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, 1999                                                      	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; 8,688,641 shares outstanding
as of August 6, 1999,

                      	PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS
-----------------------------

	See page 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 Quantum Group, Inc., (the Company), is in the business of
investigating innovative products and technologies in the
environmental and recycling industries which it further develops and
designs for rubber recycling and after market products plants.  Areas
for growth in the Company are in the technology transfer areas,
including the EGS tire recycling system, ECO press technology and
equipment, marketing and technology transfer of asphalt paving
technology, the Revulcon(R)  devulcanization of crumb rubber for use
in processes requiring vulcanization such as new tire production, and
the production of fine mesh (to -60 mesh ASTM), crumb rubber from tire
buffings and larger mesh crumb rubber.

	In 1998, the Company began to focus its energies on the design
and development of rubber recycling systems and subsystems which
encompass initial rubber tire recycling and after market crumb rubber
products rather than rely solely upon third party equipment sales.
The Company provides feasibility studies, engineering, equipment,
installation and training for its clients with rubber recycling
systems.

	The Company's goal is to design and market the most efficient and
cost-effective rubber recycling systems, producing high-quality crumb
rubber.  In keeping with this goal, the Company designs
environmentally friendly, efficient and profitable turnkey recycling
plants that satisfy the requirements of developers, engineers and
governments for a process to turn the huge, toxic and unsightly piles
of scrap tires into attractive, high-quality consumer and industrial
products.  In alliance with FDC Engineering of Switzerland, which was
founded in 1967 and specializes in the area of contracting project
design, engineering and project management within the environmental
recycling industry, the Company is able to provide complete
engineering designs for its recycling systems and subsystems.

	2

	Joint venture arrangements are one vehicle the Company employs to
market and showcase its turnkey recycling plants.  It is anticipated
that by participating as an equity partner in recycling joint
ventures, the Company will develop cash flow through operations
conducted by such recycling facilities.  The Company also performs
direct marketing of its equipment, technologies and products soon to
be manufactured in the California Prison project situated near San
Diego.

	In addition to tire recycling systems and product manufacturing
subsystems, the Company is developing markets for its crumb rubber
value added after market products.  The Company intends to establish a
manufacturing  facility in California to produce sports mats for gyms
and ball courts, door mats, anti-fatigue mats, cattle mats, heated pet
mats and safety flooring products such as playground tiles for the
U.S. and export markets.

	The Company is a majority joint venture partner in the Poseidon
Products, GmbH project in Penkun, near Berlin, Germany.  It is
anticipated that by participating as an equity partner in recycling
joint ventures, the Company will develop cash flow through operations
conducted by such recycling facilities.  The Poseidon project, in
addition to being the initial project to utilize the Company's EGS
shredding and granulating system, will also be licensed to utilize
proprietary technologies for after market products purchased or
developed by the Company.  The Company anticipates using the Poseidon
project to showcase its full array of tire recycling technology and
after market products  made from crumb rubber and industrial rubber.

	QCAL (QCAL, Inc.) was established to enter a joint venture with
the State of California, Department of Corrections for construction
and operation of a mini-recycling facility at the Donovan Correctional
Facility located near San Diego.  Currently under contract, the
Company is providing equipment for the facility which is scheduled to
begin the initial stage of operations in September, 1999.  The QCAL
project will recycle tires into crumb rubber and then produce value-added after
market products.

Joint Venture Projects
----------------------

	Poseidon Products GmbH.
	-----------------------
	In a joint venture agreement with a German Government sponsored
company, Steg, the Company established Poseidon Products GmbH which
will construct and operate a tire recycling facility in Penkun, 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 tire recycling facility whereby tires will be
shredded and granulated producing the commodity crumb rubber.  Some of
the crumb rubber will be devulcanized with the Company's Revulc 300
machine with the material used in a variety of products.  The balance
of the crumb rubber will be used for in-house manufacturing of value
added products utilizing the Eco-Press systems and other technologies.

	The funding for the Poseidon joint venture is now expected to be
completed during the third  quarter, 1999.  The Company's management
team has met with Deutsche Bank and German state government officials
who have agreed to proceed with the project.  Deutsche Bank is

3

negotiating with Deutsche Ausgleichsbank to participate in the funding
program with a minority position.  Due to the size and nature of the
project, concluding the necessary funding, with grant and loan
agreements has caused unavoidable delays in completing the funding
package.  Management believes all necessary agreements will finally be
completed during the third quarter of 1999.

	Ground breaking for the Poseidon project occurred September 17,
1998 in Penkun, Germany and Poseidon has opened offices in Penkun and
commenced a German wide marketing study and plan to introduce and sell
its manufactured products in Germany and Europe.  Upon completion of
funding, the Company is poised to immediately begin on-site civil
engineering and construction which will be coordinated by FDC
engineering.  The project is expected to take ten months to complete.

	The Company has established a Poseidon Website which may be
viewed at www.poseidon-products.com.  The Website which is soon to be
in German and English, provides a platform for showcasing the Poseidon
joint venture and promoting an awareness of the Company.

	California Prison Manufacturing Project.
	----------------------------------------

	The Company established QCAL, Inc., a California corporation as a
wholly owned subsidiary for the purposes of entering a joint venture
agreement with the State of California, Department of Corrections,
(CDC), Richard J. Donovan Correctional facility to manufacture and
assemble products for sale utilizing and hiring the services of adult
offenders.  The Company is leasing a 10,000 square foot facility from
CDC for this purpose. The operations at the QCAL facility will be the
shredding and recycling of tires into crumb rubber and the further
processing of the crumb rubber into value-added after market products
for sale. QCAL will provide all materials, machinery and equipment
necessary for the manufacture of goods.  QCAL will also provide all
necessary training and operational supervision.  Manufactured products
will be the property of QCAL who will retain the rights from all
sales.  CDC involvement is to establish a work program with training
for inmates.

