AMERICAN INTERNATIONAL HOLDINGS CORP. - Annual Report: 2011 (Form 10-K)

dsi10k2011.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2011

¨ 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

DELTA SEABOARD INTERNATIONAL, INC.

(Exact Name Of Registrant As Specified In Its Charter)

Texas	88-0225318
(State of Incorporation)	(I.R.S. Employer Identification No.)

601 Cien Street, Suite 235 Kemah, TX	77565-3077
(Address of Principal Executive Offices)	(ZIP Code)

Registrant's Telephone Number, Including Area Code: (281) 334-9479

Securities Registered Pursuant to Section 12(g) of The Act: Common Stock, $0.0001

Indicate by check mark 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 ¨ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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, 2011, 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 $178,648 based on the closing sale price of $0.04 on such date as reported on the OTCBB.

The number of shares outstanding of each of the issuer’s classes of equity as of March 30, 2012 is 70,882,250 shares of common stock and 3,769,626 shares of preferred stock.

TABLE OF CONTENTS

Item	Description	Page
PART I
			3
ITEM 1.	DESCRIPTION OF BUSINESS		7
ITEM 1A.	RISK FACTORS RELATED TO OUR BUSINESSES		11
ITEM 1B.	UNRESOLVED STAFF COMMENTS		11
ITEM 2.	DESCRIPTION OF PROPERTY		12
ITEM 3.	LEGAL PROCEEDINGS		12
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II

ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES		12
ITEM 6.	SELECTED FINANCIAL DATA		13
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION		14
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		16
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		17
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		31
ITEM 9A(T).	CONTROLS AND PROCEDURES		31
ITEM 9B.	OTHER INFORMATION		31
PART III

ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		32
ITEM 11.	EXECUTIVE COMPENSATION		33
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS		35
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		36
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES		36
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES		36

Cautionary Statement regarding Forward-Looking Statements

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

ITEM 1. DESCRIPTION OF BUSINESS

Delta Seaboard International, Inc.

Delta Seaboard International, Inc. is a 46.4% owned subsidiary of American International Industries, Inc. ("American") (OTCBB: AMIN).

Description of Delta's Organization and Financing Transactions

Some of the statements contained in this current report of Delta Seaboard International Inc., (hereinafter the "Company", "Delta", "We" or the "Registrant" discuss future expectations, contain projections of our operations or financial condition or state other forward-looking information.

On February 3, 2010, Hammonds and Delta Seaboard, a Texas corporation, completed a reverse merger. In connection with the reverse merger, Hammonds changed its name to Delta Seaboard International, Inc. Following the effective date of the Reverse Split (as defined in Note 1), Delta issued shares of common stock to the existing stockholders of Delta Seaboard as follows: (i) 22,186,572 post-Reverse Split shares in consideration for American’s 51% equity ownership of Delta Seaboard, and 10,000,000 post-Reverse Split shares in consideration for American converting $872,353 in principal and accrued interest of debt payable by Delta to American; (ii) a total of 21,316,510 shares to Robert W. Derrick, Jr., a newly appointed director of Delta as well as Delta Seaboard’s president and a director of American and Ron Burleigh, a newly-appointed director of Delta as well as Delta Seaboard’s vice president, in consideration for their 49% equity ownership of Delta Seaboard; 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. Stock-based compensation of $847,750 was recorded as a result of the 9,607,843 shares issued to Messrs. Derrick and Burleigh. As part of the Reverse Merger, Delta assumed $709,552 in liabilities from Hammonds, including $615,000 in preferred dividends payable in shares of Delta's common stock. Additionally, during the year ended December 31, 2010, a payable to American was forgiven and recorded as contributed capital in the amount of $42,131 for legal and audit fees incurred on behalf of Delta during the year ended December 31, 2009.

American owns 32,859,935 shares of common stock, representing 46.4% of Delta's total outstanding shares and Messrs. Derrick and Burleigh, the owners of the noncontrolling interest in Delta Seaboard, own 31,925,832 shares of common stock, representing 45.0% of Delta's total outstanding shares. All other stockholders of Delta own 6,096,483 shares of common stock, representing 8.6% of Delta's total 70,882,250 outstanding shares.

Delta Seaboard is a 100% owned subsidiary of Delta. Delta Seaboard is managed by Robert W. Derrick, Jr. and Ron Burleigh, who are Delta Seaboard's executive officers. Delta Seaboard was founded in 1958 in Houston, Texas. Delta Seaboard'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 Seaboard's services include workover services, plugging and abandonment, and well completion and recompletion services.

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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.

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 Delta

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.

On February 3, 2010, the Company and Delta Seaboard completed the reverse merger pursuant to which Delta Seaboard was merged with and into Hammonds. Delta 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.

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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.

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: Basic Energy and Key Energy Services, 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 operates. 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.

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Employees

As of December 31, 2011, Delta had 40 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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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.

ITEM 1A. 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 58% of Delta’s oil and gas related revenues in 2011 were 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 profitability 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: Basic Energy and Key Energy Services, 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 2011, Delta’s largest customers for workover services were Legend Natural Gas, Choice Exploration, and New Century Exploration.

