UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549___________________FORM 10-KSB/A________________________________ ýANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended December
31, 2005   ̈TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the transition period from
         to  Commission
file number:0-50912 INTERNATIONAL
AMERICAN TECHNOLOGIES, INC.(Exact Name Of Registrant
As Specified In Its Charter) Nevada
    88-0225318(State of Incorporation)
    (I.R.S. Employer
    Identification No.)601 Cien Street, Suite 235 Kemah, TX
    77565-3077(Address of Principal
    Executive Offices)
    (ZIP Code) Registrant's
Telephone Number, Including Area Code:(281) 334-9479 **Securities
Registered Pursuant to Section 12(g) of The Act: Common Stock, $0.0001** Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. YesxNo ̈Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in the definitive proxy
or information statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. ̈At December 31, 2005, the aggregate market value of the3,823,720common stock held by non-affiliates of the
registrant was approximately $2,485,418. At December 31, 2005, the registrant had
20,135,000 shares of common stock outstanding.Issuer's revenues for
its most recent fiscal year: $3,395,151. Indicate
whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Exchange Act). Yes ̈NoxIndicate whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).Yes ̈Nox




TABLE OF CONTENTS Item
    
    Description
    
    Page**PART I**ITEM
    1.
    
    DESCRIPTION OF BUSINESS
    
    
    3ITEM
    2.
    
    DESCRIPTION OF PROPERTY
    
    
    15ITEM
    3.
    
    LEGAL PROCEEDINGS
    
    
    15ITEM
    4.
    
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    15**PART II**ITEM
    5.
    
    MARKET
    FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    
    
    16ITEM 6.
    
    MANAGEMENT'S
    DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
    
    
    16ITEM
    7.
    
    FINANCIAL STATEMENTS
    
    
    18ITEM 8.
    
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    18ITEM
    8.A
    
    CONTROLS AND PROCEDURES
    
    
    18ITEM 8.B
    
    OTHER INFORMATION
    
    
    18**PART III**ITEM 9.
    
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT, COMPLIANCE WITH SECTION 16(A)
    
    
    19ITEM 10.
    
    EXECUTIVE COMPENSATION
    
    
    20ITEM 11.
    
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    
    
    20ITEM 12.
    
    CERTAIN RELATIONSHIPS
    AND RELATED TRANSACTIONS
    
    
    20ITEM 13.
    
    EXHIBITS AND REPORTS
    ON FORM 8-K
    
    
    20ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND
    SERVICES
    
    
    21




**Cautionary Statement regarding Forward-Looking
Statements** This Annual Report on Form
10-KSB/A of International American Technologies, Inc. (hereinafter the
"Company", the "Registrant" or "IMTG") includes
forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The
Registrant has based these forward-looking statements on its current expectations and
projections about future events. These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about the Registrant that may cause its
actual results, levels of activity, performance or achievements to be materially different
from any future results, levels of activity, performance or achievements expressed or
implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "will,"
"should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate,"
"continue," or the negative of such terms or other similar expressions. Factors
that might cause or contribute to such a discrepancy include, but are not limited to,
those described in this Annual Report on Form 10-KSB/A and in the Registrant's other
Securities and Exchange Commission filings. Should one or more of these risks or
uncertainties materialize, or should any of our assumptions prove incorrect, actual
results may vary in material respects from those projected in the forward-looking
statements. For a more detailed discussion of the foregoing risks and uncertainties, see
"Risk Factors". PART I ITEM 1.
DESCRIPTION OF BUSINESSBack to
Table of Contents **International American Technologies, Inc.** International American Technologies, Inc., a
Nevada corporation, is publicly traded on the pink sheets under the symbol IMTG. The
Company was incorporated on August 18, 1986 and in connection with a stock purchase
agreement in between the Company and Hammonds Technical Services, Inc. effective on April
28, 2005, the Registrant changed its name from Unlimited Coatings Corporation to
International American Technologies, Inc. The Registrant is an 81.0% owned subsidiary of
American International Industries, Inc., a public reporting company under the Exchange Act
with its shares subject to quotation on the OTCBB under the symbol AMIN. Description of**Hammonds**Business Some of the statements contained in this current report
of International American Technologies Inc., (hereinafter the "Company",
"IMTG", "We" or the "Registrant"  discuss future
expectations, contain projections of our operations or financial condition or state other
forward-looking information. On February 28, 2005, the Registrant entered into a Stock
Purchase Agreement (the "Agreement") to acquire 51% of the capital stock of
Hammonds Technical Services, Inc., a privately owned Texas corporation
("Hammonds") in consideration for the Registrant or its parent, American
International Industries, Inc., providing: (i) 998,300 in cash to Hammonds for working
capital; (ii) a secured revolving long-term line of credit in the amount of $2,000,000;
and (iii) the Registrant's parent, American International Industries, Inc., issuing
145,000 restricted shares of common stock to the Registrant in consideration for a
$1,450,000 promissory note. These restricted shares were exchanged for two minority equity
interests in Hammonds owned by third parties, which minority interest were canceled.
Pursuant to the Agreement, which closed on April 28, 2005, Hammonds became a subsidiary of
the Registrant. **General Background of Hammonds**

Hammonds Technical Services, Inc. and Hammonds Fuel Additives, Inc.
were separate private company's and, in connection with the acquisition by IMTG, Hammonds
Fuel Additives was merged into Hammonds Technical Services on February 28, 2005. Hammonds
manufactures engineered products and chemicals that serve multiple segments of the fuels
distribution, water treatment and utility vehicle industries. Hammonds' products are
marketed by a worldwide network of distributors, manufacturers representatives and
original equipment manufacturers. Hammonds was founded in 1982 by Carl Hammonds and
provides the following diverse products and services:

The treatment of municipal and industrial water is a growing industry
in the U.S., as the demand for clean water grows. Hammonds' proprietary solid disinfection
technology provides a major alternative to gaseous chlorine used in every phase of water
treatment. Hammonds believes that the areas of drinking water, food processing and
industrial waste treatment present a significant growth potential for Hammonds' water
treatment technology. Hammonds distributed 1.2 million pounds of calcium hypochlorite for
municipal disinfection through its distribution network in 2005 and believes that it will
distribute 2.5 million pounds in 2006.

Hammonds designs and manufactures fluid handling equipment. Hammonds
fluid powered additive systems permit the use of a single battlefield fuel by supplying
both distribution and tactical additive injectors to all branches of the United States
military. Hammonds intends to continue to provide additive injection systems to the
military through sole source equipment contracts. Hammonds manufactures truck mounted
injectors with custom blending at the end of the hose for jet fuel and other products such
as diesel, LPGN (propane), home heating oil, and bio-diesel. In January 2005, Hammonds
began a long-term project to install dye injection systems in over eight hundred Canadian
and U.S. stationary and truck mounted diesel delivery injectors and is continuing this
project in 2006.

Hammonds' fuel additive division produces and markets motor and
aviation fuel additives, with Biobor® JF as its primary product, serving the aviation,
stand-by power and marine fuel markets. Biobor® JF is one of only two biocides approved
for use in aviation fuels, but it has also been tested and approved as a preservative for
manufactured wood products such as engineered trusses, windows and sheet building
materials. The expanding use of these manufactured wood products should provide a new
expanded market for Biobor® JF since products such as arsenic have been removed from the
list of approved wood preservatives.

In March 2005, Hammonds started production of an entirely new type of
industrial utility vehicle called Omni Directional Vehicle ("ODV"). Hammonds
believes that ODV utility vehicle will establish a new standard for industrial utility
vehicles based on vehicle safety and performance. Hammonds believes that the patented new
design can be utilized in connection with forklifts, freight terminal tractors, security
vehicles, industrial highway mowers and a full range of aviation ground handling vehicles.
Hammonds has produced several prototypes of its new ODV product at its plant in Houston,
Texas. Hammonds has entered into license agreements with manufacturers to produce a range
of vehicles based on its ODV patented technology. In addition, Hammonds has received
initial stocking orders for ODVs from distributors which provide for six ODVs and a
delivery schedule of a minimum of two ODVs per month for the next twelve months. The total
revenues of the initial stocking orders and the scheduled delivery orders are estimated at
$2,500,000. Subsequent to the year ended December 31, 2005, Hammonds  received orders
for: its new line of ODVs; water purification products; and fuel additives and injectors.
These orders, which exceed $3,000,000, are scheduled to be delivered during the last
quarter of 2006 and the first quarter of 2007.
Description of Hammonds Products and Services


Water Treatment Technology Systems

Tableted Calcium Hypochlorite Systems: Manufactured by Hammonds under
several United States and foreign patents, Hammonds industrial and municipal tablet
systems provide water disinfection for a wide range of potable and waste water
applications. Hammonds pioneered engineered tablet systems and believes that it is well
established in the markets for solid chemical disinfection.

Granulated and Powder Blenders: This equipment, for which Hammonds has
several patents, is used to blend and inject a variety of hydroscopic materials into
pressurized fluid lines. Hammonds believes that this equipment offers competitive features
related to its packaging system, removal of environmental contamination, personnel safety,
preservation of product quality and accurate feed rates. Hammonds' dry products blender
equipment can primarily be used in municipal and industrial waste water treatments, food
processing, refining and paper manufacture.

Hydrostatic Test Equipment: Hammonds manufactures a variety of test and
service equipment used in manufacturing and servicing pipelines, distribution systems and
process equipment. This equipment is distributed through municipal water equipment
distributors and the rental industry.

Hammonds also manufactures and markets a line of granulated and powder
blenders under its U.S. patents, which equipment is used to blend and inject a variety
hydroscopic materials into pressurized fluid lines. Hammonds' dry products blenders are
used in municipal and industrial waste water treatment, food processing, refining and
paper manufacture.

Fuel Handling Equipment Systems

Fluid Powered Injectors: Hammonds' injector systems are injection pumps
that are driven and controlled by the flow of product. They utilize a fluid driven motor
that furnishes both power and control to the injector. Requiring no external power, these
injectors provide accurate proportionate-to-flow injection of up to eight different
additives, separately or simultaneously. With primary applications in fuel distribution,
Hammonds' fluid powered injectors are chosen for aviation fuels for application in fuel
system icing inhibitors, corrosion inhibitors, conductivity and thermal stability
additives.

"Smart" Electronic Injectors: This technology combines fluid
powered technology with electronic process controls for use in data analysis and
performance verification of Hammonds' fuel handling systems. Introduced to the aviation
industry by Hammonds, these innovative systems have given Hammonds a strong market
position and Hammonds expects to maintain a competitive position in this growing market.

Hypodermic Pump: Hammonds believes that this new technology will play a
dominant role in a wide range of chemical metering applications. Hammonds believes that
this is the first entirely new fluid handling technology introduced in over twenty-five
years. Its hypodermic pump is expected to contribute increasing revenues to Hammonds' line
of fluid handling products.

In-Tank Vehicle Additive System: The In-Tank system automatically
dispenses additives into vehicle tanks as they are filled with fuel. This system functions
without power or controls while a variety of performance additives can be blended as the
vehicle moves from fuel stop to fuel stop. Hammonds expects that higher energy costs and
growing demand for alternative blended fuels will continue to increase demand for
Hammonds' proprietary technology.

LPGN and Natural Gas Blending: Hammonds has a line of injector systems
that enable new chemicals to be added to ordinary LPGN and natural gas, which will replace
acetylene as fuel in manufacturing processes. Consumers of high volumes of natural gas or
acetylene gas are the  target markets for this line of injector systems.

Fuel Polishing: Hammonds distributes fuel handling systems
designed to "polish" contaminated fuel in various vehicle tanks. Offered for
rent and for sale, these units are distributed to industrial fuel and marine equipment
dealers throughout the United States.

As a result of Hammonds' introduction of data acquisition
and transaction data trails, Hammonds believes that its additive systems will continue to
utilize the latest in solid state controls. Hammonds has developed and has commenced
production of the second generation of injector systems and believes that these new
additive systems should enable Hammonds to maintain its competitive market position in
this growing market into the next decade.

Additives for General Fuels and Commercial Aviation Fuels Additives are the only means by which the performance of
fuels can be enhanced. Higher levels of sophistication in aviation and ground based
equipment will continue to demand additives that can expand performance. Hammonds supplies
additives for aviation, diesel, gasoline, LPGN and natural gas powered vehicles and
equipment. Biobor® JF Fuel Biocide: In 1991, Hammonds purchased
Biobor® JF, a fuel biocide approved for control of microbial growth in hydrocarbon fuels.
Biobor® JF was developed by U.S. Borax in conjunction with major oil companies and the
aviation industry as a means of controlling dangerous corrosion and contamination of
aviation fuel as a result of hydrocarbon utilizing micro organisms. For over forty years,
Biobor® JF has enjoyed the unique status as the only biocide approved for use in aviation
fuels. Currently, only two manufactures are approved and Biobor® JF has continued to
command the majority of the aviation market. Also widely used indiesel and heavy
fuels of all grades, Biobor® JF is exclusively used by manufacturers such as Boeing,
Dessault, Airbus, Lockheed, Cessna, Gulfstream, Learjet, General Dynamics, Pratt &
Whitney, Rolls Royce, GE, Cummins,General Motors, Ford, Caterpillar,
DaimlerChrysler and John Deere. Performance Additives: Hammonds sells performance
additives including detergents, pourpoint depressants, cetane improvers, lubricity agents
and fuel system icing inhibitors. These products are purchased in bulk from manufacturers
such as Shell and Union Carbide and are carefully selected to provide a well-rounded
family of products that compliment the commercial and marine industry, aviation, railroad
and off-road equipment market. All such products have trademarked names owned by Hammonds. Fuel Quality Materials:Hammonds offers fuel test
kits and materials used inquality control, filter media, water absorption
materials and related accessories utilized extensively by aviation, off-road, commercial
transportation, marine and railroad industries.  Omni Directional Vehicles Hammonds Omni Directional Vehicle (ODV) is based on a
round chassis that is driven by two individually powered wheels located at the center axis
of the circle. Caster wheels either in the rear of the vehicle at a fixed point, or on a
transport tool carriage that moves about the circumference of the chassis, balances the
vehicle and allows it to move in any radial direction from a given point regardless of the
position of the "front" of the vehicle.Since it is possible to rotate a
full360 degrees without moving off its original position, it can change direction
by simply rotating to the desired direction, and then begin moving forward or in reverse. Working in conjunction with the ODV's ability to move
precisely in any direction, a radial hitch moves freely about the entire circumference of
the vehicle. The radial hitch provides a connection point to which a wide range of
implements and tools can be attached including tow bars for aircraft, plows and buckets
for materials excavation, forks for materials handling and accessories such as rotary
broom, sweepers, vacuums and spreaders. Hammonds believes that its newly-developed line of ODVs
has createdan entirely new class of industrial vehicles presenting Hammonds
with an opportunity to reshape the way multiple industries move equipment and materials. The ODV utilizes the most current closed loop
hydrostatic technology. Integral dynamic and parking brakes, dual speed wheel motors and
digitally controlled pumps utilize sophisticated controls that offer engineering a wide
range of options in delivering features to the customer. Electric power will play a
dominant role in future propulsion of industrial vehicles and Hammonds' ODVs are ideally
suited to electric power. With plans to provide munitions loaders for the Joint Strike
Force aircraft as well as current aircraft in theU.S. inventory, Hammonds believes
that the sophistication level of its ODV will grow and enable it to meet the precise
handling requirements in multiple targeted industries. **Markets Hammonds Operates In** Water Treatment Market *Demand for Clean Water.* It is
estimated three percent of the world's water is fresh water, most of which is in the form
of ice and snow. It is further estimated that approximately 0.6 percent of all the world's
water is used by humans for various purposes, including agricultural uses. Only some of
this water can be used again, after purification treatment. About 70 percent of all fresh
water is used for irrigation, and most of this cannot be recycled. In the U.S. about 30
percent of all irrigation water is groundwater pumped from the High Plains aquifer.
Approximately 20% of the fresh water goes to industrial uses, leaving only about 10% for
domestic drinking, cooking, and sanitation. Accordingly, the purification and treatment
of municipal drinking water and wastewater is a worldwide concern. The water treatment
market is highly fragmented, consisting of many companies involved in various capacities,
including companies that design fully integrated systems for processing millions of
gallons of water for municipal, industrial, and commercial applications. Demand for water
treatment has continued to grow due to economic expansion, population growth, scarcity of
usable potable water, concerns about water quality and regulatory requirements. Drinking
water, regardless of its source, may contain contaminants that can affect the health of
consumers. Although municipal agencies and water
utilities in the United States are required to provide drinking water which complies with
the U.S. Safe Drinking Water Act, the water supplied to homes and businesses from
municipalities and utilities may contain high levels of bacteria, toxins and parasites, as
well as high levels of chlorine used to eliminate contaminants. The importance of
effective water treatment is critical from a health concerns standpoint due to the fact
that impure water can impair consumers' confidence in food products, and discharge
violations can result in significant fines and penalties from regulatory agencies. *Existing Water Treatment Systems.*
In a typical water treatment facility, the first step adds to the raw incoming water a
substance which causes tiny, sticky particles (called "floc") to form - these
attract dirt and other particles suspended in the water. This process of coagulation
results in the heavy particles of dirt and floc clumping together and falling to the
bottom. These heavier particles form sediment which is siphoned off, leaving the clearer
water, which passes on to filtration. The most common filtration method is known as
"slow sand" or sand-anthracite, in which the water flows into large shallow beds
and passes down through layers of sand, gravel and charcoal. The final process is
disinfection, which is intended to kill bacteria or other microorganisms left in the water
and leave a residual to keep the water safe through the delivery pipes to the customer.
Chlorine is the most commonly employed disinfectant, although chloramine, ozone, and
ultraviolet (UV) are also used. Hammonds manufactures under several U.S. and foreign
patents tableted calcium hypochlorite systems which provide water disinfection for a wide
range of potable and waste water applications. Today's trend in water treatment
filtration, due to the higher demands for water and the reduction in clean or relatively
clean source waters, is to clarify and heavily filter all municipal water supplies. The
smaller municipalities will also be required to meet the added water quality goals of the
larger systems and will require the infrastructure to do so. Smaller municipalities
ordinarily do not have the technical or financial resources required to design build and
operate systems that will meet the new water quality criteria. Fuel Handling Equipment Market Hammonds manufactures a wide variety of fluid injector
systems which are injection pumps that are driven and controlled by the flow of product.
They utilize a fluid driven motor that furnishes both power and control to the injector.
Requiring no external power, these injectors provide accurate proportionate-to-flow
injection of up to eight different additives, separately or simultaneously. With primary
applications in fuel distribution, Hammonds' fluid powered injectors marketed to the
general aviation industry and the U.S. military for application in fuel system icing
inhibitors, corrosion inhibitors, conductivity and thermal stability additives. Hammonds'
fuel handling equipment provides this market with an advanced means of blendings additives
and chemicals. Fuel Additives Market Fuel additives are the only
means by which the performance of fuels can be enhanced. Hammonds believes that higher
levels of demand by the aviation and ground based equipment industry will continue to
grow, with increased levels of performance from fuel additives. Hammonds manufactures
and/or markets additives for aviation, diesel, gasoline, LPGN and natural gas powered
vehicles and equipment. Governments worldwide are legislating specifications regarding the
fuel itself and engine design. Today's advanced fuel engines are far cleaner than the
engines of prior decades. Unfortunately, even today's engines are not clean enough to meet
current stricter air pollution regulations. Diesel fuel engines can become ultra-clean.
Meeting the environmental challenges will require extensive research on clean-fuel
technology. Research in this area is currently being sponsored by government agencies,
major engine companies, truck and plane manufacturers, automobile makers, catalyst
producers and, for fuels, oil refining companies and their technology suppliers. Large
Fortune 500 companies, as well as small, emerging technology companies are investing
hundreds of millions of dollars in research and development worldwide on clean-fuel
technologies. Hammonds manufactures its Biobor® JF fuel additive for sale to the
general and military aviation industries. Biobor® JF provides a means of controlling
dangerous corrosion and contamination of aviation fuel as a result of hydrocarbon
utilizing micro organisms. Biobor® JF is one of only two biocides approved for use in
aviation fuels. Currently, only two manufactures are approved and Biobor® JF has
continued to command the majority of the aviation market. Also widely used indiesel
and heavy fuels of all grades, Biobor® JF is used by manufacturers such as Boeing,
Dessault, Airbus, Lockheed, Cessna, Gulfstream, Learjet, General Dynamics, Pratt &
Whitney, Rolls Royce, GE, Cummins,General Motors, Ford, Caterpillar,
DaimlerChrysler and John Deere.

Hammonds also markets performance additives including detergents,
pourpoint depressants, cetane improvers, lubricity agents and fuel system icing
inhibitors. These products are purchased in bulk from manufacturers such as Shell and
Union Carbide and are carefully selected to provide a well rounded family of products that
compliment the commercial and marine industry, aviation, railroad and off-road equipment
market. All such products have trademarked names owned by Hammonds.Hammonds offers
fuel test kits and materials used inquality control, filter media, water
absorption materials and related accessories utilized extensively by aviation, off-road,
commercial transportation, marine and railroad industries.

Industrial Utility Vehicle Market (ODV) Aviation: It is estimated that the aviation industry
will require approximately 100,000 ground support vehicles during the next five years.
Hammonds believes that the aviation  industry is undergoing electrification and
expansion into regional jet service in addition to now facing a depleted and worn fleet as
a result of world political and economical conditions over the past three years. Fork lifts: This fundamental industrial tool represents the largest
segment of industrial vehicle demand with an annual production of of more than 160,000
units during the past year. Hammonds believes that the technology and advanced engineering
features of its ODV  represents an advance in the fork lift industry. Utility Tractors: Skid steer utility vehicles used for earth and snow
handling compose an annual unit production of over 16,000 units. A large percentage of
these tractors are used for snow management as well as general excavation and bulk
material handling, and the ODV is being marketed to this industry. Freight Trailer "Mules": Modified tractors are used to move
trailers at major terminals as they are loaded for transport. Two major manufacturers
dominate this market delivering approximately 3,000 units per year. Hammonds believes that
it will also be able to successfully compete for this market. Security/Law Enforcement: National security has generated a unique
opportunity for the ODV since it can provide high visibility and radial vision in a very
limited space. Requirements at airports, port, bridges and other high risk locations are
demanding now methods of patrol and observation. Each of the  major classifications of equipment can be segmented
into several categories. A fundamentalbenefit of the ODV is the diversity of the
markets and industries it is capable of serving. In each segment of each major
classification, Hammonds believes that there are distinct market boundaries providing a
broad base of opportunity for the ODV product line. Hammonds Business Strategy Since its inception, Hammonds strategy has been to grow as a provider
of new technology.  Hammonds continues to expand its scope as a leader in serving the
fuels, water treatment and utility vehicle industries. It also believes that it will
experience growth in sales of water treatment products, the addition of new pumping and
dispensing technologies,  and expansion of fuel additive applications and production.
With its development of the Omni Directional Vehicle in  addition to its other
products and services, Hammonds continues to experience revenue growth with an expanding
line of products and services for multiple markets, sectors and industries.

Hammonds believes that future growth and profitability are attainable
through careful management of corporate assets including:

 Diverse background in design, manufacturing and sales of
materials handling equipment;
 Leadership in aviation fuels treatment for both commercial and military uses;
 Strong marketing alliances with major industries and organizations including Arch
Chemical, CSX Railroad, Exxon/Mobil, BP Aviation, Chevron(Texaco), Tomco, KopCoat, U.S.
Army, U.S. Air Force, Defense Energy Supply and Lockheed Martin;
 Introduction and continued development of the ODV, providing significant growth
potential;
 Continued development of an extensive network of distributors and original
equipment manufacturers;
 Patented, proprietary technology in markets with high growth potential; 
 High profile visibility with broad based industries such as aviation, petroleum
distribution, water treatment and utility vehicles; and
 Ability to secure additional debt or equity financing at terms and conditions
satisfactory to the Registrant.

Competition

The markets in which Hammonds operates are highly
competitive. We compete in several of our products and services lines against many
companies in fragmented, highly competitive markets and we have fewer resources than some
of those companies. Our business competes in the areas of water treatment technology, fuel
handling equipment, fuel additives and industrial utility vehicles principally on the
basis of the following factors: product quality and specifications (water treatment
technology and fuel additives); customized design and technical qualifications (fuel
handling equipment and industrial utility vehicles); reputation, technical expertise and
reliable service (fuel additives and fuel handling equipment). Competitive pressures and
other factors could cause us additional difficulties in acquiring market share or could
result in decreases in prices, either of which could have a material adverse effect on our
financial position and results of operations.

Hammonds faces competition in the water
treatment technology market from competitors offering similar equipment. Hammonds
technology competes mainly against methodologies that continue to evolve as environmental
and economic issues force the water treatment industry to continuously seek new and more
effective ways to purify a diminishing supply of usable water. Hammonds holds multiple
patents marketable in a variety of current and emerging disinfection methods including
solid tablet, granular and liquid chlorine. Hammonds main competitors are PPG Industries
and Arch Chemical, both of which companies market a packaged water treatment system and
have far greater financial and other resources than the Registrant.

Among our competitors are some of the world's largest
chemical and water treatment companies and major integrated companies that have their own
raw material resources and far greater financial resources. Hammonds will compete with
numerous well-established water treatment providers, fuel additive and chemical products
companies, fuel handling equipment companies and industrial vehicle manufacturing and
marketing companies, many of which possess substantially greater experience, financial,
marketing, personnel and other resources than Hammonds.

Hammonds believes that it is one of the only fuel handling equipment
manufacturers presently offering new proprietary designs. Other providers, Hammonds
believes, sell new versions of systems based upon designs that were developed thirty and
forty years ago. Price is a powerful incentive in this industry, however, and performance
with low installation costs will continue to drive customer demands. Hammonds believes
that Gammon Technical Services and Lubrizol are its main competitors in its fuel handling
equipment business. There are a number of small competitors that use non-proprietary
technology. Hammonds' fuel handling products are focused on unique market segments.
Hammonds believes that its injectors are most successful in markets where electrical power
and or metering equipment is not available. Hammonds has been a sole-source vendor for the
United States Air Force and Army since 1985.

In the fuel additive market, Hammonds developed additive
blending, introducing a fluid powered system that has been widely accepted in military and
general aviation. The U.S. military has accepted the Hammonds' injectors as its "sole
source" for rapid deployment combat and terminal pipeline injection. This has
provided Hammonds with contracts for these products and it believes a competitive
advantage compared to other equipment manufacturers that cannot meet the required
specifications.

Biobor® is a fuel biocide marketed to the aviation,
off-road vehicle and stand-by power generation industries and is registered by the United
States Environmental Protection Agency as a fuel biocide. (EPA 65217-1). Biobor® is one
of only two biocides approved for use in aviation jet fuel. Competition for the jet fuel
market is limited to Kathon FP, a product of Rohm and Haas. Kathon FP is not approved for
use in some parts of the United States. Biobor® has no geographical limitations and is
used throughout the world as a primary choice by operators of turbine fuel aircraft. There
are a host of other manufacturers producing fuel biocides for diesel and other hydrocarbon
based fuels, with Angus Chemical being one of the largest.

Hammonds' Biobor® JF fuel biocide is approved for control
of microbial growth in hydrocarbon fuels. The Biobor® JF product, a fuel additive, is
widely recognized as a standard for control of fuel-born microbial growth and has been
widely accepted in the aviation, marine and power generation industries. Hammonds has
established a very competitive position with the Biobor® JF product, selling to such
major customers as Boeing, Dessault, Airbus, Lockheed, Cessna, Gulfstream, Learjet,
General Dynamics, Pratt & Whitney, Rolls Royce, GE, Cummins, General Motors, Ford,
Caterpillar, DaimlerChrysler and John Deere. Hammonds does not believe that any other
product is as accepted in the market as its Biobor® JR. While Biobor® JF is one of only
two biocides approved for use in aviation fuels, it has also been tested and approved as a
preservative for manufactured wood products such as engineered trusses, windows and sheet
building materials. The expanding use of these manufactured wood products should provide a
new expanded market for Biobor® JF since products such as arsenic have been removed from
the list of approved wood preservatives. Hammonds believes that it enjoys strong market
position in the aviation fuel additive market. Several other competitors have entered this
market with limited success. There is considerable competition in the field of fuel
biocides.

The aviation industry has begun to move from engine driven to electric
powered equipment. Rechargeable battery powered vehicles promise more efficiency, less
maintenance and cleaner air. A majority of new equipment in the aviation industry is based
on electric power. Airlines are eagerly seeking new products and ideas. Competition is
significant because much of the competitors' equipment is virtually similar. However,
Hammonds believes that its ODV has better features and can move faster, safer, smoother
and with easier use and operation.

Many of our competitors have achieved significant national brand name
and product recognition and engage in extensive promotional programs. Moreover, certain of
our products and services use technology that is widely available. Accordingly, barriers
to entry, apart from capital availability, may be low in certain product segments of our
business, and the entrance of new competitors into the industry may reduce our ability to
capture improving profit margins in circumstances where capacity utilization in the
industry is increasing. Hammonds' ability to compete successfully will depend on our
success at penetrating each targeted market with our products and services, market
acceptance of its products and services, our ability to license and develop new and
improved products, and our ability to develop and maintain distribution networks. There
can be no assurance that Hammonds will be able to compete successfully, that its products
will continue to meet with customer approval, that competitors will not develop and market
products that are similar or superior to our products or that Hammonds will be able to
successfully enhance its products or services.

**Production Facilities**

Hammonds' facilities are located on 10 acres of land in
Houston, TX and include a 104,000 square foot industrial manufacturing, production,
warehousing and distribution plant that also serves as Hammonds' territorial sales office.
The real property and plant are owned by the Company and leased to Hammonds at a monthly
rental of $25,000. This facility also has a subtenant that leases approximately 24,000
square feet at a monthly rental of $8,000. In addition, Hammonds maintains an executive
office facility in Harris County, Houston, TX. The Houston, TX facility has sufficient
production capacity to meet the Company's anticipated needs for product for the
foreseeable future.
Materials and Principal Suppliers


Hammonds' additive systems are assembled using fabricated parts from
Hammonds' facility and machined parts manufactured in our in-house machine shop. Light
sheet metal working equipment were added to our fabrication capacity in 2005. Hammonds
performance additives, including detergents, pourpoint depressants, cetane improver,
lubricity agents and fuel systems icing inhibitors, are produced by Hammonds from products
that are purchased in bulk from manufacturers such as Shell and Union Carbide.

The ODV utilizes three main propulsion components: wheel drives,
hydrostatic pumps and the engine or electric motor that powers the system. A broad range
of manufacturers offer equipment of this type making sourcing of primary components
selective and competitive.

**Dependence on Major Customers**

Hammonds depends on several major customers, specifically the U.S. Army
  and Air Force, the major customer for Hammonds fuel additive products. Hammonds
other significant customers include Arch Chemical, CSX Railroad, Exxon/Mobil, BP Aviation,
Chevron/Texaco, Tomco, KopCoat, Defense Energy Supply and Lockheed Martin. If any of these
major industrial or governmental agencies terminated its relationship with Hammonds,
whether as the result of technological advances by competitors, or otherwise, the business
operations and financial condition of the Registrant could be adversely effected.
Patents, Trademarks And Licenses and Other Intellectual Property


Hammonds' products are covered by various United States patents and
patents pending. At present, Hammonds owns three patents covering various fuel additive
blending applications. In addition, Hammonds owns six patents covering its water treatment
technology. Its new Omni Directional Vehicle is covered by five patents related to design.

Employees

As of December 31, 2005, Hammonds had 46 full time employees
including Carl Hammonds. No employees are covered by a collective bargaining agreement.
Hammonds management considers relations with its employees to be satisfactory.

**Environmental Laws and Regulations**

Hammonds is required to comply with the
rules and regulations promulgated by the U.S. Environmental Protection Agency (EPA),
pursuant to the Environmental Protection Act. The original EPA registration for Biobor®
JF included extensive testing in order to establish any potential adverse effects on
personnel or the environment. The use of certain chemicals and other substances is subject
to extensive and frequently changing federal, state, provincial and local laws and
substantial regulation under these laws by governmental agencies, including the EPA, the
Occupational Health and Safety Administration, various state agencies and county and local
authorities acting in conjunction with federal and state authorities. Among other things,
these regulatory bodies impose requirements to control air, soil and water pollution, to
protect against occupational exposure to chemicals, including health and safety risks, and
to require notification or reporting of the storage, use and release of certain hazardous
chemicals and substances. Hammonds provides all required label warnings and instructions
for the handling of its fuel additive products. Hammonds believes that it is in
substantial compliance with all laws and regulations governing its material business
operations and has obtained all required licenses and permits for the operation of its
business. There can be no assurance that Hammonds in the future will be able to comply
with, or continue to comply with, all current or future government regulations in every
jurisdiction in which it will conduct its material business operations without substantial
cost or interruption of its operations, or that any present or future federal, state,
provincial or local environmental protection regulations may not restrict Hammonds'
present and possible future activities. In the event that Hammonds is unable to comply
with such requirements, Hammonds could be subject to substantial sanctions, including
restrictions on its business operations, monetary liability and criminal sanctions, any of
which could have a material adverse effect upon Hammonds' business. However, Hammonds'
believes that it is in full compliance with all present environmental rules and
regulations and that it should be able to remain in compliance in the future. Risk Factors

Investing in our common stock will provide an investor with an equity
ownership interest. Shareholders will be subject to risks inherent in our business. The
performance of our shares will reflect the performance of our business relative to, among
other things, general economic and industry conditions, market conditions and competition.
The value of the investment may increase or decrease and could result in a loss. An
investor should carefully consider the following factors as well as other information
contained in this annual report on Form 10-KSB/A.
This annual report on Form 10-KSB/A also contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result of many
factors, including the risk factors described below and the other factors described
elsewhere in this Form 10-KSB/A.


RISK FACTORS RELATED TO OUR BUSINESS

Dependence Upon Affiliate for Funding
The Registrant completed the acquisition of 51% of Hammonds on April 28, 2005. In order to
successfully grow Hammonds business and meet Hammonds plans to increase its market share
for its products and services, the Registrant has been and continues to be dependent upon
the funding from its parent, American International Industries, Inc. (OTCBB:AMIN) and the
parent's ability to secure and maintain its existing $2,000,000 revolving credit line for
Hammonds. We presently estimate that Hammonds will need approximately $1,500,000 in
additional financing in order to complete development of  Hammonds' ODV and expand
Hammonds products and services in water treatment technology systems, fuel handling
equipment systems, additives for general fuels and commercial aviation fuels. The
Registrant believes that additional debt and/or equity financing will be available at
terms and conditions acceptable to the Registrant. However, there can be no assurance that
unforeseen events, such as the length of time necessary to generate market acceptance of
the ODVs,  any unexpected material increased development costs, and the general
economy in the markets where Hammonds operates, may result in an inability to secure
necessary additional financing at satisfactory terms and conditions, if at all.
We may experience adverse impacts on our results of operations
as a result of adopting new accounting standards or interpretations.Our implementation of and compliance with changes in accounting rules, including new
accounting rules and interpretations, could adversely affect our operating results or
cause unanticipated fluctuations in our operating results in future periods. For example,
we are required by the Sarbanes-Oxley Act of 2002 to file annual reports and quarterly
reports disclosing the effectiveness of our internal controls and procedures. Although we
believe our internal controls are operating effectively, and we have committed internal
resources to ensure compliance, we cannot guarantee that we will not have any material
weaknesses as reported by our auditors and such determination could materially adversely
affect our business or significantly increase our costs in order to establish effective
controls and procedures.

CompetitionWhile we believe that we are competitive and havean established presence in ourwater
treatment technology systems, fuel handling equipment systems, additives for general fuels
and commercial aviation fuelsbusiness sectors, we may face
significant competition in our efforts to market and sell our new ODV. Further we could
face competition from our customers, if they determine to produce and use the products we
presently sell in ourwater treatment technology systems, fuel handling equipment
systems, additives for general fuels and commercial aviation fuelsbusiness sectors. Many of our customersare
well-established and possess far greater financial, technical, human and other resources
than does theRegistrant.

We will compete against many companies in fragmented,
highly competitive markets and we have fewer resources than some of those companies. Our
business sectors compete principally on the basis of the following factors: product
quality and specifications (water treatment technology and fuel additives); customized
design and technical qualifications (fuel handling equipment and industrial utility
vehicles); and reputation, technical expertise and reliable service (fuel additives and
fuel handling equipment). Competitive pressures, including those described above, and
other factors could cause us additional difficulties in acquiring and maintaining market
share or could result in decreases in prices, either of which could have a material
adverse effect on our financial position and results of operations. From time to time, the
intensity of competition results in price discounting in a particular industry or region.
Such price discounting puts pressure on margins and can negatively impact our ability to
generate an operating profit.
Development efforts for our new ODV product line are dependent
upon factors outside of our control, and upon successful completion of development and
market acceptanceWe have devoted significant financial and other resources to the development of our
new Omni Directional Vehicle (ODV). We are dependent upon the ability of the third party
manufacturers and subcontractors of the ODV components and complete units and for them to
to successfully complete manufacturing of the units in a timely manner, with the features
that are required, in order for us to be able to commercially exploit our development.
Hammonds believes that the patented new design can be utilized in connection with
forklifts, freight terminal tractors, security vehicles, industrial highways mowers and a
full range of aviation ground handling vehicles. Hammonds has produced several prototypes
of its ODV products at its plant in Houston, TX and has entered into license agreements
with several major manufacturers to produce a range of vehicles based on its ODV patented
technology. While Hammonds has been successful in generating initial stocking orders for 6
ODVs and has new scheduled delivery orders for 2 ODVs per month for the next 12 months,
there can be no assurance that Hammonds will be able to successfully manufacture and sell
a sufficient number of ODV units to generate significant revenues and profits.

In each of the target markets for Hammonds' ODV we
will  face competition from older and more established companies and will be
dependent on gaining market approval for our new ODV technology. We must compete for the
present market for traditional forklifts, freight terminal tractors, security vehicles,
industrial highway mowers and a full range of aviation ground handling vehicles and gain
market acceptance for our uniquely designed ODV. If we are successful in generating demand
for our ODV, we will be dependent upon third party manufacturers to produce on a timely
basis necessary ODV components with the quality and quantity that will be required.

We rely heavily on commodities in the manufacturing of
our equipment and price fluctuations can have a material and adverse affect on the cost
structure of our business
We are exposed to fluctuations in market prices for various commodities in the production
of our fuel additive and water treatment products. The rising price of steel also can have
an impact on the cost of production of our ODVs. At this time, we are unable to predict
the potential impact of future increases in commodity costs on the cost of our products,
or our ability, if any, to increase the selling price of our products to cover such costs.
We have not established arrangements to hedge commodity prices and, where possible, to
limit near-term exposure to fluctuations in raw material prices. As a result, the cost to
manufacture our products may rise at a time when we are unable to increase the selling
price of such products.

Our business is subject to environmental regulations;
failure to comply could result in substantial penalties
We are regulated by various national and local environmental laws governing our use of
substances and control of emissions in all our operations. Compliance with these laws
could have a material impact on our capital expenditures, earnings, or competitive
position. Our failure or inability to comply with the applicable laws and regulations
could result in monetary or other penalties, resulting in unanticipated expenditures or
restrictions on our ability to operate.