	The QCAL facility will be completed over two phases.  Phase one,
currently underway, consists of the installation of a compact
granulator, ECO Press 200 flat press, mixer, flocking machine and a
SuperCollider.  The Company anticipates completing installation of
Phase one by September, 1999 with initial operations commencing
immediately thereafter.  Phase two will include a continuous roll
press to make sheeting material for industrial applications and a
Revulc 300 machine.  Phase two is anticipated to be completed by the
end of the fourth quarter, 1999.

	Upon completion of Phase one, the facility will begin
manufacturing door mats, sports surfaces, playground tiles,
cattle/livestock mats and truck bed liners among other products.  With
completion of Phase two, the facility will produce industrial flooring
underlay and other commercial and industrial applications with the
employment of the Revulcon(R) technology.

	The Company has hired Tom Driscoll, Vice President of Operations,
to head the QCAL joint venture project.  Mr. Driscoll brings many
years of engineering operations and production experience to the
Company.  He has extensive knowledge of full scale plant operations
and is implementing quality control systems and just in time inventory
operations into the QCAL facility.  Mr. Driscoll will be responsible
for establishing the operating and training systems for the QCAL
facility and overall plant supervision.

	4
</Page>


	Initially, the Company will hire and train approximately 10
inmates to work at the facility building up to 40 when all phases of
the project are complete.  The plant will operate one eight-hour shift
a day, then move to two eight-hours shifts with the potential to
operate at full capacity of three eight-hour shifts per day.  The
Company intends to cross-train the workforce, thus mitigating any
critical skills necessary for plant operations.  Depending upon the
success of this pilot project, the Company expects to expand this into
a larger scale project subject to raising the necessary capital.  The
Company will pay the inmates California minimum wage of $5.75 per
hour, thus increasing the potential net revenue to the Company from
products manufactured and sold at the facility.

	Throughout the start-up and operation of the QCAL facility, the
Company will be designing operation standards, technical manuals and
operating procedures which will be used for future recycling plants.

Proposed Joint Venture Projects
-------------------------------

	United Kingdom.
	---------------
	In May, management of the Company met with potential investors
and government agency representatives regarding a joint venture
project.  The Company is considering entering an agreement to perform
a feasibility study for two plants in the United Kingdom, one near
Glasgow, Scotland and another near Liverpool, England.  The
feasibility study will provide information on the accessibility of
Structural Fund Grants provided by the European Union for economic
development in targeted areas similar to the arrangements for the
Poseidon project

	Ireland.
	--------
	The Company has continued to meet with potential investors and
governmental agencies in anticipation of forming a joint venture for a
tire recycling plant modeled after the Poseidon project.  The
Company's subsidiary, Hibernian Envirotech Rubber Recycling Limited,
an Irish limited liability company, was established for the purpose of
entering a joint venture agreement in Ireland.

	Brazil.
	-------
	The Company is currently conducting a feasibility study in Belo
Horizonte, Brazil which is now scheduled for completion at the end of
August, 1999.	The Company has experienced some delays in completing
the feasibility study due to the complexity of analyzing and reporting
on the information received.  At such time the feasibility study is
complete, the parties will then make a determination as to whether or
not to proceed with a joint venture project.

	South Africa.
	-------------
	A Company representative met with potential investors in July
regarding a joint venture project involving a 12,000 ton tire
recycling facility including after market product manufacturing
capabilities.  The Company has tentatively scheduled a meeting with
the South African investors in late August to showcase the after
market product manufacturing process at the QCAL facility.

5


The Company also continues negotiations with various potential
clients in the United States, Europe, the Arabian Gulf, South America,
Puerto Rico, Great Britain and Asia.

Current Contracts
-----------------

	Atzendorf, Germany.
	-------------------
	The Company has a two phase order for press equipment, flocking
equipment and continuous roll manufacturing equipment for the
manufacturing of after market flooring products.  The Company will
also supply a grizzly to supplement the existing granulating facility.
Due to the client reposturing its corporate position, delivery of the
equipment has been delayed and is now expected to occur in 2000.

	Coswig, Germany.
	----------------
	Originally scheduled for delivery in Chemnitz, Germany, the
client has requested the mini recycling plant order be rescheduled for
delivery in Coswig, Germany which is near Dresden.  The Company will
be delivering a total of three Revulc 300 systems along with press
equipment.  Due to the client reposturing its corporate position,
delivery of the first Revulc 300 machine has been delayed and is now
expected to occur in 2000.

	Mexico Agreement.
	-----------------
	The CISAP equipment sale to Mexico was entered in 1994.  The
client has experienced problems in the commissioning of the C9000
machines supplied by CISAP.  The Company sent an engineering team to
the site to correct the problems, however, the team uncovered
additional problems.  The Company continues to explore viable
solutions for the problems encountered by the client with the CISAP
equipment.  To this end, the Company has had a field engineer at the
Mexico facility to evaluate and troubleshoot problems. The Company
anticipates a corrective action plan to be in place by the third
quarter of 1999.

	In an effort to mitigate the problems encountered by the Mexico
client, the Company continues to purchase crumb rubber from the client
for sale in the United States.

	Saudi Agreement.
	----------------
	The agreement for the initial phase of CISAP equipment to be
delivered in Saudi Arabia was entered in 1994 with additional
equipment purchased by the clients from CISAP in 1995 and 1997.  The
client experienced problems with the CISAP equipment as well as
problems with equipment supplied by SMS.  The Company has completed
remedial work on two of the faulty CISAP machines, which are now fully
functional on two shifts per day to the client's satisfaction.  A
detailed proposal for retrofit of the third CISAP machine has been
submitted to the client for approval.  In addition, the Company has
submitted a proposal for an ECO Press 3000 system to supplement the
SMS press equipment as the client is now focusing its efforts on
manufacturing value added products.  The Company anticipates a
response to the proposals by August, 1999.

