<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: JUNE 30, 1997
-------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________ to _____________
Commission file number: 0-023532
--------
AMERICAN DIVERSIFIED GROUP, INC.
--------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0292161
------ ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
437 MAIN AVENUE, S.W., HICKORY, NC 28602
----------------------------------------
(Address of principal executive offices)
(704) 322-2044
--------------
(Issuer's telephone number)
700 CANAL STREET, 3RD FLOOR, STAMFORD, CT 06902
-----------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the past 12 months ( or for such
shorter period that the registrant was required to file such report (s), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $.001 par value 86,212,560 shares outstanding as of June
30, 1997.
Transitional Small Business Disclosure Format: Yes __ No X
_
<PAGE>
INDEX
AMERICAN DIVERSIFIED GROUP, INC.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Balance Sheets - December 31, 1996 and June 30, 1997 (Unaudited).
Statements of Operations - Three months and six months ended June 30,
1997 and 1996 (Unaudited).
Statements of Cash Flows - Three months and six months ended June 30,
1997 and 1996 (Unaudited).
Notes to Financial Statements
2
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ITEM 2. 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 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. 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.
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 and
during the six months ended June 30, 1997. 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, directors 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 from the sale to developing
countries of products manufactured by third parties. Substantial efforts have
been devoted and expended by Emerging Trends Linkages Corp., a New York
corporation and consultant to the Company ("ETLC") with respect to the
development of purchase orders for generic pharmaceuticals, diagnostic test
kits and blood derivative products from countries in West Africa.
To that end, the Company entered into consulting agreements during fiscal
1996 with 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 and Mali. 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.
3
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Such services have enabled the Company to reach its present stage of
development, which includes: having received product registration and approved
purchase orders aggregating approximately $1,000,000 for generic
pharmaceuticals, vitamins, diagnostic test kits and HSA from the Republic of
Guinea and having shipped its initial generic pharmaceutical products subject
to that order; having secured a commitment for pre-export financing from an
institutional investment banking firm and a loan from private lenders pre-
export funding for its initial shipments to Guinea which shipments commenced
in June, 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, for which technical approvals have been obtained and final
approvals are pending, 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 are presently under consideration; and after the
quarter ended June 30, 1997, having secured a letter of credit in favor of the
Company in the amount of $100,000 from PERGUE S.A.R.L., the Company's
representative in the Republic of Mali underlying the Company's recent orders
from Mali for generic pharmaceuticals, as well as orders for blood derivative
products and diagnostic test kits, which also provided for the shipment of HIV
test kits to Mali for registration and sale to the National Blood Bank of
Mali; and after the quarter ended June 30, 1997 the establishment of a venture
that is presently marketing "call-back" telecommunication services to major
multinational corporations and foreign embassies in both Guinea and Mali, from
which the Company shall begin to generate operating revenues and current
accounts receivable commencing in the quarter ended September 30, 1997.
Directly as a direct result of the foregoing business advances and
pending business developments, the Company has been able to raise
approximately $180,000 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, the receipt of the letter
of credit with respect to the orders from the Republic of Mali, as well as
revenues that the Company believes should be generated from orders for dengue
fever and malaria vivex test kits from Brazil, 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 continue to ship the products that are the
subject of the purchase orders from the Republic of Guinea and the Republic of
Mali is essential to the Company's goal of generating operating revenues from
its pharmaceutical and medical products businesses in West Africa. The Company
is presently outsourcing these generic pharmaceutical products from
approximately 5-10 third party manufacturers and distributors located in the
United States, Canada, Mexico, South America, Europe, and as of the date of
this report also intends to utilize sources in India and China, in order to
fulfill the pending and anticipated future purchase orders. The Company is
also sourcing HIV test kits from several manufacturers pursuant to the orders
from Mali. The Company is presently seeking the best prices that are available
from such manufacturers, consistent with the Guinean and Malian pharmaceutical
products and test kit budgets allocated for
4
<PAGE>
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 and medical products in the
required quantities to satisfy the orders generated from Guinea, Mali 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 pharmaceutical and medical products are available, at
prices and in quantities sufficient to satisfy the orders in a timely manner.
