| **  **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       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| **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 September 30, 2000    
[  ] TRANSITION REPORT    UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1994
For the transition period    from _______ to _______  
COMMISSION FILE NUMBER: **0-25223**    
**AMERICAN INTERNATIONAL    INDUSTRIES, INC.**
(Exact name of small    business issuer as specified in its charter)    
**Nevada**
**88-0326480**
(State or Other Jurisdiction    of Incorporation)
(IRS Employer Identification    No.)**  ****  **
**601 Cien    Street, Suite 235, Kemah, TX**
**77565-3077**
(Address of    Principal Executive Offices)
(Zip Code)    
**(281)    334-9479**
(Issuer's    telephone number)   
Check    whether the issuer: (i) 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 reports), and (ii) has been subject to the filing requirements    for the past 90 days. Yes [  ] No [X ]

APPLICABLE ONLY TO CORPORATE ISSUERS
State    the number of shares outstanding of each of issuer's classes of common equity outstanding    as of the latest practicable date:
Common    Stock, $.001 par value, 139,868,991 outstanding as of December 20, 2000.
Page    1 of 12
 

 

 

 

 

 

 

TABLE OF CONTENTS

**PART    I.   CONSOLIDATED FINANCIAL INFORMATION**
Page
Item 1. Consolidated Financial    Statements (Unaudited)
2
Item    2. Management’s Discussion and Analysis of Financial Condition and Results of    Operations
9
**PART    II. OTHER INFORMATION**
Item 1. Legal Proceedings
11
Item 2. Changes in Securities    and Use of Proceeds
11
Item 3. Default Upon Senior Securities
11
Item 4. Submission of    Matters to a Vote of Security Holders
11
Item 5. Other Information
11
Item 6. Exhibits and Reports on Form 8-K
11
FORWARD LOOKING STATEMENTS:THIS FORM 10-QSB AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY AMERICANINTERNATIONAL INDUSTRIES, INC. OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAYCONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACTOF 1933, AS AMENDED (THE "ACT") AND THE SECURITIES EXCHANGE ACT OF 1934 (THE"EXCHANGE ACT") BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. 15U.S.C.A. SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTSREGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AS WELL AS THEASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. PROSPECTIVE INVESTORS ARE CAUTIONED THATANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVERISKS AND UNCERTAINTIES, AND THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSECONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TOMANAGEMENT THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INFORWARD-LOOKING STATEMENTS ARE SET FORTH IN THE SAFE HARBOR COMPLIANCE STATEMENT FORFORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 TO OUR FORM 10-QSB/A FOR THE PERIODENDED JUNE 30, 2000 FILED ON DECEMBER 18, 2000, AND ARE HEREBY INCORPORATED HEREIN BYREFERENCE. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKINGSTATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF UNANTICIPATED EVENTS ORCHANGES TO FUTURE OPERATING RESULTS OVER TIME. 

**PART I.  FINANCIAL INFORMATION**

**Item1. Consolidated Financial Statements**
   Page
Independent Auditors' Letter3
Consolidated Financial    Statements (Quarter ended September 30, 2000 Reviewed)
    Balance Sheets –  September 30, 2000 and    December 31, 1990 (Audited)4
    Statements of Operations – Three and    nine months ended September 30, 2000 and 19995
    Statements of Cash Flows – Nine months    ended September 30, 2000 and 19996
    Notes to Consolidated Financial    Statements8
 

 

 
**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: Rebassie@aol.com**IndependentAuditors’ Letter

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 September    30, 2000, and the related condensed consolidated statements of operations and cash flows    for the three-month and nine-month periods ended September 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. B. Bassie & Co., P.C.
Houston, Texas
December 20, 2000
 

 

 

 