Current Orders
--------------
	In conjunction with FDC engineering, the Company is negotiating
an agreement in China to deliver flat press and continuous roll
equipment for two projects.  It is anticipated that negotiations will
be finalized in August, 1999.

6
</Page>

	The Company anticipates its orders for 1999 to increase due to
anticipated orders from China, QCAL and Saudi.  Further, the Company
expects to generate a new revenue stream as a result of  orders for
value added products manufactured at the QCAL facility.

SuperCollider - Impact 500
--------------------------
	The Company has developed a compact SuperCollider which it is
marketing under the name Impact 500.  The Impact 500 is designed to
take large mesh size crumb rubber produced by the Company's EGS System
and buffings from tire retreading and pulverize it into fine powder.
The finished product is then used in extrusion products, press
products and products combining super-fine crumb and plastic.  The
Company currently has a letters of intent for four Impact 500 machines
which are scheduled for delivery during the second half of 1999 and
early 2000.  Three Impact 500 machines are slated for delivery to
Germany and one is scheduled for delivery to the QCAL facility.

	The testing of the Impact 500 has proven to meet or exceed
initial specifications.  Final development on the Impact 500 is
scheduled for completion by September, 1999.  The prototype will be
moved to the QCAL project as a showcase venue.

	Initially, the Company will manufacture the Impact 500 machines
in-house.  The Company has leased a small facility in Long Beach,
California which will serve as the Company's manufacturing facility.
The Company anticipates it will need to hire approximately five
additional employees to work on the Impact 500 manufacture.  The
Company is exploring the viability of making patent applications for
the Impact 500 machines.

REVULCON(R) - Revulc 300 Technology
-----------------------------------
	The Company has an exclusive worldwide license agreement with
Faru GmbH., Dresden, Germany (Faru) for the REVULCON(R) technology.
This technology enables the production of high density, smooth finish
rubber moldings and extrusions, including new tires by adding
REVULCON(R) compound in the manufacture of 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.

	The Company has met with Ermafa in Chemnitz, Germany, the
manufacturer of the Revulc 300 machines, and has reached an agreement
whereby Ermafa will add equipment to the Revulc 300 prototype in order
to provide in-feed and material off-take equipment (silos and
bagging).  This will provide the Company with a complete Revulc 300
system.  The improvements are expected to be complete by August, 1999
giving the Company a full Revulc system to market.

7

	The first Revulc 300 system will be installed at the Coswig
project during the third quarter of 1999.  Two additional Revulc 300
machines are scheduled to be ordered upon proof of operation of the
prototype machine at Coswig.  The Company anticipates the order for
the two additional Revulc 300 machines to be in place by the end of
third quarter 1999 with delivery scheduled for the first half of 2000.

CISAP Agreement
---------------
	In 1993, Eurectec, Inc., the Company's subsidiary, acquired
rights to license and market CISAP tire recycling equipment.  The
license agreement provides that CISAP will manufacture, ship and
install the CISAP equipment sold by Eurectec, Inc. as well as provide
training in equipment operation and maintenance to the purchaser of
any CISAP equipment.  The Company sold CISAP granulator systems in
Canada, China, Saudi Arabia, and Mexico.  The Saudi Arabia and Mexico
clients have experienced problems with the CISAP equipment which the
Company and CISAP have resolved for the Saudi client and are
attempting to resolve for the Mexico client.

	Because of the difficulties with the CISAP equipment, Eurectec,
Inc. has identified other manufacturers as suppliers of compact
granulating equipment systems.

SMS Agreement
-------------
	In May of 1996, Eurectec, Inc. entered an agreement with SMS
Sondermaschinen GmbH, a German corporation, (SMS) which provided
Eurectec, Inc. the right to sell and market SMS press equipment and
machinery.   Eurectec, Inc. sold SMS equipment to its client in Saudi
Arabia who has experienced problems with the SMS equipment.  Eurectec,
Inc. has resolved the difficulties with the Saudi client's equipment
and has other manufacturers in place for its future press equipment
needs.

Sales and Marketing
-------------------
	The Company has initiated an intense marketing campaign to
establish sales channels for the products to be manufactured at the
QCAL facility.  Initially, the QCAL facility will fabricate doormats,
interlocking sports mats for gyms and fitness centers, playground
safety mats and specialty mats.  Because of recent changes in the laws
regulating playground surfaces, a potentially huge market is being
opened up to the Company for its playground safety mats.  The Company
is capitalizing on this potential market with intense marketing
efforts.  Current focus of the marketing campaign is telephone
soliciting, personal contacts, direct mailings and e-mail advertising
as well as trade journal advertising.

	The Company is also targeting existing markets for is door mats.
The existing market includes hotels/motels, real estate companies, and
state agencies such as prisons, hospitals, etc.  The Company markets
its sports mats through a current distribution network as well as
direct solicitations.

8


	The Company's Vice President of Sales, Mr. Gayle Hickok heads up
the Company's product manufacturing sales and marketing efforts.  Mr.
Hickok has a proven success record in sales including developing sales
and  marketing material ranging from brochures, mail packages,
telephone and in-person sales presentations.

	The Company continues to research and develop new value added
products such as animal mats, heated tile, fatigue mats, doormats,
interlocking tiles, playground tiles, soaker hoses, continuous roll
sheet material, plastic and crumb rubber mixes and industrial rubber
scrap.

Exhibitions
-----------
	The Company participated at the International Tire and Rubber
Association (ITRA) Expo  held in Nashville, Tennessee from June 10
through 12, 1999 where it showcased the SuperCollider which was very
well received by participants.  Demonstrations of the SuperCollider
resulted in numerous inquiries.  The Company also attended a major
recycling exposition in Munich, Germany via Poseidon in conjunction
with FDC (the Company's engineering affiliate) in May, 1999.

