Chairman’s Letter

Dear fellow shareholders,

American International Industries, Inc. reported that its earnings before interest, taxes, depreciation and amortization (EBITDA) significantly improved by $358,238 compared to a loss from continuing operations of $426,263, or $0.04 per share, for the year ended December 31, 2010, compared to EBITDA from continuing operations for the year ended December 31, 2009, which reflected a loss of $784,501, or $0.09 per share. 

Our ongoing strategy of providing financing and management expertise for our subsidiaries continues to enhance our financial position and improve shareholder value.

Our asset portfolio, now primarily consists of one wholly-owned operating subsidiary and a 46.4% owned operating subsidiary, as follows: 

·        Northeastern Plastics, Inc. (NPI), a wholly-owned subsidiary, a supplier of automotive after-market products and consumer durable goods products to retailers and wholesalers in the automotive after-market and in the consumer durable electrical products markets. NPI's diversified products are sold in the automotive and consumer retail and after market channels. NPI currently markets its diversified product assortment under the Good Choice® and MOTOR TREND® brand names.

·        Delta Seaboard International, Inc. (Delta), a 46.4% owned subsidiary, an onshore rig-based well-servicing contracting company providing services to the oil and gas industry.

Real Estate Portfolio

In addition, the Company continues to own 287 undeveloped acres of waterfront property on Dickinson Bayou and Galveston Bay in Galveston County, Texas. The book value for this property is $225,000, based on its historic cost, and is listed with CBRE for sale to developers for $25.0 million.  Additionally, the Company’s portfolio includes 174 acres in Waller County, approximately 50 acres in north Houston, and other properties in Galveston County.  All of these properties are listed for sale with brokers and have appraised values that are significantly higher than their book values.  Management believes that these three properties should be sold in the next 24 to 36 months, which will substantially increase the Company’s cash and working capital positions. 

Financial highlights of 2010 

·        We reported revenues of $24,263,332 for the year ended December 31, 2010, compared to $18,463,407 for the year ended December 31, 2009, representing an increase of $5,799,925, or 31.4%. Revenues for NPI during the year ended December 31, 2010 were $14,460,039, compared to $9,673,598 for the year ended December 31, 2010, representing an increase of $4,786,441, or 49.5%. NPI's revenues increased primarily because NPI replaced a very large supplier for one of its major accounts, substantially increasing its business with this major customer. Additionally, NPI's revenues increased due to the addition of several new accounts and increased orders for existing accounts. During the year ended December 31, 2010, Delta had revenues of $9,023,129, compared to $8,789,809 for the year ended December 31, 2009, representing an increase of $233,320, or 2.7%. Pipe sales for the year ended December 31, 2010 were $5,878,377 compared to $4,208,215 for the year ended December 31, 2009, representing an increase of $1,670,162, or 39.7%. Pipe sales increased primarily due to significantly increased drilling activities during 2010. Additionally, the cost of steel products decreased, allowing Delta to be more competitive in the pipe market. More pipe was sold to end-users, affording Delta larger pipe orders with higher margins. Rig service revenues decreased for the year ended December 31, 2010 by $1,436,842, or 31.4%, to $3,144,752 compared to $4,581,594 for the year ended December 31, 2009. Rig service revenues have decreased due to major maintenance on two rigs during 2010.

·        Earnings before interest, taxes, depreciation and amortization (EBITDA) and excluding the non-controlling interest and discontinued operations for the year ended December 31, 2010 reflected a loss of $426,263, or $0.04 per share, an improvement of $358,238, compared to EBITDA from continuing operations and excluding the non-controlling interest for the year ended December 31, 2009, which reflected a loss of $784,501, or $0.09 per share. We had a net loss from continuing operations attributable to American of $1,334,681, or $0.13 per share, for the year ended December 31, 2010, compared to a net loss of $1,808,050, or $0.21 per share, for the same period in 2009. Our net loss from continuing operations for the year ended December 31, 2010 included interest expense, a tax benefit, depreciation and amortization, and loss attributable to non-controlling interest of $459,436, $12,521, $461,503, and $493,083, respectively. Our net loss from continuing operations for the year ended December 31, 2009 included interest expense, taxes, depreciation and amortization, and loss attributable to non-controlling interest of $460,517, $36,782, $526,250 and $635,348, respectively.

·        Assets from continuing operations were $25.9 million at December 31, 2010.

Looking forward to 2011 and beyond 

Of course, no one can predict what the economy will do in 2011; however, we anticipate increased revenues and profitability from operations in 2011 over those of 2010, despite the slow down in the economy. 

Management believes that the properties mentioned above should be sold in the next 24 to 36 months, which will substantially increase the Company’s cash and working capital positions. 

American International Industries, Inc. is a growing diversified holding company with a business model emphasis on enhancing assets and stockholders’ equity to facilitate substantial future revenues and earnings per share.

We remain focused on further strengthening our financial profile in 2011 and beyond. We believe that we can achieve growth and add shareholder value by continuing to pursue opportunities to acquire additional and complimentary businesses and by expanding the operations of our existing businesses. We will evaluate whether businesses can be acquired at reasonable terms and conditions, at attractive earnings multiples, and present opportunity for growth and profitability. These efforts will include the application of improved access to financing and management expertise afforded by synergistic relationships between the Company and its subsidiaries. Periodically, as opportunities present themselves, we may sell or merge the subsidiaries in order to bring value to our shareholders and to enable the Company to acquire larger companies. 

As stewards of the Company, our management team seeks opportunities to improve working capital through a variety of financing options. A key talent of our management team has been to acquire real estate and sell it for a substantial profit. The Company may acquire real estate for resale, based upon market conditions, location, and development potential. We will use profits from these ventures and continue to strengthen our relationships with financial institutions and outside investors to improve our asset portfolio. 

I wish to thank our management team and all of our employees for their hard work and dedication. On behalf of our Board and management, I wish to express our gratitude to our shareholders for your continued support. We remain committed to delivering value to our shareholders and look forward to a bright future.

Daniel Dror

Chairman and C.E.O.