<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 June 30, 2000
Commission File No. 000-25223
AMERICAN INTERNATIONAL INDUSTRIES, INC.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
<S> <C>
Nevada 88-0326480
------ ----------
(State or jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
601 Cien St., Suite 235
Kemah, Texas 77565-3077
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 ____
162,256,222 shares of Common Stock, par value $.001 per share, were outstanding
at July 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
Condensed Consolidated Financial Statements (Quarter ended June 30, 2000
Reviewed)
Balance Sheets - June 30, 2000 and December 31, 1999 (Audited)
Statements of Operations - Three months ended June 30, 2000 and 1999
Statements of Operations - Six months ended June 30, 2000 and 1999
Statements of Cash Flows - Six months ended June 30, 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
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 June 30, 2000,
and the related condensed consolidated statements of operations and cash flows
for the three-month and six-month period ended June 30, 2000. These financial
statements are the responsibility of the Company'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 18, 2000
<PAGE> 4
AMERICAN INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 2000 and December 31, 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
<CAPTION>
<S> <C> <C>
Assets 2000 1999
(Reviewed) (Audited)
Current assets:
Cash $ 390,524 $ 639,396
Restricted certificates of deposit 1,000,000 1,150,000
Trading securities 539,936 1,006,779
Accounts receivable, less allowance for doubtful accounts of
$138,236 in 2000 and $135,614 in 1999 2,042,065 1,609,561
Notes receivable 342,926 431,691
Inventories 1,136,326 1,199,947
Prepaid expenses and other current assets 20,422 45,510
------------------- --------------------
Total current assets 5,472,199 6,082,884
------------------- --------------------
Real estate held for sale 939,584 939,584
Property and equipment, net of accumulated
depreciation and amortization 1,541,624 1,588,222
Excess of cost over net assets of businesses
acquired, less accumulated amortization of
$190,518 in 2000 and $132,729 in 1999 1,546,242 1,604,031
Non-compete agreements, net of accumulated amortization of
$375,000 in 2000 and $325,000 in 1999 125,000 175,000
Other assets 20,764 18,793
------------------- --------------------
Total assets $ 9,645,413 $ 10,408,514
=================== ====================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses 2,583,914 2,377,963
Margin loan from financial institution 248,729 523,863
Current installments of notes payable to related parties 221,000 471,000
Current installments of notes payable 296,509 487,444
Current installments of capital lease obligations 41,586 45,109
------------------- --------------------
Total current liabilities 3,391,738 3,905,379
Notes payable to related parties, less current installments - -
Notes payable, less current installments 695,478 703,596
Capital lease obligations, less current installments 25,620 46,132
Minority interest 70,298 70,298
------------------- --------------------
Total liabilities 4,183,134 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:
162,508,222 shares issued and 162,256,222 shares
outstanding in 2000, 125,972,971 shares issued and
125,720,971 shares outstanding in 1999 162,256 125,721
Additional paid-in capital 17,096,559 16,393,094
Accumulated deficit (11,344,508) (10,801,678)
------------------- --------------------
Total stockholders' equity 5,914,307 5,717,137
Less common stock subscriptions (418,000) -
Less treasury stock, at cost (252,000 shares) (34,028) (34,028)
------------------- --------------------
Total stockholders' equity 5,462,279 5,683,109
Commitments and contingent liabilities
------------------- --------------------
Total liabilities and stockholders' equity $ 9,645,413 $ 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 June 30, 2000 and 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
<CAPTION>
2000 1999
(Reviewed) (Unaudited)
<S> <C>
Revenues 3,865,112 $ 4,845,862
Costs and expenses:
Costs of sales 3,329,343 4,137,910
Selling, general and administrative 751,227 1,289,821
------------------ -----------------
Total operating expenses 4,080,570 5,427,731
