Balance
                at end of year
            
            $
            2,482
            
            $
            2,586
            
            $
            928





F-17








**NOTE
                9.**
            **RESTRUCTURING
                CHARGES**





During
      the fourth quarter of 2005, the Company initiated a restructuring plan to close
      its underperforming operation in the Netherlands and re-align the resources
      and
      cost structure. The Company now directs the activities of all of its
      international distributors directly from its domestic operations center. Since
      the Company continues to have a presence in the markets previously managed
      by
      its Netherlands operation, the results of that unit’s operations are included in
      continuing operations. The closing of the Netherlands operations resulted in
      restructuring charges of $621,000 including $125,000 of non-cash charges,
      principally related to impairment of fixed assets. The Company believes that
      its
      restructuring charge is adequate to cover charges associated with the remaining
      lease terminations.





In
      accounting for restructuring charges, the Company complied with
      SFAS No. 146, *Accounting for Costs Associated with Exit or Disposal
      Activities* ,
      which
      requires that a liability for costs associated with an exit or disposal activity
      be recognized and measured initially at fair value only when the liability
      is
      incurred.





The
      following is a summary of restructuring charge activity for the year ended
      December 31, 2005 (in thousands):




**Lease**
              **Termination**
              **And
                Other**
              **Related**
              **Charges**
            
            
            **Professional**
              **Fees
                and Other Related Charges**
            
            
            **Severance**
            
            
            **Non-cash**
              **Charges**
            
            
            **Total**Total
                restructuring charge
            
            $
            100
            
            $
            75
            
            $
            321
            
            $
            125
            
            $
            621Payments
            
            
            --
            
            
            (75
            )
            
            (321
            )
            
            --
            
            
            (396
            )Non-cash
                charges
            
            
            --
            
            
            --
            
            
            --
            
            
            (125
            )
            
            (125
            )Balance
                as of December 31, 2005
            
            $
            100
            
            $
            --
            
            $
            --
            
            $
            --
            
            $
            100











**NOTE
                10.**
            **INCOME
                TAXES**





The
      components of the provision for income taxes for the years ended December
      31:




**2005**
            
            **2004**
            
            **2003****(In
                thousands)**Current:Federal
            
            $
            --
            
            $
            205
            
            $
            --State
            
            
            --
            
            
            96
            
            
            --Total
                provision for income taxes
            
            $
            --
            
            $
            301
            
            $
            --





The
      following is a reconciliation of the (benefit) provision 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:








**2005**
            
            **2004**
            
            **2003****(In
                thousands)**Expected
                income tax (benefit) provision
            
            $
            (9,572
            )
            $
            3,393
            
            $
            (4,879
            )State
                income tax (benefit), net of federal benefit
            
            
            (594
            )
            
            66
            
            
            --Other
            
            
            (89
            )
            
            23
            
            
            2Changes
                in deferred income tax asset valuation allowance
            
            
            10,255
            
            
            (3,181
            )
            
            4,877Provision
                for income taxes
            
            $
            --
            
            $
            301
            
            $
            --










F-18








The
      components of the Company's net deferred tax assets as of December 31, were
      as
      follows:








**2005**
            
            **2004****(In
                thousands)**Deferred
                income tax assets:Warranty
                reserves
            
            $
            896
            
            $
            879Deferred
                revenue
            
            
            --
            
            
            364Basis
                difference of other current assets
            
            
            860
            
            
            207Total
                current deferred income tax assets
            
            
            1,756
            
            
            1,450Net
                operating loss carryforwards
            
            
            22,547
            
            
            13,118Basis
                difference of intangible assets
            
            
            4,172
            
            
            1,817Research
                and development credit carryforwards
            
            
            579
            
            
            245Federal
                alternative minimum tax credit carryforwards
            
            
            121
            
            
            205Basis
                difference of other long-term assets
            
            
            115
            
            
            63Total
                non-current deferred income tax assets
            
            
            27,534
            
            
            15,448Total
                gross deferred income tax assets
            
            
            29,290
            
            
            16,898Deferred
                income tax liabilities:Basis
                difference of long-term intangible asset
            
            
            --
            
            
            (906
            )Basis
                difference of other long-term assets
            
            
            (415
            )
            
            (46
            )Total
                gross deferred income tax liabilities
            
            
            (415
            )
            
            (952
            )Net
                deferred income tax asset
            
            
            28,875
            
            
            15,946Less
                deferred income tax asset valuation allowance
            
            
            (28,875
            )
            
            (15,946
            )Net
                deferred income tax assets
            
            $
            --
            
            $
            --







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, 2005 and 2004,
      respectively.




