0001615774-15-002333.txt : 20150819 0001615774-15-002333.hdr.sgml : 20150819 20150819165055 ACCESSION NUMBER: 0001615774-15-002333 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20141231 FILED AS OF DATE: 20150819 DATE AS OF CHANGE: 20150819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: M LINE HOLDINGS INC CENTRAL INDEX KEY: 0001072248 STANDARD INDUSTRIAL CLASSIFICATION: METALWORKING MACHINERY & EQUIPMENT [3540] IRS NUMBER: 880375818 STATE OF INCORPORATION: NV FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-53265 FILM NUMBER: 151064600 BUSINESS ADDRESS: STREET 1: 2672 DOW AVENUE CITY: TUSTIN STATE: CA ZIP: 92780 BUSINESS PHONE: 714 630-6253 MAIL ADDRESS: STREET 1: 2672 DOW AVENUE CITY: TUSTIN STATE: CA ZIP: 92780 FORMER COMPANY: FORMER CONFORMED NAME: GATEWAY INTERNATIONAL HOLDINGS INC DATE OF NAME CHANGE: 20020207 FORMER COMPANY: FORMER CONFORMED NAME: GOURMET GIFTS INC DATE OF NAME CHANGE: 19990503 10-Q 1 s101638_10q.htm FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 31, 2014

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from _______________ to _______________.

 

Commission File Number 000-53265

 

M LINE HOLDINGS, INC.
(Exact Name of Company as Specified in its Charter)

         
  Nevada   88-0375818  
  (State or other jurisdiction of   (I.R.S. Employer  
  incorporation or organization)   Identification No.)  
         
  2672 Dow Avenue      
  Tustin, CA   92780  
  (Address of principal executive offices)   (Zip Code)  
     
  (714) 630-6253  
     
  (Registrant’s telephone number, including area code)  
     
  (Former name, former address and former fiscal year, if changed since last report)  

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No ☐.

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ     No ☐.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

     
Large accelerated filer     Accelerated filer  
     
Non-accelerated filer     Smaller reporting company  þ
(Do not check if a smaller reporting company)    

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No þ.

 

Applicable only to issuers involved in bankruptcy proceedings during the preceding five years

 

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes þ     No. ☐

 

Applicable only to corporate issuers:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 19, 2015, there were 1,199,555,785 shares of common stock, par value $.001, issued and outstanding.

 

-1-
 

 

M LINE HOLDINGS, INC.

 

TABLE OF CONTENTS

       
      Page
PART I      
       
Item 1. Financial Statements (Unaudited)   3
       
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   17
       
Item 3. Quantitative and Qualitative Disclosures About Market Risk   23
       
Item 4. Controls and Procedures   23
       
PART II      
       
Item 1. Legal Proceedings    
       
Item 1A. Risk Factors   28
       
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   28
       
Item 3. Defaults Upon Senior Securities   28
       
Item 4. (Removed and Reserved)   28
       
Item 5. Other Information   28
       
Item 6. Exhibits   28
       
  Signatures   31

 

-2-
 

  

PART 1—FINANCIAL INFORMATION

 

References in this document to “us,” “we” or the “Company” refer to M LINE HOLDINGS, INC. and our subsidiaries, E.M. Tool Company, Inc., Precision Aerospace & Technologies, Inc., formerly Eran Engineering, Inc., and M Line Business Services, Inc.

 

Item 1. Financial Statements. 

 

M LINE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

          
    As of December 31
2014
    As of June 30
2014
 
Assets 
Current assets:          
Cash and cash equivalents  $60,460   $46,925 
           
Accounts receivable, net   230,169    222,344 
           
Inventory, net   1,752,862    1,430,682 
           
    2,043,491    1,699,951 
           
Property and equipment, net   258,178    402,476 
           
Deposits and other   123,285    140,922 
Total assets  $2,424,954   $2,243,349 
           
Liabilities and Stockholders’ deficit 
           
Current liabilities:          
           
Bank overdraft  $307,318    149,699 
Accounts payable   1,721,832    1,350,157 
           
Accounts payable - related party   35,954    35,954 
           
Accrued expenses and other   3,128,087    2,594,616 
           
Litigation payable   287,500    287,500 
           
Derivative Liability   965,003    634,769 
           
Line of credit   2,694,703    2,330,453 
           
Notes payable - current, net of debt discount of $310,291 and $317,977   814,048    1,018,755 
           
Current portion of capital lease obligations   53,901    53,901 
           
    Total current liabilities   10,008,346    8,455,804 
           
Notes payable - net of current portion   124,023    124,023 
           
Capital Lease obligation, net of current portion   46,426    46,426 
           
Total liabilities   10,178,795    8,626,253 
           
Commitments and contingencies          
           
Stockholders’ deficit:         
Series A Preferential stock: $0.001 par value, 10,000,000 shares authorized, 200,000 and 200,000 shares issued and outstanding at December 31, 2014 and June 30, 2014 respectively   200    200 
           
Series B Preferential stock: $0.001 par value, 10,000,000 shares authorized, 10,000,000 and 0, shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively.   10,000     
           
Common stock: $0.001 par, 1,000,000,000 shares authorized, 942,437,603 and 243,178,484 shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively   942,437    243,178 
           
Additional paid in capital   13,300,109    12,846,981 
           
Accumulated deficit   (22,006,587)   (19,473,263)
           
Total stockholders’ deficit   (7,753,841)   (6,382,904)
Total liabilities and stockholders’ deficit  $2,424,954   $2,243,349 

 

The accompanying notes form an integral part of these unaudited  consolidated financial statements

 

-3-
 

 

M LINE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS  
(UNAUDITED)

                                 
   Three months ended December  31,    Six months ended December  31,  
   2014    2013      2014    2013  
                     
Net sales  $1,504,304   $3,306,380   $2,461,784   $6,033,574 
                     
Cost of sales   1,481,115    2,394,345    2,430,381    4,112,425 
                     
Gross profit   23,189    912,035    31,403    1,921,149 
Operating expenses:                    
                     
Selling, general and administrative   499,607    372,690    1,329,313    1,151,051 
                     
Operating income (loss)   (476,418)   539,345    (1,297,910)   770,098 
Other income (expense):                    
                     
Interest expense   (353,935)   (220,350)   (418,716)   (345,342)
Loss on debt extinguishment           (165,526)    
                     
Derivative loss   (165,437)   (48,130)   (651,172)   (48,130)
                     
Total other income (expenses)   (519,372)   (268,480)   (1,235,414)   (393,472)
                     
Income (loss) before income tax   (995,790)   270,865    (2,533,324)   376,626 
                     
Income tax provision       (1,694)       (1,694)
Net income (loss)  $(995,790)  $269,171   $(2,533,324)  $374,932 
Deemed dividend - Series B Preferred Stock   (225,500)       (225,500)    
Net income (loss) available to common stockholders  $(1,221,290)  $269,171   $(2,758,824)  $374,932 
Net income (loss) per share:                    
Basic and diluted :  $(0.00)   (0.01)  $0.00   $(0.02)
                     
Weighted average number of common shares outstanding - basic and diluted   942,437,603    83,972,797    737,919,242    78,632,746 

 

The accompanying notes form an integral part of these unaudited consolidated financial statements

 

-4-
 

 

M LINE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 

   Six months ended December  31,  
   2014    2013  
Cash flows from operating activities:          
Net income (loss)  $(2,533,324)  $374,932 
Reconciliation of net loss to net cash provided by  operations:          
           
Loss on disposition of assets   46,250     
           
Bad debt expense   39,211     
           
Depreciation   54,798    85,253 
           
Amortization of debt discount and deferred financing fees   335,836    155,027 
           
Loss on debt extinguishment   165,526    —  
           
Issuance of shares for services       217,916 
           
Change in derivative liabilities   651,172    48,130 
           
Changes in operating assets and liabilities:          
           
Accounts receivable   (47,036)   (356,402)
           
Inventory   (322,180)   (57,776)
           
Prepaid expenses and other assets   17,637    (2,477)
           
Due from related party       (28,652)
           
Accounts payable, accrued expenses and other   1,253,527    (393,838)
           
Net cash provided by (used in) operating activities   (338,583)   42,113 
           
Cash flows from investing activities:          
           
Proceeds from disposals of property and equipment   35,000     
           
Net cash provided by investing activities   35,000     
           
Cash flows from financing activities:          
           
Net borrowings (repayments) on line of credit   50,000    (53,493)
           
Proceeds from notes payable   110,499    202,195 
           
Bank overdraft   157,619    (48,092)
           
Payments to notes payable   (1,000)   (206,871)
           
Payments on capital leases       (31,441)
           
Net cash provided by (used in) financing activities   317,118    (137,702)
           
Net increase (decrease) in cash and cash equivalents   13,535    (95,589)
           
Cash and cash equivalents at beginning of period   46,925    182,305 
Cash and cash equivalents at end of period  $60,460   $86,716 
           
Supplemental disclosure of cash flow information:          
Cash paid for interest  $   $158,815 
Cash paid for income taxes  $   $ 
           
Supplemental disclosure of non-cash investing and financing activities:          
Debt discount resulting from derivative liability   602,576    63,000 
Return of property and equipment   8,250     
Acquisition of property and equipment through line of credit   224,250     
Interest added to principal   124,031     
Shares issued for conversion of debt   347,773     
Deemed dividend -Series B Preferred Stock   225,500     

 

The accompanying notes form an integral part of these unaudited consolidated financial statements

 

-5-
 

 

M LINE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. Business

 

M. Line Holdings, Inc. (the “Company”) and its subsidiaries currently are engaged in the following businesses, which also represent its business segments:

 

·      E.M. Tool Company, Inc. dba Elite Machine Tool Company (“Elite”), its wholly owned subsidiary, acquires, refurbishes and sells pre-owned CNC machine tool equipment. This is the machine sales group.

 

·      Precision Aerospace & Technologies, Inc., formerly Eran Engineering, Inc. (“Precision”), its wholly owned subsidiary, manufactures precision metal component parts and assemblies for the aerospace, medical and defense industries. This is the precision manufacturing group.

 

·      M Line Business Services, Inc., (M Line Business”) its wholly owned subsidiary, provides advice and support in raising new capital, management support in relation to financial control and management of the business, advice and support in relation to stock listing, reverse mergers, listing on various US and European exchanges, and sales and support specifically related to the aerospace industry.

 

2. Significant Accounting Policies

 

Basis of presentation

 

In the opinion of management, the accompanying interim consolidated balance sheets and statements of operations and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2014 filed with the U.S. Securities and Exchange Commission (the “Commission”) on June 24, 2015.

 

Principles of consolidation

 

The accompanying consolidated financial statements include the accounts of M Line Holdings, Inc. and its wholly owned subsidiaries Elite, Precision, and M Line Business . All intercompany accounts and transactions have been eliminated.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management are among others, realization of inventories, collectability of accounts receivable, litigation, impairment of goodwill and long-lived assets other than goodwill. Actual results could materially differ from those estimates.

 

Recent accounting pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

-6-
 

 

3. Going Concern and Management Plans

 

The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has an accumulated deficit of $22,006,587 as of December 31, 2014 and negative working capital.   

 

The Company recognizes that the very weak economy over the past few years and the difficulty in raising new funds has impacted the working capital needs of the Company.  

 

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to retain its current short term financing and ultimately to generate sufficient cash flow to meet its obligations on a timely basis in order to attain profitability.  

 

To date the Company has funded its operations from both internally generated cash flow and external sources. The Company will pursue additional external capitalization opportunities, as necessary, to fund its long-term goals and objectives.

 

4.  Inventories

 

Inventories are stated at the lower of cost or market, cost being determined using the first in first out (“FIFO”) method. The Company provides inventory reserves for obsolescence and other matters based on management’s review of current inventory levels. The Company includes inventory costs, labor and overhead costs directly associated with manufacturing its product.

 

Inventories as of December 31 and June 30, 2014 consist of the following:

               
   December.
31, 2014
   June 30, 2014 
Finished goods and components  $959,610   $1,112,647 
CNC machines held for sale   511,000    152,000 
Work in progress   446,781    327,620 
Raw materials and parts   11,392    14,336 
    1,928,783    1,606,603 
Less: Reserve for inventories   (175,921)   (175,921)
Inventories, net.  $1,752,862   $1,430,682 

 

5.  Accrued Expenses 

 

Accrued expenses and other as of December 31 and June 30, 2014 consist of the following: 

 

   December
31, 2014
   June 30,
2014
 
Compensation and related benefits  $2,209,233   $2,023,064 
Audit Fees   50,000    46,000 
Other   868,854    525,552 
   $3,128,087   $2,594,616 

 

-7-
 

6. Capital Leases

 

The Company leases certain equipment under capital leases with terms ranging from four to five years. Future annual minimum lease payments are as follows as of December 31, and June 30, 2014.

 

   December
31, 2014
  

June 30,
2014

 
2014  $53,901   $53,901 
2015   46,426    46,426 
Total minimum lease payments   100,327    100,327 
Present value of future minimum lease payments   100,327    100,327 
Less current portion of capital lease obligations   (53,901)   (53,901)
Capital lease obligations, net of current portion  $46,426   $46,426 

 

7. Line of Credit

 

TCA Global Master Credit Fund LP (“TCA”):

 

The Company has an existing line of credit with TCA Global Credit Master Fund, LLC (“TCA”) in the amount of $10 million. As of December 31 and June 30, 2014, the Company has drawn $1,700,000 from the line of which $2,420,453 and $2,330,453 is outstanding as of December 31, 2014 and June 30, 2014. Amounts drawn from the line of credit are subject to interest and matured on October 31, 2013. The line was automatically renewed for a further six months and expired on April 30, 2014. There is no availability under the line of credit. The Company has entered into a settlement agreement with TCA and expects to repay the debt within 15 months. The line of credit with TCA is secured by the receivables and inventory and a second position on the equipment of Precision and the inventory and receivables of Elite together with a blanket lien over all of the Company’s assets. During the six months ended December 31, 2014, additional interest of $90,000 was added to the balance of the line of credit.

 

In October 2014, the Company also entered into a new line of credit with Eqfin, LLC in the amount of $300,000 to provide equipment finance for the purchase of equipment for our subsidiary, Elite. The line is subject to annual interest of 19% and matures on October 5, 2015. The Company has drawn $274,250 from the line which remains outstanding as of December 31, 2014. This line is secured by the equipment that is purchased by Elite.

 

-8-
 

  

8. Notes Payable

 

Notes payable as of December 31 and June 30 consist of : 

 

   December  
31, 2014
   June
30, 2014
 
CONVERTIBLE NOTES (DERIVATIVE).          
           
One unsecured  5% convertible notes payable to a  financial institution due March 4, 2015. This note can be converted to common stock at 55% of the lowest closing price in the 20 trading days prior to conversion.  $130,200   $110,000 
           
Two unsecured 8% convertible notes payable in the sum of $110,751 to a  financial institution due February 12, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 7 trading days prior to conversion.   40,804    50,000 
           
An unsecured 12% convertible note payable to a financial institution due January 31, 2015. This note can be converted to common stock at 55% of the lowest closing price in the 5 trading days prior to conversion.   11,500    21,500 
           
An unsecured 12% convertible note payable to a financial institution due February 12, 2016. This note can be converted to common stock at $0.0235 or 60% of the lowest closing price in the last 25 trading days prior to conversion.   40,710    50,631 
           
Two unsecured convertible notes payable in the sum of $110,674 to a financial institution with $50,000 due on February 6, 2015 and $55,674 due on May 30, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 7 to 10 trading days prior to conversion.   16,144    105,674 
           
Two unsecured 8% convertible notes payable to a financial institution both due May 30, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 10 trading days prior to conversion.   83,855    160,674 
           
Four unsecured convertible notes with interest ranging from 8% to 12% payable to a financial institution with $50,000 due April 25, 2015, $75,000 due on December 25, 2014, $125,662 due October 3, 2014 and $37,500 due on February 18, 2015. These notes can be converted to common stock after maturity date at 40% - 55% of the lowest closing price in the last 10 to 20 trading days prior to conversion.   220,109    225,562 
           
Three unsecured 8% convertible notes payable in the sum of $160,674 to a financial institution with $50,000 due on February 6, 2015 and $110,674 due on June 10, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 50% - 55% of the lowest closing price in the last 7 to 15 trading days prior to conversion.   130,000    160,674 
           
An unsecured 8% convertible note payable to a financial institution due on June 10, 2015. This note can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 10 trading days prior to conversion.   50,000    50,000 
    723,322    934,715 
OTHER NOTES (NON-CONVERTIBLE).          
           
Notes payable to a financial institution, secured by the underlying equipment in aggregate monthly installments of varying amounts, on a reducing balance method, with the balance due in October  2016.  $247,811   $247,811 
           
Two unsecured notes payable in the sum of $150,000, each, to a financial institution in full in November 2011 and March 31, 2012. The Company is currently in default and has negotiated to pay the notes in monthly installments of $20,000 commencing November 2012.   75,459    75,459 
           
An  unsecured note payable to a corporation in weekday amounts of $700, increasing to $1,650, in September 2013 and ending in December 2013. This note is in default  but a settlement reached with monthly payments being made will pay off the note by June 25, 2015. The note was not paid by June 25 and the Company is currently negotiating a new pay-off schedule.   40,300    40,300 
           
An  unsecured note payable to a corporation in weekday amounts of $691 each through December 2013. This note is in default but a settlement reached with monthly payments being made will pay off the note by October 2015.   56,120    57,120 
           
An  unsecured note payable to a corporation in weekday amounts of $841 each through February 2014. This note is in default.   105,350    105,350 
    525,040    526,040 
Total of convertible and other notes   1,248,362    1,460,755 
Less Debt discount   (310,291)   (317,977)
TOTAL   938,071    1,142,778 
Less Current Portion   814,048    1,018,755 
Long Term Portion  $124,023   $124,023 
           
2016   124,023    124,023 
2017        
2018        
2019        
Thereafter        
   $124,023   $124,023 

 

Owing to the variable conversion rates of convertible notes, the Company determined that the conversion feature met the definition of a liability under ASC 815-40. Consequently, the Company bifurcated the conversion feature and accounted for this as a derivative liability. See Note 11.

 

In connection with one of the notes issued during the six months ended December 31, 2014, the Company issued 15,625,000 warrants that have a term of 5 years and an exercise price of $0.0016 per share. The exercise price on these warrants, contain a reset provision in the event shares are sold by the Company at a price lower than the exercise price. Consequently, the warrants were accounted for as derivatives and the fair value of such warrants amounting to $28,125 was recognized as a debt discount and amortized over the term of the note.

 

During the six months ended December 31, 2014, the Company converted total debt of $347,773 for 699,259,119 common shares and recognized a loss on debt extinguishment related to the conversion of $1,089,040.

 

9. Commitments and Contingencies

 

Leases

 

The Company leased its manufacturing and office facilities under non-cancellable operating lease arrangements.

 

Rent expense under operating leases was $237,662 and $253,454 for the six months ended December 31, 2014 and 2013, respectively.

 

-9-
 

  

Litigation

 

Litigation payable as of December 31and June 30, 2014 consist of the following:

 

   December 31,
2014
   June 30,
2014
 
An unsecured note payable to a corporation in settlement of a lawsuit payable in 12 monthly payments of $5,000.  $210,000    210,000 
           
Unsecured notes payable to various parties in settlement of lawsuits payable in full.   77,500    77,500 
           
TOTAL  $287,500    287,500 

 

The Company’s existing litigation proceedings are set forth below:

     
  1. James M. Cassidy v. Gateway International Holdings, Inc., American Arbitration Association, Case No. 73-194-32755-08.
     
    The Company was served with a Demand for Arbitration and Statement of Claim, which was filed on September 16, 2008. 
     
    The Statement of Claim alleges that claimant is an attorney who performed services for the Company pursuant to an agreement dated April 2, 2007 between the Company and the claimant. The Statement of Claim alleges that the Company breached the agreement and seeks compensatory damages in the amount of $195,000 plus interest, attorneys’ fees and costs. Management denies the allegations of the Statement of Claim and will vigorously defend against these allegations. An arbitrator has not yet been selected, and a trial date has not yet been scheduled. 
     
    No provision has been made in the December 31 and June 30, 2014 financial statements with respect to this matter because the Company has assessed the litigation as having no merit and the likelihood of any liability pursuant to this litigation to be extremely low.
     
  2. CNC Manufacturing v. All American CNC Sales, Inc., Elite Machine Tool Company/Sales & Services, CNC Repos, Superior Court for the State of California, County of Riverside, Case No. RIC 509650.
     
    Plaintiff filed this Complaint on October 2, 2008.
     
    The Complaint alleges causes of action for breach of contract and rescission and claims that All American breached the agreement with CNC Manufacturing by failing to deliver a machine that conforms to the specifications requested by CNC Manufacturing, and requests damages totaling $138,750. Elite Machine filed an Answer timely, on January 15, 2009.
     
    Abstract of Judgment and Writ were issued August 17, 2012.

 

-10-
 

 

     
    The Company entered into a settlement agreement for a settlement in the total amount of $37,500. However, no payments have been made to date.
     
    A provision has been made in the December 31 and June 30, 2014 financial statements with respect to this matter in the sum of $37,500.
     
  3. Donald Yu v. M Line Holdings, Inc., et al.; Case No. 30-2012-00574019-CU-BC-CJC
     
    This is an employment dispute asserted by a former employee against M Line Holdings and two corporate insiders, Jitu Banker and Anthony Anish, in their respective individual capacities.  The action was filed in Orange County Superior Court on June 4, 2012.  The parties entered into a settlement agreement and stipulation for judgment against M Line Holdings, only, on about May 12, 2013.  Pursuant to the terms and conditions of the settlement agreement, M Line agreed to pay $21,450.00 in three (3) equal installments.  M Line Holdings failed to make payment on a timely basis, and plaintiff filed a stipulated judgment against M Line Holdings on June 12, 2013.  Plaintiff also filed default judgments against Messrs. Banker and Anish.  
     
    In response, defendants filed a motion to set aside the defaults and vacate the default judgments against Messers. Banker and Anish as well as renegotiate the terms of the prior settlement with Plaintiff.  On or about September 30, 2013, the parties entered into a supplemental settlement agreement and mutual release wherein the Company agreed to pay plaintiff the sum of $24,000 in two (2) equal installments.  The first installment of $12,000 has already been paid.  
     
    The final installment of $12,000 was due on or before October 30, 2013, and has not been paid at this time. A judgment remains outstanding against the Company in the sum of  $12,000.
     
  4. Subramani Srinivasan, et al. v. M Line Holdings, Inc., et al.; Case No. 30-2014-00724484-CU-CO-CJC
     
    This is a breach of contract, fraud, and related causes of action against Defendants Eran Engineering, Inc., Bart Webb, Precision Aerospace and Technologies, Inc. (erroneously sued as “Precision Aerospace Technologies, Inc.”); M-Line Holdings, Inc.; Anthony Anish; Jitu Banker; Larry Consalvi; and Elite Machine Tools (collectively, “Defendants”).  
     
    The parties entered into a settlement agreement against the corporate defendants on or about January 22, 2015.  Pursuant to the terms and conditions of the settlement agreement, the corporate defendants agreed to pay $20,000 in three (3) equal installments on or before April 30, 2015.  
     
    As of June 2, 2015, the corporate defendants have paid $20,000 and this case has been dismissed, which effectively terminates all litigation in its entirety.
     
  5. Can Capital Asset Servicing, Inc. v. E.M. Tool Company, Inc., et al.; Case No. 30-2014-00727606- CU-CL-CJC
     
    This is a breach of contract and related claims arising out of a business loan, and alleges that E.M. Tool failed to pay Can Capital all amounts due under the loan agreement in the principal sum of $58,313, plus interest, costs and attorneys’ fees.  
     
    On or about November 2014, the parties entered into a settlement agreement and stipulated judgment.  Pursuant to the terms and conditions of the settlement agreement, the Company agreed to pay plaintiff the sum of $50,000 in installments on or before May 15, 2015.  

 

-11-
 

 

     
    As of May 13, 2015, the defendants have made partial payments, and still owe plaintiff $25,500. Plaintiff provided notice of its intent to file the stipulated judgment on May 7, 2015, and commence collection efforts if payment of $10,000 is not paid prior thereto and those payments have been made. Since May, the Company has paid $1,500. The balance as of August 17, 2015 is $24,000
     
  6. Fadal Machining v. All American CNC Sales, et al., Los Angeles Superior Court, Los Angeles, California, Case No. BC415693.
     
    The Complaint was filed on June 12, 2009.
     
    The Complaint alleges causes of action for breach of contract and common counts against All American CNC seeking damages in the amount of at least $163,579, and arises from a claim by Fadal that All American failed to pay amounts due. On June 26, 2009, Fadal amended the complaint to include M Line Holdings, Inc. as a defendant.
     
    A settlement agreement in the amount of $60,000 was signed on May 31, 2011.
     
    The Company had made a provision in the sum of $210,000 in the financial statements as of September 30, and June 30, 2014 as no payments that were due under the settlement agreement have been made. Judgment was entered on June 16, 2011, and a Writ was issued on February 24, 2012.
     
  7. C. William Kircher Jr. v. M Line Holdings, Inc. Orange County Superior Court Case No. 00397576
     
    A former attorney for M Line Holdings, Inc. has sued seeking damages for failure to pay legal fees in the amount of $120,166.
     
    The parties reached a settlement. The terms of the settlement call for 12 payments of $5,000 per month commencing August 25, 2011 and the issuance of 150,000 shares of common stock. The Company has issued the 150,000 shares of common stock and made two payments to date. The Company has a provision in the sum of $50,000 in the financial statements as of December 31, and June 30, 2014.
     
    The Company currently is in default of its payment obligations under the settlement. Plaintiff currently is seeking to obtain a judgment as a result of the breach of the settlement agreement.
     
  8. Timothy D. Consalvi v. M Line Holdings, Inc. et.al., Orange County Superior Court Case No, 00308489.
     
    A former president of All American CNC Sales, Inc. has filed suit against the Company seeking payment on an alleged severance obligation by the Company. The Complaint does not specify the damages sought. The parties then reached a settlement in the principal sum of $40,000 to be documented in due course. Meanwhile a default was entered against the Company, which management believes was in error because a settlement was already reached by the principal parties involved. The default has since been vacated, and the Company has answered the complaint and has filed a motion for leave to file a cross complaint.
     
    A settlement of $50,000 was reached in this case, requiring payments commencing on March 11, 2011 for 10 months. The first two month’s payments were made; however, the Company currently is in default of the terms of this settlement agreement. Mr. Consalvi filed his stipulated judgment on March 5, 2012. Abstract of judgment and Writ were issued on March 13, 2012.
     
    A provision in the sum of $40,000 has been made in the financial statements as of December 31 and June 30, 2014.

 

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    To date there has been no further action on this case, and the Company plans to resolve this matter as soon as possible.
     
  9. All Direct Travel Services, Inc. v. Jitu Banker, M Line holdings, Inc., Airworks  International, Inc., case number 30-2011-00472824-CL-CO-CJC
     
    This case was settled as to Jitu Banker and the Company for $2,000 payable on February 25, 2013. We do not yet have sufficient information to determine what the potential outcome of this may be or whether or to what extent it would or could have a financial impact on the Company. A default judgment was entered on January 6, 2012.
     
    To date there has been no further action on this case, and the Company plans to resolve this matter as soon as possible.
     
  10. TCA Global Credit Master Fund, L.P. vs M LI ne Holdings, Inc. EM Tool Company, Inc. dba Elite Machine Tool, Precision Aerospace and Technologies, Inc., Anthony Anish and Jitendra Banker case # CACE-14-012871
     
    Plaintiff filed this case on July 1, 2014 in Broward County, Florida.
     
    The complaint alleges that the Company owes the Plaintiff the amount due under the revolving note, and is claiming foreclosure of the collateral, breach of the credit agreement and a claim against the individuals under the validity agreement due to the non-payment.
     
    The Plaintiff obtained a default judgment however due to a settlement agreement reached on September 5, 2014 ceased any further legal activity.  The Defendants were unable to honor the agreement and Plaintiff continued to obtain sister state judgments in California and Nevada.
     
    On February 23, 2015 a new settlement agreement was signed between the parties under which plaintiff agreed to accept two methods of repayment, the first being $1,200,000 paid over a fifteen month period commencing as soon as the Company was up to date with its filings and the balance of funding would come from a new asset based lending program that Defendants were in the process of arranging.
     
    The Company has accrued $2,420,453 and $2,330,453 in the financial statements that includes all interest and fees due to Plaintiff through December 31, and June 30, 2014, respectively.
     
  11. Global Vantage Ltd.,  a California Corporation vs Eran Engineering, Inc. Precision Aerospace and Technologies, Inc., M Line Holdings, Inc., Anthony Anish, Lawrence Consalvi and Kenneth Collini
     
    Plaintiff filed this complaint on August 7, 2014 in Orange County, California.
     
    The complaint alleges that the Company owes funds that are due for the lease of certain equipment or plaintiffs want repossession of the equipment.
     
    The plaintiffs obtained judgment in February 2015 and the equipment has been returned to plaintiff.  However, defendants are filing an appeal against this judgment.

 

Litigation is subject to inherent uncertainties, and unfavorable rulings could occur.  If an unfavorable ruling were to occur in any of the above matters, there could be a material adverse effect on the Company’s financial condition, results of operations or liquidity.

 

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The related provisions for these litigations are reported under litigation payable, accounts payable and accrued expenses and other in the consolidated balance sheets.

 

10. Shareholders’ Equity

 

During the six months ended December 31, 2014, the Company issued the following shares of common stock:

   
· 699,259,119 common shares were issued to financial institutions in connection with the conversion of debt and accrued interest totaling to $347,773.
   
· On October 14, 2014, the Board agreed to issue 10,000,000 blank check preferred stock to Anthony Anish, the COO of the Company.  These shares carry no par value and are designated as the Company’s Series B preferred stock having only the following rights;  The Series B stock shall be non-convertible, zero dividend, zero interest and carrying a voting power of the combined voting power of 50% of the Company’s common and preferred stock while outstanding. The fair value of these shares amounting to $225,500 was recorded as a deemed dividend during the six months ended December 31, 2014.

 

11. Fair Value of Financial Instruments

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

 

· Level 1 - Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
· Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily-available pricing sources for comparable instruments.
· Level 3 - Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

 

The following table presents the derivative financial instrument. The Company’s only financial liability is measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis and their level of hierarchy as of December 31, 2014: 

                     
   Amount   Level 1   Level 2   Level 3 
Embedded conversion derivative liability  $965,003   $   $   $965,003 
Total  $965,003   $   $   $965,003 

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:

 

Balance at June  30, 2014  $634,769 
Fair value of warrant derivative liabilities at issuance, recorded as debt discount   602,576 
Settlement of derivative liabilities to gain on debt extinguishment.   (923,514)
Unrealized derivative loss resulting from marked to market fair values included in other expense   651,172 
Balance at December 31, 2014  $965,003 

 

-14-
 

 

The fair value of the derivative liability is calculated at the time of issuance and the Company records a derivative liability for the calculated value. Changes in the fair value of the derivative liability are recorded in other income (expense) in the consolidated statements of operations.

 

The following are the assumptions used for derivative instrument valued using the Black Scholes option pricing model:

 

   At Issuance   December 31, 2014 
Market value of stock on measurement date  $0.0012 - 0.0018   $0.0002 
Risk-free interest rate   0.05 – 1.58%   0.03 – 1.65%
Dividend yield   0%   0%
Volatility factor   241 - 417 %   286 -402%
Term    0.51 - 5 years    0.10 – 4.63 years 

 

12. Related Party Transactions 

 

As of December 31, 2014, the amount due from related party was $0 compared to $0 as at June 30, 2014. The amount due to an officer of the Company as at December 31, 2014 and June 30, 2014 was $35,594, This amount is for expenses of the Company paid personally by the Officer on behalf of the Company.

 

13. Segments and Geographic Information

 

The Company’s segments consist of individual companies managed separately with each manager reporting to the Board. “Other” represents corporate functions. Sales, and operating or segment profit, are reflected net of inter-segment sales and profits. Segment profit is comprised of net sales less operating expenses and interest. Income taxes are not allocated and reported by segment since they are excluded from the measure of segment performance reviewed by management. The revenue of the Precision Manufacturing group is down significantly compared to the comparable period last year as a result of rebuilding revenue following the Company’s move and subsequent delay before production could start again.

 

Segment information is as follows for the three months and six months ended December 31, 2014 and 2013:

  

Segment Information for the three months ended December   31, 2014  Machine
Sales
   Precision Manufacturing   Corporate   Total 
Revenue  $1,172,882   $331,422   $   $1,504,304 
Interest Expense   40,500    45,000    268,435    353,935 
Depreciation and Amortization       25,599        25,599 
Income (loss) before taxes   (169,182)   (180,696)   (645,912)   (995,790)
Total Assets   642,218    1,726,093    56,643    2,424,954 
Capital Expenditure  $   $   $   $ 
                     
Segment Information for the three months ended December   31, 2013  Machine
Sales
   Precision Manufacturing   Corporate   Total 
Revenue  $2,447,201   $859,179   $   $3,306,380 
Interest Expense   40,306    60,528    119,516    220,350 
Depreciation and Amortization   750    40,118        40,868 
Income (loss) before taxes   34,199    474,097    (300,431)   207,865 
Total Assets   1,076,182    2,746,680    19,176    3,842,038 
Capital Expenditure  $   $   $   $ 

 

-15-
 

  

Segment Information for the six months ended December   31, 2014  Machine Sales   Precision Manufacturing   Corporate   Total 
Revenue  $1,903,109   $558,675   $   $2,461,784 
Interest Expense   72,000    90,000    256,716    418,716 
Depreciation and Amortization       54,798       54,798
Income (loss) before taxes   (486,884)   (490,549)   (1,555,891)   (2,533,324)
Total Assets   642,218    1,726,093    56,643    2,424,954 
Capital Expenditure  $   $   $   $ 
                     
Segment Information for the six months ended December   31, 2013  Machine Sales   Precision Manufacturing   Corporate   Total 
Revenue  $4,206,759   $1,826,815   $   $6,033,574 
Interest Expense   98,511    114,815    132,016    345,342 
Depreciation and Amortization   1,500    83,753        85,253 
Income (loss) before taxes   208,649    557,894    (389,917)   376,626 
Total Assets   1,076,182    2,746,680    19,176    3,842,038 
Capital Expenditure  $   $   $   $ 

 

Sales are derived principally from customers located within the United States.

 

No segment information has been provided for M Line Business Services, Inc. as the Company had not started trading prior to December 31, 2014

 

14. Subsequent Events

   
· On January 15, 2015, the effective date, the Company entered into a settlement agreement with  TCA. Under the terms of the agreement, TCA will receive $100,000 as soon as all of the Company’s filings are current and will then receive $80,000 per month for 13 months and $60,000 in the 15th month. These payments will be accelerated at any time. In addition the balance of the note TCA will be paid through financing being obtained from an asset based lender. TCA will release their liens on the Company at that time.
   
· On March 3, 2015, a total of 200,000,000 shares were issued to two officers in lieu of payroll.
   
· In March 2015, the Company issued 57,118,182 shares in connection with the conversion of debt amounting to $6,283.
   
· On April 1, 2015, the Company temporarily shut down the operations of Elite laying off all the staff. Management was dissatisfied with the manner in which the Company was being managed and decided to restart the business by the end of 2015 in a new location with new management.
   
· On August 7, 2015, the Company entered into a short term loan in the amount of $10,720. This amount is due for repayment together with interest and fees of $1,780 on September 1, 2015. In the event it is not paid the amount may be coverted to stock at 125% of the original note amount and converted at the lower of $0.0002 or a 50% discount to market based on the the lowest price for the 20 consecutive days prior to conversion.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

This quarterly report on Form 10-Q of M Line Holdings, Inc. (referred to herein as “us, “we” or the “Company”) for the six month period ended December 31, 2014 contains forward-looking statements, principally in this section and in the section herein titled “Business.” Generally, you can identify these statements because they use words like “anticipates,” “believes,” “expects,” “future,” “intends,” “plans” and similar terms. These statements reflect only our current expectations. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy, and actual results may differ materially from those we anticipated due to a number of uncertainties, many of which are unforeseen, including, among others, the risks we face as described in this filing. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. These forward-looking statements are within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement where we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be accomplished.

 

We believe it is important to communicate our expectations to our investors. There may be events in the future, however, that we are unable to predict accurately or over which we have no control. The risk factors listed in our Annual Report on Form 10-K, as well as any cautionary language in our Annual Report on Form 10-K, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Factors that could cause actual results or events to differ materially from those anticipated, include but are not limited to: our ability to successfully develop new products; the ability to obtain financing for product development; changes in product strategies; general economic, financial and business conditions; changes in and compliance with governmental healthcare and other regulations; changes in tax laws; and the availability of key management and other personnel.

