SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT

EXHIBIT 10.1

FOR ACCREDITED INVESTORS ONLY

THE SECURITIES ARE BEING OFFERED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”), IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) OF THE SECURITIES ACT AND REGULATION D PROMULGATED THEREUNDER. INVESTMENT IN THE SECURITIES INVOLVES A HIGH DEGREE OF RISK, AND INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.  THE SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PROSPECTIVE INVESTORS MUST ACQUIRE THE SECURITIES FOR INVESTMENT, SOLELY FOR THEIR OWN ACCOUNT, AND WITHOUT ANY VIEW TOWARD RESALE OR DISTRIBUTION. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

SUBSCRIPTION AND REGISTRATION RIGHTS AGREEMENT

Name of Subscriber ________________________

The Quantum Group, Inc.

3420 Fairlane Farms Road, Suite C

Wellington, Florida 33414

1.

Purchase .  

The undersigned (the “Holder” or the “Investor”) hereby agrees to purchase certain 10% Subordinated Promissory Notes (the “Notes”) set forth on the Signature Page attached hereto of The Quantum Group, Inc., a Nevada corporation (the “Company”), on the terms set forth herein (together with Exhibit A –Confidential Investor Questionnaire, Exhibit B – Form of 10% Subordinated Promissory Note, Exhibit C – Form of Equity Consideration Certificate, Exhibit D – Risk Factors, and Appendix A – the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2009, the “Transaction Documents”) describing the offering of a minimum of $50,000 and a maximum of up to $550,000 in the principal amount of the Notes of the Company (the “Offering”).

The Offering shall terminate on July 31, 2009 unless extended by mutual agreement of the Company and the Placement Agent (as defined below), for a period of up to additional 60 days without notice to the Investor. Subscriptions are subject to the right of the Company to accept or reject a subscription in whole or in part, to prior sale, and to termination of the Offering at any time.  Minimum investment amount is $25,000, subject to the Company’s right to accept lesser amounts in

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its sole discretion. The Company intends to use the net proceeds of this Offering for working capital and general corporate purposes.

The Company has retained Paulson Investment Company, Inc. (the “ Placement Agent ”) to act as its exclusive placement agent (with right to retain subagents) in connection with the Offering.  The Placement Agent shall be entitled to a commission of 10% of the gross proceeds paid to the Company for purchase of the Notes, payable in cash on the Closing Date(s).

In consideration of the undersigned’s purchasing the Notes on the terms set forth in the Transaction Documents, the Company shall issue to such Investor an Equity Consideration Certificate (the “Equity Certificate”) representing the right to be issued a certain number of the Company’s common stock, which number shall be determined as set forth below (“Primary Equity Consideration” or “Alternate Equity Consideration,” as the terms are defined forth below).

The term “Primary Equity Consideration” shall refer to and consist of shares of the Company’s common stock that the Company will issue to the Holder in the event the Company consummates a Qualified Offering (as defined below). The exact number of shares shall be calculated based on 100% of the original principal amount of the Note purchased in this Offering by the Holder (the “Original Investment”), divided by the closing price of the Company’s common stock on the date of the first closing of this Offering. The Primary Equity Consideration shall be delivered to the Investors as soon as practical following the Qualified Offering closing, but in no event later than five business days after the closing of the Qualified Offering.

The term “Qualified Offering” shall refer to a underwritten public offering or a private placement of the Company’s securities subsequent to the Offering resulting in gross proceeds to the Company of at least $3,000,000.

In the event the Company does not consummate a Qualified Offering by November 30, 2009, the Company shall issue to the Holder shares of common stock as “Alternative Equity Consideration.” The exact number of shares of common stock to be issued as Alternative Equity Consideration shall be calculated based on 200% of the Original Investment divided by the closing price of the Company’s common stock on the date of the first closing of this Offering. The Alternate Equity Consideration shall be issued to the Investors no later than November 30, 2009, if a Qualified Offering shall not have occurred by such date.

For purposes of calculating the number of shares of common stock to be issued as Primary Equity Consideration or Alternative Equity Consideration, the “closing price” shall mean either (i) the last sale price for the Company’s common stock on the date of the first closing of this Offering; or (ii) the closing bid price of the Company’s common stock on such date, if there is no last sale price on that date.

The “Notes” and the shares of the Company’s common stock representing the Primary Equity Consideration and the Alternate Equity Consideration shall be referred hereinafter as the “Securities.” All capitalized terms used in this Note that are not defined herein shall have the respective meanings given such terms in the Transaction Documents.  

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2.

Payment .  

The undersigned is tendering to the Company cash or a check made payable to the order of Continental Stock Transfer and Trust Company as escrow agent for the Company (the “Escrow Agent”) in the amount indicated on the Signature Page and below, or alternatively, the undersigned has wired funds to the Escrow Agent in such amount, as set forth in the Subscription Procedures.

