<PAGE>
 
                     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
                               -------------------------------

                   AMERICAN DIVERSIFIED GROUP, INC.
             ---------------------------------------------

          NEVADA                                      88-0292161
       ------------                                 -----------------
   (State or Other Jurisdiction                       (IRS Employer
     of Incorporation)                                 Identification No.)

                    700 Canal Street, 3rd Floor, Stamford, CT 06902
        --------------------------------------------------------------------
                        (Address of Principal Executive Offices)
 
                                (203) 328-3092
                              ---------------------
                           Issuer's telephone number

  Securities registered under Section 12 (b) of the Exchange Act: None
                                                                  ----
                                    (Title of class)

  Securities registered under Section 12(g) of the Exchange Act
                      common stock, par value $.001
                      -----------------------------
                         (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 
                          -----      ----

  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
                                                             ------------------
  III, Item 13, hereof.
  ---------------------------

  (*) 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
  ----------------------
 
     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.

                                       2
<PAGE>
 
     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.

                                       3
<PAGE>
 
     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
  ----------------------------------------------------------------------
 
       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 

                                       4
<PAGE>
 
  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 

                                       5
<PAGE>
 
  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 

                                       6
<PAGE>
 
  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 

                                       7
<PAGE>
 
  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
  -------------------------              --------          ----------
                                                     
  Quarter Ending March 31                   $   1/8            $   1/32
  Period Ending April 30                    $   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)

    23            Consent Grant-Schwartz Associates, CPA's

    27            Financial Data Schedule

    (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: /s/ Jerrold Hinton
                                    --------------------------------
                                    Jerrold Hinton, President, Chief
                                    Executive Office and Director


                                 Date:  May 1, 1997
                                      ------------------------------


       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

                                     /s/ Thomas J. Craft Jr.
                                     -------------------------------------------
                                     Thomas J. Craft Jr., Secretary and Director


                                      22
<PAGE>
 
                       GRANT-SCHWARTZ ASSOCIATES, CPA'S
                      40 Southeast 5th Street, Suite 500
                             Boca Raton, FL  33432



                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
American Diversified Group, Inc.

We have audited the accompanying balance sheet of American Diversified Group,
Inc. (Formerly Tera West Ventures, Inc.) as of December 31, 1995 and the related
consolidated statements of income, stockholders' equity and cash flows for the
year then ended.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit also includes assessing the accounting principles used
and significant estimates by management, as well as evaluating the overall
financial statement presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Diversified Group,
Inc. (Formerly Tera West Ventures, Inc.) as of December 31, 1995 and the results
of its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 4 of the
financial statements, the Company has suffered recurring losses from operations
and other transactions.  At December 31, 1995, the Company has an accumulated
deficit of $8,811,789.  These raise substantial doubt about its ability to
continue as a going concern.  Management's plans in regard to these matters are
also described in Note 4.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


                                        /s/ Grant-Schwartz Associates, CPA's
                                       _____________________________________

                                          Grant-Schwartz Associates, CPA's

Boca Raton, Florida
July 16, 1996
<PAGE>
 
                        AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                                 BALANCE SHEET
                            AS OF DECEMBER 31, 1995


                                     ASSETS
                                     ------
<TABLE> 
<CAPTION>  

CURRENT ASSETS
--------------
<S>                                            <C>             <C> 
Cash                                           $       944
Inventories                                          5,000
                                               -----------
 
     Total Current Assets                                         5,944
 
FIXED ASSETS
------------
 
Property and Equipment (Net)                                     21,574
                                                                -------
         
     Total Assets                                               $27,518
                                                                =======
 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------

CURRENT LIABILITIES
-------------------

Accounts Payable and Accrued Expenses          $    17,826
                                               -----------

     Total Liabilities                                           17,826

STOCKHOLDERS' EQUITY
--------------------

Preferred Stock, Series A, $10 par value
  authorized 50,000 shares; none outstanding
 
Common Stock, par value $.001 per share,
  authorized 50,000,000 shares; issued and
  outstanding 42,742,520 shares                     42,742
 
Additional Paid-In Capital                       9,408,739
Accumulated Deficit                             (8,811,789)
Deferred Consulting Fees                          (630,000)
                                               -----------
 
     Total Stockholders' Equity                                   9,692
                                                                -------
 
