<PAGE>
United States
Securities and Exchange Commission
Washington, DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File Number
June 30, 1997 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 Center, 14771 Myford Road, Building B
------------------------------------------------
Tustin, CA 92780
----------------
(Address of principal executive offices)
(714) 508-1470
--------------
(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; 3,153,232 shares outstanding
as of August 14, 1997
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See pages F-1 to F-8 attached
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
GENERAL
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 has been the Company's business since the beginning of 1993. Sales
generally take six to eighteen months to complete. Some cash flow is generated
by customer deposits and miscellaneous charges when a contract is signed.
However, the bulk (generally 80%) of the cash flow is released to the Company
when the product is shipped. Contracts often provide for a final payment,
generally 5% to 10% of the contract amount, to be paid when installation is
completed.
Based on the periodic nature of these payments and the ongoing nature of
administrative expenses, the Company intends to increase, beginning in 1997, the
initial payment made when sales agreements are executed and obtain the full
balance when equipment is delivered. The Company believes that these
arrangements will eliminate many of the cash flow timing problems the Company
has experienced in the past.
The Company's unsecured loans received in 1995 and 1996 from German lenders are
current and due December 31, 1997. The balance due for rights to technology
purchased from Rothbury Engineering Limited is current and final payment is also
due December 31, 1997. The Company anticipates the amount due the German
lenders and Rothbury will be paid from working capital generated from future
period sales.
The Company may consider the possibility of making an offering of common shares
to raise capital in the event anticipated sales revenue are not fully realized.
To date, no agreement or commitments have been made to secure additional capital
for the Company.
ATLANTA RUBBER RECYCLING, INC. AGREEMENT
Atlanta Rubber Recycling, Inc. has been unable, to date, to raise the required
funds to proceed with their purchase commitments and the equipment sales
agreement between the Company and Atlanta Rubber Recycling, Inc. has expired.
However, Atlanta Rubber Recycling, Inc. has expressed interest in proceeding and
is still seeking financing for the equipment. Because the Atlanta Rubber
Recycling, Inc. contract has expired, the Company is aggressively seeking
alternative buyers for the equipment, held in Company inventory, previously
reserved for Atlanta Rubber Recycling, Inc.
MEXICO AGREEMENTS
The Company's project with Mexico Recycling Technology, continues on schedule.
During the first and second quarters of 1997, the Company received revenue and
cash flow from the pre equipment delivery phases of the contracts. The initial
equipment package was shipped in July, 1997 and the final shipment is scheduled
for the end of August, 1997.
Phase 2 of the Mexico contract is also on schedule with conclusion of the
contract expected during the third quarter of 1997, following installation of
the Phase 1 contract.
SAUDI AGREEMENTS
Negotiations for a Phase 3 contract of the Saudi project are continuing. The
Company expects to finalize these negotiations in Saudi Arabia during the fourth
quarter of 1997 when the Phase 1 and Phase 2 equipment is installed, with
equipment delivery for Phase 3 scheduled for 1998.
NEVADA ENVIRONMENTAL TECHNOLOGIES, INC. AGREEMENT
The Company finalized negotiations during the first quarter of 1997 to issue a
license to Nevada Environmental Technologies, Inc. The license fee is $100,000.
The Company agreed to take $100,000 of common shares of the licensee's parent,
Keystone Energy Service, Inc. (KESE) as payment of the license fee. The license
fee was not recognized during the first quarter of 1997 because the value of the
Keystone Energy Service, Inc. stock was not established until second quarter of
1997 following a merger and name change. A preliminary equipment sales
agreement has also been signed which is contingent upon Nevada Environmental
Technology, Inc. raising approximately $10 to $12 million dollars for the
project which includes $7,500,000 equipment contract value. The Company does
not anticipate finalizing the equipment contract until 1998 with delivery of
equipment likely in 1999. (FN1)
WASTE RESOURCES RECLAMATION AGREEMENT
Negotiations with Waste Resources Reclamation for the sale and purchase of SMS
press equipment are proceeding and the Company expects to conclude negotiations
by the fourth quarter of 1997.
CURRENT NEGOTIATIONS
The Company is proceeding with sales discussions and negotiations with qualified
international prospects in Germany, Hungary, The United Kingdom, Ireland,
Morocco, Egypt and Syria and domestically with prospects in Michigan, Florida,
California and Kentucky. As of June 30, 1997, agreements have not been
finalized. The Company continues pursuing discussions and anticipates one or
more of these sales will be signed and sales deposits received in 1997.
ECO-ETCH AND QUANTUM ENVIRONMENTAL SOLUTIONS & TECHNOLOGY, INC.
The Company is engaged in negotiations with IN.TEC, GmbH, a German environmental
technology firm, for the exclusive North American distribution rights to the
marketing of the "ECO-ETCH" system. ECO-ETCH is the brand name given to new
technology for the recycling and recovery of etching solutions used in the
printed circuit board manufacturing industry. On April 21, 1997, the Company
incorporated Quantum Environmental Solutions & Technology, Inc. ("QEST") as a
wholly owned subsidiary to market the ECO-ETCH system upon conclusion of the
negotiations, which is anticipated during the third quarter of 1997.
Eco-etching will remove and recuperate copper from ammoniac etching solutions
used in the manufacture of printed circuit boards. Numerous laboratory tests
have been carried out by the manufacturer to confirm that Eco-etching through a
chemical process allows for the total regeneration of etching solutions and the
total recuperation of copper. As an example, an Eco-etching plant with a
treatment capacity of 30 liters/hour of spent etching liquid containing up to
170 g/1 of metal, recuperates 5kg/1 of copper. The Eco-etching technology is
highly modifiable and may be tailored to suit the characteristics of the etching
plant and the etched circuits. The entire process is fully automated and
computer controlled using sensors located in various parts of the system.
The Company is negotiating with IN.TEC on the basis that they will supply to a
US based Quantum customer, an option based guaranteed system for six months,
which after this time, the customer can purchase the system following successful
"real-time" testing of the design performance characteristics.
The Company has negotiated a wholesale price for various size of plants,
however, the draft exclusive contract calls for minimum annual orders and the
Company is still reviewing this in light of the technology supplier draft North
American distribution agreement. The Company is taking a very conservative
approach with this project in order to gauge the potential market acceptance of
this concept. In this regard, the Company's Website has been used to stimulate
inquiries, several of which are presently being followed up. At this time, no
contracts have been signed with any potential customers and the distribution
agreement is still under negotiation.
RECENT INTERNAL DEVELOPMENTS
EURECTEC MARKETING DIVISION. The Company has established a marketing division
of it's subsidiary, Eurectec, Inc. Presently dormant, this division will be
used for the marketing of a wide variety of PressMaster products. The Company
anticipates this division will assist customers in the promotion and sale of
PressMaster products.
QUANTUM MODIFIED ASPHALT XCETERA ("QMAX"). The Company has established this
division to market specialized mobile equipment concerned with the mixing of
crumb rubber and asphalt. Presently dormant, this division will also be
responsible for crumb rubber technology transfer programs.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company had cash of $8,005.
Although the Company continues to realize delays in cash from existing and
pending projects, Management believes that proceeds from current equipment sales
and license fees, together with pending sales will provide sufficient capital
and liquidity to meet the company's needs for the next twelve months.
During the first half of 1997, the Company's net cash generated by operations
was $5,821, compared to cash generated of $236,647 during the first half of
1996. In the comparable 1996 period the Company had an increase of customer
deposits of $404,446 and the utilization of deposits on inventory of $424,820,
partially off set by an increase in accounts receivable of $202,359, and
reductions in accrued expenses and accounts payable of $80,194, and $66,565
respectively. This activity resulted from the delivery of Phase one of the
Saudi Project. During the first half of 1997, the Company received the first
revenues and cash flow from the Mexico contract. This large difference is
solely the result of the timing of the shipments on large projects and is not
indicative of a declining trend in revenue or in Company activity.
The Company experienced a loss of $19,085 in the quarter ended March 31, 1997
compared to a loss of $193,870 in 1996. The Company had no revenue during the
second quarter of 1996.
Accounts receivable of $20,000 are $362,322 less than the June 30, 1996 balance.
The Company collected the final payment of phase two of the Saudi contract
($184,522) during the second quarter of 1997.
Inventory increased during the first six months of 1997 by $27,457. This
increase is in tile production materials for the SMS machine.
Accounts payable at June 30, 1997 of $112,630 are $246,727 less than the June
30, 1996 balance of $ 359,357 at June 30, 1997 and is a reduction of $92,702
since December 31, 1996. Accrued Expenses increases to $165,049 at June 30,
1997 from $133,192 at June 30, 1996. The June 30, 1997 balance is an increase of
$6,227 from December 31, 1996. This increase represents an increase $36,478 in
accrued interest, reduced by $30,251 in cash payments.
1996 Investing Activities consisted of the sale of the Company's residential
property in Miami, Florida, and the purchase of the Rothbury license agreement
during the second half of 1996. The company added $24,773 capital improvements
to the SMS Machine during the current year.
Financing activity in the six months ended June 30, 1997 consisted of a
decrease in advances from officers of $18,003 compared to an increase of $23,000
in 1996. In 1996 the Company paid off the mortgage on the sale of the
residential property and paid off the vehicle note. There were no comparable
transaction in the six months ended June 30, 1997. The Company completed
negotiations to arrange for financing using its held letters of credit on
pending equipment deliveries, and borrowed $50,000 against the Mexico Letter of
Credit during the second quarter of 1997 which has subsequently been paid in
full in August, 1997.
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1997 AND THE THREE MONTHS ENDED
JUNE 30, 1996.
The Company generated revenue of $154,889 during the three months ended June 30,
1997. No revenue was generated in the same period of the prior year. The 1997
revenue is for management services on the beginning of the Mexico contract and
the sale of the license to Nevada Recycling Technologies, Inc. The differences
in revenue for the two periods is the result of the project nature of the
Company's business an is not indicative of a trend in revenue or Company
activities.
Depreciation expense increased from $2,604 to $12,253 due to the purchase in
1996 of the SMS press equipment and the addition to it in 1997.
Office and Administrative expenses declined during the 1997 quarter. These
expenses had been higher in 1996 due to the Saudi project.
Interest expenses increased because of the financing of the SMS press equipment.
Minority Interest is a credit of $5,377 for the three months ended June 30,
1997, this credit is less than the $34,111 credit for the quarter ended June 30,
1996, because of the lower loss in the current year.
Income tax expense is a credit of $2,423, which reverses the first quarter
expense due to the year to date loss. In 1996 the company reversed an accrual of
$8,900 for the same reason.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1997 AND THE SIX MONTHS ENDED JUNE
30, 1996.
The Company had revenue of $341,450 in the Six months ended June 30, 1997.
Revenue of $781,549 was generated in the same period of the prior year. The
1996 revenue reflects the shipment of part one of the Saudi project. The 1997
revenue is for management services on the beginning of the Mexico contract and
the sale of the license agreement to Nevada Recycling Technologies, Inc. The
difference in revenue for the two periods is the result of the timing of
shipments of large contracts and is not indicative of a downturn in revenue or
Company activities.
Commission expense of $70,000 was recognized on a completed Saudi sale in 1996.
Commissions of $37,000 were paid during the three months ended March 31, 1997,
but treated as prepaid as they relate to the equipment portion of the Mexico
contract. These commissions will be expensed at the time the sale revenue is
recognized.
Depreciation expense increase from $5,208 to $123,231 due to the purchase in
1996 of the SMS press equipment and the addition to it in 1997.
Office and Administrative expenses declined during the 1997 quarter. These
expenses had been higher in 1996 due to the Saudi project.