	Company products have been exhibited at the California Parks &
Recreation Show in Ontario, California in March of this year, at the
Sports Industry Trade Shows in San Diego and Las Vegas and at the
California Farm Equipment Show in Tulare, California in February of
this year.  The Company will also attend the National Hardware Show in
Chicago scheduled for August, 1999.

Public Relations
----------------
	The Company has re-engaged the services of The Blaine Group,
Inc., based in Beverly Hills, California, to help with public and
investor relations.  It is anticipated the Blaine Group will initiate
a PR campaign in September, 1999, centering on the QCAL facility and
Poseidon projects.

	Internet Capital Corporation is assisting the Company with its
internet presence by updating the Company's website and creating an e-commerce
platform.

Year 2000 Compliance
--------------------
	The Company is currently year 2000 compliant and does not
anticipate any problems with its computing or support equipment.
However, vendors, banks and other suppliers and parties upon whom the
Company relies, may not be year 2000 compliant.  The Company has no
control over such parties and any impact upon the Company is
uncertain.  The Company is currently in the process of requesting Y2K
compliance status from the parties with which it conducts business in
order to evaluate any impact to the Company.  The Company has not been
notified that any of its vendors, banks or other suppliers or parties
upon whom it relies are non-compliant with Y2K matters.

9

Web Site
--------
	The Company has updated its group Website and has created links
to other allied Websites,  which can be viewed at
http://www.thequantumgroupinc.com. where the Company is currently
----------------------------------
adding a German translation.  During the second quarter of 1999, the
Company had 86,202 hits on its Website.  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 provides a link to two additional Websites which will be
www.Qest-Quantum.com  and www.Qmax-Quantum.com.  Qest-Quantum.com will
focus on the group's new systems and technologies and Qmax-Quantum.com
will focus on the group's asphalt paving related business. The Company
will offer e-commerce capabilities in the second half of 1999,
allowing customers to purchase products directly from the Company.  An
additional Website can be viewed at http://www.tirerecycling.com,
	----------------------------------
which will become a main portal for the Company.  The Company had
26,560 hits on this Website during the second quarter of 1999.  This
Website has links to The Quantum Group, Inc. site and allows the
viewer to access an overview of the Company's activities, obtain
market information for the Company's stock, view the Company's EDGAR
filings, retrieve information on the Company's joint venture projects
and link to the Company's subsidiaries websites.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
	As of June 30, 1999, the Company had cash of $716,045 on hand.

	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 current Regulation S offering
proceeds will provide sufficient capital and liquidity to meet the
Company's requirements for the next twelve months.

	The Company does not currently have any capital commitments for
1999.  However, at such time the Company initiates Phase two of the
QCAL project, it may have a capital commitment for approximately
$1,500,000 for equipment needs.

	The Company is emphasizing product and services sales via the
Internet and trade show participation as well as direct marketing
efforts.  Additionally, the Company is vigorously pursuing joint
venture arrangements similar to that of the Poseidon Project.  The
Company anticipates it will experience continued growth during 1999
through these efforts pursuant to the Company's strategic plan.

10

RESULTS OF OPERATIONS
---------------------

	Comparison of the three months ended June 30, 1999 and the three
	----------------------------------------------------------------
months ended June 30, 1998.
---------------------------

	During the first half of 1999, the Company's net cash used in
operations was $756,944, compared to cash used in operations of
$766,112 during the first half of 1998.  The 1999 cash utilization is
a result of an operating loss of $670,839 and the payment of $393,199
of Equipment Deposits, and an increase of deposits from customers of
$530,055.  The Company purchase $486,189 of equipment to be used in
the California prison project.

	The Company generated $4,099 of other revenue during the quarter
ended June 30, 1999.  All of this is interest income.  No equipment
sales were made during this quarter in 1999 or in the same 1998
quarter.  The second quarter of 1998 had $9,099 of other revenue,
$1,900 of this revenue was generated from the sale of research
reports. $6,175 in interest was earned 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.

	Travel expense in the three months ended June 30, 1999 of $45,248
exceeded the prior period expense of $41,461 by $3,787.
Administrative expense decreased from $61,451 to $47,201 from the
second quarter of 1998 to the same quarter of 1999.  This decrease is
also due to the substitution of Company employees for contract labor
and temporary employees.  Because of the change the Salaries and Wages
account has $22,531 of expense which would have been in Administrative
expense.  Additionally, $24,327 of salaries were paid to new employees
brought on to assist the California prison project.  No Salaries and
Wages Account existed in 1998.

	Consultant fees increased by $31,752 to $125,432 in the three
months ended June 30, 1999 compared to the $96,680 incurred in the
comparable three month period in 1998. $20,000 of this increase is as
a result of expenses incurred in relation to the engineering of the
Poseidon project.  The balance is due to increased activity in
preparing for the sale of mat products anticipated to be produced in
the California prison project.  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.  No comparable
transaction was applicable to the same quarter of this year.

	Comparison of the six months ended June 30, 1998 and the six
	------------------------------------------------------------
months ended June 30, 1999.
---------------------------
	The Company had $9,088 of other revenue during the six month
period ended June 30, 1999.  No equipment sales have been delivered
during this period.  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. $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.

11


	The Company had a loss of $670,839 in the six months ended June
30, 1999 compared to a loss of $452,361 in 1998.  This is because of
the increased level of activities resulting from preparation for the
California prison project and the Poseidon project.

