UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
SEPTEMBER 30, 1996 0-23812
THE QUANTUM GROUP, INC.
(Exact name of registrant as specified in its charter)
NEVADA
-------
(State or other jurisdiction of incorporation or organization
95-4255962
(I.R.S. Employer Identification No.)
PARK IRVINE BUSINESS CENTER
14771 MYFORD ROAD, BLDG. B.
TUSTIN, CA, 92780
(Address of principal executive offices)
(714)-508-1475
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12 (b) of the Act:
None
----
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
----- -----
State the number of shares outstanding of each of the registrants classes of
common equity, as of the latest practicable date.
Common stock, par value $.001; 9,456,696 shares outstanding
as of November 15, 1996 <PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See pages F-1 to F-8 attached
The attached financial statements are unaudited. However, management believes
that any and all adjustments necessary, have been made to insure that they are
not misleading.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had cash of $25,767 on hand.
The management of the Company made the decision at year end 1992 to concentrate
its resources and management efforts on the Company's tire recycling operations.
This start up effort eliminated the Company's ability to generate revenue
throughout of 1993 and 1994, as sales take six to twenty months to complete. As
such the Company experienced cash flow difficulties through 1993, 1994 and most
of 1995.
Equipment sales of the Second Saudi Unit and deposits on Phase Two of the Saudi
project provided an increase in working capital.
During the nine months ended September 30, 1996, the Company's net cash
generated from operations was $55,148 compared to cash utilized of $4,992 in
the same period of 1995. This is due to the a number of factors within the
accounting for cash format. The Company wrote off it's Accounts Receivable
from the Canadian licensee during the three months ended June 30, 1995, this
results in an addition to operating loss and a "source" of funds which are
practically offsetting. Additionally, the effect of the write off in
decreasing minority interest becomes a "use" of funds which is offset by the
increase in accounts payable which was the Company's cash flow source for the
period. The write off was a total of $882,498, the net loss for the three
months ended June 30, 1995 was $814,792.
In the nine months ended September 30, 1996, Receivables increased $400,421, due
primarily to the addition of retainage on projects shipped. Accounts payable
in the nine months ended September 30, 1996 decreased by $176,500 and accrued
expenses deceased $45,759 compared to increases of $178,096 and $30,000
respectively, in the nine months ended September 30, 1995
The Company purchased a license for tile manufacturing for $497,547, $144,000 of
which was cash.<PAGE>
Customer deposits were applied to purchases resulting in only a minor change
$488. The utilization of deposits on inventory of $424,829 partially offset the
cash outflows.
Investing Activities consisted of the proceeds from the sale of the Company's
residential property in Miami, Florida, during the first quarter, and the
purchase furniture and fixtures of $11,089 in the third quarter of 1996. This
purchase was of telephone and computer equipment for the new office. The
purchase of the license for tile manufacturing is included in Investment
Activities as it is a depreciable asset.
Financing activity in the nine months ended September 30, 1996 consisted of cash
sources from an advances from officers of $31,1620 and $1,600 from contributed
capital. The note portion of the purchase of the tile manufacturing license was
$353,547. Cash was utilized in the payoff of the mortgage on the sale of the
Company's Miami property ($165,000) and the payoff of the vehicle note ($4,781).
During the nine months ended September 30, 1995, financing activity consisted of
an increase in the amounts due offices of $9,365 reduced by a pay down of $1,300
on the vehicle note.
The Company has no material commitments for capital expenditures.
RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 1996, and the three months
ended September 30, 1995.
The Company had revenue of $1,697,149 during the three months ended September
30, 1996 compared to $19,401 for the same three months of 1995. The 1996 Revenue
consisted of Equipment sales to Saudi Arabia of $1,1662,149 and the sale of a
license in Florida for $35,000.
