PART
III
Item
10. Directors, Executive Officers, and Corporate Governance
The
following table presents the information required by Paragraph (b) of Item 401 of Regulation S-K.
Our
directors and executive officers are:
Name:
|
|
Age
|
|
Position
|
Luciano
(Lou) Melluzzo
|
|
55
|
|
President
and Chief Executive Officer
|
Michael
E. Recca
|
|
69
|
|
Chief
Financial Officer
|
Michael
N. Taglich
|
|
54
|
|
Chairman
of the Board
|
Robert
F. Taglich
|
|
53
|
|
Director
|
David
J. Buonanno
|
|
64
|
|
Director
|
Peter
D. Rettaliata
|
|
69
|
|
Director
|
Robert
C. Schroeder
|
|
53
|
|
Director
|
Michael
Brand
|
|
62
|
|
Director
|
Michael
D. Porcelain
|
|
51
|
|
Director
|
Luciano
(Lou) Melluzzo has been our President and Chief Executive Officer since November 2017. He joined our company in September
2017 as Chief Operating Officer. From November 2003 to September 2011, Mr. Melluzzo was employed in various capacities by EDAC
Technologies Corporation (“EDAC”), a designer, manufacturer and distributor of precision aerospace components and
assemblies, precision spindles and complex fixturing, tooling and gauging with design and build capabilities, whose shares were
then listed on the Nasdaq Capital Market. He served as EDAC’s Vice President and Chief Operating Officer from November 2005
until February 2010. From September 2011 to November 2015, Mr. Melluzzo was self-employed in the residential real estate redevelopment
industry. From November 2015 to January 2017, he was general manager of Polar Corporation, a privately held company specializing
in computer numeric controlled milling and turning of small hardware components for the aerospace industry.
Michael
E. Recca has been our Chief Financial Officer since October 2016. Mr. Recca has been engaged by us since September 2008 in
a variety of positions related to our capital finance and acquisition programs. Immediately prior to becoming our Chief Financial
Officer, he served as Chief of Corporate Development& Capital Markets, a position in which he directed our acquisition program
and coordinated with our lenders. Mr. Recca received a Bachelor of Arts degree from the SUNY Stony Brook and an MBA from Columbia
University.
Michael
N. Taglich has been Chairman of our Board of Directors since September 2008. He is Chairman and President of Taglich Brothers,
a New York City based securities firm which he co-founded in 1992 and which is focused on public and private micro-cap companies.
Mr. Taglich is currently Chairman of the Board of Mare Island Dry Dock LLC, a company engaged in ship repair services,
and Vice Chairman of the Board of BioVentrix, Inc., a privately held medical device company whose products are directed at heart
failure. He also serves as a Director of Bridgeline Digital Inc., a publicly traded company, Icagen Inc., a reporting but
not trading company engaged in early stage pharmaceutical research, Decision Point Systems Inc., a company engaged in field service
automation, Dilon Technologies, a private medical device company and Autonet Mobile Inc., a private company focused on connecting
automobiles to the internet.
Robert
F. Taglich has been a director of our company since 2008. He is a Managing Director of Taglich Brothers, which he co-founded
in 1992. Prior to founding Taglich Brothers, Mr. Taglich was a Vice President at Weatherly Securities. Mr. Taglich has served
in various positions in the securities brokerage industry for the past 25 years. Mr. Taglich serves on the board of privately
held BioVentrix, Inc. Mr. Taglich holds a Bachelor’s degree from New York University.
David
J. Buonanno has been a director of our company since 2008. He is the Founder and President of Buonanno Enterprises Consulting,
providing strategic management, supply chain/operations and recruitment services to aerospace and defense industry clients. 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 and International Offset (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 serving as Operations Manager and Manager, Program Materials Management of GE’s Astro-Space
Division. From June 1977 to May 1987, he was employed by RCA and affiliated companies. 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.
Peter
D. Rettaliata has been a director of our company since 2005. He served as our Acting President and Chief Executive Officer
from March 2017 to November 2017 and served as our President and Chief Executive Officer from November 2005 through December 2014.
He also served as the President of our wholly owned subsidiary, AIM, from 1994 to 2008. Prior to his involvement at AIM, Mr. Rettaliata
was employed by Grumman Aerospace Corporation for twenty-two years, where he attained the position of Senior Procurement Officer.
Professionally, Mr. Rettaliata has served as the Chairman of “ADDAPT”, an organization of regional aerospace companies,
as a member of the Board of Governors of the Aerospace Industries Association, and as 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 Harvard Business School where
he completed the PMD Program.
