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US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to _____________
COMMISSION FILE NUMBER: 0-23532
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AMERICAN DIVERSIFIED GROUP, INC.
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NEVADA 88-0292161
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(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation)
700 CANAL STREET, 3RD FLOOR, STAMFORD, CT 06902
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Address of Principal Executive Offices)
(203) 328-3092
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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 registrant was required to file such reports),
and (ii) has been subject to the filing requirements for the past 90 days.
Yes XX No
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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 registrant'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 Registrant had no revenues for its recent fiscal year ended December
31, 1995. The aggregate market value of the voting stock held by non-
affiliates(*) of the Registrant based on the average bid and asked prices of
$.04 and $.035 respectively, of such common stock as of July 6, 1997 is
$2,466,378.80, based upon an average of $.03 multiplied by 82,212,560 shares
of common stock as of July 6, 1997 held by non-affiliates. As of July 6, 1997,
the Registrant had a total of 86,212,560 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 Registrant's common stock,
both record and beneficially.
Page 1 of ____.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Background-Prior to Fiscal 1996
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American Diversified Group, Inc., a Nevada corporation (hereinafter the
"Company" or the "Registrant"), 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"). The Company's interest in
Aimrite was acquired in exchange for 16,500,000 shares of the Company's common
stock issued between December 1993 and January 1995. Aimrite owned patents and
technology covering computer-controlled shock absorber and air suspension
systems. Pursuant to an agreement with Kenneth Coleman, the principal of
Aimrite, granted Mr. Coleman the right to acquire the Company's interest in
Aimrite. This right was granted in the event that the Company determined not to
devote its resources to the development of the shock absorber and air
suspension systems, or in the event that the Company had a change in
management.
The Company determined that it would devote its efforts towards becoming
a medical products company and as a result, on March 28, 1995, Kenneth
Coleman, the President of Aimrite, resigned as a director and as president of
Tera West Ventures, Inc., and exercised his right to purchase the Company's
interest in Aimrite. As a result of the exercise by Mr. Coleman of this right,
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 approximately
$4,200,000 were removed from the Company's balance sheet, and this reduction
was duly reported in the Form 10-QSB for the three month period ended March
31, 1995. Further, the removal of these assets, as well as the liabilities of
Aimrite, also had an impact on shareholders' equity, which reduction when
written off resulted in a loss of approximately $2,500,000 which was also
reported on the Form 10-QSB for the three month period ended March 31, 1995.
See Note 2 to the Financial Statements for the year ended December 31, 1995,
filed in the Company Annual Report on Forms 10-KSB and 10-KSB/A for fiscal
1995.
In about March 1995, 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. Ameril Corp., prior to the rescission
and settlement with the Company, had transferred 2 million of the shares in a
private transaction to an unaffiliated third party. As a result, the Company
determined that it was in its best interests to settle with Ameril on terms
that provided for the cancellation of the 8.53 million shares rather than
litigate, at possibly significant expense, in an effort to achieve
cancellation of the additional 2 million shares that had been transferred.
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Following the exercise by Kenneth Coleman of his right to repurchase the
70% interest in Aimrite from the Company, and the termination of the
acquisition agreement with ADMC, the Company through fiscal 1995 should be
considered to be a holding company. During 1995 and in 1996, the Company's
activities involved the search of a business or assets that it could acquire,
in order to become an operating company, or in the alternative, efforts to
develop its own business operations, principally with the assistance of third
parties. To that end, the Company continued to investigate several
opportunities, principally in the medical products field, including the
distribution of HSA and test kits to test cholera, gonorrhea, strep and
syphilis. During fiscal 1996, the Company also explored other potential
acquisitions and businesses, including computer and technology products and
services. See the discussion below.
As part of the determination to terminate the ADMC acquisition, the
Registrant entered into a one (1) year consulting agreement with Andrew
Montero pursuant to which Montero agreed to identify potential joint venture
or acquisition candidates for the Registrant to pursue business opportunities
and provide other services to the Registrant with respect to Registrant and
its product line, as contemplated. In consideration for the consulting
services, Registrant 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 Registrant, Montero was instrumental in negotiating the
termination of the agreement to acquire ADMC and the cancellation and physical
return of the above referenced 8.53 million shares to Registrant's transfer
agent.
In the same registration statement on Form S-8, the Company registered a
total of 1 million shares to Messrs. Elliot Bauer and Leonard Cohen, the
principals of AVIX International Pharmaceutical Corp. ("AVIX"), in
consideration for a one (1) year consulting agreement between Messrs. Bauer
and Cohen, on behalf of AVIX, and the Company. The services provided by AVIX
included identification of pharmaceutical firms for potential joint ventures
with the Company, services with respect to the approval process for the
commercial sale of medical products in the United States and internationally,
identification of investment banking firms for possible relationships with the
Company and its ventures, and dissemination of information concerning the
Company and its proposed products and services to the medical community, and
services in connection with public relations firms, among other services. In
furtherance of its obligations to provide services to the Company, AVIX:
introduced the Company to a new source of Human Serum Albumin ("HSA"), a
product in that is widely regarded to be in short supply internationally, and
is comprised of the serum component of whole blood. See the discussion under
"Consulting Agreements" below.
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 other tropical areas, such as West Africa,
where refrigeration is not readily available.
AVIX also made the initial introduction of the Company to Emerging Trends
Linkages Corp. ("ETLC"), a New York corporation, although no formal business
relationship was formed between ADGI and ETLC until February 12, 1996. See the
discussion below under "Recent Business Developments" and "Consulting
Agreements" with respect to orders from the Republic of Guinea and
registration of pharmaceutical products in West Africa, and other business
opportunities and relationships resulting from the agreements with ETLC.
Further. AVIX was responsible for the introduction of the Company to Ms.
Judith Grossman, who became a consultant to the Company in mid 1995 and has
provided continuing services to the Company for approximately the past twenty-
four months to date. The services of Ms. Grossman include services that led to
ADGI's receipt of a commitment of pre-export financing from an institutional
investment bank and certain private lenders for the purpose of funding the
purchase of pharmaceutical
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products that are the subject of the Company's orders from the Republic of
Guinea. See "Recent Business Developments" and "Consulting Agreements" below.
During fiscal 1995 and in early 1996, while the Registrant did not have
actual operations, it believed that its future lay principally in the field of
medical products, including the sale of HSA and test kits. With the advice of
its consultants, the Company believed that the likely market for such products
was in Mexico and South America, as well as in certain developing countries.
However, throughout fiscal 1996, Registrant did not have an assured supply for
HSA, which sources of supply it sought to develop with the assistance of third
parties including its consultants. During fiscal 1996, the Company also lacked
a means to purchase and distribute HSA and test kits products, if and when
both supply of and any firm purchase orders for such products were obtained.
The Company, therefore, pursued third party sources for HSA and test kits and
sought to acquire or otherwise generate purchase orders for such products,
principally in Mexico and South America During 1996 and since the end of the
fiscal year, the Company has also sought various means of financing the
purchase orders it has generated.
In connection with the efforts to acquire sources of HSA, the Company,
through the efforts of United Biomedical, Inc., a Florida corporation ("UBI"),
found a supplier of HSA in China, which furnished samples of HSA for shipment to
certain potential customers for HSA that had been developed by UBI in Mexico and
South America. See the discussion under "Item 9-Directors, Officers, Promoters
and Control Persons" with respect to employment by UBI of Dr. Jerrold R. Hinton,
president and chief executive officer of the Company, prior to March 1995.
The Company's experience is that alternate sources of HSA are necessary
because from time to time, manufacturers and suppliers of HSA have supply
difficulties, for among other reasons, demand from within their own countries,
problems with human donors, who are necessary to produce HSA, or other reasons
beyond the particular manufacturer's control.. As a result, UBI was introduced
to a new Chinese manufacturer of HSA by AVIX as a consultant to the
Registrant. In addition to the arrangements that AVIX endeavored to make for
HSA supply directly from the manufacturer in China, AVIX also introduced the
Company to Hemo Biologics International, Inc., of Ft. Lauderdale, FL, which
the Company was informed had another HSA source in China. The services
provided by AVIX and UBI in seeking to secure HSA sources for the Company were
provided pursuant to certain consulting agreements between the Company and UBI
and AVIX, discussed more fully below, and no additional consideration was
given to either UBI or AVIX for such introductions.
Notwithstanding the supply difficulties, the Company believes that it
will be successful in developing alternate suppliers of HSA, with the
introductions by UBI and its other consultants. The basis for this belief is
that following the end of the 1995 fiscal year, UBI found another source
manufacturer of HSA in Argentina. See the discussion below with respect to the
supply of HSA and other blood derivative products that the Company has secured
from the efforts of ETLC from the Bayer Corporation-Biological Products
Division, for the purpose of fulfilling orders from the Republic of Guinea and
commencement of the registration process for the sale of blood derivative
products to the National Blood Bank of the Ivory Coast. It should be noted that
because of existing distribution arrangements of Bayer Corporation, Bayer
Corporation will supply the Company's needs for purchase orders from West
Africa, but will not supply the Company with HSA for the contingent purchase
orders assigned to the Company by UBI from South America. See "Recent Business
Developments" and "Consulting Agreements" below.
The Company is not required to have any licenses to sell or export HSA
or any of its existing products that it is endeavoring to sell because in each
instance the manufacturer or the distributor through which the Company shall
supply products subject to any purchase orders has all required licenses.
However, in each instance, the Company or its representatives must submit
samples of each product from a designated supplier/manufacturer. Therefore, if
and when the manufacturer or supplier of any pharmaceutical product that is the
subject of an order changes, the Company, and all entities conducting similar
business, must submit new samples conforming with the products that are the
subject of the order or the pending registration process, in order to secure
approval or complete a sale.
