Mail Stop 7010
July 14, 2005
Via U.S. mail and facsimile
Mr. Daniel Dror
President and Chief Executive Officer, American International
Industries, Inc.
601 Cien Street, Suite 235
Kemah, TX 77565-3077
RE: Form 10-KSB for the fiscal year ended December 31, 2004
Form 10-QSB for the period ended March 31, 2005
File No. 0-25223
Dear Mr. Dror:
We have reviewed these filings and have the following
comments. If you disagree with a comment, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004
Description of Business
Brenham Oil & Gas
1. Disclose how you account for your oil, gas and mineral royalty
interest. Disclose the carrying amount of this royalty interest
on
your balance sheet and reconcile such carrying amount to the
$5,926,931 of identifiable oil and gas assets listed in Note 13.
Management`s Discussion and Analysis
General
2. We note your disclosure in the second paragraph of Management`s
Discussion and Analysis that you sold your real estate subsidiary
during 2004. We also note the related discussion under the
subcaption "Former Real Estate Business" in Item 1 - Description
of
Business. In a period in which a component of an entity has been
disposed of or is classified as held for sale, the income
statement
of the entity for current and prior periods should report the
results
of operations of the discontinued component as discontinued
operations. See SFAS 144, paragraph 43. Accordingly, please
restate
your financial statements for fiscal 2004 to report your former
real
estate business as discontinued operations. In addition, revise
your
Management`s Discussion and Analysis to reflect such restatement
and
focus your discussion on the results of your continuing
operations.
Results of Operations
3. We note your discussion regarding the revenues of your
corporate
segment in which you state that the corporate segment had revenues
of
$4,752,916 in 2004 and no reported revenue in 2003. This is
inconsistent with your segment disclosure in Note 13 (Segment
Information) which reflects no revenues for the corporate segment
in
2004 and 2003 and reflects $4,752,916 and $86,000 of revenues for
the
real estate segment in 2004 and 2003. Please correct this
inconsistency in connection with the revisions necessary to
reflect
your former real estate business as discontinued operations.
4. Expand the discussion of changes in revenues, cost of sales and
net income to include the prospects for future operations and
address
key variable and other qualitative and quantitative factors as
required by Regulation S-B, Item 303(b)(1). In addition, discuss
any
known trends or uncertainties with respect to overall revenues
that
you reasonably expect will have a material favorable or
unfavorable
impact on future operations. The discussion should include
information that does not clearly appear in the financial
statements.
Your discussion should not merely repeat numerical data contained
in
the financial statements or recite amounts that are readily
computable from the financial statements.
5. Disclose the extent to which changes in revenues are
attributable
to changes in volumes and to changes in prices charged to
customers.
6. We note you sold certain real estate holdings in 2004 that were
transferred from Surgicare as part of the conversion of
Surgicare`s
Series AA stock into common stock and recorded a material gain
within
revenues. Please revise to classify this gain outside your
operating
income since this gain relates to transactions associated with
your
marketable trading securities.
Liquidity and Capital Resources
7. Liquidity should be discussed on both a long-term and short-
term
basis. See Regulation S-B, Item 303(b)(1)(i). In this regard, we
note that the revolving credit arrangement was extended until July
5,
2005. If you have not identified any sources of long-term
liquidity,
a statement to that effect should be included in Management`s
Discussion and Analysis.
Item 8A. Controls and Procedures
8. We note your disclosure that "the chief executive officer and
chief financial officer concluded that the Company`s disclosure
controls and procedures are effective to ensure that information
required to be disclosed by the Company in reports that it files
or
submits under the Exchange Act is recorded, processed, summarized
and
reported within the time periods specified in the Securities and
Exchange Commission rules and forms." Revise to clarify, if true,
that your officers concluded that your disclosure controls and
procedures are also effective to ensure that information required
to
be disclosed in the reports that you file or submit under the
Exchange Act is accumulated and communicated to your management,
including your chief executive officer and chief financial
officer,
to allow timely decisions regarding required disclosure. See
Exchange Act 13a-15(e).
Financial Statements
Balance Sheet
9. Provide a note to the financial statements to summarize the
transactions that resulted in changes in your accounts receivable
and
loans payable to your related party amounts and address the
disclosure requirements of SFAS 57, paragraph 2.
Statement of Operations
10. Provide a footnote to disclose a reconciliation of your
earnings
per share computations as required by SFAS 128, paragraph 40a. In
this regard, expand your significant accounting policy for
earnings
per share to address how earnings per share takes into account
your
redeemable and convertible preferred stock.
11. Present diluted loss per share for 2003. If all potentially
dilutive securities were anti-dilutive, diluted loss per share
would
be equal to basic loss per share and the weighted average shares
would be the same for both calculations.
Statement of Cash Flows
12. Please reconcile the proceeds from sale of drilling rigs to
the
other amounts on your cash flow statement relating to drilling
rigs,
including the change in the asset and the gain on the sale.
Provide
a footnote to your financial statements that discusses the amount
of
proceeds received from the sale, the carrying amour of the
drilling
rigs and the gain recognized. Clarify why it was appropriate to
record $4,087,000 as a source of operating cash flows and
$5,000,000
as a source of investing cash flows.
13. Please reconcile the $3,000,800 increase in accounts
receivable
to the $400,116 decrease reflected on your balance sheet. Provide
appropriate disclosures as necessary.
14. Please reconcile the $3,492,534 use of cash in your operating
activities related to your trading securities to your disclosures
in
Notes 3 and 5. In this regard, it appears that the $3,150,000
cost
basis of your OHC investment resulted from a noncash transaction.
Note 1 - Summary of Significant Accounting Policies
Impairment of Long-Lived Assets
15. Please revise your disclosures to clarify that you have
appropriately applied the guidance in paragraphs 19 through 22 of
SFAS 142 with regard to the recognition and measurement of an
impairment loss for goodwill.
Revenue Recognition
16. If true, revise your revenue recognition policy to clarify
that
sales of real estate are recognized under the full accrual method
when each of the criteria in paragraph 5 of SFAS 66 are met.
17. Please expand your disclosure to address the nature of the
services provided, types of contracts you have with your
customers,
and how revenues and related costs are recognized in accordance
with
SAB 101.
18. Please provide a description of your revenue recognition
policy
with respect to your oil and gas segment. In this regard, we note
your disclosure in Note 13 which indicates you have an oil, gas
and
mineral interest in Texas.
Note 2 - Acquisitions and Divestitures
Har-Whit`s/Pitt`s & Spitt`s
19. Disclose how you accounted for the foreclosure on the
90,000,000
shares of common stock of HWPS as payment for the two $1,000,000
notes. Disclose the amount of any gain or loss recognized on the
foreclosure. Clarify why it was appropriate to recognize a gain
on
the machinery and equipment and trademark given the significant
balloon payment on the notes receivable in 2007. Confirm that all
payments have been received on a timely basis. Clarify where the
note is recorded in your financial statements.
Note 3 - Investment Securities
20. Please reconcile the net decreases in the market value of
equity
securities of $688,110 (2004) and $251,566 (2003) to the tables
showing the unrealized loss of the trading securities. Also
reconcile the $679,710 unrealized losses in your statement of cash
flow to your disclosures in Note 3. Revise your disclosures as
necessary.
21. Expand your disclosure to address discuss the transaction in
which you acquired the 800,000 shares of Transmeridian Exploration
common stock at a cost of $1,600,000.
Note 5 - Transactions
22. Please use consistent names throughout your filing. In this
regard, we believe that "SRG" is the same as "SurgiCare, Inc."
which
is now known as Orion HealthCorp. Inc. as explained in Item 1
under
Former Real Estate Business. If our understanding is incorrect,
please define "SRG" otherwise correct the inconsistency.
23. We note your use of the reduced profit method to record the
sale
of the land transferred to you by SRG. Disclose the amount of
the
balloon payment at the end of the five years and confirm and
clarify
that the gain recognized by the company was calculated by
discounting
the note receivable from the buyer to the present value of the
lowest
level of annual payments required by the sales contract over the
maximum period specified in paragraph 12 of SFAS 66 and excluding
requirements to pay lump sums. Refer to paragraph 68 of SFAS 66.
24. In light of the materiality of your notes receivable, please
add
a footnote to your financial statements summarizing the face value
of
your notes receivable and any related discounts or reserves.
FORM 10-QSB FOR THE PERIOD ENDED MARCH 31, 2005
General
25. Please address the comments above in your interim filings as
well.
* * * *
Please respond to these comments within 10 business
days,
or tell us when you will provide us with a response. Please
provide
us with a supplemental response letter that keys your responses to
our comments and provides any requested supplemental information.
Detailed letters greatly facilitate our review. Please file your
supplemental response on EDGAR as a correspondence file. Please
understand that we may have additional comments after reviewing
your
responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in their filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Marie Trimeloni, Staff Accountant, at (202) 551-
3734
or, in her absence, to Jeanne Baker, Assistant Chief Accountant at
(202) 551-3691.
Sincerely,
Rufus Decker
Accounting Branch Chief
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Mr. Daniel Dror
July 14, 2005
Page 7 of 7
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE