UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended ~~December 31,~~September ~~2013~~30, 2014

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

For the transition period from _______________ to _______________.

Commission File Number 0000-~~32341~~53265

M LINE HOLDINGS, INC.

(Exact Name of Company as Specified in its Charter)

Nevada (State or other jurisdiction of incorporation or organization)	88-0375818 (I.R.S. Employer Identification No.)
Nevada	88-0375818
2672 Dow Avenue Tustin, CA (Address of principal executive offices)	92780 (Zip Code)
(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~~ 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 ~~[x]~~þ No ~~[ ]~~¨.

Indicate by check mark whether the registrant has ~~submitted~~ 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~~ shorter period that the registrant was required to submit and post such files). Yes ~~[x]~~ 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 ~~[x]~~þ (Do not check if a smaller reporting company)

~~Table~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of ~~Contents~~the 1Exchange Act). Yes ¨ No þ.

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

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

Check whether the registrant filed all documents and reports ~~required~~ 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 ~~[x]~~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 ~~February~~August 1119, ~~2014~~2015, there were 951,~~266~~199,~~275~~ 555,785 shares of common stock, par value $.001, issued and outstanding.

Table of Contents 2

M LINE HOLDINGS, INC.

TABLE OF CONTENTS

PART I		Page
			Page
Item 1.	Financial Statements (Unaudited)	4
PART I			3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
Item 1.		Financial Statements (Unaudited)	3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 4.	Controls and Procedures	24
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	22
PART II
Item 4.		Controls and Procedures	22
Item 1.	Legal Proceedings	26
PART II
Item 1A.	Risk Factors	29
Item 1.		Legal Proceedings
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 1A.		Risk Factors	27
Item 3.	Defaults Upon Senior Securities	29
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 4.	(Removed and Reserved)	29
Item 3.		Defaults Upon Senior Securities	27
Item 5.	Other Information	29
Item 4.		(Removed and Reserved)	27
Item 6.	Exhibits	30
Item 5.		Other Information	27
	Signatures	32
Item 6.		Exhibits	27
		Signatures	30

~~Table of Contents 3~~-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. and Precision Aerospace & Technologies, Inc., formerly Eran Engineering, Inc.

Item 1. Financial Statements.

M LINE HOLDINGS, INC. AND SUBSIDIARIES

~~CONDENSED~~ CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	As of September 30			As of June 30
	2014			2014
Assets
	As of December 31			As of June 30
	2013			2013
Current assets:
Cash and cash equivalents	$	8612,~~716~~408		$	~~182~~46,~~305~~925
Accounts receivable, net		1114,~~346,412~~754			~~990~~222,~~010~~344
Inventory, net		1,~~613~~514,~~686~~843			1,~~555~~430,~~910~~682
Due from related party		128,000			99,348
		1,642,005			1,699,951
Deferred Financing Costs		80,000			199,516
Property and equipment, net		283,778			402,476
Total current assets		3,254,814			3,027,089
Deposits and other		130,786			140,922
Property and equipment, net		471,302			556,555
Total assets	$	2,056,569		$	2,243,349
Deposits and other		115,922			113,445
Liabilities and Stockholders’ deficit
Total assets	$	3,842,038		$	3,697,089
Liabilities and shareholders' deficit
Current liabilities:
Bank overdraft	$	37311,~~450~~171			85149,~~542~~699
Accounts payable		1,~~349~~641,~~035~~652			1,~~421~~350,~~626~~157
Accounts payable - related party		4335,~~454~~954			4335,~~454~~954
Accrued expenses and other		2,~~477~~623,~~450~~861			2,~~788~~594,~~697~~616
Litigation payable		~~137~~287,500			~~137~~287,500
Derivative liability		~~111~~549,~~130~~003			—634,769
Line of credit		12,~~649~~330,~~233~~453			12,~~702~~330,~~726~~453
Notes payable - current, net of debt discount of $69,996		705,689			675,961
Notes payable - current, net of debt discount of $314,663 and $317,977		810,676			1,018,755
Current portion of capital lease obligations		53,901			5453,~~501~~901
Deferred income		—			10,000
Total current liabilities		8,644,171			8,455,804
Total current liabilities		6,564,842			6,920,007
Notes payable - net of current portion		124,023			124,023
Notes payable - net of current portion		257,010			318,903
Capital lease obligation, net of current portion		46,426			46,426
Capital Lease obligation, net of current portion		59,901			90,742
Total liabilities		8,814,620			8,626,253
Total liabilities		6,881,753			7,329,652
Commitments and contingencies		-			-
Stockholders’ deficit:
Preferential stock: $0.001 par value, 10,000,000 shares authorized, 200,000 and 200,000 shares issued and outstanding at September 30, 2014 and June 30, 2014 respectively		200			200
Common stock: $0.001 par, 1,000,000,000 shares authorized, 942,437,603 and 243,178,484 shares issued and outstanding at September 30, 2014 and June 30, 2014, respectively		942,437			243,178
Additional paid in capital		13,310,109			12,846,981
Accumulated deficit		(21,010,797	)		(19,473,263	)
Total Stockholders’ deficit		(6,758,051	)		(6,382,904	)
Total liabilities and Stockholders’ deficit	$	2,056,569		$	2,243,349

~~Table~~The accompanying notes form part of ~~Contents~~these 4unaudited consolidated financial statements

Commitments and contingencies		—			—
Shareholders' deficit:
Preferential stock: $0.001 par value, 10,000,000 shares authorized, 200,000 shares issued and outstanding at December 31, 2013 and June 30, 2013 respectively		200			200
Common stock: $0.001 par, 100,000,000 shares authorized, 92,016,275 and 70,211,145 shares issued and outstanding at December 31, 2013 and June 30, 2013, respectively		92,016			70,211
Additional paid in capital		10,937,508			10,741,397
Accumulated deficit		(14,069,439	)		(14,444,371	)
Total shareholders' equity		(3,039,715	)		(3,632,563	)
Total liabilities and shareholders' deficit	$	3,842,038		$	3,697,089
The accompanying notes form an integral part of these unaudited consolidated financial statements

-3-

Table of Contents 5

M LINE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2013 AND 2012 (UNAUDITED)
	Three months ended December 31,						Six months ended December 31,
	2013			2012			2013			2012
Net sales	$	3,306,380		$	2,440,883		$	6,033,574		$	4,421,473
Cost of sales		2,394,345			1,853,075			4,112,425			3,121,746
Gross profit		912,035			587,808			1,921,149			1,299,727
Operating expenses:
Selling, general and administrative		372,690			895,497			1,151,051			1,848,264
Operating income (loss)		539,345			(307,689	)		770,098			(548,537	)
Other income (expense):
Interest expense		(220,350	)		(92,375	)		(345,342	)		(191,465	)
Derivative loss		(48,130	)		—			(48,130	)		—
Total other income (expenses)		(268,480	)		(92,375	)		(393,472	)		(191,465	)
Income (loss) before income tax		270,865			(400,064	)		376,626			(740,002	)
Income tax provision		(1,694	)		(61	)		(1,694	)		(2,087	)
Net income (loss)	$	269,171		$	(400,125	)	$	374,932		$	(742,089	)
Net income (loss) per share:
Basic and diluted income (loss) per share:	$	0.00			(0.01	)	$	0.00		$	(0.01	)
Weighted average common shares outstanding Basic and diluted		83,972,797			57,731,879			78,632,746			56,325,357
The accompanying notes form an integral part of these unaudited consolidated financial statements

Table of Contents 6

M LINE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
	Six months ended December 31,
	2013			2012
Cash flows from operating activities:
Net income (loss)	$	374,932		$	(742,089	)
Reconciliation of net income (loss) to net cash provided by operations:
Depreciation		85,253			94,187
Amortization of debt discount and deferred financing fees		155,027			—
Share based compensation		217,916			172,000
Derivative loss		48,130			—
Changes in operating assets and liabilities:
Accounts receivable		(356,402	)		357,625
Inventory		(57,776	)		(100,897	)
Prepaid expenses and other assets		(2,477	)		(27,757	)
Due from related party		(28,652	)		(16,624	)
Accounts payable, accrued expenses and other		(393,838	)		517,446
Litigation payable		—			69,093
Net cash provided by operating activities		42,113			322,984
Cash flows from investing activities:
Acquisition of property and equipment		—			(53,651	)
Net cash used in investing activities		—			(53,651	)
Cash flows from financing activities:
Bank overdraft		(48,092	)		—
Net borrowings (repayments) on line of credit		(53,493	)		(334,735	)
Proceeds from notes payable		202,195			519,835
Payments to notes payable		(206,871	)		(261,129	)
Payments on capital leases		(31,441	)		(37,911	)
Net cash used in financing activities		(137,702	)		(113,940	)
Net increase (decrease) in cash and cash equivalent		(95,589	)		155,393
Cash and cash equivalents at beginning of period		182,305			5,212
Cash and cash equivalents at end of period	$	86,716		$	160,605
Supplemental disclosure of cash flow information:
Cash paid for interest	$	158,815		$	191,465
Cash paid for income taxes	$	—		$	—
Supplemental disclosure of non cash financing activity Debt discount resulting from derivative liability	$	63,000		$	—

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

Table of Contents 7

M LINE HOLDINGS, INC. AND SUBSIDIARIES

~~NOTES~~CONSOLIDATED TOSTATEMENT ~~CONDENSED~~OF ~~CONSOLIDATED FINANCIAL STATEMENTS~~OPERATIONS

(UNAUDITED)

	Three months ended September 30,
	2014			2013

Net sales	$	957,480		$	2,727,194

Cost of sales		1,018,891			1,718,080

Gross Profit (loss)		(61,411	)		1,009,114

Operating expenses:

Selling, general and administrative		760,081			778,361

Amortization of intangible assets		-			12,500

Total operating expense		760,081			790,861

Operating income (loss)		(821,492	)		218,253

Other income (expense):

Interest expense		(64,781	)		(112,492	)

Loss on debt extinguishment		(165,526	)		-

Change in derivative liability		(485,735	)		-

Total other income (expenses)		(716,042	)		(112,492	)

