UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to_____________
Commission file number: 0-023532
AMERICAN DIVERSIFIED GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0292161
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
110 North Center Street, Suite 202, Hickory, NC 28601
(Address of principal executive offices)
(704) 322-2044
(Issuer's telephone number)
(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 June 30, 1998.
Transitional Small Business Disclosure Format: Yes __ No X
INDEX
AMERICAN DIVERSIFIED GROUP, INC.
PART I FINANCIAL INFORMATION
Item 1.Financial Statements (Unaudited)
Balance Sheets - December 31, 1997 and June 30, 1998 (Unaudited).
Statements of Operations - Three months and six months
ended June 30, 1998 and 1997 (Unaudited).
Statements of Cash Flows - Three months and six months
ended June 30, 1998 and 1997 (Unaudited).
Notes to Financial Statements
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 and
six month periods ended June 30, 1998, the Company incurred
net losses of $279,686 ($.0013 per Share) and $872,356
($.0044 per share) compared to losses of $260,094
($0.0030 per Share) and $959,756 ($0.0119 per share) for
the comparable three and six month periods of the prior
fiscal year. The Company reported sales of $13,672 and $66,422,
respectively, for the three and six month periods ended
June 30, 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 periods of the prior year.
The Company's net losses for the three and six month
periods ended June 30, 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
six month period ended June 30, 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 has been informed that the dengue fever test kit has
been approved by Brazil's Helath Department and the Company
projects that initial sales of the test kit should commence
during the third quarter of fiscal 1998, with potential
annual sales in Brazil nationally of up to $5 million.
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.
The Company projects from call-back sales to
international and domestic mining companies, financial
institutions, oil companies and foreign embassies in West
Africa that it should be able to generate gross revenues of
up to $200,000 monthly, after installation of certain
telecommunications hardware and software. This is based upon
having approximately 200 customersbefore the end of fiscal
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.
This installation shall permit the Company to expand the
market penetration for its call-back telecommunications
service in West Africa.
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) 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;
(iv) secured approvals 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;
(v) 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 during the third and fourth
quarters of fiscal 1998;
(vi) 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
(vii) entered into a joint venture and equity
participation agreement with Global Transmedia
Communications Corp., Miami, FL, which is engaged in the
sale of Internet and Telephony products and services,
including low cost long distance service, 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. 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.
Liquidity and Capital Resources
The Company, at June 30, 1998, had current assets of
approximately $94,262 compared to $40,303 at the June 30,
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.
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 June 30, 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.
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
See Footnote 3-Miscellaneous Receivables- to Notes to
Financial Statements for the Fiscal Year Ended
December 31, 1997.
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
ARTICLE 5
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET (UNAUDITED) AND THE
OPERATIONS FOR THE PERIOD ENDED JUNE 30 1998 (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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)
August, 1997 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)
JUNE 30, 1998
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
Page
Balance Sheet 1
Statements of Operations 2
Statements of Cash Flows 3
Notes To Financial Statements 5
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(UNAUDITED)
AS OF JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
Current Assets:
Cash $11,079
Accounts Receivable (Net) 24,891
Due from Customer 18,100
Inventories 5,000
Prepaid Expenses 533
-------
Total Current Assets 59,603
Fixed Assets:
Property and Equipment (Net of $16,785 Accum. Depr.)
19,089
Other Assets:
Deposits 570
Advance to Affiliate 15,000
Miscellaneous Receivable
(Net of $100,000 Allowances) -
------
Total Other Assets 15,570
-------
Total Assets $94,262
=======
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS'(DEFICIT) EQUITY
Current Liabilities:
Accounts and Accrued Expenses Payable $11,421
Accounts and Accrued
Expenses Payable to Related Parties 234,044
Notes Payable to Related Parties 191,463
---------
Total Current Liabilities 436,928
Shareholders' (Deficit) Equity:
Preferred Stock, Series A, $10 par value
authorized 50,000 shares; none outstanding -
Common Stock, par value $.001 per share,
authorized 350,000,000 shares; issued and
outstanding 212,062,520 shares 212,062
Additional Paid-In Capital 17,846,819
Stock Subscriptions Receivables (10,500)
Deferred Consulting Fees (964,334)
Deficit Accumulated During
Development Stage (8,614,924)
Deficit Accumulated Prior to
Development Stage (8,811,789)
-----------
Total Shareholders' (Deficit) Equity (342,666)
---------
Total Liabilities and Shareholders' (Deficit) Equity $94,262
=========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
1
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
6 MONTHS 6 MONTHS 3 MONTHS 3 MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues $66,422 $0 $13,672 $0
Cost of Revenues 56,630 11,135
--------- --------- --------- ---------
Gross Profit 9,792 0 2,537 0
Selling, General and
Administrative Expenses 889,950 959,756 282,223 260,094
--------- --------- --------- ---------
Loss From Operations (880,158) (959,756) (279,686) (260,094)
Other Income:
Reimbursement of Losses 7802 0 0 0
----------- ----------- ----------- ----------
Net Loss ($872,356) ($959,756) ($279,686) ($260,094)
=========== =========== =========== ==========
Net Loss Per Share ($0.0044) ($0.0119) ($0.0013) ($0.0030)
=========== =========== =========== ==========
Average Number of Shares Outstanding 197,342,671 80,520,572 212,062,560 85,891,131
=========== =========== =========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
2
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
6 MONTHS 6 MONTHS 3 MONTHS 3 MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Cash Flows From Operating
Activities:
Net Loss ($872,356) ($959,756) ($279,686) ($260,094)
Depreciation 3,487 2,950 1,776 1,647
Amortization of Deferred
Consulting Fees 401,942 232,971
General and
Admin.Expenses Paid by Stock 388,400 775,362 175,181
Decrease in Accounts
Receivable 23,500 36,964
Increase in Due from Customer (18,100) (18,100)
Increase in Prepaid Expenses (533) (533)
Increase in Deposits (29,733) (30,303)
Increase In Accounts Payable
Accrued Expenses 60,852 39,218 38,664 28,463
-------- --------- ------ --------
Net Cash Flows From
Operating Activities (12,808) (171,959) 12,056 (85,106)
-------- --------- ------ --------
Cash Flows From Investing
Activities:
Advances to Affiliates (15,000) (15,000)
Increase in Due from Related Party (5,000) (5,000)
Acquisition of Property
and Equipment (2,124) (9,135) (1,608) (5,334)
-------- -------- ------- -------
Net Cash Flows From Investing
Activities (17,124) (14,135) (16,608) (10,334)
-------- -------- -------- --------
</TABLE>
3
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
6 MONTHS 6 MONTHS 3 MONTHS 3 MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Cash Flows From Financing Activities:
Sales of Common Stock 135,500 35,500
Brokers' Fee Paid on Sales
of Common Stock (6,000)
Proceeds from Notes
Payable to Related Parties 50,942 50,000 50,000
Payments on Notes Payable
to Related Parties (15,000) (9,000) (15,000) (5,000)
Cash Overdraft 9,594 13,604
---------- --------- --------- ----------
Net Cash Flows From
Financing Activities 29,942 186,094 (15,000) 94,104
---------- --------- --------- ----------
Net Increase (Decrease) In Cash 10 0 (19,552) (1,336)
Cash, Beginning of Period 11,069 0 30,631 1,336
---------- --------- --------- ----------
Cash, End of Period $11,079 $0 $11,079 $0
========== ========= ========= ==========
</TABLE>
Non-Cash Transactions in 1998:
1. Issued 52,700,000 shares of costock 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
4
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 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 of the financial position and the results
of operations for the interim period presented. All adjustments
are of a normal recurring nature.
Certain financial information and footnote disclosures which are
normally included in financial statements prepared in accordance
with generally accepted accounting principles, but which are not
required for interim reporting purposes, have been condensed or
omitted. The accompanying financial statements should be read in
conjunction with the financial statements and notes thereto as of
December 31, 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.
