Edgar Filing: QUANTUM GROUP INC /FL

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TWELVE MONTH PERIOD ENDED OCTOBER 31, 2004

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 000-31727

THE QUANTUM GROUP, INC.
(Name of registrant as specified in its charter)

NEVADA 20-0774748
(State or other jurisdiction of (I.R.S. Employer Identification No)
Incorporation or organization)

3460 FAIRLANE FARMS ROAD, SUITE 4
WELLINGTON, FLORIDA 33414
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER: (561) 227-1597
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS
COMMON STOCK, $.001 PAR VALUE
SERIES A PREFERRED, $.001 PAR VALUE

Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]

Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in the definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]

Revenues for the most recent fiscal year: $0

The aggregate market value of the Registrant's voting Common Stock held
by non-affiliates of the registrant was approximately $3,251,950 (computed using
the closing price of $.50 per share of Common Stock on January 27, 2005 as
reported by OTCBB, based on the assumption that directors and officers and more
than 5% stockholders are affiliates).

There were 18,659,238 shares of the registrant's Common Stock, par
value $.001 per share, outstanding on January 27, 2004.

AVAILABLE INFORMATION

The public may read and copy any materials filed by The Quantum Group (referred
to throughout this Report as "our company") with the United States Securities
and Exchange Commission (the "Commission") at the Commission's Public Reference
Room at 450 Fifth Street, Northwest, Washington, D.C. 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding our Company and other issuers that file reports electronically with
the Commission at http://www.sec.gov

FORWARD LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain of the statements contained
herein, which are not historical facts, are forward-looking statements with
respect to events, the occurrence of which involve risks and uncertainties.
These forward-looking statements may be impacted, either positively or
negatively, by various factors. Information concerning potential factors that
could affect our Company is detailed from time to time in our Company's reports
filed with the Commission. This Report contains "forward-looking statements"
relating to our Company's current expectations and beliefs. These include
statements concerning operations, performance, financial condition, anticipated
acquisitions and anticipated growth. For this purpose, any statements contained
in this Form 10-KSB, Forms 14-C and other reports filed with the Commission
referred to herein that are not statements of historical fact are
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "would," "expect," "believe," "anticipate,"
"intend," "could," "estimate," or "continue," or the negative or other variation
thereof or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, which are beyond our Company's control. Should one or more of
these risks or uncertainties materialize or should our Company's underlying
assumptions prove incorrect, actual outcomes and results could differ materially
from those indicated in the forward-looking statements.

CONTEXT

The information in this report is qualified in its entirety by
reference to the entire report; consequently, this report must be read in its
entirety. This is especially important in light of material subsequent events
disclosed. Information may not be considered or quoted out of context or without
referencing other information contained in this report necessary to make the
information considered, not misleading.

The Quantum Group, Inc.

FORM 10-KSB FOR THE YEAR ENDED OCTOBER 31, 2004

TABLE OF CONTENTS

PAGE
PART I

Item 1. Description of Business ..................................... 4
Item 2. Description of Property ..................................... 22

Item 3. Legal Proceedings ........................................... 22
Item 4. Submission of Matters to a Vote of Security Holders ......... 22

PART II

Item 5. Market for Common Equity and Related Stockholder Matters .... 24
Item 6. Management's Plan of Operation .............................. 26
Item 7. Financial Statements ........................................ 32
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ..................................... 32
Item 8A Controls and Procedures ..................................... 32

PART III

Item 9. Directors and Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act ... 34
Item 10. Executive Compensation ...................................... 37
Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder matters .................. 38
Item 12. Certain Relationships and Related Transactions .............. 40
Item 13. Exhibits, List and Reports on Form 8-K ...................... 41
Item 14. Principal Accountant Fees and Services ...................... 42

SIGNATURES .............................................................. 43

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS .............................. F-1

PART I

ITEM 1. DESCRIPTION OF BUSINESS

INTRODUCTION

The Quantum Group, Inc. (the terms "Company", "us" "QTUM" and/or "we"
and other similar terms as used herein refer collectively to the Company
together with its principal operating subsidiaries) is a Nevada corporation
created for the sole purpose to reorganize and change domicile of the
predecessor company, Transform Pack International, Inc. (TPII). Transform Pack
was originally formed as a Minnesota corporation in February 1975 under the name
Automated Multiple Systems, Inc., subsequently changed its name to Stylus, Inc.,
and then changed its name to Cybernetics, Inc. in December 1997. Throughout the
early years of the corporation, its business and management were located in
Minnesota. However, since 2000 the business and management of Transform Pack
have been located in Moncton, New Brunswick, and as of May 29, 2003 in
Wellington, Florida.

On May 28, 2003, Transform Pack completed the acquisition of Quantum
HIPAA Consulting Group, Inc., a Florida Corporation based in Wellington,
Florida. Quantum HIPAA Consulting Group was in the business of advising the
healthcare industry on the implementation of regulations created to comply with
the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
Transform Pack made the acquisition by issuing 27,000,000 shares of Common Stock
($0.004 par value) to Noel J. Guillama, the sole stockholder of Quantum HIPAA
Consulting Group, in exchange for all the issued and outstanding shares of
Quantum HIPAA Consulting Group. As a result, Mr. Guillama became the direct and
beneficial owner of approximately 80.18% of the issued and outstanding shares of
the Company. For accounting purposes, this transaction was treated as a
reorganization. Prior to the acquisition of Quantum HIPAA Consulting Group,
there was no affiliation or other relationship between Transform Pack and
Quantum HIPAA Consulting Group or Mr. Guillama.

Since Transform Pack no longer has any business or management
connection with the state of Minnesota, the Board of Directors determined late
in 2003, that the corporation could benefit from changing its domicile to a
state such as Nevada. With the ratification by the Shareholders on January 30,
2004, completed in February 2004, the Company's new stock symbol on the
Over-the-Counter Bulletin Board market was changed to QTUM.

The Company is a development stage company with no current revenues. As
of February 6, 2004 management's efforts have been primarily in market research,
business development, negotiations of various Letters of Intent and due
diligence on potential acquisitions, joint ventures and licensing agreements.
Its business model today is to become a leading provider of services to the
healthcare industry in three complementary areas: outsourcing administrative
responsibilities for physicians, Managed Care Organizations, healthcare
facilities, physician associations; developing new technologies to create a more
effective and responsive healthcare system; and providing leading edge
healthcare services to consumers.

In developing this model, the Company originally purchased 20% interest
from our major shareholder in two companies which he was developing. These
companies are Quantum Medical Technologies, Inc. (QMT) (a Florida corporation)
and Renaissance Health Systems, Inc. (RHS) (a Florida corporation). Both QMT and
RHS are also development stage companies. In both cases each company has a
Letter of Intent (LOI) to develop products and services with institutions in the
healthcare field; however, the capital has not been secured to exploit these
opportunities. Management believes that with a more complex and complementary
model the Company is more likely to obtain financing that in the end will
produce results for shareholders.

965,000 options were exercised leaving Mr. Guillama with a direct and beneficial
ownership of approximately 79% of the issued and outstanding shares of the
Company. Control in the Company will not material change, since all the
shareholders in numbers and relative beneficial ownership of both QMT and RHS
are also material and beneficial owners of the common share of the Company
today. The final merger was completed in August 2004.

The Company is organized in three key operating divisions:
>> THE QUANTUM GROUP, as the parent company, will provide outsourcing to
physicians and healthcare organizations. Our services will include:
privacy consulting, human resources management, managed care
contracting, government compliance, financial management, facilities
management, venture management, and healthcare venture/merchant
banking. The Company has identified potential acquisitions to give it a
core group of services, such as medical billing and collections,
consulting and financial services.

>> QUANTUM MEDICAL TECHNOLOGIES (QMT). The QMT team has spent 4 years in
the development of technology systems to increase the efficiency of the
healthcare system. The Company has in development process three PATENT
PENDING business processes. In addition, the Company also provides
webservices to medical societies and is currently developing a
web-based health information platform to use both internally and market
to non-affiliated physicians.

>> RENAISSANCE HEALTH SYSTEMS (RHS). RHS is organized as a new breed, next
generation Community Health System (CHS), contracting with Florida
Managed Care Organizations (MCOs) to manage the care of patients in a
proactive and cost effective environment. RHS has secured an agreement
with one Florida MCO, and is currently in final negotiations with two
other Florida-based MCOs.

Success in developing the Company will be highly dependant on the Company's
ability to attract capital, people and contracts and on management's ability to
manage a complex organization.

MISSION STATEMENT:

To identify and pursue leading edge opportunities within the healthcare
industry and bring significant return on investment ("ROI") to all shareholders,
employees and the community at large.

VISION STATEMENT:

As the US healthcare system nears its most critical period, The Quantum
Group seeks to develop efficient, quality, proactive, cost effective and
innovative healthcare solutions through the integration of intelligence,
products, services, technology, and outsourcing. This will permit the healthcare
industry to effectively deliver highly personal, quality-focused healthcare
services in a cost effective and profitable manner.

VALUES STATEMENT:

To increase the value of our shareholders, provide leadership in our
industry, our community and our employees, and provide our patients with the
absolute best possible products and services.

BUSINESS STRATEGY OVERVIEW

The Quantum Group, Inc. - Outsourcing

The Quantum Group, Inc. is a development stage company which intends to
provide a broad range of consulting services and products to the healthcare
community, consisting primarily of individual physician practices, ancillary
providers and other small to mid-size healthcare facilities. The Company is
focusing on medical practices and business with annual revenues in the $500,000
to $20,000,000 range. The Company believes that this is a highly underserved
market, and when these businesses receive consulting services they are in a
fragmented, sporadic and inefficient manner.

The Company's initial product/service offered is assistance to
healthcare providers and organizations generally covered under the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) that deal with
administrative simplifications, privacy and security of both electronic and
physical (paper) medical records.

The Company has developed a comprehensive system for training
non-medical consultants in the implementation of HIPAA regulations. The Company
has in the past trained approximately 100 consultants in a trial project and
intends to fully deploy its ability to create documentation and systems beyond
HIPAA into other areas of healthcare consulting, ranging from medical billing
and coding to information technology, once sufficient capital has been secured.

The Company anticipates providing consulting services and solutions to
healthcare organizations including health plans and technology providers with
special emphasis on physician practices, ancillary providers and an integrated
delivery of health systems.

The Company intends to design solutions to enable clients to reap the
benefits of their investments in new systems and information technology by
improving financial performance, increasing productivity, and improving clinical
and operational performance.

To address the increased industry-wide focus on patient safety,
clinical excellence, compliance with security regulations and financial
performance, we intend to design solutions that give the healthcare industry the
tools and strategies they need to serve their customers effectively, improve the
quality and safety of clinical care, secure and authenticate online healthcare
transactions, reduce cost and ensure compliance with evolving government and
industry requirements, including the Health Insurance Portability and
Accountability Act ("HIPAA").

From education, visioning and planning, to implementation and
outsourcing, the Company intends to provide the following services and solutions
that are designed to help client organizations perform better:

>> Government Compliance
o HIPAA
o Medicare
o Medicaid
o HMO/PPO
>> Managed Care
o Contract Negotiations
o Auditing
o Business Development
o MSO Development
o IPA Development
>> Financial Management
o Billing Services
o Collection Services
o Payroll Services
o Accounts Receivable Financing
o Equipment Financing
o Executive Lines of Credit
>> Information Technology
o Website Development
o Information Management
o ASP Services
o Secure Communications
o Business Process Management
>> Information Technology
o Full Medical Office Management
o Facilities Management
o Employee Management

o Placement Services
o Personnel Training
>> Business Venture Management
>> Healthcare Merchant Banking Services

Because of our management team's extensive knowledge of the healthcare
industry, our future clients' needs, and our management's range of healthcare
experience in healthcare operations and workflow, IT and clinical systems, we
should be able to work with clients to enable them to leverage their existing
systems and processes to accelerate their return on investments. Once fully
operational, we believe that our in-depth knowledge of the healthcare industry
and the range of services we intend to offer endow us with significant
advantages over small competitors in marketing additional services and winning
new engagements. We believe that with this plan we will be well positioned to
help healthcare providers bridge traditional services in a new environment to
create new efficiencies and a better, more responsive healthcare system. Our
goal is to be the preferred, if not sole, provider of a broad range of
outsourcing and consulting solutions for each of our clients.

Quantum Medical Technologies, Inc. - Technology

Quantum Medical Technologies, Inc. (QMT) was incorporated in January
2000 by our current Chairman to create a new model for managing information in
the medical industry. In a pending business process environment branded as
Cybernaptic (SM), connecting all the `touch points' of healthcare in one ASP
based system, the Clients of QMT will be able to choose any combination of
support, including full outsourcing with data center consolidation, 24/7/365
network monitoring and help desk through our network control center, as well as
facility management, application unification, application outsourcing and
interim management of their entire IT operations.

The healthcare IT environment is increasingly complex and costly as a
result of the challenges inherent in deploying new technologies, maintaining or
integrating older computer systems and deploying an IT function capable of
meeting new objectives designed to improve clinical quality and patient safety,
achieve regulatory compliance and ensure secure digital transactions while at
the same time improving business operations and the revenue cycle as well as
reducing supply costs. With all of these pressures, healthcare organizations
must become more efficient and effective. As a result, we believe that the
healthcare industry will increase the percentage of its budget devoted to IT
solutions.

Computer-based patient record systems and other technologies into the
healthcare delivery process can enable organizations to improve their bottom
line. These technologies help healthcare organizations reduce costs through
clinical and supply chain efficiencies, enhance communications with physicians,
patients, payers and other constituencies, improve care delivery and patient
safety and streamline activities such as claims processing, eligibility
verification and billing.

We believe that healthcare participants will continue to turn to
outside consultants, external management of formerly internal information
systems, application support and full outsourcing arrangements as a means of
coping with the financial and technical demands of information systems
management and integration of web-based solutions. QMT anticipates responding to
these demands by developing and providing information technology and management
consulting services and solutions along with flexible business process and
information technology outsourcing solutions, business process and IT
operations. Through outsourcing, clients can achieve their business process and
information technology goals while remaining focused on expanding their primary
businesses and reducing related capital outlay.

The Company has also begun to develop a new method to track improvement
in patient life style with a patent pending process called QuantumQuotient (sm)
or Qx2 (sm) . The Company is exploring validation by a major research university
in the U.S.

Renaissance Health Systems, Inc. - Services

Renaissance Health Systems, Inc. ("Renaissance" or "RHS") was
incorporated in the State of Florida on December 13, 2002. The RHS strategy is
to create a new type of healthcare delivery system built on the extensive
experience of our senior management team. We intend to specialize in managed

care Percentage of Premium (POP) contracting. RHS expects to create a new model
for healthcare called the Community Health System (CHS) to contract with Florida
Managed Care Organizations (MCOs) to manage the care of patients in a proactive
and cost effective environment. RHS has secured an agreement with one Florida
MCO and is currently in final negotiations with two other Florida-based MCOs.

INDUSTRY BACKGROUND

Recent developments in healthcare:

In 2004 total health spending in the U.S. will account for nearly 15
percent of the nation's gross domestic product, or GDP. The Department of Health
and Human Services (HHS) announced that healthcare spending shot up 9.3 percent
in 2002, the largest increase in 11 years, to a total of $1.55 trillion. HHS
estimates that healthcare expenditures will reach $2 trillion by 2008; that
represents an increase for each person from $5,440 to $7,100 in the United
States alone. Projections put health spending at 17.7 percent of GDP, by 2008.

On December 8, 2003, the President signed into law the Medicare
Prescription Drug, Improvement, and Modernization Act--the most significant
improvement in healthcare coverage for senior citizens and those with
disabilities in nearly forty years. This historic legislation makes available a
prescription drug benefit to all 41 million Medicare beneficiaries, helping them
afford the cost of their medicines, and offering other significant improvements
as well.

According to President Bush's proposed 2005 Federal Budget, Medicare
Advantage (formerly Medicare + Choice) growth is projected to increase nearly
100% over the next 4 years. In addition, actual "per member per month" (PMPM)
payments to Managed Care Organizations (MCO) are expected to be increased by a
record 10.6% nationwide. In Palm Beach County Florida where the Company is
based, federal funding to Medicare HMOs is increasing about 16 percent. MCOs
will receive $734.51 per member per month from the federal government, up from
$633.86 per member per month.

Federal officials and members of Congress are on the record stating
that they hoped the increase, five times as large as the typical annual increase
in recent years, would reverse the exodus of private plans from the Medicare
program. The administration, trying to enhance competition and efficiency in the
Medicare marketplace, wants to triple enrollment in private plans within three
years.

With Medicare payments to MCO's rising 2 percent annually in recent
years, many insurance executives decided that they could no longer do business
with the program because their Medicare-related costs were rising about 10
percent a year. From 1999 to 2003, health plans dropped more than 2.4 million
Medicare beneficiaries. Some pulled out of Medicare entirely, while others
curtailed their participation by withdrawing from specific counties. Leslie V.
Norwalk, acting deputy administrator of the Federal Centers for Medicare and
Medicaid Services, predicted publicly that as a result of the increased
payments, which took effect March 1, 2004, many private plans would return to
the Medicare program.

About 4.6 million beneficiaries, or 11 percent of the 41 million people
enrolled in Medicare, are now in MCO's, which have customarily provided drug
benefits and preventive care not available in the original fee-for-service
program. The number of people in private plans reached a peak of 6.3 million, or
16 percent of beneficiaries, in late 1999.

The Bush administration predicts that the Medicare law enacted in
December 2003, to encourage people to enroll in MCO's and similar private plans
called Preferred Provider Organizations (PPO's), so that by 2007, 35 percent of
beneficiaries will be members of such plans. Tommy G. Thompson, the Secretary of
Health and Human Services, described the increased payments as "an investment in
our seniors." As a result of the increase, Mr. Thompson said, Medicare
beneficiaries will have more options and better services. Private plans will be
able to use the additional money to enhance benefits, to reduce premiums or
co-payments paid by beneficiaries, or, as a way of stabilizing the network of
healthcare providers who serve the beneficiaries, to increase payments to
doctors and hospitals.

The new Medicare law not only created a prescription drug benefit but
also gave private health plans a larger role in the program. Indeed, how much to
pay the private plans was one of the biggest issues in Congressional debate over
the bill.

As enacted, the legislation established a complex new formula for
determining such payments, a provision that the President is now applying in
arriving at an increase of 10.6 percent. The Congressional Budget Office
estimates that the extra payments to private plans under that formula will
slightly exceed $500 million this year and will total $14 billion from 2004 to
2013.

The Centers for Medicare & Medicaid Services announced January 16, 2004
that this significantly increases in federal payment rates for Medicare
Advantage health plans, aimed at supporting improvements in services and lower
costs for Medicare beneficiaries enrolled in private health plans, as well as
more options for Medicare coverage.

The increased payments to Medicare Advantage were included in the
bipartisan Medicare Prescription Drug, Improvement and Modernization Act
recently signed into law by President Bush. The increases will average 10.6
percent across plans.

The provision requires managed care organizations to use the funds to:

o Reduce beneficiary premiums or co-pays
o Enhance benefits
o Stabilize or expand the network of doctors and other healthcare
providers available to seniors o Reserve funds to offset either premium
increases or reduced benefits in the future.

"These increases are an investment in our seniors. They are aimed at
supporting better services for Medicare beneficiaries in healthcare plans. And
at the same time they will help support more choice of Medicare options for all
beneficiaries," HHS Secretary Tommy G. Thompson said. "We want private health
plans to develop attractive benefits and strong networks of providers. And we
want beneficiaries to have a range of reliable alternatives so they can choose
the coverage options that serve them best. This is an important improvement to
the Medicare system that addresses a long-standing concern by seniors who prefer
managed care plans."

The new provision gives those managed care organizations that announced
they were leaving Medicare Advantage or reducing their services the opportunity
to remain in the program, providing continued service for seniors who choose a
managed care plan.

"We expect that these new rates will help beneficiaries by enabling
their plans to deliver better benefits, such as enhanced prescription drug
coverage, reduced out-of-pocket costs, and more reliable access to the providers
in their communities," said Dennis Smith, CMS acting Administrator. "They will
provide equitable payments to private plans to support better service for
Medicare beneficiaries. Over the long term, sharing this investment with the
private plans can yield important benefits to beneficiaries and taxpayers."

The new rate is one of many steps being taken rapidly in response to
the Medicare Improvement Act. CMS has also launched its plans to make a drug
discount card available to Medicare beneficiaries this spring, and published
updated payment rates for physicians and outpatient hospitals.

"We are encouraged by the number of plans that continue to expand their
reach and bring more choices to millions of beneficiaries, and we expect this
trend to accelerate with this announcement," Smith said. "These health plans are
very important for lower-income seniors, minority seniors and disabled
individuals who rely on them for their healthcare, to keep costs affordable, and
for the valuable benefits that are not available in fee-for-service Medicare."

The amount of the increase varies by county. The average increase in
2004 was about 10.6 percent for those counties where Medicare Advantage plans
are available. That increase includes an average 3.2 percent increase that plans
were expected to receive in 2004 before the enactment of the new Medicare law.

In a survey completed by Harris Interactive(R) of attendees at the
World Health Care Congress, top executives in the healthcare industry believe
information technology is key to containing rising healthcare costs in the U.S.
Seventy-nine percent of those polled - leaders of health insurance companies,
hospitals, pharmaceutical corporations and large employers - cited information
technology's ability to improve the quality of care in conjunction with practice
guidelines and other proposals made by the Institute of Medicine (IOM) as
effective and desirable ways to contain costs. When respondents were asked to
identify their top two priorities for containing costs, use of information
technology in conjunction with practice guidelines and other proposals made by
IOM emerged as the number one choice with 49 %.

During a speech on February 2004 at the World Healthcare Congress in
Washington, U.S. Health and Human Services Secretary Tommy Thompson said that
"Four years into the 21st century, the healthcare industry still depends on
pencils, papers, manila folders, and memo sheets as primary tools for getting
its work done" he further said "the nation's healthcare delivery system needs to
more widely incorporate business practices used in other industries, especially
information technology."

In the same speech, Thompson told attendees that supermarket clerks
rely on technology to ensure they give customers the right change, without
mistakes. Yet, the Institute of Medicine estimates that 98,000 patients die--and
even more are disabled each year--due to errors that can be largely prevented by
technologies such as computerized prescription ordering, drug bar-code systems,
and electronic patient medical records.

The adoption of those and other technologies in healthcare "could save
[the U.S.] $100 billion" a year, through reduced deaths and disabilities.
Because the government's Medicare program makes the federal government "the
country's largest insurance company, the feds are taking a lead role in trying
to make it easier to for more health-care providers to adopt these technologies.
The ability to share patient information electronically can help doctors and
other providers to make better-informed decisions and spot potential mistakes
before they happen. However, without data and other technical standards, the
sharing of patient information electronically among health providers is often
difficult or impossible. Over the last year or so, Health and Human Services has
adopted five key standards related to formats and transmission of patient data,
so that electronic medical records can be more easily shared among caregivers.
That includes adopting SnoMed as the federal government's standard lexicon for
medical diagnosis and treatments. The government is also offering the healthcare
industry use of SnoMed free of licensing fees."

(Information compiled from reliable media/new sources and websites of US Health
and Human Service and Center for Medicare Services)

GENERAL

There is today a greater emphasis than ever placed on issues of patient
safety and the prevention of medical errors, competition in clinical care
quality and IT innovation, as well as heightened awareness of the urgency to
implement digital security measures and compliance strategies. We believe that
these factors, combined with changes in federal, state and commercial/private
payer reimbursement, slowed growth of Medicare payments, the aging of the U.S.
population and the growing acceptance of the Internet and web-based
technologies, and spurred by the increasingly vocal demands of consumers for
quality care, will result in continued dramatic change in the healthcare
industry.

We also see that today there are, with minor exceptions, only two
places physicians or medical providers can turn for help in meeting all the
demands placed on him or her by the business and healthcare environment. Those
are high-end highly paid consultants that could be represented by large
accounting and large consulting firms, or the local cottage industry of
healthcare consultants that range from HR functions to accounting and tax work,
generally specializing in one or two areas and stretching to meet the ever
increasing needs of his or her client.

Consulting & Outsourcing

The changing business environment has produced an evolving range of
strategic and operating options for healthcare entities. In response, healthcare
participants are formulating and implementing new strategies and tactics,
redesigning business processes and workflows, acquiring better technology to

improve operations and patient care, integrating legacy systems with web-based
technologies, developing e-commerce abilities and adopting or remodeling
customer service, patient care and marketing programs. We believe that
healthcare participants will continue to turn to outside consultants to assist
in this vast array of initiatives for several reasons: the pace of change is
eclipsing the capacity of their own internal resources to identify, evaluate and
implement the full range of options; consultants enable healthcare participants
to develop better solutions in less time and can be more cost effective. By
employing outside expertise, healthcare providers can often improve their
ability to compete by more rapidly deploying new processes.

In 2004, the healthcare consulting industry was highly fragmented and
consisted primarily of:

o Larger systems integration firms, including the consulting
divisions of the national accounting firms and their spin-offs,
which may or may not have a particular healthcare focus or offer
healthcare consulting as one of several specialty areas;

o Healthcare information systems vendors that focus on services
relating to the software solutions they offer;

o Healthcare consulting firms, many of which focus on selected
specialty areas, such as strategic planning or vendor-specific
implementation;

o Large general management consulting firms that may or may not
specialize in healthcare consulting and/or do not offer systems
implementation; and

o Boutique firms that offer one or two specialized services, or who
service a particular geographic market.

The Company believes that, increasingly, the competitive advantage in
healthcare consulting will be gained by those consulting firms which:

>> Are able to coordinate the necessary expertise and resources to
offer comprehensive skill sets and packaged solutions to clients;

>> Have the vision, strength and consistency to advise clients along
the entire service continuum, from strategy to selection to
implementation to operation;

>> Offer the flexibility to meet the challenges of the rapidly
changing healthcare, e-commerce and IT environment; and

>> Have assets to bring total solutions including offerings that
address the clients' need for market expansion and capital
replacement.

Healthcare Services

MCO's, in response to escalating expenditures in healthcare costs, have
increasingly pressured physicians, hospitals and other providers to contain
costs. This pressure has led to the growth of lower cost outpatient care and
reduction of hospital admissions and lengths of stay. To further increase
efficiency and reduce the incentive to provide unnecessary healthcare services
to patients, payers have developed a reimbursement structure called percentage
of premium (POP). POP contracts require the payment to healthcare providers of a
fixed amount per patient for a given patient population. The providers assume
responsibility for servicing all of the healthcare services needs of those
patients, regardless of their condition. We believe that low cost providers will
succeed in the POP environment because such companies have the ability to manage
the cost of patient care.

The highly fragmented nature of the delivery of outpatient services has
created an inefficient healthcare services environment for patients, payers and
providers. MCOs and other payers must negotiate with multiple healthcare
services providers, including physicians, hospitals and ancillary services
providers, to provide geographic coverage to their patients. Physicians who

practice alone or in small groups have experienced difficulty negotiating
favorable contracts with managed care companies and have trouble providing the
burdensome documentation required by such entities. Healthcare service providers
may lose control of patients when they refer them out of their network for
additional services that such providers do not offer. We intend to continue
affiliating with physicians who are sole practitioners or who operate in small
groups to staff and expand our Health System which should make us a provider of
choice to managed care organizations.

We intend to pay the physicians a capitated fee for providing the
services and assume a portion of the financial risk for the physician's
performance related to our members. In addition to providing certain
administrative services to the physicians, we also provide utilization
assistance.

Renaissance Health Services and the Community Health System (CHS)

Management views the U.S. healthcare systems as broken. Though a 1.7
trillion dollar business, the fragmented industry is materially ineffective in
providing cost effective and quality healthcare. Over the last 15 years there
have been many experiments on how to make the treatment of patients more
effective, faster and with a sensitivity to cost and outcomes.

The management of this Company has been part of that experimental
process from the days when acquiring doctors was expected to be the "solve-all"
solution, to the later evolution of Physician Practice Management (PPM),
Management Services Organization (MSO) and Provider Sponsored Network (PSN).

Management believes that in all these models the patient is effectively
placed last by the healthcare system. Renaissance has developed a new model for
treating patients, providers, and insurers: the Community Health System or CHS.
In a CHS the patient is recognized as the true consumer of healthcare services.
The doctor and patient jointly call the shots, not the Managed Care Organization
(MCO) by itself. Patients are actively involved in the improvement of their own
healthcare lifestyle. The benefits of the MCO, Renaissance (RHS), the physician,
and most importantly the patients are aligned, not just to treat the sick, but
to proactively keep the patient healthy and well, thus, reducing the overall
costs for the patient and the industry. RHS will pay the physicians to keep
their patients healthy, and also directly incentivize the patient at the end of
each year for actively participating in his or her own healthcare improvement.

The listed table below identifies Florida counties where the Company
intends to focus its business.. The table identifies each county by name, total
population, HMO enrollment and contains other relevant data, intended to
demonstrate financial opportunity. There is no statement made as to the
probability of entering more than one county or having a material penetration of
the Medicare lives in those counties. The information was gathered exclusively
from Federal and State of Florida websites, and should only be used as
representative of opportunity for the Company and its subsidiary.

MEDICARE
ADVANTAGE
PER MONTHLY
TOTAL TOTAL % OF CAPITA % OF CAPITATION RATES
POPULATION MEDICARE TOTAL HMO MEDICARE INCOME GROWTH (PART A & PART B
COUNTY (2003) POPULATION ENROLLMENT PENETRATION (2002) 1990 TOTAL) PMPM
------------------------------------------------------------------------------------------------------------------------

DADE 2,341,176 317,289 150,780 47.50% $26,780 20.90% $986.14
------------------------------------------------------------------------------------------------------------------------
BROWARD 1,731,347 253,695 103,486 40.80% $31,785 37.90% $917.04
------------------------------------------------------------------------------------------------------------------------
PALM BEACH 1,216,282 269,119 64,615 24.01% $44,120 40.90% $863.22
------------------------------------------------------------------------------------------------------------------------
MARTIN 135,122 36,585 2,625 7.20% $44,370 33.90% $731.63
------------------------------------------------------------------------------------------------------------------------
ST. LUCIE 213,447 46,575 4,115 8.80% $23,458 42.10% $836.79
------------------------------------------------------------------------------------------------------------------------
OKEECHOBEE 37,481 6,049 642 10.60% $18,818 26.50% $971.67
------------------------------------------------------------------------------------------------------------------------
INDIAN RIVER 120,463 33,520 2,524 7.50% $39,830 33.50% $714.80
------------------------------------------------------------------------------------------------------------------------
VOLUSIA 468,663 99,753 32,517 32.60% $24,747 26.40% $654.22
------------------------------------------------------------------------------------------------------------------------
FLAGLER 62,206 16,680 4,472 26.80% $24,041 116.70% $654.22
------------------------------------------------------------------------------------------------------------------------
BREVARD 505,711 101,176 16,577 16.40% $27,762 26.80% $728.24
------------------------------------------------------------------------------------------------------------------------
ST. JOHN 142,869 21,601 22 0.10% $37,191 70.40% $711.08
------------------------------------------------------------------------------------------------------------------------

Strategy Overview - RHS Services

Management expertise will allow the Company to provide a service and
manage the risk that health insurance companies cannot provide on an efficient
and economic level. Health insurance companies are typically structured as
marketing entities to sell their products on a broad scale. Due to mounting
pressures from the industry, MCO's have altered their strategy, returning to the
traditional model of selling insurance and transferring the risk to the CHS's.
Under such arrangements MCO's receive premiums from the Center for Medicare
Services (CMS), a division of the Department of Health and Human Services, and
commercial groups and pass a significant percentage of the premium on to a third
party such as RHS, to provide covered benefits to patients including pharmacy
and other enhanced services.

After all medical expenses are paid any surplus or deficit remains with
the CHS. When managed properly accepting this risk can create a significant
surplus. Under the RHS model the physicians maintain their independence but are
aligned with a professional staff to assist in providing cost effective
healthcare. This in turn helps maximize profits for the physicians and RHS. To
limit exposure RHS intends to secure reinsurance (stop-loss coverage).

Our RHS business model is unique and based on educating, motivating and
assembling physicians in groups that are prepared to assume managed care risk.
We envision expanding our Health System of Physicians to provide our members
healthcare services on an efficient and cost effective basis through strategic
alliances with insurance companies and other healthcare providers on a statewide
basis. Beyond that, our model is based on a direct, proactive, involved
participation with our real client, the patient members of our CHS program.

Under our proposed MCO agreement(s), RHS, through affiliated providers,
is responsible for the provision of all covered benefits. While responsible for
all medical expenses for each covered life, we intend to limit our exposure by
obtaining reinsurance/stop-loss coverage. We have capitated high volume
specialties, fixing our cost on a per-member-per-month (PMPM) basis. Low volume
providers remain at a discounted fee-for-service basis. A change in healthcare
legislation, inflation, major epidemics, natural disasters and other factors
affecting the delivery and cost of healthcare are beyond our control and may
adversely affect our operating results.

Under our model, the physicians maintain their complete independence
but are aligned with our professional staff to assist in providing cost
effective quality medicine. Each primary care physician provides direct patient
services as a primary care doctor including referrals to specialists, hospital
admissions and referrals to diagnostic services and rehabilitation. In the
future, we may seek to acquire, develop or partner with a number our providers
in Company owned medical centers of excellence that will serve as our model
facilities.

We enhance administrative operations of our physician practices by
providing management functions, such as payer contract negotiations,
credentialing assistance, financial reporting, risk management services and the
operation of integrated billing and collection systems. We offer the physicians
increased negotiating power associated with managing their practice and fewer
administrative burdens. This allows the physician to focus on providing care to
patients.

We intend to use the Internet extensively to help process referral
claims between our Health System's primary care physicians and specialists and
to communicate with patients. This process helps reduce paperwork in the
physician's office as well as provide a more efficient method for the patients
in our Health System. Our utilization management team will communicate with the
physicians on a daily basis to provide overall management of the patient.

MCO Arrangements

Executed Agreements The Company has executed a Letter of Intent (LOI)
with a Florida Managed Care Organization (MCO), and, subject to completion of
each party's respective due diligence investigation anticipates a formal
contract in the near future. The terms of the LOI detail that RHS will be
responsible for arranging a Provider Health System in the Central Florida market
place. The agreement calls

for RHS to receive a percentage of premiums received by the MCO. Relating to
this agreement, the Company is required to place $50,000 in a segregated bank
account to start and increase this amount by 3% of the revenues generated by the
agreement up to a total $1,000,000. The Company anticipates that if properly
funded, this agreement will be generating $10,000,000 in revenues by December 1,
2005. The Company anticipates a formal agreement as soon as the Company is able
to meet the capital requirements.

Future Agreements

The Company further intends to have a substantial amount of its
revenues derived from agreements with MCOs that provide for the receipt of
capitated fees. Capitated fees are negotiated fees that stipulate a specific
dollar amount or a percentage of premiums (POP) collected by an insurer or payer
source to cover the partial or complete healthcare services deliveries to a
person. The fees are determined on a per capita basis paid monthly by managed
care organizations. MCO enrollees may come from the integration or acquisition
of healthcare providing entities, additional affiliated physicians, and acquire
and increase enrollment in MCOs currently contracting with the Company through
its Physician Practices and Ancillary Services, or from agreements with new
MCOs. The Company intends to enter into MCO agreements, which generally will be
for one-year terms, and subject to annual negotiation of rates, covered benefits
and other terms and conditions. MCO agreements are often negotiated and executed
in arrears.

