-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CM1Cf0QDkKaLlyyCNrMvcpkYpUFieYXAf5D4MDerFtY9YRm7nokQXO4BUjE4MeSw giC4iM3uGGALka6tk69C3g== 0001188112-04-001022.txt : 20040630 0001188112-04-001022.hdr.sgml : 20040630 20040630171553 ACCESSION NUMBER: 0001188112-04-001022 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040521 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040630 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TURBOCHEF TECHNOLOGIES INC CENTRAL INDEX KEY: 0000916545 STANDARD INDUSTRIAL CLASSIFICATION: REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580] IRS NUMBER: 481100390 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-23478 FILM NUMBER: 04892104 BUSINESS ADDRESS: STREET 1: 10500 METRIC DRIVE SUITE 128 CITY: DALLAS STATE: TX ZIP: 75243 BUSINESS PHONE: 2143419471 MAIL ADDRESS: STREET 1: 10500 NETRIC DRIVE STREET 2: SUITE 128 CITY: DALLAS STATE: TX ZIP: 75243 FORMER COMPANY: FORMER CONFORMED NAME: TURBOCHEF INC DATE OF NAME CHANGE: 19940207 8-K/A 1 t8ka-3009.txt 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------------------- FORM 8-K/A (AMENDMENT NO. 1) CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) MAY 21, 2004 ------------------------------ TURBOCHEF TECHNOLOGIES, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) DELAWARE 0-23478 48-1100390 - -------------------------------- -------------------- ------------------------ (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 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 ---------------------------- NOT APPLICABLE - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) EXPLANATORY NOTE: On May 28, 2004, TurboChef Technologies, Inc. (the "Registrant") filed a Current Report on Form 8-K in connection with the consummation of a series of transactions with Enersyst Development Center, L.L.C. ("Enersyst"), and the completion of a private placement of shares of the Registrant's common stock to certain investors (the "Investors"). The Registrant hereby amends that Current Report to file the financial statements of Enersyst and the pro forma financial information required by Items 7(a) and 7(b) of Form 8-K. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Businesses Acquired. The following financial statements of Enersyst are filed as Exhibit 99.2 to this Form 8-K/A: (1) REPORTS OF INDEPENDENT AUDITORS (2) BALANCE SHEETS AS OF MARCH 31, 2004 (UNAUDITED), DECEMBER 31, 2003 AND 2002 (3) STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (4) STATEMENTS OF CHANGES IN MEMBERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2004 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (5) STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 2003 AND 2002 (6) NOTES TO FINANCIAL STATEMENTS (b) Pro Forma Financial Information. The following pro forma financial information of the Registrant and Enersyst is filed as Exhibit 99.3 to this Form 8-K/A: (1) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2004 (2) UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003 AND THE THREE MONTHS ENDED MARCH 31, 2004. (c) Exhibits. EXHIBIT NO. DESCRIPTION ----------- ----------- 2.1 Contribution Agreement, dated May 21, 2004 by and among the Registrant, Enersyst and the members of Enersyst* 10.1 Preferred Unit Exchange Agreement, dated May 21, 2004, by and among the Registrant and the members of Enersyst* 10.2 Form of Subscription Agreement entered into as of May 21, 2004 by the Registrant and each of the Investors* 10.3 Form of Registration Rights Agreement, dated May 21, 2004, by and among the Registrant and the Investors* 10.4 Amended and Restated Operating Agreement of Enersyst, dated May 21, 2004* 23.1 Consent of Whitley Penn 23.2 Consent of Deloitte & Touche LLP 99.1 Press Release of the Registrant dated May 24, 2004* 99.2 Financial Statements of Enersyst 99.3 Unaudited Pro Forma Condensed Consolidated Financial Information of the Registrant and Enersyst -------------------- * Previously filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TURBOCHEF TECHNOLOGIES, INC. (REGISTRANT) By: /s/ James A. Cochran --------------------------------- James A. Cochran Senior Vice President and Chief Financial Officer Date: June 30, 2004 EX-23.1 2 tex23_1-3009.txt EX-23.1 EXHIBIT 23.1 Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation of our report dated April 23, 2004 on the financial statements of Enersyst Development Center, L.L.C. as of December 31, 2003 and for the year then ended, included in this Form 8-K/A (Amendment No. 1) into TurboChef Technologies, Inc.'s previously filed Registration Statements on Form S-8, File No.'s 333-81571, 333-76662 and 333-116225, and Form S-3, File No. 333-82518. /s/ Whitley Penn Dallas, Texas June 25, 2004 EX-23.2 3 tex23_2-3009.txt EX-23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-82518 of Turbochef Technologies, Inc. on Form S-3 and Registration Statements 333-81571, 333-76662 and 333-116225 of Turbochef Technologies, Inc. on Form S-8 of our report dated May 31, 2003 (which report expresses an unqualified opinion and includes an explanatory paragraph relating to Enersyst Development Center, L.L.C. adopting Statement of Financial Accounting standards No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002) relating to the financial statements of Enersyst Developement Center, L.L.C. as of and for the year ended December 31, 2002, appearing in this Current Report on Form 8-K/A (Amendment No. 1) of Turbochef Technologies, Inc. DELOITTE & TOUCHE LLP Fort Worth, Texas June 30, 2004 EX-99.2 4 tex99_2-3009.txt EX-99.2 EXHIBIT 99.2 ENERSYST DEVELOPMENT CENTER, L.L.C. FINANCIAL STATEMENTS AS OF MARCH 31, 2004 (UNAUDITED), FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED) AND THE YEARS ENDED DECEMBER 31, 2003 AND 2002 TABLE OF CONTENTS Reports of Independent Auditors.............................................. 