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, 1998 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; 7,440,494 shares outstanding
as of August 5, 1998
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
See pages F-1 to F-10 attached
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS
This Form 10-QSB contains certain forward-looking statements. For this
purpose any statements contained in this Form 10-QSB that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, words such as "may," "will," "expect," "believe,"
"anticipate," "estimate" or "continue" or comparable terminology are intended to
identify forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, and actual results may differ materially
depending on a variety of factors.
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 10% of the contract amount, to be paid when installation is
completed. The Company intends that future sales will require 15% to 20%
deposit at the time of sale and the balance due on delivery of the equipment.
Because of the Company's experience with recycling equipment and time-
frames required to deliver, install and debug the systems, the Company is
focusing its efforts on the design and development of its own systems whereby
the Company has control rather than rely on outside technology. To this end the
Company is also developing systems and projects through joint-ventures whereby
the Company will be able to generate regular and consistent revenue and cash
flows from the joint-venture entities and not solely rely on erratic time-frames
of outside equipment sales. This strategy has now culminated with the Company's
EGS system incorporated in the Poseidon project in which the Company is the
majority shareholder. Because of the Company's revised focus at vertical
integration, the Company will have a delay in recognizing revenue and operating
profits until the Poseidon project is in production which is expected second
quarter of 1999.
The Company believes that at such time the Poseidon project is operational,
it will act as a platform for future sales of full-circle recycling plants as
well as become a significant revenue producing project for the Company on its
own.
The Company now expects minimal growth during the second half of 1998 from
equipment sales until the problems with the CISAP equipment in Saudi Arabia and
Mexico are resolved and due to the shift of the Company's focus toward full-
circle recycling plants. Current emphasis will be placed on PressMaster,
SuperCollider and REVULCON equipment packages, where manufacturing and
installation times are much less than with full turn key tire recycling plants
including shredding and granulating equipment which could yet positively impact
year end results.
The Company is preparing an application for a patent on its Heated Tile
products and anticipates filing during the third quarter of 1998. Heated Tile
is a value added after market product and the Company anticipates licensing the
Heated Tile process as a part of its full-circle recycling plant projects.
<PAGE>
The Company plans on sending a 1997 Annual Report to all shareholders of
record during the third quarter of 1998.
Joint Venture Projects
- ----------------------
SteG Germany - Poseidon Products GmbH. The Company has finalized a joint
venture agreement with a German Government sponsored company,
Strukturentwicklungsgesellschaft Ueckermunde GmbH., located near Berlin. As a
result of joint venture agreement, Poseidon Products GmbH. was established and
will construct and operate a tire recycling facility in the state of
Mecklenburg-Vorpommern to produce crumb rubber and to manufacture a wide range
of value added products. The plant is designed to be a full circle tire
recycling facility whereby tires will be shredded and granulated producing the
commodity crumb rubber. The crumb rubber is subsequently partially devulcanized
utilizing the exclusive REVULCON process to enable material to be used in a
variety of products and processes including incorporation into new tire
manufacture. The plant will employ a number of presses to manufacture
additional value added after market products such as flooring, soaker hoses for
irrigation applications, interlocking tiles and heated tiles as well as other
products.
The Poseidon joint-venture funding is in the process of being completed.
Grant funding of 50% of the total project costs (approximately $13,800,000) from
the German Government is anticipated to be complete by the end of the third
quarter 1998 as well as 30% bank financing and 20% equity raised through a
private offering in Germany. Eurectec, Inc., is under contract to supply the
technology transfer and equipment package for the Poseidon project valued at
$7,370,000, with anticipated equipment delivery commencing the second quarter of
1999. Engineering for the project is being coordinated by FDC Engineering of
Switzerland, an independent contractor.
Subsequent to the date of this report, the Company has negotiated a land
purchase in Penkun, near Berlin Germany for the Poseidon project. Ground
breaking is scheduled for third quarter 1998.
The Company anticipates the Poseidon project to be a showcase for future
full circle plant sales. The plant equipment and technology is the culmination
of research and development by the Company and the Company no longer relies on
outside sources for equipment design or technology.
Proposed Joint Venture Projects
- -------------------------------
Portugal / Scotland / Ireland. The Company is entering joint venture
projects in Portugal, Scotland and Ireland similar to that of the Poseidon
project to erect full circle tire recycling plants. It is anticipated that a
significant portion of the funding for these projects will be realized from
European Union grants. The Company expects to have all three projects underway
by early 1999.
California Prison Manufacturing Project. The Company continues negotiating
with the California State Prisons - Department of Corrections, Sacramento,
California to investigate the feasibility of establishing a joint venture
between the Company and the Department of Corrections Manufacturing Department.
During negotiations, the Company and the California State Prisons - Department
of Corrections have scaled back the original project of producing crumb rubber
to a project utilizing purchased crumb rubber. A factor influencing the
decision to scale back the prison project is the difficulty of the logistics of
having frequent shipments in and out of a prison facility. Another factor in
the decision to scale back the project is the ready availability of crumb
rubber. This project will incorporate a PressMaster and REVULCON technology to
produce value added after market products. A result of this joint venture would
be to provide the Company with a manufacturing platform for products and serve
as a showcase for marketing efforts. Negotiations are now expected to be
concluded in 1999 following a series of meetings at a number of potential
facilities.
