UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~FORM~~Form 10-Q

(Mark One)

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

~~[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~
For the quarterly period endedMarch 31, ~~2014~~2015

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

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

For the transition period from ~~_______________to~~_______________ to _______________.

Commission File Number000-53265

M LINE HOLDINGS, INC.

(Exact Name of Company as Specified in its Charter)

Nevada	~~88-0375818~~
(State or other jurisdiction of	~~(I.R.S. Employer~~
incorporation or organization)	88-0375818 (I.R.S. Employer Identification No.)

2672 Dow Avenue
Tustin, CA	~~92780~~
(Address of principal executive offices)	92780 (Zip Code)

(714) 630-6253

(Registrant’s telephone number, including area code)

~~_______________________________________________~~

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ~~[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)

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

~~-1-~~

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

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
Yes ~~[X] No.[ ]~~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 ~~May 18, 2014,~~August 19, 2015, there were ~~216,413,801~~1,199,555,785 shares of common stock, par value $.001, issued and outstanding.

~~-2-~~

-1-

M LINE HOLDINGS, INC.

TABLE OF CONTENTS

PART I		Page

~~PART I~~Item 1.	Financial Statements (Unaudited)	-3-

~~Item 1.~~	~~Financial Statements (Unaudited)~~	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17-18-

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22-24-

Item 4.	Controls and Procedures	23-25-

PART II

Item 1.	Legal Proceedings	23__

Item 1A.	Risk Factors	26-28-

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26-29-

Item 3.	Defaults Upon Senior Securities	26-29-

Item 4.	(Removed and Reserved)	26-29-

Item 5.	Other Information	26-29-

Item 6.	Exhibits	26-29-
	Signatures	-32-

-2-

~~Signatures~~

~~-3-~~

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., and M Line Business Services, Inc.

Item 1. Financial Statements.

M LINE HOLDINGS, INC. AND SUBSIDIARIES
~~CONDENSED~~

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

Assets
As of March 31 As of June 30
2014 2013
Current assets:

Cash and cash equivalents $ 187,148 $ 182,305
Accounts receivable, net 2,044,498 990,010
Inventory, net 1,654,593 1,555,910
Due from related party 179,769 99,348
Deferred financing costs - 199,516

     Total current assets 4,066,008 3,027,089

Property and equipment, net 439,308 556,555

Deposits and other 115,922 113,445

Total assets $ 4,621,238 $ 3,697,089

Liabilities and shareholders' equity

Current liabilities:
Bank overdraft $ 80,366 $ 85,542
Accounts payable 1,404,470 1,421,626
Accounts payable - related party 43,454 43,454
Accrued expenses and other 2,753,988 2,788,697
Litigation payable 137,500 137,500
Derivative liability 605,987 -
Line of credit 1,641,215 1,702,726
Notes payable - current, net of debt discount of $292,142 and $69,996 respectively. 701,403 675,961
Current portion of capital lease obligations 53,901 54,501
Deferred income - 10,000
     Total Current Liabilities 7,422,284 6,920,007

Notes payable - net of current portion 274,194 318,903

Capital lease obligation, net of current portion 50,917 90,742

Total liabilities 7,747,395 7,329,652

Commitments and contingencies - -

Shareholders' equity:

Preferential stock: $0.001 par value, 10,000,000 shares authorized, 200,000 shares issued and outstanding at March 31, 2014 and June 30, 2013 respectively 200 200
Common stock: $0.001 par, 500,000,000 shares authorized, 145,951,247 and 70,211,145 shares issued and outstanding at March 31, 2014 and June 30, 2013, respectively 145,951 70,211

Additional paid in capital 11,798,044 10,741,397

Subscription receivable (27,200 ) -

Accumulated deficit (15,043,152 ) (14,444,371 )

Total shareholders' equity (3,126,157 ) (3,632,563 )

Total liabilities and shareholders' equity $ 4,621,238 $ 3,697,089

Assets
	As of March 31			As of June 30
	2015			2014

Current assets:
Cash and cash equivalents	$	2,885		$	46,925

Accounts receivable, net		377,841			222,344

Inventory, net		1,250,028			1,430,682

		1,630,754			1,699,951

Property and equipment, net		390,564			402,476

Deposits and other		92,643			140,922
Total assets	$	2,113,961		$	2,243,349

Liabilities and Stockholders’ deficit

Current liabilities:

Bank overdraft	$	348,115			149,699
Accounts payable		1,508,472			1,350,157

Accounts payable - related party		35,954			35,954

Accrued expenses and other		2,900,554			2,594,616

Litigation payable		287,500			287,500

Derivative liability		1,920,542			634,769

Line of credit		2,784,703			2,330,453

Notes payable - current, net of debt discount of $132,863 and $317,977		1,011,105			1,018,755

Current portion of capital lease obligations		53,901			53,901

Total current liabilities		10,850,846			8,455,804

Notes payable - net of current portion		73,786			124,023

Capital lease obligation, net of current portion		46,426			46,426

Total liabilities		10,971,058			8,626,253

Commitments and contingencies		—			—

Stockholders’ deficit:

Series A Preferential stock: $0.001 par value, 10,000,000 shares authorized, 200,000 and 200,000 shares issued and outstanding at March 31, 2015 and June 30, 2014, respectively		200			200

Series B Preferential stock: $0.001 par value, 10,000,000 shares authorized, 10,000,000 and 0 shares issued and outstanding at March 31, 2015 and June 30, 2014, respectively		10,000			—

Common stock: $0.001 par, 2,500,000,000 shares authorized, 1,199,555,785 and 243,178,484 shares issued and outstanding at March 31, 2015 and June 30, 2014, respectively		1,199,555			243,178

Additional paid in capital		13,174,398			12,846,981

Accumulated deficit		(23,241,250	)		(19,473,263	)

Total stockholders’ deficit		(8,857,097	)		(6,382,904	)
Total liabilities and stockholders’ deficit	$	2,113,961		$	2,243,349

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

~~-4-~~

-3-

M LINE HOLDINGS, INC. AND SUBSIDIARIES
~~CONDENSED~~

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF OPERATIONS
~~FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2014 AND 2013~~

(UNAUDITED)

Three months ended March 31,

Nine months ended March 31,

2014

2013

2014

2013

Net sales
$
2,419,511

$
2,319,819

$
8,453,085

$
6,741,292

Cost of sales

1,459,876

1,960,709

5,572,301

5,082,455

Gross profit

959,635

359,110

2,880,784

1,658,837

Operating expenses:

Selling, general and administrative

724,055

863,060

1,875,106

2,711,324

Amortization of intangible assets

-

-

-

-

Total operating expense

724,055

863,060

1,875,106

2,711,324

Operating income (loss)

235,580

(503,950
)

1,005,678

(1,052,487
)

Other expenses

Interest expense

(557,325
)

(111,463
)

(902,667
)

(302,928
)

Derivative loss

(651,968
)

-

(700,098
)

-

Total other expenses

(1,209,293
)

(111,463
)

(1,602,765
)

(302,928
)

Loss before income tax

(973,713
)

(615,413
)

(597,087
)

(1,355,415
)

Income tax provision

-

-

(1,694
)

(2,086
)
Net loss
$
(973,713
)
$
(615,413
)
$
(598,781
)
$
(1,357,501
)

Net loss per share:

Basic and dilutive loss per share:
$
(0.01
)

(0.01
)
$
(0.01
)
$
(0.02
)

Weighted average number of common shares under in per share calculations (basic and diluted)

104,796,533

62,234,201

87,226,691

58,266,218

	Three months ended March 31,						Nine months ended March 31,
	2015			2014			2015			2014

Net sales	$	1,505,615		$	2,419,511		$	3,967,399		$	8,453,085

Cost of sales		1,276,939			1,459,876			3,707,320			5,572,301

Gross profit		228,676			959,635			260,079			2,880,784

Operating expenses:
Selling, general and administrative		169,288			724,055			1,498,601			1,875,106

Operating income (loss)		59,388			235,580			(1,238,522	)		1,005,678

Other income (expense):
Interest expense		(328,388	)		(557,325	)		(747,104	)		(902,667	)
Gain (loss) on debt extinguishment		6,283			—			(159,243	)		—
Derivate loss		(971,946	)		(651,968	)		(1,623,118	)		(700,098	)
Total other income (expenses)		(1,294,051	)		(1,209,293	)		(2,529,465	)		(1,602,765	)

Loss before income tax		(1,234,663	)		(973,713	)		(3,767,987	)		(597,087	)

Income tax provision		—						—			(1,694	)
Net loss		(1,234,663	)		(973,713	)		(3,767,987	)		(597,781

Deemed dividend – Series B Preferred stock		—			—			(225,500	)		—
Net loss available to common stockholders	$	(1,234,663	)	$	(973,713	)	$	(3,993,487	)	$	(598,781	)

Net loss per share Basic and diluted:	$	(0.00	)		(0.01	)	$	(0.00	)	$	(0.01	)

Weighted average number of common shares outstanding – basic and diluted		1,015,448,815			104,796,533			829,078,591			87,226,691

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

~~-5-~~

-4-

M LINE HOLDINGS, INC. AND SUBSIDIARIES
~~CONDENSED~~

CONSOLIDATED STATEMENTS OF CASH FLOWS
~~(UNAUDITED)~~

Nine months ended March 31,
2014 2013
Cash flows from operating activities:
Net loss $ (598,781 ) $ (1,357,501 )
Reconciliation of net loss to net cash provided by operations:
Depreciation 125,247 134,828
Amortization of deferred financing costs 199,516 -
Amortization of debt discount 393,293 -
Issuance of shares for services 217,916 380,750
Change in derivative liabilities 700,098 -
Changes in operating assets and liabilities:
Accounts receivable (1,054,488 ) (111,780 )
Inventory (98,683 ) (13,415 )
Prepaid expenses and other assets (2,477 ) (26,816 )
Due from related party (80,421 ) (54,974 )
Accounts payable, accrued expenses and other (85,566 ) 1,016,646
Litigation payable - 105,959

Net cash provided by (used in) operating activities (284,346 ) 73,697
Cash flows from investing activities:
Acquisition of property and equipment (8,000 ) (53,650 )
Net cash used in investing activities (8,000 ) (53,650 )
Cash flows from financing activities:
Net borrowings (repayments) on line of credit (61,511 ) (223,501 )
Net proceeds from notes payable 643,695 619,835
Bank overdraft (5,176 ) -
Payments to notes payable (239,394 ) (220,384 )
Payments on capital leases (40,425 ) (60,738 )
Net cash provided by financing activities 297,189 115,212

Net increase in cash and cash equivalents 4,843 135,259

Cash and cash equivalents at beginning of period 182,305 5,212

Cash and cash equivalents at end of period $ 187,148 $ 140,471

Supplemental disclosure of cash flow information:
Cash paid for interest $ 211,560 $ 302,928
Cash paid for income taxes $ - $ -

Non-cash investing and financing activities: $ $
Debt discount from derivative liability 544,400 -
Common stock issued for debt conversions 248,761 -
Derivative resolution due to conversions 638,511 -
Subscription receivable 27,200 -

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

~~-6-~~(UNAUDITED)


	Nine months ended March 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(3,767,987	)	$	(598,781	)
Reconciliation of net loss to net cash provided by operations:
Loss on disposal of assets		9,250			—
Bad debt expense		69,954			—
Depreciation		79,412			125,247
Amortization of debt discount and deferred financing costs		548,264			592,809
Issuance of shares for services		80,000			217,916
Loss on extinguishment of debt		159,243			—
Change in derivative liabilities		1,623,118			700,098
Changes in operating assets and liabilities:
Accounts receivable		(314,808	)		(1,054,488	)
Inventory		180,654			(98,683	)
Prepaid expenses and other assets		17,636			(2,477	)
Due from related party		—			(80,421	)
Accounts payable, accrued expenses and other		914,334			(85,566	)

Net cash used in operating activities		(400,930	)		(284,346	)

Cash flows from investing activities:
Acquisition of property and equipment		—			(8,000	)
Proceeds from disposition of assets		35,000			—

Net cash provided by (used in) investing activities		35,000			(8,000	)

Cash flows from financing activities:
Net borrowings (repayments) on line of credit		50,000			(61,511	)
Proceeds from notes payable		110,499			643,695
Bank overdraft		198,416			(5,176	)
Payments to notes payable		(37,025	)		(239,394	)
Payments on capital leases		—			(40,425	)

Net cash provided by financing activities		321,890			297,189

Net increase (decrease) in cash and cash equivalents		(44,040	)		4,843

Cash and cash equivalents at beginning of period		46,925			182,305
Cash and cash equivalents at end of period	$	2,885		$	187,148

Supplemental disclosure of cash flow information:
Cash paid for interest	$	—		$	211,560
Cash paid for income taxes	$	—		$	—

Supplemental disclosure of non-cash investing and financing activities:
Receivable from sale of property and equipment		157,000			—
Return of property and equipment		8,250			—
Acquisition of property and equipment through line of credit		224,250			—
Debt discount resulting from derivative liability		637,576			544,400
Interest added to principal		225,731			—
Shares issued for conversion of debt		354,056			248,761
Subscription receivable		—			27,200
Deemed dividend – Series B Preferred stock		225,500			—

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

-5-

M LINE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO ~~CONDENSED~~ CONSOLIDATED FINANCIAL STATEMENTS
~~(UNAUDITED)~~

(UNAUDITED)

1. Business

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

• E.M. Tool Company, Inc. dba Elite Machine Tool Company (“Elite”), its wholly owned subsidiary, acquires, refurbishes and sells pre-owned CNC machine tool equipment. This is the machine sales group.
• Precision Aerospace & Technologies, Inc., formerly Eran Engineering, Inc. (“Precision”), its wholly owned subsidiary, manufactures precision metal component parts and assemblies for the aerospace, medical and defense industries. This is the precision manufacturing group.

• M Line Business Services, Inc., 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 in relation to the aerospace industry.

2. 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 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, 2014.~~June 24, 2015.

Principles of consolidation

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

Use of Estimates

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

Recent accounting pronouncements

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

-6-

3. Going Concern and Management Plans

The ~~Company's~~Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has an accumulated deficit of ~~$15,043,152~~$23,241,250 as of March 31, ~~2014~~2015 and negative working capital. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

~~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.~~

~~-7-~~

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~~Company’s continuation as a going concern is dependent upon its ability to retain its current short term financing and ultimately to generate sufficient cash flow to meet its obligations on a timely basis in order to attain profitability.

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

4. Inventories

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

Inventories ~~consisted~~as of March 31, 2015 and June 30, 2014 consist of the following:

March 31, June 30,
2014 2013
Finished Goods and Components $ 1,194,034 $ 971,099
CNC Machines held for sale 265,500 364,583
Work in Progress 378,419 415,108
Raw Materials and Parts 16,640 5,120
1,854,593 1,755,910
Less: Reserve for inventories (200,000 ) (200,000 )
Inventories, net. $ 1,654,593 $ 1,555,910

	March 31, 2015			June 30, 2014
Finished goods and components	$	1,163,257		$	1,112,647
CNC machines held for sale		—			152,000
Work in progress		241,942			327,620
Raw materials and parts		20,750			14,336
		1,425,949			1,606,603
Less: Reserve for inventories		(175,921	)		(175,921	)
Inventories, net.	$	1,250,028		$	1,430,682

5. Accrued Expenses

Accrued expenses and other as of March 31, 2015 and June 30, 2014 consist of the following:

	March 31, 2015		June 30, 2014
Compensation and related benefits	$	2,236,908	$	2,023,064
Audit fees		50,000		46,000
Other		613,646		525,552
	$	2,900,554	$	2,594,616

March 31, June 30,
2014 2013
Compensation and related benefits $ 1,939,270 $ 1,934,314
Audit Fees 46,000 72,500
Other 768,718 781,883
$ 2,753,988 $ 2,788,697

-7-

6. Capital Leases

The Company leases certain equipment under capital leases with terms ranging from four to five years. Future annual minimum lease payments are as follows as of March 31, ~~2014~~2015 and June 30, ~~2013.~~2014.

March 31, June 30,
2014 2013
2014 $ 53,901 $ 54,501
2015 50,917 54,501
2016 - 36,241
2017 - -
Total minimum lease payments 104,818 145,243
Less amount representing interest - -
Present value of future minimum lease payments 104,818 145,243
Less current portion of capital lease obligations (53,901 ) (54,501 )
Capital Lease obligations, net of current portion $ 50,917 $ 90,742

~~-8-~~

	March 31, 2015			June 30, 2014
2014	$	53,901		$	53,901
2015		46,426			46,426
Total minimum lease payments		100,327			100,327
Present value of future minimum lease payments		100,327			100,327
Less current portion of capital lease obligations		(53,901	)		(53,901	)
Capital lease obligations, net of current portion	$	46,426		$	46,426

7. Line of Credit

~~Main Credit:~~

~~As of March 31, 2014, the Company owed $0 principal as all outstanding sums were paid in July 2013.~~

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

The Company has an existing line of credit with ~~Main~~TCA Global Credit ~~was replaced on April 30, 2013, with a line of credit from TCA up to~~Master Fund, LLC (“TCA”) in the amount of $10 million. As of March 31, 2015 and June 30, 2014, the Company has drawn ~~$1,836,470~~$1,700,000 from the line of which ~~$1,641,215~~$2,510,453 and $2,330,453 is outstanding as of March 31, 2015 and June 30, 2014. Amounts drawn from the line of credit are subject to interest ~~at 18% per annum. The loan~~and matured on October 31, ~~2013, but~~2013. The line was ~~extended~~automatically renewed for a further ~~period of~~ six months ~~through~~and expired on April 30, 2014.