1 Financial Statements: Balance Sheets.......................................................... 3 Statements of Operations................................................ 4 Statements of Changes in Members' Equity................................ 5 Statements of Cash Flows................................................ 6 Notes to Financial Statements........................................... 7 REPORT OF INDEPENDENT AUDITORS To the Members of Enersyst Development Center, L.L.C. We have audited the accompanying balance sheet of Enersyst Development Center, L.L.C., as of December 31, 2003, and the related statements of operations, changes in members' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Enersyst Development Center, L.L.C. as of December 31, 2003, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Whitley Penn Dallas, Texas April 23, 2004 INDEPENDENT AUDITORS' REPORT Enersyst Development Center, L.L.C.: We have audited the accompanying balance sheet of Enersyst Development Center, L.L.C. (the "Company") as of December 31, 2002, and the related statements of operations, members' equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Enersyst Development Center, L.L.C. at December 31, 2002, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note B, effective January 1, 2002, in connection with the adoption of Statement of Financial Accounting Standards No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, the Company ceased amortization of goodwill. DELOITTE & TOUCHE LLP Fort Worth, Texas May 31, 2003
ENERSYST DEVELOPMENT CENTER, L.L.C. BALANCE SHEETS MARCH 31, DECEMBER 31, 2004 2003 2002 ------------ ------------ ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 34,573 $ 21,882 $ 45,035 Accounts receivable, less allowance for doubtful accounts of $21,113 in 2004 and 2003 and $66,207 in 2002 943,497 930,316 1,141,124 Other current assets 169,803 164,996 20,792 ------------ ------------ ------------ Total current assets 1,147,873 1,117,194 1,206,951 Property and equipment, net 681,782 710,614 700,444 Goodwill 5,835,779 5,835,779 5,835,779 Other intangible assets, net 5,347,526 5,539,213 6,245,722 ------------ ------------ ------------ Total assets $ 13,012,960 $ 13,202,800 $ 13,988,896 ============ ============ ============ LIABILITIES AND MEMBERS' EQUITY Current liabilities: Accounts payable $ 73,820 $ 109,436 $ 139,566 Accrued expenses 130,611 103,779 102,826 Line-of-credit 1,075,000 1,100,000 - Current portion of note payable 5,278,479 5,523,819 1,303,456 ------------ ------------ ------------ Total current liabilities 6,557,910 6,837,034 1,545,848 Line-of-credit, member - - 485,000 Notes payable, members 1,402,241 1,377,241 1,277,241 Note payable - - 5,553,169 ------------ ------------ ------------ Total liabilities 7,960,151 8,214,275 8,861,258 Commitments and contingencies - - - Members' equity 5,052,809 4,988,525 5,127,638 ------------ ------------ ------------ Total liabilities and members' equity $ 13,012,960 $ 13,202,800 $ 13,988,896 ============ ============ ============ See accompanying notes to financial statements. 3
ENERSYST DEVELOPMENT CENTER, L.L.C. STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, 2004 2003 2003 2002 ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) Revenues: Royalties and license fees $ 823,255 $ 945,846 $ 2,581,356 $ 2,599,150 Development and consulting projects 183,792 387,146 1,209,552 1,065,854 Other - - - 13,066 ----------- ----------- ----------- ----------- Total revenues 1,007,047 1,332,992 3,790,908 3,678,070 Expenses: Direct project costs 17,262 80,356 176,669 221,440 Compensation and related costs 402,993 454,566 1,687,328 1,696,097 Selling, general and administrative expenses 181,739 195,780 719,799 824,468 Depreciation and amortization 222,680 204,886 834,788 827,943 ----------- ----------- ----------- ----------- Total expenses 824,674 935,588 3,418,584 3,569,948 ----------- ----------- ----------- ----------- Income from operations 182,373 397,404 372,324 108,122 Other income (expense): Interest income - - 975 202 Interest expense (94,697) (108,662) (426,207) (458,344) Interest expense, members (23,392) (32,810) (96,067) (209,185) Gain on extinguishment of debt - - - 1,028,758 Other income - - 9,862 - ----------- ----------- ----------- ----------- Total other income (expense) (118,089) (141,472) (511,437) 361,431 ----------- ----------- ----------- ----------- Net income (loss) $ 64,284 $ 255,932 $ (139,113) $ 469,553 =========== =========== =========== =========== See accompanying notes to financial statements. 4
ENERSYST DEVELOPMENT CENTER, L.L.C. STATEMENTS OF CHANGES IN MEMBERS' EQUITY NUMBER OF UNITS AMOUNT ------------- --------------- Balance at December 31, 2001 102,923 $ 4,567,724 Issuance of membership interests 4,190 90,361 Net income - 469,553 ------------- --------------- Balance at December 31, 2002 107,113 5,127,638 Net loss - (139,113) ------------- --------------- Balance at December 31, 2003 107,113 4,988,525 Net income (Unaudited) - 64,284 ------------- --------------- Balance at March 31, 2004 (Unaudited) 107,113 $ 5,052,809 ============= =============== See accompanying notes to financial statements. 5
ENERSYST DEVELOPMENT CENTER, L.L.C. STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, 2004 2003 2003 2002 ----------- ----------- ----------- ----------- (UNAUDITED) (UNAUDITED) OPERATING ACTIVITIES Net income (loss) $ 64,284 $ 255,932 $ (139,113) $ 469,553 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 30,994 16,431 71,273 74,830 Amortization 191,687 188,455 763,515 753,113 Gain on extinguishment of debt - - - (1,028,758) Changes in operating assets and liabilities: Accounts receivable (13,181) (179,373) 210,808 (163,830) Other current assets (4,807) (224,010) (144,204) (8,793) Other intangible assets - (57,006) (57,006) - Accounts payable (35,616) (11,834) (30,130) (36,780) Accrued expenses 26,832 92,058 953 (58,870) ----------- ----------- ----------- ----------- Net cash provided by operating activities 260,193 80,653 676,096 465 INVESTING ACTIVITIES Purchases of property and equipment (2,162) (6,232) (81,443) (34,136) FINANCING ACTIVIITIES Net borrowings (payments) under line-of-credit (25,000) 1,150,000 1,100,000 - Net payments under line-of-credit, member - (485,000) (485,000) (115,000) Proceeds from notes payable, members 25,000 25,000 100,000 1,103,833 Payments on note payable (245,340) (629,116) (1,332,806) (1,011,650) Issuance of membership interests - - - 90,360 ----------- ----------- ----------- ----------- Net cash provided by (used in) financing activities (245,340) 60,884 (617,806) 67,543 ----------- ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents 12,691 135,305 (23,153) 33,872 Cash and cash equivalents at beginning of period 21,882 45,035 45,035 11,163 ----------- ----------- ----------- ----------- Cash and cash equivalents at end of period $ 34,573 $ 180,340 $ 21,882 $ 45,035 =========== ============ =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for interest $ 118,089 $ 141,472 $ 521,860 $ 686,115 =========== ============ =========== =========== See accompanying notes to financial statements. 6
ENERSYST DEVELOPMENT CENTER, L.L.C. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2004 (UNAUDITED) AND DECEMBER 31, 2003 AND 2002 A. NATURE OF BUSINESS Enersyst Development Center, L.L.C. (the "Company") was formed June 25, 1996. The Company is primarily engaged in the development and licensing of heat transfer technology for use mainly in commercial foodservice ovens. The Company's corporate offices are located in Dallas, Texas. On May 24, 2001 Cairnwood Food Group, LLC ("CFG") acquired a majority interest in the Company. As of March 31, 2004 and December 31, 2003, CFG had an 85.56% interest in the Company with employees and former employee members owning the balance. B. ACCOUNTING POLICIES A summary of the Company's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: BASIS OF ACCOUNTING The accounts are maintained and the financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts in the financial statements and accompanying notes. Actual results could differ from these estimates and assumptions. CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At March 31, 2004 and December 31, 2003 and 2002, the Company had no such investments included in cash and cash equivalents. ACCOUNTS RECEIVABLE Accounts receivable primarily relate to royalties earned but not paid by customers and are governed by license agreements between the Company and the licensee. Licensee royalty payments are typically due within forty-five days of the end of each quarter (one licensee's payments are due semiannually within forty-five days of the end of each six month period). In the event a licensee fails to make timely royalty payments the Company is allowed to, upon expiration of an interim cure period, in addition to seeking equitable payment in full, terminate such license agreement. 7 B. ACCOUNTING POLICIES - CONTINUED ACCOUNTS RECEIVABLE - CONTINUED Credit is extended to non-license related customers on an uncollateralized basis. The Company maintains allowances for potential credit losses which, when realized, have been within management's expectations. In the event of complete non-performance by these customers, the maximum exposure to the Company is the outstanding accounts receivable balance at the date of non-performance. The Company had an allowance for doubtful accounts as of March 31, 2004 and December 31, 2003 and 2002 in the amount of $21,113, $21,113 and $66,207, respectively. PROPERTY AND EQUIPMENT Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: buildings and improvements - 20 years; all other property and equipment - 3 to 10 years. Expenditures for normal maintenance and repairs are expensed as incurred. The cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses are recognized in the accompanying statement of operations of the respective period. GOODWILL AND OTHER INTANGIBLE ASSETS In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, GOODWILL AND OTHER INTANGIBLES ASSETS, which addresses the accounting for goodwill and other intangible assets. Under SFAS No. 142, effective January 1, 2002 goodwill and intangible assets with indefinite lives are no longer amortized, but reviewed on an annual basis for impairment. Other intangible assets consist of patents acquired and deferred financing costs, which are amortized over 10 years and the terms of the related debt, respectively. Patent filings and maintenance costs not from acquisitions are expensed as incurred. IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews its long-lived assets for impairment in accordance with the guidelines of SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS. SFAS No. 144 requires that, when events or circumstances indicate that the carrying amount of an asset may not be recoverable, the Company should determine if impairment of value exists. If the estimated undiscounted future net cash flows are less than the carrying amount of the assets, an impairment exists and an impairment loss must be calculated and recorded. If an impairment exists, the impairment loss is calculated based on the excess of the carrying amount of the asset over the asset's fair value. Any impairment loss is treated as a permanent reduction in the carrying value of the assets. Through March 31, 2004 and December 31, 2003, no events or circumstances have arisen which would require the Company to record a provision for impairment on its long-lived assets. 8 B. ACCOUNTING POLICIES - CONTINUED REVENUE RECOGNITION The Company receives license and royalty fee payments from licensees based on sales of licensees' related products during the prior quarter or semiannual periods. The Company recognizes revenues and related expenses based on the sales dates of the licensees' products. Development and consulting revenues are recorded based on attainment of scheduled performance milestones. INCOME TAXES The Company is organized as a Limited Liability Company for federal income tax purposes. As a result, income or losses are taxable or deductible to the members rather than at the corporate level; accordingly, no provision has been made for federal income taxes in the accompanying financial statements. The Company is subject to state franchise tax, which is based on income or equity of the Company. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. Research and development expenses for the three months ended March 31, 2004 and 2003 were $76,000 and $58,000, respectively, and for the years ended December 31, 2003 and 2002 were approximately $220,000 and $250,000, respectively and is included in selling, general and administrative expenses in the Statements of Operations. MEMBERSHIP UNIT PROFIT INTEREST OPTION BASED COMPENSATION The Company has elected to follow Accounting Principles Board Opinion ("APB") No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations in accounting for its employee membership unit profit interest options. The Company accounts for membership unit profit interest options based compensation for non-employees under the fair value method prescribed by SFAS No. 123, ACCOUNTING FOR STOCK BASED COMPENSATION. FAIR VALUE OF FINANCIAL INSTRUMENTS In accordance with the reporting requirements of SFAS No. 107, DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this statement and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments. The estimated fair values of accounts receivable and accounts payable approximate their carrying amounts due to the relatively short maturity of these instruments. The carrying value of short and long-term debt also approximates fair value since these instruments bear market rates of interest. None of the financial instruments are held for trading purposes. 9 B. ACCOUNTING POLICIES - CONTINUED IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In April 2002, the FASB issued SFAS No. 145, RESCISSION OF FASB STATEMENTS NO. 4, 44 AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL CORRECTIONS. SFAS No. 13 is amended to eliminate any inconsistency between the required accounting for sale leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to leaseback transactions. This statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company adopted this standard in its year beginning January 1, 2003, resulting in the Company reclassifying its 2002 extraordinary gain on extinguishment of debt to other income (expense) in the financial statements. In May 2003, the FASB issued SFAS No. 150, ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS No. 150 requires that certain financial instruments, which under previous guidance could be accounted for as equity, be classified as liabilities in the accompanying balance sheet. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and is otherwise effective for the Company in the fourth quarter of 2003. Adoption of SFAS No. 150 did not have an impact on the Company's results of operations or financial condition. In November 2002, the FASB issued Interpretation No. 45, GUARANTOR'S ACCOUNTING AND DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF OTHERS, which elaborates on the disclosures to be made by a Guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. Interpretation No. 45 is effective for guarantees issued or modified after December 31, 2002 and the disclosure requirements in this interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. Adoption of Interpretation No. 45 did not have an impact on the Company's results of operations or financial condition. In December 2003, the FASB issued Interpretation No. 46 (revised December 2003), CONSOLIDATION OF VARIABLE INTEREST ENTITIES, ("FIN 46R") which addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, CONSOLIDATION OF VARIABLE INTEREST ENTITIES, which was issued in January 2003. The Company will be required to apply FIN 46R to variable interests in variable interest entities ("VIEs") created after December 31, 2003. For variable interests in VIEs created before January 1, 2004, FIN 46R will be applied beginning on January 1, 2005. For any VIEs that must be consolidated under FIN 46R that were created before January 1, 2004, the assets, liabilities and noncontrolling interests of the VIE initially would be measured at their carrying amounts with any difference between the net amount added to the consolidated balance sheet and any previously recognized interest being recognized as the cumulative effect of a change in accounting principle. If determining the carrying amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities and noncontrolling interest of the VIE. The Company owns no interests in variable interest entities; therefore, FIN 46R will not affect the Company's results of operations or financial condition. RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to the current year presentation. 10 C. PROPERTY AND EQUIPMENT Property and equipment consist of the following:
MARCH 31, DECEMBER 31, 2004 2003 2002 -------------- ------------- ------------- (UNAUDITED) Land $ 192,000 $ 192,000 $ 192,000 Building and improvements 434,494 434,494 433,520 Computer hardware and software 116,785 114,623 94,523 Machinery and equipment 92,225 92,225 45,779 Office furniture and equipment 56,476 56,476 55,356 Automobiles and other 13,777 13,777 975 -------------- ------------- ------------- Total property and equipment 905,757 903,595 822,153 Less accumulated depreciation 223,975 192,981 121,709 -------------- ------------- ------------- Property and equipment, net $ 681,782 $ 710,614 $ 700,444 ============== ============= =============
Depreciation expense was $30,994 and $16,431 for the three months ended March 31, 2004 and 2003, respectively, and $71,273 and $74,830 for the years ended December 31, 2003 and 2002, respectively. D. GOODWILL Goodwill of $6,081,250 is recorded net of related accumulated amortization of $245,471 at March 31, 2004 and December 31, 2003 and 2002. The Company's annual evaluation of goodwill impairment was performed as of December 31, 2003. No impairment was identified as a result of such evaluation. E. OTHER INTANGIBLE ASSETS Other intangible assets consist of the following:
MARCH 31, DECEMBER 31, 2004 2003 2002 -------------- ------------- ------------- (UNAUDITED) Patents $ 7,440,789 $ 7,440,789 $ 7,440,789 Deferred financing costs 57,006 57,006 - -------------- ------------- ------------- Total other intangible assets 7,497,795 7,497,795 7,440,789 Less accumulated amortization 2,150,269 1,958,582 1,195,067 -------------- ------------- ------------- Other intangible assets, net $ 5,347,526 $ 5,539,213 $ 6,245,722 ============== ============= =============
Future amortization of other intangible assets at December 31, 2003 are as follows: 2004 $ 775,173 2005 744,079 2006 744,079 2007 744,079 2008 744,079 Thereafter $ 1,787,724 11 E. OTHER INTANGIBLE ASSETS - CONTINUED Other intangible assets are tested annually for impairment, and no impairment losses have been identified as a result of such evaluations. Amortization expense of other intangible assets was $191,687 and $188,455 for the three months ended March 31, 2004 and 2003, respectively, and $763,515 and $753,113 for the years ended December 31, 2003 and 2002, respectively. F. LINE-OF-CREDIT In March 2003, the Company entered into a $1,250,000 revolving line-of-credit with a lending institution, subordinate to the Company's note payable to a different lending institution. As of March 31, 2004 and December 31, 2003, $1,075,000 and $1,100,000 was outstanding, respectively. The loan bears interest at the greater of prime plus 1% or the Federal Funds Rate plus 1.5% (5.0% as of December 31, 2003) with monthly interest only payments due prior to maturity on December 31, 2004, at which time all outstanding principal and unpaid interest is due. The line-of-credit is guaranteed by a member. G. NOTES PAYABLE, MEMBERS The Company has entered into a note payable to a member, with interest of 6.75%, and $1,228,833 and $1,203,833 was outstanding as of March 31, 2004 and December 31, 2003, respectively. The note payable is secured by the assets of the Company, matures August 25, 2006, and is subordinate to the note payable due to a lending institution, as described in Note H. There is an agreement with the senior lender to the Company that an additional $25,000 per quarter may be drawn on this note in order to pay management fees to a related entity of the member, as described in Note K. Interest only payments are due monthly with all outstanding principal and unpaid interest due at the maturity date. The Company has entered into a note payable to a member, with interest of 6.75%, and $173,408 outstanding as of March 31, 2004 and December 31, 2003. The note requires interest only payments prior to refinancing or retirement of the senior lender note. Principal and interest payments are due monthly with all outstanding principal and unpaid interest due within twenty-four months of refinancing or extinguishment of the senior lender note. H. NOTE PAYABLE The Company has entered into an amended senior note payable to a lending institution with monthly principal payments due of $109,306 through December 31, 2004, at which time all outstanding principal and unpaid interest is due. As of March 31, 2004 and December 31, 2003, $5,278,479 and $5,523,819 was outstanding, respectively, under this note payable. This note is collateralized by all assets of the Company, which includes personal property, real property, and intangible assets. A CFG related entity has guaranteed $1 million of this note. This note bears interest at prime plus 2.0% (6.0% at December 31, 2003). This note contains covenants pertaining to quarterly EBITDA, monthly minimum tangible net worth, and monthly financial reporting requirements. The Company is in compliance with the amended debt covenants at March 31, 2004 and December 31, 2003. 12 I. MEMBERSHIP UNIT PROFIT INTEREST OPTIONS The Company has issued membership unit profit interest options to employees. Such units exercised under these options will only participate in distributions to members after the majority member has been distributed $5,262,794, which is equivalent to this member's total contributions to the Company. Distributions can only be made to members after the senior debt has been repaid in full. Such options are vested upon date of grant, have a $0.01 exercise price per option and have a contractual life of 10 years, as long as the employee remains employed by the Company. A summary of the Company's membership unit profit interest options activity is as follows: Number of Membership Unit Profit Interest Options ------------------ Balance at December 31, 2001 2,785 Granted 6,701 Exercised - Forfeited - ------------------ Balance at December 31, 2002 9,486 Granted 2,500 Exercised - Forfeited - ------------------ Balance at December 31, 2003 11,986 Granted (Unaudited) - Exercised (Unaudited) - Forfeited (Unaudited) - ------------------ Balance at March 31, 2004 (Unaudited) 11,986 ================== The Black Scholes value for membership unit profit interest options granted for pro forma disclosure purposes in accordance with SFAS No. 123 was nominal, and hence not disclosed. J. COMMITMENTS AND CONTINGENCIES The Company is involved in various legal proceedings in the normal course of business. Management believes the outcome of these matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company. K. RELATED PARTY TRANSACTIONS CONSULTING AGREEMENT The Company has a consulting agreement with a related party of a member to provide management consulting services for $200,000 per year. The Company incurred $50,000 for the three months ended March 31, 2004 and 2003 and $200,000 for the years ended December 31, 2003 and 2002 related to such services, of which $25,000, $100,000 and $25,000 has been added to notes payable, members through March 31, 2004 and December 31, 2003 and 2002, respectively. 13 K. RELATED PARTY TRANSACTIONS - CONTINUED NOTES PAYABLE, MEMBERS The Company has entered into certain notes payable agreements with members of the Company as discussed in Note G. L. RISK CONCENTRATIONS As of March 31, 2004, the Company had two customers that accounted for approximately 43% and 29% of the Company's accounts receivable balance. As of December 31, 2003, the Company had four customers that accounted for approximately 22%, 19%, 17%, and 14% of the Company's accounts receivable balance. As of December 31, 2002, the Company had five customers that accounted for approximately 18%, 17%, 15%, 15%, and 11% of the Company's accounts receivable balance. For the three months ended March 31, 2004, the Company had two customers that accounted for approximately 41% and 20% of revenues. For the three months ended March 31, 2003, the Company had two customers that accounted for approximately 30% and 21% of revenues. For the year ended December 31, 2003, the Company had three customers that accounted for approximately 30%, 19%, and 10% of revenues. For the year ended December 31, 2002, the Company had three customers that accounted for approximately 32%, 21%, and 10% of revenues. M. EMPLOYEE BENEFIT PLAN The Company sponsors a 401(k) employee savings plan (the "Plan") covering essentially all employees who meet certain minimum age and length of service requirements. The Plan provides for payment of the employee's vested portion of the Plan upon retirement, termination, disability or death. The Plan is funded by employee salary deferral contributions as well as Company matching contributions which are at the discretion of the members. Company matching contributions to the plan totaled $2,700, $4,110, $13,747 and $12,478 for the three months ended March 31, 2004 and 2003 and the years ended December 31, 2003 and 2002, respectively. N. SUBSEQUENT EVENT (UNAUDITED) On May 21, 2004, TurboChef Technologies, Inc. (the "Registrant") entered into a Contribution Agreement (the "Contribution Agreement") with the Company and the members of the Company (the "Members"). Pursuant to the Contribution Agreement, the Registrant was issued 7,247,081 common membership units of the Company (the "Common Units") in exchange for a capital contribution in the amount of $7,247,081, and the Members exchanged all of their units of membership interest of the Company for preferred membership units of the Company (the "Preferred Units"). The Registrant's capital contribution was used to retire the Company's outstanding indebtedness. 14 N. SUBSEQUENT EVENT (UNAUDITED) - CONTINUED In addition, the Registrant and the Members entered into a Preferred Unit Exchange Agreement (the "Exchange Agreement") pursuant to which the Members were granted the right to exchange their Preferred Units for shares of the Registrant's common stock, par value $0.01 per share ("Common Stock"). As of May 21, 2004, the Preferred Units were exchangeable for a total of 1,832,924 shares of Common Stock based on an exchange price of $3.465 per share. The exchange price is subject to adjustment only in the event of a stock split, stock dividend, recapitalization or other similar events. The Members also were granted piggy-back registration rights under the Exchange Agreement with respect to the shares of Common Stock for which their Preferred Units may be exchanged. The Members and the Registrant also entered into an Amended and Restated Operating Agreement of the Company (the "Operating Agreement"). Under the Operating Agreement, the Registrant will serve as the Company's managing member, and will be exclusively responsible for the management of the assets, affairs, and operations of the Company. 