Interest expenses increased because of the financing of the SMS press equipment.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None during the Six months ended June 30, 1997, however, The Company
shares were reverse split 1 for 3 effective July, 1997.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On June 27, 1997, the Company held its annual meeting of shareholders
and presented the following matters for a vote of the shareholders:
A. Elect three directors for one year terms each to serve until the next
annual meeting of shareholders or until his successor is elected and qualified:
Ehrenfried Liebich FOR: 4,379,078 WITHHELD: -0-
John F. Pope FOR: 4,379,078 WITHHELD: -0-
Keith J. Fryer FOR: 4,379,078 WITHHELD: -0-
B. Approve a one for three reverse split of the issued and outstanding
common shares of the Company:
FOR AGAINST ABSTAIN NOT VOTED
--- ------- ------- ---------
4,379,078 -0- -0- 5,080,891
C. Approve the 1997 Stock Option Plan of the Company.
FOR AGAINST ABSTAIN NOT VOTED
--- ------- ------- ---------
4,379,078 -0- -0- 5,080,891
D. Amend the Articles of Incorporation to create a class of preferred
stock, to consist of 5,000,000 shares which may be issued in series or classes
and with such other designation of rights and preferences as may be determined
by the Board of Directors:
FOR AGAINST ABSTAIN NOT VOTED
--- ------- ------- ---------
4,379,078 -0- -0- 5,080,891
E. To adopt Bylaws of the Company as amended by the Board of Directors:
FOR AGAINST ABSTAIN NOT VOTED
--- ------- ------- ---------
4,379,078 -0- -0- 5,080,891
All matters were approved by a majority of the shareholders. The Company
solicited proxies using a proxy statement which is included herein by reference.
Item 5. Other Information
None
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Reports on Form 8-K
No reports on Form 8-K were filed, or required to be filed, during the
quarter ended June 30, 1997.
(B) Exhibits. The following exhibits are included as part of this report:
Exhibit SEC Exhibit
Number Ref. Number Title of Document Location
- ------ ----------- ------------------------------ ---------
3 3 Articles of Amendment to the Articles Attached
of Incorporation of The Quantum Group,
Inc.
10.01 10 Waste Resources Reclamation Attached
Letter of Intent
10.02 10 Nevada Environmental Technologies, Attached
Inc., Agreement
22 22 Proxy Statement Incorporated
by reference*
27 27 Financial Data Schedule Attached
* Incorporated by reference from the Definitive Proxy Statement filed June
16, 1997 by the Registrant on Form Type DEF 14A as filed with the Commission,
SEC file no. 0-23812
<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.
August 14, 1997 -----------------------
Ehrenfried Liebich
Chairman of the Board, President, and
Chief Executive Officer
August 14, 1997 -----------------------
John F. Pope
Vice President, Finance
Chief Accounting Officer
<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.
August 14, 1997 /s/ Ehrenfried Liebich
----------------------------
Ehrenfried Liebich
Chairman of the Board,
President, and
Chief Executive Officer
August 14, 1997 /s/ John F. Pope
--------------------------
John F. Pope
Vice President, Finance
Chief Accounting Officer
<PAGE>
THE QUANTUM GROUP, INC.
&
Subsidiaries
FINANCIAL STATEMENTS
Three Months and Six Months Ended June 30, 1997
Three Months and Six Months Ended June 30, 1996
<PAGE>
THE QUANTUM GROUP, INC. (F-1)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June June December
30, 1997 30, 1996 31, 1996
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 8,005 $ 210,192 $ 6,602
Accounts Receivable 20,000 382,322 204,522
Inventory 518,036 490,579 490,579
Loan Receivable 0 0 0
Note Receivable 0 83,960 0
---------- ---------- ----------
Total Current Assets 546,041 1,167,053 701,703
PROPERTY & EQUIPMENT
Furniture and Fixtures 6,852 6,986 10,651
Residential Property 0 0 0
Vehicles 0 749 0
Equipment 175,485 0 170,144
---------- ---------- ----------
Total Property & 182,337 7,735 180,795
Equipment
OTHER ASSETS
Cash Pledged 5,122 0 5,122
Accounts Receivable 0 254,221 0
Loan Receivable 0 38,750 0
Securities 100,000 6,250 0
License Rights 439,500 489,255 464,377
Deposit 3,281 661 3,281
Tax Benefit Deferred 80 0 80
Prepaid Commissions 37,008 67,415 0
---------- ---------- ----------
Total Other Assets 584,991 856,552 472,860
---------- ---------- ----------
Total Assets $1,313,369 $2,031,340 $1,355,358
========== ========== ==========
/TABLE
<PAGE>
THE QUANTUM GROUP, INC. (F-2)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June June December
30, 1997 30, 1996 31, 1996
---------- ---------- ----------
<S> <C> <C> <C>
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued Expenses $ 165,049 $ 133,192 $ 158,822
Accounts Payable 112,630 359,357 205,332
Due Officers 133,149 81,701 151,152
Customer Deposits 23,860 648,920 0
Franchise Tax Payable 0 0 0
Capitalized Leases 0 16,741 0
Current Maturities 785,197 266,871 785,197
Note Payable 50,000 0 0
--------- ---------- ----------
Total Current Liabilities 1,269,885 1,506,782 1,300,503
LONG TERM LIABILITIES
Note Payable - Machinery 170,519 0 170,519
Note Payable - Technology 347,547 0 347,547
Note Payable 267,131 620,418 267,131
Less Current Maturities (785,197) (266,871) (785,197)
---------- ---------- ----------
Total Long Term 0 353,547 0
Liabilities
Minority Interest
in Subsidiary 82,464 81,049 84,739
STOCKHOLDER'S EQUITY
Common stock, 50,000,000
shares authorized
9,456,696 shares
outstanding 9,457 9,457 9,457
Paid in Capital 1,678,363 1,678,363 1,678,363
Accumulated Deficit (1,726,800)(1,597,778) (1,717,704)
---------- ---------- ----------
Total Stockholders' (38,980) 90,042 (29,884)
Equity
TOTAL LIABILITIES & ---------- ---------- ----------
STOCKHOLDERS' EQUITY $1,313,369 $2,031,420 $1,355,358
========== ========== ==========
</TABLE>
<PAGE>
THE QUANTUM GROUP, INC. (F-3)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Six Three Six Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
June June June June December
30, 30, 30, 30, 12,
1997 1997 1996 1996 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUE
Equipment Sales $ 54,889 $ 241,152 $ 0 $ 781,549 $ 2,872,679
License Sales 100,000 100,000 0 0 35,000
Other 0 298 0 0 0
----------- ----------- ----------- ----------- -----------
Total Revenues 154,889 341,450 0 781,549 2,907,679
COST OF SALES 0 0 0 457,813 1,895,468
----------- ----------- ----------- ----------- -----------
Gross Profit 154,889 341,450 0 323,736 1,012,211
EXPENSES
Commission 0 0 0 70,000 195,077
Depreciation 12,253 23,231 2,604 5,208 22,926
Amortization 12,439 24,878 8,292 8,292 33,169
Travel 11,802 25,871 35,058 40,656 67,586
Professional Fees 1,156 1,156 10,000 10,000 68,147
Office 11,693 25,872 16,349 36,783 21,546
Rent & Utilities 13,465 38,113 16,227 30,455 83,103
Administration Expenses 20,482 39,060 51,432 89,011 87,283
Consulting Fees 57,545 115,461 86,714 162,321 265,375
Interest 40,939 59,178 10,205 21,487 88,161
Accounts Receivable
Written Off 0 0 0 0 376,931
Foreign Currency
Translation 0 0 0 0 (6,344)
---------- ----------- ----------- ----------- -----------
Total Expenses 181,774 352,820 236,881 474,213 1,302,960
---------- ----------- ----------- ----------- -----------
Net Profit or
(Loss) from
Operations (26,885) (11,370) (236,881) (150,477) (290,749)
</TABLE>
<PAGE>
THE QUANTUM GROUP, INC. (F-4)
STATEMENT OF OPERATIONS
(UNAUDITED)
-Continued-
<TABLE>
<CAPTION>
Three Six Three Six Twelve
Months Months Months Months Months
Ended Ended Ended Ended Ended
June June June June December
30, 30, 30, 30, 31,
1997 1997 1996 1996 1996
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Other Income & (Expenses)
Interest Income 0 0 0 0 122
Gain of Sale of Residence 0 0 0 0 38,327
Loss on Investment 0 0 0 0 (6,250)
Income - Capital Lease 0 0 0 24,850 16,741
--------- --------- --------- --------- ---------
Total Other Income & (Expenses) 0 0 0 24,850 48,940
Profit or (Loss) (26,885) (11,370) (236,881) (125,627) (241,809)
Taxes & Minority Interest
Minority Interest 5,377 2,274 34,111 16,733 12,989
Provision for Taxes 2,423 0 8,900 0 0
Provision for Taxes and --------- --------- --------- --------- ---------
Minority interest 7,800 2,274 43,011 16,733 12,989
--------- --------- --------- --------- ---------
Net Profit or (Loss)
After Tax and Minority
Interest ($19,085) ($9,096)($193,870)($108,894)($228,820)
========= ========= ========= ========= =========
Net Profit or (Loss)
Per Share ($0.00) ($0.00) ($0.02) ($0.01) ($0.02)
Weighted Average
Shares Outstanding 9,456,696 9,456,696 9,456,696 9,456,696 9,456,696
Diluted Net Profit or
(Loss) Per Share N/A N/A N/A N/A N/A
Weighted Average
Shares Outstanding N/A N/A N/A N/A N/A
</TABLE>
<PAGE>
THE QUANTUM GROUP, INC. (F-5)
STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
From January 1, 1994 to June 30, 1997
<TABLE>
<CAPTION>
COMMON STOCK PAID IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT
-------------------------------------------------
<S> <C> <C> <C> <C>
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
Loss for the
year ended
December 31, 1996 (228,820)
-------------------------------------------------
Balance,
December 31, 1996 9,456,696 $9,457 1,678,363 (1,717,704)
Loss for the Six
Months ended
June 30, 1997 (89,096)
-------------------------------------------------
Balance,
June 30, 1997 9,456,696 $9,457 $1,678,363 ($1,806,800)
=================================================
</TABLE>
<PAGE>
THE QUANTUM GROUP, INC. (F-6)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Six Twelve
Months Months Months
Ended Ended Ended
June June December
30, 1997 30, 1996 31, 1996
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Profit (Loss) ($89,096) ($108,894) ($228,820)
Adjustments to reconcile net profit
or (loss) to net cash:
Write Off Investment 0 0 6,250
Write Off Loan Receivable 0 0 38,750
Write Off Long Term Receivable 0 0 338,181
Amortization & Depreciation 48,108 13,498 56,095
Foreign Currency Remeasurement (6,344)
Non Cash Income (16,741)
Minority Interest (22,275) (16,733) (12,989)
Changes in Operating Assets &
Liabilities
(Increase) Decrease in
Accounts Receivable 184,522 (202,359) (24,559)
(Increase) Decrease in Inventory (27,457) 0 0
(Increase) in Deposit on Inventory 424,820 424,820 0
Decrease (Increase) in Long Term
Accounts Receivable 0 0 0
(Increase) Decrease in Loan Receivable
(Increase) in Prepaid Commissions (37,008) (67,415) 0
(Increase) Decrease in Deposits 0 0 (3,281)
Increase (Decrease) in Notes Receivable
Increase (Decrease) in Accrued Expenses 6,227 (93,694) (68,034)
Increase (Decrease) in Accounts Payable (92,702) (117,022) (271,047)
Increase (Decrease) in Tax Payable
Increase in Customer Deposits 23,860 404,446 (244,464)
Increase in Cash Pledged 0 0 (5,122)
Rounding 0 0 (3)
--------- --------- ---------
Net Cash Generated (Used) by
Operating Activities (5,821) 236,647 (17,308)
--------- --------- ---------
</TABLE>
<PAGE>
THE QUANTUM GROUP, INC. (F-7)
STATEMENT OF CASH FLOWS
(UNAUDITED)
Continued
<TABLE>
<CAPTION>
Six Six Twelve
Months Months Months
Ended Ended Ended
June June December
30, 1997 30, 1996 31, 1996
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Investing Activities
Purchase of Equipment (24,773) 0 (182,295)
Purchase of License Rights 0 (497,547) (497,547)
Sale of Residential Property 0 236,586 252,532
Purchase of Furniture 0 0 (11,086)
---------- ---------- ----------
Net Cash Provided (Used)
by Investing Activities (24,773) (260,961) (438,396)
Cash Flows From Financing Activities
Payment of Long Term Debt 0 (165,000) (169,781)
Increase (Decrease) in Notes
Payable 50,000 353,547 511,896
Increase (Decrease) in Vehicle
Note Payable 0 (4,781) 0
Increase (Decrease) in Amounts
Due Officers (18,003) 23,000 92,451
Contributed Capital 0 1,600 1,600
---------- ---------- ----------
Net Cash Provided by
Financing Activities 31,997 208,366 436,166
---------- ---------- ----------
Increase (Decrease) In Cash 1,403 184,052 (19,538)
Cash at Beginning of Period 6,602 26,140 26,140
---------- ---------- ----------
Cash at End of Period $ 8,005 $ 210,192 $ 6,602
========== ========== ==========
</TABLE>
Significant Non-Cash Transactions:
In February 1997, as discussed in Item 2. Management's Discussion and Analysis
of Financial Statements, (FN1). The Company issued a license agreement to Nevada
Environmental Technology, Inc. The licence agreement fee was $100,000
which was paid by $100,000 of common shares of the licensee's parent
Keystone Energy Service, Inc. (KESE)
<PAGE>
THE QUANTUM GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE #1 - Corporate History
- ---------------------------
The Company was organized on December 2, 1968, under the laws of the state of
California, as Acqualytic Systems, Inc. The Company was suspended on June 1,
1971 for failure to comply with statutory laws of California. On June 15, 1989,
the Company was reinstated after paying the applicable taxes and fees to the
state of California. During the period of its suspension the Company transacted
no business with the exception of its President, Mr. Frank Scoville,
transferring stock previously issued to him to a number of other individuals.