The Company in the future may negotiate discounts for service
arrangements with managed care companies. These arrangements would place no
additional financial risk to the Company. In all cases, they are either
negotiated flat, mutually agreed upon rates for covered services, usually
calling for a discount of 30% from usual and customary charges, or a call for
payment at a percentage of Medicare allowable rates (ranging from 70% to 150%).

OPPORTUNITY

We believe that the current environment in the healthcare industry is
consistent with the Company's business plan. As physicians try to reverse what
has been declining net revenues adjusted for inflation over the last 15 years,
they will seek to outsource non-core competencies such as the services the
Company intends to provide. We believe we can offer those services at a lower
cost and with better results than the physician can achieve on the physician's
own. This trend, if it continues, will benefit the Company's
Consulting-Outsourcing operations. We also believe that with the projected
growth in Medicare Advantage, as described above, MCOs will be even more likely
to contract with third-party organization such as our RHS to bring them and then
manage Medicare Advantage members. If this trend materializes as expected this
would materially benefit RHS. Lastly, as both the trends discussed above, we
believe that with the proper and smart use of technology and new systems the
industry and both of the Company's operations in Outsourcing-Consulting and
Services will benefit from the use of the technology QMT is anticipated to bring
to the Company. In addition, QMT services as those of RHS and QTUM can and will
stand on their own.

COMPETITION

The healthcare industry is highly competitive and is subject to
continuing changes in the provision of services and the selection and
compensation of providers. The Company will compete with numerous national,
regional and local companies in providing services, products and technology.
Excluding individual physicians and small medical groups, all of the Company's
competitors are larger and better capitalized and may have longer established
relationships with buyers of such services.

EMPLOYEES

As of February 1, 2005, the Company had 9 full-time employees employed
at the Company's executive offices. No employees of the Company are covered by a
collective bargaining agreement or are represented by a labor union. The Company
considers its employee relations to be excellent.

RECENT CORPORATE EVENTS

During the summer of 2004, the Company leased a new facility to house
its corporate office. The 2,750 square foot facility was remodeled and equipped
at a cost of $55,000. The new facility is capable of providing work space for 15
employees. It is anticipated that the Company will need to seek larger
facilities before the end of 2005.

GOVERNMENT REGULATION

As a player in the healthcare industry, the Company's operations and
relationships will be subject to extensive and increasing regulation by a number
of governmental entities at the federal, state and local levels. The Company
intends to structure its operations to be in material compliance with applicable
laws. There can be no assurance that a review of the Company's or the affiliated
physician's business by courts or regulatory authorities will not result in a
determination that could adversely affect the operations of the Company or the
affiliated physicians or that the healthcare regulatory environment will not
change so as to restrict the Company's or the affiliated physicians' existing
operations or their expansion.

The laws of many states prohibit business corporations such as the
Company from practicing medicine and employing physicians to practice medicine.
In Florida, non-licensed persons or entities, such as the Company, are
prohibited from engaging in the practice of medicine directly. However, Florida
does not prohibit such non-licensed persons or entities from employing or
otherwise retaining licensed physicians to practice medicine so long as the
Company does not interfere with the physician's exercise of independent medical
judgment in the treatment of patients. The laws in most states, including
Florida, regarding the corporate practice of medicine have been subjected to
limited judicial and regulatory interpretation and, therefore, no assurances can
be given that the Company's activities will be found to be in compliance, if
challenged.

There are also state and federal civil and criminal statutes imposing
substantial penalties, including civil and criminal fines and imprisonment,
administrative sanctions and possible exclusion from Medicare and other
governmental programs on healthcare providers that fraudulently or wrongfully
bill governmental or other third-party payers for healthcare services. The
federal law prohibiting false billings allows a private person to bring a civil
action in the name of the United States government for violations of its
provisions. Moreover, technical Medicare and other reimbursement rules affect
the structure of physician and ancillary billing arrangements. The Company
believes it will always be in material compliance with such laws, but there is
no assurance that the Company's activities will not be challenged or scrutinized
in the future by courts or governmental authorities. Noncompliance with such
laws may adversely affect the operation of the Company and subject it to
penalties and additional costs.

Certain provisions of the Social Security Act, commonly referred to as
the "Anti-Kickback Statute," prohibit the offer, payment, solicitation or
receipt of any form of remuneration in return for the referral of Medicare or
state health program patients or patient care opportunities, or in return for
the recommendation, arrangement, purchase, lease or order of items or services
that are covered by Medicare or state health programs. The Anti-Kickback Statute
is broad in scope and has been broadly interpreted by courts in many
jurisdictions. Read literally, the statute places at risk many business
arrangements, potentially subjecting such arrangements to lengthy, expensive
investigations and prosecutions initiated by federal and state governmental
officials. Violation of the Anti-Kickback Statute is a felony, punishable by
significant fines and/or imprisonment. In addition, the Department of Health and
Human Services may impose civil penalties excluding violators from participation
in Medicare or state health programs.

The new federal Health Insurance Portability and Accountability Act
(HIPAA) expands the government's resources to combat healthcare fraud, creates
several new criminal healthcare offenses and establishes a new advisory opinion
mechanism under which the Office of Inspector General is required to respond to
requests for interpretation of the Anti-Kickback Statute, in an effort to bring
clarity and relief to the uncertainty of the Anti-Kickback Statute. Due to the
newness of the legislation, it is impossible to predict the impact of the new
law on the Company's operations.

Congress, in the Omnibus Budget Reconciliation Act of 1993, enacted
significant prohibitions against physician referrals. These prohibitions,
commonly known as "Stark II," amended prior physician self-referral legislation
known as "Stark I" by dramatically enlarging the field of physician-owned or
physician-interested entities to which the referral prohibitions apply.

Effective January 1, 1995, Stark II prohibits, subject to certain exceptions,
including a group practice exception, a physician from referring Medicare or
Medicaid patients to an entity providing "designated health services" in which
the physician or immediate family member has an ownership or investment interest
or with which the physician has entered into a compensation arrangement. The
designated health services include clinical laboratory services, radiology and
other diagnostic services, radiation therapy services, physical and occupational
therapy services, durable medical equipment, parenteral and enteral nutrients,
equipment and supplies, prosthetics, orthotics, outpatient prescription drugs,
home health services, and inpatient and outpatient hospital services. The
penalties for violating Stark II include a prohibition on payment by these
government programs and civil penalties of as much as $15,000 for each violative
referral and $100,000 for participation in a "circumvention scheme." The Stark
legislation is broad and ambiguous. Interpretive regulations clarifying the
provisions of Stark II have not been issued. Florida has also enacted similar
self-referral laws. The Florida Patient Self-Referral Act of 1992 severely
restricts patient referrals for certain services by physicians with ownership or
investment interests, requires disclosure of physician ownership in businesses
to which patients are referred and places other regulations on healthcare
providers. While the Company believes it is in compliance with the Florida and
Stark legislation, and their exceptions, future laws, regulations or
interpretations of current law could require the Company to modify the form of
its relationships with physicians and ancillary service providers. Moreover, the
violation of Stark I or II or the Florida Patient Self-Referral Law of 1992 by
the Company's Physician group could result in significant fines and loss of
reimbursement which would adversely affect the Company.

RISK FACTORS

FORWARD LOOKING STATEMENTS

The discussion in this report regarding our business and operations
includes "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1996. Such statements consist of any
statement other than a recitation of historical fact and can be identified by
the use of forward-looking terminology such as "may," "expect," "anticipate,"
"intend," "estimate" or "continue" or the negative thereof or other variations
thereof or comparable terminology. The reader is cautioned that all
forward-looking statements are speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ from those
referred to in such forward-looking statements. This disclosure highlights some
of the important risks regarding our business. The number one risk of the
Company is its ability to attract fresh and continued capital to execute its
comprehensive business plan. In addition, the risks included should not be
assumed to be the only things that could affect future performance. Additional
risks and uncertainties include the potential loss of contractual relationships,
changes in the reimbursement rates for those services as well as uncertainty
about the ability to collect the appropriate fees for services provided by us.
Also, the Company faces challenges in technology development, deployment and
use, medical malpractice exposure and the fluctuation of medical costs vs.
medical payments. The Company may also be subject to disruptions, delays in
collections, or facilities closures caused by potential or actual acts of
terrorism or government security concerns.

o Dilution and Exposure Relating to Recent Shareholder Vote

The Company issued 13,300,000 shares of common stock and 200,000 shares
of Series A preferred stock to acquire the remaining 80% of Renaissance Health
Systems and Quantum Medical Technologies from the majority shareholder of those
companies. The majority shareholder had granted 7,175,000 options at $.001 to
purchase shares held by Mr. Guilllama. The shareholders of RHS and QMT are
beneficial shareholders of the Company, including all executive officers and
directors. Therefore, this is clearly not an arms-length transaction; however,
management feels it is in the best interest of the Company's current and future
shareholders by widely expanding the business strategy, acquiring letters of
intents in place and by eliminating distractions from management. As a result of
this action and the approval by the board of directors, the Company could face
scrutiny by regulators, SEC and IRS; and further could face complaints and/or
lawsuit from dissident minority shareholders. In potential offset, the Chairman
has proposed to the Board that he will allow restrictions on the shares he would
receive in this consolidation to serve as collateral for any successful claims
made on anyone as it specifically relates to this transaction. The Company does

not have any reason to believe that anyone would object, however if someone
objects and successfully wins in a claim against the Company, the Company may
not have the resources to defend or prevail is such actions.

o Need for Substantial Additional Financing

There can be no assurance that the Company will be able to obtain
additional financing if, and when, it is needed on terms the Company deems
acceptable. The inability of the Company to obtain additional financing would
have a material adverse effect on the Company's ability to implement its
business, and as a result, could require the Company to diminish or suspend
activities.

o Dependence on MCO Agreements; Capitated Nature of Revenues; Control of
Healthcare Costs

The Company intends to have a substantial part of its revenues derived
from agreements with Managed Care Organizations ("MCOs") that provide for the
receipt of capitated fees. Capitated fees are a negotiated percentage of total
premiums collected by an insurer or payer source to cover the partial or
complete healthcare services deliveries to a person. The fees are determined on
a per capita basis paid monthly by managed care organizations. MCO enrollees may
come from the integration or acquisition of healthcare providing entities,
additional affiliated physicians and acquire and increase enrollment in each
contract/region serviced by the Company. The Company intends to enter into MCO
agreements, which generally will be for one-year terms, and subject to annual
negotiation of rates, covered benefits and other terms and conditions. MCO
agreements are often negotiated and executed in arrears. There can be no
assurance that such agreements will be entered into, or renewed, or if entered
into and/or renewed that they will contain these favorable reimbursement terms
to the Company and its affiliated providers. There can be no assurance that the
Company will be successful in identifying, acquiring and integrating MCO
entities or in increasing the number of MCO enrollees. Once acquired, a decline
in enrollees in MCOs could also have a material adverse effect on the Company's
profitability.

Under the MCO agreements the Company, through its affiliated providers,
will generally be responsible for the provision of all covered hospital benefits
as well as outpatient benefits regardless of whether the affiliated providers
directly provide the healthcare services associated with the covered benefits.
To the extent that enrollees require more care than is anticipated or require
supplemental healthcare, which is not otherwise reimbursed by the MCO, aggregate
capitation rates may be insufficient to cover the costs associated with the
treatment of enrollees. If revenue is insufficient to cover costs, the Company's
operating results could be adversely affected. As a result the success of the
Company will depend in large part on the effective management of healthcare
costs through various methods, including utilization management, competitive
pricing for purchased services and favorable agreements with payers. Recently
many providers have experienced pricing pressures with respect to negotiations
with MCOs. There can be no assurance that these pricing pressures will not have
a material adverse impact on the operating results of the Company. Changes in
healthcare practices, inflation, new technologies, major epidemics, natural
disasters and numerous other factors affecting the delivery and cost of
healthcare are beyond the control of the Company and may adversely affect its
operating results.

Under MCO agreements the Company will be responsible for the provision
of all covered hospital benefits regardless of whether it is responsible for
provision of the hospital services associated with the covered benefits. In
connection with hospital covered benefits, the Company will enter into a per
diem arrangement with a hospital or hospitals whereby the Company will pay the
hospital service provider a flat per diem fee, for which the hospital will
provide all hospital directed services for a single per diem fee. In some cases
the Company would be required to pay a percentage of usual and customary
hospital charges if a capitated patient is seen or admitted in a hospital not
under contract to the Company. The Company intends to contract with a number of
hospitals to provide covered services to MCO enrollees who have been assigned to
the physician practices affiliated with the Company. The Company expects to seek
additional hospital providers to provide covered services to MCO enrollees
assigned to its affiliated physicians. To the extent that enrollees require more
care than is anticipated or require supplemental care that is not otherwise
reimbursed by the MCOs, aggregate capitation rates may be insufficient to cover
the costs associated with the treatment of enrollees. If such revenue is
insufficient, the Company's operating results could be adversely affected.

The MCO agreements often contain shared-risk provisions under which
additional revenue can be earned or economic penalties can be incurred based

upon the utilization of hospital physicians and ancillary services by MCO
enrollees. These estimates are based upon resource consumption, utilization and
associated costs incurred by MCO enrollees compared to budgeted costs.
Differences between actual contract settlements and amounts estimated as
receivable or payable relating to MCO risk-sharing arrangements are generally
reconciled annually, which may cause fluctuations from amounts previously
accrued. See "Business".

o Reductions in Third-Party Reimbursement

Healthcare providers that render services on a fee-for-service basis
(as opposed to a capitated plan), typically submit bills for healthcare services
provided to various third-party payers, such as governmental programs (e.g.,
Medicare and Medicaid), private insurance plans and managed care plans, for the
healthcare services provided to their patients. A portion of the future revenues
of the Company are likely to be derived from payments made by these third-party
payers. These third-party payers increasingly are negotiating the prices charged
for healthcare services with the goal of lowering reimbursement and utilization
rates. The success of the Company depends in part on the effective management of
healthcare costs. This includes controlling utilization of specialty care
physicians and other ancillary providers and purchasing services from
third-party providers at competitive prices. There can be no assurance that
payments under governmental programs or from other third-party payers will
remain at present levels. Third-party payers can deny reimbursement if they
determine that treatment was not performed in accordance with the cost-effective
treatment methods established by such payers, was experimental, or for other
reasons. o The Development of Management Information Systems May Involve
Significant Time and Expense.

We expect to develop a management information system as an important
component of the business. The development and implementation of such systems
involve the risk of unanticipated delay and expense, which could have an adverse
impact on our operations.

o Risks Associated with Development of Management Information Systems;
Dependence on Major Customers for Management Information Systems

The Company's management information systems will be an important
component of the business. The Company is participating in the development of an
integrated management information system. This would be designed to provide
centralized billing, permit the review of a patient's electronic medical records
and information on practice guidelines, monitor utilization, and measure patient
satisfaction and outcomes of care. The development and implementation of such
systems involve the risk of unanticipated delay and expense, and there can be no
assurance that the Company will be successful in implementing the integrated
management information system. The Company has no active information system
installed currently, and may seek to outsource all management system functions
to a third party.

o Exposure to Professional Liability; Liability Insurance

In recent years physicians, hospitals and other providers in the
healthcare industry have become subject to an increasing number of lawsuits
alleging medical malpractice and related legal theories. Many of these lawsuits
involve large claims and substantial defense costs. Once funding is secured, the
Company expects to secure professional liability insurance coverage, on a claim
basis, in amounts that exceed the requirements as mandated by the State of
Florida, but which may not be adequate to protect the Company's assets.

o Competition

The healthcare industry is highly competitive and subject to continual
changes in the method in which services are provided and the manner in which
healthcare providers are selected and compensated. Companies in other healthcare
industry segments, some of which have financial and other resources greater than
we do, may become competitors in providing similar services. Our principal
competitors include Metropolitan Health Networks, Inc. (a company that our CEO
and CFO jointly co-founded) Continucare, Primary Care Specialists and First
Consulting Group, WebMD, Z Consulting. Our strength, in comparison with our
competitors, is our knowledge, understanding, and experience in managed care
risks, information technology and systems development.

o The healthcare industry is highly regulated and our failure to comply
with laws or regulations, or a determination that in the past we have
failed to comply with laws or regulations, could have an adverse effect
on our financial condition and results of operations.

The healthcare services that we and our affiliated professionals intend
to provide are subject to extensive federal, state and local laws and
regulations governing various matters such as the licensing and certification of
our facilities and personnel, the conduct of our operations, our billing and
coding policies and practices, our policies and practices with regard to patient
privacy and confidentiality and prohibitions on payments for the referral of
business and self-referrals. If we fail to comply with these laws, or a
determination is made that in the past we have failed to comply with these laws,
our financial condition and results of operations could be adversely affected.
Changes to healthcare laws or regulations may restrict our existing operations,
limit the expansion of our business or impose additional compliance
requirements. These changes could have the effect of reducing our opportunities
or continued growth and imposing additional compliance costs on us that may not
be recoverable through price increases.

Federal anti-kickback laws and regulations prohibit certain offers,
payments or receipts of remuneration in return for referring Medicaid or other
government-sponsored healthcare program patients or patient care opportunities
or purchasing, leasing, ordering, arranging for, or recommending any service or
item for which payment may be made by a government-sponsored healthcare program.
Federal physician self-referral legislation, known as the Stark Law, prohibits
Medicare or Medicaid payments for certain services furnished by a physician who
has a financial relationship with various physician-owned or
physician-interested entities. These laws are broadly worded and, in the case of
the anti-kickback law, have been broadly interpreted by federal courts, and
potentially subject many business arrangements to government investigation and
prosecution which can be costly and time consuming. Violations of these laws are
punishable by monetary fines, civil and criminal penalties, exclusion from
participation in government-sponsored healthcare programs and forfeiture of
amounts collected in violation of such laws, which could have an adverse effect
on our business and results of operations. Florida also has anti-kickback and
self-referral laws, imposing substantial penalties for violations.

o HIPAA

The Health Insurance Portability and Accountability Act (HIPAA) portion
that deals with patient privacy became effective April 14, 2003. These new
federal health privacy regulations set a national floor of privacy protections
that will reassure patients that their medical records are kept confidential.
The rules intend to ensure appropriate privacy safeguards are in place as we
harness information technologies to improve the quality of care provided to
patients.