 

Overview

 

We currently conduct all of our operations through three of our wholly-owned subsidiaries: E..M. Tool Company, Inc. dba Elite Machine Tool Company (“Elite”), Precision Aerospace & Technologies, Inc. (“Precision”), (formerly Eran Engineering, Inc.) and M Line Business Services, Inc. Through Elite we refurbish and sell pre-owned CNC (computer numerically controlled) machine tool equipment and service and rebuild CNC equipment for customers and Precision is a customer focused, industry leading aircraft and medical precision metal component manufacturer offering low cost build-to-print and assembly services for production and spare parts, with design, development and sustaining engineering support services for it’s customers.

 

Our services and products are primarily marketed and sold to the commercial aviation, defense, medical, and energy industries. Currently we manage the operations of these subsidiaries. In the future we hope to expand our business, both through the growing of our existing businesses and their client bases, as well as through acquisitions of companies that complement the products and services we currently offer.

 

Our business services subsidiary provides advice and support in raising new capital, management support in relation to financial control and management of the business, advice and support in relation to stock listing, reverse mergers, listing on various US and European exchanges, and sales and support specifically relating to the aerospace industry.

 

Machine Sales Group

 

The Machine Sales Group is currently composed of one subsidiary, Elite, which is in the business of acquiring refurbishing and selling computer numerically controlled (“CNC”) machine tools, and providing service and machine rebuilds, to manufacturing customers.

 

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CNC machines use commands from an onboard computer to control the movement of cutting tools and the rotation speeds in order to cut precision metal parts. The computer controls enable the operator to program specific operations, such as part rotation and tooling selection and movement for a particular part and then store that program in memory for future use. Because CNC machines can manufacture parts unattended and operate at speeds faster than similar manually-operated machines, they can generate higher profits with less rework and scrap. Elite Machine specializes in selling refurbished Mori Seiki and other high end Japanese manufactured machine Tools.

 

In April 2015 we temporarily shut down operations of Elite. All the staff were laid off. We plan on restarting Elite shortly but certainly before the end of 2015 with a new management team and staff. The decision was made to stop the losses being incurred at Elite and we knew we needed new management.

 

Precision Manufacturing Group

 

The Precision Manufacturing Group is composed of Precision (formerly Eran Engineering), a wholly-owned subsidiary. Precision is a customer focused, industry leading aircraft and medical component manufacturer offering low cost build-to-print and assembly services for production and spare parts, with design, development and sustaining engineering support services for it’s customers. Precision, with an installed base of over forty CNC machines, manufactures parts and assemblies primarily for the aerospace and medical industries. Aerospace Customers include Panasonic Avionics Corporation (“Panasonic”), UTC Aerospace, (formerly Goodrich Aerostructures), a division of the United Technologies Group and our largest medical customer, Beckman Coulter (part of the Danaher group).

 

Business Services Group

 

The business services group is composed of M line Business Services, Inc., a wholly owned subsidiary. M Line Business provides advice and support in raising new capital, management support in relation to financial control and management of the business, advice and support in relation to stock listing, reverse mergers, listing on various US and European exchanges, and sales and support specifically related to the aerospace industry.

 

Trends Affecting Our Business

 

Although the recent tightening of the capital markets has eased, customers’ limited access to capital still limits our ability to sell used CNC machines. Historically, as capital markets tighten, companies that purchase large machines on credit, such as CNC machines, have more difficulty in obtaining credit and, therefore, are unable to purchase machines that they may be able to purchase in better financial times. The credit markets have improved slightly but may have an impact on our customers’ ability to purchase machines, which could negatively impact our business.

 

The primary components sold by our Precision Manufacturing Group during the six month period ended December 31, 2014 and 2013 were parts sold to Panasonic, a leading provider of in-flight entertainment systems for commercial aircraft. Although the market for in-flight entertainment systems has improved and is expected to continue to improve over the next two to three years, business is still inconsistent, and this may affect our business over the next several months. In addition, if there is a decrease in work, this may have an impact with the Machine Sales Group, as many of our customers that purchase machines from us do business with airline manufacturers.

 

The economy could have a serious effect on the business that is being entertained by M Line Business Services. Currently we are negotiating prospective contracts with a number of potential clients. However an economic downturn could impact the growth of the business.

 

Critical Accounting Policies

 

Use of Estimates

 

Our preparation, discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which are in conformity with and have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of sales and expenses during the reporting period. By their nature, these estimates made by management are, among others, realization of inventories, collectability of accounts receivable, litigation, impairment of goodwill and long-lived assets other than goodwill. We regularly evaluate our estimates and assumptions based on historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent actual results differ from these estimates, our future results of operations may be affected.

 

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Inventories

 

Within our Precision Manufacturing Group, we seek to purchase and maintain raw materials at sufficient levels to meet lead times based on forecasted demand. We generally manufacture parts based on purchase orders. Within our Machine Sales Group, we purchase machines held for resale based on management’s judgment of current market conditions and demand for both new and used machines. If forecasted demand exceeds actual demand, we may need to provide an allowance for excess or obsolete quantities on hand. We also review our inventories for changes in demand patterns and in the market prices of machines held in inventory and provide reserves as deemed necessary. If actual market conditions are less favorable than those projected by management, additional inventory reserves for CNC machines and parts may be required. We state our inventories at the lower of cost, using the first-in, first-out method on an average costs basis, or market.

 

Abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) are recognized as current-period charges. Fixed production overhead is allocated to the costs of conversion into inventories based on normal capacity of the production facilities. We utilize an expected normal level of production within the Precision manufacturing segment, based on our plant capacity. To the extent we do not achieve a normal expected productions levels, we charge such under-absorption of fixed overhead to operations. 

 

Results of Operations for the Three Months Ended December 31, 2014 compared to the Three Months Ended December 31, 2013.

                      
   For the three
months
ended
December 31,
2014
    For the three
months ended
December 31,
2013
    Change  
                
Sales by segment:               
Machine Sales  $1,172,882   $2,447,201    (1,274,319)
Precision Engineering   331,422    859,179    (527,757)
    1,504,304    3,306,380    (1,802,076)
                
Gross Profit by segment:               
Machine Sales   154,790    399,314    (244,524)
Precision Engineering   (131,601)   512,721    (644,322)
    23,189    912,035    (882,092)
                
Gross Profit by segment: %               
Machine Sales   667.51    43.78      
Precision Engineering   (567.51)   56.22      

 

Sales

 

Sales in the three month period ended December 31, 2014 decreased 54.50% compared to the three month period ended December 31, 2013.

 

The change is attributable to a decrease in sales in the Machine Sales and Precision Engineering Group. Sales decreased by 52.07% in the Machine Sales Group and by 61.43% in the Precision Manufacturing Group.

 

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Our Machine Sales Group primarily sells pre-owned CNC machinery manufactured by Mori Seiki. The average sale price of the machinery changes based on the equipment that is available to purchase in the market place and the prevailing market conditions that affect the price that equipment can be sold for. The average sale price of the 19 pieces of equipment sold in the three months ended December 31, 2014 was $55,184 compared to the comparable period in fiscal 2013 of 47 pieces of equipment sold at an average sale price of $46,383. In addition, service work for the three months ended December 31, 2014 was $30,422 compared to the comparable period in fiscal 2013 of $144,765.

 

Market conditions reflect not only the price that equipment can be purchased for but also the price at which that equipment may be sold. During good economic times when the business climate is improving, particularly in areas such as aerospace, the demand for equipment can result in a change in the purchase price. However, the need for that equipment by customers is generally reflected in the sale price. Therefore, as a general rule margins are reasonably consistent even though average sale prices may change. As a result, we do not expect future results to be materially impacted by these conditions.

 

The decrease in sales in the Precision Manufacturing Group is primarily the result of a net decrease of $608,048 in sales of precision metal component parts from Panasonic Avionics Corporation in the three months ended December 31, 2014.

 

Gross Margin

 

Gross profit decreased by 96.72% in fiscal period ended December 31, 2014 compared to the comparable period in fiscal 2013. The gross profit for the Machine Sales Group decreased by 61.23% due to a decrease in the volume of machines sold and a reduction in service work during this three month period. The decrease within the Precision Manufacturing Group of 125.67% resulted from higher costs of goods and higher salaries in relation to lower sales due primarily to the move of our business from the Tustin location to our new location in Anaheim. .

 

Selling, General and Administrative

 

Selling, general and administrative costs increased by $126,917 to $499,607 for the three month period ended December 31, 2014, compared to $372,690 for the three month period December 31, 2013. The change is primarily due to higher administrative salaries in the Precision Engineering division as the company tried to get back to full production.

 

Interest Expense

 

Interest expense increased by $133,585 for the three months ended December 31, 2014 compared to the three months ended December 31, 2013. The change is attributable to higher interest costs expensed for our Notes payable in the current period.

 

Derivative Gain (Loss).

 

The derivative gain (loss) for the three month period ended December 31, 2014 was $(165,437) compared to that of the comparable period in 2013 amounting to $(48,130). 

 

The derivative cost for the three month period ended December 31, 2014 was $165,437 compared to $48,130 for the three month period ended December 31, 2013. The derivative costs are computed on convertible promissory notes with the ability to convert to shares at a discount from market price. Until the loans are repaid a charge is included on our financial statements that reflected the possible derivative liability that could result if the loan was converted to shares in the Company. The derivative liability was calculated using the Black Sholes method.

 

Results of Operations for the Six Months Ended December 31, 2014 compared to the Six Months Ended December 31, 2013.

 

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   For the six
months
ended
December
31,
2014
    For the six
months
ended
December
31,
2013
    Change  
                
Sales by segment:               
Machine Sales  $1,903,109   $4,206,759    (2,303,650)
Precision Engineering   558,675    1,826,815    (1,268,140)
    2,461,784    6,033,574    (3,571,790)
                
Gross Profit by segment:               
Machine Sales   152,962    926,583    (773,621)
Precision Engineering   (121,559)   994,566    (1,116,125)
    31,403    1,921,149    (1,889,746)
                
Gross Profit by segment: %               
Machine Sales   487.09    48.23      
Precision Engineering   (387.09)   51.77      

 

Sales

 

Sales in the six month period ended December 31, 2014 decreased 59.20% compared to the six month period ended December 31, 2013.

 

The change is attributable to decreases in sales in the Machine Sales and the Precision Engineering Groups. Sales decreased by 54.76% in the Machine Sales Group and by 69.42% in the Precision Manufacturing Group.

 

Our Machine Sales Group primarily sells pre-owned CNC machinery manufactured by Mori Seiki. The average sale price of the machinery changes based on the equipment that is available to purchase in the market place and the prevailing market conditions that affect the price that equipment can be sold for. The average sale price of the 34 pieces of equipment sold in the six month ended December 31, 2014 was $51,382 compared to the comparable period in fiscal 2013 of 75 pieces of equipment sold at an average sale price of $50,885. In addition, service work for the six month ended December 31, 2014 was $54,080 compared to the comparable period in fiscal 2013 of $224,074.

 

Market conditions reflect not only the price that equipment can be purchased for but also the price at which that equipment may be sold. During good economic times when the business climate is improving, particularly in areas such as aerospace, the demand for equipment can result in a change in the purchase price. However, the need for that equipment by customers is generally reflected in the sale price. Therefore, as a general rule margins are reasonably consistent even though average sale prices may change. As a result, we do not expect future results to be materially impacted by these conditions.

 

The decrease in sales in the Precision Manufacturing Group is primarily the result of a net decrease of $1,172,605 in sales of precision metal component parts from Panasonic Avionics Corporation in the six months ended December 31, 2014.

 

Gross Margin

 

Gross profit decreased by 98.37% in fiscal period ended December 31, 2014 compared to the comparable period in fiscal 2013. The gross profit for the Machine Sales Group decreased by 83.49% due to a decrease in the volume of machines sold and a reduction in service work during this six month period. The decrease within the Precision Manufacturing Group of 112.22% resulted from higher costs of goods and higher salaries in relation to lower sales due primarily to the move of our business from the Tustin location to our new location in Anaheim. .

 

-21-
 

 

Selling, General & Administrative

 

Selling, general and administrative costs increased by $178,262 to $1,329,313 for the six month period ended December 31, 2014 compared to $1,151,051 for the six months ended December 31, 2013. The change is due primarily to officer’s salaries for the parent company which were not expensed as they were waived during the prior period and higher administrative salaries in the Precision Engineering division as the Company tried to get back to full production

 

Interest Expense

 

Interest expense increased by $73,374 for the six months ended December 31, 2014 compared to the six months ended December 31, 2013. The change is attributable to higher interest costs expensed for our Notes Payable for the current period.

 

Loss on debt extinguishment of convertible debt

  

Loss on debt extinguishment increased by $165,526 for the six months ended December 31, 2014 compared to the six months ended December 31, 2013. The change is primarily from the conversion of the convertible notes and settlement of the corresponding derivative liabilities.

 

Derivative Gain (Loss).

 

The derivative gain (loss) for the six month period ended December 31, 2014 was $(651,172) compared to that of the comparable period in 2013 amounting to $(48,130). 

 

The $651,172 cost in derivative liability arises as a result of convertible loans from various financial institutions in fiscal 2014 compared to $48,130 in the fiscal 2013 period.

 

These loans were loans with the ability to convert to shares at a discount from market price. Until the loans are repaid a charge is included on our financial statements that reflected the possible derivative liability that could result if the loans were converted to shares in the Company. The derivative liability was calculated using the Black Sholes method.

 

Liquidity and Capital Resources.

 

Our principal sources of liquidity consist of cash and cash equivalents, cash generated from operations and borrowing from various sources, including repayment of debt by the issue of common stock. As of December 31, 2014, our working capital (current assets less current liabilities) totaled ($7,964,855) compared to $(6,755,853) as of June 30, 2014, a decrease of $1,209,002.

 

The Company has an accumulated deficit of $22,006,587 as of December 31, 2014 and negative working capital. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

 

As of December 31, 2014 we had $2,420,453 in debt outstanding under our Accounts Receivable and Inventory line of Credit with TCA Global Credit Master Fund, LP and an equipment financing line of credit with Eqfin, LLC in the sum of $274,250.

 

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to retain its current short term financing and ultimately to generate sufficient cash flow to meet its obligations on a timely basis in order to attain profitability.

 

Our existing sources of liquidity, along with cash expected to be generated from sales, may not be sufficient to fund our operations, anticipated capital expenditures, working capital and other financing requirements for the foreseeable future. If that is the case we may need to seek to obtain additional debt or equity financing, especially if we experience downturns or cyclical fluctuations in our business that are more severe or longer than anticipated, or if we fail to achieve anticipated revenue targets, or if we experience significant increases in the cost of raw material and equipment for resale, or lose a significant customer, or experience increases in our expense levels resulting from being a publicly traded company. If we attempt to obtain additional debt or equity financing, we cannot assure you that such financing will be available to us on favorable terms, or at all.

 

Cash Flows

                
Provided by (used in)  2014   2013   Change 
                
Operating activities   (338,583)   42,113    380,696 
Investing activities   35,000        (35,000)
Financing activities   317,118    (137,702)   (454,820)
    13,537    (95,589)   (109,126)

 

-22-
 

 

Operating Activities

 

Operating cash flows during the six month period ended December 31, 2014 and 2013, respectively, reflect our results of operations, offset by net cash provided by operating assets and liabilities and non-cash items (depreciation, amortization and stock-based compensation). During the six month period ended December 31, 2014, non-cash expenses included in our net income and in operating activities totaled $1,292,793 compared to $506,326 in six month period ended December 31, 2013.

 

The increase (decrease) in operating assets and liabilities for the six month period ended December 31, 2014 and 2013 were $901,948 and $(839,145), respectively. During the six month period ended December 31, 2014, the increase was primarily attributable to an increase in accounts receivable, inventory and accounts payable and accrued expenses.

 

Investing Activities

 

We made disposals and (capital expenditures) of $35,000 and $0 during the six month period of the fiscal 2014 and 2013 period, respectively.

 

Financing Activities

 

Net cash provided by (used in) financing activities was $317,118 for the six months ended December 31, 2014, compared to $(137,702) for the six months ended December 31, 2013.  

 

Off Balance Sheet Arrangements

 

We have no off balance sheet arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

As a smaller reporting company, we are not required to provide the information required by this Item. However, we opted to include the following information.

 

The only financial instruments we hold are cash and cash equivalents. Changes in market interest rates will impact our interest costs.

 

We currently are billed by the majority of our vendors in U.S. dollars, and we currently bill the majority of our customers in U.S. dollars. However, our financial results could be affected by factors such as changes in foreign currency rates or changes in economic conditions.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of December 31, 2012, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2014, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in this Item

 

The principal weakness is that we have limited staff due to the size of the Company. As a result the division of duties and responsibilities amongst staff and the lack of internal controls lead to material weaknesses in these business areas.

 

-23-
 

 

Changes in Internal Control over Financial Reporting

 

There have been no changes to our internal control over financial reporting during our nine month period ended December 31, 2014.

 

Litigations

 

The Company’s existing litigation proceedings are set forth below:

 

1.James M. Cassidy v. Gateway International Holdings, Inc., American Arbitration Association, Case No. 73-194-32755-08.

 

The Company was served with a Demand for Arbitration and Statement of Claim, which was filed on September 16, 2008. 

 

The Statement of Claim alleges that claimant is an attorney who performed services for the Company pursuant to an agreement dated April 2, 2007 between the Company and the claimant. The Statement of Claim alleges that the Company breached the agreement and seeks compensatory damages in the amount of $195,000 plus interest, attorneys’ fees and costs. Management denies the allegations of the Statement of Claim and will vigorously defend against these allegations. An arbitrator has not yet been selected, and a trial date has not yet been scheduled. 

 

No provision has been made in the September 30 and June 30, 2014 financial statements with respect to this matter because the Company has assessed the litigation as having no merit and the likelihood of any liability pursuant to this litigation to be extremely low.

 

2.CNC Manufacturing v. All American CNC Sales, Inc., Elite Machine Tool Company/Sales & Services, CNC Repos, Superior Court for the State of California, County of Riverside, Case No. RIC 509650.

 

Plaintiff filed this Complaint on October 2, 2008.

 

The Complaint alleges causes of action for breach of contract and rescission and claims that All American breached the agreement with CNC Manufacturing by failing to deliver a machine that conforms to the specifications requested by CNC Manufacturing, and requests damages totaling $138,750. Elite Machine filed an Answer timely, on January 15, 2009.

 

Abstract of Judgment and Writ were issued August 17, 2012.