Robert C. Schroeder
has been a director of our company since 2008. He is Vice President - Investment Banking of Taglich Brothers and specializes
in advisory services and capital raising for small public and private companies. Mr. Schroeder joined Taglich Brothers in April
1993 as an Equity Analyst publishing sell-side research. Prior to joining Taglich Brothers, he served in various positions in
the brokerage and public accounting industry. Mr. Schroeder also serves as a director of the following publicly traded companies:
DecisionPoint Systems, Inc., a leading provider and integrator of enterprise mobility, wireless applications and RFID solutions,
Intellinetics, Inc., a provider of cloud-based enterprise content management solutions and Akers Biosciences, Inc., a developer
and manufacturer of rapid diagnostic screening and testing products. Mr. Schroeder received a B.S. degree in accounting and economics
from New York University. He is a Chartered Financial Analyst and a member of the Association for Investment Management and Research
and a member of the New York Society of Security Analysts.
Michael
Brand has been a director of our company since 2012, and from March 2017 to November 2017 served as a consultant to our company
focused on day to day production issues, scheduling of the products to be manufactured and related operational issues such as
the maintenance of appropriate inventory levels. He was the President of Goodrich Landing Gear, a unit of Goodrich Corporation,
from July 2005 to June 2012. Prior to joining Goodrich for over 25 years he held senior management positions in the Aerospace
industry. He began his career at General Electric Corporation and rose to senior management in its jet engine manufacturing operations.
Mr. Brand is a graduate of Clarkson University, with advanced degrees and certificates from Xavier University and the Wharton
School.
Michael
Porcelain has been a director of our company since October 23, 2017. Mr. Porcelain has served as President and Chief Operating
Officer of Comtech Telecommunications Corp., a publicly traded company and leading provider of advanced communication solutions
for both commercial and government customers worldwide, since 2019, and prior to that served as the Chief Financial Officer
from 2006 through 2018, and from 2002 to 2006, he served as Vice President of Finance and Internal Audit of Comtech. From
1998 to 2002, Mr. Porcelain was Director of Corporate Profit and Business Planning for Symbol Technologies, a mobile wireless
information solutions company. Previously, he spent five years in public accounting holding various positions, including Manager
in the Transaction Advisory Services Group of PricewaterhouseCoopers. Since 1998, he has owned and operated The Independent Adviser
Corporation, a privately held company which holds the rights to use certain intellectual properties and trademarks (including
various Internet websites) related to the financial planning and advisory industry. Mr. Porcelain is an Adjunct Professor at St.
John’s University located in New York where he teaches graduate level accounting courses. Mr. Porcelain has a B.S.
in Business Economics from State University of Oneonta, New York, a M.S. in Accounting and an M.B.A. degree from Binghamton University.
Michael
N. Taglich and Robert F. Taglich are brothers.
All
directors hold office until the next annual meeting of shareholders and until their successors have been duly elected and qualified.
Officers are elected by and serve at the discretion of the Board of Directors. Employee directors do not receive any compensation
for their services as directors. Non-employee directors are entitled to receive compensation for serving as directors and may
receive option grants from our company.
Information
Concerning the Board of Directors
Board
Leadership Structure and Risk Oversight
The
Board does not have a policy requiring separation of the roles of Chief Executive Officer and Chairman of the Board. The Board
has determined that a non-employee director serving as Chairman is in the best interests of our stockholders at this time. This
structure ensures a greater role of non-employee Directors in the active oversight of our business, including risk management
oversight, and in setting agendas and establishing Board priorities and procedures. This structure also allows the Chief Executive
Officer to focus to a greater extent on the management of our day-to-day operations.
The
Board of Directors as a whole is responsible for consideration and oversight of the risks we face and is responsible for ensuring
that material risks are identified and managed appropriately. Certain risks are overseen by committees of the Board of Directors
and these committees make reports to the full Board of Directors, including reports on noteworthy risk-management issues. Members
of the Company’s senior management team regularly report to the full Board about their areas of responsibility and a component
of these reports is the risks within their areas of responsibility and the steps management has taken to monitor and control such
exposures. Additional review or reporting on risks is conducted as needed or as requested by the Board or one of its committees.
Board
Independence
Our
Board of Directors has determined that Robert Schroeder, David Buonanno, Peter Rettaliata, Michael Brand and Michael Porcelain
are “independent directors” within the meaning of NYSE American Rule 803A(2).
Director
Compensation
Non-employee
Directors are entitled to receive compensation for serving as directors and may receive option grants from our company. Each Director
also is entitled to be repaid or prepaid all traveling, hotel and incidental expenses reasonably incurred or expected to be incurred
in attending meetings of our Board of Directors or committees of our Board of Directors or stockholder meetings or otherwise in
connection with the discharge of his duties as a Director. The compensation committee will assist the directors in reviewing and
approving the compensation structure for our directors.
The
following table sets forth certain information regarding the compensation paid to, earned by or accrued for, our directors during
the fiscal year ended December 31, 2019.