**AMERICAN    INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES**
**Consolidated Balance Sheets**
September    30, 2000 and December 31, 1999
(Unaudited    - see accompanying accountants' review report)      
2000
1999
Assets(Reviewed) Restated
(Audited)    RestatedCurrent assets:   Cash
$                        969,886
$                   639,396   Restricted    certificates of deposit- 
1,150,000   Trading securities283,588
1,006,779   Accounts receivable,    less allowance for doubtful accounts of     $130,399    at September 30, 2000 and $135,614 in 19993,697,546
1,609,561   Notes receivable502,835
181,691   Inventories1,149,220
1,199,947   Prepaid expenses and    other current assets1,992
45,510     Total    current assets4,222,199
5,832,884   Note receivable, net of allowance    for doubtful accounts of $1,200,000 at September 30, 2000 and December 31, 1999128,200
-Real estate held for sale939,584
939,584Property and equipment, net of    accumulated   depreciation and    amortization1,397,177
1,588,222Excess of cost over net assets of    businesses   acquired, less    accumulated amortization of   $230,900 in 2000 and    $132,729 in 19991,435,565
1,604,031Non-compete agreements, net of    accumulated amortization of   $400,000 in 2000 and    $325,000 in 1999
100,000
175,000Other assets
13,165
18,793          Total assets
$               10,618,758
$               10,158,514  
Liabilities    and Stockholders' Equity  Current liabilities:   Accounts payable and    accrued expenses3,644,480
2,448,261   Margin loan from    financial institution101,679
523,863   Current installments    of notes payable to related parties500,800
471,000   Current installments    of notes payable597,045
487,444   Current installments    of capital lease obligations13,396
45,109   Net assets from    discontinued operations- 
1,200,000     Total    current liabilities4,857,400
5,175,677Notes payable to related parties,    less current installments- 
-Notes payable, less current    installments996,308
703,596Capital lease obligations, less    current installments- 
46,132     Total    liabilities5,853,708
5,925,405   Stockholders' equity:   Preferred stock,    $.001par value. Authorized        10,000,000 shares: none issued
-   Common stock, $.001    par value. Authorized 200,000,000 shares:        140,120,991shares issued and 138,868,991 shares outstanding at           September 30, 2000, 125,972,971shares issued and 125,720,971      shares    outstanding at December 31, 1999139,869
125,721   Additional paid-in    capital17,389,244
16,393,094   Accumulated deficit(12,730,035)
(12,251,678)     Total    stockholders 'equity4,799,078
4,267,137   Less treasury stock,    at cost (252,000 shares)(34,028)
(34,028)Accumulated other comprehensive    loss- 
-     Total    stockholders' equity4,765,050
4,233,109Commitments and contingent    liabilities- 
-      Total    liabilities and stockholders' equity
$                10,618,758
$           10,158,514See accompanying notes    to consolidated financial statements
 