------------------ -----------------
Operating income (loss) (215,458) (581,869)
Other income (expenses):
Interest income 10,259 16,298
Realized gains on investments 131,437 1,096,128
Unrealized gain and (losses) on investments (529,017) 423,795
Other income (expense) (1,081) 6,872
Interest expense (36,927) (31,542)
------------------ ----------------
Total other income (expense) (425,329) 1,511,551
------------------ ----------------
Net earnings (loss) before income taxes (640,787) 929,682
Provision for income taxes - -
------------------ ----------------
Net earnings (loss) from continuing operations (640,787) 929,682
Loss from discontinued operations (note 2) - (560,602)
---------------------- ----------------------
Net earnings (loss) $ (640,787) $ 369,080
====================== ================
Net earnings (loss) per share - basic and diluted:
Net earnings (loss) from continuing operations $ (0.00) $ 0.01
====================== ======================
Net earnings (loss) from discontinued operations $ - $ (0.00)
====================== ======================
Net earnings (loss) $ (0.00) $ 0.00
====================== ======================
Weighted average common shares -basic and diluted 135,956,046 124,853,043
====================== ======================
Consolidated statements of comprehensive income
Net earnings $ (640,787) $ 369,080
Unrealized gain on securities available-
for-sale
Unrealized holding gain arising during
the period - 62,875
Less: reclassification adjustment for gain included
in net income - (1,031,703)
---------------------- ----------------------
Comprehensive income $ (640,787) $ (599,748)
====================== ======================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
AMERICAN INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six months ended June 30, 2000 and 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
<CAPTION>
2000 1999
(Reviewed) (Unaudited)
<S> <C> <C>
Revenues $ 7,063,115 $ 7,902,564
Costs and expenses:
Costs of sales 5,975,133 6,150,020
Selling, general and administrative 1,487,863 2,027,949
---------------- ------------------
Total operating expenses 7,462,996 8,177,969
---------------- ------------------
Operating income (loss) (399,881) (275,405)
Other income (expenses):
Interest income 33,244 29,948
Realized gains on investments 178,808 1,145,030
Unrealized gain and (losses) on investments (270,643) 332,397
Other income 1,834 75,889
Interest expense (86,192) (98,321)
---------------- ------------------
Total other income (expense) (142,949) 1,484,943
---------------- ------------------
Net earnings (loss) before income taxes (542,830) 1,209,538
Provision for income taxes - -
---------------- ------------------
Net earnings (loss) from continuing operations (542,830) 1,209,538
Loss from discontinued operations (note 2) - (799,184)
---------------- ------------------
Net earnings (loss) $ (542,830) $ 410,354
================== ==================
Net earnings (loss) per share - basic and diluted:
Net earnings (loss) from continuing operations $ (0.00) $ 0.01
================ ==================
Net earnings (loss) from discontinued operations $ - $ (0.01)
================== ==================
Net earnings (loss) $ (0.00) $ 0.00
================== ==================
Weighted average common shares -basic and diluted 130,310,836 124,853,043
================== ==================
Consolidated statements of comprehensive income
Net earnings $ (542,830) $ 410,354
Unrealized gain on securities available-
for-sale:
Unrealized holding gain arising during
the period - 1,051,720
Less: reclassification adjustment for gain included
in net income - (1,032,756)
---------------- ------------------
Comprehensive income $ (542,830) $ 429,318
================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
AMERICAN INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2000 and 1999
(Unaudited - see accompanying accountants' review report)
<TABLE>
<CAPTION>
2000 1999
(Reviewed) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (542,830) $ 410,354
Loss from discontinued operations - 799,184
------------------ -------------------
Net earnings (loss) from continuing operations (542,830) 1,209,538
Adjustments to reconcile net earnings (loss) to net
cash used in operating activities:
Depreciation and amortization 194,062 169,254
Realized gain on sale of securities (178,808) (1,145,033)
(Increase) decrease in market value of equity securities 270,643 (332,397)
(Increase) decrease in assets:
Accounts receivable (432,504) (2,583,976)
Inventories 63,621 (182,127)
Prepaid expenses and other current assets 25,088 (104,444)
Purchase of trading securities, net (150,126) (1,467,967)
Other assets (1,971) 106,444
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 205,951 1,428,517
Deferred revenue - 19,756
------------------ -------------------
Net cash used in continuing operations (546,874) (2,882,435)
Net cash provided by discontinued operations - 559,213
------------------ -------------------
Net cash used in operating activities (546,874) (2,323,222)
------------------ -------------------
Cash flows from investing activities:
Proceeds from sale of available-for-sale investment securities - 1,167,605
Purchase of property and equipment (39,675) (161,956)
Redemption of certificate of deposit 150,000 -
Cash paid for acquisitions - (141,306)
Notes receivable - (7,000)
------------------ -------------------
Net cash provided by investing activities 110,325 857,343
------------------ -------------------
Cash flows from financing activities:
Proceeds from stock subscriptions - 456,000
Proceeds from issuance of stock 322,000 -
Proceeds from note payable - 1,135,311
Repayment of notes receivable 88,765 -
Repayment of notes payable (199,053) (315,610)
Principal payments on capital lease obligations (24,035) (196,087)
Sale of treasury stock - 4,190
------------------ -------------------
Net cash provided by financing activities 187,677 1,083,804
------------------ -------------------
Net decrease in cash (248,872) (382,075)
Cash at beginning of year 639,396 1,012,995
------------------ -------------------
Cash at end of period $ 390,524 $ 630,920
================== ===================
Supplemental schedule of cash flow information:
Interest paid $ 86,192 $ 204,322
================== ===================
Non-cash transactions:
Purchase of securities on margin $ - $ 149,072
================== ===================
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 - 1,885
Goodwill - 674,764
Accounts payable - (76,498)
Notes payable - (30,500)
Notes payable to related parties - (30,000)
Other liabilities - (220)
------------------ -------------------
$ - $ 706,142
================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
(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
Rules of Regulation S-B, 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 for 1999 had been restated to
delete the media entertainment data, which had been treated as a loss
from discontinued operations in 1999. 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> 9
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 for the six months
ended June 30, 2000 and 1999, and identifiable assets as of June 30,
2000 and 1999, were as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net revenues:
Industrial/Commercial $ 7,045,694 $ 7,296,743
Real estate 12,654 600,000
Oil and gas 4,767 5,821
------------- -------------
$ 7,063,115 $ 7,902,564
============= =============
Operating income (loss):
Industrial/Commercial $ (31,676) $ 162,970
Real estate (15,631) 451,602
Oil and gas 4,644 807
Corporate expenses (357,218) (890,784)
------------ -------------
$ (399,881) $ (275,405)
============ =============
Identifiable assets:
Industrial/Commercial $ 8,174,470 $ 10,293,211
Media/Entertainment - 3,954,360
Real estate 948,638 1,139,736
Oil and gas 74,659 65,573
Corporate 447,646 2,295,399
------------ -------------
$ 9,645,413 $ 17,748,279
============ =============
</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.
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.
<PAGE> 10
In order to make this document easier to read, the following defined terms are
used: Har-Whit/Pitt's & Spitt's, Inc. ("Har-Whit"), Acqueren, Inc. ("Acqueren"),
Northeastern Plastics, Inc. ("NPI"), Marald, Inc. d/b/a Unlimited Coatings
("Unlimited"), Tough Trucks & Accessories, Inc., d/b/a Armor Linings ("Armor"),
Texas Real Estate Enterprises, Inc. ("TREE"), MidTowne Properties, Inc.
("MidTowne"), (Brenham Oil & Gas, Inc. ("BOG"), and Modern Film Effects, Inc.
d/b/a Cinema Research Corporation ("CRC").
THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS AND SIX
MONTHS ENDED JUNE 30, 1999
RESULTS OF OPERATIONS - AMERICAN INTERNATIONAL INDUSTRIES, INC. CONSOLIDATED
Net revenues for the six months and three months ended June 30, 2000 decreased
by $839,449 or 10.6% and $980,750 or 20.2%, respectively, over the comparable
periods a year earlier. For the six-month periods, the decrease was from
$7,902,564 to $7,063,115 and for such three-month periods the decrease was from
$4,845,862 to $3,865,112. The decrease in revenue was primarily the result of
decreased sales of approximately $921,000 at NPI for the six months ended June
30, 2000.
Cost of goods sold for the six and three months ended June 30, 2000 decreased by
$174,887 or 2.8% and decreased by $808,567 or 19.5%, respectively, over the
comparable periods a year earlier. For such six-month periods was from
$6,150,020 to $5,975,133 and for such three-month period the decrease from
$4,137,910 to $3,329,343. The decrease in cost of goods sold for the six months
ended June 30, 2000 was primarily attributable to a decrease in sales at NPI.
Cost of goods sold as a percentage of net sales increased over the six-month
periods from 77.8% to 84.6%. This increase is primarily due to the sale of an
option to purchase real estate in 1999. The cost of the option ($100,000) was
recorded in 1998 and the sale of the option actually occurred in February 1999
for a price of $600,000. Cost of goods sold as a percentage of net sales
increased by 85.4% to 86.1% for the three-month periods ended June 30, 2000 and
1999.
Selling, general and administrative expenses consist primarily of management,
clerical and administrative salaries and professional services. Selling, general
and administrative expenses for the six and three months ended June 30, 2000
decreased by $540,086 or 26.6% and decreased by $538,594 or 41.8% over the
comparable periods a year earlier. Selling, general and administrative expenses
as a percentage of sales decreased from 25.7% to 21.1% for the comparable
six-month periods and decreased from 26.7% to 19.4% for the comparable
three-month periods. The decrease in selling, general and administrative
expenses for the six months and three months periods ended June 30, 2000 was
attributable to the decrease in the cost of auditing and accounting services
incurred during these periods in 2000.
<PAGE> 11
Operating losses for the six months ended June 30, 2000 increased by $124,476
over the comparable period in 1999. Operating losses for the three months ended
June 30, 2000 decreased by $366,411 over the comparable period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have been financed principally through internal growth
and liquid assets on hand. At June 30, 2000, the Company's working capital was
$2,080,461.
Net cash used by operating activities for the six months ended June 30, 2000 of
$546,874 was primarily due to an increase in accounts receivable by $432,504.
Net cash provided by investing activities for the six months ended June 30, 2000
of $110,325 was primarily due to the redemption of a restricted certificate of
deposit in the amount of $150,000.
Net cash provided by financing activities for the six months ended June 30, 2000
of $187,677 was primarily due to receipts of proceeds from the sale of the
Company's common stock in the amount of $322,000.
The Company believes that internally generated funds and the available
borrowings under its exiting credit facilities will provide sufficient liquidity
and enable it to meet current and foreseeable working capital requirements.
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 18, 2000,
for all securities the Company sold since March 31, 2000, 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 May 2000, the Company sold 30,000,000 shares of the Company's common stock to
an affiliate of the Company at a price of $500,000. Of this amount, $250,000 had
been received as of June 30, 2000 by conversion of an existing debt. All
$250,000 was received during the six months ended June 30, 2000. In June 2000,
the Company sold 10,000,000 shares of the Company's common stock to an
accredited investor at a price of $200,000. Of this amount, $32,000 had been
received as of June 30, 2000. These issuances were exempt pursuant to Section
4(2) of the
<PAGE> 12
Securities Act of 1933, as amended, as private negotiated, isolated issuances to
accredited investors.
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 June
30, 2000.
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
No. Description
------- -----------
27 Financial Data Schedule
