<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB

(Mark One)

[X]     Quarterly Report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934
        For the quarterly period ended:  February 28, 1998

[ ]     Transition report pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934
        For the transition period from ________________ to ________________


                             Commission File Number
                                    000-23615

                       AMERICAN DIVERSIFIED HOLDINGS, INC.
        (Exact name of small business issuer as specified in its charter)



              NEVADA                                   86-0854150
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)


                            12100 Wilshire Boulevard
                                    Suite 680
                          Los Angeles, California 90025
                    (Address of principal executive offices)

         Issuer's telephone number, including area code: (310) 442-9931


        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 reports), 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: 103,027,000 shares of Common Stock
outstanding as of March 31, 1998.

Transitional Small Business Disclosure Format (check one):

Yes [ ]     No [X]



<PAGE>   2



                       AMERICAN DIVERSIFIED HOLDINGS, INC.
                                   Form 10-QSB


                                      INDEX


<TABLE>
<CAPTION>
                                                                                       Page
                                                                                       ----
<S>                   <C>                                                               <C>
PART I.               FINANCIAL INFORMATION

        Item 1.       Condensed Consolidated Balance Sheets at
                      February 28, 1998 and August 31, 1997......................        3

                      Condensed Consolidated Statements of Operations for the
                      three months and six months ended February 29, 1998 and
                      the period from February 4, 1997 (inception) to August 31,
                      1997 and February 28, 1998.................................        4

                      Condensed Consolidated Statements of Cash Flows
                      for the three months and six months ended February 28, 1998
                      and the period from February 4, 1997 (inception)
                      to AUGUST 31,1997 AND February 28, 1998....................        5

                      Notes to Condensed Consolidated
                      Financial Statements.......................................        6

        Item 2.       Management's Discussion and Analysis of
                      Financial Condition and Results of Operations..............        8


PART II.              OTHER INFORMATION

        Item 1.       Legal Proceedings..........................................        9

        Item 2.       Changes in Securities......................................        9

        Item 3.       Defaults Upon Senior Securities............................        9

        Item 4.       Submission of Matters to a Vote of Security Holders........        9

        Item 5.       Other Information..........................................        9

        Item 6.       Exhibits and Reports on Form 8-K...........................        9
</TABLE>




                                        2

<PAGE>   3

              AMERICAN DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                      February 28, 1998 and August 31, 1997


<TABLE>
<CAPTION>
                                                    February 28, 1998       August 31, 1997
                                                    -----------------       ---------------
<S>                                                    <C>                    <C>         
ASSETS

Cash and cash equivalents ...................          $    306,662           $      2,264
Debt Securities .............................             1,193,049
Prepaid expenses and other
   receivables ..............................               297,592                  4,220
Stock subscriptions received ................             1,842,464                117,000
Equipment ...................................                40,930                 14,320
                                                       ------------           ------------
TOTAL ASSETS ................................          $  3,680,697           $    137,804
                                                       ============           ============


LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Accounts payable and accrued
expenses ....................................               615,038                 63,577

Bank overdraft ..............................               419,911
                                                       ------------           ------------
TOTAL LIABILITIES ...........................             1,034,949                 63,577
                                                       ============           ============

Equity
Series A par value $1;  5,000,000 shares
   authorized, 9% cumulative, convertible
   (subscribed 3,514,491 shares) ............             3,509,011                150,545
Unpaid subscriptions as of
   April 14, 1998 ...........................              (239,489)               (33,545)
Common Stock
   110,000,000 shares authorized; 100,652,000
   shares issued and outstanding ............            10,107,429                 96,754
Deficit accumulated during the
   development stage ........................              (792,278)              (139,527)
Notes receivable from
   shareholders(Note 4) .....................            (9,938,925)
                                                       ------------           ------------
Total Shareholders' Equity ..................             2,645,748                 74,227
                                                       ------------           ------------
TOTAL LIABILITIES AND
SHAREHOLDER'S EQUITY ........................          $  3,680,697           $    137,804
                                                       ============           ============
</TABLE>


See Notes to the Condensed Consolidated Financial Statements


                                              3

<PAGE>   4



                     AMERICAN DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                                 (A Development Stage Company)

                        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                            Period from       Period from
                                        Three months       Six months    February 4, 1997  February 4, 1997
                                            Ended             ended       (inception) to    (inception) to
                                        February 28,      February 28,      February 28,       August 31,
                                           1998              1998              1998               1997
                                        ------------      ------------   ----------------  ----------------
<S>                                     <C>               <C>               <C>               <C>         