There
      was
      no provision for income taxes required for 2005 or 2003. The provision for
      income taxes in 2004 was $301,000 and consisted of estimated Federal Alternative
      Minimum Tax and estimated state and local taxes. This tax provision was an
      effective tax rate of 3% and reflected utilization of approximately $9.0 million
      in operating losses carried forward from prior years which reduced taxable
      income in 2004. At December 31, 2005, the Company has net operating loss
      carryforwards for federal income tax purposes of $62.4 million, which may be
      used against future taxable income, if any, and which expire in years 2010
      to
      2025. Additionally, the Company has $8.9 million 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 12), which for income tax purposes under Internal
      Revenue Code Section 382, limits the annual utilization of the $31.4 million
      loss carryforwards and could cause some amount of the carryforwards to expire
      before they are utilized. The Company has federal alternative minimum tax credit
      carryforwards of $121,000, which may be used to offset future federal tax
      liability, if any.





The
      Company also has research and development credit carryforwards of approximately
      $579,000, which may be used to offset future federal tax liability, if any.
      A
      portion of this credit may be subject to limitations.





**NOTE
                11.**
            **CREDIT
                FACILITY**





On
      February 28, 2005, the Company entered into a Credit Agreement with Bank of
      America, N.A. (the Credit Agreement). The Credit Agreement, as amended, allows
      the Company to borrow up to $10.0 million at any time under the revolving credit
      facility, based upon a portion of the Company's eligible accounts receivable.
      The Credit Agreement also provides for a letter of credit facility within the
      credit limit of up to $2.0 million. Revolving credit loans under the Credit
      Agreement bear interest at a rate of the British Bankers Association LIBOR
      Rate
      plus 3.5% unless for certain reasons Eurodollar Rate Loans are unavailable,
      then
      at a rate in an amount of 2.5% over the higher of the Federal Funds Rate plus
      0.5% and Bank of America's prime rate. The Company's obligations under the
      Credit Agreement are secured by substantially all of the assets of TurboChef
      and
      its subsidiaries. The Credit Agreement contains customary affirmative and
      negative covenants and acceleration provisions. The credit commitment expires
      on
      February 28, 2006, and any outstanding indebtedness under the Credit Agreement
      is due on that date. To date, the Company has not borrowed under the Credit
      Agreement. The Company is currently negotiating the renewal of a credit
      facility.





F-19











**NOTE
                12.**
            **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 convertible 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 preferred stock issued in the private placement were
      convertible into an aggregate of 14,217,667 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 would have been converted into common stock). Net proceeds to the Company
      of $12.6 million were 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.





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 this series
      of preferred stock. Accordingly, this issue of preferred stock was considered
      redeemable preferred stock until a formal proxy statement was filed to approve
      the authorization of additional shares of the Company's common stock. Therefore,
      at December 31, 2003, the Company recorded $12.6 million; the aggregate
      consideration paid for such shares, as mezzanine equity.





The
      shares of this series of preferred stock were immediately convertible, and
      such
      shares also had beneficial conversion characteristics. In accordance with the
      guidance of Emerging Issues Task Force (“EITF”) 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.





As
      of
      December 31, 2004, all of this series of preferred stock had been converted
      into
      common stock.





In
      connection with the private placement, the Company recorded in its 2003
      statement of operations a charge of $7.6 million in compensation and severance
      related to termination of former officers and directors. This charge included
      $5.6 million for the estimated fair value of non-compete and release agreements
      with the former Chairman and a member of the board; $916,000 for the estimated
      fair value of cancellation of notes given by the former Chairman and a member
      of
      the board for options exercised and the cancellation of all their outstanding
      options and $1.1 million as the estimated fair value of severance, including
      cash and equity compensation, paid to two other officers who were terminated
      in
      connection with appointment of new officers and directors resulting from the
      private placement.





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 resolved all claims under the note and 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 674,995
      shares of the Company's Common Stock and agreed to reduce from 333,333 to
      266,667 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 $1.2 million in cash from the proceeds of the transaction, and issue
      to
      Grand Cheer 217,429 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 $1.2 million 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.








**NOTE
                13.**
            **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 2,550,000 shares of the
      Company's common stock be reserved for grants to eligible participants. The
      2003
      Plan, as amended, reserved up to 5,333,333 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, 2005, there was an aggregate maximum of 3.0 million
      shares available for grant under both of these plans.





