

Chairmans
Letter
Dear fellow shareholders,
American International
Industries, Inc. achieved several key milestones in 2007. Our
shares of common stock began trading on the NASDAQ Capital Market on
August 21, 2007. The Company’s revenues increased for a fourth
straight year to a record level of $34.9 million, total assets
increased by 22%, and stockholders’ equity increased by 20%. Our
ongoing strategy of providing financing and management expertise for
our subsidiaries continues to enhance our financial position and
improve shareholder value.
We produced record results for
2007 and substantially improved our financial profile from our asset
portfolio, which consists of wholly-owned and majority-owned
subsidiaries, 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 Well Service, Inc. (Delta), a 51% owned subsidiary, an
onshore rig-based well-servicing contracting company providing
services to the oil and gas industry.
· Hammonds
Industries, Inc. (OTCBB:"HMDI"), a 48.2% owned subsidiary, is a
public reporting company, which owns 100% of Hammonds Technical
Services, Inc., Hammonds Fuel Additives, Inc., and Hammonds Water
Treatment Systems, Inc. (collectively "Hammonds"):
o Hammonds
Technical Services – a business engaged in fuel handling equipment
for the United States military and industrial customers, a provider
of fuel injection services for the aviation industry, and the
designer of a new line of omni directional vehicles (ODV®) for a
wide variety of uses;
o Hammonds
Fuel Additives – produces and markets motor and aviation fuel
additives; and
o Hammonds
Water Treatment – manufactures patented systems which provide water
disinfection for a wide range of potable and waste water
applications.
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 under contract for sale at $16.0 million. During 2007,
the Company purchased for investment a 174 acre tract of land in
Waller County, Texas for $1.7 million. This property is listed for
sale with a real estate broker. Management believes that these two
properties should be sold in 2008, 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. To
that end, during the past five years, the Company has increased
assets to $44.6 million at December 31, 2007, or an increase of
$33.4 million, or 299%, from $11.2 million at December 31, 2002; the
Company has increased stockholders’ equity to $27.1 million at
December 31, 2007, or an increase of $19.0 million, or 234%, from
$8.1 million at December 31, 2002.
Financial highlights of 2007
· We
reported record revenues of $34.9 million for the twelve months
ended December 31, 2007, compared to $33.4 million in 2006, an
increase of approximately 5%.
· Revenues
generated by our Hammonds subsidiary increased by $3.6 million, or
56%, to $10.1 million. Increasing demand for Hammonds Water
Treatment products and Hammonds Technical Services’ transport
mounted injection systems is driving the increase in revenues at our
Hammonds subsidiary.
· The
Company added shareholder value by significantly strengthening the
balance sheet in 2007:
o
Total assets increased by $8.0 million.
o
Working capital increased by $10.2 million.
o
Stockholders’ equity increased by $4.5 million.
Looking forward to 2008 and beyond
· Without
any potential acquisitions, we project revenues for 2008 in excess
of $45 million.
o With
the investment in manufacturing assets, Hammonds is ideally
positioned to meet growing demand for its innovative products and
experience unprecedented growth. Hammonds’ backlog of orders was
$3.7 million at December 31, 2007. This backlog, as well as the
increasing acceptance of its existing products and prospects for
introduction of its technology in new markets, has Hammonds on track
for substantial revenue growth for 2008 and 2009. Recent fuel cost
increases have resulted in increased demand for injector
technologies to achieve fuel economies. Also, recent acceptance of
Hammonds’ ODV® by The Boeing Company and the U.S. Army present the
potential for significantly increasing demand for our materials
handling and aircraft positioning equipment. New manufacturing
processes and equipment should appreciably lower manufacturing
costs. Hammonds expects to enjoy improved profitability through
better absorption of fixed costs over an increasing revenue base.
o NPI
projects that its revenues will grow by over 15% for 2008. NPI is
in final negotiations with a major "big box" chain to distribute its
Good Choice™ night light and wall tap products, and if successful,
this should further increase revenues significantly in 2008. NPI's
strategic plan for 2008 includes targeting three or more additional
large accounts and reducing its dependence upon major customers by
adding more mid-size accounts, which will reduce risk and
substantially increase revenues and profitability.
o Delta
projects that its revenues will grow by over 12% for 2008. Delta
will activate a seventh well service rig during the second half of
2008, and expects this rig will add a minimum of $75,000 in monthly
revenues.
· Management
believes that these two properties mentioned above should be sold in
2008, which will substantially increase the Company’s cash and
working capital positions.
We remain focused on further
strengthening our financial profile in 2008 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
which lead to the Company’s record results for 2007. 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.
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