**AMERICAN    INTERNATIONAL INDUSTRIES, INC. AND SUBSIDIARIES
**Consolidated Statements of Operations**
Three and nine    months ended September 30, 2000 and 1999
(Unaudited - see    accompanying accountants' review report)   
Three    months ended September 30,
Nine    months ended September 30,   
  2000      (Reviewed)
  1999    (Unaudited)
  2000    (Reviewed)
  1999    (Unaudited)Revenues 
$            5,170,647
$             3,011,305
$         12,233,762
$          10,913,870   Costs and expenses:    Cost of sales 4,585,4872,497,54810,560,6208,647,569   Selling, general and    administrative 470,773983,979
1,958,636
3,012,502     Total    operating expenses 5,056,2603,481,527
12,519,256
11,660,071   Operating income (loss) 114,387(470,222)
(285,494)
(746,201)   Other income (expenses):    Interest income 13,41420,915
46,658
58,588   Realized gains on    investments 86,73134,411
265,539
1,179,447   Unrealized gain and    (losses) on investments (180,313)(956,397)
(450,956)
(624,001)   Gain on the sale of    assets52,881- 52,881-    Other Income36,420(303,634)
38,254
(235,473)   Interest expense (59,047)(42,503)
(145,239)
(140,251)     Total    other income (expenses)(49,914)(1,247,208)
(192,863)
238,310        Net    earnings (loss) before income tax 64,473(1,717,430)
(478,357)
(507,891)Provision for income tax- - 
- 
-     Net    earnings (loss) from continuing operations 64,473(1,717,430)
(478,357)
(507,891)Loss from discontinued operations - (532,370)
- 
(1,331,554)     Net    earnings (loss) 
$               64,473)
$          (2,249,800)
$     (478,357)
$        (1,839,445)   Net earnings (loss) per common    share - basic and diluted:    Net earnings (loss)    from continuing operations 
$                  (0.00)
$                   (0.01)
$               (0.00)
$               (0.00)   Net earnings (loss)    from discontinued operations 
$                  (0.00)
$                   (0.00)
$               (0.00)
$               (0.01)   Net earnings (loss)    applicable to common shareholders 
$                  (0.00)
$                   (0.02)
$               (0.00)
$               (0.01)   Weighted average common shares - basic and diluted140,803,774124,947,982
134,604,117
124,883,901  Consolidated statements of    comprehensive income (loss):    Net earnings (loss) 
$                64,473
$          (2,249,800)
$          (478,357)
$            (1,839,445)   Unrealized gain    (loss) on shares available-for-sale:   Unrealized holding    gain (loss) arising during the period- - 
- 
1,051,720   Less:    reclassification adjustment for gain included in net income- - 
- 
(1,032,756)        Comprehensive income (loss)
$                 64,473
$          (2,249,800)
$       (478,357)
$         (1,820,481)See accompanying notes    to consolidated financial statements
 
**AMERICAN INTERNATIONAL INDUSTRIES, INC.    AND SUBSIDIARIES****Consolidated Statements of Cash Flows**Nine months ended September 30, 2000 and    1999(Unaudited - see accompanying accountants'    review report)      2000
1999
(Review  Restated
(Unaudited)Cash flows from operating    activities:        Net earnings (loss) 
$  (478,357)  $ 
(1,839,445)        Adjustments to reconcile net earnings (loss)          to net cash used in operating activities:             Depreciation and amortization   304,024 
783,203            Realized gain on sale of securities   (265,539) 
(1,179,445)            (Increase) decrease in market value of equity securities   405,956 
624,001            (Increase) decrease in operating assets:                Accounts receivable   (1,996,650) 
(412,644)               Inventories   53,972 
(151,425)               Prepaid expenses and other current assets  47,868 
(17,073)                (Purchase) sale of trading securities, net   160,590 
(1,374,676)               Other assets   12,879 
125,143            (Increase) decrease in operating liabilities:                Accounts payable and accrued expenses   1,278,523 
 1,054,409               Decrease in net liabilities from discontinued operations  (1,200,000) 
-                 Deferred revenues   -  
 20,539                           Net cash used in operating activities  (1,676,734) 
 (2,367,413)  Cash    flows from investing activities:         Proceeds from sale of available-for-sale investment securities  -     
1,167,605        Purchase of property and equipment   (58,214) 
(290,269)        Redemption (purchase) of restricted certificate of deposit  1,150,000 
(1,500,000)        Disposition of assets  -   130,155        Cash paid (sold) for acquisitions (dispositions)  (8,428) 
 (140,736)        Notes receivable   (54,010) 
 143,000                 Net cash provided by (used in) investing activities   1,029,348 
 (140,245)          Cash    flows from financing activities:         Proceeds from stock subscriptions  490,000 
456,900        Repayments of notes receivable  -     
5,000        Proceeds from note payable  500,000 
3,309,357        Proceeds from note payable to related party  29,800  -            Principal payments of notes payable   (13,588) 
(2,415,608)        Principal payments on capital lease obligations   (28,356) 
(296,342)        Sale of treasury stock   -  
 4,190                 Net cash provided by financing activities   977,856 
 1,063,497                        Net increase (decrease) in cash   330,470 
(1,444,161)         Cash    at beginning of year   639,396 
 2,149,916  Cash    at end of period 
$  969,866  $ 
 705,755  Supplemental    schedule of cash flow information:         Interest paid  
$  145,239  $ 
 288,366        Non-cash transactions:            Purchase of securities on margin 
$  -   $ 
   149,072          Stockholder debt forgiveness $- $365,158
See    accompanying notes to consolidated financial statements
**AMERICAN INTERNATIONAL INDUSTRIES, INC. ANDSUBSIDIARIES**