DIRECTOR COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
|
Fees Earned or Paid In Cash ($)
|
|
|
|
Stock Awards ($)(1)
|
|
|
|
Option Awards ($)
|
|
|
|
Non-Equity Incentive Plan Compensation ($)
|
|
|
|
Non-Qualified Deferred Compensation Earnings
($)
|
|
|
|
All Other Compensation ($)
|
|
|
|
Total
($)
|
|
Michael Taglich
|
|
|
|
|
|
|
73,486
|
|
|
|
5.750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
79,236
|
|
Robert Taglich
|
|
|
|
|
|
|
73,486
|
|
|
|
5,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
79,236
|
|
Robert Schroeder
|
|
|
16,332
|
|
|
|
16,628
|
|
|
|
5,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
38,710
|
|
David Buonanno
|
|
|
30,996
|
|
|
|
|
|
|
|
5,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
36,746
|
|
Michael Brand
|
|
|
30,996
|
|
|
|
|
|
|
|
5,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
36,746
|
|
Michael Porcelain
|
|
|
|
|
|
|
56,199
|
|
|
|
5,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
61,949
|
|
Peter Rettaliata
|
|
|
|
|
|
|
63,901
|
|
|
|
5,750
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
69,651
|
|
(1)
|
Director
fees paid in shares.
|
Board
Meetings; Committees and Membership
The
Board of Directors held five meetings during the fiscal year ended December 31, 2019 and each of the directors attended more than
75% of the aggregate of (i) the total number of meetings of the Board of Directors and (ii) the total number of meetings of all
committees of the Board on which such director served.
We
maintain the following committees of the Board of Directors: the Audit Committee, the Compensation Committee and the Nominating
Committee. Each committee is comprised entirely of directors who are “independent” within the meaning of NYSE American
Rule 803A(2), except that Michael Taglich serves as a member of the Compensation Committee. Each committee acts pursuant to a
separate written charter, and each such charter has been adopted and approved by the Board of Directors. Copies of the committee
charters are available on our website at airindustriesgroup.com under the heading “Investor Relations.”
Audit
Committee. Messrs. Porcelain, Schroeder and Buonanno are members of the Audit Committee. Mr. Porcelain serves as Chairman
of the Audit Committee and also qualifies as an “audit committee financial expert,” as that term is defined in Item
407(d)(5)(ii) of Regulation S-K. The Board has determined that each member of our Audit Committee meets the financial literacy
requirements under the Sarbanes-Oxley Act and SEC rules and the independence requirements under NYSE American Rule 803A(2).
Our
Audit Committee is responsible for preparing reports, statements and charters of audit committees required by the federal securities
laws, as well as:
|
●
|
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;
|
|
●
|
preparing
the report that SEC rules require be included in our annual proxy statement;
|
|
●
|
overseeing
and monitoring our independent registered public accounting firm’s qualifications, independence and performance;
|
|
●
|
providing
the Board with the results of its monitoring and its recommendations; and
|
|
●
|
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.
The
Audit Committee held six meetings during fiscal 2019.
|
Compensation
Committee. Our Compensation Committee is composed of Messrs. Buonanno, Brand and Michael Taglich. Our Board of Directors has
determined that membership on the Compensation Committee by Mr. Taglich at this time is in the best interests of our company and
its shareholders. Mr. Taglich serves on the board of a number of public and private companies, including small cap growth companies
and is familiar with compensation policies, structures and levels that are necessary to properly incentivize executives while
protecting the interests of shareholders.
The
Compensation Committee is responsible for:
|
●
|
establishing
our company’s general compensation policy, in consultation with senior management, and overseeing the development and
implementation of compensation programs;
|
|
●
|
reviewing
and approving corporate goals and objectives relevant to the compensation of the CEO, and evaluating the performance of the
CEO at least annually in light of those goals and objectives and communicating the results of such evaluation to the CEO and
the Board, and determining the CEO’s compensation level based on this evaluation, subject to ratification by the independent
directors on the Board. In determining the incentive component of CEO compensation, the Committee will consider, among other
factors, the performance of our company and relative stockholder return, the value of similar incentive awards to CEOs at
comparable companies, the awards given to the CEO in past years, and such other factors as the Committee may determine to
be appropriate;
|
|
●
|
reviewing
and approving the compensation of all other executive officers of our company, such other managers as may be directed by the
Board, and the directors of our company;
|
|
●
|
overseeing
the Board’s benefit and equity compensation plans, overseeing the activities of the individuals and committees responsible
for administering these plans, and discharging any responsibilities imposed on the Committee by any of these plans;
|
|
●
|
approving
issuances under, or any material amendments to, any stock option or other similar plan pursuant to which a person not previously
an employee or director of our company, as an inducement material to the individual’s entering into employment with
our company, will acquire stock or options;
|
|
●
|
in
consultation with management, overseeing regulatory compliance with respect to compensation matters, including overseeing
the company’s policies on structuring compensation programs to preserve related tax objectives;
|
|
●
|
reviewing
and approving any severance or similar termination payments proposed to be made to any current or former officer of our company;
and
|
|
●
|
preparing
an annual report on executive compensation for inclusion in our proxy statement for the election of directors, if required
under the applicable SEC rules.