 

The Company entered into a settlement agreement for a settlement in the total amount of $37,500. However, no payments have been made to date.

 

A provision has been made in the December 31 and June 30, 2014 financial statements with respect to this matter in the sum of $37,500.

 

-24-
 

 

3.Donald Yu v. M Line Holdings, Inc., et al.; Case No. 30-2012-00574019-CU-BC-CJC

 

This is an employment dispute asserted by a former employee against M Line Holdings and two corporate insiders, Jitu Banker and Anthony Anish, in their respective individual capacities. The action was filed in Orange County Superior Court on June 4, 2012. The parties entered into a settlement agreement and stipulation for judgment against M Line Holdings, only, on about May 12, 2013. Pursuant to the terms and conditions of the settlement agreement, M Line agreed to pay $21,450.00 in three (3) equal installments. M Line Holdings failed to make payment on a timely basis, and plaintiff filed a stipulated judgment against M Line Holdings on June 12, 2013. Plaintiff also filed default judgments against Messrs. Banker and Anish.

 

In response, defendants filed a motion to set aside the defaults and vacate the default judgments against Messers. Banker and Anish as well as renegotiate the terms of the prior settlement with Plaintiff. On or about September 30, 2013, the parties entered into a supplemental settlement agreement and mutual release wherein the Company agreed to pay plaintiff the sum of $24,000 in two (2) equal installments. The first installment of $12,000 has already been paid.

 

The final installment of $12,000 was due on or before October 30, 2013, and has not been paid at this time. A judgment remains outstanding against the Company in the sum of $12,000.

 

4.Subramani Srinivasan, et al. v. M Line Holdings, Inc., et al.; Case No. 30-2014-00724484-CU- CO- CJC

 

This is a breach of contract, fraud, and related causes of action against Defendants Eran Engineering, Inc., Bart Webb, Precision Aerospace and Technologies, Inc. (erroneously sued as “Precision Aerospace Technologies, Inc.”); M-Line Holdings, Inc.; Anthony Anish; Jitu Banker; Larry Consalvi; and Elite Machine Tools (collectively, “Defendants”).

 

The parties entered into a settlement agreement against the corporate defendants on or about January 22, 2015. Pursuant to the terms and conditions of the settlement agreement, the corporate defendants agreed to pay $20,000 in three (3) equal installments on or before April 30, 2015.

 

As of June 2, 2015, the corporate defendants have paid $20,000 and this case has been dismissed, which effectively terminates all litigation in its entirety.

 

5.Can Capital Asset Servicing, Inc. v. E.M. Tool Company, Inc., et al.; Case No. 30-2014-00727606-CU-CL-CJC

 

This is a breach of contract and related claims arising out of a business loan, and alleges that E.M. Tool failed to pay Can Capital all amounts due under the loan agreement in the principal sum of $58,313, plus interest, costs and attorneys’ fees.

 

On or about November 2014, the parties entered into a settlement agreement and stipulated judgment. Pursuant to the terms and conditions of the settlement agreement, the Company agreed to pay plaintiff the sum of $50,000 in installments on or before May 15, 2015.

 

As of May 13, 2015, the defendants have made partial payments, and still owe plaintiff $25,500. Plaintiff provided notice of its intent to file the stipulated judgment on May 7, 2015, and commence collection efforts if payment of $10,000 is not paid prior thereto and those payments have been made. Since May, the Company has paid $1,500. The balance as of August 17, 2015 is $24,000.

 

6.Fadal Machining v. All American CNC Sales, et al., Los Angeles Superior Court, Los Angeles, California,Case No. BC415693.

 

The Complaint was filed on June 12, 2009.

 

-25-
 

 

The Complaint alleges causes of action for breach of contract and common counts against All American CNC seeking damages in the amount of at least $163,579, and arises from a claim by Fadal that All American failed to pay amounts due. On June 26, 2009, Fadal amended the complaint to include M Line Holdings, Inc. as a defendant.

 

A settlement agreement in the amount of $60,000 was signed on May 31, 2011.

 

The Company had made a provision in the sum of $210,000 in the financial statements as of December 31, and June 30, 2014 as no payments that were due under the settlement agreement have been made. Judgment was entered on June 16, 2011, and a Writ was issued on February 24, 2012.

 

7.C. William Kircher Jr. v. M Line Holdings, Inc. Orange County Superior Court Case No. 00397576

 

A former attorney for M Line Holdings, Inc. has sued seeking damages for failure to pay legal fees in the amount of $120,166.

 

The parties reached a settlement. The terms of the settlement call for 12 payments of $5,000 per month commencing August 25, 2011 and the issuance of 150,000 shares of common stock. The Company has issued the 150,000 shares of common stock and made two payments to date. The Company has a provision in the sum of $50,000 in the financial statements as of December 31, and June 30, 2014.

 

The Company currently is in default of its payment obligations under the settlement. Plaintiff currently is seeking to obtain a judgment as a result of the breach of the settlement agreement.

 

8.Timothy D. Consalvi v. M Line Holdings, Inc. et.al., Orange County Superior Court Case No, 00308489.

 

A former president of All American CNC Sales, Inc. has filed suit against the Company seeking payment on an alleged severance obligation by the Company. The Complaint does not specify the damages sought. The parties then reached a settlement in the principal sum of $40,000 to be documented in due course. Meanwhile a default was entered against the Company, which management believes was in error because a settlement was already reached by the principal parties involved. The default has since been vacated, and the Company has answered the complaint and has filed a motion for leave to file a cross complaint.

 

A settlement of $50,000 was reached in this case, requiring payments commencing on March 11, 2011 for 10 months. The first two month’s payments were made; however, the Company currently is in default of the terms of this settlement agreement. Mr. Consalvi filed his stipulated judgment on March 5, 2012. Abstract of judgment and Writ were issued on March 13, 2012.

 

A provision in the sum of $40,000 has been made in the financial statements as of December 31 and June 30, 2014.

 

To date there has been no further action on this case, and the Company plans to resolve this matter as soon as possible.

 

9.All Direct Travel Services, Inc. v. Jitu Banker, M Line holdings, Inc., Airworks International, Inc., case number 30-2011-00472824-CL-CO-CJC

 

This case was settled as to Jitu Banker and the Company for $2,000 payable on February 25, 2013. We do not yet have sufficient information to determine what the potential outcome of this may be or whether or to what extent it would or could have a financial impact on the Company. A default judgment was entered on January 6, 2012.

 

To date there has been no further action on this case, and the Company plans to resolve this matter as soon as possible.

 

-26-
 

 

10.TCA Global Credit Master Fund, L.P. vs M LI ne Holdings, Inc. EM Tool Company, Inc. dba Elite Machine Tool, Precision Aerospace and Technologies, Inc., Anthony Anish and Jitendra Banker case # CACE-14-012871

 

Plaintiff filed this case on July 1, 2014 in Broward County, Florida.

 

The complaint alleges that the Company owes the Plaintiff the amount due under the revolving note, and is claiming foreclosure of the collateral, breach of the credit agreement and a claim against the individuals under the validity agreement due to the non-payment.

 

The Plaintiff obtained a default judgment however due to a settlement agreement reached on September 5, 2014 ceased any further legal activity. The Defendants were unable to honor the agreement and Plaintiff continued to obtain sister state judgments in California and Nevada.

 

On February 23, 2015 a new settlement agreement was signed between the parties under which plaintiff agreed to accept two methods of repayment, the first being $1,200,000 paid over a fifteen month period commencing as soon as the Company was up to date with its filings and the balance of funding would come from a new asset based lending program that Defendants were in the process of arranging.

 

The Company has accrued $2,420,453 and $2,330,453 in the financial statements that includes all interest and fees due to Plaintiff through December 31, and June 30, 2014, respectively.

 

11.Global Vantage Ltd., a California Corporation vs Eran Engineering, Inc. Precision Aerospace and Technologies, Inc., M Line Holdings, Inc., Anthony Anish, Lawrence Consalvi and Kenneth Collini

 

Plaintiff filed this complaint on August 7, 2014 in Orange County, California.

 

The complaint alleges that the Company owes funds that are due for the lease of certain equipment or plaintiffs want repossession of the equipment.

 

The plaintiffs obtained judgment in February 2015 and the equipment has been returned to plaintiff. However, defendants are filing an appeal against this judgment.

 

Litigation is subject to inherent uncertainties, and unfavorable rulings could occur.  If an unfavorable ruling were to occur in any of the above matters, there could be a material adverse effect on the Company’s financial condition, results of operations or liquidity.

 

The related provisions for these litigations are reported under litigation payable, accounts payable and accrued expenses and other in the consolidated balance sheets.

 

-27-
 

 

Item 1A. Risk Factors.

 

As a smaller reporting company we are not required to provide the information required by this Item. However, we did include risk factors in our Annual Report on Form 10-K for the year ended June 30, 2014, as filed with the Commission on June 24, 2015.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

The Company issued 699,699,259,119 shares of the Company’s common stock for conversion of debt and to our investor relations and other consultants in payment of services to the Company. These shares were free trading and restricted in accordance with Rule 144. The issuance was exempt registration pursuant to Section 4 (2) of the Securities Act of 1933 and these financial institutions are sophisticated investors and familiar with our operations.

 

Item 3. Defaults Upon Senior Securities.

 

There have been no events required to be reported under this Item.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits.

 

The following Exhibits required by Item 601 of Regulation S-K to be filed herewith are either filed herewith or incorporated by reference to previously filed documents, as indicated.

 

(1)

     
Item No.   Description
     
3.1 (1)   Articles of Incorporation of M Line Holdings, Inc., a Nevada corporation, as amended
     
3.2 (5)   Certificate of Amendment of Articles of Incorporation
     
3.3 (1)   Bylaws of M Line Holdings, Inc., a Nevada corporation
     
3.3 (2)   Amended By Laws of M Line Holdings, inc. a Nevada Corporation
     
10.1 (1)   Asset Purchase Agreement with CNC Repos, Inc. and certain of its shareholders dated October 1, 2007
     
10.2 (1)   Commercial Real Estate Lease dated February 15, 2007 for the office space located in Tustin, CA
     
10.3 (1)   Commercial Real Estate Lease dated November 15, 2007 for the office space located in Anaheim, CA
     
10.4 (1)   Employment Agreement with Timothy D. Consalvi dated February 1, 2007
     
10.5 (1)   Employment Agreement with Anthony L. Anish dated January 1, 2015
     
10.6 (2)   Employment Agreement with Jitendra Banker dated January 1, 2015

 

-28-
 

 

     
10.7 (1)   Settlement Agreement with TCA Global Credit Master Fund, LP
     
10.9 (1)   Fee Agreement with Steve Kasprisin dated April 30, 2008
     
10.10 (3)   Separation Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence A. Consalvi dated September 26, 2008
     
10.11 (4)   Sales Agent Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence A. Consalvi dated September 30, 2008
     
10.12 (4)   Loan Agreements with Pacific Western Bank dated September 20, 2008
     
10.13 (5)   Assignment of Promissory Note and Consent Thereto by and between M Line Holdings, Inc. and Money Line Capital, Inc. dated March 24, 2009
     
10.14 (5)   M Line Holdings, Inc. Demand Note for up to $500,000 dated March 25, 2009
     
10.15 (6)   Letter of Intent by and between M Line Holdings, Inc. and Money Line Capital, Inc. dated June 30, 2010
     
10.16 (8)   Securities Purchase Agreement and Convertible Promissory Note with Asher Enterprises, Inc. dated April 26, 2010
     
10.18 (8)   Commercial Real Estate Lease with SG&H Partners, L.P. for Anaheim Property dated July 1, 2015  
     
10.19 (8)   Business Loan Agreement with Pacific Western Bank dated June 7, 2010
     
10.20 (8)   Loan and Security Agreement and Note with Utica Leaseco, LLC
     
10.21 (8)   Note and Stock Purchase Agreements with Spagus Capital Partners, LLC
     
10.19 (9)   Loan Agreements with TCA  Global Master Credit Fund, LP
     
10.19(10)   Convertible note agreement with Gel Properties, LLC
     
10.20 (10)   Convertible Note agreement with LG Funding, LLC
     
10.21 (10)   Convertible Note agreements with Beaufort Capital, LLC
     
10.22 (10)   Convertible Note agreements with Union Capital, Inc.
     
10.23 (10)   Convertible Note agreements with Coventry Funding, Inc.
     
10.24 (10)   Convertible Note agreements with Iconic Holdings, Inc.
     
10.25 (10)   Convertible Note with Adar Bays, LLC
     
10.26 (10)   Convertible Note with JMJ Financial
     
10.23   Addendum No. 2 dated September 30, 2011 to Commercial Real Estate Lease dated February 15, 2007 for the office space located in Tustin, CA

 

-29-
 

 

     
10.24   Executive Employee Agreement with Barton Webb dated July 25, 2011
     
21 (7)   List of Subsidiaries
     
31.1   Rule 13a-14(a)/15d-14(a) Certification of George Colin (filed herewith).
     
31.2   Rule 13a-14(a)/15d-14(a) Certification of Jitu Banker (filed herewith).
     
32.1   Section 1350 Certification of George Colin (filed herewith).
     
32.2   Section 1350 Certification of Jitu Banker (filed herewith).

 

(1) Incorporated by reference from our Registration Statement on Form 10-12G filed with the Commission on May 16, 2008.

 

(2) Incorporated by reference from our Registration Statement on First Amended Form 10-12G/A filed with the Commission on July 16, 2008.

 

(3) Incorporated by reference from our First Amended Current Report on Form 8-K/A filed with the Commission on October 10, 2008.

 

(4)  Incorporated by reference from our Quarterly Report on Form 10-Q for the period ended September 30, 2008, as filed with the Commission on November 13, 2008.

 

(5)  Incorporated by reference from our Current Report on Form 8-K filed with the Commission on April 24, 2009.

 

(6)  Incorporated by reference from our Current Report on Form 8-K filed with the Commission on July 6, 2009.

 

(7)  Incorporated by reference from our Annual Report on Form 10-K for the period ended June 30, 2009, as filed with the Commission on October 13, 2009.

 

(8)  Incorporated by reference from our Annual Report on Form 10-K for the period ended June 30, 2010, as filed with the Commission on November 12, 2010.

 

-30-
 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     
  M Line Holdings, Inc.
     
Dated: August 19,  2015   /s/ Bruce Barren
  By: Bruce Barren
    President, Chief Executive
    Officer and a Director
     
Dated: August 19,  2015   /s/ Jitu Banker
  By: Jitu Banker
    Chief Financial Officer,
    and a Director

 

-31-
 

 

EX-21 2 s101638_ex21.htm EXHIBIT 21

 

Exhibit 21

 

SUBSIDIARIES OF THE REGISTRANT

 

E.M. Tool Company, Inc.

Eran Engineering, Inc.

M Line Business Services, Inc.

 

-33-

 

EX-31.1 3 s101638_ex31-1.htm EXHIBIT 31.1

 

EXHIBIT 31.1

 

RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CHIEF EXECUTIVE OFFICER

 

I, Bruce Barren, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q of M Line Holdings, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
  
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
  
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
   
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated:  August 19,  2015 /s/ Bruce Barren  
  By: Bruce Barren
    Chief Executive Officer

 

-34-

EX-31.2 4 s101638_ex31-2.htm EXHIBIT 31.2

 

EXHIBIT 31.2

 

RULE 13a-14(a)/15d-14(a) CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Jitu Banker, certify that:

 

1.I have reviewed this Quarterly Report on Form 10-Q of M Line Holdings, Inc.;
  
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
  
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
  
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
  
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: August 19,  2015   /s/ Jitu Banker  
  By: Jitu Banker
    Chief Financial Officer

 

-35-

EX-32.1 5 s101638_ex32-1.htm EXHIBIT 32.1

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of M Line Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2014, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Bruce Barren, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)          The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)          Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

   
Dated:  August 19,  2015 /s/ Bruce Barren
  By: Bruce Barren
  Its:  Chief Executive Officer

 

A signed original of this written statement required by Section 906 has been provided to M Line Holdings, Inc. and will be retained by M Line Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

-36-

 

EX-32.2 6 s101638_ex32-2.htm EXHIBIT 32.2

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of M Line Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended December 31, 2014, as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Jitu Banker, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)          The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)          Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

       
Dated: August 19,  2015 /s/ Jitu Banker  
  By: Jitu Banker
  Its: Chief Financial Officer

  

A signed original of this written statement required by Section 906 has been provided to M Line Holdings, Inc. and will be retained by M Line Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

 

-37-

 

