Edgar Filing: Gales Industries Inc

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:

|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12

GALES INDUSTRIES INCORPORATED
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):

|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

|_| Fee paid previously with preliminary materials.

|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:

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GALES INDUSTRIES INCORPORATED
1479 North Clinton Avenue
Bay Shore, New York 111706

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 12, 2007

May 22, 2007

Dear Stockholder,

You are invited to attend the 2007 Annual Meeting of stockholders to be
held at 10:00 AM on June 12, 2007, at the offices of Eaton & Van Winkle LLP, 3
Park Avenue, 16th floor, New York, New York 10016.

The Annual Meeting will include a report on our business operations,
discussion and voting on the matters set forth in the accompanying notice of
Annual Meeting and proxy statement, and discussion and voting on any other
business matters properly brought before the meeting.

Whether or not you plan to attend, you can be sure your shares are
represented at the meeting by completing, signing, dating and returning your
proxy form in the enclosed envelope.

Thank you for your continued support.

Cordially,

James A. Brown
Chairman

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GALES INDUSTRIES INCORPORATED
1479 North Clinton Avenue
Bay Shore, New York 111706

NOTICE OF 2007 ANNUAL MEETING OF STOCKHOLDERS

To Our Stockholders:

NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of Gales
Industries Incorporated (the "Company") will be held at the offices Eaton & Van
Winkle LLP, 3 Park Avenue, 16th floor, New York, New York 10016, on June 12,
2007 at 10:00 AM, New York time, for the following purposes, all as more fully
described in the attached Proxy Statement:

(a) the election of seven (7) directors to serve until the next annual
meeting of stockholders and until their respective successors are
elected and qualified;

(b) the ratification of the selection by the Audit Committee of our
Board of Directors of Golub Goldstein & Kessler LLP as the
independent registered public accounting firm for the year ending
December 31, 2007;

(d) adjourn the Annual Meeting to solicit additional proxies in the
event there are insufficient votes to approve any of the foregoing
Proposals; and

(e) such other business as may properly come before the Annual Meeting
or any adjournment thereof

You are cordially invited to attend the meeting in person. You are
requested to date, sign and return the accompanying form of proxy in the
envelope enclosed for that purpose (to which no postage need be affixed if
mailed in the United States) whether or not you expect to attend the meeting in
person. The proxy is revocable by you at any time prior to its exercise and will
not affect your right to vote in person in the event you attend the meeting or
any adjournment thereof. The prompt return of the proxy will be of assistance in
preparing for the meeting and your cooperation in this respect will be
appreciated.

A copy of our Annual Report for the year ended December 31, 2006 is
enclosed.

BY ORDER OF THE BOARD OF DIRECTORS

Stephen M. Nagler
Secretary

Bay Shore, New York
May 22, 2007

GALES INDUSTRIES INCORPORATED
1479 North Clinton Avenue
Bay Shore, New York 111706

PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 12, 2007

This proxy statement and the accompanying proxy are being furnished in
connection with the solicitation of proxies by our Board of Directors for use in
voting at the 2007 Annual Meeting of Stockholders to be held at the offices of
Eaton & Van Winkle LLP, and any adjournments thereof. Distribution to
stockholders of this proxy statement and a proxy form is scheduled to begin on
or about May 22, 2007 to each stockholder of record at the close of business on
May 17, 2007.

Your vote is important. Whether or not you plan to attend the Annual
Meeting, please take the time to vote your shares of common stock or preferred
stock as soon as possible. You can ensure that your shares are voted at the
meeting by completing, signing, dating and returning the enclosed proxy card in
the envelope provided. Submitting your proxy will not affect your right to
attend the meeting and vote. A stockholder who gives a proxy may revoke it at
any time before it is exercised by voting in person at the Annual Meeting, by
delivering a subsequent proxy or by notifying the inspector of election in
writing of such revocation.

INFORMATION ABOUT THE 2007 ANNUAL MEETING AND PROXY VOTING

What Matters are to be Voted on at the Annual Meeting?

We intend to present the following proposals for stockholder consideration
and voting at the Annual Meeting:
(1) the election of seven (7) directors to serve for until the next annual
meeting of stockholders and until their respective successors are elected and
qualified;
(2) the ratification of the selection by the Audit Committee of our Board
of Directors of Golub Goldstein & Kessler LLP as the independent registered
public accounting firm for the year ending December 31, 2007;
(3) amend our certificate of incorporation to change our corporate name to
Air Industries Group, Inc.;
(4) adjourn the Annual Meeting to solicit additional proxies in the event
there are insufficient votes to approve any of the foregoing Proposals; and
(5) such other business as may properly come before the Annual Meeting or
any adjournment thereof.

What is the Board's Recommendation?

The Board of Directors recommends votes FOR items 1, 2, 3 and 4 on your
proxy card.

Will Any Other Matters be Presented for a Vote at the Annual Meeting?

The Board of Directors did not receive any notice prior to the deadline
for submission of additional business that any other matters might be presented
for a vote at the Annual Meeting. However, if another matter were to be properly
presented, the proxies would use their own judgment in deciding whether to vote
for or against it.

Who is Entitled to Vote?

Our voting securities consist of our series B convertible preferred stock
and our common stock. All stockholders of record of our series B convertible
preferred stock or common stock at the close of business on May 17, 2007 are
entitled to vote at the Annual Meeting. Holders of our series B convertible
preferred stock and holders of our common stock on that date will vote together
as a single class on all of the matters described above. Each share of common
stock will be entitled to one vote and each share of series B convertible
preferred stock will be entitled to 27 votes, representing that number of votes
that the holder would have if that share had been converted into common stock on
May 17, 2007.

As of the close of business on May 17, 2007, we had outstanding 59,380,036
shares of common stock and 802,300 shares of series B convertible preferred

stock. The total number of votes that may be cast at the Annual Meeting is
81,042,136, representing the total number of shares of common stock that we
would have outstanding on that date if all of those shares of series B
convertible preferred stock had been converted into common stock on that date

If you are the beneficial owner, but not the record owner, of our series B
convertible preferred stock or common stock, you will receive instructions about
voting from the bank, broker or other nominee that is the stockholder of record
of your shares. Contact your bank, broker or other nominee directly if you have
questions.

Who can Attend the Annual Meeting?

Only stockholders of record of our common stock or series B convertible
preferred stock, or their duly appointed proxies, are entitled to attend the
Annual Meeting. If you are a stockholder of record and wish to attend the Annual
Meeting, please so indicate on the proxy card.

If a bank, broker or other nominee is the record owner of your shares, you
will need to have proof that you are the beneficial owner to be admitted to the
Annual Meeting. A recent statement or letter from your bank or broker confirming
your ownership, or presentation of a valid proxy from a bank, broker or other
nominee that is the record owner of your shares, would be acceptable proof of
your beneficial ownership.

How do I Vote my Shares?

o Stockholders of record may grant a proxy with respect to their
shares by mail

o Voting instructions appear on your proxy card.

o If you are a stockholder of record or a duly appointed proxy of a
stockholder of record, you may attend the Annual Meeting and vote in
person. However, if your shares are held in the name of a bank,
broker or other nominee, and you wish to attend the Annual Meeting
to vote in person, you will have to contact your bank, broker or
other nominee to obtain its proxy. Bring that document with you to
the meeting.

o Proxies submitted by mail or on the Internet will be voted in the
manner you indicate by the individuals named on the proxy. If you do
not specify how your shares are to be voted, the proxies will vote
your shares FOR Proposals 1, 2, 3 and 4.

May I Change or Revoke my Proxy After it is Submitted?

Yes, you may change or revoke your proxy at any time before the Annual
Meeting by:

o returning a later-dated proxy card;

o subsequently granting a proxy on the Internet;

o attending the Annual Meeting and voting in person; or

o sending your written notice of revocation to Stephen M. Nagler, our
Secretary.

Your changed proxy or revocation must be received before the polls close
for voting.

What is a "Quorum?"

In order for business to be conducted at the Annual Meeting, a quorum must
be present. A quorum will be present if stockholders of record holding a
majority in voting power of the outstanding shares of our series B convertible
preferred stock and common stock entitled to vote at the Annual Meeting are
present in person or are represented by proxies.

