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US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No Fee required]
For the transition period from _____________ to _____________
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
of Incorporation) Identification No.)
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
$.06 and $.065 respectively, of such common stock as of February 27, 1997 is
$4,228,910, based upon an average of $.0625 multiplied by 67,662-560 shares of
common stock as of January 27, 1997 held by non-affiliates. As of February 27,
1997, the Registrant had a total of 68,662,560 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/A except for certain previously filed exhibits identified in Part
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III, Item 13, hereof.
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(*) 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 22.
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PART I
Item 1. Description of Business
Background-Fiscal 1995
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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.
Prior to the exercise by Mr. Coleman of the purchase option, the Company
determined to enter into an acquisition agreement involving the purchase of
ADMC. However, as a condition precedent to the formal closing of this
acquisition, ADMC had to satisfy its representation to the Company that it
had net worth of $2,000,000 at the date of closing. As a result of ADMC's
failure to satisfy such net worth requirement, the closing of this acquisition
was terminated with a rescission and settlement that resulted in the
cancellation of 8,530,000 of the restricted shares of the Company's common
stock that had been issued to ADMC's stockholder, Ameril Corp., in
contemplation of the closing. 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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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 with the Company. The
services provided by AVIX included identification of pharmaceutical firms for
potential joint ventures with ADGI, 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 ADGI and its ventures, and dissemination of information
concerning ADGI 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 ADGI, AVIX:
introduced ADGI 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. 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 Africa, where
refrigeration is not readily available in outlying areas. AVIX also made the
initial introduction of ADGI 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 with respect
to orders from the Republic of Guinea and registration of products in West
Africa). Further. AVIX was responsible for the introduction of ADGI to Judith
Grossman, who became a consultant to ADGI in mid 1995 and has provided
continuing services to ADGI for approximately the past eighteen months to
date, including services that led to ADGI's receipt of a commitment of pre-
export financing from an institutional investment bank for the purpose of
funding the purchase of pharmaceutical products that are the subject of ADGI's
orders from the Republic of Guinea. See "Subsequent Events; Consulting
Agreements; Recent Business Developments".
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 respect to ADMC because ADMC did not have the
business net worth that ADMC had represented to the Company in writing in the
acquisition agreement, the Company should be considered through fiscal 1995 to
continue to be a holding company. During 1995 and into 1996, the Company was
in search of a business or assets that it could acquire, in order to become an
operating company. 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 (the "Test Kits") but also explored other potential acquisitions and
fields, including computer and technology products and services. See the
discussion below under "Subsequent Events".
During fiscal 1995 and beginning 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 HSA and Test Kits, and believed that the
likely market for such products was in Mexico and South America, as well as in
other developing countries. However, during 1995, Registrant did not have an
assured supply for such products, which it sought to develop, with the
assistance of third parties, and also lacked a means to purchase and
distribute products, assuming that both supply of and orders for such products
were obtained. The Company, therefore, pursued third party sources for HSA and
Test Kits and sought to acquire orders for such products, principally in
Mexico and South America.
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During the same period, the Company also contemplated the potential of
establishing a research or commercial medical laboratory; as well as the
purchase and resale of used medical equipment, although it has not been
actively involved in the latter two pursuits.
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. However, when HSA was in short supply or was
otherwise temporarily unavailable though UBI's initial supplier, UBI was
introduced to a new Chinese manufacturer of HSA by AVIX, a consultant to the
Registrant. In addition to the arrangement that AVIX made for HSA supply
directly from the manufacturer in China, AVIX also introduced the Company to
Hemo Biologics International, Inc., of Ft. Lauderdale, FL, which had another
HSA source in China. The services provided by AVIX and UBI in finding HSA
sources for the Company were provided pursuant to the consulting agreements
between the Company and UBI and AVIX, discussed more fully below, and
therefore no additional consideration was given to either UBI or AVIX for such
introductions.
The Company understands that alternate sources of HSA are necessary and
believes that it will be successful in developing alternate suppliers of HSA,
with the introduction by UBI, following the end of the 1995 fiscal year, of a
manufacturer of HSA in Argentina. Such alternate sources are necessary in the
event that any one supplier shall have a temporary shortfall, as has occurred
from time to time in the past. 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 with the manufacturer or the
distributor through whom the Company shall supply products subject to any
orders shall have 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.