The
Compensation Committee held two meetings during fiscal 2019.
|
Nominating
Committee. Our Nominating Committee is composed of Messrs. Schroeder, Brand and Porcelain. The purpose of the Nominating Committee
is to seek and nominate qualified candidates for election or appointment to our Board of Directors. The Nominating Committee held
one meeting during fiscal 2019.
The
Nominating Committee will seek candidates for election and appointment that possess the integrity, leadership skills and competency
required to direct and oversee the Company’s management in the best interests of its stockholders, customers, employees,
communities it serves and other affected parties.
A
candidate must be willing to regularly attend Committee and Board of Directors meetings, to develop a strong understanding of
our company, its businesses and its requirements, to contribute his or her time and knowledge to our company and to be prepared
to exercise his or her duties with skill and care. In addition, each candidate should have an understanding of all corporate governance
concepts and the legal duties of a director of a public company.
Stockholders
may contact the Nominating Committee Chairman, the Chairman of the Board or the Corporate Secretary in writing when proposing
a nominee. This correspondence should include a detailed description of the proposed nominee’s qualifications and a method
to contact that nominee if the Nominating Committee so chooses.
Stockholder
Communications
Any
stockholder who desires to contact any of our Directors can write to Air Industries Group, 1460 Fifth Avenue, Bay Shore, New York
11706, Attention: Stockholder Relations. Your letter should indicate that you are an Air Industries Group stockholder. Depending
on the subject matter, our stockholder relations personnel will:
|
●
|
forward
the communication to the Director(s) to whom it is addressed;
|
|
●
|
forward
the communication to the appropriate management personnel;
|
|
●
|
attempt
to handle the inquiry directly, for example where it is a request for information about the Company, or it is a stock-related
matter; or
|
|
●
|
not
forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic.
|
Code
of Ethics
We
have adopted a written code of ethics that applies to our principal executive officers, 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.
Item
11. Executive Compensation
The
following summary compensation table shows, for the periods indicated, information regarding the compensation awarded to, earned
by or paid to each individual that served as our principal executive officer during the fiscal year ended December 31, 2019 and
each other executive officer whose compensation for the 2019 fiscal year exceeded $100,000 for all services rendered in all capacities
to our company and its subsidiaries. The individuals listed in the following table are referred to herein collectively as our
“Named Executive Officers.”
Summary
Compensation Table
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
awards
($)
|
|
Option
awards
($)
|
|
Non-equity
Incentive
Plan
Information
($)
|
|
Nonqualified
deferred
compensation
earnings
($)
|
|
All other
compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Luciano Melluzzo
President and CEO
|
|
|
2019
2018
|
|
|
323,961
280,000
|
|
|
—
—
|
|
|
—
—
|
|
|
98,000
—
|
|
|
112,644
—
|
|
|
—
—
|
|
|
10,800
10,800
|
(1)
(1)
|
|
|
545,405
290,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Recca
|
|
|
2019
|
|
|
224,401
|
|
|
|
|
|
—
|
|
|
44,100
|
|
|
49,556
|
|
|
—
|
|
|
5,400
|
(1)
|
|
|
323,457
|
|
CFO
|
|
|
2018
|
|
|
203,846
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,400
|
(1)
|
|
|
209,246
|
|
(1)
|
Represents
car allowance.
|
Our
executive officers named in the above table do not have employment agreements providing for a fixed term of employment. Both are
employees at will terminable at any time without any severance, other than that payable to employees generally.
Executive
Compensation Policies as They Relate to Risk Management
The
Compensation Committee and management have considered whether our compensation policies might encourage inappropriate risk taking
by the Company’s executive officers and other employees. The Compensation Committee has determined that the current compensation
structure aligns the interests of the executive officers with those of the Company without providing rewards for excessive risk
taking by awarding a mix of fixed and performance based or discretionary bonuses with the performance based compensation focused
on profits as opposed to revenue growth.
The
Compensation Committee working with management adopts a plan each year intended to award members of our management including executive
officers for meeting or exceeding targeted goals, The Committee believes the amounts to be paid to Messrs. Melluzzo and Recca
for services rendered in fiscal 2019 are appropriate in light of the significant improvement in our financial performance 2019.
Equity
Awards – 2019
The following table shows the grant of equity awards to the Named Executive Officers during 2019.
GRANT OF PLAN-BASED AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Option
|
|
|
|
|
|
|
|
|
Awards: Number of
|
|
|
Grant Date Fair Value
|
|
|
|
|
|
Securities Underlying
|
|
|
of Stock and Option
|
|
Name
|
|
Grant Date
|
|
Options (#)
|
|
|
Awards ($)
|
|
Luciano Melluzzo
|
|
1/19/2019
|
|
|
200,000
|
|
|
$
|
98,000
|
|
Michael Recca
|
|
1/19/2019
|
|
|
90,000
|
|
|
$
|
44,100
|
|
Outstanding
Equity Awards at 2019 Year-End
The
following table shows certain information regarding outstanding equity awards held by our Named Executive Officers as of December
31, 2019.