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Cassidy V. Gateway International Holdings, Inc [Member] Litigation Case [Axis] Cnc Manufacturing V. All American Cnc Sales, Inc., [Member] Donald Yu v M Line Holdings [Member] Subramani Srinivasan, et al. v. M Line Holdings, Inc [Member] Can Capital Asset Servicing, Inc. v. E.M. Tool Company, Inc [Member] Fadal Machining V. All American Cnc Sales, Et Al., [Member] C. William Kircher Jr. V M Line Holdings, Inc. [Member] All Direct Travel Services Inc. Vs Jitu Banker [Member] TCA Global Credit Master Fund, L.P [Member] Global Vantage Ltd [Member] Timothy D Consalviv M Line Holdings Incetal [Member] Unsecured Note Various Parties [Member] Unsecured note payable to corporation settlement of lawsuit payable [Member] Preferential Stock Par Value [Member] Class of Stock [Axis] Anthony Anish COO [Member] Series B Preferred Stock [Member] Series A Preferred Stock [Member] TCA Global Master Credit Fund LP ("TCA") [Member] Eqfin, LLC [Member] Convertible Debt [Member] Document And Entity Information Entity Registrant Name Entity Central Index Key Document Type Trading Symbol Document Period End Date Amendment Flag Current Fiscal Year End Date Entity a Well-known Seasoned Issuer Entity a Voluntary Filer Entity's Reporting Status Current Entity Filer Category Entity Public Float Entity Common Stock, Shares Outstanding Document Fiscal Period Focus Document Fiscal Year Focus Statement [Table] Statement [Line Items] Assets Current assets: Cash and cash equivalents Accounts receivable, net Inventory, net Total current assets Property and equipment, net Deposits and other Total assets Liabilities and Stockholders' deficit Current liabilities: Bank overdraft Accounts payable Accounts payable - related party Accrued expenses and other Litigation payable Derivative liability Line of credit Notes payable - current, net of debt discount of $310,291 and $317,977 Current portion of capital lease obligations Total current liabilities Notes payable - net of current portion Capital lease obligation, net of current portion Total liabilities Commitments and contingencies Stockholders' deficit: Preferential stock Common stock: $0.001 par, 1,000,000,000 shares authorized, 942,437,603 and 243,178,484 shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively Additional paid in capital Accumulated deficit Total Stockholders' deficit Total liabilities and Stockholders' deficit Debt discount (in dollar) Preferred stock, par value (in dollars per shares) Preferred stock, shares authorized Preferred stock, shares issued Preferred stock, shares outstanding Common stock, par value (in dollars per shares) Common stock, shares authorized Common stock, shares issued Common stock, shares outstanding Income Statement [Abstract] Net sales Cost of sales Gross profit Operating expenses: Selling, general and administrative Operating income (loss) Other income (expense): Interest expense Loss on debt extinguishment Derivative loss Total other income (expenses) Income (loss) before income tax Income tax provision Net income (loss) Deemed dividend - Series B Preferred Stock Net income (loss) available to common stockholders Net income (loss) per share: Basic and diluted (in dollars per share) Weighted average number of common shares - basic and diluted (in shares) Statement of Cash Flows [Abstract] Cash flows from operating activities: Net income (loss) Reconciliation of net loss to net cash provided by operations: Loss on disposition of assets Bad debt expense Depreciation Amortization of debt discount and deferred financing fees Loss on debt extinguishment Issuance of shares for services Change in derivative liabilities Changes in operating assets and liabilities: Accounts receivable Inventory Prepaid expenses and other assets Due from related party Accounts payable, accrued expenses and other Net cash provided by (used in) operating activities Cash flows from investing activities: Proceeds from disposals of property and equipment Net cash provided by investing activities Cash flows from financing activities: Net borrowings (repayments) on line of credit Proceeds from notes payable Bank overdraft Payments to notes payable Payments on capital leases Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Supplemental disclosure of cash flow information: Cash paid for interest Cash paid for income taxes Supplemental disclosure of non-cash investing and financing activities: Debt discount resulting from derivative liability Return of property and equipment Acquisition of property and equipment through line of credit Interest added to principal Shares issued for conversion of debt Deemed dividend - Series B Preferred Stock Organization, Consolidation and Presentation of Financial Statements [Abstract] Business Accounting Policies [Abstract] Significant Accounting Policies Going Concern and Management Plans Inventory Disclosure [Abstract] Inventories Payables and Accruals [Abstract] Accrued Expenses Leases, Capital [Abstract] Capital Leases Line of Credit Facility [Abstract] Line of Credit Notes Payable [Abstract] Notes Payable Commitments and Contingencies Disclosure [Abstract] Commitments and Contingencies Equity [Abstract] Shareholders 'Equity Fair Value Disclosures [Abstract] Fair Value of Financial Instruments Related Party Transactions [Abstract] Related Party Transactions Segment Reporting [Abstract] Segments and Geographic Information Subsequent Events [Abstract] Subsequent Events Basis of presentation Principles of consolidation Use of estimates Recent accounting pronouncements Schedule of inventories Schedule of accrued expenses Schedule of future annual minimum lease payments Notes Payable Tables Schedule of notes payable Schedule of litigation payable Schedule of financial liability measured and recorded at fair value on recurring basis Schedule of changes in fair value Schedule of assumptions used for derivative instrument Segments And Geographic Information Tables Schedule of segment information Accumulated deficit Finished goods and components CNC machines held for sale Work in progress Raw materials and parts Inventory, gross Less: Reserve for inventories Inventories, net Compensation and related benefits Audit fees Other Accrued Liabilities and Other Liabilities 2014 2015 Total minimum lease payments Present value of future minimum lease payments Less current portion of capital lease obligations Capital Lease obligations, net of current portion Line of credit, amount drawn Line of credit, amount outstanding Debt repayment period Additional interest Annual interest Number of warrants issued Warrants Term Exercise price of warrants Fair value of warrants Debt beneficial conversion feature Number of equity instrument issued Loss on debt extinguishment Total of convertible notes Total of other non convertible notes Total of convertible and other notes Less discount TOTAL Less: current portion Long term portion 2016 2017 2018 2019 Thereafter Long term debt maturities repayements Description of conversion term Rent Expense Lawsuit filing date Damages sought, value Damages awarded value Settlement agreement, date Settlement agreement consideration 1 Settlement agreement periodic payments Settlement agreement interest rate Settlement agreement, terms Damages paid value Legal fees Shares issued for deposit (in shares) Accrual, carrying value, payments Estimate of possible loss Reduction amount Accrual, carrying value, provision Shares issued for debt repayment, Shares Shares valued for debt settlement Preferred stock voting rights Stock issued Deemed dividend Embedded conversion derivative liability Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] Balance Fair value of warrant derivative liabilities at issuance, recorded as debt discount Settlement of derivative liabilities to gain on debt extinguishment. Unrealized derivative loss resulting from marked to market fair values included in other expense Balance Market value of stock on measurement date Risk-free interest rate Dividend yield Volatility factor Term Due from related parties Due to officers Revenue Interest Expense Depreciation and Amortization Income (loss) before taxes Total Assets Capital Expenditure Agreement settlement amount Agreement settlement amount term for pending amount Pending settlement amount in fifteenth month Proceeds from convertible debt Funded convertible notes Shares issued Convertible notes, description Value of convertable debt Number of convertable shares issued Short term loan Description of loan converted to stock Debt instrument payement Debt instrument, convertible, percentage of stock price (as a percent) Discount to market based Debt instrument, convertible, trading days Refers the amount of deposits and other assets as on the reporting date. Debt discount through derivative liability. Refers the value of property and equipment returned during the period. Interest added to principal. Common stock issued for debt conversions. The entire disclosure for line of credit . Machines Held For Sale. Audit Fees TCA Global Master Credit Fund LP ("TCA") [Member]. Shares valued for debt settlement. Refers the machine sales. Refers the precision manufacturing during the period. Refers the amount of fair value of warrant derivative liabilities at issuance. Refers the issuance date. Schedule of litigation payable table text block. TCA member. Two officers member. Agreement settlement amount term for pending amount. Pending settlement amount in fifteenth month. Funded convertible notes. Refers the warrants term during the period. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. Debt obligation not collateralized by pledge of, mortgage of or other lien on the entity's assets. James M. Cassidy V. Gateway International Holdings, Inc [Member] Cnc Manufacturing V. All American Cnc Sales, Inc., [Member] Donald Yu v M Line Holdings [Member] Subramani srinivasan rt al vm line holdings inc member. Can capital asset servicing inc VEM tool company inc member. Fadal Machining V. All American Cnc Sales, Et Al., [Member] C. William Kircher Jr. V M Line Holdings, Inc. [Member] All Direct Travel Services Inc. Vs Jitu Banker [Member] TCA global credit master fund LP member. Global vantage ltd member. Timothy D Consalviv M Line Holdings Incetal [Member] Loss Contingency Settlement Agreement Periodic Payments Loss Contingency Settlement Agreement Interest Rate Loss Contigency Reduction Amount If Entire Payments Made Before Due Date Unsecured note various member. Unsecured note payable corporation settlement of lawsuit payable member. Amount represent as a derivative loss. Amount represents as a acquisition of property and equipment through line of credit. Represents as a related party. The amount of debt discount that was originally recognized at the issuance of the instrument that has yet to be amortized. Increase for accrued, but unpaid interest on the credit facility for the period. Refers to amount the nonconvertible portions. Refers to amount the convertible and nonconvertible portions. UnsecuredDebt5Member Assets, Current Liabilities, Current Liabilities Stockholders' Equity Attributable to Parent Liabilities and Equity Gross Profit Operating Income (Loss) DerivativeLoss Nonoperating Income (Expense) Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest Income Tax Expense (Benefit) Preferred Stock Dividends and Other Adjustments Net Income (Loss) Available to Common Stockholders, Basic Gain (Loss) on Disposition of Property Plant Equipment, Excluding Oil and Gas Property and Timber Property Increase (Decrease) in Accounts Receivable Increase (Decrease) in Inventories Increase (Decrease) in Prepaid Expense and Other Assets Increase (Decrease) in Due from Related Parties Net Cash Provided by (Used in) Operating Activities Net Cash Provided by (Used in) Investing Activities Proceeds from (Repayments of) Bank Overdrafts Repayments of Notes Payable Repayments of Long-term Capital Lease Obligations Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Inventory, Gross Inventory Valuation Reserves Accrued Liabilities and Other Liabilities Capital Leases, Future Minimum Payments Due Capital Leases, Future Minimum Payments, Present Value of Net Minimum Payments Extinguishment of Debt, Gain (Loss), Net of Tax Fair Value, Measurement with Unobservable Inputs Reconciliations, Recurring Basis, Liability Value Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Settlements EX-101.PRE 12 mlhc-20141231_pre.xml XBRL PRESENTATION FILE XML 13 R39.htm IDEA: XBRL DOCUMENT v3.2.0.727
Fair Value of Financial Instruments (Details 1) - Embedded conversion derivative liability [Member]
6 Months Ended
Dec. 31, 2014
USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]  
Balance $ 634,769
Fair value of warrant derivative liabilities at issuance, recorded as debt discount 602,576
Settlement of derivative liabilities to gain on debt extinguishment. (923,514)
Unrealized derivative loss resulting from marked to market fair values included in other expense 651,172
Balance $ 965,003
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Notes Payable (Details Narrative) - Dec. 31, 2014
USD ($)
Number
$ / shares
shares
Notes Payable [Abstract]  
Number of warrants issued | shares 15,625,000
Warrants Term 5 years
Exercise price of warrants | $ / shares $ 0.0016
Fair value of warrants $ 28,125
Debt beneficial conversion feature $ 347,773
Number of equity instrument issued | Number 699,259,119
Loss on debt extinguishment $ 1,089,040
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Commitments and Contingencies (Tables)
6 Months Ended
Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
Schedule of litigation payable

Litigation payable as of December 31and June 30, 2014 consist of the following:

 

    December 31,
2014
    June 30,
2014
 
An unsecured note payable to a corporation in settlement of a lawsuit payable in 12 monthly payments of $5,000.   $ 210,000       210,000  
                 
Unsecured notes payable to various parties in settlement of lawsuits payable in full.     77,500       77,500  
                 
TOTAL   $ 287,500       287,500  
XML 18 R42.htm IDEA: XBRL DOCUMENT v3.2.0.727
Segments and Geographic Information (Details) - USD ($)
3 Months Ended 6 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Jun. 30, 2014
Revenue $ 1,504,304 $ 3,306,380 $ 2,461,784 $ 6,033,574  
Interest Expense 353,935 220,350 418,716 345,342  
Depreciation and Amortization 25,599 40,868 54,798 85,253  
Income (loss) before taxes (995,790) 207,865 (2,533,324) 376,626  
Total Assets $ 2,424,954 $ 3,842,038 $ 2,424,954 $ 3,842,038 $ 2,243,349
Capital Expenditure          
Machine Sales [Member]          
Revenue $ 1,172,882 $ 2,447,201 $ 1,903,109 $ 4,206,759  
Interest Expense $ 40,500 40,306 $ 72,000 98,511  
Depreciation and Amortization   750   1,500  
Income (loss) before taxes $ (169,182) 34,199 $ (486,884) 208,649  
Total Assets $ 642,218 $ 1,076,182 $ 642,218 $ 1,076,182  
Capital Expenditure          
Precision Manufacturing [Member]          
Revenue $ 331,422 $ 859,179 $ 558,675 $ 1,826,815  
Interest Expense 45,000 60,528 90,000 114,815  
Depreciation and Amortization 25,599 40,118 54,798 83,753  
Income (loss) before taxes (180,696) 474,097 (490,549) 557,894  
Total Assets $ 1,726,093 $ 2,746,680 $ 1,726,093 $ 2,746,680  
Capital Expenditure          
Corporate [Member]          
Revenue          
Interest Expense $ 268,435 $ 119,516 $ 256,716 $ 132,016  
Depreciation and Amortization          
Income (loss) before taxes $ (645,912) $ (300,431) $ (1,555,891) $ (389,917)  
Total Assets $ 56,643 $ 19,176 $ 56,643 $ 19,176  
Capital Expenditure          
XML 19 R37.htm IDEA: XBRL DOCUMENT v3.2.0.727
Shareholders' Equity (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Oct. 14, 2014
Dec. 31, 2014
Dec. 31, 2014
Shares issued for debt repayment, Shares     699,259,119
Shares valued for debt settlement     $ 347,773
Preferred stock voting rights

The Series A stock shall be non-convertible, zero dividend, zero interest and carrying a voting power of the combined voting power of 50% of the Company’s common and preferred stock while outstanding.

   
Deemed dividend   $ 225,500 $ 225,500
Anthony Anish COO [Member] | Series B Preferred Stock [Member]      
Stock issued $ 10,000,000    
Deemed dividend $ (225,500)    
XML 20 R9.htm IDEA: XBRL DOCUMENT v3.2.0.727
Inventories
6 Months Ended
Dec. 31, 2014
Inventory Disclosure [Abstract]  
Inventories

4.  Inventories

 

Inventories are stated at the lower of cost or market, cost being determined using the first in first out (“FIFO”) method. The Company provides inventory reserves for obsolescence and other matters based on management’s review of current inventory levels. The Company includes inventory costs, labor and overhead costs directly associated with manufacturing its product.

 

Inventories as of December 31 and June 30, 2014 consist of the following:

                 
    December.
31, 2014
    June 30, 2014  
Finished goods and components   $ 959,610     $ 1,112,647  
CNC machines held for sale     511,000       152,000  
Work in progress     446,781       327,620  
Raw materials and parts     11,392       14,336  
      1,928,783       1,606,603  
Less: Reserve for inventories     (175,921 )     (175,921 )
Inventories, net.   $ 1,752,862     $ 1,430,682  

 

XML 21 R43.htm IDEA: XBRL DOCUMENT v3.2.0.727
Subsequent Events (Details Narrative)
1 Months Ended
Aug. 07, 2015
USD ($)
Number
Jan. 15, 2015
USD ($)
Mar. 31, 2015
USD ($)
shares
Mar. 03, 2015
shares
Dec. 31, 2014
shares
Jun. 30, 2014
shares
Shares issued | shares         942,437,603 243,178,484
Subsequent Event [Member]            
Value of convertable debt     $ 6,283      
Number of convertable shares issued | shares     57,118,182      
Short term loan $ 10,720          
Description of loan converted to stock

Coverted to stock at 125% of the original note amount and converted at the lower of $0.0002 or a 50% discount to market based on the the lowest price for the 20 consecutive days prior to conversion.

         
Debt instrument payement $ 1,780          
Debt instrument, convertible, percentage of stock price (as a percent) 125.00%          
Discount to market based 50.00%          
Debt instrument, convertible, trading days | Number 20          
Subsequent Event [Member] | TCA [Member]            
Agreement settlement amount   $ 100,000        
Subsequent Event [Member] | TCA [Member] | Pending Litigation Amount [Member]            
Agreement settlement amount   $ 80,000        
Agreement settlement amount term for pending amount   13 months        
Pending settlement amount in fifteenth month   $ 60,000        
Subsequent Event [Member] | Two officers [Member]            
Shares issued | shares       200,000,000    
XML 22 R29.htm IDEA: XBRL DOCUMENT v3.2.0.727
Inventories (Details) - USD ($)
Dec. 31, 2014
Jun. 30, 2014
Inventory Disclosure [Abstract]    
Finished goods and components $ 959,610 $ 1,112,647
CNC machines held for sale 511,000 152,000
Work in progress 446,781 327,620
Raw materials and parts 11,392 14,336
Inventory, gross 1,928,783 1,606,603
Less: Reserve for inventories (175,921) (175,921)
Inventories, net $ 1,752,862 $ 1,430,682
XML 23 R28.htm IDEA: XBRL DOCUMENT v3.2.0.727
Going Concern and Management Plans (Details Narrative) - USD ($)
Dec. 31, 2014
Jun. 30, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]    
Accumulated deficit $ 22,006,587 $ 19,473,263
XML 24 R30.htm IDEA: XBRL DOCUMENT v3.2.0.727
Accrued Expenses (Details) - USD ($)
Dec. 31, 2014
Jun. 30, 2014
Payables and Accruals [Abstract]    
Compensation and related benefits $ 2,209,233 $ 2,023,064
Audit fees 50,000 46,000
Other 868,854 525,552
Accrued Liabilities and Other Liabilities $ 3,128,087 $ 2,594,616
XML 25 R31.htm IDEA: XBRL DOCUMENT v3.2.0.727
Capital Leases (Details) - USD ($)
Dec. 31, 2014
Jun. 30, 2014
Leases, Capital [Abstract]    
2014 $ 53,901 $ 53,901
2015 46,426 46,426
Total minimum lease payments 100,327 100,327
Present value of future minimum lease payments 100,327 100,327
Less current portion of capital lease obligations (53,901) (53,901)
Capital Lease obligations, net of current portion $ 46,426 $ 46,426
XML 26 R8.htm IDEA: XBRL DOCUMENT v3.2.0.727
Going Concern and Management Plans
6 Months Ended
Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern and Management Plans

3. Going Concern and Management Plans

 

The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has an accumulated deficit of $22,006,587 as of December 31, 2014 and negative working capital.   

 

The Company recognizes that the very weak economy over the past few years and the difficulty in raising new funds has impacted the working capital needs of the Company.  

 

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to retain its current short term financing and ultimately to generate sufficient cash flow to meet its obligations on a timely basis in order to attain profitability.  

 

To date the Company has funded its operations from both internally generated cash flow and external sources. The Company will pursue additional external capitalization opportunities, as necessary, to fund its long-term goals and objectives.