**Notesto the Consolidated Financial Statements**
**(1) General

American International Industries, Inc. (the "Company" or"AIII"), formerly Black Tie Affair, Incorporated, operates as a diversifiedholding company with a number of wholly-owned subsidiaries and one majority-ownedsubsidiary.

Theunaudited consolidated financial statements have been prepared on the same basis as theaudited consolidated financial statements and, in the opinion of management, reflect alladjustments (consisting of normal recurring adjustments) necessary for a fair presentationfor each of the periods presented. The results of operations for interim periods are notnecessarily indicative of results to be achieved for full fiscal years.

Ascontemplated by the Securities and Exchange Commission (SEC) under Rules of RegulationS-B, the accompanying consolidated financial statements and related footnotes have beencondensed and do not contain certain information that will be included in the Company'sannual consolidated financial statements and footnotes thereto. For further information,refer to the Company's 1999 audited consolidated financial statements and relatedfootnotes.

**(2) Industry Segments**

The Company has three reportable segments and corporate overhead:industrial/commercial, oil and gas, and real estate. The industrial/commercial segmentincludes (1) a supplier of automotive after-market products; (2) a manufacturer anddistributor of barbecue pits and custom sheet metal products for customers predominatelyin the energy industry; (3) distributors of specialty chemicals for the automotiveafter-market, including specializing in the application of spray-on bed liners for truckbeds; and (4) a holding company for future commercial ventures. The oil and gas segmentowns 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 comparativesegment 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 corporateoverhead includes the Company's investment holdings including financing current operationsand expansion of its current holdings as well as evaluating the feasibility of enteringinto additional businesses.

Theaccounting policies of the segments are the same as those described in the summary ofsignificant accounting policies. The Company evaluates performances based on profit orloss from operations before income taxes, not including nonrecurring gains and losses andforeign exchange gains and losses.

TheCompany's reportable segments are strategic business units that offer different technologyand marketing strategies. Most of the businesses were acquired as subsidiaries and themanagement at the time of the acquisition was retained.

Consolidatedrevenues, net operating losses for the nine months ended September 30, 2000 and 1999, andidentifiable assets as of September 30, 2000 and 1999, were as follows:

 
20001999Revenues:   Industrial/Commercial
$ 12,202,321
$ 10,306,513   Real estate22,854607,357   Oil and gas8,587-    $    12,233,762$    10,913,870Operating income (loss):   Industrial/Commercial$ 249,430$ 69,419   Real estate(48,233)445,941   Oil and gas8,276(5,026)   Corporate expenses(494,967)(1,256,535)$    (285,494)$    (746,201)Identifiable assets:   Industrial/Commercial $ 9,510,975$ 8,129,243   Media/Entertainment-3,916,701   Real estate949,380996,631   Oil and gas78,29867,528   Corporate80,1051,502,027$    10,618,758$    14,612,130
The Company's areas of operations are principallyin the United States. No single foreign country or geographic area is significant to theconsolidated financial statements.

**Item 2. Management's Discussion and Analysis of Financial Condition and Resultsof Operations**

Forward-Looking Statements; Market Data

As used in this Quarterly Report,  the terms "we", "us", "our" "AIII" and the"Company" means American International Industries, Inc., a Nevada corporation.To the extent that we make any forward-looking statements in the "Management’sDiscussion and Analysis of Financial Condition and Results of Operations" in thisQuarterly Report, we emphasize that forward-looking statements involve risks anduncertainties and our actual results may differ materially from those expressed or impliedby our forward-looking statements. All forward-looking statements in this Quarterly Reportreflect our current views about future events and are based on assumptions and are subjectto risks and uncertainties. Except as required by applicable law, including the securitieslaws of the United States, we do not intend to update or revise any forward-lookingstatements, which forward-looking statements may include, but not  be limited to,statements about our plans, objectives, expectations, intentions and assumptions and otherstatements that are not historical facts. Generally, forward-looking statements includephrases with words such as  "expect", "anticipate","intend", "plan", "believe", "seek","estimate" and similar expressions to identify forward-looking statements.

