<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549
                                  FORM 10-QSB

(Mark one)

[ X ]   QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE   SECURITIES
        EXCHANGE ACT OF 1934

     For the quarterly period ended: JUNE 30, 1997
                                     -------------

[   ]   TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
        ACT OF 1934

     For the transition period from ____________ to _____________

                         Commission file number: 0-023532
                                                 --------

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

               NEVADA                                 88-0292161
               ------                                 ----------
       (State or other jurisdiction of                (IRS Employer
       incorporation or organization)              Identification No.)
 

                    437 MAIN AVENUE, S.W., HICKORY, NC 28602
                    ----------------------------------------
                    (Address of principal executive offices)

                                 (704) 322-2044
                                 --------------
                          (Issuer's telephone number)

                700 CANAL STREET, 3RD FLOOR, STAMFORD, CT 06902
                -----------------------------------------------
  (Former name, former address and former fiscal year, if changed since last
                                    report)

       Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15 (d) of the Exchange Act during the past 12 months ( or for such
shorter period that the registrant was required to file such report (s), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ X ]  No [   ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS
       State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

       Common Stock, $.001 par value 86,212,560 shares outstanding as of June
30, 1997.
                                                            
Transitional Small Business Disclosure Format:  Yes __   No X
                                                            _
<PAGE>
 
                                     INDEX


                        AMERICAN DIVERSIFIED GROUP, INC.


PART I FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS (UNAUDITED)

       Balance Sheets - December 31, 1996 and June 30, 1997 (Unaudited).

       Statements of Operations - Three months and six months ended June 30,
       1997 and 1996 (Unaudited).

       Statements of Cash Flows - Three months and six months ended June 30,
       1997 and 1996 (Unaudited).

       Notes to Financial Statements


                                       2
<PAGE>
 
ITEM 2.  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
  Aimrite, endeavored to develop and market a computer controlled shock absorber
  system Before the shock absorber system could be completed, of which there was
  no assurance, the Company 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. 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 and subsequent to 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.
  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 1996 and
  during the six months ended June 30, 1997. Therefore, the Company was
  dependent upon the funds provided by non-interest bearing loans from the
  Company's executive officer and directors, as well as the willingness of the
  Company's executive officer, directors and consultants to accept shares in
  lieu of cash compensation for continued services to the Company. With the
  assistance of the Company's consultants 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 from the sale to developing
  countries of products manufactured by third parties. Substantial efforts have
  been devoted and expended by Emerging Trends Linkages Corp., a New York
  corporation and consultant to the Company ("ETLC") with respect to the
  development of purchase orders for generic pharmaceuticals, diagnostic test
  kits and blood derivative products from countries in West Africa.

       To that end, the Company entered into consulting agreements during fiscal
  1996 with 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 and Mali. 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.

                                       3
<PAGE>
 
       Such services have enabled the Company to reach its present stage of
  development, which includes: having received product registration and approved
  purchase orders aggregating approximately $1,000,000 for generic
  pharmaceuticals, vitamins, diagnostic test kits and HSA from the Republic of
  Guinea and having shipped its initial generic pharmaceutical products subject
  to that order; having secured a commitment for pre-export financing from an
  institutional investment banking firm and a loan from private lenders pre-
  export funding for its initial shipments to Guinea which shipments commenced
  in June, 1997; having secured purchase orders for 100,000 dengue fever and
  100,000 malaria vivex test kits from the National Health Foundation of Brazil,
  State of Roraima, for which technical approvals have been obtained and final
  approvals are pending, which order may result in additional orders for up to
  1,000,000 test kits in Brazil, nationally; having submitted samples of blood
  derivative products, manufactured by the Bayer Corporation, Biological
  Products Division, pursuant to the request of the National Blood Bank of the
  Ivory Coast, which samples are presently under consideration; and after the
  quarter ended June 30, 1997, having secured a letter of credit in favor of the
  Company in the amount of $100,000 from PERGUE S.A.R.L., the Company's
  representative in the Republic of Mali underlying the Company's recent orders
  from Mali for generic pharmaceuticals, as well as orders for blood derivative
  products and diagnostic test kits, which also provided for the shipment of HIV
  test kits to Mali for registration and sale to the National Blood Bank of
  Mali; and after the quarter ended June 30, 1997 the establishment of a venture
  that is presently marketing "call-back" telecommunication services to major
  multinational corporations and foreign embassies in both Guinea and Mali, from
  which the Company shall begin to generate operating revenues and current
  accounts receivable commencing in the quarter ended September 30, 1997.