Current Contracts
- -----------------
Mexico Agreement. The client has experienced problems in the commissioning
of the C9000 machines mainly relating to CISAP equipment and the high fiber
content tires in Mexico and the high altitude of the project site near Mexico
City. The Company has sent an engineering team to the site to investigate the
problems and the Company originally anticipated the equipment to be fully
operational by the end of the second quarter 1998. However, the engineering
team uncovered additional problems with the CISAP equipment which have required
re-engineering of the CISAP equipment on-site and re-engineering of the plant
itself. Currently, CISAP is preparing a proposal for further re-engineering and
modifications of the equipment. Included in CISAP's proposal will be a time
frame for completion of the modifications. The client in Mexico has expressed
concerns as to the length of time it is taking to repair the equipment. The
client has indicated that until such time as the CISAP equipment is working to
specification and all modifications and repairs completed, the client will not
consider initiating Phase 2 of the project or the purchase of additional after
market equipment. The Company anticipates having the CISAP equipment problem
resolved, based on CISAP representations, by the end of the third quarter of
1998.
Saudi Agreement. Initial equipment for Phase one of this project has been
delivered and partially installed at the site in Dammam. The anticipated
purchase of an additional two CISAP granulators has been deferred because the
Saudi client is rebuilding a salvaged granulator machine and expects the rebuilt
machine, along with the two existing CISAP granulators to meet its immediate
needs. The client has changed its focus to value added after market products.
CISAP has proposed a retrofit to modify the equipment already on site. The
scope of the retrofit will include two front end mills to increase the through-
put capacity of the C6000 machines. Other pending orders are for one additional
PressMaster 200 and other ancillary equipment. The Company anticipates
finalizing negotiations for the front end mills and other equipment by the end
of the third quarter of 1998.
Nevada Environmental Technologies, Inc. The Company finalized negotiations
in 1997 to issue a license to Nevada Environmental Technologies, Inc., ("NET").
In addition, a preliminary equipment sales agreement had been signed. NET has
shifted their concentration on energy marketing and the Company does not expect
NET to proceed with their previously planned tire recycling project in Reno.
This will be reviewed on an ongoing basis as the current exclusive Nevada state
license agreement expires on December 31, 1998.
Proposals Under Negotiation
- ---------------------------
Waste Resources Reclamation Agreement. The Company received a letter of
intent for the sale and purchase of SMS press equipment to Waste Resources
Reclamation. The Company anticipates entering a final agreement during the
third quarter of 1998, when the client expects to conclude its funding
arrangements.
Phoenix Environmental Group, Inc. The Company has received a letter of
commitment from Phoenix Environmental Group, Inc., ("PEG") to employ Eurectec
technology for a tire recycling facility. PEG has secured a large site close to
the Detroit International Airport and has prepared a detailed Project
Feasibility Study for the construction of a recycling park in Detroit, Michigan.
PEG anticipates initial development to commence the second half of 1998 with
equipment delivery during the second half of 1999, when the project funding has
been secured.
<PAGE>
Current Negotiations
- --------------------
A Director of the Company has visited and initiated negotiations with
several companies located in the Arabia Gulf, namely; Doha, Qatar, Abu Dhabi and
Dubai, United Arab Emirates to supply pressing equipment and shredding and
granulating equipment. The Company anticipates completing negotiations by year
end 1998.
The Company continues to have on-going sales discussions and negotiations
with qualified international and domestic prospects.
Faru Agreement - REVULCON
The Company has completed all payments for the REVULCON technology. For
each REVULCON plant sold by the Company, Faru will receive a royalty payment of
$10,000 for up to fifteen (15) plants and $20,000 royalty payment for each plant
sold following the initial fifteen. In joint negotiations with Faru and Ermafa,
located in Chemnitz near Dresden, Germany, the company has contracted Ermafa to
build the first REVULCON machine as part of the technology proof testing. The
Company expects to have the proof testing completed during the fourth quarter of
1998. The proof testing is in anticipation of incorporating the REVULCON
technology in the full circle recycling plants, particularly the Poseidon
project.
The REVULCON technology enables the production of high density, smooth
finish rubber moldings and extrusions, including new tires, from recycled crumb
rubber. This is done by a process of devulcanizing the rubber, returning it to
a state where it can be utilized in new products and be re-vulcanized. The
reactivated rubber waste can be processed without further additives to rubber
products like mats, plates, solid rubber tires, components for fall protection,
elements for sound and vibration deadening, blocking and insulating layers
against heat and moisture, etc., in mixtures with fresh rubber or plastic,
profiles and other goods can be made by extrusion or injection molding.
Eco-Etch Agreement
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. Ownership of IN.TEC changed
during 1997 which resulted in delays in final negotiations. ECO-ETCH is the
brand name given to a new technology for the recycling and recovery of etching
solutions used in the printed circuit board manufacturing industry. The Company
is currently in the process of finalizing the technology distribution rights for
ECO-ETCH. The Company is now in the process of completing negotiations and
anticipates a firm agreement during the third quarter of 1998. ECO-ETCH systems
will be marketed through the Company's subsidiary, Quantum Environmental
Solutions and Technologies, ("QEST").
Public Relations
- ----------------
The Company has negotiated a contract with a public relations firm, the
Blaine Group, Inc., based in Beverly Hills, California, who will provide
contract and product PR support services. Currently, the Blaine Group is
providing PR services for the Company.
Exhibitions
- -----------
The Company has attended and exhibited its products, technology and
services at the "10th Annual Money Show" which was organized by Intershow in Las
Vegas May 12 through 15. More than 6,000 people visited the show over the three
days. The Company will also attend the "San Francisco 20th Annual Money Show"
in August 6-9, 1998. Attendance and exhibits at these shows promote public
awareness of the Company.
<PAGE>
Web Site
- --------
The Company has developed a Website which can be viewed at
http://www.thequantumgroupinc.com. The Website allows the viewer to access an
overview of the Company's activities, obtain market information for the
Company's trading stock, view the Company's EDGAR filings and link to the
Eurectec, Inc. Website (http://www.eurectec.com).
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At June 30, 1998, the Company had cash of $640,666 on hand.
In January 1998, the Company concluded an off-shore offering under
Regulation S of 1,000,000 shares which yielded gross proceeds of $1,500,000.
This was used to eliminate all prior debt and provide working capital. The
Company has initiating an additional Regulation S offering for 1,600,000 shares
which the Company anticipates may yield up to $3,300,000 by the end of 1998. As
of June 30, 1998 this offering continues in process and has resulted in the sale
of 717,778 shares for a gross proceeds of $1,315,000. Once this has been
achieved, the Company intends to proceed with a registered offering to raise
further capital for Company expansion.
The Company does not currently have any outstanding debt and Management
believes that proceeds from current equipment sales and license fees, pending
sales and the Regulation S offering proceeds will provide sufficient capital and
liquidity to meet the Company's need for the next twelve months.
The Company is currently working with ParaDynamiX, a financial consulting
firm, to revise the Company's detailed funding plan reflecting the expectations
and implementation of the Company's strategic plan which now focuses on joint
venture projects with its own full circle recycling facilities. Upon completion
of the funding plan, the Company anticipates proceeding with a registered
offering to provide additional capital to the Company with the funds being used
to fund the joint venture projects as well as to purchase equipment for the
California project. The remainder of the funds will be used for domestic and
international marketing, exhibition participation and working capital.
The Company does not have any material capital commitments for 1998.
Should the Company proceed with a registered offering, the Company may enter
into capital commitments for equipment required by the California prison
project, although not expected until next year as previously stated.
RESULTS OF OPERATIONS
Comparison of the three months ended June 30, 1998 and the three months
ended June 30, 1997.
During the first half of 1998, the Company's net cash used in operations
was $766,112, compared to cash used in operations of $5,821 during the first
half of 1997. The 1998 cash utilization is a result of an operating loss of
$452,361 and the payment of $336,556 of accrued expenses, primarily accrued
interest on the Company's debt of $721,318, which was also paid off during the
first quarter. The Company realized net proceeds of $1,108,634, after
commissions, legal and accounting fees on its regulation S offering during the
three months ended June 30, 1998. No such activity was conducted during the
comparable quarter in 1997.
The Company invested an additional $80,000 in a license for additional
technology (Faru) and $22,222 in the German Joint Venture (Poseidon) during the
quarter ended June 30, 1998. No comparable activity occurred in 1997.
<PAGE>
The Company generated $9,088 of other revenue and $38,175 of costs during
the quarter ended June 30, 1998. $1,900 of this revenue was generated by the
sale crumb rubber inventory and 1,000 was generated from the sale of research
reports. $6,175 in interest was earned during the quarter. No project revenue
was recorded during the quarter. The crumb rubber was sold at cost and $31,000
of additional expenses were incurred for added equipment on the Mexico project
resulting in a cost of sales of $38,175 The Company had project Revenue of
$54,889 and a territorial license sale of $100,000 during the comparable quarter
in 1997.
Travel expense in the three months ended March 31, 1998 of $41,461 exceeded
the prior period expense of $11,802 by $29,659 because of the negotiation and
sales activities of a number of foreign transactions and a general increase in
the Company's marketing activities. Administrative expense increased from
$20,482 to $61,451 from the second quarter of 1997 to the same quarter of 1998.
This increase is also due to the increases in marketing activities during the
1998 period.
Consultant fees increased by $39,135 to $96,680 in the three months ended
June 30, 1998 compared to the $57,454 incurred in the comparable three month
period in 1997. $22,620 of this increase is as a result of charging expenditures
incurred by or on behalf of the Company president to consulting expenses. In
prior periods, the payments to or on behalf of the Company president had been
accounted for as a reduction of the debt owed to the officer by the Company.
During the three months ended June 30, 1998, the Company sold it's investment in
Keystone Energy at a loss of $13,875 from the previously reduced carrying value
rather than continue to incur potential additional losses. No comparable
transaction was applicable to the same quarter of the prior year.
Comparison of the six months ended June 30, 1998, and the six months ended
June 30, 1997.
The Company generated $460,000 of equipment sales revenue and $400,000 of
costs as a result of contract additions on the Mexico project during the six
months ended June 30, 1998. $40,000 of additional revenue was also generated by
the sale of a small parcel of land that the Company owned in conjunction with
the previously owned residential property in Florida. This parcel was excluded
from the original sale in order to eliminate the need to take a owner financing
plan of questionable collectability. Due to the uncertainty of revenue
recognition the parcel had been held without asset value, and as such the
purchase price of $40,000 is all a gain on sale. $1,920 in other revenue was
generated from the sale of crumb rubber and 1,000 was generated from the sale of
research materials. $6,175 in interest was also earned during the first half of
1998. The Company had $241,152 of Equipment sales and $100,000 of licence sales
for the comparable 1997 period.