	Travel expenses of $129,318 in the six months ended June 30, 1999
exceeded the comparable 1998 period expense of $76,272 by $53,046,
with the majority of this difference incurred in the first quarter of
1999.  Administrative expenses increased during the first quarter but
were reduced during the second quarter of 1999 as explained above.
Consulting fees have increased from $190,707 in the six months ended
June 30, 1998 to $213,308 in 1999, with all of this increased
occurring in the second quarter as explained above. Professional fees
increased to $77,754 in the six months ended June 30, 1999 from
$18,462 in the comparable 1998 period.  This increase is due to the
increased legal activity related to the upcoming projects.  Office
expenses increased from $24,941 in the first half of 1998 to $75,047
in 1999 because of the purchase of new computing equipment ($10,000)
and the addition of staff.

	Comparison of the three months ended June 30, 1998 and the three
	----------------------------------------------------------------
months ended June 30, 1997.
---------------------------

	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.

12


	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.


13


	PART II - OTHER INFORMATION
	---------------------------

Item 1.  Legal Proceedings
--------------------------

	The Company's subsidiary, Eurectec, Inc. has been named as the
defendant in a complaint filed in Pistoia, Italy by Tyre's Ecology
S.r.l., formerly known as Cisap Ecology S.r.l.  Tyre's Ecology S.r.l..
succeeded to the interest of Cisap Spa as a party to a marketing
agreement between Eurectec, Inc. and Cisap Spa.  Under the marketing
agreement Eurectec, Inc. was granted the exclusive rights to market
certain tire granulating equipment manufactured by Cisap Spa and
Tyre's Ecology.  The agreement required a minimum number of
granulating systems to be sold by Eurectec, Inc. to maintain the
exclusive rights.  Eurectec, Inc. has not met its minimum sales quota.
The Complaint seeks among other things to terminate the marketing
agreement and to recover damages in the approximate amount of $520,000
arising from alleged misstatements by Eurectec, Inc. as to the
manufacturers' represented through put capacity of equipment and
alleged defamation by Eurectec and a former engineer of Tyre's Ecology
S.r.l., that has performed work for Eurectec, Inc. and purchasers of
Cisap Spa and Tyre's Ecology S.r.l. equipment in Saudi Arabia and
Mexico.  Eurectec, Inc. will be required to respond to the complaint
in November, 1999.

	The Company intends to vigorously defend the claim for damages on
the basis that none of the Cisap Spa or Tyre's Ecology S.r.l.
equipment sold to any of the purchasers introduced by Eurectec, Inc.
has been able to operate as represented by the manufacturers and the
manufacturers have failed to deliver equipment purchased, failed to
properly install equipment as required by contract and failed to
provide warranty service to the purchasers of the equipment.
Eurectec, Inc. has been informed by the purchasers of the equipment in
Saudi Arabia and Mexico that they will support and cooperate with
Eurectec, Inc. to establish the breach of the various equipment
purchase agreements.

	As a result of the plaintiffs non-performance,  Eurectec, Inc.
has incurred substantial costs attempting to obtain performance for
its clients and has suffered substantial damages to its business as a
result of the plaintiff's unwillingness and inability to perform under
its sales agreements.  Eurectec, Inc. intends to seek recovery of
damages from the plaintiffs.  As to the issue of having its marketing
rights terminated under the marketing agreement, Eurectec, Inc. does
not believe that such marketing rights hold any value to it because
the manufacturers have consistently failed to deliver commercially
viable equipment to purchasers.


14


Item 2.  Changes in Securities
------------------------------
Recent Sales of Unregistered Securities
---------------------------------------
(a) Securities sold.
--------------------

<TABLE>
<CAPTION>

	1.  Regulation S offering
	-------------------------
   	Date	                   Title 	 Price Per Share	      Amount
	------------------	-------------- 	----------------	------------
	<S>              	<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

	Date	                     Title 	   Price Per Share	      Amount
	------------------	-------------  ------------------	------------
	Third Quarter 1998	      Common	              $2.25	     225,000
</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.

	In July, 1998, an option for 200,000 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 1998 to non U.S. persons.  All
shares of common stock were sold in Germany to Beteiligungs Fonds,
GBR.

	2.	Option Exercise
	--------------------
	The June option was exercised by RMC International, a consultant
to the Company.

	The July option was exercised by Johann Brendgens, a consultant
to the Company.

15


(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.

	The aggregate offering price for sales made during the third
quarter 1998 was $506,250 and the Company paid commission in the
amount of $71,988.

	2.	Option Exercise
	--------------------
	The Company realized $3,100 from the exercise of the option in
June, 1998.

	The Company realized $12,400 from the exercise of the option in
July, 1998.

(d) Exemption from registration claimed.
----------------------------------------
	1.	Regulation S Offering
	--------------------------
	The securities were sold in 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 June option was exercised pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933, as
amended.

	The July option was exercised pursuant to Regulation S.

16


(e) Terms of conversion or exercise.
------------------------------------
	1.	Regulation S Offering
	--------------------------
	Not applicable.

	2.	Option Exercise
	--------------------
	The June 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.

	The July 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 200,000 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>
	<S>                   	<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

17

<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

<CAPTION>

	Regulation S Offering - Third Quarter 1998
	------------------------------------------
	Gross proceeds	        $   506,250
	Commission                 	71,988
	Net Proceeds              	434,262

	Poseidon Joint Venture	$   434,262

	Total Proceeds	        $   434,262

</TABLE>

	2. Option Exercise
	------------------

	The Company realized $3,100 from the exercise of the June 1998
option which funds were placed in general working capital.

	The Company realized $12,400 from the exercise of the July 1998
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

	18
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, 1999.

