here the history of EDII...
American International Industries, Inc.
In September 1994, the Company was incorporated in Nevada under the name Black Tie Affair, Inc. for the purposes of engaging in catering services. In July 1996, an unaffiliated group of investors purchased shares of Company common stock constituting 90% of the outstanding shares of Black Tie Affair, Inc. This group changed the name of the Company to Pitts and Spitts of Texas, Inc., and acquired Pitt's & Spitts, Inc. and Har-Whit, Inc. in September 1996. In September and October 1997, a new investor group ("1997 Group") including Mr. Daniel Dror, Sr., gained control of the Company through the following arms-length negotiated transactions with the Company and unaffiliated third parties:
(i) Elk International Corporation, Ltd., an entity controlled by Mr. Dror's brother, purchased 5,000,000 shares of Company common stock at a purchase price of $0.03 per share from the Company, received an option to purchase 2,000,000 shares of Company common stock at an exercise price of $0.02 per share from the Company, and purchased 1,200,000 shares of Company common stock at a purchase price of $0.03 per share from an individual (Mr. Dror has never owned any shares of Elk International Corporation, Ltd., nor has he ever served as an officer or director of such entity),
(ii) Jack Talan, a former director of the Company, purchased 500,000 shares of Company common stock from the Company at a purchase price of $0.10 per share, and
(iii) Daniel Dror & Company, Inc., formerly controlled by Mr. Dror, purchased 200,000 shares of Company common stock at a purchase price of $0.03 per share from an individual.
At the closing of this transaction, the sole operating entities of the Company were its two subsidiaries Pitt's & Spitt's, Inc. and Har-Whit, Inc. This group elected a new board of directors, appointed current management, and appointed Mr. Dror chairman of the board and chief executive officer. In December 1997, the name of the Company was changed to Energy Drilling Industries, Inc., and in June 1998, the Company changed its name to American International Industries, Inc.
In January 1998, the Company amended its Articles of Incorporation to increase its authorized common shares to 100,000,000 and to authorize 10,000,000 preferred shares. In September 1998, the Company amended its Articles of Incorporation to increase its authorized common shares to 200,000,000 ("Common Stock").
The Company is located at 601 Cien St., Suite 235 in Kemah, Texas 77565. Its telephone number is (281) 334-9479.
As of March 15, 1999, the Company, excluding its subsidiaries, employed seven persons, on a full-time basis, none of which are covered by a collective bargaining agreement.
Har-Whit/Pitt's & Spitt's, Inc.
In September 1996, prior to the 1997 Group gaining control of AIII, the Company purchased all of the capital stock of Pitt's & Spitt's, Inc., a Texas corporation, incorporated in December 1989, and Har-Whit, Inc., a Texas corporation, incorporated in January 1975, for 2,527,000 shares of Common Stock and $500,000 in exchange for non-compete agreements with the previous owners. Messrs. Hartis and Whitworth, two of the prior owners of the above corporations who served as directors for fiscal year 1998, each received 631,750 shares of Common Stock and $250,000 in connection with the acquisitions. In August 1998, Pitt's & Spitt's, Inc. was merged into Har-Whit, Inc., which subsequently changed its name to Har-Whit/Pitt's & Spitt's, Inc. ("Har-Whit"). Har-Whit is located at 14221 Eastex Freeway in Houston, Texas 77032. Its telephone number is (281) 442-5013.
Brenham Oil & Gas, Inc.
In December 1997, the Company purchased all of the capital stock of Brenham Oil and Gas, Inc., a Texas corporation, incorporated in November 1997 ("Brenham"), for 6,000,000 shares of Common Stock from Daniel Dror II 1976 Trust. At the time of the transaction, Mr. Dror was the trustee of the Daniel Dror II 1976 Trust, but he has never had any financial interest in such trust, the sole beneficiary being Mr. Dror's son.
Brenham's sole asset is an oil and gas royalty interest which was owned by the Daniel Dror II 1976 Trust prior to December 1995. The mineral rights which resulted in the royalty interest, were retained by the Daniel Dror II 1976 Trust in a real estate sale transaction. All of the cost basis which the Daniel Dror II 1976 Trust had in that property was attributed to the property which was sold, thus no basis is attributed to the mineral interest. Brenham is located at 601 Cien Road, Suite 235 in Kemah, Texas 77565. Its telephone number is (281) 334-9479.
Texas Real Estate Enterprises, Inc.
In December 1997, the Company purchased all of the capital stock of Texas Real Estate Enterprises, Inc. a Texas corporation, incorporated in March 1996 ("TRE"), for 10,000,000 shares of Common Stock from Elk International Corporation, Ltd., which is controlled by Mr. Dror's brother. The Company also purchased G.C.A. Incorporated ("GCA") (wholly owned by an unrelated individual) for 6,000,000 shares of AIII Common Stock. TRE and GCA are collectively referred to as TRE. In May 1998, the Company through TRE issued 8,000,000 shares of AIII Common Stock to Daniel Dror & Company, Inc., which at the time of the transaction was controlled by Mr. Dror in exchange for additional property.
In June 1998, the Company through TRE purchased all of thecapital stock of Midtowne Properties, Inc. ("Midtowne") for 1,100,000 shares of AIII Common Stock, from two parties, one of which was the Daniel Dror II 1976 Trust, which received 660,000 shares of AIII Common Stock. In December 1998, because the appraisals on the properties exceeded the preliminary values of the properties as estimated by both parties to the transaction, the Company authorized the issuance of an additional 1,000,000 shares of AIII Common Stock, of which the party with which Mr. Dror was affiliated was to receive 600,000 shares. The purchase price of TRE, GCA, Midtowne Properties, Inc., and the additional property was established based on the fair market value of the assets acquired as determined by independent, certified appraisals. Management believes the terms of the purchases were fair and reasonable based on such appraisals. TRE is located at 601 Cien Road, Suite 235 in Kemah, Texas 77565. Its telephone number is (281) 334-9479.
Acqueren, Inc.
In June 1998, the Company entered into a purchase agreement to acquire all of the capital stock of Acqueren, Inc., a Delaware corporation, incorporated in December 1995("Acqueren"), which operates through its wholly-owned subsidiary Northeastern Plastics, Inc., a New York corporation, incorporated in January 1986 ("NPI"). The purchase agreement provided for the issuance of 6,750,000 shares of Common Stock to the two largest shareholders of Acqueren in exchange for approximately 55% of the outstanding capital stock of Acqueren, and provided for the remaining shareholders of Acqueren to receive approximately 25.02 shares of Common Stock for each share of Acqueren common stock exchanged (these remaining shares of Acqueren common stock had been issued pursuant to a private placement and included a warrant to purchase one share of Acqueren common stock, which is included in the above exchange). The transaction was closed effective July 1, 1998, and through July 1, 1999, the Company had exchanged shares representing a total of approximately 99% of the outstanding shares of Acqueren. Based upon the estimated fair value of the restricted common stock of AIII ($.08 per share at date of acquisition), the total purchase consideration for Acqueren was approximately $2,140,000. Based on the representations made to it at the time of the transaction, management believed the terms of the acquisition were fair and reasonable being based on arms-length negotiations. NPI is located at 11601 Highway 32 in Nicholls, Georgia 31554. Its telephone number is (912) 345-2030.
Modern Film Effects, Inc.
In September 1998, the Company purchased all of the capital stock of Electronic Pictures California, Inc., a California corporation, incorporated in August 1997, in exchange for 1,900,000 shares of Common Stock. Electronic Pictures California, Inc. owned an option to purchase all of the capital stock of Modern Film Effects, Inc., a California corporation, incorporated in June 1962, doing business as Cinema Research Corporation, and Digital Research Corporation, a California corporation, incorporated in June 1993. In September 1998, the Company exercised such option and purchased all of the capital stock of Modern Film Effects, Inc. and Digital Research Corporation (referred to collectively as "CRC"), for 4,400,000 shares of Common Stock and options to purchase 400,000 shares of Common Stock over five years at $0.20 per share to Jordan Friedberg.
In November 1998, Digital Research Corporation became a wholly-owned subsidiary of Modern Film Effects, Inc. Based upon the estimated fair value of the restricted common stock at the date of closing of $1,260,000 ($.20 per share), stock options valued at $32,000, and the discounted present value of the note payable to a selling stockholder ($303,300), the total purchase consideration was 1,595,300. Management believes the terms of the acquisitions were fair and reasonable being based on arms-length negotiations. CRC is located at 6860 Lexington Avenue in Hollywood, California 90038. Its telephone number is (323) 460-4111.
Recent Developments
Between November 1998 and January 1999, Acqueren and Erick Friedman, a Company director, purchased an aggregate of 103,000 shares of Hertz Technology Group, Inc. ("Hertz") representing approximately 9.7% of Hertz's outstanding common stock for an aggregate purchase price of $177,131. Hertz operates the following subsidiaries:
The Company has discussed possible business combinations with Hertz, but to date no agreements have been reached and there can be no assurance that any agreement will be reached regarding any business combination in the future.
Effective January 1999, the Company purchased all of the capital stock of Marald, Inc., doing business as Unlimited Coatings (UC), in exchange for 3,500,000 restricted shares of Common Stock of AIII valued at fair market value of approximately $652,000 at $.19 per share plus a finders fee of $45,000 paid in part to a party related to Mr. Dror.
In addition, under the terms of the acquisition agreement, the Company has agreed to provide chemicals at a discount to Toro Spray-On Liners, Inc. an entity partially owned by the above related party. UC, headquartered in Houston, Texas distributes specialty chemicals to the automotive after-market and is best known for its spray-on bed-liners for trucks.
UC's products, are marketed under the "Toro Liner" name. UC also markets specialty chemicals, including rustproofing, undercoating, fabric protectants, fuel additives, and performances enhancement chemicals related to the automotive after-market. The UC acquisition has been accounted for as a purchase.
In March 1999, the Company acquired a minority interest(approximately 20%) in Signal Products, Inc. (Signal), a California corporation, which owns the exclusive license to market handbags and leather accessories bearing the "Guess" trademark. Signal develops, manufactures and markets its products throughout the United States. The investment in Signal was accomplished through the issuance of 10,000,000 restricted shares of common stock of AIII, valued at fair market value of approximately $2,000,000. The shares are placed in escrow pending the completion of a business valuation of Signal. The shares will be released from escrow upon satisfactory determination of Signal's value; 5,000,000 shares to Hardee Capital Partners and 5,000,000 shares to Elk International, a related party, both of which had claims against the shares of Signal. Should the determination of the value of the Signal shares, after valuation of Signal, yield a value less than $2,000,000, the number of shares to be released from escrow shall be reduced accordingly; however, no additional shares shall be issuable should the valuation indicate a greater value.
In November 1998, Acqueren deposited $100,000 on behalf of TRE as earnest money on a contract with a third party for the option to buy a building in downtown Houston, Texas. The earnest money deposit is included in other assets in the accompanying consolidated balance sheet at December 31, 1998. In February 1999, TRE sold such option to unrelated third parties for $600,000, realizing a gain on sale of $500,000.
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