15 EX-99.3 5 tex99_3-3009.txt EX-99.3 EXHIBIT 99.3 TURBOCHEF TECHNOLOGIES, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The unaudited pro forma condensed consolidated financial statements have been prepared to give effect to TurboChef Technologies, Inc.'s (TurboChef) acquisition of Enersyst Development Center, L.L.C. (Enersyst) pursuant to the terms of a Contribution Agreement entered into with Enersyst and the members of Enersyst (the Members) on May 21, 2004. In connection therewith, TurboChef made a capital contribution in the amount of $7,247,081 in exchange for 7,247,081 shares of common membership units (the Common Units) of Enersyst. The Members exchanged all of their units of membership interest for preferred membership units (the Preferred Units) and the Members and TurboChef entered into a Preferred Unit Exchange Agreement (the Exchange Agreement) pursuant to which the Members were granted the right to exchange their Preferred Units for shares of TurboChef common stock, par value $.01 per share (Common Stock). As of May 21, 2004, the effective date of the Contibution Agreement and the Exchange Agreement, the Preferred Units were exchangeable for a fixed total of 1,832,924 shares of Common Stock based on the exchange price of $3.465 per share. The exchange price is subject to adjustment in the event of a stock split, stock dividend, recapitalization or other similar events. The Members and TurboChef also entered into and Amended and Restated Operating Agreement of Enersyst (the Operating Agreement). Under the Operating Agreement, TurboChef will serve as the managing member and will be exclusively responsible for the management and operations of Enersyst. TurboChef financed the capital contribution with a portion of the proceeds it received in connection with a private placement of 3,453,629 shares of its Common Stock at $2.90 per share for aggregate proceeds received of $10,015,524. The pro forma condensed consolidated balance sheet gives effect to the Enersyst acquisition as if it had occurred on March 31, 2004 combining the balance sheets of TurboChef and Enersyst as of that date. Additionally, the pro forma condensed consolidated balance sheet gives effect to the private placement as if it had occurred on March 31, 2004. The pro forma condensed consolidated statements of operations for the three months ended March 31, 2004 and for the year ended December 31, 2003 give effect to the acquisition as if it had occurred on January 1, 2003 combining the results of TurboChef for the three months ended March 31, 2004 and the year ended December 31, 2003 with those of Enersyst for the three months ended March 31, 2004 and for the year ended December 31, 2003. The pro forma consolidated statements of operations for the three months ended March 31, 2004 and for the year ended December 31, 2003 include appropriate adjustments for amortization, interest and other items related to the transaction. The pro forma adjustments are based on preliminary appraisal results, estimates, available information and certain assumptions that management deems appropriate. The pro forma consolidated financial information is unaudited and does not purport to represent the consolidated results that would have been obtained had the transactions occurred at the beginning of 2003, as assumed, nor does it purport to present the results which may be obtained in the future.
TURBOCHEF TECHNOLOGIES, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET MARCH 31, 2004 (IN THOUSANDS, EXCEPT SHARE INFORMATION) TURBOCHEF ENERSYST ADJUSTMENTS COMBINED ------------------------------------------------------------------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 5,593 $ 35 $ 10,000 (A) $ 8,079 (302) (B) (7,247) (C) Accounts receivable, net 787 943 1,730 Other receivables, net 52 - 52 Inventories 2,542 - 2,542 Prepaid expense and other current assets 287 170 457 ------------------------------------------------------------------------ Total current assets 9,261 1,148 2,451 12,860 Property and equipment, net 1,471 682 (362) (B) 1,791 Intangible and other assets, net 109 5,347 7,173 (B) 12,629 Goodwill - 5,836 (3,819) (B) 2,017 ------------------------------------------------------------------------ Total assets $ 10,841 $ 13,013 $ 5,443 $ 29,297 ======================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,128 $ 74 $ 1,202 Other payables 1,445 - 1,445 Accrued expenses 1,172 131 1,303 Notes payable - 6,353 (6,353) (C) - Deferred revenue 267 - 267 Accrued warranty and upgrade costs 878 - 878 ------------------------------------------------------------------------ Total current liabilities 4,890 6,558 (6,353) 5,095 Notes payable, members - 1,402 (1,402) (C) - Deferred income tax liabilities 1,900 (B) 1,900 ------------------------------------------------------------------------ Total liabilities 4,890 7,960 (5,855) 6,995 ------------------------------------------------------------------------ Convertible, redeemable preferred stock 12,605 - - 12,605 ------------------------------------------------------------------------ Equity: Members' equity - 5,053 (5,053) (B) - Non-redeemable, convertible preferred units exchangeable into 1,832,924 shares of TurboChef Common Stock 6,351 (B) 6,351 Stockholders' equity: Common stock 262 - 35 (A) 297 Additional paid-in capital 56,122 - 9,965 (A) 66,087 Accumulated deficit (62,544) - (62,544) Notes receivable for stock issuances (43) - (43) Treasury stock - at cost (451) - (451) ------------------------------------------------------------------------ Total equity (6,654) 5,053 11,298 9,697 ------------------------------------------------------------------------ Total liabilities and equity $ 10,841 $ 13,013 $ 5,443 $ 29,297 ========================================================================