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Delta’s revenues and cash flows from pipe sales are subject to commodity price risk

Approximately 58% of Delta’s oil and gas related revenues in 2011 were 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 losses of $351,254 and $904,039 during the years ended December 31, 2011 and 2010, respectively. As of December 31, 2011, Delta's accumulated deficit was $2,928,578. 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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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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RISK FACTORS RELATED TO MARKET OF OUR COMMON STOCK

The Company's officers and directors own or control 93.4% 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 43,503,082 shares of common stock issued and 0 shares of preferred stock issued. In February 2010, we issued 24,839,168 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. On February 23, 2012, Delta completed an agreement with VOMF pursuant to which VOMF will convert 3,769,626 shares of Delta's preferred stock, constituting all of Delta's outstanding preferred stock, into 3,769,626 shares Delta's common stock, which shares were issued on February 29, 2012, and waive all accrued stock dividends payable on the preferred 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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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 at any time in the future, the market price of our Common Stock could fall. Existing non-affiliate Shareholders beneficially hold approximately 4,556,483 shares of Common Stock of which approximately 2,856,483 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

As of the filing of this annual report on Form 10-K, there were no material unresolved comments from the staff of the Securities and Exchange Commission.

ITEM 2. DESCRIPTION OF PROPERTIES

Wintech Partners, LLC ("Wintech"), a company owned by the noncontrolling interest owners of Delta, owns 100% of Delta's Houston facilities. Delta pays rent to Wintech by paying the monthly payments of $14,158 due on the note payable. Delta also has a 5,000 square foot office and warehouse facility in Louisiana which is leased from Wintech at an annual rental of $18,000.

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ITEM 3. LEGAL PROCEEDINGS

Delta's 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 Delta.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

During the year ended December 31, 2011, no matters were submitted to a vote of our security holders.

PART II

ITEM 5. 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.

	Fiscal 2011				Fiscal 2010
	High		Low		High		Low
First Quarter ended March 31	$	0.14	$	0.03	$	0.10	$	0.03
Second Quarter ended June 30	$	0.09	$	0.04	$	0.65	$	0.01
Third Quarter ended September 30	$	0.08	$	0.02	$	0.23	$	0.04
Fourth Quarter ended December 31	$	0.15	$	0.01	$	0.16	$	0.03

As of December 31, 2011, our shares of common stock were held by approximately 232 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

None.

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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 2011.

							Maximum
							Number of Shares
					Total Number of		That May Yet Be
	Total Number of		Average		Shares Purchased		Purchased Under
	Shares		Price Paid		as Part of Publicly		the Plans at the
Period	Purchased		Per Share		Announced Plans		End of the Period

October 1, 2011 to October 31, 2011		-	$	-		-		-
November 1, 2011 to November 30, 2011		-		-		-		-
December 1, 2011 to December 31, 2011		10,000		0.074		-		-
		10,000	$	0.074		-		-

ITEM 6. SELECTED FINANCIAL DATA

Not required.

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ITEM 7. 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

Delta Seaboard International, Inc. is a 46.4% owned subsidiary of American International Industries, Inc. ("American") (OTCBB: AMIN).

As of December 31, 2011, American owns 32,859,935 shares of common stock, representing 46.4% of Delta's total outstanding shares and Messrs. Derrick and Burleigh, the owners of the noncontrolling interest in Delta Seaboard, own 31,925,832 shares of common stock, representing 45.0% of Delta's total outstanding shares. All other stockholders of Delta own 6,096,483 shares of common stock, representing 8.6% of Delta's total 70,882,250 outstanding shares.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2011 VERSUS YEAR ENDED DECEMBER 31, 2010

During the year ended December 31, 2011, Delta had revenues of $11,293,189, compared to $9,023,129 during the year ended December 31, 2010, representing an increase of $2,270,060, or 25.2%. Pipe sales for the year ended December 31, 2011 were $6,633,607 compared to $5,878,377 for the year ended December 31, 2010, representing an increase of $755,230, or 12.8%. Pipe sales increased primarily due to significantly increased drilling activities during 2011. Margins on pipe sales were 20.5% for the year ended December 31, 2011 compared to 20.0% for the year ended December 31, 2010. Rig service revenues increased for the year ended December 31, 2011 by $1,514,830, or 48.2%, to $4,659,582 compared to $3,144,752 for the year ended December 31, 2010. Rig service revenues have increased due to major maintenance on two rigs during 2010.

Operating expenses increased by $870,386 or 8.2%, to $11,546,835 for the year ended December 31, 2011, compared to operating expenses of $10,676,449 for the year ended December 31, 2010. Cost of sales for the year ended December 31, 2011 was $5,276,430, compared to $4,701,810 during the year ended December 31, 2010, an increase of $574,620, or 12.2%. The increase in cost of sales was due to the increase in pipe sales during the year ended December 31, 2011. General and administrative expenses were $6,270,405 for the year ended December 31, 2011, compared to $5,974,639 for the year ended December 31, 2010, representing an increase of $295,766, or 5.0%, due to the increase in rig service revenues. General and administrative expenses for 2010 include non-cash stock-based compensation of $858,750 primarily to the executive officers of Delta Seaboard in consideration for extending their employment agreements (as described in Note 1 to the consolidated financial statements). This was offset significantly by lower operating expenses associated with the decline in rig service revenues during 2010 compared to the year ended December 31, 2009.

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Delta had an operating loss of $216,646 during the year ended December 31, 2011, compared to $1,649,820 during the year ended December 31, 2010, an improvement of $1,433,174 from the prior period.

Other expenses during the year ended December 31, 2011 were $78,121, compared to other income of $690,151 during the year ended December 31, 2010, a decrease of $768,272 from the prior period. Other income for the year ended December 31, 2010 included the receipt of a $700,000 cash settlement for its claims in an insurance lawsuit (as described in greater detail in Note 9 to the consolidated financial statements) and $76,710 for a bankruptcy settlement with one of Delta's customers.