We are dependent on third-party distributors for our ODV
sales, which could reduce our ability to gain marketplace acceptance
We have begun efforts to build the Hammonds ODV brand through direct sales and through
distribution networks and major supply agreements with other companies. Several
distributors have elected to carry initial stocking inventories of our ODV and some have
scheduled for delivery ODVs on a monthly basis. We are dependent upon our distributors'
success in generating customer orders for the stocking inventory they have purchased, in
continued scheduled orders for future shipment, as we as increasing development of our
third party distribution network. In addition, distributors may elect to make special ODV
orders with specific components and features based upon their various customers'
requirements.  This could result in continued adjustment to inventories based on
their assessments of future needs. Such adjustments can impact our results either
positively or negatively.

A disruption or termination of our relationships with
certain suppliers could have a material adverse effect on our operations 
Certain of the components included in our products, including our fuel handling equipment,
our fluid injector systems and our new ODV equipment, are obtained from a limited number
of suppliers. Disruption or termination of supplier relationships could have a material
adverse effect on our operations. We believe that alternative sources could be obtained,
if necessary, but the inability in a timely manner to obtain sufficient quantities of
necessary components or the need to develop alternative sources, if and as required in the
future, could result in delays or reductions in product shipments which in turn could have
an adverse effect on our operating results and customer relationships.
Actual results could differ from the
estimates and assumptions that we use to prepare our financial statementsTo prepare financial statements in conformity with generally accepted accounting
principles, management is required to make estimates and assumptions, as of the date of
the financial statements, which affect the reported values of assets, liabilities,
revenues and expenses and disclosures of contingent assets and liabilities. Areas
requiring significant estimates by our management include:

- contract costs and profits and revenue recognition;
- provisions for uncollectible receivables and recoveries of costs from subcontractors,
vendors and others;
- provisions for income taxes and related valuation allowances;
- recoverability of other intangibles and related estimated lives;
- accruals for estimated liabilities;
- timing of the introduction of new products and services and market acceptance of the
same
We are subject to the risks associated with being a government
contractorWe are a provider of products and services to governmental agencies, including
municipal water agencies, waste treatment, and our fuel additive and injector services for
the U.S. military. We are therefore exposed to risks associated with government
contracting, including reductions in government spending, canceled or delayed
appropriations specific to our contracts or projects, heightened competition and modified
or terminated contracts. Legislatures typically appropriate funds for a given program on a
year-by-year basis, even though contract performance may take more than one year and are
not always guaranteed. As a result, at the beginning of a contract or project, the related
contract or project may be only partially funded, and additional funding is normally
committed only as appropriations are made in each subsequent year. These appropriations,
and the timing of payment of appropriated amounts, may be influenced by, among other
things, the state of the economy, competing priorities, curtailments in the use of
government contracting firms, budget constraints, the timing and amount of tax receipts
and the overall level of government expenditures.

Our dependence on major customers could adversely affect usHammonds has been dependent upon its ability to market its products and services to
major industrial and governmental agencies such as Arch Chemical, CSX Railroad,
Exxon/Mobil, BP Aviation, Chevron/Texaco, Tomco, KopCoat, U.S. Army, U.S. Air Force,
Defense Energy Supply and Lockheed Martin. If any of these major industrial or
governmental agencies terminated its relationship with Hammonds, whether as the result of
technological advances by competitors, or otherwise, the business operations and financial
condition of the Registrant could be adversely effected.

Our failure to attract and retain qualified personnel, including key
officers, could have an adverse effect on usOur ability to attract and retain qualified engineers, and other professional
personnel in accordance with our needs is an important factor in determining our future
success. The market for these professionals is competitive, and there can be no assurance
that we will be successful in our efforts to attract and retain needed professionals. In
addition, our ability to be successful depends in part on our ability to attract and
retain skilled laborers in our manufacturing and service business. Demand for these
workers can be high at times and the supply can be extremely limited at times. Our success
is also highly dependent upon the continued services of our key officer, Carl Hammonds and
the loss of Mr. Hammonds could adversely effect us. At present we have no "key"
man insurance on the life of Mr. Hammonds.

Risks inherent in establishing a new marketThere can be no assurance that we will be successful in marketing our ODV, which is a
new technology aimed at a highly competitive industry for industrial utility
vehicles.  The market for new products can be very difficult to establish. There are
competitors with long-established products, accepted technology and superior financial
resources for marketing such products. If the market for our ODV product line takes longer
to develop than anticipated, this would have an adverse affect on revenues and potential
profitability. While we believe the ODV represents an important innovation in industrial
utility vehicles, we cannot ensure our targeted customers will purchase a significant
number of units or that we will be able to establish a nationwide and international
network of distributors. If the market develops more slowly than anticipated we may
require additional financing in addition to the presently estimated $1,500,000, and no
assurances can be made that additional funding will be available at acceptable terms and
conditions.

We may need additional capital to fund our negative cash
flow from operations through debt or equityBased upon our present available cash and credit line, we require additional funding
through debt and/or equity financing to cover our costs of operations and the costs of
completing development of the ODV line. We expect to fund our general operations and
marketing activities for fiscal 2006 with the funding provided or arranged for us by our
corporate parent, American International Industries or through the sale of equity.
However, unexpected expenses or increases in costs may arise. There is no assurance we can
raise the additional capital in a timely manner as and if needed. As additional funds are
required it may be expected that we sell additional securities or seek increased credit
lines or new debt financing, but there can be no assurance that such financing will be at
terms satisfactory to us.

Potential risks associated with rapid technological
changesRapid technological changes could adversely affect our business. The market for our
products and technology in particular is characterized by rapid changes. Evolving industry
standards and changing customer needs gives rise to a very competitive marketplace for new
technology. If we are unable to meet or stay ahead of new technologies being developed and
to changes in industry standards, our business could be adversely affected.

Changes in technology, competitively imposed process
standards and regulatory requirements influence the demand for many of our products and
services. To grow and remain competitive, we need to anticipate changes in technological
and regulatory standards. We need to continue to introduce new and enhanced products on a
timely basis. We may not achieve these goals and some of our products may become obsolete.
New products often face lack of market acceptance, development delays or operational
failure. Stricter governmental regulations also may affect acceptance of new products. Our
various patents may not provide substantial protection from competition or be of
commercial benefit to us. We may not be able to enforce our rights under trademarks or
patents against third parties. Some international jurisdictions may not protect these
kinds of rights to the same extent that they are protected under U.S. law. If a third
party successfully challenges our trademarks or patents, it may affect our competitive and
financial position.

Environmental factors and changes in laws and regulations could
increase our costs and liabilities and affect the demand for our products and services.In addition to the environmental risks described above relating to our water treatment
business and other operations, we are subject to environmental laws and regulations,
including those concerning:
- emissions into the air;
- discharges into waterways;
- soil and water pollution;
- occupational health and safety.

Environmental laws and regulations generally impose limitations and
standards for regulated materials and require us to obtain a permit and comply with
various other requirements
The improper characterization, handling, or disposal of regulated materials or any other
failure to comply with federal, state and local environmental laws and regulations or
associated environmental permits may result in the assessment of administrative, civil,
and criminal penalties, the imposition of investigatory or remedial obligations, or the
issuance of injunctions that could restrict or prevent our ability to perform.

The environmental health and safety laws and regulations to which we
are subject are constantly changing, and it is impossible to predict the effect of any
future changes to these laws and regulations on us. We do not yet know the full extent, if
any, of environmental liabilities associated with many of our contracts or projects. We
cannot assure that our operations will continue to comply with future laws and regulations
will not significantly adversely affect us.

The level of enforcement of these laws and regulations also affects the
demand for many of our services. Proposed changes in regulations and the perception that
enforcement of current environmental laws has been reduced has decreased the demand for
some services, as customers have anticipated and adjusted to the potential changes. Future
changes could result in increased or decreased demand for some of our services. The
ultimate impact of the proposed changes will depend upon a number of factors, including
the overall strength of the economy and customers' views on the cost-effectiveness of
remedies available under the changed regulations. If proposed or enacted changes
materially reduce demand for our environmental services, our results of operations could
be adversely affected.

Dependent upon our ability to manage our growth.
Hammonds anticipates continued rapid growth in the future, based upon in 2005 sales and
new orders, especially if its marketing efforts for its new ODV are successful. In such
event we will require effective management and increased financial and other resources.
This growth, if achieved, will place significant strains on the Company's financial,
managerial and other resources. Failure to effectively manage growth could have a
materially adverse effect on the Company's business and results of operations.

Limited patent and proprietary information protectionHammonds believes that its patents for its various products and systems, including the
new ODV, and the proprietary processes used in production of its products and equipment
systems, does not infringe on the patents and proprietary rights of others. In the event
that Hammonds' products infringe the patent or proprietary rights of others, we may be
required to modify our process or obtain a license. There can be no assurance that we
would be able to do so in a timely manner, upon acceptable terms and conditions or at all.
The failure to do so would have a material adverse effect on the Company's business. In
addition, there can be no assurance that the Company will have the financial or other
resources necessary to prosecute or defend a patent infringement or proprietary rights
action. Moreover, if any of the Company's products infringe patents or proprietary rights
of others, the Company could, under certain circumstances, become liable for damages,
which could have a material adverse effect on the Company. Hammonds relies on its own
patents and proprietary know-how and confidential information and employs various methods
to protect the processes, concepts, ideas and documentation associated with its
proprietary rights. However, such patents and methods may not afford complete protection
and there can be no assurance that others will not independently develop such processes,
concepts, ideas and documentation or otherwise challenge the Company's patents. Although
the Company requires all of its employees to sign non-disclosure, non-competition and
inventions agreements, there can be no assurance that such agreements will be enforceable
or will provide meaningful protection to the Company. There can be no assurance that the
Company will be able to adequately protect its patents and trade secrets or that other
companies will not acquire information that the Company considers proprietary. Moreover,
there can be no assurance that other companies will not independently develop know-how
comparable to or superior to that of the Company.

RISK FACTORS RELATED TO MARKET OF OUR COMMON STOCK
Market prices of our equity securities can fluctuate
significantlyThe market prices of our common stock may change significantly in response to various
factors and events beyond our control, including the following: 
- the other risk factors described in this Form 10-KSB;
- changing demand for our products and services and ability to develop and generate
sufficient revenues;
- any delay in our ability to generate operating revenue or net income;
- general conditions in markets we operate in;
- general conditions in the securities markets;
- issuance of a significant number of shares, whether for compensation under employee
stock options, conversion of debt, potential acquisitions, additional financing or
otherwise.

There is only a limited trading market for our common stockOur common stock is subject to quotation on the pink sheets. There has only been limited
trading activity in our common stock. There can be no assurance that a more active trading
market will commence in our securitiesas a result of the
increasing operations of Hammonds.Further, in the
event that an active trading market commences, there can be no assurance as to the level
of any market price of our shares of common stock, whether any trading market will provide
liquidity to investors, or whether any trading market will be sustained.

State Blue Sky Registration; Potential Limitations on Resale of our SecuritiesThe class of common stock registered under the Exchange Act has not been registered for
resale under the Act or the "blue sky" laws of any state. The holders of such
shares and persons who desire to purchase them in any trading market that might develop in
the future, should be aware that there may be significant state blue-sky law restrictions
upon the ability of investors to resell our securities. Accordingly, investors should
consider the secondary market for the Company's securities to be a limited one.

It is the intention of the management to
seek coverage and publication of information regarding the Company in an accepted
publication which permits a manual exemption. This manual exemption permits a security to
be distributed in a particular state without being registered if the Company issuing the
security has a listing for that security in a securities manual recognized by the state.
However, it is not enough for the security to be listed in a recognized manual. The
listing entry must contain (1) the names of issuers, officers, and directors, (2) an
issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year
preceding the balance sheet or for the most recent fiscal year of operations. Furthermore,
the manual exemption is a nonissuer exemption restricted to secondary trading
transactions, making it unavailable for issuers selling newly issued securities.

Most of the accepted manuals
are those published in Standard and Poor's, Moody's Investor Service, Fitch's Investment
Service, and Best's Insurance Reports, and many states expressly recognize these manuals.
A smaller number of states declare that they "recognize securities manuals" but
do not specify the recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois,
Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.

Dividends UnlikelyWe do not expect to pay dividends for the foreseeable future. The payment of dividends, if
any, will be contingent upon our future revenues and earnings, capital requirements and
general financial condition. The payment of any dividends will be within the discretion of
our board of directors. It is ourintentionto retain all earningsfor use in the business operationsof
Hammonds and accordingly, we do not anticipate that
the Company will declare any dividends in the foreseeable future.

Possible Issuance of Additional SecuritiesOur Articles of Incorporation authorize the issuance of 195,000,000 shares of common
stock, par value $0.0001 and 5,000,000 shares of preferred stock, par value $0.0001. AtDecember 31, 2005, we had20,135,000 shares of common stock issued and no preferred shares
issued. We may issue additional shares of common stock inconnection
with any future acquisitions of operating businesses or assets or to raise additional
funding.To the extent that additional shares of
common stock are issued, our shareholders would experience dilution of their respective
ownership interests in the Company. The issuance of additional shares of common stock may
adversely affect the market price of our common stock and could impair our ability to
raise capital through the sale of our equity securities.

