UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10-K




ýANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the fiscal year ended December 31, 2009




 ̈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




HAMMONDS INDUSTRIES, 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 235Kemah,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 if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes     ̈ No  x
  Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes   ̈ No  x


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. Yes  x No   ̈




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-K or any amendment to this Form 10-K.   ̈




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer, "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
  Large accelerated filer  ̈
Accelerated filer ̈Non-accelerated filer  ̈
Smaller reporting company x
  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ̈No x
  As of June 30, 2009, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $22,167 based on the closing sale price of $0.001 on such date as reported on the OTCBB.
  The number of shares outstanding of each of the issuer’s classes of equity as of  April 15, 2010 is 5,031,326 shares of common stock and 3,769,626 shares of preferred stock.







TABLEOF CONTENTS




Item

Description

PagePART I3ITEM 1.

DESCRIPTION OF BUSINESS


7ITEM 1A.

RISK FACTORS RELATED TO OUR BUSINESSES


11ITEM 1B.

UNRESOLVED STAFF COMMENTS


11ITEM 2.

DESCRIPTION OF PROPERTY


11ITEM 3.

LEGAL PROCEEDINGS


11ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES


12ITEM 6.

SELECTED FINANCIAL DATA


13ITEM 7.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION


14ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


16ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


17ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


31ITEM 9A(T).

CONTROLS AND PROCEDURES


31ITEM 9B.

OTHER INFORMATION


32PART IIIITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE


32ITEM 11.

EXECUTIVE COMPENSATION


33ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS


35ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENCENCE


36ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES


36ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES


36










Cautionary Statement regarding Forward-Looking Statements




This Annual Report on Form 10-K of Hammonds Industries, Inc. (hereinafter the "Company", the "Registrant" or " Hammonds") 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-K 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




ITEM1. DESCRIPTION OF BUSINESS




Hammonds Industries, Inc.




Hammonds Industries, Inc., a Nevada corporation, was incorporated on August 18, 1986 and is publicly traded on the Pinksheets under the symbol "HMDI". The Company was a subsidiary of American International Industries, Inc. ("American") until December 31, 2008.


Description of Hammonds' Organization and Financing Transactions




Some of the statements contained in this current report of Hammonds Industries Inc., (hereinafter the "Company", "Hammonds", "We" or the "Registrant" discuss future expectations, contain projections of our operations or financial condition or state other forward-looking information. In 2005, the Company, through its parent company, acquired
51% of the capital stock of Hammonds Technical Services, Inc. Hammonds Technical Services, Inc. and Hammonds Fuel Additives, Inc. were separate privately-owned Texas companies. In connection with the 2005 acquisition by the Company, Hammonds Fuel Additives was merged into Hammonds Technical Services. In April 2005 and January 2006, respectively, Hammonds Fuel Additives and Hammonds Water Treatment Systems, respectively, were reincorporated as separate entities from Hammonds Technical Services, and all three
entities are wholly-owned subsidiaries of the Company. On August 1, 2006, the Company acquired the 49% minority interest of Hammonds Technical Services, Inc., Hammonds Fuel Additives, Inc., and Hammonds Water Treatment Systems, Inc. in consideration for the issuance of 1,600,000 restricted shares of common stock, valued at a price of $2.50 per share, the price of the Company's common stock at the date of the transaction.




Prior to the year ended December 31, 2008, in accordance with FIN 46(R) (ASC 810-10), American consolidated Hammonds, even though its ownership was less than 51%, because American appointed the members of Hammonds’ board of directors. Since Hammonds was incurring losses and the minority interest had no recorded common stock equity
value, American recognized 100% of Hammonds’ losses.
 On December 31, 2008, the board of directors of American approved the deconsolidation of Hammonds from American. To effect the deconsolidation of Hammonds, American was required to reduce its ownership percentage, board membership, and guarantee of Hammonds’ debt. After the distribution of the special dividend of approximately 1.74
million shares of Hammonds’ common stock to American's shareholders of record on December 31, 2008, American's ownership is approximately 13% of Hammonds' issued and outstanding common stock. Effective December 31, 2008, Carl Hammonds was appointed Chairman and CEO and John Stump, III was appointed CFO. Hammonds accepted the resignations of Daniel Dror, as Chairman of the Board and CEO, Sherry L. Couturier, as Director, CFO and Vice President, and Charles R. Zeller, as Director, and appointed
Richard C. Richardson as a new board member unrelated to American. As a result, the majority of Hammonds’ board of directors is no longer controlled by American. Additionally, a reduction of American's guarantee of Hammonds’ debt to $1,000,000 was obtained from Texas Community Bank.
  On April 16, 2009, Hammonds entered into an Asset Purchase Agreement with FabCorp, Inc., a Houston-based manufacturing company, pursuant to which Hammonds sold all of its assets, including all of the shares of its operating  wholly-owned subsidiaries, Hammonds Fuel Additives, Inc., Hammonds Technical Services, Inc., Hammonds Water
Treatment Systems, Inc. and Hammonds ODV, Inc. (collectively, the “Operating Subsidiaries”) to a newly formed Texas company, Hammonds Technologies, LLC., a wholly owned subsidiary of FabCorp, Inc.
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 3
 The transaction was authorized and approved pursuant to the provisions of the Nevada Revised Statutes by the Joint Written Consent of the Board of Directors and the Majority Stockholders of Hammonds.
 
 The Board of Directors decision to enter into the Asset Purchase Agreement was based upon the following reasons, among others: the poor business outlook for the Operating Subsidiaries because of Hammonds’ inability to raise sufficient capital, either through equity or debt financing to continue its operations and grow the businesses
of the Operating Subsidiaries; the weak financial viability of the Operating Subsidiaries without a substantial infusion of capital; that at December 31, 2008, Hammonds total current liabilities were about $6.9 million compared to current assets of about $2.8 million and total liabilities were about $7.3 million or about $460,000 more than  total assets (all amounts unaudited); for more than the past year, Hammonds’ management had been actively seeking financing, either through equity or debt,
necessary to support ongoing operations and to that end had retained investment banking consultants pursuing several possible financing opportunities, but none of these efforts were successful and no additional financing was raised; the ongoing  upheaval in the credit and investment environment; and the determination by Hammonds management that it would be unable to continue as a “going concern.”
 
 Pursuant to the Asset Purchase Agreement, FabCorp purchased all of the assets,  free and clear of all liens and other encumbrances, in consideration for the payment of liabilities of Hammonds to Texas Community Bank in the amount of $2.6 million, payment of the senior promissory bridge note of $250,000 to Hammonds’
institutional investor, Vision Opportunity Master Fund, Ltd., the assumption of all payables and liabilities of the Operating Subsidiaries of approximately $2.6 million and the commitment to provide continuing financial support for the Operating Subsidiaries.
 
 Based upon the foregoing, Hammonds’ Board of Directors determined that is was in the best interests of Hammonds and its shareholders that Hammonds enter into the Asset Purchase Agreement, so that Hammonds could pursue other business opportunities through a merger, acquisition or other business combination with an operating
entity.  On August 13, 2009, Hammonds, American, Delta Seaboard Well Service, Inc. ("Delta"), American's 51% owned subsidiary, and the minority interest owners of Delta entered into an agreement to commence a reverse merger of Delta into Hammonds.
 On February 3, 2010, the Company and Delta completed the reverse merger pursuant to which Delta was merged with and into Hammonds. In connection with the Reverse Merger of Delta into Hammonds, following the effective date of the Reverse Split, the Company issued shares of Common Stock to the existing stockholders of Delta as follows: (i)
22,186,572 post-Reverse Split shares in consideration for American’s 51% equity ownership of Delta, and 10,000,000 post-Reverse Split shares in consideration for American converting $872,353 in principal and accrued interest of debt payable by the Company to American; (ii) a total of 21,316,510 shares to Robert W. Derrick, Jr., a newly appointed director of the Company as well as Delta’s president and a director of American and Ron Burleigh, a newly-appointed director of the Company as well as
Delta’s vice president, in consideration for their 49% equity ownership of Delta; and (iii) 9,607,843 post-Reverse Split shares in consideration for Messrs. Derrick and Burleigh extending their employment agreements for five years in addition to the balance of their current employment agreements. Following the Reverse Split and Reverse Merger, American owns 32,859,935 shares of Common Stock, representing 48.2% of the Company’s total outstanding shares and Messrs. Derrick and Burleigh, the owners of
the noncontrolling interest in Delta, own 30,924,353 shares of Common Stock, representing 45.4% of the Company’s total outstanding shares. All other stockholders of the Company own 4,357,962 shares of Common Stock, representing 6.4% of the Company’s total 68,142,250 outstanding shares.All common share amounts have been retroactively adjusted to reflect the reverse stock split.


2006 Private Financing Transactions


On August 8, 2006,  the Company entered into a stock purchase agreement with Vision Opportunity Fund Limited ("VOMF"), an institutional investor, pursuant to which the Company sold VOMF 833,333 shares of Series A Convertible Preferred Stock for $1,500,000 and issued a Series A Warrant exercisable for a period of 5 years to purchase
833,333 shares of the Company’s common stock at $1.80 per share and a Series B Warrant exercisable for a period of 2 years to purchase an additional 833,333 shares of the Company’s common stock at $1.80 per share.




On September 29, 2006, the Company entered into another stock purchase agreement with VOMF pursuant to which the Company sold 833,333 shares of Series B Convertible Preferred Stock for $1,500,000 and issued a Series C Warrant exercisable for a period of 5 years to purchase 833,333 shares of the Company’s common stock at $5.00
per share.




The stock purchase agreements in the 2006 Private Financing Transactions provide that each share of Series A and Series B Convertible Preferred Stock is convertible into 1 share of Hammonds' common stock.





2007 Private Financing Transactions


In connection with the agreement of VOMF to exercise up to 400,000 Series C Warrants in March 2007, the Company reduced the exercise price of the Series C Warrants from $5.00 per share to $1.80 per share through December 31, 2007, following which the exercise price reverts to $5.00 per share. On March 27, 2007, VOMF exercised 397,040 Series
C Warrants at a price of $1.80 per share with net proceeds of $694,672 to the Company.