       Directly as a direct result of the foregoing business advances and
  pending business developments, the Company has been able to raise
  approximately $180,000 from the private placement of its units, with
  additional commitments form private financing, as described below. This
  funding, together with the shipment in June, 1997, of the initial generic
  pharmaceutical order to the Republic of Guinea, and the anticipated continued
  shipment of orders for generic pharmaceuticals, diagnostic test kits, and
  blood derivative products to the Republic of Guinea, the receipt of the letter
  of credit with respect to the orders from the Republic of Mali, as well as
  revenues that the Company believes should be generated from orders for dengue
  fever and malaria vivex test kits from Brazil, as well as additional sales of
  generic pharmaceutical to West Africa, should enable the Company to become
  operational and hopefully will permit the Company's independent auditors to
  remove from their report the qualification regarding the Company as a "going
  concern".

       The Company's ability to continue to ship the products that are the
  subject of the purchase orders from the Republic of Guinea and the Republic of
  Mali is essential to the Company's goal of generating operating revenues from
  its pharmaceutical and medical products businesses in West Africa. The Company
  is presently outsourcing these generic pharmaceutical products from
  approximately 5-10 third party manufacturers and distributors located in the
  United States, Canada, Mexico, South America, Europe, and as of the date of
  this report also intends to utilize sources in India and China, in order to
  fulfill the pending and anticipated future purchase orders. The Company is
  also sourcing HIV test kits from several manufacturers pursuant to the orders
  from Mali. The Company is presently seeking the best prices that are available
  from such manufacturers, consistent with the Guinean and Malian pharmaceutical
  products and test kit budgets allocated for

                                       4

<PAGE>
 
  such 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 and medical products in the
  required quantities to satisfy the orders generated from Guinea, Mali 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 pharmaceutical and medical products are available, at
  prices and in quantities sufficient to satisfy the orders in a timely manner.

       In addition, as discussed above, the Company has established a venture
  for the purpose of marketing call-back telecommunication services in Guinea
  and Mali, and presently has in excess of thirty major customers for such
  service, including such multinational and domestic corporations, such as
  Barricks Gold, BMCD (the largest bank in Mali), Mobil Oil, Rangold, Save the
  Children-Mali, Eltin Mining, Cathay Pacific Airlines, Guinea Interair
  Airlines, Bureau Veritas, Sobragui Brewery (subsidiary of major French bottler
  of water, beer and wine) Ro-Marong S.A. (subsidiary of RICO Graph, a major
  French manufacturer) as well as the Consulate of Italy and Malian Mission to
  United States in New York. The Company's customers commenced using the call-
  back service offered by the Company during the third quarter ending September
  30, 1997, and as a result, the Company shall generate its first operating
  revenues and current accounts receivable, which shall be reported in its Form
  10-QSB for the period ending September 30, 1997. On an annual basis, the
  Company projects up to $200,000 per month from call-back, after the Company
  has had the opportunity to fully market such services in Guinea and Mali, and
  signs as customers the corporate and embassy customers that it has targeted.
  It is presently anticipated that it may take up to three months to establish
  working relationships with its targeted customers, and begin to generate
  significant revenues from call-back and there can be no assurance that the
  Company will fully penetrate the targeted market, as certain competition
  already exists in both Guinea and Mali.

       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 $10,000 per month, the Company from
  January, 1997 to early June, 1997, has raised approximately $150,000 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 received indications of interest from certain private
  investors for additional subscriptions of up to $120,000 in units, and to date
  has received approximately $30,000 in subscriptions following the end of the
  quarter on June 30, 1997. However, there can be no assurance that additional
  subscriptions shall be received under the unit private placement. The trading
  price of shares of the Company's common stock during the three months ended
  June 30, 1997, has been in the range of $.02 to $.04, but during September,
  1997, the trading range has been in the $.05 to $.08 range. While the Company
  has been successful in raising capital in the unit private placement, there
  can be no assurance that the Company will be able to continue to raise private
  capital, whether or not the Company's shares continue to trade at the levels
  that have prevailed during September, 1997.

       Based upon the Company's present liquid resources after the expenses that
  were paid by the Company following receipt of the private placement funds,
  which expenses included office expenses, relocation expenses,
  professional/accounting fees, transfer agent

                                       5

<PAGE>
 
  and EDGAR service fees, and certain other expenses, and based upon its present
  monthly operating expenses, the Company will be able to operate for
  approximately 3 to 5 months if no revenues are generated from operations.
  However, the Company believes that it will begin to generate operating
  revenues during the third quarter of 1997, as a result of the initial
  shipments of generic pharmaceuticals to Guinea in June, 1997, as well as the
  shipments under purchase orders from Mali for generic pharmaceutical products,
  in connection which the Company has recently received a letter of credit for
  $100,000. In addition, the Company anticipates commencement of shipment of
  dengue fever and malaria vivex test kits to Brazil during the fourth quarter
  of fiscal 1997, ending December 31, 1997. The Company presently estimates that
  it will begin to receive monies from its initial pharmaceutical shipments in
  September, 1997 and will also generate its first revenues from call-back
  during the same period.