There is no availability under the line of credit. The Company has entered into a settlement agreement with TCA and expects to repay the debt within 15 months. The line of credit with TCA ~~Global Credit Master Fund, LP~~ is secured by the receivables and inventory and a second position on the equipment of Precision ~~Aerospace~~ and ~~Technologies, Inc., E. M. Tool Co. Inc.,~~the inventory and receivables of Elite together with a blanket lien over all of the ~~group’s~~Company’s assets. During the nine months ended March 31, 2015, additional interest of 180,000 was added to the balance of the line of credit.

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

-8-

8. Notes Payable

March 31, June 30,
2014 2013

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. $ 335,525 $ 422,940

An unsecured note payable to a corporation in respect of accounting software payable in monthly installments of $ 1,923. This note is now due and payable and is being negotiated with the company. 46,811 46,811

Two unsecured convertible notes payable to a financial institution, net of debt discount of 186,676 16,970 -

An unsecured convertible note payable to a financial institution, net of discount of $25,208 2,292 -

An unsecured convertible note payable to a financial institution, net of discount of $17,917 3,583 -

~~-9-~~

Two unsecured convertible notes payable in the sum of $110,751, $55,463 of which have been converted to common stock, net of discount of $4,407. 50,881 -

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. 137,810 354,459

Two unsecured convertible notes payable in the sum of $110,751, $18,500 of which have been converted to common stock, net of discount of $35,209 57,042 -

Two unsecured convertible notes payable in the sum of $110,751, $48,750 of which have been converted to common stock, net of discount of $10,001 52,000 -

An unsecured note payable to a corporation in weekday amounts of $700, increasing to $1,650, in September 2013 through December 2013. This note is currently past due. 40,300 86,624

An unsecured note payable to a corporation in weekday amounts of $691 each, ending in December 2013. This note is currently past due. 57,121 84,030

An unsecured note payable to a corporation in weekday amounts of $890 each, ending in October 2014, net of a discount of $12,724. 69,911 -

~~-10-~~Notes payable as of March 31, 2015 and June 30, 2014 consist of :

An unsecured note payable to a corporation in weekday amounts of $841 each, ending in February 2014. This note is currently past due. 105,351 -

TOTAL 975,597 994,864
Less Current Portion 701,403 675,961
Long Term Portion $ 274,194 $ 318,903

2014 701,403 675,961
2015 143,537 123,780
2016 130,657 123,780
2017 - 71,343
Thereafter - -
975,597 994,864

	March 31, 2015			June 30, 2014
CONVERTIBLE NOTES (DERIVATIVE).

One unsecured 5% convertible notes payable to a financial institution due March 4, 2015. This note can be converted to common stock at 55% of the lowest closing price in the 20 trading days prior to conversion.		170,617			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.		130,000			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.		83,855			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
		763,739			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.	$	197,811		$	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.		35,095			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
		454,015			526,040
Total of convertible and other notes		1,217,754			1,460,755
Less Debt discount		(132,863	)		(317,977	)
TOTAL		1,084,891			1,142,778
Less Current Portion		1,011,105			1,018,755
Long Term Portion	$	73,786		$	124,023

2016		73,786			124,023
2017		—			—
2018		—			—
2019		—			—
Thereafter		—			—
	$	73,786		$	124,023

-9-

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

In connection with one of the notes issued during the nine months ended March 31, 2015, the Company issued 15,625,000 warrants that have a term of 5 years and an exercise price of $0.0016 per share. The exercise price on these warrants contain a reset provision in the event shares are sold by the Company at a price lower than the exercise price. Consequently, the warrants were accounted for as derivatives and the fair value of such warrants amounting to $28,125 was recognized as a debt discount and amortized over the term of the note.

During the nine months ended March 31, 2015, the Company converted total debt of $354,056 for 756,377,301 common shares and recognized a loss on debt extinguishment related to the conversion of the notes of $1,134,164.

9. Commitments and Contingencies

Leases

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

-10-

Rent expense under operating leases was ~~$404,462~~$340,704 and $375,887 for the nine months ended March 31, 2015 and 2014, ~~and 2013.~~respectively.

Litigations

Litigation payable ~~consisted~~as of ~~the following at~~ March 31, ~~2014~~2015 and June 30, ~~2013:~~2014 consist of the following:

March 31, June 30,
2014 2013

An unsecured note payable to a corporation in settlement of a lawsuit payable in 12 monthly payments of $5,000. $ 60,000 60,000

Unsecured notes payable to various parties in settlement of lawsuits payable in full. 77,500 77,500

TOTAL $ 137,500 137,500

	March 31, 2015		June 30, 2014

An unsecured note payable to a corporation in settlement of a lawsuit payable in 12 monthly payments of $5,000.	$	210,000		210,000

Unsecured notes payable to various parties in settlement of lawsuits payable in full.		77,500		77,500

TOTAL	$	287,500		287,500

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

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

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

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

No provision has been made in the March 31, 2015, and June 30, 2014 financial statements with respect to this matter because the Company has assessed the litigation as having no merit and the likelihood of any liability pursuant to this litigation to be extremely low.

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

Plaintiff filed this Complaint on October 2, 2008.

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

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

-11-

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

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

A provision has been made in the March 31, 2015 and June 30, 2014 financial statements with respect to this matter in the sum of $37,500.

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

This is an employment dispute asserted by a former employee against M Line Holdings and two corporate insiders, Jitu Banker and Anthony Anish, in their respective individual capacities. The action was filed in Orange County Superior Court on June 4, 2012. The parties entered into a settlement agreement and stipulation for judgment against M Line Holdings, only, on about May 12, 2013. Pursuant to the terms and conditions of the settlement agreement, M Line agreed to pay $21,450 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, which amount has been provided for in the financial statements dated March 31, 2015.

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

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

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

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

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

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

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


		~~The Company was served with a Demand for Arbitration and Statement of Claim, which was filed on September 16, 2008.~~ -12-

~~-11-~~

		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 March 31, 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 remote.

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

		~~Plaintiff filed this Complaint on October 2, 2008.~~

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

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

		~~A provision has been made in the March 31, 2014 financial statements in litigation payable 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.~~

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

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

		The Company has made a provision in the sum of $60,000 in the financial statements in accounts payable as of June 30, 2013 but no payments that are due under the settlement agreement have been made. Judgment was entered on June 16, 2011, and a Writ for collection was issued on February 24, 2012.

	4.	~~Fox Hills Machining v. CNC Repos~~~~, Orange County Superior Court, Orange County, California, Case No. 30-2009- 00121514.~~

		~~The Complaint was filed on April 14, 2009.~~

		The Complaint alleges causes of action for Declaratory Relief, Breach of Contract, Fraud, Common Counts, and Negligent Misrepresentation, claiming the Defendant failed to pay Fox Hills Machining for the sale of two machines from Fox Hills to CNC Repos. The damages sought in the Complaint are estimated to be approximately $40,000. Court records show that a stipulated judgment was entered on August 27, 2012; a writ was issued on September 9, 2012.

		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.

	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.~~

~~-12-~~

		~~The parties reached a settlement. The terms~~ 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 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 March 31, 2014.

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

	6.	~~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 in litigation payable as of March 31, 2014.~~

		~~To date, there has been no further action on this case.~~

	7.	~~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.	~~Douglas Technologies Group, Inc. v Elite Machine Tool Company and Lawrence Consalvi, et al., case number 30- 2013-00657906-CU-FR-CJC~~.

		This suit was filed on June 20, 2013 in respect of an alleged deficiency in the machine supplied to Douglas Technologies. The Company decided to settle the lawsuit and thereby entered into a settlement agreement with the customer.

~~This case was settled~~ on ~~November 5, 2013 for $50,000 requiring a commencing~~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 $1,500 payment has been made. The balance as of August 17, 2015 is $24,000.

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

The Complaint was filed on ~~November 15, 2013 with~~June 12, 2009.

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

A settlement agreement in ~~8 monthly installments~~the amount of $60,000 was signed on May 31, 2011.

The Company had made a provision in the sum of $210,000 in the financial statements as of March 31, 2015 and June 30, 2014 as no payments that were due under the settlement agreement have been made. Judgment was entered on June 16, 2011, and a Writ was issued on February 24, 2012.

