<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
- - --------------------------------------------------------------------------------
(Mark One)
X
- - -------- QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
- - -------- TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________to__________
- - --------------------------------------------------------------------------------
Commission File Number: 0-23478
-----------
TURBOCHEF, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 48-1100390
- - ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10500 Metric Drive, Suite 128
Dallas, Texas 75243
-----------------------------
(214) 341-9471
-----------------------------------------------
(Issuer's telephone number including area code)
- - --------------------------------------------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 ninety days.
Yes X No
____ ____
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: May 3, 1996: 12,868,078
1
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TURBOCHEF, INC.
FORM 10-QSB
Table of Contents
Part I Financial Information Page
- - ------ --------------------- ----
Item 1 Financial Statements
Balance Sheets as of March 31, 1996 and December 31, 3
1995
Statements of Operations for the three months ended 4
March 31, 1996 and 1995
Statement of Stockholders' Equity for the three months 5
ended March 31, 1996
Statements of Cash Flows for the three months ended 6
March 31, 1996 and 1995
Notes to Financial Statements 7
Item 2 Management's Discussion and Analysis or Plan of Operation 9
Part II Other Information
- - ------- -----------------
Item 1 Legal Proceedings 13
Item 2 Changes in Securities 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
2
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Part I - Item 1 FINANCIAL STATEMENTS
TURBOCHEF, INC.
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
--------- ------------
1996 1995
--------- ------------
Assets (Unaudited) (Note)
------
<S> <C> <C>
Current assets:
Cash $ 1,027,868 $ 642,883
Accounts receivable 207,999 572,299
Inventories 347,503 539,083
Prepaid expenses 64,474 98,782
------------ -----------
Total current assets 1,647,844 1,853,047
Property and equipment:
Leasehold Improvements 37,818 37,818
Furniture and fixtures 59,370 56,360
Equipment 312,849 305,718
------------ -----------
410,037 399,896
Less accumulated depreciation (174,259) (154,330)
------------ -----------
Net property and equipment 235,778 245,566
Deferred offering costs 183,057 48,529
Other assets 105,672 70,728
------------ -----------
$ 2,172,351 $ 2,217,870
============ ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Notes payable to stockholders $ 285,000 $ 285,000
Accounts payable 555,508 404,293
Accrued expenses 70,671 35,314
Sales deposits 175,150 45,250
------------ -----------
Total current liabilities 1,086,329 769,857
Stockholders' equity:
Common stock, $.01 par value. Authorized
20,000,000 shares. Issued 12,868,078
and 12,867,078 128,681 128,671
Additional paid-in capital 10,995,024 10,992,534
Accumulated deficit (10,037,683) (9,673,192)
------------ -----------
Total stockholders' equity 1,086,022 1,448,013
------------ -----------
$ 2,172,351 $ 2,217,870
============ ===========
</TABLE>
Note: The balance sheet at December 31,1995 was derived from audited financial
statements but does not include all disclosures required by generally accepted
accounting principles.
See accompanying notes to financial statements.
3
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TURBOCHEF, INC.
Statements of Operations
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------
1996 1995
---------------- --------------
<S> <C> <C>
Net sales $ 1,048,888 $ 165,398
Other revenues 5,120 -
----------- ----------
Total revenues 1,054,008 165,398
Costs and expenses:
Cost of goods sold 796,431 132,917
Research and development expenses 120,116 146,160
Selling, general and administrative expenses 498,904 384,401
Interest expense, net 3,048 21,587
----------- -----------
Total costs and expenses 1,418,499 685,065
----------- -----------
Net loss $ (364,491) $ (519,667)
=========== ===========
Loss per common share $ (0.03) $ (0.04)
=========== ===========
Weighted average number of common
shares and common share
equivalents outstanding 12,867,375 11,943,825
=========== ===========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
TURBOCHEF, INC.
Statement of Stockholders' Equity
(UNAUDITED)
<TABLE>
<CAPTION>
Shares of Additional
Common Common Paid-In Accumulated
Stock Stock Capital Deficit Total
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 12,867,078 $128,671 $10,992,534 $ (9,673,192) $1,448,013
Exercise of stock options 1,000 10 2,490 - 2,500
Net loss - - - (364,491) (364,491)
--------------------------------------------------------------------------------
Balance, March 31, 1996 12,868,078 $128,681 $ $10,995,024 $ $(10,037,683) $ $1,086,022
=================================================================================
</TABLE>
See accompanying notes to financial statements.
5
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TURBOCHEF, INC.
Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (364,491) $ (519,667)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 22,165 18,540
Interest added to principal - 14,032
Decrease (increase) in accounts receivable 364,300 (24,628)
Decrease (increase) in inventories 191,580 116,414
Decrease in prepaid expenses 34,308 9,173
Increase (decrease) in accounts payable 151,215 (11,080)
Increase (decrease) in accrued expenses 35,357 (1,424)
Increase in sales deposits 129,900 -
---------- ----------
Net cash provided by (used in) operating activities 564,334 (398,640)
---------- ----------
Cash flows from investing activities:
Purchase of equipment (10,141) -
Additions to intangibles (37,180) -
---------- ----------
Net cash used in investing activities (47,321) -
---------- ----------
Cash flows from financing activities:
Proceeds from note payable - 140,000
Proceeds from notes payable to stockholders 285,000 -
Repayment of note payable to stockholder (285,000) (7,490)
Exercise of stock options 2,500 -
Deferred offering costs (134,528) -
---------- ----------
Net cash (used in) provided by financing activities (132,028) 132,510
---------- ----------
Net increase (decrease) in cash 384,985 (266,130)
Cash at beginning of period 642,883 617,495
---------- ---------
Cash at end of period $1,027,868 $ 351,365
========== =========
</TABLE>
See accompanying notes to financial statements.
6
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TURBOCHEF, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1996
1. The consolidated financial statements of TurboChef, Inc. (the "Company")
included herein have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission (SEC) and have not been examined by
independent public accountants. In the opinion of management, all
adjustments (which consisted only of normal recurring accruals) necessary to
present fairly the financial position and results of operations have been
made. Pursuant to SEC rules and regulations, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed
or omitted from these statements unless significant changes have taken place
since the end of the most recent fiscal year. The December 31, 1995 balance
sheet was derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The
Company believes that the disclosures contained herein, when read in
conjunction with the financial statements and notes included in the Company's
Annual Report for the fiscal year ended December 31, 1995 on Form 10-KSB, are
adequate to make the information presented not misleading. It is suggested,
therefore, that these statements be read in conjunction with the statements
and notes included in the aforementioned Form 10-KSB. The results of
operations for the three months ended March 31, 1996 are not necessarily
indicative of the results to be expected for the full year.