REVENUE ..........................      $                 $                 $                 $

EXPENSES

Employee compensation
and benefits .....................           116,993           194,902           215,743            20,841
Travel and entertainment .........            33,377            70,845            93,331            22,486
Administration ...................            65,692           130,183           152,669            22,506
Advertising ......................            52,831            95,299           102,519             7,220
Professional services ............            28,469           161,522           227,996            66,474
                                        ------------      ------------      ------------      ------------
Expenses .........................           297,362           652,751           792,278           139,527
                                        ------------      ------------      ------------      ------------

(Loss) before income taxes .......          (297,362)         (652,751)         (792,278)         (139,527)

Income taxes .....................              --                --                --                --
                                        ------------      ------------      ------------      ------------
NET (LOSS) .......................      $    297,362      $    652,751      $    792,278      $    139,527
                                        ============      ============      ============      ============

Average common shares outstanding         50,250,000       100,409,333        51,727,384        10,000,000
                                        ------------      ------------      ------------      ------------
Net (loss) per common share ......             (0.01)            (0.01)            (0.02)            (0.01)
                                        ------------      ------------      ------------      ------------
</TABLE>


See Notes to the Condensed Consolidated Financial Statements




                                        4

<PAGE>   5

              AMERICAN DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                          (A Development Stage Company)

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

       Periods from inception (February 4, 1997) through August 31, 1997
from December 1, 1997 to February 28, 1998 and from Inception to February 1998

<TABLE>
<CAPTION>
                                                                                    Period from        Period from
                                                Three months      Six months     February 4, 1997   February 4, 1997
                                                   Ended             ended        (inception) to     (inception) to
                                                February 28,      February 28,      February 28,       August 31,
                                                   1998              1998              1998               1997
                                                -----------       -----------    ----------------   ---------------
<S>                                             <C>               <C>               <C>               <C>         

Cash Flows from Operating Activities:
Net Loss .................................      $  (297,362)      $  (652,751)      $  (742,676)      $  (139,527)
Adjustments to reconcile net loss
 to net cash used in operating activities:
Noncash expenses;
   professional fees .....................             --              56,100           105,059            48,959
Depreciation expense .....................            2,049             3,529             3,529
Changes in assets and liabilities:
Increase in accounts payable and
   accrued expenses ......................          442,337           598,647           615,038            63,577
Increase in bank overdraft ...............          112,458           419,911           419,911
Increase in prepaid expenses
   and other .............................         (119,965)         (293,372)         (297,512)           (4,220)
Net cash (used in) provided by
   operating activities ..................          139,517            84,878            53,667           (31,211)
                                                -----------       -----------       -----------       ----------- 
Cash Flows from Investing Activities
   Purchase Equipment ....................          (13,915)          (23,181)          (44,359)          (14,320)
                                                -----------       -----------       -----------       ----------- 
Cash Flows from Financing Activities
   Proceeds from issuance of preferred
   stock .................................          117,009           234,009           234,009
   Proceeds from issuance of common
   stock .................................           15,550            15,550            63,345            47,795
                                                -----------       -----------       -----------       ----------- 
                                                    132,559           249,559           297,354            47,795
                                                -----------       -----------       -----------       ----------- 
Increase in cash and cash equivalent .....          255,822           304,419           306,832             2,264

Cash and Cash equivalents
   Beginning of the period ...............           50,710             2,284              --                --
   End of the period .....................      $   306,662       $   306,662       $   306,662       $     2,264
                                                ===========       ===========       ===========       ===========

Supplement schedule of noncash financing
   activities
Issuance of 510,000, 8,135,000 and 
   7,625,000 common shares in exchange for
   services rendered .....................      $                 $    56,100       $   105,059       $    48,959
                                                -----------       -----------       -----------       ----------- 
Issuance of 1,193,051 preferred shares
   in exchange for debt securities .......      $ 1,193,051                         $ 1,193,051
                                                ===========                         ===========       ===========
Issuance of 90,000,000 common
 shares in exchange for note
 receivable ..............................                        $ 9,773,260       $ 9,773,260
                                                                  ===========       ===========
</TABLE>


See Notes to the Condensed Consolidated Financial Statements




                                        5

<PAGE>   6

                       AMERICAN DIVERSIFIED HOLDINGS, INC.
                                AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

       For the three month and six month periods ending February 28, 1998


NOTE 1:  QUARTERLY INFORMATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with SEC requirements for interim financial statements. The
statements do not necessarily include all disclosures that would be presented in
the Annual Report on Form 10-SB of American Diversified Holdings, Inc. (the
"Company"). These statements should be read in conjunction with the financial
statements contained in the Company's Annual Report on Form 10-SB as of and for
the period from February 4,1997 (inception) to August 31, 1997.