THE AGGREGATE PRINCIPAL AMOUNT OF THE NOTES SUBSCRIBED FOR HEREUNDER IS $___________.

3.

Representations and Warranties .  By executing this Subscription Agreement, the undersigned:

(a)

Acknowledges that the undersigned has received and carefully read the Transaction Documents, is familiar with and understands the Transaction Documents, has relied on the information contained in the Transaction Documents, and has not relied upon any other offering literature or prospectus;

(b)

Represents and warrants that the undersigned is acquiring the Securities for his or her own account as principal for investment and not with a view to resale or distribution, and that the undersigned will not sell or otherwise transfer the Securities except in accordance with restrictions on transfer under the applicable federal and state securities laws;

(c)

Represents and warrants that the undersigned has such knowledge and experience in financial and business matters as will enable him or her to evaluate the merits and risks of the prospective investment;

(d)

Represents and warrants that the undersigned is able to bear the economic risk of losing his or her entire investment in the Securities;

(e)

Represents and warrants that the undersigned’s overall commitment to investments which are not readily marketable is not disproportionate to the net worth of the undersigned, and his or her investment in the Securities will not cause such overall commitment to become excessive;

(f)

Represents and warrants that (i) the undersigned is at least 21 years of age, (ii) he or she has adequate means of providing for his or her current needs and personal contingencies, (iii) he or she has no need for liquidity in the proposed investment in the Securities, (iv) he or she maintains a domicile and is not a transient or temporary resident at the address shown in the Confidential Purchaser Questionnaire, and (v) all of his or her investments in and commitments to non-liquid investments are, and after his or her purchase of the Securities will be, reasonable in relation to the undersigned's net worth and current needs;

(g)

Understands that the Company shall have the right, in its sole and absolute discretion, to accept or reject this tendered subscription in whole or in part, at any time prior to closing, or to allocate to him or her fewer than the number of Securities than the undersigned has subscribed for;

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(h)

Understands that the Company will notify the undersigned whether this subscription is accepted or rejected, and that in the event such subscription is rejected, the tendered payment will be returned in full, and all of the obligations of the undersigned hereunder shall terminate;

(i)

Understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “1933 Act”), or the securities laws of any state and, as a result thereof, are subject to substantial restrictions on transfer, which restrictions are described in the Transaction Documents;

(j)

Agrees and understands that he or she will not sell or otherwise transfer any Securities unless the Securities are registered under the 1933 Act and any other applicable federal or state securities laws, or the undersigned obtains an opinion of counsel which is satisfactory to the Company (both as to the issuer of the opinion and the form and substance thereof) that the Securities may be transferred in reliance on an applicable exemption from the registration requirements of such laws;

(k)

Understands that (i) except as otherwise set forth in this Subscription Agreement, the Company has no obligation or intention to register the Securities for resale under any federal or state securities laws or to take any action (including the filing of reports or the publication of information required by Rule 144 under the 1933 Act) which would make available any exemption from the registration requirements of such laws, and (ii) the undersigned therefore may be precluded from selling or otherwise transferring or disposing of any Securities or any portion thereof for an indefinite period of time or at any particular time, and may therefore have to bear the economic risk of investment in the Securities for an indefinite period of time;

(l)

Understands that an investment in the Company involves certain risks, and has taken full cognizance of and understands all of the risk factors relating to the purchase of Securities;

(m)

Understands that no federal or state agency has approved or disapproved the Securities, passed upon or endorsed the merits of the offering thereof, or made any finding or determination as to the fairness of the Securities for investment;

(n)

Acknowledges that all material documents, records, and books pertaining to this investment have on request been made available to the undersigned and to his or her advisors;

(o)

Acknowledges that the Company has made available to the undersigned the opportunity to ask questions of, and receive answers from, the Company concerning the terms and conditions of the offering, and to obtain any additional information to the extent that the Company possess such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information given to the undersigned; and

(p)

The undersigned is an "accredited investor" as such term is defined in Section 2(15) of the 1933 Act and Rule 501 of Regulation D promulgated by the Securities and Exchange Commission under the 1933 Act.  Specifically, the undersigned is (check all appropriate items):

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(i)

A bank as defined in Section 3(a)(2) of the 1933 Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the 1933 Act, whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; an insurance company as defined in Section 2(13) of the 1933 Act; an investment company registered under the Investment Company Act of 1940 (the "Investment Company Act") or a business development company as defined in Section 2(a)(48) of the Investment Company Act; a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such plan has total assets greater than $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA"), if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or a registered investment advisor, or if the employee benefit plan has total assets greater than $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;