Compliance with Penny Stock RulesOur securities will initially be considered a "penny stock" as defined in the
Exchange Act and the rules thereunder, since the price of our shares of common stock is
less than $5. Unless our common stock is otherwise excluded from the definition of
"penny stock," the penny stock rules apply with respect to that particular
security. The penny stock rules require a broker-dealer prior to a transaction in penny
stock not otherwise exempt from the rules, to deliver a standardized risk disclosure
document prepared by the SEC that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its sales person in the transaction, and monthly account statements
showing the market value of each penny stock held in the customer's account. In addition,
the penny stock rules require that the broker-dealer, not otherwise exempt from such
rules, must make a special written determination that the penny stock is suitable for the
purchaser and receive the purchaser's written agreement to the transaction. These
disclosure rules have the effect of reducing the level of trading activity in the
secondary market for a stock that becomes subject to the penny stock rules. So long as the
common stock is subject to the penny stock rules, it may become more difficult to sell
such securities. Such requirements, if applicable, could additionally limit the level of
trading activity for our common stock and could make it more difficult for investors to
sell our common stock.

Shares eligible for future sale
As of December 31, 2005, the Registrant had 20,135,000 shares of common stock issued and
outstanding, 16,446,280 shares are "restricted" as that term is defined under
the Securities Act, and in the future may be sold in compliance with Rule 144 under the
Securities Act. Rule 144 generally provides that a person holding restricted securities
for a period of one year may sell every three months in brokerage transactions and/or
market-maker transactions an amount equal to the greater of one (1%) percent of (a) the
Company's issued and outstanding Common Stock or (b) the average weekly trading volume of
the Common Stock during the four calendar weeks prior to such sale. Rule 144 also permits,
under certain circumstances, the sale of shares without any quantity limitation by a
person who has not been an affiliate of the Company during the three months preceding the
sale and who has satisfied a two-year holding period. However, all of the current
shareholders of the Company owning 5% or more of the issued and outstanding Common Stock
are subject to Rule 144 limitations on selling. ITEM 2. DESCRIPTION OF PROPERTIESBack to Table of Contents The Registrant'scorporate office is located at the offices of American International Industries, Inc., 601
Cien Street, Suite 235, Kemah, TX 77565, which space is  provided to us on a
rent-free basis. These facilities consist of approximately 1,300 square feet of executive
office space and are leased by American International Industries from an unaffiliated
third party. The Registrant believes that the office facilities are sufficient for the
foreseeable future and this arrangement will remain until we find a new business
opportunity or consummate a business combination. Hammonds' facilities are located on 10 acres of land in
Houston, TX and include a 80,000 square foot industrial manufacturing, production,
warehousing and distribution plant that also serves as Hammonds' territorial sales office.
The real property and plant are owned by the Company and leased to Hammonds at a monthly
rental of $25,000. This facility also has a subtenant that leases approximately 24,000
square feet at a monthly rental of $8,000. In addition, Hammonds maintains an executive
office facility in Harris County, Houston, TX. The Houston, TX facility has sufficient
production capacity to meet the Company's anticipated needs for product for the
foreseeable future. ITEM 3. LEGAL
PROCEEDINGBack to Table of
Contents  The
Registrant's officers and directors are not aware of any threatened or pending litigation
to which the Registrant is a party or which any of its property is the subject and which
would have any material, adverse effect on the Registrant. ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS Back to Table of Contents During the year ended December 31, 2005, no matters were
submitted to a vote of our security holders.




PART II ITEM 5.
MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERBack to Table of Contents **Market
Information** Our common stock is
currently quoted on the Pink Sheets under the symbol IMTG.There has only been limited trading activity during the past two years.
The following table shows the high and low bid prices for the Company's common stock
during the last two fiscal years as reported by the Pink Sheets. These prices reflect
inter-dealer quotations without adjustments for retail markup, markdown or commission, and
do not necessarily represent actual transactions. The quotes below reflect a twenty for
one stock recapitalization adopted August 3, 2004.Quotation of the
Company's securities on the Pink Sheets limits the liquidity and price of the Company's
common stock more than if the Company's shares of common stock were listed on The NASDAQ
Stock Market or a national exchange. **Fiscal 2006**
    
    **Fiscal 2005**
    
    **Fiscal 2004****High**
    
    **Low**
    
    **High**
    
    **Low**
    
    **High**
    
    **Low**First
    Quarter ended March 31
    
    $
    0.60
    
    $
    0.35
    
    $
    0.28
    
    $
    0.23
    
    $
    0.05
    
    $
    0.05Second Quarter ended June 30
    
    $
    0.45
    
    $
    0.30
    
    $
    0.46
    
    $
    0.20
    
    $
    0.05
    
    $
    0.03Third Quarter ended September 30
    
    $
    0.50
    
    $
    0.25
    
    $
    0.85
    
    $
    0.35
    
    $
    0.05
    
    $
    0.02Fourth Quarter ended December 31
    
    $
    ---
    
    $
    ---
    
    $
    0.65
    
    $
    0.31
    
    $
    0.06
    
    $
    0.02 As of December 31,
2005, our shares of common stock were held by approximately 60 stockholders of record. The
transfer agent of our common stock is Colonial Stock Transfer, Salt Lake City, UT. **Dividends** Holders of common
stock are entitled to dividends when, as, and if declared by the Board of Directors, out
of funds legally available therefore. We have never declared cash dividends on its common
stock and our Board of Directors does not anticipate paying cash dividends in the
foreseeable future as it intends to retain future earnings to finance the growth of our
businesses. There are no restrictions in our articles of incorporation or bylaws that
restrict us from declaring dividends. **Securities
Authorized for Issuance Under Equity Compensation Plans** No equity
compensation plan or agreements under which our common stock is authorized for issuance
has been adopted during the fiscal year ended December 31, 2005. **Sale of Unregistered
Securities** During
fiscal year ended December 31, 2005, the Registrant issued: 100,000 restricted shares to
its president and CFO as compensation valued at $3,000; 25,000 restricted shares to
Rebekah Laird-Ruthstrom for services valued at $750; and 10,000 restricted shares to a
consultant for services valued at $300.The Company believes that the issuances of
these restricted shares was exempt from registration pursuant to Section 4(2) of the Act
as privately negotiated, isolated, non-recurring transactions not involving any public
solicitation. Appropriate restrictive legends are affixed to the stock certificates issued
in such transactions. ITEM 6.
MANAGEMENT'S DISCUSSION AND RESULTS OF OPERATIONS AND FINANCIALCONDITIONSBack to Table of Contents The following discussion should be read in conjunction with our
financial statements and the related notes appearing elsewhere in this annual report. The
following discussion contains forward-looking statements reflecting our plans, estimates
and beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements. Factors that could cause or contribute to such differences
include, but are not limited to those discussed below and elsewhere in this report,
particularly in the section entitled "Risk Factors" beginning on page 10 of this
annual report.

General

The Registrant acquired 51% of its operating subsidiary, Hammonds
Technical Services, Inc. Prior to the acquisition of its operating subsidiary, the
Registrant was a non-operating company. As a result, the financial statement of the
Registrant for its fiscal years ended December 31, 2005 and 2004 are not comparable.

Revenues

Gross revenues for the year ended December 31, 2005 were $3,395,151
generated by Hammonds. During fiscal 2005, Hammonds production facility in Houston,
TX was forced to close for approximately two weeks related to Hurricane Katrina. In
addition, Hammonds production operations were halted for two weeks in connection
with Hammonds move from a leased facility to a facility owned by the
Registrants parent. The two stoppages reduced Hammonds revenues from those
anticipated. Hammonds' new 80,000 square foot facility has enabled it to increase
production which should result in increased sales revenues during 2006, specifically from
its new line of ODVs which were introduced during the fourth quarter of 2005, and the
increase in water purification systems and injector business. We had inventories of
$1,004,657 at December 31, 2005, consisting primarily of parts and materials in
expectation of increasing demand for our products including Hammonds ODV line during
2006. Subsequent to the year ended December 31, 2005, Hammonds  received orders for:
its new line of ODVs; water purification products; and fuel additives and injectors. These
orders, which exceed $3,000,000, are scheduled to be delivered during the last quarter of
2006 and the first quarter of 2007

Cost of Sales

Costs of sales for the year ended December 31, 2005 was $2,396,950 or
70.6% of revenues. Costs of sales are anticipated to increase during 2006 related to
anticipated increased costs of manufacturing including manufacturing components and direct
and indirect labor costs for the production of Hammonds new line of ODVs, injector
systems and water purification systems.

General and administrative expenses

In 2005, general, selling and administrative expenses totaled
$2,104,473 or 61.98% of revenues. The selling, general and administrative expenses
primarily consist of sales and marketing expenses, research and development costs and
engineering expenses. General and administrative expenses are expected to increase in 2006
principally due to additional expenditures related to additional personnel requirements.
We expect our operating expenses to marginally decrease as a percentage of revenues with
increasing sales in 2006.

Operating Loss

Our operating loss was $1,106,272 in 2005. Our operating loss was
mainly attributable to slower than anticipated growth in sales, in part caused by
Hammonds two work stoppages and the later than anticipated introduction of the new
ODV line. We expect that our operating loss will decrease with the anticipated growth in
revenues and reduced expenses associated with research and development as a percentage of
revenues.

Net Loss

Our net loss applicable to common shareholders was $1,194,652 in 2005.

Liquidity and Capital Resources

Our current assets were$1,937,150 at December
31, 2005, consisting mainly of inventories and accounts receivable, which we expect are
fully collectible. In connection with the acquisition of Hammonds, we recorded intangible
assets valued at $2,536,263 as of December 31, 2005. Our total assets at December 31, 2005
were $5,749,767 compared to $832,142 at December 31, 2004, which increase reflects the
acquisition of Hammonds. We had current liabilities of $3,747,754
at December 31, 2005, consisting principally of current installments of long-term debt of
$1,442,849 and accounts payable and accrued expenses of $2,131,605. At December 31, 2005,
we had long-term liabilities of $2,346,788 consisting of a note payable to our parent,
American International Industries, Inc. in the amount of $1,843,588 and deferred tax
liability of $503,200. During 2005, we had a negative cash flow
from operations of $1,419,992 mainly due to our net loss of $1,194,652, an increase in
accounts receivable and inventories of $515,747, offset by depreciation and amortization
of $304,946. We funded our cash used in operating
activities through proceeds from our long-term line of credit in the amount of $2,131,605
and through borrowings of $998,300 from our parent. We made payments of $570,223 on
short-term borrowings during 2005. We used cash for investing
activities of $1,077,914 in 2005. Cash was used to purchase property and equipment
in the amount of $119,801. We received $998,300 in short-term borrowings from our parent
which funds were used by Hammonds for working capital. There are no limitations in the Company's articles of incorporation on
the Company's ability to borrow funds or raise funds through the issuance of restricted
common stock. The Company's resources together with the resources of its corporate parent
have facilitated it ability to secure its revolving line of credit and the Company
believes that it has the ability to borrow funds and/or raise capital through the sale of
restricted stock. To the extent that additional debt financing is utilized, any borrowing
will subject us to various risks traditionally associated with indebtedness, including the
risks of interest rate fluctuations and insufficiency of cash flow to pay principal and
interest. Off-Balance Sheet Arrangements
As of December 31, 2005 we did not have any off-balance sheet arrangements as defined in
Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Act of 1934. Contractual Obligations and Commitments
As of December 31, 2005, we have a lease with our parent for the property and the
subsidiary owes the parent a management fee (see note 10). Critical Accounting Estimates Our significant accounting policies are
described in the note 2 to the notes to our consolidated financial statements for the year
ended December 31, 2005. The following supplements the description of our accounting
policies as described in the notes to our consolidated financial statements. Hammonds Technical Services' business
involves the manufacturing of several different lines of equipment and product systems. As
a result, Hammonds is subject to fluctuations in profitability from period to period due
to the types and quantities of equipment and product systems ordered by and delivered to
its customers. Hammonds does not start production activity without firm purchase orders
from customers. Based upon the increasing size of Hammonds' orders, Hammonds has a backlog
of orders and this is expected to permit Hammonds to achieve economic efficiencies in
purchasing inventory and in allocation of its workforce. Further, with its improving
liquidity, achieved following its year ended December 31, 2005, Hammonds has begun to
generate improving economies in manufacturing. Hammonds fuel additive business supplies
additives to the industries which provide purchase orders for the production of additives.
Hammonds does not have additives produced by third-parties until purchase orders are
received and accepted by Hammonds. Hammonds has a backlog in orders for fuel additives of
approximately $150,000 per month which enables Hammonds to produce one month's production
at a time. As Hammonds' fuel additive customers order increasing quantities of its
proprietary Biobor® JF fuel product, we estimate that backorders will increase, resulting
in increases in production and revenues in future periods. Hammonds' Water Treatment Solutions was
established after the 2005 fiscal year end to identify its contribution to the Company.
Hammonds Water Treatment Solutions generates revenues and incurs costs from a third party
that supplies Hammonds purification chemicals. Hammonds projects that revenue from
Hammonds Water Treatment Solutions will exceed $2,000,000 during the next twelve months. Subsequent to year end December 31,
2005, Hammonds Technical Services, Inc. was separated into three segments: (i) Hammonds
Technical Services, which is the manufacturing segment for Hammonds product line,
including ODVs, injectors and water purification systems; (ii) Hammonds Fuel Additives,
which supplies all of the fuel additives; and (iii) Hammonds Water Treatment Solutions,
the recently established third segment, which provides the tablets for Hammonds' water
purification systems. ITEM
7. FINANCIAL STATEMENTSBack
to Table of Contents The Registrant's audited financial statements for the
fiscal years ended December 31, 2005 and December 31, 2004 are attached to this annual
report. Financial Statements ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSUREBack to
Table of Contents Not Applicable. ITEM
8A. CONTROLS AND PROCEDURESBack to Table of Contents Evaluation of disclosure controls and procedures. In connection
with the audit of the Companys financial statements for the year ended December 31,
2005, the Company's president/chief financial officer conducted an evaluation regarding
the effectiveness of the Company's disclosure controls and procedures (as defined in Rules
13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls
and procedures and discussions with our independent accountants, our president/chief
financial officer concluded that our disclosure controls and procedures were ineffective
as of December 31, 2005. The president/chief financial officer determined that the Company
did not maintain effective controls over the financial reporting process due to an
insufficient complement of personnel with an appropriate level of accounting knowledge,
experience and training in the application of generally accepted accounting principles
commensurate with its financial reporting requirements and the complexity of the
companys operations and transactions, specifically at the Companys operating
subsidiary, Hammonds Technical Services, Inc. The Company did not maintain effective
controls to ensure there was adequate analysis, documentation, reconciliation and review
of accounting records and supporting data and monitoring and oversight of the work
performed by completeness of the consolidated financial statements in accordance with
generally accepted accounting principles. Specifically, the Company did not have effective
controls designed and in place over the consolidation of the financial statements of the
Hammonds subsidiary, including the acquisition, the reconciliation of inter-company
accounts,  inventory and reserves, fixed assets and depreciation, accrued liabilities
and general and administrative expense. In light of the above, the Company has determined
to restate its financial statements for the periods ended June 30 and September 30, 2005.  Changes in internal controls. Subsequent to December
31, 2005, the period covered by this annual report, the Company made changes in our
internal control over financial reporting in order to improve such internal controls over
financial reporting. Specifically, the Company has taken the following steps to address
the specific deficiencies in internal disclosure controls and procedures: (i) the
Companys operating subsidiary has hired a full time controller who has been directed
to implement procedures to correct the noted deficiencies; (ii) the Company has hired a
qualified consultant with accounting and auditing experiences to perform an internal audit
function; and the Companys parent has hired a full time CFO to oversee financial and
accounting transactions to include the financial reporting and disclosure. **ITEM 8B. OTHER INFORMATION**Back to Table of Contents  On April 28, 2006, the
Company inadvertently filed its annual report on Form 10-KSB for the fiscal year ended
December 31, 2005, before certain edits and reviews were fully completed. For this reason
the Company filed an amended annual report on Form 10-KSB/A on May 8, 2006.