The Company acted as its own transfer agent.
Pursuant to an agreement of merger filed on June 27, 1989, in the state of
Nevada, Acqualytic Systems, Inc., a California Corporation, merged with Country
Maid, Inc., a Nevada Corporation. The Nevada Corporation was incorporated in
the state of Nevada on June 13, 1988 and on June 30, 1989 Country Maid, Inc.,
filed applicable documents with the state of Nevada and received a Certificate
of Reinstatement. Country Maid, Inc., was the survivor Corporation pursuant to
the merger agreement. The surviving Corporation changed its name to
Transcontinental Video Robotics, Inc., on June 27, 1989. On September 18, 1992,
the name of the Company was changed to The Quantum Group, Inc.
During 1991, and 1992, the Company marketed electronic acupuncture devices and a
complete line of nutritional supplements through franchised distribution
centers. In December 1992, all operations of the subsidiary involved with the
acupuncture devices and nutritional supplements were suspended. Losses incurred
in these operations have been treated as operating losses in 1991 and 1992.
NOTE #2 - SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------
(A) The Company uses the accrual method of accounting.
(B) Revenues and directly related expenses are recognized in the period when
the goods are shipped to the customer.
(C) The Company considers all short term, highly liquid investments that are
readily convertible, within three months, to known amounts as cash equivalents.
The Company currently has no cash equivalents.
(D) Primary Earnings Per Share amounts are based on the weighted average number
of shares outstanding at the dates of the financial statements. Fully Diluted
Earnings Per Shares shall be shown on stock options and other convertible issues
that may be exercised within ten years of the financial statement dates.
(E) Inventories: Inventories are stated at the lower of cost, determined by
the FIFO method or market.
(F) Consolidation Policies: The accompanying consolidated financial
statements include the accounts of the company and its majority - owned
subsidiary. Intercompany transactions and balances have been eliminated in
consolidation.
(G) Foreign Currency Translation / Remeasurement Policy: The company has no
on site operations in foreign countries. All purchases and sales in foreign
countries are concluded in American dollars. If at future dates assets and
liabilities occur in foreign countries they will be recorded at historical cost
and translated at exchange rates in effect at the end of the year. Income
Statement accounts are translated at the average exchange rates for the year.
Translation gains and losses shall be recorded as a separate line item in the
equity section of the financial statements.
(H) Depreciation: The cost of property and equipment is depreciated over the
estimated useful lives of the related assets. The cost of leasehold improvements
is depreciated (amortized) over the lesser of the length of the related assets
or the estimated lives of the assets. Depreciation is computed on the straight
line method for reporting purposes and for tax purposes.
<PAGE>
THE QUANTUM GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE #2 - SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------
(I) Issuance of Subsidiary's Stock: The Company has elected to accounts for
shares issued by its subsidiary as an equity transactions.
(J) Estimates: The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
<PAGE>
<PAGE>
Exhibit 3
AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
THE QUANTUM GROUP, INC.
The Quantum Group, Inc., a corporation organized under the laws of the
State of Nevada, June 13, 1988, hereby adopts the following Articles of
Amendment to its Articles of Incorporation pursuant to the provisions of Nevada
Revised Statutes Sections 78.385 and 78.390.
I
The Articles of Incorporation shall be amended to read as follows:
ARTICLE IV
AUTHORIZED SHARES
The Corporation shall have the authority to issue fifty million
(50,000,000) shares of Common Stock with a par value of $.001 per share. The
Corporation shall also have the authority to issue five million (5,000,000)
shares of Preferred Stock, with $.001 par value per share. The Board of
Directors is hereby expressly authorized to issue the shares of Preferred Stock
in such series and to fix from time to time before issuance the number of shares
to be included in any series and the designation, relative rights, preferences
and limitations of all shares of such series.
II
The shareholders voted and approved a one for three reverse split of the
outstanding shares of the Corporation. The authorized shares of common stock
will remain at 50,000,000, $.001 par value common voting shares. There are
currently 9,456,696 shares issued and outstanding in the Corporation. Following
the reverse split there will be 3,153,232 common shares outstanding.
III
The date of the adoption of the foregoing amendment and reverse split by
the shareholders was June 27, 1997. The number of shares outstanding in the
Corporation and entitled to vote on the amendment was 9,459,696. All stock in
the Corporation is entitled to one vote per share for each matter coming before
the meeting of the shareholders.
IV
The number of shares that voted in favor of the above amendments was
4,379,078. The number of shares that voted against the above amendments was
- -0-.
DATED this 27th day of June, 1997.
THE QUANTUM GROUP, INC.
By: /s/ Ehrenfried Liebich
--------------------------
Ehrenfried Liebich
President
By: /s/ Keith J. Fryer
--------------------------
Keith J. Fryer
Secretary
STATE OF CALIFORNIA )
:ss
COUNTY OF ORANGE )
On the ____ day of June, 1997, personally appeared before me Ehrenfried
Liebich and Keith J. Fryer and duly acknowledged to me that they are the persons
who signed the foregoing instrument as President and Secretary respectively and
that they have read the foregoing instrument and know the contents thereof and
that the same is true of their own knowledge except as to those matters upon
which they operate on information and belief and as to those matters believe
them to be true.
____________________________________
NOTARY PUBLIC
Residing in :__________________________
My Commission Expires:_______________
<PAGE>
<PAGE>
Exhibit 10.01
LETTER OF INTENT
May 8, 1997
Definitions:
Waste Resources Reclamation, LLC is the purchaser identified as WRR. Eurectec,
Inc. is the vendor, identified as ET.
1. WRR, and ET, have communicated over a period of approximately one year,
during which time by way of exchanging information relating to their respective
interests in the processing of waste rubber to produce raw material to be used
in the manufacturing of a variety of new value added products.
2. WRR. has made known to ET its plan to develop a recycling/manufacturing
project in Louisville, Kentucky and its interest in utilizing the ET. process
and manufacturing equipment as a part of its future operation.
3. WRR. has disclosed to ET. its funding source, Steadfast of Great Britain,
and of its anticipated time of funding, May-June 1997.
4. Based on the above and such other commonalties as have developed over a
period of months, WRR. is presenting to ET. this conditional Purchase
Agreement, subject to available funding as cited in #3 above.
5. Subject to such formal conditions as may be agreed upon at the time of
funding, it is the intent of WRR. to purchase a Eurectec Pressmaster product
manufacturing Systems, which will include a Pressmaster 200 Molding Press, a
Blendmaster Mixer, a Flockmaster Flocking System which three machines are
capable of effectively supporting the production capacity of the Pressmaster 200
Molding Press.
Our purchase agreement will also include such molds as are to be designated. At
such time as the initial product line for the ET. System has been selected.
6. Such other ancillary equipment, values controls, meters, special tools and
supplies as are necessary for the proper installation, testing, adjustments,
training of operating personnel will be a part of the formal sales contract and
their respective costs, appropriately listed.
/S/ J.M. Morganti 5/8/97
- -----------------
J.M. Morganti
Executive Vice President
/S/ Keith J. Fryer 5/8/97
- ------------------
Keith J. Fryer
Executive Vice President<PAGE>
<PAGE>
Sales Agreement
Eurectec, Inc.
This Agreement is made and entered into this day of February 28, 1997 by
and between Eurectec, Inc., a Nevada corporation ("Seller") and Nevada
Environmental Technologies, Inc., c/o 35986 Novio Court, Rancho Mirage, CA 92270
("Buyer"). Seller has agreed to sell, and Buyer has agreed to purchase, a
Compact 6000 Granulator system and other equipment as per Exhibit A on the terms
and conditions set forth below. Accordingly the parties, intending to be legally
bound thereby, agree as follows :
1. Identification of granulator. The equipment to which this Agreement
relates is a Eurectec Compact 6000 granulator, Model No. 6000, together with
additional optional equipment: as per attached list Exhibit A. (collectively the
"granulator/shredder/slitter/PressMaster and other equipment to schedule").
Unless otherwise specified herein, Seller will manufacture the
granulator/ancillary equipment for the express purpose of fulfilling this
Agreement.
2. Agreement to purchase. a) Buyer agrees to purchase from Seller, and
Seller agrees to sell to Buyer, the Compact 6000 Granulator and PressMaster
identified above with additional equipment for the total purchase price of $
7,644,830.00. Exhibit A.
b) Payments. 15% deposit payment $ 1,146,724.00 US dollars
to be paid at the time of signing the contract and is to be wire transferred
to the following account details : Beneficiary : Eurectec, Inc. Account # 023
712 350 ABA Route # 1220 16066 City National Bank 4685 MacArthur Court, Newport
Beach, CA 92660
c) The balance of $ 6,498,106.00 US dollars to be paid as
follows ; the full amount to be paid via an irrevocable, confirmed &
transferable Letter of Credit, acceptable to Eurectec, Inc.. Payment to be made
upon the presentation of clean "on-board" bills of lading. The prices quoted do
not include any excise, sales, use or other taxes applicable in California,
Nevada or elsewhere in the United States or overseas. The total purchase price
includes costs of freight and insurance of a common carrier chosen by Seller,
and does not include any expedited shipping, waiting or other extraordinary
shipping services required by Buyer.
Taxes which the Seller must pay or collect with respect to the sale of the
Granulator/equipment (other than income taxes) shall be added to the total
purchase price and shall be payable by Buyer upon delivery of the Granulator(s).