The Company had a loss of $452,361 in the six months ended June 30, 1998
compared to a loss of $9,096 in 1997. This is also because of the difference in
revenue mix and the increased activity and resultant expenses in 1998.
The Company's cash position at June 30, 1998 is significantly stronger at
$640,666 compared to $8,005 at June 30, 1997. Accounts receivable of $731,198
are an increase of $20,000 the same time in 1997. The Company has a deposit on
inventory of $421,451 at June 30, 1998, no deposits were in place in 1997.
Inventory decreased during the first six months of 1998 compared to 1997
because of the sale back of the inventory unit to Cisap during the forth quarter
of 1997.
In 1997, the company acquired free trading fully registered shares of
Keystone Energy, Inc. in return for a license agreement. The company recognized
"Mark to Market" valuation losses in 1997 and in the first quarter of 1998. In
the second quarter, the Company sold the shares at a loss of $13,125 from book
value.
The Company invested $44,722 in the German Joint Venture and $150,000 in
the Faru license in 1998. No comparable transaction took place in 1997. In
anticipation of German project, the company has incurred $117,155 in prepaid
expenses. These expenses will subsequently be billed to the project. No prepaid
expenses were incurred in 1997.
Travel expenses of $76,272 in the six months ended June 30, 1998 exceed the
comparable 1997 period by $50,401, due to the German joint Venture and follow up
and sales activities in Mexico and Saudi Arabia. Administrative expenses and
consulting fees have increased from 1997 levels for the same reasons.
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 contact 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.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is endeavoring to explore all avenues to cure the problems
it has encountered with CISAP both in Mexico and Saudi Arabia. At the present
time, there is no formal litigation pending or threatened either against the
Company or CISAP. However, should the Company be unable to resolve its issues
with CISAP, the Company will consider filing suit against CISAP for any damages
it may incur because of the problems with the CISAP equipment and time-delays.
<PAGE>
Item 2. Changes in Securities
Recent Sales of Unregistered Securities
(a) Securities sold.
- ---------------------
1. Regulation S offering
--------------------------
<TABLE>
<CAPTION>
Date Title Price Per Share Amount
-------------------- ---------- --------------- -----------
<C> <C> <C> <C>
First Quarter 1998 Common $ 1.50 1,000,000
Date Title Price Per Share Amount
--------------------- ---------- --------------- -----------
Second Quarter 1998 Common $ 1.50 300,000
Common $ 2.00 300,000
Common $ 2.25 117,777
</TABLE>
2. Option Exercise
In June, 1998, an option for 50,000 shares of common stock, issued pursuant
to the Company's 1997 Stock Option Plan, was exercised at a price of $0.062 per
share.
(b) Underwriters and other purchasers.
1. Regulation S Offering
All securities were sold during the first and second quarters of 1998 to
non U.S. persons. All shares of common stock were sold in Germany to
Beteiligungs Fonds, GBR.
2. Option Exercise
The option was exercised by RMC International, a consultant to the Company.
(c) Consideration.
1. Regulation S Offering
The aggregate offering price for sales made during the first quarter 1998
was $1,500,000 and the Company paid a 10% commission in the amount of $150,000.
The aggregate offering price for sales made during the second quarter 1998
was $1,315,000 and the Company paid commission in the amount of $207,144.
2. Option Exercise
The Company realized $3,100 from the exercise of the option.
(d) Exemption from registration claimed.
1. Regulation S Offering
The securities were sold in the first and second quarters of 1998 pursuant
to Regulation S as promulgated by the Securities and Exchange Commission under
the Securities Act of 1933, as amended. The Company did not offer the
securities to any person in the United States, any identifiable groups of U.S.
citizens abroad, or to any U.S. Person as that term is defined in Regulation S.
At the time the buy order was originated, the Company reasonably believed the
Buyer was outside of the United States and was not a U.S. Person. The Company
reasonably believed that the transaction had not been pre-arranged with a buyer
in the United States. The Company has not nor will engage in any "Directed
Selling Efforts" and reasonably believes the Buyer has not nor will engage in
any "Directed Selling Efforts." The Company reasonably believed the Buyer
purchased the securities for its own account and for investment purposes and not
with the view towards distribution or for the account of a U.S. Person.
2. Option Exercise
The option was exercised pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
(e) Terms of conversion or exercise.
1. Regulation S Offering
Not applicable.
2. Option Exercise
The option was granted pursuant to the Company's 1997 Stock Option Plan.
The exercise price per share was $.062 and the option, which is for a total of
50,000 shares, may be exercised over a period of two years from October 23,
1997, the date of the grant.
(f) Use of Proceeds.
1. Regulation S Offering - First Quarter 1998
The use of proceeds (other than commission paid) are estimated. No
proceeds resulted in payments either directly or indirectly to directors,
officers or persons owning 10% or more of any class of equity securities; or to
affiliates of the issuer.
