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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number: 0-23532
AMERICAN DIVERSIFIED GROUP, INC.
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NEVADA 86-0359523
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(State or Other Jurisdiction (IRS Employer
of Incorporation) Identification No.)
501 South Dixie Highway, West Palm Beach, FL 33401
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(Address of Principal Executive Offices)
(407) 832-5208
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Issuer's telephone number
Securities registered under Section 12 (b) of the Exchange Act: none
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(Title of class)
Securities registered under Section 12(g) of the Exchange Act
common stock, par value $.001
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(Title of class)
Check whether the issuer: (i) 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 Issuer was required to file such reports), and (ii) has been
subject to the filing requirements for the past 90 days.
Yes No xx
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Check if there is no disclosure of delinquent filers in response to Item 405 of
regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the Issuer's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ ]
The Issuer had no revenues for its most recent fiscal year. The
aggregate market vale of the voting stock held by non-affiliates(*) of the
Issuer based on the average bid and asked prices of $.17 and $.185 respectively,
of such common stock as of July 31, 1996 is $9,168,346, based upon an average of
$.178 multiplied by 51,507,560 shares of common stock as of July 31, 1996 held
by non-affiliates. As of July 31, 1996, the Issuer had a total of 54.962,560
shares of common stock, par value $.001 outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
There are no documents incorporated by reference in this report on
Form 10-KSB except for certain previously filed exhibits identified in Part III,
Item 13, hereof.
(*) Affiliates for the purposes of this Item refer to the officers, directors
and/or persons or firms owning 5% or more of the Company's common stock, both
record and beneficially.
Page 1 of 25.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Background
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American Diversified Group, Inc., a Nevada corporation (the
"Company"), was incorporated under the laws of the State of Nevada as Terra West
Homes, Inc. on January 16, 1979. In October, 1991, the Company changed its name
to Gerard Enterprises, Ltd. and in November, 1991, changed its name to Tera West
Ventures, Inc. On March 15 1995, the Company's name was changed to American
Diversified Group, Inc. in contemplation of the planned acquisition of American
Diversified Medical Corporation ("ADMC"), which transaction was terminated as
discussed below.
At December 31, 1994, the Company, which was then known as Tera West
Ventures, Inc., owned approximately 70% of the outstanding common stock of
Aimrite Systems International, Inc. ("Aimrite"). Aimrite owned patents and
technology covering computer-controlled shock absorber and air suspension
systems. On March 28, 1995, Kenneth Coleman, the President of Aimrite and
former president of Tera West Ventures, Inc., repurchased the Company's interest
in Aimrite. As a result of the repurchase by Mr. Coleman, assets previously
reflected on the Company's Annual Report of Form 10-KSB for its fiscal year
ended December 31, 1994, in the amount of $4,200,000 were removed from the
Company's balance sheet, a loss of approximately $2,500,000 was recognized and
the loss and reduction was duly reported in the Form 10-QSB for the three month
period ended March 31, 1995. See Item 7, Financial Statements and Notes thereto
with respect to this transaction, and the fact that Mr. Coleman retained certain
of the shares previously issued in the acquisition upon his repurchase of
Aimrite.
Following the exercise by Mr. Coleman of the repurchase option, the
Company determined to enter into an acquisition agreement involving the purchase
of ADMC. However, as a condition precedent to the formal closing of this
acquisition, ADMC had to satisfy its representation to the Company that it had
net worth of $2,000,000 at the date of closing. As a result of ADMC's failure
to satisfy such net worth requirement, the closing of this acquisition was
terminated with a rescission and settlement that resulted in the cancellation of
8,530,000 of the restricted shares of the Company's common stock that had been
issued to ADMC's stockholder, Ameril Corp., in contemplation of the closing. See
Item 7, Financial Statements and Notes with respect to further disclosure
regarding this transaction and its cancellation.
As part of the determination to terminate the ADMC acquisition, the
Company entered into a consulting agreement with Andrew Montero pursuant to
which Montero agreed to identify potential joint venture or acquisition
candidates for the Company to pursue business opportunities and provide other
services to the Company. In consideration for the consulting services, The
Company issued to Montero 1,200,000 shares which were included in the December
13, 1995 registration statement on Form S-8. As part of his services to The
Company, Montero was instrumental in negotiating the termination of the
agreement to acquire ADMC and the cancellation and physical return of the above
referenced shares to the transfer agent.
Following the termination of the acquisition agreement regarding ADMC,
the Company continued to investigate several opportunities in the medical
products field, including the distribution of blood products and blood
derivatives, known as Human Serum Albumin (HSA) and test kits to test Cholera,
Gonorrhea, Strep and Syphilis (the "Test Kits"). Thereafter, the Company sought
to market such products, principally in Mexico and South America; and also
contemplated the potential of establishing a research or commercial laboratory;
and the purchase and resale of used medical equipment. To that end, the Company
entered into several consulting agreements for the purpose of seeking out
potential businesses and operations in medical and other fields. The discussion
that follows may be deemed "Subsequent Events", because they largely occurred
after the Company's fiscal year end, and were part of the Company's continuing
efforts to become an operating entity after the termination of the agreement
with ADMC/Ameril and the withdrawal of Aimrite by Kenneth Coleman.
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Subsequent Events; Consulting Agreements; Recent Business Developments
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While the Company is well aware that the market for medical products
is extremely competitive. ADGI believes that it can compete successfully on the
basis of price, with respect to certain products, and as a result of its unique
marketing niche gained from its agreement to purchase of United Biomedical,
Inc., a Florida corporation ("UBI"), and perhaps more importantly, as a result
of its agreements with Emerging Trends Linkages Corp., a New York corporation
("ETLC"), which has provided the Company with the ability to market its products
in Africa and has given the Company the opportunity to increase its product line
to include generic drugs and vitamins. These products are becoming increasingly
in demand in third world countries, where price, rather than brand name has
become critical. ADGI does not have the resources of many of its competitors
and is a newcomer to the industry, but the Company believes that ADGI has an
opportunity to compete in Mexico, Central and South America and West and Central
Africa. However, as ADGI develops further with a goal of becoming a diversified
medical products and services company, its business may well become subject to
government regulation in each country in which ADGI sells medical products or
engages in any medical activity, which could have a material adverse affect upon
the Company if it lacks the resources, including personnel and financial, to
secure necessary approvals.