Buyer bears the risk of loss for the Granulator and other equipment after
delivery, in accordance with Buyer's instructions.
<PAGE>
Sales Agreement
Eurectec, Inc.
3. Delivery Date.
The shredding, granulation and PressMaster equipment can be delivered within 180
days following the receipt of the advance payment and confirmed Letter of
Credit.
In event of loss during shipment, actual delivery shall be delayed a reasonable
time to allow Seller to collect insurance and effect repairs or replacement.
4. Other obligations of Seller. Seller agrees to make available to Buyer
via telephone or in person at Buyer's premises (at Buyer option), such of
Seller's personnel as Buyer reasonably deems necessary for the purpose of
instructing and training Buyer's employees in the operation and maintenance of
the Granulator in connection with the uses proposed to be made by Buyer of the
Granulator, provided such instruction and training is performed during initial
installation of the Granulator. Unless otherwise agreed in writing, Seller shall
pay transportation and lodging costs for Seller's personnel required to travel
to Buyer's location and Seller shall bear all other costs of providing such
services.
5. Buyer's Installation Obligations. Buyer shall be responsible to obtain
all necessary inspections, licenses and permits for the installation and
operation of the Granulator. Buyer acknowledges that the total purchase price
for Compact 6000 model does not include any power hook-ups pads or floor
reinforcement required in Buyer's facility prior to installation. Buyer shall
reimburse Seller for any additional costs of Seller's training and installation
personnel occasioned by Buyer's failure to properly prepare the installation
site.
Where appropriate, Granulator blades are considered normal wear items. Due to
the variety of materials and operating conditions, Seller makes no warranty or
representation as to the operating life of Granulator blades.
6. Warranty. Seller warrants that the Granulator will be free from defects
in design, materials and workmanship for a period of one year from the date of
shipment or 2,080 hours of use, whichever comes first. Eurectec, Inc., reserve
the right to overhaul the equipment before production commences. To be entitled
to the benefits of this warranty, the Granulator must have been properly
installed, maintained, and operated within its rated capacity and not otherwise
abused. Buyer is to keep full production records and make same available to the
seller when requested. Any use of the Granulator other than as stated in
Seller's maintenance manuals supplied with the Granulator shall constitute
abuse. Anticipated yield charts subject to (debeaded) truck or car tire feed
stock will be supplied separately.
In the event of any defects covered by this warranty, Seller will remedy such
defects by repairing or replacing any parts found to be defective.
<PAGE>
Sales Agreement
Eurectec, Inc.
This warranty is limited to parts and labor only and does not include any labor
other than the removal and replacement of any defective parts. This shall be the
exclusive remedy for all claims whether based on contracts, negligence, or
strict liability, Seller shall not, in any event, be liable for any loss of the
use of any equipment or incidental or consequential damages or commercial loss.
7. Specifications - Engineering Changes. Specifications contained in
Seller's quotation or brochures and illustrations were in effect at the time of
the quotation or of printing of brochures and illustrations. Seller reserves the
right to make design or specification changes without notice; provided that any
such change shall not materially reduce the utility of the Granulator to Buyer.
Unless incorporated herein by specific reference, such specifications do not
form a part of this Agreement.
8. Default - Remedies. In the event of the failure by Seller to fulfill
any material term or condition of this Agreement prior to the Seller's notice of
its readiness to make delivery of the Granulator, which failure remains uncured
ten (10) days after receipt by Seller of written notice thereof, Buyer shall be
entitled to withhold all unpaid amounts and to seek the return of any amounts
previously paid to Seller, and Buyer shall be under no further obligation to
Seller hereunder.
In the event of failure by Buyer to purchase the equipment in accordance with
Section 2 hereof, other than as a result of Seller's default hereunder, and if
such failure remains uncured ten (10) days after receipt by Buyer of written
notice thereof, Seller shall be entitled, at its option, to terminate this
Agreement.
However, under these circumstances, all amounts previously paid by Buyer
hereunder to the seller, will be used by the seller as liquidated damages to
cover all costs associated with the establishment of the Buyers purchase order.
In the event of any dispute between the parties hereunder, and upon the request
of either party, the parties agree to submit their dispute to non-binding
mediation before an independent mediator in Los Angeles, California.
Should an amicable settlement not be reached, through mediation or otherwise, or
if the parties cannot mutually agree upon a mediator, each of the parties
reserves all legal and equitable rights it may have had against the other party
were it not for this mediation provision.
9. Mutual Representations. The individuals executing this Agreement on
behalf of each of the parties hereto represents and warrants to the other party
that he or she has full power and authority to act for and bind the party for
whom he or she purports to act, and that this Agreement has been authorized by
all necessary corporate action, if applicable.
<PAGE>
Sales Agreement
Eurectec, Inc.
10. Miscellaneous. (a) This Agreement represents the entire agreement
of the parties with respect to the subject matter hereof, and supersedes any
prior written or oral expressions of the parties with respect to such subject
matter. This Agreement may be amended or modified only in writing signed by each
of the parties hereto.
(b) The goods herein described are to be manufactured in and
delivered from Europe. However, the parties agree that a contract resulting
herefrom in the United States, shall be deemed a California contract and shall
be construed in accordance with the Laws of California, other than principles of
conflicts of Law.
Buyer hereby : `
(i) agrees that Seller may bring suit arising from this
Agreement in the courts of California or in United States courts located in Los
Angeles, California,
(ii) consents to the jurisdiction of each such court,
(iii) waives any obligation it may have to the laying of
venue of any such suit in such court, and
(iv) irrevocably designates the Director of the Los Angeles
Department of Commerce as its agent in California to receive service of any
process in any such suit in California
(c) The addresses of each of the parties for the purpose of
any notice required or permitted to be given hereunder shall be as indicated
following such parties signature, and Notice addresses may be changed by giving
notice to the other party. Notices shall be effective upon delivery to the
notice address by personal delivery, overnight express service, United States
mail or facsimile transmission (with hard copy to follow by first class mail).
(d) Charge- out rates for additional technical services are
included under Exhibit B.
----------
This contract is open for acceptance and execution for 180 days maximum from the
date hereto, otherwise Eurectec and it's agents reserve the right to increase
the prices accordingly.
<PAGE>
Sales Agreement
Eurectec, Inc.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed by
their duly authorized officers on the date and year first above written.
Seller > > > > > > > > Eurectec, Inc.
WITNESS:
______________________________ BY_______________________________
Buyer > > > > > > > Nevada Environmental Technologies, Inc.
WITNESS :
______________________________ BY_____________________________
Date : February 28, 1997
<PAGE>
Sales Agreement
Eurectec, Inc.
EQUIPMENT COSTS SUMMARY for Tire Recycling Plant - EXHIBIT "A"
Detailed Equipment List and Contract Prices to follow as an Appendix to this
Agreement :
<PAGE>
Sales Agreement
Eurectec, Inc.
EXHIBIT "B"
Management & Technical Services
Billing Rates - Net
Item Charge
1. Senior Project Management $150.00/hour
2. Senior Staff Engineer $108.00/hour
3. Process Engineer $108.00/hour
4. Engineer $90.00/hour
5. Designer/CAD $75.00/hour
6. Secretarial/Clerical $36.00/hour
7. Charges for services by outside
firms for special reproduction,
express mailing, and other
special items At cost
Whenever any work in connection with this Agreement is performed in the field,
it will be performed at the hourly rate specified above.
This rate will apply to all travel time and time at work at the job site or
client's offices which occurs during normal working hours. Travel time, used
herein, refers to travel between the job site or client's offices and Eurectec,
Inc., headquarters.
Overtime work will not be performed without specific client approval, except in
an emergency case(s) where client cannot be contacted to obtain approval for
overtime work.
All travel, living, and out-of-pocket expenses will be charged at cost as stated
below:
1.0 Transportation
1.1 Automobile rental
Reimbursable at cost
1.2 Air Travel
Reimbursable at cost. Whenever possible, and unless special circumstances
dictate otherwise, domestic air travel will be at coach rates. International
travel will be at business class rates.
<PAGE>
Sales Agreement
Eurectec, Inc.
EXHIBIT - B continued
2.0 Living Costs
------------
2.1 Motel and hotel accommodations will be reimbursable at cost.
2.2 Meals and nominal incidental expenses (tips, laundry, baggage
handling, etc.) will be reimbursable at cost.
2.3 Any Eurectec, Inc., employee required to be away from the Los Angeles
City office for an extended period of time, at a domestic location
will be permitted to return home every weekend and such travel costs
will be reimbursable at cost.
2.4 Any Eurectec, Inc., employee required to be away from the Los Angeles
City office for any extended period of time, at an international
location, will be permitted to return home every fourth weekend and
such travel costs will be reimbursable at cost.
<PAGE>
Sales Agreement Nevada Environmental Technologies, Inc. page
Date : February 28, 1997 Appendix to Sales Agreement.
Nevada Environmental Technologies, Inc.
c/o 35986 Novio Court,
Rancho Mirage, CA 92270
Gentlemen,
Re : Eurectec, Inc. - Tire Recycling Plant - Crumb Rubber & product
manufacture
Further to your recent inquiry, we have pleasure in enclosing our budget
proposals to supply you with a Compact tire shredding, granulation and product
manufacturing equipment, for the manufacture of crumb rubber and a range of
crumb rubber derived after market products. Prices quoted will be subject to
confirmation, once a specific equipment configuration has been determined and
drawings have been approved for manufacture.
Eurectec, Inc., are marketing this compact range of equipment worldwide, under
an exclusive contract with the European manufacturers, and we are presently
installing a number of projects in, the United States, China, Japan, Saudi
Arabia, Europe and other international territories at this time.
First of all, by way of background, the Compact range of crumb rubber
granulation machines, as the name implies, are very compact units that are
designed to receive shredded tires of between 2 and 6 inch pieces and in one
complete process, the machine separates the crumb rubber from the steel and
nylon in the tire and via associated equipment we can individually bag the
processed materials as appropriate.
The machine can be set to produce 5 sizes of granules, ranging from 35 mesh to 4
mesh (ASTM) or 0.5 mm to 5 mm. The 10, 20 and 35 Mesh sizes are ideally suited
for use in CRM asphalt paving applications and the 5, 10 mesh are also used in
after market product manufacture. The largest size can be mixed with fertilizer
for a number of horticultural applications.
The mesh sizes and yield rates are as follows :
Please note : This data is based solely on shredded & de - beaded truck tire
feed stock. Other feed stock, due to the nature of the compounds used in
manufacture, may reduce the yields quoted.
<PAGE>
Eurectec, Inc.
Output calculation : per C6000 machine :
Assumed truck tire casings are introduced : Introducing 1200 kg - 2646
pounds/per hour @ 85% efficiency = 2249 pound/hour days worked per year = 312
(26 days per month x 12)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
MESH. Introduced @85% Net Yield/shift 2 Shift
pounds/hour efficiency Percent ( %) 8 hr. 16 hr. Pounds/Year
35 160.35 136 6.06 1088^ 2176 678,912
20 402.35 341 15.18 2728^ 5456 1,702,272
10 280.48 238 10.60 1904 3808 1,188,096
5 603.29 512 22.814 4096 8192 2,555,904
4 542.43 461 20.53 3688 7376 2,301,312
- --------------------------------------------------------------------------------
sub total crumb rubber: 75.18 13504 27,008 8,426,496
Steel 529.20 449 20.00 3592 7184 2,241,408
Fabric 128.06 108 4.81 864 1728 539,136
- --------------------------------------------------------------------------------
Totals 2646.16 2245* 99.99 17960 35,920 11,207,040
================================================================================
</TABLE>
^ It is planned to further screen these mesh sizes in order to recover the finer
mesh contained within the product to be able to sell at a much higher price per
pound. A supplementary detailed analysis can be supplied upon request.