**Overview**

We are aholding company and currently have six wholly owned operating subsidiaries and onemajority-owned (consolidating) subsidiary.     The historical financialstatements of AIII include the acquisitions of acquired companies as of the effectivedates of the purchases and the results of these companies subsequent to closing, as thesetransactions were accounted for under the purchase method of accounting.The acquisitionsof certain subsidiaries were accounted for using the purchase method of accounting,whereby the purchase price of the acquisition was allocated based on the fair market valueof the assets acquired and liabilities assumed. If the purchase price exceeded the netfair market value of the assets acquired, any remaining purchase price was allocated togoodwill. In addition, certain subsidiaries were accounted for using the historical costbasis of the predecessor. Reference is made to our Form 10-KSB/A for our year endedDecember 31, 1999 filed with the Securities and Exchange Commission ("SEC") onDecember 15, 2000 for a full discussion of our business and subsidiaries under"Description of Business" and Note 2 of the Notes to Consolidated FinancialStatements which were filed as part of the Form 10-KSB/A. 

We havethree reportable segments and corporate overhead: industrial/commercial, oil and gas, andreal estate. The industrial/commercial segment includes (1) a supplier of automotiveafter-market products; (2) a manufacturer and distributor of barbecue pits and customsheet metal products for customers predominately in the energy industry; (3) distributorsof specialty chemicals for the automotive after-market, including specializing in theapplication of spray-on bed liners for truck beds; and (4) a holding company for futurecommercial ventures. The oil and gas segment owns an oil, gas and mineral royalty interestin Washington County, Texas. Prior to 1999,we had a media/entertainment segment, which wesold in 1999. The comparative segment information for 1999 had been restated to delete themedia entertainment data, which had been treated as a loss from discontinued operations in1999. The corporate overhead includes our investment holdings including financing currentoperations and expansion of its current holdings as well as evaluating the feasibility ofentering into additional businesses. The accounting policies of the segments are the sameas those described in the summary of significant accounting policies. We evaluateperformances based on profit or loss from operations before income taxes, not includingnonrecurring gains and losses and foreign exchange gains and losses. Our discussion under"Results of Operations" and "Liquidity and Capital Resources" below ison a consolidated basis. For reference to "Industry Segments" see Note 2 to theConsolidated Notes to Financial Statements  in Item 1, Consolidated FinancialStatements above. 

**Results ofOperations - American International Industries, Inc. Consolidated**

**ThreeMonths and Nine Months Ended September 30, 2000 Compared to Three Months and Nine MonthsEnded September 30, 1999**

Netrevenues for the nine months and three months ended September 30, 2000 increased by$1,317,892 or 10.8% and $2,159,342 or 41.8%, respectively, compared to the same periods inthe prior year. For the nine-month periods ended September 30, 2000 and 1999, revenues increased from $10,913,870 to $12,233,762, respectively and for thethree-month periods revenues increases from $3,011,305 to $5,170,647, respectively. Theincrease in revenue was primarily the result of increased sales of approximately$2,100,000 at Northeastern Plastic Inc. ("NPI") for the nine months endedSeptember 30, 2000. 

