<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission File No. 000-25223
AMERICAN INTERNATIONAL INDUSTRIES, INC.
(Name of small business issuer in its charter)
Nevada 88-0326480
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(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 Cien St., Suite 235
Kemah, Texas 77565-3065
281-334-9479
(Address, including zip code and telephone number, including area
code, of registrant's executive offices)
Common Stock
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X NO
--- ---
128,220,971 shares of Common Stock, par value $.001 per share, were outstanding
at March 31, 2000.
Documents Incorporated by Reference: None
<PAGE> 2
AMERICAN INTERNATIONAL INDUSTRIES, INC.
FORM 10-QSB
Table of Content
PART I - Financial Information
Item 1 - Financial Statements
Independent Accountants' Report
Consolidated Financial Statements (Quarter ended March 31, 2000 Reviewed)
Balance Sheets - March 31, 2000 and December 31, 1999 (Audited)
Statements of Operations - Three Months ended March 31, 2000 and 1999
Statements of Cash Flows - Three Months ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II
Item 2 - Changes in Securities and Use of Proceeds
Item 6 - Reports on Form 8-K
SIGNATURES
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
R. E. BASSIE & CO., P.C.
CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL CORPORATION
--------------------------------------------------------------------------------
7171 Harwin Drive, Suite 306
Houston, Texas 77036-2197
Tel: (713) 266-0691 Fax: (713) 266-0692
E-Mail: [email protected]
INDEPENDENT ACCOUNTANTS' REPORT
To The Board of Directors and Stockholders
American International Industries, Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
American International Industries, Inc. and subsidiaries as of March 31, 2000,
and the related condensed consolidated statements of operations and cash flows
for the three-month period ended March 31, 2000. These financial statements are
the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of American International Industries,
Inc. and subsidiaries as of December 31, 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended (not presented herein); and in our report dated July 7, 2000, we expressed
an unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1999 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
/s/ R. E. Bassie & Co., P.C.
Houston, Texas
August 4, 2000
<PAGE> 4
AMERICAN INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
<CAPTION>
Assets 2000 1999
------------ ------------
(Audited)
<S> <C> <C>
Current assets:
Cash $ 791,042 $ 639,396
Restricted certificates of deposit 1,000,000 1,150,000
Trading securities 1,155,282 1,006,779
Accounts receivable, less allowance for doubtful accounts of
$138,066 in 2000 and $135,614 in 1999 1,628,589 1,609,561
Notes receivable 440,458 431,691
Inventories 1,163,307 1,199,947
Prepaid expenses and other current assets 33,858 45,510
------------ ------------
Total current assets 6,212,536 6,082,884
------------ ------------
Real estate held for sale 939,584 939,584
Property and equipment, net of accumulated
depreciation and amortization 1,596,257 1,588,222
Excess of cost over net assets of businesses
acquired, less accumulated amortization of
$153,002 in 2000 and $132,729 in 1999 1,583,758 1,604,031
Non-compete agreements, net of accumulated amortization of
$350,000 in 2000 and $325,500 in 1999 150,000 175,000
Other assets 21,113 18,793
------------ ------------
Total assets $ 10,503,248 $ 10,408,514
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses 2,452,545 2,377,963
Margin loan from financial institution 549,494 523,863
Current installments of notes payable to related parties 471,000 471,000
Current installments of notes payable 355,239 487,444
Current installments of capital lease obligations 43,998 45,109
------------ ------------
Total current liabilities 3,872,276 3,905,379
Notes payable to related parties, less current installments -- --
Notes payable, less current installments 703,596 703,596
Capital lease obligations, less current installments 36,012 46,132
Minority interest 70,298 70,298
------------ ------------
Total liabilities 4,682,182 4,725,405
------------ ------------
Stockholders' equity:
Preferred stock, $.001 par value. Authorized
10,000,000 shares: none issued -- --
Common stock, $.001 par value. Authorized 200,000,000 shares:
128,472,971 shares issued and 128,220,971 shares
outstanding in 2000, 125,972,971 shares issued and
125,720,971 shares outstanding in 1999 128,221 125,721
Additional paid-in capital 16,430,594 16,393,094
Accumulated deficit (10,703,721) (10,801,678)
------------ ------------
Total stockholders' equity 5,855,094 5,717,137
Less common stock subscriptions -- --
Less treasury stock, at cost (252,000 shares) (34,028) (34,028)
Accumulated other comprehensive loss -- --
------------ ------------
Total stockholders' equity 5,821,066 5,683,109
Commitments and contingent liabilities
------------ ------------
Total liabilities and stockholders' equity $ 10,503,248 $ 10,408,514
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
AMERICAN INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended March 31, 2000 and 1999 (Unaudited - see