In
      December 2005, in response to SFAS 123R, the Board of Directors of the Company,
      upon recommendation of its Compensation Committee, approved an acceleration
      of
      all unvested options granted to employees and directors under the Company's
      2003
      Stock Incentive Plan. As a result of the acceleration, options to acquire 1.8
      million shares of the Company's common stock became immediately exercisable.
      The
      decision to accelerate vesting of these options was made primarily to minimize
      future compensation expense that the Company would otherwise recognize in its
      consolidated statements of operations upon the effectiveness of
      SFAS





F-20





123R.
      As
      a result of the acceleration, the Company expects to reduce the stock option
      expense it otherwise would be required to record in connection with accelerated
      options by approximately $5.7 million in 2006, $2.4 million in 2007 and
      $800,000 in 2008. In order to prevent unintended personal benefit to the holders
      of these options, the Board of Directors, upon recommendation of its
      Compensation Committee, imposed certain restrictions on any shares received
      through the exercise of accelerated options. These restrictions generally
      prevent the sale of stock obtained through exercise of an accelerated option
      prior to the original vesting date. All other provisions of the original option
      grants remain. Employees who terminate prior to their original vesting date
      ostensibly receive a benefit from the acceleration of options measured by the
      differences in the estimated fair value of the options pre- and
      post-acceleration. The Company’s estimate of the benefit associated with
      possible future employee terminations is approximately $100,000 and,
      accordingly, recorded a one-time non-cash compensation charge in the fourth
      quarter of 2005 as a result of the acceleration.





A
      summary
      of stock option activity follows:





**Number
                of**
              **Shares**
            
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**Options
                outstanding at January 1, 2003
            
            
            1,398,517
            
            $
            9.24Options
                granted
            
            
            2,262,128
            
            
            5.40Options
                exercised
            
            
            (33,615
            )
            
            2.58Options
                expired or canceled
            
            
            (732,057
            )
            
            11.01Options
                outstanding at December 31, 2003
            
            
            2,894,973
            
            
            5.91Options
                granted
            
            
            673,333
            
            
            10.62Options
                exercised
            
            
            (274,363
            )
            
            4.01Options
                expired or canceled
            
            
            (172,317
            )
            
            8.01Options
                outstanding at December 31, 2004
            
            
            3,121,626
            
            
            6.97Options
                granted
            
            
            966,578
            
            
            12.81Options
                exercised
            
            
            (482,058
            )
            
            4.38Options
                expired or canceled
            
            
            (82,219
            )
            
            12.51Options
                outstanding at December 31, 2005
            
            
            3,523,927
            
            
            8.79Options
                exercisable at December 31, 2003
            
            
            757,973
            
            $
            6.78Options
                exercisable at December 31, 2004
            
            
            1,246,848
            
            
            6.53Options
                exercisable at December 31, 2005
            
            
            3,523,927
            
            
            8.79





The
      following table summarizes information about the Company's stock options
      outstanding at December 31, 2005:





****
            **Options
                Outstanding and Exercisable**
            ****
            
            ******Range
                of Exercise Prices**
            
            
            ****
            **Outstanding
                as**
              **of
                December 31,**
              **2005**
            ****
            **Weighted
                Average Remaining**
              **Contractual
                Life**
            ****
            **Weighted**
              **Average**
              **Exercise
                Price**
            ****$2.58-$5.25
            
            
            
            
            1,639,521
            
            
            
            7.68
            
            
            $
            5.10$5.26-$10.35
            
            
            
            
            1,175,567
            
            
            
            8.65
            
            
            
            9.86$10.36-$28.50
            
            
            
            
            708,839
            
            
            
            8.45
            
            
            
            15.573,523,927
            
            
            
            8.16
            
            
            
            8.79





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 50,000 exercisable at $5.25.





In
      2004,
      the Company recorded compensation expense of $113,000 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 were 3,334 and 8,333 exercisable at $9.30 and
      $14.25, respectively.





In
      2005,
      the Company recorded compensation expense of $100,000 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 were 3,333 and 16,667 exercisable at $15.45 and
      $11.00, respectively.





***Stock
      Issuances***





In
      April
      2003, the Company issued 80,158 and 40,079 shares of common stock as payment
      of
      accrued dividends on the Company's Series B and Series C convertible preferred
      stock, respectively.





F-21











In
      October 2003, the Company issued 92,347 and 45,314 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 45,000 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.





In
      May
      2004, the Company completed a private placement of 1,151,209 shares of common
      stock for aggregate consideration of $10.0 million, or $8.70 per share. A
      portion of the proceeds from the private placement was used to finance
      TurboChef's acquisition of Enersyst (see Note 3) with the remainder to be used
      for working capital and other general corporate purposes.





On
      February 8, 2005, the Company closed a public offering of 5,000,000 shares
      of
      its common stock at $20.50 before discounts and commissions to underwriters
      and
      other offering expenses. Of the shares sold, 2,925,000 were sold by the Company
      and 2,075,000 were sold by certain selling shareholders. The Company plans
      to
      use the net proceeds to finance the development and introduction of residential
      ovens, to pursue possible acquisitions or strategic investments and for working
      capital and other general corporate purposes.





During
      2005, the Company exchanged Enersyst preferred membership units for 518,000
      shares of common stock. The remaining preferred membership units are
      exchangeable for 93,000 shares of common stock under the terms of the exchange
      agreement.





***Stock
      Warrants***





At
      December 31, 2005, warrants remained outstanding for purchase of an aggregate
      of
      163,000 shares of the Company's common stock with a weighted average exercise
      price of $6.71 and a weighted average remaining contractual life of 6.56
      years.








**NOTE
                14.**
            **COMMITMENTS
                AND CONTINGENCIES**





***Lease
      Commitments***




The
      Company leases office facilities and certain equipment under noncancellable
      operating leases having original terms ranging from one to eight years.
      Approximate future minimum rent payments, by year and in the aggregate, under
      noncancellable operating leases are as follows (in thousands):




Year2006
                
                $
                1,1302007
                
                
                1,0722008
                
                
                9972009
                
                
                9142010
                
                
                633Thereafter
                
                
                1,226$
                5,972




Rent
      expense was approximately $920,000, $473,000, and $271,000 for the years ended
      December 31, 2005, 2004 and 2003, respectively.





***Employee
      Benefit Plan***




The
      Company maintains an employee savings plan that qualifies as a cash or deferred
      salary arrangement under Section 401(k). The plan covers all employees who
      meet minimum age and service requirements. Eligible employees may contribute
      to
      the plan, subject to certain limitations. The Company may make matching
      contributions to the plan at its sole discretion. Employees become fully vested
      with respect to Company contributions after five years of service. The matching
      contribution for 2005 totaled $150,000. There were no matching contributions
      made for 2004 or 2003.








F-22








**NOTE
                15.**
            **LITIGATION**





***Maytag
      Corporation***





The
        Company filed for arbitration against Maytag Corporation 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. Hearings before the panel took place during 2005,
        with
        the final hearing on October 4, 2005. On March 1, 2006 the panel issued its
        decision in which it denied all monetary damage and other claims by both
        parties, except it did order Maytag to assign a fifty-percent interest to
        TurboChef in ten U.S. patents issued to Maytag.





In
      May
      2002, Maytag filed a complaint in Iowa federal court seeking, among other
      things, to require that two of the 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 in a January 2002 press release (and in certain other unidentified
      statements) the Company publicized false and misleading statements about
      Maytag’s use of our intellectual property in its residential appliances. Based
      upon this allegation, Maytag asserts claims that the Company caused false
      advertising with respect to Maytag’s goods and services, intentionally
      interfered with Maytag’s prospective business, defamed Maytag and unfairly
      competed with Maytag. Maytag’s complaint in the Iowa proceeding does not specify
      the dollar amount of damages sought. In July 2002, the Company filed a motion
      to
      dismiss the Maytag complaint or, in the alternative, stay the Iowa proceeding
      pending resolution of the Texas arbitration. In addition, on December 23, 2002,
      the Federal Court issued an order staying indefinitely the remainder of Maytag’s
      claims in the Iowa proceeding, pending the final resolution of the Texas
      arbitration.





Maytag
      has also initiated arbitration against the Company in Boston, claiming damages
      in excess of $1.3 million for failure to pay for ovens. The Company’s financial
      statements include accounts payable of approximately $1.4 million in connection
      with this claim. The Company has filed a counterclaim alleging that Maytag
      breached its warranty and committed fraud and that it has been damaged in an
      amount in excess of $1.5 million. The Company believes that these claims by
      Maytag are without merit, and it intends to vigorously defend against Maytag’s
      allegations. The Company has agreed to a scheduling order with Maytag that
      contemplates a hearing in the Boston arbitration sometime after the hearing
      on
      the Texas arbitration, which occurred in 2005..