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During 1996 and following the end of the fiscal year, the Company was
able to outsource with the assistance of UBI access to test kits for cholera,
syphilis, gonorrhea and strep, and another source of HSA. As a result of using
new sources for both HSA and test tits, the contingent orders that the Company
received by assignment from UBI require that the respective products be
resubmitted to appropriate regulatory authorities prior to confirmation that
the new products have been approved for registration and sale. Assuming that
such new sources are approved and the samples comply with the specifications
contained in the contingent purchase orders, of which there can be no
assurance, then in such event, the Company can generate actual revenues from
the presently existing contingent orders assigned to the Company by UBI from
Mexico and South America, as discussed below. When and if the products are
approved for registration in each of the countries in South America, the
Company would be in position to ship and be paid for the products that are
subject of these contingent purchase orders. This could also result in the
Registrant being able to generate future sales of medical products, including
test kits and HSA from Mexico and South America, but there can be no assurance
that the samples of HSA and the test kits that have been submitted for
approval to Mexico and South America will be approved or will generate sales
revenues for the Company. The Company's financial statements for fiscal 1996
do not reflect such contingent purchase orders as assets or receivables,
because of the contingent nature of such orders.
Recent Business Developments
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The Company's principal efforts during fiscal 1996 and to date have
principally resulted from the engagement of ETLC, as consultant, for the
purpose of seeking purchase orders for the distribution and sale of a variety
of medical/pharmaceutical products, including generic pharmaceuticals and
vitamins, blood derivative products, and diagnostic test kits. In addition,
the Company has utilized ETLC for the purpose of seeking the supply form
unaffiliated third parties of products subject to purchase orders as such
orders have been received. In addition, ETLC, together with the efforts of Ms.
Judith Grossman, a Company consultant, have been active in securing pre-export
financing and commitments for further pre-export financing to enable the
Company to pay for the products that are part of existing purchase orders,
which shipments commenced in May, 1997.
During the last six months of fiscal 1996 and continuing to date, ETLC
has been successful on behalf of the Company in generating purchase orders
after obtaining approval for the registration, distribution and sale of
medical products in the Republic of Guinea in West Africa, including purchase
orders for generic pharmaceuticals, vitamins, diagnostic test kits and HSA
from the Central Pharmacy of the Republic of Guinea. In addition, ETLC has
commenced the registration and approval process, a condition precedent to
receipt of anticipated purchase orders for blood derivative products,
following shipment of samples of four blood products to the National Blood
Bank of the Ivory Coast. Further, ETLC has been able to generate purchase
orders from the National Health Foundation of Brazil for the State of Roraima
for dengue fever and malaria vivex test kits. This order is subject only to
approval of samples of such test kits submitted to the National Health
Foundation by the Company through ETLC as discussed more fully below.
The Company is aware that the market for the sale of
medical/pharmaceutical products is extremely competitive. In order for the
Company to compete successfully, of which there can be no assurance, the
Company must be able to have certain competitive advantages, whether on the
basis of price, with respect to certain products, or as a result of its unique
marketing niche gained from its agreement with ETLC and to a lesser extent
with UBI. The Company has benefited from the ability of ETLC to generate
purchase orders from the Republic of Guinea for generic pharmaceuticals,
vitamins, HSA and test kits, among other products. In addition, in the Ivory
Coast, and Brazil, where ETLC has business representatives, the registration
and approval process has commenced for the sale of blood derivative products
and test kits, respectively. During fiscal 1996, ETLC submitted samples of HSA
and test kits to the Central Pharmacy of the Republic of Guinea, which
resulted in the Company's receipt of an initial purchase order in the amount
of $200,000. Further, the efforts of ETLC provided the Company with the
opportunity to expand its product line, by generating additional purchase
orders in the amount of
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approximately $750,000 from the Central Pharmacy of the Republic of Guinea for
generic pharmaceuticals and vitamins. The Company in May, 1997, commenced
shipment of the initial products subject to the purchase order for generic
pharmaceuticals and vitamins to the Central Pharmacy of Guinea, and also
shipped diagnostic test kits in connection with the initial purchase order.
Historically, generic pharmaceutical products had been only a small
percentage of the total pharmaceutical product market in the developing
countries of West Africa (less than 10% of the total market). However, with
the efforts of ETLC, generic pharmaceuticals have begun to be demanded in the
Republic of Guinea, and are becoming increasingly in demand elsewhere in West
Africa, as compared to brand name pharmaceuticals that have previously
controlled the market. The cost of pharmaceutical products, and indeed all
products sold to West Africa, have increased significantly following the
devaluation of the West African currencies. The devaluations have led many
West African governments to seek a variety of products from suppliers other
than France and Belgium, which had traditionally been the major suppliers of
almost all products sold to their former colonies in West Africa. The
determination by the West African governments and particularly the Ministries
of Health to seek alternative sources of supply has presented opportunities to
companies, such as ADGI, to generate purchase orders and penetrate new
markets.
Price has become the critical factor and the generic pharmaceuticals
available from the United States and elsewhere offer an opportunity to
penetrate a previously "closed" market, with an expanded line of
pharmaceutical products, including diagnostic test kits, blood derivative
products, HSA, generic pharmaceuticals and vitamins. ADGI does not have the
resources of many of its competitors and is a newcomer to the industry, but
the Company believes that it has an opportunity to compete in Mexico, and
South America as well as in West Africa because of the expertise and
relationships of its consultants and their respective representatives,
described more fully below. See "Management's Plan of Operation" with respect
to its receipt of commitment for pre-export financing to fund the purchase of
products subject to pending and future purchase orders, and its receipt of
private financing that is funding its ongoing expenses and expanded marketing
efforts in West Africa.
Consulting Agreements
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On February 20, 1996, Registrant entered into a one year consulting
agreement with United Biomedical Inc., of Miami, FL ("UBI"), which has been
engaged in the business of the distribution and marketing of HSA and cholera,
syphilis, gonorrhea and strep test kits, as well as related medical products
and services. In connection with the consulting agreement with UBI, the
Company issued to UBI 2.5 million shares of common stock which were included
in a registration statement on Form S-8 dated February 29, 1996. Such shares
were issued to UBI in consideration for UBI's providing consulting services
including the introduction of rights to market in Mexico the telemedicine
programming which UBI had developed. See the discussion under "Item 9-
Directors, Officers, Promoters and Control Persons" with respect to employment
by UBI of Dr. Jerrold R. Hinton, president and chief executive officer of the
Company, prior to March 1995.
Telemedicine programming involves remote medical diagnostic and treatment
procedures using two-way video teleconferencing. The procedures include a
physician specialist located at a remote location, with on-line video, so that
he can assist a medical technician, who is instructed on a step by step basis,
in conducting tests of and treatment for a patient. The Company believed that
this telemedicine programming could be a cost effective way of treating
patients in developing countries with limited medical resources and personnel,
such as those countries where the Company was seeking to market HSA, test
kits, and other medical products. UBI also granted Registrant non-exclusive
rights to distribute a DNA Analyzer in Mexico and South America. A DNA
Analyzer is an instrument designed to accurately measure cancer cells in human
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 DNA Analyzer is
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manufactured by RatCom, Inc., located in Miami, FL. During fiscal 1996 and to
date, Registrant has not yet generated any revenues from its consulting
agreement with UBI, from either the rights to market the telemedicine program
or the DNA Analyzer. Further, Registrant has not pursued nor does it
contemplate devoting any efforts involving the DNA Analyzer or the
telemedicine program, principally because it has determined to devote its
resources and energies to the pharmaceutical business, which is not as capital
intensive as marketing and selling expensive equipment, such as the DNA
Analyzer, or installing sophisticated telecommunication equipment necessary
for video teleconferencing.
This determination to devote efforts to pharmaceuticals and medical
products was based upon success of Registrant, through the efforts of ETLC, in
receipt of purchase orders from the Republic of Guinea for HSA, test kits,
generic pharmaceuticals and vitamin products; the commencement of the
registration process for blood derivative products in the Ivory Coast; and
receipt of purchase orders from Brazil for dengue fever and malaria vivex test
kits, subject to approval of samples. Notwithstanding its decision not to
pursue the telemedicine program and DNA Analyzer businesses, Registrant
considers that UBI fulfilled its obligations to the Company under the above
referenced consulting agreement, because of the assets the Company received
from UBI, evidenced by assignment of contingent purchase orders for HSA and
cholera test kits and other valuable services provided to Registrant by UBI.
See the discussion below with respect to the assignment to ADGI of UBI's
contingent purchase orders.
Prior to the determination to devote its energies to the distribution of
pharmaceuticals and medical products, the Company entered into another
agreement with UBI dated June 16, 1996, with the purpose of acquiring UBI. The
principal purpose of acquiring UBI was based upon the Company's determination
at that time that its future was in the medical equipment products field, as
well as its belief in its ability to generate confirmed orders for medical
products, such as HSA and test kits. The planned acquisition of UBI included
the assignment of UBI's sources of HSA and test kits, and assignment of UBI's
contingent purchase orders for HSA and test kits. In connection with the
agreement to acquire UBI, the Company issued 2,000,000 restricted shares of
common stock and undertook to register these restricted shares in a
registration statement on Form S-1 under the Act. Further, by action of both
UBI and the Company, the Company was assigned UBI's contingent purchase orders
with respect to HSA and test kits, which assignment included UBI's
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; Total orders, which are contingent upon
registration and approval of product samples. With respect to HSA, the
contingent orders are $585,750 from South America as follows: Ecuador-
$177,500; Peru-$88,750; Columbia-$53,250; Bolivia-$53,250; and Argentina-
$106,500 through Hampton Roberts International, and Brazil-$106,500 through
American Entrepreneur Corp. With respect to cholera test kits the contingent
orders are Mexico-$351,500 through Probifasa.