PART III ITEM
9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, COMPLIANCE WITH SECTION 16(A)Back to Table of Contents At present, we have one officer and two directors. Our
directors are elected to serve until the next annual meeting of shareholders and until
their respective successors will have been elected and will have qualified. The following
table sets forth the name, age and position held with respect to our present directors and
executive officers: **Name**
    **Age**
    **Positions**Gary D. Woerz
    60
    President, CFO and DirectorDaniel Dror
    65
    Chairman of the Board Gary D. Woerz has been the Company's President and Chief
Financial Officer since June 2002 and became a director of the Company in February 2005.
Mr. Woerz also serves as Chief Financial Officer of American International Industries,
Inc. From 2000 to 2002, Mr. Woerz served as Chief Financial Officer of Phymetrics, Inc.,
which was a subsidiary of High Voltage Engineering (HVE). Phymetrics was a
multi-divisional manufacturing and laboratory service company. From 1998 to 2000, Mr.
Woerz served as Chief Financial Officer of Virtual Founders LLC, San Jose, CA, whose
business involved investment banking and management consulting services to development
stage high technology companies. Daniel Dror, Chairman of the Board, has also served as
Chief Executive Officer, President and Chairman of the Board of the Company's parent,
American International Industries, Inc. since September 1997. From 1994 to 1997, Mr. Dror
served as Chairman of the Board and Chief Executive Officer of Microtel International,
Inc., a public company in the telecommunication business. From 1982 until 1993, Mr. Dror
served as Chairman of the Board and Chief Executive Officer of Kleer-Vu Industries, Inc.,
a public company. Code of Ethics 
The Registrant has adopted a Code of Ethics that are designed to deter wrongdoing and to
promote honest and ethical conduct, full, fair, accurate, timely and understandable
disclosure in the Registrant's SEC reports and other public communications. The Code of
Ethics promotes compliance with applicable governmental laws, rules and regulations.  Section 16(a) Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires the Registrant's
directors and executive officers, and persons who own beneficially more than ten percent
(10%) of the Registrant's Common Stock, to file reports of ownership and changes of
ownership with the Securities and Exchange Commission. Copies of all filed reports are
required to be furnished to the Registrant pursuant to Section 16(a). Based solely on the
reports received by the Registrant and on written representations from reporting persons,
the Registrant was informed that its officers and directors and ten percent (10%)
shareholders have not filed reports required to be filed under Section 16(a).




ITEM 10.
EXECUTIVE COMPENSATIONBack to
Table of Contents The following table contains the executive compensation
to the Registrant's executive officer for the periods set forth below. No executive
compensation was paid during the fiscal years 2005, 2004 and 2003. **Summary Compensation Table****Long
    Term****Annual
    Compensation**
    **Compensation
    Awards****Other**
    **Restricted**
    **Securities****Annual**
    **Stock**
    **Underlying**
    **All Other****Salary**
    **Bonus**
    **Compensation**
    **Award(s)**
    **Options**
    **Compensation****Name and
    Principal Position**
    
    **Year**
    **($)**
    **($)**
    **($)**
    **($)**
    **($)**
    **($)**Gary D. Woerz, President and CFO (1)
    
    2005
    ---
    ---
    ---
    3,000
    ---
    ---2004
    ---
    ---
    ---
    ---
    ---
    ---2003
    ---
    ---
    ---
    ---
    ---
    ---(2) Mr. Woerz received no cash compensation
    from the Registrant for serving as President and CFO. The Company has no employment agreement with any of its
officers and directors. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTBack to Table of Contents The following table
sets forth information regarding the beneficial ownership of our common stock as of
December 31, 2005. The information in this table provides the ownership information for:
each person known by us to be the beneficial owner of more than 5% of our common stock;
each of our directors; each of our executive officers; and our executive officers and
directors as a group. Beneficial
ownership has been determined in accordance with the rules and regulations of the SEC and
includes voting or investment power with respect to the shares. Unless otherwise
indicated, the persons named in the table below have sole voting and investment power with
respect to the number of shares indicated as beneficially owned by them. **Name of Beneficial Owner**
    ****
    **Common Stock Beneficially Owned (1)**
    ****
    **Percentage of Common Stock  Owned (1)**American
    International Industries, Inc.
    
    16,311,280
    
    81.00%601 Cien Street,
    Suite 235Kemah, TX 77565Gary D. Woerz, President, CFO and
    Director
    
    100,000
    
    0.00%601 Cien Street,
    Suite 235Kemah, TX 77565Daniel Dror,
    Chairman of the Board
    
    0
    
    0.00%601 Cien Street,
    235Kemah, TX 77565Directors and
    Officers (2 person)
    
    100,000
    
    0.00% (1) Applicable
percentage ownership is based on 20,135,000 shares of common stock outstanding as of
December 31, 2005. Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment power with
respect to securities. Shares of common stock that are currently exercisable or
exercisable within 60 days of December 31, 2005 are deemed to be beneficially owned by the
person holding such securities for the purpose of computing the percentage of ownership of
such person, but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. ITEM 12. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONSBack to Table of Contents During the last two fiscal years, to the
knowledge of the Registrant, there was no person who had or has a direct or indirect
material interest in any transaction or proposed transaction to which the Registrant was
or is a party. Transactions in this context relate to any transaction
which exceeds $60,000. During 2005, the Registrant borrowed $998,300 from its parent,
American International Industries, Inc., which funds were used by Hammonds for working
capital. ITEM
13. EXHIBITS AND REPORTS ON FORM 8-KBack to Table of Contents (a) The following documents
are filed as exhibits to this report on Form 10-KSB or incorporated by reference herein.
Any document incorporated by reference is identified by a parenthetical reference to the
SEC filing that included such document. **Exhibit
    No.**
    **Description**3(i)
    Articles of
    Incorporation, as amended, attached to the Registrant's Form 10-SB/12g filed on August 24,
    2004.3(i)1
    Certificate of Amendment to the
    Articles of Incorporation, attached to the Registrant's Form 8-K filed on March 10, 2005.3(ii)
    Bylaws, attached to the
    Registrant's Form 10-SB/12g filed on August 24, 2004.17
    Letter on director resignation,
    attached to the Registrant's Form 8-K filed on December 29, 2004.10.1
    Stock Purchase Agreement between
    Registrant and Hammonds Technical Services, Inc., attached to the Registrant's Form 8-K
    filed on March 10, 200531.1
    Certification of
    President CFO Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley
    Act of 2002, filed herewith.32.1
    Certification of
    President and CFO Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to the
    Sarbanes-Oxley Act of 2002, filed herewith. (b) Reports on Form 8-K Filed During the Last Quarter of the Fiscal
Year Covered by this Report: The Registrant did not file a Form 8-K during the last quarter of the
fiscal year covered by this Annual Report. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESBack to Table of Contents Independent Public
Accountants
The Registrant's Board of Directors has appointed Thomas Leger & Co., L.L.P.  Our
financial statements for the fiscal year ended December 31, 2004 were audited by R.E.
Bassie & Co.  Principal
Accounting Fees
The following table presents the fees for professional audit services rendered by Thomas
Leger & Co., L.L.P. and R.E. Bassie & Co. for the audit of the Registrant's annual
financial statements for the years ended December 30, 2005 and 2004, and fees billed for
other services rendered by Thomas Leger & Co., L.L.P. and R.E. Bassie & Co. during
those years.  Year EndedDecember 31,  2005
    
    
    December 31, 2004Audit fees (1)
    $
    100,000
    
    $
    4,500Audit-related fees (2)
    
    --
    
    
    --Tax fees (3)
    
    --
    
    
    --All other fees
    
    
    
    
    --
    
    
    --(1)
    Audit fees consist of audit and review services, consents and review of documents filed
    with the SEC.(2)
    Audit-related fees consist of assistance and discussion concerning financial accounting
    and reporting standards and other accounting issues.(3)
    Tax fees consist of preparation of federal and state tax returns, review of quarterly
    estimated tax payments, and consultation concerning tax compliance issues.  SIGNATURES Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated. By /s/ Daniel DrorDaniel DrorChairmanOctober 11, 2006By /s/ Gary D. WoerzGary D. WoerzCEO and CFOOctober 11, 2006




**Financial
Statements**Back to Table of Contents Report of Independent Registered Public Accounting Firm
    23Report of
    Independent Registered Public Accounting Firm
    24Consolidated Financial Statements:Balance Sheets -
    December 31, 2005 and 2004
    25Statements
    of Operations - Years ended December 31, 2005 and 2004
    26Statements of Stockholders' Equity
    (Deficit) - Years ended December 31, 2005 and 2004
    27Statements
    of Cash Flows - Years ended December 31, 2005 and 2004
    28Notes
    to Consolidated Financial Statements
    29




REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMBack to Table of ContentsTo the Stockholders
International American Technologies, Inc. and Subsidiary
Houston, Texas

We have audited the accompanying consolidated balance sheet of
International American Technologies, Inc. and Subsidiary as of December 31, 2005 and the
related consolidated statements of operations, changes in stockholders deficit, and
cash flows for the year ended December 31, 2005. These consolidated financial statements
are the responsibility of the Companys management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects the financial position of International American
Technologies, Inc. and Subsidiary as of December 31, 2005, and the consolidated results of
their operations and their cash flows for the year ended December 31, 2005 in conformity
with accounting principles generally accepted in the United States of America.

/s/ Thomas Leger & Co., L.L.P.
Thomas Leger & Co., L.L.P.

April 17, 2006
Houston, Texas




**R. E. Bassie & Co.****Certified Public Accountants**6671 Southwest Freeway, Suite 550Houston, Texas 77074Tel: (713) 272-8500 Fax: (713)
    272-8515E-Mail: Rebassie@aol.comREPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Back to Table of Contents The Board of Directors and Stockholders
International American Technologies, Inc.:

We have audited the balance sheet of International American
Technologies, Inc. (formerly Unlimited Coating Corporation) as of December 31, 2004, and
the related statements of operations, stockholders' equity and cash flows for the year
ended December 31, 2004. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of International American
Technologies, Inc. as of December 31, 2004, and the results of its operations and its cash
flows for the year ended December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.

/s/ R. E. Bassie & Co.
Houston, Texas

March 15, 2005




**INTERNATIONAL
    AMERICAN TECHNOLOGIES, INC.**Consolidated Balance SheetsBack to Table of ContentsDecember
    31, 2005 and 2004**2005**
    
    **2004**AssetsCurrent assets:Cash
    $
    61,875
    $
    99Certificate of
    deposits
    
    -
    
    300,000Accounts
    receivable, net ofallowance of
    doubtful accounts of $123,925 at December 31, 2005
    
    829,294
    
    -Current portion of
    notes receivable
    
    27,435
    
    25,585Inventories
    
    1,004,657
    
    88,712Prepaid expenses
    
    13,889
    
    -Total current assets
    
    1,937,150
    
    414,396Long-term notes receivable
    
    390,310
    
    417,746Property and equipment, net
    
    829,049
    
    -Intangible assets, net
    
    2,536,263Other assets
    
    56,995
    
    -Total assets
    $
    5,749,767
    $
    832,142Liabilities
    and Stockholders' Equity (Deficit)Current liabilities:Accounts payable
    and accrued expenses
    $
    1,442,849
    $
    15Short-term note
    payable
    
    173,300
    
    -Current
    installments of long-term debt
    
    2,131,605
    
    -Total current liabilities
    
    3,747,754
    
    15Due to American International
    Industries, Inc.
    