Although the Company has historically incurred significant losses, the
Company expects to generate future cash flows from the sale of commercial
ovens, and a future equity financing. On March 29, 1996, the Company filed a
registration statement with the Securities and Exchange Commission in
connection with the proposed public offering of 700,000 shares of its common
stock. The Company anticipates, based on its currently proposed plans and
assumptions relating to its operations (including assumptions regarding the
progress of its research and development efforts and its ability to reduce
oven production costs) that the proceeds of the proposed offering, together
with its current cash and cash equivalent balances and anticipated revenues
from operations, will be sufficient to fund its operations and satisfy its
contemplated capital requirements for at least 24 months following the
consummation of the proposed offering. In the event that the Company's plans
change, or its assumptions change or prove to be incorrect, or if the
proceeds of the proposed offering, cash balances and anticipated revenues
otherwise prove to be insufficient, the Company would be required to revise
its plan of operations (which revision would include a significant reduction
in operating costs) and/or seek additional financing prior to the end of such
period. In the event that the proposed public offering is not successful and
other sources prove to be insufficient, two officers, who are major
shareholders of the Company, have agreed to provide financial support as
required to enable the Company to meet its obligations through June 1997.
2. Loss per share is determined based on weighted average number of common and
dilutive common equivalent shares outstanding during each period. Stock
options were antidilutive during each period.
Giving effect to the March 15, 1995 conversion of a note payable to
stockholder and related accrued interest of $1,144,730 into 457,892 shares of
common stock would not have materially affected loss per share for the three
month period ended March 31, 1995.
3. On December 29, 1995, the Company effected a two-for-one stock split. The
stock split has been reflected in all periods reported upon in the financial
statements and, accordingly, all applicable dollar, share and per share
amounts have been restated to reflect the stock split.
4. On March 15, 1995, pursuant to an agreement between the majority stockholder
and the Company, outstanding indebtedness and accrued interest aggregating
$1,144,730 to such stockholder was exchanged for 457,892 shares of common
stock of the Company. In
7
<PAGE>
addition, the stockholder received an option to purchase 600,000 shares of
the common stock of the Company at $2.50 per share. The option price was
greater than the market price of the Company's common stock on the date of
the grant. The options have a five year term and became exercisable on March
15, 1996.
5. In November 1994, the Company and Acadia International Limited, a corporation
incorporated under the laws of the British Virgin Islands ("Acadia"), entered
into an agreement to jointly develop a new consumer-operated TurboChef oven
(the Model E-1 TurboChef oven) for use in retail locations (the "Acadia
Agreement"). Pursuant to the Acadia Agreement, Acadia committed to invest up
to $1,200,000 in the Model E-1 project, over a period of 16 months, for which
it was ultimately to receive between a 20% and 30% (depending on various
circumstances) ownership interest in AcadiaChef, Inc. ("AcadiaChef"), the
entity formed in connection with this joint venture to commercialize the
proposed Model E-1 oven. Each of the Company and Acadia had the option,
however, of terminating the Acadia Agreement prior to such time, whereupon
Acadia's investment would be returned to it pursuant to certain agreed upon
terms, as outlined below, and its interest in AcadiaChef and the E-1 project
would be eliminated. As of March 31, 1995, the Company had completed an
initial prototype of the Model E-1 TurboChef oven and Acadia had invested a
total of $350,000 in the project pursuant to the terms of the Acadia
Agreement. The Company elected at such time to terminate its arrangement with
Acadia. Pursuant to the terms of the Acadia Agreement, upon such termination,
Acadia had the option of (i) having its investment returned to it, plus
interest accrued thereon at the rate of 10% per annum, in cash and receiving
an option to purchase 350,000 shares of Common stock at $1.50 per share (the
market price of the Common Stock on the date of the Acadia Agreement), or
(ii) having its investment returned to it, without interest, in the form of
Common Stock, i.e. converting the principal amount of its investment into
233,334 shares of Common Stock, based on a conversion rate of $1.50 per
share, and receiving an option to purchase 525,000 shares of Common Stock at
$2.50 per share. Instead, the Company was able to reach an agreement with
Acadia in June 1995, with an effective date of March 31, 1995, whereby Acadia
converted its $350,000 investment, foregoing the accrued interest thereon,
into an aggregate of 233,334 shares of Common Stock and received the Acadia
Option to purchase 262,500 shares of Common Stock at $2.50 per share.
6. On March 15, 1995, Jeffrey B. Bogatin, the Chairman of the Board and a
principal stockholder of the Company, exchanged outstanding indebtedness and
accrued interest thereon, in the aggregate amount of $1,144,730, for 457,892
shares of Common Stock (a conversion rate of $2.50 per share) and, in
connection with such exchange, also received an option to purchase 600,000
shares of Common Stock at $2.50 per share. The established conversion and
option exercise prices were approximately 74% above the market price of the
Company's Common Stock on the date of the transaction.
7. In June 1995, Mr. Bogatin, together with Philip R. McKee, a principal
stockholder and the President and Chief Executive Officer of the Company,
made contributions to the capital of the Company in the aggregate amount of
$1,000,000. Mr. Bogatin exercised options to purchase 80,000 shares of
Common Stock at $2.50 per share, for total proceeds to the Company of
$200,000, and Mr. McKee purchased 118,518 shares of restricted Common Stock
from the Company at $6.75 per share, for total proceeds to the Company of
$800,000.
8. During December 1995, Mr. Bogatin made an additional $300,000 contribution to
the capital of the Company by exercising options to purchase 120,000 shares
of Common Stock at $2.50 per share, and Mr. McKee advanced to the Company the
sum of $285,000. The note issued to Mr. McKee evidencing such borrowing bore
interest at the rate of 6.5% per annum and was repaid in full (an aggregate
of $288,139, including accrued interest) on February 28, 1996.