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights That Have
Not Vested
(#)
|
|
|
Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares,
Units or Other Rights
That Have Not Vested
|
|
Luciano Melluzzo
|
|
|
200,000
|
|
|
|
—
|
|
|
$
|
0.88
|
|
|
1/31/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
|
270,000
|
|
|
|
—
|
|
|
|
1.50
|
|
|
9/30/2024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Recca
|
|
|
90,000
|
|
|
|
|
|
|
|
0.88
|
|
|
01/31/2024
|
|
|
—
|
|
|
|
—
|
|
|
|
|
20,000
|
|
|
|
30,000
|
|
|
|
1.42
|
|
|
7/24/2024
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
10.31
|
|
|
5/1/2021
|
|
|
—
|
|
|
|
—
|
|
|
|
|
56,250
|
|
|
|
|
|
|
|
6.60
|
|
|
8/31/2020
|
|
|
|
|
|
|
|
|
Equity
Incentive Plans
We
have four equity incentive plans, the 2017 Equity Incentive Plan (the “2017 Plan”), which our Board of Directors adopted
on July 24, 2017 and our stockholders approved on October 3, 2017, the 2016 Equity Incentive Plan (“the “2016 Plan”),
which our Board of Directors adopted in June 2016 and our stockholders approved on November 30, 2016, the 2015 Equity Incentive
Plan (the “2015 Plan”), which our Board of Directors adopted in March 2015 and our stockholders approved in June 2015,
and the 2013 Equity Incentive Plan (the “2013 Plan”), which our Board of Directors adopted in May 2013 and our stockholders
approved in July 2013. The Plans are virtually identical, except that the 2017 Plan authorizes the issuance of 1,200,000 shares
of Common Stock, the 2016 Plan and the 2015 Plan authorize the issuance of 350,000 shares of Common Stock and the 2013 Plan authorizes
the issuance of 600,000 shares of Common Stock.
The
Plans permit the Company to grant stock awards and non-qualified and incentive stock options to employees, directors and consultants.
The Plans are administered by the Compensation Committee of the Board and each has a term of ten years from the date it was adopted
by the Board.
We
adopted the Plans to provide a means by which employees, directors, and consultants of our Company and those of our subsidiaries
and other designated affiliates, which we refer to together as our affiliates, may be given an opportunity to purchase our common
stock, to assist in retaining the services of such persons, to secure and retain the services of persons capable of filling such
positions, and to provide incentives for such persons to exert maximum efforts for our success and the success of our affiliates.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The
following table sets forth information known to us regarding beneficial ownership of our Common Stock as of March 27, 2020 by
(i) each person known by us to own beneficially more than 5% of our outstanding Common Stock, (ii) each of our directors, (iii)
our chief executive officer and the other Named Executive Officers, and (iii) all of our directors and executive officers 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 March 27, 2020, we had outstanding 30,531,949 shares of Common Stock. Except as stated in the table, the address of the
holder is c/o our company, 1460 Fifth Avenue, Bay Shore, New York 11706
Directors and Executive Officers:
|
|
Number of Shares Beneficially Owned
|
|
|
Percent
|
|
Michael N. Taglich
|
|
|
6,802,226
|
(1)
|
|
|
20.44
|
%
|
Robert F. Taglich
|
|
|
4,633,251
|
(2)
|
|
|
14.17
|
%
|
Peter D. Rettaliata
|
|
|
160,925
|
(3)
|
|
|
*
|
|
David Buonanno
|
|
|
81,540
|
(4)
|
|
|
*
|
|
Robert Schroeder
|
|
|
184,679
|
(5)
|
|
|
*
|
|
Michael Brand
|
|
|
137,004
|
(6)
|
|
|
*
|
|
Michael Porcelain
|
|
|
114,512
|
(7)
|
|
|
*
|
|
Luciano Melluzzo, President and CEO
|
|
|
626,667
|
(8)
|
|
|
2.02
|
%
|
Michael Recca, CFO
|
|
|
249,583
|
(9)
|
|
|
*
|
|
All Directors and Executive Officers as a group (9 persons owning shares)
|
|
|
12,388,285
|
(10)
|
|
|
34.26
|
%
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership of More Than 5% of Shares:
|
|
|
|
|
|
|
|
|
Richmond Brothers, Inc. et al.(11)
|
|
|
4,321,837
|
(11)
|
|
|
|
|
David S. Richman
|
|
|
5,500,405
|
(11)
|
|
|
|
|
Matthew J. Curfman
|
|
|
4,414,227
|
(11)
|
|
|
|
(11)
|
(1)
|
Includes
3,817,310 shares owned by Mr. Taglich, 239,946 shares owned by Taglich Brothers, 2,282,621 shares he may acquire upon conversion
of convertible notes (including 340,687 shares which may be acquired by Taglich Brothers), but excluding shares for accrued
interest thereon, 427,849 shares he may acquire upon exercise of warrants (including 21,469 shares which may be acquired by
Taglich Brothers) and 34,500 shares he may acquire upon exercise of options, in each case exercisable within 60 days.