Costof goods sold for the nine and three months ended September 30, 2000 increased by$1,913,051 or 18.1% and by $2,087,939 or 45.5%, respectively, over the comparable periodsin the prior year. Total cost of goods sold during the nine-month period increase from$8,647,569 in 1999 to $10,560,620 in 2000 and for the three-month period total cost ofgoods sold increased from $2,497,548 to $4,585,487. The increase in cost of goods sold forthe nine months ended September 30, 2000 was primarily attributable to an increase insales at NPI. Cost of goods sold as a percentage of net sales increased over thenine-month periods from 79.3% to 86.3%. This increase is primarily due to the sale of anoption to purchase real estate in 1999. The cost of the option ($100,000) was recorded in1998 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 82.9% to 88.2% forthe three-month periods ended September 30, 2000 and 1999. 

Selling,general and administrative expenses consisted primarily of management, clerical andadministrative salaries and professional services. Selling, general and administrativeexpenses for the nine and three months ended September 30, 2000 decreased by $1,053,866 or53.8% and by $513,206 or 109.0% over the same periods in the prior year. Selling, generaland administrative expenses as a percentage of sales decreased from 32.7% to 16.0% for thecomparable nine-month periods and from 26.7% to 9.1% for the comparable three-monthperiods. The decrease in selling, general and administrative expenses for the nine monthsand three months periods ended September 30, 2000 was attributable to the decrease in thecost of auditing and accounting services incurred during these periods in 2000. 

Operatinglosses for the nine months ended September 30, 2000 decreased by $460,707 over thecomparable period in 1999. Operating income for the three months ended September 30, 2000increased by $584,609 over the comparable period in 1999.
**Liquidityand Capital Resources

TheCompany's operations have been financed principally through internal growth and liquidassets on hand. At September 30, 2000, the Company's working capital was $1,747,667. 

Netcash used by operating activities for the nine months ended September 30, 2000 of$1,676,734 was primarily due to an increase in accounts receivable by $1,996,6510 and theuse of $1,200,000 to payoff notes payable related to CRC. This was a result of thediscontinued operation and was reported during the three month period ended June 30, 2000in the Company's Form 10-QSB/A for such period. 

Netcash provided by investing activities for the nine months ended September 30, 2000 of$1,029,348 was primarily due to the redemption of restricted certificates of deposit inthe amount of $1,150,000.

Netcash provided by financing activities for the nine months ended September 30, 2000 of$977,856 was primarily due to receipts of proceeds from the sale of restricted shares ofthe Company's common stock during the last quarter in the amount of $490,000 and proceedsfrom borrowing in the amount $529,800. 

TheCompany believes that internally generated funds and the available borrowings under itsexiting credit facilities will provide sufficient liquidity and enable it to meet currentand foreseeable working capital requirements.

**Part II**
**Item 1. LegalProceedings**
None, reference is made to Item 3. in Part I of theamended Form 10-KSB filed on December 15, 2000.
**Item 2. Changes in Securities and Use of Proceeds

None.

**Item3. Default 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**
(a) Exhibits

The following exhibits are to be filed or incorporated by reference aspart of the Quarterly Report:
Exhibit No.Description13The Registrant's amended Form    10-KSB/A for the year ended 1999 is incorporated herein by reference.27Financial Data Schedule99.1Safe Harbor Compliance Statement for Forward-Looking    Statements filed previously on Form 10-QSB/A, File No. 0-25223
(b) The Company filed a Form 8-kon July 5, 2000 and amended such report on August 4, 2000. The Company reports under Item4. Changes in Registrant's Certifying Accountant.
**SIGNATURES**
In accordance with the Section 13 or 15(d) of the Exchange Act, theregistrant caused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

American International Industries, Inc.
By /s/ Daniel DrorDaniel DrorPresident, Chief Executive Officer and Director   By /s/ John W. Stump, IIIJohn W. Stump, IIIChief Financial Officer
In accordance with the Exchange Act, this report has been signed belowby the following persons on behalf of the registrant and in the capacities and on thedates indicated.
SignatureTitleDate/s/ Daniel Dror Chairman of the Board and Chief Executive Officer December 20, 2000Daniel Dror      /s/ Erick Friedman DirectorDecember 20, 2000Erick Friedman****************** |