9. On March 30, 1996, Mr. Bogatin and Mr. McKee loaned the Company the sums of
$200,000 and $85,000, respectively. These loans are evidenced by promissory
notes bearing interest at the rate of 6.5% per annum. Each of these notes is
payable upon demand. These loans were made to satisfy certain eligibility
requirements in order for the Company's Common Stock to continued to be
listed on the NASDAQ SmallCap Market ("NASDAQ").
8
<PAGE>
PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
Although the Company was organized in April 1991, it was not until March 1994
that it began the initial commercial introduction of the Model D-1 TurboChef
oven, its first commercial product, and not until June 1995 that it entered
into a purchase contract with Whitbread PLC ("Whitbread"), its first major
contract, and commenced shipment of its Model D-2 TurboChef oven. Prior to
such time, the Company was engaged primarily in research and development,
limited production operations and test marketing of prototype ovens. As a
result, to date, the Company has generated limited revenues and incurred
substantial operating losses since its inception. The Company anticipates
that it will continue to incur significant operating expenses in the future,
including in connection with the Company's ongoing development activities
relating to new product applications for its proprietary foodservice
technologies, the training and set-up of additional third-party manufacturing
sources and the continued implementation of the Company's marketing plans.
The Company's future profitability will thus depend upon, among other things,
corresponding increases in revenues from operations to offset these
expenditures.
On March 29, 1996, the Company filed a registration statement with the
Securities and Exchange Commission in connection with the proposed public
offering of 700,000 shares of its Common Stock
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
results of operations and financial condition. The discussion should be read
in conjunction with the financial statements and notes thereto contained
elsewhere in this report.
RESULTS OF OPERATIONS
Revenues for the three months ended March 31, 1996 were $1,054,008, an
increase of $888,610, or 537%, when compared to revenues of $165,398 for the
three months ended March 31, 1995. This increase is primarily attributable to
greater oven unit sales to Whitbread during 1996. During the first eight
months of 1995, ovens were only sold to small accounts and on a test basis to
chain accounts. Additional revenues recognized in the three months ended
March 31, 1996 were $5,120 received from the licensing of the Company's
proprietary dough-setting process.
Cost of sales for the three months ended March 31, 1996 was $796,431, an
increase of $663,514 when compared to $132,917 for cost of sales for the
three months ended March 31, 1995. This increase is consistent with greater
oven unit sales.
Gross profit on sales for the three months ended March 31, 1996 increased
677% or $219,976 to $252,457 when compared to gross profit on sales of
$32,481 during the three months ended March 31, 1995. The increase is a
result of the increase in oven unit sales, primarily to Whitbread.
Gross margin for the three months ended March 31, 1996 was 24% of sales
compared to 20% for the three months ended March 31, 1995. The percentage
increase is primarily attributable to a reduced per unit manufacturing cost
as a result of increased production volume and cost reduction programs
implemented during the fourth quarter of 1995. The margin increase is
partially offset by the reduced oven unit selling price offered to Whitbread
for a significant quantity of ovens, as compared to the higher oven unit
selling on small quantity purchases during the prior year period.
Research and development expenses for the quarter ended March 31, 1996
decreased 18%, or $26,044, to $120,116 from research and development expenses
of $146,160 for the quarter ended March 31, 1995. This decrease is primarily
attributable to reduced salary levels and lower prototype parts costs,
partially offset by an increase in outside research engineering costs
associated with the development of the home version of the TurboChef oven.
9
<PAGE>
Selling, general and administrative expenses for the quarter ended March 31,
1996 increased 30%, or $114,503, to $498,904 from comparable expenses of
$384,401 for the same period in 1995. This increase is attributable to staff
additions, additional travel associated with the Company's international
customers, the establishment of a service warranty reserve as a result of
increasing oven sales and the addition of a marketing and sales consultant.
Interest expense net of interest income for the three months ended March 31,
1996 decreased $18,539, or 86%, to $3,048 from $21,587 for the three months
ended March 31, 1995. The decrease is attributable to reduced average
borrowing levels, as a result of approximately $1,100,000 of outstanding
indebtedness and accrued interest to the majority stockholder of the Company
being exchanged for 457,892 shares of Common Stock in March 1995.
As a result, for the three months ended March 31, 1996, the Company incurred
a net loss of $364,491 compared to a net loss of $519,667 for the same period
in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements in connection with its product and
technology development and marketing efforts have been and will continue to
be significant. In addition, capital is required to operate and expand the
Company's operations. Since its inception, the Company has been substantially
dependent on loans and capital contributions from its principal stockholders,
private placements of its securities and the proceeds from the initial public
offering of common stock in April 1994 ("the April 1994 IPO") to fund its
activities.
At March 31, 1996, the Company had working capital of $561,515 as compared to
working capital of $1,083,190 at December 31, 1995. The $521,675 working
capital decrease from December 31, 1995 resulted primarily from the operating
loss of $364,491 incurred by the Company during the three months ended March
31, 1996 and the $134,528 in deferred offering costs associated with the
proposed public offering. For the three months ended March 31, 1996 accounts
receivable turnover improve to 9.9 from 8.1 during the three months ended
March 31, 1995 as a result of the Company adopting more favorable payment
terms with Whitbread.
Cash provided by operating activities was $564,334 for the three months ended
March 31, 1996 as compared to cash used in operating activities of $398,640
for the three months ended March 31, 1995 for an increase of $962,974. The
increase is a result of a $155,176 decrease in operating losses, a decrease
in accounts receivable of $364,300, a $151,215 increase in accounts payable
and the receipt of a sales deposit of $129,900. Cash used in investing
activities for the three months ended March 31, 1996 was $47,321 as a result
of equipment purchases and patent costs. Cash used in financing activities
was $132,028 for the three months ended March 31, 1996, which represents
primarily the costs incurred by the Company relating to the proposed public
offering, repayment of a note payable to a stockholder, offset by the
proceeds from notes payable to two stockholders. At March 31, 1996, the
Company had cash of $1,027,868, compared to cash of $642,883 at December 31,
1995.
In April 1994, the Company consummated the April 1994 IPO, pursuant to which
the Company sold 2,600,000 shares of Common Stock for aggregate net proceeds
to the Company (after deducting underwriting discounts and commissions and
other expenses of the offering) of $5,237,007, of which approximately
$1,360,000 was utilized for the repayment of debt.
