UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number: 0-023532
AMERICAN DIVERSIFIED GROUP, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0292161
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
110 North Center Street, Suite 177, Hickory, NC 28601
(Address of principal executive offices)
(828) 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 254,637,560 shares outstanding
as of June 30, 1999.
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, 1998 and June 30, 1999
(Unaudited).
Statements of Operations - Three months and six months ended
June 30, 1999
and 1998 (Unaudited).
Statements of Cash Flows - Three months and six months ended
June 30, 1999 and 1998 (Unaudited).
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Except for the historical information herein, the matters discussed
in this quarterly report includes forward-looking statements that
may involve a number of risks and uncertainties. Actual results may
vary based upon a number of factors, including, but not limited to,
risk in product availability, product technology changes, market
acceptance of new products and services, questions of continuing
demand, the impact of competitive products and pricing, changes in
economic conditions and other risk factors contained in the
Company's most recent filings with the Securities and Exchange
Commission ("SEC").
Results of Operations
- ---------------------
American Diversified Group, Inc.(the "Company") is a development
stage company. The disclosure in the quarterly report should be
read in conjunction with the Company's annual report on Form 10-
KSB/A for its year ended December 31, 1998, which was filed with
the SEC, as well as the Quarterly Report on Form 10-QSB for the
three month period ended March 31, 1999. During the Company's three
and six month periods ended June 30, 1999, the Company incurred net
losses of $239,614 ($.00 per Share) and $664,145 ($.00 per Share)
compared to net losses of $279,868 ($.00 per Share) and $872,356
($.00 per Share) for the comparable three and six month periods for
the prior year.
The Company reported no sales revenues for the three and six month
periods ended June 30, 1999, compared to sales revenues of $13,672
and $66.422, respectively, for the three and six month periods
ended June 30, 1998. These revenues during 1998 resulted from sales
of generic pharmaceuticals and telecommunication products.
The Company's net losses for the three and six month periods ended
June 30, 1999, were the result of the lack of sales revenues during
the periods and the continued expenses associated with continuing
to operate and maintain its offices, professional fees and expenses
associated with being a reporting public company, which include
accounting and printing/EDGAR preparation and filing fees. The
Company incurred non-cash expenses associated with the issuance of
shares to its executive officer, directors and consultants for
continued services to the Company during the three month period
ended March 31, 1999, in the aggregate amount of $225,000,
exclusive of $48,000 advanced by the Company to GTCC to expand its
Internet telephony business as an affiliate of the Company. No
shares were issued for services during the second quarter ended
June 30, 1999. Such non-cash compensation in connection with the
issuance of shares expensed during the six month period ended June
30, 1998, was $996,400.
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. In addition,
during the second quarter of 1999, the Company received funds from
the exercise of options by certain persons totaling $52,000.
There can be no assurance of any additional exercise of options,
although following the end of the quarter ended June 30, 1999, the
Company granted to certain consultants and employees additional
options from which it believes it will generate revenues prior to
the end of the third quarter ending September 30,1999.
While the Company raised capital from private investors in the
Company's unit private placement ($122,000 net of commissions
during 1997) and ($56,000 net of commissions during 1998), which
units were sold at $.04 per unit, each consisting of one share of
common stock and one common stock purchase option exercisable at
$.08 per share, there can be no assurance based upon present market
price of the shares that it will be able to raise additional
private placement funding, at terms and conditions satisfactory to
the Company, and the Company is not presently soliciting any
private placement proceeds.
The Company, during the first six months of 1999, has continued to
pursue efforts to generate further orders for pharmaceutical
products in West Africa. These efforts, the Company presently
believes, should result in its ability to begin to generate sales
revenues for pharmaceutical products in West Africa. While the
Company's consulting agreement with Emerging Trends Linkages Corp.
(ETLC) expired in June, 1999, the Company, however, is continuing
negotiations with ETLC for the purposes of extending its
relationship with ETLC. In fact, ETLC has engaged the services of a
new representatives for West Africa, and the Company believes that
there will be an increasing level of pharmaceutical product orders
during successive quarters in 1999. The Company has recently
shipped samples, and registration documentation, for the
registration and sale of approximately 30 generic pharmaceutical
products in West Africa. The Company's ability to generate revenues
from such efforts is contingent upon the Company concluding an
extension with ETLC at terms and conditions that are mutually
agreeable.
The Company together with ETLC is presently outsourcing these
generic pharmaceutical products from several third party
manufacturers and distributors, located in India, which have
provided quality products at competitive prices necessary for the
Company to meet the pricing structure in West Africa and elsewhere.