|
(2)
|
Includes
2,188,901 shares owned by Mr. Taglich, 239,946 shares owned by Taglich Brothers, 44,760 shares owned by custodial accounts
for the benefit of his children under the NY UGMA, 1,849,288 shares he may acquire upon conversion of convertible notes (including
340,687 shares that may be acquired by Taglich Brothers) , but excluding shares for accrued interest thereon, 275,856 shares
he may acquire upon exercise of warrants (including 21,469 shares which may be acquired by Taglich Brothers, and 3,416 shares
which may be acquired as custodian for his children) and 34,500 shares he may acquire upon exercise of options, in each case
exercisable within 60 days.
|
(3)
|
Includes
61,250 shares he may acquire upon exercise of options exercisable within 60 days.
|
(4)
|
Includes
1,016 shares he may acquire upon exercise of warrants and 34,500 shares he may acquire upon exercise of options, in each case
exercisable within 60 days.
|
(5)
|
Includes
47,698 shares he may acquire upon exercise of warrants and 34,500 shares he may acquire upon exercise of options, in each
case exercisable within 60 days.
|
(6)
(7)
|
Includes
84,500 shares he may acquire upon exercise of options exercisable within 60 days.
Includes
38,500 shares he may acquire upon exercise of options exercisable within 60 days.
|
(8)
|
Includes
536,667 shares he may acquire upon exercise of options exercisable within 60 days.
|
(9)
|
Represents
shares he may acquire upon exercise of options exercisable within 60 days.
|
|
|
(10)
|
Includes
3,791,222 shares that may be acquired upon conversion of convertible notes, 730,950 shares that may be acquired upon exercise
of warrants and 1,108,500 shares that may be acquired upon exercise of options, in each case exercisable within 60 days.
|
|
|
(11)
|
The
information set forth below is based on the amended Schedule 13D filed with the SEC and the Company on March 31,
2020 reflecting ownership as of that date. By virtue of their Joint Filing Agreement, dated October 9, 2018, the persons and
entities affirm their membership in a group under SEC Rule 13d-5(b) and the group is deemed to beneficially own all of
the shares beneficially owned by the group members. The beneficial ownership of each of the group members was disclosed as
follows, based upon 30,531,049 shares outstanding:
|
|
|
Sole
Voting
Power
|
|
|
|
Shared
Voting Power
|
|
|
Sole
Dispositive
Power
|
|
|
Shared
Dispositive
Power
|
|
|
Total
|
|
|
Percent
|
|
Richmond Brothers, Inc.(a)
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,321,837
|
#
|
|
|
4,321,837
|
#
|
|
|
14.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RBI Private Investment II, LLC
|
|
|
15,333
|
|
|
|
|
—
|
|
|
|
15,333
|
|
|
|
—
|
|
|
|
15,333
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RBI Private Investment III, LLC
|
|
|
1,080,000
|
+
|
|
|
|
—
|
|
|
|
1,080,000
|
+
|
|
|
—
|
|
|
|
1,080,000
|
+
|
|
|
3.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RBI PI Manager, LLC(b)
|
|
|
1,095,333
|
+
|
|
|
|
—
|
|
|
|
1,095,333
|
+
|
|
|
—
|
|
|
|
1,095,333
|
+
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richmond Brothers 401(k) Profit Sharing Plan
|
|
|
83,235
|
|
|
|
|
—
|
|
|
|
83,235
|
|
|
|
—
|
|
|
|
83,235
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David S. Richmond(c)
|
|
|
1,095,333
|
+
|
|
|
|
83,235
|
|
|
|
1,095,333
|
+
|
|
|
4,405,072
|
#
|
|
|
5,500,405
|
+#
|
|
|
17.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Curfman(d)
|
|
|
9,155
|
|
|
|
|
83,235
|
|
|
|
9,155
|
|
|
|
4,405,072
|
#
|
|
|
4,414,227
|
#
|
|
|
14.3
|
%
|
(a)
|
Held
as investment advisor to certain separately managed accounts.
|
(b)
|
Includes
the shares owned by RBI Private Investment II, LLC and RBI Private Investment III, LLC.
|
(c)
|
Sole
voting and dispositive power includes shares owned by Mr. Richmond directly and by RBI Private Investment II, LLC
and RBI Private Investment III, LLC. Shared voting and dispositive power includes shares owned by Richmond Brothers, Inc.
and the Profit Sharing Plan.
|
(d)
|
Sole
voting and dispositive power includes shares owned by Mr. Curfman. Shared voting and dispositive power includes shares
owned by Richmond Brothers, Inc. and the Profit Sharing Plan.
|
#
Includes 312,000 shares which may be acquired upon exercise of warrants.