As further effort to pursue operations, the Company, in 1995,
commenced a relationship with UBI, which also had a business relationship with
AVIX in Mexico, totally unrelated to the operations and proposed operations of
the Company. UBI has available sources for HSA. The Company's 1995 UBI Agreement
granted the Company the right to distribute in Mexico a DNA Analyzer, which is
an instrument designed to accurately measure the DNA content in cancer cells in
human cancer patients. Prior to the Company's acquisition of these rights, DNA
Analyzers were sold by unaffiliated persons to hospitals in Italy, France,
Germany as well as the United States. The Company through fiscal 1995, and to
date has not generated any revenues from DNA Analyzers and no assurance can be
given that any revenues will be generated from such rights.
On February 20, 1996, The Company entered into a consulting agreement
with UBI pursuant to which it issued to UBI 2.5 million shares of common stock
which were included in a registration statement on Form S-8 under the Act, which
registration statement incorporated by reference in Item 7 below. Such shares
were issued to UBI in consideration for UBI's providing the Company with
consulting services including providing introduction and contacts in obtaining
rights similar to those granted by Prison Telemedicine, Inc., a corporation
formed by Dr. Jerry T. Thornthwaite and Dr. Jerrold R. Hinton to Systems of
Excellence, Inc., a public company which has been engaged in the business of
marketing telemedicine program rights for use by the Division of Corrections for
the State of Florida. The Company is exploring rights to market the telemedicine
program in Mexico, but has not yet generated any revenues from its consulting
agreement or the subsequent purchase agreement with UBI with respect to the
rights to the telemedicine program. Further, while the Company has been assigned
UBI's receivables with respect to HSA and test kits, as set forth in the
attached exhibit, The Company has not yet generated revenues therefrom,
although it reasonably expects that it shall in the near future. Further, the
Company believes that with its access to supply of HSA, which were developed by
UBI with the assistance of AVIX International Pharmaceutical Corp., a consultant
to the Company ("AVIX"), and access to Test Kits, that its receivables will be
collected and that it shall in the future generate sales of medical products,
including Test Kits and HSA.
The Company entered into a purchase agreement dated June 16, 1996, to
acquire United Biomedical Inc., 7880 SW 139th Terrace, Miami, FL 33158 ("UBI"),
which has been engaged in the business of marketing, sale and distribution of a
blood derivative product, Human Serum Albumin (HSA), as well as FDA approved
Test Kits for testing Cholera, Syphilis, Gonorrhea and Strep in human subjects,
and related medical products business. In connection with the purchase
agreement, a copy of which was attached to the Company's Report on Form 8-K,
dated July 16, 1996, the Company shall acquire 100% of
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UBI's capital stock, and thereby acquire: the rights to market HSA in Central
and South America; the source agreement that UBI possessed with respect to HSA;
the assignment of UBI's non-exclusive marketing agreement in Mexico for DNA
Analyzer; the assignment of representation, distribution and marketing
agreements between UBI and: Probifasa, S.A. DE C.V.-Mexico; American
Entrepreneur Corporation-Brazil; Chembiomed Comercio E. Representacoes LTDA-
Brazil; Hampton Roberts International-Ecuador, Peru, Argentina, Bolivia and
Columbia; assignment of all orders and/or receivables for HSA and cholera Test
Kits that UBI has in the above countries, as set forth in the purchase
agreement; and laboratory equipment of UBI purchased by UBI from Life Medical,
Inc.; and the Company assumed UBI's rental obligation on its Suburban Medical
Center of $600 per month.
In consideration for the purchase agreement, the Company agreed to
register 2,300,000 restricted shares of ADGI common stock that had previously
been issued to UBI in return for certain licensing and marketing rights to
market and sell HSA and the FDA approved test kits, which registration shall be
on Form S-1 under the Act. It is impracticable for the Company to file the
financial statements of UBI at the date of this report, but the Company shall
file a report on Form 8 as soon as such financial statements are available,
which it anticipates within thirty (30) days. Jerrold Hinton, President of the
Company, was an officer of UBI from 1992 through early 1995. During 1992 through
1994, Mr. Hinton was owed salary which was accrued but unpaid during such
period. Such accrued but unpaid salary was paid by UBI in 1996 from the proceeds
of its sale of securities issued in connection with the Registration Statement
on Form S-8 dated February 29, 1996. In connection with the purchase of UBI, the
Company and Dr. Thornthwaite have agreed to enter into an employment agreement.
The Company in fiscal 1995, entered into a consulting agreement with
Leonard Cohen and Elliot Bauer, the two principals of AVIX International
Pharmaceutical Corp., a New York corporation ("AVIX").and on January 15, 1996,
entered into a further consulting agreement with AVIX, to perform additional
services for the Company. Pursuant to the initial agreement, AVIX, through its
contacts in China and the Far East, and elsewhere, has continued to endeavor to
secure for the Company further source manufacturers for Human Serum Albumin
("HSA"). HSA is a product that is widely regarded short supply internationally,
and is comprised of the serum component of whole blood. HSA is commonly used in
accidents, as well as in operations and warfare conditions where there is a
significant loss of blood, and where HSA serves as a short-term blood substitute
which prevents shock. In addition, HSA does not require refrigeration and
therefore is well suited to the climates in Central and South American, as well
as in Africa, where refrigeration is not readily available in outlying areas,
outside of urban centers. AVIX also advanced to the Company the sum of $50,000
pursuant to a convertible promissory note, in the form attached to this Report
as an exhibit, to assist the Company in its cash flow. See "MANAGEMENT'S PLAN OF
OPERATION". The Company also entered into two consulting agreements with AVIX
International Pharmaceutical Corp. (AVIX) and its principals. In the initial
agreement, AVIX's principals agreed to provide services: to identify
pharmaceutical companies to engage in joint ventures with the Company; seek
approvals for product sale in foreign countries; and introduce the Company to
public relations and investment banking firms. AVIX introduced ETLC to the
Company. In the second, AVIX provided services in development, manufacturing,
and marketing of medically products outside of the United States including HSA
and developed sources for HSA. AVIX also secured for the Company a supply for
HSA directly from a factory in China at a time when HSA was in short supply or
was otherwise temporarily unavailable though UBI's previous supplier. In
addition, to the arrangement AVIX has made from the HSA supply directly from
that manufactured in China, AVIX has recently introduced the Company to Hemo
Biologics International, Inc. of Ft. Lauderdale, FL. Hemo Biologics' source is
another manufacturer in China, and therefore the Company believes that it has
successfully developed alternative supplies in the event that any one supplier
shall have a temporary shortfall, as has occurred from time to time in the past.