* Rounded
<PAGE>
Eurectec, Inc.
Summary of C6000 annual production :
Annual production (per C6000 machine) based on 2 x shifts calculated as follows
: one shift = 13504 pounds of crumb rubber only x 2 shifts = 27,008 x 312 days =
8, 426,495 pounds per annum or 4,213.25 tons of crumb rubber plus 1120 tons of
steel plus 270 tons of fabric = 5603.25 tons net yield of materials.
During 1994 several large US companies in the Asphalt business will be securing
supply contracts for the crumb rubber. This is the area that we are focusing on
right now in the US, where Federal Law mandates the use of crumb rubber as an
asphalt modifier under the Federal Highway Act - Intermodel Surface
Transportation Efficiency Act of 1991 (ISTEA).
In addition to this, we have developed new technology for the manufacture of a
wide range of after market products, including impact absorbing interlocking
paving stones, flooring mats, carpet underlay and school playground tiles.
We can confirm our "turn-key" package price for a tire recycling and product
manufacturing plant as follows :
ITEM # 1 Compact 6000 Granulator :
Supply and deliver as per specification to achieve 6000 Metric tons of input per
annum for the sum of : US $ 1,056,506.00. (F.O.B.) manufacturing plant.
The machine has installed power of 180 kilowatt (equivalent to 241 horsepower)
which will run at 460 V / 200 amp, 3 phase/60 Hertz. 14 days of training is also
included which will entail us running the plant for 7 days to ensure production
outputs.
This includes the C6000 granulator, the hopper with conveyor ( from hopper plus
horizontal feed) and weigh scales for material feed to mills, shredded material
conveyor from the Saturn shredder to the C6000 hopper feed and computer modem.
Also, control adjustments to conform to E.C. rules and additional densimetric
separators.
All costs, associated with our engineers time during commissioning and
installation and subsistence costs, are also included in these package prices.
<PAGE>
Eurectec, Inc.
C6000 granulators :
<TABLE>
<S> <C>
Single 6,000 metric ton C6000 Compact granulator $ 1,056,506.00
- --------------------------------------------------------------------------
Item # 1 sub total 4 # C6000 granulators : $ 4,226,024.00
- --------------------------------------------------------------------------
ITEM # 2 Mac / Saturn stationery shredder & Grizzly
to feed 4 x C6000 granulators :
High volume shredder to feed 4 # C6000 granulators :
----------------------------------------------------
Mac/Saturn 62-40 HT (200HP) Shredder, including
Electrical controls, stand and hopper $ 0,345,000.00
Model 80 Grizzly, 300 HP Electric motor, stand,
infeed and discharge hopper. $ 0,425,000.00
Shredder infeed conveyor 36" x 36" $ 0,028,000.00
Model 80 Grizzly infeed and Discharge conveyors $ 0,083,333.00
Crossbelt Magnetic Separator $ 0,030,000.00
Crossbelt Magnet Stand with Mounting Hardware $ 0,009,167.00
- --------------------------------------------------------------------------
Item # 2 sub total Shredder : $ 0,920,500.00
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
ITEM # 3 Supplementary equipment :
- - C6000 spare parts $ 85,637.00 per set x 4 # $ 0,348,548.00
Conveyor to hopper feed $ 7,989.00 x 4 # $ 0,031,956.00
- - Bead Puller $ 28,143.00 x 2 # $ 0,056,286.00
- - Slitter ES2 $ 26,250.00 x 2 # $ 0,052,500.00
Compressor Group $ 15,444.00 (1000 liter per min.) x 4 # $ 0,061,776.00
- - Rotary Screener $ 43,731.00 x 2 # $ 0,087,462.00
- - Magnetic Separator $ 10,000 x 2 # $ 0,020,000.00
- - Conveying & Bagging equipment from 4 x C6000 granulators
complete with Pneumatic Feed to 4 x Silos $ 189,556 x 2 $ 0,379,112.00
- - SuperCollider $ 30,000.00 x 2 $ 0,060,000.00
- - Baling Machine $ 15,000.00 x 2 $ 0,030,000.00
- --------------------------------------------------------------------------------
Item # 3 sub total supplementary equipment : $ 1,121,640.00
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Eurectec, Inc.
ITEM # 4 PressMaster Product manufacturing equipment :
<TABLE>
<S> <C>
- - "PressMaster" Uno Press including auto mold change
and high pressure cylinder $ 300,000.00 x 2 $ 600,000.00
- - Spare part inventory $ 21,000.00 per set x 2 sets $ 042,000.00
- - MixMaster system for two PressMaster machines $ 205,000.00
- - Autoflocking machine 3m/min. $ 127,854.00
- - Semi automatic glue machine $ 025,114.00
- - CutMaster machine ( cutting mats ) $ 013,698.00
- - Additional Molds to produce "other" products :
a) 2 x simple shallow molds (steel
form ) Each $ 22,500 (pattern to
be decided) $ 045,000.00
b) 2 x heavy deep molds (steel form)
Each $ 29,000 (pattern to be
decided) $ 058,000.00
- --------------------------------------------------------------------------------
Item # 4 sub total "PressMaster" product manufacturing equipment $ 1,116,666.00
- --------------------------------------------------------------------------------
ITEM # 5 Misc. project costs :
- - Project coordination, equipment drawings, plant
layout and building interface coordination ( excluding
design, supply and installation of the building and associated
works ) equipment commissioning & installation
and training on the operation of all equipment supplied $ 100,000.00
- - Shipping costs, including insurance, flat rack containers,
40' box containers and US overland delivery of the
shredder. Excluding all import duties and local taxes.
Based on 4 x flat racks and 2 x 40' containers Italy, plus
2 x 40' containers from Germany plus 1 x flat rack Texas. $ 160,000.00
- --------------------------------------------------------------------------------
Item # 5 sub total Misc. project costs $ 260,000.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ITEMS 1 - 5
TOTAL EQUIPMENT SUPPLY & INSTALL COST $ 7,644,830.00 *
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
Eurectec, Inc.
* Notes on total price quoted :
Equipment shipments based on C.I.F. European / US port subject to confirmation.
Prices quoted are valid for 60 days, thereafter subject to adjustments.
Equipment package does not include fork-lift truck or other ancillary vehicles
etc.
Timing / Payment
Manufacturing time, from our receipt of a 15% deposit and your client company
establishing an acceptable irrevocable/transferable letter of credit, in favor
of Eurectec, Inc., (for 85% of the contract value) will be approx. 180 days.
Delivery by sea shipment will take an additional 5/6 weeks approx. ex. European
port and installation, a further 2 / 3 weeks. Equipment installation,
commissioning, testing and training shall take a further 60 - 90 days, subject
to local conditions. Delivery time is subject to confirmation at the time of
order.
Maintenance - based on Compact 6000
Servicing is carried out routinely and the European experience has not involved
any significant production down-time, based on 2 shift working. All major
maintenance, has been undertaken over weekends and has been handled within a
short space of time, typically 2-5 hours. The changing of blades will normally
take 3/4 hours. The annual cost of replacement parts viz. : 1 set blades 1
Phase, 1 set of blades II Phase + 4 sharpening each, 2 or 3 sets of III phase
cylinders, 2 sets of IV phase cylinders and 1 set of blades for the high speed
mills. The above parts are to be multiplied by 2 (for 2 shift working) and would
amount to circa. $ 170,000 for the year or approx. 4 cents per kg. or two cent
per pound.
Warranty
All Cisap products are guaranteed for twelve (12) months, commencing from plant
& equipment commissioning date. The guarantee includes the replacement of all
parts that are defective or mis-manufactured, and covers defects in the
machinery operation resulting from such defective parts and/or manufacturing
defects. This guarantee does not include consumable items such as blades and/or
cutting tools, seals or bearings. Cisap guarantees the nominal production
capacity of Compact 6000 granulators within +/- 10%. Data is based on the
crumbling and granulating of radial, steel belted, truck casings resulting in
granules measuring between 0.5 mm and 4.0 mm.
Other manufacturer warranties will apply and these will be submitted as part of
the Sales Agreement / Contract documentation.
<PAGE>
Eurectec, Inc.
Warranty continued /.
The warranty does not cover electrical equipment for which we will the same
warranty of each different supplier. The warranty period will start with the
installation of the equipment. Damages caused by modifications brought by the
buyer and not conforming to the specifications contained in the owner's manual,
or which have not been previously approved in writing by the Vendor, are not
covered by the warranty. Damages caused to the equipment by using spare parts
bought by the buyer and without the vendor's approval, or due to modifications
brought in contrast with owner's manual specifications, are not covered by this
warranty. This warranty does not cover damages caused by the introduction in the
equipment of dangerous materials, such as but not limited to : screws, bolts,
truck tire steel bed wire, or material other than that for which the equipment
has been specifically designed.
Installation of the equipment :
The Buyer will provide to prepare the space for the installation of the
equipment and make available all electric, telephone and water connections, as
well as all necessary construction works, based upon instructions which will be
supplied by the vendor for this purpose. The Buyer will also supply all the
means for the moving of the equipment as well as all personnel necessary to
assist the Vendor's technicians.
The equipment shall be shipped on a flat rack container, assembled and made
ready for installation. The installation and the training of the Buyer's
technicians will be performed in 2-3 weeks or in any case a period which will be
deemed necessary. Cost for the vendor's technicians will be borne by the buyer
as well as return travel costs, whether outside or within the Country of Buyer,
as well as full board and lodging and air fare. The departure of the Vendor's
technicians will take place after the buyer will have informed the vendor that
the equipment has been placed as per agreed lay-out and that all electrical and
telephone lines ( the latter to service the modem ) as well as water means will
have been positioned as per instructions.
After Sales Support Services
Eurectec, Inc., can provide clients with a wide range of marketing support
services including crumb rubber sales brokerage, after market product sales
support and sales training and development programs. Details upon request.
<PAGE>
Eurectec, Inc.
Pro forma
If requested, we have included pro forma income statements for your reference,
based on a number of assumptions, however, Eurectec, Inc., or its agents do not
guarantee or warrant the figures shown, which are for indication purposes only
and sales revenues and costs may vary from project to project and each clients
market projections, are to be fully evaluated by independent means.
We trust this provides you with an overview of our equipment and processes and
we look forward to hearing from you, following your evaluation of the enclosed
materials.
Should you have any additional questions, please do not hesitate to contact the
writer.
We thank you for your interest in our products and services.
Very truly yours,
Eurectec, Inc.
enclosures :
Ref : NET/EL/2/28/97
page
<PAGE>
This Document
represents a
LICENSE AGREEMENT
between
The Quantum Group, Inc.
Licensor
and
Nevada Environmental Technologies, Inc.
