Item 1.01 Entry into a Material Definitive Agreement
Placement Agency Agreement
On May 17, 2018 Air Industries Group (the “Company”) entered into a Placement Agency Agreement with Taglich Brothers, Inc., as placement agent (the “Placement Agent”), pursuant to which the Placement Agent agreed to offer on behalf of the Company, on a best efforts basis, up to $1,250,000 of the Company’s Subordinated Notes due May 31, 2019 (the “Notes”) to accredited investors (the “Offering”), together with a number of shares of Common Stock equal to 30% of the amount invested divided by the closing price of the Common Stock on the trading day immediately preceding the date of purchase, in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). The Notes and shares of Common Stock sold in the Offering are sometimes collectively referred to in this report as the “Securities.”
Under the terms of the Placement Agency Agreement, the Placement Agent is entitled to a placement agent fee equal to 4% of the gross proceeds of the Offering, payable at the Company’s option, in cash or additional notes and shares on the terms sold to subscribers.
Subscription Agreements
The Company has entered into subscription agreements with three accredited investors for the purchase of an aggregate of $1,200,0000 principal amount of Notes, together with a total of 215,062 shares of Common Stock, including $1,000,000 principal amount of Notes and 178,571 shares of Common Stock to be issued to Michael Taglich, and $100,000 principal amount of Notes and 17,857 shares of Common Stock to be issued to Robert Taglich, each of whom is a director and principal stockholder of the Company and a principal of Taglich Brothers, Inc.
Item 3.02 Sale of Unregistered Equity Securities.
On May 18, 2018 and May 21, 2018, the Company issued sold an aggregate principal amount of $1,200,000 of Notes, together with a total of 215,062 shares of Common Stock for a total purchase price of $1,200,000 to three accredited investors. Michael Taglich purchased $1,000,000 principal amount of Notes and 178,571 shares of Common Stock for a purchase price of $1,000,000 and Robert Taglich purchased $100,000 principal amount of Notes and 178,571 shares of Common Stock for a purchase price of $1,000,000. Seventy percent (70%) of the total purchase price for the Securities purchased by each investor has been allocated to the Notes with the remaining thirty percent (30%) allocated to the shares of Common Stock purchased. The number of shares purchased by Michael and Robert Taglich was calculated based upon $1.68, the closing price of the Common Stock on May 20, 2018, the trading day immediately preceding the date of purchase.
Interest on the Notes is payable on the outstanding principal amount thereof at the rate of one percent (1%) per month, payable monthly commencing June 30, 2018. Upon the occurrence and continuation of a failure to pay accrued interest, interest shall accrue and be payable on such amount at the rate of 1.25% per month; provided that upon the occurrence and continuation of a failure to timely pay the principal amount of the Note, interest shall accrue and be payable on such principal amount at the rate of 1.25% per month and shall no longer be payable on interest accrued but unpaid.
For acting as placement agent of the Securities, Taglich Brothers, Inc. is entitled to a placement agent fee equal to 4% of the gross proceeds of the Offering, payable at the Company’s option, in cash or additional notes and shares of Common Stock on the terms sold to subscribers.
The Notes, as well as the shares of Common Stock, issued to the purchasers of the Securities and the placement agent, were issued pursuant to an exemption from registration afforded by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder, and were endorsed with the customary Securities Act legend.