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On September 20, 2007, the Company entered into an agreement with VOMF pursuant to which the Series A, B and C Warrants were amended to: (i) adjust the exercise price of all of the Warrants to $1.00; and (ii) provide for the issuance of a total of 2,102,960 shares of the Company's newly authorized Series C Convertible
Preferred Stock in lieu of 2,102,960 shares of common stock. On September 21, 2007, VOMF delivered a notice of exercise of all 2,102,960 Series A, B and C Warrants at an exercise price of $1.00 per warrant, from which the Company received net proceeds of $981,162 and VOMF cancelled Hammonds’ short-term promissory note payable in the amount of $1,000,000, representing a loan made by VOMF to the Company on August 17, 2007.





In total, the Company has received approximately $5.4 million from the 2006 and 2007 VOMF Private Financing Transactions.  The material terms of these preferred stock issuances are included in Note 5 to the financial statements.




General Background of Hammonds




From May 1, 2005 through April 16, 2009, the Company had three subsidiaries.  Hammonds Technical Services, Inc. and Hammonds Fuel Additives, Inc. were separate privately-owned Texas companies. In connection with the 2005 acquisition by the Company, Hammonds Fuel Additives was merged into Hammonds Technical Services. In April 2005 and
January 2006, respectively, Hammonds Fuel Additives and Hammonds Water Treatment Systems, respectively, were reincorporated as separate entities from Hammonds Technical Services, and all three entities are wholly-owned subsidiaries of the Company. Hammonds manufactured engineered products and chemicals that serve multiple segments of the fuels distribution, water treatment and utility vehicle industries.




provides the following products and services:




Description of Delta’s Business
 
 Overview
 
 On September 30, 2003, American acquired a 51% interest in Delta Seaboard Well Service, Inc. and a related entity, Seaboard Well Service (collectively "Delta"), both Texas corporations, pursuant to a stock purchase agreement for cash consideration of $1,000,000. American also issued 400,000 shares of Series A 5% cumulative redeemable convertible
preferred stock ("Series A Preferred Stock") to a creditor of Delta in consideration for the release of the creditor’s interest in certain of Delta's coastal rigs and in satisfaction of certain Delta indebtedness.
 
 Delta's Business
 
 Delta's well site services provide a broad range of products and services that are used by oil companies and independent oil and natural gas companies operating in South and East Texas, and the Gulf Coast market. Delta's services include workover services, plugging and abandonment, and well completion and recompletion services. During 2004,
Delta combined its Louisiana operations into its Houston operation and facilities and sold three rigs in Louisiana to third parties. Delta continues to own one land-based rig in Louisiana and five land-based rigs in the Gulf Coast region of Texas.




Well Service Market





Demand for Delta's workover and related services are correlated to the level of expenditures by oil and gas producers, which is a function of oil and gas prices. In general, we expect demand for Delta's services to increase significantly due to expanding activities of oil and gas producers in the United States as a result of the significant
increase in energy prices in the U.S. and worldwide. Delta is dependent to a significant degree on the level of development and workover activities in the U.S. Gulf Coast area. Delta faces competition from many larger companies in the U.S. Gulf of Mexico market.




Products and Services
 
 Delta provides workover products and services primarily to customers in the U.S. Gulf Coast market. Workover products and services are used to restore or increase production on a producing well. Workover services are typically used during the well development, production and abandonment stages. Delta's hydraulic workover units are typically
contracted on a short-term dayrate basis. As a result, utilization of our workover units varies from period to period and the time to complete a particular service contract depends on several factors, including the number of wells and the type of workover or pressure control situations involved. Usage of our workover units is also affected by the availability of trained personnel. With our current level of trained personnel, we estimate that we have the capability to crew and operate multiple jobs simultaneously.
 
 During 2008, Delta had the opportunity to purchase and import new Chinese Seamless Pipe (OCTG) and make it available to our customers who were drilling and completing new wells in the United States.  These pipe sales generated considerable revenues and profit for Delta for the year ended December 31, 2008.


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 5


Competition





Delta believes that it has certain competitive advantages related to cost efficiencies, material coordination, reduced engineering time resulting from its highly experienced staff of toolpushers, field supervisors and operations managers, and its fully integrated operations with cementing and electric wireline operations that include cutting
casing and tubing as part of Delta's services. Delta also believes that with the financial resources as a separate public Company and its access to the public capital markets, Delta will be able to pursue strategic acquisitions and enter into ventures that should result in long-term growth and market expansion.





Delta's services are sold in highly competitive markets. The competition in the oil and gas industry could result in reduced profitability or inability to increase market share. In its markets, principally in South and East Texas, and the Gulf Coast, Delta competes principally with the following entities: Tetra Applied Technologies
and Five J.A.B., as well as a number of smaller companies. The land drilling service business is highly fragmented and consists of a small number of large companies and many smaller companies. Many of Delta's competitors have greater financial resources than Delta. Delta relies upon the Company's ability to provide working capital and secure debt and/or equity financing in order for Delta to continue to expand its oil and gas well services business and pursue its growth plan in land-based exploration and drilling
operations.





We reasonably expect competition to intensify because of the business opportunities presented by the opportunities in the oil and gas industry. In addition, competition may also increase as a result of consolidation. We may be faced with new technological advancements developed by new competitors that change the way the service business
of the oil and gas industry. In addition, some of our current or future competitors may have longer operating histories, larger customer bases and/or greater marketing resources than we have. Increased competition may result in reduced operating margins, loss of market share and diminished value in our products and services, as well as different pricing, service or marketing decisions.


Government Regulation
 
 The business of Delta is significantly affected by federal, state and local laws and regulations relating to the oil and natural gas industry. Changes in these laws and regulations, including more restrictive administrative regulations and enforcement of these laws and regulations, could significantly affect Delta's business and results
of operations. Delta cannot predict future changes in existing laws and regulations or how these changes in laws and regulations may be interpreted or the effect changes in these laws and regulations may have on Delta or its future operations or earnings. Delta cannot predict whether additional laws and regulations will be adopted. Delta depends on the demand for its products and services from oil and natural gas companies. This demand is affected by economic cycles, changing taxes and price and other laws and
regulations relating to the oil and gas industry, including those specifically directed to oilfield and offshore operations. The adoption of new laws and regulations curtailing exploration and development drilling for oil and natural gas in our areas of operation could also adversely affect Delta's operations by limiting demand for its products and services. Delta cannot determine the extent to which its future operations and earnings may be affected by new legislation, new regulations or changes in existing
regulations or enforcement. Although Delta believes that it is in compliance with existing laws and regulations, there can be no assurance that substantial costs for compliance will not be incurred in the future. Moreover, it is possible that other developments, such as the adoption of more restrictive environmental laws, regulations and enforcement policies, could result in additional costs or liabilities that Delta cannot currently quantify.
  Employees
  As of December 31 2009, Delta had 39 employees, including its two executive officers. No employees are covered by a collective bargaining agreement and Delta considers relations with its employees satisfactory.
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 6
 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-K.




This annual report on Form 10-K 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-K.






ITEM1A. RISK FACTORS RELATED TO OUR BUSINESS




Delta’s operations are materially dependent on levels of oil and gas workover and abandonment activities in the United States
 
 Delta's services include workover services, plugging and abandonment, and well completion and recompletion services. Activity levels for Delta’s oil and gas related services businesses are affected both by short-term and long-term trends in oil and gas prices and supply and demand balance, among other factors. Oil and gas prices and,
therefore, the levels of workover and abandonment activities, tend to fluctuate. Demand for Delta's services can vary significantly due to levels of activities of oil and gas producers in the United States which are directly effected by the significant increase in energy prices in the U.S. and worldwide. Delta is dependent to a significant degree on the level of development and workover activities in the U.S. Gulf Coast area.
 
 Any prolonged slowdown of the U.S. economy may contribute to an eventual downward trend in the demand for Delta’s services
 
 Other factors affecting Delta’s oil and gas services business include any decline in production of oil and gas wells in the Texas and Gulf Coast area in which it operates. Delta’s revenues and profitability are particularly dependent upon oil and gas industry activity and spending levels in the Texas and Gulf Coast
region. Delta’s operations may also be affected by interest rates and cost of capital, tax policies and overall economic activity. Adverse changes in any of these other factors may depress the levels of well workover and abandonment and result in a corresponding decline in the demand for Delta’s products and services and, therefore, have a material adverse effect on Delta’s revenues and profitability.
 
 Profitability of Delta’s operations is dependent on numerous factors beyond Delta’s control
 
 Delta’s operating results in general, and gross margin in particular, are functions of market conditions and the product and service mix sold in any period. Other factors impact the cost of sales, such as the price of steel, because approximately 75% of Delta’s oil and gas related revenues is from the sale of new drilling pipe
and used pipe extracted during Delta’s well plugging business. Competition for pipe which is impacted by the US and worldwide cost of and demand for steel, availability of skilled labor and contract services, shortages in raw materials due to untimely supplies or ability to obtain items at reasonable prices may also continue to affect the cost of sales and the fluctuation of gross margin in future periods.
  Delta encounters and expects to continue to encounter intense competition in the sale of Delta’s products and services
 
 Delta competes with numerous companies and its services are sold in highly competitive markets. The competition in the oil and gas industry could result in reduced profitability or inability to increase market share. In its markets, principally in South and East Texas, and the Gulf Coast, Delta competes principally with the following
entities: Tetra Applied Technologies, Key Energy Services, Basic Energy, which are far larger than Delta, as well as a number of smaller companies. The land drilling service business is highly fragmented and consists of a small number of large companies and many smaller companies. Many of Delta's competitors have greater financial resources than Delta. Many of Delta’s competitors have substantially greater financial and other related resources than us.
 
 Dependence upon major customers for Delta’s workover products and services
 
 Delta provides workover products and services primarily to customers in the U.S. Gulf Coast market. Workover products and services are used to restore or increase production on a producing well. Workover services are typically used during the well development, production and abandonment stages. Delta's hydraulic workover units are typically
contracted on a short-term dayrate basis. As a result, utilization of Delta’s workover units varies from period to period and the time to complete a particular service contract depends on several factors, including the number of wells and the type of workover or pressure control situations involved. In 2009, Delta’s largest customers for workover services were Legend Natural Gas, New Century Exploration, Newfield Exploration, The Railroad Commission of Texas and Square Mile Energy.
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7
 Delta’s revenues and cash flows from pipe sales are subject to commodity price risk
 Approximately 75% of Delta’s oil and gas related revenues is from the sale of pipe; therefore, Delta has increased market risk exposure in the pricing applicable to the costs of steel. Realized pricing is primarily driven by the prevailing worldwide price and demand for steel. The cost of steel has been increasing significantly due
to increased world demand generally and from China and India specifically.
 
 Delta’s business involves certain operating risks, and its insurance may not be adequate to cover all losses or liabilities Delta might incur in its operations
 
 Delta’s operations are subject to many hazards and risks, including the following:
 -  fires and explosions;
 -  accidents resulting in serious bodily injury and the loss of life or property;
 -  pollution and other damage to the environment; and
 -  liabilities from accidents or damage by our fleet of trucks, rigs and other equipment.
 
 If these hazards occur, they could result in suspension of operations, damage to or destruction of our equipment and the property of others, or injury or death to our or a third party's personnel.
 
 Risks related to government regulation
 
 Delta’s business is significantly affected by federal, state and local laws and regulations relating to the oil and natural gas industry. Changes in these laws and regulations, including more restrictive administrative regulations and stricter enforcement of these laws and regulations, could significantly affect Delta's business and
results of operations. Delta cannot predict future changes in existing laws and regulations or how these laws and regulations may be interpreted or the effect changes in these laws and regulations may have on Delta or its future operations and profitability. Delta cannot predict whether additional laws and regulations will be adopted. The adoption of new laws and regulations curtailing exploration and development drilling for oil and natural gas in Delta’s areas of operation could also materially adversely
affect Delta's operations by limiting demand for its products and services.
 
 Delta’s workover products and services are subject to and affected by various types of government regulation, including numerous federal and state environmental protection laws and regulations. These laws and regulations are becoming increasingly complex and stringent. Governmental authorities have the power to enforce compliance
with these regulations, and violators are subject to civil and criminal penalties, including civil fines, injunctions, or both. Third parties may also have the right to pursue legal actions to enforce compliance. It is possible that increasingly strict environmental laws, regulations and enforcement policies could result in substantial costs and liabilities to Delta and could subject its operations to increased scrutiny.
  Delta May Be Unable To Achieve Profitability 
 Delta incurred a net loss of $1,296,628 during the year ended December 31, 2009 and net income of $117,809 for the year ended December 31, 2008. As of December 31, 2009, Delta's accumulated deficit was $943,285. Delta may continue to incur significant expenditures as we believe Delta will continue to grow and expand to develop
new products and services. As a result, Delta will need to generate significant additional revenue to achieve profitability. Delta may not be able to achieve significant revenue growth in the future. Delta's operating results for future periods are subject to numerous uncertainties and Delta may not achieve sufficient revenue to sustain profitability.
  Our Quarterly Revenues May Fluctuate Significantly, Our Capital Expenditures Are Based on Estimated Future Revenues, Revenue Shortfall Would Have an Adverse Impact on Our Operating Results.
 
 Because the market we operate and compete in is volatile and rapidly evolving, our future revenue is difficult to forecast. Further, our expense levels are based largely on our expansion plan and estimates of future revenue. We may be unable to adjust our spending to compensate for an unexpected shortfall in revenue. Accordingly, any
significant shortfall in revenue relative to our planned expenditures in a particular quarter would harm our results of operations and could lead our stock price to fall sharply, particularly following quarters in which our operating results fail to meet expectations.
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8
 Factors that may cause fluctuations in our revenues or operating results on a quarterly basis include the following, some of which are beyond our control:
  ·the amount and timing of operating costs and capital expenditures related to the expansion of our business;
 ·the impact on our renewal rates caused by our customers’ financial restrictions or a perceived lack of need for our product and services;
 ·changes in demand for our products and services due to the announcement or introduction of new products and services or the cancellation of existing products and services by us or
our competitors;
 ·changes in the pricing of our products and services in light of the services and pricing offered by our competitors;
 ·the impact of possible acquisitions or equity investments both on our operations and on our reported operating results due to associated accounting charges; and
 ·technical difficulties or service interruptions that significantly harm our ability to deliver our products and services on schedule.
  We May Not Be Able to Hire and Retain Qualified Personnel
  Our future success depends in large part on our ability to attract, retain and motivate highly skilled employees. Although we believe we provide compensation packages that include competitive salaries, bonus incentives and other employee benefits, we may be unable to retain our key employees or to attract and retain other highly
qualified employees in the future. If we are unable to attract or retain key employees, our business would suffer.
  We Cannot Predict Our Future Capital Needs And We May Not Be Able To Secure Additional Financing.
  We believe that the cash we have on hand will not be sufficient to meet our presently anticipated working capital and capital expenditure requirements for existing operations for the next twelve months, however our belief is based on our operating plan which in turn is based on assumptions, which may prove to be incorrect. As a result,
our financial resources may not be sufficient to satisfy our capital requirements for this period.
  Further, we may require additional working capital to support our operations. We expect to raise any required additional funds through public or private equity offerings, debt financings, corporate collaborations, governmental research grants may in some cases be available to us. We may also seek to raise additional capital to fund additional
products and services, even if we have sufficient funds for our planned operations.
  There can be no assurance that any such required additional funding will be available to us at all or available on terms acceptable to us. Further, we currently have no credit facility or similar financing currently available. And any debt financing, if available, may involve restrictive covenants, which may limit our operating flexibility
with respect to certain business matters. If additional funds are raised through the issuance of equity securities, the percentage ownership of our existing stockholders will be reduced and our stockholders will experience additional dilution in net tangible book value per share. If adequate funds are not available on acceptable terms, we may be unable to successfully market our products and services, take advantage of future opportunities, repay debt obligations as they become due or respond to competitive pressures,
any and all of which would have an adverse effect on our business.
  We May Not Be Able to Adapt to Trends In our Industry  We may not be able to adapt our product and services as customer demand or preferences evolves; whether attributable to regulatory constraints, mismanagement or a lack of financial resources or, our failure to respond in a timely manner; to new technologies, customer preferences, changing market conditions or new developments in our industry.
Any of the failures to adapt or inabilities described herein or otherwise would have a material adverse effect on our business, prospects, financial condition and results of operations.

We may Encounter Difficulties in Managing Our Growth, Which Would Adversely Affect Our Results of Operations.

If we are successful in growing our business we will need to significantly expand our operations, which could put significant strain on our management and our operational and financial resources. To manage future growth, we will need to hire, train, and manage additional employees. We may not be able to support, financially or otherwise,
future growth, or hire, train, motivate, and manage the required personnel. Our failure to manage growth effectively could limit our ability to achieve our goals.

Our success in managing our growth will depend in part on the ability of our executive officers to continue to implement and improve our operational, management, information and financial control systems and to expand, train and manage our employee base, and particularly to attract, expand, train, manage and retain a sales force to market
our products on acceptable terms. Our inability to manage growth effectively could cause our operating costs to grow at a faster pace than we currently anticipate, and could have a material adverse effect on our business, financial condition, results of operations and prospects.
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9


RISK FACTORS RELATED TO MARKET OF OUR COMMON STOCK


The Company's officers and directors own 93.6% of issued shares of Common Stock, a controlling interest in the Company, and thus may influence certain actions requiring stockholder vote.
  Pursuant to the Agreement, former members of the Company’s board of directors resigned and five (5) persons designated by American and Delta were appointed as the new board of directors of the Company, which resulted in the change in control of the Company. Pursuant to the Schedule 14C Information Statement and the joint consent of
the Company’s board of directors and holders of a majority of the Company’s presently issued and outstanding shares of Common Stock, all of the newly-appointed directors will continue in office at least until the next shareholder meeting is called by the current board of directors. If there is an annual meeting, as a consequence of the controlling interest of the Company's management, it has broad discretion regarding proposals submitted to a vote by shareholders. Accordingly, the Company's existing
directors will continue to exert substantial control.
  Your Percentage Ownership of our Common Shares will be Diluted by Future Share Issuances
  Our 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. At December 31, 2009, we had 5,031,326 shares of common stock issued and 3,769,626 shares of preferred stock issued.  In February 2010, we issued 53,110,925
shares of common stock in connection with the reverse merger with Delta. We may issue additional shares of common stock in connection with any future acquisitions of operating businesses or assets or to raise additional funding for our operations. 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.

If the 833,333 shares of Series A Preferred Stock, 833,333 shares of Series B Preferred Stock, and 2,102,960 of Series C Preferred Stock issued to VOMF are converted into shares of common, we would be required to issue an additional 3,769,626 shares of common stock.


In addition to the issuance of post-reverse shares to American and Delta’s noncontrolling shareholders, to the extent we issue new shares to fund acquisitions, to raise additional capital, to compensate employees and other persons your percentage ownership of our shares will be further diluted.




We Do Not Intend To Pay Future Cash Dividends.




We currently do not anticipate paying cash dividends on our Common Stock at any time in the near future. We may never pay cash dividends or distributions on our Common Stock. Any credit agreements which we may enter into with institutional lenders may restrict our ability to pay dividends. Whether we pay cash dividends in the future will
be at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements and any other factors that the board of directors decides is relevant.




Our Common Stock is Illiquid And Should A Market For Our Securities Develop The Price Of Our Securities May Be Volatile.




Our Common Stock is currently subject to quotation on the Pinksheets and the trading market for our securities may likely remain illiquid. This means that as an investor you will likely have a difficult time selling our Common Stock at market. Furthermore because of the small amount of shares that will represent the public float, and notwithstanding
the Reverse Split of our shares, the market price of our Common Stock may experience significant volatility. Other factors that may contribute to volatility should a market for our Common Stock develop are, our quarterly results, announcements by us or our competitors regarding acquisitions or dispositions, loss of existing clients, new procedures or technology, litigation, changes in general conditions in the economy and general market conditions could cause the market price of the Common Stock to fluctuate
substantially. In addition, the stock market has experienced significant price and volume fluctuations that have particularly affected the trading prices of equity securities of many companies. Frequently, these price and volume fluctuations have been unrelated to the operating performance of the affected companies.