Delta had a net loss of $351,254 for the year ended December 31, 2011, compared to $904,039 for the year ended December 31, 2010, a decrease in net loss of $552,785 from the prior period.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is our ability to generate sufficient cash flows from operating activities to meet the Company’s obligations and commitments, or obtain appropriate financing. Currently, our liquidity needs arise primarily from working capital requirements, debt service on indebtedness, and capital expenditures. We have funded these liquidity requirements from operations.

Capital expenditures for the year ended December 31, 2011 were $397,557 compared to $166,883 for the year ended December 31, 2010. The Company has no major capital expenditure commitments for the next 12 months.

We believe that our cash on hand, operating cashflows, and credit facilities will be sufficient to fund our operations, service our debt, and fund planned capital expenditures for at least 12 months from the date of this report.

As of December 31, 2011, Delta had total assets of $5,285,026, consisting primarily of $3,577,340 in current assets and $1,701,186 in property and equipment. Delta had $1,469,406 in accounts receivable and $1,862,098 in inventories as of December 31, 2011, which were included in current assets.

As of December 31, 2011, Delta had total liabilities of $3,929,440, of which $3,879,597 were current liabilities. As of December 31, 2011, Delta's current liabilities consisted primarily of $1,522,424 in accounts payable and non-cash accrued stock dividends, $169,080 in short-term debt, $2,106,701 in current installments of long-term debt, and $81,392 for bank overdrafts. Long-term debt, less current installments was $49,843 at December 31, 2011.

Delta had a working capital deficit of $302,257 and total stockholders’ equity of $1,616,622 as of December 31, 2011. Working capital excluding non-cash accrued stock dividends of $1,035,000 was $732,743 as of December 31, 2011. The accrued dividends on the preferred stock were waived on February 23, 2012.

Net cash provided by operating activities was $701,356 during the year ended December 31, 2011, which was derived from a net loss of $351,254 and offset primarily by non-cash expenses of $536,135, including stock-based compensation of $127,500 and depreciation of $408,635, a decrease in inventory of $581,622, and a decrease in accounts receivable of $78,028. Accounts payable decreased by $316,473 and prepaid expenses and other current assets decreased by $211,906. Net cash provided by operating activities was $782,881 during the year ended December 31, 2010, which was derived from a net loss of $904,039 and offset primarily by non-cash expenses of $1,251,356, including stock-based compensation of $858,750 and depreciation of $392,606, a decrease in inventory of $337,626, and an increase in accounts payable of $155,072. Accounts receivable increased by $266,897 and prepaid expenses and other current assets decreased by $208,942.

Net cash used in investing activities during the year ended December 31, 2011 was $106,766, compared to $414,396 during the year ended December 31, 2010. Net cash used in investing activities during the year ended December 31, 2011 was primarily for the purchase of property and equipment for $397,557, offset by the redemption of a certificate of deposit of $250,000. Net cash used in investing activities during the year ended December 31, 2010 was primarily for the purchase of property and equipment for $166,883 and a net investment in a certificate of deposit of $250,000.

Net cash used in financing activities during the year ended December 31, 2011 was $608,607 due to principal payments on debt of $674,259 and repayments under lines of credit of $15,000, offset by bank overdrafts of $81,392. Net cash used in financing activities during the year ended December 31, 2010 was $370,899 due to principal payments on debt of $539,519 and repayment of loans from related parties of $120,000, offset by borrowings under lines of credit of $288,620.

Off-Balance Sheet Arrangements

As of December 31, 2011, 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.

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New Accounting Pronouncements

There were various accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our consolidated financial position, operations or cash flows.

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, 2011.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Annual Report on Internal Control Over Financial Reporting	18
Report of Independent Registered Public Accounting Firm	19
Financial Statements:
Consolidated Balance Sheets - December 31, 2011 and 2010	20
Consolidated Statements of Operations - Years Ended December 31, 2011 and 2010	21
Consolidated Statements of Changes in Stockholders' Equity - Years Ended December 31, 2011 and 2010	22
Consolidated Statements of Cash Flows - Years Ended December 31, 2011 and 2010	23
Notes to Consolidated Financial Statements	24

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MANAGEMENT’S ANNUAL 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, 2011, in connection with the audit of the Company's financial statements. In making this assessment, we used the criteria established in Internal Control — Integrated Framework issued 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, 2011.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders

Delta Seaboard International, Inc.

Kemah, Texas

We have audited the accompanying consolidated balance sheets of Delta Seaboard International, Inc. as of December 31, 2011 and 2010 and the related consolidated statements of operations, changes in stockholders’ equity, 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 audits 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 consolidated financial statements referred to above present fairly, in all material respects the consolidated financial position of Delta Seaboard International, Inc. as of December 31, 2011 and 2010, and the consolidated results of operations and 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

March 30, 2012

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DELTA SEABOARD INTERNATIONAL, INC.

Consolidated Balance Sheets


	December 31, 2011			December 31, 2010
Assets
Current assets:
Cash and cash equivalents	$	10,655		$	24,672
Certificate of deposit		-			250,000
Trading securities		105			6,772
Accounts receivable, less allowance for doubtful accounts
of $55,087		1,469,406			1,547,434
Inventories		1,862,098			2,443,720
Prepaid expenses and other current assets		235,076			202,012
Total current assets		3,577,340			4,474,610

Property and equipment, net of accumulated depreciation		1,701,186			1,588,303
Other assets		6,500			50,025
Total assets	$	5,285,026		$	6,112,938
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$	487,424		$	803,897
Bank overdrafts		81,392			-
Dividends payable		1,035,000			795,000
Short-term notes payable		169,080			91,183
Current installments of long-term debt		2,106,701			1,955,840
Total current liabilities		3,879,597			3,645,920