Income (loss) before income tax		(1,537,534	)		105,761

Income tax provision		-			-
Net income (loss)	$	(1,537,534	)	$	105,761

Net income (loss) per share:
Basic and diluted	$	(0.00	)	$	0.00
Weighted average number of common shares - basic and diluted		533,400,881			73,292,696

The accompanying notes form part of these unaudited consolidated financial statements

-4-

M LINE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three months ended September 30,
	2014			2013
Cash flows from operating activities:
Net loss	$	(1,537,534	)	$	105,761
Reconciliation of net loss to net cash provided by operations:
Loss on disposition of assets		46,250			-
Bad debt expense		24,277			-
Depreciation		29,199			44,385
Amortization of intangible assets		-			12,500
Issuance of shares for services		-			47,916
Amortization of debt discount		80,901			26,704
Loss on debt extinguishment		165,526			-
Change in derivative liabilities		485,735			-
Changes in operating assets and liabilities:
Accounts receivable		83,313			(22,754	)
Inventory		(84,161	)		(264,351	)
Prepaid expenses and other assets		10,136			(7,801	)
Due from related party		-			(25,000	)
Accounts payable, accrued expenses and other		354,870			20,847
Net cash used in operating activities		(341,488	)		(61,793	)

Cash flows from investing activities:
Proceeds from disposal of assets		35,000			-
Acquisition of property and equipment		-			(12,500	)
Net cash provided by (used in) investing activities		35,000			(12,500	)

Cash flows from financing activities:
Net borrowings (repayments) on line of credit		-			(85,590	)
Proceeds from notes payable		110,499			63,000
Bank overdraft		161,472			57,492
Payments to notes payable		-			(117,247	)
Payments on capital leases		-			(8,983	)
Net cash provided by (used in) financing activities		271,971			(91,328	)

Net decrease in cash and cash equivalents		(34,517	)		(165,621	)

Cash and cash equivalents at beginning of period		46,925			182,305
Cash and cash equivalents at end of period	$	12,408		$	16,684

Supplemental disclosure of cash flow information:
Cash paid for interest	$	-		$	85,788
Cash paid for income taxes	$	-		$	-

Supplemental disclosure of non-cash financing activities:
Debt discount resulting from derivative liability	$	352,013			-
Return of property and equipment		8,250			-
Interest added to principal		34,031			-
Shares issued for conversion of debt		347,773			-

The accompanying notes form part of these unaudited consolidated financial statements

-5-

M LINE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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., 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 relating to the aerospace industry.

Significant Accounting Policies

Basis of presentation

In the opinion of management, the accompanying interim consolidated balance sheets and ~~related~~ ~~interim~~ statements of operations and cash flows include all adjustments, consisting only of normal recurring items, ~~necessary~~ 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, ~~2013~~2014 filed with the U.S. Securities and Exchange Commission (the “Commission”) on ~~January 2~~June 24, ~~2014~~2015.

Principles of consolidation

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

Going Concern and Management Plans

The Company's consolidated financial ~~statements~~ 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 $1421,~~069~~010,~~439~~797 as of ~~December~~September 3130, ~~2013~~2014 and negative working capital.

Table of Contents 8

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.

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 ~~consisted~~as of September 30 and June 30 consist of the following:

	December 31, 2013			June 30, 2013
	September 30, 2014			June 30, 2014
Finished goods and components	$	1,~~339~~021,~~694~~457		$	~~971~~1,~~099~~112,647
CNC machines held for sale		~~242~~210,~~250~~750			~~364~~152,~~583~~000
Work in progress		~~226~~446,~~622~~781			~~415~~327,~~108~~620
Raw materials and parts		511,~~120~~776			514,~~120~~336
		1,813,686			1,755,910
		1,690,764			1,606,603
Less: Reserve for inventories		(~~200~~175,~~000~~921	)		(~~200~~175,~~000~~921	)
Inventories, net	$	1,613,686		$	1,555,910
Inventories, net.	$	1,514,843		$	1,430,682

Accrued Expenses

	December 31, 2013		June 30, 2013
Compensation and related benefits	$	1,959,413	$	1,934,314
Audit fees		46,000		72,500
Other		472,037		781,883
	$	2,477,450	$	2,788,697

Accrued expenses and other as of September 30 and June 30 consist of the following:

Table of Contents 9

	September 30, 2014		June 30, 2014
Compensation and related benefits	$	2,156,849	$	2,023,064
Audit fees		50,000		46,000
Other		417,012		525,552
	$	2,623,861	$	2,594,616

-7-

Capital Leases

The Company leases certain equipment under capital leases with ~~terms~~ terms ranging from four to five years. Future annual minimum lease payments are as follows as of ~~December~~September 3130, ~~2013~~ and June 30, ~~2013~~2014.

	December 31, 2013			June 30, 2013
	September 30, 2014			June 30, 2014
2014	$	53,901		$	5453,~~501~~901
2015		5346,~~901~~426			5446,~~501~~426
2016		6,000			36,241
Total minimum lease payments		100,327			100,327
2017		—			—
Less amount representing interest		-			-
Total minimum lease payments		113,802			145,243
Present value of future minimum lease payments		100,327			100,327
Less amount representing interest		—			—
Less current portion of capital lease obligations		(53,901	)		(53,901	)
Present value of future minimum lease payments		113,802			145,243
Capital lease obligations, net of current portion	$	46,426		$	46,426
Less current portion of capital lease obligations		(53,901	)		(54,501	)
Capital lease obligations, net of current portion	$	59,901		$	90,742

Line of Credit

Main Credit:

As of December 31, 2013, the Company owed $0 principal as all outstanding sums were paid off in July 2013.

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

The Company has an existing line of credit with ~~Main~~TCA Global Credit Master ~~was replaced on April 30~~Fund, ~~2013, with~~LLC ~~a line of credit from~~ (“TCA”) upin to the amount of $10 million. As of ~~December~~September 3130 and June 30, ~~2013~~2014, the Company has drawn $1,~~743~~700,~~997~~000 from the line of which $12,~~649~~330,~~233~~453 is outstanding as of ~~December~~September 3130, ~~2013~~2014 and June 30, 2014. Amounts drawn from the line of credit are subject to interest at ~~18%~~and ~~per annum. The loan~~ matured on October 31, 2013,. ~~but~~The line was ~~extended~~automatically renewed for a further ~~period of~~ six months and ~~through~~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.

The line of credit with TCA Global Credit Master Fund, LP is secured by the receivables and inventory of Precision Aerospace and Technologies, Inc., E. M. Tool Co. Inc., and a blanket lien over all of the group’s assets.-8-

Notes Payable

Notes payable as of ~~December~~September ~~31,~~30 ~~2013~~ and June 30, ~~2013~~ consist of :

	December 31, 2013			June 30, 2013
	September 30, 2014			June 30, 2014
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.	$	361,047		$	422,940
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.		57,120			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
		526,040			526,040
Total of convertible and other notes		1,249,362			1,460,755
Less Debt discount		(314,663	)		(317,977	)
TOTAL		934,699			1,142,778
Less Current Portion		810,676			1,018,755
Long Term Portion	$	124,023		$	124,023
2016		124,023			124,023
2017		—			—
2018		—			—
2019		—			—
Thereafter		—			—
	$	124,023		$	124,023

~~Table~~Owing to the variable conversion rates of ~~Contents~~the 10convertible 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.

An unsecured note payable to a corporation in respect of accounting software payable in monthly installments of $ 1,923. This note has matured and is currently in default.		46,811		46,811
An unsecured convertible note payable to a financial institution payable in full on April 3, 2014, net of a discount of $63,000. The embedded conversion option is accounted for as a derivative due to the variable conversion price.		—		—
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.		354,459		354,459
An unsecured note payable to a corporation in weekday amounts of $700, increasing to $1,650, in September 2013 through December 2013, net of a discount of $17,291 ($38,976)		26,009		86,624
An unsecured note payable to a corporation in weekday amounts of $691 each, through December 2013, net of a discount of $18,687 ($31,020).		38,934		84,030
An unsecured note payable to a corporation in weekday amounts of $890 each, ending in January 2014, net of a discount of $23,940		59,195		—
An unsecured note payable to a corporation in weekday amounts of $841 each, ending in February 2014, net of a discount of $32,107		76,244		—
TOTAL		962,699		994,864
Less – current portion		705,689		675,961
Long - term portion	$	257,010	$	318,903

-9-

~~Table~~In connection with one of ~~Contents~~the 11notes issued during the quarter ended September 30, 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.

2014	705,689	675,961
2015	143,230	123,780
2016	113,780	123,780
2017	—	71,343
Thereafter	—	—
	962,699	994,864

During the three months ended September 30, 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.

Commitments and Contingencies

Leases

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

Rent expense under operating leases was $~~253~~99,~~454~~276 and $~~213~~138,~~024~~749 for the ~~six~~three months ended ~~December~~September 3130, ~~2013~~2014 and ~~2012~~2013, respectively .

Litigations

Litigation payable ~~consisted~~as of ~~the~~September ~~following~~30 ~~at December 31, 2013~~ and June 30, ~~2013~~2014 consist of the following:

	December 31, 2013		June 30, 2013
	September 30, 2014		June 30, 2014
An unsecured note payable to a corporation in settlement of a lawsuit payable in 12 monthly payments of $5,000.	$	60210,000		60210,000
Unsecured notes payable to various parties in settlement of lawsuits payable in full.		77,500		77,500
	$	137,500		137,500
TOTAL	$	287,500		287,500

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

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, 2013 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 remote.-10-

~~Table~~Management denies the allegations of ~~Contents~~the 12Statement 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.

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

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

AThe ~~provision~~Company ~~has~~entered ~~been~~into ~~made~~a insettlement ~~the~~agreement ~~December 31, 2013 financial~~for ~~statements~~a settlement in ~~litigation~~the ~~payable~~total ~~with~~amount ~~respect~~of to$37,500. ~~this~~However, ~~matter~~no inpayments ~~the~~have ~~sum~~been ofmade ~~$37,500~~to date.