The Company, in May, 1999, was informed by ETLC that initial
deliveries were made of the dengue fever test kits in South
America. These test kits, which are manufactured in US, require
funding from the South American customers prior to any payments
being made the Company and the US manufacturer. The Company's
relationship is directly through ETLC, whose representative was
active in the registration approval of the test kits in South
America, and not with the US manufacturer. The Company believes
that it should be able to generate revenues from the sale of dengue
fever test kits. However, this ability is dependent upon the
Company successfully concluding an extension of its relationship
with ETLC, with whom the Company has had a continued business
relationship since 1995.
The Company, during the quarter ended March 31, 1999, pursuant its
interim stock purchase/loan agreement with Global Transmedia
Communications Corporation (GTCC) of Miami, Florida, continued
efforts to expand the Internet telephony service business of GTCC
in domestic and foreign markets. Following its agreement with GTCC,
initial orders were announced by GTCC for the distribution and sale
of GTCC's telephony service to a distributor in Canada.
However, to date, GTCC has received only limited revenues from the
Canadian distribution agreement, but is pursuing this business
opportunity. Further, GTCC has recently introduced enhancements to
its Internet telephony business service, to permit its
subscribers/users to use GTCC's service world-wide. Initially, its
services were largely limited to Internet telephony from South
America to the US, but with the new enhancements, GTCC's
subscribers may access and place Internet telephony communications
of full voice, data, fax features to and from Asia, South America
and elsewhere, to the US or any other location. While to date, GTCC
has generated only limited operating revenues, the Company has not
yet received any distributions from its arrangement with GTCC.
The Company, based upon the representations received from GTCC,
hopes that during the second half of 1999, GTCC will begin to
generate revenues from operations with increased subscriber base
for its Internet telephony business include prepaid calling cards
at very competitive rates. GTCC recently entered into an agreement
with a group of telecommunication companies in Venezuela. While
such agreement calls for the purchase of a minimum 2,100,000
minutes, and up to 3,900,000 minutes in calling volume, with annual
revenues of up to $780,000, GTCC's ability to generate operating
revenues which ability is dependent upon GTCC's capacity to satisfy
the potential customer requirements in its markets of which there
can be no assurance
The Company continues to be dependent upon the willingness of the
Company's executive officers/directors and its consultants to
accept shares as compensation for continued services to the
Company, which services the Company considers to be valuable and
necessary to its continued operations.
Liquidity and Capital Resources
- -------------------------------
The Company, at June 30, 1999, had current assets of $7,484,
compared to current assets of $59,603 at June 30, 1998, and current
assets of $3,016 at the year ended December 31, 1998. To assist
the Company in its cash flow requirements which are presently
estimated at $5,000 per month, the Company has generated $52,000
from the exercise of options through June 30, 1999. The Company may
determine, depending upon the prevailing stock price of its shares,
to seek subscriptions from the sale of securities to private
investors, although there can be no assurance that it will be
successful in securing any investment from private investors at
terms and conditions satisfactory to the Company, if at all. The
Company may also seek to generate revenues from the exercise of
options, at terms to be negotiated. The Company also hopes to
receive revenues from sales of Internet telephony products and
services in South America, through GTCC, and from sales of
pharmaceutical products in West Africa, dengue fever test kits in
South America. The amount of such sales revenues cannot at this
time be determined.
The Company must conclude at satisfactory terms and conditions the
extension of its consulting relationship with ETLC, in order to
secure the benefit it hopes to derive from pharmaceutical sales and
dengue fever test kit sales. The consulting arrangement with ETLC,
which commenced in 1995, and was extended in November 1998 through
June, 1999, is presently being discussed and the Company believes
that it will successfully conclude such negotiations during the
third quarter of 1999.
Based upon the Company's present liquid resources, after the
expenses that were paid by the Company following receipt of the
proceeds from the exercise of options during the second quarter of
1999, which expenses include office expense,
professional/accounting fees, transfer agent and printing service
fees, and telecommunications costs, among other expenses, and based
upon its present operating expenses of $5,000 per month, the
Company will be able to operate for approximately four months, if
no revenues are generated from operations or other sources.
However, the Company anticipates receipt of increased operating
revenues during the second half of 1999, as a result the business
developments by GTCC, as well as revenues from pharmaceutical and
medical product sales.
The Company's monthly operating expenses of approximately $5,000
during the three and six month periods ended June 30, 1999, include
rent for executive office space in Hickory, NC. ETLC has continued
to provide the Company with the use of conference facilities for
its Investor Relations offices at Rockefeller Center in NYC ( the
arrangement with ETLC provides that there will be no rent costs to
the Company for use of the space at Rockefeller Center),
professional /accounting fees, telephones, but do not reflect any
salary to Dr. Jerrold R. Hinton, the Company's sole executive
officer, which salary has been accrued at the rate of $8,333 per
month, but not paid. 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
positive cash flow from operations.
PART II. OTHER INFORMATION
- --------------------------
Item 1.Legal Proceedings
See Item 3. Legal Proceedings, in the Company's Annual
Report on Form 10-KSB/A for the year ended December 31, 1998.
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 1999 (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 10, 1999
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, 1999
Page
Balance Sheet F-1
Statements of Operations F-2
Statements of Cash Flows F-4
Notes To Financial Statements F-6
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(UNAUDITED) JUNE 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
JUN 30, DEC 31,
1999 1998
(UNAUDITED) (AUDITED)
ASSETS
CURRENT ASSETS
Cash US$4,498 US$30
Refundable taxes 2,986 2,986
----- -----
TOTAL CURRENT ASSETS 7,484 3,016
----- -----
PROPERTY AND EQUIPMENT (net of $9,055 7,794 8,753
accum. depr.) ----- -----
OTHER ASSETS
Deposits 570 570
Contractual advances to acquire
common stock 270,350 222,350
Miscellaneous receivable (less - -
$100,000 allowance)
------- -------
TOTAL OTHER ASSETS 270,920 222,920
------- -------
TOTAL ASSETS US$286,198 US$234,689
========== ==========
LIABILITIES AND DEFICIENCY IN ASSETS
LIABILITIES
Accounts payable US$17,297 US$15,174
Accrued expenses and other
liabilities 746 11,523
Accrued salary payable to officer 275,000 225,000
Notes payable - stockholders 199,421 215,671
------- -------
TOTAL CURRENT LIABILITIES 492,464 467,368
------- -------
DEFICIENCY IN ASSETS
Preferred stock, Series A, $10 par
value,50,000 shares authorized;
none outstanding - -
Common stock, $.001 par value,
350,000,000 shares
authorized; 254,637,560 shares
issued and outstanding;
and 230,762,560 shares issued and 254,637 230,762
outstanding 254,637 230,762
Additional paid-In capital 18,525,74418,224,619
Deferred consulting fees (31,602) (397,160)
Deficit accumulated prior to (8,811,789)(8,811,789)
development stage
Deficit accumulated during (10,143,256)(9,479,111)
development stage
--------- ---------
TOTAL DEFICIENCY IN ASSETS (206,266) (232,679)
--------- ---------
TOTAL LIABILIT. A. DEFICIENCY IN ASSETS $286,198 $234,689
========= =========
See accompanying notes.
</TABLE>
F-1
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF LOSS
(UNAUDITED)
JUNE 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> CUMULATIVE
DURING THE
FOR THE FOR THE FOR THE FOR THE DEVELOPMENT
6 MONTHS 6 MONTHS 3 MONTHS 3 MONTHS STAGE
ENDED ENDED ENDED ENDED JAN 1, 1996
JUN 30, JUN 30, JUN 30, JUN 30, JUN 30,
1999 1998 1999 1998 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
REVENUES
Sales 0 66,422 0 13,672 137,191
Costs of sales - 56,630 - 11,135 125,163
------- ------- ------- ------- ---------
GROSS MARGIN 0 9,792 0 2,537 12,028
------- ------- ------- ------- ---------
EXPENSES
Consulting fees 574,808 790,342 182,779 232,971 9,265,623
Officer's salary 50,000 50,000 25,000 25,000 275,000
Professional fees 16,625 11,963 15,625 3,645 158,475
Reimbursed consultants'
expenses - - - - 127,974
Telephone 5,787 6,286 4,403 3,293 60,075
Other operating expenses 16,925 31,359 11,807 17,314 223,354
------- ------- ------- ------- ----------
TOTAL EXPENSES 664,145 889,950 239,614 282,223 10,110,501
------- ------- ------- ------- ----------
LOSS FROM OPERATIONS (664,145) (880,158) (239,614) (279,686)(10,098,473)
------- ------- ------- ------- ----------
OTHER INCOME (EXPENSE)
Forgiveness of
indebtedness - - - - 50,000
Gains on settlements - - - - 4,795
Loss on abandonment of
acquisitions - - - - (107,380)
Other income - 7,802 - - 7,802
------- ------- ------- ------- -------
NET OTHER INCOME(EXPENSES) 0 7,802 0 0 (44,783)
------- ------- ------- ------- -------
NET LOSS (664,145) (872,356) (239,614) (279,686)(10,143,256)
======= ======= ======= ======= ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
(PRIMARY AND FULLY DILUTED) 243,806,758 197,342,671 254,637,560 212,062,560 126,819,165
----------- ----------- ----------- ----------- -----------
BASIC NET LOSS PER SHARE
(PRIMARY AND FULLY DILUTED) (0.003) (0.004) (0.001) (0.001) (0.080)
----- ----- ----- ----- -----
See accompanying notes.
</TABLE>
F-3
AMERICAN DIVERSIFIED GROUP, INC.
FORMERLY TERA WEST VENTURES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
JUNE 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CUMULATIVE
FOR THE FOR THE DURING THE
6 MONTHS 6 MONTHS DEVELOP STAGE
ENDED ENDED JAN 1, 1996
JUN 30, JUN 30, JUN 30,
1999 1998 1999
(UNAUDITED) (UNAUDITED)(UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss (664,145) (872,356) (10,143,256)
Adjustments to reconcile net
loss to net
cash provided by (used in)
operating activities:
Depreciation 3,590 3,487 21,472
Amortization of deferred 365,558 401,942 5,225,898
consulting fees
Loss on abandonment of - - 107,380
acquisitions
Forgiveness of indebtedness - - (50,000)
Common stock exchanged for 225,000 388,400 4,084,957
services
(Increase) decrease in assets:
Accounts receivable - 23,500 -
Inventory - - 5,000
Other assets - (18,633) -
Increase (decrease) in
liabilities:
Accounts payable and accrued 41,346 60,852 275,216
liabilities
------- ------- -------
NET CASH PROVIDED BY (USED BY)
OPERATING ACTIVITIES (28,651) (12,808) (473,333)
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of property and (2,631) (2,124) (12,315)
equipment
Payments for possible - (107,380)
acquisitions
Deposits - - (570)
------- ------- ---------
NET CASH USED BY INVESTING (2,631) (2,124) (120,265)
ACTIVITIES ------- ------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES
Sales of common stock (net of 52,000 (6,000) 387,500
brokers' fees)
Proceeds (net) from notes payable (16,250) 35,942 264,652
to stockholders
Payments on notes payable to - - (40,000)
potential investees
Payments for loans receivable (15,000) (15,000)
f.potential investees
Cash overdraft - - -
------- -------- --------
NET CASH PROVIDED BY (USED BY)
FINANCING ACTIVITIES 35,750 14,942 597,152
------- -------- --------
NET INCREASE (DECREASE) IN CASH 4,468 10 3,554
CASH, BEGINNING 30 11,069 944
CASH, ENDING 4,498 11,079 4,498
====== ====== =======
See accompanying notes.
</TABLE>
AMERICAN DIVERSIFIED GROUP, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
CUMULATIVE
DURING THE
FOR THE FOR THE DEVELOPMENT
6 MONTHS 6 MONTHS STAGE
ENDED ENDED JAN 1, 1996
JUN 30, JUN 30, JUN 30,
1999 1999 1999
(UNAUDITED) (UNAUDITED)(UNAUDITED)
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest 482 - 482
Income taxes - - -
Cash and common stock given by
shareholders to potential
investee on behalf of the Company
for notes payable - - 167,358
In addition to amounts reflected
above, common stock was issued for:
Contractual advances to 48,000 - 88,000
acquire common stock
Settlement of debt - - 7,000
Consulting services 225,000 996,400 8,892,400
======= ======= =========
</TABLE>
See accompanying notes.
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, 1998 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.
F-6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET (UNAUDITED) AS OFJUNE 30, 1999 AND THE STATEMENTS OF OPERATIONS
(UNAUDITED) FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
<CASH> 4,498 118
<SECURITIES> 0 0
<RECEIVABLES> 2,986 2,986
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,484 3,104
<PP&E> 16,849 14,218
<DEPRECIATION> 9,055 7,260
<TOTAL-ASSETS> 270,920 280,982
<CURRENT-LIABILITIES> 492,464 482,413
<BONDS> 0 0
0 0
0 0
<COMMON> 254,637 254,637
<OTHER-SE> (460,903) (456,068)
<TOTAL-LIABILITY-AND-EQUITY> (286,198) (280,982)
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> (664,145) (239,614)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (664,145) (239,614)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (664,145) (239,614)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