What Vote is Necessary to Pass the Items of Business at the Annual Meeting?

Holders of our common stock will vote as a single class and will be
entitled to one vote per share with respect to each matter to be presented at
the Annual Meeting. The seven (7) nominees for director receiving a plurality of
the votes cast by holders of our series B convertible preferred stock and common

stock, at the Annual Meeting in person or by proxy, shall be elected to our
Board. The favorable vote of a majority of our outstanding shares entitled to
vote at the Annual Meeting, in person or by proxy, is required to approve the
proposal to change our corporate name. The holders of a majority of shares voted
at the Annual Meeting, in person or by proxy, is required for approval of all
the remaining matters.

How are Abstentions and Broker Non-Votes Counted?

Abstentions and broker non-votes will be counted to determine whether a
quorum is present. However, if a stockholder abstains from voting as to a
particular matter, those shares will not be counted as voting for or against
that matter. If a broker or other record holder of shares returns a proxy card
indicating that it does not have discretionary authority to vote as to a
particular matter ("broker non-votes"), those shares will not be counted as
voting for or against that matter. Accordingly, abstentions and broker non-votes
will have no effect on the outcome of a vote.

What is the Deadline for Submission of Stockholder Proposals for the 2008 Annual
Meeting?

Proposals that our stockholders may wish to include in our proxy statement and
form of proxy for presentation at our 2008 annual meeting of stockholders must
be received by or delivered to us at our executive offices, 1479 North Clinton
Avenue, Bay Shore, New York 111706 Attention: Secretary, no later than January
23, 2008. Any stockholder proposal must be made in accordance with the rules and
regulations of the Securities and Exchange Commission and must constitute a
proper matter for stockholder action.

Where can I Find the Voting Results of the Annual Meeting?

The preliminary voting results will be announced at the Annual Meeting.
The final results will be published in our quarterly report on Form 10-QSB for
the quarter ending June 30, 2007.

May I Request Electronic Delivery of My Proxy Statement and Annual Report?

This Proxy Statement and our Annual Report on Form 10-KSB may be viewed
online at the website maintained by the SEC for reporting companies at
www.sec.gov. Should you choose to receive your proxy materials electronically,
your choice will remain in effect until you notify us that you wish to resume
mail delivery of these documents. To request electronic delivery, please contact
our Secretary using the information provided under "How do I communicate
directly with Gales Industries Incorporated?'' below.

If you hold your shares of stock through a bank, broker or other holder of
record, refer to the information provided by that entity for instructions on how
to elect this option.

How can I Get a Copy of Gales Industries Annual Report on Form 10-KSB?

To obtain without charge a copy of Gales Industries Annual Report on Form
10-KSB for the year ended December 31, 2006, address your request to our
executive offices, 1479 North Clinton Avenue, Bay Shore, New York 111706
Attention: Secretary. The annual report on Form 10-KSB also may be accessed at
the website maintained by the SEC at www.sec.gov.

INFORMATION ABOUT COMMUNICATIONS WITH US AND OUR BOARD OF DIRECTORS

How may I Communicate Directly with the Board of Directors?

The Board provides a process for stockholders to send communications to
the Board. You may communicate with the Board, individually or as a group, as
follows:

BY MAIL: to our Board of Directors at our executive offices, 1479 North Clinton
Avenue, Bay Shore, New York 111706, Attn: Secretary
BY TELEPHONE: at 1-631-968-5000.

You should identify your communication as being from a stockholder. The
Secretary may require reasonable evidence that your communication or other
submission is made by a stockholder before transmitting your communication to
the Board.

How may I Communicate Directly with the Non-Employee Directors?

You may communicate with the non-employee directors of the Board,
individually or as a group, by any of the means set forth above or by writing
to:

Non-Employee Directors of the Board of Directors, at our executive offices, 1479
North Clinton Avenue, Bay Shore, New York 111706 Attention: Secretary.

How do I Communicate Directly with the Company?

You may communicate with us by writing to: our Secretary or Investor
Relations at our executive offices, 1479 North Clinton Avenue, Bay Shore, New
York 111706.

Who will pay the expenses related to the Annual Meeting?

We are responsible for, and will pay, all expenses that we incur in
connection with the Annual Meeting, including the costs associated with the
preparation, printing and mailing of this proxy statement and the solicitation
of proxies.

PROPOSAL 1:

ELECTION OF DIRECTORS

At the Annual Meeting, the seven (7) nominees named below are to be
elected as directors to hold office until the 2008 Annual Meeting and until
their successors have been elected and have qualified. Six of the nominees have
been members of our Board since November 30, 2005.

All of the nominees named below have been nominated by our Board to be
elected by our stockholders. We are not aware of any reason why any nominee
would be unable to serve as a director. If a nominee is unable to serve, the
shares represented by all valid proxies will be voted for the election of any
other person that our Board may nominate.

THE BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF
OUR VOTING SECURITIES VOTE FOR THE ELECTION OF
EACH OF THE FOLLOWING NOMINEES:

James A. Brown, age 54, became our Chairman on March 17, 2007, following his
appointment as Co-Chairman on February 13, 2007. Mr. Brown was Chief Executive
Officer and Secretary of our predecessor, Ashlin Development Corporation, from
September 2004 to November 30, 2005 and was Ashlin's Chairman of the Board from
May 2003 to November 30, 2005. Ashlin filed for bankruptcy protection while Mr.
Brown was its Chairman and CEO. Mr. Brown currently serves in a Board or
advisory capacity with other firms, including Preferred Commerce, a privately
held, seven year old technology solutions provider headquartered in West Palm
Beach. Mr. Brown also advises a development stage Florida- based firm focused on
bringing scientific breakthroughs in the acoustic arena to the consumer market.
Mr. Brown has served as a private equity manager, targeting undervalued
opportunities in both the public and private arenas. He has also served as a
work-out specialist for firms at the behest of creditors, management, and
investors. Mr. Brown has advised more than thirty firms on matters including
strategy, corporate finance and business process.

Louis Giusto, age 64, has been our Vice Chairman, Chief Financial Officer and
Treasurer since November 30, 2005. Mr. Giusto has over 30 years of financial
control experience with foreign and domestic banks, non-bank financial service
entities and consumer product companies. From 2003 to November 2005 Mr. Giusto
acted as an independent consultant to a number of private businesses. From 2000
to 2003, Mr. Giusto was an Account Manager for a public accounting firm and the
SVP Finance and Operations of Credit2B.com a web-based internet company. Before
joining C2B, Mr. Giusto served for fourteen years in various positions with
Fleet Bank and, prior to its acquisition by Fleet Bank, NatWest PLC, London.
During his tenure at NatWest, Mr. Giusto served as Senior Financial Officer and
Treasurer of NatWest Commercial Services, Inc. (a billion dollar wholly owned
subsidiary of NatWest PLC, London) and a Credit Administrator (Risk Manager)
with Fleet Bank. Mr. Giusto serves as a director of Long Island Consultation
Center, a not-for-profit psychiatric care facility. Mr. Giusto graduated from
New York University with a BS in Economics and Accounting and from Long Island
University (with Distinction) with an MBA in Finance.

Peter Rettaliata, age 56, has been our President and Chief Executive Officer
since November 30, 2005. He also has been the President of our wholly-owned
subsidiary, Air Industries Machining Corp., referred to as AIM, since 1994.
Prior to his involvement at AIM, Mr. Rettaliata was employed by Grumman
Aerospace Corporation for twenty-two years. Professionally, Mr. Rettaliata is
the Chairman of "ADAPT", an organization of regional aerospace companies, a past
member of the Board of Governors of the Aerospace Industries Association, and a
member of the Executive Committee of the AIA Supplier Council. He is a graduate
of Niagara University where he received a B.A. in History and the Harvard
Business School where he completed the PMD Program.

Dario Peragallo, age 42, has been our Executive Vice President since November
30, 2005 and is also Executive Vice President of Manufacturing for AIM. Mr.
Peragallo has been associated with AIM for over 25 years. He became AIM's
Director of Manufacturing in 2000. In addition, he has helped develop and
maintain AIM's current business systems. Mr. Peragallo has been the company
"Lean Advocate" since the inception of the program at AIM to decrease its
inventory and increase productivity. Mr. Peragallo became Executive Vice
President with overall responsibility for engineering, manufacturing and
customer-critical technical matters in 2003. He has been an active member of
Diversity Business since 2000, which is an organization specializing in the
promotion of small and minority owned businesses. He is a graduate of SUNY
Farmingdale where he received a B.A. in Manufacturing Engineering. Mr. Peragallo
oversees all engineering and production matters relating to AIM.

