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: March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT
For the transition period from________ to_____________
Commission file number: 0-023532
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AMERICAN DIVERSIFIED GROUP, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0292161
(State or other jurisdiction of (IRS Employer identification No.)
incorporation or organization)
110 North Center Street, Suite 202, Hickory, NC 28601
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(Address of principal executive offices)
(704) 322-2044
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(Issuer's telephone number)
437 Main Avenue, SW, Hickory, NC 28602
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(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 210,212,560
shares outstanding as of May 1, 1998
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, 1997 (Unaudited) and
March 31, 1998 (Unaudited).
Statements of Operations - Three months and ended
March 31, 1998 and 1997 (Unaudited).
Statements of Cash Flows - Three months ended March
31, 1998 and 1997 (Unaudited).
Notes to Financial Statements
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
American Diversified Group, Inc. (the "Company") is
a development stage company. During the Company's three
month period ended March 31, 1998, the Company incurred a
net loss of $($592,670)($.0032per Share) compared to a loss of
$699,662 ($0.0093 per Share) for the comparable three month
period for the prior fiscal year. The Company reported sales
of $50,750 for the three month period ended March 31, 1998,
represented by the sales revenues and receivables from
generic pharmaceuticals and telecommunication sales compared
to no sales revenues or accounts receivable for the
comparable period of the prior year.
The Company's net loss for the period ended March 31,
1998, was principally the result of the limited sales
revenues during the quarter, the continued expenses
associated with continuing to operate and maintain its
offices and expenses associated with being a reporting
company, which include professional, accounting and
printing/EDGAR preparation and filing fees, and the non-cash
expenses associated with the issuance of shares to its
executive officer, directors and consultants for continued
services to the Company in lieu of cash compensation during
the period. Such non-cash compensation expensed during the
three month period ended March 31, 1998, was $996,400
compared to $975,000 during the same period in the prior
fiscal year. In order for the Company to pay its operating
expenses, including office rents, communication expenses,
accounting and bookkeeping fees, printing and EDGAR
preparation costs, publication costs, and other general and
administrative expenses, the Company was dependent upon the
funds provided by non-interest bearing loans from the
Company's executive officer and directors, from a
consultant, as well as from the private placement of its
securities to private investors.
The Company has continuing orders for pharmaceutical
products in West Africa, which will increase in size during
successive quarters in fiscal 1998, and projects to expand
its orders to other West African countries. The Company is
increasing its product lines to include a broad spectrum of
generic pharmaceuticals and diagnostic test kits. The
Company is in the final stages of testing and approval for
dengue fever test kits in Brazil, and with final approvals
should generate projected gross sales of $5 million
annually.
The Company's ability to continue to ship the products
that are the subject of the purchase orders from West Africa
is essential to the Company's goal of generating increased
levels of operating revenues from its pharmaceutical and
medical products business in West Africa. The Company is
presently outsourcing these generic pharmaceutical products
from several third party manufacturers and distributors
located in the United States, Canada, Mexico, South America,
Europe, and India, which have provided quality generic
pharmaceutical products at highly competitive prices
necessary for the Company to profitably fulfill existing and
future orders for such products from West Africa and
elsewhere.
<PAGE>
The Company, subsequent to the end of the quarter on
March 31, 1998, also shipped additional generic
pharmaceuticals to West Africa. Furthermore, following the
installation of additional communications hardware and
software in West Africa, the Company projects significant
increases in call-back revenues during the remainder of
fiscal 1998, as well as higher profit margins from the
increased revenues. The higher profit margins shall result
from the fact that the new hardware and software will
facilitate greater use of the multiple lines by more
customers, simultaneously, without increased costs. The
Company presently projects that following such installation,
monthly call-back revenues should be approximately $20-
30,000 per month during the 3-6 month call-back start-up
period.
The Company projects from call-back sales to
international and domestic mining companies, financial
institutions, oil companies and foreign embassies in Guinea
and Mali, that it should be able to generate from $200,000
to $400,000 in gross revenues monthly, after the start-up
period of three to six months. The Company further projects
that it will have over 200 customers in or about the summer
of fiscal 1998 and up to 400 customers by fiscal year end
1998, with estimated usage of $500 to $1,000 per customer.