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

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

The parties reached a settlement. The terms of the settlement call for 12 payments of $5,000 ~~each. Payments amounting~~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 ~~$30,000 were made during~~$50,000 in the ~~period ended~~financial statements as of March 31, 2015 and June 30, 2014.

~~The balance of the provision in accounts payable is $20,000 at March 31, 2014.~~

	9.	~~Donald Yu. v M Line Holdings, Inc., Anthony L Anish and Jitu Banker, et al., case number 30-2012-005-740-19-CU- BC-CJC~~.

		~~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.~~

		~~The case was settled on September 25, 2013 for $24,000 requiring two payments of $12,000 each, payable on September 30, 2013 and October 30, 2013.~~

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

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

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

A settlement of $50,000 was reached in this case, requiring payments commencing on March 11, 2011 for 10 months. The first ~~payment~~two month’s payments were made; however, the Company currently is in default of ~~$12,000~~the terms of this settlement agreement. Mr. Consalvi filed his stipulated judgment on ~~September 30, 2013 but has not made the second payment due~~March 5, 2012. Abstract of judgment and Writ were issued on ~~October 30, 2013.~~March 13, 2012.

A provision in the sum of ~~$12,000~~$40,000 has been made in the financial statements ~~in accrued expenses~~ as of March 31, 2015 and June 30, 2014.

~~-13-~~

	~~10.~~	~~Alu Forge, Inc., dba~~~~American Handforge . v Jitu Banker, Precision Aerospace & Technologies, Inc., and M Line~~~~Holdings, Inc., et al., 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.~~ -13-

~~11.~~

~~Yates, Fontenot, Smith & Brum, LLC v. M Line Holdings, Inc. (formerly Gateway International Holdings, Inc.), et al.;~~~~Case No. 30-2013-0063058~~6

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

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

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

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

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

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

The ~~above-referenced matter~~complaint alleges that the Company owes the Plaintiff the amount due under the revolving note, and is ~~an unlawful detainer action concerning certain real property located at 2672 Dow Avenue, Tustin, California. The unlawful detainer action was filed~~claiming foreclosure of the collateral, breach of the credit agreement and a claim against the ~~Company by its landlord Yates, Fontenot, et al.~~individuals under the validity agreement due to the non-payment.

The Plaintiff obtained a default judgment however due to a settlement agreement reached on ~~February 15, 2013.~~September 5, 2014 ceased any further legal activity. The ~~action is pending~~Defendants were unable to honor the agreement and Plaintiff continued to obtain sister state judgments in ~~Orange County Superior Court.~~California and Nevada.

On ~~or about September 2013,~~February 23, 2015 a new settlement agreement was signed between the parties ~~settled~~under which plaintiff agreed to accept two methods of repayment, the ~~action for an agreed upon sum payable in installments through January 5, 2014. Assuming all payment obligations are made, plaintiff shall file~~first being $1,200,000 paid over a ~~request for dismissal~~fifteen month period commencing as soon as the Company was up to date with ~~prejudice~~its filings and the balance of ~~the entire action by or before March 14, 2014.~~

~~A provision~~funding would come from a new asset based lending program that Defendants were in the ~~amount~~process of ~~$35,000~~arranging.

The Company has ~~been made~~accrued $2,510,453 and $2,330,453 in the financial statements ~~in accounts payable, as of~~that includes all interest and fees due to Plaintiff through March 31, ~~2014.~~2015 and June 30, 2014, respectively.

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

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

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

Global Vantage obtained judgment in February 2015 and the equipment has been returned to them. However, defendants are filing an appeal against this judgment.

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

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

~~10. Shareholders’ Equity~~

-14-

10. Shareholders’ Equity

During the nine months ended March 31, ~~2014,~~2015, the Company issued the following shares of common stock:

5,805,130 common shares were issued to financial advisors, consultants and other parties in payment of fees and services to the Company. The Company determined the fair value of these shares to be $57,916.

~~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.~~

~~45,934,972 common shares were issued in connection with the conversion of debt and accrued interest of $248,761 to equity~~
· 756,377,301 common shares were issued to financial institutions in connection with the conversion of debt and accrued interest totaling to $354,056.
~~8,000,000 common shares issued for subscriptions amounting to $27,200~~

200,000,000 common shares were issued for payment of unpaid salaries. The Company determined the fair value of these shares to be $80,000.

~~The authorized common stock of the Company was increased to 500,000,000 shares effective October 15, 2013.~~

On October 14, 2014, the Board agreed to issue 10,000,000 blank check preferred stock to Anthony Anish, the COO of the Company. These shares carry no par value and are designated as the Company’s Series B preferred stock having only the following rights: non-convertible, zero dividend, zero interest and carrying a voting power of the combined voting power of 50% of the Company’s common and preferred stock while outstanding. The fair value of these shares amounting to $225,500 was recorded as a deemed dividend during the nine months ended March 31, 2015.

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.

~~-14-~~

•●	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 March 31, ~~2014:~~2015:

Amount Level 1 Level 2 Level 3
Embedded conversion derivative liability $ 605,987 $ - $ - $ 605,987
Total $ 605,987 $ - $ - $ 605,987

	Amount		Level 1		Level 2		Level 3
Embedded conversion derivative liability	$	1,920,542	$	—	$	—	$	1,920,542
Total	$	1,920,542	$	—	$	—	$	1,920,542

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

Balance at June 30, 2014	$	634,769
Fair value of warrant derivative liabilities at issuance, recorded as debt discount		637,576
Settlement of derivative liabilities to gain on debt extinguishment		(974,921	)
Unrealized derivative loss resulting from marked to market fair value included in other expense		1,623,118
Balance at March 31, 2015	$	1,920,542

~~Balance at June 30, 2013~~

-15-

~~Fair value of warrant derivative liabilities at issuance, recorded as debt discount~~		~~544,400~~
~~Settlement of derivative liabilities to additional paid in capital~~		~~(638,511~~	)
~~Unrealized derivative loss included in other expense~~		~~700,098~~
~~Balance at March 31, 2014~~	$	~~605,987~~

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 March 31, 2014
Market value of stock on measurement date $ 0.01 - 0.03 $ 0.01
Risk-free interest rate 0.07 - 0.35% 0.13 – 0.44%
Dividend yield 0% 0%
Volatility factor 256 - 343% 321 -334%
Term 0.26 - 2 years 0.84 – 1.9 years

	At Issuance			March 31, 2015
Market value of stock on measurement date	$	0.0003 – 0.0018		$	0.001
Risk-free interest rate		0.05 – 1.58	%		0.03 – 1.37	%
Dividend yield		0	%		0	%
Volatility factor		–134 - 417	%		166 - 339	%
Term		–0.51 - 5 years			0.16 – 4.39 years

12. Related Party Transactions

As of March 31, 2015 and June 30, 2014, the amount due from related party ~~of $179,769 represents an~~was $0. The amount due ~~from~~to an officer of ~~Elite~~the Company as at March 31, 2015 and June 30, 2014 was $35,594. This amount is for ~~funds advanced~~expenses of the Company paid personally by the Officer on behalf of the Company.

~~-15-~~

13. Segments and Geographic Information

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

Segment information is as follows for the three months and nine months ended March 31, ~~2014~~2015 and ~~2013:~~2014:

Segment Information for the three Machine Precision
months ended March 31, 2014 Sales Manufacturing Corporate Total

Revenue $ 1,580,726 $ 838,785 $ - $ 2,419,511

Interest Expense 36,342 79,153 441,830 557,325
Depreciation and Amortization 750 39,244 - 39,994
Income (loss) before taxes 291,422 (46,896 ) (1,218,239 ) (973,713 )
Total Assets 1,613,644 2,976,949 30,645 4,621,238
Capital Expenditure $ - $ 8,000 $ - $ 8,000

Segment Information for the three Machine Precision
months ended March 31, 2013 Sales Manufacturing Corporate Total
Revenue $ 1,431,482 $ 888,337 $ - $ 2,319,819
Interest Expense - 66,878 44,585 111,463
Depreciation and Amortization 750 37,091 2,799 40,640
Income (loss) before taxes (18,914 ) (418,053 ) (178,466 ) (615,433 )
Total Assets 780,201 2,675,766 1,270,213 4,726,180
Capital Expenditure $ - $ - $ - $ -

Segment Information for the nine Machine Precision
months ended March 31, 2014 Sales Manufacturing Corporate Total

Revenue $ 5,787,485 $ 2,665,600 $ - $ 8,453,085
Interest Income - - - -
Interest Expense 134,853 193,968 573,846 902,667
Depreciation and Amortization 1,500 123,747 - 125,247
Income (loss) before taxes 500,068 511,001 (1,608,156 ) (597,087 )
Total Assets 1,613,644 2,976,949 30,645 4,621,238
Capital Expenditure $ - $ 8,000 $ - $ 8,000