The Company has since agreed with UBI that it shall not acquire UBI
because it has been assigned those assets which it considers to be of most
value--the assignment of contingent purchase orders and the sources of HSA and
test kits--and the Company does not have a present interest in entering into
the capital intensive medical equipment products business. Therefore, both
parties have agreed that the 2 million shares shall be returned to the
Company's transfer agent for cancellation. This determination not to acquire
UBI was also based upon the fact that Dr. Thornthwaite did not intend to
become a full time employee of the Company and rather preferred to remain as a
consultant, providing services from time to time with respect to the Company's
generic pharmaceutical, blood product, and diagnostic test kit business, which
arrangement the Company has determined is satisfactory, in consideration for
the shares issued to UBI by the Company in the initial consulting agreement.
Dr. Jerrold R. Hinton, President of the Registrant, was an officer of UBI from
1992 through early 1995, during which period Mr. Hinton was owed salary by UBI
at the rate of $7,000 per month, which amount was accrued but unpaid. Such
accrued but unpaid salary in the total amount of $240,000 was paid by UBI in
1996 from the proceeds of its sale of a portion of Registrant's securities
issued under the consulting agreement, which shares were registered in the
registration statement on Form S-8 dated February 29, 1996.
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At present, the principal supplier of cholera, strep, gonorrhea and
syphilis test kits is New Horizons Diagnostics Corp., located in Columbia, MD.
The Company has had several different suppliers of HSA, including three in
China and one source in Argentina for its contingent orders for HSA from
Mexico and South America. See the discussion below with respect to: the
purchase orders received from the Republic of Guinea for HSA and test kits;
purchase orders, subject to sample approval, for dengue fever and malaria
vivex test kits, received from Brazil; and the registration process for blood
derivative products obtained by the Company from the Bayer Corporation for
sale in the Ivory Coast. The Company does not market any medical products in
the United States and has no present intention of doing so. The Company is
also negotiating with several other manufacturers for the supply of additional
diagnostic test kits, including test kits for malaria vivex, dengue fever and
a rapid AIDS test kit, as a result of the efforts of a new representative of
ETLC working in Brazil.
Registrant has not yet generated any revenues from the assignment by
UBI of the above referenced contingent purchase orders for HSA and cholera
test kits, nor can there be any assurance that revenues will be generated in
the foreseeable future, because these products must be approved for
registration and sale prior to shipment of the products subject to the
purchase orders. Because of the change in the manufacturing source of the HSA,
new samples of HSA have been sent to the appropriate regulatory authorities in
South America for approval, and the purchase orders are being revalidated.
However, because HSA is presently sold in each of the countries where the
Company has been assigned purchase orders, the only regulatory protocol that
the Company must satisfy is that its source of supply meets the criteria and
specifications established for such products. The Company believes that the
new supplier of HSA from Argentina should satisfy all regulatory protocols in
the South American market.
The Company entered into a second consulting agreement AVIX on January
15, 1996, for a term of two (2) years. The principal business of AVIX during
the past two years has involved the registration of pharmaceutical products
manufactured by third parties, for the purpose of securing approval of the
distribution and sale of such products in Mexico, China and elsewhere in the
Far East. The Company retained AVIX for such additional services because of
the expertise gained by AVIX in such areas, which expertise has been of value
to the Company, in management's opinion. In connection with the second
consulting agreement, AVIX agreed to perform additional services for the
Company, including but not limited to services in medical product development
and sourcing, as well as medical product distribution. AVIX, through its
contacts in China continued efforts to secure for the Company further source
manufacturers for HSA, and following the Company's agreement to utilize the
services of ETLC, AVIX provided services for the purpose of assisting the
Company in its efforts to outsource generic pharmaceutical products that are
the subject to its purchase orders from the Republic of Guinea. In addition,
AVIX in 1996 introduced Registrant to Hemo Biologics International, Inc. of
Ft. Lauderdale, FL, which has another source of HSA in China. As stated above,
AVIX was helpful in bringing ETLC and the Company together in 1996 and also
paid the initial consideration to Ms. Grossman, who has continued to provide
valuable services to the Company in connection with arrangements for the
Company to receive a commitment for pre-export financing from the
institutional investment bank and from private lenders, to which end the
Company has furnished the institutional investment bank and the private
lenders with the documentation necessary for the funding of the pre-export
financing under the commitment with the assistance of Ms. Grossman.
In consideration for this second consulting agreement, the Company agreed
to issue AVIX a total of 6,500,000 shares, all of which were registered under
the Form S-8 registration statement dated February 29, 1996. In fact,
5,200,000 shares were issued to AVIX and its principals and 1,300,000 shares
were issued directly to Diversified Corporate Consulting Group L.C. for the
purpose of providing corporate and financial consulting services to the
Company. The 1,300,000 shares which were issued to Diversified Corporate
Consulting Group L.C. were included in the AVIX agreement, because of the
obligation of AVIX to secure for Registrant a corporate and financial public
relations firm to assist in the promotion of the Registrant and its principal
business endeavors, which involve medical related products. However, AVIX has
informed the Company that it did not negotiate the agreement with Diversified
Corporate Consulting Group and has conducted no prior or subsequent business
with such firm. While the
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Company believes that AVIX has continued to fulfill its obligations to the
Company, to date Diversified Corporate Consulting Group has not performed any
services for the Company.
AVIX also advanced to the Company the sum of $50,000 pursuant to a
convertible promissory note (the "AVIX Note") to assist the Company in its
cash flow. The AVIX Note provided for conversion into shares of the Company's
common stock at a price of $.25 per share, which conversion would have been
required upon the filing by the Company of a registration statement on Form S-
1 under the Act. The AVIX Note provided for interest at 12% per annum and
would have been due July 30, 1997, unless the Company filed a registration
statement prior to such date and the AVIX Note was converted.
AVIX was also instrumental in the Company's negotiations with respect to
the initial consulting agreement between the Company and ETLC, dated February
12, 1996. However, prior to the end of the Company's fiscal year, AVIX
confirmed that it did not continue to have sources for HSA. As a result, the
Company and AVIX agreed that the principal and interest due under the AVIX
Note be foregiven, which indebtedness was foregiven during the first quarter
of 1997.
In connection with this consulting agreement with ETLC, ETLC agreed to
use its best efforts to secure approvals for product registration, and obtain
purchase orders for the distribution and sale of HSA, ADGI's principal product
at the date of the agreement, within the West African countries of Ivory
Coast, Mali, Congo, and Guinea. ETLC also agreed to use the services of ETLC's
West African representatives to secure and service any purchase orders
generated for ADGI. In consideration for the February 12, 1996 consulting
agreement with ETLC, the Company issued 600,000 shares to ETLC and granted
ETLC an option to acquire 900,000 shares ("option shares") for an adjusted
price of $.18 per option share. These shares and the option shares were
registered in the Company's registration statement on Form S-8 filed with the
Commission on February 29, 1996. The grant of the option may be deemed as
ETLC's payment for the rights to market the Company's products within its
territory in West Africa. This agreement was amended on 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 the above referenced West African
countries. In connection with this amendment, additional consideration of
1,500,000 shares were issued to ETLC, which were registered in a registration
statement on Form S-8 dated December 17, 1996, described below, as were
additional shares issued to ETLC, pursuant to the further agreements of the
parties after the end of fiscal year 1996, discussed below.
On August 5, 1996, following confirmation from ETLC that orders for HSA
and test kits were imminent, ETLC transmitted to the Company two written
purchase orders that ETLC received from the Central Pharmacy for the Republic
of Guinea, as follows: a purchase order for $200,000 in HSA and test kits,
which products at that time constituted ADGI's entire product line of medical
products. Further, ETLC presented the Company with a purchase order for
$750,000 for generic pharmaceuticals and vitamins, which at the time of
receipt of this order was not part of the Company's existing product line. The
Company, with the assistance principally of ETLC, Judith Grossman, and Thomas
J. Craft, Jr., the Company's counsel, corporate secretary and a director, has
outsourced from several manufacturers and distributors in the United States,
Canada, Mexico, Europe and has also developed a relationship with Chinese
sources of generic pharmaceuticals to fulfill the initial orders. The Company
believes that it will be able to fulfill the orders from the Republic of
Guinea and further orders as they are received from West Africa and Brazil
(see the discussion below), from more than one third party
manufacturer/distributor sources at terms and conditions satisfactory to the
Company, and does not believe that it will be dependent upon any one source.
The Company commenced shipment of generic pharmaceuticals and diagnostic
test kits in June, 1997, of the initial products subject to the orders from
the Central Pharmacy of the Republic of Guinea and will continue shipment of
products pursuant to both purchase orders during fiscal 1997. Further, because
it has received commitments for pre-export financing from an institutional
investment bank and has received loans from certain private lenders to permit
it to purchase and prepay for the products that are subject of the orders, the
Company believes that it should be able to secure more advantageous pricing
9
<PAGE>
than if it sought to purchase the products on credit, and pay for the products
after receipt of payment from the Republic of Guinea. The Republic of Guinea
is providing for a letter of credit to pay for the products through Bicgui
Bank, the National Bank of Guinea.
In addition, ETLC has been requested by the Ministry of Health of Guinea,
on behalf of Sierra Leone, to assist Guinea in its agreement with
international health organizations including the World Health Organization and
the United Nations, in efforts to rebuild the medical services sector of
Sierra Leone. Although Sierra Leone is not part of ETLC's initially designated
territory in West Africa under the agreements between the Company and ETLC,
ETLC agreed to use its best efforts to sell medical such products on behalf of
the Company to the Ministry of Health and Sanitation in Sierra Leone, which
efforts, however, have been halted as a result of the political unrest in
Sierra Leone. No assurance can be given as to whether the Company through ETLC
will generate any business from Sierra Leone, based upon current conditions in
that country.