To date, the Company has signed 50 to 100 customers for call-
back service in West Africa but has had only limited
revenues and receivables from call-back because of the
requirement to install the enhanced hardware and software,
which is planned for May, 1998. This installation shall
permit the Company to expand the market penetration for its
call-back telecommunications service in West Africa.
<PAGE>
The services of the Company's consultants, together
with that of the Company's management, have enabled the
Company to reach its present stage of development, which
includes having:
(i) shipped additional generic pharmaceutical
products subject to orders from West Africa, after
generating its purchase orders for such products in fiscal
1997 and its first shipments during the third quarter of
fiscal 1997;
(ii) received a letter of credit in the aggregate
initial amount of approximately $70,000, which sums were
paid to the Company during the first and second quarters of
fiscal 1998, as payment of generic pharmaceutical products
from West Africa;
(iii) received approximately $1,703,500 from private
investors in the Company's unit private placement during
fiscal 1997;
(iv) secured third party manufacturers from whom the
Company can continue to source generic pharmaceuticals at
competitive pricing so as to enable it to sell such products
at satisfactory profit margins during fiscal 1998, in the
highly competitive and price sensitive developing world
markets;
(v) secured all preliminary approvals and
preliminary testing results of dengue fever test kits, which
are prerequisite for the anticipated purchase orders for
dengue fever test kits from the National Health Foundation
of Brazil, State of Roraima, and in Brazil nationally;
(vi) established a business venture that is
presently marketing call-back telecommunication services to
major multinational corporations, domestic business
corporations and foreign embassies in West Africa, from
which the Company first began to generate accounts
receivable commencing in September, 1997, with increasing
revenues and accounts receivable being generated subsequent
to the quarter ending June 30, 1998;
(vii) commenced business relationship with
manufacturers of complete lines of generic pharmaceuticals
for the purpose of satisfying the Company's existing
purchase orders and its expected increasing level of orders
in West Africa; and
(viii) entered into a joint venture and equity
participation agreement with Telephonetics Overseas
Corporation, Miami, FL, which is engaged in the sale of
Internet and Telephony products and services, and on-hold
messaging and advertising products and services.
The Company continues to be dependent upon the
willingness of the Company's executive officer, directors
and each of its consultants to accept shares in lieu of cash
compensation for continued services to the Company. As a
direct result of the foregoing business advances and pending
business developments, the Company has been able to raise
$150,000 through September 30, 1997, from the private
placement of its units, at the unit offering price of $.04.
This funding, together with the recent payments for generic
pharmaceutical products from the letter of credit for the
shipments to West Africa, and anticipated increased levels
of telecommunications revenues in the coming months, 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" during subsequent fiscal periods, perhaps as
early as the second quarter of 1998.
<PAGE>
Liquidity and Capital Resources
The Company, at March 31, 1998, had current assets of
approximately $97,486, compared to $6,336 at the March 31,
1997, and $64,460 at the end of the fiscal year ended December
31, 1997. To assist the Company in its cash flow
requirements which are presently estimated at $10-15,000 per
month, the Company may determine to continue to seek
subscription proceeds from private investors, as well as
revenues from sales of products and telecommunications
products and services, and anticipated commencement of sales
revenues from dengue fever test kits in Brazil. Further, the
Company projects that with the increased revenues from call-
back following the installation of enhanced
telecommunications hardware and software, the Company shall
also have higher profit margins on such revenues for the
reasons stated above.
Notwithstanding indications of interest from investors
for additional subscriptions, 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 March
31, 1998, has been primarily in the range of $.025 to $.05,
but during several days in March, 1998, the trading range
increased to the level of $.06 to $.08 range. Following the
end of the quarter ended March 31, 1998, the trading price
of the shares has again been in the range of $.025 to $.05
per share. 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
March 1998.
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, professional/accounting fees, transfer
agent and printing service fees, and certain other expenses,
and based upon its present monthly operating expenses of $10-
15,000, the Company will be able to operate for
approximately four months if no additional revenues are
generated from operations. However, the Company is
generating increased operating revenues during the first and
second quarters of fiscal 1998, as a result of additional
shipments of generic pharmaceuticals to West Africa, and
projects increasing receivables from sales of call-back
service in West Africa and anticipates revenues from Brazil.