XML 27 R32.htm IDEA: XBRL DOCUMENT v3.2.0.727
Line of Credit (Details Narrative) - USD ($)
6 Months Ended
Dec. 31, 2014
Oct. 02, 2014
Jun. 30, 2014
Line of credit, amount drawn $ 1,700,000   $ 1,700,000
Line of credit, amount outstanding 2,420,453   $ 2,330,453
TCA Global Master Credit Fund LP ("TCA") [Member]      
Line of credit, amount outstanding $ 10,000,000    
Debt repayment period 15 months    
Additional interest $ 90,000    
Eqfin, LLC [Member]      
Line of credit, amount drawn 274,250    
Line of credit, amount outstanding $ 274,250 $ 300,000  
Annual interest   19.00%  
XML 28 R40.htm IDEA: XBRL DOCUMENT v3.2.0.727
Fair Value of Financial Instruments (Details 2) - Dec. 31, 2014 - Embedded conversion derivative liability [Member] - $ / shares
Total
Market value of stock on measurement date $ 0.0002
Dividend yield 0.00%
Minimum [Member]  
Risk-free interest rate 0.03%
Volatility factor 286.00%
Term 1 month 6 days
Maximum [Member]  
Risk-free interest rate 1.65%
Volatility factor 402.00%
Term 4 years 7 months 16 days
At Issuance [Member]  
Dividend yield 0.00%
At Issuance [Member] | Minimum [Member]  
Market value of stock on measurement date $ 0.0012
Risk-free interest rate 0.05%
Volatility factor 241.00%
Term 6 months 3 days
At Issuance [Member] | Maximum [Member]  
Market value of stock on measurement date $ 0.0018
Risk-free interest rate 1.58%
Volatility factor 417.00%
Term 5 years
XML 29 R2.htm IDEA: XBRL DOCUMENT v3.2.0.727
CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($)
Dec. 31, 2014
Jun. 30, 2014
Current assets:    
Cash and cash equivalents $ 60,460 $ 46,925
Accounts receivable, net 230,169 222,344
Inventory, net 1,752,862 1,430,682
Total current assets 2,043,491 1,699,951
Property and equipment, net 258,178 402,476
Deposits and other 123,285 140,922
Total assets 2,424,954 2,243,349
Current liabilities:    
Bank overdraft 307,318 149,699
Accounts payable 1,721,832 1,350,157
Accounts payable - related party 35,954 35,954
Accrued expenses and other 3,128,087 2,594,616
Litigation payable 287,500 287,500
Derivative liability 965,003 634,769
Line of credit 2,694,703 2,330,453
Notes payable - current, net of debt discount of $310,291 and $317,977 814,048 1,018,755
Current portion of capital lease obligations 53,901 53,901
Total current liabilities 10,008,346 8,455,804
Notes payable - net of current portion 124,023 124,023
Capital lease obligation, net of current portion 46,426 46,426
Total liabilities $ 10,178,795 $ 8,626,253
Commitments and contingencies    
Stockholders' deficit:    
Common stock: $0.001 par, 1,000,000,000 shares authorized, 942,437,603 and 243,178,484 shares issued and outstanding at December 31, 2014 and June 30, 2014, respectively $ 942,437 $ 243,178
Additional paid in capital 13,300,109 12,846,981
Accumulated deficit (22,006,587) (19,473,263)
Total Stockholders' deficit (7,753,841) (6,382,904)
Total liabilities and Stockholders' deficit 2,424,954 2,243,349
Series A Preferred Stock [Member]    
Stockholders' deficit:    
Preferential stock 200 $ 200
Series B Preferred Stock [Member]    
Stockholders' deficit:    
Preferential stock $ 10,000  
XML 30 R6.htm IDEA: XBRL DOCUMENT v3.2.0.727
Business
6 Months Ended
Dec. 31, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business
1. Business

 

M. Line Holdings, Inc. (the “Company”) and its subsidiaries currently are engaged in the following businesses, which also represent its business segments:

 

·      E.M. Tool Company, Inc. dba Elite Machine Tool Company (“Elite”), its wholly owned subsidiary, acquires, refurbishes and sells pre-owned CNC machine tool equipment. This is the machine sales group.

 

·      Precision Aerospace & Technologies, Inc., formerly Eran Engineering, Inc. (“Precision”), its wholly owned subsidiary, manufactures precision metal component parts and assemblies for the aerospace, medical and defense industries. This is the precision manufacturing group.

 

·      M Line Business Services, Inc., (M Line Business”) its wholly owned subsidiary, provides advice and support in raising new capital, management support in relation to financial control and management of the business, advice and support in relation to stock listing, reverse mergers, listing on various US and European exchanges, and sales and support specifically related to the aerospace industry.

XML 31 R35.htm IDEA: XBRL DOCUMENT v3.2.0.727
Commitments and Contingencies (Details Narrative) - USD ($)
1 Months Ended 6 Months Ended 12 Months Ended
Aug. 17, 2015
May. 31, 2015
May. 31, 2011
Dec. 31, 2014
Dec. 31, 2013
Jun. 30, 2014
Jun. 02, 2015
Rent Expense       $ 237,662 $ 253,454    
Litigation payable       $ 287,500   $ 287,500  
Shares issued for deposit (in shares)       699,259,119      
James M. Cassidy V. Gateway International Holdings, Inc [Member]              
Lawsuit filing date       September 16, 2008      
Damages sought, value       $ 195,000      
Cnc Manufacturing V. All American Cnc Sales, Inc., [Member]              
Lawsuit filing date       October 2, 2008      
Damages sought, value       $ 138,750      
Damages awarded value       $ 37,500   $ 37,500  
Settlement agreement, date       September 30, 2014   June 30, 2014  
Donald Yu v M Line Holdings [Member]              
Damages awarded value       $ 24,000      
Settlement agreement, date       September 30, 2013      
Settlement agreement consideration 1       $ 21,450      
Settlement agreement periodic payments       12,000      
Damages paid value       $ 12,000      
Fadal Machining V. All American Cnc Sales, Et Al., [Member]              
Lawsuit filing date       June 12, 2009      
Damages sought, value       $ 163,579      
Settlement agreement, date       May 31, 2011      
Settlement agreement, terms       A settlement agreement in the amount of $60,000 was signed on May 31, 2011.      
Accrual, carrying value, provision       $ 210,000      
C. William Kircher Jr. V M Line Holdings, Inc. [Member]              
Settlement agreement periodic payments       $ 5,000      
Settlement agreement, terms       The terms of the settlement call for 12 payments of $5,000 per month commencing August 25, 2011 and the issuance of 150,000 shares of common stock.      
Legal fees       $ 120,166      
Shares issued for deposit (in shares)       150,000      
Accrual, carrying value, provision       $ 50,000   $ 50,000  
All Direct Travel Services Inc. Vs Jitu Banker [Member]              
Estimate of possible loss       2,000      
Timothy D Consalviv M Line Holdings Incetal [Member]              
Damages sought, value       $ 40,000      
Settlement agreement, terms       A settlement of $50,000 was reached in this case, requiring payments commencing on March 11, 2011 for 10 months.      
Accrual, carrying value, payments       $ 50,000      
Accrual, carrying value, provision       $ 40,000   40,000  
Subramani Srinivasan, et al. v. M Line Holdings, Inc [Member]              
Settlement agreement, date       January 22, 2015      
Settlement agreement periodic payments       $ 20,000      
Subramani Srinivasan, et al. v. M Line Holdings, Inc [Member] | Subsequent Event [Member]              
Litigation payable             $ 20,000
Can Capital Asset Servicing, Inc. v. E.M. Tool Company, Inc [Member]              
Settlement agreement, date       May 15, 2015      
Settlement agreement consideration 1       $ 58,313      
Settlement agreement periodic payments       50,000      
Accrual, carrying value, payments $ 24,000     25,500      
Reduction amount   $ 1,500          
Accrual, carrying value, provision       $ 10,000      
Fadal Machining V. All American Cnc Sales, Et Al., [Member]              
Accrual, carrying value, provision     $ 60,000     210,000  
TCA Global Credit Master Fund, L.P [Member]              
Lawsuit filing date       July 1, 2014      
Settlement agreement, date       September 5, 2014      
Settlement agreement periodic payments       $ 1,200,000      
Accrual, carrying value, payments       $ 2,420,453   $ 2,330,453  
Global Vantage Ltd [Member]              
Lawsuit filing date       August 7, 2014      
XML 32 R22.htm IDEA: XBRL DOCUMENT v3.2.0.727
Accrued Expenses (Tables)
6 Months Ended
Dec. 31, 2014
Payables and Accruals [Abstract]  
Schedule of accrued expenses

Accrued expenses and other as of December 31 and June 30, 2014 consist of the following: 

 

    December
31, 2014
    June 30,
2014
 
Compensation and related benefits   $ 2,209,233     $ 2,023,064  
Audit Fees     50,000       46,000  
Other     868,854       525,552  
    $ 3,128,087     $ 2,594,616  
XML 33 R36.htm IDEA: XBRL DOCUMENT v3.2.0.727
Commitments and Contingencies (Details) - USD ($)
Dec. 31, 2014
Jun. 30, 2014
Litigation payable $ 287,500 $ 287,500
Unsecured Note Various Parties [Member]    
Litigation payable 210,000 210,000
Unsecured note payable to corporation settlement of lawsuit payable [Member]    
Litigation payable $ 77,500 $ 77,500
XML 34 R24.htm IDEA: XBRL DOCUMENT v3.2.0.727
Notes Payable (Tables)
6 Months Ended
Dec. 31, 2014
Notes Payable Tables  
Schedule of notes payable

Notes payable as of December 31 and June 30 consist of : 

 

    December  
31, 2014
    June
30, 2014
 
CONVERTIBLE NOTES (DERIVATIVE).                
                 
One unsecured  5% convertible notes payable to a  financial institution due March 4, 2015. This note can be converted to common stock at 55% of the lowest closing price in the 20 trading days prior to conversion.   $ 130,200     $ 110,000  
                 
Two unsecured 8% convertible notes payable in the sum of $110,751 to a  financial institution due February 12, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 7 trading days prior to conversion.     40,804       50,000  
                 
An unsecured 12% convertible note payable to a financial institution due January 31, 2015. This note can be converted to common stock at 55% of the lowest closing price in the 5 trading days prior to conversion.     11,500       21,500  
                 
An unsecured 12% convertible note payable to a financial institution due February 12, 2016. This note can be converted to common stock at $0.0235 or 60% of the lowest closing price in the last 25 trading days prior to conversion.     40,710       50,631  
                 
Two unsecured convertible notes payable in the sum of $110,674 to a financial institution with $50,000 due on February 6, 2015 and $55,674 due on May 30, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 7 to 10 trading days prior to conversion.     16,144       105,674  
                 
Two unsecured 8% convertible notes payable to a financial institution both due May 30, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 10 trading days prior to conversion.     83,855       160,674  
                 
Four unsecured convertible notes with interest ranging from 8% to 12% payable to a financial institution with $50,000 due April 25, 2015, $75,000 due on December 25, 2014, $125,662 due October 3, 2014 and $37,500 due on February 18, 2015. These notes can be converted to common stock after maturity date at 40% - 55% of the lowest closing price in the last 10 to 20 trading days prior to conversion.     220,109       225,562  
                 
Three unsecured 8% convertible notes payable in the sum of $160,674 to a financial institution with $50,000 due on February 6, 2015 and $110,674 due on June 10, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 50% - 55% of the lowest closing price in the last 7 to 15 trading days prior to conversion.     130,000       160,674  
                 
An unsecured 8% convertible note payable to a financial institution due on June 10, 2015. This note can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 10 trading days prior to conversion.     50,000       50,000  
      723,322       934,715  
OTHER NOTES (NON-CONVERTIBLE).                
                 
Notes payable to a financial institution, secured by the underlying equipment in aggregate monthly installments of varying amounts, on a reducing balance method, with the balance due in October  2016.   $ 247,811     $ 247,811  
                 
Two unsecured notes payable in the sum of $150,000, each, to a financial institution in full in November 2011 and March 31, 2012. The Company is currently in default and has negotiated to pay the notes in monthly installments of $20,000 commencing November 2012.     75,459       75,459  
                 
An  unsecured note payable to a corporation in weekday amounts of $700, increasing to $1,650, in September 2013 and ending in December 2013. This note is in default  but a settlement reached with monthly payments being made will pay off the note by June 25, 2015. The note was not paid by June 25 and the Company is currently negotiating a new pay-off schedule.     40,300       40,300  
                 
An  unsecured note payable to a corporation in weekday amounts of $691 each through December 2013. This note is in default but a settlement reached with monthly payments being made will pay off the note by October 2015.     56,120       57,120  
                 
An  unsecured note payable to a corporation in weekday amounts of $841 each through February 2014. This note is in default.     105,350       105,350  
      525,040       526,040  
Total of convertible and other notes     1,248,362       1,460,755  
Less Debt discount     (310,291 )     (317,977 )
TOTAL     938,071       1,142,778  
Less Current Portion     814,048       1,018,755  
Long Term Portion   $ 124,023     $ 124,023  
                 
2016     124,023       124,023  
2017            
2018            
2019            
Thereafter            
    $ 124,023     $ 124,023  
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Significant Accounting Policies
6 Months Ended
Dec. 31, 2014
Accounting Policies [Abstract]  
Significant Accounting Policies

2. Significant Accounting Policies

 

Basis of presentation

 

In the opinion of management, the accompanying interim consolidated balance sheets and statements of operations and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2014 filed with the U.S. Securities and Exchange Commission (the “Commission”) on June 24, 2015.

 

Principles of consolidation

 

The accompanying consolidated financial statements include the accounts of M Line Holdings, Inc. and its wholly owned subsidiaries Elite, Precision, and M Line Business . All intercompany accounts and transactions have been eliminated.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management are among others, realization of inventories, collectability of accounts receivable, litigation, impairment of goodwill and long-lived assets other than goodwill. Actual results could materially differ from those estimates.

 

Recent accounting pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.

XML 37 R3.htm IDEA: XBRL DOCUMENT v3.2.0.727
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($)
Dec. 31, 2014
Jun. 30, 2014
Debt discount (in dollar) $ 310,291 $ 317,977
Common stock, par value (in dollars per shares) $ 0.001 $ 0.001
Common stock, shares authorized 1,000,000,000 1,000,000,000
Common stock, shares issued 942,437,603 243,178,484
Common stock, shares outstanding 942,437,603 243,178,484
Series A Preferred Stock [Member]    
Preferred stock, par value (in dollars per shares) $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 200,000 200,000
Preferred stock, shares outstanding 200,000 200,000
Series B Preferred Stock [Member]    
Preferred stock, par value (in dollars per shares) $ 0.001 $ 0.001
Preferred stock, shares authorized 10,000,000 10,000,000
Preferred stock, shares issued 10,000,000 0
Preferred stock, shares outstanding 10,000,000 0
XML 38 R17.htm IDEA: XBRL DOCUMENT v3.2.0.727
Related Party Transactions
6 Months Ended
Dec. 31, 2014
Related Party Transactions [Abstract]  
Related Party Transactions

12. Related Party Transactions 

 

As of December 31, 2014, the amount due from related party was $0 compared to $0 as at June 30, 2014. The amount due to an officer of the Company as at December 31, 2014 and June 30, 2014 was $35,594, This amount is for expenses of the Company paid personally by the Officer on behalf of the Company.

XML 39 R1.htm IDEA: XBRL DOCUMENT v3.2.0.727
Document and Entity Information - shares
6 Months Ended
Dec. 31, 2014
Aug. 19, 2015
Document And Entity Information    
Entity Registrant Name M LINE HOLDINGS INC  
Entity Central Index Key 0001072248  
Document Type 10-Q  
Trading Symbol mlhc  
Document Period End Date Dec. 31, 2014  
Amendment Flag false  
Current Fiscal Year End Date --06-30  
Entity a Well-known Seasoned Issuer No  
Entity a Voluntary Filer No  
Entity's Reporting Status Current Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   1,199,555,785
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2015  
XML 40 R18.htm IDEA: XBRL DOCUMENT v3.2.0.727
Segments and Geographic Information
6 Months Ended
Dec. 31, 2014
Segment Reporting [Abstract]  
Segments and Geographic Information

13. Segments and Geographic Information

 

The Company’s segments consist of individual companies managed separately with each manager reporting to the Board. “Other” represents corporate functions. Sales, and operating or segment profit, are reflected net of inter-segment sales and profits. Segment profit is comprised of net sales less operating expenses and interest. Income taxes are not allocated and reported by segment since they are excluded from the measure of segment performance reviewed by management. The revenue of the Precision Manufacturing group is down significantly compared to the comparable period last year as a result of rebuilding revenue following the Company’s move and subsequent delay before production could start again.

 

Segment information is as follows for the three months and six months ended December 31, 2014 and 2013:

  

Segment Information for the three months ended December   31, 2014   Machine
Sales
    Precision Manufacturing     Corporate     Total  
Revenue   $ 1,172,882     $ 331,422     $     $ 1,504,304  
Interest Expense     40,500       45,000       268,435       353,935  
Depreciation and Amortization           25,599             25,599  
Income (loss) before taxes     (169,182 )     (180,696 )     (645,912 )     (995,790 )
Total Assets     642,218       1,726,093       56,643       2,424,954  
Capital Expenditure   $     $     $     $  
                                 
Segment Information for the three months ended December   31, 2013   Machine
Sales
    Precision Manufacturing     Corporate     Total  
Revenue   $ 2,447,201     $ 859,179     $     $ 3,306,380  
Interest Expense     40,306       60,528       119,516       220,350  
Depreciation and Amortization     750       40,118             40,868  
Income (loss) before taxes     34,199       474,097       (300,431 )     207,865  
Total Assets     1,076,182       2,746,680       19,176       3,842,038  
Capital Expenditure   $     $     $     $  

  

Segment Information for the six months ended December   31, 2014   Machine Sales     Precision Manufacturing     Corporate     Total  
Revenue   $ 1,903,109     $ 558,675     $     $ 2,461,784  
Interest Expense     72,000       90,000       256,716       418,716  
Depreciation and Amortization           54,798             54,798  
Income (loss) before taxes     (486,884 )     (490,549 )     (1,555,891 )     (2,533,324 )
Total Assets     642,218       1,726,093       56,643       2,424,954  
Capital Expenditure   $     $     $     $  
                                 
Segment Information for the six months ended December   31, 2013   Machine Sales     Precision Manufacturing     Corporate     Total  
Revenue   $ 4,206,759     $ 1,826,815     $     $ 6,033,574  
Interest Expense     98,511       114,815       132,016       345,342  
Depreciation and Amortization     1,500       83,753             85,253  
Income (loss) before taxes     208,649       557,894       (389,917 )     376,626  
Total Assets     1,076,182       2,746,680       19,176       3,842,038  
Capital Expenditure   $     $     $     $  

 

Sales are derived principally from customers located within the United States.