The Company and ETLC have agreed to a further addendum to the consulting
agreements, based upon ETLC's commitment to generate up to $15 million in
purchase orders for generic pharmaceutical products and other medical related
products from the Republic of Guinea and elsewhere in West Africa. In
consideration for such addendum and the commitment from ETLC to provide
additional consulting services to the Company, including services related to
generating orders for ADGI for an increased period from two (2) years to five
(5) years, the Company issued to ETLC 3 million additional shares in a
registration statement on Form S-8, which was filed on December 17, 1996, an
additional 4 million shares that were included in a post effective amendment
no. 1 to Form S-8 dated January 2, 1997, and an additional 7 million shares
that were included in a post effective amendment no. 2 to Form S-8 dated
February 13, 1997, of which latter amount 2 million shares are being held in
escrow by counsel to the Company, and shall vest upon the shipment of
additional orders to the Republic of Guinea. This was based upon ETLC's
receipt on behalf of the Company of the purchase orders for generic drugs and
vitamins beyond the scope of the initial and amended agreements, and provided
for the sale of products by the Company that were not within its existing or
contemplated product line at the time the initial agreements were executed.
Further, with the collaboration of ETLC and Ms. Grossman, the Company, in
January, 1997, received a written commitment from an institutional investment
banking firm for a continuing line of credit, and in May, 1997, the Company
received private financing from lenders to permit the Company to purchase the
generic pharmaceuticals that are the subject of its existing orders from
Guinea. This line of credit will also be available to fund the purchase of
products that become the subject of future orders from the Republic of Guinea,
which order are backed by the written commitment of Bicgui Bank, the National
Bank of Guinea and will be followed by letter of credit.
The Company in consideration for her continued services to the Company
during the past two years issued to Ms. Grossman 350,000 shares in the
registration statement on Form S-8 dated December 17, 1996 and 1.5 million
shares in post effective amendment no. 2 to such registration statement dated
February 13, 1997. Further, in the registration statement on Form S-8 dated
December 17, 1996, the Company issued to Thomas J. Craft, Jr., Esq. 350,000
shares for serving as a director and providing certain legal services to the
Company, and in post effective amendment no. 2, the Company also issued to
Thomas J. Craft, Jr., Esq., in consideration for serving as corporate
secretary, a director and counsel to the Company, and for his direct
assistance in sourcing pharmaceutical products and dengue fever and malaria
vivex test kits for Brazil an additional 3 million shares. The Company also
issued to Dr. Hinton, in consideration for his continuing to serve as the
Company's president and chief executive officer, as well as director 1 million
shares in post effective amendment no. 1 and in consideration for the
execution of a three year employment agreement, which provides for no salary
until the Company's cash flow shall permit, an additional 3 million shares.
The Company has also agreed to negotiate with Messrs. Hinton, and Craft, and
Ms. Grossman, as well as ETLC, and other persons providing continuing services
to the Company, for the issuance of additional shares, in a registration
statement on Form S-8 and/or Form S-1, to compensate such parties for
continuing services performed and to be performed on behalf of the
10
<PAGE>
Company in developing its pharmaceutical products business and other services
necessary for the Company's operations prior to its generating a positive cash
flow.
The Company, based upon the orders and the commitment it has received for
pre-export financing, as well as additional financing that it has negotiated
utilizing the services of ETLC and Ms. Grossman, firmly believes that it will
be able to continue to supply such generic drugs and vitamins at prices that
shall permit the Company to generate a profit. Further, through the efforts of
ETLC's new representative in Brazil, the Company has recently received
purchase orders for malaria vivex and dengue fever test kits from the National
Health Foundation, State of Roraima, Brazil, and is utilizing several
manufacturers to supply these test kits. The purchase orders for 100,000 of
each of the above test kits is subject only to approval of products samples,
which will be sent to Brazil during June, 1997, with shipment of actual orders
to follow. The Company has been informed that the potential market for dengue
fever and malaria vivex test kits in Brazil, nationally, is approximately 1
million of each test kit, with potential sales of $16 million, based upon
current world pricing of such kits.
Prior Contemplated Projects
---------------------------
Registrant during 1996, entered into letter of intent with respect to
the proposed acquisition of Aptek Communications Products, Inc. ("Aptek"), a
computer company owned by Gerard Haryman, who served as a director of
Registrant from January, 1996 through December, 1996. In contemplation of the
business arrangement with Aptek, the Registrant moved into the corporate
offices of Aptek, which included 6,000 square feet of office and warehouse
space at 501 South Dixie Highway, West Palm Beach, FL 33480. (See "Description
of Property" below with respect to the relocation of the Company's offices to
Stamford, CT.) In connection with this proposed acquisition of Aptek and its
computer assets, Registrant engaged Denise Valentini, Palm Beach, FL, as a
consultant to prepare a business valuation and valuation of the inventory of
Aptek. The consultant was issued 2,250,000 shares of common stock which were
included in the Form S-8 registration statement dated February 29, 1996. In
the Company's registration statement on Form S-8 dated December 12, 1996, the
Company issued to Mr. Haryman 500,000 shares for his services as a director
from January, 1996 through December, 1996.
The Registrant, after reviewing the valuations of Aptek for the purpose
of determining the consideration that it would pay, which would have consisted
of restricted shares of ADGI, has since determined not to pursue the
acquisition of Aptek. Prior to this determination, Mr. Haryman had agreed that
as a director, he would not vote, but rather would abstain, on any
determination to merge and the amount of share consideration to be issued in
consideration of the contemplated merger, assuming that the board of directors
voted to acquire Aptek. However, Mr. Haryman resigned from the board of
directors following the determination by the board in December, 1996, not to
acquire Aptek, because of Mr. Haryman's continuing interest in pursuing the
business of Aptek, which involves computers and related telecommunication
products and services, including video teleconferencing, fax and cellular
phone technology. The decision of Mr. Haryman to resign as a director was
based solely upon his determination to pursue the business opportunities
presented by his ownership of Aptek and his other business interests, and was
not based upon any disagreement with management with respect to any matter of
policy of business practices.
Registrant, during fiscal 1996, 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 a provider of related
satellite technology, including earth station for global communication
services. in Wisconsin and Illinois. During the negotiations with respect to
the proposed acquisition of ISS, the Company advanced approximately $100,000
to assist ISS in continuing its operations, while the Company continued its
due diligence efforts. The Company believed that ISS's business and technology
matched well with the contemplated acquisition of Aptek.
Following the completion of due diligence with respect to ISS, and the
discovery of facts that the Company considered to constitute
misrepresentations by ISS, the Company determined not to acquire ISS
11
<PAGE>
but rather limit its efforts to the anticipated growth and the potential it
believed and continues to believe exists in the pharmaceutical business and
related medical products business in West Africa and South America, and in
other developing countries.
The Company, after consulting with counsel in Florida, determined to
pursue a cause of action against ISS for damages, including recovery of the
$100,000 in interim capital advanced to ISS. The Company's action was moved to
Dade County Superior Court and cannot determine at this time whether it will
prevail against and be successful in recovering any damages against ISS. The
entire board of directors of ADGI agreed unanimously not to acquire ISS. The
Company generated no income from its involvement with either Aptek or ISS.
On January 12, 1996, Registrant entered into a consulting agreement
with Harvard Financial Corp. in consideration for which Registrant 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
Registrant 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 Registrant terminated the agreement.
ITEM 2. DESCRIPTION OF PROPERTY
The Company leases approximately 250 square feet of executive office
space at 700 Canal Street, 3rd Floor, Stamford, CT 06902 for $800 per month.
In addition, the Company has use of warehouse facilities at JFK International
Airport, New York City and conference room facilities at the International
Building Rockefeller Center, New York, which are available to the Company on
an hourly or on a month-to-month basis, at the Company's discretion, and on an
"as-used" basis. The condition of the Company's leased facilities in Stamford
is excellent, and its arrangements with respect to warehouse and conference
facilities are at advantageous terms, because of its relationship with ETLC.
During the period from January, 1996 through December, 1996, the Company
shared office facilities with Aptek, including use of executive offices and
warehouse space, at a monthly expense of $1,500, which the Company believes to
be the fair market value of the facilities used by the Company. In addition,
the Company paid its pro-rata share of the telephone, secretarial and other
monthly office expenses.
The Company during the period commencing in September, 1994, and through
the period ending April, 1995, issued a total of 3.8 shares of restricted
common stock in connection with the acquisition of a rental property. The
Company recorded the shares issued and the building and rights acquired based
upon the estimated fair market value of shares issued. The contract with
respect to the acquisition of the rental property provided that the transferor
of the property could rescind the transaction if the price of the Company's
shares fell below $5.00 per share. In fact, following exercise by Mr. Coleman
of his right to repurchase Aimrite, the Company became in essence a holding
company without operations, and as a result the stock price dropped reflecting
the lack of operations and assets. The rescission of the transfer of the
rental property to the Company was the result of inability of the Company to
perform its obligations under the agreement and satisfy a condition subsequent
contained therein. As a result of negotiations between counsel for the Company
and the transferor of the rental property, it was determined that the Company
was unable to fulfill its obligation under the condition subsequent and
therefore the transferor was permitted to retain 2.5 million of the total
shares issued in connection with the acquisition. The cancellation of the
transaction was recorded by reversing the amounts initially recorded, less the
par value of the shares retained. No loss was recorded in connection with this
transaction.
12
<PAGE>
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 Energy Associates, and Peter Berney, 11th Judicial Circuit, Dade
----------------------------------------------
County, Florida, Case No. 94-24371. The case was settled in February 1996 with
the payment by Kenneth Coleman and Peter Berney of a total of $50,000.