Licensee
for the territory of
Nevada
Date : February 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . .4
1.1 Business Day. . . . . . . . . . . . . . . . . . . . . . .4
1.2 Confidential Information. . . . . . . . . . . . . . . . .4
1.3 Dollars (CAN) or "$CAN" . . . . . . . . . . . . . . . . .4
1.4 Dollars (US) or "$US" . . . . . . . . . . . . . . . . . .4
1.5 Effective Date. . . . . . . . . . . . . . . . . . . . . .4
1.6 Licensed Technology . . . . . . . . . . . . . . . . . . .4
1.7 Net Revenues. . . . . . . . . . . . . . . . . . . . . . .4
1.8 Patents . . . . . . . . . . . . . . . . . . . . . . . . .4
1.9 Payment . . . . . . . . . . . . . . . . . . . . . . . . .5
1.10 Plant . . . . . . . . . . . . . . . . . . . . . . . . . .5
1.11 Technical Information . . . . . . . . . . . . . . . . . .5
1.12 Territory . . . . . . . . . . . . . . . . . . . . . . . .5
1.13 Trademarks. . . . . . . . . . . . . . . . . . . . . . . .5
II. GRANT OF RIGHTS AND LICENCES. . . . . . . . . . . . . . .5
2.1 Use of Patents. . . . . . . . . . . . . . . . . . . . . .5
2.2 Construction of Plants. . . . . . . . . . . . . . . . . .5
2.3 Use of Technical Information. . . . . . . . . . . . . . .5
2.4 Right to Use Trademarks . . . . . . . . . . . . . . . . .6
2.5 Quality Control . . . . . . . . . . . . . . . . . . . . .6
2.6 Right to Sublicense . . . . . . . . . . . . . . . . . . .6
2.7 No Rights by Implication. . . . . . . . . . . . . . . . .6
2.8 Non-Competition . . . . . . . . . . . . . . . . . . . . .6
III. OBLIGATIONS OF EURECTEC . . . . . . . . . . . . . . . . .6
3.1 Training and Technical Assistance . . . . . . . . . . . .6
3.2 Additional Services . . . . . . . . . . . . . . . . . . .7
IV COMPENSATION PAYABLE TO EURECTEC . . . . . . . . . . . .7
4.1 Licensing Fee and Royalty . . . . . . . . . . . . . . . .7
4.2 Contents of Licensee's Reports. . . . . . . . . . . . . .8
4.3 Payments Accompany Licensee's Reports . . . . . . . . . .8
4.4 Minimum Royalty . . . . . . . . . . . . . . . . . . . . .8
4.5 Payments of Royalties and Other Amounts . . . . . . . . .8
4.6 Licensee's Books and Records. . . . . . . . . . . . . . .9
4.7 Quantum's Right to Audit. . . . . . . . . . . . . . . . .9
4.8 Audit Information Confidential. . . . . . . . . . . . . .9
4.9 Licensee's Reports Conclusively Correct . . . . . . . . .9
V INVENTIONS. . . . . . . . . . . . . . . . . . . . . . . .9
5.1 Disclosure Inventions . . . . . . . . . . . . . . . . . .9
5.2 Right to Use Inventions . . . . . . . . . . . . . . . . .9
5.3 Registering Patents on Inventions . . . . . . . . . . . .9
5.4 Registering Patents in the Territory. . . . . . . . . . .9
<PAGE>
VI CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . .9
6.1 Confidentiality Maintained. . . . . . . . . . . . . . . .9
6.2 Information in Connection with Sale . . . . . . . . . . 10
6.3 Liability for Disclosure. . . . . . . . . . . . . . . . 10
VII WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . 10
7.1 Warranties. . . . . . . . . . . . . . . . . . . . . . . 10
VIII TERMINATION . . . . . . . . . . . . . . . . . . . . . . 10
8.1 Term of Agreement . . . . . . . . . . . . . . . . . . . 10
8.2 Termination . . . . . . . . . . . . . . . . . . . . . . 10
8.3 After Termination . . . . . . . . . . . . . . . . . . . 11
8.4 Payment Obligations Continue. . . . . . . . . . . . . . 11
8.5 No Damages for Termination. . . . . . . . . . . . . . . 11
8.6 Sub-Licenses not to be Terminated . . . . . . . . . . . 11
8.7 Sub-Licensees Rights if Licensee Terminated . . . . . . 11
IX REPRESENTATIONS, WARRANTIES & COVENANTS OF EURECTEC . . 15
9.1 Ownership of Licensed Technology. . . . . . . . . . . . 11
9.2 No Conflicting Agreements . . . . . . . . . . . . . . . 11
X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 12
10.1 Assignments . . . . . . . . . . . . . . . . . . . . . . 12
10.2 Governing Law . . . . . . . . . . . . . . . . . . . . . 12
10.3 Arbitration . . . . . . . . . . . . . . . . . . . . . . 12
10.4 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . 12
10.5 Non Circumvention . . . . . . . . . . . . . . . . . . . 12
10.6 No Other Relationship . . . . . . . . . . . . . . . . . 12
10.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . 13
10.8 Entire Understanding. . . . . . . . . . . . . . . . . . 13
10.9 Invalidity. . . . . . . . . . . . . . . . . . . . . . . 13
10.10 Amendments. . . . . . . . . . . . . . . . . . . . . . . 13
10.11 Fees Payable. . . . . . . . . . . . . . . . . . . . . . 13
10.12 Responsibility for Taxes. . . . . . . . . . . . . . . . 13
10.13 Survival of Contents. . . . . . . . . . . . . . . . . . 14
10.14 Table of Contents and Headings. . . . . . . . . . . . . 14
10.15 Counterparts. . . . . . . . . . . . . . . . . . . . . . 14
10.16 Feasibility . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
LICENSE AGREEMENT
-----------------
This License Agreement is made and entered into on this day : February 28, 1997
by and between The Quantum Group, Inc. 14771 Myford Road, Bldg. B, Tustin,
California 92780 and :
Nevada Environmental Technologies, Inc.
WHEREAS, Quantum possesses certain intellectual and industrial property rights
with respect to tire recycling and recovery processes from the company and other
recycling technologies ; and
WHEREAS, Quantum under the terms of this agreement, is willing to grant, and
LICENSEE/sub licensee desires to receive, the right to use such rights in :
Nevada
in accordance with the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual promises, terms and
conditions hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties do hereby
agree as follows :
I. DEFINITIONS
As used herein, the following terms shall have the following definitions.
1.1 Business Day. "Business Day" shall mean a day on which banks are open for
business in Los Angeles, California, U.S.A.
1.2 Confidential Information. "Confidential Information" shall mean that part of
the Technical Information which is not publicly known.
1.3 Dollars (Can). "Dollars (Can)" shall mean the lawful money of Canada in
immediately available funds.
1.4 Dollars (US) or "$US". "Dollars (US)" or "$US" shall mean the lawful money
of the United States of America in immediately available funds.
1.5 Effective Date. "Effective Date" shall mean the later of (a) the date on
which Quantum executes this Agreement, (b) the date on which LICENSEE executes
this Agreement and pays the Licensing Fee [4.1 (a)(i)].
1.6 Licensed Technology. "Licensed Technology" shall mean the Patents ,
Trademarks and Technical Information now in existence.
1.7 Gross Income. "Gross Income" shall mean (a) any and all amounts received by
LICENSEE or its sub licensees in connection with the services rendered and/or
products sold from or by Plants which operate in the Territory.
1.8 Patents. "Patents" shall mean all patents and patent applications listed in
Exhibit A to this Agreement.
<PAGE>
1.9 Payment. "Payment" shall mean a Commercial Letter of Credit or other
mutually acceptable and agreed upon payment method.
1.10 Plant. "Plant" shall mean a tire recycling and recovery facility operated
pursuant to the rights granted to LICENSEE/sub licensee hereunder.
1.11 Technical Information. "Technical Information" shall mean all currently
existing trade secrets , know-how, computer programs (including copyrights in
said programs), knowledge, technology, means, methods, processes, practices,
formulas, techniques, procedures, technical, assistance, designs, drawings,
apparatus, written and oral rectification's of data, specifications, assembly
procedures, schematics and other valuable information of whatever nature,
whether confidential or not, and whether proprietary or not, which are necessary
to allow someone reasonably skilled in the industry to construct, use, service
and test a Plant.
1.12 Territory."Territory" shall mean : Nevada
------
1.13 Trademarks. "Trademarks" shall mean any and all trademarks, trade names,
service marks and other commercial symbols either listed in Exhibit C to this
Agreement or else which QUANTUM may from time to time designate to be included
within this definition by written notice to LICENSEE/sub licensee. Once included
in this definition, such trademarks, trade names, service marks and other
commercial symbols shall not be removed from this definition without the mutual
agreement of the parties hereto.
II. GRANT OF RIGHTS AND LICENSES
Subject to all of the terms and conditions set forth in this Agreement :
2.1 Use of Patents. QUANTUM hereby grants to LICENSEE an exclusive right and
license during the term of this Agreement to practice the Technology in order to
use and operate Plants and/or sell equipment in the Territory. LICENSEE shall
not use or operate Plants or sell equipment outside the Territory. LICENSEE
shall not use or operate Plants or sell equipment outside the Territory.
QUANTUM shall not use/ or operate Plants or sell equipment inside the Territory.
- --------------------------------------------------------------------------------
2.2 Construction of Plant(s)
Pursuant to the presentation to QUANTUM for approval of otherwise completed
sub-license agreements and/or otherwise completed contracts for the construction
and operation of plants by LICENSEE/sub licensee, QUANTUM will test successfully
and disassemble and package safely for shipment, complete equipment and
machinery as described in the said agreements or contracts. (EXHIBIT B) All
other costs of shipping, duties, taxes and licences shall be borne by the
sub-licensee or by LICENSEE according to the agreement between LICENSEE and the
sub-licensee.
2.3 Use of Technical Information.
(a) QUANTUM grants to LICENSEE an exclusive right and license during the
term of this Agreement to use the Technical Information in the Territory in
connection with QUANTUM's exercise of its rights and licenses granted in
Paragraph 2.1 above.
<PAGE>
(b) As soon as practicable after the Effective Date, but in no event later
than (60) days after the Effective Date, QUANTUM shall provide to LICENSEE/sub
licensee, at no additional costs to LICENSEE/sub licensee, all of the Technical
Information.
2.4 Right to Use Trademarks. LICENSEE/sub licensee shall use each of the
Trademarks on an exclusive basis in connection with the use, operation and
promotion of Plants hereunder, provided, however, that LICENSEE/sub licensee
shall give QUANTUM thirty (30) days prior written notice before using any
Trademark for the first time in a particular location in the Territory.
LICENSEE/sub licensee may also use other trademarks, trade names, service marks
and commercial symbols of its own choosing in connection with the use, operation
and promotion of Plants hereunder.
2.5 Quality Control.
(a) In order to comply with QUANTUM's quality control standards,
LICENSEE/SUB LICENSEE shall :
(i) maintain the quality of each plant by adhering to those specific
quality control standards that QUANTUM may from time to time promulgate and
communicate to LICENSEE with respect to such Plant ;
(ii) use the Trademarks prominently on the Plant(s) and documentation
relating to the Plant(s), and in compliance with all relevant laws and
regulations;
(iii) accord EURECTEC the right to inspect each Plant during normal
business hours, without prior advance notice, to confirm that LICENSEE's use of
such Trademarks is in compliance with this provision.
2.6 Right to Sub license. LICENSEE shall have the right to sub license any of
the rights and licenses granted hereunder without the prior consent of QUANTUM,
so long as : (a) each sub licensee agrees in writing to be bound by all of the
terms and conditions contained in this Agreement; and (b) QUANTUM is provided
with a copy of each such agreement within ten (10) days after it is executed.
LICENSEE hereby guarantees that each of its sub licensees shall comply with the
terms contained in this Agreement.
2.7 No Rights by Implication. No rights or licenses with respect to Licensed
Technology are granted or deemed granted hereunder or in connection herewith,
other than those rights or licenses expressly granted in this Agreement.
2.8 Non-Competition. During the term of this Agreement , LICENSEE/sub licensee
shall not engage in any negotiations with third parties with a view towards or
engage in the manufacture of any device which may be employed to recycle or
otherwise recover tires if such device could reasonably be considered to be in
competition with the QUANTUM processes described in this Agreement; neither
shall QUANTUM shall negotiate or conclude any agreement with any other party to
construct or operate a Plant or Plants within the Territory while this Agreement
is in effect.