***Duke
      Manufacturing Co.***





On
      January 26, 2005, Duke Manufacturing Co. filed a complaint against TurboChef
      in
      federal district court in St. Louis, Missouri, but the Company was never served.
      The complaint sought a declaration that Duke’s speed cook oven products do not
      violate two of the Company’s patents relating to the use of catalytic
      converters, and that those patents are invalid. Duke voluntarily dismissed
      its
      complaint in March 2005.





***Food
      Automation-Service Techniques, Inc.***





On
      August
      8, 2005, Technology Licensing Corporation and Food Automation-Service
      Techniques, Inc. (“FAST”) filed suit against TurboChef in Federal District Court
      in Connecticut alleging infringement by the Company’s three commercial oven
      products of U.S. Patent No. 4,920,948. FAST sought unspecified damages,
      injunction, attorneys’ fees and costs. In its press release of September 9,
      2005, FAST claimed it was seeking damages that could exceed $30 million.
      TurboChef filed its answer on August 30, 2005, among other things, denying
      any
      infringement. Management believes that these claims are without merit and
      vigorously defended itself. The parties reached agreement to settle the
      lawsuit effective as of February 21, 2006, the effects of which on 2005 are
      included in the accompanying financial statements.





The
      Company is also party to other legal proceedings that have arisen in the
      ordinary course of our business, but the Company believes an unfavorable outcome
      of which would not have a material adverse affect on our operating results
      or
      future operations.











F-23








**NOTE
                16.**
            **QUARTERLY
                FINANCIAL INFORMATION
                (UNAUDITED)**








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







**2005**
            
            **First**
            
            **Second**
            
            **Third**
            
            **Fourth**
            
            **Fiscal
                Year**Total
                revenues
            
            $
            20,403
            
            $
            10,750
            
            $
            11,814
            
            $
            9,282
            
            $
            52,249Gross
                profit
            
            
            7,912
            
            
            1,220
            
            
            (2,705
            )
            
            2,290
            
            
            8,717Net
                income (loss) available to commonstockholders
            
            
            1,521
            
            
            (5,866
            )
            
            (16,715
            )
            
            (7,094
            )
            
            (28,154
            )Basic
                income (loss) per share
            
            $
            0.06
            
            $
            (0.21
            )
            $
            (0.59
            )
            $
            (0.25
            )
            $
            (1.00
            )Number
                of shares used in the computationof
                basic income (loss) per share
            
            
            26,589,785
            
            
            28,193,611
            
            
            28,525,088
            
            
            28,598,014
            
            
            28,034,103Diluted
                income (loss) per share
            
            $
            0.05
            
            $
            (0.21
            )
            $
            (0.59
            )
            $
            (0.25
            )
            $
            (1.00
            )Number
                of shares used in the computationof
                diluted income (loss) per share
            
            
            28,989,040
            
            
            28,193,611
            
            
            28,525,088
            
            
            28,598,014
            
            
            28,034,103







**2004**
            
            **First**
            
            **Second**
            
            **Third**
            
            **Fourth**
            
            **Fiscal
                Year**Total
                revenues
            
            $
            946
            
            $
            2,420
            
            $
            31,006
            
            $
            36,522
            
            $
            70,894Gross
                profit
            
            
            499
            
            
            1,246
            
            
            11,704
            
            
            13,398
            
            
            26,847Net
                (loss) income available to commonstockholders
            
            
            (1,946
            )
            
            (2,261
            )
            
            6,419
            
            
            7,467
            
            
            9,679Basic
                (loss) income per share
            
            $
            (0.23
            )
            $
            (0.24
            )
            $
            0.64
            
            $
            0.35
            
            $
            0.79Number
                of shares used in the computationof
                basic (loss) income per share
            
            
            8,615,656
            
            
            9,258,823
            
            
            9,987,607
            
            
            21,098,010
            
            
            12,256,686Diluted
                (loss) income per share
            
            $
            (0.23
            )
            $
            (0.24
            )
            $
            0.24
            
            $
            0.27
            
            $
            0.37Number
                of shares used in the computationof
                diluted (loss) income per share
            
            
            8,615,656
            
            
            9,258,823
            
            
            26,676,983
            
            
            27,201,127
            
            
            26,142,101








**NOTE
                17.**
            **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 is as
      follows:





**REGION**
            
            **2005**
            
            **2004**
            
            **2003****(In
                thousands)**North
                America
            
            $
            41,031
            
            $
            69,182
            
            $
            2,096Europe
                and Asia/Pacific
            
            
            11,218
            
            
            1,712
            
            
            1,594Totals
            
            $
            52,249
            
            $
            70,894
            
            $
            3,690










F-24