     TOTAL LIABILITIES AND EQUITY                               $27,518
                                                                =======
</TABLE>


                       See Notes to Financial Statements
<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                            STATEMENTS OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1995

<TABLE> 
<CAPTION> 
                                                    1995
                                                  -----------
<S>                                              <C> 
Revenues
  Other Income                                   $       -0-

Expenses
  General and Administrative                         920,599
                                                 -----------

Loss from Operations                                (920,599)
 
Other Losses
  Loss on Disposal of Subsidiary                   2,545,076
  Loss on Possible Acquisitions                      250,000
  Loss on Settlement of Litigation                   375,000
  Loss on Settlement                                 115,310
                                                 -----------
 
     Total Other Losses                            3,285,386
                                                 -----------

Net Loss                                         $(4,205,985)
                                                 ===========

Net Loss Per Share                               $    (0.104)
                                                 =========== 

Average Number of Shares Outstanding              40,611,127
                                                 ===========
</TABLE> 

                       See Notes to Financial Statements
<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                            STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 1995


CASH FLOWS FROM OPERATING ACTIVITIES:
------------------------------------ 

<TABLE>
<S>                                                <C>        
Net Loss                                           $(4,205,985)
Depreciation                                             2,692
General and Administrative Expenses                           
  Paid by Stock                                        772,100
Other Expenses Paid by Stock                           375,000
Loss on Disposal of Subsidiary                       2,545,076
Loss on Possible Acquisition                           250,000
Increase - Accounts Payable                             14,326
                                                   -----------
                                                              
  Cash Flow Used by Operating Activities              (246,791)
                                                              
CASH FLOWS FROM INVESTING ACTIVITIES:                         
------------------------------------                          
                                                              
Acquisition of Property and Equipment                   (9,066)
                                                   ----------- 
                                                              
  Cash Flows Used by Investing Activities               (9,066)
                                                   ----------- 
                                                              
CASH FLOWS FROM FINANCING ACTIVITIES:                         
------------------------------------                          
                                                              
Sale of Common Stock                                   250,000
                                                   -----------
                                                              
  Cash Flows Provided from Financing Activities        250,000
                                                   ----------- 



Net Increase (Decrease) in Cash                         (5,857)

Cash - Beginning                                         6,801
                                                   -----------

Cash - Ending                                      $       944
                                                   ===========
</TABLE> 

NON-CASH TRANSACTIONS:
--------------------- 

1.  Issued 8,250,000 of common stock for services of $1,377,100.
2.  Issued 80,000 of common stock for inventory and equipment valued at $20,000.
3.  Issued 10,000 shares of common stock for bonus of $25,000.
4.  Issued 8,100,000 shares of common stock for possible acquisition valued at
    $250,000.
5.  Issued 150,000 shares of common stock in settlement of litigation of
    $375,000.


                       See Notes to Financial Statements
<PAGE>
 
                        AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                       STATEMENT OF STOCKHOLDERS' EQUITY
                            AS OF DECEMBER 31, 1995


<TABLE>
<CAPTION>
                                            COMMON                  ADDITIONAL
                                            STOCK                    PAID-IN         ACCUMULATED          MINORITY INTEREST
                                     SHARES           AMOUNT         CAPITAL            LOSS           SHARES           TOTAL
                                   ----------         -------      -----------       -----------      --------        ----------
<S>                                <C>                <C>          <C>               <C>              <C>             <C>
BALANCE - DECEMBER 31, 1994        15,152,520         $15,152      $12,142,029       $(4,605,804)      674,619        $1,129,494 
                                                                                                                                
Issued Shares for Services             20,000              20           54,980                                                  
                                                                                                                                
Issued Additional Shares                                                                                                        
for Acquisition of Aimrite          4,000,000           4,000          (4,000)                                                  
                                                                                                                                
Issued for Possible                                                                                                             
Acquisition                           100,000             100          249,900                                                  
                                                                                                                                
Issued in Settlement of                                                                                                         
Litigation                            150,000             150          374,850                                                  
                                                                                                                                
Issued Additional Shares                                                                                                        
for Building and Rights             9,300,000           9,300          (9,300)                                                  
                                                                                                                                
Issued Shares as Bonus                 10,000              10           24,990                                                     
                                                                                                                                
Issued for Acquisition of ADMC     12,000,000          12,000         (12,000)                                                  
                                                                                                                                