    1,843,588
    
    -Deferred tax liability
    
    503,200
    
    -Total liabilities
    
    6,094,542
    
    15Stockholders' equity (deficit):Preferred stock,
    $0.0001par value.Authorized
    5,000,000 shares: none issued
    
    -
    
    -Common stock,
    $0.0001 par value. Authorized 195,000,000 shares:20,135,000 shares issued and outstanding at December 31, 2005 and20,000,000 shares issued and outstanding at December 31, 2004
    
    2,014
    
    2,000Additional paid-in
    capital
    
    969,378
    
    951,642Accumulated
    deficit
    
    (1,316,167)
    
    (121,515)Total
    stockholders' equity (deficit)
    
    (344,775)
    
    832,127Total liabilities and stockholders' equity (deficit)
    $
    5,749,767
    $
    832,142See accompanying
    notes to consolidated financial statements.




**INTERNATIONAL AMERICAN TECHNOLOGIES, INC.**Consolidated Statements of OperationsBack to Table of ContentsYears ended December 31, 2005 and 2004****
    
    **2005**
    
    **2004**Revenues
    $
    3,395,151
    $
    -Costs and expenses:Cost of sales
    
    2,396,950
    
    -Selling, general
    and administrative
    
    2,104,473
    
    30,968Total operating expenses
    
    4,501,423
    
    30,968Operating loss
    
    (1,106,272)
    
    (30,968)Other income (expenses):Interest income
    
    18,237
    
    23,975Interest expense
    
    (106,617)
    
    -Total
    other income (expenses)
    
    (88,380)
    
    23,975Net
    loss before income tax
    
    (1,194,652)
    
    (6,993)Provision for income tax
    
    -
    
    -Net loss applicable to common shareholders
    $
    (1,194,652)
    $
    (6,993)Net loss per
    common share - basic and diluted
    $
    (0.06)
    $
    (0.00)Weighted
    average common shares - basic and diluted
    
    20,111,000
    
    20,000,000See accompanying
    notes to consolidated financial statements




INTERNATIONAL AMERICAN  TECHNOLOGIES, INC.Consolidated Statements of
    Stockholders' Equity (Deficit)Back
    to Table of ContentsFor the years ended December 31, 2005 and 2004******Additional**
    
    
    
    **Total****Common
    Stock**
    
    **paid-in**
    
    **Accumulated**
    
    **stockholders'****shares**
    
    **amount**
    
    **capital**
    
    **deficit**
    
    **equity**Balance,
    December 31, 2003
    20,000,000
    $
    2,000
    $
    951,642
    $
    (114,522)
    $
    839,120Net loss
    -
    
    -
    
    -
    
    (6,993)
    
    (6,993)Balance,
    December 31, 2004
    20,000,000
    
    2,000
    
    951,642
    
    (121,515)
    
    832,127Issuance of common stock
    for services
    135,000
    
    14
    
    17,736
    
    -
    
    17,750Net loss
    -
    
    -
    
    -
    
    (1,194,652)
    
    (1,194,652)Balance,
    December 31, 2005
    20,135,000
    $
    2,014
    $
    969,378
    $
    (1,316,167)
    $
    (344,775)See
    accompanying notes to consolidated financial statements




INTERNATIONAL AMERICAN TECHNOLOGIES, INC.Consolidated Statements of Cash FlowsBack to Table of ContentsYears ended December 31, 2005 and 2004****
    
    **2005**
    
    **2004**Cash flows from operating
    activities:Net loss
    $
    (1,194,652)
    $
    (6,993)Adjustments to
    reconcile net lossto net
    cash used in operating activities:Depreciation and amortization
    
    304,946
    
    -Issuance of common stock for services
    
    17,750
    
    -(Increase) decrease of operating assets, net of acquisitions:Accounts receivable
    
    (319,928)
    
    -Inventories
    
    (195,819)
    
    -Other
    
    (22,538)
    
    -Increase (decrease) in operating liabilities:Accounts payable and accrued expenses
    
    (9,751)
    
    15Net cash used in operating activities
    
    (1,419,992)
    
    (6,978)Cash flows from investing
    activities:Purchase of
    property and equipment
    
    (119,006)
    
    -Redemption
    (purchase) of certificate of deposit
    
    300,000
    
    (300,000)Proceeds from
    payments on long-term notes receivable
    
    25,586
    
    21,935Amount due from
    (to) affiliates
    
    (342,700)
    
    281,600Purchase of stock
    in majority-owned subsidiary
    
    (998,300)
    
    -Cash acquired in
    acquisition of majority-owned subsidiary
    
    56,506
    
    -Net cash provided by (used in) investing activities
    
    (1,077,914)
    
    3,535Cash flows from financing
    activities:Proceeds from
    long-term borrowing
    
    2,131,605
    
    -Proceeds from
    borrowings from related parties
    
    998,300
    
    -Repayment of
    short-term borrowing
    
    (570,223)
    
    -Net cash provided by financing activities
    
    2,559,682
    
    -Net increase (decrease) in cash
    
    61,776
    
    (3,443)Cash at beginning of year
    
    99
    
    3,542Cash at end
    of year
    $
    61,875
    $
    99Supplemental schedule of cash
    flow information:Interest paid
    $
    106,617
    $
    -Taxes paid
    $
    -
    $
    -Non-cash investing and
    financing transactions:Issuance of note
    payable and assumption of liabilitiesfor
    acquisition of subsidiary
    $
    1,457,400
    $
    -Non-cash portion of assets and
    liabilities received in the acquisition ofa majority-owned
    subsidiary (see Note 2):Current assets
    $
    1,379,433Property and equipment
    
    826,765Patents, trademarks and contract
    
    2,724,487Other
    non-current assets
    
    70,085Current liabilities
    
    (2,098,376)Deferred tax liability-
    
    (503,200)See accompanying
    notes to consolidated financial statements




INTERNATIONAL AMERICAN TECHNOLOGIES, INC.Notes to Consolidated Financial Statements Back to Table of Contents December 31, 2005 and 2004 (1) Summary of Significant Accounting Policies
Organization, Ownership and Business

International American Technologies, Inc., f/k/a Unlimited Coatings
Corporation, (the "Company"), was a public shell company with no operations in
2004. In 2005, the Company acquired, through its parent company, 51% of the capital stock
of Hammonds Technical Services, Inc. The Company is 81.0% owned subsidiary of American
International Industries, Inc. (AIII).
Principles of Consolidation

The 2005 consolidated financial statements include the accounts of the
Company and its majority-owned subsidiary: Hammond Technical Services, Inc. All
significant intercompany transactions and balances have been eliminated in consolidation.

Presentation of certain amounts for the year ended December 31, 2004
have been reclassified to conform to the presentations for the current year.

**Cash and Cash-Equivalents**

The Company considers cash and cash-equivalents to include cash on hand
and demand deposits with banks with an original maturity of three months or less.
Accounts Receivable

Accounts receivable consist primarily of trade receivables, net of a
valuation allowance for doubtful accounts.

**Allowance for Doubtful Accounts**

The Company extends credit to customers and other parties in the normal
course of business. The Company regularly reviews outstanding receivables and provides for
estimated losses through an allowance for doubtful accounts. In evaluating the level of
established reserves, the Company makes judgments regarding its customers' ability to make
required payments, economic events and other factors. As the financial condition of these
parties change, circumstances develop or additional information becomes available,
adjustments to the allowance for doubtful accounts may be required. In the event the
Company was to determine that a customer may not be able to make required payments, the
Company would increase the allowance through a charge to income in the period in which
that determination is made.
Inventories

Inventories are valued at the lower-of-cost or market on a first-in,
first-out basis. The Company assesses the realizability of its inventories based upon
specific usage and future utility. A charge to results of operations is taken when factors
that would result in a need for a reduction in the valuation, such as excess or obsolete
inventory, are noted.
Property, Plant, Equipment, Depreciation, Amortization and Long Lived
Assets

Long-lived assets include:

Property, Plant and equipment  These assets are recorded at
original cost and increased by the cost of any significant improvements after purchase. We
depreciate the cost evenly over the assets estimated useful lives. Upon retirement
or sale, the cost of the assets disposed of and the related accumulated depreciation are
removed from the accounts, with any resultant gain or loss being recognized as a component
of other income or expense.

Identifiable intangible assets  These assets are recorded at
original cost, intangible assets with finite lives are amortized evenly over their
estimated useful lives.

At least annually, we review all long-lived assets for impairment. When
necessary, we record changes for impairments of long-lived assets for the amount by which
the present value of future cash flows, or some other fair value measure, is less than the
carrying value of these assets.

During April, 2005 the Company acquired Hammonds Technical Services,
Inc. for a purchase price of approximately $2,455,700 (See Note 2). The operations of
Hammonds Technical Services are included in the consolidated statements of operations from
date of acquisition.
Revenue Recognition

Revenue is recognized when the earning process is completed, the risks
and rewards of ownership have transferred to the customer, which is generally the same day
as delivery or shipment of the product, the price to the buyer is fixed or determinable,
and collection is reasonably assured. The Company has no significant sales returns or
allowances.
Income Taxes

The Company is a taxable entity and recognizes deferred tax assets and
liabilities for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to be in effect when the temporary differences reverse. The effect on the
deferred tax assets and liabilities of a change in tax rates is recognized in income in
the year that includes the enactment date of the rate change. A valuation allowance is
used to reduce deferred tax assets to the amount that is more likely than not to be
realized.
Earnings (Loss) Per Share

The basic net earnings (loss) per common share is computed by dividing
the net earnings (loss) by the weighted average number of shares outstanding during a
period. Diluted net earnings (loss) per common share is computed by dividing the net
earnings (loss), adjusted on an as if converted basis, by the weighted average number of
common shares outstanding plus potential dilutive securities.
Management's Estimates and Assumptions

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues
and expenses. Actual results could differ from these estimates.
Fair Value of Financial Instruments

The Company estimates the fair value of its financial instruments using
available market information and appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop the estimates of
fair value. Accordingly, the Company estimates of fair value are not necessarily
indicative of the amounts that the Company could realize in a current market exchange. The
use of different market assumption and/or estimation methodologies may have a material
effect on the estimated fair value amounts. The interest rates payable by the Company on
its notes payable approximate market rates. The Company believes that the fair value of
its financial instruments comprising accounts receivable, notes receivable, accounts
payable, and notes payable approximate their carrying amounts.
New Standards Implemented

In May 2005, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 154, Accounting
Changes and Error Corrections. SFAS No. 154 replaces Accounting Principles Board
Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes
in Internal Financial Statements, and changes the requirements for the accounting for
and reporting of a change in accounting principle. SFAS No. 154 requires retrospective
application of changes in accounting principle to prior periods financial
statements, unless it is impracticable to determine either the period-specific effects or
the cumulative effect of the change. SFAS No. 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005. We will
adopt SFAS No. 154 on January 1, 2006. Any impact on the Companys consolidated
results of operations and earnings per share will be dependent on the amount of any
accounting changes or corrections of errors whenever recognized.

In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 153. This statement addresses the
measurement of exchanges of nonmonetary assets. The guidance in APB Opinion No. 29, "Accounting
for Nonmonetary Transactions," is based on the principle that exchanges of
nonmonetary assets should be measured based on the fair value of the assets exchanged.

The guidance in that opinion; however, included certain exceptions to
that principle. This statement amends Opinion 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a general
exception for exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. This statement is effective
for financial statements for fiscal years beginning after June 15, 2005. Earlier
application is permitted for nonmonetary asset exchanges incurred during fiscal years
beginning after the date of this statement is issued. Management believes the adoption of
this statement will have no impact on the financial statements of the Company.

In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 152, which amends FASB statement No. 66, "Accounting
for Sales of Real Estate," to reference the financial accounting and reporting
guidance for real estate time-sharing transactions that is provided in AICPA Statement of
Position (SOP) 04-2, "Accounting for Real Estate Time-Sharing Transactions."
This statement also amends FASB Statement No. 67, "Accounting for Costs and
Initial Rental Operations of Real Estate Projects," to state that the guidance
for (a) incidental operations and (b) costs incurred to sell real estate projects does not
apply to real estate time-sharing transactions. The accounting for those operations and
costs is subject to the guidance in SOP 04-2. This statement is effective for financial
statements for fiscal years beginning after June 15, 2005. Management believes the
adoption of this statement will have no impact on the financial statements of the Company.

In November 2004, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 151, "Inventory Costs
an amendment of ARB No. 43, Chapter 4." This statement amends the guidance in ARB
No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that "under some
circumstances, items such as idle facility expense, excessive spoilage, double freight,
and rehandling costs may be so abnormal as to require treatment as current period
charges." This statement requires that those items be recognized as
current-period charges regardless of whether they meet the criterion of "so
abnormal." In addition, this statement requires that allocation of fixed
production overheads to the costs of conversion be based on the normal capacity of the
production facilities. This statement is effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. Management does not believe the adoption of
this statement will have any immediate material impact on the Company.
(2) Acquisition of Hammonds Technical Services, Inc.