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10


Future Sales Of Our Common Stock May Depress Our Stock Price. 
 If our controlling stockholders sell substantial amounts of our Common Stock in the public market following this Reverse Merger or at any time in the future, the market price of our Common Stock could fall. Existing non-affiliate Shareholders, following the implementation of the Reverse Split, will beneficially hold approximately 4,357,962
shares of Common Stock of which approximately 2,657,962 shares are in the public float and are eligible to be sold free of any restrictions. All other shares are “restricted” as defined in Rule 144 under the Securities Act (“Rule 144”). Since the Company has previously been designated a shell company , the restricted shares issued during the Company’s status as shell Company must be held for one year from the date of this filing prior to being eligible to be sold pursuant
to Rule 144. The Company can make no prediction as to the effect, if any, that sale of shares, or the availability of shares for future sale, will have on the market price of the shares prevailing from time to time. Sales of substantial amounts of shares in the public market, or the perception that such sales could occur, could depress prevailing market prices for the shares. Such sales may also make it more difficult for the Company to sell equity securities or equity-related securities in the future at
a time and price which it deems appropriate.
 
 Broker-Dealers may be discouraged from effecting transactions in our Common Stock because they may be considered a “Penny Stock” and are subject to the applicable Penny Stock rules.
 
 Rules 15g-1 through 15g-9 promulgated under the Exchange Act impose sales practice and disclosure requirements on certain brokers-dealers who engage in certain transactions involving a “penny stock.” Subject to certain exceptions, a penny stock generally includes any non-NASDAQ equity security that has a market price of
less than $5.00 per share. There is currently no established price quotation for our shares, however, we expect that initial quotations will not exceed $5.00 and there is the possibility that the quoted shares price may never exceed $5.00, and that our Common Stock will be deemed penny stock for the purposes of the Exchange Act. The additional sales practice and disclosure requirements imposed upon brokers-dealers may discourage broker-dealers from effecting transactions in our Common Stock, which could severely
limit the market liquidity of the stock and impede the sale of our stock in the secondary market. Specifically, any broker-dealer selling penny stock to anyone other than an established customer or “accredited investor,” generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding $200,000, or $300,000 together with his or her spouse, must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction
prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the penny stock regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the United States Securities and Exchange Commission relating to the penny stock market, unless the broker-dealer or the transaction is otherwise exempt. A broker-dealer is also required to disclose commissions payable to the broker-dealer and the registered representative
and current quotations for the securities. Finally, a broker-dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer’s account and information with respect to the limited market in penny stocks.


ITEM1B. UNRESOLVED STAFF COMMENTS








ITEM2. DESCRIPTION OF PROPERTIES




Hammonds had no facilities at December 31, 2009.  Delta's facilities consist of 2,500 square feet of office space and 10,000 square feet of warehouse located in Houston, TX. These facilities were formerly leased by Delta and were acquired by Delta in
2005 from a third party for $850,000. In 2006, these facilities were acquired by American (51%) and Delta's executive officers and owners of the noncontrolling interest of Delta (49%). During 2004, Delta consolidated its Louisiana operations and offices into its Houston facilities to create operating efficiencies. Delta has retained a 5,000 square foot office and warehouse facility in Louisiana which is leased from a third party at an annual rental of $18,000.




ITEM3. LEGAL PROCEEDINGS




Hammonds' officers and directors are not aware of any threatened or pending litigation to which we are a party or which any of our property is the subject and which would have any material, adverse effect on Hammonds.




ITEM4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS




During the year ended December 31, 2009, no matters were submitted to a vote of our security holders.


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 11
 PART II






ITEM5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES




Market Information




Our common stock is subject to quotation on the pink sheets. There has only been limited trading activity in our common stock.  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.For the periods indicated, the following table sets forth the high and low bid prices per share of common stock. The below prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.  The below prices have not been adjusted to reflect the 1 for
10 reverse stock split, resulting from the reverse merger of Delta into Hammonds.


Fiscal 2009


Fiscal 2008High


Low


High


LowFirst Quarter ended March 31


$
0.20


$
0.01


$
0.51


$
0.30Second Quarter ended June 30


$
0.01


$
0.00


$
0.50


$
0.22Third Quarter ended September 30


$
0.04


$
0.01


$
0.43


$
0.15Fourth Quarter ended December 31


$
0.51


$
0.00


$
0.30


$
0.15




As of December 31, 2009, our shares of common stock were held by approximately 400 stockholders of record. The transfer agent for 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 our 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. However, the 2006 Private Financing Transactions with VOMF provide that no cash dividends may be paid on our common stock unless and until all accrued dividends on the Series A and Series B Preferred Stock have been paid.
  Securities Authorized for Issuance Under Equity Compensation Plans
  None.
  Sale of Unregistered Securities
  During 2008, the Company issued 14,000 shares of restricted stock valued at $51,283 as stock based compensation to Daniel Dror for his services as Chairman and CEO.
  On June 20, 2008, the Company issued 5,000 shares of restricted stock valued at $11,000 as a director’s fee to John W. Stump III.
  On November 10, 2008, the Company issued 10,000 shares of restricted stock to both American International Industries, Inc. and Vision Opportunity Fund Limited valued at $58,000 as additional consideration for bridge loans provided to the Company.
 
 The Company believes that the issuances of these restricted shares were 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.
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 12
 Issuer purchases of equity securities
  The following table provides information with respect to purchases made by or on behalf of the Corporation or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of the Corporation’s common stock during the fourth quarter of 2009.


MaximumNumber of SharesTotal Number of


That May Yet BeShares Purchased


Purchased UnderTotal Number of


Average Price


as Part of Publicly


the Plans at thePeriod

Shares Purchased


Paid Per Share


Announced Plans


End of the PeriodOctober 1, 2009 to October 31, 2009


-


$
-



-



-November 1, 2009 to November 30, 2009


-



-



-



-December 1, 2009 to December 31, 2009


-



-



-



--


$
-



-



-




ITEM6. SELECTED FINANCIAL DATA




Not required.


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 13


ITEM7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION




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" of this annual report.




General




In 2005, the Company, through its parent company, acquired 51% of the capital stock of Hammonds Technical Services, Inc. Hammonds Technical Services, Inc. and Hammonds Fuel Additives, Inc. were separate privately-owned Texas companies. In connection with the 2005 acquisition by the Company, Hammonds Fuel Additives was
merged into Hammonds Technical Services. In April 2005 and January 2006, respectively, Hammonds Fuel Additives and Hammonds Water Treatment Systems, respectively, were reincorporated as separate entities from Hammonds Technical Services, and all three entities are wholly-owned subsidiaries of the Company. On August 1, 2006, the Company acquired the 49% minority interest of Hammonds Technical Services, Inc., Hammonds Fuel Additives, Inc., and Hammonds Water Treatment Systems, Inc. in consideration for the issuance
to Carl Hammonds of 1,600,000 restricted shares of common stock, valued at a price of $2.50 per share, the price of the Company's common stock at the date of the transaction.


Prior to the year ended December 31, 2008, in accordance with FIN 46(R) (ASC 810-10), American International Industries, Inc. (American), consolidated Hammonds, even though its ownership was less than 51%, because American appointed the members of Hammonds’ board of directors. Since Hammonds was incurring losses and the minority interest
had no recorded common stock equity value, American recognized 100% of Hammonds’ losses.
 On December 31, 2008, the board of directors of American approved the deconsolidation of Hammonds from American. To effect the deconsolidation of Hammonds, American was required to reduce its ownership percentage, board membership, and guarantee of Hammonds’ debt. After the distribution of the special dividend of approximately 1.74
million shares of Hammonds’ common stock to American's shareholders of record on December 31, 2008, American's ownership is approximately 13% of Hammonds' issued and outstanding common stock. Effective December 31, 2008, Carl Hammonds was appointed Chairman and CEO and John Stump, III was appointed CFO. Hammonds accepted the resignations of Daniel Dror, as Chairman of the Board and CEO, Sherry L. Couturier, as Director, CFO and Vice President, and Charles R. Zeller, as Director, and appointed
Richard C. Richardson as a new board member unrelated to American. As a result, the majority of Hammonds’ board of directors is no longer controlled by American. Additionally, a reduction of American's guarantee of Hammonds’ debt to $1,000,000 was obtained from Texas Community Bank.
  On April 16, 2009, Hammonds entered into an Asset Purchase Agreement with FabCorp, Inc., a Houston-based manufacturing company, pursuant to which Hammonds sold all of its assets, including all of the shares of its operating  wholly-owned subsidiaries, Hammonds Fuel Additives, Inc., Hammonds Technical Services, Inc., Hammonds Water
Treatment Systems, Inc. and Hammonds ODV, Inc. (collectively, the “Operating Subsidiaries”) to a newly formed Texas company, Hammonds Technologies, LLC., a wholly owned subsidiary of FabCorp, Inc.
  The transaction was authorized and approved pursuant to the provisions of the Nevada Revised Statutes by the Joint Written Consent of the Board of Directors and the Majority Stockholders of Hammonds.
 
 The Board of Directors decision to enter into the Asset Purchase Agreement was based upon the following reasons, among others: the poor business outlook for the Operating Subsidiaries because of Hammonds’ inability to raise sufficient capital, either through equity or debt financing to continue its operations and grow the businesses
of the Operating Subsidiaries; the weak financial viability of the Operating Subsidiaries without a substantial infusion of capital; that at December 31, 2008, Hammonds total current liabilities were about $6.9 million compared to current assets of about $2.8 million and total liabilities were about $7.3 million or about $460,000 more than  total assets (all amounts unaudited); for more than the past year, Hammonds’ management had been actively seeking financing, either through equity or debt,
necessary to support ongoing operations and to that end had retained investment banking consultants pursuing several possible financing opportunities, but none of these efforts were successful and no additional financing was raised; the ongoing  upheaval in the credit and investment environment; and the determination by Hammonds management that it would be unable to continue as a “going concern.”
 
 Pursuant to the Asset Purchase Agreement, FabCorp purchased all of the assets,  free and clear of all liens and other encumbrances, in consideration for the payment of liabilities of Hammonds to Texas Community Bank in the amount of $2.6 million, payment of the senior promissory bridge note of $250,000 to Hammonds’
institutional investor, Vision Opportunity Master Fund, Ltd., the assumption of all payables and liabilities of the Operating Subsidiaries of approximately $2.6 million and the commitment to provide continuing financial support for the Operating Subsidiaries.
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 14
 Based upon the foregoing, Hammonds’ Board of Directors determined that is was in the best interests of Hammonds and its shareholders that Hammonds enter into the Asset Purchase Agreement, so that Hammonds could pursue other business opportunities through a merger, acquisition or other business combination with an operating entity.  On August
13, 2009, Hammonds, American, Delta Seaboard Well Service, Inc. (Delta), American's 51% owned subsidiary, and the minority interest owners of Delta entered into an agreement to commence a reverse merger of Delta into Hammonds.
 The Company received approximately $5.4 million from the 2006 and 2007 VOMF Private Financing Transactions (See the discussion under "2006 Private Financing Transactions" and "2007 Private Financing Transactions" in “ITEM 1. DESCRIPTION OF BUSINESS”).




RESULTS OF OPERATIONS


YEAR ENDED DECEMBER 31, 2009 VERSUS YEAR ENDED DECEMBER 31, 2008




Revenue.  We had no revenue from continuing operations for the years ended December 31, 2009 and 2008.
 
 Selling and Administrative. Selling and administrative expenses for the year ended December 31, 2009 were $92,612, compared to $159,034 for the same period in 2008.  Selling and administrative expenses for the year ended December 31, 2008 included stock-based compensation
of $125,298.
 
 Operating Income / losses. Our operating loss for the year ended December 31, 2009 was $92,612, compared to $159,034 for the same period in 2008.
 
 Total Other Expenses. Other expenses for the year ended December 31, 2009 were $37,855, compared to $150,036 for the same period in 2008.  Other expenses for the year ended December 31, 2008 included net realized and unrealized losses on trading securities of $28,314 (see note 3
to the financial statements).  Interest expense for the year ended December 31, 2009 was $37,855, compared to $126,392 for the same period in 2008.
 
 Net income / loss. We had a net loss from continuing operations of $130,467, or $0.03 per share, and preferred dividends of $240,000, or $0.05 per share, resulting in a net loss of $0.08 per common share from continuing operations for the year ended December 31, 2009, compared
to a net loss of $309,070, or $0.06 per share, and preferred dividends of $225,000, or $0.05 per share, resulting in a net loss of $0.11 per common share from continuing operations for the same period in 2008. We had a net loss from discontinued operations of $712,033, or $0.14 per share, and $5,850,888, or $1.17 per share, for the year ended December 31, 2009 and December 31, 2008, respectively.  We had a net loss of $842,500, or $0.17 per share, and preferred dividends
of $240,000, or $0.05 per share, resulting in a net loss of $0.22 per common share for the year ended December 31, 2009, compared to a net loss of $6,159,958, or $1.23 per share, and preferred dividends of $225,000, or $0.05 per share, resulting in a net loss of $1.28 per common share for the year ended December 31, 2008.
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 15


LIQUIDITY AND CAPITAL RESOURCES




At December 31, 2009 and 2008, we had total assets of $0 and $6,966,017, respectively.  Assets from continuing operations at December 31, 2009 and 2008 were $0 and $8,395, respectively.  Assets from discontinued operations at December 31, 2008 were $6,957,622.

Net cash used in continuing operations was $395 during the year ended December 31, 2009, compared to $76,470 during the same period in 2008.  The cash used during the year ended December 31, 2008 was primarily for selling and administrative expenses.

Net cash used by investing activities was $793,000 during the year ended December 31, 2008. The cash used during the year ended December 31, 2008 was from the investment in subsidiaries.


Off-Balance Sheet Arrangements




As of December 31, 2009, 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.




New Accounting Pronouncements




In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“SFAS 168” or ASC 105-10). SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by
all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009, and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact American’s results of operations or financial condition. The Codification did not change GAAP; however, it did change the way GAAP is organized and presented.
As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. American implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards. Contractual Obligations and Commitments




None.




Critical Accounting Estimates




Our significant accounting policies are described in Note 1 to our financial statements for the year ended December 31, 2009. The following supplements the description of our accounting policies as described in the notes to our financial statements.




ITEM7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not applicable.





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 16




ITEM8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




Management’s Annual Report on Internal Control Over Financial Reporting
18Report of Independent Registered Public Accounting Firm
19Financial Statements:Balance Sheets - December 31, 2009 and 2008
20Statements of Operations - Years Ended December 31, 2009 and 2008
21Statements of Changes in Stockholders' Equity - Years Ended December 31, 2009 and 2008
22Statements of Cash Flows - Years Ended December 31, 2009 and 2008
23Notes to Financial Statements
24






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 17


MANAGEMENT’SANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL


REPORTING




Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined by SEC rules adopted under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It consists of policies and procedures that:




•
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;•
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and•
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.




Under the supervision and with the participation of management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), we made an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2009, in connection with the audit of the Company's financial
statements. In making this assessment, we used the criteria established in Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation, we concluded that our internal control over financial reporting was effective as of December 31, 2009.


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 18


REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Shareholders
Hammonds Industries, Inc.
Houston, Texas

We have audited the accompanying balance sheets of Hammonds Industries, Inc. as of December 31, 2009 and 2008 and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years then ended. 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 audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. 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 audits provide 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 Hammonds Industries, Inc. as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the
United States of America.


/s/ GBH CPAs, PC

GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
April 13, 2010




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 19




HAMMONDS INDUSTRIES, INC.Balance Sheets


December 31, 2009


December 31, 2008AssetsCurrent assets:Cash

$
-


$
395Current assets from discontinued operations


-



2,895,000Total current assets


-



2,895,395Other assets


-



8,000Long-term assets from discontinued operations


-



4,062,622Total assets

$
-


$
6,966,017Liabilities and Stockholders' DeficitCurrent liabilities:Accounts payable and accrued expenses

$
709,551


$
348,004Short-term notes payable - related parties


802,063



802,063Current liabilities from discontinued operations


-



5,657,699Total current liabilities


1,511,614



6,807,766Long-term liabilities from discontinued operations


-



587,365Total liabilities


1,511,614



7,395,131Commitments and contingencies


-



-Stockholders' deficit:Preferred stock, $0.0001 par value, authorized 5,000,000 shares:3,769,626 issued and outstanding

$
377


$
377Additional paid-in capital - preferred stock


4,811,573



4,811,573Additional paid-in capital - beneficial conversion feature


3,272,060



3,272,060Common stock, $0.0001 par value, authorized 195,000,000 shares:5,031,326 issued and outstanding


503



503Additional paid-in capital - common stock


7,668,025



7,668,025Accumulated deficit


(17,264,152
)


(16,181,652
)Total stockholders' deficit


(1,511,614
)


(429,114
)Total liabilities and stockholders' deficit

$
-


$
6,966,017The accompanying notes are an integral part of these financial statements.




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HAMMONDS INDUSTRIES, INC.Statements of Operations


Years Ended December 31,2009


2008Revenues

$
-


$
-Costs and expenses:Cost of sales


-



-Selling, general and administrative


92,612



159,034Total operating expenses


92,612



159,034Operating loss


(92,612
)


(159,034
)Other income (expenses):Interest income


-



4,670Interest expense


(37,855
)


(126,392
)Realized loss on trading securities


-



(100,000
)Unrealized gain on trading securities


-



71,686Total other expenses


(37,855
)


(150,036
)Loss before income tax


(130,467
)


(309,070
)Income tax expense


-



-Loss from continuing operations, net of income taxes


(130,467
)


(309,070
)Loss from discontinued operations, net of income taxes


(712,033
)


(5,850,888
)Net loss

$
(842,500
)

$
(6,159,958
)Preferred dividends:Regular dividends


(240,000
)


(225,000
)Net loss applicable to common shareholders

$
(1,082,500
)

$
(6,384,958
)Net loss per common share - basic and dilutedContinuing operations

$
(0.08
)

$
(0.11
)Discontinued operations


(0.14
)


(1.17
)Total


(0.22
)


(1.28
)Weighted average common shares - basic and diluted


5,031,326



4,996,304


The accompanying notes are an integral part of these financial statements.


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HAMMONDS INDUSTRIES, INC.Statement of Changes in Stockholders’ Equity (Deficit)Years Ended December 31, 2009 and 2008


Preferred Stock


Common StockShares


Amount


AdditionalPaid-in Capital


Shares


Amount


AdditionalPaid-in Capital


AccumulatedDeficit


Total
Stockholders’ EquityBalance, December 31, 2007


3,769,626


$
377


$
8,083,633



4,974,826


$
497


$
7,484,733


$
(9,796,694
)

$
5,772,546Issuance of common stock for services


-



-



-



36,500



4



125,294



-



125,298Issuance of common stock for payment of debt


-



-



-



20,000



2



57,998



-



58,000Regular preferred dividends


-



-



-



-



-



-



(225,000
)


(225,000
)Net loss from continuing operations


























(309,070
)


(309,070
)Net loss from discontinued operations


-



-



-



-



-



-



(5,850,888
)


(5,850,888
)Balance, December 31, 2008


3,769,626



377



8,083,633



5,031,326



503



7,668,025



(16,181,652
)


(429,114
)Regular preferred dividends


-



-



-



-



-



-



(240,000
)


(240,000
)Net loss from continuing operations


-



-



-



-



-



-



(130,467
)


(130,467
)Net loss from discontinued operations


-



-



-



-



-



-



(712,033
)


(712,033
)Balance, December 31, 2009


3,769,626


$
377


$
8,083,633



5,031,326


$
503


$
7,668,025


$
(17,264,152
)

$
(1,511,614
)


The accompanying notes are an integral part of these financial statements.