Issued as Finder's Fee and                                                                                                      
for Consulting Services             3,150,000           3,150          144,850                                                  
                                                                                                                                
Issued Additional Shares                                                                                                        
for Building and Rights             1,000,000           1,000          (1,000)                                                  
                                                                                                                                
Issued for Professional                                                                                                         
Services                              480,000             480           21,120                                                  
                                                                                                                                
Disposal of Aimrite               (8,000,000)         (8,000)                                         (674,619)       (1,129,494)
                                                                                                                                
Issued for Consulting                                                                                                           
Services                            1,000,000           1,000          124,000                                                  
                                                                                                                                
Issued for Consulting                                                                                                           
Services                              300,000             300           37,200                                                  
                                                                                                                                
Issued for Cash                     2,000,000           2,000          248,000                                                  
                                                                                                                                
Rescission of Acquisition                                                                                                       
of Building and Rights            (1,300,000)         (1,300)      (4,993,500)                                                  
                                                                                                                                
Issued for Inventory and                                                                                                        
Equipment                              80,000              80           19,920                                                  
                                                                                                                                
Issued for Consulting Services                                                                                                  
and Professional Fees               3,300,000           3,300          986,700                                                  
                                                                                                                                
Net Loss for Year Ended                                                                                                         
December 31, 1995                                                                     (4,205,985)                               
                                   ----------         -------       ----------       -----------     ---------     -------------
 
BALANCE DECEMBER 31, 1995          42,742,520         $42,742       $9,408,739       $(8,811,789)    $     -0-     $         -0-
                                   ==========         =======       ==========       ===========     =========     =============
</TABLE> 


                       See Notes to Financial Statements
<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                          FORMERLY TERA WEST VENTURES
                         NOTES TO FINANCIAL STATEMENTS
                     FOR THE YEAR ENDED DECEMBER 31, 1995


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------

Organization and Capitalization
-------------------------------

The Company was organized January 16, 1979 under the laws of the State of Nevada
as Terra West Homes, Inc.  On October 5, 1991 the Company changed its name to
Gerard Enterprises, Ltd., in connection with a merger.  The merger was not
consummated and on November 23, 1991, the name was changed to Tara West
Ventures, Inc.  On March 15, 1995 the Company changed its name to American
Diversified Group, Inc.

On October 20, 1991, the authorized number of shares of common stock were
increased from 25,000 shares to 25,000,000 shares and the par value changed from
$1 per share to $.001 per share, and, on the same date, the Company approved a
40 to 1 forward stock split on outstanding shares.  On November 22, 1992, the
authorized shares were increased to 50,000,000.

On April 7, 1993, the Company amended its Articles of Incorporation and
authorized 50,000 shares of preferred Series A stock with a par value of $10 per
share.  No shares of preferred stock are outstanding.

Cash and Cash Equivalents
-------------------------

Cash and cash equivalents include investments in highly liquid debt instruments
with a maturity of three months or less.

Inventories
-----------

Inventories consist of medical supplies and equipment held for resale and are
stated at the lower of cost or market.  Cost is determined on a first-in, first-
out basis.

Property and Equipment
----------------------

Property and equipment is recorded at cost.  Depreciation of property and
equipment is computed on a straight line basis and depreciated over the
estimated useful lives of assets ranging from 3 to 7 years.

Income Taxes
------------

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes."  The statement
requires that the Company follow the liability method of accounting for income
taxes and requires an adjustment to the provision for income taxes for the
effect on deferred income taxes of any changes in corporate income tax rates.

Through December 31, 1995 the Company has accumulated net operating losses which
can be used to offset future earnings.  Accordingly, no provision for income
taxes is recorded in the financial statements.

Net Income (Loss) Per Common Share
----------------------------------

Income (Loss) per common share has been computed based on the weighted average
number of shares of common stock outstanding.  The weighted average number of
shares outstanding for the year ended December 31, 1995 were 40,611,127.

Nature of Operations
--------------------

The Company is operating as a diversified medical company with intentions to
acquire, develop, and market proprietary medical procedures and cancer treatment
programs and to buy and sell medical equipment and supplies.
<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                          FORMERLY TERA WEST VENTURES
                         NOTES TO FINANCIAL STATEMENTS
                     FOR THE YEAR ENDED DECEMBER 31, 1995


NOTE 2 - BUSINESS DISPOSITION

At December 31, 1994 the Company owned approximately 69% of the outstanding
stock of Aimrite Systems International, Inc. ("Aimrite").  In January 1995, an
additional 4 millions shares were issued in connection with the Company's
acquisition of Aimrite.