The new protections give patients greater access to their own medical
records and more control over how their personal information is used by their
health plans and healthcare providers. Consumers are required to receive a
notice explaining how their health plans, doctors, pharmacies and other
healthcare providers use, disclose and protect their personal information.
Consumers now have the ability to see and copy their health records and to
request corrections of any errors included in their records. Consumers may file
complaints about privacy issues with their health plans or providers or with the
Office for Civil Rights.

If the Company, and/or its affiliates, is found in violation of HIPAA
regulations, the Company could face substantial fines and restrictions including
the loss of its MCO contracts.

o Healthcare Reform

As a result of the continued escalation of healthcare costs and the
inability of many individuals to obtain health insurance, numerous proposals
have been or may be introduced in the U.S. Congress and state legislatures
relating to healthcare reform. There can be no assurance as to the ultimate
content, timing or effect of any healthcare reform legislation. It is impossible
at this time to estimate the impact of potential legislation that may be
material to the Company, its operations and profitability.

o Control by Management and Present Shareholders of the Company

As of October 31, 2004, Mr. Guillama and his family control
approximately 79.0%, of the Company's issued and outstanding Common Stock. The
Officers and Directors of the Company collectively control 81.4% of the common
shares of the Corporation. This effectively gives Mr. Guillama material control
of the Company and with the ability to change the entire Board of Directors.

o Dependence on Key Personnel

Implementation of the Company's business strategy is largely dependent
on the efforts of two senior officers, Noel J. Guillama, Chief Executive
Officer, and Donald B. Cohen, Chief Financial Officer. The Company's operations
are dependent to a great degree on the continued efforts of the President, Chief
Executive and Operation Officer of the Company, Noel J. Guillama. Furthermore,
the Company will likely be dependent on other senior management and the entire
Board of Directors as the Company grows. Competition for highly qualified
personnel is intense and the Company has very limited resources. The loss of any
executive officer or other key employee, or the failure to attract and retain
other skilled employees could have a material adverse impact upon the Company's
business, operations or financial condition.

o Capital Needs May Have Dilutive Effect

The Company will need to raise additional capital through the issuance
of long-term or short-term indebtedness, a bank line of credit or recoverable
factoring facility or the issuance of additional equity securities including
sale of common or preferred stock in private or public transactions at such
times as management deems appropriate and the market allows. Any of such
financings can result in dilution of existing equity positions, increased
interest and amortization expense, or decreased income to fund future expansion.
There can be no assurance that acceptable financing for future acquisitions, or
for the integration and expansion of existing networks, can be obtained.

o Shares Eligible for Future Sale

At October 31, 2004, the Company had 18,307,276 outstanding shares of
common stock of which 17,997,388 are "restricted securities" and in the future
may be sold upon compliance with Rule 144 adopted under the Securities Act. Rule
144 provides that a person holding "restricted securities" for a period of two
years may sell only an amount every three months equal to the greater of (a) one
percent of the Company's issued and outstanding shares, or (b) the average
weekly volume of sales during the four calendar weeks preceding the sale. A
proposed rule that may be adopted by the Commission will reduce these two and
three year periods to one and two years, respectively.

o Anti-Takeover Provisions

Certain provisions of the Company's Articles of Incorporation and
Bylaws may be deemed to have anti-takeover effects and may delay, defer or
prevent a takeover attempt of the Company, which include when and by whom
special meetings of the Company may be called. In addition, the Company's
Articles of Incorporation (Nevada) authorize the issuance of up to 30,000,000
shares of Preferred Stock with such rights and preferences as may be determined
from time to time by the Board of Directors. Accordingly, the Board of Directors
may, without shareholder approval, issue Preferred Stock with dividends,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of the Company's Common Stock.

Additionally, the Company's Articles of Incorporation, Bylaws and
Nevada corporate law, where the Company is incorporated authorize the Company to
indemnify its directors, officers, employees and agents and limit the personal
liability of corporate directors for monetary damages, except in certain
instances.

o Absence of Dividends

The Management of the Company believes that the purpose of a
corporation is to provide a return on the investments of its shareholders.
Management's goal is to pay dividends to all shareholders, common and preferred
within five years. Holders of the Company's Common Stock are entitled to cash
dividends from funds legally available when, and if, declared by the Board of
Directors. As a newly organized corporation the Company has never paid
dividends. The Company does not anticipate the declaration or payments of any
dividends in the foreseeable future. The Company intends to retain any earnings
in the first few years to finance the development and expansion of its business.
Future dividend policy will be subject to the discretion of the Board of
Directors and will be contingent upon future earnings, the Company's financial
condition, capital requirements, general business conditions and other factors.
Future dividends may also be subject to covenants contained in loan or other
financing documents. Therefore, there can be no assurance that cash dividends of
any kind will ever be paid.

o The loss of a future agreement and the capitated nature of our future
revenues could materially affect our operations.

Once operational, the majority of our revenues will come from
agreements with managed care organizations that provide for the receipt of
capitated fees. Capitated fees are negotiated fees that stipulate a specific
dollar amount or a percentage of total premiums collected by an insurer or payer
source to cover the partial or complete healthcare services deliveries to a
person. We expect to enter into one-year and three-year term agreements that are
renewable annually thereafter. These agreements may be terminated on short
notice or not renewed on terms favorable to our affiliated providers and us. We
may not be successful in obtaining additional MCO agreements or in increasing
the number of MCO enrollees once we secure such agreements.

Under the MCO agreements the Company through its affiliated providers,
generally will be responsible for the provision of all covered hospital
benefits, as well as outpatient benefits, regardless of whether the affiliated
providers directly provide the healthcare services associated with the covered
benefits. To the extent that enrollees require more care than is anticipated,
aggregate capitation rates may be insufficient to cover the costs associated
with the treatment of enrollees. If revenue is insufficient to cover costs, our
operating results could be adversely affected. As a result, our success will
depend in large part on the effective management of healthcare costs. Pricing
pressures may have a material adverse effect on our operating results. Changes
in healthcare practices, inflation, new technologies, and numerous other factors
affecting the delivery and cost of healthcare are beyond our control and may
adversely affect our operating results.

o The price of the Company's Common Stock could fall dramatically.

Due to the substantial number of shares that will be eligible for sale
in the future, the market price of our common stock could fall if a publicly
traded market develops, as a result of sales of a large number of shares of
common stock in the market, or the price could remain lower because of the
perception that such sales may occur.

These factors could also make it more difficult for us to raise funds
through future offerings of our common stock. As of January 27, 2005, there were
18,659,238 shares of our common stock outstanding.

o Our business will suffer if we fail to successfully integrate any
potential acquisition or technologies in the future.

Part of our business plan is to acquire, license or joint venture other
organization's products, services and/or technology. If we are unable to acquire
and/or successfully integrate the acquisitions, this could have a material
impact on our business model and/or development.

Consequently, we may not be successful in integrating acquired
businesses or technologies and may not achieve anticipated revenue and cost
benefits. We also cannot guarantee that these acquisitions will result in
sufficient revenues or earnings to justify our investment in, or expenses
related to, these acquisitions or that any synergies will develop. The
healthcare technology industry is consolidating and we expect that we will face
intensified competition for acquisitions. If we fail to execute our acquisition
strategy successfully for any reason, our business will suffer significantly.

o Developing our intellectual property may be subjected to infringement
claims or may be infringed upon.

Our intellectual property will be important to our business. We could
be subject to intellectual property infringement claims as the number of our
competitors grows and the functionality of our applications overlaps with
competitive offerings. These claims, even if not meritorious, could be expensive
and divert management's attention from our operations. If we become liable to
third parties for infringing their intellectual property rights, we could be
required to pay a substantial damage award and to develop non-infringing
technology, obtain a license or cease selling the applications that contain the
infringing intellectual property.

o Limited release of information

Due to the highly competitive nature of the healthcare industry in Florida, the
Company has taken a position that disclosing certain information like name of
HMOs (under LOIs or contract), counties of service, detailed terms of contracts
with these HMOs and/or strategic partnerships may be used by our competitors to
our determent, therefore the Company intends to be as cautious as possible in
press releases and public filings as not to divulge confidential and strategic
corporate information, as such it will be hard to fully access the risk of the
company's future development.

ITEM 2. DESCRIPTION OF PROPERTY

Our offices are located at 3460 Fairlane Farms Road, Suite 4,
Wellington, Florida where the Company occupies approximately 2,750 square feet
at a current monthly rent of $3,470 pursuant to a lease expiring July 14, 2007.

The Company's property is not leased from an affiliate.

ITEM 3. LEGAL PROCEEDINGS

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held a Special Meeting of the stockholders of The Company
International, Inc. called by the Board of Directors on January 30, 2004, at
12230 Forest Hill Blvd., Conference Room One, Wellington, Florida. The Special
Meeting was called to obtain stockholder approval of:

(1) The change of the state of incorporation of Transform Pack from
Minnesota to Nevada through a merger with and into The Quantum Group,
Inc., a Nevada company formed for that purpose, so that The Quantum
Group becomes the surviving corporation;

(2) A 1-for-10 reverse split in the outstanding common stock of
Transform Pack, which will be effected in the merger with The Quantum
Group by exchanging one share of The Quantum Group for every ten shares
of Transform Pack;

(3) An amendment to the Articles of Incorporation of Transform Pack to
change the name of the corporation to The Quantum Group, Inc., which
will be effected in the merger as a result of the Articles of
Incorporation of The Quantum Group becoming the Articles of
Incorporation of the surviving corporation;

(4) An amendment to the Articles of Incorporation of Transform Pack to
increase the number of authorized shares of common stock from
40,000,000 to 170,000,000 and increase the number of authorized shares
of preferred stock from 5,000,000 to 30,000,000, which will be effected
in the merger as a result of the Articles of Incorporation of The
Quantum Group becoming the Articles of Incorporation of the surviving
corporation;

(5) An amendment to the Articles of Incorporation of Transform Pack to
opt out of the application of business combination and control share
acquisition restrictions imposed under state law, which will be
effected in the merger as a result of the Articles of Incorporation of
The Quantum Group becoming the Articles of Incorporation of the
surviving corporation;

(6) An amendment to the Articles of Incorporation of Transform Pack to
allow the Board of Directors to remove a Director for cause, which will
be effected in the merger as a result of the Articles of Incorporation
of The Quantum Group becoming the Articles of Incorporation of the
surviving corporation; and

(7) The 2003 Incentive Equity & Option Plan adopted by the Board of
Directors of Transform Pack on October 2, 2003.

All items before the shareholders all passed consecutively with
27,000,000 votes for and none against.

[Balance of page intentionally left blank]

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

CAPITALIZATION OF COMPANY

Post re-organization, the Company has 200,000,000 shares authorized; of
which, 170,000,000 are common shares with a par value of $0.001; and 30,000,000
are undesignated preferred shares with a par value of $0.001. As of January 27,
2005 there are 18,659,238 common shares and 200,000 preferred shares issued.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors with the result that
the holders of more than 50% of the shares voted for the election of directors
and can elect all of the directors. The holders of Common Stock are entitled to
receive dividends, when, and if, declared by the Board of Directors out of funds
legally available. In the event of liquidation, dissolution or winding up, the
holders of Common Stock are entitled to share ratably in all assets remaining
available for distribution to them after payment of liabilities and after
provision has been made for each class of stock, if any, having preference over
the Common Stock. Holders of shares of Common Stock, as such, have no
conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to Common Stock. All of the outstanding shares of Common
Stock, and the shares of Common Stock offered hereby, will be, duly authorized,
validly issued, fully paid and non-assessable.

The Company currently believes it has approximately 710 beneficial
shareholders of record.

PREFERRED STOCK

We are authorized to issue 30,000,000 shares of Preferred Stock with
such designation, rights and preferences as may be determined from time to time
by the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue Preferred Stock with dividend,
liquidation, conversion, voting or other rights that could adversely affect the
voting power or other rights of the holders of the Common Stock. In the event of
issuance, the Preferred Stock could be utilized, under certain circumstances, as
a method of discouraging, delaying or preventing a change in control. In August
2004, the Company issued 200,000 special Series A-1 preferred to the majority
shareholder of the Company as part of the transaction to acquire Quantum Medical
Technologies, Inc., and Renaissance Health Systems, Inc. The shares are
convertible into 30 shares of common stock after four years at the option of
holder.

(a) Market Information

As of the fiscal year ended October 31, 2004, our common stock was
quoted on the Over-The- Counter Bulletin Board Trading System ("OTCBB") under
the symbol "QTUM". Until February 6, 2004, our common stock trade under the
symbol TPII.

The price range per share reflected in the table below is the high and
low bid quotation for our common stock and reflects all stock splits affected by
the Company.

Quarter High Low
------- ------ ------
Fiscal Year Ended October 31, 2003
1st Quarter 2003 $ 1.30 $ 0.20
2nd Quarter 2003 $ 1.50 $ 0.70
3rd Quarter 2003 $ 1.60 $ 0.20
4th Quarter 2003 $ 1.60 $ 0.70

Fiscal Year Ended October 31, 2004
1st Quarter 2004 $ 1.30 $ 0.60
2nd Quarter 2004 $ 1.00 $ 0.04
3rd Quarter 2004 $ 1.50 $ 0.55
4th Quarter 2004 $ 1.05 $ 0.75

Trading in our common stock on the OTCBB market has been limited and
sporadic and the quotations set forth above are not necessarily indicative of
actual market conditions. The quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commissions and may not represent actual
transactions.

We have never declared or paid any cash dividends on our common stock.
We currently intend to retain future earnings, if any, to finance the expansion
and growth of our business and do not expect to pay any cash dividends in the
foreseeable future. Payment of future cash dividends, if any, will be at the
discretion of our board of directors after taking into account various factors,
including our financial condition, operating results, current and anticipated
cash needs, plans for expansion and other factors considered relevant by our
Board of Directors.

(b) Holders

The Company believes that there were approximately 710 beneficial
shareholders of record of our common stock as of October 31, 2004.

The Company has not paid any dividends on its common stock nor does the
Company anticipate paying any dividends in the foreseeable future. All earnings,
if any, will be reinvested in the Company.

(d) Recent sale of Unregistered Securities:

The following information is furnished with regard to all securities
sold by us since inception that were not registered under the Securities Act.
The issuances described hereunder were made in reliance upon the exemptions from
registration set forth in Section 4(2) of the Securities Act or Regulation D,
Rule 506 of the Securities Act. None of the foregoing transactions involved a
distribution or public offering.

During the period July through December 2004, the Company sold
1,378,905 shares of common stock to foreign investors for an average sale price
of $0.275 per share under an agreement the Company signed with an investment
group. Each investor represented to us that the investor was not a "U.S.
Person", as defined under Regulation S of the 1933 Act. The shares were issued
as restricted shares under the 1933 Act and were endorsed with a restrictive
legend. The Company realized net proceeds, after commissions, approximately
$330,000. The Company issued another 68,904 shares of common stock as additional
commission and 199,170 warrants to purchase common stock at a price of $.275 per
share expiring January 4, 2010. Shares were issued to 150 investors.

On June 4, 2004, the Company received a loan for $30,000 from an
accredited investor. On August 26, 2004, the Company issued 300,000 restricted
common shares exempt from registration, under Rule 144, to satisfy this
obligation.

Transfer Agent

The Transfer Agent for our shares of Common Stock is Fidelity Transfer
Company, Salt Lake City, Utah.

ITEM 6 MANAGEMENT'S PLAN OF OPERATIONS

RISK FACTORS

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS

The discussion in this section regarding our business and operations
includes "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1996. Such statements consist of any
statement other than a recitation of historical fact and can be identified by
the use of forward-looking terminology such as "may," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereof or
comparable terminology. The reader is cautioned that all forward-looking
statements are speculative, and there are certain risks and uncertainties that
could cause actual events or results to differ from those referred to in such
forward-looking statements. This disclosure highlights some of the important
risks regarding our business. The number one risk of the Company is its ability
to attract fresh and continued capital to execute its comprehensive business
plan. In addition, the risks included should not be assumed to be the only
things that could affect future performance. Additional risks and uncertainties
include the potential loss of contractual relationships, changes in the
reimbursement rates for those services as well as uncertainty about the ability
to collect the appropriate fees for services provided by us. Also, the Company
faces challenges in technology development, attracting competent personnel,
deployment and use, medical malpractice exposure and the fluctuation of medical
costs vs. medical payments. The Company may also be subject to disruptions,
delays in collections, or facilities closures caused by potential or actual acts
of terrorism or government security concerns.

GOING CONCERN

The Company is a development stage company that over the last three
years has expensed material sums in creating procedures, manuals and systems to
assist the medical community in the implementation of medical regulations.
Though the Company has materially finished developing its training programs,
additional updates and deployment will be required. The Company has completed
creating a Community Health System (medical delivery network) in Northern
Florida and has been negotiating an MCO contract as well as creating two
websites for medical societies.

As shown in the accompanying condensed financial statements, the
Company has incurred recurring losses and negative cash flows from its
development and organization activities and has negative working capital and
shareholders' deficit. Under normal conditions, these conditions raise
substantial doubt about the Company's ability to continue as a going concern.

There can be no assurance that the Company will be able to successfully
implement its plans to generate additional investor interest and raise
additional capital, or if such plans are successfully implemented, that the
Company will achieve its goals.

Furthermore, if the Company is unable to raise additional funds, it may
be required to modify its growth and developmental plans, and even be forced to
severely limit development operations completely.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern and do not include
any adjustments to reflect the possible future effects of the recoverability and
classification of assets or the amounts and classification of liabilities that
might result from the outcome of this uncertainty. See "Liquidity and Capital
Resources," below.

MANAGEMENT'S PERSPECTIVE AND DEVELOPMENT PLAN FOR THE FISCAL YEAR ENDING
OCTOBER 31, 2005

The Company is a development stage company and has no current revenues.
The Company has raised a total of approximately $856,000 to date, approximately
$180,000 from loans and stock purchases from our Chairman and approximately
$676,000 from convertible loans and the sale of stock to others. As of February
1, 2005 management's efforts have been primarily in market research, creating a
business model, investigating best practices, business development, negotiations
of various Letters of Intent and due diligence on potential acquisitions/joint
ventures and licensing agreements. It has developed HIPAA compliance manuals and
a training material. The Company has created an interactive educational compact
disk in conjunction with a public university in Florida. The Company has
recently completed developing its first CHS. It has secured two medical
associations to provide web services and is in negotiations with several others.
The Company has acquired a Health Information Platform currently undergoing
upgrades.

In the Company's business model we seek to become a leading provider of
services to the healthcare industry in three complementary areas. Those include:
outsourcing administrative responsibilities for physicians, Managed Care
Organizations, healthcare facilities, physician associations; developing new
technologies to create a more effective and responsive healthcare system; and
providing leading edge healthcare services to consumers.

In developing this mode further, the Company purchased 20% interest
from our Chairman and major shareholder in two companies which he was
developing. These companies are Quantum Medical Technologies, Inc ("QMT") (a
Florida corporation) and Renaissance Health Systems, Inc. ("RHS") (a Florida
corporation). These agreements were not negotiated at arm's length and no
independent valuation was made. Both QMT and RHS are also development stage
companies. In both cases each company has a Letter of Intent (LOI) to develop
products and services with institutions in the healthcare field; however the
capital has not been secured at this time to exploit these opportunities.
Management believes that with a more complex and complementary model the Company
is more likely to obtain financing that in the end will produce results for
shareholders. At a Special Meeting of the shareholders held on January 30, 2004
the majority of the shareholders agreed to issue 13,300,000 post reverse shares
and 200,000 Series A Preferred Stock (subsequently added to the purchase price
by the Board of Directors on July 19, 2004) to the majority shareholder of the
Company, Mr. Guillama, of both QMT and RHS for the 80% of each of those
companies. Mr. Guillama had previously granted 7,175,000 options exercisable at
$.001 per share on the shares he owned in the two Companies. 1,000,000 options
are held by an affiliate of Mr. Guillama, 2,180,000 are held by Directors of the
Quantum Group and 3,995,000 are held by non affiliates. As of October 31, 2004,
965,000 options were exercised leaving Mr. Guillama with a direct and beneficial
ownership of approximately 79% of the issued and outstanding shares of the
Company. Control in the Company will not material change, since all the
shareholders in numbers and relative beneficial ownership of both QMT and RHS
are also material and beneficial owners of the common share of the Company
today. The final merger was completed in August 2004.

Upon completion of the acquisition, the Company is now organized in
three key operating divisions consisting of:

>> THE QUANTUM GROUP, as the parent company, will provide outsourcing to
physicians and healthcare organizations. Our services will include:
privacy consulting, human resources management, managed care
contracting, government compliance, financial management, facilities
management, venture management, and healthcare venture/merchant
banking. The Company has identified potential acquisitions to give it a
core group of services, such as medical billing and collections,
consulting and financial services.

We are focusing all our efforts on reaching and selling our services to
medical practices and businesses with annual revenues in the $500,000 to
$20,000,000 range. We believe that this is a highly underserved market, and when
these businesses receive consulting services they are in a fragmented, sporadic
and inefficient manner.

We expect to use a portion of any capital available that the Company
raises to invest in designing solutions to enable clients to reap the benefits
of their investments in new systems and information technology by improving
financial performance, increasing productivity, and improving clinical and
operational performance.

From education, visioning and planning, to implementation and
outsourcing, the Company intends to provide the following specific services and
solutions that are designed to help client organizations perform better:

>> Government Compliance
o HIPAA
o Medicare
o Medicaid
o HMO/PPO
>> Managed Care
o Contract negotiations
o Auditing
o Business development
o MSO development
o IPA development
>> Financial Management
o Billing Services
o Collection services
o Payroll services
o Accounts receivable financing
o Equipment Financing
o Executive lines of credit

>> Information Technology
o Website development
o Information management
o ASP services
o Secure Communications
o Business Process Management
>> Human Resource Services
o Full medical office management
o Facilities management
o Employee management
o Placement services
o Personnel training
>> Business Venture Management
>> Healthcare Merchant Banking Services

QUANTUM MEDICAL TECHNOLOGIES, INC. - TECHNOLOGY

QMT expects in the coming year to continue to work on developing and
enhancing its current patent pending business processes. The first is branded as
Cybernaptic (sm), connecting all the `touch points' of healthcare in one ASP
based system. The clients of QMT will be able to choose any combination of
support, including full outsourcing with data center consolidation, 24/7/365
network monitoring and help desk through a to-be-developed network control
center, as well as facility management, application unification, application
outsourcing and interim management of their entire IT operations for healthcare
facilities. The Company has also begun to develop a new method to track
patient's improvement in their healthcare/lifestyle in a patent pending process
called QuantumQuotient (sm) or Qx2 (sm) . The Company is exploring validation by
a major research university in the U.S. If the current expectations are met,
this product could have a material effect on behavior and controlling medical
cost. In addition the Company is also exploring developing a web-based
marketplace for diagnostic services that is in a patent pending business
process.

The Company has executed two agreements with medical associations that
show great promise, in the development and operation of a complete website and
secure information between member and other member and their patients. These
first two medical societies collectively have 2000 active physician members. We
seek to develop this relationship and produce revenues by the end of the year.

The Company is currently in discussion with four separate companies
that have foreign healthcare technology with application in the US and with US
companies that have technology that is used in other industries with healthcare
applications. The Company expects that a portion of any money secured by the
Company will go towards development of these technologies or relationships.
These products include the secure transfer of medical records over the Internet,
secure verifiable clearing of medical transactions, HIPAA compliant email and
instant messaging, all to be included in a QuantumSuites (SM) packaging. We
expect with the development of this QuantumSuite (SM) of products we will begin
to receive revenues by the end of the year.

QMEDSELECT SM

In December 2004, the Company purchased an Application Service Provider
Platform (ASP) from a Florida based Limited Liability Corporation. This product
has been previously certified in a Microsoft based platform. The Company has
secured contracted programmers to debug the software program and anticipates
beta-testing mid-2005. In conjunction with this acquisition, the Company has
been accepted into the Microsoft ISV program and anticipates Microsoft partner
recognition during 2005. The Company anticipates that it will need $500,000 over
the balance of the year to complete redevelopment of the platform and begin beta
testing. The Company anticipates revenues from this product late in 2005.

RENAISSANCE HEALTH SYSTEMS, INC. - SERVICES

RHS's model shows great promise in the short term for revenues and
profitability of the Company. Therefore management will allocated a greater
portion of all moneys raised in the Company's Plan to its development. The RHS
strategy is to create a new type of healthcare delivery system built on the
extensive experience of our management team. We intend to specialize in managed
care Percentage of Premium (POP) contracting. RHS expects to create a new model
for healthcare called a Community Health System (CHS).
Our RHS business model is unique and based on educating, motivating and
assembling physicians in groups that are prepared to assume managed care risk
with professionals by their side. We envision expanding our Health System of
physicians to provide our members healthcare services on an efficient and cost
effective basis through strategic alliances with insurance companies and other
healthcare providers on a statewide basis. Our model is based on a direct,
proactive, involved participation with our real client, the members of our CHS
program.

Under our model, the physicians maintain their complete independence
but are aligned with our professional staff to assist in providing cost
effective quality medicine. Each primary care physician provides direct patient
services as a primary care doctor including referrals to specialists, hospital
admissions and referrals to diagnostic services and rehabilitation. In the
future, we may seek to acquire, develop or partner with a number our providers
in creating Company owned medical centers of excellence that will serve as our
model facilities.

We intend to use the Internet extensively, with available and
to-be-developed applications, to help process referral claims between the Health
System's primary care physicians and specialists and to communicate with
patients. This process should help to reduce paperwork in the physician's office
as well as provide a more efficient method for the patients in our Health
System. Once developed, our utilization management team will communicate with
the physicians on a daily basis to provide overall management of the patient.

We have executed a Letter of Intent (LOI) with a Florida MCO, which
anticipates a formal contract in the near future. The terms of the LOI details
that RHS will be responsible for arranging a Community Health System (CHS) in
the Central Florida market place. The agreement calls for RHS to receive a
percentage of premiums received by the MCO. Relating to this agreement, the
Company is required to place $50,000 in a segregated bank account to start and
increase this amount by 3% of the revenues generated by the agreement up to a
total $1,000,000. The Company anticipates that if properly funded, this
agreement will be generating $10,000,000 in revenues by December 1, 2005. The
Company anticipates a formal agreement as soon as the Company is able to meet
the capital requirements.

Use of Capital

The Company will need approximately $2.5-$3.5 million to implement its
business plan over the next 12-18 months.

The first $1,000,000 in new capital will go towards the development and
completion of our second, third, fourth, and fifth CHS in the south Florida
market, with approximately $500,000 going towards continued development of
technology solutions. We expect to hire an additional 10 people to develop these
networks on the ground and to create systems and protocols. As the Company's CHS
business develops, the Company expects that it will have to increase the amount
of reserves up to $500,000 over the following 12-18 months for a total of
$1,000,000.

The Company expects to spend $500,000 to acquire a billing and
collection company and further assumes certain obligations associated with that
acquisition. With this acquisition, we expect to hire/acquire a minimum of 20
employees. In addition, we are likely to invest additional funds to update
computers, technology and systems. We believe that identifying qualified
candidates to staff these positions will not present a problem.

We expect to continue to expend resources in developing Cybernaptic
(SM) and the Quantum Quotient (SM) solutions and utilize RHS for the trial,
testing and deployment of these solutions. It is anticipated that this will cost
from $100,000 to $300,000 in this initial phase, and will require the entire
fiscal 2005 to complete. Revenues are not expected until fiscal year end 2005.
We anticipate that the first trial of this new technology/system will be at RHS.

The balance of the funds needed will be used for working capital,
legal, accounting, marketing and development of new markets within the state of
Florida. If the additional capital is available, and the assumptions, contracts
and relationship materialize as expected, the Company would expect to have 35
employees by October 31, 2005, generating run-rate revenues of $5-7 million
per-year.

LIQUIDITY AND CAPITAL RESOURCES

The Company is a development stage company and has not generated any
revenues during the prior year; therefore all our capital requirements will have
to be raised through equity or debt financing. We will need approximately $2.5
to $3.5 million over the next 12 to 18 months to implement the Company's
business plan.

As of October 31, 2004, we had cash of $35,968 and total assets of
$125,175 as compared to $242 and $14,708 at October 31, 2003, respectively. We
had current liabilities of $994,604 and $507,633 at October 31, 2004 and 2003,
respectively.

At October 31, 2004 the Company had a working capital deficit of
$958,636 as compared to a working capital deficit of $507,391 at October 31,
2003. The Company's expenses representing net loss for the year ended October
31, 2004 was $1,119,986 as compared to $246,555 for the year ended October 31,
2003. The increase of $873,431 was primarily due the increase in personnel costs
due increase in staffing. Without a significant infusion of capital or revenues
from proposed operations, it is unlikely that we will be able to sustain
operations or implement our business plan.

Since its inception, the Company has been dependent upon the receipt of
capital investment and loans to fund its continuing activities. In addition to
the normal risks associated with a new business venture, there can be no
assurance that the Company's business plan will be successfully executed. In
addition, the responsibilities of a public company will require the Company to
meet certain legal and accounting requirement that will stress any capital
available.

There can be no assurances that the Company, even with adequate equity
financing, will be able to successfully implement its plans, or if such plans
are successfully implemented, that the Company will achieve sustained
profitability. Furthermore, if the Company is unable to raise adequate funds, it
may be forced to terminate business activity partially or completely.

There can be no assurance that sufficient financing will be obtained to
keep the company operating over the next twelve months. Nor can any assurance be
made that the Company will generate substantial revenues or that the business
operations will prove to be profitable. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. The accompanying
financial statements reflect ongoing losses, negative cash flows from operating
activities, negative working capital and shareholders' deficit. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.

ITEM 7. FINANCIAL STATEMENTS

The financial statements required pursuant to this item are filed under
Part III, Item 13(a) (1) of this report. The financial statement schedule
required under Item 310 (a) of Regulation S-B is filed under Part III, Item 13
(a) (2) of this report.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

ITEM 8A. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures, that are
designed to ensure that information required to be disclosed in the Company's
Securities Exchange Act reports is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and that such
information is accumulated and communicated to the Company's management,
including its Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.

Our Chief Executive Officer and Chief Financial Officer evaluated
the effectiveness of the design and operation of the Company's disclosure
controls and procedures for a Company of our size and simplicity. Based upon
this evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that the disclosure controls and procedures are effective in ensuring
that information required to be disclosed by the Company in the reports that it
files or submits under the Securities and Exchange Act of 1934, as amended, is
recorded, processed, summarized and reported within the time period specified by
the Securities and Exchange Commission's rules and forms.
Additionally, there were no significant changes in the Company's
internal controls that could significantly affect the Company's disclosure
controls and procedures subsequent to the date of their evaluation, nor were
there any significant deficiencies or material weaknesses in the Company's
internal controls. As a result, no corrective actions were required or
undertaken.

Corporate Governance- Board of Directors

Election of Officers

Each director is elected at the Company's annual meeting of
shareholders and holds office until the next annual meeting of stockholders or
until the successors are qualified and elected. The Company's bylaws provide for
not less than one (1) director. Currently there are six (6) directors in the
Company; however, the Company will seek to elect at least one (1) additional
outside director by the end of the fiscal year 2005. The bylaws permit the Board
of Directors to fill any vacancy and such director may serve until the next
annual meeting of shareholders or until his or her successor is elected and
qualified. The bylaws also allow for removal of a director for cause as
determined by the majority of the Board of Directors. The Board of Directors
elects officers and their terms of office are, except to the extent governed by
future employment contracts, at the discretion of the Board. Mr. Noel J.
Guillama and Ms. Susan E. Darby are married. Other than as indicated above,
there are no family relations among any officers or directors of the Company.

The Company has four committees: Audit, Executive, Compensation, and an
Option Committee.

o The Audit Committee selects the independent auditors, reviews the
results and scope of the audit and other services provided by
independent auditors. It reviews and evaluates internal control
functions. As an advisory function of the committee, members also
participate in financings, review budgets prior to presentation to the
Board of Directors and review budgets vs. actual reports. The Board of
Directors has elected Mr. Haggerty as the sole member of the Audit
Committee and as its "financial expert"; as such term is defined under
federal securities law.

o The Executive Committee may exercise the power of the Board of
Directors in the management of business and affairs at any time when
the Board of Directors is not in session. The Executive Committee
shall, however, be subject to the specific directions of the Board of
Directors, and is currently composed of Mr. Guillama, Ms. Darby and Mr.
Baker. All actions of the Executive Committee require a unanimous vote.

o The Compensation Committee consists of Ms. Darby and Mr. Haggerty. The
Compensation Committee makes recommendations to the Board of Directors
concerning compensation for executive officers, employees and
consultants of the Company. All actions of the Compensation Committee
require a unanimous vote.

o The Option Committee consists of Ms. Darby and Mr. Baker. The Option
Committee makes recommendations to the Board of Directors concerning
the Company's Stock Option Plan and administers it accordingly. All
actions of the Option Committee require a unanimous vote.

CODE OF CONDUCT

The Company has adopted two Codes of Conduct that collectively
covers all officers, directors and employees of the Company. One Code of Conduct
is for employees in general and one Code of Conduct is for senior officers and
accounting personnel of the Company. This first Code of Conduct sets Company
policy on inside information, conflicts of interest, trading on inside
information, management and accounting ethics and compliance with all local,
state, and federal laws. The second one has special consideration for the
handling of Corporate financials and disclosure information. The Codes of
Conduct may be reviewed at the Company's website www.thequantumgroupinc.com. The
Code of Ethics for Principal Executive and senior Financial Officers is attached
to this form.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The following table sets forth the names, ages, and positions with
Buyers United for each of the directors and officers.

NAME AGE POSITIONS(1) SINCE
---- --- ------------ -----

Noel J. Guillama 45 Chairman, President,
and Director 2003

Susan E. Darby 44 Vice President, Secretary,
and Director 2003

Marion D. Thorpe, Jr.,
M.D., M.P.H. 39 Vice Chairman and
Director 2003

Donald B. Cohen 51 Vice President, Chief
Financial Officer and
Director 2003

James D. Baker 61 Director 2003

Mark Haggerty 56 Director 2003

All directors hold office until the next annual meeting of stockholders
and until their successors are elected and qualify. Officers serve at the
discretion of our Board.

NOEL J. GUILLAMA, CHAIRMAN, PRESIDENT, AND DIRECTOR

Noel J. Guillama, is the co-founder of The Quantum Group, Inc. and its
predecessor companies and is a seasoned executive that has participated in
various public and private companies in healthcare, real estate, construction
and technology, collectively raising over $75 million of capital. Prior, Mr.
Guillama was Founder, Chairman, President and Chief Executive Officer of
Metropolitan Health Networks, Inc. of West Palm Beach, Florida, (AMEX:MDF) from
its inception in January 16, 1996 to February 1, 2000. Originally Metropolitan
was involved in operating a pharmacy, physical therapy facilities, diagnostic
imaging, and direct medical care. Mr. Guillama was primarily responsible to
transitioning Metropolitan from an physician practice management company in 1998
to a management services organization securing major a contract with a HMO and
disposing of all not core businesses in the later part of 1999. While at
Metropolitan, Mr. Guillama created MetBilling Group which became one of the
largest medical billing companies in South Florida and served as the management
information system of the Company. The Company operated facilities throughout
Florida. Metropolitan, at the time of Mr. Guillama's departure, had experienced
400 percent-annualized compounded growth, and reported revenues of $119 million
with a $5 million profit in fiscal 2000. Metropolitan provides comprehensive
care to over 40,000 patients on a monthly basis and is one of the largest
healthcare providers in Florida. Mr. Guillama has retained only minority
interest in MDF, leaving Metropolitan to develop Quantum, and has no non-compete
agreement with MDF. From 1994 to 1995, Mr. Guillama was Vice President of
Development for MedPartners, Inc. (NYSE:DRX), a Birmingham, Alabama-based
physician practice. From 1991 to 1994, he served as Director and Vice President
of Operations of Quality Care Networks, Inc., a South Florida based
comprehensive group practice with 36 physicians and seven offices. From 1980 to
1990, Mr. Guillama served as President and Chief Executive Officer of Tektonica,
Inc. At that time Tektonica was a diversified company with interests in
construction, real estate, mortgage financing, and trucking in South Florida.
Mr. Guillama remains Chairman of Tektonica to this date. Mr. Guillama holds
active licensure as a Building Contractor, Real Estate Broker, Mortgage Broker
and Insurance Broker in the State of Florida and held a NASD registration from
1990-1995. Mr. Guillama is a member of the American College of Health Care
Executives, Medical Group Management Association. Mr. Guillama serves a director
of the Florida International University Foundation. Based in Miami, Florida, FIU

has 34,000 students, 1,100 full-time faculty, and 95,000 alumni, making it the
largest university in South Florida and placing it among the nation's 30 largest
colleges and universities.

SUSAN E. DARBY, VICE PRESIDENT, SECRETARY, AND DIRECTOR

Ms. Darby has over 18 years of experience in consulting, human
resources and facilities operations. Her extensive background encompasses a wide
range of businesses. Ms. Darby had been an outside consultant with Quantum from
September 2000 to April 2003, when she joined Quantum fulltime. Prior to joining
Quantum, she was with ALLTEL Information Services in early 2001 through April
2003 where she led the human resources and training departments for a national
division focused on banking software solutions. Prior to this she had her own
consulting organization, Jacobs Consulting, which focused on employee
initiatives such as change management, outplacement and transition services,
customer service and career workshops, general employment consulting, and other
training initiatives. For almost 10 years previous to this, she was Director for
People with ServiceMaster, in which she led human resource departments for the
HealthCare Services and the Business & Industry Group serving both hospitals and
long-term care facilities, and focused in the automotive and transportation,
food processing, and manufacturing industries. These divisions were nationwide
in scope with a base of over 3,500 employees in both union and non-union
environments. Ms. Darby is a certified master trainer, recruiter and interviewer
and holds certifications from Gallup, London House, DDI, and is certified by the
American Institute of Baking in Food Processing, Sanitation & Hygiene. She is a
member the Society of Human Resource Management and the Palm Beach County HR
Association. Ms. Darby earned her Bachelor's degree in Communication from the
University of South Florida, and an Associates degree in Pre-Law. Additional
professional training includes an extensive three-year executive graduate
program. Ms. Darby is the wife of Noel J. Guillama.

MARION D. THORPE, JR., M.D., M.P.H., VICE-CHAIRMAN AND DIRECTOR

Dr. Thorpe has a Masters in Health Policy and Administration from
Chapel Hill School of Public Health. In addition, Dr. Thorpe received a Doctor
of Medicine from Chapel Hill School of Medicine. Prior to joining Quantum, Dr.
Thorpe was a founding member of the Florida Health Information Systems Council
from 1999-2002. Dr. Thorpe was also President & CEO of Medical-Net Information
Management Group (MNIMG.com). Dr. Thorpe is a legislative liaison for the
organization Kidz 2000 and Beyond and assists them in establishing state and
federal funding opportunities. Dr. Thorpe serves as an adjunct Professor for the
University of Miami School of Medicine Department of Epidemiology.

DONALD B. COHEN, VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND DIRECTOR

Mr. Cohen is a co-founder of Quantum. Prior to joining Quantum, he
served as Chief Financial Officer of I-Titan Communications Network, Inc. a
technology design and manufacturer from April 2001 through January 2002. He also
served as Chief Financial Officer and Director of Metropolitan Health Networks,
Inc. (AMEX:MDF) from April 1996 to April 1999. While at Metropolitan, Mr. Cohen
was directly responsible for all accounting reporting and SEC disclosures and
was instrumental in designing, installing and operations of the company's
extensive management information and billing and collections system connecting
numerous sites into a state-of-the-art leading edge financial system. He
additionally served as a consultant for the Company through January 2000. Prior
to this, Mr. Cohen was Vice President and CFO of ProSports Video Response, Inc.,
from 1989 to 1992, Vice President and CFO of BDS, Inc., from 1987 to 1989, and
Director of Finance of Tel-Plus Communication of Southern California from 1984
to 1986. From 1993 to 1995, Mr. Cohen worked for Ocwen Financial Corporation
designing and implementing a loan accounting system. Mr. Cohen has extensive
experience in information systems and start-up ventures. Mr. Cohen received a
Bachelor of Science degree from California State University in Northridge, and
was certified as a CPA in the State of California.

JAMES D. BAKER, OUTSIDE DIRECTOR

Mr. Baker has many years of experience as CEO and Director of several
successful start-up companies. He has founded and operated several profitable
computer based high technology companies where he played a key role in their
launch and success. From the beginning of 2003 until the present time, Mr. Baker
has been a Director, President and CEO of Q-Net Technologies, Inc. (QNTI), a
public company created to introduce consumer technology and value added Internet
services into the Chinese market. From 2000 until 2002, Mr. Baker was the
President of TargitInteractive, Inc. a interactive marketing services provider
that delivers millions of e-mail messages on the Internet daily for major
clients such as General Motors, Mercedes, Warner Brothers, Kraft Foods, Lexus,
and many other advertisers. Mr. Baker currently serves as a director of the
company. In1997, Mr. Baker became the CEO of AegiSoft, Inc., a digital rights
management company that provided software and digital content publishers the
technology to rent their products, such as software, music, movies and
electronic books. In 1995, he founded RAPOR, Inc. and is currently on the Board
of Directors. RAPOR is a manufacturer of computer-controlled doors for the
security industry (www.rapor.com). From 1991 through 1995, he served as a
founder, President and CEO of Datamed Systems, Inc. a medical device EMG
provider and rolled the company up into Quality Care Networks, Inc. a physician
practice management company. Mr. Baker was employed from 1967 to 1981 by IBM in
their MIS area and was a Project Manager of Security Systems Development. He
left IBM in 1981 to form his own company, Computer Application Systems, Inc.
(CASI), a Florida corporation that commercialized computer-based security
systems. CASI was number 50 in the INC. 500 list of fastest growing privately
held companies in the United States in 1987 and was then sold to Figgie
International Inc. in September 1987. Mr. Baker worked with Figgie as a Vice
President of Strategic Business Development through 1991. Mr. Baker obtained a
Bachelor of Science degree in industrial management from the University of
Cincinnati and pursued a master's degree in business administration at the
University of Michigan.

MARK HAGGERTY, JD, OUTSIDE DIRECTOR

Mr. Haggerty is a graduate of the University of Minnesota Law School
and was in private practice as an employee, shareholder, director and youngest
vice president of the Minneapolis law firm of Smith, Juster, Feikema, Haskvitz
and Malmon from 1971 through 1985. During the early 70's he was a contract
prosecutor and then specialized in corporate, securities and medical law. From
1985 through 1987 he acted as senior vice president and counsel to the
350-person securities firm of Miller & Schroeder Financial, Inc. of Minneapolis.
From 1976 through 1987 Mr. Haggerty structured and closed over one billion
dollars in financings for numerous projects including medical clinics and
nursing homes through out the United States. From 1987 through 1993 Mr. Haggerty
became President of Haggerty & Associates, Inc. and consulted for private
companies and the US Agency for International Development in the US, Europe and
Africa. From 1993 to 2003 he was President of Voice & Wireless Corporation, a
fully SEC reporting public company. From 2003 to present he has acted as
in-house legal counsel to a SEC licensed investment advisory corporation. In
1996, Mr. Haggerty was a co-founder of Metropolitan Health Networks, Inc. and
acted as Chairman of its advisory board. Mr. Haggerty is an elected county
official having recently been elected to his third term as Hennepin County Parks
Commissioner and serves as its Vice-Chairperson. He is a past president of the
Minneapolis Chamber of Commerce and the County Bar Association there. In
addition to his being licensed to practice law in the Minnesota and United
States Supreme Courts, he also is licensed as a series 7 and 63 securities
representative from the NASD and the SEC.

COMPENSATION OF DIRECTORS

The Company reimburses all Directors for their expenses in connection
with their activities as Directors of the Company. In addition, the Company has
granted each outside Director approximately 30,000 shares of stock, vested over
three years, and an annual cash fee of $5,000. It is expected that compensation
to outside Directors will increase as their responsibility expands and the
Company develops. The Directors will make themselves available to consult with
the Company's management as well as serve on one or more of its Committees. All
of the Directors of the Company that are also employees of the Company do not
receive additional compensation for their services as Directors.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
(10%) percent of the outstanding Common Stock, to file with the Securities and
Exchange Commission (the "SEC") initial reports of ownership on Form 3 and
reports of changes in ownership of Common Stock on Forms 4 or 5. Such persons
are required by SEC regulation to furnish the Company with copies of all such
reports they file.

Based solely on its review of the copies of such reports furnished to
the Company or written representations that no other reports were required, the
Company believes that all Section 16(a) filing requirements applicable to its
officers, directors and greater than (10%) percent beneficial owners were
complied with during the year ended October 31, 2003.

ITEM 10. EXECUTIVE COMPENSATION

Noel J. Guillama, our Chief Executive Officer, became an executive
officer at the end of May 2003 and has not received any direct or indirect
compensation for services rendered on behalf of the Company the since that time.
The Company has no agreement or understanding, express or implied, with any
officer, director, or principal stockholder, or their affiliates or associates,
regarding employment with the Company or compensation for services, excluding
those previously identified regarding outside directors in Item 9.

Executive Compensation

The Company expects to pay Mr. Guillama, Ms. Darby, and Mr. Cohen with
permanent compensation and bonuses to be negotiated with Compensation Committee
of the Company. As of October 31, 2004, the Company has accrued a total of
$208,000 in compensation for Mr. Guillama, $92,000 for Mr. Cohen, and $99,000
for Ms. Darby in anticipation of such arrangement. The Company has also accrued
$25,000 for the compensation of Outside Directors. As of November 1, 2004, the
Board had approved accrual of $200,000 compensation for Mr. Guillama, and
$96,000 each for Ms. Darby and Mr. Cohen.

Employment Agreements

The Company has no employment agreement with any of its senior
officers. All officers serve at the pleasure of the Board of Directors.

The following tables present information concerning the cash
compensation and stock options provided to the Company's Chief Executive Officer
and each additional executive officer for the fiscal years ended October 31,
2004, 2003 and 2002.

SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION

OTHER RESTRICTED SECURITIES
NAME AND PRINCIPAL FISCAL ANNUAL STOCK UNDERLYING
POSITON YEAR SALARY COMPENSATION AWARD OPTIONS
------------------ ------ ------ ------------ ---------- ----------

Noel J. Guillama 2004 $ -- $ -- -- --
President, Chairman, CEO 2003 $ -- $ -- -- 200,000
2002 $ -- $ -- -- --
Donald B. Cohen 2004 $ -- $ 12,500 -- --
Vice President 2003 $ -- $ 1,500 45,000 150,000
CFO, Director 2002 $ -- $ -- -- --
Susan E. Darby 2004 $ 13,000 $ -- -- --
Vice President, Secretary, 2003 $ -- $ -- -- --
Director 2002 $ -- $ -- -- --

OPTIONS AND COMMON SHARES GRANTED IN THE YEAR ENDED OCTOBER 31, 2004 TO
EXECUTIVES

No stock options or common shares were granted to any of our named
executive officers during our most recent fiscal year ended October 31, 2004

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The following table sets forth, as of January 27, 2005, the number and
percentage of the outstanding shares of common stock that, according to the
information supplied to the Company, were beneficially owned by (i) each person
who is currently a director, (ii) each executive officer, (iii) all current
directors and executive officers as a group and (iv) each person who, to the
knowledge of The Quantum Group, Inc.the Company, is the beneficial owner of more
than five percent of the outstanding common stock. The only persons who hold
five percent or more of the outstanding common stock are also officers and
directors. Except as otherwise indicated, the persons named in the table have
sole voting and dispositive power with respect to all shares beneficially owned,
subject to community property laws where applicable.

AMOUNT/NATURE
OF BENEFICIAL PERCENTAGE OF
NAME/ADDRESS OF BENEFICIAL OWNERSHIP OF BENEFICIAL
OWNER COMMON STOCK OWNERSHIP
-------------------------- -------------- ------------

Guillama, Noel (1)(7) 14,646,090 78.97%
12230 Forest Hill Blvd., Suite 157
Wellington, Florida
Darby, Susan E. (2)(8) 1,152,719 6.22%
Cohen, Donald B. (3) 1,137,854 6.14%
Baker, James D. (4) 137,857 0.74%
Haggerty, Mark (5) 131,191 0.71%
Thorpe, Marion (6) 114,540 0.62%

Directors and Executive
Officers, as a group (6 persons) 15,095,251 81.39%

(1) Includes (a) 13,702,125 shares held by Mr. Guillama; (b) 520,078 shares held
by Guillama Family Holdings, Inc.; (c) 300,078 held by his minor son and (d)
123,809 issuable upon the exercise upon the exercise of options at $.40 per
share until February, 2010. This does not include (a) 76,191 shares issuable
upon the exercise of options at $.40 per share until October 1, 2010 and (b)
200,000 shares of Series A Preferred Stock which is convertible into 6,000,000
common shares after August 2008.

(2) Includes (a) 162,678 shares; (b) 40,041 shares held by her minor son; (c)
800,000 shares transferable upon the exercise of options at $.001 per share on
shares owned by Mr. Guillama and (d) 150,000 shares transferable upon the
exercise of options at $.001 per share owned by Mr. Guillama and held by her
minor son.

(3) Includes (a) 95,000 shares; (b) 950,000 shares transferable upon the
exercise of options at $.001 per share owned by Mr. Guillama and (c) 92,854
issuable upon the exercise of options at $.40 per share until February, 2009.
Does not include (a) 25,000 shares issuable monthly at a rate of 2,500 per month
until October, 2005; and (b) 57,146 shares issuable upon the exercise of options
at $.40 per share until October, 2010.

(4) Includes (a) 11,666 shares; (b) 100,000 shares transferable upon the
exercise of options at $.001 per share owned by Mr. Guillama and (c) 20,000
shares transferable upon the exercise of options at $.01 per share on shares
owned by Mr. Guillama until July 24, 2008 and (d) 6,191 issuable upon the
exercise of options at $.40 per share until February, 2010. Does not include (a)
18,334 shares issuable monthly at a rate of 833 per month until October, 2006;
and (c) 3,809 shares issuable upon the exercise of options at $.40 per share
until October 1, 2010.

(5) Includes (a) 10,000 shares; (b) 65,000 shares transferable upon the exercise
of options at $.001 per share owned by Mr. Guillama ; (c) 35,000 shares
transferable upon the exercise of options at $.001 per share owned by Mr.
Guillama held by Linda Jean Haggerty (c) 2,500 shares transferable upon the
exercise of options at $.01 per share on shares owned by Mr. Guillama until July
24, 2008; (d) 12,500 shares transferable upon the exercise of options at $.01
per share until July 24, 2008 held by Linda Jean Haggerty and (e) 6,191 issuable
upon the exercise of options at $.40 per share until February, 2010. Does not
include (a) 20,000 shares issuable quarterly at a rate of 2,500 per quarter
until October 1, 2006; and (d) 3,809 shares issuable upon the exercise of
options at $.40 per share until October 1, 2010.

(6) Includes (a) 21,450 shares; (b) 80,000 shares transferable upon the exercise
of options at $.001 per share owned by Mr. Guillama; (c) 10,000 shares
transferable upon the exercise of options at $.01 per share on shares owned by
Mr. Guillama until July 24, 2008 and (c) 3,090 issuable upon the exercise of
options at $.40 per share until February, 2009. Does not include (a) 11,550
shares issuable quarterly at a rate of 2,887 per quarter until October 1, 2006;
and (b) 1,910 shares issuable upon the exercise of options at $.40 per share
until October 1, 2010.

(7) Mr. Guillama has granted options to purchase 1,590,514 shares of the Company
at $.001 per share, of the 2,700,000 shares he originally owned. Of the
1,590,514 options granted 257,642 options remain unexercised of which 45,000
options were granted to Directors and their affiliated persons and 212,642
options were granted to unaffiliated persons. Mr. Guillama had granted options
to purchase shares of Quantum Medical Technologies, Inc. and Renaissance Health
Systems, Inc. prior to the Company's acquisition of these companies, at .001 per
share. The number of options granted and unexercised is 6,210,000, of which
1,000,000 were granted to an affiliate of Mr. Guillama, 2,180,000 were granted
to Directors and their affiliated persons and 3,030,000 were granted to
unaffiliated persons.

(8) Ms. Darby is the wife of Mr. Guillama.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On May 28, 2003, Transform Pack completed the acquisition of Quantum
HIPAA Consulting Group, Inc., a Florida Corporation based in Wellington,
Florida. Quantum HIPAA Consulting Group is in the business of advising the
healthcare industry on the implementation of regulations created to comply with
the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
Transform Pack made the acquisition by issuing 27,000,000 shares of Common Stock
($0.004 par value) to Noel J. Guillama, the sole stockholder of Quantum HIPAA
Consulting Group, in exchange for all the issued and outstanding shares of
Quantum HIPAA Consulting Group. As a result, of the acquisition on May 28, 2003,
Mr. Guillama became the direct and beneficial owner of approximately 80.18 % of
the issued and outstanding shares of the Company. Prior to the acquisition of
Quantum HIPAA Consulting Group, there was no affiliation or other relationship
between Transform Pack and Quantum HIPAA Consulting Group or Mr. Guillama.

At a Special Meeting of the shareholders held on January 30, 2004 the
majority of the shareholders agreed to issue 13,300,000 post reverse shares and
200,000 Series A Preferred Stock (subsequently added to the purchase price by
the Board of Directors on July 19, 2004) to the majority shareholder of the
Company, Mr. Guillama, of both QMT and RHS for the 80% of each of those
companies. Mr. Guillama had previously granted 7,175,000 options exercisable at
$.001 per share on the shares he owned in the two Companies. 1,000,000 options
are held by an affiliate of Mr. Guillama, 2,180,000 are held by Directors of the
Quantum Group and 3,995,000 are held by non affiliates. As of October 31, 2004,
965,000 options were exercised leaving Mr. Guillama with a direct and beneficial
ownership of approximately 79% of the issued and outstanding shares of the
Company. Control in the Company will not material change, since all the
shareholders in numbers and relative beneficial ownership of both QMT and RHS
are also material and beneficial owners of the common share of the Company
today. The final merger was completed in August 2004.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) (1) Financial Statements

(a) (2) Financial Statement Schedules

All schedules have been omitted because they are not applicable or the
required information is provided in the consolidated financial statements,
including the notes thereto, as part of this Form 10-KSB.

(a) (3) Exhibits

Exhibit Item 601
No. Ref. No. Title of Document
------ -------- -----------------
1 2.12 Exchange Agreement dated May 28, 2003
between Transform Pack International and Quantum
HIPAA Consulting Group, Inc.

2. 2.12 Articles of Incorporation The Quantum Group, Inc. (Nevada)

3 2.2 Agreement and Plan of Exchange between The Quantum Group,
Inc., Quantum Medical Technologies, Inc. and
Noel J. Guillama, dated August 9, 2004(2)

4 2.3 Agreement and Plan of Exchange between The Quantum Group,
Inc., Renaissance Health Systems, Inc., and
Noel J. Guillama, date August 9, 2004(2)

5 3.4 By-Laws The Quantum Group, Inc (Nevada)(1)

6 3.5 2003 INCENTIVE EQUITY & OPTION PLAN(1)

7 10.11 Put Option Agreement between Transform Pack International
and HANS MEIER, CARMELLE CAISSIE, DANIEL SCHAM and
ROBERT TALBOT, TRUSTEE

8 14.1 Code of Ethics(3)

9 31.1 Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*

10 31.2 Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002*

11 32.1 Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*

12 32.2 Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*

------------------
* filed herewith

(1) Incorporated by reference to the Company's Form 14-C filed on
January 7, 2004
(2) Incorporated by reference to the Form 8-K filed August 20, 2004
(3) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the fiscal year ended October 31, 2003, as filed with the Commission
on February 13, 2004

FORM 8-K FILINGS

(b) Reports on Form 8-K filed during the quarter ended October 31, 2004

August 20, 2004: Disclosure of the acquisition of Quantum Medical
Technologies, Inc. and Renaissance Health Systems, Inc.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

Audit fees billed by the Company's principal accountant total $29,216 during the
year ended October 31, 2004 through date of this report and $10,000 for the year
ended October 31, 2003.

AUDIT RELATED FEES

No audited-related fees have been billed by the Company's principal accountant
for any period.

TAX FEES

Tax fees billed by the Company's principal accountant totaled $2,440.

ALL OTHER FEES

No other fees other than those set out above have been paid to the Company's
principal accountant.

AUDIT COMMITTEES PRE-APPROVAL POLICIES AND PROCEDURES

The audit committee approves all professional services and fees provided by our
principal accountants. For the year 2004 and 2003, the audit committee approved
only professional services rendered by our principal accountants for the audit
of our annual financial statements and review of our financial statements
included in our Form 10-QSB or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years and tax compliance.

SIGNATURES

Pursuant to the requirements of the Securities Act, as amended, the
registrant has duly caused this Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized, this 10th of February, 2005.

THE QUANTUM GROUP, INC.

By: /s/ Noel J. Guillama
---------------------------------
Noel J. Guillama,
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act, as amended, this
report has been signed below by the following persons in the capacities and on
the dates indicated.

Signature Title Date
--------- ----- ----
/s/ Noel J. Guillama President and Chief
---------------------------- Executive Officer,
Noel J. Guillama Director

/s/ Susan E. Darby Vice President,
---------------------------- Director
Susan E. Darby

/s/ Marion D. Thorpe, Jr. Vice Chairman,
---------------------------- Director
Marion D. Thorpe, Jr., M.D.

/s/ Donald B. Cohen Chief Financial Officer,
---------------------------- Director
Donald B. Cohen

/s/ James D. Baker Director
----------------------------
James D. Baker

/s/ Mark Haggerty Director
----------------------------
Mark Haggerty

THE QUANTUM GROUP, INC.

INDEX TO FINANCIAL STATEMENTS

PAGE
----

Report of Independent Registered Public Accounting Firm F-2
Consolidated Balance Sheet F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Deficiency in Assets F-5
Consolidated Statements of Cash Flows F-6
Notes to the Consolidated Financial Statements F-7

F-1

[LETTERHEAD]

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders
The Quantum Group, Inc.

We have audited the accompanying consolidated balance sheet of The Quantum
Group, Inc. as of October 31, 2004, and the related consolidated statements of
operations, changes in deficiency in assets and cash flows for the two years
ended October 31, 2004. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Quantum Group,
Inc. at October 31, 2004 and the results of its operations and its cash flows
for the two years then ended in conformity with accounting principles generally
accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses and had negative
cash flows from operations which raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1. The financial statements do no include any
adjustments that might result from the outcome of this uncertainty.

[GRAPHIC OMITTED]

Boca Raton, Florida
January 26, 2005

F-2

THE QUANTUM GROUP, INC.
BALANCE SHEET
(A DEVELOPMENT STAGE ENTERPRISE)
OCTOBER 31, 2004

ASSETS

Current assets:

Cash $ 35,968

-----------
Total current assets 35,968

Property and equipment, net of accumulated depreciation of $6,959 52,456

Goodwill 23,500
Other assets 13,251

-----------
Total assets $ 125,175
===========

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
Accounts payable and accrued liabilities $ 347,754
Accrued payroll 392,372
Notes payable and accrued interest - shareholder 254,478
-----------

Total current liabilities 994,604

Capital Lease Obligation 6,881

-----------
Total Liabilities 1,001,485

Commitments and contingencies

Deficiency in assets accumulated during development stage (876,310)

-----------
Total liabilities and deficiency in assets $ 125,175
===========

See accompanying notes to financial statements

F-3

THE QUANTUM GROUP, INC.
STATEMENTS OF OPERATIONS
(A DEVELOPMENT STAGE ENTERPRISE)
FOR THE YEARS ENDED OCTOBER 31, 2004 AND 2003

FOR THE PERIOD
FOR THE YEAR ENDED JULY 24, 2001
-------------------------------------- (INCEPTION) TO
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004
---------------- ---------------- ----------------

Interest Expense $ 37,550 $ 33,432 $ 70,989
Other Expenses 1,082,436 213,123 1,509,528

----------- ----------- ----------
Expenses Representing Net Loss $ 1,119,986 $ 246,555 $1,580,517
=========== =========== ==========

Basic and diluted (loss)
per common share $ (0.17) $ (0.08)
=========== ===========

Weighted average number of
common shares outstanding 6,565,873 2,939,761
=========== ===========

See accompanying notes to financial statements.

F-4

THE QUANTUM GROUP, INC.
STATEMENT OF CHANGES IN DEFICIENCY IN ASSETS ACCUMULATED
DURING THE DEVELOPMENT STAGE
OCTOBER 31, 2004

PREFERRED STOCK COMMON STOCK
PAR VALUE $.001 PAR VALUE $.001
PER SHARE PER SHARE
30,000,000 170,000,000
AUTHORIZED AUTHORIZED
-------------- ------------------- ALLOCATED
# # ADDITIONAL SHARES
OF OF PAID-IN DEFERRED FOR DEFERRED ACCUMULATED TOTAL
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION COMPENSATION DEFICIT EQUITY
------- ------ ---------- ------- ---------- ------------ ------------ ----------- ----------

Balance at 10-31-01 2,700,000 2,700 17,300 (127,576) (107,576)

Net (loss) (86,400) (86,400)
------- ---- ---------- ------- --------- --------- --------- ----------- ----------

Balance at 10/31/02 2,700,000 2,700 17,300 (213,976) (193,976)

Merger with TPII 510,885 511 (121,363) (120,852)
Sale of common stock for cash 86,000 86 64,914 65,000
Deferred compensation-
stock options 207,500 (207,500) --
Deferred compensation-
stock grants (327,150) $ 327,150 --
Amortization of deferred comp 3,458 3,458
Net (loss) (246,555) (246,555)
------- ---- ---------- ------- --------- --------- --------- ----------- ----------

Balance at 10/31/03 3,296,885 3,297 168,351 (531,192) 327,150 (460,531) (492,925)

Sale of common stock 1,188,122 1,188 276,690 277,878
Conversion of note payable 300,000 300 164,700 165,000
Issuance of stock - stk grants 197,269 197 172,551 172,748 (172,748) 172,748
Amortization of
deferred compensation 83,975 83,975
Stock based compensation 25,000 25 23,475 23,500
Merger - Renaissance Health
Systems, Inc. 100,000 100 9,300,000 9,300 9,400
Merger - Quantum Medical
Technologies, Inc. 100,000 100 4,000,000 4,000 4,100
Deferred compensation-
stock grants (45,950) 45,950 --
Grant of stock options 79,800 (79,800) --
Net (loss) $(1,119,986 (1,119,986)
------- ---- ---------- ------- --------- --------- --------- ----------- ----------

Balance at 10/31/04 200,000 $200 18,307,276 $18,307 $ 885,567 $(400,219) $ 200,352 $(1,580,517 $ (876,310)
======= ==== ========== ======= ========= ========= ========= =========== ==========

See accompanying notes to financial statements.

F-5

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOW
FOR THE PERIODS ENDED OCTOBER 31, 2004 AND 2003

YEAR YEAR JULY 24, 2001
ENDED ENDED (INCEPTION) TO
OCTOBER 31, 2004 OCTOBER 31, 2003 OCTOBER 31, 2004
---------------- ---------------- ----------------

OPERATING ACTIVITIES
Net (loss) $(1,119,986) $(246,555) (1,580,517)
----------- --------- -----------
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation 4,033 1,269 6,959
Amortization of deferred compensation 83,975 3,458 87,433
Issuance of stock for compensation 196,248 196,248
Loss on conversion of debt to common stock 135,000 135,000

Changes in operating assets and liabilities:
Increase in other assets (10,478) (952) (13,250)
Increase in accounts payable
and accrued liabilities 456,291 174,380 649,460
----------- --------- -----------
Total adjustments 865,069 178,155 1,061,850
----------- --------- -----------

Net cash used in operating activities (254,917) (68,400) (518,667)

INVESTING ACTIVITIES
Purchase of property and equipment (44,258) (890) (48,878)
Investment in related companies (10,000) (10,000)
----------- --------- -----------
Net cash used in investing activities (44,258) (10,890) (58,878)
----------- --------- -----------

FINANCING ACTIVITIES
Proceeds from note payable 57,515 14,532 251,127
Proceeds from issuance of common stock 277,878 65,000 362,878
Repayments on capital lease obligation (492) (492)
----------- --------- -----------
Net cash provided by financing activities 334,901 79,532 613,513
----------- --------- -----------

Net increase in cash 35,726 242 35,968

Cash at beginning of period 242 -- --
----------- --------- -----------

Cash at end of period $ 35,968 $ 242 $ 35,968
=========== ========= ===========

Supplemental disclosures of cash flow information:

Cash paid during the period for interest $ 2,208 $ -- $ 2,208

Supplemental disclosures of non-cash investing and
financing activities:

Assumption of Liabilities of
Transform Pack International, Inc. $ -- $ 120,852 $ 120,852
Common stock and preferred stock
issued in connection with acquisitions $ 23,500 $ 23,500
Capital lease obligations incurred
on purchases of equipment $ 10,358 $ 10,358
Conversion of convertible note
into common stock $ 30,000 $ 30,000

See accompanying notes to financial statements.

F-6

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 1: DESCRIPTION OF COMPANY

On May 28, 2003, Transform Pack International, Inc. (the "Company") merged with
Quantum HIPAA Consulting, Inc. ("Quantum"). On January 30, 2004, the
shareholders of the Company approved the reincorporation of the Company under
the name of The Quantum Group, Inc. ("TQGI"). The Company's business model is to
become a provider of services to the healthcare industry in three complementary
areas: outsourcing administrative responsibilities for physicians, Managed Care
Organizations, healthcare facilities and physician associations; developing new
technologies for the healthcare delivery system; and providing healthcare
services to consumers.

GOING CONCERN

The Company has no revenues to date. Since its inception, the Company has been
dependent upon the receipt of capital investment to fund its continuing
activities. In addition to the normal risks associated with a new business
venture, there can be no assurance that the Company's business plan will be
successfully executed. The Company's ability to execute its business model will
depend on its ability to obtain additional financing and achieve a profitable
level of operations. There can be no assurance that sufficient financing will be
obtained. Nor can any assurance be made that the Company will generate
substantial revenues or that the business operations will prove to be
profitable. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents. At October 31, 2004
there were no cash equivalents.

PROPERTY AND EQUIPMENT

Furniture and equipment are stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets, which range
from three to five years.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to expense when incurred.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles 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
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates and the differences could be material.

F-7

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

GOODWILL

On an annual basis, management assesses the composition of the Company's assets
and liabilities, as well as the events that have occurred and the circumstances
that have changed since the most recent fair value determination. If events
occur or circumstances change that would more likely than not reduce the fair
value of goodwill below its carrying amount, goodwill will be tested for
impairment. The Company will recognize an impairment loss if the carrying value
of the asset exceeds the fair value determination. As of October 31, 2004, there
was no impairment of goodwill.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements for the period ended October
31, 2004 include the accounts of The Quantum Group, Inc. and its subsidiaries,
Renaissance Health Systems, Inc. and Quantum Medical Technologies, Inc.

REVENUE RECOGNITION

It is anticipated that the Company will recognize a majority of its revenue from
Health Maintenance Organizations (HMO) as a percentage of premium collected by
the HMO from governmental sources. These payments are paid at the beginning of
each month, with quarterly adjustments as required on a look back basis to
account for any disenrollments. Revenue will be recorded in the month earned
with an allowance for the quarterly adjustments.

STOCK COMPENSATION

The company has adopted Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation." SFAS 123 encourages the
use of a fair-value-based method of accounting for stock-based awards, under
which the fair value of stock options is determined on the date of grant and
expensed over the vesting period. Under SFAS 123, companies may, however,
measure compensation costs for those plans using the method prescribed by
Accounting Principles Board Opinion No. 25 ("APB No. 25"), "Accounting for Stock
Issued to Employees." Companies that apply APB No. 25 are required to include
pro forma disclosures of net earnings and earnings per share as If the
fair-value-based method of accounting had been applied. The Company elected to
account for such plans under the provisions of APB No. 25. The Company accounts
for stock options granted to consultants under SFAS 123.

F-8

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK COMPENSATION (CONTINUED)

Had the compensation expense for the stock option plan been determined based on
the fair value of the options at the grant date consistent with the methodology
prescribed under Statement of Financial Standards No. 123, "Accounting for Stock
Based Compensation," at October 31, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below:

2004 2003
------------- -----------
Net income (loss)
As reported $ (1,119,986) $ (246,555)
------------- -----------
Pro forma $ (1,246,706) $ (256,827)
------------- -----------
Earnings per share
As reported $ (0.17) $ (0.08)
------------- -----------
Pro forma $ (0.19) $ (0.09)
------------- -----------

The fair value of each option is estimated on the date of grant using the fair
market value option-pricing model with the assumptions:

Risk-free interest rate 3%
Expected life (years) 5
Expected volatility 1.22
Expected dividends None

NEW ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation ("FIN") No. 46, "Consolidation of Variable Interest Entities
(VIE)," (revised December 2003 by FIN No. 46R), which addresses how a business
enterprise should evaluate whether it has a controlling financial interest in an
entity through means other than voting rights and accordingly should consolidate
the entity. For variable interests in VIEs created before January 1, 2004, the
Interpretation will be applied beginning on January 1, 2005. For any VIEs that
must be consolidated under FIN No. 46R that were created before January 1, 2004,
the assets, liabilities and non-controlling interests of the VIE initially would
be measured at their carrying amounts with any difference between the net amount
added to the balance sheet and any previously recognized interest being
recognized as the cumulative effect of an accounting change. If determining the
carrying amounts is not practicable, fair value at the date FIN No. 46R first
applies may be used to measure the assets, liabilities and non-controlling
interest of the VIE. The adoption of FIN No. 46R did not have a material impact
on the Company's financial position, results of operations or cash flows as the
Company does not have any VIEs.

