UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
X Quarterly report under section 13 or 15(d) of the Securities Exchange
- ------ Act of 1934 for the quarterly period ended March 31, 2000 or
- ------ Transition report under section 13 or 15(d) of the Exchange Act for
the transition period from _______ to _______
Commission file number: 000-21811
Torque Engineering Corporation
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(Exact Name of Small Business Issuer as Specified In Its Charter)
Delaware 83-0317306
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(State of Incorporation) (I.R.S. Employer
Identification No.)
2932 Thorne Drive, Elkhart, Indiana 46514
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(Address of Principal Executive Offices)
(219) 264-2628
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(Issuer's Telephone Number, Including Area Code)
Quintessence Oil Company
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(Former Name, Former Address and Former
fiscal Year, if Changed Since Last Report)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 90 days.
YES X NO
----- ------
As of March 31, 2000 the Issuer had 7,832,940 shares of Common Stock, par value
$0.00001, outstanding.
Transitional Small Business Disclosure Format (check one): Yes ____ No _X_
Torque Engineering Corporation
(A Development Stage Company)
FORM 10-QSB
For the Quarterly Period Ended March 31, 2000
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at March 31, 2000 (unaudited)...............................1
Statements of Operations for the three months
ended March 31, 2000 and 1999 (unaudited)............................2
Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 (unaudited)............................3
Notes to Consolidated Financial Statements (unaudited)....................4
Item 2. Management's Discussion and Analysis or Plan of Operations............5
General
Results of Operations
Liquidity and Capital Resources
PART II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................6
Item 2. Change in Securities.................................................6
Item 3. Defaults upon Senior Securities......................................6
Item 4. Submission of Matters to a Vote of Security Holders..................6
Item 5. Other Information....................................................6
Item 6. Exhibits and Reports on Form 8-K.....................................6
Signature ....................................................................7
Torque Engineering Corporation
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
ASSETS
March 31, December 31,
2000 1999
---- ----
(unaudited) (audited)
CURRENT ASSETS
Cash $ 335,141 $ 798,019
Accounts Receivable, net 5,256 2,289
Marketable securities 41,697 32,145
Prepaid expenses -0- 4,768
Inventory 1,242,350 1,165,000
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Total Current Assets 1,624,444 2,002,231
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PROPERTY & EQUIPMENT, NET 10,239,017 10,454,045
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OTHER ASSETS -0- -0-
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TOTAL ASSETS $11,863,461 $12,456,276
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable & accrued expenses $ 107,048 $ 82,051
Obligation under Capital lease - current portion 32,837 32,837
Due related parties 28,708 28,708
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Total Current Liabilities 168,593 143,596
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LONG-TERM LIABILITIES
Obligation under Capital lease 575,536 575,536
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TOTAL LIABILITIES 744,129 719,132
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STOCKHOLDERS EQUITY
Common Stock, $0.00001 par value, 50,000,000 shares authorized,
7,832,940 shares issued and outstanding 78 78
Additional paid in capital 13,330,715 13,330,715
Deficit accumulated during development stage (1,966,284) (1,336,328)
Accumulated other comprehensive loss (170,579) (180,131)
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11,193,930 11,814,334
Less Treasury Stock at cost (6,750 Shares) (56,970) (56,970)
Less Deferred compensation expense (17,628) (20,220)
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Total Stockholders' Equity 11,119,332 11,737,144
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,863,461 $12,456,276
========== ==========
See accompanying notes to financial statements
1
Torque Engineering Corporation
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Three Months For the period from
Ended Ended June 26, 1996
March 31 March 31 (inception) to
2000 1999 March 31, 2000
---- ---- --------------
SALES $ 5,185 $ -0- $ 96,485
COST OF SALES (181,802) -0- (254,528)
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GROSS LOSS (176,617) -0- (158,043)
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OPERATING EXPENSES
Payroll & other compensation 70,844 -0- 463,639
Amortization -0- 375 3,375
Depreciation 262,536 -0- 906,239
Rent 30,000 -0- 100,168
Other selling, general & administrative 97,445 26,622 425,670
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Total Operation Expenses (460,825) (26,997) (1,899,091)
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NET (LOSS) FROM OPERATIONS $(637,442) $ (26,997) (2,057,164)
OTHER INCOME (EXPENSE)
Interest 7058 -0- 21,563
Consulting Income -0- -0- 120,500
Other 428 -0- 428
Loss on Marketable Securities -0- -0- 51,642
--------- --- ------
NET (LOSS) $ (629,956) $ (26,997) $ (1,966,284)
--------- -------- -----------
OTHER COMPREHENSIVE GAIN, NET OF TAX
Unrealized gain (loss) on marketable securities - net 9,552 -0- (170,579)
COMPREHENSIVE LOSS $ (620,404) $ (26,997) $ (2,136,863)
--------- -------- -----------
Net loss per share - basic & diluted $ (0.079) $ (0.026) (0.546)
Weighted average number shares outstanding 7,832,940 1,000,000 3,916,470
during the period - basic & diluted
See accompanying notes to financial statements.