	(B)	Exhibits.  The following exhibits are included as part of
this report:

<TABLE>
<CAPTION>

	Exhibit	   SEC Exhibit	  Title of Document	             Location
	Number	    Ref. Number
	-------   	-----------	  ---------------------------- 	-----------
	<S>      	<C>          	<C>                           	<C>
  	10.1	      10         	Employment Agreement between 	  Attached
                       			The Quantum Group, Inc., and
                       			Thomas A. Driscoll

  	10.2      	10          Joint Venture Agreement with   	Attached
                       			California Department of
                       			Corrections

  	27        	27         	Financial Data Schedule        	Attached

</TABLE>
                                	SIGNATURES

	Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this to be signed on its behalf
by the undersigned thereunto duly authorized.


                       			The Quantum Group, Inc.

                       			/S/ Ehrenfried Liebich
August 13, 1999          	-----------------------------------------
                       			Ehrenfried Liebich
                       			Chairman of the Board, President and
                       			Chief Executive Officer


                       			/S/ John F. Pope
August 13, 1999          	-----------------------------------------
                       			John F. Pope
                       			Vice President, Finance
                       			Chief Accounting Officer












	20


                                                                        	(F-1)
                    	The Quantum Group, Inc., and Subsidiaries

                               	Financial Statements

                                   	June 30, 1999

                                                                       	 (F-2)
                     	The Quantum Group, Inc. and Subsidiaries
                                   	Balance Sheets
                               	June 30, 1999 and 1998
                                    	(UNAUDITED)

<TABLE>
<CAPTION>

			ASSETS

                                    					June 30,    		June 30, 	December 31,
                                        					1999        		1998        		1998
                                 					------------		------------		------------
<S>                                		<C>	         	<C>         		<C>

Current Assets
--------------

	Cash	                                $ 	716,045 	  $ 	640,666 	 $ 	1,781,944
	Accounts Receivable		                 3,065,040     		731,198    		3,065,040
	Inventory		                              64,210      		29,760       		19,425
	Deposit                               		696,220 	    	421,451      		303,021
	Note & Interest Receivable
   - Officer                            		47,619           		0       		30,932
	Prepaid Expenses                          		220           		0 	         	440
                                  			------------	 	------------	 	------------
			 Total Current Assets  		           4,589,354		    1,823,075	   	5,200,802

Property and Equipment
----------------------

	Furniture and Fixtures                        0              0             0
	Equipment 	                            	548,116      		137,712      		93,166
	Vehicles                               		37,274           	 	0      		41,382
	Land                                  		179,309 	           	0 	    	179,309
                                 				------------	 	------------ 	------------
			Total Property and Equipment        		764,699 	     	137,712     		313,857

Other Assets
------------
	Investment in Joint Venture	                 	0       		44,722 	          	0
	Cash Pledged	                            	5,329        		5,225 	      	5,329
	License Rights                        		474,990      		539,745 	    	507,367
	Deposit 	                            	1,807,789 	       	3,281 	  	1,807,789
	Prepaid Expenses                            		0 	     	117,155 	          	0
			                                		------------ 		------------		------------
			Total Other Assets	                	2,288,108 	     	710,128   		2,320,485
                                					------------	 	------------		------------
			TOTAL ASSETS	                     $	7,642,161   	$	2,670,915 	 $	7,835,144
                                					============	 	============		============

</TABLE>

See Accompanying Notes

                                                                        	(F-3)
                   	The Quantum Group, Inc. and Subsidiaries
                          	Balance Sheets -Continued-
                           	June 30, 1999 and 1998
                                	(UNAUDITED)
<TABLE>
<CAPTION>

			LIABILITIES AND STOCKHOLDERS' EQUITY

                                    					June 30,    		June 30, 		December 31,
                                        					1999        		1998 	       	1998
                                 					------------		------------		------------
<S>                                		<C>	         	<C>	         	<C>
Current Liabilities
-------------------
	Accrued Expenses 	                   $  	450,467 	 $  	215,843 	 $  	450,084
	Accounts Payable	                       	675,385 	    	323,623     		725,201
	Customer Deposits	                    	2,723,017       		2,500   		2,192,962
	Franchise Tax Payable                  		103,548     		103,548     		103,548
                                 					------------		------------		------------
			 Total Current Liabilities	         	3,952,417     		645,514   		3,471,795

Long Term Liabilities
---------------------
Capital Lease 	                           	22,737           		0      		25,503
	                                 				------------		------------		------------
			Total Long Term Liabilities	           	22,737           		0      		25,503

Minority Interest in Subsidiary	           	9,463           		0       		9,463
-------------------------------     		------------		------------		------------

Stockholders' Equity
--------------------

	Common Stock 50,000,000 Shares
		  Authorized; Par Value of $0.001
		  Per Share, 8,400,075,and 7,121,187
 			and 8,400,755 Shares Issued
 			Retroactively Restated Respectively   		8,400       		7,121 	      	8,400
	Paid in Capital  		                    6,018,287   		4,086,453   		6,018,287
	Currency Translation Differential	       	18,199           		0      		18,199
	Accumulated Deficit                 	(	2,387,342) 	(	2,068,173)	 (	1,716,503)
                                 					------------		------------		------------
			Total Stockholders' Equity	         	3,657,544 	  	2,025,401   		4,328,383
                                 					------------		------------		------------
			TOTAL LIABILITIES &
			STOCKHOLDERS' EQUITY	              $	7,642,161  	$	2,670,915  	$	7,835,144
                                 					============		============		============

</TABLE>
	See Accompanying Notes

                                                                        	(F-4)
                   	The Quantum Group, Inc. and Subsidiaries
	 Statement of Operations
	For the Three Months and Six Months Ended June 30, 1999 and 1998
	(UNAUDITED)

<TABLE>
<CAPTION>
                  					Three       		Six     		Three       		Six 	    	Twelve
                 					Months    		Months 	   	Months    		Months     		Months
                  					Ended     		Ended     		Ended     		Ended 	     	Ended
                   					June 	     	June 	     	June      		June   		December
               					30, 1999 	 	30, 1999  		30, 1998  		30, 1998   		31, 1998
              					----------		----------		----------		----------		-----------
<S>	             	<C>	       	<C>	       	<C>	       	<C>       		<C>
Revenues
--------