TURBOCHEF TECHNOLOGIES, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2004 (IN THOUSANDS, EXCEPT PER SHARE INFORMATION) Pro Forma Pro Forma TurboChef Enersyst Adjustments Combined ------------------------------------------------------------ Total revenue $ 946 $ 1,007 $ - $ 1,953 ------------------------------------------------------------ Costs and expenses: Cost of goods sold 447 - - 447 Selling, general and administrative 2,165 749 127 (D) 3,041 Research and development 311 76 - 387 ------------------------------------------------------------ Total operating expenses 2,923 825 127 3,875 ------------------------------------------------------------ Operating income (loss) (1,977) 182 (127) (1,922) Interest and other (expense), net 31 (118) 118 (E) 31 ------------------------------------------------------------ Net income (loss) $ (1,946) $ 64 $ (9) $ (1,891) ============================================================ Net (loss) per share: Basic and diluted $ (0.08) $ (0.07) ============== ============== Weighted average shares outstanding: 25,847 28,521 ============== ==============
TURBOCHEF TECHNOLOGIES, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2003 (IN THOUSANDS, EXCEPT PER SHARE INFORMATION) Pro Forma Pro Forma TurboChef Enersyst Adjustments Combined ------------------------------------------------------------ Total revenue $ 4,340 $ 3,791 $ 8,131 ------------------------------------------------------------ Costs and expenses: Cost of goods sold 2,338 2,338 Selling, general and administrative 6,523 3,199 488 (D) 10,210 Research and development 897 220 1,117 Compensation and severance related to termination of former officers and directors 7,585 7,585 ------------------------------------------------------------ Total operating expenses 17,343 3,419 488 21,250 ------------------------------------------------------------ Operating income (loss) (13,003) 372 (488) (13,119) Interest and other (expense), net (1,088) (511) 522 (E) (1,077) ------------------------------------------------------------ Net (loss) (14,091) (139) 34 (14,196) Preferred stock dividends and beneficial conversion (12,800) (12,800) ------------------------------------------------------------ Net (loss) available to common shareholders $ (26,891) $ (139) $ 34 $ (26,996) ============================================================ Net (loss) per share: Basic and diluted $ (1.32) $ (1.17) ============== ============== Weighted average shares outstanding: 20,393 23,067 ============== ==============
TURBOCHEF TECHNOLOGIES, INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET ADJUSTMENTS (A) Records the private placement of 3,453,629 shares of TurboChef Common Stock at a per share price of $2.90 for proceeds of $10.0 million net of transaction costs. (B) Records the Enersyst acquisition, including (1) capital contribution of $7.2 million in exchange for the Common Units, (2) the Members exchange of all of their units of membership interest for the Preferred Units exchangeable for a fixed 1,832,924 shares of TurboChef Common Stock based on an exchange price of $3.465 per share, (3) payment of all outstanding indebtedness of Enersyst and (4) estimated transaction costs of $300,000. The Preferred Units are valued based on the contract price per share of the TurboChef Common Stock for which they are exchangeable which approximates recent closing prices. For pro forma purposes the total consideration is estimated at $13.9 million. This acquisition was accounted for as a purchase with the total consideration preliminarily allocated to the assets and liabilities assumed as follows:
AMOUNT DESCRIPTION (IN THOUSANDS) Total consideration: Capital contribution in exchange for Common Units $ 7,247 Issuance of Preferred Units exchangeable for 1,832,924 shares of TurboChef Common Stock 6,351 Estimated transaction costs 302 ------------- 13,900 ============= Allocation: Current assets 1,148 Property and equipment 320 Current liabilities (205) Deferred income tax liabilities (1,900) Developed technology and other amortizable intangibles 12,520 Goodwill including assembled workforce 2,017 ------------- $ 13,900 -------------
The foregoing allocations are based on estimated fair values and are subject to adjustment. Fair values of assets acquired were determined based on an independent valuation. (C) Records payment of outstanding indebtedness. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS (D) Records adjustment to amortization expense to reflect increase for new basis of identifiable intangible assets including developed technology and assembled workforce. Developed technology is amortized using the straight line method over a 10 year estimated life. Assembled workforce is considered to have an indefinite life and is classified together with goodwill. (E) Records adjustment to interest expense to reflect the payment of Enersyst's indebtedness arising from the acquisition. -----END PRIVACY-ENHANCED MESSAGE-----