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(ii)

A private business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940;

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(iii)

An organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 as amended, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the securities offered, with total assets greater than $5,000,000;

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(iv)

A director or executive officer of the Company;

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(v)

A natural person whose individual net worth or joint net worth with that person's spouse, at the time of his or her purchase exceeds $1,000,000. (California and Massachusetts residents:  If the undersigned is a California resident, his or her investment in the Company will not exceed 10% of his or her net worth (or joint net worth with his or her spouse).  If the undersigned is a Massachusetts resident, his or her investment in the Company will not exceed 25% of his or her joint net worth with his or her spouse (exclusive of principal residence and its furnishings);

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(vi)

A natural person who had an individual income greater than $200,000 in each of the two most recent years or joint income with that person's spouse greater than $300,000 in each of those years, and in either such case, has a reasonable expectation of reaching the same income level in the current year. (California and Massachusetts residents: please see Paragraph 3(v)(v) above for additional requirements.)

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(vii)

A trust with total assets greater than $5,000,000 not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)(ii) (i.e., a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment.); or

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(viii)

An entity in which all of the equity owners are accredited investors. (If this alternative is checked, the undersigned must identify each equity owner and provide statements signed by each demonstrating how each is qualified as an accredited investor.)

4.

Indemnification .  The undersigned acknowledges that he or she understands the meaning of the representations made by him or her in this Subscription Agreement, and hereby agrees to indemnify and hold harmless the Company, and all persons deemed to be in control of the Company from and against any and all loss, costs, expenses, damages and liabilities (including, without limitation, court costs and attorneys' fees) arising out of or due to a breach by the undersigned of any such representations.

All such representations shall survive the delivery of this Subscription Agreement and the purchase by the undersigned of any Securities.

5.

No Third Party Beneficiaries .  Notwithstanding anything to the contrary contained herein, no provision of this Subscription Agreement is intended to benefit any party other than the parties hereto and their permitted successors and assigns, and shall not be enforceable by any other party.

6.

Registration Rights .   The Company shall use its reasonable best efforts to cause a registration statement on Form S-1, S-3 or other applicable form (the “Resale Registration Statement”), relating to the resale by the Holders of all of the shares of the Company’s common stock representing the Equity Consideration (the “Registrable Securities”) to be declared effective by the Securities and Exchange Commission (the “SEC”) by no later than December 11, 2009, subject to customary lock-up and any other restrictions required by a national securities exchange as a condition to listing such securities for trading on such exchange. In the event all of the Registrable Securities cannot be included in such registration statement, the Company shall use its reasonable best efforts to file a second resale registration statement for the Registrable Securities following the effective date of such Resale Registration Statement (the “Second Resale Registration Statement”), and shall thereafter use its reasonable best efforts to cause the Second Resale Registration Statement to be declared effective within 30 days of such filing, if the SEC elects not to review the filing or within 60 days after such filing if the filing is reviewed by the SEC staff.

Notwithstanding the foregoing, the Company shall have the right to restrict the use of the Resale Registration Statement or the Second Resale Registration Statement, as the case may be, for up to 60 days upon the occurrence of certain events with respect to the Company that, in the judgment of the Board of Directors of the Company, make such restriction advisable

The Holder further understands and agrees that the registration rights set forth in this Section shall terminate as to any Holder when the Registrable Securities held by such Holder (together with any affiliate of such Holder with whom such Holder must aggregate its sales under SEC Rule 144) could be sold without restriction under Rule 144 promulgated under the 1933 Act.

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The Company will, until such time as the Registrable Securities may be sold under Rule 144 without volume limitation:

(A)

prepare and file with the SEC such amendments to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective;

(B)

furnish to the Holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities;

(C)

use its best efforts to register or qualify the securities covered by such registration statement under such state securities or blue sky laws of such jurisdictions as the Holders may reasonably request in writing within twenty (20) days following the original filing of such registration statement, except that the Company shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or subject itself to taxation in any such jurisdiction;

(D)

notify the Holders, promptly after it shall receive notice thereof, of the time when such registration statement has become effective or a supplement to any prospectus forming a part of such registration statement has been filed;

(E)

notify the Holders promptly of any request by the SEC for the amending or supplementing of such registration statement or prospectus or for additional information;

(F)

prepare and file with the SEC, promptly upon the request of any Holders, any amendments or supplements to such registration statement or prospectus which, in the opinion of counsel for such Holders (and concurred in by counsel for the Company), is required under the Act or the rules and regulations thereunder;

(G)

prepare and promptly file with the SEC and promptly notify such Holders of the filing of such amendment or supplement to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Act, any event shall have occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading; and

(H)

advise the Holders, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the