 

No segment information has been provided for M Line Business Services, Inc. as the Company had not started trading prior to December 31, 2014

XML 41 R4.htm IDEA: XBRL DOCUMENT v3.2.0.727
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($)
3 Months Ended 6 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Income Statement [Abstract]        
Net sales $ 1,504,304 $ 3,306,380 $ 2,461,784 $ 6,033,574
Cost of sales 1,481,115 2,394,345 2,430,381 4,112,425
Gross profit 23,189 912,035 31,403 1,921,149
Operating expenses:        
Selling, general and administrative 499,607 372,690 1,329,313 1,151,051
Operating income (loss) (476,418) 539,345 (1,297,910) 770,098
Other income (expense):        
Interest expense (353,935) (220,350) (418,716) (345,342)
Loss on debt extinguishment     (165,526)  
Derivative loss (165,437) (48,130) (651,172) (48,130)
Total other income (expenses) (519,372) (268,480) (1,235,414) (393,472)
Income (loss) before income tax $ (995,790) 270,865 $ (2,533,324) 376,626
Income tax provision   (1,694)   (1,694)
Net income (loss) $ (995,790) 269,171 $ (2,533,324) 374,932
Deemed dividend - Series B Preferred Stock (225,500)   (225,500)  
Net income (loss) available to common stockholders $ (1,221,290) $ 269,171 $ (2,758,824) $ 374,932
Net income (loss) per share:        
Basic and diluted (in dollars per share) $ (0.00) $ (0.01) $ 0.00 $ (0.02)
Weighted average number of common shares - basic and diluted (in shares) 942,437,603 83,972,797 737,919,242 78,632,746
XML 42 R12.htm IDEA: XBRL DOCUMENT v3.2.0.727
Line of Credit
6 Months Ended
Dec. 31, 2014
Line of Credit Facility [Abstract]  
Line of Credit

7. Line of Credit

 

TCA Global Master Credit Fund LP (“TCA”):

 

The Company has an existing line of credit with TCA Global Credit Master Fund, LLC (“TCA”) in the amount of $10 million. As of December 31 and June 30, 2014, the Company has drawn $1,700,000 from the line of which $2,420,453 and $2,330,453 is outstanding as of December 31, 2014 and June 30, 2014. Amounts drawn from the line of credit are subject to interest and matured on October 31, 2013. The line was automatically renewed for a further six months and expired on April 30, 2014. There is no availability under the line of credit. The Company has entered into a settlement agreement with TCA and expects to repay the debt within 15 months. The line of credit with TCA is secured by the receivables and inventory and a second position on the equipment of Precision and the inventory and receivables of Elite together with a blanket lien over all of the Company’s assets. During the six months ended December 31, 2014, additional interest of $90,000 was added to the balance of the line of credit.

 

In October 2014, the Company also entered into a new line of credit with Eqfin, LLC in the amount of $300,000 to provide equipment finance for the purchase of equipment for our subsidiary, Elite. The line is subject to annual interest of 19% and matures on October 5, 2015. The Company has drawn $274,250 from the line which remains outstanding as of December 31, 2014. This line is secured by the equipment that is purchased by Elite.

 

XML 43 R11.htm IDEA: XBRL DOCUMENT v3.2.0.727
Capital Leases
6 Months Ended
Dec. 31, 2014
Leases, Capital [Abstract]  
Capital Leases

6. Capital Leases

 

The Company leases certain equipment under capital leases with terms ranging from four to five years. Future annual minimum lease payments are as follows as of December 31, and June 30, 2014.

 

    December
31, 2014
    June 30,
2014
 
2014   $ 53,901     $ 53,901  
2015     46,426       46,426  
Total minimum lease payments     100,327       100,327  
Present value of future minimum lease payments     100,327       100,327  
Less current portion of capital lease obligations     (53,901 )     (53,901 )
Capital lease obligations, net of current portion   $ 46,426     $ 46,426  
XML 44 R23.htm IDEA: XBRL DOCUMENT v3.2.0.727
Capital Leases (Tables)
6 Months Ended
Dec. 31, 2014
Leases, Capital [Abstract]  
Schedule of future annual minimum lease payments

Future annual minimum lease payments are as follows as of December 31, and June 30, 2014.

 

    December
31, 2014
    June 30,
2014
 
2014   $ 53,901     $ 53,901  
2015     46,426       46,426  
Total minimum lease payments     100,327       100,327  
Present value of future minimum lease payments     100,327       100,327  
Less current portion of capital lease obligations     (53,901 )     (53,901 )
Capital lease obligations, net of current portion   $ 46,426     $ 46,426  
XML 45 R19.htm IDEA: XBRL DOCUMENT v3.2.0.727
Subsequent Events
6 Months Ended
Dec. 31, 2014
Subsequent Events [Abstract]  
Subsequent Events

14. Subsequent Events

   
· On January 15, 2015, the effective date, the Company entered into a settlement agreement with  TCA. Under the terms of the agreement, TCA will receive $100,000 as soon as all of the Company’s filings are current and will then receive $80,000 per month for 13 months and $60,000 in the 15th month. These payments will be accelerated at any time. In addition the balance of the note TCA will be paid through financing being obtained from an asset based lender. TCA will release their liens on the Company at that time.
   
· On March 3, 2015, a total of 200,000,000 shares were issued to two officers in lieu of payroll.
   
· In March 2015, the Company issued 57,118,182 shares in connection with the conversion of debt amounting to $6,283.
   
· On April 1, 2015, the Company temporarily shut down the operations of Elite laying off all the staff. Management was dissatisfied with the manner in which the Company was being managed and decided to restart the business by the end of 2015 in a new location with new management.
   
· On August 7, 2015, the Company entered into a short term loan in the amount of $10,720. This amount is due for repayment together with interest and fees of $1,780 on September 1, 2015. In the event it is not paid the amount may be coverted to stock at 125% of the original note amount and converted at the lower of $0.0002 or a 50% discount to market based on the the lowest price for the 20 consecutive days prior to conversion.
XML 46 R15.htm IDEA: XBRL DOCUMENT v3.2.0.727
Shareholders' Equity
6 Months Ended
Dec. 31, 2014
Equity [Abstract]  
Shareholders 'Equity

10. Shareholders’ Equity

 

During the six months ended December 31, 2014, the Company issued the following shares of common stock:

   
· 699,259,119 common shares were issued to financial institutions in connection with the conversion of debt and accrued interest totaling to $347,773.
   
· On October 14, 2014, the Board agreed to issue 10,000,000 blank check preferred stock to Anthony Anish, the COO of the Company.  These shares carry no par value and are designated as the Company’s Series B preferred stock having only the following rights;  The Series B stock shall be non-convertible, zero dividend, zero interest and carrying a voting power of the combined voting power of 50% of the Company’s common and preferred stock while outstanding. The fair value of these shares amounting to $225,500 was recorded as a deemed dividend during the six months ended December 31, 2014.
XML 47 R13.htm IDEA: XBRL DOCUMENT v3.2.0.727
Notes Payable
6 Months Ended
Dec. 31, 2014
Notes Payable [Abstract]  
Notes Payable

8. Notes Payable

 

Notes payable as of December 31 and June 30 consist of : 

 

    December  
31, 2014
    June
30, 2014
 
CONVERTIBLE NOTES (DERIVATIVE).                
                 
One unsecured  5% convertible notes payable to a  financial institution due March 4, 2015. This note can be converted to common stock at 55% of the lowest closing price in the 20 trading days prior to conversion.   $ 130,200     $ 110,000  
                 
Two unsecured 8% convertible notes payable in the sum of $110,751 to a  financial institution due February 12, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 7 trading days prior to conversion.     40,804       50,000  
                 
An unsecured 12% convertible note payable to a financial institution due January 31, 2015. This note can be converted to common stock at 55% of the lowest closing price in the 5 trading days prior to conversion.     11,500       21,500  
                 
An unsecured 12% convertible note payable to a financial institution due February 12, 2016. This note can be converted to common stock at $0.0235 or 60% of the lowest closing price in the last 25 trading days prior to conversion.     40,710       50,631  
                 
Two unsecured convertible notes payable in the sum of $110,674 to a financial institution with $50,000 due on February 6, 2015 and $55,674 due on May 30, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 7 to 10 trading days prior to conversion.     16,144       105,674  
                 
Two unsecured 8% convertible notes payable to a financial institution both due May 30, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 10 trading days prior to conversion.     83,855       160,674  
                 
Four unsecured convertible notes with interest ranging from 8% to 12% payable to a financial institution with $50,000 due April 25, 2015, $75,000 due on December 25, 2014, $125,662 due October 3, 2014 and $37,500 due on February 18, 2015. These notes can be converted to common stock after maturity date at 40% - 55% of the lowest closing price in the last 10 to 20 trading days prior to conversion.     220,109       225,562  
                 
Three unsecured 8% convertible notes payable in the sum of $160,674 to a financial institution with $50,000 due on February 6, 2015 and $110,674 due on June 10, 2015. These notes can be converted to common stock after 180 days from the date of issuance at 50% - 55% of the lowest closing price in the last 7 to 15 trading days prior to conversion.     130,000       160,674  
                 
An unsecured 8% convertible note payable to a financial institution due on June 10, 2015. This note can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 10 trading days prior to conversion.     50,000       50,000  
      723,322       934,715  
OTHER NOTES (NON-CONVERTIBLE).                
                 
Notes payable to a financial institution, secured by the underlying equipment in aggregate monthly installments of varying amounts, on a reducing balance method, with the balance due in October  2016.   $ 247,811     $ 247,811  
                 
Two unsecured notes payable in the sum of $150,000, each, to a financial institution in full in November 2011 and March 31, 2012. The Company is currently in default and has negotiated to pay the notes in monthly installments of $20,000 commencing November 2012.     75,459       75,459  
                 
An  unsecured note payable to a corporation in weekday amounts of $700, increasing to $1,650, in September 2013 and ending in December 2013. This note is in default  but a settlement reached with monthly payments being made will pay off the note by June 25, 2015. The note was not paid by June 25 and the Company is currently negotiating a new pay-off schedule.     40,300       40,300  
                 
An  unsecured note payable to a corporation in weekday amounts of $691 each through December 2013. This note is in default but a settlement reached with monthly payments being made will pay off the note by October 2015.     56,120       57,120  
                 
An  unsecured note payable to a corporation in weekday amounts of $841 each through February 2014. This note is in default.     105,350       105,350  
      525,040       526,040  
Total of convertible and other notes     1,248,362       1,460,755  
Less Debt discount     (310,291 )     (317,977 )
TOTAL     938,071       1,142,778  
Less Current Portion     814,048       1,018,755  
Long Term Portion   $ 124,023     $ 124,023  
                 
2016     124,023       124,023  
2017            
2018            
2019            
Thereafter            
    $ 124,023     $ 124,023  

 

Owing to the variable conversion rates of convertible notes, the Company determined that the conversion feature met the definition of a liability under ASC 815-40. Consequently, the Company bifurcated the conversion feature and accounted for this as a derivative liability. See Note 11.

 

In connection with one of the notes issued during the six months ended December 31, 2014, the Company issued 15,625,000 warrants that have a term of 5 years and an exercise price of $0.0016 per share. The exercise price on these warrants, contain a reset provision in the event shares are sold by the Company at a price lower than the exercise price. Consequently, the warrants were accounted for as derivatives and the fair value of such warrants amounting to $28,125 was recognized as a debt discount and amortized over the term of the note.

 

During the six months ended December 31, 2014, the Company converted total debt of $347,773 for 699,259,119 common shares and recognized a loss on debt extinguishment related to the conversion of $1,089,040.

XML 48 R14.htm IDEA: XBRL DOCUMENT v3.2.0.727
Commitments and Contingencies
6 Months Ended
Dec. 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

9. Commitments and Contingencies

 

Leases

 

The Company leased its manufacturing and office facilities under non-cancellable operating lease arrangements.

 

Rent expense under operating leases was $237,662 and $253,454 for the six months ended December 31, 2014 and 2013, respectively.

  

Litigation

 

Litigation payable as of December 31 and June 30, 2014 consist of the following:

 

    December 31,
2014
    June 30,
2014
 
An unsecured note payable to a corporation in settlement of a lawsuit payable in 12 monthly payments of $5,000.   $ 210,000       210,000  
                 
Unsecured notes payable to various parties in settlement of lawsuits payable in full.     77,500       77,500  
                 
TOTAL   $ 287,500       287,500  

 

The Company’s existing litigation proceedings are set forth below:

     
  1. James M. Cassidy v. Gateway International Holdings, Inc., American Arbitration Association, Case No. 73-194-32755-08.
     
    The Company was served with a Demand for Arbitration and Statement of Claim, which was filed on September 16, 2008. 
     
    The Statement of Claim alleges that claimant is an attorney who performed services for the Company pursuant to an agreement dated April 2, 2007 between the Company and the claimant. The Statement of Claim alleges that the Company breached the agreement and seeks compensatory damages in the amount of $195,000 plus interest, attorneys’ fees and costs. Management denies the allegations of the Statement of Claim and will vigorously defend against these allegations. An arbitrator has not yet been selected, and a trial date has not yet been scheduled. 
     
    No provision has been made in the December 31 and June 30, 2014 financial statements with respect to this matter because the Company has assessed the litigation as having no merit and the likelihood of any liability pursuant to this litigation to be extremely low.
     
  2. CNC Manufacturing v. All American CNC Sales, Inc., Elite Machine Tool Company/Sales & Services, CNC Repos, Superior Court for the State of California, County of Riverside, Case No. RIC 509650.
     
    Plaintiff filed this Complaint on October 2, 2008.
     
    The Complaint alleges causes of action for breach of contract and rescission and claims that All American breached the agreement with CNC Manufacturing by failing to deliver a machine that conforms to the specifications requested by CNC Manufacturing, and requests damages totaling $138,750. Elite Machine filed an Answer timely, on January 15, 2009.
     
    Abstract of Judgment and Writ were issued August 17, 2012.

     
    The Company entered into a settlement agreement for a settlement in the total amount of $37,500. However, no payments have been made to date.
     
    A provision has been made in the December 31 and June 30, 2014 financial statements with respect to this matter in the sum of $37,500.
     
  3. Donald Yu v. M Line Holdings, Inc., et al.; Case No. 30-2012-00574019-CU-BC-CJC
     
    This is an employment dispute asserted by a former employee against M Line Holdings and two corporate insiders, Jitu Banker and Anthony Anish, in their respective individual capacities.  The action was filed in Orange County Superior Court on June 4, 2012.  The parties entered into a settlement agreement and stipulation for judgment against M Line Holdings, only, on about May 12, 2013.  Pursuant to the terms and conditions of the settlement agreement, M Line agreed to pay $21,450.00 in three (3) equal installments.  M Line Holdings failed to make payment on a timely basis, and plaintiff filed a stipulated judgment against M Line Holdings on June 12, 2013.  Plaintiff also filed default judgments against Messrs. Banker and Anish.  
     
    In response, defendants filed a motion to set aside the defaults and vacate the default judgments against Messers. Banker and Anish as well as renegotiate the terms of the prior settlement with Plaintiff.  On or about September 30, 2013, the parties entered into a supplemental settlement agreement and mutual release wherein the Company agreed to pay plaintiff the sum of $24,000 in two (2) equal installments.  The first installment of $12,000 has already been paid.  
     
    The final installment of $12,000 was due on or before October 30, 2013, and has not been paid at this time. A judgment remains outstanding against the Company in the sum of  $12,000.
     
  4. Subramani Srinivasan, et al. v. M Line Holdings, Inc., et al.; Case No. 30-2014-00724484-CU-CO-CJC
     
    This is a breach of contract, fraud, and related causes of action against Defendants Eran Engineering, Inc., Bart Webb, Precision Aerospace and Technologies, Inc. (erroneously sued as “Precision Aerospace Technologies, Inc.”); M-Line Holdings, Inc.; Anthony Anish; Jitu Banker; Larry Consalvi; and Elite Machine Tools (collectively, “Defendants”).  
     
    The parties entered into a settlement agreement against the corporate defendants on or about January 22, 2015.  Pursuant to the terms and conditions of the settlement agreement, the corporate defendants agreed to pay $20,000 in three (3) equal installments on or before April 30, 2015.  
     
    As of June 2, 2015, the corporate defendants have paid $20,000 and this case has been dismissed, which effectively terminates all litigation in its entirety.
     
  5. Can Capital Asset Servicing, Inc. v. E.M. Tool Company, Inc., et al.; Case No. 30-2014-00727606- CU-CL-CJC
     
    This is a breach of contract and related claims arising out of a business loan, and alleges that E.M. Tool failed to pay Can Capital all amounts due under the loan agreement in the principal sum of $58,313, plus interest, costs and attorneys’ fees.  
     
    On or about November 2014, the parties entered into a settlement agreement and stipulated judgment.  Pursuant to the terms and conditions of the settlement agreement, the Company agreed to pay plaintiff the sum of $50,000 in installments on or before May 15, 2015.  

     
    As of May 13, 2015, the defendants have made partial payments, and still owe plaintiff $25,500. Plaintiff provided notice of its intent to file the stipulated judgment on May 7, 2015, and commence collection efforts if payment of $10,000 is not paid prior thereto and those payments have been made. Since May, the Company has paid $1,500. The balance as of August 17, 2015 is $24,000
     
  6. Fadal Machining v. All American CNC Sales, et al., Los Angeles Superior Court, Los Angeles, California, Case No. BC415693.
     
    The Complaint was filed on June 12, 2009.
     
    The Complaint alleges causes of action for breach of contract and common counts against All American CNC seeking damages in the amount of at least $163,579, and arises from a claim by Fadal that All American failed to pay amounts due. On June 26, 2009, Fadal amended the complaint to include M Line Holdings, Inc. as a defendant.
     
    A settlement agreement in the amount of $60,000 was signed on May 31, 2011.
     
    The Company had made a provision in the sum of $210,000 in the financial statements as of September 30, and June 30, 2014 as no payments that were due under the settlement agreement have been made. Judgment was entered on June 16, 2011, and a Writ was issued on February 24, 2012.
     
  7. C. William Kircher Jr. v. M Line Holdings, Inc. Orange County Superior Court Case No. 00397576
     
    A former attorney for M Line Holdings, Inc. has sued seeking damages for failure to pay legal fees in the amount of $120,166.
     
    The parties reached a settlement. The terms of the settlement call for 12 payments of $5,000 per month commencing August 25, 2011 and the issuance of 150,000 shares of common stock. The Company has issued the 150,000 shares of common stock and made two payments to date. The Company has a provision in the sum of $50,000 in the financial statements as of December 31, and June 30, 2014.
     
    The Company currently is in default of its payment obligations under the settlement. Plaintiff currently is seeking to obtain a judgment as a result of the breach of the settlement agreement.
     
  8. Timothy D. Consalvi v. M Line Holdings, Inc. et.al., Orange County Superior Court Case No, 00308489.
     
    A former president of All American CNC Sales, Inc. has filed suit against the Company seeking payment on an alleged severance obligation by the Company. The Complaint does not specify the damages sought. The parties then reached a settlement in the principal sum of $40,000 to be documented in due course. Meanwhile a default was entered against the Company, which management believes was in error because a settlement was already reached by the principal parties involved. The default has since been vacated, and the Company has answered the complaint and has filed a motion for leave to file a cross complaint.
     