accompanying accountants' review report)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues $ 3,189,096 $ 4,214,020
Costs and expenses:
Costs of sales 2,645,790 2,934,465
Selling, general and administrative 736,636 1,191,505
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Total operating expenses 3,382,426 4,125,970
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Operating income (loss) (193,330) 88,050
Other income (expenses):
Interest income 22,985 16,785
Realized gains on investments 47,371 48,905
Unrealized gain and (losses) on investments 258,374 (91,398)
Other income 11,822 66,206
Interest expense (49,265) (87,273)
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Total other income (expense) 291,287 (46,775)
------------- -------------
Net earnings before income taxes 97,957 41,275
Provision for income taxes -- --
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Net earnings $ 97,957 $ 41,275
============= =============
Net earnings per share - basic and diluted $ 0.00 $ 0.00
============= =============
Weighted average common shares 128,140,221 124,785,971
============= =============
Consolidated statements of comprehensive income
Net earnings $ 97,957 $ 41,275
Unrealized gain on securities available-
for-sale
Unrealized holding gain arising during
the period -- 987,792
------------- -------------
Comprehensive income $ 97,957 $ 1,029,067
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
AMERICAN INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended March 31, 2000 and 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 97,957 $ 41,275
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 92,398 249,747
Realized gain on sale of securities (47,371) (48,905)
(Increase) decrease in market value of equity securities (258,374) 91,398
Depreciation and amortization assets and liabilities:
(Increase) decrease in accounts receivable (19,028) 323,194
Decrease in inventories 36,640 2,415
(Increase) decrease in prepaid expenses and other current assets 11,652 (50,084)
(Purchase) sale of trading securities, net 182,873 (482,953)
(Increase) decrease in other assets (2,320) 48,768
Increase (decrease) in accounts payable and accrued expenses 74,582 (243,299)
Increase in deferred revenue -- 122,766
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Net cash provided by operating activities 169,009 54,322
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Cash flows from investing activities:
Purchase of available-for-sale investment securities -- (116,949)
Purchase of property and equipment (55,160) (99,174)
Redemption of certificate of deposit 150,000 --
Notes receivable (8,767) (5,500)
--------- -----------
Net cash provided by (used in) investing activities 86,073 (221,623)
--------- -----------
Cash flows from financing activities:
Proceeds from stock subscriptions -- 420,000
Proceeds from issuance of stock 40,000 6,000
Proceeds from note payable -- 607,900
Repayment of notes receivable -- 31,000
Repayment of notes payable (132,205) (515,148)
Principal payments on capital lease obligations (11,231) (143,263)
--------- -----------
Net cash provided by (used in) financing activities (103,436) 406,489
--------- -----------
Net increase in cash 151,646 239,188
Cash at beginning of year 639,396 999,916
--------- -----------
Cash at end of period $ 791,042 $ 1,239,104
========= ===========
Supplemental schedule of cash flow information:
Interest paid $ 49,265 $ 87,273
========= ===========
Non-cash transactions:
Purchase of securities on margin $ 25,631 $ 172,040
========= ===========
Purchase of subsidiary assets and liabilities through the issuance
of common stock and options:
Accounts receivable $ -- $ 87,215
Inventory -- 36,496
Property and equipment -- 43,000
Other assets -- 18,853
Goodwill -- 674,764
Accounts payable -- 76,498
Notes payable -- 30,500
Notes payable to related parties -- 30,000
Other liabilities -- 220
--------- -----------
$ -- $ 997,546
========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
AMERICAN INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
American International Industries, Inc. (the "Company" or "AIII"),
formerly Black Tie Affair, Incorporated, operates as a diversified
holding company with a number of wholly-owned subsidiaries and one
majority-owned subsidiary.
The unaudited consolidated financial statements have been prepared on
the same basis as the audited consolidated financial statements and, in
the opinion of management, reflect all adjustments (consisting of
normal recurring adjustments) necessary for a fair presentation for
each of the periods presented. The results of operations for interim
periods are not necessarily indicative of results to be achieved for
full fiscal years.
As contemplated by the Securities and Exchange Commission (SEC) under
Rule 10-01 of Regulation S-X, the accompanying consolidated financial
statements and related footnotes have been condensed and do not contain
certain information that will be included in the Company's annual
consolidated financial statements and footnotes thereto. For further
information, refer to the Company's 1999 audited consolidated financial
statements and related footnotes.
