M LINE HOLDINGS INC - FORM 10-K

Attached files

file	filename
EX-21 - M LINE HOLDINGS INC	v162591_ex21.htm
EX-32.2 - M LINE HOLDINGS INC	v162591_ex32-2.htm
EX-31.1 - M LINE HOLDINGS INC	v162591_ex31-1.htm
EX-32.1 - M LINE HOLDINGS INC	v162591_ex32-1.htm
EX-31.2 - M LINE HOLDINGS INC	v162591_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

x	ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2009

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____________ to _____________.

Commission file number 000-53265

M LINE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

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

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

Registrant’s telephone number, including area code (714) 630-6253

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered

None		None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes x No ¨

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

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

Aggregate market value of the voting stock held by non-affiliates: $2,790,096 as based on last reported sales price of such stock. The voting stock held by non-affiliates on that date consisted of 13,950,480 shares of common stock.

Applicable Only to Registrants Involved in Bankruptcy Proceedings During the Preceding Five Years:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of October 7, 2009, there were 30,861,956 shares of common stock, par value $0.001, issued and outstanding.

Documents Incorporated by Reference

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.

M Line Holdings, Inc.

TABLE OF CONTENTS

PART I

ITEM 1 – BUSINESS	1
ITEM 1B – UNRESOLVED STAFF COMMENTS	20
ITEM 2 - PROPERTIES	20
ITEM 3 - LEGAL PROCEEDINGS	21
ITEM 4 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	24

PART II

ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	25
ITEM 6 – SELECTED FINANCIAL DATA	26
ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION	26
ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	38
ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	38
ITEM 9A – CONTROLS AND PROCEDURES
ITEM 9A(T) – CONTROLS AND PROCEDURES	39
ITEM 9B – OTHER INFORMATION	41

PART III

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNACE	41
ITEM 11 – EXECUTIVE COMPENSATION	43
ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	48
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	49
ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES	51

PART IV

ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES	52

PART I

Explanatory Note

This Annual Report includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the “Exchange Act”). These statements are based on management’s beliefs and assumptions, and on information currently available to management. Forward-looking statements include the information concerning possible or assumed future results of operations of the Company set forth under the heading “Management's Discussion and Analysis of Financial Condition or Plan of Operation.” Forward-looking statements also include statements in which words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “consider” or similar expressions are used.

Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Company's future results and shareholder values may differ materially from those expressed in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements.

ITEM 1 – BUSINESS

Corporate History

M Line Holdings, Inc. (“We,” “M Line” or “Company”) was incorporated in Nevada on September 24, 1997, under the name Gourmet Gifts, Inc. Prior to December 11, 2001, we were engaged in the business of catalogue retail gifts. At the time, our principal business activity entailed the packaging, sale and delivery of seasonal gourmet food and beverage items. However, due to difficulty in raising additional working capital to execute our business plan, we ceased operations, and subsequently completed a reverse merger with E.M. Tool Company, Inc., a California corporation d.b.a. Elite Machine Tool Company (“Elite Machine”).

Acquisition of Elite Machine and Reverse Acquisition Accounting

On December 11, 2001, we finalized an agreement to acquire 100% of the issued and outstanding capital stock of Elite Machine. Immediately prior to the merger, we had 100,000,000 shares authorized, of which 6,768,000 shares were outstanding. Pursuant to the merger, all of the outstanding shares of Elite Machine, aggregating 21,262 shares, were exchanged for shares of our common stock on a 1 to 1,274 basis or into 27,072,000 (net of 600,000 shares subsequently cancelled) shares of our common stock leaving a total of 33,240,000 shares of common stock issued and outstanding after the merger. Immediately after the merger, our previous officers and directors resigned and the executive officers and directors of Elite Machine were elected and appointed to such positions, thereby effecting a change of control.

Due to the change in voting control and change in senior management in Gateway as a result of the merger, the transaction was recorded as a “reverse-merger” whereby Elite Machine was considered to be the acquirer for accounting purposes. At the closing of the reverse merger, Elite Machine became our wholly-owned subsidiary and we changed our corporate name to Gateway International Holdings, Inc., effective January 28, 2002.

Gateway International Holdings, Inc. changed its name to M Line Holdings, Inc. effective March 25, 2009.

After the merger, through Elite Machine, we were a company engaged in the acquisition, refurbishment, distribution and sales of pre-owned computer numerically controlled (“CNC”) machine tools to manufacturing customers across the United States of America. This was our sole business from this point until we acquired the additional businesses listed herein.

Acquisition of Eran Engineering, Inc.

In October, 2003, pursuant to a Stock Purchase Agreement, dated June 17, 2003, we acquired all the issued and outstanding shares of Eran Engineering, a California corporation, from its two shareholders, Hans B. Thallmayer and Alice Thallmayer, for an aggregate purchase price of $1,250,000. In addition to a cash payment of $650,000, which was credited to the purchase price, we executed a promissory note in favor of the sellers in the principal amount of $600,000, payable in three equal annual installments of $200,000 and accruing simple interest at the rate of six percent (6%) per annum. Our obligation under the promissory note was secured by the pledge by Lawrence A. Consalvi, a former Director and former President and Chief Executive Officer, and Joseph T.W. Gledhill, a former Vice President and Director, of a security interest in certain shares of our common stock worth approximately $4,285,716 as of the date of the pledge. Concurrently with the closing of the acquisition, Eran Engineering purchased from R & H Investments, a partnership owned by the two selling shareholders of Eran Engineering, the building in which Eran Engineering operates its business. The purchase price for the building was $1,250,000, and was paid as follows:

$650,000 in cash and;

A promissory note in the principal amount of $600,000, bearing simple interest at the rate of 6% per annum.

The cash portion of the purchase price paid by us for Eran Engineering and the building was financed pursuant to a term loan from Financial Federal Credit (“FFC”), in the principal amount of $1,300,000. The loan from FFC was primarily secured by a deed of trust on the building acquired by Eran Engineering and a security interest in all the equipment owned by Eran Engineering. This note has been paid in full.

Further, in connection with the acquisition, Eran Engineering entered into employment agreements with Erich Thallmayer to serve as the President and Chief Executive Officer of Eran Engineering at an annual base salary of $105,600 and with Hans Thallmayer to serve as its Operating Manager at an annual base salary of $90,000. Our former Director and Vice President, Joseph T.W. Gledhill, subsequently replaced Erich Thallmayer as the company's President and Chief Executive Officer. Hans Thallmayer is no longer employed as the company's Operating Manager. We have no obligation to either Erich Thallmayer or Hans Thallmayer in connection with their past employment agreements.

As discussed below, Eran Engineering manufactures and assembles specialized, precision components used in the commercial aviation, medical, aerospace and defense industries. Joseph T.W. Gledhill, a former Director and Executive Vice President of the Company, currently serves as the President of Eran Engineering.

Acquisition of CNC Sales, Inc.

All American CNC Sales, Inc. (“All American”) is a California corporation and was incorporated on November 4, 1993. All American was founded by our former Chief Executive Officer, Timothy D. Consalvi, and his wife. In October, 2004, pursuant to a share exchange agreement, we acquired all the outstanding shares of All American from Mr. Consalvi and his wife in exchange for 1,000,000 shares of our common stock. On December 21, 2005, we issued an additional 500,000 shares to the original shareholders pursuant to the earn-out provisions of the share exchange agreement, which provided that if All American’s gross profit exceeded the stated goal of $300,000 for each of fiscal year 2005 and fiscal year 2006, we would issue to the shareholders an aggregate of 250,000 shares for each year such target was reached. During the year ended September 2005, shortly after the first target measurement period, for which period the gross profit threshold was achieved for the issuance of 250,000 shares, our Board of Directors agreed to issue the second traunch of 250,000 shares even though the gross profit threshold had not been achieved.

In connection with the acquisition, we entered into an employment agreement with Timothy Consalvi, the President and CEO of All American at the time of the exchange, for him to continue as President of All American. The agreement was superseded on November 20, 2006 with the execution of a new employment agreement under which Mr. Consalvi became our President and Chief Executive Officer. Timothy Consalvi was elected to our Board of Directors in March, 2005. Timothy Consalvi is the brother of Lawrence A. Consalvi, formerly the President of Elite Machine and formerly both one of our Directors and an Executive Vice President. Timothy Consalvi resigned from our Board of Directors effective March 25, 2009, and is no longer with the company in any capacity effective June 30, 2009.

All American was involved in selling new CNC machine tools but we elected to cease operations of All American effective June 30, 2009 since it was not economically feasible to continue to with its operations.

Acquisition of Assets of CNC Repos, Inc..

On October 1, 2007, pursuant to an Asset Purchase Agreement, we acquired certain assets of CNC Repos, Inc., in exchange for 1,000,000 shares of our common stock. At the request of CNC Repos, these shares were delivered to Douglas Redoglia, Kenneth Collini, and Starr Garcia, all of whom were principals of CNC Repos. The primary assets we purchased from CNC Repos were the following: (i) all the rights to use CNC Repos, Inc., including any intellectual property in the name, (ii) all customer lists, contact lists, and vendor lists of CNC Repos, (iii) a list of all customers that purchased machines in that past 24 months, and (iv) a list of all banks and other financial institutions that CNC Repos had a relationship with over the past 36 months. CNC Repos was a company that was in the business of purchasing used CNC machines, refurbishing them, and reselling them to third parties, similar to Elite Machines.

In connection with the acquisition of these assets, we entered into employment agreements with Kenneth Collini and Douglas Redoglia, the President and Vice President of CNC Repos, respectively, at the time of the asset purchase. Under the terms of these employment agreements we hired Mr. Redoglia and Mr. Collini to assist our machine tools segment with the purchase and sale of used CNC machines each at an annual salary of $120,000 per year.

Former Acquisitions and Subsidiaries

In early 2007, our management elected to streamline our operations, reorganize our accounting, financial records and reporting systems, restructure our management team, and organize our business activities into two primary operating segments: the Machine Sales Group and the Precision Manufacturing Group. The restructuring of our management team included promoting Timothy Consalvi to the position of Chief Executive Officer, Lawrence A. Consalvi stepping down as our Chief Executive Officer, as well as Lloyd Leavitt, Robert Page and David Lyons resigning from our Board of Directors.

As part of this process, we divested ourselves, through a share re-exchange, of two prior operating subsidiaries that did not integrate with our new business operations and focus, primarily due to the time and resources of management and personnel required to manage and oversee those subsidiaries. Those two former subsidiaries are Nu-Tech Industrial Sales, Inc. and Gledhill/Lyons, Inc.

Nelson Engineering, Inc. (“NEI”)

On October 4, 2002, we entered into an agreement to acquire NEI, a manufacturer of precision machine parts in the electronics, medical and automotive industry sectors for a purchase price of $123,500. The purchase price consisted of the issuance of 6,175,300 shares of our common stock. We valued the shares issued based on the closing stock price on the date of the acquisition.

In the months following the merger, disputes arose between the President and former controlling shareholder of NEI, and our management. As a result, the parties amicably negotiated a Mutual Rescission of Contracts and Release of Claims on May 13, 2003, pursuant to which the merger transaction was rescinded. In connection with the rescission, we returned to the former shareholders of NEI their shares of NEI acquired in the merger, in exchange for their return of the shares of our stock they received in the merger, and the immediate resignation of Don Nelson from our Board of Directors. The agreement also contained mutual releases of any and all claims. Accordingly, NEI no longer operates as our subsidiary or affiliate. The fair market value of the 6,175,300 shares of common stock returned to the Company was $370,518, based on the stock price on the date of the rescission agreement.

Bechler Cams, Inc. (“Bechler”)

On November 15, 2002, we entered into an agreement to acquire Bechler, a machine shop specializing in the manufacturing of precision component parts for customers in the aerospace and defense sectors and surgical instruments and components in the medical sector for a purchase price of $70,600. The purchase price consisted of the issuance of 11,837,500 shares of our common stock. The Company valued the shares issued based on the closing stock price on the date of the acquisition.

Subsequent to the merger, the former owners and executive officers of Bechler commenced litigation against us, our former executives, and the former executive officers of E.M. Tool Company, Inc. alleging, among other things, that the agreement of the Bechler parties to enter into the merger was obtained by fraud. We vigorously denied these allegations and, ultimately, the case was settled pursuant to a Mutual Rescission of Contracts, Settlement Agreement and Release of Claims on November 20, 2003, pursuant to which the merger transaction was formally rescinded. In connection with the rescission, we returned to the former shareholders of Bechler, their shares of Bechler acquired in the merger, in exchange for their return of the shares of our stock acquired in the merger, and the immediate resignation of Daniel Lennert from our Board of Directors. The agreement also contained mutual releases of any and all claims. Accordingly, Bechler no longer operates as our subsidiary or affiliate. The fair market value of the 6,175,300 shares of common stock returned to us was $591,875, based on the stock price of the date of the rescission agreement.

Nu-Tech Industrial Sales, Inc. (“Nu-Tech”)

In March, 2005, we acquired Nu-Tech as a wholly-owned subsidiary from its two shareholders in an exchange of all the outstanding stock of Nu-Tech for an aggregate of 2,500,000 shares of our common stock. At the time of the acquisition, Nu-Tech supplied tools to the automotive, aerospace and medical equipment manufacturing industries. As part of the terms of the acquisition, Robert Page, the president of Nu-Tech, continued in that position. On March 23, 2007, we entered into a share re-exchange agreement with the original shareholders of Nu-Tech whereby we exchanged the shares in the earlier share exchange transaction. We exchanged all the Nu-Tech shares we held for the 2,500,000 shares of our common stock held by the Nu-Tech shareholders less 75,000 shares that those shareholders had previously sold.

Gledhill/Lyons, Inc., dba Accurate Technology (“Accurate”)

In December, 2004, we acquired all the outstanding stock of Accurate from its shareholders in an exchange for an aggregate of 12,000,000 shares of our common stock. At the close of the acquisition, Accurate specialized in the manufacture of precision metal systems with a diverse client base in the aerospace, defense and automotive industries. In connection with the acquisition, Accurate entered into employment agreements with David Lyons, the President of Accurate, to serve as its President, and with William Gledhill, the Vice President of Accurate, to serve as its Vice President and elected Mr. Gledhill as one of our Directors. William Gledhill is the son of Joseph T.W. Gledhill, one of our Directors and the President of Eran Engineering. On March 23, 2007, we entered into a share re-exchange agreement with the past Accurate shareholders and exchanged all the Accurate shares for the 12,000,000 shares of our common stock held by the Accurate principals. As part of the divestiture of Accurate, William Gledhill resigned as one of our Directors.

In addition to divesting our ownership in Nu Tech and Accurate, as part of this reorganization we also streamlined other companies we had either acquired or formed. These companies have been either merged into our existing operations, dissolved, or both. The following is a description of these companies.

ESK Engineering, Inc. (“ESK”)

In December, 2004, we acquired ESK Engineering Inc., a California corporation, as a wholly-owned subsidiary from its sole shareholder, Erich Thallmayer, formally the President of Eran Engineering, through an exchange of all of the outstanding stock of ESK for an aggregate of 219,780 shares of our common stock and a cash payment of $50,000. Prior to the acquisition, ESK had only one major customer: Eran Engineering. Shortly after the acquisition, we transferred the operations of ESK to Eran Engineering and dissolved ESK on June 25, 2007.

Spacecraft Machine Products, Inc. (“Spacecraft”)

In January, 2005, we acquired all the outstanding stock of Spacecraft Machine Products, Inc., a California corporation, in exchange for 600,000 shares of our common stock. The exchange agreement provided for the additional payment of 150,000 shares of our common stock in each year that Spacecraft met certain annual profit goals as follows: $200,000 gross profits by December 31, 2005, $300,000 gross profits by December 31, 2006, and $350,000 by December 31, 2007. We anticipated that the gross profits would exceed the combined profit targets specified in the exchange agreement, and accordingly, on December 21, 2005, our Board of Directors approved and issued all 450,000 contingent shares.

In connection with the acquisition of Spacecraft, we executed a promissory note in favor of the Leavitt Family Trust in the principal amount of $220,000 to be paid in equal monthly installments over a 60-month period, secured by our pledge of a security interest in the Spacecraft stock acquired pursuant to the share exchange. In addition, we issued a second promissory note in the principal amount of $75,000, payable in monthly installments of $6,250.

In connection with the original share exchange transaction, Lloyd R. Leavitt, III, previously the owner of Spacecraft, entered into an employment agreement with us to serve as our Chief Operating Officer during the six months following the closing of the acquisition of Spacecraft at an annual base salary of $115,000. On February 28, 2007, we negotiated a mutually-acceptable termination of his employment agreement.

Spacecraft had been in operation for over 35 years in Torrance, California, operating as a precision machine tool shop specializing in the manufacture of parts for the defense, aerospace and automotive industries. In July, 2005, the operations of Spacecraft were merged with Accurate Technology and we closed the manufacturing facilities of Spacecraft and sold all the equipment, furniture, fixtures and fittings in an auction pursuant to which we received proceeds of $560,000. We dissolved the Spacecraft corporate entity on June 25, 2007.

A-Line Capital Corporation (“A-Line”)

We established A-Line Capital Corporation, a California corporation, in 2004, to provide financial services to consumers seeking financing for the purchase and/or lease of machine tools and equipment. Elite Machine and All American frequently sell machines that are financed through equipment lease financing companies that are not affiliated with us. A-Line was established to capture the income stream that was lost to equipment lease brokers in prior years and to provide equipment lease financing for transactions for our other subsidiaries. No financing agreements were entered into by A-Line and subsequently, we dissolved A-Line as part of our strategy to focus the time and skills of management on our core business.

The Enforcement Action

Our common stock was previously registered with the Securities and Exchange Commission (the “Commission”) under Section 12(g) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Our stock was originally registered on or around September 1999. From September 1999 through our quarterly report for the quarter ended December 31, 2002, we filed the required quarterly and annual reports with the Commission as a reporting company under Exchange Act. However, beginning with our quarterly report for the quarter ended March 31, 2003 through our quarterly report for the quarter ended March 31, 2005 we failed to timely file compliant annual and quarterly reports. Our failure to file these reports was primarily caused by our failure to obtain financial documentation from two companies we acquired in late 2002, Bechler Cams, Inc. and Nelson Engineering, Inc. Our inability to obtain this financial information led to our auditors being unable to adequately review and audit our financial statements, as required under the Exchange Act. Although we requested this information from Bechler Cams, Inc. and Nelson Engineering, Inc., in hindsight there may have been additional actions our previous management and consultants could have taken to obtain this information. Additionally, with proper due diligence, our previous management and consultants should have obtained the financial statements and determined their ability to be audited prior to closing the acquisitions. These are two areas our new management and consultants have looked at closely since that time to ensure this does not occur in the future.

As a result of not getting the required reports on file, the Commission instituted an enforcement proceeding against us in April 2005. Although we were able to eventually file our delinquent reports by unwinding certain acquisitions, the Commission ruled that our audit reports and review were still non-compliant and after a hearing in front of an administrative law judge and a subsequent appeal heard by the Commission, on May 31, 2006, the Commission entered an Order finding the following: i) our conduct with respect to our reporting obligations was “serious, egregious, recurrent, and evidenced a high degree of culpability” as evidenced by our knowledge, through our then Chief Executive Officer, Lawrence A. Consalvi, of our reporting obligations and our failure to file a total of seven annual and quarterly reports due between May 2003 and December 2004; ii) our failure to notify the Commission of our inability to file our periodic reports; iii) our failure to terminate the registration of our common stock; iv) our failure to hire new auditors to replace Squar Milner after they resigned until eighteen months had passed; v) our continuation of an aggressive growth strategy during a time when we were not complying with our Exchange Act reporting requirements; vi) our failure to offer credible assurances against future violations of our reporting obligations under the Exchange Act; and vii) our failure to accept responsibility for our failure to meet our reporting obligations under the Exchange Act, and not taking all measures available to us to obtain the necessary financial information from Bechler Cams, Inc. and Nelson Engineering.

Based on these findings the Commission entered an Order Imposing Remedial Sanctions which revoked the registration of our common stock pursuant to Section 12(j) of the Exchange Act and ordered our then President and Chief Executive Officer, Lawrence A. Consalvi, to cease and desist from causing any violations or future violations of the Exchange Act.

Due to the Commission’s decision to deregister our common stock we were de-listed from the OTC Bulletin Board and Pink Sheets. Our common stock is not currently listed on any national stock exchange or over-the-counter securities market. As discussed below, we are planning to get re-listed on the OTC Bulletin Board at some point in the future and have re-registered our common stock as the first step in this process.

The Remedial Measures and Re-Registration of our Common Stock

We have new and different management since our common stock was deregistered and de-listed. As a result of the Commission’s action, our management underwent a comprehensive review of the primary causes for our delinquent reports, and our inability to timely remedy these issues. Although the primary cause of our inability to file timely compliant reports was the breach of the acquisition agreements by the companies we acquired, there was also inadequate internal financial personnel in place to properly review these acquisitions and perform the day-to-day accounting functions necessary for a reporting company under the Exchange Act. In order to remedy these issues we have undergone numerous changes. With respect to our management, we have undergone the following changes: i) Lawrence A. Consalvi stepped down as our President, Chief Executive Officer , ii) Timothy D. Consalvi was appointed as our President and Chief Executive Officer, and was from November, 2006 until December 2008 when he resigned from those positions; and iii) Stephen M. Kasprisin, who has a long public company accounting background, was our full-time Chief Financial Officer from November 2006 until October 2007, and then was our part-time Chief Financial Officer until March 31, 2009, when he resigned and we hired Mr. Jitu Banker as our full time Chief Financial Officer. With respect to our board of directors, we recently appointed George Colin, Jitu Banker and Robert Sabahat to our board of directors.