Registrant, following the end of the fiscal year, was able to outsource,
with the assistance of UBI access to Test Kits for cholera, syphilis,
gonorrhea and strep. These new sources for both HSA and Test Kits require that
the respective products be submitted for approval prior to shipment of orders
that are the subject of the purchase 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, the Company would be
in position to ship and be paid for the products that are subject of the
orders. This could also result in the Registrant being able to generate future
sales of medical products, including Test Kits and HSA, 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 discussion that follows may be deemed "Subsequent Events", because
they occurred after the Company's fiscal year ended December 31, 1995 and were
part of the Company's continuing efforts to become an operating entity, after
the termination of the agreement with ADMC/Ameril and the exercise of by
Kenneth Coleman of his right to repurchase Aimrite from ADGI.
Subsequent Events; Consulting Agreements; Recent Business Developments
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The Company's principal efforts have involved medical/pharmaceutical
products and the marketing and distribution of such products in developing
countries since the end of its fiscal year ended December 31, 1995. However,
the Company also explored potential acquisitions involving computer and
technology products and services, which latter efforts it has determined not
to pursue. This determination was made principally as a result of the
increasing success the Company has experienced in receiving
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orders for generic pharmaceutical products , vitamins, Test Kits and HSA from
West Africa, commencing with the orders from the Republic of Guinea discussed
below.
The Company is aware that the market for medical products is extremely
competitive. ADGI believes that it can compete successfully on the basis of
price, with respect to certain products as a result of its unique marketing
niche gained from its agreements with UBI, and perhaps more importantly, its
agreements with ETLC. ETLC has provided the Company with purchase orders for
HSA and Test Kits, in the amount of $200,000 and has also provided the Company
with the opportunity to expand its product line, by generating initial
purchase orders from the Republic of Guinea for generic drugs and vitamins in
the amount of approximately $750,000.
Generic pharmaceutical products, which had been only a small percentage
of the total pharmaceutical product market in the developing countries of West
Africa (less than 10% historically) are becoming increasingly in demand, as
compared to brand names 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.
Price has become the critical factor and the generic pharmaceuticals
available from the United States offer an opportunity to penetrate a
previously "closed" market, with an expanded line of products, including Test
Kits, 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. Further, 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.
On February 20, 1996, Registrant entered into a one (1) year consulting
agreement with United Biomedical Inc., 7880 SW 139th Terrace, Miami, FL 33158
("UBI"), which has been engaged in the business of marketing, sale and
distribution of HSA, as well as Test Kits for testing cholera, syphilis,
gonorrhea and strep in human subjects, and related medical products businesses
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 under the Act dated February 29, 1996.
Such shares were issued to UBI in consideration for UBI's providing the
Registrant with consulting services including the introduction rights to
market in Mexico the telemedicine programming which UBI had developed and had
previously granted similar rights for the United States to Systems of
Excellence, Inc., a public company. The Company has been informed that Systems
of Excellence has been engaged in the business a marketing telemedicine
program rights for use by the Division of Corrections for the State of
Florida.
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, which it understood was being marketed by
Systems Of Excellence Inc. to prison facilities in Florida, and which was a
cost effective way of treating patients in a correctional facility, by
relieving the State of the expense and risks associated with transporting
prisoners to outside hospitals and clinics for treatment, could have
application in those developing countries where the Company was seeking to
market HSA, Test Kits, and other medical products. Registrant was also granted
non-exclusive rights to distribute a DNA Analyzer in Mexico and Latin/South
America. A DNA Analyzer is an instrument designed to accurately measure cancer
cells in human patients. Prior to the Company's acquisition of
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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
manufactured by RatCom, Inc., located in Miami, FL.
During fiscal 1995 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 shall it pursue any relationship with or any transactions
involving Systems of Excellence, Inc., nor the DNA Analyzer or the
telemedicine program, principally because it has determined to devote its
resources and energies to the pharmaceutical business. This is based upon
progress that Registrant has made with respect to the receipt of purchase
orders from the Republic of Guinea for HSA, test kits and generic
pharmaceutical and vitamin products, and the approval of the registration
process in the Republic of Guinea and elsewhere in West Africa.
Notwithstanding its decision not to pursue the telemedicine program and DNA
Analyzer businesses, Registrant considers that UBI has fulfilled its
obligations to the Company under the consulting agreement, because of the
assets assigned and other valuable services provided to Registrant by UBI. See
the discussion below with respect to the assignment to ADGI of UBI's purchase
orders.