Seymour G. Siegel, age 64, has been a principal in the Business Consulting Group
of Rothstein, Kass & Company, P.C., a national firm of accountants and
consultants since April 2000. He specializes in providing strategic advice to
business owners including mergers acquisitions; succession planning; capital
introductions and long range planning. In 1974, Mr. Siegel founded, and from
1974 to 1990 was managing partner of, Siegel Rich and Co, P.C., CPAs. In 1990,
Siegel Rich merged into Weiser LLP, then known as M.R.Weiser & Co., LLC, a large
regional firm where he had been a senior partner. In 1995, Mr. Siegel founded
another firm called Siegel Rich, which became a division of Rothstein, Kass in
April 2000. Mr. Siegel has been a director, trustee and officer of numerous
businesses, philanthropic and civic organizations. He serves as a director and
audit committee chairman of Hauppauge Digital Inc. and Emerging Vision
Incorporated and has served in a similar capacity at Oak Hall Capital Fund,
Prime Motor Inns Limited Partnership, Noise Cancellation Technologies and
Barpoint.com and serves as the chairman of the audit committee and as a member
of the compensation committee for Global Aircraft Solutions Incorporated. Mr.
Siegel is the Chairman of the Audit Committee of the Board.

General Ira A. Hunt, Jr.(USA, Ret), age 81, graduated from the United States
Military Academy in 1945 and subsequently served thirty-three years in various
command and staff positions in the U.S. Army, retiring from active military
service as a Major General in 1978. His last military assignment was as Director
of the Office of Battlefield Systems Integration. Subsequently, General Hunt was
president of Pacific Architects and Engineers in Los Angeles and Vice President
of Frank E. Basil, Inc. in Washington, D.C. Since 1990, General Hunt has been a
director of SafeNet Inc. (Nasdaq: SFNT), an information security technology
company. He is a Freeman Scholar of the American Society of Civil Engineers and
has a M.S. in Civil Engineering from the Massachusetts Institute of Technology,
a M.B.A. from the University of Detroit; a Doctor of the University Degree from
the University of Grenoble, France and a Doctor of Business Administration
Degree from the George Washington University. General Hunt is Chairman of the
Compensation Committee of our Board and is a member of the Audit Committee.

David J. Buonanno, age 51, is a consultant to Dresser-Rand Corporation as well
as other companies in the aerospace and defense industries. Mr. Buonanno has
extensive experience in manufacturing, supply management and operations. He was
employed by Sikorsky Aircraft, Inc., a subsidiary of United Technologies
Corporation, as Vice President, Supply Management (from January 1997 to July
2006) and as Director, Systems Subcontracts (from November 1992 to January
1997). From May 1987 to November 1992, he was employed by General Electric
Company and GE Astro Space, serving as Operations Manager for GE in 1992 and
Manager, Program Materials Management of GE Astro Space from December 1989 to
January 1992. From June 1977 to May 1987, he was employed by RCA and affiliated
companies, including RCA Astro Space. Mr. Buonanno attended Lehigh University
College of Electrical Engineering and holds a B.S. in Business Administration
from Rutgers University. He completed the Program for Management Development at
Harvard Business School in 1996.

INFORMATION CONCERNING THE BOARD OF DIRECTORS,
BOARD COMMITTEES AND CORPORATE GOVERNANCE

Board Composition

Our Board of Directors consists of seven (7) directors. Our Board has
determined that James A. Brown, Seymour G. Siegel and General Ira A. Hunt, Jr.
(USA Ret) are "independent directors" under the rules and regulations of the
SEC. Our Board held five meetings in 2006.

Committees of the Board

Our Board of Directors has established an Audit Committee and a
Compensation Committee.

During 2006, each of the members of our Board of Directors attended at
least 75% of the total meetings of the Board and committees on which he served.

Audit Committee. Our Audit Committee is responsible for preparing reports,
statements and charters required by the federal securities laws, as well as:

o overseeing and monitoring the integrity of our consolidated
financial statements, our compliance with legal and regulatory
requirements as they relate to financial statements or accounting
matters, and our internal accounting and financial controls;

o preparing the report that SEC rules require be included in our
annual proxy statement;

o overseeing and monitoring our independent registered public
accounting firm's qualifications, independence and performance;

o providing the Board with the results of our monitoring and
recommendations; and

o providing to the Board additional information and materials as it
deems necessary to make the Board aware of significant financial
matters that require the attention of the Board.

Mr. Siegel and General Hunt are members of the Audit Committee, each of
whom is a non-employee member of the Board of Directors. Mr. Siegel serves as
Chairman of the Audit Committee and also qualifies as an "audit committee
financial expert," as that term is defined under the SEC rules implementing
Section 407 of the Sarbanes-Oxley Act. The Board has determined that each member
of our Audit Committee meets the current independence and financial literacy
requirements under the Sarbanes-Oxley Act and SEC rules and regulations. Our
Audit Committee met four times in 2006. You may obtain a copy of the charter of
the Audit Committee upon written request to our corporate secretary.

Compensation Committee. Our Compensation Committee is composed of General
Hunt (Chairman), and Messrs. Siegel and Brown, each of whom is a non-employee
member of our Board of Directors. Our Compensation Committee met once in 2006.
The Compensation Committee is responsible for, among other things:

o reviewing and approving for the chief executive officer and other
executive officers (a) the annual base salary, (b) the annual
incentive bonus, including the specific goals and amount, (c) equity
compensation, (d) employment agreements, severance arrangements and
change in control arrangements, and (e) any other benefits,
compensations, compensation policies or arrangements;

o reviewing and making recommendations to the Board regarding the
compensation policy for such other officers as directed by the
Board;

o preparing a report to be included in our annual proxy statement, if
required under applicable rules of the SEC and any exchange or
automated quotation service that lists our securities, or through
whose facilities our securities are traded, that describes: (a) the
criteria on which compensation paid to the chief executive officer
for the last completed fiscal year is based; (b) the relationship of
such compensation to our performance; and (c) the committee's
executive compensation policies applicable to executive officers;
and

o acting as administrator of our current benefit plans and making
recommendations to the Board with respect to amendments to the
plans, changes in the number of shares reserved for issuance
thereunder and regarding other benefit plans proposed for adoption.

The information contained in this proxy statement with respect to the
charter of our Audit Committee and Compensation Committee, and the independence
of the non-management members of our Board of Directors shall not be deemed to
be "soliciting material" or to be "filed" with the SEC, nor shall the

information be incorporated by reference into any future filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that we specifically incorporate it by reference in a filing.

Code of Ethics

We have adopted a written code of ethics that applies to our principal
executive officer, senior financial officers and persons performing similar
functions. Upon written request to our corporate secretary, we will provide you
with a copy of our code of ethics, without cost.

Director Compensation

For services rendered from the commencement of their terms through our
next annual meeting of stockholders, each of the then non-management directors
(Mr..Brown, General Hunt, Mr. Siegel and Mr. Nagler) was granted an option to
purchase 100,000 shares of the our common stock. These options vest in equal
increments on March 1 of each of 2007, 2008 and 2009 and are exercisable at a
price of $0.27 per share for a period of seven years from the date of grant.

For their services, we will pay each non-management director a base fee of
$18,000 per year and $1,500 for each Board meeting attended. In addition, we
will pay the Chairman of the Audit Committee $12,000 for serving in that
capacity, members of the Audit Committee $1,000 for each meeting attended, and
the Chairman of each of the Compensation Committee $6,000 for serving in that
capacity. Beginning in December 2006 and continuing into 2007, we paid Mr.
Rounsevelle W. Schaum fees for certain per diem services to our company that are
included in the table below. Our Board accepted the resignation of Mr. Schaum
effective as of April 13, 2007.

The following table sets forth information concerning the compensation we
paid to our directors during the fiscal year ended December 31, 2006.

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DIRECTOR COMPENSATION
------------------------------------------------------------------------------------------------------------------------------------
Non-Qualified
Fees Stock Option Non-Equity Deferred All Other
Name Earned or Awards Awards Incentive Plan Compensation Compensation Total ($)
Paid in ($) ($) Compensation Earnings ($) ($)
Cash ($) ($)
(a) (b) (c) (d) (e) (f) (g) (j)
------------------------------------------------------------------------------------------------------------------------------------

Michael A. Gales (1)
James A. Brown 15,831 -- -- -- -- -- 15,831
Louis A. Giusto -- -- -- -- -- -- --
Peter D. Rettaliata -- -- -- -- -- -- --
Dario A. Peragallo -- -- -- -- -- -- --
Stephen M. Nagler (2) 15,831 -- -- -- -- -- 15,831
Seymour G. Siegel 24,231 24,231
Rounsevelle W
Schaum (3) 26,498(1) -- -- -- -- -- 26,498(1)
M.Gen. Ira A Hunt, Jr
(USA Ret.) 15,831 -- -- -- -- -- 15,831
----------

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(1) Mr. Gales resigned as a member of the Board on March 16, 2007.
(2) Mr. Nagler is not standing for re-election to the Board, and his term as a
director will end, at the Annual Meeting.
(2) Our Board accepted the resignation of Mr. Schaum effective as of April 13,
2007.

SECURITY OWNERSHIP

The following table sets forth information known to us regarding
beneficial ownership of our series B convertible preferred stock and our common
stock as of May 17, 2007 by (i) each person known by us to own beneficially more
than 5% of the outstanding shares of each of those classes, (ii) each of our
directors, nominees for director, and executive officers, and (iii) all of our
officers and directors as a group. Except as otherwise indicated, we believe,
based on information provided by each of the individuals named in the table
below, that such individuals have sole investment and voting power with respect
to such shares, subject to community property laws, where applicable.

As of May 17, 2007, we had outstanding 802,300 shares of our series B
convertible preferred stock and 59,380,036 shares of our common stock, without
giving any effect to the 11,284,894 additional shares of common stock that we
may issue upon exercise of outstanding options and warrants exercisable at a
range of prices from $.22 to $.55 per share. Each share of series B convertible
perferred stock is convertible into 27 whole shares of our common stock.

Name Number of Shares Percent of Class
---- Series B Preferred Common* Series B Preferred Common*
------------------ ------- ------------------ -------

Owner of More than 5% of Class
Michael A. Gales -- 5,326,219 (1) -- 8.78%
333 East 66th Street
New York, NY 10022

Hillson Partners LP(2) 112,500 3,037,500 14.02% 4.87%
110 N. Washington Street, Suite 401
Rockville, MD 20850

Directors and Executive Officers
Louis A. Giusto -- 3,884,538 (3) -- 6.49%
Peter Rettaliata -- 1,468,139 (4) -- 2.46%
Dario Peragallo -- 1,468,139 (5) -- 2.46%
Seymour G. Siegel -- 133,333 (6) -- **
Ira A. Hunt, Jr -- 842,430 (6)(7) -- 1.42%
Stephen Nagler -- 178,788 (7)(8) -- **
James A. Brown -- 709,601 (7) -- 1.19%

Nominee
David J. Buonanno -- -- -- --

All Directors and officers as a group, -- 8,684,968 (3)(4)(5)(6)(8) -- 14.60%
a group (7 persons)

* Assumes the conversion of the shares of series B convertible preferred stock
owned by the stockholder listed in the table, but not by any other holder.
** Less than 1%

(1) Includes 1,250,000 shares we may issue to Mr. Gales upon exercise of
options granted under his employment agreement that pursuant to his separation
agreement are exercisable until March 16, 2008.

(2) The general partner of Hillson Partners LP is _____, who has the sole
power to vote and dispose of the shares.

(3) Includes 480,000 shares we may issue to Mr. Giusto upon exercise of
the vested portion of the 1,200,000 options granted to him under his employment
agreement.

(4) Includes 300,000 shares we may issue to Mr. Rettaliata upon exercise
of the vested portion of the 1,200,000 options granted to him under his
employment agreement.

(5) Includes 300,000 shares we may issue to Mr. Peragallo upon exercise of
vested portion of the 1,200,000 options granted to him under his employment
agreement.

(6) Includes 45,455 shares we may issue to Mr. Nagler upon exercise of
warrants. Does not include 150,000 shares held by Eaton & Van Winkle LLP, a law
firm of which Mr. Nagler is a partner.

(7) Includes, in each case, 33,333 shares we may issue to Messrs. Brown,
Hunt, Nagler and Siegel upon exercise of the vested portion of the 100,000
options granted to each of them on February 13, 2007.

(8) Includes 709,097 shares owned by Mr. Hunt's spouse.

Compensation of Our Executive Officers

The following table shows compensation which we (including AIM) awarded or
paid to, or which was earned from us, in all capacities for fiscal years ended
December 31, 2006 and 2005, by (i) each individual who served as our chief
executive officer for all, or a portion of, 2006 and (ii) each other individual
who served as an executive officer of our company (including AIM) and received
total compensation in excess of $100,000 for our 2006.

o Michael A. Gales, our former Executive Chairman, who resigned all of
his positions with us as of March 16, 2007;
o Louis A. Giusto, our Vice Chairman, Chief Financial Officer and
Treasurer since November 30, 2005;
o Peter D. Rettaliata, our Chief Executive Officer and President since
November 30, 2005 and an officer of AIM;
o Dario A. Peragallo, our Executive Vice President since November 30,
2005 and an officer of AIM;

Summary Compensation Table

Name Year Salary Bonus Stock Option Non-Equity Change in All Other Total
and ($) ($) Awards Awards Incentive Plan Pension Value Compensation ($)
Principal ($) ($) ($) Compensation and
Position ($) Nonqualified
Deferred
Compensation
Earnings
($)
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
------------------------------------------------------------------------------------------------------------------------------------

Michael 2006 $250,000 -- 52,888(1) -- 15,938(2) $318,826
A.Gales, 2005 $ 21,233(1) -- 38,384(1) -- -- -- 59,617
Executive
Chairman

Louis A 2006 $230,000 -- 50,772(1) -- 14,768(2) 295,540
Giusto, 2005 $ 19,534(2) -- 36,850(1) -- -- 56,384
Vice
Chairman,
Chief
Financial
Officer and
Treasurer

Peter D 2006 $230,000 -- 31,733(1) -- -- -- 261,733
Rettaliatta, 2005 $241,510 -- 23,031(1) -- -- -- 265,541
CEO

Dario A. 2006 $230,000 -- 31,773(1) -- -- -- 261,733
Peragallo 2005 $242,344 -- 23,031(1) -- -- -- 265,375
Executive
VP

----------
(1) Consists of stock options to purchase shares of common stock, the
vesting schedule and other terms of which are set forth in the footnotes to the
table below under the caption "Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values".
(2) Consists of automobile leasing, maintenance, parking and insurance.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information as of December 31, 2006, concerning
outstanding equity awards granted to the individuals listed in the Summary
Compensation Table. We did not grant options, or make stock awards, to any of
our executive officers in 2006.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

Option Awards Stock Awards*
------------- -------------

Equity Incentive Equity Incentive
Plan Awards: Plan Awards:
Number Number of Securities Unearned Shares,
of Securities Underlying Shares or Units of Units or Other
Underlying Unexercised Stock that have Rights that have
Unexercised Options Unearned Options Exercise Expiration Not Vested Not Vested
---------- ----------
Name Exercisable Unexercisable (#) Price Date Number Market Value Number Market Value
----------- ------------- -------------- ----- ---- ------ ------------ ------ ------------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)

Michael A. Gales (1) 500,000 750,000 - (1) 03/16/2008 - - -
Louis A. Giusto (2) 480,000 720,000 - (2) 11/30/2015 - - -
Peter D. Rettaliata (3) 300,000 900,000 - (3) 11/30/2015 - - -
Dario A. Peragallo (3) 300,000 900,000 - (3) 11/30/2015 - - -

----------
* On December 29, 2006, the last trading day of 2006, the last sale price of a
share of our common stock was $0.25.

(1) Represents options granted to Mr. Gales pursuant to his employment
agreement. One fifth of these options vested as of November 30, 2005 at an
exercise price of $0.22 per share and another 250,000 vested on September 15,
2006 at an exercise price of $0.428 per share. Mr. Gales terminated his
employment with us and his employment agreement effective March 16, 2007. Under
the terms of his separation agreement, 750,000 options vested on March 16, 2007,
and all of his options are exercisable through March 16, 2008.
(2) One-fifth of these options vested as of November 30, 2005 at an
exercise price of $0.22 per share and another 240,000 vested on September 15,
2006 at an exercise price of $0.428 per share. The balance will vest in equal
increments of 240,000 shares each on the second through fourth anniversaries of
September 15, 2005. The exercise price of the options vesting on each of
September 15, 2007, 2008 and 2009 will be the higher of (a) $0.22 per share or
(b) the average trading price of our common stock for the thirty trading days
ending September 15, 2007, 2008 and September 15, 2009, respectively.

(3) One-eighth of these options vested as of November 30, 2005 at an
exercise price of $0.22 per share and another 150,000 vested on September 15,
2006, at an exercise price of $0.428 per share. The balance will vest in equal
increments of 150,000 shares each on the second through seventh anniversaries of
September 15, 2005. The exercise price of the options vesting on each of
September 15, 2007, 2008, 2009, 2010, 2011 and 2012 will be the higher of (a)
$0.22 per share or (b) the average trading price of our common stock for the
thirty trading days ending September 15, 2007, 2008, 2009, 2010, 2011 and
September 15, 2012, respectively.

Equity Compensation Plan Information

The following table provides certain information with respect to all of our
equity compensation plans in effect as of December 31, 2006.

Number of
Securities to be Remaining Available
Issued upon Weighted-Average for Issuance under
Exercise of Exercise Price of Equity Compensation
Outstanding Outstanding Plans (Excluding
Options, Warrants Options, Warrants Securities
and Rights and Rights Reflected in Column(a))
Plan Category (a) (b) (c)
------------------------------- --------------------------- ---------------------------

Equity compensation
plans approved by
security holders None $ -- --

Equity compensation
plans not approved
by security holders(1) 9,030,436 $ .23 5,150,000

Total (1) 9,030,346 $ .23 5,150,000

----------

(1) Shareholder approval of our 2005 Stock Incentive Plan was completed as of
February 15, 2006. In connection with our merger, our Board adopted our
2005 Stock Incentive Plan, and issued stock options to purchase 4,850,000
shares to our new executive officers. The vesting and exercise prices of
the 4,850,000 options which we have granted to our executive officers are
set forth under the section of this prospectus captioned " Executive
Compensation - Outstanding Equity Awards at Fiscal Year-End." As of
December 31, 2006, 5,150,000 shares remained available for grant under our
2005 Stock Incentive Plan.

Of the 9,030,346 shares included above, (i) 4,138,678 shares may be
acquired upon exercise of warrants issued to GunnAllen Financial, Inc., at
exercise price of $0.22 per share, and (ii) 41,668 shares may be acquired
upon exercise of warrants issued to an investor relations firm, at a
weighted average price of $0.70 per share.

Employment Agreements

The employment agreement of Louis Giusto became effective as of November 30,
2005 and will terminate five years thereafter, but will be extendable for
successive three one-year renewal periods at the option of Mr. Giusto and our
company. Under his employment agreement, Mr. Giusto will receive a base salary
at an annual rate of $230,000, which will increase a minimum of 10% per year if
our operating profits have increased by at least 5% over the preceding 12-month
period. Mr. Giusto will be entitled to an annual bonus to be determined by our
Board of Directors but which must equal at least 50% of his annual base salary.
If he is dismissed without cause, Mr. Giusto is entitled to receive salary and
benefits for the period which is the greater of the remaining initial term (or
renewal period, as the case may be) of his employment agreement or one year. In
addition, we granted to Mr. Giusto, upon the execution of his employment
agreement, options to purchase 1,200,000 shares of common stock, exercisable
over a ten-year period commencing on the date of grant. See the applicable
footnote under the foregoing table captioned, "Outstanding Equity Awards at
Fiscal Year-End". Mr. Giusto's employment agreement also contains restrictive
covenants prohibiting Mr. Giusto (i) from directly or indirectly competing with
us, (ii) from soliciting any customer of our company or AIM for any competitive
purposes and (iii) from employing or retaining any employee of our company or
AIM or soliciting any such employee to become affiliated with any entity other
than our company or AIM during the twelve-month period commencing upon the
termination of his agreement.

The employment agreement of Peter D, Rettaliata became effective as of November
30, 2005, and will terminate five years thereafter, but will be extendable for
successive three one-year periods unless he or our company decides not to extend
the agreement. Under his employment agreement, Mr. Rettaliata will receive a
base salary at an annual rate of $230,000, which will increase a minimum of 5%
per year if our operating profits have increased by at least 5% over the
preceding 12-month period, and such bonus compensation as the Board of Directors
may determine. The terms of Mr. Rettaliata's employment agreement relating to
severance upon termination without cause are the same as those provided for in
Mr. Giusto's employment agreement. In addition, we granted to Mr. Rettaliata,
upon the execution of his employment agreement, options to purchase 1,200,000
shares of common stock, exercisable over a ten-year period commencing on the
date of grant. Please see the applicable footnote under the foregoing table
captioned, "Outstanding Equity Awards at Fiscal Year-End". Mr. Rettaliata's
employment agreement also contains the restrictive covenants included in Mr.
Giusto's employment agreement, discussed above.

The employment agreement of Dario A. Peragallo became effective as of November
30, 2005, and will terminate five years thereafter, but will be extendable for
successive three one-year periods unless he or our company decides not to extend
the agreement. Under his employment agreement, Mr. Peragallo will receive a base
salary at an annual rate of $230,000, which will increase a minimum of 5% per
year if our operating profits have increased by at least 5% over the preceding
12-month period, and such bonus compensation as the Board of Directors may
determine. The terms of Mr. Peragallo's employment agreement relating to
severance upon termination without cause are the same as those provided for in
Mr. Giusto's employment agreement. In addition, we granted to Mr. Peragallo,
upon the execution of his employment agreement, options to purchase 1,200,000
shares of common stock, exercisable over a ten-year period commencing on the
date of grant. The vesting schedule and exercise price relating to Mr.
Peragallo's options are the same as those relating to Mr. Rettaliata's options
set forth above. Mr. Peragallo's employment agreement also contains the
restrictive covenants included in Mr. Giusto's employment agreement, discussed
above.

We have agreed with GunnAllen Financial, Inc., placement agent for our private
placement of series B convertible preferred stock, that during the two year
period following the completion of that offering, without its prior consent we
will not change or modify the employment agreements with, or grant more stock
options to, Messrs. Giusto, Rettaliata and Peragallo.

In March 2007, we entered into an agreement with James A. Brown for his service
as Chairman of our company. Under the agreement, we have paid Mr. Brown $15,000
and we will compensate him at a rate of $175,000 per annum until December 31,
2007, or until such date as he shall cease to serve as Chairman. In addition to
his cash compensation, we issued to Mr. Brown, under a Restricted Stock
Agreement, 200,000 shares of our common stock, of which 100,000 shares became
vested on March 30, 2007and the second 100,000 will vest as of December 31,
2007.

Prior to March 16, 2007, we employed Michael A. Gales under an employment
agreement effective November 30, 2005. We entered into a Separation Agreement
and General Release with Mr. Gales, effective March 16, 2007, under which Mr.
Gales resigned from his positions with our company. Under the separation

agreement, our employment agreement with Mr. Gales was terminated effective
March 16, 2007. In lieu of the compensation payable to Mr. Gales pursuant to his
employment agreement, from March 16, 2007, to November 30, 2010, we will pay Mr.
Gales $100,000 per annum; from December 1, 2010 to May 31, 2011, we will pay him
$50,000. In addition, if we achieve certain agreed-upon levels of performance,
he may receive up to an additional $50,000. Upon the execution of his employment
agreement we granted Mr. Gales options to purchase 1,250,000 shares of our
common stock, subject to an agreed upon vesting schedule and exercisable over a
ten-year period commencing on the date of grant. Under the separation agreement,
all unvested options held by Mr. Gales vested as of March 16, 2007, and the
right to exercise all of his options will terminate as of March 16, 2008.

Certain Relationships and Related Transactions

On November 30, 2005, in connection with our acquisition of Air Industries
Machining, Corp. ("AIM"), our wholly-owned subsidiary, we issued our convertible
promissory notes in the principal amount of $332,631 to each of Peter
Rettaliata, our Chief Executive Officer and a Director, and Dario Peragallo, our
Executive Vice President and a Director, convertible into shares of our common
stock at the conversion price of $0.40 per share. On January 26, 2007, each of
Mr. Rettaliata and Mr. Peragallo exercised their right to convert their
promissory notes, including accrued interest of $27,255 into 899,716 shares of
common stock. In consideration for the shares of common stock issued, all of our
indebtedness under the promissory notes was cancelled. These shares of common
stock were issued pursuant to an exemption under Section 4(2) under the
Securities Act.

On February 13, 2007, each of the non-management members of the Board was
issued an option to purchase 100,000 shares of our common stock. The options
will vest in equal thirds on March 1, 2007, 2008 and 2009 and are exercisable at
a price of $0.27 per share until March 1, 2014.

In March 2007, we entered into an agreement to compensate James Brown for
his services as a member of our Board of Directors. Under the agreement, Mr.
Brown has received $15,000 and will be compensated at a rate of $175,000 per
annum until December 31, 2007, or until such date as he shall cease to serve as
Chairman. In addition to his cash compensation, we issued to Mr. Brown 200,000
shares of our common stock pursuant to the Restricted Stock Agreement, of which
100,000 shares vested on March 30, 2007 and the second 100,000 shares will vest
as of December 31, 2007.

We entered into a Separation Agreement and General Release with Michael
Gales, effective March 16, 2007, under which Mr. Gales resigned from his
positions with us. Under the Separation Agreement, our employment agreement with
Mr. Gales was terminated effective March 16, 2007. In lieu of the compensation
payable to Mr. Gales pursuant to his employment agreement, from March 16, 2007,
to November 30, 2010, we will pay Mr. Gales $100,000 per annum; from December 1,
2010 to May 31, 2011, we will pay him $50,000. In addition, if we achieve
certain agreed-upon levels of performance, he may receive up to an additional
$50,000. Upon the execution of his employment agreement we granted Mr. Gales
options to purchase 1,250,000 shares of our common stock, subject to an agreed
upon vesting schedule and exercisable over a ten-year period commencing on the
date of grant. Under the separation agreement, all unvested options held by Mr.
Gales vested as of March 16, 2007, and the right to exercise all of his options
will terminate as of March 16, 2008.

Stephen M. Nagler, a director of our company, is a partner in Eaton & Van
Winkle LLP, our legal counsel. We paid Eaton & Van Winkle LLP $ 500,000 in 2006
and $630,000 in 2005 for legal fees and disbursements.

Transactions of Ashlin Prior to the Merger:

In connection with our Plan of Reorganization, in January 2005, we entered
into an employment agreement with James A. Brown, who was then our Chief
Executive Officer, and disposed of substantially all of our assets to an entity
controlled by another person who had been our former Chief Executive Officer.

Mr. Brown received 100,000 shares, with a fair value of $7,000, as of
November 2005 in connection with the merger.

Transactions Relating to Original Gales Prior to the Merger:

In August 2005, Mr. Stephen Nagler, one of our directors and our
Secretary, loaned $10,000 to Gales Industries Incorporated, a privately-owned
Delaware corporation ("Original Gales"). Co-investors of Mr. Nagler loaned an
additional $35,000 to Original Gales in the same financing. In connection with
that financing, Original Gales issued to the investors its 12% convertible
bridge notes in the aggregate principal amount of $45,000. The bridge notes were
repaid with a portion of the proceeds of the offering. In connection with the
financing, Original Gales issued to the investors warrants to purchase 204,547
shares of its common stock at $0.22 per share and, as a result of the merger,
those warrants became warrants to purchase an equal number of shares of our
common stock. The warrants allow for cashless exercise and have weighted-average
anti-dilution protection with respect to the exercise price.

Transactions Relating to Air Industries Machining Corporation Prior to the
Merger:

Prior to its acquisition by Original Gales, AIM leased manufacturing and
office space from KPK Realty Corp. which, since October, 1974, has been owned
49% by Luis Peragallo, an officer, a director and the largest shareholder of AIM
prior to its acquisition by Original Gales. The annual rent under the lease was
approximately $300,000, plus annual real estate taxes on the leased property.
Between 1989 and 1990, AIM advanced $208,233 to KPK Realty Corp. In partial
repayment of the advances from AIM, rent in the amount of $11,496 in 2005 was
offset by KPK Realty Corp. from the amounts due under the lease. In addition,
from 1990 to 2005, AIM was a guarantor of the mortgage (with a balance of
approximately $677,000 as of September 30, 2005) on such leased property. This
guaranty was terminated in connection with the real estate acquisition.

Prior to its acquisition by Original Gales, AIM leased manufacturing space
at an annual rental of approximately $82,800, plus annual real estate taxes on
such property, from DPPR Realty Corp. which, since January 2003 has been 100%
owned by Peter Rettaliata and Dario Peragallo. Prior to the acquisition, Messrs.
Rettaliata and D. Peragallo owned an aggregate of 36.84% of AIM's outstanding
capital stock. Messrs. Rettaliata and D. Peragallo were officers of AIM and are
officers and directors of our company. From February 2003 to November 30, 2005,
AIM was also a guarantor of the mortgage (with a balance of approximately
$567,000 as of September 30, 2005) on such leased property. This guaranty was
terminated in connection with the real estate acquisition.

In June 1995, an individual who held 49% of the outstanding capital stock
of AIM sold such interest to Jorge Peragallo and Peter Rettaliata for cash and a
$625,000 principal amount promissory note from each of Mr. J. Peragallo and Mr.
Rettaliata ($1,250,000 in the aggregate). AIM guaranteed the repayment of these
promissory notes, which aggregated $1,250,000 in principal amount. These
promissory notes were repaid in full in June 2005.

Peter Rettaliata, who was an officer of AIM, advanced $5,000 to AIM during
2003 and $42,678 to AIM during 2004. Dario Peragallo, who was an officer of AIM,
advanced $5,000 to AIM during 2003 and $39,334 to AIM during 2004. Luis
Peragallo, who was an officer of AIM, advanced $5,000 to AIM during 2003 and
$18,179 to AIM during 2004. Jorge Peragallo, who was an officer of AIM, advanced
$5,000 to AIM during 2003 and $38,344 to AIM during 2004. As of September 30,
2005, AIM had received an aggregate of $363,323 in loans from its officers and
was obligated to repay such amount to its officers. Such amount was repaid in
connection with our acquisition of AIM. In October 2005, AIM agreed to pay an
aggregate of $225,000 to its officers to enable them to pay income taxes accrued
while operating AIM as a Subchapter S corporation. Such amount was paid in
connection with our acquisition of AIM.

Transactions Relating to the Merger and Acquisition of AIM

On November 30, 2005, Original Gales completed the acquisition from
Messrs. Luis Peragallo, Jorge Peragallo, Peter Rettaliata and Dario Peragallo,
of all of the outstanding capital stock of AIM. Original Gales had entered into
a Stock Purchase Agreement with AIM and the shareholders of AIM as of July 25,
2005. The aggregate purchase price paid to the AIM shareholders consisted of (i)
$3,114,296 in cash, (ii) $1,627,262 principal amount of promissory notes,
payable over five years, of which $962,000 were in the form of a secured
subordinated promissory note payable to Mr. Luis Peragallo and $665,262 were in
the form of unsecured convertible promissory notes ($332,631 payable to Mr.
Peter Rettaliata and $332,631 payable to Mr. Dario Peragallo), convertible into
shares of common Stock at a price of $0.40 per share, and (iii) 490,060 shares
of newly issued common stock. The 490,060 shares of common sock issued to the
AIM shareholders were allocated as follows: 253,214 shares to Luis Peragallo,
118,423 shares to Peter Rettaliata and 118,423 shares to Dario Peragallo. The
unsecured convertible promissory notes issued to Messrs. Rettaliata and D.
Peragallo will be converted automatically into shares of our common stock upon
the effectiveness of a registration statement filed under the Securities Act
relating to those shares. In addition to the purchase price, Original Gales paid
an aggregate of $1,053,862 in connection with the acquisition, a portion of
which represented legal and accounting expenses ($300,000) incurred by AIM and
its shareholders and $270,403 to enable AIM's shareholders to pay income taxes
accrued prior to closing. The purchase price paid to AIM's shareholders was the
result of arms' length negotiation between Original Gales and the AIM
shareholders.

Our employment agreements with Messrs. Gales, Giusto, Rettaliata and D.
Peragallo became effective on November 30, 2005 and we issued stock options to
them as of that date. See "Executive Compensation - Employment Agreements".

As of November 30, 2005, Original Gales Acquisition Corp., Inc. completed
the purchased from entities which are owned, in part, by affiliates of AIM (KPK
Realty Corp. and DPPR Realty Corp.), for the aggregate purchase price
$4,190,000, of the properties, described above, which were being leased by AIM
prior to November 30, 2005 from such entities. The purchase price paid to KPK
Realty Corp. was $2,690,000 and the purchase price paid to DPPR Realty Corp. was
$1,500,000. Gales Industries Acquisition Corp., Inc. contemporaneously merged
into AIM, with AIM being the surviving entity, so that AIM became the owner of
such properties.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and beneficial owners of more than 10% of our
common stock to file with the SEC reports of their holdings of, and transactions
in, our common stock. Based solely upon our review of copies of such reports and
written representations from reporting persons that were provided to us, we
believe that our officers, directors and 10% stockholders complied with these
reporting requirements with respect to 2006.

REPORT OF THE AUDIT COMMITTEE

The Audit Committee operates under a written charter adopted by the Board
of Directors. The Audit Committee assists the Board of Directors in fulfilling
its responsibility to oversee management regarding:

o the conduct and integrity of our financial reporting to any
governmental or regulatory body, the public or other users thereof;

o our systems of internal accounting and financial and disclosure
controls;

o the qualifications, engagement, compensation, independence and performance
of our independent auditors, their conduct of the annual audit, and their
engagement for any other services;

o our legal and regulatory compliance; and

o the preparation of the Audit Committee report required by SEC rules to be
included in our annual proxy statement.

In fulfilling its responsibilities, the Audit Committee has:

o Reviewed and discussed the audited consolidated financial statements with
management;

o Discussed with our independent registered public accounting firm,
Goldstein Golub Kessler LLP matters required to be discussed under
Statements of Auditing Standards No. 61, Communications with Audit
Committees, as amended; and Statements of Auditing Standards No. 90
Communication with Audit Committees;

o Received from our independent registered public accounting firm, Goldstein
Golub Kessler LLP disclosures regarding their independence required by
Independence Standards Board Standard No. 1, Independent Discussions with
Audit Committees, and has discussed with Goldstein Golub Kessler LLP their
independence from management and our company.

The Audit Committee discussed our independent registered public accounting
firm the overall scope and plans for the audit. The Audit Committee met with the
independent registered public accounting firm, with and without management
present, to discuss the results of their examinations and the overall quality of
our financial reporting and internal controls.

Based on the foregoing, the Audit Committee recommended to the Board of
Directors that the audited consolidated financial statements be included in our
annual report on Form 10-KSB for the year ended December 31, 2006 for filing
with the SEC. The Audit Committee and the Board of Directors have also
recommended, subject to stockholder approval, the selection of Goldstein Golub
Kessler LLP as our independent registered public accounting firm.

The Audit Committee held four meetings during the year ended December 31,
2006. Each member of the Committee meets the current independence and financial
literacy requirements under the Sarbanes-Oxley Act and SEC rules and
regulations.

Respectfully Submitted by:

MEMBERS OF THE AUDIT COMMITTEE

Ira A.Hunt, Jr. (Chairman)
Seymour Siegel
James A. Brown

Independent Registered Public Accounting Firm

We retained Goldstein Golub Kessler LLP as our independent registered
public accounting firm to audit our consolidated financial statements for the
years ended December 31, 2006 and 2005. Goldstein Golub Kessler LLP has been our
principal accounting firm since December 15, 2005 and also performed certain
services for Gales Industries Incorporated, a privately-owned Delaware
corporation, prior to November 30, 2005. Daszkal Bolton LLP was our principal
accounting firm in 2004 and from January 1, 2005 to December 15, 2005.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Registered Public Accounting Firm.

As required by our Audit Committee charter, our Audit Committee
pre-approved the engagement of Daszkal Bolton LLP and Goldstein Golub Kessler
LLP for all audit and permissible non-audit services. The Audit Committee
annually reviews the audit and permissible non-audit services performed by our
principal accounting firm and reviews and approves the fees charged by our
principal accounting firm. The Audit Committee has considered the role of
Daszkal Bolton LLP and Goldstein Golub Kessler LLP in providing tax and audit
services and other permissible non-audit services to us and has concluded that
the provision of such services, if any, was compatible with the maintenance of
such firm's independence in the conduct of its auditing functions

During fiscal year 2006 and fiscal year 2005, the aggregate fees which we
paid to or were billed by Goldstein Golub Kessler LLP for professional services,
which only included audit fees, were as follows:

Fiscal Year Ended December 31,

2006 2005

Audit Fees (1) $341,879 $220,018
Audit-Related Fees (2) $-0- $-0-
Tax Fees (3) $-0- $-0-
All Other Fees $-0- $-0-

(1) Fees for services to perform an audit or review in accordance with
generally accepted auditing standards and services that generally only our
independent registered public accounting firm can reasonably provide, such
as the audit of our consolidated financial statements, the review of the
financial statements included in our quarterly reports on Form 10-QSB, and
for services that are normally provided by independent registered public
accounting firms in connection with statutory and regulatory engagements.

(2) Fees, if any, for assurance and related services that are traditionally
performed by our independent registered public accounting firm, such as,
audit attest services not required by statute or regulation, and
consultation concerning financial accounting and reporting standards.

(3) Fees for tax compliance. Tax compliance generally involves preparation of
original and amended tax returns, claims for refunds and tax payment
planning services.

During fiscal year 2006 and fiscal year 2005, the aggregate fees which we paid
to Daszkal Bolton LLP for professional services were as follows:

Fiscal Year Ended December 31,

2006 2005

Audit Fees (1) $-0- $38,539(2)
Audit-Related Fees $-0- $-0-
Tax Fees (2) $-0- $ 5,568
All Other Fees (3) $-0- $ 720

(1) Fees for audit services include fees associated with the annual audit and
the review of our quarterly reports on Form 10-QSB.

(2) Tax services consisted primarily of filing tax returns.

(3) The $720 paid to our principal accounting firm in 2005 was for its review of
our bankruptcy filing and related sale of assets to determine potential tax
consequences.

Changes and Disagreements with Accountants

On December 15, 2005, we appointed the firm of Goldstein Golub Kessler LLP
as our independent auditor and, as of that date, we dismissed the firm of
Daszkal Bolton LLP, which had been serving as our independent auditor until that
date. The change in auditors is in connection with the merger which occurred on
November 30, 2005 and the resulting change in control of our company.

During the period from January 1, 2005 to December 15, 2005, we did not
have any disagreements (within the meaning of Instruction 4 of Item 304 of
Regulation S-K) with Daszkal Bolton LLP as to any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure and there have been no reportable events (as defined in Item 304 of
Regulation S-K).

We have not consulted with Goldstein Golub Kessler LLP regarding the
application of accounting principles to a specified transaction or the type of
audit opinion that might be rendered on our financial statements during the two
most recent fiscal years through the present.

The dismissal of Daszkal Bolton LLP and the appointment of Goldstein Golub
Kessler LLP as our independent auditor were approved by our Board of Directors
on December 15, 2005.

PROPOSAL TWO:

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM

The Board and the Audit Committee have selected Goldstein Golub Kessler
LLP as the independent registered public accounting firm to perform the audit of
our consolidated financial statements for the year ending December 31, 2007.
Goldstein Golub Kessler LLP was our independent registered public accounting
firm for the year ended December 31, 2006. The firm is a registered public
accounting firm with the Public Company Accounting Oversight Board (the
"PCAOB"), as required by the Sarbanes-Oxley Act of 2002 and the Rules of the
PCAOB.

A representative of Goldstein Golub Kessler LLP is expected to attend the
2007 Annual Meeting. That representative will have an opportunity to make a
statement at the Annual Meeting if he desires to do so and will be available to
respond to appropriate stockholder questions.

We are asking our stockholders to ratify the selection of Goldstein Golub
Kessler LLP as our independent registered public accounting firm. Although
ratification is not required by our bylaws or otherwise, the Board is submitting
the selection of Goldstein Golub Kessler LLP to our stockholders for
ratification as a matter of good corporate practice. Even if the selection is
ratified, the Audit Committee in its discretion may select a different
independent registered public accounting firm at any time during the year if it
determines that such a change would be in the best interests of our company and
our stockholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE SELECTION OF GOLDSTEIN GOLUB KESSLER LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING
DECEMBER 31, 2007.

PROPOSAL THREE:

AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO CHANGE OUR
CORPORATE NAME TO AIM INDUSTRIES, INC.

On April 13, 2007, our Board of Directors approved the submission to the
stockholders of an amendment to our Certificate of Incorporation changing our
corporate name from Gales Industries Incorporated to Air Industries Group, Inc.

Our Board believes that the name Air Industries Group, Inc. will provide
us with greater name recognition within the defense contracting industry. The
name of our principal operating subsidiary is Air Industries Machining Corp.,
referred to as "AIM". AIM enjoys a favorable standing in the industry and with
customers within its target market. In addition, under the terms of our
separation agreement with our former executive chairman and founder, Michael A.
Gales, we agreed to remove his surname from our corporate name.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
AMENDMENT TO OUR CERTIFICATE OF INCORPORATION CHANGING OUR CORPORATE
NAME TO AIM INDUSTRIES, INC.

PROPOSAL FOUR:

ADJOURNMENT OF ANNUAL MEETING

Our Board of Directors has approved the submission to the stockholders of
a proposal to adjourn the Annual Meeting in the event that there are not a
sufficient number of votes at the Annual Meeting to approve Proposals 1, 2 or 3.
In order to permit proxies that have been timely received to be voted for an
adjournment, we are submitting this proposal as a separate matter for your
consideration. If it is necessary to adjourn the Annual Meeting and the
adjournment is for a period of less than 30 days, no notice of the time or place
of the reconvened meeting will be given to shareholders, other than an
announcement made at the Annual Meeting.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING.

APPENDIX A

AUDIT COMMITTEE CHARTER
OF
GALES INDUSTRIES INCORPORATED

APPENDIX B

COMPENSATION COMMITTEE CHARTER
OF
GALES INDUSTRIES INCORPORATED

FORM OF PROXY CARD FOR COMMON STOCK

Number of Shares ___________ Mark, sign and date your proxy card and
return it in the postage-paid envelope we
have provided or return it to Gales
Industries Corporation, c/o ______________.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION
FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS
PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

GALES INDUSTRIES INCORPORATED

THE DIRECTORS RECOMMEND A VOTE
"FOR" ALL ITEMS.
Vote on Directors

To withhold authority to vote, mark "For
All Except" and write the nominee's number
on the line below.

------------------------------------------

For Withhold For All
All All Except

1. To elect as Directors of Gales Industries |_| |_| |_|
Incorporated the nominees listed below.
James A. Brown |_| |_| |_|
Louis A. Giusto |_| |_| |_|
Peter D. Rettaliata |_| |_| |_|
Dario A. Peragallo |_| |_| |_|
Seymour G. Siegel |_| |_| |_|
M. Gen. Ira A. Hunt, Jr. (USA Ret.) |_| |_| |_|
David J. Buonanno |_| |_| |_|

Vote on Proposals For Against Abstain

2. The ratification of the selection by the Audit Committee of the Company's
Board of Directors of Goldstein Golub Kessler LLP as the independent
registered public accounting firm for the year ending December 31, 2007; |_| |_| |_|

3. Amend our Certificate of Incorporation to change our corporate name to Air
Industries Group, Inc. |_| |_| |_|

4. Adjourn the Annual Meeting to solicit additional proxies in the event
there are insufficient votes to approve any of the foregoing Proposals |_| |_| |_|

5. In their discretion, upon such other matters that may properly come before
the meeting or any adjournment or adjournments thereof

The shares represented by this
proxy when properly executed will
be voted in the manner directed
herein by the undersigned
Stockholder(s). If no direction is
made, this proxy will be voted FOR
items 1, 2, 3 and 4. If any other
matters properly come before the
meeting, the person named in this
proxy will vote in their
discretion.

------------------------------------------ -------------------------------

------------------------------------------ -------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
------------------------------------------ -------------------------------

Gales Industries Incorporated
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
June 12, 2007

The stockholder(s) hereby appoint(s) James A. Brown and Louis A. Giusto,
or either of them, as proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated on the
reverse side of this ballot, all the shares of common stock of Gales Industries
Incorporated that the stockholder(s) is/are entitled to vote at the Annual
Meeting of Stockholders to be held at 10:00 a.m. (Eastern Daylight Time) on June
12, 2007, at the offices of Eaton & Van Winkle LLP, 3 Park Avenue, New York, NY
10016, and any adjournment or postponement thereof.

THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS
AND FOR EACH PROPOSAL.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED REPLY ENVELOPE

CONTINUED AND TO BE SIGNED ON REVERSE SIDE.

FORM OF PROXY CARD FOR SERIES B CONVERTIBLE PREFERRED STOCK

Mark, sign and date your proxy card and
Number of Shares ___________ return it in the postage-paid envelope we have
provided or return it to Gales Industries
Number of Votes____________ Corporation, c/o ______________.

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION
EPICE1 FOR YOUR RECORDS
--------------------------------------------------------------------------------
DETACH AND RETURN THIS
PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

GALES INDUSTRIES INCORPORATED

THE DIRECTORS RECOMMEND A VOTE
"FOR" ALL ITEMS.
Vote on Directors

To withhold authority to vote, mark "For
All Except" and write the nominee's number
on the line below.

------------------------------------------

For Withhold For All
All All Except

1. To elect as Directors of Gales Industries |_| |_| |_|
Corporation the nominees listed below.
James A. Brown |_| |_| |_|
Louis A. Giusto |_| |_| |_|
Peter D. Rettaliata |_| |_| |_|

Dario A. Peragallo |_| |_| |_|
Seymour G. Siegel |_| |_| |_|
M. Gen. Ira A. Hunt, Jr. (USA Ret.) |_| |_| |_|
David J. Buonanno |_| |_| |_|

Vote on Proposals For Against Abstain

3. Amend our Certificate of Incorporation to change our corporate name to Air
Industries Group, Inc. |_| |_| |_|

4. Adjourn the Annual Meeting to solicit additional proxies in the event
there are insufficient votes to approve any of the foregoing Proposals |_| |_| |_|

5. In their discretion, upon such other matters that may properly come before
the meeting or any adjournment or adjournments thereof

The shares represented by this
proxy when properly executed will
be voted in the manner directed
herein by the undersigned
Stockholder(s). If no direction is
made, this proxy will be voted FOR
items 1, 2, 3, 4 and 5. If any
other matters properly come before
the meeting, the person named in
this proxy will vote in their
discretion.

------------------------------------------ -------------------------------

Gales Industries Incorporated
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS
June 12, 2007

The stockholder(s) hereby appoint(s) James A. Brown and Louis A. Giusto,
or either of them, as proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated on the
reverse side of this ballot, all the shares of series B convertible preferred
stock of Gales Industries Incorporated that the stockholder(s) is/are entitled
to vote at the Annual Meeting of Stockholders to be held at 10:00 a.m. (Eastern
Daylight Time) on June 12, 2007, at the offices of Eaton & Van Winkle LLP, 3
Park Avenue, New York, NY 10016, and any adjournment or postponement thereof.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED REPLY ENVELOPE

CONTINUED AND TO BE SIGNED ON REVERSE SIDE.