The Company's monthly operating expenses for the
quarter ended March 31, 1998 and during the present quarter
include rent for executive office space in Hickory, NC, use
of conference facilities for its Investor Relations offices
at Rockefeller Center in NYC, professional/accounting fees,
telephones, but do not reflect any salary to Dr. Jerrold R.
Hinton, the Company's sole executive officer. The Company is
accruing but 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 positive cash flow from operations. During
fiscal 1997 and the first quarter of fiscal 1998, 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.
<PAGE>
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
See Footnote E to Financial Statement
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
<PAGE>
EXHIBIT 27
ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET (UNAUDITED) AND THE
OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31 (UNAUDITED)
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<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)
May 15, 1998 By: /s/Jerrold R. Hinton
Jerrold R. Hinton
President, Chief Executive Officer and
Chief Financial Officer
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
PAGE
BALANCE SHEET 1
STATEMENTS OF OPERATIONS 2
STATEMENTS OF CASH FLOW 3
NOTES TO FINANCIAL STATEMENTS 4
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(UNAUDITED)
AS OF MARCH 31, 1998
ASSETS
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Current Assets:
Cash $30,631
Accounts Receivable 61,855
Inventories 5,000
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Total Current Assets 97,486
Fixed Assets:
Property and Equipment (Net of $15,009 Accum. Depr.) 19,258
Other Assets:
Deposits 570
Miscellaneous Receivable (Net of $100,000 Allowance) -
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Total Other Assets 570
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Total Assets $117,314
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LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
- ----------------------------------------------
Current Liabilities:
Accounts and Accrued Expenses Payable $30,622
Accounts and Accrued Exp. Pay.-Related Parties 172,190
Notes Payable to Related Parties 206,463
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Total Current Liabilities 409,275
Shareholders' (Deficit) Equity:
Preferred Stock, Series A, $10 par value
authorized 50,000 shares; none outstand -
Common Stock, par value $.001 per share,
auth.200,000,000 shares; issued and
outstanding 212,062,520 shares 212,062
Additional Paid-In Capital 17,838,319
Deferred Consulting Fees (1,197,305)
Deficit Accumulated During Develop. Stage (8,333,248)
Deficit Accumulated Prior to Develop. Stage(8,811,789)
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Total Shareholders' (Deficit) Equity (291,961)
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Total Liabilities and Shareholders' (Deficit) $117,314
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SEE NOTES TO FINANCIAL STATEMENTS
1
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31
1998 1997
Sales $52,750 $0
Costs of Sales 45,495 0
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Gross Profit 7,255 0
General and Administrative Expenses 607,727 699,662
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Loss From Operations (600,472) (699,662)
Other Income:
Reimbursement of Loss 7,802 -
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Net Loss ($592,670) ($699,662)
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Net Loss Per Share ($0.0032) ($0.0093)
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Average Number of Shares Outstanding 182,495,226 75,090,337
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SEE NOTES TO FINANCIAL STATEMENTS
2
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31
1998 1997
Cash Flows From Operating Activities:
Net Loss ($592,670) ($699,662)
Depreciation 1,711 1,303
General and Administ. Exp. Paid by Stock 557,371 600,181
Increase In Accounts Receivable (13,464) -
Increase In Accounts Pay. and Accrued Exp. 22,188 10,755
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Net Cash Used In Operating Activities (24,864) (87,423)
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Cash Flows From Investing Activities:
Acquisitions of Property and Equipment (516) (3,801)
Decrease In Deposits - 570
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Net Cash Used In Investing Activities (516) (3,231)
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Cash Flows From Financing Activities:
Sales of Common Stock - 100,000
Brokers' Fees Paid on Sales of Common Stock (6,000)
Proceeds from Notes Payable to Related Parti 50,942 -
Payments on Notes Payable to Related Parties - (4,000)
Cash Overdraft - (4,010)
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Net Cash Provided By Financing Activit. 44,942 91,990
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Net Increase in Cash 19,562 1,336
Cash, Beginning of Period 11,069 -
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Cash, End of Period $30,631 $1,336
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Non-Cash Transactions in 1998:
- ------------------------------
1. Issued 52,700,000 shares of common stock for services of $996,400.
Non-Cash Transactions in 1997:
- ------------------------------
1. Issued 19,500,000 shares of common stock for services of $975,000.
SEE NOTES TO FINANCIAL STATEMENTS
3
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1998
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
on 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, 1997 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