Our management, together with our advisors, have discussed the due diligence review, and legal and financial preparations, that must occur prior to closing any future acquisitions. These preparations include full legal review of any letters of intent and acquisition agreements prior to execution, and review of any target company’s financial statements and information by our Chief Financial Officer, controller and outside financial consultants, if any, to ensure the target company’s financial information can be fully audited prior to completing any acquisition. Additionally, as a reporting company under the Exchange Act, we conduct quarterly and annual evaluations, 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 Exchange Act 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 and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As part of this process we have worked with our executives at the subsidiary level to ensure proper communication with our Controller and Chief Financial Officer, and have provided our Controller and Chief Financial Officer with outside financial consultants to assist as needed to ensure accurate and timely reporting of our financial information.

With these changes in place, on May 16, 2008, we filed a registration statement on Form 10 to re-register our common stock under Section 12 of the Exchange Act. As a result, on July 15, 2008, we became subject to the reporting requirements under the Exchange Act.

Business Overview

We currently conduct all of our operations through two of our three wholly-owned subsidiaries: Elite Machine and Eran Engineering. We ceased operations of our third subsidiary, All American, effective June 30, 2009. Through our two operating subsidiaries we provide services and products to the machine tool industry, including the sale of new and refurbished CNC machines and the manufacture of precision metal components.

Our services and products are primarily marketed and sold to the commercial aviation, medical, aerospace, and defense 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.

Money Line Capital Letter of Intent

As part of that strategy, on June 30, 2009, we entered into a binding Letter of Intent (the “LOI”) with Money Line Capital, Inc. (“MLCI”). MLCI is our largest shareholder and specializes in business financing transactions and holds equity in a number of operating subsidiaries in various fields, including financing, aerospace, real estate, media, beverage, and technology. Under the LOI the parties agree to complete a transaction whereby all the MLCI shareholders will exchange their shares of MLCI stock for shares of our stock. No cash will be exchanged in this transaction. The parties have agreed to negotiate in good faith to close the transaction on or before January 29, 2010. The LOI is predicated on us being current in our reporting obligations under the Securities and Exchange Act of 1934, as amended, and being publicly-traded at the time of the closing; and MLCI having its financial statements (and its subsidiaries, as applicable) audited for the period ended June 30, 2009, as well as completing a valuation by a qualified third-party company.

Machine Sales Group

The Machine Sales Group is currently composed of one of our subsidiaries, Elite Machine, which is in the business of acquiring and selling computer numerically controlled (“CNC”) machines, and related tools, to manufacturing customers. The operations of this group also include the business generated from our purchase of certain assets of CNC Repos, Inc.

CNC machines use commands from an onboard computer to control the movement of cutting tools and the rotation speeds of the part being produced. 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 Machines specializes in selling used, refurbished CNC machines.

For the years ended June 30, 2009, and 2008, the Machine and Tools Group accounted for $4,752,435 (49%) and $8,955,916 (59%) of our total sales, respectively. This segment of our business also accounted for 25% and 22% of our gross profits for the years ended June 30, 2009, and 2008, respectively.

(a) Company Overview

Elite Machine is a California corporation and was founded in 1990 by our former Director and Executive Vice President, Lawrence A. Consalvi. Mr. Consalvi was also the President of Elite Machine. Through the reverse merger transaction described above, Elite Machines became our wholly-owned subsidiary, which today specializes in the sale of previously-owned CNC machine tools from CNC machine manufacturers including Mori Seiki, Matsuura and Kitamura. Elite Machine is a leading dealer of pre-owned CNC machines in the Western United States. Elite Machine purchases high-quality used CNC machinery from Japan, Europe, and the United States, and then inspects and repairs them prior to being refurbished for resale. Elite Machine’s refurbishments on CNC machines it purchases typically include painting, replacing parts, and servicing the machine.

(b) Principal Products and Services.

Elite Machines is in the business of selling CNC machines. However, the company does not manufacture its own CNC machines. Elite Machines buys used CNC machines, refurbishes them and sells them. CNC machines use commands from an onboard computer to control the movement of cutting tools and the rotation speeds of the part being produced. 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. The machines are then typically used to mass produce a particular part. This helps ensure all the same parts are identical. The machine can then be reprogrammed to manufacture a different part depending on the needs of the customer.

Elite Machines purchases all the used machines it sells, bears the risk of reselling the machines, and is responsible for all costs incurred in order to resell the machines. Normally the machines sold by Elite Machines are sold “as is.” However, Elite Machines does offer a limited warranty to the purchasers of the used CNC machines it sells, but the company is planning on moving away from this practice. Currently, approximately 80% of Elite Machines’ customers are under some type of warranty with Elite Machines with most on a 30-day warranty.

Elite Machines does not manufacture any of its own products.

Elite Machine locates CNC machines for resale through relationships with past customers and through its marketing efforts, the monitoring of both internet and direct mail sale boards, and personal relationships with machine tool companies. Elite Machine purchases the machines on credit terms or cash on delivery. Machines are purchased based upon the desirability of the model and make and the age and condition of the machine. Refurbishment generally entails cleaning the machine, spot painting and testing for basic functionality. All machines are either sold on an “as is” or a warranty basis, typically with 30-day expiration, and Elite generally provides installation of the machine in the customer’s facility.

(d) Sales, Marketing and Distribution.

The Elite Machine product line consists primarily of used CNC machines. These machines are predominately marketed through our in-house sales staff. Sales personnel are assigned regions and sell the machines in their territory. Used machines are sold on a warranty basis, typically with 30-day expiration, and generally includes installation of the machine at the customer’s location. We are currently investigating a strategy to sell machine tools through alternative channels such as the internet and auctions.

On September 24, 2008, Lawrence A. Consalvi resigned from his position as President of Elite Machine. After his resignation we contracted with Mr. Consalvi for him to be an independent sales agent, whereby Mr. Consalvi is involved in selling CNC machines on behalf of Elite Machine.

Mr. Lawrence A. Consalvi was re-appointed as President of Elite Machine Tool effective July 1, 2009.

(e) New Product Development.

Due to Elite Machine selling machines manufactured by third parties, as opposed to being a manufacturing company, the company does not engage in new product development. However, the company does advise the CNC machine manufacturers regarding customer needs and requirements to assist with their future machine development.

(f) Competition.

Our competitors in the machine tools industry consist of a large fragmented group of companies, including certain business units or affiliates of our customers. Our management believes that competition within the industry will increase substantially as a result of industry consolidations and trends toward favoring greater outsourcing of components and reducing the number of preferred suppliers. Certain of our competitors may have substantially greater financial, production and other resources and may have (i) the ability to adapt more quickly to changes in customer requirements and industry conditions or trends, (ii) stronger relationships with customers and suppliers, and (iii) greater name recognition.

(g) Sources and Availability of Raw Materials.

All of the machines and parts sold by Machine Sales Group are manufactured by third parties so we do not directly purchase any raw materials. However, the third party companies that manufacture CNC machines rely on the availability of a variety of raw materials, primarily metals such as steel and aluminum, but none of the primary raw materials are scarce and we do not anticipate the third party manufacturers will have any problems obtaining these raw materials.

(h) Dependence on Major Customers.

Our Machines and Tools Group does not depend on one or two major customers. In fact, the largest single customer of this group accounted for less than 10% of the total revenue for this group.

(i) Patents, Trademarks and Licenses.

Elite Machines does not have any patents or licenses, or other intellectual property.

(j) Need for Government Approval.

As noted above, Elite Machines does not manufacture its own products, it merely sells used CNC machines. As sellers of used CNC machines, Elite Machines does not need government approval to operate its business.

(k) Effect of Government Regulation on Business.

As noted above, Elite Machines does not manufacture its own products, they merely sell used CNC machines. As sellers of used CNC machines, Elite Machines is not subject to onerous government regulation.

However, inasmuch as Elite Machines refurbishes used CNC machines to resell, it maintains strict control standards on the maintenance and use of its equipment to ensure employee safety during the refurbishing process.

(l) Research and Development.

Because Elite Machine sells products manufactured by third parties this business segment does not spend a material amount on research and development.

(m) Effects of Compliance with Environmental Laws.

The machine tool industry is subject to environmental laws and regulations concerning emissions into the air, discharges into waterways, and the generation, handling, storage and disposal of waste materials, some of which may be hazardous. CNC machines contain coolants which are deemed as hazardous waste and must be disposed of according to the laws of specific jurisdictions. In addition, we perform spot painting of machines during the re-furbishing process. As required we provide for waste containers for coolants and cleaning products and contract with a hazardous waste company for proper disposal.

We strive to comply with all applicable environmental, health and safety laws and regulations. We believe that our operations are in compliance with all applicable laws and regulations on environmental matters. These laws and regulations, on federal, state and local levels, are evolving and frequently modified and we cannot predict accurately the effect, if any, they will have on its business in the future. In many instances, the regulations have not been finalized, or are frequently being modified. Even where regulations have been adopted, they are subject to varying and contradicting interpretations and implementation. In some cases, compliance can only be achieved by capital expenditure and we cannot accurately predict what capital expenditures, if any, may be required.

Environmental laws could become more stringent over time, imposing greater compliance costs and increasing risks and penalties associated with any violations. As a generator of hazardous materials, we are subject to financial exposure with regard to intentional or unintentional violations. In addition, we utilize facilities located in industrial areas with lengthy operating histories and it is possible that historical or neighboring activities could impact our facilities. Any present or future noncompliance with environmental laws or future discovery of contamination could have a material adverse effect on our results of operations or financial condition.

(n) Employees.

As of June 30, 2009, we, with our subsidiaries, employ a total of 51 full-time employees, including three executive employees. Of these employees our Machine Sales Group employs two managerial employees, and two employees engaged in the sales and processing of CNC machine sales.

We are not aware of any problems in our relationships with our employees. Our employees are not represented by a collective bargaining organization and we have never experienced any work stoppage.

Precision Manufacturing Group

The Precision Manufacturing Group is composed of Eran Engineering, a wholly-owned subsidiary, which is in the business of manufacturing and assembling specialized, precision components used in equipment and machinery in the commercial aviation, medical, aerospace and defense industries.

For the years ended June 30, 2009 and 2008, the Precision Manufacturing Group accounted for $4,898,749 (51%) and $6,263,190 (41%) of our sales, respectively. This segment of our business also accounted for 35% and 39% our gross profits for the years ended June 30, 2009 and 2008, respectively.

(a) Company Overview.

(1) Eran Engineering, Inc.

In October, 2003, pursuant to a Stock Purchase Agreement, dated June 17, 2003, we acquired all the issued and outstanding shares of Eran Engineering, a California corporation, from its two shareholders for an aggregate purchase price of $1,250,000. In addition to a cash payment of $650,000, which was credited to the purchase price, we executed a promissory note in favor of the sellers in the principal amount of $600,000, payable in three equal annual installments of $200,000 and accruing simple interest at the rate of six percent (6%) per annum. Our obligation under the promissory note was secured by the pledge by Lawrence A. Consalvi, our then President and Chief Executive Officer, and Joseph T.W. Gledhill, our former Vice President and Director, of a security interest in certain shares of our common stock worth approximately $4,285,716 as of the date of the pledge. Concurrently with the closing of the acquisition, Eran Engineering purchased from R & H Investments, a partnership owned by the two selling shareholders of Eran Engineering, the building in which Eran Engineering operated its business. The purchase price for the building was $1,250,000, and was paid as follows:

$650,000 in cash and;

A promissory note in the principal amount of $600,000, bearing simple interest at the rate of 6% per annum.

Concurrently with the acquisition of Eran Engineering, we purchased the Santa Ana, California, building in which Eran Engineering operated. The purchase price for the building was $1,250,000, of which we paid $600,000 by a promissory note in the amount of $600,000 and the remainder in cash financed pursuant to a term loan in the principal amount of $1,300,000. On February 23, 2007, we completed the sale of the building and property for a sales price of $2,017,000 resulting in a net gain to us of over $600,000.

(b) Product Manufacturing.

Eran Engineering manufactures and assembles specialized, precision components used in equipment and machinery in the commercial aviation, medical, aerospace and defense industries. The primary components sold by Eran during the years ended June 30, 2009 and, 2008, were parts sold to Panasonic Avionics Corporation, a leading provider of in-flight entertainment systems for commercial aircraft. The other components were parts manufactured for, and sold to, medical companies and general commercial aircraft companies. Eran Engineering maintains approximately 39 CNC machines for use in its specialized manufacturing processes. Joseph T.W. Gledhill, one of our former Directors and Executive Vice Presidents, serves as the President of Eran Engineering.

Eran maintains an in-house sales staff that solicits orders from customers. Solicitation of orders is generally based upon relationships with buyers versus the use of advertising or other forms of solicitation. Orders are received via a bid process and Eran prepares costs estimates and submits a bid for the manufacturing order. Once an order is received, generally through a binding purchase order, Eran programs its machines to manufacture the part. Parts are manufactured internally and then in most cases, assembled at Eran’s facility. Some assemblies require the receipt of parts manufactured by other companies and as a result, delays in shipment could be encountered as a result of delays in manufacturing by contractors retained by the customer. Eran has no control or liability for these parts manufactured by other manufacturers used in the assembly’s delivered by Eran.

(d) New Product Development.

Eran does not develop any proprietary products. Instead, Eran works with principal manufacturers to machine the components they require for the development of their products.

(e) Competition.

The market for precision part manufacturing is extremely competitive. There are no substantial barriers to entry, and we continue to face competition from domestic and international manufacturers. We believe that our ability to compete successfully depends upon a number of factors, including market presence, connections in the industry, reliability, low error rate, technical expertise and functionality, performance and quality of our parts, customization, the pricing policies of our competitors, customer support, our ability to support industry standards, and industry and general economic trends.

Many of our competitors have greater market presence, engineering and marketing capabilities, and financial, technological and personnel resources than those available to us. As a result, they may be able to develop and expand more quickly, adapt more swiftly to new or emerging technologies and changes in customer requirements, take advantage of acquisition and other opportunities more readily, and devote greater resources to the marketing of their services than we can.

The competition for design, manufacturing and service in precision machining and machine tools consists of independent firms, many of which, however, are smaller than our collective group of wholly-owned subsidiaries. We believe that this allows it to bring a broader spectrum of support to its customers.

In addition to similar companies, we compete against the in-house manufacturing and service capabilities of our larger customers. We believe these large manufacturers are increasingly outsourcing activities that are outside their core competency to increase their efficiencies and reduce their costs. This outsourcing provides an opportunity for us to grow with our current clients and the addition of new clients.

Although there are numerous domestic and foreign companies which compete in the markets for the products and services offered by us, our management believes that it will be able to compete effectively with these firms on price, ability to meet customer deadlines and the stringent quality control standards. We strive to develop a competitive advantage by providing high quality, high precision and quick turnaround support to customers from design to delivery.

(f) Sources and Availability of Raw Materials.

Our precision equipment group utilizes a variety of raw materials in its specialized manufacturing processes, however, the primary raw materials it uses are widely available and we believe they will be readily available for our use as needed.

(g) Dependence on Major Customers.

Eran has one major customer, Panasonic Avionics Corp., which accounted for 66% and 27% of our total revenue for the years ended June 30, 2009 and 2008, respectively.

(h) Patents, Trademarks and Licenses.

Eran does not have any patents or licenses, or other intellectual property.

(i) Need for Government Approval.

As a manufacturer of precision parts, Eran’s business is not subject to government approval for its operations or its end products. .

(j) Effect of Government Regulation on Business.

As a manufacturer of precision parts there are certain regulations that relate to the conduct of our business in general, such as regulations and standards established by the Occupational Safety and Health Act or similar state laws relating to employee health and safety. As such we maintain strict control standards on the maintenance and use of its equipment to ensure employee safety. We comply with all guidelines and recommendations regarding the use of safety equipment such as safety goggles, protective gloves and aprons, ventilators or air guards as may be required. Employees are specifically trained, including emphasis on safety procedures, for each machine used. Management maintains and reviews a schedule of maintenance and safety check for all the equipment used in its operations.

Although there are not many regulations on the manufacturing of precision parts, there are certifications companies can receive in the industry. Eran is ISO 9001-2000 and AS9100 rev. B registered.

(k) Research and Development.

Our precision manufacturing group does not engage in research and development. Eran purchases manufactured CNC machines and receives a purchase order with detailed instructions from its customers regarding the specifications for the parts it wishes to have Eran manufacture.

(l) Effects of Compliance with Environmental Laws.

The precision manufacturing industry is subject to environmental laws and regulations concerning emissions into the air, discharges into waterways, and the generation, handling, storage and disposal of waste materials, some of which may be hazardous.

The precision manufacturing division utilizes various coolants and lubricants that could be considered hazardous waste. Care is taken to prevent accidental discharge and all coolants and lubricants removed from machines are contained and disposed of by an outside waste disposal company. In addition, our Tustin facility is subject to certain local waste water regulations and is required annually to have its waste water and backflow prevention equipment tested by an outside testing agency. The last test was performed in September 2007 and we passed without exception.

Eran strives to comply with all applicable environmental, health and safety laws and regulations. Eran believes that its operations are in compliance with all applicable laws and regulations on environmental matters. These laws and regulations, on federal, state and local levels, are evolving and frequently modified and we cannot predict accurately the effect, if any, they will have on its business in the future. In many instances, the regulations have not been finalized, or are frequently being modified. Even where regulations have been adopted, they are subject to varying and contradicting interpretations and implementation. In some cases, compliance can only be achieved by capital expenditure and we cannot accurately predict what capital expenditures, if any, may be required.

(m) Employees.

As of June 30, 2009, we, with our subsidiaries, employ a total of 51 full-time employees, including three executive employees. For the precision manufacturing group, we employ one managerial employee, one sales manager, and 36 employees engaged in tool manufacturing-related positions.

We are not aware of any problems in its relationships with its employees. The Company’s employees are not represented by a collective bargaining organization and the Company has never experienced any work stoppage.

Discontinued Operations

Effective June 30, 2009, our Board of Directors elected to cease the operations of All American because the business was no longer economically feasible. During the year ended June 30, 2009, All American was part of our machine tools group. The company sold new CNC machines it purchased from third party manufacturers. As a result of All American shutting down its operations on June 30, 2009, the operations of All American are included in the accompanying financial statements as discontinued operations.

Prior to being shut down and for our fiscal year ended June 30, 2009, All American specialized in the sale of new CNC machines throughout the Orange County, California market and had a customer base of over 530 companies, representing approximately a 10% market share in that area. The primary product lines offered through All American included: Fadal Vertical Machining Centers, Hwacheon CNC Turning Centers and Vertical Machining Centers, Visionwide CNC Bridge Mills, and Clausing Industrial CNC Vertical Machining Centers. The primary industry segments in which All American sold machines was in the aerospace, military and medical fields. However, on or about March 31, 2009, Fadal, one of All American’s primary suppliers of CNC machines, ceased manufacturing CNC machines.

Typically, All American purchased a machine once a customer ordered and purchased the machine from All American. However, at times, All American purchased a CNC machine when it did not have a prospective customer to purchase the machine. This normally occurred when All American either needed a CNC machine for a showroom, management believed it was getting a good deal on the machine from the manufacturer, and/or it needed one or more machines on hand to meet future customer demand. Normally, the original manufacturer of the machine, not All American, was responsible for any problems or issues with the machine, since the machines are typically under warranty. As of June 30, 2009, when we ceased operations of All American, we had no machines in our inventory, and current assets totaling $116,868, consisting entirely of accounts receivable and non-current assets totaling $63,704, consisting of company vehicles and office equipment. These assets are listed accordingly on our balance sheet in the accompanying financial statements.

Industry Overview

CNC Machines

Since the introduction of CNC tooling machines, continual advances in computer control technology have allowed for easier programming and additional machine capabilities. A vertical turning machine permits the production of larger, heavier and more oddly-shaped parts on a machine that uses less floor space when compared to the traditional horizontal turning machine because the spindle and cam are aligned on a vertical plane, with the spindle on the bottom. Horizontal turning machines have become faster and more accurate with the ability to perform more functions i.e. milling of the parts and cross milling both on and off center line of the part. The vertical turning machines have additionally increased thru-put for part production through increase spindle RPM’s (rotations per minute), with the ability to accomplish high speed machining and increased accuracy through new electronics. Finally, the horizontal machines through the same features mentioned above and with the expansion of more tools and the ability to add multiple pallets out in the field gives the customer the ability to grow into the machine as his work flow increases.

Historically, CNC machines had been sold by the manufacturer, however, more recently many manufacturers are utilizing third party manufacturing representation companies, like All American, to sell their machines in order to cut down on internal overhead expenses related to a sales staff.

Precision Tools

The precision tools industry, as it relates to Eran and our business, deals with the manufacturing of specific, specialized parts for use in several different industries, including, but not limited to, the commercial aviation, medical, aerospace and defense industries. Since the introduction of Computer Numerical Control (CNC) machines into the manufacturing arena, the process of taking raw material and producing a product have had a significant impact in today’s highly competitive manufacturing environment. Precision tool manufacturing companies operate by receiving a purchase order from a customer, then with a blueprint drawing from engineering, and produce a part program which is then loaded into the on board memory of the CNC machine tool. The machine tool follows the part program and cuts the material into the desired shape which the engineers have designed. The CNC Machine tool benefits are: a more consist end product as well as a closer tolerance product on a consistent part-over-part process. In today’s competitive market all types of raw materials are used from a varied type of steel, aluminum, brass, copper as well as plastics.

The precision manufacturing business is an ever changing segment and to remain competitive companies must be prepared to constantly maintain their quality programs, equipment and train their personnel. Manufacturing in today’s work environment is extremely competitive and, therefore, maintaining ISO registration is almost certainly a requirement. To become a first tier supplier to major aerospace and defense contractors a company must become AS9100 compliant with a Continuous Improvement Operation with an eye on the future. All of these programs in conjunction with a competitive price point and on time delivery commitment will make a significant impact to a company’s ability to maintain their business and grow.

ITEM 1A. – RISK FACTORS.

As a smaller reporting company we are not required to provide a statement of risk factors. However, we believe this information may be valuable to our shareholders for this filing. We reserve the right to not provide risk factors in our future filings. Our primary risk factors and other considerations include:

If we are unable to maintain relationships with our suppliers, our business could be materially adversely affected.

Substantially all of our products are manufactured by third parties. To the extent that a manufacturer is unwilling to do business with us, or to continue to do business with us once we enter into formal agreements with it, our business could be materially adversely affected. In addition, to the extent that the manufacturer modifies the terms of any contract it may enter into with us (including, without limitation, the terms regarding price, rights of return, or other terms that are favorable to us), or extend lead times, limit supplies due to capacity constraints, or other factors, there could be a material adverse effect on our business.

We operate in a competitive industry and continue to be under the pressure of eroding gross profit margins, which could have a material adverse effect on our business.

The market for the products we sell is very competitive and subject to rapid technological change. The prices for our intended products tend to decrease over their life cycle, which can result in decreased gross profit margins for us. There is also substantial and continuing pressure from customers to reduce their total cost for products. We expend substantial amounts on the value creation services required to remain competitive, retain existing business, and gain new customers, and we must evaluate the expense of those efforts against the impact of price and margin reductions. Further, our margins will be lower in certain geographic markets and certain parts of our business than in others. If we are unable to effectively compete in our industry or are unable to maintain acceptable gross profit margins, our business could be materially adversely affected.

Products sold by us may be found to be defective and, as a result, warranty and/or product liability claims may be asserted against us, which may have a material adverse effect on the company.

We may face claims for damages as a result of defects or failures in the products we intend to sell to our customers. Although many of our products are sold under a third-party warranty or are sold “as is” our ability to avoid liabilities, including consequential damages, may be limited as a result of differing factors, such as the inability to exclude such damages due to the laws of some of the locations where we do business. Our business could be materially adversely affected as a result of a significant quality or performance issue in the products developed by us, if we are required to pay for the damages that result.

Our share ownership is concentrated.

Money Line Capital, Inc., our largest shareholder, controls approximately 55% of our outstanding common stock. Our officers and directors, as a group, own a majority of Money Line Capital, Inc.’s common stock and own an additional 3.5% of our common stock as a group. As a result, these stockholders can exert significant influence over all matters requiring stockholder approval, including the election and removal of directors, any merger, consolidation or sale of all or substantially all of assets, as well as any charter amendment and other matters requiring stockholder approval. In addition, these stockholders may dictate the day to day management of the business. This concentration of ownership may delay or prevent a change in control and may have a negative impact on the market price of our common stock by discouraging third party investors. In addition, the interests of these stockholders may not always coincide with the interests of our other stockholders.

If we acquire other companies or assets, we may not be able to successfully integrate them or attain the anticipated benefits.

We intend to acquire other businesses that are synergistic with ours. If we are unsuccessful in integrating our acquisitions, or if integration is more difficult than anticipated, we may experience disruptions that could have a material adverse effect on our business. In addition, we may not realize all of the anticipated benefits from our acquisitions, which could result in an impairment of goodwill or other intangible assets.

If we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls over financial reporting, we may not be able to report our financial results accurately or timely or detect fraud, which could have a material adverse effect on our business.

An effective internal control environment is necessary for us to produce reliable financial reports and is an important part of our effort to prevent financial fraud. We will be required to periodically evaluate the effectiveness of the design and operation of our internal controls over financial reporting. Based on these evaluations, we may conclude that enhancements, modifications or changes to internal controls are necessary or desirable. While management will evaluate the effectiveness of our internal controls on a regular basis, and although we have recently undergone substantial changes to address any weaknesses, these controls may not always be effective. There are inherent limitations on the effectiveness of internal controls, including collusion, management override, and failure of human judgment. In addition, control procedures are designed to reduce rather than eliminate business risks. If we fail to maintain an effective system of internal controls, or if management or our independent registered public accounting firm discovers material weaknesses in our internal controls, we may be unable to produce reliable financial reports or prevent fraud, which could have a material adverse effect on our business. In addition, we may be subject to sanctions or investigation by regulatory authorities, such as the SEC. Any such actions could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements, which could cause the market price of our common stock to decline or limit our access to capital.

We rely on third-party suppliers and manufacturers to provide our CNC machines, and we will have limited control over these suppliers and manufacturers and may not be able to obtain quality products on a timely basis or in sufficient quantity.

All of our CNC machines are manufactured by third-party manufacturers. We do not have any long-term contracts with these suppliers or manufacturing sources. We expect we will have to compete with our competitors for production capacity and availability at these third-party manufacturers.

There can be no assurance that there will not be a significant disruption in the supply of CNC machines from our intended sources or, in the event of a disruption, that we would be able to locate alternative suppliers of equipment of comparable quality at an acceptable price, or at all. In addition, we cannot be certain that our unaffiliated manufacturers will be able to fill our orders in a timely manner. If we experience significant increased demand, or need to replace an existing manufacturer, there can be no assurance that additional manufacturing capacity will be available when required on terms that are acceptable to us, or at all, or that any supplier or manufacturer would allocate sufficient capacity to us in order to meet our requirements. In addition, even if we are able to expand existing or find new manufacturing sources, we may encounter delays in production and added costs as a result of the time it takes to train our suppliers and manufacturers in our methods, products and quality control standards. Any delays, interruption or increased costs in the manufacture of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term.

In addition, there can be no assurance that our suppliers and manufacturers will continue to manufacture products that are consistent with our standards. We may receive shipments of product that fail to conform to our quality control standards. In that event, unless we are able to obtain replacement products in a timely manner, we risk the loss of revenues resulting from the inability to sell those products and related increased administrative and shipping costs. In addition, because we do not control our manufacturers, products that fail to meet our standards or other unauthorized products could end up in the marketplace without our knowledge, which could harm our reputation in the marketplace.

We have one customer that accounts for greater than 66% of our total sales and more than 66% of our precision manufacturing group’s sales.

Panasonic Avionics Corp., accounts for 66% and 27% of our total sales for the years ended June 30, 2009 and 2008, respectively, and more than 66% and 84% of our precision manufacturing group’s sales for the years ended June 30, 2009 and 2008, respectively. We do not have a long term, exclusive agreement with this customer. If this customer reduced or stopped ordering precision parts from Eran it would have a material adverse impact on our consolidated sales, results of operations and cash flows.

Our Machine Sales Group relies on the availability of used CNC machines for resale, if no used machines are available for purchase our business will suffer.

The primary business of our Machine Sales Group is to purchase and resell used CNC machines. If there are no or limited CNC machines available for purchase, our Machine Sales Group sales will suffer. Likewise, if there is a slow down in the economy and the current owners of CNC machines opt not to sell their used CNC machines to purchase new ones, or our customers hold on to their existing CNC machines longer and do not purchase additional used CNC machines our sales will suffer.

The current crisis in the credit markets may adversely affect our customers’ ability to finance the purchase of new and used CNC machines. This would result in a significant reduction in our sales.

Most of our customers that purchase used CNC machines do so utilizing credit. The current crisis in the credit markets may adversely affect our customers’ ability to finance the purchase of a used CNC machine from us. If this were to occur it would result in a significant reduction in our sales.

Under our credit agreement with Pacific Western Bank we have numerous affirmative and negative financial and non-financial covenants we must comply with on at least a quarterly basis. If we are unable to meet these covenants and cannot obtain a waiver from Pacific Western Bank, our breach of these covenants would constitute a default under the credit agreement, which could require us to repay all indebtedness immediately. If this were to occur we likely would not be able to repay this indebtedness and it would have a severe, negative impact on our business and our ability to continue as a going concern.

We have a business loan agreement with Pacific Western Bank dated August 21, 2006. This loan agreement has numerous affirmative and negative financial and non-financial covenants, which we are required to abide by as a condition of the loan. These covenants primarily relate to our financial condition, such as tangible net worth, working capital, debt ratio, etc., as well as restricts our ability to enter into certain transactions outside the ordinary course of business without prior written approval by Pacific Western Bank. Our failure to meet these affirmative and negative covenants under the Agreement would constitute a default under the loan agreement. If we were to default under the loan agreement, and if at that time we are unable to get the lender to waive or forbear the default, then the lender could immediately terminate the loan agreement and all indebtedness then owed by us to the lender would be immediately due and payable, without any further notice by the lender. Were this to occur it would have a significant negative impact on our business.

As of June 30, 2008, we did not meet our capital expenditures and profitability covenants, as set forth in the November 15, 2007 credit agreement. Therefore, we were not in compliance with those two covenants. However, on September 4, 2008, Pacific Western Bank provided us with a letter of forbearance from the measurement of the required covenants as of June 30, 2008. Effective July 1, 2008, we are required to comply with all of the covenants of the amended credit agreement dated September 26, 2008. As of June 30, 2009, we believe we were in compliance with the covenants under the amended credit agreement. The quarter ended June 30, 2009 was the end of our fiscal year.

As of September 21, 2009, our credit agreement with Pacific Western Bank terminated. Pacific Western Bank and the company have agreed to a two month extension to repay the line of credit and our management feels confident that we will be able to do so in a timely manner. As of June 30, 2009, we owed $440,000 under the line of credit with Pacific Western Bank.

The Commission previously revoked the registration of our common stock pursuant to Section 12(j) of the Exchange Act due to our failure to timely file our periodic reports under the Exchange Act. If we fail to timely file these reports in the future, we could be delisted from an exchange and/or the Commission could delist our common stock again, which could negatively impact our business and cause a significant decrease in our stock price.

On May 31, 2006, the Commission entered an Order Imposing Remedial Sanctions which revoked the registration of our common stock pursuant to Section 12(j) of the Exchange Act and ordered our then president and chief executive officer, Lawrence A. Consalvi, to cease and desist from causing any violations or future violations of the Exchange Act. This deregistration was the result of our inability to obtain financial information from acquisitions we completed in the past. Although we have since divested ourselves of those acquisitions, and taken numerous remedial measures to ensure this does not occur in the future, there can be no assurance that future acquisitions by us will not have issues or cause us to be delinquent with our required filings under the Exchange Act. Any delinquent filings could have an adverse effect on our business and our stock price, if we are publicly-traded. These adverse effects include being delisted from any exchange where our common stock may be listed, such as the OTC Bulletin Board, which could cause our stock price to decrease. Additionally, if we are unable to timely file our periodic reports under the Exchange Act, the Commission could again revoke the registration of our common stock pursuant to Section 12(j) of the Exchange Act, prohibiting us from listing our stock on any public marketplace, including the OTC Bulletin Board and Pink Sheets, which would have the effect of our common stock not being publicly-traded and greatly reduce the liquidity of our common stock and greatly reduce the ability of our stockholders to sell or trade our common stock. Regarding our business, if we were delinquent in our filings and/or had the registration of our common stock revoked, we may be unable to effectuate our business plan to acquire other companies in our industry since we likely would not be able to structure these acquisitions using our common stock or other securities. This could negatively impact our business and cause a significant decrease in our stock price.

ITEM 1B – UNRESOLVED STAFF COMMENTS

This Item is not applicable to us as we are not an accelerated filer, a large accelerated filer, or a well-seasoned issuer; however, we have not received written comments from the Commission staff regarding our periodic or current reports under the Securities Exchange Act of 1934 within the last 180 days before the end of our last fiscal year.

ITEM 2 – PROPERTIES

In July, 2007, we entered into a 5-year triple net lease for approximately 48,600 square feet of manufacturing and office space in a free-standing industrial building at 2672 Dow Avenue, Tustin, California 92780 for a average monthly rental of $28,390 for the first 12 months, $35,090 for the second 12 months, $36,143 for the third 12 months, $37,227 for the fourth 12 months and $38,334 for the final 12 months. The lease contains an option to renew for an additional 60 months with monthly rental of $39,494 for months 61 to 72, $40,679 for months 73 to 84, $41,900 for months 85 to 96, $43,157 for months 97 to 108 and $44,451 for months 109 to 120.

We also have a three year lease for approximately 13,820 square feet of office and warehouse space located at 3840 East Eagle Drive, Anaheim, California at a monthly rental rate of $7,968 for the first year, $8,499 for the second year, and $9,030 for the third year. The lease for this property began November 1, 2007 and expires on October 31, 2010. The Machines Sales Group resides at this location.

ITEM 3 - LEGAL PROCEEDINGS

1. Onofrio Saputo and Christopher Frisco v. Gateway International Holdings, Inc., Lawrence Consalvi, Timothy Consalvi and Joe Gledhill, Court of the State of California, County of Orange, Case No. 30-2008-00110905. Plaintiffs filed this action on August 21, 2008. A Dismissal with Prejudice was filed with the Court on or about April 24, 2009.

The Complaint, which had causes of action for securities fraud, breach of fiduciary duties, fraud and deceit, and rescission, alleged that the defendants intentionally misrepresented, or failed to disclose, certain facts regarding the company prior to the plaintiffs purchasing Gateway International Holdings, Inc. (now M Line Holdings, Inc.) common stock. The Complaint sought total monetary damages of approximately $188,415, plus interest, and punitive damages. We filed an Answer to the Complaint on October 17, 2008, denying the allegations of the Complaint, denying that plaintiffs are entitled to any relief whatsoever and asserting various affirmative defenses. On January 22, 2009, the parties signed a Settlement Agreement, whereby a party unrelated to the lawsuit, Money Line Capital, Inc., our largest shareholder, agreed to purchase the plaintiffs’ shares of our common stock for the purchase price, or $289,000. This settlement closed on April 22, 2009. Of the $289,000 settlement money, $189,000 was paid to plaintiffs and we received $100,000 in exchange for the cancellation of a promissory note for $100,000 owed to us by one of the plaintiffs. Per the settlement agreement, a Dismissal with Prejudice was filed by the plaintiffs with the Court on or about April 24, 2009, for the purpose of dismissing this lawsuit.

2. Voicu Belteu v. Mori Seiki Co., Ltd.; Mori Seiki U.S.A., Inc.; All American CNC Sales, Inc. dba Elite Machine Tool Company; Ellison Manufacturing Tech., Superior Court for the State of California, County of Orange, Case No. 30-2008-00103710. Plaintiff filed this action on March 7, 2008.

The Complaint, which has causes of action for strict products liability and negligence, alleges that a CNC machine manufactured by Mori Seiki and sold through our subsidiary, All American CNC Sales, Inc. dba Elite Machine Tool Company, was defective and injured the plaintiff. The Complaint seeks damages in excess of $6,300,000 for medical expenses, future medical expenses, lost wages, future lost wages and general damages. All American CNC Sales filed its Answer and Cross-complaint on July 1, 2008 against several individuals and entities involved in the machine purchase and sales transaction, seeking indemnity and contribution.

Plaintiff and All American CNC Sales have both responded to discovery requests and are engaged in the meet and confer process to resolve outstanding discovery issues. Several depositions have been taken and we anticipate more going forward. The Court has set a trial date for March 22, 2010. Management believes we have meritorious defenses to plaintiff’s claims and plan to vigorously defend against the lawsuit and pursue Mori Seiki, and possibly other entities or individuals, for any damages we incur. However, there can be no assurance as to the outcome of the lawsuit.

3. James M. Cassidy v. Gateway International Holdings, Inc., American Arbitration Association, Case No. 73-194-32755-08. We were 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 us pursuant to an agreement dated April 2, 2007 between us and the claimant. The Statement of Claim alleges that we breached the agreement and seeks compensatory damages in the amount of $195,000 plus interest, attorneys’ fees and costs. We deny 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.

4. Elite Machine Tool Company v. ARAM Precision Tool and Die, Avi Amichai, Superior Court for the State of California, County of Orange, Case No. 30-2008-00090891. Elite Machine filed this action on August 8, 2008.

The Complaint alleged breach of contract for the defendants failing to pay Elite Machine for a machine the defendants purchased from Elite Machine, and sought damages totaling $16,238. ARAM Precision Tool and Die filed its Answer and Cross-Complaint on October 1, 2008. The Cross-Complaint alleged that Elite Machine failed to deliver certain parts of the machine per the sales contract and seeks damages totaling $25,000. In late June, the parties settled this matter and the lawsuits were dismissed on August 13, 2009. Under the terms of the settlement, Aram paid Elite Machine Tool Company $4,000 in full and final settlement.

5. 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 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. Discovery has commenced in this matter but is not expected to be concluded for several months. The Court has set a Case Management Conference for March 29, 2010. Management intends to aggressively defend itself against this claim. No trial date has been set.

6. Elite Machine Tool Co. v. Sunbelt Machine, Orange County Superior Court, Case No. 0-2008-00112502. All American filed the Complaint on September 25, 2008. No trial date has been set.

This case involves a dispute between Elite Machine and Sunbelt regarding the sale of a Mori Seiki MH-63 machine by Elite Machine to Sunbelt. Sunbelt has claimed that it received a machine that does not conform to the specifications it ordered. The amount at issue is approximately $140,000 at this stage. Subsequent to filing of the above-referenced suit, Sunbelt has filed a similar action in Federal District Court in Houston, Texas. As a result, this case was dismissed and the case is being heard in Federal District Court.

7. Sunbelt Machine Works Corp. v. All American CNC Sales, Inc., United States District Court, Southern District of Texas, Case No. 4:09-cv-108. Sunbelt filed the Complaint on January 16, 2009.

This case involved a dispute between All American and Sunbelt regarding the sale of a Mori Seiki MH-63 machine by All American to Sunbelt. Sunbelt claimed that it received a machine that does not conform to the specifications it ordered. The amount sought in the Complaint was approximately $139,000. All American filed its Answer on April 13, 2009. Sunbelt filed a Motion for Summary Judgment, which was granted by the Court. As a result a Judgment has been entered against All American in the amount of $153,000, which is accrued as of June 30, 2009. Management for All American maintains the claim has no merit and intends to appeal the Judgment.

8. Hwacheon Machinery v. All American CNC Sales, Circuit Court of the 19th Judicial Circuit, Lake County, Illinois, Case No. 09L544. The Complaint was filed on June 8, 2009.

The Complaint alleges causes of action for account stated, and arises from a claim by Hwacheon that All American CNC has not paid it for machines sold to All American CNC. The Complaint seeks damages of approximately $362,000. All American filed an answer on or about July 15, 2009. We denied the allegations in the Complaint and plan to vigorously defend the Complaint. No trial date has been set.

9. 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. On or about August 11, 2009, the Court heard oral argument on Fadal’s Motion for Right to Attach Order and Writ of Attachment. The Court granted this Motion in part, issuing a Right to Attach Order against All American CNC in the amount of approximately $164,000, which has been accrued as of June 30, 2009. The Court denied the Motion as to M Line Holdings, Inc. On August 12, 2009, All American CNC filed an Answer to the Complaint, and M Line Holdings, Inc., filed a demurrer to the Complaint. The Court has scheduled a hearing for the demurrer for October 15, 2009. This hearing has been continued until November 24, 2009. Management intends to aggressively defend itself against this claim. No trial date has been set.

10. Do v. E.M. Tool Company, Orange County Superior Court, Orange County, California, Case No. 30-2009-00123879. The Complaint was filed on June 1, 2009.

The Complaint alleges causes of action for negligence, product liability and breach of warranty, and seeks damages to be determined at time of trial. This lawsuit was tendered by E.M. Tool Company to its insurance company, which is currently providing a defense. We filed an Answer and a Cross-complaint against the manufacturer of the equipment the Mori Seiki Company, Ltd. No trial date has been set.

11. 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 not less than $30,000. The Defendants filed an Answer on June 5, 2009. Management intends to aggressively defend itself against this claim. No trial date has been set.

12. Laureano v. Eran Engineering, State of California Worker’s Compensation Appeals Board, no case number.

Mr. Laureano has filed a claim with the Worker’s Compensation Appeals Board against Eran Engineering. At this time, Eran Engineering has only been served with a subpoena for business records, requesting Mr. Laureano’s employment file, personnel file, claim file, and payroll documents. Management intends to aggressively defend this claim.

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 our financial condition, results of operations or liquidity.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We held our 2009 Annual Meeting of Shareholders on March 25, 2009, in Tustin, California. There were shareholders representing 14,941,334 votes present at the meeting, either in person or by proxy, which represented over 50% of the 27,611,956 total outstanding votes of the Company, so a quorum was present. The following agenda items set forth in the Company’s 14C Information Statement on file with the SEC, which had been pre-approved by the holders of a majority of our common stock, went effective on March 25, 2009:

1. The election of three (3) directors, namely George Colin, Stephen Kasprisin and Jitu Banker, to serve until the next Annual Meeting of Shareholders and thereafter until a successor is elected and qualified. All three nominees were directors prior to the meeting. This agenda item was pre-approved by a majority of our shareholders prior the meeting. The shares voting in favor of this agenda item were as follows:

Director	Votes For		Votes Against	Votes Withheld	Abstentions	Broker Non-Votes
George Colin		14,371,334	-0-	-0-	-0-	-0-
Stephen Kasprisin		14,371,334	-0-	-0-	-0-	-0-
Jitu Banker		14,371,334	-0-	-0-	-0-	-0-

2. An amendment to our Articles of Incorporation to change the name of the Company to M Line Holdings, Inc. This agenda item was pre-approved by a majority of our shareholders prior the meeting. The shares voting in favor of this agenda item were as follows:

Votes For		Votes Against			Votes Withheld			Abstentions			Broker Non-Votes
14,371,334		-0-			-0-			-0-			-0-

3. The ratification of the appointment of Kabani & Company as independent auditors of the Company for the fiscal year ending June 30, 2009. Kabani & Company were approved as our independent auditors in place of McKennon Wilson & Morgan LLP, who were removed by our Board of Directors on March 16, 2009, prior to the meeting. The results of the voting were as follows:

Votes For		Votes Against			Votes Withheld			Abstentions			Broker Non-Votes
14,371,334		-0-			-0-			-0-			-0-

A more detailed description of each agenda item at the 2009 Annual Shareholders Meeting can be found in our Schedule 14C Information Statement dated and filed with the Securities and Exchange Commission on February 25, 2009.

PART II

ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is not currently traded on any stock exchange or electronic quotation system. We expect that our common stock will be traded on the OTC Bulletin Board at some point in the future, but there is no guarantee this will occur. On May 16, 2008, we filed a registration statement on Form 10 to re-register our common stock under Section 12 of the Exchange Act. As a result, on July 15, 2008, we became subject to the reporting requirements under the Exchange Act.

Holders

As of June 30, 2009, there were 30,861,956 shares of our common stock outstanding held by 88 holders of record of our common stock and numerous shareholders holding shares in brokerage accounts. Of these shares, 13,950,480 are held by non-affiliates. On the cover page of this filing we value these shares at $2,790,096. These shares were valued at $0.20 per share, which is the price of our shares the most recent private transactions involving our common stock. Due to not being publicly traded at June 30, 2009, this value may not have been an accurate value of our common stock, or indicative of the true value of our common stock, at that time.

Dividends

In May 2005, we declared and paid a dividend of $0.005 on our common stock. The dividend was paid to all shareholders except shareholders who are also directors of the Company or members of their immediate family, all of whom waived their right to receive the dividend payment. We have not paid any dividends since May, 2005 nor do we plan to in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

There are no outstanding options or warrants to purchase, or securities convertible into, shares of our common stock.

Non-Qualified Stock Option Plan

In November 2006, the Board of Directors approved the creating of a non-qualified stock option plan for key managers, which, among other provisions, would have provided for the granting of options by the board at strike prices at or exceeding market value, and expiration periods of up to ten years. This plan was never created and no options were ever issued.

As a result, we did not have any options, warrants or rights outstanding as of June 30, 2009.

Plan Category	Number of Securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		- 0 -		- 0 -		- 0 -
Equity compensation plans not approved by security holders		- 0 -		- 0 -		- 0 -
Total		- 0 -		- 0 -		- 0 -

Recent Issuance of Unregistered Securities

On March 25, 2009, we entered into an Assignment of Promissory Note and Consent Thereto (the “Assignment”) with Money Line Capital, Inc., a California corporation (“MLCI”), and our largest shareholder, under which MLCI agreed to assume our repayment obligations to Joseph Gledhill and Joyce Gledhill under that certain $650,000 principal amount Promissory Note dated December 8, 2008 (the “Gateway Note”) in exchange for the issuance of 3,250,000 shares of our common stock (the “Shares”). We issued the Shares, restricted in accordance with Rule 144, to MLCI on June 30, 2009. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, and MLCI is a sophisticated investor and familiar with our operations.

If our stock is listed on an exchange we will be subject to the Securities Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to a few exceptions which we do not meet. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith.

ITEM 6 – SELECTED FINANCIAL DATA

As a smaller reporting company we are not required to provide the information required by this Item.

ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

Forward-Looking Statements

This annual report on Form 10-K of M Line Holdings, Inc. for the year ended June 30, 2009 contains forward-looking statements, principally in this Section and “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 annual 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 of 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 this filing, as well as any cautionary language in this annual report, 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 maintain a credit facility to purchase new and used machines, manufacture new products; the ability to obtain financing for product acquisition; changes in product strategies; general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in various tax laws; and the availability of key management and other personnel.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which requires us to make estimates and assumptions in certain circumstances that affect amounts reported. In preparing these financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. We believe that of our significant accounting policies (more fully described in Notes to the Consolidated Financial Statements), the following are particularly important to the portrayal of our results of operations and financial position and may require the application of a higher level of judgment by our management, and as a result are subject to an inherent degree of uncertainty.

Estimates

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally 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 revenues and expenses during the reporting period. By their nature, these estimates and judgments are subject to an inherent degree of uncertainty. We review our estimates on an on-going basis, including those related to sales allowances, the allowance for doubtful accounts, inventory reserves, long-lived assets, income taxes and litigation. We base our estimates on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates, and material effects on our operating results and financial position may result. We believe the following critical accounting policies involve our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

We recognize revenues when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) our price to the customer is fixed or determinable; and (iv) collection of the sales price is reasonably assured. Delivery occurs when goods are shipped and title and risk of loss transfer to the customer, in accordance with the terms specified in the arrangement with the customer. Revenue recognition is deferred in all instances where the earnings process is incomplete. We record reserves for estimated sales returns and allowances for both CNC machine sales and manufactured parts in the same period as the related revenues are recognized. We base these estimates on our historical experience for returns or the specific identification of an event necessitating a reserve. Our estimates may change from time to time in the event we ship manufactured parts which in the customers’ opinion, do not conform to the specifications provided. To the extent actual sales returns differ from our estimates, our future results of operations may be affected.

Accounts Receivable

We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current credit worthiness, as determined by our review of their current credit information. We continuously monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. While our credit losses have historically been within our expectations and the allowance established, we may not continue to experience the same credit loss rates as we have in the past. Accounts receivable are written off or reserves established when considered to be uncollectible or at risk of being uncollectible. While management believes that adequate allowances have been provided in the Consolidated Financial Statements, it is possible that we could experience unexpected credit losses. Our accounts receivable are concentrated in a relatively few number of customers. One customer, Panasonic Avionics Corporation (“Panasonic”), a leading provider of in-flight entertainment systems for commercial aircraft, accounts for 39% and 35% of our consolidated accounts receivable balance at June 30, 2009 and 2008, respectively. Therefore, a significant change in the liquidity or financial position of any one customer could make it more difficult for us to collect our accounts receivable and require us to increase our allowance for doubtful accounts, which could have a material adverse impact on our consolidated financial position, results of operations and cash flows.

Inventories

Within our Precision Manufacturing segment, we seek to purchase and maintain raw materials at sufficient levels to meet lead times based on forecasted demand. Within our Machine Tools segment, we purchase machines held for resale based upon 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 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 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.

We adopted Statement of Financial Accounting Standard (“SFAS”) No. 151, “Inventory Costs, an amendment of Accounting Research Bulletin (ARB) No. 43, Chapter 4 beginning January 1, 2006,” with no material effect on our financial condition or results of operations. 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 the 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 production levels, we charge such under-absorption of fixed overhead to operations.

Long-lived Assets

We continually monitor and review long-lived assets, including fixed assets intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that the carrying amount of any such asset may not be recoverable. The determination of recoverability is based on an estimate of the undiscounted cash flows expected to result from the use of an asset and its eventual disposition. The estimate of cash flows is based upon, among other things, certain assumptions about expected future operating performance, growth rates and other factors. Our estimates of cash flows may differ from actual cash flows due to, among other things increased competition, loss of customers and loss of manufacturer representation contract, all which can cause materially changes our operating performance. If the sums of the undiscounted cash flows are less than the carrying value, we recognize an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset or discounted cash flows. Long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

Based on managements review, we determined there were no impairments of long-lived assets as of June 30, 2009 and 2008.

Goodwill and Acquired Intangible Assets

SFAS No. 141 “Business Combinations” requires that all business combinations be accounted for under the purchase method. The statement further requires separate recognition of intangible assets that meet certain criteria. SFAS No. 142 “Goodwill and Other Intangible Assets”, requires that an acquired intangible asset meeting certain criteria shall be initially recognized, and measured based on its fair value.

In accordance with SFAS No. 142, goodwill is not amortized, and is tested for impairment at the reporting unit level annually or when there are any indications of impairment. A reporting unit is an operating segment for which discrete financial information is available and is regularly reviewed by management.

SFAS No. 142 requires a two-step approach to test goodwill for impairment for each reporting unit. The first step tests for impairment by applying fair value-based tests to a reporting unit. The second step, if deemed necessary, measures the impairment by applying fair value-based tests to specific assets and liabilities within the reporting unit. Application of the goodwill impairment tests require judgment, including identification of reporting units, assignment of assets and liabilities to each reporting unit, assignment of goodwill to each reporting unit, and determination of the fair value of each reporting unit. The determination of fair value for a reporting unit could be materially affected by changes in these estimates and assumptions. Based on its review, we determined there were impairments of goodwill from continuing operations as of June 30, 2009.

Accounting for Income Taxes

We account for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes”. Under this method, we determine deferred tax assets and liabilities based upon the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. The tax consequences of most events recognized in the current year's financial statements are included in determining income taxes currently payable. However, because tax laws and financial accounting standards differ in their recognition and measurement of assets, liabilities, equity, revenues, expenses, gains and losses, differences arise between the amount of taxable income and pre-tax financial income for a year and between the tax bases of assets or liabilities and their reported amounts in the financial statements. Because it is assumed that the reported amounts of assets and liabilities will be recovered and settled, respectively, a difference between the tax basis of an asset or a liability and its reported amount on the consolidated balance sheet will result in a taxable or a deductible amount in some future years when the related liabilities are settled or the reported amounts of the assets are recovered. We then assess the likelihood that our deferred tax assets will be recovered from future taxable income and unless we believe that recovery is more likely than not, we must establish a valuation allowance.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”. FIN 48 describes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. Therefore, FIN 48 was effective for us beginning July 1, 2007. The adoption of FIN 48 on July 1, 2007 did not have a material impact to our consolidated financial statements.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”, which replaces FAS No. 141. SFAS No. 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is to be applied prospectively to business combinations. The company is evaluating this statement for the impact, if any, on its consolidated financial statements, however, we will be required to expense cost related to any acquisition after June 30, 2009

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51”. This statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. Upon its adoption, effective for us in the fiscal year beginning July 1, 2009, noncontrolling interests will be classified as equity in the Company’s balance sheet and income and comprehensive income attributed to the noncontrolling interest will be included in the Company’s income and comprehensive income, respectively. The provisions of this standard must be applied prospectively upon adoption except for the presentation and disclosure requirements. We do not expect the adoption of SFAS No. 160 to have an impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133”. SFAS No. 161 amends and expands the disclosure requirements of SFAS No. 133 for derivative instruments and hedging activities. SFAS No. 161 requires qualitative disclosure about objectives and strategies for using derivative and hedging instruments, quantitative disclosures about fair value amounts of the instruments and gains and losses on such instruments, as well as disclosures about credit-risk features in derivative agreements. We do not expect the adoption of SFAS No. 161 to have a significant impact on our consolidated financial statements.

In April 2008, The FASB issued FASB Staff Position FSP No. 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142. FSP 142-3 is effective for us in the fiscal year beginning July 1, 2009. We are currently evaluating the impact of the adoption of FSP 142-3 on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS will become effective 60 days following the Security and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. We do not expect the adoption of SFAS No. 162 to have a significant impact on our consolidated financial statements.

In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" (“SFAS 165”). SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 will be effective for interim or annual period ending after June 15, 2009 and will be applied prospectively. We will adopt the requirements of this pronouncement for the year ended June 30, 2009. We do not anticipate the adoption of SFAS 165 will have an impact on its consolidated results of operations or consolidated financial position.

EITF 07-5, “ Determining Whether an Instrument ( or embedded Feature” is Indexed to an Entity’s Own Stock” (EIFT 07-5) was issued in June 2008 to clarity how to determine whether certain instruments or features were indexed to an entity own stock under EITF Issue No. 01-6, “ The Meaning of “ Indexed to a Company’s Own Stock” (EITF 01-6). EITF 07-5 applies to any freestanding financial instrument (or embedded feature” that has all the characteristics of a derivative as defined in FAS 133, for purpose of determining whether that instrument (or embedded feature) qualifies for the first part of the paragraph 11 (a) scope exception. It is also applicable to any freestanding financial instrument (e.g., gross physically settled warrants) that is potentially settled in an entity’s own stock, regardless of whether it has all the characteristics of a derivative as defined in FAS 133, for purpose of determining whether to apply EITF 00-19. EITF 07-5 does not apply to share-based payment awards within the scope of FAS123(R), Share-Based Payment (FAS123R). However, an equity-linked financial instrument issued to investors to establish a market-based measure of the fair value of employee stock options is not within the scope of FAS 123 R and therefore is subject to EITF 07-5.

The guidance is applicable to existing instruments and is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Management is currently considering the effect of this EITF on financial statements for the year beginning July 1, 2009.

On January 12, 2009 FASB issued FSP EITF 99-20-01, “ Amendment to the Impairment Guidance of EITF Issued No. 99-20”. This RSP amends the impairment guidance in EITF Issued No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to be Held by a Transferor in Securitized Financial Assets,” to achieve more consistent determination of whether an other-that-temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115, “ Accounting for Certain Investments in Debt and Equity Securities”, and other related guidance. The FSP is shall be effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is permitted. We do not believe this pronouncement will impact our financial statements.

Results of Operations

Discontinued Operations

All American generated revenues of $2,964,928 and $4,298,613 during the years ended June 30, 2009 and 2008, respectively.

During the year ended June 30, 2009, we recognized pre-tax losses from discontinued operations of ($2,264,216). Also during the year ended June 30, 2009, we recorded a loss from discontinued operations, net of income tax benefit of $2,264,216. The losses for All American resulted primarily from - trading losses and the write off of intangible assets.

Since we did not cease operating All American until the last day of our fiscal year the shutdown of these operations did not impact our revenues or operating results for fiscal 2009.

Sales Concentration

The sales within our Precision Manufacturing segment are highly concentrated within one customer, Panasonic Sales to this customer accounted for 66% and 27% of consolidated sales for the years ended June 30, 2009 and 2008, respectively. The loss of all or a substantial portion of sales to this customer would cause us to lose a substantial portion of our sales within this segment and on a consolidated basis, and have a corresponding negative impact on our operating profit margin due to operation leverage this customer provides. This could lead to sales volumes not being high enough to cover our current cost structure or provide adequate operating cash flows. Panasonic has been a customer of ours for approximately 15 years and we believe our relationship is good.

Gross Profit

Our gross profit represents sales less the cost of sales. Gross margin represents our gross profit divided by sales.

Cost of sales for our Precision Manufacturing segment primarily consists of raw materials, direct labor, depreciation of manufacturing equipment and overhead incurred in the manufacturing of parts for our customers. Our gross margins will increase and decrease depending on the amount of products we manufacture as result of allocating fixed manufacturing costs over a larger or reduced number of parts, which yields lower or higher per unit costs, respectively. As a result, a change in manufacturing volume in a quarter can significantly affect our gross margin in that and future quarters.

Cost of sales for our Machine Sales Segment includes the cost of machines, replacement parts, freight, and refurbishment expenses. Gross margins within the Machine Sales segment can vary based on the price we procure equipment for in the marketplace, sales mix between new and used equipment and the costs to refurbish used machines.

Selling, General and Administrative

Our selling, general and administrative expenses consist of personnel costs, including the sales, executive, finance and administration. These costs also include non-manufacturing related depreciation, overhead and professional fees (primarily legal and accounting).

Amortization of Intangible Assets

Our amortization expense includes the amortization of identifiable intangible assets, consisting of customer lists, from our acquisition of All American CNC Sales, Inc. in 2004 and our acquisition of CNC Repos, Inc. in fiscal 2008.

Interest Expense

Interest expense primarily consists of the cost of borrowings under our credit agreement with Pacific Western Bank, loans from Joseph Gledhill, a former executive officer and Director, amounts previously outstanding with First Financial Credit and capital lease agreements. See Liquidity and Capital Resources and Notes to Consolidated Financial Statements for further discussion.

Segment Information

	Year ended June 30,
	2009			2008			Change ($)			Change (%)
Sales by segment
Machine Sales	$	4,752,435		$	8,955,916		$	(4,203,481	)		47
Precision Manufacturing		4,898,749			6,230,190			(1,331,441	)		21

Gross profit by segment
Machine Sales		1,172,998			2,001,147			828,149			41
Precision Manufacturing		1,731,312			2,400,158			668,846			28

Gross Margin by segment-
Machine Sales		25	%		22	%
Precision Manufacturing		35	%		39	%

Results of Operations for the Year Ended June 30, 2009 and 2008

Introduction

For the twelve months ended June 30, 2009, we generated $9,651,183 in revenues on cost of sales of $6,746,873. With these revenues and cost of sales for the year ended June 30, 2009, we had a net income(loss) of ($2,258,883). For the year ended June 30, 2008, we had revenues of $15,219,106, on cost of sales of $10,817,801. With these revenues and costs of sales we had a net income(loss) of $73,407, for year ended June 30, 2008. An explanation of these numbers and how they relate to our business is contained below.

Revenues, Expenses and Loss from Operations

	Year Ended June 30, 2009			Year Ended June 30, 2008

Revenues	$	9,651,183		$	15,219,106
Cost of Sales		6,746,873			10,817,801
Selling, General and Administrative Expenses		2,771,762			3,989,227
Amortization of Intangible Assets		41,783			17,410
Operating Income		90,765			394,668
Interest Expense		(109,147	)		(155,455	)
Interest Income		9,990			7,029
Gain on Sale of Assets		16,125			(63,652	)
Total Other Income		(83,032	)		(212,078	)
Net Income (Loss)	$	(2,258,883	)	$	73,407

Revenues

Our revenues for the year ended June 30, 2009 were $9,651,183 compared to revenues of $15,219,106 for the year ended June 30, 2008. Our approximately 33% reduction in our revenues from the year ended June 30, 2008 to year ended June 30, 2009, was primarily due to a decline in orders due to a slowdown in the overall economy. Our revenues for the year ended June 30, 2009 consisted primarily of sales of CNC machines and machined products.

Cost of Sales

Our cost of sales for the year ended June 30, 2009, were $6,746,873 and consisted primarily of used CNC machines and raw materials usage, compared to our cost of sales for the year ended June 30, 2008 of $10,817,305. The reduction in our cost of sales was primarily due to a slowdown in the overall economy and a lack of orders from our customers.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses are those expenses we have related to the actual sales of our products and the costs we incur in transporting those products. For the year ended June 30, 2009 our selling and distribution expenses were $2,771,762, compared to $3,989,227 for the year ended June 30, 2008. Our selling, general and administrative expenses for the year ended June 30, 2009, primarily consisted of salaries of $717,477, rent of $490,196, legal and professional fees of $470,494, and insurance expenses of $297,393.

Interest Expense

For the year ended June 30, 2009, our interest expense decreased by $46,308 compared to the comparable period in 2008. The change is attributable to lower average debt balances and decreases in the average interest rate paid on our debt and capital lease obligations.

Gain on Sale of Assets

During 2009, we recorded net gain from the sale of assets resulting from the sale of certain manufacturing equipment within the Precision Manufacturing Group during 2009 for proceeds of $16,125. During the 2008 period, we recognized a net loss of $63,652 from the sale of assets as we sold certain manufacturing equipment within the Precision Manufacturing group.

Loss from Discontinued Operations

The profit (Loss) from discontinued operations were $(2,264,216) and $917 for the years ended June 30, 2009 and 2008, respectively. As noted above, for the period ended in 2009, this was primarily related to the decision by our management to cease operating All American CNC Sales, Inc. See Notes to Consolidated Financial Statements for further discussion.

Provision for Income Taxes

For the 2009 period, the effective tax rate was 31%. There was no tax provision for 2009 apart from the minimum state income taxes for the year.

Liquidity and Capital Resources

Our principal sources of liquidity consist of cash and cash equivalents, cash generated from operations and borrowing from various sources, including Pacific Western Bank. At June 30, 2009, our cash and cash equivalents totaled $438,030 and we had working capital of $440,594.

At June 30, 2009, we had $440,000 in debt outstanding under our credit agreement with Pacific Western Bank. The credit agreement provides for borrowings of up to $1,500,000, which includes a line of credit, a term loan and a letter of credit. The amount outstanding under the line of credit, term loan and letter of credit are $440,000, $250,000 and $0, respectively. The credit agreement is currently secured by substantially all of our assets and personal guarantees by two of our former executive officers, Joseph Gledhill and Timothy Consalvi. On November 29, 2008, the term of the credit agreement was extended through November 21, 2009. Since that time we have agreed on an additional two month extension with Pacific Western Bank.

We have no liability under the letter of credit as this was terminated during the year ended June 30, 2009.

The line of credit provides for borrowings of up to $1,000,000, bearing interest at the lender's referenced prime rate plus 1.5%, and is payable monthly with the outstanding principal balance due on November 21, 2008. The amount available for borrowings is determined on a monthly basis based on 80% of eligible accounts receivable, as defined. As of June 30, 2009, the amount that should have been available for borrowings was $560,000; however, due to our request to change personal guarantors, this line was frozen by Pacific Western Bank and no amount was available for borrowings.

The term loan provides for borrowings of up to $500,000. The loan bears interest at the lender's referenced prime rate plus 1.5%, with principal and interest payments due monthly.

The current credit agreement requires us to maintain certain financial and non-financial covenants. These covenants are as follows:

No later than 90 days after the end of our fiscal year we must provide audited financial statements for the period ended to the lender;

No later than 60 days after the end of each fiscal quarter we must provide unaudited financial statements for the period ended to the lender;

No later than 30 days after the filing date for any tax returns we must provide the tax returns for the period ended to the lender;

Minimum working capital of $800,000, to be evaluated quarterly;

Maintain a minimum current ratio of 1.15 to 1.00, to be evaluated quarterly;

Maintain a minimum tangible net worth of $2,750,000, to be evaluated quarterly;

Maintain a debt/worth” ratio of 2.50 to 1.00, to be evaluated quarterly, with “debt/worth” ratio being defined as total liabilities (excluding debt subordinated to lender) and divided by our tangible net worth;

Maintain a commercial loan debt service coverage ratio of 1.35 to 1.00, to be evaluated annually, and is calculated as our net profit, plus depreciation and amortization, minus any dividends, withdrawals and non-cash income/expenses, divided by the current portion of our long term debt, plus the current portion of any capital lease obligations;

We cannot, without prior written consent of the lender, make any capital expenditure totaling $1,000,000 in any fiscal year, or incur any liability for rentals of property in an amount which, together with capital expenditures in any fiscal year exceeds such sum;

We must be profitable at the end of each fiscal year and cannot incur a net loss in more than one fiscal quarter. For purposes of this covenant, the profitability is calculated as our net profit, plus depreciation and amortization, minus any dividends, withdrawals and non-cash income/expenses items;

We may not incur any trade debt, except in the normal course of business, and we may not sell, transfer, mortgage, assign, pledge, lease, grant a security interest in or encumber any of our assets, without written consent of the lender;

We may not engage in any business activities substantially different than those which we are presently engaged, or cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, without prior written consent of the lender;

We may not pay any cash dividends on our common stock without the prior written consent of the lender; and

We may not loan, invest in or advance money or assets to any other person, enterprise or entity, or purchase, acquire, or create any interest in any other enterprise or entity, or incur any obligation as a surety or guarantor other than in the ordinary course of business, without the prior written consent of the lender.

The failure to meet these affirmative and negative covenants under the Agreement would constitute a default under the loan agreement. If we were to default under the loan agreement, and if at that time we are unable to get the lender to waive or forbear the default, then the lender could immediately terminate the loan agreement and all indebtedness then owed by us to the lender would be immediately due and payable, without any further notice by the lender. Were this to occur it would have a significant negative impact on our business and liquidity position.

As of June 30, 2008, we did not meet our capital expenditures and profitability covenants, as set forth in our prior credit agreement with Pacific Western Bank. On September 4, 2008, Pacific Western Bank provided us with a letter of forbearance from the measurement of the required covenants as of June 30, 2008. Beginning on July 1, 2008, we are required to comply with all of the covenants of the amended credit agreement. We were in compliance with the covenants at June 30, 2009, we are currently in compliance with the covenants under the amended credit agreement with Pacific Western Bank.

We believe that our existing sources of liquidity, along with cash expected to be generated from sales, will be sufficient to fund our operations, anticipated capital expenditures, working capital and other financing requirements for the foreseeable future. We may need to seek to obtain additional debt or equity financing 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, lose a significant customer, or increases in our expense levels resulting from being a publicly-traded company, if we achieve this status. If we attempt to obtain additional debt or equity financing, we cannot assure you that such financing will be available to us on favorable terms, or at all.

Cash Flows

The following table sets forth our cash flows for the years ended June 30:

	2009			2008
Provided by (used in)
Operating activities	$	(221,938	)	$	384,298
Investing activities		14,277			(230,603	)
Financing activities		(378,953			(101,598	)
		(586,614	)	$	52,097

Cash Flows for the Years Ended June 30, 2009 and 2008

Operating Activities

Net cash provided by (used in) operating activities was ($221,938) for the year ended June 30, 2009, compared to $384,298 for the year ended June 30, 2008. Our cash from operating activities for the year ended June 30, 2009 was primarily $604,577 in accounts receivables, $419,868 in inventories, $94,761 in prepaid expenses and other assets, ($181,071) in accounts payable and accrued expenses, ($149,500) in customer deposits, and ($187,954) in income taxes payables.

Investing Activities

Net cash provided by (used in) investing activities was $14,277 for the year ended June 30, 2009, compared to ($230,603) for the year ended June 30, 2008. For the year ended June 30, 2009, our cash provided by (used in) investing activities consisted of $74,790 in proceeds from sale of assets and ($60,513) in capital expenditures. These related to equipment purchases and sales in our precision manufacturing group.

Financing Activities

Net cash provided by (used in) financing activities was ($378,953) for the year ended June 30, 2009, compared to ($101,598) for the year ended June 30, 2008. The cash provided by (used in) financing activities for the year ended June 30, 2009, consisted of $110,000 in net borrowings on our line of credit, ($202,416) in payments on note payables, ($198,579) in payments on related party notes payable, and ($87,958) in payments on capital leases.

Contractual Obligations

The following table summarizes our contractual obligations and commercial commitments as of June 30, 2009:

	2010		2011		2012		2013		2014		Total

Debt obligations	$	265,969	$	167,165	$	0	$	0	$	0	$	433,134
Capital leases		82,519		53,830		50,329		3,038		0		189,716
Operating leases		514,521		453,966		408,816		0		0		1,377,303
	$	863,009	$	674,961	$	459,145	$	3,038	$	0	$	2,000,153

Quantitative and Qualitative Disclosures about Market Risk

The only financial instruments we hold are cash and cash equivalents. We also have a floating interest rate agreement with Pacific Western Bank. Changes in market interest rates will impact our interest costs.

We are currently 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 credit n currency rates or changes in economic conditions.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements.

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company we are not required to provide the information required by this Item.

ITEM 8 - FINANCIALS STATEMENT AND SUPPLEMENTARY DATA

Reports of Registered Public Accounting Firms	F-2

Consolidated Balance Sheets as of June 30, 2009 and 2008	F-3

Consolidated Statements of Operations for the years ended June 30, 2009 and 2008	F-4

Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2009 and 2008	F-5

Consolidated Statements of Cash Flows for the years ended June 30, 2009 and 2008	F-6

Notes to Consolidated Financial Statements	F-7

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On March 16, 2009, we dismissed McKennon Wilson & Morgan LLP, the independent accountants previously engaged as the principal accountants to audit our financial statements. The decision to change accountants was approved by our Board of Directors.

Also effective on March 16, 2009, we engaged Kabani & Company, Certified Public Accountants, as our independent certified public accountants. The decision to change accountants was approved by our Board of Directors.

McKennon Wilson & Morgan LLP, audited our financial statements for our fiscal year ended June 30, 2008. The audit report of McKennon Wilson & Morgan LLP on our financial statements for the fiscal year stated above (the “Audit Period”) did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Audit Period, and through March 16, 2009, there were no disagreements with McKennon Wilson & Morgan LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of the former accountants, would have caused it to make reference to the subject matter of the disagreements in connection with its report, and there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K.

During the two most recent fiscal years, or any subsequent interim period prior to engaging Kabani & Company, we nor anyone acting on our behalf consulted with Kabani & Company regarding (i) the application of accounting principles to a specific completed or contemplated transaction, or (ii) the type of audit opinion that might be rendered on the company’s financial statements where either written or oral advice was provided that was an important factor considered by the company in reaching a decision as to the accounting, auditing, or financial reporting issue, or (iii) any matter that was the subject of a disagreement with the company’s former accountant on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of the former accountant, would have caused it to make reference to the subject matter of the disagreements in connection with its audit report.

Item 9A(T) Controls and Procedures

(a) 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 June 30, 2009, 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 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 June 30, 2009, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in Item 9A(T)(b).

(b) Management Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that:

•	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and any disposition of our assets;

•

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2009. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, Management has identified the following three material weaknesses that have caused management to conclude that, as of June 30, 2009, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:

1. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

2. We have not documented our internal controls. We have limited policies and procedures that cover the recording and reporting of financial transactions. Although providing this report in this Annual Report is optional for us at this time, written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act. We are required to provide written documentation of key internal controls over financial reporting beginning with our fiscal year ending June 30, 2009, however we have not documented these controls. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

3. Prior to Spring/Summer 2008, we did not have adequate internal controls, or policies and procedures, with respect to our travel and expense reports. As a result, it was discovered that certain expense reimbursements were paid to our officers and directors even though complete expense reimbursement paperwork had not been submitted with adequate documentation surrounding the nature of the expense. These expenses reimbursements were paid based on the incomplete paperwork. To the extent these expenses could not subsequently be substantiated we requested reimbursement from that officer and director.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only our management’s report in this Annual Report.

(c)	Remediation of Material Weaknesses

To remediate the material weakness in our documentation, evaluation and testing of internal controls we plan to engage a third-party firm to assist us in remedying this material weakness.

To remediate the material weakness related to our travel and expense reports we plan to develop written policies and procedures regarding the payment of expenses to all our employees. We adopted a policy in July 2008 which requires an officer to approve another officer’s expense reports, and requiring, two signatures required for any check issued to an officer or director, neither of which can be the payee.

(d)	Changes in Internal Control over Financial Reporting

This filing contains our first report on internal control over financial reporting and, therefore, there are no changes to report during our most recently completed fiscal quarter.

ITEM 9B – OTHER INFORMATION

There are no events required to be disclosed by the Item.

PART III

ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following table sets forth the names and ages of our current directors and executive officers, the principal offices and positions held by each person, and the date such person became a director or executive officer. Our executive officers are elected annually by the Board of Directors. The directors serve one year terms until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. Unless described below, there are no family relationships among any of the directors and officers.

Name	Age	Position(s)

George Colin	76	Director (3/09), Chief Executive Officer (12/08)

Jitu Banker	69	Chief Financial Officer (3/09) and Director (3/09)

Robert Sabahat	46	Secretary (3/09) and Director (3/09)

George Colin has served as one of the Company’s directors since January, 2009. Since 1994 Mr. Colin has been an independent consultant for numerous businesses regarding general business decisions and investment decisions. From 1976 to 1994, Mr. Colin was the Chief Executive Officer and majority shareholder of Odyssey Systems. In this role he managed all aspects of the business, which manufactured and supplied swimming pool equipment. Mr. Colin also served as a lieutenant in the U.S. Navy. Mr. Colin received NROTC officer training at Villanova University and obtained a BSCE in 1955.

Jitu Banker has served as one of the Company’s directors since January, 2009. Mr. Banker is currently the President and Chief Financial Officer of Money Line Capital, Inc., the Company’s largest shareholder. Since 1990, Mr. Banker has also been the owner of Banker & Co., a company specializing in tax, accounting, Internal Revenue Service audits, and other related services. From 2004 to 2006, Mr. Banker was one of the Company’s Directors and the Company’s Chief Financial Officer. Mr. Banker has a Bachelor of Arts in Accounting with Economics and is a member of the Institute of Chartered Accountants in England and Wales, the Institute of Management Accountants in London, England, and the American Institute of Certified Public Accountants.

Robert Sabahat is an owner and partner of Madison Harbor Law Group, a law firm located in Orange County, California. Mr. Sabahat has held this position since September 1999. In this position Mr. Sabahat has a practice focusing on real estate and commercial litigation involving contract and tort based claims, business transactions, commercial lease agreements, and unfair competition. From June 1995 to September 1999, Mr. Sabahat was Corporate Counsel for Unicorp Paper Industries, Inc., where he was responsible for all legal matters for the multinational manufacturer of commercial printing papers. Mr. Sabahat received his Juris Doctorate with honors from Western State University, College of Law in 1994.

Other Directorships

None of our officers and directors are directors of any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.

Audit Committee

We do not currently have an audit committee.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten percent shareholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

During the most recent fiscal year, to the Company’s knowledge, the following delinquencies occurred:

Name	No. of Late Reports	No. of Transactions Reported Late	No. of Failures to File
Timothy D. Consalvi	1	0	0
Joseph Gledhill	1	0	0
Lawrence A. Consalvi	2	1	0
Stephen M. Kasprisin	2	1	0
George Colin	0	0	0
Jitu Banker	1	0	0
Robert Sabahat	1	0	0
Money Line Capital, Inc.	1	3	0

Board Meetings and Committees

During the fiscal year ended June 30, 2009, the Board of Directors met on a regular basis and took written action on numerous other occasions. All the members of the Board attended the meetings. The written actions were by unanimous consent

Code of Ethics

We have not adopted a written code of ethics, primarily because we believe and understand that our officers and directors adhere to and follow ethical standards without the necessity of a written policy.

ITEM 11 - EXECUTIVE COMPENSATION

Executive Officers and Directors

The following tables set forth certain information about compensation paid, earned or accrued for services by (i) our Chief Executive Officer and (ii) all other executive officers who earned in excess of $100,000 in the fiscal year ended June 30, 2009, 2008 and 2007 (“Named Executive Officers”):

Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($) *		Option Awards ($) *		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation ($)		All Other Compensation ($)			Total ($)

George Colin (1)	2009		0		0		0		0		0				0			0
Chief Executive Officer

Jitu Banker (2)	2009		90,000		0		0		0		0		0		0			90,000
Chief Financial Officer

Robert Sabahat (3)	2009		0		0		0		0		0		0		0			0
Secretary

Timothy D. Consalvi (4)	2009		230,000		0		0		0		0		0		3,157	(9)		233,157
Former President and Chief Executive Officer	2008		260,000		51,250		-		-		-		-		21,772	(9)		333,022
	2007		260,000		-		-		-		-		-		10,864	(9)		270,864

Joseph Gledhill (5)	2009		248,846		0		0		0		0		0		0	(10)		248,846
Former Executive Vice President	2008		260,000		52,000		-		-		-		-		15,372	(10)		327,372
	2007		260,000		-		-		-		-		-		16,327	(10)		276,327

Lawrence A. Consalvi (6)	2009		260,000		0		0		0		0		0		3,157	(11)		263,157
Former Executive Vice President	2008		260,000		50,899		-		-		-		-		18,657	(11)		329,556
	2007		260,000		-		-		-		-		-		15,629	(11)		275,629

Stephen M. Kasprisin (7)	2009		15,000		0		0		0		0		0		0	(12)		15,000
Former Chief Financial Officer	2008		58,333		-		-		-		-		-		3,128	(12)		81,461
	2007		134,615		-		-		-		-		-		4,874	(12)		139,489

Lloyd Leavitt (8)	2009		-		-		-		-		-		-		-			-
Former Chief Financial Officer	2008		-		-		-		-		-		-		-			-
	2007		119,569		-		-		-		-		-		8,850	(13)		128,419

Based upon the aggregate grant date fair value calculated in accordance with the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standard (“FAS”) No. 123R, Share Based Payment. Our policy and assumptions made in valuation of share based payments are contained in the Notes to our June 30, 2009 financial statements. The monies shown in the “option awards” column is the total calculated value for each individual.

	(1)	George M. Colin was hired as our Chief Executive Officer on December 9, 2008.
	(2)	Jitu Banker was hired as our Chief Financial Officer on March 31, 2009.
	(3)	Robert Sabahat was hired our Secretary effective March 31, 2009.
	(4)	Timothy D. Consalvi resigned from his position as our Chief Financial Officer on December 9, 2009.
	(5)	Joseph Gledhill resigned from his position as our Executive Vice President on March 25, 2009, but remains as President of Eran Engineering.
	(6)	Lawrence Consalvi resigned all positions with us and our subsidiaries, effective September 24, 2008.
	(7)	Stephen M. Kasprisin was hired on November 13, 2006 as Chief Financial Officer, and resigned on October 17, 2007. In April 2008, Mr. Kasprisin agreed to serve as our interim Chief Financial Officer. Mr. Kasprisin resigned as our Chief Financial Officer and Secretary on March 31, 2009.
	(8)	Lloyd Leavitt joined the Company in January, 2005 through the acquisition of Spacecraft. Mr. Leavitt’s employment was terminated in February, 2007.
	(9)	Includes vehicle reimbursements of $0, $13,181, and $8,156 in 2009, 2008 and 2007, respectively, and medical and life insurance payments of $3,157, $8,591, and $2,708, for those same years.
	(10)	Includes vehicle reimbursements of $0, $15,372 and $13,180, in 2009, 2008 and 2007, respectively, and medical insurance payments of $3,147 in 2007.
	(11)	Includes vehicle reimbursements of $0, $11,897, and $12,921, in 2009, 2008, and 2007, respectively and medical and life insurance payments of $3,157, $6,760, and $2,708, in 2009, 2008 and 2007, respectively.
	(12)	Includes vehicle reimbursements of $1,500 and $2,400 in 2008 and 2007, respectively, and medical and life insurance payments of $1,628 and $2,474 in 2008 and 2007, respectively.
	(13)	Includes vehicle reimbursements of $5,250 in 2007 and medical insurance payments of $3,600 in 2007.

Employment Contracts

We currently do not have written employment agreements with our executive officers. We had employment agreements with each of our former principal executives, which provided for participation of the employee in any tax-qualified and nonqualified deferred compensation and retirement plans, group term life insurance plans, short-term and long-term disability plans, employee benefit plans, practices, and programs maintained or to be established by us and made available to similarly situated executives generally.

Agreement with Timothy D. Consalvi. In connection with our acquisition of All American from its sole shareholders in September, 2004, Timothy and Kathy Consalvi, All American entered into an employment agreement with Mr. Consalvi to serve as the President of All American at a compensation rate of $168,000 per annum. The initial term of this employment agreement was for one year commencing on October 1, 2004, and with automatic renewals for successive one year terms unless earlier terminated by either party. On February 1, 2007, we entered into a new employment agreement with Mr. Consalvi to serve as our President and Chief Executive Officer at an annual compensation rate of $260,000. The initial term of this employment agreement was for two years commencing February 1, 2007, with automatic renewals for successive two year terms unless terminated by either party. On December 8, 2008, in conjunction with the sale of a portion of his stock to Money Line Capital, Inc., we entered into a new employment agreement with Mr. Consalvi to serve as the President of All American at a compensation rate of $200,000 per annum. The employment agreement provided that Mr. Consalvi may be terminated for cause with no further compensation. If Mr. Consalvi was terminated without cause, he was entitled to a lump sum severance payment equal to 75% of his annual salary at the date of termination, and medical benefits for a period of nine months after termination. The agreement also provides that for a period of 12 months following termination of the employment agreement, Mr. Consalvi shall not (i) compete with respect to any services or products of the Company which are either offered or are being developed by the Company, (ii) attempt to influence any employee of ours to leave the employ of the Company or to aid any competitor, customer or supplier to hire any employee of ours, (iii) disclose any information about our affairs including trade secrets, know-how, customer lists, business plans, operational methods, policies, suppliers, customers or other such Company information, nor (iv) use or employ any of our information for his own benefit or in any way adverse to our interests. We terminated this agreement effective June 30, 2009, in conjunction with closing down the operations of All American. At termination we paid Mr. Consalvi $20,769, constituting his final paycheck and a severance payment of $0.

Agreement with Joseph T.W. Gledhill. On February 1, 2007, we entered into an employment agreement with Joseph T. W. Gledhill to serve as our Executive Vice President, and President of our wholly-owned subsidiary, Eran Engineering, Inc., at a compensation rate of $260,000 per annum. The initial term of this employment agreement is for two years commencing February 1, 2007, with automatic renewals for successive two year terms unless terminated by either party. The employment agreement provides that Mr. Gledhill may be terminated for cause. If Mr. Gledhill is terminated without cause, he is entitled to a lump sum severance payment equal to twice his annual salary at the date of termination, and medical benefits for a period of 24 months after termination. The agreement also provides that for a period of 12 months following termination of the employment agreement, Mr. Gledhill shall not (i) compete with respect to any services or products of the Company which are either offered or are being developed by the Company, (ii) attempt to influence any employee of ours to leave the employ of the Company or to aid any competitor, customer or supplier to hire any employee of ours, (iii) disclose any information about our affairs including trade secrets, know-how, customer lists, business plans, operational methods, policies, suppliers, customers or other such Company information, nor (iv) use or employ any of our information for his own benefit or in any way adverse to our interests. The agreement provides that the parties will arbitrate any disputes arising under the agreement.

However there is no current employment agreement with Mr. Joseph Gledhill at this time. All prior agreements were terminated effective December 2008.

Agreement with Lawrence A. Consalvi. On February 1, 2007, we entered into an employment agreement with Lawrence A. Consalvi to serve as our Executive Vice President, and President of our wholly-owned subsidiary, E.M. Tool Company, Inc. (doing business as Elite Machine), at a compensation rate of $260,000 per annum. The initial term of this employment agreement is for two years commencing February 1, 2007, with automatic renewals for successive two year terms unless terminated by either party. The employment agreement provides that Mr. Consalvi may be terminated for cause. If Mr. Consalvi is terminated without cause, he is entitled to a lump sum severance payment equal to twice his annual salary at the date of termination, and medical benefits for a period of 24 months after termination. The agreement also provides that for a period of 12 months following termination of the employment agreement, Mr. Consalvi shall not (i) compete with respect to any services or products of the Company which are either offered or are being developed by the Company, (ii) attempt to influence any employee of ours to leave the employ of the Company or to aid any competitor, customer or supplier to hire any employee of ours, (iii) disclose any information about our affairs including trade secrets, know-how, customer lists, business plans, operational methods, policies, suppliers, customers or other such Company information, nor (iv) use or employ any of our information for his own benefit or in any way adverse to our interests. The agreement provides that the parties will arbitrate any disputes arising under the agreement. Mr. Consalvi resigned, effective September 24, 2008. We entered into a Separation Agreement with Mr. Consalvi on September 26, 2008. Under the terms of the agreement, Mr. Consalvi returned 400,000 shares of our common stock to us for cancellation in order to repay certain obligations he owed us. The shares were cancelled, effective October 6, 2008. Mr. Consalvi continues to work with us selling CNC machines as an independent contractor.

Agreement with Stephen M. Kasprisin. On November 13, 2006, we entered into an employment agreement with Stephen M. Kasprisin to serve as our Chief Financial Officer at a compensation rate of $200,000 per annum. The initial term of this employment agreement was for one year commencing on November 13, 2006, with automatic renewals for successive one year terms unless terminated by either party. Mr. Kasprisin resigned and terminated the agreement on October 14, 2007. We did not have an employment agreement with Mr. Kasprisin for serving as our interim Chief Financial Officer. However, we did compensate Mr. Kasprisin the following for serving as our interim Chief Financial Officer: i) $1,500, ii) 50,000 shares of our common stock, paid upon close of the transaction with Money Line Capital, Inc. Mr. Kasprisin resigned as our interim Chief Financial Officer, our Secretary and a member of our Board of Directors, effective March 31, 2009.

Agreement with James M. Cassidy. On April 2, 2007, we entered into an agreement with James M. Cassidy to serve as our General Counsel, at a compensation rate of $120,000 per annum. The initial term of this agreement was for one year commencing on April 2, 2007, with automatic renewals for successive one year terms unless terminated by either party. The agreement provides that Mr. Cassidy may be terminated for cause. If Mr. Cassidy was terminated without cause, he would be entitled to a termination payment equal to his monthly retainer at the date of termination for a period of three months. The agreement also provides that for a period of 12 months following termination of the employment agreement, Mr. Cassidy shall not (i) disclose any information about the affairs of the Company including trade secrets, know-how, customer lists, business plans, operational methods, policies, suppliers, customers or other such Company information, nor (ii) use or employ any such Company information for his own benefit or in any way adverse to the Company’s interests. The agreement provides that the parties will arbitrate any disputes arising under the agreement. On March 13, 2008, we terminated the agreement with Mr. Cassidy for cause.

Agreement with Lloyd Leavitt. In connection with our acquisition of Spacecraft Machine Products, Inc. from Lloyd Leavitt, III and the Leavitt Family Trust in January 2005, Spacecraft entered into an employment agreement with Lloyd Leavitt, III, to serve as its President at a compensation rate of $115,050 per annum. The initial term of this employment agreement was for one year commencing on January 31, 2005, with automatic one-year renewals unless earlier terminated by either party. In September 2005, we entered into a new employment agreement with Lloyd Leavitt to perform the duties as our Chief Financial Officer, the terms of which included the issuance of 300,000 restricted shares of our common stock. The shares were valued at $357,000 based on the common stock price at the date of the award. As a result of the closure of Spacecraft, Spacecraft’s employment agreement with Mr. Leavitt was terminated. On February 28, 2007, we negotiated the termination of Mr. Leavitt’s employment with us. Under the terms of the separation agreement, Mr. Leavitt was paid his base salary for a period of 6 months following termination.

Other Compensation

We have employment agreements with several of our other employees, including Kenneth Collini and Douglas Redoglia, both of whom are salesmen for used CNC Machines.

Director Compensation

The following table sets forth director compensation as of June 30, 2009:

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($) *		Option Awards ($) *		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)

George Colin (1)		0-		0-		0-		0		0		0		0

Jitu Banker (2)		0-		0-		0		0		0		0		0

Robert Sabahat (3)		0-		0		0		0		0		0		0

Timothy D. Consalvi (4)		0-		0		0		0		0		0		0

Joseph Gledhill (5)		0-		0		0		0		0		0		0

Lawrence A. Consalvi (6)		0-		0		0		0		0		0		0

Stephen M. Kasprisin (7)		0-		0		0		0		0		0		0

Based upon the aggregate grant date fair value calculated in accordance with the Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standard (“FAS”) No. 123R, Share Based Payment. Our policy and assumptions made in valuation of share based payments are contained in the notes to our financial statements. The monies shown in the “option awards” column is the total calculated value for each individual.

	(1)	George M. Colin was appointed to our Board of Directors on January 28, 2009.
	(2)	Jitu Banker was appointed to our Board of Directors on January 28, 2009.
	(3)	Robert Sabahat was appointed to our Board of Directors on March 31, 2009.
	(4)	Timothy D. Consalvi resigned from our Board of Directors effective March 25, 2009.
	(5)	Joseph Gledhill resigned from our Board of Directors effective March 25, 2009.
	(6)	Lawrence Consalvi resigned all positions with us and our subsidiaries, effective September 24, 2008.
	(7)	Stephen M. Kasprisin resigned from our Board of Directors effective March 31, 2009.

We do not provide any compensation to our directors for serving as directors.

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information concerning outstanding stock awards held by the Named Executive Officers as of June 30, 2009:

Option Awards

Stock Awards

Name

Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable

Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable

Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)

Option

Exercise

Price

($)

Option

Expiration

Date

Number of

Shares or

Units of

Stock That

Have Not

Vested

(#)

Market

Value of

Shares or

Units of

Stock That

Have Not

Vested

($)

Equity

Incentive

Plan

Awards:

Number of

Unearned

Shares,

Units or

Other

Rights

That Have

Not Vested

(#)

Equity

Incentive

Plan

Awards:

Market or

Payout

Value of

Unearned

Shares,

Units or

Other

Rights

That Have

Not Vested

($)

George Colin

Jitu Banker

Robert Sabahat

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth, as of June 30, 2009, certain information with respect to the Company’s equity securities owned of record or beneficially by (i) each Officer and Director of the Company; (ii) each person who owns beneficially more than 10% of each class of the Company’s outstanding equity securities; and (iii) all Directors and Executive Officers as a group.

Common Stock
Title of Class	Name and Address of Beneficial Owner (3)	Amount and Nature of Beneficial Ownership			Percent of Class (1)

Common Stock	George Colin (2)		690,000			2.2	%

Common Stock	Jitu Banker (2)		325,000	(4)		1.1	%

Common Stock	Robert Sabahat (2)		0			0.0	%

Common Stock	Money Line Capital, Inc. 17702 Mitchell North, Suite 201 Irvine, CA 92614		16,918,476	(6)		54.8	%

Common Stock	All Directors and Officers As a Group (3 persons)		1,015,000	(4)		3.3	%

(1)

Unless otherwise indicated, based on 30,861,956 shares of common stock issued and outstanding. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for the purposes of computing the percentage of any other person.

(2)

Indicates one of our officers or directors.

(3)

Unless indicated otherwise, the address of the shareholder is M Line Holdings, Inc.

(4)

Includes 25,000 shares held by Mr. Banker’s son.

(5)

All three of our officers and directors own stock in Money Line Capital, Inc., but none individually or as a group control Money Line’s investment or control decisions, and, therefore, disclaim ownership of Money Line Capital’s stockholdings, including our common stock.

(6)

Includes 1,130,000 shares not owned by Money Line Capital, but controlled by irrevocable proxy.

The issuer is not aware of any person who owns of record, or is known to own beneficially, ten percent or more of the outstanding securities of any class of the issuer, other than as set forth above. There are no classes of stock other than common stock issued or outstanding.

Change of Control Transaction

On June 30, 2009, we entered into a binding letter of intent (“LOI”) with Money Line Capital, Inc. (“MLCI”), our largest shareholder. Under the LOI the parties agree to complete a transaction whereby all the MLCI shareholders will exchange their shares of MLCI stock for shares of our stock. No cash will be exchanged in this transaction. The parties have agreed to negotiate in good faith to close the transaction on or before January 29, 2010. The LOI is predicated on us being current in our reporting obligations under the Securities and Exchange Act of 1934, as amended, and being publicly-traded at the time of the closing; and MLCI having its financial statements (and its subsidiaries, as applicable) audited for the period ended June 30, 2009, as well as completing a valuation by a qualified third-party company.

Technically the transaction will result in a change of control since the shares currently held by Money Line Capital, Inc., the owner of 54% of our common stock, will be retired and become treasury shares, and the new owners of a majority of our common stock will be the shareholders of Money Line Capital at the time of the closing of the transaction.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Letter of Intent with Money Line Capital, Inc. On June 30, 2009, we entered into a binding Letter of Intent (the “LOI”) with Money Line Capital, Inc., a California corporation (“MLCI”). MLCI is our largest shareholder and specializes in business financing transactions and holds equity in a number of operating subsidiaries in various fields, including financing, aerospace, real estate, media, beverage, and technology. Under the LOI the parties agree to complete a transaction whereby all the MLCI shareholders will exchange their shares of MLCI stock for shares of our stock. No cash will be exchanged in this transaction. The parties have agreed to negotiate in good faith to close the transaction on or before January 29, 2010. The LOI is predicated on us being current in our reporting obligations under the Securities and Exchange Act of 1934, as amended, and being publicly-traded at the time of the closing; and MLCI having its financial statements (and its subsidiaries, as applicable) audited for the period ended June 30, 2009, as well as completing a valuation by a qualified third-party company.

Assignment of Gledhill Note. On March 25, 2009, we entered into an Assignment of Promissory Note and Consent Thereto (the “Assignment”) with MLCI, under which MLCI agreed to assume our repayment obligations to Joseph Gledhill and Joyce Gledhill under that certain $650,000 principal amount Promissory Note dated December 8, 2008 (the “Gateway Note”) in exchange for the issuance of 3,250,000 shares of our common stock (the “Shares”). Mr. Gledhill, one of our former directors, and Joyce Gledhill consented to the Assignment. Pursuant to the Assignment, MLCI and the Gledhill’s entered into a new $650,000 principal amount secured promissory note, a security agreement and a pledge agreement. We issued the 3,250,000 shares of our common stock to MLCI on June 30, 2009.

MLCI Demand Note. we entered into a Demand Promissory Note dated March 25, 2009 (the “Note”), evidencing the terms under which MLCI will loan us up to $500,000 on an “as needed” basis for working capital purposes. The Note accrues interest at a of 10%.per annum. Under the terms of the Note, MLCI is not obligated to loan us any money, but the Note sets forth the terms in the event MLCI elects to loan us money for working capital purposes. As of June 30, 2009, MLCI has loaned us $134,900 under this Note, as is reflected on our balance sheet for June 30, 2009.

Patricia Consalvi Note. On March 1, 2007, we executed a promissory note in favor of Patricia Consalvi, the mother of Timothy D. Consalvi and Lawrence A. Consalvi, our President and Executive Vice President, respectively, for the principal sum of $100,000, with interest at a rate of 6% per annum payable in twenty-three (23) consecutive installments of $4,435 with a final payment of $4,360 on February 1, 2009. The proceeds of the note were used for working capital purposes. This note has been repaid in full and $0 remains outstanding of June 30, 2009.

Leavitt Family Trust Note. We currently have an unsecured note payable to a stockholder payable in monthly installments of $4,505 per month, non-interest bearing, including interest imputed at 12% per annum for financial statement purposes, in the aggregate amount of $139,641. As of June 30, 2009, $31,526 remains outstanding.

Joseph Gledhill Note. We have an unsecured note payable outstanding to Joseph T.W. Gledhill, one of our officers, directors and a stockholder, which was due January, 2008, with interest of 6% per annum, in the aggregate amount of $706,200. This loan from Mr. Gledhill was used for working capital requirements. This note was repaid in accordance with its terms with the final payment being paid in the quarter ended June 30, 2008.

Joseph Gledhill Note No. 2. We have a second unsecured note payable outstanding to Joseph T.W. Gledhill, one of our officers, directors and a stockholder, which is due January, 2009, with interest of 6% per annum, in the aggregate amount of $706,200. This note consolidated earlier promissory notes issued by us in favor of Mr. Gledhill. This loan from Mr. Gledhill were used for working capital requirements. This note was assigned to Money Line Capital, Inc. on March 25, 2009 in exchange for the issuance of 3,250,000 shares of our common stock to Money Line Capital, Inc., which were issued on June 30, 2009. As a result of the assignment this note is no longer an obligation of the company.

Loan to Lawrence A. Consalvi. In connection with the close of our financial statements for the period ended June 30, 2008, it was determined that prior to the filing of our Form 10 with the Securities and Exchange Commission on May 15, 2008, we paid Lawrence A. Consalvi, our then Chief Executive Officer, $81,000 for certain business expenses. Due to the lack of documentation surrounding the nature of the expense Lawrence A. Consalvi agreed to reimburse us for this amount. As a result, we recorded a receivable due from Mr. Consalvi in our financial statements for year ended June 30, 2008. In conjunction with us becoming subject to the reporting requirements of the Securities Exchange Act of 1934, we have requested that Mr. Consalvi repay this amount to us or return 400,000 shares of our common stock to us. Pursuant to Mr. Consalvi’s resignation we entered into a Separation Agreement with Mr. Consalvi. Pursuant to the Agreement, Mr. Consalvi returned 400,000 shares of our common stock to us for cancellation in order to repay this obligation. The shares were cancelled, effective October 6, 2008. As a result this amount is no longer owed to us.

We have a written policy that relates to the payment of expenses to officers and directors that requires all expenses paid to officers and directors must be signed off on the by our Chief Financial Officer. We also have a written policy that any check payable to an officer or director, other than normal payroll checks, must have the signatures of two officers or directors. Other than these two policies we do not have a written policy concerning the review, approval, or ratification of transactions with related persons.

We do not have an audit, compensation, or nominating committee, and none of our Directors are considered independent.

We have not had a promoter during the last five fiscal years.

ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit and Restated Fees

During the year ended June 30, 2009, Kabani & Company and McKennon Wilson & Morgan LLP billed us $25,000 and $109,866, respectively, in fees for professional services for the audit of our financial statements in our Form 10-K and review of financial statements included in our Form 10-Q’s, as applicable. During the year ended June 30, 2008, McKennon Wilson & Morgan LLP billed us $109,690 in fees for professional services for the audit and review of our financial statements.

Tax Fees

During the year ended June 30, 2009, Kabani & Company and McKennon Wilson & Morgan LLP billed us $0 and $5,000, respectively, for professional services for tax preparation. During the year ended June 30, 2008, McKennon Wilson & Morgan LLP billed us $17,625 for professional services for tax preparation.

All Other Fees

During the year ended June 30, 2009, Kabani & Company and McKennon Wilson & Morgan LLP did not bill us any amounts for any other fees. During the year ended June 30, 2008, McKennon Wilson & Morgan LLP did not bill us any amounts for any other fees.

Of the fees described above for the year ended June 30, 2009, 100% were approved by the entire Board of Directors.

PART IV

ITEM 15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)(1)

Financial Statements

The following financial statements are filed as part of this report:

Reports of Registered Public Accounting Firms	F-2

Consolidated Balance Sheets as of June 30, 2009 and 2008	F-3

Consolidated Statements of Operations for the years ended June 30, 2009 and 2008	F-4

Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2009 and 2008	F-5

Consolidated Statements of Cash Flows for the years ended June 30, 2009 and 2008	F-6

Notes to Consolidated Financial Statements	F-7

(a)(2)

Financial Statement Schedules

We do not have any financial statement schedules required to be supplied under this Item.

(a)(3)

Exhibits

Refer to (b) below.

(b)

Exhibits

Item No.		Description

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

3.2 (5)		Certificate of Amendment of Articles of Incorporation

3.3 (1)		Bylaws of M Line Holdings, Inc., a Nevada corporation

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

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

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

10.4 (1)		Employment Agreement with Timothy D. Consalvi dated February 1, 2007

10.5 (1)		Employment Agreement with Joseph T.W. Gledhill dated February 5, 2007

10.6 (2)		Employment Agreement with Lawrence A. Consalvi dated February 5, 2007

10.7 (1)		Share Exchange Agreement with Gledhill/Lyons, Inc. dated March 26, 2007

10.8 (1)		Share Exchange Agreement with Nu-Tech Industrial Sales, Inc. dated March 19, 2007

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

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

10.11 (4)		Sales Agent Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence A. Consalvi dated September 30, 2008

10.12 (4)		Loan Agreements with Pacific Western Bank dated September 20, 2008

10.13 (5)		Assignment of Promissory Note and Consent Thereto by and between M Line Holdings, Inc. and Money Line Capital, Inc. dated March 24, 2009

10.14 (5)		M Line Holdings, Inc. Demand Note for up to $500,000 dated March 25, 2009

10.15 (6)		Letter of Intent by and between M Line Holdings, Inc. and Money Line Capital, Inc. dated June 30, 2009

21		List of Subsidiaries (filed herewith)

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

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

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

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

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

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

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

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

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

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

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: October 12, 2009		/s/ George Colin
	By:	George Colin
		Chief Executive Officer
		and a Director

Dated: October 12, 2009		/s/ Jitu Banker
	By:	Jitu Banker
		Chief Financial Officer
		and a Director

Dated: October 12, 2009		/s/ Robert Sabahat
	By:	Robert Sabahat
		Secretary and a Director

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

		/s/ George Colin
Dated: October 12, 2009
	By:	George Colin
		Chief Executive Officer
		and a Director

		/s/ Jitu Banker
Dated: October 12, 2009
	By:	Jitu Banker
		Chief Financial Officer
		and a Director

		/s/ Robert Sabahat
Dated: October 12, 2009
	By:	Robert Sabahat
		Secretary and a Director

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

M Line Holdings, Inc.

(formerly, Gateway International, Inc)

We have audited the accompanying balance sheet of M Line Holdings, Inc. (formerly, Gateway International, Inc) as of June 30, 2009 and the related statements of operation, stockholders' equity, and cash flow for the year ended June 30, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of M Line Holdings, Inc. as of June 30, 2009 and the results of its operation and its cash flow for the year ended June 30, 2009 in conformity with accounting principles generally accepted in the United States of America.

Kabani & Company, Inc.

CERTIFIED PUBLIC ACCOUNTANTS

Los Angeles, California

October 12, 2009

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Shareholders and Board of Directors

M Line Holding, Inc. (formerly Gateway International Holdings, Inc.)

We have audited the accompanying consolidated balance sheet of M Line Holding, Inc. (formerly Gateway International Holdings, Inc.) and its subsidiaries (collectively the “Company”) as of June 30, 2008, and the related statements of operations, shareholders’ equity and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of M Line Holding, Inc. (formerly Gateway International Holdings, Inc.) and subsidiaries as of June 30, 2008, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States.

/s/ McKennon, Wilson & Morgan LLP

Irvine, California

October 1, 2008, except for “Note 2”, paragraph “Discontinued Operations”,

for which the date is October 9, 2009

PART I-FINANCIAL INFORMATION

M LINE HOLDINGS, INC.

(FORMERLY, GATEWAY INTERNATIONAL HOLDING, INC)

CONSOLIDATED BALANCE SHEETS

FOR THE YEARS ENDED JUNE 30, 2009 AND 2008

	As of June 30,
	2009			2008
Assets

Current Assets:
Cash and cash equivalents	$	438,030		$	901,707
Accounts receivable, net		892,718			904,262
Inventories		1,301,421			740,788
Due from related party		-			81,000
Prepaid and other current assets		80,250			180,011
Deferred Income Taxes - current		95,617			179,316
Current assets -Discontinued Operations		116,868			1,847,392
Total current assets		2,924,905			4,834,476

Property and equipment, net		1,160,318			1,525,325
Intangible assets, net		348,192			389,975
Goodwill		-			198,169
Deposits and other non current assets		66,146			61,146
Deferred Income Taxes - non current		182,505			245,497
Non current assets - Discontinued Operations		63,704			811,192
Total Assets	$	4,745,770		$	8,065,780

Liabilities and Shareholders' Equity

Current Liabilities:
Line of Credit	$	440,000		$	330,000
Accounts Payable		502,745			462,450
Income Taxes Payable		-			187,954
Accrued Expenses and other		486,951			99,844
Accrued interest due to related party		-			82,173
Notes payable		265,969			244,635
Notes payable, related party		-			734,880
Deferred Income taxes-current		-			11,263
Capital Leases-current		70,747			65,094
Current liabilities-Discontinued operations		717,899			1,468,268
Total Current Liabilities		2,484,311			3,686,561

Notes Payable		167,165			429,493
Notes Payable, related party		-			31,526
Capital Leases-long term		97,351			102,596
Deferred Income Taxes-long term		168,373			303,801
Deferred Rent		65,849			79,126
Long term liabilities-Discontinued operations		29,751			27,765
Total Liabilities		3,012,800			4,660,868

Shareholders' Equity
Common Stock, $0.001: 100,000,000 shares
Authorized; 30,861,956 and 28,378,645 shares issued and outstanding at June 30, 2008 and 2009 respectively		30,862			28,379
Additional paid in capital		9,505,812			8,921,354
Accumulated deficit		(7,803,704	)		(5,544,821	)
Total stockholders' equity		1,732,970			3,404,912
Total Liabilities and Shareholders' Equity	$	4,745,770		$	8,065,780

See accompanying Notes to Consolidated Financial Statements.

F-3

M LINE HOLDINGS, INC.

(FORMERLY, GATEWAY INTERNATIONAL HOLDING, INC)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED JUNE 30, 2009 AND 2008

	June 30, 2009			June 30, 2008

Net sales	$	9,651,183		$	15,219,106
Cost of sales		6,746,873			10,817,801
Gross Profit		2,904,310			4,401,305

Operating expenses:
Selling, general and administrative		2,771,762			3,989,227
Amortization of intangible assets		41,783			17,410
Total operating expenses		2,813,545			4,006,637

Operating income		90,765			394,668

Other income (expense):
Interest Expense		(109,147	)		(155,455	)
Interest Income		9,990			7,029
Gain on sale of assets		16,125			(63,652	)
Total other income (expense)		(83,032	)		(212,078	)
Income from continuing operations, before income tax		7,733			182,590

Income tax provision		2,400			110,154

Income from continuing operations		5,333			72,436
Income (loss) from discontinued operations, net of income taxes		(2,264,216	)		971
NET INCOME (LOSS)	$	(2,258,883	)	$	73,407

NET INCOME PER SHARE:

Basic and diluted net income (loss) per share:

Continuing operations	$	-		$	-

Discontinued Operations		(0.08	)		-


Total	$	(0.08	)	$	-

Weighted average number of common shares under in per share calculations (basic and diluted)		27,817,257			28,219,631

See accompanying Notes to Consolidated Financial Statements.

F-4

M LINE HOLDINGS, INC.

(FORMERLY, GATEWAY INTERNATIONAL HOLDING, INC)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

AS OF JUNE 30, 2009 AND 2008

							Additional
	Common Stock						Paid-in			Accumulated
	Shares			Amount			Amount			Deficit			Total

Balance, July 1 2007		27,645,334		$	27,646		$	8,419,087		$	(5,618,228	)	$	2,828,505
Common stock issued for creditor settlement		150,000			150			62,850			-			63,000

Retirement of stock securing repaid note		(416,689	)		(417	)		417			-			-
Common stock issued for acquisition of CNC Repos, Inc.		1,000,000			1,000			439,000			-			440,000

Net income		-			-			-			73,407			73,407

Balance, June 30, 2008		28,378,645			28,379			8,921,354			(5,544,821	)		3,404,912

Retirement of stock securing repaid note		(416,689	)		(417	)		417			-			-

Stock compensation expense -		50,000			50			15,433			-			15,483

Retirement of stock		(400,000	)		(400	)		(80,600	)		-			(81,000	)

Imputed interest on related party notes		-			-			2,458			-			2,458

Conversion of note payable		3,250,000			3,250			646,750			-			650,000

Net loss		-			-			-			(2,258,883	)		(2,258,883	)
Balance sheet at June 30, 2009		30,861,956		$	30,862		$	9,505,812		$	(7,803,704	)	$	1,732,970

See accompany Notes to Consolidated Financial Statements.

F-5

M LINE HOLDINGS, INC.

(FORMERLY, GATEWAY INTERNATIONAL HOLDING, INC)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED JUNE 30, 2009 AND 2008

	For the years Ended June 30,
	2009			2008

Net Income (Loss)	$	(2,258,883	)	$	73,407
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Gain on sale of assets		(16,125	)		70,354

Bad debt expense		34,055			-

Depreciation		427,600			446,317

Amortization of Intangibles assets		127,323			113,396

Impairment of Goodwill and intangible assets		845,471			-

Imputed interest on related party note		2,458			-

Shares issued for compensation		15,483			-
Changes in operating assets and liabilities:

Accounts receivable		604,577			(64,124	)

Inventories		419,868			(757,415	)

Related party receivable		-			(81,000	)

Prepaid expenses and other assets		94,761			64,049

Accounts payable and accrued expenses		(181,071	)		486,982

Customer Deposits		(149,500	)		(45,500	)

Income Taxes payable		(187,954	)		59,568

Deferred Rent		-			79,126

Deferred Income taxes		-			(60,862	)

Net cash provided by (used in) operating activities		(221,938	)		384,298

Cash flows from investing activities:

Capital Expenditures		(60,513	)		(316,323	)

Proceeds from sale of assets		74,790			49,943

Deposits and other		-			35,777

Net Cash provided by (used) in investing activities		14,277			(230,603	)

Cash flows from financing activities:

Net borrowings on line of credit		110,000			264,177

Proceeds from issuance of Notes payable		-			174,651

Payments on notes payable		(202,416	)		(219,819	)

Payments on related party notes payable		(198,579	)		(153,094	)

Payments on capital leases		(87,958	)		(167,513	)

Net cash used in financing activities		(378,953	)		(101,598	)

Net Increase (decrease) in cash and cash equivalents		(586,613	)		52,097

Cash and cash equivalents at beginning of year		1,024,643			972,546
Cash and cash equivalents at end of year	$	438,030		$	1,024,643

Supplemental disclosure of cash flow information Cash paid during the year for:
Interest	$	109,147		$	113,390

Income taxes	$	-		$	49,028

Supplemental disclosure of non cash investing and financing activities:

Conversion of note payable	$	650,000		$	-

Conversion of line of credit to term loan	$	-		$	500,000

Stock issued for creditor settlement	$	-		$	63,000

Stock issued for CNC Repos, Inc.	$	-		$	440,000

Shares received for related party receivable	$	81,000		$	-

Capital expenditures acquired under capital leases	$	45,584		$	167,205

Stock retired on cancellation of note	$	-		$	417

See accompanying Notes to Consolidated Financial Statements.

F-6

M LINE HOLDINGS, INC.

(FORMERLY, GATEWAY INTERNATIONAL HOLDING, INC)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	Organization and Business

Organization

M. Line Holdings, Inc. (the “Company”) was incorporated in Nevada on September 24, 1997, under the name Gourmet Gifts, Inc. (“Gourmet Gifts”). On December 11, 2001, Gourmet Gifts acquired 100% of the issued and outstanding capital stock of Elite Machine Tool Company (“Elite”). Immediately prior to the merger, the Company had 100,000,000 shares of stock authorized, of which 6,768,000 shares were outstanding. Pursuant to the merger, all of the outstanding shares of Elite, aggregating 21,262 shares, were exchanged for shares of common stock of Gourmet Gifts on a 1 to 1,274 basis or into 27,072,000 (net of 600,000 shares subsequently cancelled) shares of common stock leaving a total of 33,240,000 shares of common stock issued and outstanding after the merger. Immediately after the merger, the officers and directors of Gourmet Gifts resigned and the executive officers and directors of Elite the company elected and appointed to such positions, thereby effecting a change of control.

Due to the change in voting control and change in senior management in Gourmet Gift as a result of the merger, the transaction was recorded as a “reverse-merger” whereby Elite was considered to be the acquirer for accounting purposes. At the closing of the reverse merger, Elite became a wholly-owned subsidiary and the company changed its corporate name to Gateway International Holdings, Inc., effective January 28, 2002. After the merger, through Elite, the Company became engaged in the acquisition, refurbishment, distribution and sales of pre-owned Computer Numerically Controlled (“CNC”) machine tools to manufacturing customers across the United States of America. This was the Company’s sole business until the acquisition of the additional businesses described below.

Gateway International Holdings, Inc. changed its corporate name to M Line Holdings, Inc. effective March 25, 2009.

Business

The Company and its subsidiaries are engaged in the following businesses:



Acquiring, refurbishing and selling pre-owned CNC machine-tool equipment through its Elite subsidiary.



Manufacturing precision metal component parts in the defense, automotive, aerospace and medical industries through its Eran Engineering, Inc. (“Eran”) subsidiary.

F-7

Divestitures of Companies

In April 2005, the Company acquired 100% of the outstanding common stock of Accurate Technologies, Inc. (“Accurate”) for an aggregate purchase price of $8,760,000, payable through the issuance of 12,000,000 shares of the Company’s common stock.

In March 2005, the Company acquired 100% of the outstanding common stock of Nu-Tech Industrial Sales, Inc. (“Nu-Tech”) for an aggregate purchase price of $2,300,000, payable through the issuance of 2,425,000 shares of the Company’s common stock.

In March 2007, the Board of Directors of the Company approved plans to divest Accurate and Nu-Tech, as a part of its strategy to exit non-core businesses. These companies were sold to the existing management of Accurate and Nu-Tech who were also members of the Company’s Board of Directors at the time of the sale, but they did not have controlling voting interests.

The Company incurred aggregate non-cash loss from the sales of these businesses of $2,280,909, net of income tax benefit of $1,212,559, primarily resulting from the change in the fair value of the common stock issued in connection with these acquisitions. These divestitures have been accounted for as discontinued operations in the consolidated statements of operations and statements of cash flows.

The divestiture of Accurate, which was part of the Precision Manufacturing segment, was completed March 23, 2007 for net consideration of 12,000,000 shares of the Company’s common stock tendered with a value of $6,960,000 based upon the trading price of the Company’s stock of $0.585 as quoted on the Pink Sheets OTC Markets Inc. (“Pink Sheets”) on the date of the transaction which management believes is the representative of fair market value. The divestiture transferred substantially all of the assets and liabilities to purchasers of Accurate. The total net assets (total assets less total liabilities) transferred were $8,791,341.

The divestiture of Nu-Tech, which was part of the Precision Manufacturing segment, which closed on March 26, 2007 for net consideration of 2,425,000 shares of the Company’s common stock of $0.58 as quoted on the Pink Sheets with a value of $1,406,500 based upon the trading price of the Company’s stock on the date of the transaction. The divestiture transferred substantially all of the assets and liabilities to purchasers of Nu-Tech. The total net assets transferred were $2,129,959.

F-8

2.	Basis of Presentation and Significant Accounting Policies

Discontinued Operations

The Board of Directors of the company decided to discontinue the operations AACNC, a wholly owned subsidiary and a part of the Machine Sales segment, due to continued losses and no prospect of AACNC of getting back to profitability. During the year ended June 30, 2009, the company incurred losses of $2,264,216 from discontinued operations of this company.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of M Line Holdings, Inc. and its wholly-owned subsidiaries: E.M. Tool Company, Inc. d.b.a. Elite Machine Tool Company, Eran Engineering, Inc and AACNC as discontinued operations. All intercompany accounts and transactions have been eliminated.

Business Segments

SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information”, requires the determination of reportable business segments (i.e., the management approach). This approach requires that business segment information used by the chief operating decision maker to assess performance and manage company resources be the source for segment information disclosure. The Company operates in two reportable segments consisting of (1) Machine Sales and (2) Precision Manufacturing.

Concentrations of Credit Risks

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents and trade accounts receivable. The Company invests its cash balances through high-credit quality financial institutions. From time to time, the Company maintains bank account levels in excess of FDIC insurance limits. If the financial institution’s in which the Company has its accounts has financial difficulties, the Company’s cash balances could be at risk.

Accounts receivable from significant customers representing 10% or more of the net accounts receivable balance consists of the following:

	June 30, 2009			June 30, 2008
% of accounts receivable		39	%		35	%

# of customers		1			1

Sales from significant customers representing 10% or more of sales consist of the following customers for the years ended June 30:

	2009			2008

% of sales		66	%		27	%

# of customers		1			1

As a result of the Company's concentration of its customer base and industries served, the loss or cancellation of business from, or significant changes in scheduled deliveries of product sold to the above customers or a change in their financial position could materially and adversely affect the Company's consolidated financial position, results of operations and cash flows.

One customer, Panasonic Avionics Corporation (“Panasonic”) included in the Precision Manufacturing segment represents a significant concentration. Sales to Panasonic as a percentage of sales within the Precision Manufacturing Segment are as follows for the years ended June 30:

	2009			2008

% of segment sales		66	%		84	%

The Company’s Precision Manufacturing segment operates a single manufacturing facility located in Tustin, California. A major interruption in the manufacturing operations at this facility would have a material adverse affect on the consolidated financial position and results of operations of the Company.

F-9

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally 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 and the reported amounts of sales and expenses during the reporting period. Significant estimates made by management are, among others, realization of inventories, collectibility of accounts receivable, litigation, impairment of goodwill, and long-lived assets other than goodwill. Actual results could materially differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with insignificant interest rate risk and original maturities of three months or less from the date of purchase to be cash equivalents. The carrying amounts of cash and cash equivalents approximate their fair values. The Company maintains cash and cash equivalents balances at certain financial institutions in excess of amounts insured by federal agencies. Management does not believe that as a result of this concentration, it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships.

Accounts Receivable

The Company performs periodic credit evaluations and continually monitors its collection of amounts due from its customers. The Company adjusts credit limits and payment terms granted to its customers based upon payment history and the customer's current creditworthiness. The Company does not require collateral from its customers to secure amounts due from them. The Company regularly reviews its accounts receivable and collection of these balances subsequent to each of these periods. The Company maintains reserves for potential credit losses, and historically, such losses have been within management expectations.

Inventories

Inventories are stated at the lower of cost, determined on a first in, first out (“FIFO”) basis average cost basis, or market. The Company adopted SFAS No. 151, “Inventory Costs, an amendment of Accounting Research Bulletin No. 43, Chapter 4” beginning July 1, 2006, with no material effect on its financial condition or results of operations. 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 the normal capacity of the production facilities. Market value is based on management’s estimates for future sale of the Company’s products.

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Equipment under capital lease obligations is depreciated over the estimated useful life of the asset. Leasehold improvements are amortized over the shorter of the estimated useful life or the term of the lease. Repairs and maintenance are expensed as incurred, while improvements are capitalized. Upon the sale or retirement of property and equipment, the accounts are relieved of the cost and the related accumulated depreciation, which any resulting gain or loss included in the consolidated statements of operations.

F-10

Long-Lived Assets

The Company reviews its fixed assets and certain identifiable intangibles with definite lives for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets”. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset or discounted cash flows. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Based on management’s review, the Company determined there were no impairments of long-lived assets as of June 30, 2009 and 2008.

Goodwill and Other Intangible Assets

SFAS No. 141 “Business Cominations” requires that all business combinations be accounted for under the purchase method. The statement further requires separate recognition of intangible assets that meet certain criteria. SFAS No. 142 “Goodwill and Other Intangible Assets”, requires that an acquired intangible asset meeting certain criteria shall be initially recognized, and measured based on its fair value.

SFAS No. 142 requires a two-step approach to test goodwill for impairment for each reporting unit. The first step tests for impairment by applying fair value-based tests to a reporting unit. The second step, if deemed necessary, measures the impairment by applying fair value-based tests to specific assets and liabilities within the reporting unit. Application of the goodwill impairment tests require judgment, including identification of reporting units, assignment of assets and liabilities to each reporting unit, assignment of goodwill to each reporting unit, and determination of the fair value of each reporting unit. The determination of fair value for a reporting unit could be materially affected by changes in these estimates and assumptions. Based on its review, the Company determined there were impairments of goodwill from continuing operations as of June 30, 2009 Income Taxes

F-11

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes— an interpretation of FASB Statement No. 109 ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”. FIN 48 describes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in a tax return and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The cumulative effect of adopting FIN 48 is required to be reported as an adjustment to the opening balance of retained earnings (or other appropriate components of equity) for that fiscal year, presented separately. The adoption of FIN 48 on July 1, 2007 did not have a material impact to the Company’s consolidated financial statements.

Income taxes for the year ended June 30, 2009 has been classified to present tax provision (benefit) for continuing operations and discontinued operations separately.

Contingencies and Litigation

The Company evaluates contingent liabilities including threatened or pending litigation in accordance with SFAS No. 5, “Accounting for Contingencies.” Management assesses the likelihood of any adverse judgments or outcomes to a potential claim or legal proceeding, as well as potential ranges of probable losses, when the outcomes of the claims or proceedings are probable and reasonably estimable. A determination of the amount of accrued liabilities required, if any, for these contingencies is made after the analysis of each matter. Because of uncertainties related to these matters, management bases its estimates on the information available at the time. As additional information becomes available, management reassess the potential liability related to its pending claims and litigation and may revise our estimates. Any revisions in the estimates of potential liabilities could have a material impact on the results of operations and financial position.

Revenue Recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104 “Revenue Recognition”. Revenue is recognized at the date of shipment to customers when; a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist, and collectibility is reasonably assured.

F-12

Revenues generated from the Precision Manufacturing segment consist of manufactured parts and in some instances, assembly of these items based on detailed engineering specifications received by the Company from the customer. The Company generally begins to manufacture the parts upon the receipt and acceptance of a purchase order which specifies the quantity, price and delivery dates such products are required to be shipped within. Prior to shipment, physical inspection of the parts is performed to ensure specifications meet the engineering requirements. Historically, customer returns have been inconsequential.

Revenues generated from the sales of new and pre-owned CNC machines from the Machine Tools segment are based on the acceptance of a purchase order and the customer’s acknowledgement of the Company’s terms and conditions which specifies the shipping terms, payment terms and the warranty period, if any. In certain instances, the Company may perform installation services including the leveling of the machine, which is inconsequential. Under agreements with certain new equipment manufacturers, a ninety day warranty is provided to customers whereby the manufacturer is responsible for any replacement parts and the Company is responsible for the installation of the parts. In certain instances, the Company provides warranties for used equipment for periods ranging up to ninety days. Historically, warranty costs have been inconsequential. Generally, the Company does not accept returns.

Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as customer deposits.

Advertising

The Company expenses the cost of advertising when incurred as selling expenses. Advertising expenses were $41, 172and $21,321, for the years ended June 30, 2009 and 2008 respectively.

Net Income (Loss) per Share

Basic net income (loss) per share is calculated by dividing net loss by the Company’s weighted average common shares outstanding during the period. Diluted net income per share reflects the potential dilution to basic earnings per share that could occur upon conversion or exercise of securities, options or other such items to common shares using the treasury stock method, based upon the Company’s weighted average fair value of the common shares during the period. For each period presented, basic and diluted net income (loss) per share amounts are identical as the Company does not have potentially dilutive securities.

Fair Value of Financial Instruments

Financial instruments are recorded on the consolidated balance sheets. The carrying amount for cash and cash equivalents, accounts receivable, accounts payable, accrued expenses approximates fair value due to the immediate or short-term maturity of these financial instruments. The fair value of long-term debt approximates the carrying amounts based upon the expected borrowing rate for debt with similar remaining maturities and comparable risk. The fair value of related party notes cannot be readily determined because of the nature of the relationship between the Company and the lenders.

F-13

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”, which replaces FAS No. 141. SFAS No. 141(R) establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any controlling interest; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) is to be applied prospectively to business combinations. The company is evaluating this statement for the impact, if any, on its consolidated financial statements, however, the Company will be required to expense cost related to any acquisition after June 30, 2009

F-14

In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" (“SFAS 165”). SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 will be effective for interim or annual period ending after June 15, 2009 and will be applied prospectively. The Company will adopt the requirements of this pronouncement for the year ended June 30, 2009. The Company does not anticipate the adoption of SFAS 165 will have an impact on its consolidated results of operations or consolidated financial position.

On January 12, 2009 FASB issued FSP EITF 99-20-01, “ Amendment to the Impairment Guidance of EITF Issued No. 99-20”. This RSP amends the impairment guidance in EITF Issued No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to be Held by a Transferor in Securitized Financial Assets,” to achieve more consistent determination of whether an other-that-temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115, “ Accounting for Certain Investments in Debt and Equity Securities”, and other related guidance. The FSP is shall be effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is permitted. The Company does not believe this pronouncement with impact its financial statements.

F-15

3.	Acquisition

On October 16, 2007, the Company acquired 100% of the outstanding common stock of CNC Repos, Inc. (“CNC Repos”) for an aggregate purchase price of $440,000 in exchange for 1,000,000 shares of the Company’s common stock and an earn out provision which provides for the issuance of an additional up to 500,000 shares of the Company’s common stock if $3,000,000 of sales are generated within one year from the date of acquisition. If sales are less than $3,000,000, but equal or exceed $2,700,000, then the Company will be required to issue an additional 400,000 shares of common stock. CNC Repos provides repossession, recovery and remarketing of CNC machines for financial institutions which will assist the Company with reaching additional customers to sell machines to. The contingent consideration will be recorded as compensation expense when and if the milestone has been met.

The acquisition has been accounted for using the purchase method of accounting in accordance with SFAS No. 141, whereby the estimated purchase price has been allocated to tangible and intangible net assets acquired based upon their fair values at the date of acquisition. The fair value of the common stock of $0.42 per share was based on trading prices prior to the delisting of the Company during 2007. Management believes this stock price is representative of the fair market value of the Company’s stock on the date of acquisition.

The components of the aggregate purchase price are as follows:

Consideration paid:
Fair value of common stock issued	$	420,000
Direct acquisition costs		20,000
	$	440,000

The purchase price of CNC has been allocated to assets acquired and liabilities assumed based on their estimated fair values determined by management as follows:

Intangible assets -customer relationships	$	417,831
Deferred tax liability		(176,000	)
Goodwill		198,169
	$	440,000

F-16

The purchase price represented a premium over CNC Repos acquired assets, resulting in the recognition of $198,169 of goodwill. The resulting intangible assets and goodwill are not deductible for federal and state income tax purposes. As a result, the Company recorded a deferred tax liability equal to value assigned to the intangible assets and goodwill multiplied by the statutory income tax rates. The customer relationships are considered an intangible asset and are being amortized over the estimated useful live of ten years from the date of the acquisition. The estimated useful life was determined based upon the historical lives of the customer base. The goodwill is not subject to amortization and the amount assigned to goodwill is not deductible for tax purposes.

Goodwill, in the amount of $198,169, was written off during the fiscal year ended June 30, 2009.

The assets acquired were the use of the name “CNC Repos”, the customer lists, and engagement of key personnel. The company considered that there was no fair value for these acquired assets as sales targets were not met during the current fiscal year, sales being the basis for computing value, in addition to the discontinuance of the operations of All American CNC, Inc., and the absorbtion of the “CNC Repos” personnel by Elite Machine Tool Company.

The carrying value of the asset was considerably in excess of the implied fair value. The company therefore wrote off the value of goodwill as that there was no indication that the “CNC Repos” personnel would ever meet any of the sales targets.

The pro-forma has not been provided for “CNC Repos” because it was immaterial

4.	Inventories

Inventories consist of the following at June 30:

	2009		2008

Finished Goods and components	$	843,305	$	612,825

CNC Machines held for sale		183,500		304

Work in progress		233,773		116,832

Raw Materials and Parts		40,843		10,827
	$	1,301,421	$	740,788

F-17

5.	Due from Related Party

In connection with the close of our financial statements for the year ended June 30, 2008, the Company discovered it had paid Lawrence A. Consalvi, a former directors for certain expenses submitted for reimbursement. Due to the lack of documentation surrounding the nature of the expense, Mr. Consalvi agreed to reimburse the Company $81,000 or return 400,000 shares of the Company’s common stock. As a result a receivable for $81,000 has been recorded as of June 30, 2008 and received by the company during the year ended June 30, 2009.

6.	Prepaid and Other

On January 10, 2008, the Company entered into a promissory note agreement in the amount of $100,000 with a shareholder of the Company and the brother in-law to Larry Consalvi, the Company’s former Executive Vice President, member of the Company’s board of directors, and the single largest shareholder. The note is due on or before January 10, 2009 and is secured by 357,142 shares of common stock of the Company. The note bears interest at a rate of 9.25% per annum and is payable upon maturity of the note. See Note 15.

The note was repaid during the year ended June 30, 2009.

7.	Property and Equipment

Property and equipment consists of the following at June 30:

	Estimated useful life (in years)		2009			2008

Machinery and Equipment		7	$	2,472,488		$	2,490,891
Equipment under capital leases	4 to 5			215,021			215,021
Fixtures, Fittings and office equipment	3 to 5			173,885			173,587
Vehicles		5		62,372			23,276
Leasehold Improvements		3		119,649			119,649
				3,043,415			3,022,424
Less accumulated depreciation and amortization				(1,883,096	)		(1,497,099	)
			$	1,160,319		$	1,525,325

F-18

Depreciation expense was $398,700 and $ 419,335 for the years ended June 30, 2009 and 2008, respectively.

On February 23, 2007, the Company completed the sale of its former manufacturing facility for aggregate proceeds of $2,017,000 resulting in a gain on the sale of $691,967. The facility was sold to facilitate the expansion of its Precision Manufacturing operation.

8.	Intangible Assets

Intangible assets consist of the following at June 30:

	Weighted Average Remaining Life (in years)		2009				2008

			Cost		Carrying Amount		Cost		Carrying Amount

Customer Relationships		7-6	$	417,831		348,192	$	417,831		389,975

Amortization expense was $41,783 and $17,410 for the years ended June 30, 2009 and 2008, respectively.

Estimated intangible asset amortization expense for the remaining carrying amount of intangible assets is as follows for the years ending June 30:

F-19

	2009
2010	$	41,783
2011		41,783
2012		41,783
2013		41,783
2014		41,783
Thereafter		139,277
	$	348,192

Goodwill

Goodwill, as of June 30, 2009, has been written off as the parent company did not consider the fair value of the reporting unit adequate to support the carrying amount of goodwill in Elite Machine Tool, Inc..

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill and other intangible assets with indefinite lives are not amortized. Intangible assets with finite lives are amortized on a pattern of estimated cash flow basis over their estimated useful lives or straight line if a pattern cannot be determined. The Company tests goodwill and other intangible assets with indefinite lives for impairment on an annual basis at the beginning of the fourth quarter, or when circumstances change, such as a significant adverse change in the business climate or the decision to sell a business, both of which would indicate that an impairment may have occurred. The Company applies the two step process in accordance with SFAS No. 142 in the evaluation of goodwill impairment. The first step involves a comparison of the fair value of the reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, the second step of the process involves a comparison of the implied fair value and carrying value of the goodwill of that reporting unit. If the carrying value of goodwill exceeds its implied fair value, an impairment charge is recorded in the statement of operations.

Goodwill, in the sum of $198,169, was written off during the current fiscal year as management concluded that the carrying value of goodwill was very much in excess of the fair value of the asset.

The basis for computing fair value was sales. The sales for the fiscal year ended June 30, 2009 were negligible. Fair value was therefore non existent and management determined that as the carrying value exceeded the fair value, goodwill should be written off. In addition, CNC Repos personnel opted to join Elite Machine Tool Company due to the discontinuance of the operations of All American CNC Sales, Inc., and the entity known as CNC Repos therefore ceased to exist.

F-20

10.	Accrued Expenses

Accrued expenses consist of the following at June 30:

	2009		2008
Compensation and related benefits	$	170,518	$	83,420
Other		316,433		16,424
	$	486,951	$	99,844

11.	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 June 30

	2009
2009		-
2010	$	82,519
2011		53,830
2012		50,329
2013		3,038
2014		-
Total minimum lease payments		189,716
Less amount representing interest		21,618
Present value of future minium lease payments		168,098
Less current portion of capital lease obligations		70,747
Capital Lease obligations, net of current portion	$	97,351

F-21

12.	Line of Credit and Notes Payable

Pacific Western Bank Credit Agreement

On August 21, 2006, the Company entered into credit agreement with Pacific Western Bank (“PWB”). The credit agreement provides for borrowings of up to $1,500,000 through a line of credit which is secured by substantially all of the Company’s assets and personal guarantees by two of the executive officers, Joseph Gledhill and Larry Consalvi. On November 15, 2007, the credit agreement was amended to reduce the amount available under the line of credit to $1,000,000 and to convert $500,000 of outstanding principal into a term loan. On September 29, 2008, the credit agreement was renewed through November 21, 2009, and Timothy Consalvi replaced Larry Consalvi as a guarantor.

The line of credit has a stated interest rate equal to the lender's referenced prime rate plus 1.5%, or 9.75% and 6.5% per annum at June 30, 2008 and 2009, respectively. Interest is payable monthly with the outstanding principal balance due on September 21, 2009. The amount available for borrowings is determined based on a monthly basis based on 80% of eligible accounts receivable, as defined. The Company also has an irrevocable letter of credit outstanding of $100,000. The proceeds are used for general working capital needs. The amount available for borrowings under the line of credit was $440,000 and $570,000 June 30, 2009 and 2008, respectively.

The irrevocable letter of credit outstanding of $100,000 has been released by the bank subsequent to year end.

The term loan provides for borrowings of up to $500,000. The loan has a stated interest rate equal to the lender's referenced prime rate plus 1.5%, or 9.75% and 6.5% per annum at June 30, 2009 and 2008, respectively. Principal and interest payments are payable monthly.

As of June 30, 2008, we did not meet our capital expenditures and profitability covenants, as set forth in the November 15, 2007 credit agreement. On September 4, 2008, Pacific Western Bank provided us with a letter of forbearance from the measurement of the required covenants as of June 30, 2008. Beginning on July 1, 2008, we are required to comply with all of the covenants of the amended credit agreement dated September 26, 2008. We are currently in compliance with the covenants under the amended credit agreement.

The company is in the process of making arrangements to repay the line of credit to Pacific Western Bank

Financial Federal Credit Business Loan Agreement

On August 21, 2006, the Company, entered into a loan agreement with a bank for $1,350,000 in connection with the purchase of real property. On February 23, 2007, the Company sold the real property secured by this loan and the loan was paid in full. The loan, while outstanding, had an interest rate at the lender’s referenced prime rate plus 1.5%, per annum.

Notes payable consist of the following at June 30:

F-22

	2009		2008
Notes payable to financial institutions, secured by the underlying equipment payable in aggregate monthly installments of $7,292, including interest rates between 7.2% and 9.75% per annum for a period of 50 and 60 months	$	151,608	$	203,836

Notes payable secured by the underlying vehicles, payable in aggregate monthly installments of $2,301,incuding interest between 2.9% and 4.9% per annum for a period of 36 and 60 months		-		67,514

Unsecured Loan to an individual in respect of the acquisition of a former subsidiary		31,526		-

Term loan to PWB payable in monthly installments of $17,120 including interest at a rate of Prime plus 1.50% per annum due November 25, 2010		250,000		402,778

Total		433,134		674,128
Less current portion		(265,949)		(244,635)
Long Term portion	$	167,185	$	429,493

	2009
2010	$	265,969
2011		167,165
2012		-
2013		-
Thereafter		-
	$	433,134

F-23

13.	Notes Payable to Related Parties

Notes payable to related parties consist of the following as of June 30:

	2009		2008
Unsecured note payable to Joseph Gledhill for working capital requirements, due January 2009 with interest of 6% per annum.	$	-	$	646,200

Unsecured note payable to a related party, the mother of Tim Consalvi, for working capital requirements due February

February 1, 2009, payable in monthly installments of $4,435 including interest at 6% per annum.		-		34,623

Unsecured note to a shareholder payable in monthy installments of $4,505 per month. due November 25, 2010		-		85,583

Total		-		766,406
Less current portion		-		(734,880	)
Long Term portion	$	-	$	31,526

There are no future maturities of notes payable to related parties at June 30, 2009.

All related party notes were repaid or settled in 2009. During 2009, the Company converted $650,000 of these notes and accrued interest with Joe Gledhill in exchange for 3,250,000 shares of common stock. There was no additional costs or charges incurred by the company

F-24

Interest expense on notes payable, capital leases and notes payable-related parties for years ended June 30, 2009 and 2008, was $109,147 and $141,265, respectively.

14.	Guarantees, Commitments and Contingencies

The Company has entered into product warranty agreements for certain used CNC machines it sells that contain features which meet the definition of a guarantee under FASB Interpretation No. 45 (“FIN 45”). FIN 45 defines a guarantee to be a contract that contingently requires the Company to make payments (either in cash, financial instruments, other assets, common shares of the Company or through provision of services) to a third party based on changes in an underlying economic characteristic (such as interest rates or market value) that is related to an asset, liability or an equity security of the other party. The Company has the following guarantees which are subject to the disclosure requirements of FIN 45:

The Company has provided certain of its customers with product warranties of ninety days from the date of sale based on management’s estimate of the probable liability under its product warranties. Warranty expense was $30,049 and $25,000 for the years ended June 30, 2009 and 2008, respectively.

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

Future minimum lease payments under non-cancelable operating leases are as follows as of June 30:

	Amount
2010	$	514,521
2011		453,966
2012		408,816
2013		-
2014		-
	$	1,377,303

Rent expense under operating leases was $490,196 and $469,702 for the years ended June 30, 2009 and 2008, respectively.

F-25

15.	Litigation

F-26

6. Elite Machine Tool Co. v. Sunbelt Machine, Orange County Superior Court, Case No. 0-2008-00112502. All American filed the Complaint on September 25, 2008. No trial date has been set.

F-27

7. Sunbelt Machine Works Corp. v. All American CNC Sales, Inc., United States District Court, Southern District of Texas, Case No. 4:09-cv-108. Sunbelt filed the Complaint on January 16, 2009.

8. Hwacheon Machinery v. All American CNC Sales, Circuit Court of the 19th Judicial Circuit, Lake County, Illinois, Case No. 09L544. The Complaint was filed on June 8, 2009.

9. 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. On or about August 11, 2009, the Court heard oral argument on Fadal’s Motion for Right to Attach Order and Writ of Attachment. The Court granted this Motion in part, issuing a Right to Attach Order against All American CNC in the amount of approximately $164,000, which has accrued as of June 30, 2009. The Court denied the Motion as to M Line Holdings, Inc. On August 12, 2009, All American CNC filed an Answer to the Complaint, and M Line Holdings, Inc., filed a demurrer to the Complaint. The Court has scheduled a hearing the demurrer for October 15, 2009. This hearing has been continued until November 24, 2009. Management intends to aggressively defend itself against this claim. No trial date has been set.

10. Do v. E.M. Tool Company, Orange County Superior Court, Orange County, California, Case No. 30-2009-00123879. The Complaint was filed on June 1, 2009.

F-28

11. 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.

12. Laureano v. Eran Engineering, State of California Worker’s Compensation Appeals Board, no case number.

16.	Income Taxes

The provision (benefit) for income taxes is comprised of the following for the years ended June 30:

F-29

	Year Ended June 30,
	2009		2008

Current federal	$	2,400	$	130,586
Current state		-		56,829
Deferred federal		-		(126,684	)
Deferrred state		-		49,423
Provision for income taxes	$	2,400	$	110,154

The benefit for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The differences between the federal statutory tax rate of 34% and the effective tax rates are primarily due to state income tax provisions, net operating loss (“NOL”) carry forwards, deferred tax valuation allowance and permanent differences as follows for the years ended June 30:

	Year Ended June 30,
	2009			2008

Federal tax at statutory rate		34	%		34	%
Permanent differences
State income taxes, net of federal benefit		6	%		7	%
Amortization of intangible assets		(2	)%		15	%
Non-deductible entertainment		(1	)%		8	%
Domestic production activity		0	%		(14	)%
Change in valuation allowance/Other		(37	)%		20	%
Other		31	%		(10	)%

Total provision		31	%		60	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

F-30

	Year Ended June 30,
	2009			2008
Deferred tax assets:
Current:
State income taxes	$	-		$	18,782
		-
Allowances and reserves		64,674			92,755

Accrued expenses		39,044			33,883

Other		33,896			33,896

		-
		137,614			179,316
Non-current:

Net operating loss carryforwards		182,505			176,905

Other		-			68,592

		-			-

		182,505			245,497
Gross deferred tax asset		320,119			424,813
Valuation allowance		(41,997	)		-
		278,122			424,813

Significant components of the Company’s deferred tax assets and liabilities consist of the following at June 30:

F-31

	Year Ended June 30,
	2009			2008

Deferred tax liabilities:
Current:
Other		-			(11,263	)
Non-current
Depreciation		(168,373	)		(167,065	)
Intangible assets		-			(136,736	)
		(168,373	)		(303,801	)
Total	$	109,749		$	109,749

The Company’s income tax provision was computed based on the federal statutory rate and the average state statutory rates, net of the related federal benefit. As of June 30, 2009 the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $326,747 and $807,821 , respectively, net of Internal Revenue Code ("IRC") Section 382 limitations. These net operating losses are available to offset future regular and alternative minimum taxable income.

Federal and state tax laws impose substantial restrictions on the utilization of net operating loss and credit carryforwards in the event of an "ownership change" for tax purposes, as defined in IRC Section 382. The Company determined that ownership changes have occurred that affect its ability to fully utilize its net operating loss carryforwards. Consequently, a portion of the Company's tax carryforwards will expire before they can be fully utilized. The Company has reduced its reported available federal and state NOL carryforwards of $807,821 and $326,747 as of June 30, 2009. If not used, these carry forwards will begin expiring between 2012 and 2021. The annual NOL deduction amount for both federal and state is limited to $25,519. The Company has recorded as of June 30, 2009 a valuation allowance for$41,997, it believes are not more likely than not to be realizable in future years. Management has based its assessment on available historical and projected operating results.

17.	Shareholders’ Equity

The Company’s articles of incorporation authorize up to 100,000,000 shares of $0.001 par value preferred stock. Shares of preferred stock may be issued in one or more classes or series at such time as the Board of Directors determine. The Company had no shares of preferred stock issued and outstanding.

During the year ended June 30, 2009, the company issued 50,000 shares of common stock to Steve Kasprisin for services rendered to the company. The company also converted the promissory note held by Mr. Joseph and Ms. Joyce Gledhill in the sum of $650,000 into 3,250,000 shares of common stock.

F-32

Stock Repurchase Program

On August 31, 2006, the Company announced a stock repurchase program to repurchase up to 2,500,000 shares of common stock. The program authorized the repurchase of shares at certain times and price levels that are satisfactory to the Company. As of June 30, 2007, the Company has repurchased and retired 600,000 shares of common stock at $0.05 per share, or $30,000, in a private negotiated transaction. The program was terminated on July 31, 2007.

Non-Qualified Stock Option Plan

In November 2006, the Board of Directors approved a Non-Qualified Stock Option Plan for key managers, which, among other provisions, provides for the granting of options by the board at strike prices at or exceeding market value, and expiration periods of up to ten years. No stock options have been granted under this plan.

18.	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.

Segment information is as follows as of and for the year ended June 30, 2009:

	Machine Sales			Precision Manufacturing			Corporate		Total

Revenues	$	4,752,435		$	4,898,749		$	-		9,651,184
Interest Income		-			-			9,990		9,990
Interest Expense		(303	)		23,339			86,111		109,147
Depreciation and Amortization		8,198			389,322			1,180		398,700
Income (Loss) before taxes		(86,102	)		(439,805	)		528,839		7,733
Total assets		403,024			3,275,471			886,703		4,565,198
Capital Expenditures	$	-		$	63,171		$	-		63,171

F-33

Segment information is as follows as of and for the year ended June 30, 2008:

	Machine Sales		Precision Manufacturing		Corporate			Total

Revenues	$	8,955,916	$	6,263,190	$	-			15,219,106
Interest Income		2,543		-		4,486			7,029
Interest Expense		17,010		38,678		99,767			155,455
Depreciation and Amortization		19,689		409,928		7,128			436,745
Income (Loss) before taxes		105,456		1,016,349		(939,215	)		182,590
Total assets		609,299		4,135,520		662,377			5,407,196
Capital Expenditures	$	-	$	268,896	$	3,539			272,435

F-34

Sales are derived principally from customers located within the United States

Long-lived assets consist of property, plant and equipment and intangible assets and are located within the United States.

19.	Discontinued Operations

The following represents the results of discontinued operations for the year ended June 30, 2009:

Net sales	$	2,964,928
Loss from discontinued operations before income taxes		(2,264,216	)
Income tax benefit		-
Loss from discontinued operations after income taxes		(2,264,216	)

The following is the combined, condensed balance sheet of All American CNC as of the dates of the respective disposition.

Cash	$	-
Accounts receivable and other (net)		116,868
Property and equipment, net		63,704

Total assets	$	180,572

Accounts payable and accrued liabilities	$	(703,133	)

Capital lease obligations		(44,517	)
Total liabilities	$	(747,650	)

The following represents the results of discontinued operations for the year ended June 30, 2008:

F-35

Net Sales	$	4,298,613

Income from discontinued operations		971

Income Tax benefit		-

Income from discontiniued operations after income taxes		971

The following is the combined, condensed balance sheet of All American CNC as of June 30, 2008:

Cash	$	122,936
Accounts receivable and other (net)		743,955
Inventory		980,501
Property and equipment, net		78,350
Intangible assets, net		538,464
Goodwill		194,378
TOTAL ASSETS		2,658,584

Accounts Payable and accrued liabilities		1,447,829
Capital Lease obligations		48,204
TOTAL LIABILITIES		1,496,033

F-36

M LINE HOLDINGS INC - FORM 10-K - October 13, 2009

Attached files

M LINE HOLDINGS INC Reports