III. OBLIGATIONS OF QUANTUM
3.1 Training & Technical Assistance.
(a) To assist LICENSEE/sub licensee in exercising its rights hereunder,
QUANTUM agrees to provide sufficient man-days of training and technical
assistance each calendar year (beginning in the year of the Effective date) to
LICENSEE/sub licensee and its employees anywhere in the Territory, so that
LICENSEE/sub licensee will be able to use the Licensed Technology to its full
potential. Such training and assistance shall be rendered by QUANTUM at no
additional charge to LICENSEE/sub licensee, except for expenses to be reimbursed
to QUANTUM as provided in Paragraph 3.1(c) below.<PAGE>
(b) To the extent LICENSEE/sub licensee requests such training and
technical assistance in excess of the man-days provided in Paragraph 3.1 (a)
above, QUANTUM shall be paid a per diem amount to be negotiated between the
parties before such assistance and training is provided and which shall be paid
before such assistance and training is rendered; provided that QUANTUM's
representatives are then able to provide such training and technical assistance.
(c) Travel costs, lodging, meals and all related expenses incurred by
QUANTUM in connection with sending representatives into the Territory pursuant
to this Paragraph 3.2 (a) or (b) shall be paid for in full by the LICENSEE/sub
licensee.
3.2 Additional Services.
(a) QUANTUM shall use its reasonable efforts to provide LICENSEE/sub
licensee with any and all additional assistance reasonably requested by
LICENSEE/sub licensee, including without limitation; producing technical, sales,
advertising and other reports and information for LICENSEE/sub licensee which
LICENSEE/sub licensee believes might be useful in promoting the Plants;
assisting LICENSEE/sub licensee in attempting to obtain from third parties
technical information, drawings, plans, specifications and other data which are
not proprietary to QUANTUM and which QUANTUM does not otherwise have the right
to use, in order to enable LICENSEE/sub licensee to respond to requests of any
potential customer, assisting LICENSEE/sub licensee in responding to technical
inquiries from potential customers of the Plants; and assisting LICENSEE/sub
licensee in the testing of Plants and in the further development of test
equipment
(b) QUANTUM shall bill LICENSEE/sub licensee for any such additional
services at prices to be agreed in advance by the parties hereto. QUANTUM shall
not commence performance of any part of any services hereunder until such prices
are established in writing by the parties hereto.
(c) Such services shall be invoiced in Dollars (US) monthly by QUANTUM.
Payment shall be due within thirty (30) days after QUANTUM's receipt of each of
QUANTUM's invoices therefor, and shall otherwise be paid in accordance with
Paragraph 4.5 hereof.
IV. COMPENSATION PAYABLE TO QUANTUM
4.0 Minimum Equipment Purchase - LICENSEE agrees to purchase the equipment
package attached, or equipment of similar value, within ( 180 ) days of signing
this Agreement .
<PAGE>
4.1 Licensing Fee & Royalty
(a) LICENSEE agrees to pay QUANTUM, for the rights granted to LICENSEE
under paragraphs 2.1, 2.2, 2.3(a) and 2.4 above and for the services to be
rendered by QUANTUM under paragraphs 2.3 (b) and 3.1 (a) above; and in addition,
upon completion of each sub-licensing agreement secured and negotiated by
LICENSEE :
(i) A Fee equal to the total amount of items supplied as per ;
Exhibit A - Price List of all Fees, Disbursements and Miscellaneous
Costs; and
Exhibit B - Price List of all machinery, equipment, supplies and
material.
The items supplied to be mutually agreed upon by QUANTUM and the LICENSEE
except for those items in Exhibits A & B which are indicated as
non-negotiable and which must, in any case, be included. Payment of the Fee
indicated in Exhibit A as "Licensing Fee" shall, subject to the signing of
this Agreement by both parties, initiate this Agreement. Signed copies of
Exhibits A & B shall constitute part of this Agreement, however, the
signing of these Exhibits may, by mutual agreement, be made subsequent to
the signing of this main part and shall not delay the Effective date of this
Agreement as per para. 1.5.
(ii) a continuing royalty equal to Two per cent (2%) of the Gross Income
from all Plants operated by the LICENSEE (re 1.7)
(iii) a continuing royalty equal to Two per cent (2%) of the Gross Income
from all Plants by sub-Licensees of the LICENSEE (re 1.7)
4.2 Contents of LICENSEE's Reports. LICENSEE shall deliver to QUANTUM within
ninety (90) days after the end of each Payment Period, starting on the Effective
Date and every 90 days thereafter, a written report describing, for the
applicable Payment Period; (a) the number of Plants operated by LICENSEE and its
sub licensees during such Payment Period; (b) the Gross Income for each Plant
during the Payment Period ; and (c) the total royalty due on such Gross Income
under Paragraph 4.1(a)(iii) hereof.
4.3 Payments Accompany LICENSEE's Reports. Each report for a payment Period
required in Paragraph 4.2 hereof shall be accompanied by a full payment to
QUANTUM of the royalties payable under Paragraph 4.1(a)(iii) hereof from the
Gross Income described in Paragraph 4.2 above.
4.4 Minimum Royalty.
(a) No minimum royalty shall apply, however, the LICENSEE/sub licensee is
required to operate and maintain the Plant or Plants in the Territory at a level
of production that shall reasonably be held comparable to other plants operating
under similar operating and market conditions.
4.5 Payments of Royalties and Other Amounts.
(a) All payments under Paragraphs 3.2, 4.3 hereof shall be made in Dollars
(US) by wire transfer or other mutually agreed upon method, to such bank or
account as QUANTUM may from time to time designate in writing.
(b) Whenever any payment hereunder shall be stated to be due on a day which
is not a Business Day, such payment shall be made on the immediately succeeding
Business day.
(c) Payments hereunder shall be considered to be made as of the day on
which they are received in QUANTUM's designated bank or account.
(d) For this agreement to become effective, the Licensee is required to
make the initial equipment purchase according to the terms and conditions
described in Exhibit "B", concurrently with the signing of this agreement.
4.6 LICENSEE's Books and Records. LICENSEE/sub licensee agrees to make and keep
full and accurate books and records in sufficient detail to enable royalties
payable hereunder to be determined.
4.7 QUANTUM Right to Audit. On seven (7) day's prior written notice to
LICENSEE/sub licensee, QUANTUM and its certified public accountants and other
auditors shall have full access to the books and records of LICENSEE and/or any
or all of its sub licensees pertaining to activities under this Agreement and
shall have the right to make copies therefrom at QUANTUM's expense. QUANTUM, its
certified public accountants and other auditors shall have such access at all
reasonable times and from time to time during normal business hours. Prompt
adjustment shall be made by the proper party to compensate for any errors or
omissions disclosed by such audit.
4.8 Audit Information Confidential. QUANTUM agrees to hold confidential all
information learned in the course of any examination of books and records
pursuant to Paragraph 4.8 above, except when it is necessary for QUANTUM to
reveal such information in order to enforce its rights under this Agreement in
court, or similar dispute resolution or enforcement proceeding or action, or
except when compelled by law.
4.9 LICENSEE's Reports Conclusively Correct. All quarterly reports and payments
not disputed as to correctness by QUANTUM within three (3) years after receipt
thereof shall thereafter conclusively be deemed correct for all purposes.
V. INVENTIONS.
5.1 Disclosure Inventions. LICENSEE/sub licensee shall disclose to QUANTUM each
Invention of LICENSEE/sub licensee affecting the operation of the Plant(s) or
equipment after such Invention is formulated, made or conceived.
5.2 Right to Use Inventions. LICENSEE/sub licensee may use such inventions only
if approved in writing by QUANTUM.
5.3 Registering Patents on Inventions. If LICENSEE/sub licensee formulates,
makes or conceives a patentable Invention, LICENSEE/sub licensee may apply, at
its own expense, for appropriate patent and other registrations of such
Invention in any and all jurisdictions in the Territory.
5.4 Registering Patents in the Territory. LICENSEE/sub licensee may register any
such patents for use in the Territory at his own expense subject to 5.2.
VI. CONFIDENTIAL INFORMATION
6.1 Confidentiality Maintained. Each party agrees that the other party hereto
has a proprietary interest in its Confidential Information. All disclosures to
the receiving party, its agency and employees shall be held in strict confidence
by such receiving party, its agents and employees, and such receiving party
shall disclose the Confidential information only to those of its agents and
employees to whom it is necessary in order to carry out their duties as limited
by the terms and conditions hereof. The receiving party shall not use the other
party's Confidential Information except for the purposes of exercising its
rights and carrying out its duties hereunder.
<PAGE>
The provisions of this paragraph 6.1 shall also apply to any consultants or
subcontractors that the receiving party may engage in connection with its
obligations under this Agreement.
6.2 Information in Connection with Sale. QUANTUM hereby grants the LICENSEE the
right during the term of this Agreement to distribute to the LICENSEE's sub
licensees in connection with the operation of Plants that part of the Technical
Information necessary for such sub licensees to use and operate such Plant, even
if such information includes some of QUANTUM's Confidential Information, to the
extent that Quantum and the LICENSEE agree that such technical Information is
helpful to such sub licensees in order to operate the Plant.
6.3 Liability for Disclosure. Notwithstanding anything contained in this
Agreement to the contrary, neither party shall be liable for a disclosure of the
other party's Confidential Information if the information is so disclosed ;
(a) was in the public domain at the time it was disclosed by the disclosing
party to the receiving party; or
(b) was independently developed by the receiving party and is so
demonstrated promptly upon receipt of the documentation and technology by the
receiving party; or
(c) becomes known to receiving party from a source other than the
disclosing party without breach of this Agreement by the receiving party and can
be so demonstrated.
VII. WARRANTIES.
7.1 Warranties.
(a) THE ORIGINAL MANUFACTURER'S WARRANTIES SHALL BE PASSED ON TO THE
LICENSEE OR SUB-LICENSEE BY QUANTUM.
(b) IN NO EVENT SHALL QUANTUM BE LIABLE TO LICENSEE FOR SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR LOSS
OF USE DAMAGES) ARISING OUT OF THE USE OR OPERATION OF ANY PLANT, EVEN IF
QUANTUM HAS BEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES OR LOSSES.
VIII. TERMINATION.
8.1 Term of Agreement. Unless it is terminated earlier pursuant to the terms of
this Article 8, this Agreement shall continue in full force and effect in
perpetuity.
8.2 Termination. Upon the occurrence of any of the following events, this
Agreement may be terminated by the non breaching party by giving written notice
of termination to the breaching party, such termination to be immediately
effective upon the giving of such notice of termination. Unless for reasons of
force majeure, outside the control of Licensor, Licensee or sub-Licensee.
(a) the occurrence of a material breach or default as to any obligation
hereunder by either party and the failure of such breaching party to promptly
pursue (within thirty (30) days after receiving written notice thereof from the
non breaching party) a reasonable remedy designed to cure (in the reasonable
judgment of the non-breaching party) such material breach or default ; or
<PAGE>
(b) the filing of a petition in bankruptcy, insolvency or reorganization
against or by either party, or either party becoming subject to a composition
for creditors, whether by law or agreement, or either party going into
receivership or otherwise becoming insolvent (for the purposes of this Paragraph
8.2., such party shall be considered to be a breaching party). or
(c) failure of the LICENSEE to order, accompanied by transferable
irrevocable Letter of Credit, the equipment for the first plant to be
constructed within the Territory, within ninety (90) days of completion of this
Agreement.
8.3 After Termination. If the LICENSEE is the breaching party, all rights to
the Territory provided in the Agreement shall revert immediately to QUANTUM.
8.4 Payment Obligations Continue. Upon termination of this Agreement for any
reason, nothing shall be construed to release LICENSEE from its obligations to
pay QUANTUM any and all royalties or other amounts accrued but unpaid hereunder
prior to the date of such termination.
8.5 No Damages for Termination. The parties hereto agree that if either party
terminates the other party pursuant to this Article 8, then the termination
party shall not be liable form damages or injuries suffered by the other party
as a result of that termination.
8.6 Sub-Licensees not to be Terminated. Should this Agreement between LICENSEE
and QUANTUM be terminated for any reason, the Agreements with sub--licensees,
which have been approved previously by QUANTUM and negotiated and completed by
LICENSEE, shall continue in effect and without penalties or requirement of
remedies unless such Agreements with sub-licensees are also in default, in which
case each sub-licensee agreement shall be treated and considered separately and
distinctly by QUANTUM.
8.7 Sub-Licensees Rights of LICENSEE Terminated. Provided the Sub-Licensees are
not in breach of this Agreement, they shall retain all rights to operate
according to the provisions of this Agreement.
IX. REPRESENTATIONS. WARRANTIES AND COVENANTS OF QUANTUM.
9.1 Ownership of Licensed Technology. EURECTEC hereby represents and warrants to
LICENSEE that, to the best of its information and belief, EURECTEC is the lawful
owner of the Licensed Technology, free and clear of all security interests,
encumbrances, liens, mortgages, licenses or rights of third parties which would
impair the licenses and rights granted to LICENSEE hereunder.
9.2 No Conflicting Agreements. EURECTEC hereby represents, warrants and
covenants that it has not and will not enter into any agreement with or become
subject to any obligation in favor of any third party which might conflict with
its obligations hereunder.
<PAGE>
X MISCELLANEOUS
10.1 Assignments. Except as provided in Paragraph 2.6 hereof, this Agreement and
any and all of the rights and obligations of either party hereunder shall not be
assigned, delegated, sold, transferred or otherwise disposed of, by operation of
law or otherwise, without the prior written consent of the other party.
This Agreement shall be binding upon, and inure to the benefit of, QUANTUM and
LICENSEE and their respective successors and assigns, to the extent such
assignments are in accordance with this paragraph 10.1.
10.2 Governing Law. This Agreement shall be governed, interpreted and construed
in accordance with the laws of the State of Nevada, United States of America, as
such laws are implied to agreements entered into and to be performed entirely
within its borders between its residents. In the unlikely event of either party
bringing a law suit against the other, each party has the right to litigate
against the other under the Laws of the United States .
10.3 Arbitration. Any dispute, controversy or claim arising out of or relating
to this Agreement or to a breach thereof, including its interpretation,
performance or termination, shall be submitted to and finally resolved by
arbitration. The arbitration shall be conducted in accordance with the
commercial rules of the United Nations Conference on International Trade Law
("UNCITRAL") which shall be administered in London, England (including the
rendering of the award) by the London Court of International Arbitration. The
arbitration, shall be the exclusive forum for resolving such dispute,
controversy or claim. For the purposes of this arbitration, the provisions of
this Agreement and all rights and obligations thereunder shall be governed and
construed in accordance with the laws of the State of Nevada, United States of
America, as such laws are applied to agreements entered into and to be performed
entirely within its borders between its residents. The decision of the
arbitrators shall be executory, final and binding upon the parties hereto, and
the expense of the arbitration (including without limitation the award of
attorney's fees to the prevailing party) shall be paid as the arbitrators
determine.
10.4 Waiver. A waiver of any breach of any provision of this Agreement shall not
be construed as a continuing waiver of other breaches of the same or other
provisions of this Agreement.
10.5 Non-Circumvention. In the event that LICENSEE or any of its designated
agents shall introduce any other person or persons, company or corporation to
the QUANTUM Patents, systems or plant, and should such introduction, discussion,
negotiation, conversation or written communication result in said person,
persons, company or corporation entering into an Agreement with QUANTUM for the
licensing of said patents, processes or the construction of a plant, whether
within or without the Territory covered by this Agreement, said person, persons,
company or corporation shall be deemed to be a sub-licensee of LICENSEE under
this Agreement and shall be governed by all the conditions contained in this
Agreement, unless such plant is to be built in another Licensee's assigned
territory in which case a "finder's fee" shall be negotiated with the other
Licensee.
10.6 No Other Relationship. Nothing herein contained shall be deemed to create a
joint venture, agency or partnership relationship between the parties hereto.
Neither party shall have any power to enter into any contracts or commitments in
the name of, or on behalf of, the other party, or bind the other party in any
respect whatsoever.
<PAGE>
10.7 Notices. Each notice required or permitted to be sent under this Agreement
shall be given by Fax transmission or by registered or recorded delivery letter
to QUANTUM and to LICENSEE at the addresses and FAX numbers supplied. Either
party may change its address and/or fax number for purposes of this Agreement by
giving the other party written notice of its new address and/or Fax number. Any
such notice if given or made by registered or recorded delivery letter shall be
deemed to have been received on the earlier of the date actually received and
the date ten (10) Business Days after the same was posted (and in proving such
it shall be sufficient to prove that the envelope containing the same was
properly addressed and posted as aforesaid) and if given or made by telecopy
transmission shall be deemed to have been received at the time of despatch,
unless such date of deemed receipt is not a Business Day, in which case the date
of deemed receipt shall be the next succeeding Business Day.
10.8 Entire Understanding. This Agreement embodies the entire understanding
between the parties relating to the subject matter hereof, whether written or
oral, and there are no prior representations, warranties or agreements between
the parties not contained in this Agreement.
10.9 Invalidity. If any provision of this Agreement is declared invalid or
unenforceable by a court having competent jurisdiction, it is mutually agreed
that this Agreement shall endure except for the part declared invalid or
unenforceable by order of such court. The parties shall consult and use their
best efforts to agree upon a valid and enforceable provision which shall be a
reasonable substitute for such invalid or unenforceable provision in light of
the intent of this Agreement.
10.10 Amendments. Any amendment or modification of any provision of this
Agreement must be in writing, dated and signed by both parties hereto.
10.11 Fees Payable. "Licensing Fee" is payable upon signing this Agreement by
the LICENSEE, other fees are payable as described in Exhibits A & B and in para
4.3 of this Agreement.
10.12 Responsibility for Taxes.
(a) Taxes in the territory now or hereafter imposed with respect to the
transactions contemplated hereunder (with the exception of income taxes or other
taxes imposed upon Quantum and measured by the gross or net income of Quantum)
shall be the responsibility of LICENSEE, and if paid or required to be paid by
Quantum, the amount thereof shall be added to and become a part of the amounts
payable by LICENSEE hereunder.
(b) Taxes outside the Territory now or hereafter imposed with respect to
the transactions contemplated hereunder (with the exception of income taxes or
other taxes imposed upon LICENSEE and measured by the gross or net income of
LICENSEE) shall be the responsibility of Quantum, and if paid or required to be
paid by LICENSEE, the amount thereof shall be deducted from the amounts payable
by LICENSEE hereunder.
(c) All taxes that become due and payable in the territory, from royalty
payments earned by Quantum Group, Inc., from the Licensee and payable to Quantum
Group, Inc., by the Licensee, under the terms of this Agreement, shall be paid
by the Licensee on behalf of Quantum Group, Inc., and the net proceeds will be
passed to Quantum Group, Inc., under the terms of this Agreement accordingly.
<PAGE>
10.13 Survival of Contents. Notwithstanding anything else in this Agreement to
the contrary, the parties agree that Paragraphs 2.7, 3.1(b) and (c), 3.2(b) and
(c), 5.2, 8.4, 8.5, 10.1, 10.2, 10.3, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10,
10.12, and 10.13 and Articles IV, VI & VII shall survive the termination or
expiration of this Agreement, as the case may be, to the extent required thereby
for the full observation and performance by any or all the parties hereto.
10.14 Table of Contents and Headings. Any table of contents accompanying this
Agreement and any headings contained herein are for directory purposes only, do
not constitute a part of this Agreement, and shall not be employed in
interpreting this Agreement.
10.15 Counterparts. This Agreement may be executed in any number of counterparts
and each such counterpart shall be deemed to be an original.
10.16 Feasibility. The Licensee acknowledges that QUANTUM makes no promises,
claims or projections concerning the feasibility, number or viability of tire
recycling plant(s) in the Territory, nor of the availability of raw materials or
markets, and that it is the responsibility of the Licensee to establish to his
own satisfaction that such a plant or plants are feasible.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement.
Signed this date : February 28, 1997
by
The Quantum Group, Inc. Nevada Environmental Technologies, Inc.
Licensor. As Licensee.
Signed : ___________________ Signed : _____________________
Witness :___________________ Witness :_____________________
Signed : ___________________ Signed : _____________________
<PAGE>
The Quantum Group, Inc.
EXHIBIT "A"
Appendix to the License Agreement between The Quantum Group, Inc.
and
Nevada Environmental Technologies, Inc.
for the Territory of
Nevada
Price List of Fees, Disbursements and Miscellaneous Costs
The following Costs and other considerations constitute part of the above
described License Agreement and shall be binding upon the parties to the
Agreement.
Item One : Licensing Fee : In consideration of which, Eurectec grants
the exclusive right to build, construct, operate
and/or sub-license the construction, building
or operation of such Tire Recycling Plants as
are the subject of this Agreement, within the
boundaries of the Territory stated in the
Agreement.
$ 150,000 U.S. dollars*
NOTE : * Fee payable upon the signing of this Agreement. The foregoing fee is a
one time only fee payable for the rights to the described Territory. No such fee
is payable to Eurectec by or for sub-Licensees of the Licensee. California Sales
Tax is not applicable to this amount.
Signed : _____________________________ (The Quantum Group, Inc.).
Signed : _____________________________ (Licensee).
Date of Agreement : February 28, 1997
<PAGE>
The Quantum Group, Inc.
EXHIBIT "B"
Appendix to License Agreement between
The Quantum Group, Inc., and Nevada Environmental Technologies, Inc.
Equipment Price List
SEE ATTACHED DETAILS.
<PAGE>
The Quantum Group, Inc.
EXHIBIT "C"
Appendix to the License Agreement between The Quantum Group, Inc.
and
Nevada Environmental Technologies, Inc.
for the Territory of :
Nevada
------
LIST & SAMPLES OF TRADEMARKS & LOGOS
The following items constitute part of the above described License Agreement
and shall be binding upon the parties to the Agreement.
SEE ATTACHED EXAMPLES
---------------------
Signed : ________________________ (The Quantum Group, Inc.)
Signed : ________________________ (Licensee)
Date of Agreement : February 28, 1997
<PAGE>
The Quantum Group, Inc.
EXHIBIT "D"
Appendix to the License Agreement between The Quantum Group, Inc.
and
Nevada Environmental Technologies, Inc.
for the Territory of
Nevada
LIST OF WARRANTIES attached.
The following Warranties constitute part of the above described License
Agreement and shall be binding upon the parties to the Agreement.
a) All processing equipment is guaranteed for twelve (12) months commencing at
commissioning date. The guarantee includes the replacement of all parts that are
defective or mismanufactured, and covers defects in the machinery operation
resulting from such defective parts and/or manufacturing defects.
The guarantee does not include consumable items such as blades, seals, or
bearings.
Technical support in the form of personnel from vendors will be supplied as per
paras 3.1 a, b & C., of the Agreement.
b) The granulator vendor guarantees the nominal production capacity of
granulators within +/- 10 %. Data is based on the crumbling and granulating of
radial, steel belted, truck casings resulting in granules measuring between
0.5 mm and 4.0 mm.
Signed : _____________________________ (The Quantum Group, Inc.)
Signed : _____________________________ (Licensee)
Date of Agreement : February 28, 1997
License Agreement Nevada page
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