3.A ~~Fadal~~provision ~~Machining~~has v.been ~~All~~made ~~American~~in ~~CNC~~the ~~Sales,~~September et30 ~~al.~~and June 30, ~~Los~~2014 ~~Angeles~~financial ~~Superior~~statements ~~Court,~~with ~~Los~~respect ~~Angeles,~~to ~~California,~~this ~~Case~~matter ~~No.~~in ~~BC415693~~the sum of $37,500.

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.

-11-

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.

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, a payment of $1,500 has been made. The balance as of August 17, 2015 is $24,000.

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,~~578.88~~579, and arises from a claim by Fadal that All American failed to pay amounts due. On June 26, 2009, Fadal amended the ~~Complaint~~complaint to include M Line Holdings, Inc. as a ~~Defendant~~defendant.

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

The Company ~~has~~had made a provision in the sum of $60210,000 in the financial statements inas ~~accounts~~of ~~payable~~September as30 ofand June 30, ~~2013~~2014 ~~but~~as no payments that ~~are~~were due under the settlement agreement ~~have~~ have been made. Judgment was entered on June 16, 2011, and a Writ was issued on February 24, 2012.

47. ~~Fox~~C. ~~Hills~~William ~~Machining~~Kircher Jr. v. ~~CNC~~M ~~Repos~~Line Holdings, Inc. Orange County Superior Court, ~~Orange County, California,~~ Case No. ~~30-2009-00121514.~~00397576

~~The~~A ~~Complaint~~former ~~was~~attorney ~~filed~~for onM ~~April~~Line 14Holdings, ~~2009~~Inc. has sued seeking damages for failure to pay legal fees in the amount of $120,166.

The ~~Complaint~~parties ~~alleges~~reached ~~causes~~a settlement. The terms of ~~action~~the settlement call for ~~Declaratory Relief,~~12 ~~Breach~~payments of ~~Contract~~$5,000 ~~Fraud,~~per ~~Common~~month ~~Counts~~commencing August 25, 2011 and ~~Negligent~~the ~~Misrepresentation,~~issuance ~~claiming~~of ~~the~~150,000 ~~Defendant~~shares ~~failed~~of tocommon ~~pay~~stock. ~~Fox~~The ~~Hills~~Company ~~Machining~~has ~~for~~issued the ~~sale~~150,000 shares of ~~two~~common ~~machines~~stock ~~from~~and ~~Fox~~made ~~Hills~~two payments to ~~CNC Repos~~date. The ~~damages~~Company ~~sought~~has a provision in the ~~Complaint~~sum ~~are~~of ~~estimated to be approximately~~ $4050,000. in ~~Court~~the ~~records~~financial ~~show~~statements ~~that~~as aof ~~stipulated~~September ~~judgment~~30 ~~was~~and ~~entered~~June ~~on August 27~~30, ~~2012; a writ was issued on September 9, 2012~~2014.

However, an agreement has been entered into with Fox Hills Machinery to pay off the judgment in the sum of $48,673. A sum of $40,000 has been paid in installments of $10,000 each effective November 8, 2013 and the final payment was made on December 9, 2013.-12-

5. 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 $120,166.30.

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 in accounts payable as of December 31, 2013.

Table of Contents 13

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.

68. 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 inas ~~litigation~~of ~~payable~~September as30 ofand ~~December~~June 3130, ~~2013~~2014.

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

79. 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.

8.To ~~Douglas~~date ~~Technologies~~there ~~Group,~~has ~~Inc.~~been vno ~~Elite~~further ~~Machine~~action ~~Tool~~on ~~Company~~this case, and ~~Lawrence~~the ~~Consalvi,~~Company etplans ~~al.,~~to ~~case~~resolve ~~number~~this ~~30-2013-00657906-CU-FR-CJC~~matter as soon as possible.

~~This~~10. ~~suit~~TCA ~~was~~Global ~~filed~~Credit onMaster ~~June 20~~Fund, ~~2013~~ inL.P. ~~respect~~vs ofM anLI ~~alleged~~ne ~~deficiency~~Holdings, inInc. ~~the~~EM ~~machine~~Tool ~~supplied~~Company, ~~to Douglas Technologies~~Inc. ~~The~~dba ~~Company~~Elite ~~decided~~Machine toTool, ~~settle~~Precision ~~the~~Aerospace ~~lawsuit~~ and ~~thereby~~Technologies, ~~entered~~Inc., ~~into~~Anthony aAnish ~~settlement~~and ~~agreement~~Jitendra ~~with~~Banker ~~the~~case ~~customer.~~# CACE-14-012871

~~This~~Plaintiff ~~case~~filed ~~was~~this ~~settled~~case on ~~November 5,~~July ~~2013 for $50~~1,~~000~~ ~~requiring~~2014 ~~a commencing payment of $10,000 on November 15, 2013 with the balance being paid~~ in ~~8 monthly installments~~Broward ~~of $5~~County,~~000~~ ~~each~~Florida.

AThe ~~payment~~complaint inalleges that the ~~sum~~Company owes the Plaintiff the amount due under the revolving note, and is claiming foreclosure of $5the collateral,~~000~~ ~~was~~breach of the credit ~~made~~agreement inand a claim against the ~~month~~individuals ofunder ~~December~~the ~~2013~~validity agreement due to the non-payment.

The ~~balance~~Plaintiff ofobtained ~~the~~a ~~provision~~default injudgment however due ~~accounts~~to ~~payable~~a issettlement ~~$45,000~~agreement atreached ~~December~~on 31September 5, ~~2013~~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.

9.On ~~Donald~~February ~~Yu.~~23, v2015 Ma ~~Line~~new ~~Holdings~~settlement agreement was signed between the parties under which plaintiff agreed to accept two methods of repayment, ~~Inc.~~the first being $1,200,000 ~~Anthony~~paid Lover a ~~Anish~~fifteen month period commencing as soon as the Company was up to date with its filings and ~~Jitu~~the ~~Banker,~~balance etof ~~al.,~~funding ~~case~~would ~~number~~come from ~~30-2012-005-740-19-CU-BC-CJC~~a new asset based lending program that Defendants were in the process of arranging.

~~This suit was filed in respect of consulting services rendered to the Company. The Company decided to settle the lawsuit and thereby entered into a settlement agreement with Donald Yu.~~-13-

~~Table~~The ofCompany ~~Contents~~has 14accrued $2,330,453 in the financial statements that includes all interest and fees due to Plaintiff through September 30, and June 30, 2014.

~~The~~11. ~~case~~Global ~~was~~Vantage ~~settled~~Ltd., ona ~~September~~California ~~25,~~Corporation ~~2013~~vs ~~for~~Eran ~~$24~~Engineering,~~000 requiring~~ ~~two~~Inc. ~~payments~~Precision ofAerospace ~~$12~~and Technologies,~~000~~ ~~each~~Inc., ~~payable~~M onLine ~~September~~Holdings, 30Inc., ~~2013~~Anthony ~~and~~Anish, ~~October~~Lawrence ~~30,~~Consalvi ~~2013.~~and Kenneth Collini

~~The~~Plaintiff ~~Company~~filed ~~made~~this ~~the~~complaint ~~first~~on ~~payment~~August ~~of $12~~7,~~000~~ on2014 ~~September~~in ~~30,~~Orange ~~2013 but has not made the second payment due on October 30~~County, ~~2013~~California.

AThe ~~provision~~complaint inalleges that the ~~sum~~Company ofowes ~~$12,000~~funds that ~~has~~are ~~been~~due ~~made~~for in the ~~financial~~ ~~statements~~lease inof ~~accrued~~certain ~~expenses~~equipment asor ofplaintiffs ~~December~~want ~~31,~~repossession ~~2013~~of the equipment.

~~10.~~The ~~Alu~~plaintiffs ~~Forge,~~obtained ~~Inc.,~~judgment ~~dba~~in ~~American~~February ~~Handforge~~2015 .and the vequipment ~~Jitu~~has ~~Banker,~~been ~~Precision~~returned ~~Aerospace~~to &plaintiff. ~~Technologies~~However, ~~Inc.,~~defendants ~~and~~are Mfiling ~~Line~~an ~~Holdings,~~appeal ~~Inc.,~~against etthis aljudgment.~~, case number 30-2013-00670772-CL-BC-CJC.~~

This suit was filed in respect of materials supplied to the Company. The Company decided to settle the lawsuit and thereby entered into a settlement agreement with the plaintiff.

The case was settled on October 31, 2013 for $19,500 with payments of $5,250 on October 31, 2013, $5,250 on November 30, 2013 and the balance of $9,000 on December 31, 2013.

The Company made the first and second payments of $5,250 on October 31, 2013 and December 24, 2013, and the final payment of $9,000 was made on December 31, 2013.

No provision is necessary as the liability has been settled in full.

11. Yates, Fontenot, Smith & Brum, LLC v. M Line Holdings, Inc. (formerly Gateway International Holdings, Inc.), et al.; Case No. 30-2013-00630586

The above-referenced matter is an unlawful detainer action concerning certain real property located at 2672 Dow Avenue, Tustin, California. The unlawful detainer action was filed against the Company by its landlord Yates, Fontenot, et al. on February 15, 2013. The action is pending in Orange County Superior Court.

On or about September 2013, the parties settled the action for an agreed upon sum payable in installments through January 5, 2014. Assuming all payment obligations are made, plaintiff shall file a request for dismissal with prejudice of the entire action by or before March 14, 2014.

A provision in the amount of $76,487 has been made in the financial statements, $25,000 in accrued expenses and $51,487 in accounts payable as of December 31, 2013.

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.

10.

Shareholders’ Equity

During the ~~six~~three months ended ~~December~~September 3130, ~~2013~~2014, the Company ~~issued~~ issued the following shares of common stock:

· 5699,~~805~~259,~~130~~119 common shares were issued to financial ~~advisors,~~institutions ~~consultants~~in ~~and~~connection ~~other~~with ~~parties~~the inconversion ~~payment~~ of ~~fees~~debt and ~~services~~accrued tointerest ~~the~~totaling ~~Company. The Company determined the fair value of these shares~~ to be $57347,~~916~~773.

· 16,000,000 common shares were issued to officers in lieu of salaries. The Company determined the fair value of these shares to be $160,000.