<TABLE>
<C> <C>
Gross proceeds $ 1,500,000
Commission (150,000)
Net proceeds 1,350,000
Payoff existing debt $ 700,000
Pay Rothbury agreement 400,000
Working capital 250,000
------------
Total Proceeds $ 1,350,000
<CAPTION>
Regulation S Offering - Second Quarter 1998
Gross proceeds $ 1,315,000
Commission (207,144)
Net Proceeds 1,107,856
Faru technology $ 80,000
Poseidon Joint Venture 22,222
Prepaid expenses 117,155
(Related to Poseidon)
Accrued expenses 61,038
Operating expenses 263,551
Cash remaining 563,890
------------
Total Proceeds $ 1,107,856
</TABLE>
2. Option Exercise
The Company realized $3,100 from the exercise of the option which funds
were placed in general working capital.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(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, 1998.
(B) Exhibits. The following exhibits are included as part of this report:
<TABLE>
<CAPTION>
Exhibit SEC Exhibit Title of Document Location
Number Ref. Number
-------- ----------- ---------------------- ---------
<C> <C> <C> <C>
10.1 10 Blaine Group Contract Attached
27 27 Financial Data Schedule Attached
</TABLE>
<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.
_________________________
__________, 1998 Ehrenfried Liebich
Chairman of the Board, President, and
Chief Executive Officer
__________, 1998 _________________________
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 12, 1998 /s/ Ehrenfried Liebich
______________ ___________________________
Ehrenfried Liebich
Chairman of the Board, President, and
Chief Executive Officer
August 12, 1998 /s/ John F. Pope
_______________ ___________________________
John F. Pope
Vice President, Finance
Chief Accounting Officer
<PAGE>
THE QUANTUM GROUP, INC.
and
SUBSIDIARIES
FINANCIAL STATEMENTS
Three Months and Six Months ended June 30, 1998
Three Months and Six Months ended June 30, 1997
<PAGE>
(F-2)
The Quantum Group, Inc. and Subsidiaries
Balance Sheets
June 30, 1998 and 1997 and December 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
June 30, June 30, December 31,
1998 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current Assets
- --------------
Cash $640,666 $8,005 $142,690
Accounts Receivable 731,198 20,000 710,979
Inventory 29,760 518,036 29,760
Deposit 421,451 421,451
----------- ----------- -----------
Total Current Assets 1,823,075 546,041 1,304,880
Property and Equipment
- ----------------------
Furniture and Fixtures 6,852 3,054
Equipment 137,712 175,485 154,778
----------- ----------- -----------
Total Property and Equipment 137,712 182,337 157,832
Other Assets
- ------------
Securities 100,000 73,125
Investment in Joint Venture 44,722
Cash Pledged 5,225 5,122 5,225
Licence Rights 539,745 439,500 414,622
Deposit 3,281 3,281 3,281
Tax Benefit Deferred 80
Prepaid Commissions 37,008
Prepaid Expenses 117,155
----------- ----------- -----------
Total Other Assets 710,128 584,991 496,253
----------- ----------- -----------
TOTAL ASSETS $2,670,915 $1,313,369 $1,958,965
=========== =========== ===========
</TABLE>
<PAGE>
(F-3)
The Quantum Group, Inc. and Subsidiaries
Balance Sheets -Continued-
June 30, 1998 and 1997
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, June 30, December 31,
1998 1997 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current Liabilities
- -------------------
Accrued Expenses $215,843 $165,049 $552,399
Accounts Payable 323,623 112,630 140,016
Due Officers 133,149 7,919
Customer Deposits 2,500 23,860 2,500
Franchise Tax Payable 103,548 103,548
Current Maturities 785,197 721,318
Note Payable 50,000
----------- ----------- -----------
Total Current Liabilities 645,514 1,269,885 1,527,700
Long Term Liabilities
- ---------------------
Note Payable - Machinery 170,519 145,631
Note Payable - Technology 347,547 347,547
Note Payable 267,131 228,140
Less Current Maturities (785,197) (721,318)
----------- ----------- -----------
Total Long Term Liabilities 0 0
Minority Interest in Subsidiary 82,464 109,256
Stockholders' Equity
- --------------------
Common Stock 50,000,000 Shares
Authorized; Par Value of $0.001
Per Share,
7,121,187 & 3,153,409 & 4,853,409
Shares issued Retroactively
Restated Respectively 7,121 3,152 4,853
Paid in Capital 4,086,453 1,684,668 1,932,968
Accumulated Deficit (2,068,173) (1,726,800) (1,615,812)
----------- ----------- -----------
Total Stockholders' Equity 2,025,401 (38,980) 322,009
----------- ----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $2,670,915 $1,313,369 $1,958,965
=========== =========== ===========
</TABLE>
<PAGE>
(F-4)
The Quantum Group, Inc. and Subsidiaries
Statement of Operations
For the Three and Six Months Ended June 30, 1998 and 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months Three Months Six Months Twelve Months
Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, December 31,
1998 1998 1997 1997 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues
- --------
Equipment Sales $460,000 $54,889 $241,152 $2,923,816
License Sales 100,000 100,000 500,000
Other Income $9,088 49,096 298 993
----------- ----------- ----------- ----------- -----------
Total Revenues 9,088 509,096 154,889 341,450 3,424,809
Cost of Sales 38,175 438,175 2,261,677
----------- ----------- ----------- ----------- -----------
Gross Profit (29,087) 70,921 154,889 341,450 1,163,132
Expenses
- --------
Commission 37,008
Depreciation 11,699 23,952 12,253 23,231 47,737
Amortization 12,439 24,878 12,439 24,878 49,756
Travel 41,461 76,272 11,802 25,871 56,056
Professional Fees 17,038 18,462 1,156 1,156 78,596
Office 14,017 24,941 11,693 25,872 36,708
Rent & Utilities 12,589 26,706 13,465 38,113 65,634
Administrative Expenses 61,451 94,020 20,482 39,060 95,377
Consultant Fees 96,680 190,707 57,545 115,461 232,571
Interest 219 219 40,939 59,178 95,656
Accounts Receivable
Written Off 195,000
Foreign Currency
Translation (63,880)
----------- ----------- ----------- ----------- -----------
Total Expenses 267,593 480,157 181,774 352,820 926,219
Net Income (Loss)
From Operations (296,680) (409,236) (26,885) (11,370) 236,913
</TABLE>
<PAGE>
(F-5)
The Quantum Group, Inc. and Subsidiaries
Statement of Operations -Continued-
For the Three and Six Months Ended June 30, 1998 and 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six MonthsThree Months Six Months Twelve Months
Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, December 31,
1998 1998 1997 1997 1997
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Other Income (Expenses)
- -----------------------
Loss on Investment (20,000) (20,000)
Investment Valuation
Loss (23,125) (6,875)
----------- ----------- ----------- ----------- -----------
Total Other Income
(Expenses) (20,000) (43,125) (6,875)
Taxes & Minority
Interest
- ----------------
Minority Interest 5,377 2,274 24,517
Provisions for Taxes
- Current 2,423 103,628
----------- ----------- ----------- ----------- -----------
Total Taxes &
Minority Interest 7,800 2,274 128,145
Net Income (Loss) ($316,680) ($452,361) ($19,085) ($9,096) $101,893
Net Income (Loss)
Per Share (0.04) (0.07) (0.01) (0.00) 0.02
Weighted Average
Shares
Outstanding 7,121,187 6,403,409 3,153,409 3,153,409 4,853,409
Diluted Net
Profit Per Share N/A N/A N/A N/A 0
</TABLE>
<PAGE>
(F-6)
The Quantum Group, Inc. and Subsidiaries
Statement of Shareholder's Equity
From January 1, 1995 to June 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Stock Amount Capital Deficit
--------------------------------------------------
<S> <C> <C> <C> <C>
Balance,
January 1, 1995
Retroactively Restated 3,153,409 $3,153 $1,683,068 ($864,190)
Loss for the Year Ended
December 31, 1995 (624,695)
--------------------------------------------------
Balance,
December 31, 1995 3,153,409 3,153 1,683,068 (1,488,885)
Contributed Capital 1,600
Loss for the Year Ended
December 31, 1996 (228,820)
--------------------------------------------------
Balance,
December 31, 1996 3,153,409 3,153 1,684,668 (1,717,705)
Shares Issued for Cash 100,000 100 149,900
Shares Issued to Officers 1,600,000 1,600 98,400
For Debt
Profit for the Year Ended 101,893
December 31, 1997 --------------------------------------------------
Balance,
December 31, 1997 4,853,409 4,853 1,932,968 (1,615,812)
Shares Issued for Cash 1,617,778 1,618 2,044,879
Shares Issued In Exchange
For Subsidiary Shares 650,000 650 108,606
Loss for the Six Months
Ended June 30, 1998 (452,361)
--------------------------------------------------
Balance,
June 30, 1998 7,121,187 $7,121 $4,086,453 ($2,068,173)
==================================================
</TABLE>
<PAGE>
(F-7)
The Quantum Group, Inc. and Subsidiaries
Statement of Cash Flows
For the Six Months Ended June 30, 1998 and 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Six Months Twelve Months
Ended Ended Ended
June 30, June 30, December 31,
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Operations
- --------------------------
Net Profit or (Loss) ($452,361) ($89,096) $101,892
Adjustments to Reconcile Net profit
or (Loss) to Net Cash
Write Off Accounts Receivable 195,000
Amortization and Depreciation 48,830 48,108 84,745
Non Cash Expense 37,000
Minority Interest (109,256) (22,275) 24,517
Changes in Operating Assets & Liabilities
(Increase) Decrease in Accounts Receivable (20,219) 184,522 (681,457)
(Increase) Decrease in Inventory (27,457) 38,991
(Decrease) Increase in Prepaid Commissions (37,008)
(Decrease) Increase in Prepaid Expenses (117,155)
Increase (Decrease) in Accrued Expenses (336,556) 6,227 393,577
Increase (Decrease)in Accounts Payable 183,607 (92,702) (65,316)
(Decrease) Increase in Tax Payable - Current 103,548
(Decrease) Increase in Customer Deposits 23,860 2,500
Increase in Taxes Payable - Deferred 80
Increase in Cash Pledged (103)
Rounding (2)
---------- ---------- ----------
Net Cash Provided (Used) by
Operating Activities (766,112) (5,821) 197,974
</TABLE>
<PAGE>
(F-8)
The Quantum Group, Inc. and Subsidiaries
Statement of Cash Flows -Continued-
For the Six Months Ended June 30, 1998 and 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Six Months Twelve Months
Ended Ended Ended
June 30, June 30, December 31,
1998 1997 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash Flows from Investing Activities
- ------------------------------------
Refund of Import Duty 718
Purchase of Equipment (3,831) (24,773) (25,492)
Purchase (Sale) of Securities 36,125 (80,000)
Purchase of License Right (150,000)
Investment in Joint Venture (44,722)
---------- ---------- ----------
Net Cash Provided (Used) by
Investing Activities (162,428) (24,773) (104,774)
Cash Flows from Financing Activities
- ------------------------------------
Sale of Common Stock 2,155,753 150,000
Payment of Long Term Debt (721,318) 50,000 (63,879)
Increase (Decrease) in Amounts Due Officer (7,919) (18,003) (43,233)
---------- ---------- -----------
Net Cash Provided (Used) by
Financing Activities 1,426,516 31,997 42,888
---------- ---------- ----------
Increase (Decrease) in Cash 497,976 1,403 136,088
Cash at Beginning of Period 142,690 6,602 6,602
---------- ---------- ----------
Cash at End of Period $640,666 $8,005 $142,690
========== ========== ==========
Disclosures from Operating Activities
Interest 219 59,178 95,656
Taxes 103,628
Significant Non Cash Transactions:
1,600,000 Shares Common Stock Issued to
Officer in Debt Satisfaction 100,000
650,000 Shares Common Stock Issued to
Convert Minority Interest 109,256
</TABLE>
<PAGE>
(F-9)
The Quantum Group, Inc., and Subsidiaries
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 Acquatic Systems, Inc. On June 27, 1989, the Company merged with
Country Maid, Inc., a Nevada Corporation, the Corporate domicile was changed to
the state of Nevada. On September 18, 1992, the name of the Company was
changed to The Quantum Group, Inc.