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 22


HAMMONDS INDUSTRIES, INC.Statements of Cash Flows 
 Years Ended December 31,2009


2008Cash flows from operating activities:Net loss

$
(842,500
)

$
(6,159,958
)Loss from discontinued operations


712,033



5,850,888Loss from continuing operations


(130,467
)


(309,070
)Adjustments to reconcile net loss to net cash used in operating activities:Realized loss on trading securities


-



100,000Unrealized gain on trading securities


-



(71,686
)Share-based compensation


-



125,298Amortization of debt discount


-



58,000Change in operating assets and liabilities:Prepaid expenses


-



(8,000
)Accounts payable and accrued expenses


130,072



28,988Net cash used in operating activities


(395
)


(76,470
)Cash flows from investing activities:Investment in Hammonds' Discontinued Subsidiaries


-



(793,000
)Net cash used in investing activities


-



(793,000
)Net decrease in cash and cash equivalents

$
(395
)

$
(869,470
)Cash and cash equivalents at beginning of year


395



869,865Cash and cash equivalents at end of year

$
-


$
395Discontinued operations:Net cash used in operating activities

$
(254,536
)

$
(1,199,122
)Net cash used in investing activities


(14,960
)


(323,101
)Net cash provided by (used in) financing activities


(33,884
)


1,098,107Net decrease in cash and cash equivalents


(303,380
)


(424,116
)Cash and cash equivalents at beginning of year


303,380



727,496Cash and cash equivalents at end of year

$
-


$
303,380Supplemental schedule of cash flow information:Interest paid

$
44,359


$
298,382Taxes paid

$
-


$
12,785Non-cash transactions:Acquisition of fixed assets under capital lease obligations

$
-


$
203,515Accrued debt discount for common shares to be issued

$
-


$
58,000The accompanying notes are an integral part of these financial statements.




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 23


HAMMONDS INDUSTRIES, INC.


Notesto Financial Statements




Note 1 - Summary of Significant Accounting Policies




Certain reclassifications have been made to amounts in prior periods to conform with the current period presentation. All reclassifications have been applied consistently to the periods presented.


Organization, Ownership and Business


In 2005, Hammonds Industries, Inc. ("Hammonds"), through its parent company, acquired 51% of the capital stock of Hammonds Technical Services, Inc. Hammonds Technical Services, Inc. and Hammonds Fuel Additives, Inc. were separate privately-owned Texas companies. In connection with the 2005 acquisition by Hammonds, Hammonds Fuel Additives
was merged into Hammonds Technical Services. In April 2005 and January 2006, respectively, Hammonds Fuel Additives and Hammonds Water Treatment Systems, respectively, were reincorporated as separate entities from Hammonds Technical Services, and all three entities are wholly-owned subsidiaries of Hammonds. On August 1, 2006, Hammonds acquired the 49% minority interest of Hammonds Technical Services, Inc., Hammonds Fuel Additives, Inc., and Hammonds Water Treatment Systems, Inc. in consideration for the issuance
of 1,600,000 restricted shares of common stock, valued at a price of $2.50 per share, the price of Hammonds' common stock at the date of the transaction. As a result of this transaction, Hammonds owns 100% of each of the Hammonds subsidiaries.
  Prior to the year ended December 31, 2008, in accordance with FIN 46(R) (ASC 810-10), American International Industries, Inc. (American), consolidated Hammonds, even though its ownership was less than 51%, because American appointed the members of Hammonds’ board of directors. Since Hammonds was incurring losses and the minority interest
had no recorded common stock equity value, American recognized 100% of Hammonds’ losses.
 On December 31, 2008, the board of directors of American approved the deconsolidation of Hammonds from American. To effect the deconsolidation of Hammonds, American was required to reduce its ownership percentage, board membership, and guarantee of Hammonds’ debt. After the distribution of the special dividend of approximately 1.74
million shares of Hammonds’ common stock to American's shareholders of record on December 31, 2008, American's ownership is approximately 13% of Hammonds' issued and outstanding common stock. Effective December 31, 2008, Carl Hammonds was appointed Chairman and CEO and John Stump, III was appointed CFO. Hammonds accepted the resignations of Daniel Dror, as Chairman of the Board and CEO, Sherry L. Couturier, as Director, CFO and Vice President, and Charles R. Zeller, as Director, and appointed
Richard C. Richardson as a new board member unrelated to American. As a result, the majority of Hammonds’ board of directors is no longer controlled by American. Additionally, a reduction of American's guarantee of Hammonds’ debt to $1,000,000 was obtained from Texas Community Bank.
  On April 16, 2009, Hammonds entered into an Asset Purchase Agreement with FabCorp, Inc., a Houston-based manufacturing company, pursuant to which Hammonds sold all of its assets, including all of the shares of its operating  wholly-owned subsidiaries, Hammonds Fuel Additives, Inc., Hammonds Technical Services, Inc., Hammonds Water
Treatment Systems, Inc. and Hammonds ODV, Inc. (collectively, the “Operating Subsidiaries”) to a newly formed Texas company, Hammonds Technologies, LLC., a wholly owned subsidiary of FabCorp, Inc.
  On February 3, 2010, the Company and Delta completed the reverse merger pursuant to which Delta was merged with and into Hammonds. In connection with the Reverse Merger of Delta into Hammonds, following the effective date of the Reverse Split, the Company issued shares
of Common Stock to the existing stockholders of Delta as follows: (i) 22,186,572 post-Reverse Split shares in consideration for American’s 51% equity ownership of Delta, and 10,000,000 post-Reverse Split shares in consideration for American converting $872,353 in principal and accrued interest of debt payable by the Company to American; (ii) a total of 21,316,510 shares to Robert W. Derrick, Jr., a newly appointed director of the Company as well as Delta’s president and a director of American
and Ron Burleigh, a newly-appointed director of the Company as well as Delta’s vice president, in consideration for their 49% equity ownership of Delta; and (iii) 9,607,843 post-Reverse Split shares in consideration for Messrs. Derrick and Burleigh extending their employment agreements for five years in addition to the balance of their current employment agreements. Following the Reverse Split and Reverse Merger, American owns 32,859,935 shares of Common Stock, representing 48.2% of the Company’s
total outstanding shares and Messrs. Derrick and Burleigh, the owners of the noncontrolling interest in Delta, own 30,924,353 shares of Common Stock, representing 45.4% of the Company’s total outstanding shares. All other stockholders of the Company own 4,357,962 shares of Common Stock, representing 6.4% of the Company’s total 68,142,250 outstanding shares.  All common share amounts have been retroactively adjusted to reflect the reverse stock split.


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 24


2006 Private Financing Transactions


On August 8, 2006,  Hammonds entered into a stock purchase agreement with Vision Opportunity Fund Limited ("VOMF"), an institutional investor, pursuant to which Hammonds sold VOMF 833,333 shares of Series A Convertible Preferred Stock for $1,500,000 and issued a Series A Warrant exercisable for a period of 5 years to purchase
833,333 shares of Hammonds’s common stock at $1.80 per share and a Series B Warrant exercisable for a period of 2 years to purchase an additional 833,333 shares of Hammonds’s common stock at $1.80 per share.




On September 29, 2006, Hammonds entered into another stock purchase agreement with VOMF pursuant to which Hammonds sold 833,333 shares of Series B Convertible Preferred Stock for $1,500,000 and issued a Series C Warrant exercisable for a period of 5 years to purchase 833,333 shares of Hammonds’s common stock at $5.00 per share.




The stock purchase agreements in the 2006 Private Financing Transactions provide that each share of Series A and Series B Convertible Preferred Stock is convertible into 1 share of Hammonds' common stock.





2007 Private Financing Transactions


In connection with the agreement of VOMF to exercise up to 400,000 Series C Warrants in March 2007, Hammonds reduced the exercise price of the Series C Warrants from $5.00 per share to $1.80 per share through December 31, 2007, following which the exercise price reverts to $5.00 per share. On March 27, 2007, VOMF exercised 397,040 Series
C Warrants at a price of $1.80 per share with net proceeds of $694,672 to Hammonds.




On September 20, 2007, Hammonds entered into an agreement with VOMF pursuant to which the Series A, B and C Warrants were amended to: (i) adjust the exercise price of all of the Warrants to $1.00; and (ii) provide for the issuance of a total of 2,102,960 shares of Hammonds' newly authorized Series C Convertible
Preferred Stock in lieu of 2,102,960 shares of common stock. On September 21, 2007, VOMF delivered a notice of exercise of all 2,102,960 Series A, B and C Warrants at an exercise price of $1.00 per warrant, from which Hammonds received net proceeds of $981,162 and VOMF cancelled Hammonds’ short-term promissory note payable in the amount of $1,000,000, representing a loan made by VOMF to Hammonds on August 17, 2007.





In total, Hammonds has received approximately $5.4 million from the 2006 and 2007 VOMF Private Financing Transactions.  The material terms of these preferred stock issuances are included in note 5 to the financial statements.  If the 833,333 shares of Series A Preferred Stock, 833,333 shares of Series B Preferred
Stock, and 2,102,960 of Series C Preferred Stock issued to VOMF are converted into shares of common, we would be required to issue an additional 3,769,626 shares of common stock.




Cash and Cash-Equivalents




Hammonds considers cash and cash-equivalents to include cash on hand and demand deposits with banks with an original maturity of three months or less, that Hammonds intends to convert.





Income Taxes




Hammonds 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.  Interest and penalties associated with income taxes are included in selling, general and administrative expense.


Loss Per Share
  The basic net loss per common share is computed by dividing the net loss by the weighted average number of shares outstanding during a period. Diluted net loss per common share is computed by dividing the net 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.


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 25


Stock-Based Compensation




Hammonds sometimes grants shares of stock for goods and services and in conjunction with certain agreements. These grants are accounted for under FASB Statement No. 123R, "Accounting for Stock-Based Compensation" (ASC 718-10) based on the grant date fair values.




Subsequent Events





New Accounting Standards
 
 In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“SFAS 168” or ASC 105-10). SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by
all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009, and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact American’s results of operations or financial condition. The Codification did not change GAAP; however, it did change the way GAAP is organized and presented.
As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. American implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.
 
 In addition to the pronouncements noted above, there were various other accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our financial position, operations or cash flows.


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 26


On April 16, 2009, Hammonds entered into an Asset Purchase Agreement with FabCorp, Inc., a Houston-based manufacturing company, pursuant to which Hammonds sold all of its assets, including all of the shares of its discontinued subsidiaries, Hammonds Fuel Additives, Inc., Hammonds Technical Services, Inc., Hammonds Water Treatment
Systems, Inc. and Hammonds ODV, Inc. (collectively, the “Discontinued Subsidiaries”) to a newly formed Texas company, Hammonds Technologies, LLC., a wholly owned subsidiary of FabCorp, Inc.
 
 The Board of Directors decision to enter into the Asset Purchase Agreement was based upon the following reasons, among others: the poor business outlook for the Discontinued Subsidiaries because of Hammonds’ inability to raise sufficient capital, either through equity or debt financing to continue its operations and grow the
businesses of the Discontinued Subsidiaries; the weak financial viability of the Discontinued Subsidiaries without a substantial infusion of capital; that at December 31, 2008, Hammonds total current liabilities were about $6.9 million compared to current assets of about $2.8 million and total liabilities were about $7.3 million or about $460,000 more than  total assets (all amounts unaudited); for more than the past year, Hammonds’ management had been actively seeking financing, either through
equity or debt, necessary to support ongoing operations and to that end had retained investment banking consultants pursuing several possible financing opportunities, but none of these efforts were successful and no additional financing was raised; the ongoing  upheaval in the credit and investment environment; and the determination by Hammonds management that it would be unable to continue as a “going concern.”
 
 Pursuant to the Asset Purchase Agreement, FabCorp purchased all of the assets,  free and clear of all liens and other encumbrances, in consideration for the payment of liabilities of Hammonds to Texas Community Bank in the amount of $2.6 million, payment of the senior promissory bridge note of $250,000 to Hammonds’
institutional investor, Vision Opportunity Master Fund, Ltd., the assumption of all payables and liabilities of the Discontinued Subsidiaries of approximately $2.6 million and the commitment to provide continuing financial support for the Discontinued Subsidiaries.
 
 Based upon the foregoing, Hammonds’ Board of Directors determined that is was in the best interests of Hammonds and its shareholders that Hammonds enter into the Asset Purchase Agreement, so that Hammonds could pursue other business opportunities through a merger, acquisition or other business combination with an operating
entity.
 Note 3 - Trading Securities
  In February 2007, Hammonds paid $100,000 for an option to buy 104,398 shares of American International Industries, Inc. stock for $5.00 per share from a former Hammonds' minority shareholder as part of a lawsuit settlement. Hammonds estimated the fair value of this stock option at December 31, 2007, by using the Black-Scholes
option-pricing model with the following weighted-average assumptions as follows:
  December 31, 2007Dividend yield


0.00
%Expected volatility


39.74
%Risk free interest


6.25
%Expected life

2 months
 As a result, this option was revalued to $28,314, and an unrealized loss of $71,686 was recorded in other income (expense) for the year ended December 31, 2007. This option expired in February 2008, resulting in a realized loss of $100,000 and a reversal of the previously recorded unrealized loss of $71,686.
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27
 Note 4 - Notes Payable - Related Parties
  December 31, 2009


December 31, 2008Note payable, principal balance due on December 31, 2008, interest at 10% through maturity and at 15% thereafter (a)

$
552,063


$
552,063Note payable for $250,000, principal due December 31, 2008, with interest at 10% through maturity and at 15% thereafter (a)


250,000



250,000$
802,063


$
802,063
  During September 2008, American provided a bridge loan of $250,000.  This loan has a 10% interest rate and was due December 31, 2008, or upon Hammonds receiving significant equity financing.  As additional consideration, Hammonds issued 100,000 shares of restricted common stock to American, resulting in finance
expense of $29,000.
 
 On August 13, 2009, Hammonds, American, Delta Seaboard Well Service, Inc. (Delta), American's 51% owned subsidiary, and the noncontrolling interest owners of Delta entered into an agreement to commence a reverse merger of Delta into Hammonds.  As part of this agreement, these notes payable were converted into 10,000,000 Hammonds' common
shares in February 2010.
 
 Note 5 - Preferred Stock


In August and September 2006, Hammonds sold to Vision Opportunity Fund Limited (“VOMF”) 833,333 shares of Series A Preferred Stock and 833,333 shares of Series B Preferred Stock, respectively (the “2006 Private Financing Transactions”). In connection with the sale of the Series A Convertible
Preferred Stock, Hammonds issued VOMF: (i) Series A Warrants to purchase 833,333 shares of common stock at $1.80 per share, expiring in August 2011; and (ii) Series B Warrants to purchase an additional 833,333 shares of common stock at $1.80 per share, expiring in August 2007. In connection with the sale of the Series B Convertible Preferred Stock, Hammonds issued VOMF: (i) Series C Warrants to purchase an additional 833,333 shares of common stock at $5.00 per share, expiring on September 29, 2011; and (ii) Hammonds
agreed to extend the expiration dates on the Series B Warrants issued in the 2006 Private Financing Transactions from August 2007 to August 2008.
  Each share of Series A and Series B Convertible Preferred Stock is convertible into one share of Hammonds' common stock.
  On September 20, 2007, Hammonds and VOMF agreed to amend the Series A, B and C Warrants to: (i) adjust the exercise price of all of the Warrants to $1.00; and (ii) provide for the issuance of a total of 2,102,960 shares of Hammonds' newly authorized Series C Convertible Preferred Stock in lieu of 2,102,960
shares of common stock. On September 21, 2007, VOMF delivered a notice of exercise of all 2,102,960 Series A, B and C Warrants at an exercise price of $1.00 per warrant from which Hammonds received net proceeds of $1,981,162.  As a result of this agreement, there are no warrants outstanding related to the Series A, B and C Convertible Preferred Stock.
 Hammonds reviewed the following accounting standards to determine the appropriate accounting for these issuances:
- SFAS No. 133:Accounting for Derivative Instruments and Hedging Activities (ASC 815-10)
- SFAS No. 150: Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (ASC 480-10)
- EITF 00-19: Accounting for Derivative Financial Instruments Indexed to (ASC 815-10), and Potentially Settled in, a Company’s Own Stock (ASC 815-40)
- EITF 98-5: Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios (ASC 505-10)
- EITF 00-27: Application of Issue No. 98-5 to Certain Convertible Instruments (ASC 505-10)
- EITF Topic D-98: Classification and Measurement of Redeemable Securities (ASC 505-10)
- ASR No. 268: Redeemable Preferred Stocks (ASC 505-10)  Back to Table of Contents
28
 We concluded that all components of these issuances should be classified as equity, because the only way for the value of the conversion feature to be realized is through the issuance of shares. Hammonds has sufficient authorized and unissued shares available to settle the contracts after considering all other
commitments that may require the issuance of stock.
 We valued the warrants using the Black-Scholes model and allocated the proceeds from the preferred share issuances based on the relative fair values of the securities issued.
 
 We determined that a beneficial conversion feature exists for the Series A, B and C Convertible Preferred Stock issuances. Based on authoritative guidance above, the amount of proceeds allocated to the Series A and Series B Convertible Preferred Stock should be assigned to the embedded conversion feature
with a corresponding amount recorded as a "deemed dividend" to the preferred shareholders. This is based on ASC 505-10, which states that "the discount assigned to the beneficial conversion feature is limited to the amount of the proceeds allocated to the convertible instrument."
  We allocated the following amounts to the embedded conversion feature and recorded a deemed dividend to the preferred shareholders:
  Preferred A – August 8, 2006

$
387,499Preferred A – August 23, 2006


176,643Preferred B – September 30, 2006


726,756Preferred C – September 20, 2007


1,981,162Total deemed dividend

$
3,272,060
  On July 25, 2007, VOMF agreed that accrued dividends may be paid, at Hammonds' option, in cash or in restricted shares of Hammonds' common stock. The number of shares of common stock to be issued as payment of accrued and unpaid
dividends shall be determined by dividing (i) the total amount of accrued and unpaid dividends to be converted into common stock by (ii) eighty percent (80%) of the average of the VWAP for the twenty (20) Trading Days immediately preceding the dividend payment date. The term "VWAP" means, for any date, (i) the daily volume weighted average price of the common stock for such date on the OTC Bulletin Board as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern
Time); (ii) if the common stock is not then listed or quoted on the OTC Bulletin Board and if prices for the common stock are then reported in the "Pink Sheets" published by the Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the common stock so reported; or (iii) in all other cases, the fair market value of a share of common stock as determined by an independent appraiser selected in good faith by the Investor and
reasonably acceptable to Hammonds.





Note 6 - Loss Per Share


Basic losses per share are calculated on the basis of the weighted average number of common shares outstanding. Diluted losses per share, in addition to the weighted average determined for basic loss per share, include common stock equivalents, which would arise from the conversion of the preferred stock to common shares.
  Years Ended December 31,2009


2008Basic loss per share:Loss from continuing operations, net of income taxes

$
(130,467
)

$
(309,070
)Loss from discontinued operations, net of income taxes


(712,033
)


(5,850,888
)Net loss


(842,500
)


(6,159,958
)Preferred dividends:Regular dividends


(240,000
)


(225,000
)Net loss applicable to common shareholders

$
(1,082,500
)

$
(6,384,958
)Weighted average common shares outstanding - basic and diluted


5,031,326



4,996,304Net loss per share - basic and dilutedContinuing operations

$
(0.08
)

$
(0.11
)Discontinued operations


(0.14
)


(1.17
)Total

$
(0.22
)

$
(1.28
)


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 29


Note 8 - Subsequent Events





On February 3, 2010, the Company and Delta completed the reverse merger pursuant to which Delta was merged with and into Hammonds. In connection with the Reverse Merger of Delta into Hammonds, following the effective date of the Reverse Split, the Company issued shares
of Common Stock to the existing stockholders of Delta as follows: (i) 22,186,572 post-Reverse Split shares in consideration for American’s 51% equity ownership of Delta, and 10,000,000 post-Reverse Split shares in consideration for American converting $872,353 in principal and accrued interest of debt payable by the Company to American; (ii) a total of 21,316,510 shares to Robert W. Derrick, Jr., a newly appointed director of the Company as well as Delta’s president and a director of American
and Ron Burleigh, a newly-appointed director of the Company as well as Delta’s vice president, in consideration for their 49% equity ownership of Delta; and (iii) 9,607,843 post-Reverse Split shares in consideration for Messrs. Derrick and Burleigh extending their employment agreements for five years in addition to the balance of their current employment agreements. Following the Reverse Split and Reverse Merger, American owns 32,859,935 shares of Common Stock, representing 48.2% of the Company’s
total outstanding shares and Messrs. Derrick and Burleigh, the owners of the noncontrolling interest in Delta, own 30,924,353 shares of Common Stock, representing 45.4% of the Company’s total outstanding shares. All other stockholders of the Company own 4,357,962 shares of Common Stock, representing 6.4% of the Company’s total 68,142,250 outstanding shares.
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 30
 