	Equipment Sales	         	0         		0         		0  	$	460,000 	$	2,882,007
	License Sales	           	0         		0         		0         		0          		0
	Other Income     	$  	4,099  	$ 	74,798  	$  	9,088 	   	49,096 	    	70,893
              					----------		----------		----------		----------		-----------

			Total Revenues    		4,099    		74,798     		9,088   		509,096  		2,952,900

			Cost of Sales         		0         		0    		38,175   		438,175  		1,761,775
              					----------		----------		----------		----------		-----------
			Gross Profit     		 4,099    		74,798   	(	29,087)	   	70,921	  	1,191,125

Expenses
--------
	Salaries and Wages 		45,528    		45,528         		0 	        	0          		0
	Depreciation       		32,843    		35,346    		11,699 	   	23,952 	    	47,691
	Amortization       		16,189    		32,378    		12,439    		24,878 	    	57,256
	Travel             		45,248   		129,318    		41,461 	   	76,272 	   	155,442
	Professional Fees  		44,083    		77,754    		17,038    		18,462     		56,978
	Office	             	15,528    		45,047    		14,017    		24,941     		98,139
	Rent & Utilities   		14,446    		28,339    		12,589    		26,706     		63,259
	Administrative
  Expenses          		31,673   		138,619    		61,451    		94,020    		249,909
	Consultant Fees   		125,432 	  	213,308    		96,680   		190,707    		449,508
	Interest	                	0         		0       		219       		219        		804
	Accounts Receivable
		Written Off            		0         		0         		0 	        	0    		100,000
	Foreign Currency
		Translation            		0         		0         		0         		0    	(	27,764)
	Research and
		Development            		0         		0         		0         		0     		13,544
              					----------		----------		----------		----------		-----------
			Total Expenses	  	370,970   		745,637   		267,593   		480,157  		1,264,766

 	Net Income (Loss)
		From Operations	 (	366,871)	 (	670,839) 	(	296,680) 	(	409,236)   	(	73,641)

</TABLE>
	See Accompanying Notes

                                                                       	 (F-5)
                	The Quantum Group, Inc. and Subsidiaries
                   	 Statement of Operations -Continued
     	For the Three Months and the Six Months Ended June 30, 1999 and 1998
                                	(UNAUDITED)

<TABLE>
<CAPTION>

                  					Three       		Six     		Three       		Six     		Twelve
                 					Months    		Months    		Months 	   	Months     		Months
                  					Ended     		Ended     		Ended 	    	Ended 	     	Ended
                   					June      		June      		June      		June  		 December
               					30, 1999  		30, 1999  		30, 1998 	 	30, 1998   		31, 1998
              					----------		----------		----------		----------		-----------
<S>	             	<C>       		<C>	      	 <C>       		<C>       		<C>
Other Income (Expenses)
-----------------------
	Interest Income         		0         		0         		0        	 	0     		13,583
	Gain on Sales of
		Residence	              	0         		0         		0         		0          		0
	Loss on Investment      		0         		0   	(	20,000)  	(	20,000)	   (	20,000)
	Investment Valuation
		Loss                   		0         		0         		0   	(	23,125)         		0
              					----------		----------		----------		----------		-----------
			Total Other
   Income
			(Expenses)	            	0         		0   	(	20,000)  	(	43,125)    	(	6,417)

Taxes & Minority Interest
-------------------------
	Minority Interest	       	0         		0         		0         		0     		(2,492)
	Provisions for Taxes
		- Current  	            	0         		0         		0 	        	0     		23,125
	              				----------		----------		----------		----------		-----------

			Total Taxes &
			Minority
   Interest              		0         		0         		0         		0     		20,633
              					----------		----------		----------		----------		-----------
			Net Income
   (Loss)	         (	366,871)	 (	670,839)	 (	316,680)	 (	452,361)	  (	100,691)
              					==========		==========		==========		==========		===========
			Net Income
   (Loss)
			Per Share	        ($	0.04)	   ($	0.08)	   ($	0.04)	   ($	0.07)	    ($	0.01)

			Weighted
   Average
			Shares
   Outstanding		   8,400,075 		8,400,075 		7,121,187 		6,403,409  		6,846,696

			Diluted Net
   Profit
			Per Share           		N/A	       	N/A		       N/A       		N/A          		0


</TABLE>

	See Accompanying Notes

                                                                       	 (F-6)
                  	The Quantum Group, Inc. and Subsidiaries
                     	Statement of Shareholder's Equity
                    	From January 1, 1997 to June 30, 1999
                                  	(UNAUDITED)
<TABLE>
<CAPTION>


                                  				Common Stock    		Paid In 		Accumulated
	                                  	Stock 		Amount 	   	Capital     		Deficit
                    								--------------------------------------------------
<S>                           	<C>	      	<C>	    	<C>	        	<C>

Balance, January 1, 1997      		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
December 31, 1997	                                             							101,893
                    								--------------------------------------------------
Balance, December 31, 1997		   4,853,409   		4,853  		1,932,968  	(	1,615,812)

Shares Issued Regulation S
for Cash	                     	2,500,000   		2,500  		3,952,536

Shares Issued on
Exercise of Options	            	396,666     		397 	    	24,177

Shares Issued to Minority
Interest Shareholders to
Acquire 100% of
Subsidiary Stock               		650,000     		650    		108,606

Loss for the Year Ended 	                                     						(	100,691)
December 31, 1998

Balance, December 31, 1998 	  	8,400,075   	$	8,400	$	6,018,287 	($	1,716,503)