Long-term debt, less current installments		49,843			396,938
Total liabilities		3,929,440			4,042,858

Commitments and contingencies		-			-

Stockholders' equity:
Preferred stock, $0.0001 par value, authorized 5,000,000 shares;
3,769,626 shares issued and outstanding		377			377
Common stock, $0.0001 par value, authorized 195,000,000 shares;
70,892,250 and 68,342,250 shares issued, respectively; and
70,882,250 and 68,342,250 shares outstanding, respectively		7,089			6,834
Additional paid-in capital		4,277,438			4,150,193
Accumulated deficit		(2,928,578	)		(2,087,324	)
Less treasury stock, at cost; 10,000 and 0 shares, respectively		(740	)		-
Total stockholders' equity		1,355,586			2,070,080
Total liabilities and stockholders' equity	$	5,285,026		$	6,112,938
The accompanying notes are an integral part of these consolidated financial statements.

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DELTA SEABOARD INTERNATIONAL, INC.

Consolidated Statements of Operations

	Year Ended December 31,
	2011			2010

Revenues	$	11,293,189		$	9,023,129

Costs and expenses:
Cost of sales		5,276,430			4,701,810
Selling, general and administrative		6,270,405			5,974,639
Total operating expenses		11,546,835			10,676,449

Gain on sale of equipment		37,000			3,500

Operating loss		(216,646	)		(1,649,820	)

Other income (expense):
Interest and dividend income		4,612			7,126
Lawsuit settlement		-			700,000
Bankruptcy settlement		-			76,710
Realized losses on trading securities		(2,247	)		-
Unrealized losses on trading securities		(629	)		(4,321	)
Interest expense		(147,525	)		(146,452	)
Other income		67,668			57,088
Total other income (expense)		(78,121	)		690,151

Loss before income tax		(294,767	)		(959,669	)
Income tax expense (benefit)		56,487			(55,630	)
Net loss	$	(351,254	)	$	(904,039	)
Preferred dividends:
Deemed dividends		(250,000	)		-
Regular dividends		(240,000	)		(240,000	)
Net loss applicable to common shareholders	$	(841,254	)	$	(1,144,039	)

Net loss per common share - basic and diluted	$	(0.01	)	$	(0.02	)
Weighted average common shares - basic and diluted		70,871,042			65,997,780
The accompanying notes are an integral part of these consolidated financial statements.

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DELTA SEABOARD INTERNATIONAL, INC.

Consolidated Statement of Changes in Stockholders’ Equity

Years Ended December 31, 2011 and 2010

	Preferred Stock				Common Stock
	Shares		Amount		Shares		Amount		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Total Stockholders’ Equity
Balance, December 31, 2009		-	$	-		43,503,082	$	4,350	$	3,891,435		$	(943,285	)	$	-		$	2,952,500
Reverse merger with Hammonds		3,769,626		377		5,031,325		503		(1,512,494	)		-			-			(1,511,614	)
Issuance of common stock for payment of debt		-		-		10,000,000		1,000		871,352			-			-			872,352
Issuance of common stock for services		-		-		9,807,843		981		857,769			-			-			858,750
Forgiveness of accounts payable		-		-		-		-		42,131			-			-			42,131
Regular preferred dividends		-		-		-		-		-			(240,000	)		-			(240,000	)
Net loss		-		-		-		-		-			(904,039	)		-			(904,039	)
Balance, December 31, 2010		3,769,626		377		68,342,250		6,834		4,150,193			(2,087,324	)		-			2,070,080
Issuance of common stock for services		-		-		2,550,000		255		127,245			-			-			127,500
Acquisition of treasury shares		-		-		-		-		-			-			(740	)		(740	)
Regular preferred dividends		-		-		-		-		-			(240,000	)		-			(240,000	)
VOMF settlement recorded as deemed dividend		-		-		-		-		-			(250,000	)		-			(250,000	)
Net loss		-		-		-		-		-			(351,254	)		-			(351,254	)
Balance, December 31, 2011		3,769,626	$	377		70,892,250	$	7,089	$	4,277,438		$	(2,928,578	)	$	(740	)	$	1,355,586

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

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DELTA SEABOARD INTERNATIONAL, INC.
Consolidated Statements of Cash Flows

	Year Ended December 31,
		2011			2010
Cash flows from operating activities:
Net loss		$	(351,254	)	$	(904,039	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation			408,635			392,606
Share-based compensation			127,500			858,750
Realized losses on trading securities			2,247
Unrealized losses on trading securities			629			4,321
Gain on sale of assets			(37,000	)		(3,500	)
Change in operating assets and liabilities:
Accounts receivable			78,028			(266,897	)
Inventories			581,622			337,626
Prepaid expenses and other current assets			211,906			208,942
Other assets			(4,484	)		-
Accounts payable and accrued expenses			(316,473	)		155,072
Net cash provided by operating activities			701,356			782,881

Cash flows from investing activities:
Proceeds from sale of trading securities			3,791			-
Purchase of trading securities			-			(1,013	)
Purchase of property and equipment			(397,557	)		(166,883	)
Redemption of certificate of deposit			250,000			250,000
Investment in certificate of deposit			-			(500,000	)
Proceeds from sale of property & equipment			37,000			3,500
Net cash used in investing activities			(106,766	)		(414,396	)

Cash flows from financing activities:
Advances repaid to officer			-			(120,000	)
Bank overdrafts			81,392			-
Net borrowings (repayments) under line of credit agreements			(15,000	)		288,620
Principal payments on debt			(674,259	)		(539,519	)
Payments for acquisition of treasury stock			(740	)		-
Net cash used in financing activities			(608,607	)		(370,899	)

Net decrease in cash and cash equivalents			(14,017	)		(2,414	)
Cash and cash equivalents at beginning of year			24,672			27,086
Cash and cash equivalents at end of year		$	10,655		$	24,672

Supplemental schedule of cash flow information:
Interest paid		$	137,251		$	146,452
Taxes paid		$	54,835		$	-
Non-cash investing and financing transactions:
Issuance of common stock to convert promissory note due to American International Industries, Inc.		$	-		$	872,352
Forgiveness of accounts payable to shareholder as contribution of capital		$	-		$	42,131
Accounts payable and dividends payable assumed in reverse merger transaction		$	-		$	709,551
Short-term debt assumed in reverse merger transaction		$	-		$	802,063
Financing of prepaid insurance		$	244,970		$	250,753
Financing of fixed assets		$	75,952		$	-
Dividends declared and unpaid		$	240,000		$	240,000
VOMF settlement recorded as deemed dividend		$	250,000		$	-
Fixed assets placed in service reclassified from other assets		$	48,009		$	-
The accompanying notes are an integral part of these consolidated financial statements.

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DELTA SEABOARD INTERNATIONAL, INC.

Notes to Consolidated Financial Statements

Note 1 - Summary of Significant Accounting Policies

Organization, Ownership and Business

Delta Seaboard International, Inc. ("Delta") is a 46.4% owned subsidiary of American International Industries, Inc. ("American") (OTCBB: AMIN).

On February 3, 2010, Hammonds and Delta Seaboard, a Texas corporation, completed a reverse merger. In connection with the reverse merger, Hammonds changed its name to Delta Seaboard International, Inc. Following the effective date of the Reverse Split, Delta issued shares of common stock to the existing stockholders of Delta Seaboard as follows: (i) 22,186,572 post-Reverse Split shares in consideration for American’s 51% equity ownership of Delta Seaboard, and 10,000,000 post-Reverse Split shares in consideration for American converting $872,353 in principal and accrued interest of debt payable by Delta to American; (ii) a total of 21,316,510 shares to Robert W. Derrick, Jr., a newly appointed director of Delta as well as Delta Seaboard’s president and a director of American and Ron Burleigh, a newly-appointed director of Delta as well as Delta Seaboard’s vice president, in consideration for their 49% equity ownership of Delta Seaboard; 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. Stock-based compensation of $847,750 was recorded as a result of the 9,607,843 shares issued to Messrs. Derrick and Burleigh. As part of the Reverse Merger, Delta assumed $709,552 in liabilities from Hammonds, including $615,000 in preferred dividends payable in shares of Delta's common stock. Additionally, during the year ended December 31, 2010, a payable to American was forgiven and recorded as contributed capital in the amount of $42,131 for legal and audit fees incurred on behalf of Delta during the year ended December 31, 2009.

Principles of Consolidation

The consolidated financial statements include the accounts of Delta Seaboard International, Inc. and its wholly-owned subsidiary, Delta Seaboard Well Service, Inc. All significant intercompany transactions and balances have been eliminated in consolidation.

Reclassifications

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.

Cash and Cash-Equivalents

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

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Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consist primarily of trade receivables, net of a valuation allowance for doubtful accounts. Delta's ability to collect outstanding receivables from our customers is critical to our operating performance and cash flows. Accounts receivable are stated at an amount management expects to collect from outstanding balances. Delta extends credit to customers and other parties in the normal course of business. Delta regularly reviews outstanding receivables and provides for estimated losses through an allowance for doubtful accounts. In evaluating the level of established reserves, Delta makes judgments regarding its customers' ability to make required payments, economic events and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. When Delta determines that a customer may not be able to make required payments, Delta increases the allowance through a charge to income in the period in which that determination is made. Though Delta's bad debts have not historically been significant, we could experience increased bad debt expense should a major customer or market segment experience a financial downturn or our estimate of uncollectible accounts, which is based on our historical experience, prove to be inaccurate.

Inventories

Inventories are valued at the lower-of-cost or market on a first-in, first-out basis. Delta assesses the realizability of its inventories based upon specific usage and future utility. Delta regularly evaluates their inventory and maintain a reserve for excess or obsolete inventory. Generally, Delta records an impairment allowance for products with no movement in over twelve months that they believe to be either unsalable or salable only at a reduced selling price. Management further uses their judgment in evaluating the recoverability of all inventory based upon known and expected market conditions. A charge to income is taken when factors that would result in a need for a reduction in the valuation, such as excess or obsolete inventory, are noted.

Freight and Shipment Policy

Delta expenses all freight and shipment expenses as incurred.

Investment Securities

Management determines the appropriate classification of its investments in marketable securities at the time of purchase and reevaluates such determination at each balance sheet date. Securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities. Debt securities for which Delta does not have the intent or ability to hold to maturity and equity securities not classified as trading securities are classified as available-for-sale. The cost of investments sold is determined on the specific identification or the first-in, first-out method. Trading securities are reported at fair value with unrealized gains and losses recognized in earnings, and available-for-sale securities are also reported at fair value but unrealized gains and losses are shown in the caption "unrealized gains (losses) on shares available-for-sale" included in stockholders' equity. Management determines fair value of its investments based on quoted market prices at each balance sheet date.

Property and Equipment

Assets acquired in the normal course of business are recorded at original cost and may be adjusted for any additional significant improvements after purchase. We depreciate the cost evenly over the assets’ estimated useful lives. Upon retirement or sale, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, with any resultant gain or loss being recognized as a component of other income or expense.

