<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: MARCH 31, 1997
                                       --------------

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

       For the transition period from ____________ to _____________

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


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

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

                700 CANAL STREET, 3RD FLOOR, STAMFORD, CT 06902
                -----------------------------------------------
                    (Address of principal executive offices)

                                 (203) 328-3092
                                 --------------
                          (Issuer's telephone number)

               501 SOUTH DIXIE HIGHWAY, WEST PALM BEACH, FL 33401
               --------------------------------------------------
             (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 March 31,
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 March 31, 1997 (Unaudited).

         Statements of Operations - Three months and ended March 31, 1997
         and 1996 (Unaudited).

         Statements of Cash Flows - Three months ended March 31, 1997 and 1996
         (Unaudited).

         Notes to Financial Statements

<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.
  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 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 the sale of
  products manufactured by third parties.

     To that end, the Company entered into consulting agreements during fiscal
  1996 with AVIX International Pharmaceutical Corp. ("AVIX"), and with United
  Biomedical Inc. ("UBI"), which agreements 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.
<PAGE>
 
       The Company during fiscal 1996 and the first quarter of 1997 has been
  dependent upon the willingness of its consultants 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 have
  enabled the Company to reach its present level of development, which includes:
  having received product registration and approved purchase orders aggregating
  approximately $1,000,000 for generic pharmaceuticals, vitamins, test kits and
  HSA from the Republic of Guinea; having secured a commitment for pre-export
  financing from an institutional investment banking firm; having received from
  private lenders pre-export funding for its initial shipment to Guinea in May,
  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, subject only to approval of sample test kits submitted, 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,
  when approved, should result in additional orders for such products.

       Directly as a direct result of the foregoing business advances and
  pending business developments, the Company has been able to raise
  approximately $150,000 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, as well as revenues that
  the Company believes will be generated from orders for dengue fever and
  malaria vivex test kits from Brazil and blood derivative products from the
  Ivory Coast, 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".

       During 1996, AVIX 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 provided for conversion into shares of the Company's
  common stock at a price of $.25 per share, which conversion would have been
  required upon the filing by the Company of a registration statement on Form S-
  1 under the Act. The AVIX Note provided for interest at 12% per annum and
  would have been due July 30, 1997, unless the Company filed a registration
  statement prior to such date and the AVIX Note was converted.

       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. However, prior to the end of the Company's fiscal year, AVIX
  confirmed that it did not continue to have sources for HSA. As a result, the
  Company and AVIX agreed that the principal and interest due under the AVIX
  Note be forgiven, which indebtedness was forgiven during the first quarter of
  1997.
<PAGE>
 
       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 and distributors located in the United
  States, Canada, Mexico, South America and Europe and may utilize sources in
  China as well as India, for the products that are the subject of the purchase
  orders. The Company is presently seeking the best prices that are available
  from such manufacturers, consistent with the Guinean pharmaceutical products
  budget allocated for 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 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 $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, at a per
  unit price to be determined on the date(s) of subscription. However, there can
  be no assurance that any additional subscriptions shall be received under the
  unit private placement. The trading price of shares of the Company's common
  stock during the past three months has been in the range of $.027 to $.04.
  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 if the Company's shares continue to trade at the
  levels that have prevailed since the beginning of the 1997 fiscal year.

       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 fees, and certain other expenses,
  and based upon its present monthly operating expenses, the Company will be
  able to operate for approximately 5 to 7 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 initial
  shipment in June, 1997, of the generic pharmaceutical products pursuant to the
  order from the Republic of Guinea, as well as from the anticipated
  commencement of orders from the Ivory coast and Brazil. The Company presently
  estimates that it will begin to receive monies from its initial shipments
  within thirty to sixty days from the first shipment. This is based upon the
<PAGE>
 
  terms of the purchase orders with the Republic of Guinea, which are backed by
  Bicgui Bank, the National Bank of Guinea, and a letter of credit provided in
  the purchase order. 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 $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.
<PAGE>
 
PART II.  OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

       See Footnote E to Financial Statement

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

<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)                              
                                                                             
                                   
July 16, 1997                      By:  /s/  Jerrold R. Hinton                 
                                        ----------------------                 
                                        Jerrold R. Hinton                     
                                        President, Chief Executive Officer and
                                        Chief Financial Officer                
<PAGE>
 




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

                             FINANCIAL STATEMENTS

                                  (UNAUDITED)

                                MARCH 31, 1997

<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC. 
                       FORMERLY TERA WEST VENTURES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                             FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                MARCH 31, 1997