+
Includes 280,000 shares which may be acquired upon exercise of warrants.
*
Less than 1 percent
The
address for Richmond Brothers, Inc., RBI Private Investment I, LLC, RBI Private Investment II, LLC, RBI
PI Manager, LLC, Richmond Brothers 401(k) Profit Sharing Plan, David S. Richmond and Matthew J. Curfman is 3568 Wildwood
Avenue, Jackson, Michigan 49202.
Item
13. Certain Relationships and Related Transactions and Director Independence
Our
Policy Concerning Transactions with Related Persons
Under
Item 404 of SEC Regulation S-K, a related person transaction is any actual or proposed transaction, arrangement or relationship
or series of similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course
of business, to which we or our subsidiaries were or are a party, or in which we or our subsidiaries were or are a participant,
in which the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end
for the last two completed fiscal years and in which any of our directors, nominees for director, executive officers, beneficial
owners of more than 5% of any class of our voting securities (a “significant shareholder”), or any member of the immediate
family of any of the foregoing persons, had or will have a direct or indirect material interest.
We
recognize that transactions between us and any of our Directors or Executives or with a third party in which one of our officers,
directors or significant shareholders has an interest can present potential or actual conflicts of interest and create the appearance
that our decisions are based on considerations other than the best interests of our Company and stockholders.
The
Audit Committee of the Board of Directors is charged with responsibility for reviewing, approving and overseeing any transaction
between the Company and any related person (as defined in Item 404 of Regulation S-K), including the propriety and ethical implications
of any such transactions, as reported or disclosed to the Committee by the independent auditors, employees, officers, members
of the Board of Directors or otherwise, and to determine whether the terms of the transaction are not less favorable to us than
could be obtained from an unaffiliated party.
Transactions
From
time to time when needed, we have borrowed funds from and issued equity securities to Michael Taglich and Robert Taglich. In addition,
Taglich Brothers, Inc. of which Michael Taglich and Robert Taglich are principals, has acted as placement agent for offerings
of our debt and equity securities and provided us with other investment banking and advisory services for which it has been compensated.
To date, Michael and Robert Taglich, and affiliated entities, have invested a total of $ 12,440,000 in our company through various
debt and equity financings. Related party notes payable, inclusive of debt discount, due to Michael and Robert Taglich,
and their affiliated entities, totaled $7,088,000 as of December 31, 2019. Interest incurred on these notes amounted to approximately
$446,000 for the year ended December 31, 2019.
The
following is a summary of transactions completed by us since January 1, 2019 in which the amount involved exceeded $120,000 and
in which any related person had a direct or indirect material interest. There are no transactions currently proposed by us in
which a related party has a direct or indirect financial interest in which the amount involved exceeds $120,000.
On
January 15, 2019, we issued senior subordinated convertible promissory notes due December 31, 2020, each in the principal amount
of $1,000,000 (the “7% Notes”), to Michael Taglich and Robert Taglich, each for a purchase price of $1,000,000. The
7% Notes bear interest at the rate of 7% per annum, are convertible into our common stock at a conversion price of $0.93 per share,
subject to the anti-dilution adjustments set forth in the 7% Notes, are subordinated to our indebtedness to Sterling National
Bank under the Loan Facility, and mature at December 31, 2020, or earlier upon an Event of Default.
We
paid Taglich Brothers a fee of $80,000 (4% of the purchase price of the 7% Notes), in the form of a promissory note having terms
substantially identical to the 7% Notes, in connection with the sale of the 7% Notes.
During the second quarter
of 2019, the maturity date of our Subordinated Notes due May 31, 2019 (the “2019 Notes”), issued together with
shares of our Common Stock in a private placement completed in May 2018, was extended to June 30, 2020. In connection with the
extension, the interest rate on the notes remained 12% per annum. As consideration for the extension, we issued 150,000 shares
of Common Stock to Michael Taglich and 15,000 shares to Robert Taglich. In May 2018, advances of $1,000,000 and $100,000 made by
Michael and Robert Taglich in March and April 2018 were applied against the purchase price of our 2019 Notes and shares of our
Common Stock, as part of a private placement. We issued to Michael Taglich a Note in the principal amount of $1,000,000, together
with 178,571 shares of Common Stock, for a purchase price of $1,000,000 and we issued to Robert Taglich a Note in the principal
amount of $100,000, together with 17,857 shares of Common Stock. Interest on the 2019 Notes is payable at the rate of one percent
(1%) per month and payments were to be made monthly commencing June 30, 2018. Upon the occurrence and continuation of a failure
to pay accrued interest, interest accrues and is payable on such amount at the rate of 1.25% per month and upon the occurrence
and continuation of a failure to timely pay the principal amount of the 2019 Note, interest shall accrue and be payable on such
principal amount at the rate of 1.25% per month. The 2019 Notes are subordinate to our obligations under our Loan Facility.
On
June 26, 2019, we were advanced $250,000 by each of Michael and Robert Taglich. These amounts are evidenced by notes which are
identical to the terms of the 2019 Notes and are payable on December 31, 2020. In connection with these notes the Company issued
37,500 shares to each of Michael and Robert Taglich.
On
October 21, 2019, Michael Taglich advanced $1,000,000 to the Company. This advance was repaid in full on January 2, 2020 together
with interest accrued at the rate of 12% per annum.
In
connection with the consummation of the SNB Loan Facility, for no additional consideration the due date of all of the Company’s
notes held by Michael and Robert Taglich was extended to December 31, 2020. There are no principal payments due on these notes
until such time.
In
connection with the sale of AMK to Meyer Tool, Inc., (“Meyer”) in 2017, Meyer agreed to pay us within 30 days after
the end of each calendar quarter, commencing April 1, 2017, an amount equal to five (5%) percent of the net sales of AMK for that
quarter until the aggregate payments made to us (the “Meyer Agreement”) equals $1,500,000 (the “Maximum Amount”).
As of December 31, 2018, the Company received an aggregate of $363,000 under the Meyer Agreement. On January 15, 2019, we entered
into a “Purchase Agreement” with 15 accredited investors (the “Purchasers”), including Michael and Robert
Taglich, pursuant to which we assigned to the Purchasers all of our rights, title and interest to the remaining $1,137,000 due
from Meyer for the sale of AMK (the “Remaining Amount”) for an immediate payment of $800,000, including $100,000 from
each of Michael and Robert Taglich, and $75,000 for the benefit of the children of Michael Taglich. If the Purchasers have not
received the entire Remaining Amount by March 31, 2023, they have the right to demand payment of their pro rata portion of the
unpaid Remaining Amount from us (“Put Right”). To the extent the Purchasers exercise their Put Right, the remaining
payments from Meyer will be retained by us. The Purchasers agreed to pay Taglich Brothers a fee equal to 2% per annum of the purchase
price paid by such Purchasers, payable quarterly, to be deducted from the payments of the Remaining Amount, for acting as paying
agent in connection with the payments from Meyer.
The
foregoing transactions were reviewed and approved by the Audit Committee or our Board of Directors. We believe that the terms
of each transaction were not less favorable to us than those terms that could be obtained from an unaffiliated third party.
Board
Independence
Our
Board of Directors has determined that Robert Schroeder, David Buonanno, Peter Rettaliata, Michael Brand and Michael Porcelain
are “independent directors” within the meaning of NYSE American Rule 803A(2).
Item
14. Principal Accountant Fees and Services
As
required by our Audit Committee charter, our Audit Committee pre-approved the engagement of Rotenberg Meril Solomon Bertiger &
Guttilla, P.C. 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 Rotenberg Meril Solomon Bertiger & Guttilla, P.C. 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 2019 and fiscal year 2018, the aggregate fees which we paid to or were billed by Rotenberg Meril Solomon Bertiger&
Guttilla, P.C. for professional services were as follows:
|
|
Year Ended December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Audit Fees(1)
|
|
$
|
481,000
|
|
|
$
|
612,372
|
|
Audit Related Fees(2)
|
|
|
21,000
|
|
|
|
94,236
|
|
Tax Fees(3)
|
|
|
67,000
|
|
|
|
65,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
569,000
|
|
|
$
|
771,608
|
|
(1)
|
Fees
for services to perform our annual audit of financial statements, review of financial statements included in our quarterly
filings included in Form 10-Q, and fees for services that are normally provided by the accountant for statutory and regulatory
filings. This category includes fees for services rendered that only the auditor reasonably can provide, including comfort
letters, consents, assistance with and review of documents filed with the SEC and accounting and financial reporting consultations
billed as audit services. The annual audit fee included in this category was $287,000 and $367,482 for 2019 and 2018, respectively.
Registration statements, consents and comfort letter fees were $30,000 and $0 for 2019 and 2018, respectively. The balance
of the fees in this category were for the reviews of our quarterly financial statements.
|
(2)
|
Fees
for assurance and related services that are traditionally performed by our independent registered public accounting firm,
such as due diligence services related to mergers and acquisitions, accounting consultation and audits in connections with
acquisitions, consultation concerning financial accounting and reporting standards not classified as audit fees and attest
services not required by statute or regulation.
|
(3)
|
Fees
for tax compliance, tax advice and planning. Tax compliance generally involves preparation of original and amended tax returns,
claims for refunds and tax payment-planning services. Tax planning and tax advice encompass a diverse range of services, including
assistance with tax audits and appeals, tax advice related to mergers and acquisitions and requests for rulings or technical
advice from taxing authorities.
|