Revenue Recognition

Revenue is recognized when the earning process is completed, the risks and rewards of ownership have transferred to the customer, which is generally the same day as delivery or shipment of the product, the price to the buyer is fixed or determinable, and collection is reasonably assured. Delta receives purchase orders for all of its service work and related pipe sales. All sales are recorded when the work is completed or when the pipe is sold. Taxes assessed by a governmental authority that are incurred as a result of a revenue transaction are not included in revenues. Delta has no significant sales returns or allowances.

Net 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.

For the years ended December 31, 2011 and 2010, preferred shares convertible into 3,769,626 common shares were excluded from the diluted earnings per share calculation for all periods because their effect would have been anti-dilutive.

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Income Taxes

Delta 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.

Delta evaluates the tax benefits from uncertain positions and determines if it is "more likely than not" that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. As of December 31, 2011, Delta had not recorded any tax benefits from uncertain tax positions.

Advertising Costs

The cost of advertising is expensed as incurred.

Management's Estimates and Assumptions

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

Fair Value of Financial Instruments

Delta utilizes the fair value that establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Basis of Fair Value Measurement

Level 1		Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2		Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3		Unobservable inputs reflecting Delta's own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

Delta believes that the fair value of its financial instruments comprising cash, accounts receivable, notes receivable, accounts payable, and notes payable approximate their carrying amounts. The interest rates payable by Delta on its notes payable approximate market rates. The fair values of Delta's Level 1 financial assets, trading securities that primarily include shares of common stock in various companies, are based on quoted market prices of the identical underlying security. As of December 31, 2011, Delta did not have any significant Level 2 or 3 financial assets or liabilities. The following table provides fair value measurement information for Delta's trading securities:

	As of December 31, 2011
					Fair Value Measurements Using:
	Carrying Amount		Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Financial Assets:
Trading Securities	$	105	$	105	$	105	$	-	$	-

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Subsequent Events

Delta has evaluated all subsequent events from December 31, 2011 through the issuance date of the consolidated financial statements for subsequent event disclosure consideration.

New Accounting Pronouncements

There were various accounting standards and interpretations issued recently, none of which are expected to a have a material impact on our consolidated financial position, operations or cash flows.

Note 2 - Inventories

Inventories consisted of the following:

	December 31, 2011		December 31, 2010
Finished goods	$	1,862,098	$	2,443,720
Less reserve		-		-
	$	1,862,098	$	2,443,720

Note 3 - Property and Equipment

Major classes of property and equipment together with their estimated useful lives, consisted of the following:

	Years	December 31, 2011			December 31, 2010
Building and improvements	20	$	52,823		$	44,558
Machinery and equipment	7-15		3,773,548			3,336,247
Office equipment and furniture	7		137,696			137,696
Automobiles	5		759,131			724,013
			4,723,198			4,242,514
Less accumulated depreciation			(3,022,012	)		(2,654,211	)
Net property and equipment		$	1,701,186		$	1,588,303

During the year ended December 31, 2011, assets of $48,009 were placed in service and reclassified from other assets to property and equipment.

Depreciation expense for the years ended December 31, 2011 and 2010 was $408,635, and $392,606, respectively.

Note 4 - Short-term Notes Payable

	December 31, 2011		December 31, 2010
Insurance note payable with interest at 4.99%, principal and interest due in monthly payments of $22,796 through May 1, 2011	$	-	$	91,183
Insurance note payable with interest at 4.79%, principal and interest due in monthly payments of $22,270 through May 1, 2012		89,080		-
Note payable with interest at 0.00%, principal due in monthly payments of $20,000 through April 20, 2012 (a)		80,000
	$	169,080	$	91,183

(a) On June 29, 2011, Delta entered into an agreement, with an effective date of July 1, 2011, with Vision Opportunity Master Fund, Ltd. (“VOMF”), pursuant to which VOMF agreed to convert 3,769,626 shares of the Company’s preferred stock, constituting all of Delta’s outstanding preferred stock, into 3,769,626 shares of common stock and also agreed to waive all accrued dividends payable on the preferred stock. In consideration for the conversion, Delta agreed to pay VOMF total consideration of $250,000, $50,000 of which was paid on July 1, 2011, and the $200,000 remainder is due and payable at the rate of $20,000 per month. On February 23, 2012, Delta completed the agreement with VOMF. On February 29, 2012, 3,769,626 shares of Delta's preferred stock were converted into 3,769,626 shares of Delta's common stock.

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Note 5 - Long-term Debt

	December 31, 2011			December 31, 2010
Note payable to a bank, which allows Delta to borrow up to $2,700,000, due in monthly payments of interest only, with interest at prime floating rate, with the principal balance due May 2012, secured by assets of Delta (a)	$	1,643,527		$	1,658,527
Note payable due in monthly payments of $19,373, including interest at 6%, through May 2012, secured by assets of Delta		396,814			571,013
Note payable to a bank, due in monthly payments of $6,120, including interest at 8.25%, through August 8, 2012, secured by assets of Delta		47,372			108,442
Other secured notes with various terms, secured by assets of Delta		68,831			14,796
		2,156,544			2,352,778
Less current portion		(2,106,701	)		(1,955,840	)
	$	49,843		$	396,938

(a) During the year ended December 31, 2011, this line of credit was renewed and the limit was increased from $2,000,000 to $2,700,000.

Principal repayment provisions of long-term debt are as follows at December 31, 2011:

2012	$	2,106,701
2013		18,988
2014		18,988
2015		11,867
Total	$	2,156,544

Note 6 - Concentration of Credit Risk

Trade accounts receivable subject Delta to the potential for credit risk with customers in the retail and distribution sectors. To reduce credit risk, Delta performs ongoing evaluations of its customers' financial condition but generally does not require collateral. As of and during the year ended December 31, 2011, Delta had one customer that accounted for 13% of trade accounts receivable.

Note 7 - Income Taxes

The components of the income tax provision (benefit) for the years ended December 31, 2011 and 2010 are as follows:

	Year ended December 31,
	2011		2010
Current:
Federal	$	-	$	(72,479	)
State		56,487		16,849
Total current		56,487		(55,630	)

Deferred:
Federal		-		-
State		-		-
Total deferred		-		-

Total income tax provision (benefit)	$	56,487	$	(55,630	)

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The following table sets forth a reconciliation of the statutory federal income tax for the years ended December 31, 2011 and 2010:

	Year ended December 31,
		2011			2010
Income tax expense computed at statutory rate	$	(119,427	)	$	(307,373	)
Share-based compensation		41,183			277,376
Meals and entertainment		23,703			14,074
Other		167			227
Change in valuation allowance		54,374			15,696
Refund for taxes		-			(72,479	)
Texas margin tax		56,487			16,849
	$	56,487		$	(55,630	)

The tax effects of the temporary differences between financial statement income and taxable income are recognized as a deferred tax asset and liabilities. Significant components of the deferred tax asset and liability as of December 31, 2011 and December 31, 2010 are set out below:

	December 31, 2011			December 31, 2010
Deferred Tax Assets:
Net operating loss carryforward	$	496,138		$	481,579
Other		7,942			4,832
Total deferred tax assets		504,080			486,411

Deferred Tax Liabilities:
Depreciation		(305,103	)		(328,155	)
Total deferred tax liabilities		(305,103	)		(328,155	)

Valuation allowance		(198,977	)		(158,256	)
Net deferred tax asset	$	-		$	-

Delta has loss carryforwards totaling $1,459,228 available at December 31, 2011 that may be offset against future taxable income. If not used, the carryforwards will expire as follows:

Operating Losses
Amount		Expires
$	1,349,528	2029
	66,881	2030
	42,819	2031
$	1,459,228

Note 8 - Commitments and Contingencies

Delta’s president and vice president entered into employment agreements that provide for an annual base salary of $150,000 each.

On July 23, 2008, Delta Seaboard Well Service, Inc., our wholly-owned subsidiary negotiated a settlement in the Fort Apache Energy, Inc. v. Delta Seaboard Well Service, Inc. lawsuit for $1,450,000. Delta partially recovered this loss through insurance as described below.

Delta Seaboard Well Service, Inc. v. Houstoun, Woodard, Eason, Gentle Tomforde and Anderson, Inc., D/B/A Insurance Alliance and Robert Holman (“Broker Lawsuit”). On February 19, 2010, Delta settled its claims in the Broker Lawsuit and received $700,000, which is included in other income for the year ended December 31, 2010.

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Future minimum lease payments are as follows:

Year December 31,	Amount
2012	$	187,896
2013		187,896
2014		187,896
2015		187,896
2016		138,422
	$	890,006

Note 9 - Equity

On January 4, 2011, Delta issued 2,550,000 restricted shares of common stock for services valued at $127,500. During the years ended December 31, 2011 and 2010, preferred dividends of $180,000 and $240,000, respectively, were accrued and unpaid.

During the year ended December 31, 2010, Delta issued 200,000 restricted shares of common stock as stock-based compensation at a cost of $11,000. John W. Stump III and Richard C. Richardson, two former officers of Hammonds, each received 100,000 restricted shares of common stock in connection with a settlement and release agreement.

On June 29, 2011, Delta entered into an agreement, with an effective date of July 1, 2011, with Vision Opportunity Master Fund, Ltd. (“VOMF”), pursuant to which VOMF agreed to convert 3,769,626 shares of the Company’s preferred stock, constituting all of Delta’s outstanding preferred stock, into 3,769,626 shares of common stock and also agreed to waive all accrued dividends payable on the preferred stock upon the payment of $250,000. In consideration for the conversion, Delta agreed to pay VOMF total consideration of $250,000, $50,000 of which was paid on July 1, 2011, and the $200,000 remainder is due and payable at the rate of $20,000 per month. On February 23, 2012, Delta completed the agreement with VOMF. On February 29, 2012, 3,769,626 shares of Delta's preferred stock were converted into 3,769,626 shares of Delta's common stock.

American owns 32,859,935 shares of common stock, representing 46.4% of Delta's total outstanding shares and Messrs. Derrick and Burleigh, the owners of the noncontrolling interest in Delta Seaboard, own 32,425,832 shares of common stock, representing 45.7% of Delta's total outstanding shares. All other stockholders of Delta own 5,596,483 shares of common stock, representing 7.9% of Delta's total 70,882,250 outstanding shares.

Delta has 5,000,000 authorized, 3,769,626 issued and outstanding, Preferred Shares consisting of Series A and Series B convertible into one share of Delta's common stock.

Note 10 - Subsequent Events

On February 23, 2012, Delta completed the agreement with VOMF pursuant to which VOMF converted 3,769,626 shares of Delta's preferred stock, constituting all of Delta's outstanding preferred stock, into 3,769,626 shares Delta's common stock, and waived all accrued stock dividends payable on the preferred stock.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9T. 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, 2011, 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, 2011.

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, 2011, 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 rules of the Securities and Exchange Commission that permit the Company to provide a management report in the Annual Report.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND 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	Positions
Daniel Dror	71	Chairman and CEO
Robert W. Derrick, Jr.	51	Director and President
Sherry L. McKinzey	51	Director, VP and CFO
Ron Burleigh	59	Director and VP
Charles R. Zeller	70	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 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. McKinzey 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.

Ron Burleigh 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.

Charles R. Zeller was appointed to the Board of Directors of the Company in 2011. He has served as a director of the American International Industries, Inc. since 2000. Mr. Zeller is a developer of residential subdivisions including Cardiff Estates, 800 acres subdivision in Houston, TX and estate of Gulf Crest in downtown Pearland, Texas. He has extensive experience in real estate and finance and has been a real estate investor and developer for over 35 years, including shopping centers, office buildings, and apartment complexes and the financing of such projects. Mr. Zeller is the President of RealAmerica Corporation.

Independent Public Accountants

Our Board of Directors approved the appointment by the Company's Board of Directors of GBH CPAs, PC as independent public accountants for the fiscal year ended December 31, 2011.

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Code of Ethics

The Registrant has adopted a Code of Ethics that are designed to deter wrongdoing and to promote honest and ethical conduct, full, fair, accurate, timely and understandable disclosure in the Registrant's SEC reports and other public communications. The Code of Ethics promotes compliance with applicable governmental laws, rules and regulations.

Section 16(a) Compliance

Section 16(a) of the Securities and Exchange Act of 1934 requires the Registrant's directors and executive officers, and persons who own beneficially more than ten percent (10%) of the Registrant's Common Stock, to file reports of ownership and changes of ownership with the Securities and Exchange Commission. Copies of all filed reports are required to be furnished to the Registrant pursuant to Section 16(a). Based solely on the reports received by the Registrant and on written representations from reporting persons, the Registrant was informed that its officers and directors and ten percent (10%) shareholders have not filed reports required to be filed under Section 16(a).

ITEM 11. EXECUTIVE COMPENSATION

The following tables contain compensation data for the Chief Executive Officer and other named executive officers of the Company for the fiscal years ended December 31, 2011 and 2010:

Summary Compensation Table
					Long Term
		Annual Compensation			Compensation Awards
				Other		Securities
				Annual	Stock	Underlying	Total
		Salary	Bonus	Compensation	Award(s)	Options	Compensation
Name and Principal Position	Year	($)	($)	($)	($) (1)	($)	($)
Daniel Dror,	2010	-	-	-	-	-	-
Chairman and CEO	2011	-	-	-	$50,000	-	$50,000

Sherry McKinzey,	2010	-	$2,500	-	-	-	$2,500
Director, VP and CFO	2011	-	$5,000	-	$8,750	-	$13,750

Robert W. Derrick, Jr.,	2010	$125,417	-	-	$423,875	-	$549,292
Director and President	2011	$142,000	-	-	$25,000	-	$167,000

Ron Burleigh,	2010	$92,022	-	$33,395 (2)	$423,875	-	$549,292
Director and VP	2011	$105,000	-	$35,000 (2)	$25,000	-	$165,000

(1)

(2)

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

Represents payments for personal insurance premiums for Mr. Burleigh.

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Grants of Plan-Based Awards

None.

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, 2011.

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 ($)

Charles R. Zeller

(1) Daniel Dror, Chairman and CEO, Sherry McKinzey, 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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ITEM 12. 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, 2011. 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.	32,859,935	46.4%
601 Cien Street, Suite 235
Kemah, TX 77565

Robert W. Derrick Jr., Director and President	15,963,566	22.5%
1212 West Sam Houston Parkway North
Houston, TX 77043

Ron Burleigh, Director and Vice President	15,962,176	22.5%
1212 West Sam Houston Parkway North
Houston, TX 77043

Daniel Dror, Chairman and CEO	1,000,000	1.4%
601 Cien Street, Suite 235
Kemah, TX 77565

Sherry McKinzey, Director, VP and CFO	211,840	0.3%
601 Cien Street, Suite 235
Kemah, TX 77565

Directors and Officers (4 persons) (2)	33,137,582	46.7%

(1) Applicable percentage ownership is based on 70,882,250 shares of common stock outstanding as of December 31, 2011. 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, 2011 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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ITEM 13. 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.

ITEM 14. 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 consolidated financial statements for the years ended December 31, 2011 and 2010.

Principal Accounting Fees

The following table presents the fees for professional audit services rendered by GBH CPAs, PC for the audit of the Registrant's annual financial statements for the years ended December 31, 2011 and 2010, and fees billed for other services rendered by GBH CPAs, PC during those years. All of the services described below were approved by the Board of Directors.

	Year Ended
		December 31, 2011		December 31, 2010
Audit fees (1)		$	60,000	$	57,500
Audit-related fees (2)		$	-	$	-
Tax fees (3)		$	16,500	$	12,000
All other fees		$	1,400	$	-
(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

(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.	Description
31.1	Certification of CEO Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002
31.2	Certification of CFO Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to the Sarbanes-Oxley Act of 2002
32.1	Certification of CEO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
32.2	Certification of CFO Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

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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.

Delta Seaboard International, Inc.

By /s/ Daniel Dror

Daniel Dror

Chief Executive Officer, President, and Chairman

March 30, 2012

By /s/ Sherry L. McKinzey

Sherry L. McKinzey

Director, Chief Financial Officer, and Vice-President
March 30, 2012

By /s/ Robert W. Derrick, Jr.

Robert W. Derrick, Jr.

Director and President of Delta Seaboard Well Service, Inc.

March 30, 2012

By /s/ Ron Burleigh

Ron Burleigh

Director and Vice President

March 30, 2012

By /s/ Charles R. Zeller

Charles R. Zeller

Director

March 30, 2012