 ITEM9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE




On June 3, 2008, the Board of Directors of Hammonds Industries, Inc. (the “Company”) dismissed GLO CPAs LLLP (“GLO”) as the Company’s independent registered public accountants and approved the engagement of GBH CPAs, PC (“GBH”) to serve as the Company’s independent registered public accountants
for the fiscal year 2008. On June 6, 2008 the Company issued a press release announcing the change in its independent registered public accountants.
  GLO’s reports on the Company’s financial statements for the years ended December 31, 2007 and 2006 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.
  During the years ended December 31, 2007 and 2006 and the subsequent interim period through June 3, 2008, the date of dismissal of GLO, there were no disagreements with GLO on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to GLO’s satisfaction,
would have caused them to make reference to the subject matter in connection with their report on the Company’s consolidated financial statements for such years; and there were no reportable events, as listed in Item 304(a)(1)(v) of Regulation S-K.
  The Company provided GLO with a copy of the disclosures in the preceding two paragraphs and requested in writing that GLO furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether or not they agree with such disclosures. GLO provided a letter, dated June 5, 2008 stating its agreement with
such statements.
  During the years ended December 31, 2007 and 2006 and through the date of the Board's decision, the Company did not consult GBH with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial
statements, or any other matter or reportable events listed in Items 304(a)(2)(i) and (ii) of Regulation S-K.


ITEM9T. CONTROLS AND PROCEDURES





Our management is responsible for establishing and maintaining an adequate level of internal controls over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes policies
and procedures that:




- Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;


- Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and


- Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.




Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with existing policies
or procedures may deteriorate.




Evaluation of disclosure controls and procedures. In connection with the audit of the Company's financial statements for the year ended December 31, 2009, the Company's CEO and CFO 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, our CEO and CFO concluded that our determined that our disclosure controls and procedures were effective as of December 31, 2009.




Changes in internal controls. There have been no significant changes in our internal controls over financial reporting that occurred during the year ended December 31, 2009 that have materially affected or are reasonably likely to materially affect, our internal controls over financial reporting.




This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules
of the Securities and Exchange Commission that permit the Company to provide a management report in the Annual Report.




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 31


ITEM9B. OTHER INFORMATION

None.PART III






ITEM10. DIRECTORS AND EXECUTIVE OFFICERSAND CORPORATE GOVERNANCE




At present, we have four officers and five directors. We may elect one or more additional directors and appoint additional officers in connection with our intent to pursue new business opportunities or entering into a business combination. 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
PositionsDaniel Dror
69
Chairman and CEORobert W. Derrick, Jr.
49
Director and PresidentSherry L. Couturier
48
Director, VP and CFORon Burleigh
57
Director and VPSteven M. Plumb
50
Director




Daniel Dror, Chairman of the Board, has served as Chief Executive Officer, President and Chairman of the Board of American International Industries, Inc. since September 1997. From April 2005 to December 2008, Mr. Dror served as Chairman and CEO of Hammonds Industries, Inc. and resumed this position on December 31,
2009.  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.


Robert W. Derrick, Jr. was appointed to the Board of Directors of American International Industries, Inc. on February 19, 2004. Mr. Derrick has served as President of the American's 51% owned subsidiary, Delta Seaboard Well Service, Inc., since September 2002 and was Delta's Vice President from December 1989 until September 2002.
Delta has been in the oil and gas business for more than 35 years, engaged in the sale of oil field pipe, tubular, well-completion work and provides work-over services for existing oil and gas wells.


Sherry L. Couturier has served as Chief Financial Officer of American International Industries, Inc. since June 1, 2007, and has been with the company since August 1, 2006.  Sherry served as CFO of Hammonds Industries, Inc. from June 2007 to December 2008, and resumed this position on December 31, 2009.  Sherry
graduated with a B.S. in Accounting from the University of Alabama and has been a Certified Public Accountant since 1986.  She has held positions in both public and industry accounting.  Prior to joining the Company, Sherry worked for El Paso Corporation for 14 years as a supervisor for various accounting departments and as a training and development consultant.




was appointed to the Board of Directors of the Company on December 31, 2009. Mr. Burleigh has served as a Director of Delta since September 2002 and was Delta's Vice-President from December 1989 to the present.




Steven M. Plumb, a CPA licensed in Texas, is a financial manager and senior executive experienced in operations, finance and marketing. Mr. Plumb is the president of Clear Financial Solutions, Inc. a business consulting firm that assists public and private
companies with financing, operations improvement, outsourced CFO services, SEC reporting, mergers and acquisitions, and financial analysis. Mr. Plumb has served as the CFO of several public companies, including Striker Oil & Gas, Inc., Hyperdynamics Corp., Oncolin Therapeutics, Inc., Bluegate Corp., and Adventrx Pharmaceuticals. Prior to starting his own consulting firm, Mr. Plumb served as the Chief Financial Officer of DePelchin Children's Center, and as controller of Memorial City Rehabilitation Hospital
in Houston, Texas. Mr. Plumb is a former auditor and consultant with KPMG. Mr. Plumb earned his BBA degree in accounting from the University of Texas at Austin.


Independent Public Accountants
  Our Board of Directors has approved the appointment by the Company's Board of Directors of GBH CPAs, PC as independent public accountants for the fiscal year ending December 31, 2009.






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32
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).





ITEM11. EXECUTIVE COMPENSATION




The following tables contain compensation data for the Chief Executive Officer and other named executive officers of the Company for the fiscal year ended December 31, 2009:




Summary Compensation TableLong TermAnnual Compensation
Compensation AwardsOther

SecuritiesAnnual
Stock
Underlying
TotalSalary
Bonus
Compensation
Award(s)
Options
CompensationName and Principal Position

Year
($)
($)
($)
($) (1)
($)
($)Daniel Dror, Chairman and CEO

2009
-
-
-
-
-
-Sherry Couturier, Director, VP and CFO

2009
-
-
-
-
-
-Robert W. Derrick, Jr., Director and President

2009
-
-
-
-
-
-Ron Burleigh, Director and VP

2009
-
-
-
-
-
-




(1)
See "Stock-Based Compensation" in note 1 to the financial statements for valuation assumptions.









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33
Grants of Plan-Based Awards









Director Summary Compensation Table




The directors serve without cash compensation, but may be granted stock as bonus compensation from time to time. The table below summarizes the compensation paid by the Company to non-employee Directors for the fiscal year ended December 31, 2009.




Director Summary Compensation Table(a)

(b)


(c)


(d)


(e)


(f)


(g)Name

Fees Earned or
Paid in Cash ($)


Stock
Awards ($)


Option
Awards ($)


Change in Pension Value and Deferred
Compensation Earnings ($)


All Other
Compensation ($)


Total ($)Steven M. Plumb

$
-


$
-



-



-



-


$
-


(1) Daniel Dror, Chairman and CEO, Sherry Couturier, VP and CFO, Robert W. Derrick, Jr., President, and Ron Burleigh, VP, are not included in this table. The compensation received by these officers and directors, as employees of the Company, are shown in the Executive Summary Compensation Table.


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 34


ITEM12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS






The following table sets forth information regarding the beneficial ownership of our common stock as of December 31, 2009. 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.

673,363
13.38%601 Cien Street, Suite 235Kemah, TX 77565Carl Hammonds

1,700,000
33.79%910 Rankin RoadHouston, TX 77073Vision Opportunity Management Fund, Ltd.

407,040
8.09%20 West 55th Street, 5th FloorNew York, NY 10019Sherry Couturier, Director, VP and CFO

38,579
0.77%601 Cien Street, Suite 235Kemah, TX 77565Robert W. Derrick Jr., Director and President

1,479
0.03%1212 West Sam Houston Parkway NorthHouston, TX 77043Directors and Officers (2 persons) (2)

713,421
14.18%




(1) Applicable percentage ownership is based on 5,031,326 shares of common stock outstanding as of December 31, 2009. 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, 2009 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.




(2) Includes shares owned by American International Industries, Inc.


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35
ITEM13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS





The Company obtains approval from its entire Board of Directors prior to entering into any transactions with a related party or affiliate of the Company, including disclosure to the Board of Directors of such relationship prior to any action or vote of the Board of Directors. Prior to entering into any financing arrangement with any affiliated
parties, disclosure is made to the Board of Directors regarding the terms and conditions of such related party transactions.


ITEM14. PRINCIPAL ACCOUNTING FEES AND SERVICES




Independent Public Accountants




The Registrant's Board of Directors has appointed GBH CPAs, PC, which firm has issued its report on our financial statements for the years ended December 31, 2009 and 2008.




Principal Accounting Fees




The following table presents the fees for professional audit services rendered by GBH CPAs, PC and GLO CPAs, LLLP for the audit of the Registrant's annual financial statements for the years ended December 31, 2009 and 2008, and fees billed for other services rendered by GBH CPAs, PC and GLO CPAs, LLLP during
those years. All of the services described below were approved by the Board of Directors.




Year EndedDecember 31,  2009

December 31,  2008Audit fees (1)

$
37,000

$
47,000Audit-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.





ITEM 15. EXHIBITS AND REPORTS ON FORM 8-K
  (a) The following documents are filed as exhibits to this report on Form 10-K 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.
Description3(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 CEO and 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 CEO 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:  None.


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 36


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 Dror
 Daniel Dror
 Chief Executive Officer, President, and Chairman
 April 15, 2010
  By /s/ Sherry L. Couturier
 Sherry L. Couturier
 Director, Chief Financial Officer, and Vice-President April 15, 2010
    Director and President of Delta Seaboard Well Service, Inc.