As further service to the Company, AVIX has made the introduction and
incurred all initial expenses in connection with the introduction to the Company
of Ms. Judy Grossman, a specialist in corporate restructuring, mergers and
acquisitions, and refinancing of public companies. Ms. Grossman has provided
continued services to the Company in evaluating the nature and amount of
consideration that
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the Company should pay if it determines to consummate the arrangement with
Aptek. Ms. Grossman has also assisted the Company in evaluating ISS, and has
consulted the Company regarding the expansion of its contractual arrangements
with UBI, including the acquisition of the telemedicine program rights.
AVIX and its principals were issued a total of ,500,000 shares which
were included in registration statements on Form S-8, one for 1 million shares
to each of Messrs. Cohen and Bauer, dated December 13, 1995 and the other for
6,500,000 shares dated February 29, 1996, which included 1,300,000 shares which
were issued to and registered for Diversified Corporate Consulting Group L.C., a
financial public relations firm, which AVIX engaged in furtherance of AVIX's
obligation to secure for the Company a corporate and financial public relations
firm to assist in the promotion of the Company and its principal business
endeavors, which involve medical related products. Both such registration
statements are incorporated by reference in Item 7 below.
Pursuant to the latter agreement with AVIX referenced above, in or
about January, 1996, AVIX introduced the Company to Emerging Trends Linkages
Corp., a New York corporation ("ETLC"), and assisted in the negotiations between
ETLC and the Company for the purpose of entering into a consulting agreement
with ETLC, which efforts by AVIX were instrumental in the Company's ability to
finalize a definitive agreement with ETLC dated as of February 12, 1996.
In consideration for the February 12, 1996 agreement with ETLC, the
Company issued 600,000 shares to ETLC and granted ETLC and option to acquire
900,000 shares, for a price that was adjusted to $.18 per share. These shares
and the shares underlying the option were registered in the Company's
registration statement on Form S-8 filed with the Commission on February 29,
1996. This option may be deemed as ETLC's payment for the rights to market the
Company's products within its territory. ETLC paid the Company $81,000 or the
exercise of the option for 450,000 shares. This agreement was amended in May 31,
1996, to also provide for the sale by ETLC, on behalf of the Company, of Test
Kits for Strep, Cholera, Syphilis, and Gonorrhea. In connection with this
amendment, additional consideration of 1,500,000 shares was agreed to be issued
to ETLC, which shares are to be registered in a registration statement on Form
S-1, to be filed under the Securities Act of 1933, as amended (the "Act").
On August 5, 1996, following verbal confirmation from ETLC that orders
for HSA and Test Kits were imminent, ETLC transmitted to the Company two
purchase orders that ETLC received from the Central Pharmacy for the Republic of
Guinea for the following: a purchase order for $200,000 in HSA and Test Kits,
which products are presently in the Company's product line, and for which it has
supply available; and an order for a minimum of $500,000 and a maximum of
$1,000,000 for generic drugs and vitamins. The Company has undertaken to
contract with third party manufacturers and/or suppliers of generic drugs and
vitamins to fulfill this order, and believes that it will be able to fill the
order from one or more sources at terms and conditions satisfactory to the
Company.. Both purchase orders contemplate shipment commencing in or about
September, 1996 and continuing to completion within twelve months. ETLC has
assigned to the Company both of these purchase orders. The Company believes,
based upon information from ETLC, that further orders will result on or prior to
the fulfillment of these initial purchase orders.
The Company and ETLC have also negotiated for added consideration in
the form of registered shares to be included in the contemplated Form S-1
registration statement, based upon ETLC's receipt on behalf of the Company of
the purchase order for generic drugs and vitamins, which order was beyond the
scope of the initial and amended agreements, and provides for the sale of
products by the Company that are not currently within its product line.
Nevertheless, the Company firmly believes that it will be able to supply such
generic drugs and vitamins at prices that shall permit the Company to generate a
profit. The amount of such consideration shall be reported on a Form 8-K as soon
as such consideration and a final agreement are concluded with ETLC.
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The Company has entered into letter of intent, a copy of which is
attached, with respect to acquisition of Aptek Communications Products, Inc.
("Aptek"), a computer company owned by Gerard Haryman, who has also been a
director of The Company since January, 1996. In contemplation of the business
arrangement with Aptek, the Company moved into the corporate offices of Aptek,
which occupies 6,000 square feet of office and warehouse space at 501 South
Dixie Highway, West Palm Beach, FL 33480. In connection with this proposed
acquisition, The Company engaged Denise Valentini, Palm Beach, FL, as a
consultant to prepare a business valuation and valuation of the inventory of
Aptek, among other services to the Company, which other services include
identifying potential acquisition candidates and product lines, especially in
the areas of the Far East where consultant has extensive contacts.. The
consultant was issued 2,250,000 shares of common stock which were included in
the Form S-8 registration statement. The Company is currently reviewing the
valuations of Aptek for the purpose of determining the consideration that it
shall pay, which shall consist of restricted shares of ADGI, to be issued to
Gerard Haryman, in connection with the acquisition of Aptek. It is presently
contemplated that the restricted shares, if issued, will be included for
registration in the Company's contemplated registration statement on Form S-1.
Mr. Haryman shall not vote, but rather shall abstain, from any
determination to merge and the amount of shares to be issued in consideration of
the merger, assuming that the Board of Directors votes to acquire Aptek. It is
presently contemplated that the total number of shares to be issued beyond a
certain minimum level, shall be contingent upon certain levels of sales, and
other conditions that have not yet been determined with certainty. the Company
shall file a periodic report on Form 8-K upon any determination with respect to
the acquisition of Aptek, including approval of said acquisition, the
consideration to be paid and the timing of such consideration and issuance of
shares. Ms. Valentini, because of her international background, has continued to
provide services to the Company with respect to potential acquisitions and
developing out-sourcing suppliers, particularly with respect to possible
providers of generic drug and vitamin suppliers, to enhance the Company's
product line for its new markets in West Africa and elsewhere, as part of her
consulting agreement and continuing services to the Company.
The Company has also entered into purchase agreement with Imaging
Systems Synergies Inc. ("ISS"), with offices located at North Miami Beach, FL.
ISS is an Internet gateway provider and an ISP provider, using satellite
technology VSDT earth station for global communication services. ISS currently
has satellite systems in Wisconsin and Illinois. The negotiations contemplate
the acquisition of ISS for an aggregate of 3.6 million restricted shares of
ADGI, and certain interim cash funding from ADGI in the amount of up to
$200,000. Upon the closing of the agreement with ISS, following the completion
of all due diligence, the Company shall file on a Report under the Exchange Act
the financial statements of ISS.
On January 12, 1996, the Company entered into a consulting agreement
with Harvard Financial Corp. in consideration for which The Company issued to
Harvard a total of 5,000,000 shares, all of which were included in the Form S-8
registration statement dated February 29, 1996. However, prior to Harvard being
able to fulfill its consulting obligations under the agreement, the Company was
informed that a principal or affiliate of Harvard had been convicted of
violations of the Federal securities laws. As a result of such conviction, the
Company and Harvard mutually agreed that it was in the Company's best interests
to terminate the agreement with Harvard.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company leases approximately 6,000 square feet of office and
warehouse space at 501 South Dixie Highway, West Palm Beach, FL. and the Company
uses this space for $1,500.00 per month, under an oral lease between UBI and the
Company, on a month-to-month basis. The Company has also assumed UBI's rental
obligation on its Suburban Medical Center of $600 per month. The condition of
both properties are excellent.
ITEM 3. LEGAL PROCEEDINGS
On December 30, 1994, Deniston Limited, a British Virgin Islands
corporation, filed a complaint against Kenneth Coleman, Tera West Ventures,
Inc., PBA Energy Associates and Peter Berney seeking injunctive relief, specific
performance and damages in connection with a securities subscription agreement
in which Deniston Limited alleged that it was to acquire common stock of the
Company. Deniston Limited v. Kenneth Coleman, Tera West Ventures, Inc., PBA
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Energy Associates, and Peter Berney 11th Judicial Circuit, Dade County,
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Florida, Case No. 94-24371. The case was settled in February 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security
holders during the fiscal year ending 1995.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's common stock is traded over-the-counter in what is
referred to as the "Bulletin Board" or "pink sheets." As of July 31, 1996,
there were 13 markets makers in the Company's stock. The following information
with respect to the high and low market prices was obtained from the Company's
records.
Bid Prices
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1993 High Low
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Quarter Ending March 31 $8 - 3/4 $4 - 7/8
Quarter Ending March 31 $8 - 3/4 $7 - 1/2
Quarter Ending March 31 $ 1/4 $ 1/4
Quarter Ending March 31 $6 - 3/4 $ 1/2
Bid Prices
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1994 High Low
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Quarter Ending March 31 $8 - 1/4 $6
Quarter Ending March 31 $8 - 3/4 $8
Quarter Ending March 31 $10 $6 - 3/4
Quarter Ending March 31 $7 - 1/4 $4 - 1/4
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Bid Prices
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1995 High Low
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Quarter Ending March 31 $ 5 5/8 $ 1/8
Quarter Ending June 30 $ 5/16 $ 1/32
Quarter Ending Sept. 30 $ 7/16 $ 1/4
Quarter Ending December 31 $ 7/16 $ 1/4
Bid Prices
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1996 High Low
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Quarter Ending March 31 $ 11/32 $ 1/8
Quarter Ending June 30 $ 1/2 $ 3/16
Period Ending July 31 $ 5/16 $ 3/16
As of December 31, 1995, there were 492 holders of record of the
Company's common stock, and no holders of the Company's preferred stock.
The Company has never paid a dividend and does not anticipate that any
dividends will be paid in the near future.
ITEM 6. MANAGEMENT'S PLAN OF OPERATION
The Company has never had revenues from operations. Reference is made
to the Company's Financial Statements, the Report of the Independent Auditors,
and Notes the Financial Statements with respect to questions of "going concern"
in the event the Company does not generate operating revenues.
Until March, 1995, the Company, through a subsidiary, was engaged in
the business of developing and marketing of computer controlled shock absorber
systems. Before development of the systems were completed, the Company divested
itself of ownership of the shock absorber and air suspension subsidiary and
instead commenced a plan to acquire ADMC, as discussed above, which agreement
was terminated because of ADMC's failure to satisfy the $2,000,000 net worth
requirement in the contract. Following the termination of its acquisition of
ADMC, the Company continued to develop its business efforts to become a
diversified medical products company, with operations intended to involve the
sale of products manufactured by others, principally in the medical field.
Reference is made to the Notes to Financial Statements, Note 5, and to
the Statement of Stockholders' Equity, which reflects the issuance of shares for
transactions including acquisitions that were later terminated. These
terminations often resulted in the cancellation of only a portion of the shares
issued in connection with the initial transactions. The Company also explored
potential acquisitions of operating businesses and to that end is currently
exploring a potential purchase of a computer supply company. The structure of
this acquisition is still to be determined, and may in fact not be completed,
depending upon the valuation of the computer operation and inventory.
The Company did not generate any operating revenues in fiscal 1995 and
was and continues to be dependent upon its ability of generating revenues from
issuance of equity and/or from operations during the fiscal year commencing
January 1, 1996 for it to be able to continue operations. It may be necessary
for the Company to raise additional funds, either from the issuance of equity or
debt, or from the exercise of outstanding options if the Company is not
successful in generating operating revenues, of which there can be no assurance.
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The Company issued common stock purchase options to Emerging Trends
Linkages Corp. exercisable to purchase 450,000 shares at $.18 per share, the
price of the shares on the date of the grant. ETLC is engaged in the business of
marketing pharmaceutical products and other products and services in West and
Central Africa. In April, 1996, ETLC, the option holder, exercised options to
acquire 450,000 shares at $.18 per share for total proceeds of $81,000 to the
Company. The Company deems that this payment may also be considered as payment
by ETLC for the rights to market the Company's test kits and HSA in ETLC's
territory, which includes Ivory Coast, Guinea, Mali and Congo. In addition, in
June, 1996, the additional 450,000 shares subject to the $.18 option were issued
to ETLC and the Company has reflected an option receivable from ETLC for
$81,000. However, there can be no assurance that any additional financing,
whether debt or equity, will be available to the Company, whether at terms
agreeable to the Company or otherwise. During 1996, the Company's executive
officers, Gerard Haryman and Jerrold Hinton, loaned the Company a total of
$52,000, and may be required to loan additional funds, if available, until the
Company begins to receives payment from the Republic of Guinea on the purchase
orders recently received.
In pursuit of its diversified medical business, the Company entered
into several contracts and sought relationships for the purpose of becoming and
operating entity. Following the Company's fiscal year ended December 31, 1995,
The Company entered into an agreement to acquire UBI and ISS, and pursuant to
its consulting agreement with ETLC, the Company has developed a market for its
HSA and Test Kits in West Africa. Further, the Company has also received orders,
as discussed both in Item 1 and below, for generic drugs and vitamins, a new
line to be added to its available products.. As a result of these agreements,
the Company plans upon engaging in the business of selling a variety of medical
products including HSA, Test Kits, generic drugs and vitamins and potentially,
DNA Analyzers. If the letter of intent with UBI results in a completed
acquisition, UBI will become a wholly owned subsidiary of the Company. This
acquisition will result in the Company having acquired from UBI its sources of
HSA, as well as the marketing, distribution and representation agreements for
HSA in Central and South America. The sources of HSA should permit the Company
to satisfy the existing and potential future orders, if any, for HSA that have
been and may in the future be generated by ETLC from Guinea and elsewhere in
West Africa.
The acquisition of UBI will also provide the Company with certain non-
exclusive marketing rights to distribute the DNA Analyzer in Mexico. Pursuant to
the agreement for the acquisition of UBI, the Company will also be assigned all
of UBI's purchase orders for HSA and Cholera Test Kits as follows: Mexico
(Cholera Test Kits) $351,000; Brazil (HSA) $106,500; Peru (HSA) $88,750; Ecuador
(HSA) $177,500; Colombia (HSA) $53,250; Bolivia (HSA) $53,250; Argentina (HSA)
$106,500; and certain conditional orders that are to be priced following receipt
by the customers in Mexico and Brazil of test vials and unit pricing for HSA.
The consideration for the UBI acquisition is the undertaking to register
2,300,000 shares of common stock, in a registration statement on Form S-1 under
the Securities Act of 1933, as amended (the "Act"), which registration statement
shall provide for the resale by the persons being issued the Company's shares.
In addition, the agreement contemplates that Dr. Jerry Thornthwaite, president
and principal shareholder of UBI, will be granted certain stock options pursuant
to an employment agreement to be executed with the Company. The shares
underlying the employee stock option granted to Dr. Thornthwaite and other
employees will also be registered in such registration statement or under
another form appropriate under the Act.
The Company has recently received from ETLC two purchase orders for
products: an initial order from the Central Pharmacy of the Republic of Guinea
for Test Kits and HSA, in the amount of $200,000, and a separate order from the
Central Pharmacy for generic drugs and vitamins in the minimum amount of
$500,000 and the maximum amount of $1,000,000. The timing for shipment of such
order is presently planned to commence in about September, 1996, and will
continue during the ensuing twelve months. The Company reasonably expects that
these orders will generate operating revenues for the Company in the third
quarter of 1996. As stated above, supply of generic drugs and vitamins to
fulfill the purchase order should be available at prices and in amounts and
terms satisfactory to the Company. Neither the
9
<PAGE>
Company nor ETLC presently can estimate the length of time that will be required
to secure the supply from third party manufacturers and/or suppliers of the
generic pharmaceutical products and vitamins to satisfy the orders generated
from Guinea or the anticipated orders that the Company hopes to generate from
other West African country within the territory granted to ETLC.
ITEM 7. FINANCIAL STATEMENTS
The financial statements for the fiscal year
ended December 31, 1995, are attached hereto.
10
<PAGE>
GRANT-SCHWARTZ ASSOCIATES, CPA'S
40 Southeast 5th Street, Suite 500
Boca Raton, FL 33432
REPORT OF INDEPENDENT AUDITORS
Board of Directors
American Diversified Group, Inc.
We have audited the accompanying balance sheet of American Diversified Group,
Inc. (Formerly Tera West Ventures, Inc.) as of December 31, 1995 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Diversified Group,
Inc. (Formerly Tera West Ventures, Inc.) as of December 31, 1995 and the results
of its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has suffered recurring
losses from operations and other transactions. At December 31, 1995, the
Company has an accumulated deficit of $8,811,789. These raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Grant-Schwartz Associates, CPA's
Boca Raton, Florida
July 16, 1996
11
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
1995
--------------
Revenues
Other Income $ -0-
Expenses
General and Administrative 920,599
-----------
Loss from Operations (920,599)
Other Losses
Loss on Disposal of Subsidiary 2,545,076
Loss on Possible Acquisitions 250,000
Loss on Settlement of Litigation 375,000
Loss on Settlement 115,310
---------
Total Other Losses 3,285,386
-----------
Net Loss $ (4,205,985)
===========
Net Loss Per Share $ (0.104)
===========
Average Number of Shares Outstanding 40,611,127
===========
12
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
BALANCE SHEET
AS OF DECEMBER 31, 1995
ASSETS
------
CURRENT ASSETS
- --------------
Cash $ 944
Inventories 5,000
Deferred Consulting Fees 630,000
--------
Total Current Assets 635,944
FIXED ASSETS
- ------------
Property and Equipment (Net) 21,574
--------
Total Assets $657,518
========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
- -------------------
Accounts Payable and Accrued Expenses $ 17,826
-----------
Total Liabilities 17,826
STOCKHOLDERS' EQUITY
- --------------------
Preferred Stock, Series A, $10 par value
authorized 50,000 shares; none outstanding
Common Stock, par value $.001 per share,
authorized 50,000,000 shares; issued and
outstanding 42,742,520 shares 42,742
Additional Paid-In Capital 9,408,739
Accumulated Deficit (8,811,789)
-----------
Total Stockholders' Equity 639,692
-----------
TOTAL LIABILITIES AND EQUITY $ 657,518
===========
13
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
AS OF DECEMBER 31, 1995
<TABLE>
<CAPTION>
COMMON ADDITIONAL
STOCK PAID-IN ACCUMULATED MINORITY INTEREST
SHARES AMOUNT CAPITAL LOSS SHARES TOTAL
------ ------ ------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1994 15,152,520 $15,152 $12,142,029 $(4,605,804) 674,619 $1,129,494
Issued Shares for Services 20,000 20 54,980
Issued Additional Shares
for Acquisition of Aimrite 4,000,000 4,000 (4,000)
Issued for Possible
Acquisitions 8,000,000 8,000 (8,000)
Issued for Possible
Acquisition 100,000 100 249,900
Issued in Settlement of
Litigation 150,000 150 374,850
Issued Additional Shares
for Building and Rights 1,300,000 1,300 (1,300)
Issued Shares as Bonus 10,000 10 24,990
Issued for Acquisition of ADMC 12,000,000 12,000 (12,000)
Issued as Finder's Fee and
for Consulting Services 3,150,000 3,150 144,850
Issued Additional Shares
for Building and Rights 1,000,000 1,000 (1,000)
Issued for Professional
Services 480,000 480 21,120
Disposal of Aimrite (8,000,000) (8,000) (674,619) (1,129,494)
Issued for Consulting
Services 1,000,000 1,000 124,000
Issued for Consulting
Services 300,000 300 37,200
Issued for Cash 2,000,000 2,000 248,000
Rescission of Acquisition
of Building and Rights (1,300,000) (1,300) (4,993,500)
Issued for Inventory and
Equipment 80,000 80 19,920
Issued for Consulting Services
and Professional Fees 3,300,000 3,300 986,700
Net Loss for Year Ended
December 31, 1995 (4,205,985)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE DECEMBER 31, 1995 42,742,520 $42,742 $9,408,739 $(8,811,789) $ -0- $ -0-
=========== =========== =========== =========== =========== ===========
</TABLE>
14
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
Net Loss $(4,205,985)
Depreciation 2,692
General and Administrative Expenses
Paid by Stock 772,100
Other Expenses Paid by Stock 375,000
Loss on Disposal of Subsidiary 2,545,076
Loss on Possible Acquisition 250,000
Increase - Accounts Payable 14,326
-----------
Cash Flow Used by Operating Activities (246,791)
CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Acquisition of Property and Equipment (9,066)
----------
Cash Flows Used by Investing Activities (9,066)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Sale of Common Stock 250,000
----------
Cash Flows Provided from Financing Activities 250,000
----------
Net Increase (Decrease) in Cash (5,857)
Cash - Beginning 6,801
----------
Cash - Ending $ 944
==========
NON-CASH TRANSACTIONS:
- ---------------------
1. Issued 8,250,000 of common stock for services of $1,377,100.
2. Issued 80,000 of common stock for inventory and equipment valued at $20,000.
3. Issued 10,000 shares of common stock for bonus of $25,000.
4. Issued 8,100,000 shares of common stock for possible acquisition valued at
$250,000.
5. Issued 150,000 shares of common stock in settlement of litigation of
$375,000.
15
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Capitalization
- -------------------------------
The Company was organized January 16, 1979 under the laws of the State of Nevada
as Terra West Homes, Inc. On October 5, 1991 the Company changed its name to
Gerard Enterprises, Ltd., in connection with a merger. The merger was not
consummated and on November 23, 1991, the name was changed to Tara West
Ventures, Inc. On March 15, 1995 the Company changed its name to American
Diversified Group, Inc.
On October 20, 1991, the authorized number of shares of common stock were
increased from 25,000 shares to 25,000,000 shares and the par value changed from
$1 per share to $.001 per share, and, on the same date, the Company approved a
40 to 1 forward stock split on outstanding shares. On November 22, 1992, the
authorized shares were increased to 50,000,000.
On April 7, 1993, the Company amended its Articles of Incorporation and
authorized 50,000 shares of preferred Series A stock with a par value of $10 per
share. No shares of preferred stock are outstanding.
Cash and Cash Equivalents
- -------------------------
Cash and cash equivalents include investments in highly liquid debt instruments
with a maturity of three months or less.
Inventories
- -----------
Inventories consist of medical supplies and equipment held for resale and are
stated at the lower of cost or market. Cost is determined on a first-in, first-
out basis.
Property and Equipment
- ----------------------
Property and equipment is recorded at cost. Depreciation of property and
equipment is computed over the estimated useful lives of assets.
Income Taxes
- ------------
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes." The statement
requires that the Company follow the liability method of accounting for income
taxes and requires an adjustment to the provision for income taxes for the
effect on deferred income taxes of any changes in corporate income tax rates.
Through December 31, 1995 the Company has accumulated net operating losses which
can be used to offset future earnings. Accordingly, no provision for income
taxes is recorded in the financial statements.
Net Income (Loss) Per Common Share
- ----------------------------------
Income (Loss) per common share has been computed based on the weighted average
number of shares of common stock outstanding. The weighted average number of
shares outstanding for the year ended December 31, 1995 were 40,611,127.
Nature of Operations
- --------------------
The Company is operating as a diversified medical company with intentions to
acquire, develop, and market proprietary medical procedures and cancer treatment
programs and to buy and sell medical equipment and supplies.
16
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
NOTE 2 - BUSINESS DISPOSITION
At December 31, 1994 the Company owned approximately 69% of the outstanding
stock of Aimrite Systems International, Inc. ("Aimrite"). In January 1995, an
additional 4 millions shares were issued in connection with the Company's
acquisition of Aimrite.
Effective March 28, 1995, all of the Company's interest in Aimrite, including
patents and technology for a computer controlled shock absorber system and a
computer controlled air suspension system, was repurchased by the original
selling shareholders of Aimrite, and, in June 1995, 8 million shares were
returned to the Company and canceled.
During the year ended December 31, 1995, the Company recorded a loss of
$2,545,076 on the disposal of Aimrite.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1995 is as follows:
Useful Life
Medical Equipment $21,656 5 years
Office Furniture and Equipment 2,410 5 years
-------
Total Cost 24,066
Less: Accumulated Depreciation (2,492)
-------
Net Property and Equipment $21,574
=======
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Going Concern
- -------------
As shown in the accompanying financial statements, during year ended December
31, 1995, the Company has had no revenues and has incurred a loss from
operations of $4,205,985 and, as of December 31, 1995, the Company's accumulated
deficit is $8,811,789. These factors, as well as the uncertain conditions the
Company faces regarding its ability to successfully develop and market its
intended products and services, create an uncertainty about the Company's
ability to continue as a going concern.
In order for the Company to continue as a going concern, management intends to
acquire, develop, and market proprietary medical procedures and cancer treatment
programs and to buy and sell medical equipment and supplies.
Management's plans also include seeking to raise funds through sales of stock in
private and public placements of securities. During the year ended December 31,
1995, the Company sold 2 million shares of stock for cash of $250,000. The
Company has been actively seeking to acquire or merge with other suitable
businesses.
NOTE 5 - SHAREHOLDERS' EQUITY
Shares Issued for Building and Contractual Rights
- -------------------------------------------------
In September and December 1994, the Company issued a total of 1.5 million shares
of common stock as prepayment on the acquisition of a rental building and
certain contractual rights to a construction company. In February 1995, the
Company issued a total of 1.3 million additional shares, and, in April 1995, the
Company issued an additional 1 million shares as further consideration.
The building and contractual rights were never delivered to the Company, and in
February 1995 the Company agreed to rescind the acquisition and relinquish its
rights to the building and contractual rights in return for 1.3 million of the
shares previously issued. In September 1995, the 1.3 million shares were
returned to the Company and canceled.
17
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
NOTE 5 - SHAREHOLDERS' EQUITY (CONTINUED)
- ------------------------------------------
Shares Issued in Connection with Possible Acquisitions
- ------------------------------------------------------
Effective February 27, 1995, the Company entered into an agreement to acquire
all of the issued and outstanding stock of American Diversified Medical Corp.
("ADMC"), a Delaware corporation, in exchange for the issuance of 12 million
shares of the Company's common stock. The agreement was never consummated, and
on April 4, 1996 the Company entered into a settlement which, among other
things, terminated the agreement "ab initio," such as the agreement had never
been entered into.
The settlement provides for the seller to retain 2 million shares of the
Company's stock and to return for cancellation all other shares currently held
by the seller. As of the date these financial statements were prepared, these
shares have not yet been canceled. Upon cancellation of these shares, the
Company will adjust stockholders' equity for the par value of the shares
canceled. See "Subsequent Events" below.
In connection with the initial acquisition agreement, the Company issued a total
of 3,150,000 shares of common stock as finders' fees and for consulting
services. The Company estimated the value of the fees and services at $148,000
and has charged this amount to expense during the year ended December 31, 1995.
In February 1995 the Company issued 8 million shares of common stock in
connection with the possible acquisition of certain other companies.
In February 1995 the Company also issued 100,000 shares of common stock in
connection with another possible acquisition. The acquisition was never
consummated. The shares issued were valued by the Company at $250,000 based on
50% of the bid price of the stock, and the Company has recorded this amount as a
loss during the year ended December 31, 1995.
Shares Issued In Settlement of Litigation
- -----------------------------------------
In February 1995 the Company issued 150,000 shares of common stock in settlement
of a pending lawsuit. The shares issued were valued by the Company at $375,000
based on 50% of the bid price of the stock, and the Company has recorded this
amount as a loss during the year ended December 31, 1995.
Shares Issued for Services
- --------------------------
In January 1995 the Company issued 20,000 shares of common stock for
professional services rendered. The shares issued were valued by the Company at
$55,000 based on 50% of the bid price of the stock, and the Company has charged
this amount to expense during the year ended December 31, 1995.
In February 1995 the Company issued 10,000 shares of common stock as a bonus to
an officer of the Company. The shares issued were valued by the Company at
$25,000 based on 50% of the bid price of the stock, and the Company has charged
this amount to expense during the year ended December 31, 1995.
In April 1995 the Company issued a total of 480,000 shares of common stock for
legal and consulting services rendered. The shares issued were valued by the
Company at $21,600 based on 50% of the bid price of the stock, and the Company
has charged this amount to expense during the year ended December 31, 1995.
In June 1995 the Company issued a total of 1 million shares and in August 1995
issued an additional 300,000 shares of common stock for consulting services.
The shares issued were valued by the Company at $125,000 and $37,000,
respectively, based on the issuance price of shares recently sold for cash. The
Company has charged these amounts to expense during the year ended December 31,
1995.
18
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
NOTE 5 - SHAREHOLDERS' EQUITY (CONTINUED)
- -----------------------------------------
Shares Issued for Services (Continued)
- --------------------------------------
In December 1995 the Company issued a total of 3.3 million shares of common
stock for consulting services and professional fees rendered during the year
ended December 31, 1995 and to be rendered during future periods. The shares
issued were valued by the Company at $990,000 based on the average of the bid
and ask price of the stock. In connection with services rendered, the Company
has charged $360,000 to expense during the year ended December 31, 1995, and, in
connection with services to be rendered during future periods, the Company has
charged $630,000 to deferred consulting fees.
Shares Issued for Medical Equipment and Supplies
- ------------------------------------------------
In August 1995 the Company issued 80,000 shares of common stock in exchange for
medical equipment and medical supplies, valued at $15,000 and 5,000,
respectively.
Stock Issued for Cash
- ---------------------
During July and August 1995, the Company issued 2,000,000 shares of common stock
at $.125 per share, for $250,000 cash.
Warrants and Options
- --------------------
As of December 31, 1995 there are no warrants or options outstanding to acquire
any additional shares of common stock of the Company.
NOTE 6 - SUBSEQUENT EVENTS
In March 1996 the Company issued a total of 19.850 million shares of common
stock for consulting services and professional fees. 17.850 million of the
shares issued were valued by the Company at $3,034,500 based on 50% of the
average of the bid and ask price of the stock. Two million of the shares issued
are restricted (Rule 144) and were valued by the Company at $230,000 based on
the 50% average of the bid and ask price of the stock.
During April 1996, 8,530,000 shares of common stock previously issued in
connection with the terminated ADMC acquisition were canceled.
During June 1996, the Company entered into an agreement to purchase a company
engaged in the business of marketing, sale and distribution of medical products.
During June 1996, the Company entered into an agreement to purchase a company
engaged in the business of providing satellite technologies.
19
<PAGE>
CONSENT OF CERTIFIED PUBLIC ACCOUNTANT
As Independent Public Accountants, we consent to the use of our report dated
July 16, 1996 to all references to our firm included in or made a part of the
Form 10-KSB of American Diversified Group, Inc. (Formerly Tera West Ventures,
Inc.)
/s/ Grant-Schwartz Associates, CPA's
GRANT-SCHWARTZ ASSOCIATES, CPA'S
Boca Raton, Florida
July 29, 1996
20
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
In connection with the audit of the consolidated financial statements
of American Diversified Group, Inc. ("ADGI" or "The Company") for the fiscal
year ended December 31, 1994, Duane V. Midgley, CPA, Salt Lake City, UT, issued
a report dated February 9, 1995, a copy of which was attached to the Company's
Form 10-KSB, for the fiscal year ended December 31, 1994, which was duly filed
with the Securities and Exchange Commission.
In March, 1995, Tera West Ventures, Inc. ("TWVI"), the Company's
former name, changed its name to American Diversified Group, Inc. and its
business location from TWVI's offices in Las Vegas, NV to that of ADGI in
Florida. As a result of the move of its base of operations to Florida, the
Company, by action of its board of directors, determined to change its
independent accountant from Mr. Midgley, the former accountant for TWVI, to a
firm in Florida. The accountant did not resign, nor did he decline to stand for
re-election, and the board of directors did not dismiss Mr. Midgley. There was
no disagreement with Mr. Midgley on any accounting matter whatsoever.
On May 24, 1996, the Company engaged the firm of Rachlin, Cohen and
Holtz to perform the audit for the fiscal year ended December 31, 1995. A copy
of this engagement was attached as an exhibit to the Company's Current Report on
Form 8-K on July 5, 1996. However, by letter dated June 24, 1996, as a result of
the inability of the Company and Rachlin, Cohen and Holtz to agree on the amount
of time that the accounting firm could devote to the Company as a new client,
and the cost of conducting the audit, the Company and Rachlin Cohen and Holtz
agreed to discontinue the engagement of Rachlin Cohen and Holtz. A copy of this
letter was also attached as an exhibit to such Current Report. In that letter,
The Company informed Rachlin Cohen and Holtz that the Company had retained the
accounting firm of Grant-Schwartz Associates, CPA's, as its auditors, and
Rachlin Cohen and Holtz has agreed to cooperate with the new accounting firm to
complete the 1995 audit.
During the past two years there were no disagreement with either
former accountant on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope of procedure. The engagement of Grant-
Schwartz Associates, CPA's, 40 SE 5th Street-Suite 500, Boca Raton, FL 33432 was
attached as an exhibit to the Current Report referenced above. As a result of
the change in auditors, The Company was delayed in completing its Form 10-KSB
and Form 10-QSB, for the periods ended December 31, 1995 and June 30, 1996.
21
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
(A) THE DIRECTORS AND EXECUTIVE OFFICERS ARE:
Name Age Title
---- --- -----
Jerrold R. Hinton 54 President, Chief Executive Officer,
and a Director
Gerard Haryman 52 Chairman of the Board and Chief
Financial Officer
Thomas J. Craft, Jr., Esq. 31 Secretary and a Director
All directors hold office until the next annual meeting of
stockholders of the Company and until their successors have been elected and
shall qualify. Officers serve at the discretion of the Board of Directors, but
the Company contemplates that it may elect during the current fiscal year to
enter into employment agreements with certain of its executive officers and
employees, the terms of which have not been determined as of the date of this
Report on Form 10-KSB.
Jerrold R. Hinton has served as President, Chief Executive Officer and a
Director of the Company since March 1995, following the change of the Company's
operations from that of Tera West Ventures to that of ADGI. Dr. Hinton, a
graduate of Florida State University, holds bachelors, masters and doctorate
degrees in management, engineering, surveying, real estate and construction
during the five years prior to joining the Company in his present capacity. From
1992 to early 1995, Dr. Hinton served as an officer of United Biomedical, Inc.
(UBI), a private company recently acquired by the Company. Dr. Hinton was not a
shareholder of UBI.
Gerard Haryman has served as the Company's Chairman of the Board and Chief
Financial Officer since February, 1996. During the past five years, Mr. Haryman
has been engaged in the following activities: he served as a director of Aspen
Marine Group, Inc.. a public company presently subject to jurisdiction of a
Chapter 11 proceeding in Federal Bankruptcy Court in the Southern District of
Florida, from April 1994 to the present; a director of Life Industries Inc., a
public company, from March 1995 to September 1995; and is the sole shareholder
of Aptek Communications Products Inc., a private company. In addition, Mr.
Haryman is a real estate investor with residential properties located in Palm
Beach, FL and in Europe. . . .
Thomas J. Craft, Jr., Esq., is an attorney practicing law under the laws of the
State of Florida. Mr. Craft has been Secretary and a Director of the Company
since March, 1996. From July 1994 to the present, Mr. Craft has been counsel,
secretary and a director of Trident Environmental Systems, Inc., an inactive
public company located in West Palm Beach, FL. During the past five years, prior
to his present positions with The Company and Trident, Mr. Craft was engaged in
the private practice of law in West Palm Beach, FL
(B) COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's officers and directors, and persons who own more that ten percent of a
registered class of the Company's equity
22
<PAGE>
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and with any exchange on which the Company's
securities are traded. Officers, directors and persons owning more than ten
percent of such securities are required by Commission regulation to file with
the Commission and furnish the Company with copies of all reports required under
Section 16(a) of the Exchange Act. Based solely upon its review of the copies of
such reports received from officers, directors and greater than ten percent
shareholders, the Company reports that as of the date of this Report, there were
no failures to file reports under Section 16(a) of the Exchange Act:
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
Long Term Compensation
<TABLE>
<CAPTION>
Annual Compensation Awards Payouts
---------------------------------------------- ------------------------- ---------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other
Annual Restricted Securities All Other
Name and Compen- Stock Underlying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position (*) Year Salary Bonus($) ($) ($) SARs(#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jerrold Hinton 1995 $19,175 0 0
Douglas Morgan 1995 23,204 0 0
Jerry Thornthwaite 1995 14,250 0 0
Kenneth Coleman 1994 0 0 0
Kenneth Coleman 1993 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) Messrs. Hinton and Coleman were chief executive officers and presidents of
the Company during the respective years.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of December 31, 1995, the security ownership of the following
persons and entities, who were either executive officers of the Company or were
known to the Company to own more than 5 percent of the Company's outstanding
voting securities was as follows:
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Percent
Beneficial Owner Nature of of
Beneficial Ownership Class
- --------------------------------------------------------------------------------
Common Stock Kenmar Company Trust 4,421,000 8.1%
225 Stevens Ave
Suite 104
Salem Beach, Ca 92075
================================================================================
23
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The discussion under Item 1, Description of Business, and under Item
2, Description of Property, sets forth all disclosure with respect to related
party transactions.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Sequential
Exhibit No. Document Description Page No.
- ----------- -------------------- --------
3.1 Articles of Incorporation (filed as Exhibits 3.1,
3.2 and 3.3 to the Company's Registration Statement
on Form 10-SB and incorporated herein by reference)
3.2 Bylaws (filed as Exhibit 3.4 to the Company's
Registration Statement on Form 10-SB and
incorporated herein by reference)
21 Subsidiaries of the Company
23 Consent of Grant-Schwartz Associates, CPA
(b) - The Company filed no Reports on Form 8-K during the quarter ended
December 31, 1995. On July 16, 1996, the Company filed a Current Report on Form
8-K.
24
<PAGE>
SIGNATURES
In accordance with Section 12 or 15(d) of the Exchange Act, the
Company has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
AMERICAN DIVERSIFIED GROUP, INC.
By: /s/ Jerold Hinton
-----------------------------------
Jerrold Hinton, President, Chief
Executive Office and Director
Date:
----------------------------------
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Company and in the capacities and on
the dates indicated
/s/ Thomas J. Craft
-----------------------------------
Thomas J. Craft Jr.
25