Table of Contents 15

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 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, 2013:-14-

	Amount		Level 1		Level 2		Level 3
Embedded conversion derivative liability	$	111,130	$	—	$	—	$	111,130
Total	$	111,130	$	—	$	—	$	111,130

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 September 30, 2014:

	Amount		Level 1		Level 2		Level 3
Embedded conversion derivative liability	$	549,003	$	-	$	-	$	549,003
Total	$	549,003	$	-	$	-	$	549,003

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, 2013	$	—
Balance at June 30, 2014	$	634,769
Fair value of warrant derivative liabilities at issuance, recorded as debt discount		63352,~~000~~013
Unrealized derivative loss included in other expense		48,130
Settlement of derivative liabilities to gain on debt extinguishment		(923,514	)
Balance at December 31, 2013	$	111,130
Unrealized derivative loss resulting from marked to market fair values included in other expense		485,735
Balance at September 30, 2014	$	549,003

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~~September 3130, ~~2013~~2014
Market value of stock on measurement date	$	0.~~030~~0012 - 0.0018		$	0.~~025~~001
Risk-free interest rate		0.0705 - 1.58	%		0.0702 - 1.78	%
Dividend yield		0	%		0	%
Volatility factor		~~256~~241 - 417	%		~~255~~229 -414	%
Term		0.2651 ~~year~~- 5 years			0.2535 ~~year~~– 4.88 years

12.

Related Party Transactions

As of ~~December~~September 3130, ~~2013~~2014, the amount due from related party was $0. As of September 30, 2014, the related party payable was $~~128~~35,~~000~~954, which represents an the amount due ~~from~~to an officer of ~~Elite~~the Company for ~~funds~~amounts ~~advanced~~charged byto ~~the~~his ~~Company~~personal credit card.

Table of Contents 16

13.

Segments and Geographic Information

The Company’s segments consist of individual companies ~~managed~~ managed separately with each manager reporting to the Board. “Other” represents corporate functions. Sales, and operating or or segment profit, are reflected net of inter-segment sales and profits. Segment profit is comprised of net sales less operating ~~expenses~~ expenses and interest. Income taxes are not allocated and reported by segment since they are excluded from the measure of segment ~~performance~~ 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 and six months ended December 31, 2013 and 2012:~~-15-

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 is as follows for the three months ended September 30, 2014 and 2013:

Segment Information for the three months ended December 31, 2012	Machine Sales			Precision Manufacturing			Corporate			Total
Segment Information for the three months ended September 30, 2014	Machine Sales			Precision Manufacturing			Corporate			Total
Revenue	$	1730,~~557,598~~227		$	~~883~~227,~~285~~253		$	—-		$	2957,~~440,883~~480
Interest Expense		—31,500			6045,~~789~~000			31(11,~~586~~719	)		9264,~~375~~781
Depreciation and Amortization		~~750~~-			4229,~~172~~199			~~545~~-			4329,~~467~~199
Income (loss) before taxes		51,706			(387,777	)		(63,993	)		(400,064	)
Loss before taxes		(317,703	)		(309,850	)		(909,981	)		(1,537,534	)
Total Assets		~~409~~274,~~214~~809			21,~~543~~535,~~267~~701			1246,~~247,439~~059			42,~~199~~056,~~920~~569
Capital Expenditure	$	—-		$	—-		$	—-		$	—-

Segment Information for the six months ended December 31, 2013	Machine Sales		Precision Manufacturing		Corporate			Total
Segment Information for the three months ended September 30, 2013	Machine Sales		Precision Manufacturing		Corporate			Total
Revenue	$	41,~~206,~~759,558	$	1967,~~826,815~~636	$	—-		$	62,~~033~~727,~~574~~194
Interest Income		—		—		—			—
Interest Expense		58,204		54,288		-			112,492
Interest Expense		98,511		114,815		132,016			345,342
Depreciation and Amortization		750		43,636		12,500			56,886
Depreciation and Amortization		1,500		83,753		—			85,253
Income (loss) before taxes		174,317		83,930		(152,486	)		105,761
Income (loss) before taxes		208,649		557,894		(389,917	)		376,626
Total Assets		1,079,295		2,476,208		251,486			3,806,989
Total Assets		1,076,182		2,746,680		19,176			3,842,038
Capital Expenditure	$	-	$	-	$	-		$	-
Capital Expenditure	$	—	$	—	$	—		$	—

Table of Contents 17

Segment Information for the six months ended December 31, 2012	Machine Sales			Precision Manufacturing			Corporate			Total
Revenue	$	2,459,665		$	1,961,808		$	—		$	4,421,473
Interest Income		—			—			—			—
Interest Expense		17,151			132,603			41,711			191,465
Depreciation and Amortization		1,500			91,699			988			94,187
Income (loss) before taxes		(62,128	)		(388,288	)		(289,586	)		(740,002	)
Total Assets		409,214			2,543,267			1,247,439			4,199,920
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. (ML Machinery Funding, Inc.) as the company was incorporated subsequent to September 30, 2014.

14.

Subsequent Events

In· On January ~~2014~~15, ~~Asher~~2015, ~~Enterprises~~the effective date, ~~Inc~~the Company entered into a settlement agreement with TCA. ~~converted~~Under the terms of the agreement, TCA will receive $32100,000 as soon as all of the ~~debt~~ ~~due~~Company’s ~~into~~filings 3are current and will then receive $80,~~250~~000 per month for 13 months and $60,000 ~~shares~~in the 15th month. These payments will be accelerated at any time. In addition the balance of ~~our~~the ~~common~~note ~~stock~~TCA will be paid through financing being obtained from an asset based lender. TCA will release their liens on the Company at that time.

~~Table~~· Since October 1, 2014, the Company has raised funds through a 10% convertible note for $330,000 of ~~Contents~~which 18$257,000 has been funded. The note is convertible at the lower of $0.001 or 50% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date of conversion.

In October 2014, M Line Holdings, Inc. formed a wholly owned subsidiary, M Line Machinery Funding, Inc. This Company which has not traded to date, will be used for machinery finance and also for any other financial services provided by the Company to prospective customers. The name has been changed to M Line Business Services, Inc.

-16-

On October 14, 2014, the Company issued to one of its officers 10 million shares of blank check preferred stock (designated as Series B Preferred Stock) which are non-convertible, zero divided and zero interest and carry a voting power equivalent to 50% of the Company’s outstanding common and preferred stock.

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 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~~three month period ended ~~December~~September 3130, 2014 ~~2013~~ 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 two of our two wholly-owned subsidiaries: E..M. Tool Company, Inc. dba Elite Machine Tool Company (“Elite”) and Precision Aerospace & Technologies, Inc. (“Precision”), (formerly Eran Engineering, 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.

In October 2014, we formed our new subsidiary M Line Business Services, Inc. that is providing corporate services and advice to various corporate clients. The revenue for this first client was included in the June 2014 10-K however the true value of the income derived was not included as the payment received in public stock could not be valued as the Company was not listed at that time. We expect the true value to be included in the June 2015 10-K as the Company is expected to be listed during August, 2015

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.

~~Table~~In April 2015 we temporarily shut down operations of ~~Contents~~Elite. 19All 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~~its 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”), Rockwell Collins, UTC Aerospace, (formerly Goodrich Aerostructures), a division of the United Technologies Group and our largest medical customer, Beckman Coulter (part of the Danaher group).

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~~three month period ended ~~December~~September 3130, ~~2013~~2014 and ~~2012~~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.

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.

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 under19-~~absorption of fixed overhead to operations.~~

~~Table~~Abnormal amounts of ~~Contents~~idle 20facility 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 normal expected productions levels, we charge such under-absorption of fixed overhead to operations.

Results of Operations for the Three Months Ended ~~December~~September 3130, ~~2013~~ 2014 compared to the Three Months Ended ~~December~~September 3130, ~~2012~~2013.

	For the three months ended December 31,			For the three months ended December 31,
	For the three months ended September 30,			For the three months ended September 30,
	2013			2012		Change
	2014			2013		Change
Sales by segment:
Machine Sales	$	2730,~~447,201~~227		$	1,~~557~~759,~~598~~558	$	~~889~~(1,~~603~~029,331	)
Precision Engineering		~~859~~227,~~179~~253			~~883~~967,~~285~~636		(24740,~~106~~383	)
		3,306,380			2,440,883		865,497
		957,480			2,727,194		(1,769,714	)
Gross Profit by segment:
Machine Sales		~~399~~(1,~~314~~828	)		~~348~~527,~~335~~269		50(529,~~979~~097	)
Precision Engineering		~~512~~(59,~~721~~584	)		~~239~~481,~~473~~845		~~273~~(541,~~248~~429	)
	$	912,035		$	587,808	$	324,227
		(61,412	)		1,009,114		(1,070,526	)
Gross Profit by segment: %
Machine Sales		43(2.7898	)		5952.2625
Precision Engineering		56(97.2202	)		4047.7475

Sales

Sales in the three month period ended ~~December~~September 3130, ~~2013~~2014 ~~increased~~decreased 3564.4689% compared to the three month period ended ~~December~~September 3130, ~~2012~~2013.

The change is attributable to anthe ~~increase~~ decrease in sales in both the Machine Sales Group and Precision Manufacturing Group. Sales ~~increased~~decreased by 5758.1150% in the Machine Sales Group and decreased by 276.7351% 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 4715 pieces of equipment sold in the three months ended ~~December~~September 3130, ~~2013~~2014 was $4647,~~383~~033 compared to the comparable period in fiscal ~~2012~~2013 of 2229 pieces of equipment sold at an average sale price of $6556,~~045~~738. In addition, service work for the three months ended ~~December~~September 3130, ~~2013~~2014 was $~~144~~23,~~765~~658 compared to the comparable period in fiscal ~~2012~~2013 of $379,~~676~~308.

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 the result of a net decrease of $24,106 in sales of precision metal component parts from Rockwell Collins in the three months ended December 31, 2013.-20-

The decrease in sales in the Precision Manufacturing Group is primarily the result of a net decrease of $564,558 in sales of precision metal component parts from Panasonic Avionics Corporation in the three months ended September 30, 2014.