In 1992, the Company acquired rights to import and market equipment used in the
tire recycling industry. The tire recycling operation is the thrust of the
Company's operations at December 31, 1997.
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. The inventory is stated at the lower of cost or market. The inventory is a
single recycling system that the Company intends to sell as a system. The
Company is currently pursuing several prospects to sell the system.
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.
I. Issuance of Subsidiary's Stock: The Company has elected to accounts for
shares issued by its subsidiary as an equity transactions.
<PAGE>
(F-10)
The Quantum Group, Inc., and Subsidiaries
Notes to Financial Statements -Continued-
NOTE #2 - Significant Accounting Policies -Continued-
- -----------------------------------------------------
J. Use of Estimates; The preparation of financial statements in conformity
with generally accepted accounting principals requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
K. New Technical Pronouncements:
In 1997, SFAS No. 129, "Disclosure of Information about Capital Structure"
was issued effective for periods ending after December 15, 1997. The Company
has adopted the disclosure provisions of SFAS No. 129 effective with the
fiscal year ended December 31, 1998.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued
effective for fiscal years beginning after December 31, 1997, with earlier
application permitted. The Company has elected to adopt SFAS No. 130
effective with the fiscal year ended December 31, 1998. Adoption of SFAS
No. 130 is not expected to have a material impact on the Company's financial
statements.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" was issued for fiscal year beginning after December 31,
1997, with earlier application permitted. The Company has elected to adopt
SFAS No. 131, effective with the fiscal years ended December 31, 1998.
Adoption of SFAS No. 131 is not expected to have a material impact on the
Company's financial statements.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000921450
<NAME> QUANTUM GROUP INC /NV/
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 640,666
<SECURITIES> 0
<RECEIVABLES> 731,198
<ALLOWANCES> 0
<INVENTORY> 29,760
<CURRENT-ASSETS> 1,823,075
<PP&E> 254,048
<DEPRECIATION> 116,336
<TOTAL-ASSETS> 2,670,915
<CURRENT-LIABILITIES> 645,514
<BONDS> 0
0
0
<COMMON> 7,121
<OTHER-SE> 2,018,280
<TOTAL-LIABILITY-AND-EQUITY> 2,670,915
<SALES> 0
<TOTAL-REVENUES> 9,088
<CGS> 38,175
<TOTAL-COSTS> 267,593
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (296,680)
<INCOME-TAX> 0
<INCOME-CONTINUING> (296,680)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (296,680)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
This is a contractual agreement entered into by The Blaine Group, Inc.
hereinafter referred to as agent, and Eurectec, Inc., hereinafter referred to as
client.
Client agrees to pay $4,000.00 as a monthly retainer fee, plus reimbursement of
expenses incurred by agent on behalf of client, for an ongoing trade, news, and
business-oriented public relations campaign which includes preparation and
strategy for implementing an investor relations and financial public relations
effort after the fourth month. When implementation of this additional effort is
initiated, the monthly retainer fee will be increased from $4,000.00 per month
to $6,000 per month, plus reimbursement of expenses incurred by agent on behalf
of client for Eurectec, Inc. Initial retainer fee is due and payable in
advance. An expense deposit of $1,000.00 shall be paid in advance and
replenished monthly, as invoiced.
Client retains the right to increase the level of effort to encompass all of the
above activities on a monthly basis at a monthly retainer fee of $6,000.00 per
month, plus expenses.
Total justification of expenses paid by agent on behalf of client will be
provided. Any additional expenses not covered by the above-mentioned deposits
will be billed. Any expense deposit not applied to expenses incurred will be
reimbursed to client at conclusion of contract.