(2) INDUSTRY SEGMENTS
The Company has three reportable segments and corporate overhead:
industrial/commercial, oil and gas, and real estate. The
industrial/commercial segment includes (1) a supplier of automotive
after-market products; (2) a manufacturer and distributor of barbecue
pits and custom sheet metal products for customers predominately in the
energy industry; (3) distributors of specialty chemicals for the
automotive after-market, including specializing in the application of
spray-on bed liners for truck beds; and (4) a holding company for
future commercial ventures. The oil and gas segment owns an oil, gas
and mineral royalty interest in Washington County, Texas. Prior to
1999, the Company had a media/entertainment segment which they sold in
1999. The comparative segment information reflects media entertainment
data prior to restatement. The corporate overhead includes the
Company's investment holdings including financing current operations
and expansion of its current holdings as well as evaluating the
feasibility of entering into additional businesses.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company
evaluates performances based on profit or loss from operations before
income taxes, not including nonrecurring gains and losses and foreign
exchange gains and losses.
<PAGE> 8
AMERICAN INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's reportable segments are strategic business units that
offer different technology and marketing strategies. Most of the
businesses were acquired as subsidiaries and the management at the time
of the acquisition was retained.
Consolidated net revenues, net operating losses, and identifiable
assets were as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net revenues:
Industrial/Commercial $ 3,189,096 $ 2,456,703
Media/Entertainment -- 1,157,317
Real estate -- 600,000
------------ ------------
$ 3,189,096 $ 4,214,020
============ ============
Operating income (loss):
Industrial/Commercial $ 16,790 $ 72,407
Media/Entertainment -- (218,415)
Real estate (13,299) 485,101
Oil and gas (36) (5,014)
Corporate expenses (196,785) (246,029)
------------ ------------
$ (193,330) $ 88,050
============ ============
Identifiable assets:
Industrial/Commercial $ 8,799,086 $ 7,609,017
Media/Entertainment -- 4,483,456
Real estate 947,756 1,066,440
Oil and gas 72,527 63,610
Corporate 683,879 2,304,082
------------ ------------
$ 10,503,248 $ 15,526,605
============ ============
</TABLE>
The Company's areas of operations are principally in the United States.
No single foreign country or geographic area is significant to the
consolidated financial statements.
<PAGE> 9
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
RESULTS OF OPERATIONS - AMERICAN INTERNATIONAL INDUSTRIES, INC. CONSOLIDATED
Consolidated net earnings for the three-month period ended March 31, 2000 was
$97,957 as compared to $41,275 for the three months ended March 31, 1999. The
factors contributing to the consolidated net earning are discussed below.
Net revenues for the three months ended March 31, 2000 was $3,189,096 as
compared to $4,214,020 for March 31, 1999. Such 24.3% decrease is primarily due
to discontinued operations of CRC at October 31, 1999. CRC had sales of
$1,157,317 at March 31, 1999. TREE had no revenue for the three-month period
ended March 31, 2000, while it had revenue of $600,000 for the comparable three
months of 1999. NPI had sales of $1,887,967 at March 31, 2000 as compared to
$1,545,390 for the three months ended March 31, 1999. Marald had sales of $561,
-432 at March 31, 2000 as compared to $472,866 at March 31, 1999. Armor Linings,
acquired in April 1999, had sales of $188,907 at March 31, 2000. Har-Whit sales
for the three months ended March 31, 2000 were $550,790 as compared to $438,447
for the three months ended March 31, 1999. Brenham reported royalty income of
$2,553 in the current quarter compared to $4.308 during the first three months
of 1999. The activity of Acqueren during the three months ended March 31, 2000
consisted of investments and trading in various investments; such activity
resulted in unrealized gains and losses of $258,374 and $42,493 at March 31,
2000 and 1999, respectively. Cost of sales as a percentage of net sales for the
three months ended March
<PAGE> 10
31, 2000 was approximately 83% with gross margin of 17%, as compared to
approximately 69.6% cost of sales and 30.4% gross margin during the three-month
period ended March 31, 1999. The change is primarily due to NPI's gross margin
of 7.9% during this quarter as compared to 16.9% during the three months ended
March 31, 1999. Har-Whit sustained a 31.4% margin in 2000 as compared to 30.4%
in 1999. Marald posted margins averaging 32.5% during the quarter and Armor
Linings sustained margins averaging 18% at March 31, 2000.
Selling, general and administrative expenses at March 31, 2000 were $736,636 as
compared to $1,191,505 for the three months ended March 31, 1999. This decrease
is primarily the result of discontinued operations of CRC, which had operating
expenses of $453,377 at March 31, 1999. Armor Linings incurred $57,704 in
operating expenses during the three months ended March 31, 2000. AIII incurred
expenses at the corporate level of $196,785, including $69,704 of legal and
accounting fees and $25,000 of goodwill.