In November 1994, the Company and Acadia International Limited, a
corporation incorporated under the laws of the British Virgin Islands
("Acadia"), entered into an agreement to jointly develop a new consumer-
operated TurboChef oven (the Model E-1 TurboChef oven) for use in retail
locations (the "Acadia Agreement"). Pursuant to the Acadia Agreement, Acadia
committed to invest up to $1,200,000 in the Model E-1 project, over a period
of 16 months, for which it was ultimately to receive between a 20% and 30%
(depending on various circumstances) ownership interest in AcadiaChef, Inc.
("AcadiaChef"), the entity formed in connection with this joint venture to
commercialize the proposed Model E-1 oven. Each of the Company and Acadia had
the option, however, of terminating the Acadia Agreement prior to such time,
whereupon Acadia's investment would be returned to it pursuant to certain
agreed upon terms, as outlined below, and its interest in AcadiaChef and the
E-1 project would be eliminated. As of March 31, 1995, the
10
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Company had completed an initial prototype of the Model E-1 TurboChef oven
and Acadia had invested a total of $350,000 in the project pursuant to the
terms of the Acadia Agreement. The Company elected at such time to terminate
its arrangement with Acadia. Pursuant to the terms of the Acadia Agreement,
upon such termination, Acadia had the option of (i) having its investment
returned to it, plus interest accrued thereon at the rate of 10% per annum,
in cash and receiving an option to purchase 350,000 shares of Common stock at
$1.50 per share (the market price of the Common Stock on the date of the
Acadia Agreement), or (ii) having its investment returned to it, without
interest, in the form of Common Stock, i.e. converting the principal amount
of its investment into 233,334 shares of Common Stock, based on a conversion
rate of $1.50 per share, and receiving an option to purchase 525,000 shares
of Common Stock at $2.50 per share. Instead, the Company was able to reach an
agreement with Acadia in June 1995, with an effective date of March 31, 1995,
whereby Acadia converted its $350,000 investment, foregoing the accrued
interest thereon, into an aggregate of 233,334 shares of Common Stock and
received the Acadia Option to purchase 262,500 shares of Common Stock at
$2.50 per share.
On March 15, 1995, Jeffrey B. Bogatin, the Chairman of the Board and a
principal stockholder of the Company, exchanged outstanding indebtedness and
accrued interest thereon, in the aggregate amount of $1,144,730, for 457,892
shares of Common Stock (a conversion rate of $2.50 per share) and, in
connection with such exchange, also received an option to purchase 600,000
shares of Common Stock at $2.50 per share. The established conversion and
option exercise prices were approximately 74% above the market price of the
Company's Common Stock on the date of the transaction.
In June 1995, Mr. Bogatin, together with Philip R. McKee, a principal
stockholder and the President and Chief Executive Officer of the Company,
made contributions to the capital of the Company in the aggregate amount of
$1,000,000. Mr. Bogatin exercised options to purchase 80,000 shares of Common
Stock at $2.50 per share, for total proceeds to the Company of $200,000, and
Mr. McKee purchased 118,518 shares of restricted Common Stock from the
Company at $6.75 per share, for total proceeds to the Company of $800,000.
During December 1995, Mr. Bogatin made an additional $300,000 contribution to
the capital of the Company by exercising options to purchase 120,000 shares
of Common Stock at $2.50 per share, and Mr. McKee advanced to the Company the
sum of $285,000. The note issued to Mr. McKee evidencing such borrowing bore
interest at the rate of 6.5% per annum and was repaid in full (an aggregate
of $288,139, including accrued interest) on February 28, 1996.
On March 30, 1996, Mr. Bogatin and Mr. McKee loaned the Company the sums of
$200,000 and $85,000, respectively. These loans are evidenced by promissory
notes bearing interest at the rate of 6.5% per annum. Each of these notes is
payable on demand. These loans were made to satisfy certain eligibility
requirements in order for the Company's Common Stock to continue to be listed
on NASDAQ.
The Company currently utilizes its own existing capital resources to finance
its operations. However, the Company is dependent on a proposed equity
offering of 700,000 shares of common stock or other financing to expand its
operations, including, among other things, to continue its product
development activities and marketing efforts and to set-up additional third-
party production operations for the manufacture of the Company's ovens. The
Company anticipates, based on its currently proposed plans and assumptions
relating to its operations (including assumptions regarding the progress of
its research and development efforts and its ability to reduce oven
production costs) that the proceeds of the proposed offering, together with
its current cash and cash equivalent balances and anticipated revenues from
operations, will be sufficient to fund its operations and satisfy its
contemplated capital requirements for at least 24 months following the
consummation of the proposed offering. In the event that the Company's plans
change, or its assumptions change or prove to be incorrect, or if the
proceeds of the proposed offering, cash balances and anticipated revenues
otherwise prove to be insufficient, the Company would be required to revise
its plan of operations (which revision would include a significant reduction
in operating costs) and/or seek additional financing prior to the end of such
period. Other than a commitment from Messrs. Bogatin and McKee to provide
financial support (if and as required) to enable the Company to meet its
obligations through June 1997, the Company has no current arrangements with
respect to, or sources of, additional financing. There can thus be no
11
<PAGE>
assurance that additional financing will be available to the Company, if and
when needed, on commercially reasonable terms, or at all.
Although the Company intends to use a substantial portion of the proceeds of
the proposed offering to implement the next phase of its business strategy in
an effort to expand its current level of operations and grow the Company's
business, the Company's future performance will be subject to a number of
business factors, including those beyond the Company's control, such as
economic downturns and evolving industry needs and preferences, as well as to
the level of the Company's competition and the ability of the Company to
successfully market its products and effectively monitor and control its
costs. There can thus be no assurance that the Company will be able to
successfully implement the next phase of its business strategy, that its rate
of revenue growth will continue in the future or that it will ever be able to
achieve profitable operations.
12
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PART II - OTHER INFORMATION
Item 1 - LEGAL PROCEEDINGS
None
Item 2 - CHANGE IN SECURITIES
None
Item 3 - DEFAULTS UPON SENIOR SECURITIES
None
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5 - OTHER INFORMATION
None
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
(a) Number Description of Document
------- -----------------------
10.1 Promissory Note dated March 30, 1996 issued to Jeffrey B. Bogatin.
10.2 Promissory Note dated March 30, 1996 issued to Philip R. McKee.
11 Statement re: Computation of Per Share Earnings (not required
because the relevant computations can be clearly determined from
material contained in the financial statements included herein).