       The Company's monthly operating expenses of $10,000 include rents, office
  expenses, professional/accounting fees, telephones and salaries to an
  employee, but excluding Dr. Hinton, the Company's sole executive officer. The
  Company does not contemplate commencing payment to Dr. Hinton of the monthly
  salary of $8,333.33 provided in his three year employment agreement unless and
  until it begins to generate revenues from operations. The monies received from
  the Company's unit private placement and any pre-export funding will not be
  used to pay salaries to officer or fees to directors or consultants, each of
  whom have agreed receive compensation for services by the issuance of shares
  in registration statements on Form S-8 and/or Form S-1. During 1996 and
  through early 1997, the Company's executive officer, directors and consultants
  were issued shares in registration statements on Form S-8 in consideration for
  their continued services to the Company and in lieu of any cash compensation.


                                       6
<PAGE>
 
PART II.  OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS


         See Footnote E to Financial Statements


ITEM 2.  CHANGES IN SECURITIES


         NONE


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES


         NONE


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


         NONE


ITEM 5.  OTHER INFORMATION


         NONE


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K


 
         Exhibit 27


                                       7
<PAGE>
 
EXHIBIT 27


ARTICLE 5

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET (UNAUDITED) AND THE OPERATIONS FOR THE PERIOD ENDED JUNE 30 (UNAUDITED)
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.


                                       8
<PAGE>
 
                                   SIGNATURES

       In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                              AMERICAN DIVERSIFIED GROUP, INC..
                              (Registrant)



September 29, 1997            By:  /s/ Jerrold R. Hinton
                                   --------------------------------------
                                   Jerrold R. Hinton
                                   President, Chief Executive Officer and
                                   Chief Financial Officer
 

                                       9

<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                             FINANCIAL STATEMENTS

                                  (UNAUDITED)

                                 JUNE 30, 1997
<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                             FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 JUNE 30, 1997


                                                                       PAGE
                                                                       ----
BALANCE SHEET                                                            1
                                                              
STATEMENT OF OPERATIONS                                                  2
                                                              
STATEMENT OF CASH FLOWS                                                  3
                                                              
NOTES TO FINANCIAL STATEMENTS                                            5
<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                                 BALANCE SHEET
                                  (UNAUDITED)
                              AS OF JUNE 30, 1997

<TABLE>
<CAPTION>
ASSETS
------
<S>                                             <C>             <C>
Current Assets:
  Due from Related Party                        $     5,000     
  Inventories                                         5,000
  Deposit                                            30,303
                                                -----------
    Total Current Assets                                           40,303

Fixed Assets:
  Property and Equipment (Net of $9,924
   Accum. Depr.)                                                   23,827

Other Assets:
  Miscellaneous Receivable (Net of
   $100,000 Allowance)                                                 --
                                                                ---------
    TOTAL ASSETS                                                $  64,130
                                                                =========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
----------------------------------------------
<S>                                             <C>             <C>
Current Liabilities:
  Bank Overdraft                                $    13,604
  Accounts Payable and Accrued Expenses             107,712
  Notes Payable to Related Parties                  166,521
                                                -----------
    Total Current Liabilities                                     287,837

Shareholders' (Deficit) Equity:
  Preferred Stock, Series A, $10 par value
   authorized 50,000 shares; none outstanding            --
  Common Stock, par value $.001 per share,
   authorized 200,000,000 shares; issued and
   outstanding 86,212,520 shares                     86,212
  Additional paid-In Capital                     14,601,269
  Deferred Consulting Fees                         (807,388)
  Deficit Accumulated During Development Stage   (5,292,011)
  Deficit Accumulated Prior to Development
   Stage                                         (8,811,789)
                                                -----------
    Total Shareholders' (Deficit) Equity                         (223,707)
                                                                ---------
    TOTAL LIABILITIES AND SHAREHOLDERS'
     (DEFICIT) EQUITY                                           $  64,130
                                                                =========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

                                       1

<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                           STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE> 
<CAPTION> 
                                        6 MONTHS     6 MONTHS      3 MONTHS   3 MONTHS
                                          ENDED        ENDED         ENDED       ENDED 
                                        JUNE 30,      JUNE 30,     JUNE 30,    JUNE 30,
                                          1997          1996         1997        1996
                                       ----------   -----------   ----------  ----------
<S>                                    <C>          <C>           <C>         <C>
Revenues:                                $      0    $        0    $      0     $      0

Expenses:
   General and Administrative             969,756     2,083,947     260,094      659,778

Loss From Operations                     (969,756)   (2,083,947)   (260,094)    (659,778)