The Company has pending a cause of action against ISS for damages,
including recovery of the $100,000 in interim capital advanced to ISS. The
Company's action, American Diversified Group, Inc. v. Imaging Systems
---------------------------------------------------
Synergies, Inc., et al., which action was moved to the 11th Judicial Circuit,
-----------------------
Dade County, Florida, Case No. 97-001983AN, from Palm Beach County, where the
proceeding was initially commenced. The Company cannot determine at this time
whether it will prevail against and be successful in recovering any damages
against ISS. The entire board of directors of ADGI agreed unanimously not to
acquire ISS. The Company generated no income from its involvement with either
Aptek or ISS.
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 1996.
13
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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 6, 1997, there were
15 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.
<TABLE>
<CAPTION>
Bid Prices
--------------------
1993 High Low
- ------------------------- -------- ----------
<S> <C> <C>
Quarter Ending March 31 $8-3/4 $4-7/8
Quarter Ending June 30 $8-3/4 $7-1/2
Quarter Ending Sept. 30 $ 1/4 $ 1/4
Quarter Ending Dec. 31 $6-3/4 $ 1/2
Bid Prices
--------------------
1994 High Low
- ------------------------- -------- ----------
Quarter Ending March 31 $8-1/4 $6
Quarter Ending June 30 $8-3/4 $8
Quarter Ending Sept. 30 $10 $6-3/4
Quarter Ending Dec. 31 $7-1/4 $4-1/4
Bid Prices
--------------------
1995 High Low
- ------------------------- -------- ----------
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 Dec. 31 $7/16 $1/4
Bid Prices
--------------------
1996 High Low
- ------------------------- -------- ----------
Quarter Ending March 31 $11/32 $1/8
Quarter Ending June 30 $1/2 $3/16
Quarter Ending Sept. 30 $5/16 $3/16
Quarter Ending Dec. 31 $1/8 $1/32
Bid Prices
--------------------
1997 High Low
- ------------------------- -------- ----------
Quarter Ending March 31 $3/16 $1/8
Period Ending July 6 $1/8 $1/32
</TABLE>
14
<PAGE>
As of July 6, 1997, there were 655 holders 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. During the period
from 1994 and through the first quarter of fiscal 1995, the Company, through
Aimrite, endeavored to develop and market a computer controlled shock absorber
system See the discussion under Item 1. "Description of Business-Background
Prior to Fiscal 1996" with respect to Aimrite. Before the shock absorber
system could be completed, of which there was no assurance, the Company
divested itself of ownership of Aimrite, upon the exercise by Kenneth Coleman
of his option to repurchase Aimrite, because of a change in management of the
Company and management's determination that it did not have the intensive
capital resources necessary to complete the development, of which there was no
assurance of success. As discussed in Item 1 above, the Company commenced a
plan to acquire ADMC and thereafter determined to terminate the acquisition of
ADMC, because of ADMC's failure to satisfy the net worth requirements of the
agreement.
However, during and subsequent to fiscal 1995, the Company began to
develop its plan to devote its business energies and limited resources to
become a medical products company, with intention to seek operations involving
the sale of products manufactured by others, principally in the medical field.
See the discussion in Item 1. "Description of Business: "Recent Business
Developments" and "Consulting Agreements" above. During the last half of
fiscal 1995 and throughout fiscal 1996, the Company entered into consulting
agreements with third parties for the purpose of exploring potential
acquisitions of operating businesses, seeking advise and assistance in
identifying business opportunities in the medical products and services fields
and also contemplated other business opportunities.
The Company did not generate any operating revenues in fiscal 1996.
Therefore, the Company was dependent upon the funds provided by non-interest
bearing loans from the Company's executive officer and directors, as well as
the willingness of the Company's executive officer and consultants to accept
shares in lieu of cash compensation for continued services to the Company.
With the assistance of the Company's consultants the Company's management
determined that its best business opportunities were in the area of medical
products and principally in its ability of generating revenues the sale of
products manufactured by third parties.
To that end, the Company entered into consulting agreements during fiscal
1996 with AVIX, and with UBI, all of which were intended to assist the Company
in entering into the medical products field and becoming an operating company.
In connection with the consulting agreement with ETLC, the Company received
$81,000 from the exercise of options to acquire 450,000 shares at $.18 per
share, the price of the stock on the date of the grant to ETLC. 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, during the last
quarter of 1996 and through February, 1997, ETLC paid an additional $36,000
for the exercise of 200,000 option shares. The Company and ETLC have agreed to
negotiate whether any payment shall be required with respect to the remaining
250,000 option shares.
The Company during fiscal 1996 has been dependent upon the willingness of
its consultants to accept shares of the Company's common stock, issued
pursuant to registration statements on Form S-8, in consideration for
providing services to the Company. Such services have enabled the Company to
reach its present level of development, which includes: having received
product registration and approved purchase orders aggregating approximately
$1,000,000 for generic pharmaceuticals, vitamins, test kits and HSA from the
Republic of Guinea; having secured a commitment for pre-export financing from
an institutional investment banking firm; having received from private lenders
pre-export funding for its initial shipment to Guinea in May, 1997; having
secured purchase orders for 100,000 dengue fever and 100,000 malaria vivex
test kits from the National Health Foundation of Brazil, State of Roraima,
subject only to approval
15
<PAGE>
of sample test kits submitted, which order may result in additional orders for
up to 1,000,000 test kits in Brazil, nationally; having submitted samples of
blood derivative products, manufactured by the Bayer Corporation, Biological
Products Division, pursuant to the request of the National Blood Bank of the
Ivory Coast, which samples, when approved, should result in additional orders
for such products.
Directly as a direct result of the foregoing business advances and
pending business developments, the Company has been able to raise
approximately $150,000 from the private placement of its units, with
additional commitments form private financing, as described below. This
funding, together with the shipment in June, 1997, of the initial generic
pharmaceutical order to the Republic of Guinea, and the anticipated continued
shipment of orders for generic pharmaceuticals, diagnostic test kits, and
blood derivative products to the Republic of Guinea, as well as revenues that
the Company believes will be generated from orders for dengue fever and
malaria vivex test kits from Brazil and blood derivative products from the
Ivory Coast, as well as additional sales of generic pharmaceutical to West
Africa, should enable the Company to become operational and hopefully will
permit the Company's independent auditors to remove from their report the
qualification regarding the Company as a "going concern"
The Company's ability to ship these products that are the subject of the
purchase orders is the result of the Company having received a commitment from
an institutional investment banking firm for pre-export financing, which
commitment involves a revolving credit line that will be used for continued
shipments of orders as future orders are received. The Company is outsourcing
through 10-15 third party manufacturers and distributors located in the United
States, Canada, Mexico, South America and Europe and may utilize sources in
China as well as India, for the products that are the subject of the purchase
orders. The Company is presently seeking the best prices that are available
from such manufacturers, consistent with the Guinean pharmaceutical products
budget allocated for such products. Neither the Company nor ETLC presently can
estimate the length of time that will be required to secure the supply from
third party manufacturers for all of the pharmaceutical products in the
required quantities 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. However, the Company firmly
believes that all such products are available, at prices and in quantities
sufficient to satisfy the orders in a timely manner.
To assist the Company in its cash flow requirements while the initial
orders are shipped, and in order to pay the operating expenses of the Company,
which are estimated to be approximately $10,000 per month, the Company from
January, 1997 to early June, 1997, has raised approximately $150,000 from the
private placement of units, each unit comprised of one (1) share and one (1)
common stock purchase option exercisable at $.08 per share. The units were
priced at $.04 per unit, which was the price of the Company's shares on
January 15, 1997, the date of the private placement subscription agreement.
The Company has also received indications of interest from certain private
investors for additional subscriptions of up to $120,000 in units, at a per
unit price to be determined on the date(s) of subscription. However, there can
be no assurance that any additional subscriptions shall be received under the
unit private placement. The trading price of shares of the Company's common
stock during the past three months has been in the range of $.027 to $.04.
While the Company has been successful in raising capital in the unit private
placement, there can be no assurance that the Company will be able to continue
to raise private capital if the Company's shares continue to trade at the
levels that have prevailed since the beginning of the 1997 fiscal year.
Based upon the Company's present liquid resources after the expenses that
were paid by the Company following receipt of the private placement funds,
which expenses included office expenses, relocation expenses,
professional/accounting fees, transfer agent fees, and certain other expenses,
and based upon its present monthly operating expenses, the Company will be
able to operate for approximately 5 to 7 months if no revenues are generated
from operations. However, the Company believes that it will begin to generate
operating revenues during the second quarter of 1997, following the initial
shipment in May, 1997, of the generic pharmaceutical products pursuant to the
order from the Republic of Guinea, as well as from the anticipated
commencement of orders from the Ivory coast and Brazil. The Company
16
<PAGE>
presently estimates that it will begin to receive monies from its initial
shipments within thirty to sixty days from the first shipment. This is based
upon the terms of the purchase orders with the Republic of Guinea, which are
backed by Bicgui Bank, the National Bank of Guinea, and a letter of credit
provided in the purchase order. Further, such operating revenues, supplemented
by the Company acceptance of up to an additional $120,000 in private placement
subscriptions, should permit the Company to operate, at present levels, for up
to one additional year or longer, depending upon the timing of shipments and
receipt of payments on the orders.
The Company's monthly operating expenses of $10,000 include rents, office
expenses, professional/accounting fees, telephones and salaries to an
employee, but excluding Dr. Hinton, the Company's sole executive officer. The
Company does not contemplate commencing payment to Dr. Hinton of the monthly
salary of $8,333.33 provided in his three year employment agreement unless and
until it begins to generate revenues from operations. The monies received from
the Company's unit private placement and any pre-export funding will not be
used to pay salaries to officer or fees to directors or consultants, each of
whom have agreed receive compensation for services by the issuance of shares
in registration statements on Form S-8 and/or Form S-1. During 1996 and
through early 1997, the Company's executive officer, directors and consultants
were issued shares in registration statements on Form S-8 in consideration for
their continued services to the Company.