(b) No reports on Form 8-K were filed during the quarterly period ended March
31, 1996.
13
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TURBOCHEF, INC.
May 9, 1996 /s/ Philip R. McKee
-------------------------------------------------
Philip R. McKee
President, Chief Executive Officer
(Principal Executive Officer)
May 9, 1996 /s/ Dennis J. Jameson
-------------------------------------------------
Dennis J. Jameson
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
14
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
- - ----------- -----------
10.1 Promissory Note dated March 30, 1996 issued to Jeffrey B. Bogatin.
10.2 Promissory Note dated March 30, 1996 issued to Philip R. McKee.
<PAGE>
EXHIBIT 10.1
PROMISSORY NOTE
U.S. $200,000.00 DALLAS, TEXAS MARCH 30, 1996
FOR VALUE RECEIVED, the undersigned, TURBOCHEF, INC. a Delaware corporation
("Maker"), unconditionally promises to pay to the order of Jeffrey B. Bogatin
("Holder"), the principal sum of Two Hundred Thousand and No/100 Dollars
($200,000.00), in lawful money of the United States and in immediately available
funds, together with accrued but unpaid interest on the outstanding principal
balance, in like money and funds, at the rate per annum and on the dates
provided below (provided that the interest payable shall not exceed the Maximum
Rate (as hereinafter defined)).
1. Interest. The unpaid principal balance of the outstanding balance
--------
hereunder shall bear interest at the lesser of (a) six and one-half percent
(6 1/2%) per annum, and (b) the maximum rate per annum permitted by applicable
law (the "Maximum Rate"). All past-due principal and interest under this Note
shall bear interest at the lesser of (i) eighteen percent (18%) per annum, and
(ii) the Maximum Rate. Interest paid or agreed to be paid shall not exceed the
maximum amount permissible under the applicable laws of the United States or the
State of Texas and, in any contingency whatsoever, if Holder shall receive
anything of value deemed interest under such laws which would exceed the amount
of interest permissible under those laws, the excessive interest shall be
applied first to the reduction of unpaid principal outstanding under this Note
and the remainder of such excessive interest shall then be refunded to Maker if
such excessive interest exceeds unpaid principal. All interest paid or agreed to
be paid under this Note shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period until
payment in full of the principal so that the interest hereon for such full
period shall not exceed the Maximum Rate. Interest shall be computed on the per
annum basis of a year of 360 days and for the actual number of days (including
the first but excluding the last day) elapsed.
2. Payment of Principal and Interest. The outstanding principal balance
---------------------------------
of this Note, together with accrued interest thereon, shall be due and
payable upon demand.
3. Representations and Warranties. Maker does hereby represent and
------------------------------
warrant to Holder as follows:
(a) Due Organization and Qualification. Maker (i) is duly organized
----------------------------------
and validly existing and in good standing under the laws of the State of
Delaware; and (ii) is qualified and licensed to do business in, and in good
standing in, any other state or foreign jurisdiction in which the conduct
of its business or its ownership of property requires that it be so
qualified.
(b) Due Authorization; No Conflict. The execution, delivery and
------------------------------
performance of this Note are within Maker's corporate powers, have been
duly
1
<PAGE>
authorized and do not conflict with or constitute a breach of any
provision contained in Maker's governing documents, nor do they constitute
an event of default under any agreement to which Maker is now a party.
(c) No Default. No Event of Default (as hereinafter defined) and no
----------
event which, with the giving of notice or lapse of time or both, would
become such an Event of Default, has occurred and is continuing.
(d) Compliance with Laws. Maker is in compliance in all material
--------------------
respects with all applicable foreign, federal, state or local laws,
statutes, ordinances, regulations, orders and other requirements of any
federal, state, county, parish, local or foreign governmental entity or
municipality or subdivision thereof or any authority, arbitrator,
department, commission, board, bureau, body, agency, court or
instrumentality thereof (each a "Governmental Authority") having
jurisdiction over Maker, Maker's assets or the conduct of Maker's business.
4. Covenants.
---------
While any part of any of the obligations arising hereunder remains unpaid,
and unless otherwise waived by Holder in writing, Maker agrees as follows:
(a) Corporate Existence. Maker shall maintain and preserve its
-------------------
corporate existence and authority to transact business and shall remain in
good standing under the laws of the State of Delaware and all other
jurisdictions where the failure to do so maintain would have a material
adverse effect upon the assets of Maker.
(b) Observance of Terms. (a) Maker shall pay the principal and
-------------------
interest on this Note when due or when declared due, in accordance with
this Note, and (b) Maker shall observe, perform and comply with every
covenant, term and condition herein on the part of Maker to be observed,
performed or complied with.
(c) Compliance with Applicable Law. Maker shall comply in all
------------------------------
respects with the requirements of all applicable laws, the noncompliance
with which might, in any respect, materially and adversely affect Maker's
business, property, assets, operations or condition, financial or
otherwise.
(d) Notice of Default. Maker shall notify Holder in writing within
-----------------
three (3) business days after the earliest date on which any director or
officer of Maker acting diligently and in good faith becomes or should have
become aware thereof (a) of any condition or event that constitutes an
Event of Default or an event that, with the giving of notice or lapse of
time or both, would constitute and Event of Default, (b) of any other
material default or potential material default by Maker, under any note,
indenture, loan agreement, mortgage, lease, deed or other similar agreement
to which Maker is a party or by which Maker is bound, or (c) of any
2
<PAGE>
event or condition that, or an event that, with the giving of notice or
lapse of time or both, would allow or permit the attachment of any liens,
claims, security interests or encumbrances on any of Maker's assets. Such
notice shall specify the nature and period of existence of any such
condition, event, default or potential default and what action Maker has
taken, is taking or proposes to take with respect thereto.