Effective April 28, 2005, the Company entered into a Stock Purchase
Agreement ("the Agreement") to acquire a 51% interest in the capital stock of
Hammonds Technical Services, Inc., a privately owned Texas corporation
("Hammonds") in consideration for the Company or its parent, American
International Industries, Inc., providing: (i) $998,300 in cash to Hammonds for working
capital; (ii) a secured revolving long-term line of credit in the amount of $2,000,000;
and (iii) the parent issuing 145,000 restricted shares of common stock to the Company in
consideration for a $1,450,000 promissory note. These shares were exchanged for two
minority equity interests in Hammonds owned by third parties. The total purchase price to
acquire the 51% in Hammonds was $2,455,700 representing cash payments of $825,000, 145,000
shares of AIIIs restricted common stock valued at $1,450,000 and the assumption of a
note payable to one of the former shareholders in the amount of $173,300 and liabilities
in excess of assets in the amount of $7,400. No minority interest liability was recognized
at the time of the acquisition because liabilities were in excess of assets.

Prior to the acquisition, Hammonds was two separate legal entities,
Hammonds Technical Services, Inc. and Hammonds Fuel Additives, Inc. (collectively "Hammonds")
manufacturers engineered products and chemicals that serve multiple segments of the fuels
distribution, water treatment and utility vehicle industries. Hammonds products are
marketed by a worldwide network of distributors, manufacturers representatives and
original equipment manufacturers. On February 28, 2005, Hammond Fuels Additives, Inc. was
merged into Hammonds Technical Services, Inc.

As required by SFAS No. 141, the Company has recorded the acquisition
using the purchase method of accounting with the purchase price allocated to the acquired
assets and liabilities based on their respective estimated fair values at the acquisition
date. The purchase price of $2,455,700 had been allocated at follows:
**Hammonds Net Book Value**
    
    **Allocation of Purchase Price**
    
    **Consolidated**Current assets
    $
    1,435,939
    $
    -
    $
    1,435,939Property and equipment
    
    418,603
    
    408,162
    
    826,765Patents, trademarks and contract
    
    173,749
    
    2,550,738
    
    2,724,487Other non-current assets
    
    70,085
    
    -
    
    70,085Current liabilities
    
    (2,090,976)
    
    (7,400)
    
    (2,098,376)Deferred tax liability
    
    -
    
    (503,200)
    
    (503,200)$
    (7,400)
    $
    $2,448,300
    $
    2,455,700

The following table contains a summary of the intangible assets
acquired:
**As of December 31, 2005**Gross
    Carrying Amount
    
    Accumulated
    Amortization
    Average
    Weighted LivesPatents
    $
    1,806,387
    $
    125,706
    12 yearsTrademarks
    
    465,199
    
    29,464
    10 yearsSole Source Contract
    
    464,039
    
    44,192
    7 years$
    2,735,625
    $
    199,362
    10 years


Aggregate Amortization
    ExpenseFor year ended December 31, 2005
    $
    199,362Estimated Amortization ExpensesFor year ending December 31, 2006
    $
    246,516For year ending December 31, 2007
    $
    246,516For year ending December 31, 2008
    $
    246,516For year ending December 31, 2009
    $
    246,516For year ending December 31, 2010
    $
    246,516

Revenues and expenses are included in the Companys
statement of operations from May 1, 2005 through December 31, 2005.

The following unaudited pro forma data summarizes the
results of operations of the Company for the years ended December 31, 2005 and 2004 as if
the acquisition had been completed on January 1, 2004. The pro forma data gives effect to
the actual operating results prior to acquisition. The pro forma results do not purport to
be indicative of the results that would have actually been achieved if the acquisition had
occurred on January 1, 2004 or may be achieved in the future.
**December 31, 2005**
    
    **December 31, 2004**Revenues
    $
    4,558,174
    $
    4,681,316Net income (loss)
    
    (1,505,316)
    
    (520,812)Basic net earnings (loss) per share
    
    (0.07)
    
    (0.03)(3) Inventory


Inventory at December 31, 2005 consisted of the following:**2005**Finished goods
    $
    134,240Work in process
    
    25,696Parts and
    materials
    
    1,148,3051,308,241Less:
    Obsolescence reserve
    
    (303,584)$
    1,004,657(4) Property and Equipment


A summary of property and equipment and related accumulated
depreciation and amortization are as follows:**2005**Machinery and equipment
    $
    839,393Leasehold improvements
    
    95,240Total property and
    equipment
    
    934,633Less: Accumulated
    depreciation and amortization
    
    (105,584)Net property and equipment
    $
    829,049(5) Intangible Assets

Intangible assets at December 31, 2005 consisted of the following:**2005**Patents
    $
    1,806,387Trademarks
    
    465,199Sole Source Contract
    
    464,0392,735,625Less accumulated
    amortization
    
    (199,362)$
    2,536,263(6) Long-term Debt


Long-term debt consisted of the following:**December
    31****2005**
    
    **2004**Note payable to a bank,
    interest due monthly at prime plus 2%, principal payment due December 17, 2006, secured by
    assets of the Company's subsidiary
    $
    1,993,878
    $
    -Note payable, unsecured,
    with interest at 10.75%, interest payments due quarterly, with the principal balance due
    on December 10, 2006
    
    89,890
    
    -Other notes with various
    terms
    
    47,837
    
    -2,131,605
    
    -Less current portion
    
    (2,131,605)
    
    -$
    -
    $
    -Principal repayment provisions of long-term debt are as follows at
December 31, 2005:2006
    $
    2,131,605Total
    $
    2,131,605(7) Concentration of Credit Risk


Financial instruments that potentially subject the Companies to credit
risk are primarily accounts receivable  trade and notes receivable. The Company
grants credit to customers throughout the United States. Generally, the Companies do not
require collateral or other security to support customer receivables. Hammonds Technical
Services (HTS) had two customers that represented more than 10% of its total sales.
Hammonds Fuel Additives (HTA)had one customer that represented more than 10% of its total
sales.
Customer A
    HTS
    25%Customer B
    HTS
    15%Customer C
    HFA
    10%(8) Income Taxes


The following table set forth a reconciliation of the statutory of federal income tax
for the year December 31, 2005 and 2004. The loss before taxes was $1,194,652 in 2005 and
$6,993 in 2004.
**December 31****2005**
    
    **2004**Income tax benefit
    computed at statutory rate for
    $
    (406,182)
    $
    (2,378)Permanent differences -
    non deductible expenses
    
    84,600
    
    -Increase in valuation allowance
    
    321,582
    
    2,378Tax benefit
    $
    -
    $
    -

The Company will not file a consolidated income tax return.

Deferred Income Taxes

The tax effects of the temporary differences between financial statement income and
taxable income are recognized as deferred tax asset and liability as of December 31,2005
is set below.
**December 31****2005**
    
    **2004**Deferred tax assets:
    $
    
    $Net operating loss - current
    period
    
    362,882
    
    41,300Total
    deferred tax asset
    
    362,882
    
    41,300Valuation allowance
    
    (362,882)
    
    (41,300)Net
    deferred asset
    $
    -
    $
    -**December 31****2005**
    
    **2004**Deferred tax
    liability:
    $
    
    $Fixed
    asset temporary difference
    
    138,775
    
    -Intangible asset temporary
    difference
    
    364,425
    
    -Net
    deferred tax liability
    $
    503,200
    $
    -

The Company's parent has various net operating loss carryforwards in excess of
$13,000,000 which expire in 2026. The loss is limited under Internal Revenue Code Section
382.
(9) Segment Information


The Company has two reportable segments and corporate overhead:
Hammonds was two separate reportable segments, Hammonds Technical Services, Inc. and
Hammonds Fuel Additives, Inc. (collectively "Hammonds"). Hammonds manufacturers
engineered products and chemicals that serve multiple segments of the fuels distribution,
water treatment and utility vehicle industries. Hammonds products are marketed by a
worldwide network of distributors, manufacturers representatives and original equipment
manufacturers. The corporate overhead includes the Company's investment holdings including
financing current operations and expansion of its current holdings as well as evaluating
the feasibility of entering into additional businesses.

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

The Company's reportable segments are strategic business units that
offer different technology and marketing strategies.

The Company's areas of operations are principally in the United States.
No single foreign country or geographic area is significant to the consolidated financial
statements.

Consolidated revenues, operating income/(losses), and identifiable
assets were as follows:**December
    31****2005**
    
    **2004**Revenues:Hammonds Technical Services
    $
    2,583,887
    $
    -Hammonds Fuel Additives
    
    811,264
    
    -Corporate
    
    -
    
    -$
    3,395,151
    $
    -Cost of Sales:Hammonds Technical Services
    $
    1,878,500
    $
    -Hammonds Fuel Additives
    
    518,450
    
    -$
    2,396,950
    $
    -Loss from operations:Hammonds Technical Services
    $
    (1,076,259)
    $
    -Hammonds Fuel Additives
    
    (10,888)
    
    -Corporate
    
    (19,125)
    
    (30,968)$
    (1,106,272)
    $
    (30,968)Identifiable assets:Hammonds Technical Services
    $
    2,193,207
    $
    -Hammonds Fuel Additives
    
    3,138,302
    
    -Corporate
    
    418,258
    
    832,142$
    5,749,767
    $
    832,142

**(10) Commitments** The Company leases office space under a noncancelable operating lease
which expires in October 2015. Future minimum lease payments under the operating lease are
as follows: **Year December 31,**
    
    **Amount**2006
    $
    301,6002007
    
    307,2002008
    
    307,2002009
    
    307,2002010
    
    307,200Thereafter
    
    1,484,800$
    3,015,200
 Lease expenses for the years ended December 2005 and 2004, were $132,701
and $0, respectively. The Company is obligated to pay a management fee to its parent in
the amount of $10,000 monthly. **(11) Related Party Transactions and Economic Dependence** The Company has been and continues to be dependent upon the funding from
its parent, American International Industries, Inc. At December 31, 2005, the Company owed
the parent $1,843,588. **(12) Restatement of Previously Issued Quarterly Data (Unaudited)** The data for the quarterly periods ended June 30, 2005 and September 30,
2005 is being restated to properly account for the allocation of the purchase price for
the acquisition of Hammonds. Originally, the acquisition of Hammonds incorrectly included
a 100% write-up of the assets to include the 51% interest and the 49% minority interests.
In addition, the restatement corrects for the overstatement of income which primarily
resulted from the forgiveness of debt in the amount of $466,350, which should have been
taken into consideration at the time of the acquisition.  **Quarter ended June 30, 2005****As
    previously reported**
    
    **Restatement
    adjustments**
    
    **As
    restated**Revenues
    $
    576,035
    $
    -
    $
    576,035Cost of
    sales
    
    389,139
    
    -
    
    389,139Selling,
    general and administrative expenses
    
    391,955
    
    52,056
    
    444,011Total costs
    & expenses
    
    781,094
    
    52,056
    
    833,150Operating
    loss
    
    (205,059)
    
    (52,056)
    
    (257,115)Interest
    income
    
    5,469
    
    6,164
    
    11,633Other income
    
    466,350
    
    (466,350)
    
    -Total other
    income (expense)
    
    471,819
    
    (460,186)
    
    11,633Net earnings
    (loss) before minority interest
    
    266,760
    
    (512,242)
    
    (245,482)Minority
    interest
    
    (136,178)
    
    136,178
    
    -Net earnings
    (loss) applicable to common shareholders
    
    130,582
    
    (376,064)
    
    (245,482)Weighted
    average common shares
    
    20,125,000
    
    -
    
    20,125,000Net earnings
    (loss) per share applicable to shareholders -basic
    and diluted
    $
    0.01
    $
    -
    $
    (0.01)Patents and
    trademarks, net of amortization
    $
    138,415
    
    2,509,652
    
    2,648,067Goodwill
    
    4,134,049
    
    (4,134,049)
    
    -Current
    liabilities
    
    2,961,807
    
    (863,429)
    
    2,098,378Deferred tax
    liability
    
    -
    
    503,200
    
    503,200Minority interest
    
    2,200,231
    
    (2,200,231)
    
    -Accumulated deficit
    $
    4,291
    $
    (376,064)
    $
    (371,773)Total stockholders equity
    $
    967,933
    $
    (376,064)
    $
    591,869**Quarter ended September 30, 2005****As
    previously reported**
    
    **Restatement
    adjustments**
    
    **As
    restated**Revenues
    $
    1,704,922
    $
    -
    $
    1,704,922Cost of
    sales
    
    1,305,043
    
    -
    
    1,305,043Selling,
    general and administrative expenses
    
    1,058,947
    
    102,715
    
    1,161,662Total costs
    and expenses
    
    2,363,990
    
    102,715
    
    2,466,705Operating
    loss
    
    (659,068)
    
    (102,715)
    
    (761,783)Interest
    income
    
    14,325
    
    -
    
    14,325Other income
    (expense)
    
    519,099
    
    (519,099)
    
    -Total other
    income (expense)
    
    533,424
    
    (519,099)
    
    14,325Net loss
    before minority interest
    
    (125,644)
    
    (621,814)
    
    (747,458)Net loss
    applicable to shareholders
    
    (125,644)
    
    (621,814)
    
    (747,458)Weighted
    average common shares
    
    20,102,650
    
    22,350
    
    20,125,000Net loss per
    share applicable to shareholders - basic and diluted
    $
    (0.01)
    $
    -
    $