The Company entered into an agreement with UBI dated June 16, 1996, to
acquire UBI. The principal purpose of acquiring UBI was based upon the
Company's determination that its future was in the medical products field,
which included its perceived ability to generate orders for medical products,
including HSA and Test Kits, UBI's sources of HSA and Test Kits, and UBI's
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 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
with respect to HSA 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. ADGI was also assigned purchase order for cholera
test kits from Mexico-$351,500 through Probifasa. The Company has since agreed
with UBI that it shall not acquire UBI, because it has received those assets
which it considers to be of most value--the assignment of purchase orders and
the sources of HSA and Test Kits--and therefore both parties have agreed that
the 2 million shares shall be returned to the Company's transfer agent for
cancellation.
The principal supplier of cholera, strep, gonorrhea and syphilis Test
Kits is New Horizons Diagnostics Corp., located in Columbia, MD. ADGI has had
several different suppliers of HSA, including three in China and one source in
Argentina. See the discussion below with respect to the purchase orders
received from the Republic of Guinea for HSA and Test Kits. 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 Technical
Products, Inc. of Ft. Lauderdale, FL and Murex Diagnostics, Inc. of Norcross,
GA, for the supply of additional Test Kits, including Test Kits for malaria,
dengue fever and AIDS. See the discussion below with respect to the shipment
and sale of sample strep Test Kits to Brazil pursuant to the efforts of a new
representative of ETLC.
Registrant has not yet generated any revenues from the assignment by UBI
of these 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 established for such products. The
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Company believes that its present supplier of HSA, from Argentina, will
satisfy all regulatory protocols in the South American market.
The Company has since determined that, as a result of the assignment by
UBI to the Company of its purchase orders for HSA and Test Kits, and providing
the Company with all of its sources for such products, as well as the
Company's decision not to pursue telemedicine programming rights or rights to
sell the DNA Analyzer at the present time, it shall not conclude the
acquisition of UBI. As a result, the Company has agreed with Dr. Jerry T.
Thornthwaite, president and principal shareholder of UBI, that the 2 million
restricted shares issued in contemplation of the acquisition will not be
registered but rather will be returned to the Company's transfer agent for
cancellation. Jerrold 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 Registrant's securities
issued pursuant to the consulting agreement which were registered in the
registration statement on Form S-8 dated February 29, 1996.
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. ADGI retained AVIX for such additional services because of the
expertise gained by AVIX in such areas, which expertise has been of value to
ADGI, 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 ADGI's agreement to utilize the services
of ETLC, AVIX provided services for the purpose of assisting ADGI in its
efforts to outsource generic pharmaceutical products that are the subject to
ADGI's purchase orders. 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 ADGI to receive a commitment for pre-export
financing from the institutional investment bank. ADGI has furnished the
institutional investment bank 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, ADGI 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 ADGI. The 1,300,000
shares which were issued to Diversified Corporate Consulting Group L.C. were
included in the AVIX agreement, because of its obligation 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
Company believes that AVIX has continued to fulfill its obligations to ADGI,
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 provides for conversion into shares of common stock
at a price of $.25 per share, which conversion shall be required upon the
filing by the Company of a registration statement on Form S-1 under the Act.
The AVIX Note bears interest at 12% per annum and is due July 30, 1997, unless
the AVIX Note is converted prior to the
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maturity date or the term is extended upon agreement. The Company presently
intends to prepare and file a registration statement on Form S-1 as soon as
reasonably practicable, after the Company's annual report on Form 10-KSB is
filed with the Securities and Exchange Commission for its fiscal year ended
December 31, 1996.
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. In connection with this consulting agreement with ETLC, ETLC agreed
to use its best efforts to secure approvals with respect to registration, and
obtaining 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, and use the services of
ETLC's representatives in these countries to secure approvals necessary to
generate purchase orders for ADGI's product. 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, for an adjusted
price of $.18 per share. These shares and the shares underlying the option
were registered in the Company's registration statement on Form S-8 filed with
the Commission on February 29, 1996. 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.
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 ADGI 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 and Judith Grossman, and to a lesser extent
AVIX, has outsourced from several manufacturers in the United States, Canada,
Mexico, and has also developed a relationship with Chinese sources of generic
pharmaceuticals to fulfill the initial order. ADGI believes that it will be
able to fulfill the order from the Republic of Guinea and further orders as
they are received from one or more third party sources at terms and conditions
satisfactory to the Company, and does not believe that it will be dependent
upon any one source.
The Company, in early March, 1997, shipped pharmaceutical samples to the
Republic of Guinea presently contemplates that it will commence shipment of
products pursuant to both purchase orders commencing in or about late March,
1997 following approval of the samples delivered to the Central Pharmacy of
the Republic of Guinea. Further, because it has received commitments from an
institutional investment bank for pre-export financing to permit it to
purchase and prepay for the products that are subject of the orders, ADGI
should be able to secure more advantageous pricing than if it sought to
purchase the products on credit, and pay for the products after receipt of
payment from the Republic of Guinea, through Bicgui Bank, the National Bank of
Guinea.
Initially, the Company believed that it could commence shipment in or
about the last quarter of 1996, but it determined that it could obtain better
prices for these outsourced orders if it had credit lines prearranged so that
it could pay for the products prior to shipment. These purchase orders will
provide for continuing shipment of products during fiscal 1997, and the
Company believes, based upon information received from ETLC and its Guinean
representatives that further orders will result on or prior to the fulfillment
of these initial purchase orders.
8
<PAGE>
In addition, ETLC has been requested by the Ministry of Health of Guinea,
on behalf of Sierra Leone, which has recently experienced the end of a long
civil war, 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. To that
end, ETLC has requested that Sierra Leone's Ministry of Health and Sanitation
submit a list of World Health Organization approved drugs that are required by
Sierra Leone, including generic pharmaceuticals, Test Kits, HSA, and even
medical supplies. 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 ADGI to the Ministry of Health and Sanitation in Sierra Leone.
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. In consideration for such addendum and
the commitment from ETLC to provide additional consulting services to ADGI,
including services related to generating orders for ADGI for an increased
period from two (2) years to five (5) years, ADGI issued to ETLC 3 million
additional shares in a registration statement on Form S-8, which was filed on
December 17, 1996 and 4 million additional shares that were included in a post
effective amendment to Form S-8 dated January 2, 1997. 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, to permit the Company to
purchase the generic pharmaceuticals, HSA and Test Kits that are the subject
of its existing orders. This line of credit will also continue 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. Following receipt of this commitment for
pre-export financing, the Company has begun the process to draw down the
funding by securing pricing and product availability from 10-15 third party
manufacturers being used for sourcing.
The Company, based upon the orders and the commitment it has received for
pre-export financing, as well as additional financing that it is negotiating
utilizing the services of ETLC and Ms. Grossman, firmly believes that it will
be able to supply such generic drugs and vitamins at prices that shall permit
the Company to generate a profit. Further, through the efforts of ETLC's new
representative in Brazil, the Company has recently shipped and sold samples of
cholera Test Kits to a hospital laboratory facility in Brazil. The Company has
been informed that this facility has favorably approved the samples and has
proceeded to commence the registration process in order for the Test Kits to
be sold and distributed by the Company in Brazil. The same facility has also
requested that the Company submit for approval Test Kits for malaria, dengue
fever and a rapid AIDS Test Kit. The Company is presently in negotiation with
a US manufacturer of the AIDS Test Kits, but no terms have yet been discussed
with respect to cost or supply.
Other 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 in or about 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
9
<PAGE>
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.
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. 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 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
not to acquire Aptek, because of Mr. Haryman's continuing interest in pursuing
the business of Aptek, which involves computers and related products and
services, including telecommunications, fax and cell phone technology.
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 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 is consulting with counsel in Florida to determine whether it
has any cause of action against ISS for damages, including recovery of the
$100,000 in interim capital advanced to ISS. The Company cannot determine at
this time whether it will proceed against ISS, or if it does proceed whether
it will prevail in recovering any damages against ISS. The entire board of
directors of ADGI agreed unanimously not to acquire ISS and referred the
matter to counsel. 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. 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.
10
<PAGE>
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.
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.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fiscal
year ending 1995.
11
<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 January 31, 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
------------------------- -------- ----------
Period Ending Feb. 27 $ 1/8 $ 1/32
</TABLE>
12
<PAGE>
As of February 27, 1997, there were 463 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 a
subsidiary, Aimrite, endeavored to develop and hoped to market a computer
controlled shock absorber system See the discussion under Item 1. "Description
of Business-Background-Fiscal 1995" with respect to Aimrite. Before the shock
absorber system could be completed, of which there was no assurance, the
Company was 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 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-Subsequent Events; Consulting
Agreements; and Recent Business Developments". 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 1995 and was
dependent upon the funds raised in a private placement which involved the
issuance of 2,000,000 shares at $.125 per share, which was sold to private
investors. The Company agreed to register the restricted shares issued in its
private placement in a registration statement on Form S-1, as soon as
reasonably practicable. However, following the private placement, the Company
made the determination to rescind the acquisition of ADMC because of the
breach by Ameril of the material net worth representation contained in the
purchase agreement, the Company did not proceed with the Form S-1.
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.
13
<PAGE>
The Company during 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 were necessary in order for
the Company to reach its present status, which includes its having received
product registration and approved purchase orders from the Republic of Guinea,
and its having secured a commitment for pre-export financing from an
institutional investment banking firm. As a direct result of the foregoing
advance in its business, the Company has been able to raise $130,000 from the
private placement of its units, as described below. This funding, together
with its anticipated shipment in the immediate future of orders to the
Republic of Guinea, and its receipt of payment for such orders, management
believes should enable the Company's independent auditors to remove from their
report the qualification regarding the Company as a "going concern"
The Company during fiscal 1996 received through the efforts of ETLC an
initial order from the Government of the Republic of Guinea for Test Kits and
HSA, in the approximate amount of $200,000, and received a second order of
approximately $750,000 from the Republic of Guinea for generic pharmaceuticals
and vitamins. These order were received after samples of the Test Kits and HSA
were first submitted by ETLC to the Minister of Health and the Director of the
Central Pharmacy of Guinea in May, 1996, for the purpose of securing approval
of such products for registration and thereafter for sale in Guinea.
The Company during fiscal 1996 and through February, 1997, the Company
was dependent upon the willingness of its consultants to continue 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 were necessary in order for the Company to reach its
present status, which includes its having received product registration and
approved purchase orders from the Republic of Guinea, and its having secured a
commitment for pre-export financing from an institutional investment banking
firm. As a direct result of the foregoing advance in its business, the Company
has been able to raise $130,000 from the private placement of its units, as
described below. This funding, together with its anticipated shipment in the
immediate future of orders to the Republic of Guinea, and its receipt of
payment for such orders, management believes should enable the Company's
independent auditors to remove from their report the qualification regarding
the Company as a "going concern".
The timing for shipment of such orders is contemplated to commence during
March, 1997, because the Company shipped samples of the generic
pharmaceuticals and vitamins to the Central Pharmacy of the Republic of Guinea
in early March, 1997. 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, located in the
United States, Canada, Mexico and may utilize a source in China, for the
products that are the subject of the purchase order. The Company is presently
seeking the best prices that are available from such manufacturers, consistent
with the Guinean budget allocated for such ordered 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 $20,000 per month, the Company, during
January and February, 1997, has raised $130,000 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
14
<PAGE>
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.
Based upon the Company's present liquid resources after the expenses that
were paid by the Company following receipt of the placement funds, including
office expenses, relocation expenses, professional fees, transfer agent and
certain other expenses, and its present monthly operating expenses, the
Company will be able to operate for approximately 5 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
shipment of the generic pharmaceuticals and vitamin products pursuant to the
initial order from the Republic of Guinea, and the Company presently estimates
that it will begin to receive monies from its initial shipments within sixty
days from the first shipment, based upon the terms of the purchase orders with
the Republic of Guinea, which are backed by Bicgui Bank, the National Bank of
Guinea. 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 $20,000 include rents, office
expenses, professional fees, telephones and salaries to employees, which
include the recent hiring of an executive administrative assistant to serve as
office manager, but excluding Dr. Hinton, its sole executive officer. The
Company does not contemplate commencing payment to Dr. Hinton of the monthly
salary of $8,333.33 provided in his employment agreement unless and until it
begins to generate revenues from operations. The monies received from the
private placement and from the commitment of capital for pre-export financing
will not be used to pay salaries to officer or fees to directors or
consultants, each of whom have agreed to be issued shares and during 1996 and
through early 1997 were issued shares in registration statements on Form S-8
in consideration for their continued services to the Company.
15
<PAGE>
Item 7. Financial Statements
The financial statements for the fiscal year ended December 31, 1995,
are attached hereto.
16
<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.
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.
17
<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. During the five pears
prior to joining Registrant in his present capacity. From 1992 to early 1995,
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, 1995, and in connection with the
change of its business, principally as set forth in Item 5 above, the
following directors resigned: Claude Kirk, Douglas Morgan, Neil Matheson,
Louis Maniero, and Bernard D. Wagner. Copies of the resignations were filed as
exhibits to the Form 10-KSB filed with the Commission.
The Registrant does not believe that any of the above resigned as a result
of any disagreement with respect to or relating to Registrant's operations,
policies or practices. Rather, the resignation of Douglas Morgan and Neil
Matheson was the result of the Registrant's determination not to complete the
acquisition of American Diversified Medical Corp. (ADMC), which determination
was made by the Registrant after it determined that ADMC did not meet or
satisfy the asset requirement in the agreement for such acquisition. Messrs.
Morgan and Matheson were designees of ADMC. The resignation of Claude Kirk,
Louis Maniero and Bernard D. Wagner was a result of their individual
determinations that they could not devote the time necessary to Registrant.
Following these resignations, the board of directors appointed Gerard Haryman
and Thomas J. Craft, Jr. to serve along with Jerrold R. Hinton until the next
meeting of shareholders. In December, 1996, Gerard Haryman resigned as a
director as a result of the Company determining not to pursue the acquisition
of Aptek and Mr. Haryman's decision that he wished to devote his full business
time to Aptek and his other business interests.
18
<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:
<TABLE>
<CAPTION>
Name of Filer Report Not Filed
------------- ----------------
<S> <C>
Kenneth Coleman Forms 4 and 5
</TABLE>
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/ Payouts sation
Position (*) Year Salary Bonus($) ($) ($) SARs (#) ($) ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jerrold Hinton 1995 0 0 0 0 0 0 0
Kenneth Coleman 1994 0 0 0 0 0 0 0
Kenneth Coleman 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.
The Company has not had sufficient funds to pay its executive officers or
directors during fiscal 1995. 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
19
<PAGE>
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 vest over the term of the
agreement. 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.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
As of December 31, 1996, 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 1,000,000 1.5%
501 South Dixie Blvd.
West Palm Beach,
Fl 33401
Common Stock Kenmar Company Trust(2) 4,421,000 6.5%
225 Stevens Ave
Suite 104
Salem Beach, Ca 92075
</TABLE>
(1) Based upon a total of 68,662,560 shares outstanding.
(2) Kenmar Company Trust is owned by Kenneth Coleman, owner of Aimrite,
which has been a subsidiary of the Company.
Item 12. Certain Relationships and Related Transactions.
Other than the contemplated acquisitions of ADMC and Aptek, which
acquisitions the Company did not consummate, and the disposition of Aimrite by
the action of Kenneth Coleman exercising his option to repurchase the
Company's 70% interest in Aimrite, and the return by Mr. Coleman and his
affiliates of all shares issued in connection with the initial acquisition of
Aimrite, during 1995 and 1996, the Company has not entered into any contracts
with any officers, directors or 5% shareholders of the Company.
20
<PAGE>
However, 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.
Item 13. Exhibits and Reports on Form 8-K.
<TABLE>
<CAPTION>
Sequential
Exhibit No. Document Description Page No.
----------- -------------------- --------
<S> <C> <C>
3.1 Articles of Incorporation (filed as Exhibits 3.1, 3.2 and
3.3 to the Company's Registration Statement on Form
10-SB and incorporated herein by reference)
3.2 Bylaws (filed as Exhibit 3.4 to the Company's
Registration Statement on Form 10-SB and incorporated
herein by reference)
21 Subsidiaries of the registrant
23 Consent of Duane V. Midgley, CPA
(b) The Company filed no Reports on Form 8-K during the quarter ended
December 31, 1995. During fiscal 1996, the Company filed Reports on
Form 8-K and 8-K/A on July 5, 1996 and October 22, 1996, respectively.
</TABLE>
21
<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:
--------------------------------
Jerrold Hinton, President, Chief
Executive Office and Director
Date:
------------------------------
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
-------------------------------------------
Thomas J. Craft Jr., Secretary and Director
22