Loss for the Six
Months Ended
June 30, 1999  	                                              						(	670,839)
                    								--------------------------------------------------
Balance, June 30, 1999       		8,400,075   	$	8,400	$	6,018,287 	($	2,387,342)
                    								==================================================

</TABLE>
	See Accompanying Notes

                                                                       	 (F-7)
                   	The Quantum Group, Inc. and Subsidiaries
                            	Statement of Cash Flows
                	For the Six Months Ended June 30, 1999 and 1998
                                   	(UNAUDITED)
<TABLE>
<CAPTION>
                                           					Six        		Six     		Twelve
                                        					Months     		Months     		Months
                                         					Ended      		Ended      		Ended
                                          					June      	 	June 	  	December
                                      					30, 1999   		30, 1998   		31, 1998
                                    					-----------		-----------		-----------
<S>                                   		<C>        		<C>	        	<C>
Cash Flows from Operations
--------------------------

	Net Profit or (Loss)                   	($	670,839)	 ($	452,361)	 ($	100,691)
	Adjustments to Reconcile Net profit
	 or (Loss) to Net Cash
		Write Off Accounts Receivable	                 	0          		0    		100,000
		Amortization and Depreciation            		67,724     		48,830    		104,947
		Non Cash Expense                              		0     		37,000          		0
	  Minority Interest                            		0   	(	109,256)    		12,210
	Changes in Operating Assets & Liabilities
		(Increase) Decrease in Accounts Receivable    		0    	(	20,219)	(	2,354,061)
		(Increase) Decrease in Inventory        	(	44,785)		         0     		10,335
		(Increase) Decrease in Prepaid Expenses       		0   	(	117,155)         		0
		(Increase) Decrease in Deposit on
			Inventory                             	(	393,199)	         	0    		118,430
		(Increase) Decrease in Prototype
     Impact 500                                 		0          		0    	(	63,203)
		(Increase) Decrease in Notes Receivable
			-Officer                               	(	16,687)         		0    	(	30,932)
		(Increase) Decrease in Prepaid Insurance    		220          		0       	(	440)
		(Increase) Decrease in Deposits               		0          		0 	(	1,804,508)
		Increase (Decrease) in Accrued Expenses     		383   	(	336,556)  	(	102,315)
		Increase (Decrease) in Accounts Payable 	(	49,816)   		183,607    		585,185
		(Decrease) Increase in Customer Deposits		530,055          		0  		2,190,462
		Increase Decrease in Cash Pledged             		0          		0       	(	104)
		Rounding                                      		0         	(	2)	         	0
                                    					-----------		-----------		-----------
			Net Cash Provided (Used) by
			Operating Activities	                  (	576,944)  	(	766,112)	(	1,334,685)

</TABLE>

	See Accompanying Notes



                                                                       	 (F-8)
                   	The Quantum Group, Inc. and Subsidiaries
                      	Statement of Cash Flows -Continued-
               	For the Six Months Ended June 30, 1999 and 1998
                                   	(UNAUDITED)
<TABLE>
<CAPTION>

                                           					Six        		Six     		Twelve
                                        					Months     		Months     		Months
                                         					Ended      		Ended      		Ended
                                          					June       		June   		December
                                      					30, 1999   		30, 1998   		31, 1998
                                    					-----------		-----------		-----------
<S>                                   		<C>	        	<C>        		<C>
Cash Flows from Investing Activities
------------------------------------
	Purchase of Land                                		0          		0  	(	179,309)
	Purchase of Equipment                    	(	486,189)    	(	3,831)  	(	82,389)
	Purchase (Sale) of Securities	                   	0     		36,125    		73,125
	Purchase of License Right	                       	0   	(	150,000) 	(	150,000)
	Purchase of Furniture	                           	0          		0    		40,000
	Sale of Press                                   		0          		0   		216,635
	Investment in Joint Venture	                     	0    	(	44,722)        		0
                                    					-----------		-----------		-----------
			Net Cash Provided (Used) by
			Investing Activities                  	(	486,189)  	(	162,428)   	(	81,938)

Cash Flows from Financing Activities
------------------------------------
	Sale of Common Stock                           		0  		2,155,753  		3,759,611
	Payment of Long Term Debt	                      	0   	(	721,318)  	(	721,318)
	Increase (Decrease) in Amounts
   Due Officer	                                  	0     	(	7,919)    	(	7,919)
	Increase Capital Lease	                         	0          		0     		27,655
	Payment Capital Lease                     	(	2,766)	         	0     	(	2,152)
                                    					-----------		-----------		-----------
			Net Cash Provided (Used) by
			Financing Activities                    	(	2,766)	 	1,426,516  		3,055,877
                                    					-----------		-----------		-----------
			Increase (Decrease) in Cash         	(	1,065,899)   		497,976  		1,639,254

			Cash at Beginning of Period	          	1,781,944 	   	142,690    		142,690
                                    					-----------		-----------		-----------
			Cash at End of Period	                $ 	716,045 	 $ 	640,666  	$1,781,944
                                    					===========		===========		===========
Disclosures from Operating Activities
-------------------------------------
	Interest	                               $       	0  	$     	209  	$     	209
	Taxes                                          		0          		0          		0

Significant Non Cash Transactions
---------------------------------
	650,000 Shares of Common Stock Issued
	to Acquire Minority Interest in
 Subsidiary                                     		0          		0    		109,256

</TABLE>

	See Accompanying Notes

                                                                        	(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:   Assets and
  	liabilities that occur in foreign countries are 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.


                                                                       	(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.


NOTE #3 - Statement Preparation
-------------------------------
The Company has prepared the accompanying financial statements with
interim financial reporting requirements promulgated by the Securities &
Exchange Commission.  The information furnished reflects all adjustments
which are, in the opinion of management, necessary for a fair presentation
of financial position and results of operations.

The financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's 1998 10-K report.