F-9

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 03-01, "The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments." EITF 03-01 provides guidance on
other-than-temporary impairment models for marketable debt and equity securities
accounted for under SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," and SFAS No. 124, "Accounting for Certain Investments
Held by Not-for-Profit Organizations," and non-marketable equity securities
accounted for under the cost method. The EITF developed a basic three-step model
to evaluate whether an investment is other-than-temporarily impaired. In
September 2004, the FASB issued FASB Staff Position EITF 03-01-1, which delays
the effective date until additional guidance is issued for the application of
the recognition and measurement provisions of EITF 03-01 to investments in
securities that are impaired; however, the disclosure requirements are effective
for annual periods ending after June 15, 2004. The adoption of the disclosure
provisions of EITF 03-01 did not have a material effect on the Company's results
of operations or financial condition.

In November 2004, the FASB issued SFAS 151, Inventory Costs--an amendment of ARB
No. 43, Chapter 4 . The Statement amends the guidance of ARB No. 43, Chapter 4,
Inventory Pricing , by clarifying that abnormal amounts of idle facility
expense, freight, handling costs, and wasted materials (spoilage) should be
recognized as current-period charges and by requiring the allocation of fixed
production overheads to inventory based on the normal capacity of the production
facilities. It does not appear that this Statement will have a material effect
on the financial position, operations or cash flows of the Company when it
becomes effective in 2006.

In December 2004, the FASB issued SFAS No. 123R "Share-Based Payment" ("SFAS
123R"), a revision to SFAS No. 123 "Accounting for Stock-Based Compensation"
("SFAS 123"), and superseding APB Opinion No. 25 "Accounting for Stock Issued to
Employees" and its related implementation guidance. SFAS 123R establishes
standards for the accounting for transactions in which an entity exchanges its
equity instruments for goods or services, including obtaining employee services
in share-based payment transactions. SFAS 123R applies to all awards granted
after the required effective date and to awards modified, repurchased, or
cancelled after that date. Adoption of the provisions of SFAS 123R is effective
as of the beginning of the first interim or annual reporting period that begins
after June 15, 2005. The Company is currently in the process of evaluating the
potential impact that the adoption of SFAS 123R will have on its consolidated
financial position and results of operations.

NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, accounts payable and accrued
liabilities approximate their fair value because of the short maturity of these
financial instruments.

F-10

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 4: PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

2004 2003
-------- -------
Computer and other equipment $ 33,118 $ 3,729
Furniture and Fixtures 8,908 890
Leasehold Improvements 17,389 -0-
-------- -------
59,415 4,619
Less: Accumulated Depreciation (6,959) (2,926)
-------- -------
Total $ 52,456 $ 1,693
======== =======

Depreciation expense for the years ended October 31, 2004 and 2003 was $4,033
and $1,269.

NOTE 5: DEFERRED INCOME TAXES

The Company's evaluation of the tax benefit of its net operating loss
carrforward is presented in the following table for years ended October 31, 2004
and 2003. At October 31, the tax amounts have been calculated using the 34%
federal and 5.5% state income tax rate.

2004 2003
--------- --------

Income tax (benefit) consists of:
Current $ -- $ --
Deferred -- --
Provision (benefit) for income taxes $ -- $ --
========= ========

Reconciliation of the federal statutory income tax rate to the Company's
effective tax rate is as follows:

2004 2003
--------- --------

Taxes computed at combined federal $(380,795) $(83,829)
Non-deductible expenses 46,867 340
State income taxes, net of federal income tax benefit (35,652) (8,912)
Increase (decrease) in deferred tax asset
valuation allowance 369,580 92,401
--------- --------
Provision (benefit) for income taxes $ -- $ --
========= ========

F-11

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 5: DEFERRED INCOME TAXES (CONTINUED)

The components of the deferred tax asset were as follows at October 31:

2004 2003
--------- --------
Deferred tax assets:
Net operating loss carryforward
and start up costs $ 212,473 $ 37,097
Stock based compensation 75,149 1,301
Accrued compensation 147,648 41,423
Accrued interest 26,711 12,580
--------- --------
Total deferred tax assets 461,981 92,401
--------- --------

Valuation allowance:
Beginning of year (92,401) --
Decrease (increase) during the year (369,580) (92,401)
--------- --------
Ending balance (461,981) (92,401)
--------- --------
Net deferred taxes $ -- $ --
========= ========

As of October 31, 2004, the Company had an used net operating loss carryforward
and start-up costs of approximately $564,636 available for use on its future
corporate income tax returns. This net operating loss carry forward begins to
expire in October 2024. Pursuant to Sections 382 and 383 of the Internal Revenue
Code, annual use of any of the Company's net operation loss and credit carry
forwards may be limited if cumulative changes in ownership of more than 50%
occur during any three year period.

NOTE 6: MERGER WITH QUANTUM HIPAA CONSULTING, INC.

Effective May 28, 2003, the Company consummated a merger pursuant to a merger
agreement with Quantum HIPAA Consulting Group, Inc. Quantum HIPAA Consulting
Group, Inc. developed a training compact disc and manuals to instruct the
healthcare industry on the implementation of the regulations created to comply
with the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The Company completed the merger by issuing 2,700,000 million shares of Common
Stock to the sole shareholder of Quantum, in exchange for all the issued and
outstanding shares of Quantum. For accounting purposes, the acquisition was
treated as a recapitalization of the Company. The value of the net assets of the
Company after the acquisition was completed is the same as their historic book
value.

On May 30, 2003, in accordance with the agreement, the Company, Transform Pack
International, Inc., sold its wholly owned subsidiary, Transform Pack, Inc.
(TPI) to certain previous shareholders and investors of the Company. Transform
Pack, Inc. and its shareholders have agreed to assume and indemnify the Company
for all operating debts of the Company.

F-12

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 7: LOSS PER SHARE

Basic loss per share is computed by dividing loss available to common
shareholders by the weighted average number of common shares for the period. The
computation of diluted loss per share is similar to basic loss per share, except
that the denominator is increased to include the number of additional common
shares that would have been outstanding if the potentially dilutive common
shares, such as options, had been issued. Diluted loss per share is not
presented as the effects would be anti-dilutive.

NOTE 8: OTHER COMMON STOCK TRANSACTIONS

DEFERRED COMPENSATION

The Company granted 57,000 and 363,500 shares of common stock to employees,
directors and advisors in lieu of or as partial compensation for services
performed for the Company for years ended October 31, 2004 and 2003,
respectively. These shares started vesting January 1, 2004 and are to be vested
over two and three year periods. The Company recorded $45,950 and $327,150 of
unearned compensation for the years ended October 31, 2004 and 2003,
respectively, and recorded the unvested shares as Deferred Compensation -
Allocated Shares in the equity section of the balance sheet. The Company
recognized $148,612 and $ 11,912 in compensation expense related to these stock
grants for the years ended October 31, 2004 and 2003. During the year ended
October 31, 2004, 98,125 shares were forfeited with a value of $88,312 and
98,933 shares were issued. No shares were forfeited during the fiscal year end
October 31, 2003. The value of the stock was determined by the closing market
price at the date of grant.

Additionally, the Company granted 415,000 options at $.40 per share to employees
and directors to be vested over three years during the year ended October 31,
2003. These options start vesting January 1, 2004. The Company granted 185,000
options to consultants at an average exercise price of $.42 per share and
176,000 options to employees at an average exercise price of $ .94. These
options vest over a period of a period of one to two years. The Company has
recognized $79,800 and $207,500 in deferred compensation in relation to the
issuance of the stock options in conjunction with Statement of Financial
Accounting Standard No. 123 for the years ended October 31, 2004 and 2003,
respectively. The values of the options were determined based upon the market
value of the common shares at the time of grant less the exercisable price. The
Company has recognized $ 48,064 and $3,458 in compensation expense related to
these stock option grants for the years ended October 31, 2004 and 2003,
respectively. During fiscal year ended October 31, 2004, 14,288 vesting shares
with a value of $7,144 were forfeited.

REVERSE STOCK SPLIT

In January 2004, the shareholders of the Company approved the merger of the
Company into The Quantum Group, Inc. for the purpose of reincorporation in the
State of Nevada. In conjunction with the reincorporation, the shareholders
approved a 1 for 10 reverse stock split of its common stock. An amended and
restated Articles of Incorporation have been filed to change the name of the
Company to The Quantum Group, Inc. ("TQGI") and to set the authorized shares of
common stock to 170,000,000 at a par value of $.001 per share and authorized
preferred stock to 30,000,000 at a par value of $.001 per share. All share and
per share amounts have been retroactively restated in the accompanying financial
statements and notes for all periods presented.

F-13

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 9: LEASE COMMITMENTS

Certain non-cancelable leases are classified as capital leases and leased assets
are included as part of property and equipment. Other leases are classified as
operating leases and thus are not capitalized. The Company leases its corporate
offices under an operating lease agreement, which expires July 14, 2007. Total
rental expense amounted to $16,219 and $6,275 for the years ended October 31,
2004 and 2003, respectively.

The Company is obligated under capital leases. The leased property under the
capital leases as of October 31, 2004 and 2003 had a cost of $10,538 and $0
respectively, and accumulated depreciation of $351 and $0, respectively.
Amortization of the leased property is included in depreciation expense.

Future minimum lease payments for these leases at October 31 are as follows:

CAPITAL OPERATING
YEARS ENDING OCTOBER 31, LEASES LEASES
------------------------ -------- ---------
2005 $ 4,200 $ 41,446
2006 4,200 41,446
2007 3,500 29,358
2008 -- --
2009 -- --
------- ---------
Total minimum lease payments 11,900 $112,250
=========
Less: amount representing interest (1,854)
-------
Present value of
net minimum lease payments 10,046
Less: current portion (3,165)
-------
Noncurrent portion $ 6,881
=======

NOTE 10: INCENTIVE EQUITY AND STOCK OPTION PLAN

In October 2003, the Company adopted an incentive equity and stock option plan.
The purpose of the plan is to advance the interests of the Company by providing
an additional incentive to attract, retain and motivate highly qualified and
competent persons who are key to the Company, including key employees,
consultants, independent contractors, Board members, advisory board members,
officers and directors by authorizing the grant of awards of Common Stock and
options to purchase Common Stock of the Company.

Options granted under this plan may either be options qualifying as incentive
stock options under Section 422 of the Internal Revenue Code of 1986, as
amended, or options that do not so qualify. Any incentive option must provide
for an exercise price of not less than 100% of the fair market value of the
underlying shares on the date of such grant, but the exercise price of any
incentive option granted to an eligible employee owning more than 10% of the our
common stock must be at least 110% of such fair market value as determined on
the date of the grant.

F-14

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 10: INCENTIVE EQUITY AND STOCK OPTION PLAN (CONTINUED)

The term of each option and the manner in which it may be exercised is
determined by the board of directors, provided that no option may be exercisable
more that 10 years after the date of its grant and, in the case of an incentive
option granted to an eligible employee owning more that 10% of the our common
stock, no more than five years after the date of the grant. The board of
directors shall determine the exercise price of non-qualified options.

The Company has reserved 5,000,000 shares of common stock under the plan. The
board of directors or a committee of the board of directors will administer the
plan including, without limitation, the selection of the persons who will be
granted plan options under the plan, the type of plan options to be granted, the
number of shares subject to each plan options and the plan option price.

The per share exercise price of shares granted under the plan shall not be less
than 90% of the fair market value of common stock on the grant date. Officers,
directors and key employees of and consultants to Quantum will be eligible to
receive non-qualified options or stock grants under the plan. Only officers,
directors and employees of Quantum who are employed by Quantum or by any
subsidiary thereof are eligible to receive incentive options.

Under the plan, the Company granted 361,000 options, at a weighted average
exercise price of $0.68 per share, and 82,000 shares to employees during the
year ended October 31, 2004 . The Company did not grant any stock options or
incentive shares to employees and consultants for the year ended October 31,
2003.

A summary of options and incentive shares during the years ended October 31,
2004 and 2003 is shown below:

2004 2003
--------------------------------- ---------------------------------
OPTIONS OPTIONS
---------------------- ---------------------
WEIGHTED WEIGHTED
INCENTIVE NUMBER AVERAGE COMMON NUMBER AVERAGE
STOCK OF EXERCISE STOCK OF EXERCISE
GRANTS SHARES PRICE GRANTS SHARES PRICE
--------- --------- -------- ------ --------- ---------

Outstanding at beginning
of the period -- -- -- -- $ --
Granted 82,000 361,000 $ 0.68 $ --
Exercised -- $-- -- -- $ --
Forfeited -- -- $-- -- -- $ --
------ --------- ------ ---------
Outstanding at October 31 82,000 361,000 $ 0.68 -- -- $ --
------ --------- ------ ---------
Exercisable at October 31 83,000 --

Available for issuance at
October 31 under the plan 4,557,000 5,000,000
--------- ---------

The Company has elected to account for the stock options under the Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. The Company accounts for stock options granted to
consultants under Financial Accounting Standards Board Statement No. 123,
"Accounting for Stock-Based Compensation." The Company recognized $207,500 in
compensation expense, of which $141,689 and $204,042 was deferred at October 31,
2004 and 2003, respectively.

F-15

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 11: ACQUISITION OF QUANTUM MEDICAL TECHNOLOGIES, INC. AND
RENAISSANCE HEALTH SYSTEMS, INC.

Following a motion approved by the Company's shareholders during a meeting
January 30, 2004, the Board of Directors agreed to issue 13,300,000 post reverse
shares and 200,000 shares of Series A preferred stock, approved separately by
the Board of Directors on July 19, 2004, to the shareholder of both Quantum
Medical Technologies, Inc. (QMT) and Renaissance Health Systems, Inc. (RHS) for
the 80% of the those companies which the Company does already not own from the
majority shareholder of the Company. The Series A preferred stock is convertible
into 30 common shares after 4 years at the option of the holder. Control in the
Company will not materially change, since all the shareholders in numbers and
relative beneficial ownership of both QMT and RHS are also material and
beneficial owners of the common shares of the Company today. The final merger
was consummated in August 2004.

Quantum Medical Technologies, Inc. (QMT) was incorporated in January of 2000,
and is a developmental stage company, with no significant material assets or
liabilities and no revenues, and consists primarily of intellectual and patent
pending business process to provide medical technologies, computer programs,
electronic services, predictive modeling and other services to the medical
profession. The Company has begun to develop a Cybernaptic (SM) process to
connect in an applications service provider (ASP) format most of the touch
points in the healthcare delivery system. The Company has also in development a
QuantumQuotient (SM) index that the Company believes could be used as a tool to
provide a measurable way to tack improvement in the healthcare lifestyle of its
subject. If this process can be confirmed, it could have significant value to
the Company as a tool to reduce cost, and as a intellectual property it can sell
or license to others. In addition, the Company has purchased an online medical
office billing and collection program, which is currently in beta testing.

Renaissance Health Systems, Inc. was incorporated in December of 2002, and is a
developmental stage company, with no significant material assets or liabilities
and no revenues, which was formed to create a community health system (CHS) that
will coordinate care to managed care patients by affiliating with providers,
physicians and hospitals. The Company has secured a letter of intent with a
Florida licensed health maintenance organization to build a CHS in three
counties in central Florida. The Company's management has extensive experience
in developing CHS and with recent additions to the staff seeks to complete the
CHS by end of 2nd quarter of 2005.

NOTE 12: OTHER EQUITY

In June 2004, the Company entered into an agreement with two companies to raise
a minimum of $500,000 to a maximum of $1,000,000. The terms include the share
price to be a 75% discount on the closing sale price. The placement companies
will receive a combined placement fee of 13% of the gross proceeds received from
issuance of shares plus 5% stock commission. Additionally, after the Company
receives net proceeds of $500,000, the placement companies will receive 100,000
warrants exercisable at 110% of the closing bid price with a floor of $0.275 per
share. As of October 31, 2004, the Company received $319,400 and issued
1,131,582 shares. Cash commission paid to the placement companies, as of October
31, 2004, was $41,522.

On August 26, 2004, an advance of $30,000 from an outside investor, made in June
2004, was converted into 300,000 shares of common stock at a conversion price of
$0.10 per share. The Company recognized a loss on conversion of the debt of
$135,000.

F-16

THE QUANTUM GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2004

NOTE 14: RELATED PARTY TRANSACTIONS

On November 1, 2002, the Company entered into an agreement with a shareholder to
purchase certain intellectual property integral to the Company's business. In
exchange, the company issued a three (3) year installment note for $179,080 with
an interest rate of eighteen percent (18%) per annum. The price of the sale was
equal to the cost the shareholder incurred to develop the property purchased.
The note is payable monthly starting January 2003. The Company is in technical
default as no payments have been made on the note. The Company is accruing
interest, at 18% per annum, monthly on the unpaid principal balance and has
classified the note as current as per the agreement. The interest accrued is
$54,410 and $62,469 at October 31, 2004 and 2003, respectively.

On November 2, 2002 the Company signed a demand note, with an interest rate of
eighteen percent (18%) per annum, for the expenses a shareholder paid on behalf
of the Company subsequent to the sale of the intellectual property. The note
payable balance and accrued interest as of October 31, 2004 are $20,647 and
$6,283 respectively.

NOTE 15: SUBSEQUENT EVENTS

On December 16, 2004, Quantum Medical Technologies, Inc. entered into an
agreement to purchase an application systems provider software from E.CollectMD,
LLC for $80,000. The software was in developmental stage and has received HIPPA
certification. The purchase price is to be paid over a period of 120 days from
the date of closing.

On January 4, 2005, the Company issued 199,170 warrants to purchase a share of
common stock at $.275 per share. The warrants were issued to fulfill the
agreement for the fund raising.

In December 2004 and January 2005, the Company received $200,000 for the
purchase of stock. The sale price of the stock was $100,000 at $0.27 per share
and $100,000 at $0.40 per share.

On December 27, 2004, the Company granted 1,650,000 options to purchase common
stock at an exercise price of $.50 per share to officers and directors of the
Company.

F-17