Depreciation expense of $3,159 is only slightly less than the comparable period
last year because of the sale of the residential property in the prior quarter,
offset by adding depreciation for the furniture and fixtures purchased during
the third quarter of 1996. Amortization expense of $12,439 in the current
quarter is due to the signing of the tile license agreement. This agreement
is perpetual, but is being amortized over a ten year period. Management believes
that ten years is the useful life of the technology. No such charge was made in
the prior year.
Travel Expense ($26,122 vs. $7,730), Office Expense ($19,312 vs. $986),
Administrative Expense ($23,247 vs. $9,488) and Consulting Fees ($62,377 vs.
$51,803) all increased in the quarter ended September 30, 1996 as compared with
the same quarter 1995. This increase is do to an increased level of sales
activity in the existing product line and addition activities due to starting
the tile molding activities.<PAGE>
In the second quarter of 1995, Accounts Receivable in the amount of $882,498
were written off. No write offs were incurred in the current year.
Minority Interest is a charge of $52,493 in the third quarter of 1996, which
compares to a credit of $13,241 for the same quarter of 1995 because of the
profit in 1996 rather than the loss for the same quarter 1995.
Tax expense of $23,345 is provided in the third quarter of 1996. This provision
is for state taxes only, as California does not have loss carry back provisions
similar to federal tax rules. No provision was made in 1995 due to the loss.
Comparison of the nine months ended September 30, 1996, and the nine months
ended September 30, 1995
Revenues for the nine months ended September 30, 1996 are $1,697,149 compared to
$57,201 in the comparable 1995 period. This is due to the delivery of Eurectec,
Inc., Equipment to Saudi in 1996, and the sale of a license in Florida. The cost
of goods sold is larger in 1996 for the same reason.
Amortization Expense of $20,731 in 1996 has no comparable expense in 1995.
As with the current quarter, travel expense, office expense, administrative
expense and consulting fees are larger in the nine months ended September 30,
1996 as compared to the nine months ended September 30, 1995 due to increased
sales activities and to the preparation of the molded tile line.
Because there were no significant sales in the nine months ended September 30,
1995, no commissions were paid. The delivery of the Saudi equipment in 1996
caused $117,936 of commission expense to be paid or accrued in the nine months
ending September 30, 1996.
The company recognized a $12,500 gain on the sale of previously written off
securities in the first quarter of 1995. No comparable gain occurred in 1996,
however, the company realized a gain of $25,850 on the sale of the Miami
property in 1996 with no comparable 1995 gain.
<PAGE>
THE QUANTUM GROUP, INC.
&
Subsidiaries
FINANCIAL STATEMENTS
Three Months and Nine Months ended September 30, 1996
Three Months and Nine Months Ended September 30, 1995
<PAGE>
THE QUANTUM GROUP, INC. (F-1)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER DECEMBER
30, 1996 30, 1995 31, 1995
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $25,767 $3,895 $26,140
Accounts Receivable 580,384 76,896 179,963
Inventory 490,579 503,479 490,579
Deposit on Inventory 0 424,820 424,820
Note Receivable 83,960 0 83,960
------------ ------------ ------------
Total Current Assets 1,180,690 1,009,090 1,205,462
PROPERTY & EQUIPMENT
Furniture & Fixtures 15,363 12,780 10,693
Residential Property 0 236,519 236,586
Vehicles 299 2,996 2,248
------------ ------------ ------------
Total Property & Equipment 15,662 252,295 249,527
OTHER ASSETS