Effective March 28, 1995, all of the Company's interest in Aimrite, including
patents and technology for a computer controlled shock absorber system and a
computer controlled air suspension system, was repurchased by the original
selling shareholders of Aimrite in June 1995 by the return of the 8 million
shares originally issued in the purchase.

During the year ended December 31, 1995, the Company recorded a loss of
$2,545,076 on the disposal of Aimrite.


NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 1995 is as follows:
<TABLE>
<CAPTION>
                                                   Useful Life  
                                                   -----------   
<S>                                    <C>           <C>         
     Medical Equipment                  $21,656      5 years     
     Office Furniture and Equipment       2,410      5 years      
                                        -------
     Total Cost                          24,066
     Less: Accumulated Depreciation      (2,492)
                                        -------
     Net Property and Equipment         $21,574
                                        =======
 
</TABLE>
NOTE 4 - COMMITMENTS AND CONTINGENCIES

Going Concern
-------------

As shown in the accompanying financial statements, during year ended December
31, 1995, the Company has had no revenues and has incurred a loss from
operations of $4,205,985 and, as of December 31, 1995, the Company's accumulated
deficit is $8,811,789.  These factors, as well as the uncertain conditions the
Company faces regarding its ability to successfully develop and market its
intended products and services, create an uncertainty about the Company's
ability to continue as a going concern.

The Company's management determined that its best business opportunities were in
the sale of products manufactured by third parties.  During 1996, the Company
entered into consulting agreements to assist in entering into the medical
products field and becoming an operating company.

Management's plans also include seeking to raise funds through sales of stock in
private and public placements of securities.  During the year ended December 31,
1995, the Company sold 2 million shares of stock for cash of $250,000.  The
Company has been actively seeking to acquire or merge with other suitable
businesses.


NOTE 5 - SHAREHOLDERS' EQUITY

Shares Issued for Building and Contractual Rights
-------------------------------------------------

In September and December 1994, the Company issued a total of 1.5 million shares
of common stock as prepayment on the acquisition of a rental building and
certain contractual rights to a construction company.  In February 1995, the
Company issued a total of 9.3 million additional shares (restricted under Rule
144), and, in April 1995, the Company issued an additional 1 million shares as
further consideration.

The building and contractual rights were never delivered to the Company, and in
February 1995 the Company agreed to rescind the acquisition and relinquish its
rights to the building and contractual rights in return for 1.3 million of the
shares previously issued.  In September 1995, 1.3 million shares were returned
to the Company and canceled.

<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                          FORMERLY TERA WEST VENTURES
                         NOTES TO FINANCIAL STATEMENTS
                     FOR THE YEAR ENDED DECEMBER 31, 1995


NOTE 5 - SHAREHOLDERS' EQUITY (CONTINUED)
-----------------------------------------

Shares Issued in Connection with Possible Acquisitions
------------------------------------------------------

Effective February 27, 1995, the Company entered into an agreement to acquire
all of the issued and outstanding stock of American Diversified Medical Corp.
("ADMC"), a Delaware corporation, in exchange for the issuance of 12 million
shares of the Company's common stock.  The agreement was never consummated, and
on April 4, 1996 the Company entered into a settlement which, among other
things, terminated the agreement "ab initio," such as the agreement had never
been entered into.

The settlement provides for the seller to retain 2 million shares of the
Company's stock and to return for cancellation all other shares currently held
by the seller.  As of the date these financial statements were prepared, these
shares have not yet been canceled.  Upon cancellation of these shares, the
Company will adjust stockholders' equity for the par value of the shares
canceled.  See "Subsequent Events" below.

In connection with the initial acquisition agreement, the Company issued a total
of 3,150,000 shares of common stock (restricted under Rule 144) as finders' fees
and for consulting services.  The Company estimated the value of the fees and
services at $148,000 determined based on percentage of the purchase price as
stated in the agreement and has charged this amount to expense during the year
ended December 31, 1995.

