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Mail Stop 0408
July 7, 2006
Mr. Michael A. Gales
Executive Chairman
Gales Industries Incorporated
1479 North Clinton Avenue
Bay Shore, New York 11706
Re: Gales Industries Incorporated
(formerly Ashlin Development Corporation)
Amendment Number One to Form SB-2
File No. 333-131709
Filed June 29, 2006
Dear Mr. Gales:
We have reviewed your filing and have the following initial
comments; we may issue additional comments. Where indicated, we
think you should revise your documents in response to these
comments.
If you disagree, we will consider your explanation as to why our
comment is inapplicable or a revision is unnecessary. Please be
as
detailed as necessary in your explanation. In some of our
comments,
we may ask you to provide us with information so we may better
understand your disclosure. After reviewing this information, we
may
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. From the information presented in the financial statements of
Original Gales prior to the acquisition of AIM and AIM`s financial
statements, it appears AIM can be considered your predecessor
under
RC 405 as you have succeeded to substantially all of the business
of
AIM, and your operations prior to the acquisition of AIM were
insignificant relative to the operations acquired. We note that
you
have presented separate audited financial statements of AIM as of
and
for the 11-month period end November 30, 2005, and the years ended
December 31, 2004 and 2003. . Please note that Item 310 of
Regulation S-B requests the presentation of the financial
statements
of the company (Gales) and its predecessors and revise the
financial statements and disclosures throughout your filing to
specifically comply with this guidance.
2. As a related matter, please refer to our prior comment 16.
While
the previously issued audit report of a non-issuer involved in a
reverse merger would generally not be required to refer to PCAOB
standards, this exemption does not apply to reports issued after
the
financial statements become those of the registrant. As AIM is
the
predecessor of Gales, and as the Ashlin transaction has already
taken
place, the audit reports for AIM that are included in this filing
should refer to PCAOB standards. Please revise accordingly.
Financial Statements
Gales Industries Incorporated
Note 8 - Employee Benefit Plans, page F-28
3. Please provide the applicable disclosures required under
paragraphs 12 and 13 of SFAS 132(R) with regard to your
contributions
to the Union for medical benefits.
Note 12 - Stock Based Compensation Arrangements, page F-31
4. Refer to our previous comment 55. Please tell us more about
how
you determined the "date of grant" and the "current stock prices
used" for the options discussed in Appendix 55 of your most recent
response and provide us with your basis in GAAP for your
determinations. Specifically, if you entered into the employment
agreements in September of 2005, the agreements became effective
and
the options were "issued" in November of 2005 and shareholder
approval of the plan was completed as of February 15, 2006, please
explain how your determination of the individual "grant" dates
complies with the guidance in SFAS 123(R). In addition, please
tell
us how you selected the thirty days ended December 15, 2005 as the
measure of the "current stock price" to be used for these options
pursuant to SFAS 123(R). Finally, when you refer to the "Big
Charts"
from which prices were retrieved, we assume that you are referring
to
prices quoted on the OTC bulletin board as presented on page 50.
Please advise. We may have further comments upon review of your
response.
5. As a related matter, we note that your Note 12 to Gales
financial
statements contains presentations such as "Granted and Reserved
For
Grants" related to the options referenced above. Please explain
the
meaning of "reserved for grant" and the reasons why it is
appropriate
to include these "reserved" options in your tables and schedules
of
"granted" options. We assume that you are not yet contingently
obligated to issue equity instruments or transfer assets to an
employee who renders the requisite service as specified in the
definition of the "grant date" in Appendix E of SFAS 123(R).
Please
confirm. Please also tell us whether these are contingent options
and/or there are other conditions that effect the vesting or
exercisability of these options such as service, market or
performance conditions. We may have further comments upon
review
of your response.
Air Industries Machining Corp. Financial Statements
Consolidated Statements of Income and Retained Earnings, page F 43
and F-57
6. We note the addition of pro forma information to your income
statement in response to our previous comment 23. We also note
from
your disclosure on page 25 that you used an effective rate of
40.2%.
Please revise the footnoted explanation on the face of your income
statement to include such rate and how the appropriateness of such
rate was determined.
Other
7. Please update the financial statement and related disclosures
included in the Company`s Form SB-2 registration statement in
accordance with Item 310 (g) of Regulation S-B.
8. Please include currently dated consents of the independent
accountants.
9. To facilitate our review, please clearly mark all changes in
your
next amendment, including those changes made in the financial
statements. Alternatively, please provide us with a written list,
by
page number, of all changed items in the amendment.
* * * * * * * * * * * * *
Once you have received all of our comments, please amend
your
registration statement in response to these comments. You may
wish
to provide us with marked copies of the amendment to expedite our
review. Please furnish a cover letter with your amendment that
keys
your responses to our comments and provides any requested
information. Detailed cover letters greatly facilitate our
review.
Please understand that we may have additional comments after
reviewing your amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company and each filing person
acknowledging that:
* the company or filing person is responsible for the adequacy and
accuracy of the disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company or filing person may not assert staff comments as a
defense in any proceeding initiated by the Commission or any
person
under the federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Amy Marie Geddes at (202) 551-3304 or
Margery
E. Reich at (202) 551-3347 if you have questions regarding
comments
on the financial statements and related matters. Please contact
either Jonathan E. Gottlieb at (202) 551-3416 or me at (202) 551-
3491
with any other questions.
Sincerely,
Todd K. Schiffman
Assistant Director
cc. Vincent J. McGill, Esquire
Eaton & Van Winkle, LLP
3 Park Avenue
16th Floor
New York, New York 10016
Mr. Michael Gales
Gales Industries Inc.
July 7, 2006
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