Other Income:
   Gain on Settlement                                     4,795
                                       ----------   -----------   ----------  ----------
Net Loss                                ($959,756)  ($2,079,152)  ($260,094)   ($659,778)
                                       ==========   ===========   ==========  ==========

Net Loss Per Share                      ($ 0.0119)  ($   0.0378)  ($ 0.0030)   ($ 0.0119)
                                       ==========   ===========   ==========  ==========

Average Number of Shares Outstanding   80,520,572    54,962,560   85,891,131  55,237,776
                                       ==========   ===========   ==========  ==========
</TABLE> 

SEE NOTES TO FINANCIAL STATEMENTS

                                       2

<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                           STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                 6 MONTHS         6 MONTHS         3 MONTHS        3 MONTHS
                                                  ENDED            ENDED            ENDED           ENDED
                                                 JUNE 30,         JUNE 30,         JUNE 30,        JUNE 30,
                                                  1997              1996             1997            1996
                                                ---------       -----------       ---------       ---------
<S>                                             <C>             <C>               <C>             <C>
Cash Flows From Operating Activities:
  Net Loss                                      ($959,756)      ($2,079,152)      ($260,094)      ($659,778)
  Depreciation                                      2,950             2,022           1,647           1,222
  General and Administrative Expenses
   Paid by Stock                                  775,362         1,981,667         175,181         592,750
  Increase in Deposits                            (29,733)             (570)        (30,303)
  Increase in Accounts Payable and
   Accrued Expenses                                39,218             7,955          28,463           8,051
                                                ---------       -----------       ---------       ---------
    Net Cash Flows From Operating Activities     (171,959)          (88,078)        (85,106)        (57,755)
                                                ---------       -----------       ---------       ---------

Cash Flows From Investing Activities:
  Increase in Advances Receivable                                   (45,482)                        (45,482)
  Increase in Due from Related Party               (5,000)                           (5,000)
  Acquisition of Property and Equipment            (9,135)             (500)         (5,334)           (550)
  Payments for Prepaid Acquisition Costs                            (19,398)                        (17,398)
                                                ---------       -----------       ---------       ---------
    Net Cash Flows From Investing Activities      (14,135)          (65,430)        (10,334)        (63,430)
                                                ---------       -----------       ---------       ---------
</TABLE>

                                       3

<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                           STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE> 
<CAPTION> 
                                                    6 MONTHS   6 MONTHS   3 MONTHS   3 MONTHS   
                                                      ENDED      ENDED      ENDED      ENDED    
                                                    JUNE 30,   JUNE 30,   JUNE 30,   JUNE 30,   
                                                      1997       1996       1997       1996     
                                                    --------   --------   --------   --------
<S>                                                 <C>        <C>         <C>       <C>         
Cash Flows From Financing Activities   
   Sales of Common Stock                             135,500     81,000     35,000     81,000
   Proceeds from Notes Payable to Related Parties     50,000     83,000     50,000     51,000
   Payments on Notes Payable to Related Parties       (9,000)               (5,000)   (10,000)
   Cash Overdraft                                      9,594                13,604
                                                    --------   --------   --------   --------
      Net Cash Flows From Financing Activities       186,094    164,000     94,104    122,000
                                                    --------   --------   --------   --------

Net Increase (Decrease) in Cash                            0     10,492     (1,336)       815

Cash, Beginning of Period                                  0        944      1,336     10,621
                                                    --------   --------   --------   --------

Cash, End of Period                                 $      0   $ 11,436    $     0   $ 11,436
                                                    ========   ========   ========   ========
</TABLE> 

Non-Cash Transactions in 1997:
------------------------------
1.  Issued 19,500,000 shares of common stock for services of $975,000.

Non-Cash Transactions in 1996:
------------------------------
1.  Issued 17,850,000 shares of common stock for services of $3,034,500.
2.  Issued 2,000,000 shares of common stock for possible acquisition; recorded 
    at par value.

SEE NOTES TO FINANCIAL STATEMENTS

                                       4

<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.
                       FORMERLY TERA WEST VENTURES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                             FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 JUNE 30, 1997



NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited financial statements reflect all adjustments, which, 
in the opinion of management, are necessary for a fair presentation of the 
financial position and the results of operations for the interim period 
presented. All adjustments are of a normal recurring nature, 

Certain financial information and footnote disclosures which are normally 
included in financial statements prepared in accordance with generally accepted 
accounting principles, but which are not required for interim reporting 
purposes, have been condensed or omitted. The accompanying financial statements 
should be read in conjunction with the financial statements and notes thereto as
of December 31, 1996 contained in the Company's Form 10-KSB.


NOTE 2 - EARNINGS (LOSS) PER SHARE

Per share information is computed based on the weighted average number of shares
outstanding during the period.

                                       5