Accounts Receivable 254,221 0 254,221
Loan Receivable 38,750 38,750 38,750
Securities 6,250 6,250 6,250
License Rights 476,816 0 0
Deposit 661 660 661
Prepaid Commissions 67,415 273,500 0
Tax Benefit Deferred 80 0 80
------------ ------------ ------------
Total Other Assets 844,193 319,160 299,962
------------ ------------ ------------
TOTAL ASSETS $ 2,040,545 $ 1,580,545 $ 1,754,951
============ ============ ============
/TABLE
<PAGE>
THE QUANTUM GROUP, INC. (F-2)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September September DECEMBER
30, 1996 30, 1995 31, 1995
------------ ------------ ------------
<S> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued Expenses $181,127 $120,277 $226,886
Accounts Payable 299,879 703,692 476,379
Due Officers 89,863 137,966 58,701
Customer Deposits 243,986 488,938 244,474
Franchise Tax Payable 23,345 0 0
Capitalized Leases 16,741 16,741 16,741
Current Maturities 266,871 1,964 268,835
------------ ------------ ------------
Total Current Liabilities 1,121,812 1,469,578 1,292,016
LONG TERM LIABILITIES
Note Payable 620,418 0 266,871
Vehicle Note Payable 0 5,478 4,781
Mortgage Payable 0 165,000 165,000
Less Current Maturities (266,871) (1,964) (268,835)
------------ ------------ ------------
Total Long Term Liabilities 353,547 168,514 167,817
Minority Interest in Subsidiary 133,542 58,384 97,782
STOCKHOLDERS' EQUITY
Common Stock, 50,000,000
shares authorized
9,456,696 shares
outstanding in 1996 & 1995 9,457 9,457 9,457
Paid In Capital 1,678,363 1,676,763 1,676,763
Accumulated Deficit (1,256,176) (1,802,151) (1,488,884)
------------ ------------ ------------
Total Stockholders Equity 431,644 (115,931) 197,336
------------ ------------ ------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 2,040,545 $ 1,580,545 $ 1,754,951
=========== ============ ============
</TABLE>
</Page>
<PAGE>
THE QUANTUM GROUP, INC. (F-3)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Nine Three Nine Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
September September September September December
30, 1996 30, 1996 30, 1995 30, 1995 31, 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
REVENUE
Equipment Sales $1,662,149 $2,443,698 $ 19,401 $ 57,201 $2,679,790
License Sales 35,000 35,000 0 0 0
---------- ---------- ---------- ---------- ----------
Total Revenues 1,697,149 2,478,698 19,401 57,201 2,679,790
COST OF SALES 1,046,223 1,504,036 21,239 21,239 1,688,947
---------- ---------- ---------- ---------- ----------
Gross Profit 650,926 974,662 (1,838) 35,962 990,843
EXPENSES
Commission 47,936 117,936 0 0 329,960
Depreciation 3,159 8,367 3,384 10,152 14,342
Amortization 12,439 20,731 0 0 0
Taxes 0 0 0 0 0
Travel 26,122 66,778 7,730 19,232 45,468
Professional Fees 0 10,000 5,000 11,000 46,925
Office 19,312 56,095 986 3,351 23,846
Rent & Utilities 28,689 59,144 6,827 31,868 57,221
Administration Expenses 23,247 112,258 9,488 50,707 69,301
Consulting Fees 62,377 224,698 51,803 146,295 164,178
Interest 10,205 31,692 5,667 17,655 69,617
Accounts Receivable
Write Off 0 0 0 882,498 953,634
Foreign Currency
Translations 0 0 0 0 532
---------- ---------- ---------- ---------- ----------
Total Expenses 233,486 707,699 90,885 1,172,758 1,775,024
---------- ---------- ---------- ---------- ----------
Net Profit of (Loss)
From Operations 417,440 266,963 (92,723)(1,136,796) (784,181)
</TABLE>
</Page>
THE QUANTUM GROUP, INC. (F-4)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Nine Three Nine Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
September September September September December
30, 1996 30, 1996 30, 1995 30, 1995 31, 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OTHER INCOME & (EXPENSES)
Sale of Securities
Previously Written
Off 0 0 0 12,500 12,500
Asset Abandonment 0 0 0 (10,500) (10,500)
Gain on Sale of Asset 0 24,850 0 0 0
---------- ---------- ---------- ---------- ----------
Total Other Income
& Expenses 0 24,850 0 2,000 2,000
Profit or (Loss) 417,440 291,813 (92,723)(1,134,796) (782,181)
Minority Interest 52,493 35,760 (13,241) 162,049 122,621
Provisions for Taxes
- Current 23,345 23,345 0 34,785 34,785
Provisions for Taxes
- Deferred 0 0 0 0 80
Provision for Taxes & ---------- ---------- ---------- ---------- ----------
Minority Interest 75,838 59,105 (13,241) 196,834 157,486
Net Profit or (Loss)
After ---------- ---------- ---------- ---------- ----------
Tax and Minority
Interest $341,602 $232,708 ($79,482) ($937,962) ($624,695)
========== ========== ========== ========== ==========
Net Profit or (Loss)
Per Share $0.04 $0.02 ($0.01) ($0.10) ($0.07)
Weighted Average
Shares Outstanding 9,456,696 9,456,696 9,456,696 9,456,696 9,456,696
Diluted Net Profit
Per Share N/A N/A N/A N/A N/A
Weighted Average
Shares and Options
Outstanding N/A N/A N/A N/A N/A
</TABLE>
</Page>
<PAGE>
THE QUANTUM GROUP, INC. (F-5)
STATEMENT OF SHAREHOLDERS' EQUITY
January 1, 1993 to September 30, 1996
<TABLE>
<CAPTION>
COMMON STOCK PAID IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT
-------------------------------------------------------
<S> <C> <C> <C> <C>
Balance,
January 1, 1993 8,506,090 $ 8,506 $ 958,637 $ (960,162)
Shares Issued for
Cash 938,606 939 227,817
Sale of Shares by
Subsidiary
(Eurectec, Inc.) 478,321
Profit for the
Year Ended
December 31, 1993 266,392
------------------------------------------------------
Balance,
December 31, 1993 9,444,696 9,445 1,664,775 (693,770)
Shares Issued for
Commission in Lieu
of Cash 12,000 12 11,988
Loss for the
Year Ended
December 31, 1994 (170,419)
------------------------------------------------------
Balance,
December 31, 1994 9,456,696 9,457 1,676,763 (864,189)
Loss for the
Year Ended
December 31, 1995 (624,695)
------------------------------------------------------
Balance,
December 31, 1995 9,456,696 9,457 1,676,763 (1,488,884)
Contributed Capital 1,600
Profit for the Nine
Months Ended
September 30, 1996 232,708
-----------------------------------------------------
Balance,
September 30, 1996 9,456,696 $9,457 $1,678,363 $(1,256,176)
=====================================================
</TABLE>
</Page>
<PAGE>
THE QUANTUM GROUP, INC. (F-6)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Nine Year
Ended Ended Ended
September September December
30, 1996 30, 1995 31, 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit (Loss) $232,708 ($937,962) ($624,695)
Adjustments to reconcile net profit
or (loss) to net cash:
Amortization & Depreciation 29,098 11,574 14,342
Non Cash Expenses 0 0 0
Gain on Sale of TSI Stock 0 0 (12,500)
Loss On Abandonment of Asset 0 10,500 10,500
Minority Interest 35,760 (132,049) (122,621)
Changes in Operating Asset &
Liabilities
(Increase) Decrease in Accounts
Receivable (400,421) 556,249 453,182
(Increase) Decrease in Inventory 0 0 12,900
(Increase) in Deposit on Inventory 424,820 0 0
Decrease (Increase) in Long Term
Accounts Receivable 0 326,249 (11,932)
(Increase) Decrease in Loan
Receivable 0 7,816 7,816
(Increase) Decrease in Prepaid
Insurance 0 984 984
(Increase) in Prepaid Commissions (67,415) 0 273,500
(Increase) Decrease in Deposits 0 8,336 8,335
Increase (Decrease) in Accrued
Expenses (45,759) 0 136,579
Increase (Decrease) in Accounts
Payable (176,500) 178,096 (49,217)
Increase (Decrease) in Tax Payable 23,345 (34,785) (34,785)
Increase in Customer Deposits (488) 0 (244,464)
(Increase) in Taxes Payable -
Deferred 0 0 (80)
----------- ----------- -----------
Net Cash Generated (Used) by
Operating Activities 55,148 (4,992) (182,156)