5. Events of Default. For purposes of this Note, an "Event of Default"
-----------------
shall mean:
(a) Failure by Maker to pay any principal or interest on this Note, or
any renewal, extension, modification or rearrangement hereof, when due or
declared due; or
(b) Any representation or warranty made by Maker in this Note, in any
certificate or financial or other statement furnished to Holder by Maker
or in any other agreement between Holder and Maker is untrue in any
material respect as of the date made or furnished; or
(c) Filing by Maker of a voluntary petition or any answer seeking
reorganization, arrangement, readjustment of its debts or for any other
relief under any applicable bankruptcy act or law, or under any other
insolvency act or law, now or hereafter existing, or any action by Maker
consenting to, approving of or acquiescing in any such petition or
proceeding; the application by Maker for, or the appointment by consent or
acquiescence of, a receiver or trustee for Maker or for all or a
substantial part of the assets of Maker; the making by Maker of an
assignment for the benefit of creditors; or the inability of Maker or
admission by Maker, in writing, of its inability to pay its debts as they
mature (the term "acquiescence" as used in this Section 5(c) shall mean the
failure to file a petition or motion in opposition to such petition or
proceeding or to vacate or discharge any order, judgment or decree
providing for such appointment within sixty (60) days after the appointment
of a receiver or trustee); or
(d) Filing of an involuntary petition against Maker in bankruptcy
seeking reorganization, arrangement, readjustment of its debts or for any
other relief under any applicable bankruptcy act or law, or under any other
insolvency act or law, now or hereafter existing, and such petition remains
undismissed or unanswered for a period of sixty (60) days from such filing;
or the involuntary appointment of a receiver or trustee for Maker or for
all or a substantial part of the assets of Maker, and such appointment
remains unvacated for a period of sixty (60) days or unopposed for a period
of ten (10) days from such appointment; or the issuance of a warrant of
attachment, execution or similar process against any substantial part of
the assets of Maker and such warrant remains unbonded or undismissed for a
period of fifteen (15) days from notice to Maker of its issuance; or
3
<PAGE>
(e) Without prior written consent of Holder, Maker shall sell,
transfer, lease or otherwise dispose of all or substantially all of its
assets or property, other than sales of inventory in the ordinary course of
business; or
(f) Maker ceases to function as a going concern or conduct its
operations in the normal course of business.
6. Acceleration. Upon the occurrence of any Event of Default set forth
------------
in Section 5, Holder may (but only if Maker has not cured such Event of Default
to Holder's reasonable satisfaction within fifteen (15) days after written
notice of such Event of Default is sent by Holder to Maker), in Holder's sole
and absolute discretion and upon Maker's receipt of written notice to such
effect, declare the principal of and interest accrued but unpaid under this Note
to be forthwith due and payable, whereupon the same shall become due and payable
without any presentment, acceleration, demand, protest, notice of protest,
notice of intent to accelerate, notice of acceleration or notice of any kind,
all of which are hereby waived.
7. Prepayment. This Note may be prepaid at any time, in whole or in
----------
part, without premium or penalty, at the option of Maker.
8. Transfer. Holder may not sell, transfer, pledge, hypothecate or
--------
otherwise dispose of this Note or any interest herein without the prior written
approval of Maker, which may be granted or denied by Maker in its sole
discretion.
9. Surrender. Upon payment in full of the principal amount, this Note
---------
shall be surrendered by Holder to Maker for cancellation.
10. Notices. Unless otherwise provided herein, all notices, requests,
-------
consents and demands shall be in writing and shall be delivered to the following
addresses:
If intended for Holder, to:
Jeffrey B. Bogatin
888 Park Avenue
New York, New York 10021
Facsimile: (212) 737-5576
If intended to Maker, to:
TurboChef, Inc.
10500 Metric Drive, Suite 128
Dallas, Texas 75243
Attn: Dennis J. Jameson, Chief Financial Officer
Facsimile: (214) 340-8477
4
<PAGE>
or to such other person or address as either party shall designate to the other
from time to time in writing forwarded in like manner. All such notices,
requests, consents and demands shall be in writing and deemed to have been given
or made when (i) delivered personally; (ii) delivered by facsimile when
confirmed; or (iii) sent by overnight courier, guaranteeing two- day delivery.
11. Waiver. No waiver or consent by Holder with respect to any act or
------
omission of Maker on one occasion shall constitute a waiver or consent with
respect to any other act or omission by Maker on the same or any other occasion,
and no failure on the part of Holder to exercise and no delay in exercising any
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by Holder of any right hereunder preclude any other further
right of exercise thereof or the exercise of any other right.
12. Parties in Interest. All covenants and agreements contained in this
-------------------
Note shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto, except that Maker may not assign its rights
hereunder without the prior written consent of Holder.
13. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
-------------
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF TEXAS, WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
14. Jurisdiction and Venue. Any jurisdictional proceeding brought by or
----------------------
against any of the parties to this Note, on any dispute arising out of this Note
or any matter related hereto shall be brought in the courts of Dallas County,
State of Texas, and, by execution and delivery of this Note, each of the parties
to this Agreement accepts for itself the exclusive jurisdiction and venue of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Note after exhaustion of all appeals (or by the
appropriate appellate court if such appellate court renders judgment).
15. Severability. If any provision of this Note is held to be illegal,
------------
invalid or unenforceable under present or future laws effective during the term
of this Note, such provision shall be fully severable; this Note shall be
construed and enforced as if such illegal, invalid and unenforceable provision
had never comprised a part hereof and this Note shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this Note.
16. Modification. No modification or waiver of any provision of this Note
------------
shall be effective unless such modification or waiver shall be in writing and
executed by a duly authorized officer or Holder.
17. No Demand, Presentment. The undersigned and all parties now or
----------------------
hereafter liable for the payment hereof, whether as endorser, guarantor, surety
or otherwise, severally waive demand, presentment for payment, notice of
dishonor, notice of intention to demand or accelerate payment hereof, protest
and notice of protest and diligence on collecting or bringing suit against any
party hereof, and agree to all extensions, renewals, indulgences, releases or
changes which
5
<PAGE>
from time to time may be granted by Holder and to all partial payments hereon,
with or without notice, before or after maturity.
18. Attorneys' Fees. If this Note is placed in the hands of an attorney
---------------
for collection, or if it is collected through bankruptcy or other judicial
proceedings, Maker agrees to pay all expenses of collection, including, but not
limited to, attorneys' fees, incurred by the Holder.
MAKER: TURBOCHEF, INC.
/s/ Dennis J. Jameson
-------------------------------------------
By: Dennis J. Jameson
Title: Chief Financial Officer
6
<PAGE>
EXHIBIT 10.2
PROMISSORY NOTE
U.S. $85,000.00 DALLAS, TEXAS MARCH 30, 1996
FOR VALUE RECEIVED, the undersigned, TURBOCHEF, INC. a Delaware corporation
("Maker"), unconditionally promises to pay to the order of Philip R. McKee
("Holder"), the principal sum of Eighty-Five Thousand and No/100 Dollars
($85,000.00), in lawful money of the United States and in immediately available
funds, together with accrued but unpaid interest on the outstanding principal
balance, in like money and funds, at the rate per annum and on the dates
provided below (provided that the interest payable shall not exceed the Maximum
Rate (as hereinafter defined)).
1. Interest. The unpaid principal balance of the outstanding balance
--------
hereunder shall bear interest at the lesser of (a) six and one-half percent
(6 1/2%) per annum, and (b) the maximum rate per annum permitted by applicable
law (the "Maximum Rate"). All past-due principal and interest under this Note
shall bear interest at the lesser of (i) eighteen percent (18%) per annum, and
(ii) the Maximum Rate. Interest paid or agreed to be paid shall not exceed the
maximum amount permissible under the applicable laws of the United States or the
State of Texas and, in any contingency whatsoever, if Holder shall receive
anything of value deemed interest under such laws which would exceed the amount
of interest permissible under those laws, the excessive interest shall be
applied first to the reduction of unpaid principal outstanding under this Note
and the remainder of such excessive interest shall then be refunded to Maker if
such excessive interest exceeds unpaid principal. All interest paid or agreed to
be paid under this Note shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period until
payment in full of the principal so that the interest hereon for such full
period shall not exceed the Maximum Rate. Interest shall be computed on the per
annum basis of a year of 360 days and for the actual number of days (including
the first but excluding the last day) elapsed.
2. Payment of Principal and Interest. The outstanding principal balance of
---------------------------------
this Note, together with accrued interest thereon, shall be due and payable upon
demand.
3. Representations and Warranties. Maker does hereby represent and
------------------------------
warrant to Holder as follows:
(a) Due Organization and Qualification. Maker (i) is duly organized
----------------------------------
and validly existing and in good standing under the laws of the State of
Delaware; and (ii) is qualified and licensed to do business in, and in good
standing in, any other state or foreign jurisdiction in which the conduct
of its business or its ownership of property requires that it be so
qualified.
(b) Due Authorization; No Conflict. The execution, delivery and
------------------------------
performance of this Note are within Maker's corporate powers, have been
duly
1
<PAGE>
authorized and do not conflict with or constitute a breach of any
provision contained in Maker's governing documents, nor do they constitute
an event of default under any agreement to which Maker is now a party.
(c) No Default. No Event of Default (as hereinafter defined) and no
----------
event which, with the giving of notice or lapse of time or both, would
become such an Event of Default, has occurred and is continuing.
(d) Compliance with Laws. Maker is in compliance in all material
--------------------
respects with all applicable foreign, federal, state or local laws,
statutes, ordinances, regulations, orders and other requirements of any
federal, state, county, parish, local or foreign governmental entity or
municipality or subdivision thereof or any authority, arbitrator,
department, commission, board, bureau, body, agency, court or
instrumentality thereof (each a "Governmental Authority") having
jurisdiction over Maker, Maker's assets or the conduct of Maker's business.
4. Covenants.
---------
While any part of any of the obligations arising hereunder remains unpaid,
and unless otherwise waived by Holder in writing, Maker agrees as follows:
(a) Corporate Existence. Maker shall maintain and preserve its
-------------------
corporate existence and authority to transact business and shall remain in
good standing under the laws of the State of Delaware and all other
jurisdictions where the failure to do so maintain would have a material
adverse effect upon the assets of Maker.
(b) Observance of Terms. (a) Maker shall pay the principal and
-------------------
interest on this Note when due or when declared due, in accordance with
this Note, and (b) Maker shall observe, perform and comply with every
covenant, term and condition herein on the part of Maker to be observed,
performed or complied with.
(c) Compliance with Applicable Law. Maker shall comply in all
------------------------------
respects with the requirements of all applicable laws, the noncompliance
with which might, in any respect, materially and adversely affect Maker's
business, property, assets, operations or condition, financial or
otherwise.
(d) Notice of Default. Maker shall notify Holder in writing within
-----------------
three (3) business days after the earliest date on which any director or
officer of Maker acting diligently and in good faith becomes or should have
become aware thereof (a) of any condition or event that constitutes an
Event of Default or an event that, with the giving of notice or lapse of
time or both, would constitute and Event of Default, (b) of any other
material default or potential material default by Maker, under any note,
indenture, loan agreement, mortgage, lease, deed or other similar agreement
to which Maker is a party or by which Maker is bound, or (c) of any
2
<PAGE>
event or condition that, or an event that, with the giving of notice or
lapse of time or both, would allow or permit the attachment of any liens,
claims, security interests or encumbrances on any of Maker's assets. Such
notice shall specify the nature and period of existence of any such
condition, event, default or potential default and what action Maker has
taken, is taking or proposes to take with respect thereto.
5. Events of Default. For purposes of this Note, an "Event of Default"
-----------------
shall mean:
(a) Failure by Maker to pay any principal or interest on this Note, or
any renewal, extension, modification or rearrangement hereof, when due or
declared due; or
(b) Any representation or warranty made by Maker in this Note, in any
certificate or financial or other statement furnished to Holder by Maker
or in any other agreement between Holder and Maker is untrue in any
material respect as of the date made or furnished; or
(c) Filing by Maker of a voluntary petition or any answer seeking
reorganization, arrangement, readjustment of its debts or for any other
relief under any applicable bankruptcy act or law, or under any other
insolvency act or law, now or hereafter existing, or any action by Maker
consenting to, approving of or acquiescing in any such petition or
proceeding; the application by Maker for, or the appointment by consent or
acquiescence of, a receiver or trustee for Maker or for all or a
substantial part of the assets of Maker; the making by Maker of an
assignment for the benefit of creditors; or the inability of Maker or
admission by Maker, in writing, of its inability to pay its debts as they
mature (the term "acquiescence" as used in this Section 5(c) shall mean the
failure to file a petition or motion in opposition to such petition or
proceeding or to vacate or discharge any order, judgment or decree
providing for such appointment within sixty (60) days after the appointment
of a receiver or trustee); or
(d) Filing of an involuntary petition against Maker in bankruptcy
seeking reorganization, arrangement, readjustment of its debts or for any
other relief under any applicable bankruptcy act or law, or under any other
insolvency act or law, now or hereafter existing, and such petition remains
undismissed or unanswered for a period of sixty (60) days from such filing;
or the involuntary appointment of a receiver or trustee for Maker or for
all or a substantial part of the assets of Maker, and such appointment
remains unvacated for a period of sixty (60) days or unopposed for a period
of ten (10) days from such appointment; or the issuance of a warrant of
attachment, execution or similar process against any substantial part of
the assets of Maker and such warrant remains unbonded or undismissed for a
period of fifteen (15) days from notice to Maker of its issuance; or
3
<PAGE>
(e) Without prior written consent of Holder, Maker shall sell,
transfer, lease or otherwise dispose of all or substantially all of its
assets or property, other than sales of inventory in the ordinary course of
business; or
(f) Maker ceases to function as a going concern or conduct its
operations in the normal course of business.
6. Acceleration. Upon the occurrence of any Event of Default set forth
------------
in Section 5, Holder may (but only if Maker has not cured such Event of Default
to Holder's reasonable satisfaction within fifteen (15) days after written
notice of such Event of Default is sent by Holder to Maker), in Holder's sole
and absolute discretion and upon Maker's receipt of written notice to such
effect, declare the principal of and interest accrued but unpaid under this Note
to be forthwith due and payable, whereupon the same shall become due and payable
without any presentment, acceleration, demand, protest, notice of protest,
notice of intent to accelerate, notice of acceleration or notice of any kind,
all of which are hereby waived.
7. Prepayment. This Note may be prepaid at any time, in whole or in
----------
part, without premium or penalty, at the option of Maker.
8. Transfer. Holder may not sell, transfer, pledge, hypothecate or
--------
otherwise dispose of this Note or any interest herein without the prior written
approval of Maker, which may be granted or denied by Maker in its sole
discretion.
9. Surrender. Upon payment in full of the principal amount, this Note
---------
shall be surrendered by Holder to Maker for cancellation.
10. Notices. Unless otherwise provided herein, all notices, requests,
-------
consents and demands shall be in writing and shall be delivered to the following
addresses:
If intended for Holder, to:
Philip R. McKee
5548 Southern Hills Drive
Frisco, Texas 75034
Facsimile: (214) 625-1484
If intended to Maker, to:
TurboChef, Inc.
10500 Metric Drive, Suite 128
Dallas, Texas 75243
Attn: Dennis J. Jameson, Chief Financial Officer
Facsimile: (214) 340-8477
4
<PAGE>
or to such other person or address as either party shall designate to the other
from time to time in writing forwarded in like manner. All such notices,
requests, consents and demands shall be in writing and deemed to have been given
or made when (i) delivered personally; (ii) delivered by facsimile when
confirmed; or (iii) sent by overnight courier, guaranteeing two- day delivery.
11. Waiver. No waiver or consent by Holder with respect to any act or
------
omission of Maker on one occasion shall constitute a waiver or consent with
respect to any other act or omission by Maker on the same or any other occasion,
and no failure on the part of Holder to exercise and no delay in exercising any
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by Holder of any right hereunder preclude any other further
right of exercise thereof or the exercise of any other right.
12. Parties in Interest. All covenants and agreements contained in this
-------------------
Note shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto, except that Maker may not assign its rights
hereunder without the prior written consent of Holder.
13. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
-------------
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF TEXAS, WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
14. Jurisdiction and Venue. Any jurisdictional proceeding brought by or
----------------------
against any of the parties to this Note, on any dispute arising out of this Note
or any matter related hereto shall be brought in the courts of Dallas County,
State of Texas, and, by execution and delivery of this Note, each of the parties
to this Agreement accepts for itself the exclusive jurisdiction and venue of the
aforesaid courts, and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Note after exhaustion of all appeals (or by the
appropriate appellate court if such appellate court renders judgment).
15. Severability. If any provision of this Note is held to be illegal,
------------
invalid or unenforceable under present or future laws effective during the term
of this Note, such provision shall be fully severable; this Note shall be
construed and enforced as if such illegal, invalid and unenforceable provision
had never comprised a part hereof and this Note shall not be affected by the
illegal, invalid or unenforceable provision or by its severance from this Note.
16. Modification. No modification or waiver of any provision of this Note
------------
shall be effective unless such modification or waiver shall be in writing and
executed by a duly authorized officer or Holder.
17. No Demand, Presentment. The undersigned and all parties now or
----------------------
hereafter liable for the payment hereof, whether as endorser, guarantor, surety
or otherwise, severally waive demand, presentment for payment, notice of
dishonor, notice of intention to demand or accelerate payment hereof, protest
and notice of protest and diligence on collecting or bringing suit against any
party hereof, and agree to all extensions, renewals, indulgences, releases or
changes which
5
<PAGE>
from time to time may be granted by Holder and to all partial payments hereon,
with or without notice, before or after maturity.
18. Attorneys' Fees. If this Note is placed in the hands of an attorney
---------------
for collection, or if it is collected through bankruptcy or other judicial
proceedings, Maker agrees to pay all expenses of collection, including, but not
limited to, attorneys' fees, incurred by the Holder.
MAKER: TURBOCHEF, INC.
/s/ Dennis J. Jameson
--------------------------------------------
By: Dennis J. Jameson
Title: Chief Financial Officer
6
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,027,868
<SECURITIES> 0
<RECEIVABLES> 207,999
<ALLOWANCES> 0
<INVENTORY> 347,503
<CURRENT-ASSETS> 1,647,844
<PP&E> 410,037
<DEPRECIATION> 174,259
<TOTAL-ASSETS> 2,172,351
<CURRENT-LIABILITIES> 1,086,329
<BONDS> 0
0
0
<COMMON> 128,681
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,172,351
<SALES> 1,048,888
<TOTAL-REVENUES> 1,054,008
<CGS> 796,431
<TOTAL-COSTS> 1,415,451
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,048
<INCOME-PRETAX> (364,491)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (364,491)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