The information furnished reflects all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of Company's financial position and operations for the interim
period. The results are not necessarily indicative of results to be expected for
the fiscal year.

NOTE 2:  NATURE OF THE BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The Company was organized on February 4, 1997 as a provider of financial
services in the United States and Europe. As a development stage enterprise, the
Company has devoted most of its resources since inception to raising capital and
implementing the first stages of its business plan. The Company's fiscal year
ends on the last day of each August.

The Company has established two wholly owned subsidiaries since inception:

<TABLE>
<CAPTION>
                                                               Planned Operations
                                                               ------------------
<S>                                                            <C>
American Diversified AG Wertpapierhandelsbank ("ADAG")         Provider of financial
                                                               services in Germany

American Diversified Asset Management, Inc. ("ADAM")           Investment advisor to
                                                               planned mutual funds
</TABLE>

A summary of the Company's significant accounting policies follows:

Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly owned. All material intercompany
accounts and transactions are eliminated in consolidation.

Cash and cash equivalents
Cash equivalents include highly liquid debt instruments which have a maturity of
three months or less from the date of purchase and other highly liquid
investments which are readily convertible into cash. Cash equivalents are stated
at cost which approximates market value.

Equipment
Equipment is reported at cost and includes expenditures for major improvements.
Depreciation is determined using accelerated methods based on estimated useful
lives of between three and five years.

Foreign Currency Translation
The Company has agreed to fund any cash flow deficits incurred by ADAG, its
European subsidiary. Until such time that ADAG generates sales revenue, the
Company's functional currency (U.S. $) will be considered ADAG's functional
currency for financial reporting purposes.




                                        6

<PAGE>   7

(Note 2 cont.)

Income Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carry forwards. Under the liability method, tax liabilities are recorded
for taxable temporary differences. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, all or a portion of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.

Fair value of financial instruments
The fair value of cash and cash equivalents and capital stock subscriptions
receivable approximates carrying amounts because of the short term nature of
these assets.

Net loss per common share
The net loss per common share is based on the net loss from operations and the
weighted average number of shares of common stock outstanding during the period.

Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities and expenses and the
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.

NOTE 3:  RELATED PARTY TRANSACTIONS
Legal and other services provided by the Company's stockholders and reported as
operating expenses totaled $67,483 and $117,422 during the quarter and six month
period ended February 28, 1998, respectively

In connection with the Company's founding, a group of stockholders contributed
their ownership of a "Bearer Note" secured by a first mortgage on certain real
property in Berlin. The note, with a face value of 17.5 million Deutschmarks, is
due on December 31, 1999 and accumulated interest at 4% per annum. For U.S.
accounting purposes the note receivable and the interest thereon of $9,773,260
and $165,665 respectively, are reflected as a reduction of stockholders' equity
until such time as the note and accumulated interest are converted to cash.

NOTE 4:  PREFERRED STOCK OFFERING
The Company's Board of Directors has authorized the issuance of 5,000,000 shares
of Series A 9% cumulative convertible redeemable preferred stock. The cumulative
dividends are payable semi-annually, when declared, at an annual rate of $.09
per share commencing January 1, 1998.

NOTE 5:  OTHER MATTERS
On November 24, 1997, the Company signed an agreement to effect a merger with
James Buchanan Rea, Inc., the investment advisor and distributor of the
Rea-Graham Balanced Fund. The merger which will be recorded as a purchase
transaction, will be affected by an exchange of 2,375,000 shares of the
Company's common stock and cash of $160,875 for the common stock of James
Buchanan Rea, Inc.




                                        7

<PAGE>   8
ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS

GENERAL

        The Company was organized on February 4, 1997 as a provider of financial
services in the United States and Europe. As a development-stage enterprise, the
Company has devoted most of its resources since inception to raising capital and
implementing the first stages of its business plan. As such, the Company has not
generated any revenues from operations.

RESULTS OF OPERATIONS

        For the three months ended February 28, 1998, the Company had operating
expenses of $297,362 as compared to $355,409 for the three months ended November
30 ,1997. The decrease in operating expenses was primarily due to the
reduction of professional fees associated with the development of the Company.
For the three months ended February 28, 1998, the Company incurred expenses
associated with employee compensation and benefits in the amount of $116,993,
travel and entertainment expenses of $33,377, administration costs of $65,692
and advertising expenses of $52,831 associated with the development of the 
Company.

LIQUIDITY AND CAPITAL RESOURCES

        Costs associated with staffing the Berlin location and initial
promotional costs associated with the Company's Preferred Stock Offering under
Regulation S (the "Offering") increased the Company's monthly liquidity
requirements to approximately $100,000 during the period ending February 28,
1998 as compared to $20,000 per month during the fiscal year ended August 31,
1997. Trade creditors, short-term overdrafts with local financial institutions
and initial cash inflows from the Offering provided the working capital.

SUBSEQUENT EVENTS

        The Company's U.S. subsidiary merged with and into James Buchanan Rea,
Inc. ("JBRI"), a California corporation, effective March 31, 1998. JBRI is a
licensed broker-dealer and a registered investment advisor under the Investment
Advisers Act of 1940. Since its inception in 1982, JBRI has served as the
investment advisor and distributor to the Rea-Graham Balanced Fund, a series of
mutual funds of Rea-Graham Funds, Inc., a diversified, open-end investment
company registered under the Investment Company Act of 1940 (the "Fund"). The
shareholders of the Fund, at a meeting on January 12, 1998, approved a new
investment advisory agreement with American Diversified Asset Management, Inc.,
a Nevada corporation and a wholly-owned subsidiary of the Company ("ADAM"),
effective upon completion of the merger. ADAM will succeed to the business
operations of JBRI and will operate as a broker-dealer and registered investment
advisor. ADAM will succeed as the investment advisor and distributor to the
Fund. James Buchanan Rea, Jr., the former President and registered securities
principal of JBRI has become the President and general securities principal of
ADAM. Other than through the merged operations of JBRI, ADAM does not have an
operating history and has not previously engaged in the investment management
business or in the operation and distribution of mutual funds. At March 31,
1998, the investment management business of ADAM acquired through the JBRI
merger, and the initial business activities of American Diversified AG
Wertspapierhandlesbank, a German corporation and a wholly owned subsidiary of
the Company ("ADAG"), represent the only active business activities of the
Company. The Company's results of operations do not include the results of
operations for JBRI, as the merger did not become effective until March 31,
1998.




                                        8

<PAGE>   9

                                     PART II
                                OTHER INFORMATION


ITEM 1.        LEGAL PROCEEDINGS

               None

ITEM 2.        CHANGES IN SECURITIES AND USE OF PROCEEDS

               (c)(1) The Company accepted subscriptions for 3,351,996 of Series
                      A Preferred Stock during the period covered by this
                      report, all of which were unregistered sales made in
                      reliance on Regulation S.

                  (2) The Company issued 142,000 shares of Common Stock during
                      the period covered by the report to ten employees for
                      $1,555 each in private transactions pursuant to Section
                      4(2) of the Securities Act of 1933, as amended.

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES

               None

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS


ITEM 5.        OTHER INFORMATION

               None

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

               (a)  Exhibits.

                      6.1    Plan and Agreement of Merger and Reorganization
                             among JBRI, ADAM, the Company and certain
                             shareholders of JBRI. (Filed as Exhibit 8.1 to Form
                             10-SB of the Company on January 14, 1998 and
                             incorporated herein by reference.)

               (b)  Reports on Form 8-K

               No reports on Form 8-K were filed during the applicable period





                                        9

<PAGE>   10


                                   SIGNATURES


        Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, therefore duly authorized.



                                  AMERICAN DIVERSIFIED HOLDINGS, INC.



Date:  April 30, 1998             By: /s/ PETER HARTMAN, JR.
                                      ----------------------------------------
                                      Peter Hartman, Jr.
                                      Chief Executive Officer



Date:  April 30, 1998             By: /s/ ROLAND KUETTNER
                                      ----------------------------------------
                                      Roland Kuettner
                                      Principal Financial and Accounting Officer













                                       
<PAGE>   11
                                 EXHIBIT INDEX


Exhibit
Number                   Description
-------                  -----------

  27                     Financial Data Schedule