17
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The financial statements for the fiscal year ended December 31, 1996,
are attached hereto.
18
<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 "Registrant") 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
Registrant'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 Registrant'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
Registrant, 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 matter of accounting principles or
practices, financial statement disclosure, or auditing scope of procedure
On May 24, 1996, Registrant 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 Registrant'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 Registrant and Rachlin, Cohen and Holtz to agree on
the amount of time that the accounting firm could devote to Registrant as a
new client, and the cost of conducting the audit, the Registrant 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, Registrant informed Rachlin Cohen and Holtz that
Registrant had retained the accounting firm of Grant-Schwartz Associates,
CPA's, as its auditors, and Rachlin Cohen and Holtz agreed to cooperate with
Registrant in transmitting copies of all records necessary for Grant Schwartz
Associates to complete the 1995 audit. Grant-Schwartz Associates has recently
merged its practice with the accounting firm of Beck Villota & Co., P.C.,
independent public accountants, which combined firm has conducted the audit
for fiscal 1996.
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, Registrant was delayed in completing its Annual
Report on Form 10-KSB for fiscal 1995 and its Quarterly Reports on Forms
10-QSB, for the periods ended March 31, 1996 and June 30, 1996.
19
<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:
<TABLE>
<CAPTION>
Name Age Title
---- --- -----
<S> <C> <C>
Jerrold R. Hinton 55 President, Chief Executive Officer, and
a Director
Thomas J. Craft, Jr., Esq. 32 Secretary, Corporate Counsel and a Director
</TABLE>
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/A.
Jerrold R. Hinton has served as President, Chief Executive Officer and a
Director of the Company from March 1995 to the present in a full time
capacity, 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. From 1992 to early 1995,
prior to joining Registrant in his present capacity Dr. Hinton served as an
officer of United Biomedical, Inc. (UBI), a private company. Dr. Hinton was
not a shareholder of UBI.
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 Registrant and Trident, Mr. Craft
was engaged in the private practice of law in West Palm Beach, FL
RESIGNATION OF REGISTRANT'S DIRECTORS
-------------------------------------
During the fiscal year ended December 31, 1996, and in connection with
the change of its business, principally as set forth in Item 1, "Description
of Business" above, Mr. Gerard Haryman resigned as a director. Copies of the
resignations were filed as exhibits to the Form 10-KSB filed with the
Commission.
The Registrant does not believe that Mr. Haryman resigned as a result of
any disagreement with respect to or relating to Registrant's operations,
policies or practices. Rather, the resignation of Mr. Haryman was the result
of the Registrant's determination not to complete the acquisition of Aptek,
which determination was made by the Registrant after it determined that the
Company was not interest in devoting its assets and energies to a
computer/telecommunications hardware business, and was a result of Mr.
Haryman's individual determination that desired to devote his business efforts
in such field.
20
<PAGE>
(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 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 the following failures to file reports under Section 16(a)
of the Exchange Act:
Name of Filer Report Not Filed
------------- ----------------
Kenneth Coleman Forms 4 and 5
Jerrold R. Hinton Forms 4 and 5
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
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/SAR's Payouts sation
Position (*) Year Salary Bonus($) ($) (#) ($) ($) ($)
- ------------------- ---------- ---------- ---------- ---------- ------------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jerrold Hinton
President, CEO 1996 0 0 0 0 0 0 0
Jerrold Hinton
President, CEO 1995 0 0 0 0 0 0 0
Kenneth Coleman
President, CEO 1994 0 0 0 0 0 0 0
Kenneth Coleman
President, CEO 1993 0 0 0 0 0 0 0
</TABLE>
(*) Messrs. Hinton and Coleman were the Company's chief executive officer and
president during the respective years set forth above. Mr. Hinton was issued
shares in registration statements on Form S-8 during fiscal 1996 in
consideration for his continued services to the Company, in lieu of cash
compensation.
21
<PAGE>
The Company has not had sufficient funds to pay its executive officers or
directors during fiscal 1995 and 1996. However, Ameril Corporation prior to
the determination not to proceed with the acquisition of ADMC, advanced the
following amounts to the Company's executive officers during the period from
January 1, 1995 through October 18, 1995:
Jerrold R. Hinton, Pres./CEO $27,508.00
Douglas G. Morgan, V-P $59,093.17
While Ameril expected to be repaid the amounts, as part of the settlement
with Ameril and the cancellation of all but 2 million of the shares issued to
Ameril, the amounts advanced were forgiven and no monies are owed to Ameril in
connection with the advances.
To date, the Company has not commenced payment of any salaries, but has
executed a three (3) year employment agreement with Dr. Jerrold R. Hinton, who
has agreed to serve the Company in a full time capacity of President and Chief
Executive Officer, as well as a director of the Company. The agreement
provides for the payment to Mr. Hinton of $100,000 and the issuance of 5
million shares and 5 million options, which options are exercisable at $.08
per share. The salary portion of the agreement shall not commence until the
Company begins to generate revenues from operations, of which there can be no
assurance. The Company during fiscal 1996 issued to Dr. Hinton, its president
and chief executive officer a total of 500,000 shares in a Form S-8
registration statement on December 17, 1996 and issued 500,000 shares to
Gerard Haryman in a Form S-8 registration statement on February 29, 1996. In
addition, Thomas J. Craft, Jr., Esq., a director and corporate counsel to the
Company, was issued 350,000 shares in a Form S-8 registration statement on
December 17, 1996. The Company issued additional shares to Messrs. Hinton and
Craft after the end of fiscal 1996, as disclosed under "Business: Consulting
Agreements" above. Also, see the discussion under Item 12. "Certain
Relationships and Related Transactions" below.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of July 6, 1997, 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 five percent (5%) of the Company's outstanding
voting securities was as follows:
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Percent
Beneficial Owner Nature of of
Beneficial Ownership Class (1)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Jerrold R. Hinton 4,000,000 4.6%
700 Canal Street
3rd Floor
Stamford, CT 06902
</TABLE>
______
(1) Based upon 86,212,560 shares issued and outstanding.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Other than the contemplated acquisition of Aptek, which acquisition the
Company did not consummate, during fiscal 1996, the Company has not entered
into any material contracts with any officers, directors or 5% shareholders of
the Company, other than the issuance of shares to its chief executive officer
and directors pursuant to registration statements on Form S-8 and post
effective amendments thereto, as described more fully above. Further, Dr.
Hinton received accrued but unpaid compensation from UBI in the amount of
$240,000 in 1996, for his services to UBI during the period from
22
<PAGE>
1992 to March 1995, when he joined the Company as its chief executive officer
and a director. UBI generated the funds used to pay Dr. Hinton the accrued
salary from its consulting agreement with the Company and its sale of shares
registered in the Company's February 29, 1996, registration statement on Form
S-8.
During the period from July, 1996 through the end of the fiscal year, the
Company leased approximately 40% of the executive office and warehouse space
from Aptek at 501 South Dixie Highway, West Palm Beach, FL 33401, which was
owned by Gerard Haryman. The Company's prorata share of the monthly rental was
$1,500 and the Company also paid certain expenses including telephone,
secretarial, utilities and maintenance expense on a shared basis with Aptek.
The Company believes that the sums paid for the space and the use of Aptek
facilities represented the fair market value of the space and uses.
During the fiscal year ended December 31, 1996, the Company issued to Dr.
Hinton, President and chief executive officer, and Gerard Haryman, a director
of the Company, 500,000 shares each and issued to Thomas J. Craft, Jr., Esq.,
the Company's secretary, corporate counsel and a director 350,000 shares
pursuant to a registration statement on Form S-8, dated December 17, 1996.
23
<PAGE>
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)
10(iii) Material Contracts-Consulting Agreements and Employment
Agreement(filed as Exhibits to Registration Statements of Form
S-8 and post-effective amendments thereto and incorporated
herein by reference
23 Consent of Grant-Schwartz Associates, CPA's
(b) During fiscal 1996, the Company filed Reports on Form 8-K and 8-K/A
on July 5, 1996 and October 22, 1996, respectively. The Company has not filed
any report on Form 8-K during the quarter ended March 31, 1997.
24
<PAGE>
SIGNATURES
----------
In accordance with Section 12 or 15(d) of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN DIVERSIFIED GROUP, INC.
By: /s/ Jerrold R. Hinton
---------------------
Jerrold Hinton, President, Chief
Executive Officer and Director
Date: July , 1997
In accordance with the Exchange Act, this report has been signed below by
the following person on behalf of the Registrant and in the capacities and on
the dates indicated.
/s/ Thomas J. Craft, Jr.
------------------------
Thomas J. Craft Jr., Secretary and Director
25
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1996 and 1995
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
December 31, 1996 and 1995
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
Independent Auditor's Report 3
Financial Statements:
Balance Sheets 4
Statements of Operations 5
Statement of Stockholders' Equity 6
Statements of Cash Flows 7
Notes to Financial Statements 8-14
</TABLE>
F-2
<PAGE>
GRANT-SCHWARTZ ASSOCIATES, CPA'S
40 Southeast 5th Street, Suite 500
Boca Raton, FL 33432
REPORT OF INDEPENDENT AUDITORS
Boards of Directors
American Diversified Group, Inc.