In February 1995 the Company also issued 100,000 shares of common stock
(restricted under Rule 144) in connection with another possible acquisition.
The acquisition was never consummated.  The shares issued were valued by the
Company at $250,000 based on 50% of the bid price of free-trading shares of the
Company's stock which approximates the fair value of the restricted shares
issued.  The Company has recorded this amount as a loss during the year ended
December 31, 1995.

Shares Issued In Settlement of Litigation
-----------------------------------------

In February 1995 the Company issued 150,000 shares of common stock (restricted
under Rule 144) in settlement of a pending lawsuit.  The shares issued were
valued by the Company at $375,000 based on 50% of the bid price of free-trading
shares of the Company's stock which approximates the fair value of the
restricted shares issued.  The Company has recorded this amount as a loss during
the year ended December 31, 1995.

Shares Issued for Services
--------------------------

In January 1995 the Company issued 20,000 shares of common stock (restricted
under Rule 144) for professional services rendered.  The shares issued were
valued by the Company at $55,000 based on 50% of the bid price of free-trading
shares of the Company's stock which approximates the fair value of the
restricted shares issued.  The Company has charged this amount to expense during
the year ended December 31, 1995.

In February 1995 the Company issued 10,000 shares of common stock (restricted
under Rule 144) as a bonus to an officer of the Company.  The shares issued were
valued by the Company at $25,000 based on 50% of the bid price of free-trading
shares of the Company's stock which approximates the fair value of the
restricted shares issued.  The Company has charged this amount to expense during
the year ended December 31, 1995.

In April 1995 the Company issued a total of 480,000 shares of common stock
(restricted under Rule 144) for legal and consulting services rendered.  The
shares issued were valued by the Company at $21,600 based on 50% of the bid
price of free-trading shares of the Company's stock which approximates the fair
value of the restricted shares issued.  The Company has charged this amount to
expense during the year ended December 31, 1995.
<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                          FORMERLY TERA WEST VENTURES
                         NOTES TO FINANCIAL STATEMENTS
                     FOR THE YEAR ENDED DECEMBER 31, 1995


NOTE 5 - SHAREHOLDERS' EQUITY (CONTINUED)
-----------------------------------------

Shares Issued for Services (Continued)
--------------------------------------

In June 1995 the Company issued a total of 1 million shares and in August 1995
issued an additional 300,000 shares of common stock for consulting services.
The shares issued were valued by the Company at $125,000 and $37,000,
respectively, based on the issuance price of shares recently sold for cash.  The
Company has charged these amounts to expense during the year ended December 31,
1995.

In December 1995 the Company issued a total of 3.3 million shares of common
stock for consulting services and professional fees rendered during the year
ended December 31, 1995 and to be rendered during future periods.  The shares
issued were valued by the Company at $990,000 based on the average of the bid
and ask price of free-trading shares of the Company's stock.  In connection with
services rendered, the Company has charged $360,000 to expense during the year
ended December 31, 1995, and, in connection with services to be rendered during
future periods, the Company has charged $630,000 to deferred consulting fees.

Shares Issued for Medical Equipment and Supplies
------------------------------------------------

In August 1995 the Company issued 80,000 shares of common stock (restricted
under Rule 144) in exchange for medical equipment and medical supplies, valued
at $15,000 and 5,000, respectively.  The Company recorded this transaction based
on the fair value of the medical equipment and supplies, which was more clearly
evident than the fair value of the Company's stock.

Stock Issued for Cash
---------------------

During July and August 1995, the Company issued 2,000,000 shares of common stock
at $.125 per share, for $250,000 cash.

Warrants and Options
--------------------

As of December 31, 1995 there are no warrants or options outstanding to acquire
any additional shares of common stock of the Company.


NOTE 6 - SUBSEQUENT EVENTS

In March 1996 the Company issued a total of 19.850 million shares of common
stock for consulting services and professional fees.  17.850 million of the
shares issued were valued by the Company at $3,034,500 based on 50% of the
average of the bid and ask price of the stock.  Two million of the shares issued
are restricted (Rule 144) and were valued by the Company at $230,000 based on
the 50% average of the bid and ask price of the stock.

During April 1996, 8,530,000 shares of common stock previously issued in
connection with the terminated ADMC acquisition were canceled.

During June 1996, the Company entered into an agreement to purchase a company
engaged in the business of marketing, sale and distribution of medical products.

During June 1996, the Company entered into an agreement to purchase a company
engaged in the business of providing satellite technologies.