                                                                      Page
                                                                      ----

Balance Sheet                                                          1

Statements of Operations                                               2

Statements of Cash Flows                                               3

Notes To Financial Statements                                          4

<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC.                 
                       FORMERLY TERA WEST VENTURES, INC.                
                         (A DEVELOPMENT STAGE COMPANY)                   
                                 BALANCE SHEET                          
                                  (UNAUDITED)                           
                             AS OF MARCH 31, 1997                        


<TABLE> 
<CAPTION> 


ASSETS
------
<S>                                          <C>             <C> 
Current Assets:                                                         
   Cash                                      $    1,336       
   Inventories                                    5,000       
                                             ----------       
      Total Current Assets                                       6,336

Fixed Assets:
   Property and Equipment (Net of 
      $8,277 Accum. Depr.)                                      20,140

Other Assets:
   Miscellaneous Receivable (Net of 
   $100,000 Allowance)                                              --
                                                              ---------  
      TOTAL ASSETS                                            $  26,476
                                                              =========

LIABILITIES AND SHAREHOLDER'S (DEFICIT) EQUITY
----------------------------------------------

Current Liabilities:
   Accounts Payable and Accrued Expenses     $   79,249
   Notes Payable to Related Parties             121,521
                                             ----------      
      Total Current Liabilities                                 200,770
                                                                           
Shareholder's (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 82,962,520 shares            82,962
   Additional Paid-In Capital                14,469,019
   Stock Subscribed                             100,000
   Deferred Consulting Fees                    (982,569) 
   Deficit Accumulated During                
    Development Stage                        (5,031,917) 
   Deficit Accumulated Prior to 
    Development Stage                        (8,811,789)   
                                             ----------
      Total Shareholders' (Deficit) Equity                     (174,294)
                                                              ---------     
      TOTAL LIABILITIES AND SHAREHOLDERS' 
        (DEFICIT) EQUITY                                       $ 26,476
                                                              =========    
</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)                           
                      FOR THE THREE MONTHS ENDED MARCH 31

<TABLE> 
<CAPTION> 
                                      1997                   1996
                                  ------------           -----------
<S>                               <C>                   <C> 
Revenues:                          $         0           $          0
                                   -----------           ------------  
Expenses:
   General and Administrative          699,662              1,414,206
                                   -----------           ------------  
Loss From Operations                  (699,662)            (1,424,206)

Other Income:
   Gain on Settlement                       --                  4,795
                                   -----------           ------------  

Net Loss                             ($699,662)           ($1,419,411)
                                   ===========           ============  

Net Loss Per Share                    ($0.0093)              ($0.0251)
                                   ===========           ============  


Average Number of Shares
  Outstanding                       75,090,337             56,598,015
                                   ===========           ============  
</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)                           
                      FOR THE THREE MONTHS ENDED MARCH 31

 


<TABLE> 
<CAPTION> 


                                                1997            1996
                                            -----------      ----------- 
<S>                                         <C>              <C> 
Cash Flows From Operating Activities:
   Net Loss                                   ($699,662)     ($1,419,411)
   Depreciation                                   1,303              800
   General and Administrative Expenses
    Paid by Stock                               600,181        1,388,917
   Increase (Decreases) in Accounts Payable     
    and Accrued Expenses                         10,755           (1,059) 
                                            -----------      ----------- 
      Net Cash Used in Operating Activities     (87,423)         (30,753)
                                            -----------      -----------  
Cash Flows From Investing Activities:
   Acquisitions of Property and Equipment        (3,801)              --
   Payments for Possible Acquisition                 --           (2,000)
   Decrease (Increase) in Deposits                  507             (570)
                                            -----------      ----------- 
      Net Cash Used in Investing Activities      (3,231)          (2,570)
                                            -----------      ----------- 
Cash Flows From Financing Activities:
   Sales of Common Stock                        100,000               --
   Proceeds from Notes Payable to Related
    Parties                                          --           43,000
   Payments on Notes Payable to Related
    Parties                                      (4,000)              --
   Cash Overdraft                                (4,010)              --
                                            -----------      ----------- 
      Net Cash Provided By Financing
       Activities                                91,990           43,000
                                            -----------      ----------- 
Net Increase in Cash                              1,336            9,677

Cash, Beginning of Period                            --              944
                                            -----------      ----------- 
Cash, End of Period                         $     1,336      $    10,621
</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

                                       3

<PAGE>
 
                       AMERICAN DIVERSIFIED GROUP, INC. 
                       FORMERLY TERA WEST VENTURES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                             FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                MARCH 31, 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.