We have audited the accompanying balance sheets of American Diversified Group,
Inc. (formerly Tera West Ventures, Inc.) as of December 31, 1996 and 1995, and
the related statements of operations, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We conducted our audits 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 includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 our audits provide 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
(formerly Tera West Ventures, Inc.) as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years 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. As discussed in Note 5 of the
financial statements, the Company has suffered recurring losses from operations
and other transactions. At December 31, 1996, the Company has an accumulated
deficit of $13,144,044. These issues raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 5. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
GRANT-SCHWARTZ ASSOCIATES, CPA'S
Boca Raton, Florida
July 2, 1997
F-3
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
BALANCE SHEETS
As of December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS
- ------
1996 1995
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash $ - $ 944
Inventories 5,000 5,000
------- -------
TOTAL CURRENT ASSETS 5,000 5,944
------- -------
FIXED ASSETS
Property and equipment (net) 17,642 21,574
------- -------
OTHER ASSETS
Deposits 570 -
Miscellaneous receivable (net of $100,000 allowance) - -
------- -------
TOTAL OTHER ASSETS 570 -
------- -------
TOTAL ASSETS $23,212 $27,518
======= =======
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
- ----------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Cash overdraft $ 4,010 $ -
Accounts payable and accrued expenses 68,494 17,826
Notes payable to related parties 125,521 -
------------ ------------
TOTAL LIABILITIES - ALL CURRENT 198,025 17,826
------------ ------------
STOCKHOLDERS' (DEFICIT) EQUITY
Preferred stock, Series A, $10 par value, authorized 50,000
shares; none outstanding - -
Common stock, par value $.001 per share, authorized
200,000,000 shares at December 31, 1996 and 50,000,000
at December 31 1995; issued and outstanding 63,462,520
shares at December 31, 1996 and 42,542,520 shares at
December 31 1995 63,462 42,542
Additional paid-in capital 13,513,519 9,408,939
Deferred consulting fees ( 607,750) ( 630,000)
Deficit accumulated during development stage ( 4,332,255) -
Deficit accumulated prior to development stage ( 8,811,789) ( 8,811,789)
------------ ------------
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY ( 174,813) 9,692
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY $ 23,212 $ 27,518
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
REVENUES $ - $ -
------------- -------------
EXPENSES
Selling, general and administrative 4,279,670 920,599
------------- -------------
LOSS FROM OPERATIONS ( 4,279,670) ( 920,599)
------------- -------------
OTHER INCOME (EXPENSE)
Loss on disposal of subsidiary - ( 2,545,076)
Debt forgiveness income 50,000 -
Gain (loss) on settlements 4,795 ( 115,310)
Loss on abandoned acquisitions ( 107,380) ( 250,000)
Loss on settlement of litigation - ( 375,000)
------------- --------------
NET OTHER EXPENSE ( 52,585) ( 3,285,386)
------------- --------------
NET LOSS ( $ 4,332,255) ( $ 4,205,985)
============= ==============
Net loss per share ( $ 0.079) ( $ 0.104)
============= ==============
Average number of shares outstanding 54,588,325 40,611,127
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL MINORITY INTEREST
PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT 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
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 9,300,000 9,300 ( 9,300) - - -
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
- as previously reported 42,742,520 42,742 9,408,739 ( 8,811,789) - -
Shares canceled in 1995 ( 200,000) ( 200) 200 - - -
----------- ------------- ------------ --------------- ------------- ---------------
Balance, December 31, 1995
- restated 42,542,520 42,542 9,408,939 ( 8,811,789) - -
Issued shares for services 26,550,000 26,550 3,936,950 - - -
Issued shares for possible
acquisitions 2,000,000 2,000 ( 2,000) - - -
Canceled shares per
settlement ( 8,530,000) ( 8,530) 8,530 - - -
Issued shares for cash 900,000 900 161,100 - - -
Net loss for year ended
December 31, 1996 - - - ( 4,332,255) - -
----------- -------- ------------ -------------- ------------- ---------------
Balance, December 31, 1996 63,462,520 $ 63,462 $ 13,513,519 ($13,144,044) $ - $ -
=========== ======== ============ ============== ============= ===============
</TABLE>
In addition to the above, the Company has authorized 50,000 shares of Preferred
Stock; no shares are outstanding.
The accompanying notes are an integral part of these financial statements.
American Diversified Group, Inc.
F-6
<PAGE>
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------------ -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($ 4,332,255) ($ 4,205,985)
Depreciation 4,482 2,692
General and administrative expenses paid by stock 3,985,750 772,100
Other expenses paid by stock - 375,000
Loss on abandoned acquisitions 107,380 250,000
Loss on disposal of subsidiary - 2,545,076
Debt forgiveness ( 50,000) -
Increase in accounts payable and accrued expenses 50,668 14,326
------------- -------------
NET CASH USED IN OPERATING ACTIVITIES ( 233,975) ( 246,791)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment ( 550) ( 9,066)
Payments for possible acquisitions ( 107,380) -
Deposits ( 570) -
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES ( 108,500) ( 9,066)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock 162,000 250,000
Proceeds from notes payable to related parties 175,521 -
Cash overdraft 4,010 -
------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 341,531 250,000
------------- -------------
Net decrease in cash ( 944) ( 5,857)
CASH - beginning of year 944 6,801
------------- -------------
CASH - end of year $ - $ 944
============= =============
</TABLE>
Non-cash Transactions in 1996:
- ------------------------------
1. Issued 26,550,000 shares of common stock for services of $3,963,500.
2. Issued 2,000,000 shares of common stock for possible acquisition; recorded
at par value ($.001 per share).
3. Canceled 8,530,000 shares per settlement agreement; recorded at par value.
4. Note payable of $50,000 was forgiven.
Non-cash Transactions in 1995:
- ------------------------------
1. Issued 8,250,000 shares of common stock for services of $1,377,100.
2. Issued 80,000 shares 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.
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
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 Tera 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 was
increased from 25,000 shares to 25,000,000 shares and the par value was changed
from $1 per share to $.001 per share, and on the same date the Company approved
a 40 for 1 stock split on outstanding shares. On November 22, 1992, the
authorized shares were increased to 50,000,000 shares. On July 17, 1996, the
authorized shares were increased to 200,000,000 shares.
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 Series A stock are outstanding.
Nature of Operations
- --------------------
Effective 1996, the Company is considered to be a developmental stage company
seeking to operate as a diversified medical company with intentions to acquire,
develop, distribute and/or market medical products, including generic
pharmaceuticals, vitamins, blood derivative products and diagnostic test kits,
principally for the export market. During 1995, the Company was considered to
be a holding company in search of businesses to acquire. The Company has not
generated any revenues from operations during the past two fiscal years ending
December 31, 1996.
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 on a straight line basis and depreciated over the
estimated useful life of the assets which is 5 years.
Accounting Estimates
- --------------------
The preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) 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 amounts of revenues and expenses during the reported
period.
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, 1996, 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.
F-8
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED):
Net Loss Per Common Share
- -------------------------
Loss per common share has been computed based upon the weighted average number
of shares of common stock outstanding. The weighted average number of shares
outstanding for the years ended December 31, 1996 and 1995 was 54,588,325 and
40,611,127, respectively.
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 million 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 in June of 1995 by the return of the 8 million
shares originally issued in the purchase.
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, 1996 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Medical equipment $21,656 $21,656
Office furniture and equipment 2,960 2,410
------- -------
24,616 24,066
Less: Accumulated depreciation 6,974 2,492
------- -------
Net property and equipment $17,642 $21,574
======= =======
</TABLE>
Depreciation expense was $4,482 for 1996, and $2,692 for 1995.
NOTE 4: MISCELLANEOUS RECEIVABLE:
During 1996, the Company entered into an agreement to acquire Imaging Systems
Synergies, Inc. ("ISS"). During negotiations with respect to the proposed
acquisition, the Company advanced $100,000 to assist ISS in continuing its
operations while the Company pursued its due diligence efforts.
Following the completion of due diligence, the Company concluded that it should
not acquire ISS and, after consulting with counsel, pursued a cause of action
against ISS for damages, including recovery of the $100,000 advance. It cannot
be determined at this time whether the Company will be successful in recovering
any damages against ISS.
F-9
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 5: COMMITMENTS AND CONTINGENCIES:
Going Concern
- -------------
As shown in the accompanying financial statements, during the year ended
December 31, 1996, the Company had no revenues and incurred a net loss of
$4,332,255 and, as of December 31, 1996, the Company's accumulated deficit is
$13,144,044. These factors, as well as the uncertain conditions the Company
faces regarding its ability to successfully acquire, develop and distribute
and/or market medical products, including generic pharmaceuticals, vitamins,
blood derivative products and diagnostic test kits, create substantial doubt
about the Company's ability to continue as a going concern.
The Company's management determined its best business opportunities are in the
export and sale of products manufactured by third parties. During 1996, the
Company entered into consulting agreements to assist in entering into the
medical products field and becoming an operating company.
Management's plans also include seeking to raise funds through sales of stock in
private placements and public sales of securities. During the year ended
December 31, 1996, the Company sold 900,000 shares of stock for cash of
$162,000. Subsequent to the year ended December 31, 1996, the Company sold
3,250,000 shares of stock for cash of $130,000. The Company has been actively
seeking to acquire and/or merge with other suitable businesses in its field of
medical products distribution.
Other Risks
- -----------
The Company has not obtained insurance for general liability. Because the
Company is currently in the Development stage, it does not expect to incur any
losses in connection with uninsured risks. Therefore, no provision for any such
loss has been provided in the accompanying financial statements.
Leases
- ------
The Company leases its office premises on a month-to-month basis. Rent expense
for 1996 and 1995 was $14,780 and $5,148, respectively.
NOTE 6: 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 9.3 million additional shares (restricted under Rule
144) 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, 1.3 million shares were returned
to the Company and canceled.
Shares Issued and Canceled 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 (restricted under Rule 144), of which 10.53
million shares were issued to ADMC's principal shareholder, Ameril Corp. The
agreement was never consummated, and on April 4, 1996, the Company entered into
a settlement agreement with Ameril, which, among other things, terminated the
agreement "ab initio," as if the agreement had never been entered into.