Agent shall submit invoices to client, on a monthly basis, giving sufficient
details as to all charges contained in such invoices. Client shall receive a
report of activities performed under this agreement. Client agrees to pay
expenses without approval for postage, mileage, toll and long-distance telephone
calls, publications, Xeroxed materials, and other individual expenses under
$100.00. Extra-ordinary expenses such as trips, advertising, printing, etc.,
must have prior client approval. Such expenses must be paid for in advance by
client. Extra-ordinary trips, personal appearances, and planning of special
functions shall be compensated for at an hourly rate of $100.00 per person hour
and must be approved in advance by client. Invoices shall be payable within
(10) days after receipt by client. Invoices unpaid within thirty (30) days from
date of invoice shall be deemed delinquent and shall accrue late charges at the
rate of 1 1/2% per month or portion thereof. There will be a surcharge of
$50.00 for each time a check is returned by the bank.
Agent agrees to handle all public relations matters, as agreed upon, for client.
Agent agrees to fulfill and execute campaign as discussed with client.
Neither party may assign this agreement or its rights and obligations herein to
another without the prior written approval of the other party except that client
may assign this agreement to its subsidiary or affiliated companies upon written
notice.
Any exhibits and appendices attached to this agreement are hereby incorporated
by reference and made a part hereof as though fully set forth herein.
It is expressly agreed that if client issues a purchase order or other document
for the services provided under this agreement, such instrument shall be deemed
for client's internal use only and any provisions contained therein or on the
reverse side thereof that are in conflict with any provisions of this agreement
shall have no effect.
This agreement sets forth and constitutes the entire agreement and understanding
between the parties with respect to the services and subject matter hereof, and
merges and supersedes all prior agreements, understandings, and representations,
whether written, oral, or otherwise conveyed.
This agreement shall not be modified or amended, except in writing and signed by
an authorized representative of the parties hereto.
The parties hereto agree not to disclose any of the terms and conditions of this
agreement to anyone in a position to use the information for competitive
advantage or to anyone in each respective organizations that does not have a
need to know.
Neither party shall solicit nor hire the employees, officers, directors,
consultants, or agents of the other ("Employee") during the term of this
agreement without the prior written consent of the other party and its affected
employee. Such written consent shall acknowledge the confidentiality of
information set forth in this agreement.
In connection with the services provided hereunder, employees of agent have and
will have access to certain proprietary or confidential information and trade
secrets ("Client Confidential Information") of client. Agent agrees to preserve
and maintain all such Client Confidential Information by applying the same
standard of care thereto as client applies to such information. Client agrees
to indemnify and hold harmless from and against any and all losses, claims,
damages, expenses, or liabilities which agent may incur based upon information,
representations, reports, or data furnished by client to the extent such
material is furnished, prepared, or approved by client.
Any notices required or permitted to be given under this agreement by either
party shall be in writing and shall be deemed given as of the time of hand
delivery to the addresses set forth below the signatures of each party, or four
(4) days after deposit into the United States mail, postage prepaid by
registered or certified mail, return receipt requested, to those addresses.
Should any term or provision of this agreement be found to be invalid, or
unenforceable, such finding shall in no way affect the validity or
unenforceability of the other terms and conditions hereof. Such other terms and
conditions shall be and remain valid and enforceable, as if the invalid and
unenforceable term, condition, or provision was never a part hereof.
Neither the exercise nor the failure to exercise any right, provision, or remedy
herein shall preclude the exercise of the same or any other right or remedy
herein in the future. Any waiver of right, provision, or remedy hereto shall
not be valid unless executed in writing by a duly authorized representative of
the party making such waiver.
If a dispute arises out of, or relates to, this Agreement or a claimed breach
thereof, and if the dispute cannot be settled through negotiation, the parties
agree first to try in good faith to settle the dispute by mediation.
Mediation shall be non-binding, directed toward resolution of all outstanding
issues, and be designated to produce comprehensive settlement of the entire
dispute. If, after reasonable efforts to mediate and resolve the dispute,
unresolved issues remain, the parties shall be free to pursue whatever remedies
they may have through arbitration pursuant to this agreement, if so provided,
litigation, or other dispute resolution procedure.
This agreement and all rights and obligations hereunder, including matters of
construction, validity, and performance shall be governed in and by the laws of
the State of California. If any legal action or other proceeding is brought for
the enforcement of this agreement, or because of an alleged dispute, breach,
default, or misrepresentation in connection with any of the provisions of the
agreement, the successful or prevailing party or parties shall be entitled to
recover reasonable attorney's fees and other costs incurred in connection with
that action or proceeding, in addition to any other relief to which such party
or parties may be entitled. No claim, demand, action, proceeding, arbitration,
hearing, motion, or lawsuit arising herefrom or with respect hereto shall be
commenced or prosecuted in any jurisdiction other than the State of California.
Any judgment, determination, finding, or conclusion reached or rendered in any
other jurisdiction shall be null and void between the parties hereto.
This contract begins on May 1, 1998 and concludes on April 30, 1999 and may be
terminated by either party with sixty (60) days written notice. Further, this
contract is automatically renewed, unless canceled.
Entered into on May 1, 1998
Client's Signature /s/ Ehrenfried Liebich
Ehrenfried Liebich
Park Irvine Business Center
14771 Myford Road, Bldg. B
Tustin, CA 92708
Agent's Signature /s/ Devon Blaine
Devon Blaine, President and CEO
The Blaine Group, Inc.
8665 Wilshire Blvd.
Suite #301
Beverly Hills, CA 90211