2
Torque Engineering Corporation
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOW
(unaudited)
For the period from
Three Months Three Months June 26, 1996
Ended Ended (inception) to
March 31, 2000 March 31, 1999 March 31, 2000
CASH FLOWS FROM OPERATIONS ACTIVITIES:
Net Loss $ (629,956) $ (26,997) (1,966,285)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 262,536 375 909,614
Recognized Deferred Compensation 2,592 -0- 7,972
Changes in operating assets & liabilities:
(Increase) Decrease in:
Marketing Expense incurred exchange of Stock -0- -0- 2,688
Write-off of investment -0- -0- 2,000
Write-off of organizational Expenses -0- -0- 4,125
Loss on marketable securities -0- -0- 51,642
Accounts Receivable (1,467) -0- (3,756)
Employee Advance (1,500) -0- (1,500)
Inventory (77,350) -0- (223,552)
Prepaid Expenses 4,767 -0- -0-
Increase (Decrease) in:
Accounts Payable & Accrued Expenses 26,329 831 108,380
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Net cash provided in operating activities (414,049) (25,791) (1,108,671)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property & equipment (48,829) -0- (99,510)
Proceeds from sale of available-for-sale-securities -0- -0- 316,158
Investment in Oil & Gas lease -0- -0- (2,000)
Organizational costs -0- -0- (7,500)
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(48,829) -0- 207,148
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CASH FLOWS FROM FINANCING ACTIVITES
Issuance of common stock -0- -0- 1,542,505
Payments on capital lease obligations -0- -0- (25,809)
Repayment of loans -0- -0- (280,032)
--------- -------- -----------
-0- -0- 1,236,666
--------- -------- -----------
NET INCREASE (DECREASE) IN CASH (462,878) (25,791) (335,141)
CASH & CASH EQUIVALENTS AT
BEGINNING OF PERIOD 798,019 25,791 -0-
--------- -------- -----------
CASH & CASH EQUIVALENTS AT END OF PERIOD $ 335,141 $ 0 335,141
--------- -------- -----------
See accompanying notes to financial statements
3
Torque Engineering Corporation
(A Development Stage Company)
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles and have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission for interim financial information. Accordingly, they do not
include all the information and footnotes necessary for a comprehensive
presentation of financial position and results of operations.
It is management's opinion, however, that all material adjustments (consisting
of normal recurring adjustments) have been made which are necessary for a fair
financial statement presentation. The results for the interim period are not
necessarily indicative of the results to be expected for the year.
Further information, refer to the consolidated financial statements and
footnotes, included in the Company's Form 10-KSB for the year ended December 31,
1999.
2. DEVELOPMENT STAGE COMPANY
The Company is considered to be in the development stage, as defined in
Statement of Financial Accounting Standards No. 7. There have been no
significant operations since incorporation. On May 28, 1999, the company entered
the transportation technology industry where its core business is the
manufacturing and marketing of marine pleasure boat engines, and its activities
to date include primarily fund raising, product design and development, and
establishment of markets.
3. STOCKHOLDERS' EQUITY
On October 7, 1999 the shareholders voted the 1999 Stock Option Plan allowing
500,000 shares of common stock be available for the issuance of options.
4. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company incurred a net loss of
$629,956 and negative cash flows from operating activities of $414,049 during
the three months ended March 31, 2000, and had an accumulated deficit of
$1,966,284 at March 31, 2000
In view of these matters, realization of a major portion of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
working capital requirements, and the success of its future operations.
Management believes that action presently being taken to revise the Company's
operating and financial requirements provide the opportunity for the Company to
continue as a going concern.
4
Torque Engineering Corporation
(A Development Stage Company)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Overview
The following discussion of the financial condition and results of
Torque Engineering should be read together with the interim financial statements
included in this report. This discussion contains forward-looking statements
that involve risks and uncertainties. Our actual results may differ materially
from those expressed or implied in those forward-looking statements.
Torque Engineering is a development stage company which continues to
devote its efforts toward establishing itself as a manufacturer of a
lightweight, high-powered marine engine built on a production line basis for the
luxury performance pleasure craft industry. Torque Engineering had a net loss of
$629,956 and negative cash flows from operating activities of $414,049 for the
three months ended March 31, 2000, and an accumulated deficit as of March 31,
2000 of $1,966,284. These conditions raise substantial doubt about Torque
Engineering's ability to continue as a going concern.
Torque Engineering's ability to continue as a going concern is
dependent upon management's ability to increase sales of the Torque V-12 engines
and to obtain adequate levels of additional financing. Management believes that
its current efforts will result in Torque Engineering being able to continue as
a going concern. We can not assure you, however, that we will be successful.
Revenues
For the three months ended March 31, 2000, Torque Engineering had
revenues of $5,185 attributable to the sale of various marine engine parts.
Torque Engineering did not generated revenues from operations for the comparable
period ended March 31, 1999. Cost of sales for the three months ended March 31,
2000 was $181,802. Costs of sales were primarily attributable to Torque
Engineering's continued refinement of the manufacturing process of the Torque
V-12 engines.
Net Loss
Net loss for the three months ended March 31, 2000 increased to
$629,956 from $26,997 for the period ended March 31, 1999. This is primarily
attributable to increases in general and administrative expenses and payroll
expense incurred in connection with the implementation of Torque Engineering's
business plan. In addition, Torque Engineering had $262,536 of depreciation of
property acquired as part of Torque Engineering's acquisition of IPSL and being
used in connection with Torque Engineering's production-line for the Torque V-12
engines. Net unrealized gain on marketable securities for the three months ended
March 31, 2000 was $9,552.
Liquidity and Capital Resources
Management anticipates that it will require additional capital and
plans to obtain such capital through the sale of securities, obtaining financing
from third parties, and from funds generated by the sale of the Torque V-12
engine. If we are unable to obtain financing from any of these potential
sources, or if our funds from our ongoing operations do not increase, it is
unlikely we will continue as a going concern. As of March 31, 2000, Torque
Engineering had $335,141 in cash, compared to $798,019 as of December 31, 1999.
This decrease is attributable to the continuation of manufacturing operations
during the first three months of 2000, and management's continued effort to
implement its business plan. Management believes it will require additional
working capital in order to continue operations. Management is continuing to
evaluate its projected capital needs and to identify potential sources of
capital. We can not assure you we will be able to obtain additional capital as
it becomes necessary.
5
Cash Flows
A total of $414,049 was used for operating activities for the three
months ended March 31, 2000. The cash used in operating activities was primarily
expended on general and administrative expenses related to the production-line
for the Torque V-12 engines.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
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None.
Item 2. Changes in Securities.
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None.
Item 3. Defaults Upon Senior Securities.
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None.
Item 4. Submission of Matters to a Vote of Security Holders.
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None
Item 5. Other Information.
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None.
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
On May 18, 2000 a Form 8-K was filed as to the Registrant's Certifying
Accountant engaging Weinberg & Co., P.A. as its Independent
accountants. Management determined that no prior audits had been
performed and requested Weinberg & Co., P.A. to audit all prior periods
as part of their engagement.
6
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, thereunto duly authorized.
Torque Engineering Corporation
By: /s/ Raymond B. Wedel, Jr.
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Name: Raymond B. Wedel, Jr.
Title: President
Date: May 30, 2000
7