F-10
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 6: SHAREHOLDERS' EQUITY (CONTINUED):
Shares Issued and Canceled in Connection with Possible Acquisitions (Continued)
- -------------------------------------------------------------------------------
The settlement provided for Ameril, as the corporate seller of ADMC, to retain 2
million shares of the Company's common stock in consideration for the
cancellation of 8.53 million shares held by Ameril, which 8.53 million shares
were returned to the Company's transfer agent for cancellation.
The settlement also provides for mutual releases of all parties, and
accordingly, during the year ended December 31, 1996, the Company recorded a
gain of $4,795 for net amounts due to the seller, and from ADMC.
In connection with the initial acquisition agreement, the Company issued a total
of 3,150,000 shares of common stock (restricted under Rule 144) as finders' fees
and for consulting services. The Company estimated the value of the fees and
services at $148,000 based on a percentage of the purchase price as stated in
the agreement, and has charged this amount to expense during the year ended
December 31, 1995.
In February, 1995, the Company also issued 100,000 shares of common stock
(restricted under Rule 144) 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 free-trading shares of the
Company's stock which approximates the fair value of the restricted shares
issued. The Company has recorded this amount as a loss during the year ended
December 31, 1995.
In January, 1996, the Company issued 2 million shares of common stock
(restricted under Rule 144) in connection with the possible acquisition of a
company. The acquisition was never consummated and the other company has agreed
to return the 2 million shares to the Company for cancellation. As of the date
these financial statements were prepared, these 2 million shares have note yet
been physically canceled, but the Company's transfer agent has been instructed
that such shares have in fact been canceled. Upon cancellation of these shares,
the Company will adjust stockholders' equity for the par value of the shares
canceled.
Shares Issued in Settlement of Litigation
- -----------------------------------------
In February, 1995, the Company issued 150,000 shares of common stock (restricted
under Rule 144) 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 free-trading
shares of the Company's stock which approximates the fair value of the
restricted shares issued. 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 (restricted
under Rule 144) for professional services rendered. The shares issued were
valued by the Company at $55,000 based on 50% of the bid price of free-trading
shares of the Company's stock which approximates the fair value of the
restricted shares issued. 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 (restricted
under Rule 144) 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 free-trading
shares of the Company's stock which approximates the fair value of the
restricted shares issued. The Company has charged this amount to expense during
the year ended December 31, 1995.
F-11
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 6: SHAREHOLDERS' EQUITY (CONTINUED):
Shares Issued for Services (Continued)
- --------------------------------------
In April, 1995, the Company issued a total of 480,000 shares of common stock
(restricted under Rule 144) 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 free-trading shares of the Company's stock which approximates the fair
value of the restricted shares issued. 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
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.
In December, 1995, the Company issued a total of 3.3 million shares of common
stock for consulting and professional services 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 free-trading shares of the Company's stock. In connection with
services rendered, the Company 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 charged $630,000 to deferred consulting fees, which amount
was charged to expense in 1996.
In March, 1996, the Company issued a total of 17.850 million shares of common
stock for consulting services and professional fees rendered during the fiscal
year and to be rendered during future periods. The shares issued were valued by
the Company at $3,034,500, based upon the average of the bid and ask price of
the shares on the date of issuance. In connection with services rendered, the
Company has charged $2,426,750 to expense during the year ended December 31,
1996, and in connection with services to be rendered during future periods, the
Company has charged $607,750 to deferred consulting fees.
In December, 1996, the Company issued a total of 4.7 million shares of common
stock for consulting services, professional fees and executive compensation for
services rendered during the year ended December 31, 1996. The shares issued
were valued by the Company at $329,000 based upon the average bid and ask price
of the shares on the date of issuance, and the Company charged this amount to
expense during the year ended December 31, 1996.
In December, 1996, the Company agreed with a shareholder to issue 4 million
shares of common stock (restricted under Rule 144) as reimbursement for shares
advanced by the shareholder to third parties for services rendered on the
Company's behalf during fiscal 1996. The shares were valued at $600,000, based
upon the estimated fair market value of the services rendered and the value of
the shares on the dates the shares were advanced, and the Company has charged
this amount to expense during the year ended December 31, 1996. The Company has
also agreed to register these shares, as soon as practicable, and to issue
additional shares as necessary to equal a total market value of $600,000, based
upon the average bid and ask price of the shares on the effective date of the
registration statement.
Shares Issued for Medical Equipment and Supplies
- ------------------------------------------------
In August, 1995, the Company issued 80,000 shares of common stock (restricted
under Rule 144) in exchange for medical equipment and medical supplies, valued
at $15,000 and $5,000, respectively. The Company recorded this transaction
based on the fair value of the medical equipment and supplies, which was more
clearly evident than the fair value of the Company's stock.
F-12
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 6: SHAREHOLDERS' EQUITY (CONTINUED):
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.
During the year ended December 31, 1996, a shareholder exercised stock options
to purchase 900,000 shares of common stock of the Company at $.18 per share, for
which the Company received $162,000.
Common Stock Purchase Options
- -----------------------------
In connection with the Company's private placement, subsequent to the end of the
fiscal year 1996, the Company issued a total of 3,250,000 shares and 3,250,000
options exercisable to purchase 3,250,000 shares at a price of $.08 per share.
The Company has agreed to register the shares and the shares underlying the
options in a registration statement of Form S-1 as soon as reasonably
practicable.
In connection with the Company's consulting agreements with two consultants, the
Company has granted options exercisable to acquire shares of the Company's
common stock. One consultant was granted options to acquire 10 million share
per year, for up to five years, provided that the shareholder is continuing to
provide services to the Company during each of the five years. The options are
exercisable at the lower of $1.00 per share or 50% of the average bid price of
the shares on the 10 days prior to the exercise of the options. The other
consultant has been granted options to acquire 5 million shares at a price of
$.08 per share.
Further, in connection with the retainer agreement with the Company's corporate
counsel, who is also a director and officer of the Company, the corporate
counsel was granted options to acquire 5 million shares at a price of $.08 per
share.
As of December 31, 1995, there are no warrants or options outstanding to acquire
any additional shares of common stock of the Company.
NOTE 7: RELATED PARTY TRANSACTIONS:
Notes Payable to Related Parties
- --------------------------------
As of December 31, 1996, the Company is obligated under four convertible
promissory notes as follows:
<TABLE>
<CAPTION>
<S> <C>
Shareholder and former director $ 75,000
Shareholder and current officer 35,521
Shareholder and consultant 10,000
Shareholder and consultant 5,000
--------
$125,521
========
</TABLE>
The notes are due and payable, without interest, nine months from December 31,
1996, and are convertible at the discretion of the holder, on the basis of
twelve (12) shares for each $1.00 of indebtedness. During the year ended
December 31, 1996, a consultant loaned the Company $50,000 pursuant to a
convertible promissory note, with interest at 12% per annum. The principal and
interest under the note was convertible into shares at a price of $.25 per
share. Subsequent to the Company's year ended December 31, 1996, the $50,000
note was forgiven, based upon a written letter agreement between the Company and
the consultant.
F-13
<PAGE>
American Diversified Group, Inc.
Formerly Tera West Ventures, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 7: RELATED PARTY TRANSACTIONS (CONTINUED):
Employment Agreement
- --------------------
Effective October 1, 1996, the Company entered into a three (3) year employment
agreement with an employee/officer/director pursuant to which the Company agreed
to pay compensation of $100,000 per annum, payable monthly at the rate of
$8,333. In accordance with the agreement, this compensation was accrued but
unpaid because of the Company's lack of positive cash flow. In addition, the
Company agreed to issue to the employee/officer/director 5 million shares and
grant an option exercisable to acquire 5 million shares at a price of $.08 per
share. The above shares and options are in addition to any compensation paid
and payable to the employee/officer/director evidenced by the issuance of shares
in registration statements on Form S-8 during and after the year ended December
31, 1996.
NOTE 8: SUBSEQUENT EVENTS:
Subsequent to the Company's year ended December 31, 1996, the Company shipped
its initial order of generic pharmaceuticals, vitamins and diagnostic test kits
to the Central Pharmacy of the Republic of Guinea. The Company has sources and
is continuing to ship products subject to its order totaling $1 million and has
received commitments from its consultant/distributor to sell up to $15 million
of products to West Africa and Brazil. In addition, the Company is servicing a
request from the National Health Foundation, State of Roraima, in Brazil, to
provide 100,000 dengue fever and 100,000 malaria vivex test kits. The Company
is exploring a joint venture with a third party to manufacture the diagnostic
test kits for the order from Brazil. Further, the Company has shipped blood
derivative products to the National Blood Bank of the Ivory Coast, in West
Africa. The Company has also received a request to supply $1 million in
generic pharmaceutical products to West Africa, and has secured supplies from
third party manufacturers at advantageous pricing in order to fulfill the above
orders and requests to supply products.
On January 2, 1997, the Company issued 4 million shares to a consultants and 1
million shares to its chief executive officer for continued services to the
Company. The shares issued were valued by the Company at $250,000 based upon
the average bid and ask price of the shares on the date of issuance, and the
Company charged this amount to expense during the first quarter of its current
fiscal year. In addition, in consideration for the services of two consultants,
as well as its corporate counsel, director and officers, the Company issued 14.5
million shares. These shares issued were valued by the Company at $725,000
based upon the average bid and ask price of the shares on the date of issuance,
and the Company charged this amount to expense during the first quarter of its
current fiscal year.
The Company has been dependent upon the willingness of its consultants,
officers, directors and professionals to accept shares issued in registration
statements of Form S-8 for services, in lieu of cash compensation. The Company
shall continue to be dependent upon the willingness of persons to accept shares
as compensation for services, until such time, if ever, that it shall generate a
positive cash flow from operations.
F-14
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
As Independent Public Accountants, we consent to the use of our report dated
July 2, 1997 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.)
GRANT-SCHWARTZ ASSOCIATES, CPA's
Boca Raton, Florida
July 2, 1997