Other income (expense) totaled $291,287 for the three months ended March 31,
2000 including interest income of $22,985, Acqueren's realized and unrealized
gains on investments of $47,371 and $258,374, other income of $11,822 and
$49,265 of interest expense. This compares to total other income (expense) for
the three-month period ended March 31, 1999 of $(46,775). The primary reason for
the difference is Acqueren's unrealized gain for the quarter as compared to an
unrealized loss of $(91,398) for the three-month period ended March 31, 1999.
NET EARNINGS AND COMPREHENSIVE INCOME
Consolidated net earnings for the three-month period ended March 31, 2000 was
$97,957 as compared to $41,275 at March 31, 1999. During the three months ended
March 31, 2000, TREE had a net loss of $6,907, Brenham had net earnings of
$2,521, Har-Whit had a net loss of $11,763, Armor Linings had a net loss of
$24,094, and Marald had net earnings of $16,151. Acqueren (including NPI) had
net earnings of $309,675. Since there were no unrealized gain on securities
available-for-sale in this quarter, net earnings is also comprehensive income.
At March 31, 1999, comprehensive income included Acqueren's unrealized gains of
$968,828 on available-for-sale equity securities, which were included as a
component of stockholders' equity.
LIQUIDITY AND CAPITAL RESOURCES - AIII
Total assets at March 31, 2000 were $10,503,248 as compared to $10,408,514 at
December 31, 1999, an increase of approximately 1%. The increase is the result
of no acquisitions during this quarter.
Total liabilities at March 31, 2000 were $4,682,182 as compared to $4,725,405 at
December 31, 1999. The decrease is primarily the result of the required
reductions of long-term debt.
<PAGE> 11
At March 31, 2000, AIII's current working capital was $2,445,509 as compared to
$2,177,505 at December 31, 1999. The improvement in working capital is primarily
attributable to the increase in the value of investments in equity securities
and a reduction in current installments of notes payable. AIII's consolidated
cash position at March 31, 2000 was $791,042 as compared to $639,396 at December
31, 1999. Accounts receivable at March 31, 2000 were $1,628,589 compared to
$1,609,561 at December 31, 1999. Inventories decreased to $1,163,307 at March
31, 2000 as compared to $1,199,947 at December 31, 1999. Investments in trading
securities increased to $1,155,282 at March 31, 31,2000 from $1,006,779.
For the three months ended March 31, 2000, AIII had $169,009 of net cash
provided by operations, $86,073 of net cash provided by investing activities,
and $103,436 of net cash used in financing activities. For the three-month
period ended March 31, 1999, AIII had $54,322 of net cash provided by operation,
$221,623 of net cash used in investing activities, and $406,444 of net cash
provided from financing activities. The change reflects decreased activities of
the Company as compared to the first quarter of 1999.
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The statements contained herein and other information contained in this report
may be based, in part, on management's estimates, projections, plans and
judgments. As such, these are forward looking statements and involve a number of
risks and uncertainties. A number of factors, which could cause actual results
to differ materially, include: general economic conditions, competitive market
influences, technology changes, and other influences beyond the control of
management.
In order to make this document easier to read, the following defined terms are
used: Northeastern Plastics, Inc. (NPI), Marald, Inc. (Marald), Tough Truck and
Accessories, Inc., d/b/a Armor Linings (Armor Linings), Har-Whit/Pitt's &
Spitt's Inc. (Har-Whit), Texas Real Estate Enterprises, Inc. (TREE), Brenham Oil
& Gas, Inc. (Brenham), Acqueren, Inc. (Acqueren) and Modern Film Effects, Inc.
d/b/a Cinema Research Corporation (CRC).
PART II
Pursuant to the Instructions on Part II of the Form 10-QSB, Items 1 and 3 -5 are
omitted.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The following information sets forth certain information as of August 4, 2000,
for all securities the Company sold since December 31, 1999, without
registration under the Act, excluding any information "previously reported as
defined in Rule 12b-2 of the Securities Exchange Act of 1934. There were no
underwriters in any of these transactions, nor were any sales commissions paid
thereon.
In January 2000, the Company sold 2,500,000 shares of the Company's common stock
for $40,000 to a director of the Company. The proceeds were used for corporate
operating expenses.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - No reports were filed for the quarter ended
March 31, 2000.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
/s/ Daniel Dror
Daniel Dror,
Chief Executive Officer
/s/ John W. Stump, III
John W. Stump, III
Chief Financial Officer
<PAGE> 13
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
27 Financial Data Schedule