----------- ----------- -----------
</TABLE>
</Page>
<PAGE>
THE QUANTUM GROUP, INC. (F-7)
STATEMENT OF CASH FLOWS
(UNAUDITED)
Continued
<TABLE>
<CAPTION>
Nine Nine
Months Months Year
Ended Ended Ended
September September December
30, 1996 30, 1995 31, 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Gross Proceeds from Sale of TSI
Stock 0 0 12,500
Sale of Residential Property 236,586 0 0
Purchase of Furniture (11,089) 0 0
Purchase of License Rights (497,547) 0 0
----------- ----------- -----------
Net Cash Provided (Used) by
Investing Activities (272,050) 0 12,500
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of Long Term Debt 0 (1,300) (1,997)
Increase (Decrease) in Notes Payable 353,547 0 266,871
Increase (Decrease) in Mortgage
Payable (165,000) 0 0
Increase (Decrease) in Vehicle Note
Payable (4,781) 0 0
Increase (Decrease) in Amounts Due
Officers 31,163 9,365 (69,900)
Contributed Capital 1,600 0 0
----------- ----------- -----------
Net Cash Provided by
Financing Activities 216,529 8,065 194,974
----------- ----------- -----------
Increase (Decrease) in Cash (373) 3,073 25,318
Cash at Beginning of Period 26,140 822 822
----------- ----------- -----------
Cash at End of Period $25,767 $3,895 $26,140
=========== =========== ===========
</TABLE>
<PAGE>
THE QUANTUM GROUP, INC.(F-8)
Notes to Financial Statements
NOTE #1 - STATEMENT PREPARATION
The Company has prepared the accompanying financial statements with
interim financial reporting requirement promulgated by the Securities and
Exchange Commission. The information furnished reflects all adjustments
which are, in the opinion of management, necessary for a fair presentation of
financial position and results of operations.
The consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's December 31, 1996 10-K report.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SHAREHOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
27 Financial Data Schedule
(B)
Reports on Form 8-K
No reports on Form 8-K were filed, or required to be filed,
during the quarter ended September 30, 1996.
</Page>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this to be signed on its behalf by the undersigned
thereunto duly authorized.
The Quantum Group, Inc.
/s/ Ehrenfried Liecich
November 15, 1996 _________________________
(Revised May 22, 1997) Ehrenfried Liebich
Chairman of the Board,
President, and
Chief Executive Officer
/s/ John F. Pope
November 15, 1996 _________________________
(Revised May 22, 1997 John F. Pope
Vice President, Finance
Chief Accounting Officer<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this to be signed on its behalf by the
undersigned thereunto duly authorized.
The Quantum Group, Inc.
November 15, 1996 /S/ Ehrenfried Liebich
(Revised May 22, 1997) ----------------------------
Ehrenfried Liebich
Chairman of the Board,
resident, and
Chief Executive Officer
November 15, 1996 /S/ John F. Pope
(Revised May 22, 1997) ----------------------------
John F. Pope
Vice President, Finance
Chief Accounting Officer
</Page>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 25,767
<SECURITIES> 0
<RECEIVABLES> 580,384
<ALLOWANCES> 0
<INVENTORY> 490,579
<CURRENT-ASSETS> 1,180,690
<PP&E> 15,662
<DEPRECIATION> 0
<TOTAL-ASSETS> 844,193
<CURRENT-LIABILITIES> 1,121,812
<BONDS> 0
<COMMON> 9,457
0
0
<OTHER-SE> 422,187
<TOTAL-LIABILITY-AND-EQUITY> 2,040,545
<SALES> 2,443,698
<TOTAL-REVENUES> 2,478,698
<CGS> 1,504,036
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 707,699
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,692
<INCOME-PRETAX> 266,963
<INCOME-TAX> 23,345
<INCOME-CONTINUING> 232,708
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 232,708
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