Gross Margin

Gross profit ~~increased~~decreased by 55106.1603% in fiscal period ended ~~December~~ 31September 30, ~~2013~~2014 compared to the comparable period in fiscal ~~2012~~2013. The gross profit for the Machine Sales Group ~~increased~~ decreased by 14100.6435% due to ana ~~increase~~decrease in the volume of machines sold during this three month period. The decrease within the Precision Manufacturing Group of 112.37% resulted from higher costs of goods in relation to lower sales due primarily to the move of our business from the Tustin location to our new location in Anaheim. .

Table of Contents 21

The increase within the Precision Manufacturing Group of 114.10% resulted from lower costs of goods sold as a result of an improvement in work flow in the scheduling of work in the factory. Management had recognized this weakness previously and has corrected it, thereby achieving greater productivity in the production area.

Selling, General & Administrative

Selling, general and administrative costs ~~decreased~~increased by $~~522~~18,~~807~~280 to $~~372~~760,~~690~~081 for the three month period ended ~~December~~September 3130, ~~2013~~2014 compared to $~~895~~778,~~497~~361 for the three months ended ~~December~~September 3130, ~~2012~~2013. The change is ~~primarily~~ due toprimarily ~~the write back of rent expense and a reduction of legal and professional expenses due~~ to ~~lower~~moving costs ~~for~~ ~~investor~~in ~~relations~~the ~~and~~Precision engineering ~~financing costs~~division.

Interest Expense

~~Interest~~Interst expense ~~increased~~has decreased by $~~127~~47,~~975~~711 for the three months ended ~~December~~ 31September 30, ~~2013~~2014 compared to the three months ended ~~December~~September 3130, ~~2012~~2013. The change is attributable to ~~carrying~~a ~~higher~~reduction ~~average~~of ~~debt balances and~~ the ~~increase in the average~~ interest ~~rate~~portion ~~paid~~that onrelates ~~our debt obligations as well as the recognition of amortization of deferred financing fees amounting~~ to ~~$119,516~~derivative liabilities.

Derivative ~~loss~~Gain (Loss).

The derivative gain (loss) for the three month period ended September ~~December 31~~30, ~~2013~~ 2014 was $48(485,~~130~~735) compared to that of the comparable period in ~~2012~~2013 amounting to $0.

~~The $48,130 cost in derivative liability arises as a result of a~~Loss convertible loan from Asher Enterprises, Inc. in fiscal 2013. The loan was a convertible promissory note with the ability to convert to shares at a discount from the market price Until the loan is repaid a charge was included on ~~our financial~~Debt 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 Scholes method. Extinguishment

~~Results~~The loss ofon ~~Operations~~debt extinguishment for the ~~Six~~three ~~Months~~month ~~Ended~~period ~~December~~ended 31September 30, ~~2013~~ 2014 was $(165,526) compared to $0 for the comparable ~~Six~~period ~~Months~~three ~~Ended~~months ~~December~~ended 31September 30, ~~2012~~2013. This expense is related to the conversion of the convertible notes and settlement of the corresponding derivative liabilities.

	For the six months ended December 31,		For the six months ended December 31,
	2013		2012		Change
Sales by segment:
Machine Sales	$	4,206,759	$	2,459,665		1,747,094
Precision Engineering		1,826,815		1,961,808		(134,993	)
		6,033,574		4,421,473		1,612,101
Gross Profit by segment:
Machine Sales		926,583		514,225		412,358
Precision Engineering		994,566		785,502		209,064
		1,921,149		1,299,727		621,422
Gross Profit by segment: %
Machine Sales		48.23		39.56
Precision Engineering		51.77		60.44

Liquidity and Capital Resources.

~~Table~~Our principal sources of ~~Contents~~liquidity 22consist 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 September 30, 2014, our working capital (current assets less current liabilities) totaled ($7,002,166) compared to $(6,755,853) as of June 30, 2014, a decrease of $246,313.

~~Sales~~The Company has an accumulated deficit of $21,010,797 as of September 30, 2014 and negative working capital. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

~~Sales~~As inof ~~the~~September ~~six~~30, ~~month~~2014 ~~period~~we ~~ended~~had ~~December 31~~$2,330,453 ~~2013~~in ~~increased~~debt outstanding ~~36.46%~~under ~~compared~~our toAccounts ~~the~~Receivable ~~six~~and ~~month~~Inventory ~~period~~line ~~ended~~of ~~December~~Credit with 31TCA Global Credit Master Fund, ~~2012~~LP.

The change is attributable to an increase in sales in the Machine Sales Group. Sales increased by 71.03% in the Machine Sales Group and decreased by 6.88% 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 75 pieces of equipment sold in the six months ended December 31, 2013 was $50,885 compared to the comparable period in fiscal 2012 of 38 pieces of equipment sold at an average sale price of $58,728. In addition, service work for the six months ended December 31, 2013 was $224,074 compared to the comparable period in fiscal 2012 of $14,766.

The decrease in sales in the Precision Manufacturing Group is the result of a net decrease of $134,993 in sales of precision metal component parts from Rockwell Collins in the six months ended December 31, 2013.

Gross Margin

Gross profit increased by 47.81% in fiscal period ended December 31, 2013 compared to the comparable period in fiscal 2012. The gross profit for the Machine Sales Group increased by 80.19% due to an increase in the volume of machines sold during this six month period. The increase within the Precision Manufacturing Group of 26.62% resulted from lower costs of goods sold as a result of an improvement in work flow in the scheduling of work in the factory. Management had recognized this weakness previously and has corrected it, thereby achieving greater productivity in the production area.

Selling, General & Administrative

Selling, general and administrative costs decreased by $697,213 to $1,151,051 for the six month period ended December 31, 2013 compared to $1,848,264 for the six months ended December 31, 2012. The change is primarily due to the write back of rent expense and a reduction of legal and professional expenses due to lower costs for investor relations and financing costs.

Interest Expense

Interest expense increased by $153,877 for the six months ended December 31, 2013 compared to the six months ended December 31, 2012. The change is attributable to carrying higher average debt balances and the increase in the average interest rate paid on our debt obligations as well as the recognition of amortization of deferred financing fees amounting to $119,516.

Derivative loss

The derivative loss for the six month period ended December 31, 2013 was $48,130 compared to that of the comparable period in 2012 amounting to $0.

The $48,130 cost in derivative liability arises as a result of a convertible loan from Asher Enterprises, Inc. in fiscal 2013. The loan was a convertible promissory note with the ability to convert to shares at a discount from the market price Until the loan is repaid a charge was 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 Scholes method.

Table of Contents 23

Liquidity and Capital Resources

Our principal sources of liquidity consist of cash and cash equivalents, cash generated from operations and borrowing from various sources. As of December 31, 2013, our working capital (current assets less current liabilities) totaled ($3,310,028) compared to $(3,892,918) as of June 30, 2013, a decrease of $582,890.

As of December 31, 2013 we had $1,649,233 in debt outstanding under our Accounts Receivable and Inventory line of Credit with TCA Global Credit Master Fund, LP.

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

The following table sets forth our cash flows for the ~~six month~~three ~~periods~~month period ended ~~December~~September 3130, ~~2013~~2014 and ~~2012~~2013.

Provided by (used in)	~~2013~~2014			~~2012~~2013			Change
Operating activities	$	42(341,~~113~~488	)	$	~~322~~(61,~~984~~793	)	$	~~280~~279,~~871~~695
Investing activities		—35,000			(5312,~~651~~500	)		(5347,~~651~~500	)
Financing activities		~~(137~~271,~~702~~971	)		(~~113~~91,~~940~~328	)		23(363,~~762~~299	)
	$	(95,589	)	$	155,393		$	250,982
		(34,517	)		(165,621	)		(131,104	)

-21-

Operating Activities

Operating cash flows during the ~~six~~three month ~~periods~~period ended ~~December~~September 3130, ~~2013~~2014 and ~~2012~~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~~three month period ended ~~December~~September 3130, ~~2013,~~ 2014, non-cash expenses included in our net income and in operating activities totaled $~~506~~831,~~326~~888 compared to $~~266~~131,~~187~~505 in ~~six~~ three month period ended ~~December~~September 3130, ~~2012~~2013.

The increase (decrease) in operating assets and liabilities ~~for~~ for the ~~six~~three month period ended ~~December~~September 3130, ~~2013~~2014 and ~~2012~~2013 were $~~(839~~364,~~145)~~158 and $~~798~~(299,~~886~~059), respectively. During the ~~six~~three month period ended ~~December~~ 31September 30, ~~2013~~2014, the ~~decrease~~increase was primarily attributable to aan ~~decrease~~increase in accounts receivable, and accounts payable and accrued expenses..

Investing Activities

We made disposals and (capital expenditures) of $035,000 and $(1812,~~388~~500) during the ~~six~~ three month period of the fiscal ~~2013~~2014 and ~~2012~~2013 period, respectively.

Financing Activities

Net cash provided by (used in) financing activities was $~~(137~~271,~~702)~~191 for the ~~six months~~three month ended ~~December~~September 3130, ~~2013~~2014, compared to $(~~113~~91,~~940~~328) for the ~~six~~three months ended ~~December~~September 3130, ~~2012~~2013.

Table of Contents 24

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~~September 3130, ~~2012~~2014, 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 September 30, ~~2013~~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 4. 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 the material weaknesses in these business areas.

-22-

Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting during our ~~six~~nine month period ended ~~December~~March 31, ~~2013~~2014.

~~Table of Contents 25~~Litigation

~~PART~~The ~~II—OTHER~~Company’s ~~INFORMATION~~existing litigation proceedings are set forth below:

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

1.The ~~James~~Company M.was ~~Cassidy~~served v.with ~~Gateway~~a ~~International~~Demand ~~Holdings,~~for ~~Inc.,~~Arbitration and ~~American~~Statement ~~Arbitration~~of ~~Association~~Claim, ~~Case~~which ~~No.~~was ~~73-194-32755-08~~filed on September 16, 2008.

The ~~Company~~Statement ~~was~~of ~~served~~Claim ~~with~~alleges athat ~~Demand~~claimant is an attorney who performed services for ~~Arbitration~~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, ~~which~~and ~~was~~will ~~filed~~vigorously ondefend ~~September~~against these 16allegations. An arbitrator has not yet been selected, ~~2008~~and a trial date has not yet been scheduled.

~~The~~No ~~Statement~~provision ofhas ~~Claim~~been ~~alleges~~made ~~that~~in ~~claimant is an attorney who performed services for~~ the ~~Company~~September ~~pursuant~~30 toand ~~an agreement dated April 2~~June 30, ~~2007~~2014 ~~between~~financial ~~the~~statements ~~Company~~with ~~and~~respect ~~the~~to ~~claimant.~~this ~~The~~matter ~~Statement of~~because ~~Claim alleges that~~ the Company ~~breached~~has ~~the~~assessed ~~agreement and seeks compensatory damages in~~ the ~~amount~~litigation ofas ~~$195,000~~having ~~plus~~no ~~interest, attorneys’~~merit ~~fees~~ and ~~costs. Management denies~~ the ~~allegations~~likelihood of ~~the~~any ~~Statement~~liability ofpursuant ~~Claim~~to ~~and~~this ~~will~~litigation ~~vigorously~~to ~~defend~~be ~~against these~~extremely ~~allegations~~low. ~~An arbitrator has not yet been selected, and a trial date has not yet been scheduled.~~

No2. ~~provision~~CNC ~~has~~Manufacturing ~~been~~v. ~~made~~All inAmerican ~~the~~CNC ~~December~~Sales, 31Inc., ~~2013~~Elite ~~financial statements~~Machine ~~with~~Tool ~~respect~~Company/Sales to& ~~this matter~~Services, ~~because~~CNC ~~the~~Repos, ~~Company~~Superior ~~has~~Court ~~assessed~~for the ~~litigation~~State asof ~~having~~California, noCounty ~~merit and the likelihood~~ of ~~any~~ ~~liability~~Riverside, ~~pursuant~~Case toNo. ~~this~~RIC ~~litigation to be remote~~509650.

2.Plaintiff ~~CNC~~filed ~~Manufacturing~~this v.Complaint ~~All~~on ~~American~~October ~~CNC Sales~~2, ~~Inc~~2008.~~, Elite Machine Tool Company/Sales & Services, CNC Repos, Superior Court for the State of California, County of Riverside, Case No. RIC 509650.~~

~~Plaintiff~~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 ~~this~~Answer ~~Complaint~~timely, on ~~October~~January 215, ~~2008~~2009.

~~The~~Abstract ~~Complaint alleges causes~~ of ~~action~~Judgment ~~for breach of contract~~ and ~~rescission~~Writ ~~and~~were ~~claims~~issued ~~that~~August ~~All American breached the agreement with CNC Manufacturing by failing to deliver a machine that conforms to the specifications requested by CNC Manufacturing~~17, ~~and requests damages totaling $138,750. Elite Machine filed~~ ~~an answer timely, on January 15, 2009~~2012.

~~Abstract~~The ofCompany ~~Judgment~~entered ~~and~~into ~~Writ~~a ~~were~~settlement ~~issued~~agreement ~~August~~for a 17settlement in the total amount of $37, ~~2012~~500. However, no payments have been made to date.

A provision has been made in the ~~December~~September ~~31,~~30 ~~2013~~and ~~financial statements~~June in30, ~~litigation~~2014 ~~payable~~financial statements with respect to this matter in the sum of $37,500.

~~3. Fadal Machining v. All American CNC Sales, et al., Los Angeles Superior Court, Los Angeles, California, Case No. BC415693.~~-23-

~~The~~3. Donald ~~Complaint~~Yu ~~was~~v. ~~filed~~M Line onHoldings, ~~June 12~~Inc., ~~2009~~et al.; Case No. 30-2012-00574019-CU-BC-CJC

~~The~~This ~~Complaint~~is ~~alleges~~an ~~causes~~employment dispute ofasserted by a former employee against M Line Holdings and two corporate insiders, Jitu Banker and Anthony Anish, in their respective individual capacities. The action ~~for~~was ~~breach~~filed ofin Orange County Superior Court on June 4, 2012. The parties ~~contract~~entered into a settlement agreement and ~~common~~stipulation ~~counts~~for judgment against ~~All~~M Line ~~American~~Holdings, ~~CNC~~only, ~~seeking~~on ~~damages~~about inMay 12, 2013. Pursuant to the ~~amount~~terms and conditions of atthe ~~least~~settlement ~~$163~~agreement,~~578~~ ~~and~~M Line ~~arises~~agreed ~~from~~to apay ~~claim by~~$21,450.00 ~~Fadal~~in ~~that~~three ~~All~~(3) ~~American~~equal installments. M Line Holdings failed to ~~pay~~make ~~amounts~~payment ~~due.~~on Ona ~~June~~timely 26basis, ~~2009,~~and ~~Fadal~~plaintiff ~~amended~~filed ~~the~~a ~~Complaint~~stipulated tojudgment ~~include~~against M Line Holdings, ~~Inc~~on June 12, 2013. asPlaintiff aalso ~~Defendant~~filed default judgments against Messrs. Banker and Anish.

AIn 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 inand mutual release wherein the ~~amount~~Company agreed to pay plaintiff the sum of $6024,000 ~~was~~in ~~signed~~two (2) equal installments. onThe ~~May~~first 31installment of $12,000 ~~2011~~has already been paid.

The ~~Company~~final ~~has made a provision in the sum~~ installment of $6012,000 in ~~the~~was ~~financial~~due ~~statements~~on inor ~~accounts~~before ~~payable as of June~~ October 30, 2013, ~~but~~and nohas ~~payments~~not ~~that~~been ~~are~~paid ~~due~~at ~~under~~this ~~the settlement agreement have been made~~time. ~~Judgment~~A ~~was~~judgment ~~entered~~remains onoutstanding ~~June~~against the ~~16,~~Company ~~2011,~~in ~~and~~the asum ~~Writ~~of ~~was issued on February 24~~$12, ~~2012~~000.

4. Subramani ~~Fox~~Srinivasan, ~~Hills~~et ~~Machining~~al. v. ~~CNC~~M Line ~~Repos~~Holdings, ~~Orange County Superior Court~~Inc., ~~Orange~~et ~~County,~~al.; ~~California,~~ Case No. 30-~~2009~~2014-~~00121514.~~00724484-CU-CO-CJC

~~Table~~This is a breach of ~~Contents~~contract, 26fraud, 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 ~~Complaint~~parties ~~was~~entered ~~filed~~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 1430, ~~2009~~2015.

~~The~~As ~~Complaint alleges causes~~ of ~~action~~June ~~for Declaratory Relief~~2, ~~Breach of Contract~~2015, ~~Fraud, Common Counts, and Negligent Misrepresentation, claiming the Defendant failed to pay Fox Hills~~ ~~Machining for~~ the ~~sale~~corporate ofdefendants ~~two~~have ~~machines~~paid ~~from Fox Hills to CNC Repos. The damages sought in the Complaint are estimated to be approximately~~ $4020,000. ~~Court~~and ~~records~~this ~~show~~case ~~that~~has abeen ~~stipulated judgment was entered on August 27~~dismissed, ~~2012;~~which aeffectively ~~writ~~terminates ~~was~~all ~~issued~~litigation onin ~~September 9, 2012~~its entirety.

~~However, an agreement has been entered into with Fox~~5. ~~Hills~~Can ~~Machinery~~Capital toAsset ~~pay~~Servicing, ~~off~~Inc. ~~the~~v. ~~judgment in the sum of $48,673~~E.M. ATool ~~sum of $40~~Company,~~000~~ ~~has been paid in installments of $10~~Inc.,~~000~~ ~~each~~et ~~effective November~~al.; 8,Case ~~2013 and the final payment was made on December 9, 2013~~No. 30-2014-00727606- CU-CL-CJC

5.This C.is ~~William~~a ~~Kircher~~breach ~~Jr.~~of v.contract Mand ~~Line~~related claims ~~Holdings~~arising out of a business loan, ~~Inc~~and alleges that E.M. ~~Orange~~Tool ~~County~~failed ~~Superior~~to ~~Court~~pay ~~Case~~Can ~~No.~~Capital ~~00397576~~all amounts due under the loan agreement in the principal sum of $58,313, plus interest, costs and attorneys’ fees.

AOn ~~former~~or ~~attorney~~about ~~for~~November M2014, ~~Line~~the ~~Holdings,~~parties entered ~~Inc.~~into ~~has~~a ~~sued seeking~~settlement ~~damages~~agreement ~~for~~and ~~failure~~stipulated judgment. Pursuant to ~~pay~~the ~~legal~~terms ~~fees~~and inconditions of the ~~amount~~settlement agreement, the Company agreed to pay plaintiff the sum of $~~120~~50,~~166~~000 in installments on or before May 15, 2015.

~~The~~As ~~parties~~of ~~reached~~May a13, ~~settlement.~~2015, ~~The~~the ~~terms~~defendants ofhave ~~the settlement~~made ~~call~~partial ~~for~~payments, 12and ~~payments~~still ofowe plaintiff $525,~~000~~500. ~~per~~Plaintiff ~~month~~provided ~~commencing~~notice ~~August~~of ~~25,~~its ~~2011~~intent ~~and~~to file the ~~issuance~~stipulated ofjudgment ~~150~~on May 7,~~000~~ ~~shares~~2015, ofand ~~common~~commence ~~stock.~~collection ~~The~~efforts ~~company has~~if ~~issued~~payment ~~the~~of ~~150~~$10,000 ~~shares~~is ofnot ~~common~~paid ~~stock~~prior thereto and ~~made~~those ~~two~~ payments tohave ~~date~~been made. ~~The~~Since ~~company~~May, ~~has~~ a ~~provision~~payment ~~in the sum~~ of $501,~~000 in~~500 ~~the~~has ~~financial~~been ~~statements~~made. inThe ~~accounts~~balance ~~payable~~ as of ~~December~~August 3117, ~~2013~~2015 is $24,000.

~~The Company currently is in default of its payment obligations~~6. ~~under~~Fadal ~~the~~Machining ~~settlement~~v. ~~Plaintiff~~All ~~currently~~American isCNC ~~seeking~~Sales, toet ~~obtain~~al., aLos ~~judgment~~Angeles asSuperior aCourt, ~~result~~Los ofAngeles, ~~the~~California,Case No. ~~breach of the settlement agreement~~BC415693.

6.The ~~Timothy~~Complaint D.was ~~Consalvi~~filed v.on MJune ~~Line Holdings~~12, ~~Inc~~2009. ~~et.al., Orange County Superior Court Case No, 00308489.~~

AThe ~~settlement~~Complaint ofalleges ~~$50,000~~causes ~~was~~of ~~reached~~action infor ~~this~~breach ~~case, requiring~~of ~~payments~~contract ~~commencing~~and oncommon ~~March~~counts ~~11,~~against ~~2011~~All ~~for~~American 10CNC ~~months.~~seeking ~~The~~damages ~~first~~in ~~two~~the ~~month’s~~amount ~~payments~~of ~~were~~at ~~made;~~least ~~however~~$163,579, ~~the~~and ~~Company~~arises ~~currently~~from a claim isby inFadal ~~default~~that ofAll ~~the~~American ~~terms~~failed ofto ~~this~~pay ~~settlement~~amounts ~~agreement~~due. ~~Mr.~~On ~~Consalvi~~June ~~filed~~26, ~~his stipulated judgment on March 5~~2009, ~~2012.~~Fadal ~~Abstract of~~amended ~~judgment~~the ~~and~~complaint ~~Writ~~to ~~were~~include ~~issued~~M onLine ~~March 13~~Holdings, Inc. ~~2012~~as a defendant.

A ~~provision~~settlement agreement in the ~~sum~~amount of $4060,000 ~~has been made in the~~was ~~financial~~signed ~~statements~~on inMay ~~litigation payable as of December~~ 31, ~~2013~~2011.

ToThe ~~date~~Company ~~there~~had ~~has~~made ~~been~~a noprovision ~~further~~in ~~action~~the onsum ~~this~~of ~~case~~$210,000 ~~and~~in the ~~Company~~financial ~~plans~~statements toas ~~resolve~~of ~~this~~September ~~matter~~30, asand ~~soon~~June 30, 2014 as ~~possible~~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. ~~All~~William ~~Direct~~Kircher ~~Travel Services, Inc~~Jr. v. ~~Jitu Banker,~~ M Line ~~holdings~~Holdings, Inc., ~~Airworks~~Orange ~~International,~~County ~~Inc.,~~Superior ~~case~~Court ~~number~~Case ~~30-2011-00472824-CL-CO-CJC~~No. 00397576

~~This~~A ~~case~~former ~~was~~attorney ~~settled as to Jitu Banker and the Company~~ for ~~$2,000~~M ~~payable~~Line ~~on February 25~~Holdings, ~~2013~~Inc. Wehas ~~do not yet have sufficient information to determine what the potential outcome of this~~sued ~~may~~seeking bedamages orfor ~~whether~~failure or to ~~what~~pay ~~extent~~legal itfees ~~would~~in ~~or could have a financial impact on~~ the ~~Company.~~amount Aof ~~default judgment was entered on January 6~~$120, ~~2012~~166.

8The parties reached a settlement. ~~Douglas~~The ~~Technologies~~terms ~~Group~~of the settlement call for 12 payments of $5,000 ~~Inc.~~per vmonth ~~Elite~~commencing ~~Machine~~August ~~Tool~~25, ~~Company~~2011 and ~~Lawrence~~the ~~Consalvi~~issuance of 150,000 etshares alof common stock. The Company has issued the 150,000 ~~case~~shares ~~number~~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 September 30~~-2013-00657906-CU-FR-CJC~~, and June 30, 2014.

~~Table~~The Company currently is in default of ~~Contents~~its 27payment obligations under the settlement. Plaintiff currently is seeking to obtain a judgment as a result of the breach of the settlement agreement.

~~This~~8. Timothy ~~suit~~D. ~~was~~Consalvi ~~filed~~v. onM ~~June~~Line 20Holdings, ~~2013~~ inInc. ~~respect of an alleged deficiency in the machine supplied to Douglas Technologies~~et.al., ~~The~~Orange ~~Company~~County ~~decided~~Superior toCourt ~~settle~~Case ~~the~~No, ~~lawsuit and thereby entered into a settlement agreement with the customer~~00308489.

~~This~~A ~~case~~former ~~was~~president ~~settled~~of All American CNC Sales, Inc. has filed suit against the Company seeking payment on ~~November~~an alleged severance obligation by the Company. The Complaint does not specify 5,the ~~2013~~damages ~~for~~sought. ~~$50,000~~The ~~requiring~~parties then reached a ~~commencing~~settlement ~~payment~~in the principal sum of $1040,000 onto ~~November~~be ~~15,~~documented ~~2013~~in ~~with~~due course. Meanwhile a default was entered against the ~~balance~~Company, ~~being~~which ~~paid~~management believes was in 8error ~~monthly~~because ~~installments~~a settlement was already reached by the ofprincipal $5parties involved. The default has since been vacated,~~000 each~~ and the Company has answered the complaint and has filed a motion for leave to file a cross complaint.

A ~~payment~~settlement of $50,000 was reached in ~~the~~this ~~sum~~case, ofrequiring payments $5commencing on March 11,~~000~~ 2011 for 10 months.~~00 was~~ The first two month’s payments were made; however, the Company currently is in default of the ~~month~~terms of ~~December~~this ~~2013~~settlement agreement. Mr. Consalvi filed his stipulated judgment on March 5, 2012. Abstract of judgment and Writ were issued on March 13, 2012.

~~The~~A ~~balance~~provision ofin the ~~provision~~sum of $40,000 has been made in the ~~accounts~~financial ~~payable~~statements isas ~~$45,000~~of atSeptember ~~December~~30 31and June 30, ~~2013~~2014.

9.To ~~Donald~~date ~~Yu.~~there vhas Mbeen ~~Line~~no ~~Holdings,~~further ~~Inc.~~action on this case, and ~~Anthony~~the LCompany ~~Anish~~plans ~~and~~to ~~Jitu~~resolve ~~Banker,~~this etmatter ~~al.,~~as ~~case~~soon ~~number~~as ~~30-2012-005-740-19-CU-BC-CJC~~possible.

~~This~~9. All ~~suit~~Direct ~~was~~Travel ~~filed~~Services, inInc. ~~respect~~v. ofJitu ~~consulting~~Banker, ~~services rendered~~M toLine ~~the~~holdings, ~~company~~Inc., ~~The~~Airworks ~~Company~~International, ~~decided~~Inc., tocase ~~settle~~number ~~the lawsuit and thereby entered into a settlement agreement with Donald Yu.~~30-2011-00472824-CL-CO-CJC

~~The~~This case was settled onas ~~September~~to ~~25,~~Jitu ~~2013~~Banker and the Company for $242,000 ~~requiring~~ ~~two~~payable ~~payments~~on ofFebruary ~~$12~~25,~~000~~ ~~each,~~2013. ~~payable~~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 ~~September~~the ~~30,~~Company. ~~2013~~A ~~and~~default ~~October~~judgment 30was entered on January 6, ~~2013~~2012.

~~The~~To ~~Company~~date ~~made~~there ~~the~~has ~~first~~been ~~payment~~no offurther ~~$12,000~~action on ~~September 30~~this case, and ~~2013~~the ~~but~~Company ~~has~~plans ~~not~~to ~~made~~resolve ~~the~~this ~~second~~matter ~~payment~~as ~~due~~soon onas ~~October 30, 2013~~possible.

~~A provision in the sum of $12,000 has been made in the financial statements in accounts payable as of December 31, 2013.~~-25-

10. TCA ~~Alu~~Global ~~Forge~~Credit Master Fund, ~~Inc~~L.P. vs M LI ne Holdings, ~~dba~~Inc. ~~American~~EM ~~Handforge~~Tool Company, Inc. vdba ~~Jitu~~Elite ~~Banker~~Machine Tool, Precision Aerospace and & Technologies, Inc., ~~and~~Anthony MAnish ~~Line~~and ~~Holdings,~~Jitendra ~~Inc.,~~Banker ~~et al.,~~ case ~~number~~# 30CACE-~~2013~~14-~~00670772-CL-BC-CJC.~~012871

~~This~~Plaintiff ~~suit was~~ filed inthis ~~respect~~case ofon ~~materials~~July ~~supplied to~~1, ~~the~~2014 ~~company.~~in ~~The~~Broward County, ~~company decided to settle the lawsuit and thereby entered into a settlement agreement with the plaintiff~~Florida.

The ~~case~~complaint ~~was~~alleges ~~settled~~that onthe ~~October~~Company owes the ~~31,~~Plaintiff ~~2013~~the ~~for~~amount ~~$19,500~~due ~~with~~under ~~payments~~the ofrevolving $5note,~~250~~ onand ~~October~~is ~~31,~~claiming ~~2013,~~foreclosure $5of the collateral,~~250~~ onbreach ~~November~~of ~~30,~~the ~~2013~~credit agreement and a claim against the ~~balance~~individuals ofunder ~~$9,000~~the onvalidity ~~December 31,~~agreement ~~2013~~due to the non-payment.

The ~~Company~~Plaintiff ~~made~~obtained ~~the~~a ~~first~~default judgment however due ~~and~~to ~~second~~a ~~payments~~settlement ofagreement ~~$5,250~~reached on ~~October~~September 315, ~~2013~~2014 ~~and~~ceased ~~December~~any ~~24,~~further ~~2013,~~legal ~~and~~activity. The Defendants were unable to honor the agreement ~~final~~and ~~payment~~Plaintiff ofcontinued ~~$9,000~~to ~~was~~obtain ~~made~~sister onstate ~~December 31,~~judgments ~~2013~~in California and Nevada.

NoOn ~~provision~~February is23, ~~necessary~~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 ~~liability~~from ~~has~~a ~~been~~new ~~settled~~asset based lending program that Defendants were in ~~full~~the process of arranging.

~~11.~~The ~~Yates,~~Company ~~Fontenot~~has accrued $2,330,453 ~~Smith~~in &the ~~Brum,~~financial statements ~~LLC~~that v.includes Mall ~~Line~~interest ~~Holdings,~~and ~~Inc.~~fees ~~(formerly~~due ~~Gateway~~to ~~International~~Plaintiff ~~Holdings,~~through ~~Inc.)~~September 30, etand ~~al.;~~June ~~Case~~30, No2014. ~~30-2013-00630586~~

~~The above-referenced~~11. ~~matter~~Global isVantage anLtd., ~~unlawful~~a ~~detainer~~California ~~action~~Corporation ~~concerning~~vs ~~certain~~Eran ~~real~~Engineering, ~~property~~Inc. ~~located~~Precision atAerospace ~~2672~~and ~~Dow Avenue~~Technologies, ~~Tustin~~Inc., ~~California.~~M ~~The unlawful~~Line ~~detainer action was filed against the Company by its landlord Yates~~Holdings, ~~Fontenot~~Inc., etAnthony ~~al. on February 15~~Anish, ~~2013.~~Lawrence ~~The~~Consalvi ~~action~~and isKenneth ~~pending in Orange County Superior Court.~~ Collini

OnPlaintiff orfiled ~~about~~this ~~September~~complaint ~~2013,~~on ~~the~~August ~~parties settled the action for an agreed upon sum payable in installments through January 5~~7, 2014. ~~Assuming all payment obligations are~~in ~~made,~~Orange ~~plaintiff shall file a request for dismissal with prejudice of the entire action by or before March 14~~County, ~~2014~~California.

AThe ~~provision~~complaint inalleges that the ~~amount~~Company ofowes ~~$76,487~~funds that ~~has~~are ~~been~~due ~~made~~for in the ~~financial~~lease ~~statements,~~of ~~$25,000~~certain inequipment ~~accrued~~or ~~expenses~~plaintiffs ~~and~~want ~~$51,487~~repossession ~~in accounts payable as~~ of ~~December~~the ~~31, 2013~~equipment.

~~Table~~The ofplaintiffs ~~Contents~~obtained 28judgment in February 2015 and the equipment has been returned to plaintiff. However, defendants are filing an appeal against this judgment.

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

-26-

Item 1A. Risk Factors.

As a smaller reporting company we are not required to provide ~~the~~ 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~~ June 30, ~~2012~~2014, as filed with the Commission on ~~December~~June 3124, ~~2013~~2015.

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

The Company issued 5699,~~805~~699,~~130~~259,119 shares of the Company's common ~~stock~~ 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 ~~Mass~~these ~~Media,~~financial ~~Newport Coast~~institutions ~~Securities, Bruce barren and American Capital Ventures~~ are sophisticated investors and familiar with our operations.

The Company issued 16,000,000 shares of the Company's common stock to officers of the Company in lieu of salaries. These shares were restricted in accordance with Rule 144. The issuance was exempt registration pursuant to Section 4 (2) of the Securities Act of 1933 and Bruce Barren, our CEO, Anthony Anish and Jitu banker, 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.

Table of Contents 29

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.

Item No.		Description
3.1		Articles of Incorporation
3.1 (1)		Articles of Incorporation of M Line Holdings, Inc., a Nevada corporation, as amended
3.2(1)		Bylaws
3.2 (5)		Certificate of Amendment of Articles of Incorporation
10.1(1)		Asset Purchase Agreement with CNC Repos, Inc. and certain of its shareholders dated October 1, 2007
3.3 (1)		Bylaws of M Line Holdings, Inc., a Nevada corporation
10.2(1)		Commercial Real Estate Lease dated February 15, 2007 for the office space located in Tustin, CA. -
3.3 (2)		Amended By Laws of M Line Holdings, inc. a Nevada Corporation
10.3(1)		Commercial Real Estate Lease dated November 15, 2007 for the office space located in Anaheim, CA
10.1 (1)		Asset Purchase Agreement with CNC Repos, Inc. and certain of its shareholders dated October 1, 2007
10.4(1)		Share Exchange Agreement with Gledhill/Lyons, Inc. dated March 26, 2007
10.2 (1)		Commercial Real Estate Lease dated February 15, 2007 for the office space located in Tustin, CA
10.5(1)		Share Exchange Agreement with Nu-Tech Industrial Sales, Inc. dated March 19, 2007
10.3 (1)		Commercial Real Estate Lease dated November 15, 2007 for the office space located in Anaheim, CA
10.6(1)		Fee Agreement with Steve Kasprisin dated April 30, 2008
10.4 (1)		Employment Agreement with Timothy D. Consalvi dated February 1, 2007
10.7(2)		Separation Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence A. Consalvi dated September 26, 2008
10.5 (1)		Employment Agreement with Anthony L. Anish dated January 1, 2015
10.8(3)		Independent Contractor Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence A. Consalvi dated September 30, 2008
10.6 (2)		Employment Agreement with Jitendra Banker dated January 1, 2015
10.9(3)		Loan Agreements with Pacific Western Bank dated September 20, 2008 -
10.10(4)		Assignment of Promissory Note and Consent Thereto by and between M Line Holdings, Inc. and Money Line Capital, Inc. dated March 24, 2009
10.11(4)		M Line Holdings, Inc. Demand Note for up to $500,000 dated March 25, 2009 [Note: What is this pro note, and what is its status? Is this the first Note described in Note 7 (Notes Payable) in the financial statements?]
10.12(5)		Letter of Intent by and between M Line Holdings, Inc. and Money Line Capital, Inc. dated June 30, 2010
10.13(6)		Securities Purchase Agreement and Convertible Promissory Note with Asher Enterprises, Inc. dated April 26, 2010
10.14(6)		Convertible Promissory Note with Asher Enterprises, Inc. dated May 25, 2010
10.15(6)		Commercial Real Estate Lease with SG&H Partners, L.P. for Anaheim Property dated August 13, 2010
10.16(6)		Business Loan Agreement with Pacific Western Bank dated June 7, 2010
10.17(7)		Addendum No. 2 dated September 30, 2011 to Commercial Real Estate Lease dated February 15, 2007 for the office space located in Tustin, CA
10.18(7)		Executive Employee Agreement with Barton Webb dated July 25, 2011
10.19(8)		Loan and Security Agreement with Utica Leaseco, LLC dated as of October 8, 2012
10.19		Loan Agreements with TCA Global Credit master Fund, LP

~~Table of Contents 30~~-27-

10.20(8)		Note and Stock Purchase Agreements with Spagus Capital Partners, LLC dated September 29, 2011
10.7 (1)		Settlement Agreement with TCA Global Credit Master Fund, LP
10.21		Executive Employee Agreement with Anthony L. Anish dated July 17, 2013
10.9 (1)		Fee Agreement with Steve Kasprisin dated April 30, 2008
10.22		Executive Employee Agreement with Jitu Banker dated July 17, 2013
10.10 (3)		Separation Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence A. Consalvi dated September 26, 2008
21		List of Subsidiaries
10.11 (4)		Sales Agent Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence A. Consalvi dated September 30, 2008
31.1		Rule 13a-14(a)/15d-14(a) Certification of George Colin (filed herewith).
10.12 (4)		Loan Agreements with Pacific Western Bank dated September 20, 2008
31.2		Rule 13a-14(a)/15d-14(a) Certification of Jitu Banker (filed herewith).
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
32.1		Section 1350 Certification of George Colin (filed herewith).
10.14 (5)		M Line Holdings, Inc. Demand Note for up to $500,000 dated March 25, 2009
32.2		Section 1350 Certification of Jitu Banker (filed herewith).
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
10.24		Executive Employee Agreement with Barton Webb dated July 25, 2011

~~________________________________________~~-28-

(1) Previously filed with Registration Statement on Form 10-12G filed with the Commission on May 16, 2008.

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).

(21) ~~Previously~~Incorporated ~~filed~~by ~~with~~reference ~~First~~from ~~Amended~~our ~~Current~~Registration ~~Report~~ Statement on Form 810-~~K/A~~12G filed with the Commission on ~~October~~May 1016, 2008.

(32) ~~Previously~~Incorporated ~~filed~~by ~~with~~reference ~~Quarterly~~from ~~Report~~our Registration Statement on First Amended Form 10-Q12G/A ~~for the period ended September 30, 2008~~ filed with the Commission on ~~November~~July 1316, 2008.

(43) ~~Previously~~Incorporated ~~filed~~by ~~with~~reference ~~Current~~from our First Amended Current Report on Form 8-K/A filed with the Commission on ~~April~~October 2410, ~~2009~~2008.

(54) Incorporated ~~Previously~~by ~~filed~~reference ~~with~~from ~~Current~~our Quarterly Report on Form 810-KQ for the period ended September 30, 2008, as filed with the Commission on ~~July~~November 613, ~~2009~~2008.

(65) Incorporated ~~Previously~~by ~~filed~~reference ~~with~~from ~~Annual~~our ~~Report~~Current Report on Form 108-K ~~for the period ended June 30, 2010~~ filed with the Commission on ~~November~~April 1224, ~~2010~~2009.

(76) Incorporated ~~Previously~~by ~~filed~~reference ~~with~~from ~~Annual~~our ~~Report~~Current Report on Form 108-K ~~for the period ended June 30, 2011~~ filed with the Commission on ~~October~~July 136, ~~2011~~2009.

(87) Incorporated ~~Previously~~by ~~filed~~reference ~~with~~from our Annual Report on Form 10-K for the period ended June 30, ~~2012~~2009, as filed with the Commission on October 1613, ~~2012~~2009.

~~Table~~(8) Incorporated ofby ~~Contents~~reference 31from our Annual Report on Form 10-K for the period ended June 30, 2010, as filed with the Commission on November 12, 2010.

-29-

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.~~	M Line Holdings, Inc.
Dated: February 11, 2014		/s/ Bruce Barren
Dated: August 19, 2015		/s/ Bruce Barren
	By:	Bruce Barren
		President, Chief Executive
		Officer and a Director
Dated: February 11, 2014		/s/ Jitu Banker
Dated: August 19, 2015		/s/ Jitu Banker
	By:	Jitu Banker
		Chief Financial Officer,
		and a Director

~~Table of Contents 32~~-30-

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