In addition, as discussed above, the Company has established a venture
for the purpose of marketing call-back telecommunication services in Guinea
and Mali, and presently has in excess of thirty major customers for such
service, including such multinational and domestic corporations, such as
Barricks Gold, BMCD (the largest bank in Mali), Mobil Oil, Rangold, Save the
Children-Mali, Eltin Mining, Cathay Pacific Airlines, Guinea Interair
Airlines, Bureau Veritas, Sobragui Brewery (subsidiary of major French bottler
of water, beer and wine) Ro-Marong S.A. (subsidiary of RICO Graph, a major
French manufacturer) as well as the Consulate of Italy and Malian Mission to
United States in New York. The Company's customers commenced using the call-
back service offered by the Company during the third quarter ending September
30, 1997, and as a result, the Company shall generate its first operating
revenues and current accounts receivable, which shall be reported in its Form
10-QSB for the period ending September 30, 1997. On an annual basis, the
Company projects up to $200,000 per month from call-back, after the Company
has had the opportunity to fully market such services in Guinea and Mali, and
signs as customers the corporate and embassy customers that it has targeted.
It is presently anticipated that it may take up to three months to establish
working relationships with its targeted customers, and begin to generate
significant revenues from call-back and there can be no assurance that the
Company will fully penetrate the targeted market, as certain competition
already exists in both Guinea and Mali.
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, and to date
has received approximately $30,000 in subscriptions following the end of the
quarter on June 30, 1997. However, there can be no assurance that additional
subscriptions shall be received under the unit private placement. The trading
price of shares of the Company's common stock during the three months ended
June 30, 1997, has been in the range of $.02 to $.04, but during September,
1997, the trading range has been in the $.05 to $.08 range. 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, whether or not the Company's shares continue to trade at the levels
that have prevailed during September, 1997.
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
5
<PAGE>
and EDGAR service fees, and certain other expenses, and based upon its present
monthly operating expenses, the Company will be able to operate for
approximately 3 to 5 months if no revenues are generated from operations.
However, the Company believes that it will begin to generate operating
revenues during the third quarter of 1997, as a result of the initial
shipments of generic pharmaceuticals to Guinea in June, 1997, as well as the
shipments under purchase orders from Mali for generic pharmaceutical products,
in connection which the Company has recently received a letter of credit for
$100,000. In addition, the Company anticipates commencement of shipment of
dengue fever and malaria vivex test kits to Brazil during the fourth quarter
of fiscal 1997, ending December 31, 1997. The Company presently estimates that
it will begin to receive monies from its initial pharmaceutical shipments in
September, 1997 and will also generate its first revenues from call-back
during the same period.
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 and in lieu of any cash compensation.
6
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Footnote E to Financial Statements
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27
7
<PAGE>
EXHIBIT 27
ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET (UNAUDITED) AND THE OPERATIONS FOR THE PERIOD ENDED JUNE 30 (UNAUDITED)
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
8
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN DIVERSIFIED GROUP, INC..
(Registrant)
September 29, 1997 By: /s/ Jerrold R. Hinton
--------------------------------------
Jerrold R. Hinton
President, Chief Executive Officer and
Chief Financial Officer
9
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
PAGE
----
BALANCE SHEET 1
STATEMENT OF OPERATIONS 2
STATEMENT OF CASH FLOWS 3
NOTES TO FINANCIAL STATEMENTS 5
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(UNAUDITED)
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C> <C>
Current Assets:
Due from Related Party $ 5,000
Inventories 5,000
Deposit 30,303
-----------
Total Current Assets 40,303
Fixed Assets:
Property and Equipment (Net of $9,924
Accum. Depr.) 23,827
Other Assets:
Miscellaneous Receivable (Net of
$100,000 Allowance) --
---------
TOTAL ASSETS $ 64,130
=========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
- ----------------------------------------------
<S> <C> <C>
Current Liabilities:
Bank Overdraft $ 13,604
Accounts Payable and Accrued Expenses 107,712
Notes Payable to Related Parties 166,521
-----------
Total Current Liabilities 287,837
Shareholders' (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; issued and
outstanding 86,212,520 shares 86,212
Additional paid-In Capital 14,601,269
Deferred Consulting Fees (807,388)
Deficit Accumulated During Development Stage (5,292,011)
Deficit Accumulated Prior to Development
Stage (8,811,789)
-----------
Total Shareholders' (Deficit) Equity (223,707)
---------
TOTAL LIABILITIES AND SHAREHOLDERS'
(DEFICIT) EQUITY $ 64,130
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
1
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
6 MONTHS 6 MONTHS 3 MONTHS 3 MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues: $ 0 $ 0 $ 0 $ 0
Expenses:
General and Administrative 969,756 2,083,947 260,094 659,778
Loss From Operations (969,756) (2,083,947) (260,094) (659,778)
Other Income:
Gain on Settlement 4,795
---------- ----------- ---------- ----------
Net Loss ($959,756) ($2,079,152) ($260,094) ($659,778)
========== =========== ========== ==========
Net Loss Per Share ($ 0.0119) ($ 0.0378) ($ 0.0030) ($ 0.0119)
========== =========== ========== ==========
Average Number of Shares Outstanding 80,520,572 54,962,560 85,891,131 55,237,776
========== =========== ========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
2
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
6 MONTHS 6 MONTHS 3 MONTHS 3 MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
--------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net Loss ($959,756) ($2,079,152) ($260,094) ($659,778)
Depreciation 2,950 2,022 1,647 1,222
General and Administrative Expenses
Paid by Stock 775,362 1,981,667 175,181 592,750
Increase in Deposits (29,733) (570) (30,303)
Increase in Accounts Payable and
Accrued Expenses 39,218 7,955 28,463 8,051
--------- ----------- --------- ---------
Net Cash Flows From Operating Activities (171,959) (88,078) (85,106) (57,755)
--------- ----------- --------- ---------
Cash Flows From Investing Activities:
Increase in Advances Receivable (45,482) (45,482)
Increase in Due from Related Party (5,000) (5,000)
Acquisition of Property and Equipment (9,135) (500) (5,334) (550)
Payments for Prepaid Acquisition Costs (19,398) (17,398)
--------- ----------- --------- ---------
Net Cash Flows From Investing Activities (14,135) (65,430) (10,334) (63,430)
--------- ----------- --------- ---------
</TABLE>
3
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
6 MONTHS 6 MONTHS 3 MONTHS 3 MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash Flows From Financing Activities
Sales of Common Stock 135,500 81,000 35,000 81,000
Proceeds from Notes Payable to Related Parties 50,000 83,000 50,000 51,000
Payments on Notes Payable to Related Parties (9,000) (5,000) (10,000)
Cash Overdraft 9,594 13,604
-------- -------- -------- --------
Net Cash Flows From Financing Activities 186,094 164,000 94,104 122,000
-------- -------- -------- --------
Net Increase (Decrease) in Cash 0 10,492 (1,336) 815
Cash, Beginning of Period 0 944 1,336 10,621
-------- -------- -------- --------
Cash, End of Period $ 0 $ 11,436 $ 0 $ 11,436
======== ======== ======== ========
</TABLE>
Non-Cash Transactions in 1997:
- ------------------------------
1. Issued 19,500,000 shares of common stock for services of $975,000.
Non-Cash Transactions in 1996:
- ------------------------------
1. Issued 17,850,000 shares of common stock for services of $3,034,500.
2. Issued 2,000,000 shares of common stock for possible acquisition; recorded
at par value.
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements reflect all adjustments, which,
in the opinion of management, are necessary for a fair presentation of the
financial position and the results of operations for the interim period
presented. All adjustments are of a normal recurring nature,
Certain financial information and footnote disclosures which are normally
included in financial statements prepared in accordance with generally accepted
accounting principles, but which are not required for interim reporting
purposes, have been condensed or omitted. The accompanying financial statements
should be read in conjunction with the financial statements and notes thereto as
of December 31, 1996 contained in the Company's Form 10-KSB.
NOTE 2 - EARNINGS (LOSS) PER SHARE
Per share information is computed based on the weighted average number of shares
outstanding during the period.
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET (UNAUDITED) AS OF JUNE 30, 1997 AND THE STATEMENTS OF OPERATIONS
(UNAUDITED) FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JAN-01-1997 APR-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 0 1,336
<SECURITIES> 0 0
<RECEIVABLES> 5,000 5,000
<ALLOWANCES> 0 0
<INVENTORY> 5,000 5,000
<CURRENT-ASSETS> 40,303 33,967
<PP&E> 33,751 28,417
<DEPRECIATION> 9,924 8,277
<TOTAL-ASSETS> 64,130 26,476
<CURRENT-LIABILITIES> 287,837 220,770
<BONDS> 0 0
0 0
0 0
<COMMON> 86,212 82,962
<OTHER-SE> (309,919) (257,256)
<TOTAL-LIABILITY-AND-EQUITY> 64,130 37,654
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 959,756 260,094
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (959,756) (260,094)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (959,756) (260,094)
<EPS-PRIMARY> (0.012) (0.003)
<EPS-DILUTED> (0.012) (0.003)
</TABLE>