~~-16-~~

Segment Information for the nine		Machine			Precision
months ended March 31, 2013		Sales			Manufacturing			Corporate			Total

Segment Information for the three months ended March 31, 2015													Machine Sales		Precision Manufacturing			Corporate			Total

Revenue	$	3,891,147		$	2,850,145		$	-		$	6,741,292		$	1,079,388	$	311,229		$	115,000		$	1,505,617
Interest Income		-			-			-			-
Interest Expense		17,151			199,481			86,296			302,928			40,500		45,000			242,888			328,388
Depreciation and Amortization		2,250			128,790			3,787			134,827			—		79,412			—			79,412
Income (loss) before taxes		(81,042	)		(806,340	)		(468,033	)		(1,355,415	)		276,680		(50,953	)		(1,898,742	)		(1,673,015	)
Total Assets		780,201			2,675,766			1,270,213			4,726,180			326,685		1,534,557			252,719			2,113,961
Capital Expenditure	$	-		$	(53,651	)	$	-		$	(53,651	)	$	—	$	—		$	—		$	—

-16-


Segment Information for the three months ended March 31, 2014	Machine Sales		Precision Manufacturing			Corporate			Total

Revenue	$	1,580,726	$	838,785		$	—		$	2,419,511
Interest Expense		36,342		79,153			441,830			557,325
Depreciation and Amortization		750		39,244			—			39,994
Income (loss) before taxes		291,422		(46,896	)		(1,218,239	)		(973,713	)
Total Assets		1,613,644		2,976,949			30,645			4,621,238
Capital Expenditure	$	—	$	8,000		$	—		$	8,000


Segment Information for the Nine months ended March 31, 2015	Machine Sales			Precision Manufacturing			Corporate			Total

Revenue	$	2,982,497		$	869,904		$	115,000		$	3,967,401
Interest Expense		112,500			135,000			499,604			747,104
Depreciation and Amortization		—			79,412			—			79,412
Income (loss) before taxes		(235,930	)		(541,503	)		(1,773,140	)		(2,550,573	)
Total Assets		326,685			1,534,557			528,299			2,389,541
Capital Expenditure	$	—		$	—		$	—		$	—


Segment Information for the Nine months ended March 31, 2014	Machine Sales		Precision Manufacturing		Corporate			Total

Revenue	$	5,787,485	$	2,665,600	$	—		$	8,453,085
Interest Expense		134,853		193,968		573,846			902,667
Depreciation and Amortization		1,500		123,747		—			125,247
Income (loss) before taxes		500,068		511,001		(1,608,156	)		(597,087	)
Total Assets		1,613,644		2,976,949		30,645			4,621,238
Capital Expenditure	$	—	$	8,000	$	—		$	8,000

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

14. Subsequent Events

~~In April and part of May 2014, the company issued 70,462,554 shares of common stock to the note holders, disclosed in note 8, in settlement of the debt due to these companies.~~

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 before the end of 2015 in a new location with new management.

~~Mr. Percy Cerff was appointed to the Board of Directors on April 21, 2014.~~

On August 7, 2015, the Company entered into a short term loan in the amount of $10,720. This amount is due for repayment together with interest and fees of $1,780 on September 1, 2015. In the event it is not paid the amount may be coverted to stock at 125% of the original note amount and converted at the lower of $0.0002 or a 50% discount to market based on the the lowest price for the 20 consecutive days prior to conversion.

-17-

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 nine month period ended March 31, ~~2014~~2015 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~~three 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.). and M Line Business Services, Inc.

Through Elite we refurbish and sell pre-owned CNC (computer numerically controlled) machine tool equipment and service and rebuild CNC equipment for customers and Precision is a customer focused, industry leading aircraft and medical precision metal component manufacturer offering low cost build-to-print and assembly services for production and spare parts, with design, development and sustaining engineering support services for ~~its~~it’s customers.

~~-17-~~

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

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

Machine Sales Group

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

-18-

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

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

Precision Manufacturing Group

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

Business Services Group

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

Trends Affecting Our Business

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

The primary components sold by our Precision Manufacturing Group during the nine month period ended March 31, 2015and 2014 ~~and 2013~~ were parts sold to Panasonic, a leading provider of in-flight entertainment systems for commercial aircraft. Although the market for in-flight entertainment systems has improved and is expected to continue to improve over the next two to three years, business is still inconsistent, and this may affect our business over the next several months. In addition, if there is a decrease in work, this may have an impact with the Machine Sales Group, as many of our customers that purchase machines from us do business with airline manufacturers.

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

Critical Accounting Policies

Use of Estimates

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

~~-18-~~

-19-

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

Inventories

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

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

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

		For the three		For the three
		months		months
		ended March		ended March
		31,		31,			For the three months ended March 31,			For the three months ended March 31,
		2014		2013	Change			2015			2014		Change

Sales by segment:
Machine Sales	$	1,580,726	$	1,431,482	149,244		$	1,079,388		$	1,580,726	$	(501,338	)
Precision Engineering		838,785		888,337	(49,552	)		311,227			838,785		(527,558	)
Corporate								115,000			—		115,000
		2,419,511		2,319,819	99,692		$	1,505,615		$	2,419,511	$	(913,896	)

Gross Profit by segment:
Machine Sales		637,451		239,390	398,061		$	384,694		$	637,451	$	(252,757	)
Precision Engineering		322,184		119,720	202,464			(271,018	)		322,184		(539,202	)
Corporate								115,000			—		115,000
		959,635		359,110	600,525		$	228,676		$	959,635	$	(676,959	)

Gross Profit by segment: %
Machine Sales		66.43		66.66				168.2			66.43
Precision Engineering		33.57		33.34				(118.5	)		33.57
Corporate								50.3			—

-20-

Sales

Sales in the three month period ended March 31, ~~2014 increased 4.30%~~2015 decreased 37.77% compared to the three month period ended March 31, ~~2013.~~2014.

The change is attributable to ~~an increase~~a decrease in sales in the Machine Sales Group. Sales ~~increased~~decreased by ~~10.43%~~31.72% in the Machine Sales Group and decreased by ~~5.58%~~62.90% 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 2912 pieces of equipment sold in the three months ended March 31, ~~2014~~2015 was ~~$54,442~~$53,093 compared to the comparable period in fiscal ~~2013~~2014 of 2029 pieces of equipment sold at an average sale price of ~~$69,225.~~$54,442. In addition, service work for the three months ended ~~March 31, 2014~~March31, 2015 was ~~$8,635~~$20,620 compared to the comparable period in fiscal ~~2013~~2014 of ~~$33,365.~~$8,635.

~~-19-~~

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 $49,552 in sales of precision metal component parts from Goodrich Aerostructures in the three months ended March 31, 2014.

~~Gross Margin~~

Gross profit increased by 167.23% in fiscal period ended March 31, 2014 compared to the comparable period in fiscal 2013. The gross profit for the Machine Sales Group increased by 166.28% due to an increase in the volume of machines sold during this three month period. The increase within the Precision Manufacturing Group of 169.11% resulted from lower costs of goods sold as a result of an improvement in work flow and 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 $139,005 to $724,055 for the three month period ended March 31, 2014 compared to $863,060 for the three months ended March 31, 2013. The change is due primarily to improved manufacturing efficiencies in the Precision engineering division.

~~Interest Expense~~

Interest expense increased by $445,862 for the three months ended March 31, 2014 compared to the three months ended March 31, 2013. The change is attributable to the amortization of the debt discount related to new notes in 2014.

~~Derivative Gain (Loss)~~

The derivative loss for the three month period ended March 31, 2014 was $651,968 compared to that of the comparable period in 2013 amounting to $0. The loss was the result of the new notes in 2014 that qualified as derivatives.

~~Results of Operations for the Nine Months Ended March 31, 2014 compared to the Nine Months Ended March 31, 2013.~~

For the nine For the nine
months months
ended March ended March
31, 31,
2014 2013 Change

Sales by segment:
Machine Sales $ 5,787,485 $ 3,891,147 1,896,338
Precision Engineering 2,665,600 2,850,145 (184,545 )
8,453,085 6,741,292 1,711,793

Gross Profit by segment:
Machine Sales 1,564,034 753,614 810,420
Precision Engineering 1,316,750 905,223 411,527
2,880,784 1,658,837 1,221,947

Gross Profit by segment: %
Machine Sales 54.29 45.43
Precision Engineering 45.71 54.57

~~-20-~~

~~Sales~~

~~Sales in the nine month period ended March 31, 2014 increased 25.39% compared to the nine month period ended March 31, 2013.~~

~~The change is attributable to an increase in sales in the Machine Sales Group. Sales increased by 48.73% in the Machine Sales Group and decreased by 6.47% 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 105 pieces of equipment sold in the nine months ended March 31, 2014 was $51,373 compared to the comparable period in fiscal 2013 of 58 pieces of equipment sold at an average sale price of $62,347. In addition, service work for the nine months ended March 31, 2014 was $232,709 compared to the comparable period in fiscal 2013 of $48,131.

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

The decrease in sales in the Precision Manufacturing Group is primarily the result of a net decrease of ~~$184,545~~$161,526 in sales of precision metal component parts from ~~Goodrich Aerostructures~~Panasonic Avionics Corporation in the ~~nine~~three months ended March 31, ~~2014.~~2015.

Gross Margin

Gross profit ~~increased~~decreased by ~~73.66%~~70.54% in fiscal period ended March 31, ~~2014~~2015 compared to the comparable period in fiscal ~~2013.~~2014. The gross profit for the Machine Sales Group ~~increased~~decreased by ~~107.54%~~39.65% due to a decrease in the volume of machines sold during this three month period. The decrease within the Precision Manufacturing Group of 167.36% 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.

Selling, General and Administrative

Selling, general and administrative costs decreased by $554,767 to $169,288 for the three month period ended March 31, 2015 compared to $724,055 for the three month period ended March 31, 2014. The change is attributable to lower costs primarily for administrative salaries in all of our subsidiaries and lower legal and professional expenses.

Interest Expense

Interest expense decreased by $228,937 for the three month period ended March 31, 2015 compared to the three months ended March 31, 2014. The change is attributable to lower interest costs for TCA a reduction in costs relating to Notes payable as a result of derivative costs being lower as computed using the Black Sholes method.

Derivative Gain (Loss)

The derivative loss for the three month period ended March 31, 2015 was $971,946 compared to $651,968 for the three month period ended December 31, 2014. The derivative costs are computed on convertible promissory notes with the ability to convert to shares at a discount from market price. Until the loans are repaid a charge is included on our financial statements that reflected the possible derivative liability that could result if the loan were converted to shares in the company. The derivative liability was calculated using the Black Sholes method.

Gain (Loss) on debt extinguishment

The gain (loss) on debt extinguishment was $6,283 for the three months ended March 31, 2015 as compared to $0 for the three months ended March 31, 2014.

-21-

Results of Operations for the Nine Months Ended March 31, 2015 compared to the Nine Months Ended March 31, 2014.

	For the nine months ended March 31,			For the nine months ended March 31,
	2015			2014		Change

Sales by segment:
Machine Sales	$	2,982,497		$	5,787,485		(2,804,988	)
Precision Engineering		869,902			2,665,600		(1,795,698	)
Corporate		115,000			—		115,000
		3,967,399			8,453,085		(4,485,686	)

Gross Profit by segment:
Machine Sales		537,656			1,564,034		(1,026,378	)
Precision Engineering		(392,577	)		1,316,750		(1,709,327	)
Corporate		115,000			—		115,000
		260,079			2,880,784		(2,620,705	)

Gross Profit by segment: %
Machine Sales		206.7			54.29
Precision Engineering		(150.9	)		45.71
Corporate		44.2

Sales

Sales in the nine month period ended March 31, 2015 decreased 53.07% compared to the nine month period ended March 31, 2014.

The change is attributable to decreases in sales in the Machine Sales and the Precision Engineering Groups. Sales decreased by 48.47% in the Machine Sales Group and by 67.37% 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 47 pieces of equipment sold in the nine months ended March 31, 2015 was $50,726 compared to the comparable period in fiscal 2014 of 105 pieces of equipment sold at an ~~increase~~average sale price of $51,373. In addition, service work for the nine month ended March 31, 2015 was $20,320 compared to the comparable period in fiscal 2014 of $232,709.

The decrease in sales in the Precision Manufacturing Group is primarily the result of a net decrease of $1,334,129 in sales of precision metal component parts from Panasonic Avionics Corporation in the nine months ended March 31, 2015.

-22-

Gross Margin

Gross profit decreased by 90.97% in fiscal period ended March 31, 2015 compared to the comparable period in fiscal 2014. The gross profit for the Machine Sales Group decreased by 65.62% due to a decrease in the volume of machines sold during this nine month period. The ~~increase~~decrease within the Precision Manufacturing Group of ~~45.46%~~129.81% resulted from ~~lower~~higher costs of goods ~~sold as a result~~in relation to lower sales due primarily to the move of ~~an improvement~~our business from the Tustin location to our new location 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.~~Anaheim.

Selling, General &and Administrative

Selling, general and administrative costs decreased by ~~$836,218~~$376,505 to $1,498,601 for the nine month period ended March 31, 2015 compared to $1,875,106 for the nine month period ended March 31, 2014 compared to $2,711,324 for the nine months ended March 31, 2013. The change is primarily due to the write back of the overprovision for 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 $599,739 for the nine months ended March 31, 2014 compared to the nine months ended March 31, 2013.~~2014. The change is attributable to ~~amortization~~lower costs primarily for administrative salaries in all of ~~debt discount related~~our subsidiaries and lower legal and professional expenses.

Interest Expense

Interest expense decreased by $155,563 for the three month period ended March 31, 2015 compared to ~~new notes~~the three months ended March 31, 2014. The change is attributable to lower interest costs for TCA a reduction in ~~2014~~costs relating to Notes payable as ~~well~~a result of derivative costs being lower as computed using the ~~recognition of amortization of deferred financing fees.~~Black Sholes method.

Derivative Gain (Loss)

~~There~~

The derivative loss for the nine month period ended March 31, 2015 was ~~a derivative (loss) of~~$1,623,118 compared to $700,098 for the nine month period ended March 31, ~~2014 and $0~~2014. The derivative costs are computed on convertible promissory notes with the ability to convert to shares at a discount from market price. Until the loans are repaid a charge is included on our financial statements that reflected the possible derivative liability that could result if the loan were converted to shares in the ~~comparable period in 2013.~~company. The derivative liability was calculated using the Black Sholes method.

Gain (Loss) on debt extinguishment

Loss on debt extinguishment increased by $159,234 for the nine months ended March 31, 2015 compared to the nine months ended March 31, 2014. The change is ~~due to~~primarily from the ~~additional~~conversion of the convertible notes ~~that qualified as derivatives in 2014.~~and settlement of the corresponding derivative liabilities.

Liquidity and Capital ~~Resources~~Resources.

Our principal sources of liquidity consist of cash and cash equivalents, cash generated from operations and borrowing from various sources, including repayment of debt by the issue of common stock. As of March 31, ~~2014,~~2015, our working capital (current assets less current liabilities) totaled ($~~3,356,276)~~9,220,092) compared to ~~$(3,983,660)~~$(6,755,853) as of June 30, ~~2013,~~2014, a decrease of ~~$627,384.~~$2,464,239

The Company has an accumulated deficit of $23,241,250 as of March 31, 2015 and negative working capital. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

As of March 31, ~~2014~~2015 we had ~~$1,641,215~~$2,510,453 in debt outstanding under our Accounts Receivable and Inventory line of Credit with TCA Global Credit Master Fund, ~~LP.~~LP and an equipment line of credit with Eqfin, LLC for $274,250.

~~-21-~~

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

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

-23-

Cash Flows

~~The following table sets forth our cash flows for the nine month periods ended March 31, 2014 and 2013.~~

Provided by (used in)	2014		2013		Change		2015		2014		Change

Operating activities	(284,346	)	73,697		(358,043	)	(400,930	)	(284,346	)	(116,584	)
Investing activities	(8,000	)	(53,650	)	45,650		35,000		(8,000	)	43,000
Financing activities	297,189		115,212		181,977		321,890		297,189		24,701
	4,843		135,259		130,416		(44,040	)	4,843		(48,883	)

Operating Activities

Operating cash flows during the nine month ~~periods~~period ended March 31, ~~2014~~2015 and ~~2013,~~2014, 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 nine month period ended March 31, ~~2014,~~2015, non-cash expenses included in our net income and in operating activities totaled ~~$1,636,070~~$2,569,241 compared to ~~$515,578~~$1,636,070 in ~~the~~ nine month period ended March 31, ~~2013.~~2014.

The increase (decrease) in operating assets and liabilities for the nine month period ended March 31, 2015 and 2014 were $797,816 and ~~2013 were~~ $(1,321,635) ~~and $915,610,~~, respectively. During the nine month period ended ~~March31, 2014,~~March 31, 2015, the ~~decrease~~increase was primarily attributable to an increase in inventory, and accounts ~~receivable,~~payable and ~~inventory.~~accrued expenses.

Investing Activities

We made proceeds from disposition of assets and capital expenditures of ~~$8,000~~$35,000 and ~~$(53,650)~~$(8,000) during the nine month period of the fiscal ~~2014~~2015 and ~~2013~~2014 period, respectively.

Financing Activities

Net cash ~~provided by~~used in financing activities was $321,890 for the nine months ended March 31, 2015, compared to $297,189 for the nine months ended March 31, ~~2014, compared to $115,212 for the nine months ended March 31, 2013.~~2014.

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.

~~-22-~~

-24-

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of December 31, 2012, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of ~~September 30, 2013,~~March 31, 2015, 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 material weaknesses in our company.

Changes in Internal Control over Financial Reporting

There have been no changes to our internal control over financial reporting during our nine month period ended March 31, ~~2014.~~2015.

~~PART II—OTHER INFORMATION~~

Item 5. Litigation

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

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

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

No provision has been made in the March 31, 2015 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.

		~~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 March 31, 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 remote.

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

Plaintiff filed this Complaint on October 2, 2008.

-25-

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

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

A provision has been made in the March 31, 2015 and June 30, 2014 financial statements with respect to this matter in the sum of $37,500.

		~~Plaintiff filed this Complaint on October 2, 2008.~~

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

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

		~~A provision has been made in the March 31, 2014 financial statements in litigation payable with respect to this matter in the sum of $37,500.~~

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

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

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, which sum has been provided for in the financial statements.

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”).

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

-26-

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.

	6.	Fadal Machining v. All American CNC Sales, et ~~al.~~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, and arises from a claim by Fadal that All American failed to pay amounts due. On June 26, 2009, Fadal amended the Complaint to include M Line Holdings, Inc. as a Defendant.

~~-23-~~

The Complaint was filed on June 12, 2009.

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

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

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

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

		The Company has made a provision in the sum of $60,000 in the financial statements in accounts payable as of June 30, 2013 but no payments that are due under the settlement agreement have been made. Judgment was entered on June 16, 2011, and a Writ for collection was issued on February 24, 2012.

	4.	~~Fox Hills Machining v. CNC Repos~~~~, Orange County Superior Court, Orange County, California, Case No. 30-2009- 00121514.~~

		~~The Complaint was filed on April 14, 2009.~~

		The Complaint alleges causes of action for Declaratory Relief, Breach of Contract, Fraud, Common Counts, and Negligent Misrepresentation, claiming the Defendant failed to pay Fox Hills Machining for the sale of two machines from Fox Hills to CNC Repos. The damages sought in the Complaint are estimated to be approximately $40,000. Court records show that a stipulated judgment was entered on August 27, 2012; a writ was issued on September 9, 2012.

		~~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.~~

	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.

The parties reached a settlement. The terms of the settlement call for 12 payments of $5,000 per month commencing August 25, 2011 and the issuance of 150,000 shares of common stock. The Company has issued the 150,000 shares of common stock and made two payments to date. The Company has a provision in the sum of $50,000 in the financial statements as of March 31, 2015, and June 30, 2014.

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

		~~A former attorney for M Line Holdings, Inc. has sued seeking damages for failure to pay legal fees in the amount of $120.166.~~
8.
		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 March 31, 2014.

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

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

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 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 in litigation payable as of March 31, 2014.~~

~~To date, there has been no further action on this case.~~

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

~~-24-~~

	8.	~~Douglas Technologies Group, Inc. v Elite Machine Tool Company and Lawrence Consalvi, et al., case number 30- 2013-00657906-CU-FR-CJC~~.

		This suit was filed on June 20, 2013 in respect of an alleged deficiency in the machine supplied to Douglas Technologies. The Company decided to settle the lawsuit and thereby entered into a settlement agreement with the customer.

~~This case was settled on November 5, 2013 for $50,000 requiring a commencing payment of $10,000 on November 15, 2013 with the balance being paid in 8 monthly installments of $5,000 each.~~

~~Payments amounting to of $30,000 were made during the period ended March 31, 2014.~~

~~The balance of the provision in accounts payable is $20,000 at March 31, 2014.~~

	9.	~~Donald Yu. v M Line Holdings, Inc., Anthony L Anish and Jitu Banker, et al., case number 30-2012-005-740-19-CU- BC-CJC~~.

		~~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.~~

		~~The case was settled on September 25, 2013 for $24,000 requiring two payments of $12,000 each, payable on September 30, 2013 and October 30, 2013.~~

		~~The Company made the first payment of $12,000 on September 30, 2013 but has not made the second payment due on October 30, 2013.~~

		~~A provision in the sum of $12,000 has been made in the financial statements in accrued expenses as of March 31, 2014.~~

	~~10.~~	~~Alu Forge, Inc., dba American Handforge . v Jitu Banker, Precision Aerospace & Technologies, Inc., and M Line~~~~Holdings, Inc., et al., 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. 30-2013-0063058~~6

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 $35,000~~ has been made in the financial statements ~~in accounts payable,~~ as of March 31, 2015 and June 30, 2014.

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

-27-

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

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

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

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

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

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

The Company has accrued $2,510,453 and $2,330,453 in the financial statements that includes all interest and fees due to Plaintiff through March 31, 2015, and June 30, 2014, respectively.

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

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

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

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

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

~~-25-~~

Item 1A. Risk Factors.

As a smaller reporting company we are not required to provide the information required by this Item. However, we did include risk factors in our Annual Report on Form 10-K for the year ended June 30, ~~2013,~~2014, as filed with the Commission on ~~December 31, 2013.~~June 24, 2015.

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

The Company issued ~~59,740,102~~756,377,301 shares of the ~~Company's~~Company’s common stock ~~in settlement~~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 Media, Newport Coast Securities, Bruce Barren and American Capital Ventures~~these financial institutions 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~~Upon Senior Securities.

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

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

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

~~Item No.~~

(1)


Item No.		Description

3.1 (1)		Articles of Incorporation of M Line Holdings, Inc., a Nevada corporation, as amended

3.2 (5)		Certificate of Amendment of Articles of Incorporation

~~3.2~~^{3.3 (1)}		Bylaws of M Line Holdings, Inc., a Nevada corporation

3.3 (2)		Amended By Laws of M Line Holdings, inc. a Nevada Corporation

10.1⁽¹⁾		Asset Purchase Agreement with CNC Repos, Inc. and certain of its shareholders dated October 1, 2007

10.2⁽¹⁾		Commercial Real Estate Lease dated February 15, 2007 for the office space located in Tustin, CA.-

10.3⁽¹⁾		Commercial Real Estate Lease dated November 15, 2007 for the office space located in Anaheim, CA

10.4⁽¹⁾		~~Share Exchange~~Employment Agreement with ~~Gledhill/Lyons, Inc.~~Timothy D. Consalvi dated ~~March 26,~~February 1, 2007

10.5⁽¹⁾		~~Share Exchange~~Employment Agreement with ~~Nu-Tech Industrial Sales, Inc.~~Anthony L. Anish dated ~~March 19, 2007~~ January 1, 2015

10.6⁽¹⁾ (2)		Employment Agreement with Jitendra Banker dated January 1, 2015

10.7 (1)		Settlement Agreement with TCA Global Credit Master Fund, LP

10.9 (1)		Fee Agreement with Steve Kasprisin dated April 30, 2008

~~10.7~~⁽²⁾10.10 (3)		Separation Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence A. Consalvi dated September 26, 2008

-29-


~~10.8~~⁽³⁾10.11 (4)		~~Independent Contractor~~Sales Agent Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence A.

~~-26-~~

	Consalvi dated September 30, 2008

~~10.9~~10.12 (4)	⁽³⁾	Loan Agreements with Pacific Western Bank dated September 20, 2008 -

~~10.10~~10.13 (5)	⁽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⁾
10.14 (5)		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⁾
10.15 (6)		Letter of Intent by and between M Line Holdings, Inc. and Money Line Capital, Inc. dated June 30, 2010

~~10.13~~10.16 (8)	⁽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~~10.18 (8)	⁽⁶⁾	Commercial Real Estate Lease with SG&H Partners, L.P. for Anaheim Property dated ~~August 13, 2010~~ July 1, 2015

~~10.16~~10.19 (8)	⁽⁶⁾	Business Loan Agreement with Pacific Western Bank dated June 7, 2010

~~10.17~~10.20 (8)	⁽⁷⁾	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

~~10.18~~	⁽⁷⁾
10.24		Executive Employee Agreement with Barton Webb dated July 25, 2011

~~10.19~~21 (7)	⁽⁸⁾~~Loan and Security Agreement with Utica Leaseco, LLC dated as~~	List of ~~October 8, 2012~~ Subsidiaries

~~10.19~~	~~Loan Agreements with TCA Global Credit master Fund, LP~~

~~10.20~~31.1	⁽⁸⁾~~Note and Stock Purchase Agreements with Spagus Capital Partners, LLC dated September 29, 2011~~

~~10.21~~	~~Executive Employee Agreement with Anthony L. Anish dated July 17, 2013~~

~~10.22~~	~~Executive Employee Agreement with Jitu Banker dated July 17, 2013~~

21	~~List of Subsidiaries~~

~~31.1~~	Rule 13a-14(a)/15d-14(a) Certification of George Colin (filed herewith).

31.2		Rule 13a-14(a)/15d-14(a) Certification of Jitu Banker (filed herewith).

32.1		Section 1350 Certification of George Colin (filed herewith).

32.2		Section 1350 Certification of Jitu Banker (filed herewith).

~~____________________~~

~~(1)~~	~~Previously filed with Registration Statement on Form 10-12G filed with the Commission on May 16, 2008.~~
~~(2)~~	~~Previously filed with First Amended Current Report on Form 8-K/A filed with the Commission on October 10, 2008.~~
~~(3)~~	~~Previously filed with Quarterly Report on Form 10-Q for the period ended September 30, 2008 filed with the Commission on November 13, 2008.~~
~~(4)~~	~~Previously filed with Current Report on Form 8-K filed with the Commission on April 24, 2009.~~
~~(5)~~	~~Previously filed with Current Report on Form 8-K filed with the Commission on July 6, 2009.~~
~~(6)~~	~~Previously filed with Annual Report on Form 10-K for the period ended June 30, 2010 filed with the Commission on November 12, 2010.~~
~~(7)~~	~~Previously filed with Annual Report on Form 10-K for the period ended June 30, 2011 filed with the Commission on October 13, 2011.~~
~~(8)~~	~~Previously filed with Annual Report on Form 10-K for the period ended June 30, 2012 filed with the Commission on October 16, 2012.~~ -30-

~~-27-~~

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

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

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

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

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

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

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

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

-31-

SIGNATURES

~~SIGNATURES~~

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

			M Line Holdings, Inc.

Dated: ~~May 20, 2014~~August 19, 2015		/s/ Bruce Barren
	By:	Bruce Barren
		President, Chief Executive
		Officer and a Director

Dated: ~~May 20, 2014~~August 19, 2015		/s/ Jitu Banker
	By:	Jitu Banker
		Chief Financial Officer,
		and a Director

~~-28-~~

-32-

Assets
		As of March 31			As of June 30
		2014			2013
Current assets:

Cash and cash equivalents	$	187,148		$	182,305
Accounts receivable, net		2,044,498			990,010
Inventory, net		1,654,593			1,555,910
Due from related party		179,769			99,348
Deferred financing costs		-			199,516

Total current assets		4,066,008			3,027,089

Property and equipment, net		439,308			556,555

Deposits and other		115,922			113,445

Total assets	$	4,621,238		$	3,697,089

Liabilities and shareholders' equity

Current liabilities:
Bank overdraft	$	80,366		$	85,542
Accounts payable		1,404,470			1,421,626
Accounts payable - related party		43,454			43,454
Accrued expenses and other		2,753,988			2,788,697
Litigation payable		137,500			137,500
Derivative liability		605,987			-
Line of credit		1,641,215			1,702,726
Notes payable - current, net of debt discount of $292,142 and $69,996 respectively.		701,403			675,961
Current portion of capital lease obligations		53,901			54,501
Deferred income		-			10,000
Total Current Liabilities		7,422,284			6,920,007

Notes payable - net of current portion		274,194			318,903

Capital lease obligation, net of current portion		50,917			90,742

Total liabilities		7,747,395			7,329,652

Commitments and contingencies		-			-

Shareholders' equity:

Preferential stock: $0.001 par value, 10,000,000 shares authorized, 200,000 shares issued and outstanding at March 31, 2014 and June 30, 2013 respectively		200			200
Common stock: $0.001 par, 500,000,000 shares authorized, 145,951,247 and 70,211,145 shares issued and outstanding at March 31, 2014 and June 30, 2013, respectively		145,951			70,211

Additional paid in capital		11,798,044			10,741,397

Subscription receivable		(27,200	)		-

Accumulated deficit		(15,043,152	)		(14,444,371	)

Total shareholders' equity		(3,126,157	)		(3,632,563	)

Total liabilities and shareholders' equity	$	4,621,238		$	3,697,089

		Three months ended March 31,						Nine months ended March 31,
		2014			2013			2014			2013

Net sales	$	2,419,511		$	2,319,819		$	8,453,085		$	6,741,292
Cost of sales		1,459,876			1,960,709			5,572,301			5,082,455
Gross profit		959,635			359,110			2,880,784			1,658,837

Operating expenses:
Selling, general and administrative		724,055			863,060			1,875,106			2,711,324
Amortization of intangible assets		-			-			-			-
Total operating expense		724,055			863,060			1,875,106			2,711,324

Operating income (loss)		235,580			(503,950	)		1,005,678			(1,052,487	)

Other expenses
Interest expense		(557,325	)		(111,463	)		(902,667	)		(302,928	)

Derivative loss		(651,968	)		-			(700,098	)		-

Total other expenses		(1,209,293	)		(111,463	)		(1,602,765	)		(302,928	)

Loss before income tax		(973,713	)		(615,413	)		(597,087	)		(1,355,415	)

Income tax provision		-			-			(1,694	)		(2,086	)
Net loss	$	(973,713	)	$	(615,413	)	$	(598,781	)	$	(1,357,501	)

Net loss per share:
Basic and dilutive loss per share:	$	(0.01	)		(0.01	)	$	(0.01	)	$	(0.02	)

Weighted average number of common shares under in per share calculations (basic and diluted)		104,796,533			62,234,201			87,226,691			58,266,218

		March 31,			June 30,
		2014			2013
Finished Goods and Components	$	1,194,034		$	971,099
CNC Machines held for sale		265,500			364,583
Work in Progress		378,419			415,108
Raw Materials and Parts		16,640			5,120
		1,854,593			1,755,910
Less: Reserve for inventories		(200,000	)		(200,000	)
Inventories, net.	$	1,654,593		$	1,555,910

Two unsecured convertible notes payable in the sum of $110,751, $55,463 of which have been converted to common stock, net of discount of $4,407.	50,881	-

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.	137,810	354,459

Two unsecured convertible notes payable in the sum of $110,751, $18,500 of which have been converted to common stock, net of discount of $35,209	57,042	-

Two unsecured convertible notes payable in the sum of $110,751, $48,750 of which have been converted to common stock, net of discount of $10,001	52,000	-

An unsecured note payable to a corporation in weekday amounts of $700, increasing to $1,650, in September 2013 through December 2013. This note is currently past due.	40,300	86,624

An unsecured note payable to a corporation in weekday amounts of $691 each, ending in December 2013. This note is currently past due.	57,121	84,030

An unsecured note payable to a corporation in weekday amounts of $890 each, ending in October 2014, net of a discount of $12,724.	69,911	-

An unsecured note payable to a corporation in weekday amounts of $841 each, ending in February 2014. This note is currently past due.		105,351		-

TOTAL		975,597		994,864
Less Current Portion		701,403		675,961
Long Term Portion	$	274,194	$	318,903

2014		701,403		675,961
2015		143,537		123,780
2016		130,657		123,780
2017		-		71,343
Thereafter		-		-
		975,597		994,864

		At Issuance		March 31, 2014
Market value of stock on measurement date	$	0.01 - 0.03	$	0.01
Risk-free interest rate		0.07 - 0.35%		0.13 – 0.44%
Dividend yield		0%		0%
Volatility factor		256 - 343%		321 -334%
Term		0.26 - 2 years		0.84 – 1.9 years

Segment Information for the three		Machine		Precision
months ended March 31, 2014		Sales		Manufacturing			Corporate			Total

Revenue	$	1,580,726	$	838,785		$	-		$	2,419,511

Interest Expense		36,342		79,153			441,830			557,325
Depreciation and Amortization		750		39,244			-			39,994
Income (loss) before taxes		291,422		(46,896	)		(1,218,239	)		(973,713	)
Total Assets		1,613,644		2,976,949			30,645			4,621,238
Capital Expenditure	$	-	$	8,000		$	-		$	8,000

		For the nine		For the nine
		months		months
		ended March		ended March
		31,		31,
		2014		2013	Change

Sales by segment:
Machine Sales	$	5,787,485	$	3,891,147	1,896,338
Precision Engineering		2,665,600		2,850,145	(184,545	)
		8,453,085		6,741,292	1,711,793

Gross Profit by segment:
Machine Sales		1,564,034		753,614	810,420
Precision Engineering		1,316,750		905,223	411,527
		2,880,784		1,658,837	1,221,947

Gross Profit by segment: %
Machine Sales		54.29		45.43
Precision Engineering		45.71		54.57