    A settlement of $50,000 was reached in this case, requiring payments commencing on March 11, 2011 for 10 months. The first two month’s payments were made; however, the Company currently is in default of the terms of this settlement agreement. Mr. Consalvi filed his stipulated judgment on March 5, 2012. Abstract of judgment and Writ were issued on March 13, 2012.
     
    A provision in the sum of $40,000 has been made in the financial statements as of December 31 and June 30, 2014.

     
    To date there has been no further action on this case, and the Company plans to resolve this matter as soon as possible.
     
  9. All Direct Travel Services, Inc. v. Jitu Banker, M Line holdings, Inc., Airworks  International, Inc., case number 30-2011-00472824-CL-CO-CJC
     
    This case was settled as to Jitu Banker and the Company for $2,000 payable on February 25, 2013. We do not yet have sufficient information to determine what the potential outcome of this may be or whether or to what extent it would or could have a financial impact on the Company. A default judgment was entered on January 6, 2012.
     
    To date there has been no further action on this case, and the Company plans to resolve this matter as soon as possible.
     
  10. TCA Global Credit Master Fund, L.P. vs M LI ne Holdings, Inc. EM Tool Company, Inc. dba Elite Machine Tool, Precision Aerospace and Technologies, Inc., Anthony Anish and Jitendra Banker case # CACE-14-012871
     
    Plaintiff filed this case on July 1, 2014 in Broward County, Florida.
     
    The complaint alleges that the Company owes the Plaintiff the amount due under the revolving note, and is claiming foreclosure of the collateral, breach of the credit agreement and a claim against the individuals under the validity agreement due to the non-payment.
     
    The Plaintiff obtained a default judgment however due to a settlement agreement reached on September 5, 2014 ceased any further legal activity.  The Defendants were unable to honor the agreement and Plaintiff continued to obtain sister state judgments in California and Nevada.
     
    On February 23, 2015 a new settlement agreement was signed between the parties under which plaintiff agreed to accept two methods of repayment, the first being $1,200,000 paid over a fifteen month period commencing as soon as the Company was up to date with its filings and the balance of funding would come from a new asset based lending program that Defendants were in the process of arranging.
     
    The Company has accrued $2,420,453 and $2,330,453 in the financial statements that includes all interest and fees due to Plaintiff through December 31, and June 30, 2014, respectively.
     
  11. Global Vantage Ltd.,  a California Corporation vs Eran Engineering, Inc. Precision Aerospace and Technologies, Inc., M Line Holdings, Inc., Anthony Anish, Lawrence Consalvi and Kenneth Collini
     
    Plaintiff filed this complaint on August 7, 2014 in Orange County, California.
     
    The complaint alleges that the Company owes funds that are due for the lease of certain equipment or plaintiffs want repossession of the equipment.
     
    The plaintiffs obtained judgment in February 2015 and the equipment has been returned to plaintiff.  However, defendants are filing an appeal against this judgment.

 

Litigation is subject to inherent uncertainties, and unfavorable rulings could occur.  If an unfavorable ruling were to occur in any of the above matters, there could be a material adverse effect on the Company’s financial condition, results of operations or liquidity. 

 

The related provisions for these litigations are reported under litigation payable, accounts payable and accrued expenses and other in the consolidated balance sheets.

XML 49 R16.htm IDEA: XBRL DOCUMENT v3.2.0.727
Fair Value of Financial Instruments
6 Months Ended
Dec. 31, 2014
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

11. Fair Value of Financial Instruments

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

 

· Level 1 - Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
· Level 2 - Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily-available pricing sources for comparable instruments.
· Level 3 - Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

 

The following table presents the derivative financial instrument. The Company’s only financial liability is measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis and their level of hierarchy as of December 31, 2014: 

                                 
    Amount     Level 1     Level 2     Level 3  
Embedded conversion derivative liability   $ 965,003     $     $     $ 965,003  
Total   $ 965,003     $     $     $ 965,003  

 

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:

 

Balance at June  30, 2014   $ 634,769  
Fair value of warrant derivative liabilities at issuance, recorded as debt discount     602,576  
Settlement of derivative liabilities to gain on debt extinguishment.     (923,514 )
Unrealized derivative loss resulting from marked to market fair values included in other expense     651,172  
Balance at December 31, 2014   $ 965,003  

 

The fair value of the derivative liability is calculated at the time of issuance and the Company records a derivative liability for the calculated value. Changes in the fair value of the derivative liability are recorded in other income (expense) in the consolidated statements of operations.

 

The following are the assumptions used for derivative instrument valued using the Black Scholes option pricing model:

 

    At Issuance     December 31, 2014  
Market value of stock on measurement date   $ 0.0012 - 0.0018     $ 0.0002  
Risk-free interest rate     0.05 – 1.58 %     0.03 – 1.65 %
Dividend yield     0 %     0 %
Volatility factor     241 - 417 %     286 -402 %
Term      0.51 - 5 years       0.10 – 4.63 years  

 

XML 50 R34.htm IDEA: XBRL DOCUMENT v3.2.0.727
Notes Payable (Details) - USD ($)
6 Months Ended
Dec. 31, 2014
Jun. 30, 2014
Total of convertible notes $ 723,322 $ 934,715
Total of other non convertible notes 525,040 526,040
Total of convertible and other notes 1,248,362 1,460,755
Less discount (310,291) (317,977)
TOTAL 938,071 1,142,778
Less: current portion 814,048 1,018,755
Long term portion 124,023 124,023
2016 $ 124,023 $ 124,023
2017    
2018    
2019    
Thereafter    
Long term debt maturities repayements $ 124,023 $ 124,023
5% One Unsecured Convertible Note Payable Due March 4, 2015 [Member]    
Total of convertible notes $ 130,200 110,000
Description of conversion term

This note can be converted to common stock at 55% of the lowest closing price in the 20 trading days prior to conversion.

 
8% Two Unsecured Convertible Note Payable Due February 12, 2015 [Member]    
Total of convertible notes $ 40,804 50,000
Description of conversion term

These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 7 trading days prior to conversion.

 
12% Unsecured Convertible Note Payable Due January 31, 2015 [Member]    
Total of convertible notes $ 11,500 21,500
Description of conversion term

This note can be converted to common stock at 55% of the lowest closing price in the 5 trading days prior to conversion.

 
12% Unsecured Convertible Note Payable February 12, 2016 [Member]    
Total of convertible notes $ 40,710 50,631
Description of conversion term

This note can be converted to common stock at $0.0235 or 60% of the lowest closing price in the last 25 trading days prior to conversion.

 
Two Unsecured Convertible Note Payable [Member]    
Total of convertible notes $ 16,144 105,674
Description of conversion term

These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 7 to 10 trading days prior to conversion.

 
8% Two Unsecured Convertible Note Payable Due May 30, 2015 [Member]    
Total of convertible notes $ 83,855 160,674
Description of conversion term

These notes can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 10 trading days prior to conversion.

 
Four Unsecured Convertible Note Payable [Member]    
Total of convertible notes $ 220,109 225,562
Description of conversion term

These notes can be converted to common stock after maturity date at 40% - 55% of the lowest closing price in the last 10 to 20 trading days prior to conversion.

 
8% Three Unsecured Convertible Note Payable [Member]    
Total of convertible notes $ 130,000 160,674
Description of conversion term

These notes can be converted to common stock after 180 days from the date of issuance at 50% - 55% of the lowest closing price in the last 7 to 15 trading days prior to conversion.

 
8% Unsecured Convertible Note Payable Due June 10, 2015 [Member]    
Total of convertible notes $ 50,000 50,000
Description of conversion term

This note can be converted to common stock after 180 days from the date of issuance at 55% of the lowest closing price in the last 10 trading days prior to conversion.

 
Notes Payable to Financial Institution Due October 2016 [Member]    
Total of other non convertible notes $ 247,811 247,811
Description of conversion term

Notes payable to a financial institution, secured by the underlying equipment in aggregate monthly installments of varying amounts, on a reducing balance method, with the balance due in October  2016.

 
Two Unsecured Convertible Note Payable [Member]    
Total of other non convertible notes $ 75,459 75,459
Description of conversion term

Two unsecured notes payable in the sum of $150,000 each, to a financial institution in full in November 2011 and March 31, 2012. The Company is currently in default and has negotiated to pay the notes in monthly installments of $20,000 commencing November 2012.

 
Unsecured Note Payable Due June 25, 2015 [Member]    
Total of other non convertible notes $ 40,300 40,300
Description of conversion term

An  unsecured note payable to a corporation in weekday amounts of $700, increasing to $1,650, in September 2013 and ending in December 2013. This note is in default  but a settlement reached with monthly payments being made will pay off the note by June 25, 2015. The note was not paid by June 25 and the Company is currently negotiating a new pay-off schedule.

 
Unsecured Note Payable Due October 2015 [Member]    
Total of other non convertible notes $ 56,120 57,120
Description of conversion term

An  unsecured note payable to a corporation in weekday amounts of $691 each through December 2013. This note is in default but a settlement reached with monthly payments being made will pay off the note by October 2015.

 
Unsecured Note Payable [Member]    
Total of other non convertible notes $ 105,350 $ 105,350
Description of conversion term

An  unsecured note payable to a corporation in weekday amounts of $841 each through February 2014. This note is in default.

 
XML 51 R21.htm IDEA: XBRL DOCUMENT v3.2.0.727
Inventories (Tables)
6 Months Ended
Dec. 31, 2014
Inventory Disclosure [Abstract]  
Schedule of inventories

Inventories as of December 31 and June 30, 2014 consist of the following:

                 
    December.
31, 2014
    June 30, 2014  
Finished goods and components   $ 959,610     $ 1,112,647  
CNC machines held for sale     511,000       152,000  
Work in progress     446,781       327,620  
Raw materials and parts     11,392       14,336  
      1,928,783       1,606,603  
Less: Reserve for inventories     (175,921 )     (175,921 )
Inventories, net.   $ 1,752,862     $ 1,430,682  

 

XML 52 R26.htm IDEA: XBRL DOCUMENT v3.2.0.727
Fair Value of Financial Instruments (Tables)
6 Months Ended
Dec. 31, 2014
Fair Value Disclosures [Abstract]  
Schedule of financial liability measured and recorded at fair value on recurring basis

The following table presents the derivative financial instrument. The Company’s only financial liability is measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis and their level of hierarchy as of December 31, 2014: 

                                 
    Amount     Level 1     Level 2     Level 3  
Embedded conversion derivative liability   $ 965,003     $     $     $ 965,003  
Total   $ 965,003     $     $     $ 965,003  
Schedule of changes in fair value

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:

 

Balance at June  30, 2014   $ 634,769  
Fair value of warrant derivative liabilities at issuance, recorded as debt discount     602,576  
Settlement of derivative liabilities to gain on debt extinguishment.     (923,514 )
Unrealized derivative loss resulting from marked to market fair values included in other expense     651,172  
Balance at December 31, 2014   $ 965,003  

 

Schedule of assumptions used for derivative instrument

The following are the assumptions used for derivative instrument valued using the Black Scholes option pricing model:

 

    At Issuance     December 31, 2014  
Market value of stock on measurement date   $ 0.0012 - 0.0018     $ 0.0002  
Risk-free interest rate     0.05 – 1.58 %     0.03 – 1.65 %
Dividend yield     0 %     0 %
Volatility factor     241 - 417 %     286 -402 %
Term      0.51 - 5 years       0.10 – 4.63 years  
XML 53 R41.htm IDEA: XBRL DOCUMENT v3.2.0.727
Related Party Transactions (Details Narrative) - USD ($)
Dec. 31, 2014
Jun. 30, 2014
Related Party Transactions [Abstract]    
Due from related parties $ 0 $ 0
Due to officers $ 35,954 $ 35,954
XML 54 R5.htm IDEA: XBRL DOCUMENT v3.2.0.727
CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED) - USD ($)
6 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Cash flows from operating activities:    
Net income (loss) $ (2,533,324) $ 374,932
Reconciliation of net loss to net cash provided by operations:    
Loss on disposition of assets 46,250  
Bad debt expense 39,211  
Depreciation 54,798 $ 85,253
Amortization of debt discount and deferred financing fees 335,836 155,027
Loss on debt extinguishment $ 165,526  
Issuance of shares for services   217,916
Change in derivative liabilities $ 651,172 48,130
Changes in operating assets and liabilities:    
Accounts receivable (47,036) (356,402)
Inventory (322,180) (57,776)
Prepaid expenses and other assets $ 17,637 (2,477)
Due from related party   (28,652)
Accounts payable, accrued expenses and other $ 1,253,527 (393,838)
Net cash provided by (used in) operating activities (338,583) $ 42,113
Cash flows from investing activities:    
Proceeds from disposals of property and equipment 35,000  
Net cash provided by investing activities 35,000  
Cash flows from financing activities:    
Net borrowings (repayments) on line of credit 50,000 $ (53,493)
Proceeds from notes payable 110,499 202,195
Bank overdraft 157,619 (48,092)
Payments to notes payable $ (1,000) (206,871)
Payments on capital leases   (31,441)
Net cash provided by (used in) financing activities $ 317,118 (137,702)
Net increase (decrease) in cash and cash equivalents 13,535 (95,589)
Cash and cash equivalents at beginning of period 46,925 182,305
Cash and cash equivalents at end of period $ 60,460 86,716
Supplemental disclosure of cash flow information:    
Cash paid for interest   $ 158,815
Cash paid for income taxes    
Supplemental disclosure of non-cash investing and financing activities:    
Debt discount resulting from derivative liability $ 602,576 $ 63,000
Return of property and equipment 8,250  
Acquisition of property and equipment through line of credit 224,250  
Interest added to principal 124,031  
Shares issued for conversion of debt 347,773  
Deemed dividend - Series B Preferred Stock $ (225,500)  
XML 55 R10.htm IDEA: XBRL DOCUMENT v3.2.0.727
Accrued Expenses
6 Months Ended
Dec. 31, 2014
Payables and Accruals [Abstract]  
Accrued Expenses

5.  Accrued Expenses 

 

Accrued expenses and other as of December 31 and June 30, 2014 consist of the following: 

 

    December
31, 2014
    June 30,
2014
 
Compensation and related benefits   $ 2,209,233     $ 2,023,064  
Audit Fees     50,000       46,000  
Other     868,854       525,552  
    $ 3,128,087     $ 2,594,616  

XML 56 R27.htm IDEA: XBRL DOCUMENT v3.2.0.727
Segments and Geographic Information (Tables)
6 Months Ended
Dec. 31, 2014
Segments And Geographic Information Tables  
Schedule of segment information

Segment information is as follows for the three months and six months ended December 31, 2014 and 2013:

  

Segment Information for the three months ended December   31, 2014   Machine
Sales
    Precision Manufacturing     Corporate     Total  
Revenue   $ 1,172,882     $ 331,422     $     $ 1,504,304  
Interest Expense     40,500       45,000       268,435       353,935  
Depreciation and Amortization           25,599             25,599  
Income (loss) before taxes     (169,182 )     (180,696 )     (645,912 )     (995,790 )
Total Assets     642,218       1,726,093       56,643       2,424,954  
Capital Expenditure   $     $     $     $  
                                 
Segment Information for the three months ended December   31, 2013   Machine
Sales
    Precision Manufacturing     Corporate     Total  
Revenue   $ 2,447,201     $ 859,179     $     $ 3,306,380  
Interest Expense     40,306       60,528       119,516       220,350  
Depreciation and Amortization     750       40,118             40,868  
Income (loss) before taxes     34,199       474,097       (300,431 )     207,865  
Total Assets     1,076,182       2,746,680       19,176       3,842,038  
Capital Expenditure   $     $     $     $  

  

Segment Information for the six months ended December   31, 2014   Machine Sales     Precision Manufacturing     Corporate     Total  
Revenue   $ 1,903,109     $ 558,675     $     $ 2,461,784  
Interest Expense     72,000       90,000       256,716       418,716  
Depreciation and Amortization           54,798             54,798  
Income (loss) before taxes     (486,884 )     (490,549 )     (1,555,891 )     (2,533,324 )
Total Assets     642,218       1,726,093       56,643       2,424,954  
Capital Expenditure   $     $     $     $  
                                 
Segment Information for the six months ended December   31, 2013   Machine Sales     Precision Manufacturing     Corporate     Total  
Revenue   $ 4,206,759     $ 1,826,815     $     $ 6,033,574  
Interest Expense     98,511       114,815       132,016       345,342  
Depreciation and Amortization     1,500       83,753             85,253  
Income (loss) before taxes     208,649       557,894       (389,917 )     376,626  
Total Assets     1,076,182       2,746,680       19,176       3,842,038  
Capital Expenditure   $     $     $     $  
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Fair Value of Financial Instruments (Details) - Fair Value, Measurements, Recurring [Member]
Dec. 31, 2014
USD ($)
Embedded conversion derivative liability $ 965,003
Level 1 [Member]  
Embedded conversion derivative liability  
Level 2 [Member]  
Embedded conversion derivative liability  
Level 3 [Member]  
Embedded conversion derivative liability $ 965,003
Embedded conversion derivative liability [Member]  
Embedded conversion derivative liability $ 965,003
Embedded conversion derivative liability [Member] | Level 1 [Member]  
Embedded conversion derivative liability  
Embedded conversion derivative liability [Member] | Level 2 [Member]  
Embedded conversion derivative liability  
Embedded conversion derivative liability [Member] | Level 3 [Member]  
Embedded conversion derivative liability $ 965,003
XML 60 R20.htm IDEA: XBRL DOCUMENT v3.2.0.727
Significant Accounting Policies (Policies)
6 Months Ended
Dec. 31, 2014
Accounting Policies [Abstract]  
Basis of presentation

Basis of presentation

 

In the opinion of management, the accompanying interim consolidated balance sheets and statements of operations and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-Q should be read in conjunction with information included in the Company’s annual report on Form 10-K for the fiscal year ended June 30, 2014 filed with the U.S. Securities and Exchange Commission (the “Commission”) on June 24, 2015.

 

Principles of consolidation

Principles of consolidation

 

The accompanying consolidated financial statements include the accounts of M Line Holdings, Inc. and its wholly owned subsidiaries Elite, Precision, and M Line Business . All intercompany accounts and transactions have been eliminated.

Use of estimates

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management are among others, realization of inventories, collectability of accounts receivable, litigation, impairment of goodwill and long-lived assets other than goodwill. Actual results could materially differ from those estimates.

Recent accounting pronouncements

Recent accounting pronouncements

 

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations.