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, 2014
OR
| ¨ |
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.) |
| |
|
|
2232 E. Orangethorpe Avenue
Anaheim, CA
(Address of principal
executive offices) |
92806
(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. ¨
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:
$ 204,606 as based on last reported sales price of such stock. The voting stock held by non-affiliates on that date
consisted of 204,605,940 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 ¨ No
¨
Indicate the number of shares outstanding of each of the registrant’s
classes of common stock, as of the latest practicable date. As of June 23, 2015, there were 1,199,555,785 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
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. Currently M Line Holdings, Inc. has two operating subsidiaries, E.M. tool Company, Inc. dba Elite Machine Tool and Precision
Aerospace and Technologies, Inc.
Business Overview
We
currently conduct our operations primarily through two of our two wholly-owned subsidiaries: E.M. Tool Company, Inc. dba
Elite Machine Tool (“Elite Machine”) and Precision Aerospace & Technologies, Inc. (formerly Eran
Engineering) (“Precision”). Elite Machine refurbishes and sells pre-owned CNC (computer numerically controlled)
machine tool equipment and also services and rebuilds CNC equipment for customers. Precision is a customer focused, industry
leading aircraft and medical precision metal component manufacturer, offering low cost build-to-print and assembly services
for production and spare parts, with design, development and sustaining engineering support services for it’s customers.
Our services and products are primarily
marketed and sold to the commercial aviation, defense, medical, and energy industries. Currently we manage the operations of these
subsidiaries. In the future we hope to expand our business, both through the growing of our existing businesses and their client
bases, as well as through acquisitions of companies that complement the products and services we currently offer.
In addition to the above M Line Holdings, inc. provides financial
services to customers. The services incl;ude advice and support in the following areas of corporate business.
| 2. | Management support in relation to financial control and management of the business. |
| 3. | Advise, support and referrals in relation to stock listings, reverse mergers and lsiting on various US and European exchanges. |
| 4. | Sales and support where applicable specifically in relation to the aerospace industry providing referrals etc. |
| 5. | Any other customer needs where our team has expertise. |
The new business will be managed by a wholly owned subsidiary,
M Line Financial Services, Inc. (a Nevada corporation) that was formed subsequent to the year end.
Machine Sales Group
The Machine Sales Group is currently composed
of one subsidiary, Elite Machine, which is in the business of acquiring, refurbishing and selling computer numerically controlled
(“CNC”) machine tools, and providing service and machine rebuilds, to manufacturing customers.
CNC machines use commands
from an onboard computer to control the movement of cutting tools and the rotation speeds in order to cut precision metal parts.
The computer controls enable the operator to program specific operations, such as part rotation and tooling selection and movement
for a particular part and then store that program in memory for future use. Because CNC machines can manufacture parts unattended
and operate at speeds faster than similar manually-operated machines, they can generate higher profits with less rework and scrap.
Elite Machine specializes in selling refurbished Mori Seiki and other high end Japanese manufactured machine Tools.
For the years ended June 30, 2014, and 2013,
the Machine and Tools Group accounted for $6,593,151 (75.8%) and $5,810,909 (62.32%) of our total sales, respectively. This segment
of our business also accounted for 74.8% and 66.6% of our gross profits for the years ended June 30, 2014, and 2013, respectively.
Elite Machine,
our wholly owned subsidiary is a California corporation and was founded in 1990 by our former Director and Executive Vice
President and Manager Lawrence A. Consalvi. Mr. Consalvi was previously the President of Elite Machine. Elite Machine specializes in the sale
of preowned CNC machine tools including Mori Seiki, and other high end Japanese manufactured machine tools. Elite Machine is
a leading dealer of pre-owned CNC machines in the Western United States. Elite Machine purchases pre-owned CNC machinery from
Japan, Europe, but primarily in the United States, and inspects and where necessary repairs and refurbishes the machine tools
prior to resale. The refurbishing completed on CNC machines it purchases typically includes 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 Machine 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, tooling selection and movement, for a particular part and then store that program in memory for future use. The
machines are typically used to mass produce a particular part. This helps ensure that the same parts are identical. The machine
can be reprogrammed to manufacture a different part depending on the needs of the customer.
Elite Machine purchases all the pre-owned
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 Machine are sold “as is.” However, Elite Machine 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 70% of Elite Machine’s customers purchase with some type of warranty with most on a 30-day warranty.
| (c) | Product Manufacturing. |
Elite Machine 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 pre-owned 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 a 30-day expiration, and generally includes installation of the machine at the customer’s location.
We also sell machine tools through alternative channels such as the internet, auctions and other machine sales operations.
On September 24, 2008, Lawrence A. Consalvi
resigned from his position as President of Elite Machine. Mr. Consalvi became the General Manager
of Elite Machine effective September 24, 2008 through the date of his resignation from the company on January 31, 2015.
| (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.
Our competitors in the machine tool 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 not increase significantly as the barrier to entry carries a very high cost.
However industry consolidations and trends toward favoring greater outsourcing of components and a reduction in the number of preferred
suppliers will increase. 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 the
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.
The major third party company that manufactures
CNC machines is DMG Mori Seki.
| (h) | Dependence on Major Customers. |
Our Machine Sales 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 Machine does not have any patents
or licenses, or other intellectual property.
| (j) | Need for Government Approval. |
As noted above, Elite Machine does not manufacture
its own product, it merely sells pre-owned CNC machines. As sellers of pre-owned CNC machines, Elite Machine does not need government
approval to operate its business.
| (k) | Effect of Government Regulation on Business. |
As noted above, Elite Machine does not manufacture
its own product, they merely sell pre-owned CNC machines. As sellers of pre-owned CNC machines, Elite Machine is not subject to
onerous government regulation.
However, in as much as Elite Machine 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.
As of June 30, 2014, we, with our subsidiaries,
employ a total of 47 full-time employees, including 2 executive employees. Of these employees our Machine Sales Group employs
2 managerial employees, and 10 employees engaged in the sales and processing of CNC machine sales and the precision manufacturing
group employs 3 managerial employees and 32 machinists and support personnel.
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 Precision (formerly Eran Engineering), a wholly-owned subsidiary. Precision
is a customer focused, industry leading aircraft and medical component manufacturer offering low cost build-to-print and assembly
services for production and spare parts, with design, development and sustaining engineering support services for it’s customers.
Precision, with an installed base of over forty CNC machines, manufactures parts and assemblies primarily for the aerospace and
medical industries. Aerospace Customers include Panasonic Avionics Corporation (“Panasonic”), Rockwell Collins, UTC
Aerospace, (formerly Goodrich Aerostructures), a division of the United Technologies Group and our largest medical customer, Beckman
Coulter (part of the Danaher group).
For the years ended June 30, 2014 and 2013,
the Precision Manufacturing Group accounted for $2,106,971 (24.21%) and $3,513,776 (37.68%) of our sales, respectively. This
segment of our business also accounted for 25% and 33% of our gross profits for the years ended June 30, 2014 and 2013, respectively.
(1) Precision
Aerospace & Technologies, Inc., (formerly Eran Engineering, Inc).
Precision was acquired in October, 2003. Precision manufactures precision metal parts and assemblies for the aerospace, medical
defense and other industries.
(b) Product
Manufacturing.
Precision is a customer
focused, industry leading aircraft and medical component manufacturer offering low cost build-to-print and assembly services for
production and spare parts, with design, development and sustaining engineering support services for it’s customers. Precision,
with an installed base of over forty CNC machines, manufactures parts and assemblies primarily for the aerospace and medical industries.
Aerospace Customers include Panasonic Avionics Corporation (“Panasonic”), UTC Aerospace, (formerly Goodrich Aerostructures),
a division of the United Technologies Group and our largest medical customer, Beckman Coulter (part of the Danaher group).
The primary components sold by Precision
during the years ended June 30, 2014 and 2013, 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. Precision (formerly Eran Engineering) maintains approximately 40 CNC machines for use
in its specialized manufacturing processes. Barton Webb, serves as the executive Vice President of Precision.
(c) Sales,
Marketing and Distribution.
Precision 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 Precision prepares costs estimates and submits
a bid for the manufacturing order. Once an order is received, through a binding purchase order, Precision programs its machines
to manufacture the part. Parts are manufactured internally and in most cases, assembled at Precision’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. Precision has no control or liability for these parts manufactured
by other manufacturers used in the assembly’s delivered by Precision.
(d) New
Product Development.
Precision usually does not develop any proprietary
products, however Precision is currently working on one or two proprietory products unrelated to the aerospace industry. Precision
primarily 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, on time deliveries, 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, financial, technological and personnel resources greater 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 are smaller than our collective
group of wholly owned subsidiaries. We believe that this allows us to bring a broader spectrum of support to our 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 and the addition of new customers.
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 and 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.
Precision has two major customers: Panasonic
Avionics Corp., which accounted for 59.84% and 44.76% of our total revenue for the years ended June 30, 2014 and 2013, respectively,
and Beckman Coulter, which accounted for 15.97% and 15.37% of our total revenue for the years ended June 30, 2014 and 2013 respectively.
(h) Patents,
Trademarks and Licenses.
Precision does not have any patents or licenses,
or other intellectual property.
(i) Need
for Government Approval.
As a manufacturer of precision parts, Precision’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. Precision is ISO 9001-2008
and AS9100 rev. C registered.
(k) Research
and Development.
Our precision manufacturing group does not
normally engage in research and development. Precision 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 Precision 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 Anaheim 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 November 2013 and we passed
without exception.
Precision strives to comply with all applicable
environmental, health and safety laws and regulations. Precision 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.
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.
(m) Employees.
As of June 30, 2014, we, with our subsidiaries,
employ a total of 47 full-time employees, including 2 executive employees. For the precision manufacturing group, we
employ 3 managerial employees, and 32 employees engaged in precision metal parts manufacturing related positions and
the machinery sales group employs 2 managerial employees and 10 sales and support personnel.
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.
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 increased 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 its work flow increases.
Precision Tools
The precision tools industry, as it relates
to Precision (formerly 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 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.
All of our materials
necessary for our precision manufacturing division are provided by third parties. To the extent that a supplier 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 refurbished machinery 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 equipment. Customers of our manufactured parts are also always trying to buy at lower
prices. 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 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.
Our officers
and directors, as a group, own 15.86% of our common stock and one officer has voting control through a preferred stock voting block
of shares. As a result, this stockholder 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 voting control 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, 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 have two customers that account
for greater than 76% of our total sales of our Precision manufacturing division for the year ended June 30, 2014.
Panasonic Avionics
Corp. account for 59.84% and 45.22% and Beckman Coulter 15.97% and 14.73% of our total sales for the years ended June 30, 2014
and 2013, respectively. We do not have a long term, exclusive agreement with these customers. If either of these customers
reduced or stopped ordering precision parts from Precision it would have a material adverse impact on our consolidated sales, results
of operations and cash flows.
We have one customer
that accounted for 100% of the total sales of M line Holdings, Inc. for the year ended June 30, 2014.
We currently have one
customer (OR Holdings, Inc.) that accounted for 100% of our total sales for the year ended June 30, 2014 and $0 in 2013. There
is no guaranty that we can continue to obtain customers for the same kind of services in the future.
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.
Decisions from
the credit markets regarding the financing of equipment may adversely affect our customers’ ability to finance the purchase
of used CNC machines. This could result in a significant reduction in our sales.
Many of our customers
that purchase used CNC machines do so utilizing credit. Credit decisions 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.
As of June 30, 2014, the Company owed
Main Credit $0 and $20,759 at June 30. 2013.
We have refinanced the line of credit with
Main Credit and have therefore repaid the balance due of $20,759 during the fiscal year ended June 30, 2014. The balance due to
Main Credit, $20,759 at June 30, 2013 was paid in full in July 2013. We have therefore repaid in full all our obligations to Main
Credit during the fiscal year ended June 30, 2014.
As of June 30, 2014, the Company owed
TCA Global Credit Master Fund, LLC (“TCA”) $2,330,452 and $1,681,973 at June 30. 2013.
The Company’s Line of
Credit with TCA became due on October 31, 2013 and was renewed for a further six months. The line of credit expired on April
30 2014. On January 15, 2015 management entered into a settlement agreement with TCA that includes two forms of
repayment that will be concluded within a fifteen month period.
New governmental regulation relating
to greenhouse gas emissions may subject us to significant new costs and restrictions on our operations.
Climate change is receiving increasing attention
worldwide. Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases,
including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. There
are bills pending in Congress that would regulate greenhouse gas emissions through a cap-and-trade system under which emitters
would be required to buy allowances to offset emissions of greenhouse gas. In addition, several states are considering
various greenhouse gas registration and reduction programs. Greenhouse gas regulation could increase the price of the
electricity we purchase, increase costs for our use of natural gas, potentially restrict access to or the use of natural gas, require
us to purchase allowances to offset our own emissions or result in an overall increase in our costs of raw materials, any one of
which could significantly increase our costs, reduce our competitiveness in a global economy or otherwise negatively affect our
business, operations or financial results. While future emission regulation appears likely, it is too early to predict
how this regulation will affect our business, operations or financial results.
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. We finalized
an amendment to the lease agreement on September 30, 2011 that extends the lease under new terms that commenced on July 1, 2012
and continues until June 30, 2017. The rent for month 1 (July 2012) through month 12 is $27,741, month 13 to 24 $28,573,
month 25 to 36, $29,430, month 37 to 48, $30,313 and month 49 to 60, $31,223.
We entered into an amicable settlement agreement
with the landlord of the Tustin property to surrender the lease without any penalty and on July 1, 2014 we moved the precision
engineering group to our new premises at 2320 E. Orangethorpe Avenue, Anaheim, CA 92806.
We entered into a 10 year triple net lease
for approximately 28,354 square feet of manufacturing and office space in a free-standing industrial building at 2310-2320 E. Orangethorpe
Avenue, Anaheim, CA 92806 for an average monthly rent of $23,353 for the first 12 months, $24,053 for the second twelve months,
$24,775 for the third twelve months, $25,518 for the fourth twelve months and $26,284 for the fifth twelve months.
We have a five 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 $8,777 for the first year, $9,040 for the second year, $9,311 for the third year, $9,591 for the fourth year, and $9,879 for
the fifth year. The lease for this property began September 1, 2010 and expires on August 31, 2015. The Machines
Sales Group resides at this location.
However, we have surrendered the lease for
the 3840 East Eagle Drive, Anaheim property as we have moved the business of the machine tool division to our new premises at 2320
E. Orangethorpe Avenue, Anaheim, CA 92806.
ITEM 3 - LEGAL PROCEEDINGS
| 1. | James M. Cassidy v. Gateway International Holdings, Inc., American Arbitration Association, Case No. 73-194-32755-08. |
The Company was served with a Demand for Arbitration
and Statement of Claim, which was filed on September 16, 2008.
The Statement of Claim alleges that claimant is an attorney
who performed services for the Company pursuant to an agreement dated April 2, 2007 between the Company and the claimant. The Statement
of Claim alleges that the Company breached the agreement and seeks compensatory damages in the amount of $195,000 plus interest,
attorneys’ fees and costs. Management denies the allegations of the Statement of Claim and will vigorously defend against
these allegations. An arbitrator has not yet been selected, and a trial date has not yet been scheduled.
No provision has been made in the June 30, 2014 financial
statements with respect to this matter. because the Company has assessed the litigation as having no merit and the likelihood of
any liability pursuant to this litigation is remote.
| 2. | CNC Manufacturing v. All American CNC Sales, Inc., Elite Machine Tool Company/Sales & Services, CNC Repos, Superior
Court for the State of California, County of Riverside, Case No. RIC 509650. |
Plaintiff filed this Complaint on October 2, 2008.
The Complaint alleges causes of action for breach of
contract and rescission and claims that All American breached the agreement with CNC Manufacturing by failing to deliver a machine
that conforms to the specifications requested by CNC Manufacturing, and requests damages totaling $138,750. Elite Machine filed
an Answer timely, on January 15, 2009.
Abstract of Judgment and Writ were issued August 17,
2012.
The company entered into a settlement agreement for
a settlement in the total amount of $37,500. However, no payments have been made to date.
A provision has been made in the June 30, 2014 financial
statements with respect to this matter in the sum of $37,500.
| 3. | Donald Yu v. M Line Holdings, Inc., et al.;
Case No. 30-2012-00574019- CU-BC-CJC |
This is an employment dispute asserted
by a former employee against M Line Holdings and two corporate insiders, Jitu Banker and Anthony Anish, in their respective
individual capacities. The action was filed in Orange County Superior Court on June 4, 2012. The parties entered into a settlement
agreement and stipulation for judgment against M Line Holdings, only, on about May 12, 2013. Pursuant to the terms and
conditions of the settlement agreement, M Line agreed to pay $21,450.00 in three (3) equal installments. M Line Holdings
failed to make payment on a timely basis, and plaintiff filed a stipulated judgment against M Line Holdings on June 12,
2013. Plaintiff also filed default judgments against Messrs. Banker and Anish.
In response, defendants filed
a motion to set aside the defaults and vacate the default judgments against
Messrs. Banker and Anish as well
as renegotiate the terms of the prior settlement with Plaintiff. On or about September 30, 2013, the parties entered into
a supplemental settlement agreement and mutual release wherein the Company agreed to pay plaintiff the sum of $24,000 in two (2)
equal installments. The first installment of $12,000 has already been paid.
The final installment of $12,000
was due on or before October 30, 2013, and has not been paid at this time. A judgment remains outstanding against the Company
in the sum of $12,000.
| 4. | Subramani Srinivasan, et al. v. M Line Holdings, Inc., et al.;
Case No. 30-2014-00724484-CU-CO-CJC |
This is a breach of contract, fraud,
and related causes of action against Defendants Eran Engineering, Inc.; Bart Webb; Precision Aerospace and Technologies, Inc. (erroneously
sued as “Precision Aerospace Technologies, Inc.”); M-Line Holdings, Inc.; Anthony Anish; Jitu Banker; Larry Consalvi;
and Elite
Machine Tools (collectively,
“Defendants”).
The parties entered into a settlement
agreement against the corporate defendants on or about January 22, 2015. Pursuant to the terms and conditions of the settlement
agreement, the corporate defendants agreed to pay $20,000 in three (3) equal installments on or before April 30, 2015.
As of June 2, 2015, the corporate
defendants have paid $20,000 and this case has been dismissed, which effectively terminates all litigation in its entirety.
| 5. | Can Capital Asset Servicing, Inc. v. E.M. Tool Company, Inc., et al.; Case No. 30-2014-00727606- |
CU-CL-CJC
This is a breach of contract and related
claims arising out of a business loan, and alleges that E.M. Tool failed to pay Can Capital all amounts due under the loan agreement
in the principal sum of $58,313, plus interest, costs and attorneys’ fees.
On or about November 2014, the parties
entered into a settlement agreement and stipulated judgment. Pursuant to the terms and conditions of the settlement agreement,
the Company agreed to pay plaintiff the sum of $50,000 in installments on or before May 15, 2015.
As of May 13, 2015, the defendants
have made partial payments, and still owe plaintiff $25,500. Plaintiff provided notice of its intent to file the stipulated judgment on may 7, 2015 and commence collection efforts
if payment of $10,000 is not paid prior thereto and those payments have been made. This amount has been provided for in the
june 30, 2014 financial statements.
Plaintiff provided notice of its intent
to file the stipulated judgment on May 7, 2015, and commence collection efforts if payment of $10,000 is not paid prior thereto
and those payments have been made.
| 6. | Fadal Machining v. All American CNC Sales, et al., Los Angeles Superior Court, Los Angeles, |
California,Case No. BC415693.
The complaint was filed on June 12, 2009.
The complaint alleges causes of action for breach of
contract and common counts against All American CNC seeking damages in the amount of at least $163,579, and arises from a claim
by Fadal that All American failed to pay amounts due. On June 26, 2009, Fadal amended the complaint to include M Line Holdings,
Inc. as a defendant.
A settlement agreement in the amount of $60,000 was
signed on May 31, 2011.
The Company had made a provision in the sum of
$60,000 in the financial statements as of June 30, 2013, which amount has been increased to $210,000 in the financial
statements as of June 30, 2014 as no payments that were due under the settlement agreement have been made. The increase to
$210,000 includes the original amount due Plaintiff under the compaint plus accrued interest. Judgment was entered on June
16, 2011, and a Writ was issued on February 24, 2012.
| 7. | Fox Hills Machining v. CNC Repos, Orange County Superior Court, Orange County, California, Case No. 30-2009-00121514. |
The complaint was filed on April 14, 2009.
The complaint alleges causes of action for Declaratory
Relief, Breach of Contract, Fraud, Common Counts, and Negligent Misrepresentation, claiming the defendant failed to pay Fox Hills
Machining for the sale of two machines from Fox Hills to CNC Repos. The damages sought in the complaint are estimated to be approximately
$40,000. Court records show that a stipulated judgment was entered on August 27, 2012 and a writ was issued on September 9, 2012.
However, an agreement has been entered into with Fox
Hills Machinery to pay off the judgment in the sum of $48,673. A sum of $40,000 has been paid in installments of $10,000 each and
the final payment of $8,673 was made on December 9, 2013.
No provision is required in this matter in the June
30, 2014 financial statements as the plaintiff has been paid in full.
| 8. | C. William Kircher Jr. v. M Line Holdings, Inc. Orange County Superior Court Case No. 00397576 |
A former attorney for M Line Holdings, Inc. has sued
seeking damages for failure to pay legal fees in the amount of $120,166.
The parties reached a settlement. The terms of the settlement
call for 12 payments of $5,000 per month commencing August 25, 2011 and the issuance of 150,000 shares of common stock. The Company
has issued the 150,000 shares of common stock and made two payments to date. The Company has a provision in the sum of $50,000
in the financial statements as of June 30, 2014.
The Company currently is in default of its payment obligations
under the settlement. Plaintiff currently is seeking to obtain a judgment as a result of the breach of the settlement agreement.
| 9. | Timothy D. Consalvi v. M Line Holdings, Inc. et.al., Orange County Superior Court Case No, 00308489. |
A former president of All American CNC Sales, Inc. has
filed suit against the Company seeking payment on an alleged severance obligation by the Company. The Complaint does not specify
the damages sought. The parties then reached a settlement in the principal sum of $40,000 to be documented in due course. Meanwhile
a default was entered against the Company, which management believes was in error because a settlement was already reached by the
principal parties involved. The default has since been vacated, and the Company has answered the complaint and has filed a motion
for leave to file a cross complaint.
A settlement of $50,000 was reached in this case, requiring
payments commencing on March 11, 2011 for 10 months. The first two month’s payments were made; however, the Company currently
is in default of the terms of this settlement agreement. Mr. Consalvi filed his stipulated judgment on March 5, 2012. Abstract
of judgment and Writ were issued on March 13, 2012.
A provision in the sum of $40,000 has been made in the
financial statements as of June 30, 2014.
To date there has been no further action on this case,
and the Company plans to resolve this matter as soon as possible.
| 10. | All Direct Travel Services, Inc. v. Jitu Banker,
M Line holdings, Inc., Airworks International, Inc., case number 30-2011-00472824-CL-CO-CJC |
This case was settled as to Jitu Banker and the Company
for $2,000 payable on February 25, 2013. We do not yet have sufficient information to determine what the potential outcome of this
may be or whether or to what extent it would or could have a financial impact on the Company. A default judgment was entered on
January 6, 2012.
To date there has been no further action on this case,
and the Company plans to resolve this matter as soon as possible.
| 11. | Douglas Technologies Group, Inc. v Elite Machine Tool Company and Lawrence Consalvi, et al., case number 30-2013-00657906-CU-FR-CJC. |
This suit was filed subsequent to June 30, 2013 in respect of
an alleged deficiency in the machine supplied to Douglas Technologies. The company decided to settle the lawsuit and thereby entered
into a settlement agreement with the customer.
This case was settled on November
5, 2013 for $50,000 requiring a payment of $10,000 on November 15, 2013 with the balance being paid in 8 monthly installments of
$5,000 each.
No provision
is required in this matter in the June 30, 2014 financial statements as the plaintiff has
been paid
in full.
| 12. | Alu Forge, Inc., dba American Handforge
. v Jitu Banker, Precision Aerospace & Technologies, Inc., and M Line Holdings, Inc., et al., case number 30-2013-00670772-CL-BC-CJC. |
This suit was filed in respect of materials supplied to the
company. The company decided to settle the lawsuit and thereby entered into a settlement agreement with the plaintiff.
The case was settled on October 31, 2013
for $19,500 with payments of $5,250 on October 31, 2013, $5,250 on November 30, 2013 and the balance of $9,000 on December 31,
2013.
The Company has made all of the
required payments and therefore no provision is required in the financial statements as of June 30, 2014
| 13. | Yates, Fontenot, Smith
& Brum, LLC v. M Line Holdings, Inc. (formerly Gateway International Holdings, Inc.), et al.; Case No. 30-2013-00630586 |
| | The above-referenced matter is an unlawful detainer action concerning certain real property located
at 2672 Dow Avenue, Tustin, California. The unlawful detainer action was filed against the Company by its landlord Yates, Fontenot,
et al. on February 15, 2013. |
On or about September 2013, the parties
settled the action for an agreed upon sum payable in installments through January 5, 2014. Assuming all payment obligations are
made, plaintiff shall file a request for dismissal with prejudice of the entire action by or before March 14, 2014.
All of
the payments due to Plaintiff has been made and no provision is required as of June 30, 2014.
The company moved out of its Tustin
location in July 2014 and agreed the surrender of its lease with the landlord, Yates, Fontenot, Smith and Brum, LLC. No further
action will be taken on this matter.
| 14. | TCA Global Credit Master Fund, L.P. vs M LI ne Holdings, Inc. EM Tool Company, Inc. dba Elite Machine Tool, Precision
Aerospace and Technologies, Inc., Anthony Anish and Jitendra Banker case # CACE-14-012871 |
Plaintiff filed this case on July 1, 2014
in Broward County, Florida.
The complaint alleges that defendants owe the Plaintiff
the amount due under the revolving note, and is claiming foreclosure of the collateral, breach of the credit agreement and a claim
against the individuals under the validity agreement due to the non-payment.
The Plaintiff obtained a default judgment however due
to a settlement agreement reached on September 5, 2014 ceased any further legal activity. The Defendants were unable to honor the
agreement and Plaintiff continued to obtain sister state judgments in California and Nevada.
On February 23, 2015 a new settlement agreement was
signed between the parties under which plaintiff agreed to accept two methods of repayment, the first being $1,200,000 paid over
a fifteen month period commencing as soon as the Company was up to date with its filings and the balance of funding would come
from a new asset based lending program that Defendants were in the process of arranging.
The Company has provided for $2,330,452 in
the financial statements that includes all interest and fees due to Plaintiff through June 30, 2014.
| 15. | Global Vantage Ltd., a California Corporation vs
Eran Engineering, Inc. Precision Aerospace and Technologies, Inc., M Line Holdings, Inc., Anthony Anish, Lawrence Consalvi and
Kenneth Collini |
Plaintiff filed this complaint on August 7, 2014 in Orange County,
California.
The complaint alleges that defendants owe funds that
are due for the lease of certain equipment or plaintiffs want repossession of the equipment.
The plaintiffs obtained judgment in February 2015 and
the equipment has been returned to plaintiff. However Defendants are filing an appeal against this judgment.
Litigation is subject
to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur in any of the
above matters, there could be a material adverse effect on our client’s financial condition, results of operations or liquidity.
ITEM 4 – (REMOVED AND RESERVED).
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 currently listed on
the OTC Bulletin Board under the symbol “MLHC.” 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. We began listing on the OTC Bulletin Board on November 23, 2009.
The following table sets forth the high
and low bid information for each quarter within the two most recent fiscal years. The information reflects prices between
dealers, and does not include retail markup, markdown, or commission, and may not represent actual transactions.
| Fiscal Year Ended June 30, | |
Period | |
Bid Prices | |
| | |
| |
High | | |
Low | |
| 2013 | |
First Quarter | |
$ | 0.05 | | |
$ | 0.01 | |
| | |
Second Quarter | |
$ | 0.03 | | |
$ | 0.01 | |
| | |
Third Quarter | |
$ | 0.09 | | |
$ | 0.01 | |
| | |
Fourth Quarter | |
$ | 0.05 | | |
$ | 0.01 | |
| | |
| |
| | | |
| | |
| 2014 | |
First Quarter | |
$ | 0.04 | | |
$ | 0.01 | |
| |
Second Quarter | |
$ | 0.01 | | |
$ | 0.00 | |
| | |
Third Quarter | |
$ | 0.00 | | |
$ | 0.00 | |
| | |
Fourth Quarter | |
$ | 0.00 | | |
$ | 0.00 | |
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.
Holders
As of June 30, 2014, there were 243,178,484
shares of our common stock outstanding held by144 holders of record of our common stock and numerous shareholders holding shares
in brokerage accounts. Of these shares, 204,605,940 were held by non-affiliates. On the cover page of this
filing we value these shares at $0.001. These shares were valued at $0.001 per share, which was closing price of our
common stock on the OTC Bulletin Board on June 22, 2015.
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 and currently there are no plans to pay future dividends.
Securities Authorized for Issuance Under Equity Compensation
Plans
There are no outstanding options or warrants
to purchase shares of our common stock under any equity compensation plans.
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, 2014.
| 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
During the year ended June 30, 2014, the Company issued the
following shares of common stock.
12,805,130 shares were issued to financial advisors and other
parties in payment of services to the Company. The Company valued the shares at the market price on the issuance dates in the sum
of $67,451.
136,062,209 shares were issued to financial institutions in
connection with the conversion of debt and interest totalling $446,489.
5,100,000 shares were issued to a financial advisor in
respect of consulting services provide to the company. These shares were valued at market price on the issuance date in the
sum of $40,290.
The Company also issued 6,000,000 shares in lieu of
payroll and 13,000,000 shares to settle unpaid salaries due to officers. The shares were valued at $190,000 based on the market
price of the shares at the grant date.
During the year ended June 30, 2014, the Company did not issue
any shares of preferential stock.
If our stock is listed on an exchange we
will be subject to the Securities Enforcement and Penny Stock Reform Act of 1990 which 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, 2014 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. In addition, we recognize revenue form financial services provided to
our customers. Payment for these services is made in the form of cash and/or marketable securities. 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 2.47% and 25.73% of our consolidated
accounts receivable balance at June 30, 2014 and 2013, respectively. Another customer, Or Holdings, Inc. accounted
for 89.42% and 0% of our consolidated accounts receivable balance at June 30, 2014 and 2013. 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.
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 management’s
review, we determined that there was no impairment provision of long-lived assets as of June 30, 2014.
Accounting for Income Taxes
The Company accounts
for income taxes in accordance with FASB ASC Topic 740-10, Income Taxes, (“ASC 740”) which requires recognition
of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between
the financial statement and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense represents the tax payable for the period and the change during the period
in deferred tax assets and liabilities.
The Company accounts
for uncertain tax positions in accordance with ASC 740, which prescribes a recognition threshold and measurement attribute for
financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides
guidance on various related matters such as de-recognition, interest, penalties and disclosures required. The Company recognizes
interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements
that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements
that have been issued that might have a material impact on its financial position or results of operations.
Results of Operations
Sales Concentration
The sales within our Precision Manufacturing
segment are highly concentrated within two customers, Panasonic Avionics and Beckman Coulter. Sales to these customers accounted
for 18% and 23%of consolidated sales for the years ended June 30, 2014 and 2013, respectively. The loss of all or a substantial
portion of sales to these customers 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 20 years and we believe our relationship is satisfactory.
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 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.
Interest Expense
Interest expense primarily consists of
the cost of borrowings under our line of credit agreement with TCA Global Credit Master Fund, LLC, other financial institutions
and credit and capital lease agreements. See Liquidity and Capital Resources and Notes to Consolidated Financial Statements for
further information.
Segment Information
| | |
For the year ended
June 30, | | |
For the year ended
June 30, | | |
| |
| | |
2014 | | |
2013 | | |
Change | |
| | |
| | | |
| | | |
| | |
| Sales by segment: | |
| | | |
| | | |
| | |
| Machine Sales | |
$ | 6,593,151 | | |
$ | 5,810,909 | | |
$ | 782,242 | |
| Precision Engineering | |
| 2,106,971 | | |
| 3,513,776 | | |
| (1,406,805 | ) |
| Financial Services | |
| 1,000 | | |
| - | | |
| 1,000 | |
| | |
| 8,701,122 | | |
| 9,324,685 | | |
| (623,563 | ) |
| | |
| | | |
| | | |
| | |
| Gross Profit by segment: | |
| | | |
| | | |
| | |
| Machine Sales | |
| 1,235,024 | | |
| 1,174,017 | | |
| 61,007 | |
| Precision Engineering | |
| 414,390 | | |
| 589,214 | | |
| (174,824 | ) |
| Financial Services | |
| 1,000 | | |
| - | | |
| 1,000 | |
| | |
| 1,650,414 | | |
| 1,763,231 | | |
| (112,817 | ) |
| | |
| | | |
| | | |
| | |
| Gross Profit by segment: % | |
| | | |
| | | |
| | |
| Machine Sales | |
| 74.83 | | |
| 66.58 | | |
| | |
| Precision Engineering | |
| 25.11 | | |
| 33.42 | | |
| | |
| Financial Services | |
| 0.06 | | |
| - | | |
| | |
At June 30, 2014 the 2,100,000 shares of common stock
of OR Holdings, Inc. held by M Line Holdings, Inc. was traded on the GXG Stock Exchange in Europe. At that date the market
value of the shares was $1.00 (.70 Euros) per share. However, since that date, OR Holdings, Inc. suspended its trading in
advance of a move to Marche Libre Stock Exchange in Europe and the new listing has not been completed as yet. As a result
revenue from financial services provided by M Line was reduced to a notional value of $1,000.
Results of Operations for the Years Ended June 30, 2014
and 2013
Introduction
For the twelve months ended June 30, 2014,
we generated $10,800,122 in revenues on cost of sales of $7,182,846. With these revenues and cost of sales for the
year ended June 30, 2014, we had a net loss of $1,161,813, after taxes. For the year ended June 30, 2013, we had
revenues of $9,324,685 , on cost of sales of $7,561,454. With these revenues and costs of sales we had a net loss of
$4,393,268, after taxes, for year ended June 30, 2013. An explanation of these numbers and how they relate to our business
is contained below.
Revenues, Expenses and Loss from operations:
| | |
Year ended | | |
Year ended | | |
| |
| | |
June 30, 2014 | | |
June 30, 2013 | | |
Change | |
| Revenue | |
$ | 8,701,122 | | |
$ | 9,324,685 | | |
$ | (623,563 | ) |
| Cost of sales | |
| 7,050,708 | | |
| 7,561,454 | | |
| (510,746 | ) |
| Selling general and administrative expenses | |
| 3,811,699 | | |
| 4,226,647 | | |
| (414,948 | ) |
| Write-off related party receivable | |
| - | | |
| 1,446,067 | | |
| (1,446,067 | ) |
| Operating loss | |
| (2,161,285 | ) | |
| (3,909,483 | ) | |
| (1,748,198 | ) |
| Interest expense | |
| (1,884,005 | ) | |
| (497,365 | ) | |
| 1,386,640 | |
| Change in derivative liability | |
| (946,518 | ) | |
| - | | |
| 946,518 | |
| Loss on settlement of liability | |
| (35,190 | ) | |
| - | | |
| 35,190 | |
| Total other income (expense) | |
| (2,865,713 | ) | |
| (497,365 | ) | |
| 2,368,348 | |
| Income tax (provision) benefit | |
| (1,894 | ) | |
| 13,580 | | |
| (15,474 | ) |
| Net income (loss) | |
$ | (5,028,892 | ) | |
$ | (4,393,268 | ) | |
$ | 635,624 | |
Revenues
Sales in the fiscal 2014 period decreased
6.69% compared to the comparable period in fiscal 2013.
The change is attributable
primarily to a decreased in the sales in the Precision Manufacturing Group. Sales increased by 13.46% in the
Machine Sales Group while it decreased by 40.01% in the Precision Manufacturing Group.
The machine sales group primarily sells
pre-owned CNC machinery manufactured by Mori Seiki. The average sale price of the machinery changes based on the equipment that
is available to purchase in the market place and the prevailing market conditions that affect the price that equipment can be
sold for. The average sale price of the 145 pieces of equipment sold in the year ended June 30, 2014 was $42,360 compared to the
comparable period in fiscal 2013 of 86 pieces of equipment sold at an average sale price of $61,224. In addition service sales
for the year ended June 30, 2014 was $255,539 compared to the comparable period in fiscal 2013 of $146,712.
Market conditions reflect not only the
price that equipment can be purchased for but also the price that equipment may be sold. During good economic times when the business
climate is improving, particularly in areas such as aerospace, the demand for equipment can result in a change in the buying price.
However the need for that equipment by customers is generally reflected in the sale price, therefore as a general rule margins
are reasonably consistent even though average sale prices may change. As a result we do not expect future results to be materially
impacted by these conditions.
The decrease in sales in the Precision
Manufacturing Group is the result of a decrease of $1,406,805 in sales of precision metal component parts from two customers of
ours, Panasonic Avionics, and Godrich Aerostructures in the fiscal year ended June 30, 2014, compared to the fiscal year ended
June 30, 2013.
Gross Margin
Gross profit decreased by 6.40%
compared to the comparable period in fiscal 2013. The gross profit for the Machine Sales Group increased by 5.19% due to an
increase in margins as a result of lower prices and associated costs paid for equipment. The decrease within the Precision
Manufacturing Group of 29.67% resulted from lower margins as a result of the decrease in sales in this group.
Cost of Sales
Our cost of sales for the year ended June
30, 2014, were $7,050,708 and consisted primarily of used CNC machines, refurbishment of those machines payroll and raw materials
usage, compared to our cost of sales for the year ended June 30, 2013 of $7,561,454. The decrease in our cost of sales
was primarily due to the decreases in the purchase of raw materials and outside processing costs to meet the sales of our precision
manufacturing group. The sales of management services by M Line Holdings, Inc., had no costs for the year ended June 30, 2014.
Selling, General and Administrative Expenses
Our selling, general and
administrative expenses are those expenses related to the actual sales of our products and the costs we incur in transporting
those products. For the year ended June 30, 2014 our selling and distribution expenses were $3,811,699, compared
to $4,226,647 for the year ended June 30, 2013. Our selling, general and administrative expenses for the year
ended June 30, 2014, primarily consisted of salaries of $1,869,299, rent of $545,177, legal and professional fees of
$709,028. Our selling and administrative expenses included a change of $390,000 for officers salaries which were waived by
those officers and credited to paid in capital. The decrease in selling, general and administrative expenses was a direct
result of an intended reduction of these expenses during the year due to the reduction in revenues in both our Elite Machine
and Precision subsidiaries.
Interest Expense
For the year ended June 30, 2014, our interest
expense increased by $1,386,640 compared to the comparable period in 2013. The change is attributable to higher average debt balances,
increases in the average interest rates paid and fees charged primarily on our debt obligations
Gain on Sale of Assets
During 2014, we had a gain on the sale
of assets within the Precision Products Group in the sum of $19,000. We did not have a gain on sale of assets in 2013.
Research and Development
We did not incur Research and Development
expenditures during the fiscal 2014 period.
Liquidity and Capital Resources
Our principal sources of liquidity consist
of cash and cash equivalents, cash generated from operations and borrowing from various sources. At June 30, 2014, our cash and
cash equivalents totaled $46,925.
As of June 30, 2014, we had $0 in debt
outstanding under our Accounts Receivable and Inventory line of credit with Main Credit. We have paid off the sum of $20,753 in
full and final settlement of all of our outstanding debt to Main Credit during the fiscal year ended June 30, 2014.
As of June 30, 2014, we had $2,330,452
in debt outstanding under our Accounts Receivable and Inventory Line of Credit with TCA Global Credit Master Fund, LLC
Our existing sources of liquidity, along
with cash expected to be generated from sales, may not be sufficient to fund our operations, anticipated capital expenditures,
working capital and other financing requirements for the foreseeable future. If that is the case we may need to seek additional
debt or equity financing, especially if we experience downturns or cyclical fluctuations in our business that are more severe
or longer than anticipated, or if we fail to achieve anticipated revenue targets, or if we experience significant increases in
the cost of raw material and equipment for resale, lose a significant customer, or increases in our expense levels resulting
from being a publicly-traded company. If we attempt to obtain additional debt or equity financing, we cannot assure you that such
financing will be available to us on favorable terms, or at all.
Cash Flows
The following table sets forth our cash
flows for the years ended June 30:
| Provided by (used in) | |
2014 | | |
2013 | | |
Change | |
| | |
| | |
| | |
| |
| Operating activities | |
$ | (815,209 | ) | |
$ | (539,087 | ) | |
$ | (276,122 | ) |
| Investing activities | |
| 11,000 | | |
| (19,335 | ) | |
| 30,335 | |
| Financing activities | |
| 668,829 | | |
| 735,515 | | |
| (66,686 | ) |
| | |
$ | (135,380 | ) | |
$ | 177,093 | | |
$ | (312,473 | ) |
Cash Flows for the Years Ended June 30, 2014 and 2013
Operating Activities
Net cash used in
operating activities was $(815,209) during the year ended June 30, 2014, compared to $(539,087) for the year ended June
30, 2013. Our cash used in operating activities for the year ended June 30, 2014 was primarily due to net losses
of $(5,028,092) offset by non-cash expenses related to bad debt expense, depreciation, amortization, share based
compensation, change in derivative liability and waiver of officers salaries totaling $2,958,682, $457,744 in
accounts receivables, $125,228 in inventories, $(27,477) in prepaid expenses and other assets and $624,647 in accounts
payable and accrued expenses.
Investing Activities
Net cash used in investing activities
was $11,000 for the year ended June 30, 2014, compared to $(19,335) for the year ended June 30, 2013. The cash
provided for investing activities for the year ended June 30, 2014 was from proceeds from disposition of assets.
Financing Activities
Net cash provided by
financing activities was $668,829 for the year ended June 30, 2014, compared to $735,515 for the year ended June 30, 2013.
The cash provided by financing activities for the year ended June 30, 2014, consisted of $(44,916) payment on capital
leases, $1,037,978 in proceeds from note payables and $(319,819) in payments on note payables.
Contractual Obligations
The following table summarizes our contractual
obligations and commercial commitments as of June 30, 2014 for the next five years:
| | |
2015 | | |
2016 | | |
2017 | | |
2018 | | |
2019 | | |
TOTAL | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Debt Obligations | |
$ | 3,349,208 | | |
$ | 124,023 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 3,473,231 | |
| Capital Leases | |
| 53,901 | | |
| 46,426 | | |
| - | | |
| - | | |
| - | | |
| 100,327 | |
| Operating Leases | |
| 233,530 | | |
| 287,242 | | |
| 295,859 | | |
| 304,735 | | |
| 313,877 | | |
| 1,435,243 | |
Quantitative and Qualitative Disclosures about Market Risk
The only financial
instruments we hold are cash and cash equivalents. We also have a fixed interest rate agreement with TCA Global Credit Master
Fund, LLC secured by receivables and inventory and a second position on the equipment of Precision and the inventory and receivables
of Elite Machine. In addition we had a fixed interest rate credit facility with Main Credit secured by the receivables and inventory
of Precision. The Main Credit facility was paid off in full in the current fiscal period. Changes in market interest
rates may 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 and 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 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders of
M Line Holdings, Inc.
Anaheim, CA
We have audited the accompanying consolidated balance
sheets of M Line Holdings, Inc. and its subsidiaries (collectively the “Company”) as of June 30, 2014 and 2013
and the related consolidated statements of operations, change in stockholders’ deficit and cash flows for each of the
years then ended. 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 audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the 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 audits provide 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 Holdings, Inc. and its
subsidiaries as of June 30, 2014 and 2013 and the results of their operations and their cash flows for each of
the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has
suffered recurring losses from operations and negative cash flows from operations. These raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
June 23, 2015
M LINE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | |
As of June 30 | | |
As of June 30 | |
| | |
2014 | | |
2013 | |
| Assets | |
| | | |
| | |
| | |
| | | |
| | |
| Current assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 46,925 | | |
$ | 182,305 | |
| Accounts receivable, net | |
| 222,344 | | |
| 990,010 | |
| Inventory, net | |
| 1,430,682 | | |
| 1,555,910 | |
| Due from related party | |
| - | | |
| 99,348 | |
| Deferred financing fees | |
| - | | |
| 199,516 | |
| Total current assets | |
| 1,699,951 | | |
| 3,027,089 | |
| | |
| | | |
| | |
| Property and equipment, net | |
| 402,476 | | |
| 556,555 | |
| Deposits and other | |
| 140,922 | | |
| 113,445 | |
| Total assets | |
$ | 2,243,349 | | |
$ | 3,697,089 | |
| | |
| | | |
| | |
| Liabilities and stockholders’ deficit | |
| | | |
| | |
| | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Bank overdraft | |
$ | 149,699 | | |
| 85,542 | |
| Accounts payable | |
| 1,350,157 | | |
| 1,421,626 | |
| Accounts payable - related party | |
| 35,954 | | |
| 43,454 | |
| Accrued expenses and other | |
| 2,594,616 | | |
| 2,788,697 | |
| Litigation payable | |
| 287,500 | | |
| 137,500 | |
| Derivative liability | |
| 634,769 | | |
| - | |
| Line of credit | |
| 2,330,453 | | |
| 1,702,726 | |
| Notes payable - current, net of debt discount of $317,977 and $69,996 | |
| 1,018,755 | | |
| 675,961 | |
| Current portion of capital lease obligations | |
| 53,901 | | |
| 54,501 | |
| Deferred income | |
| - | | |
| 10,000 | |
| Total current liabilities | |
| 8,455,804 | | |
| 6,920,007 | |
| | |
| | | |
| | |
| | |
| | | |
| | |
| Notes payable - net of current portion | |
| 124,023 | | |
| 318,903 | |
| Capital lease obligation, net of current portion | |
| 46,426 | | |
| 90,742 | |
| Total liabilities | |
| 8,626,253 | | |
| 7,329,652 | |
| | |
| | | |
| | |
| Commitments and contingencies | |
| - | | |
| - | |
| | |
| | | |
| | |
| Stockholders’ deficit: | |
| | | |
| | |
| Preferred stock: $0.001 par value, 20,000,000 shares authorized, 200,000 shares issued and outstanding at June 30,
2014 and June 30, 2013 respectively | |
| 200 | | |
| 200 | |
| Common stock: $0.001 par, 1,000,000,000 shares authorized, 243,178,484 and 70,211,145 shares
issued and outstanding at June 30, 2014 and June 30, 2013, respectively | |
| 243,178 | | |
| 70,211 | |
| Additional paid in capital | |
| 12,846,981 | | |
| 10,741,397 | |
| Accumulated deficit | |
| (19,473,263 | ) | |
| (14,444,371 | ) |
| Total stockholders’ deficit | |
| (6,382,904 | ) | |
| (3,632,563 | ) |
| Total liabilities and stockholders’ deficit | |
$ | 2,243,349 | | |
$ | 3,697,089 | |
The accompanying notes form an integral
part of these consolidated financial statements
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2014 AND
2013
| | |
Year Ended June 30 | |
| | |
2014 | | |
2013 | |
| Sales | |
$ | 8,701,122 | | |
$ | 9,324,685 | |
| Cost of sales | |
| 7,050,708 | | |
| 7,561,454 | |
| Gross profit | |
| 1,650,414 | | |
| 1,763,231 | |
| | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | |
| Selling, general and administrative | |
| 3,811,699 | | |
| 4,226,647 | |
| Write off of related party receivables | |
| - | | |
| 1,446,067 | |
| Total operating expenses | |
| 3,811,699 | | |
| 5,672,714 | |
| Operating loss | |
| (2,161,285 | ) | |
| (3,909,483 | ) |
| | |
| | | |
| | |
| Interest expense | |
| (1,884,005 | ) | |
| (497,365 | ) |
| Change in derivative liability | |
| (946,518 | ) | |
| - | |
| Loss on settlement of liability | |
| (35,190 | ) | |
| - | |
| Total other expenses | |
| (2,865,713 | ) | |
| (497,365 | ) |
| Loss before income tax | |
| (5,026,998 | ) | |
| (4,406,848 | ) |
| | |
| | | |
| | |
| Income tax benefit (provision) | |
| (1,894 | ) | |
| 13,580 | |
| Net loss | |
$ | (5,028,892 | ) | |
$ | (4,393,268 | ) |
| | |
| | | |
| | |
| Loss per common share: | |
| | | |
| | |
| Basic and diluted | |
| (0.04 | ) | |
| (0.07 | ) |
| |
| | | |
| | |
| Weighted average number of common shares outstanding – Basic and diluted | |
| 116,246,955 | | |
| 60,746,844 | |
The accompanying notes form an integral
part of these consolidated financial statements
M LINE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
DEFICIT
FOR THE YEARS ENDED JUNE 30, 2014 AND
2013
| | |
Preferred Stock | | |
Common Stock | | |
Additional | | |
Related party | | |
Accumulated | | |
| |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Paid-in Amount | | |
Receivable | | |
Deficit | | |
Total | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Balance at June 30, 2012 | |
| - | | |
$ | - | | |
| 46,871,145 | | |
$ | 46,871 | | |
$ | 10,179,021 | | |
$ | (94,000 | ) | |
$ | (10,051,103 | ) | |
$ | 80,789 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares issued for deferred financing costs | |
| 200,000 | | |
| 200 | | |
| - | | |
| - | | |
| 149,074 | | |
| - | | |
| - | | |
| 149,274 | |
| Shares issued for services | |
| - | | |
| - | | |
| 14,840,000 | | |
| 14,840 | | |
| 253,102 | | |
| - | | |
| - | | |
| 267,942 | |
| Shares issued in lieu of payroll | |
| - | | |
| - | | |
| 8,500,000 | | |
| 8,500 | | |
| 160,200 | | |
| - | | |
| - | | |
| 168,700 | |
| Share based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 94,000 | | |
| - | | |
| 94,000 | |
| Net loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,393,268 | ) | |
| (4,393,268 | ) |
| Balance at June 30, 2013 | |
| 200,000 | | |
| 200 | | |
| 70,211,145 | | |
| 70,211 | | |
| 10,741,397 | | |
| - | | |
| (14,444,371 | ) | |
| (3,632,563 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Shares issued for services | |
| - | | |
| - | | |
| 12,805,130 | | |
| 12,805 | | |
| 54,646 | | |
| - | | |
| - | | |
| 67,451 | |
| Shares issued in lieu of payroll | |
| - | | |
| - | | |
| 6,000,000 | | |
| 6,000 | | |
| 54,000 | | |
| - | | |
| - | | |
| 60,000 | |
| Shares issued to settle unpaid salaries | |
| | | |
| | | |
| 13,000,000 | | |
| 13,000 | | |
| 117,000 | | |
| | | |
| | | |
| 130,000 | |
| Shares issued for conversion of debt | |
| - | | |
| - | | |
| 136,062,209 | | |
| 136,062 | | |
| 310,427 | | |
| - | | |
| - | | |
| 446,489 | |
| Shares issued for settlement of liability | |
| - | | |
| - | | |
| 5,100,000 | | |
| 5,100 | | |
| 35,190 | | |
| - | | |
| - | | |
| 40,290 | |
| Waiver of officers' salaries | |
| - | | |
| - | | |
| | | |
| | | |
| 390,000 | | |
| - | | |
| - | | |
| 390,000 | |
| Resolution of derivative liability | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,144,321 | | |
| - | | |
| - | | |
| 1,144,321 | |
| Net loss | |
| - | | |
| - | | |
| | | |
| - | | |
| - | | |
| - | | |
| (5,028,892 | ) | |
| (5,028,892 | ) |
| Balance at June 30, 2014 | |
| 200,000 | | |
$ | 200 | | |
| 243,178,484 | | |
$ | 243,178 | | |
$ | 12,846,981 | | |
$ | - | | |
$ | (19,473,263 | ) | |
$ | (6,382,904 | ) |
The accompanying notes form an integral
part of these consolidated financial statements
M LINE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
| | |
Year ended June 30, | |
| | |
2014 | | |
2013 | |
| Cash flows from operating activities: | |
| | | |
| | |
| Net loss | |
$ | (5,028,892 | ) | |
$ | (4,393,268 | ) |
| Reconciliation of net loss to net cash provided by operations: | |
| | | |
| | |
| Provision for deferred income tax | |
| - | | |
| (16,710 | ) |
| Write off related party receivable | |
| - | | |
| 1,446,067 | |
| Gain on disposition of assets | |
| (19,000 | ) | |
| - | |
| Bad debt expense | |
| 490,601 | | |
| - | |
| Amortization of deferred financing costs | |
| 199,516 | | |
| 99,758 | |
| Amortization of debt discount | |
| 642,517 | | |
| 7,504 | |
| Depreciation | |
| 162,079 | | |
| 173,532 | |
| Change in derivative liability | |
| 946,518 | | |
| - | |
| Share based compensation | |
| 127,451 | | |
| 530,642 | |
| Reserve for inventories | |
| - | | |
| 200,000 | |
| Loss on settlement of liability | |
| 35,190 | | |
| - | |
| Waiver of officers' salaries | |
| 390,000 | | |
| - | |
| Changes in operating assets and liabilities: | |
| | | |
| | |
| Accounts receivable | |
| 457,744 | | |
| (195,693 | ) |
| Inventory | |
| 125,228 | | |
| (146,499 | ) |
| Prepaid expenses and other assets | |
| (27,477 | ) | |
| (30,639 | ) |
| Due from related party | |
| (81,331 | ) | |
| 1,626,806 | |
| Accounts payable, accrued expenses and other | |
| 624,647 | | |
| 43,454 | |
| Deferred income | |
| (10,000 | ) | |
| 10,000 | |
| Litigation payable | |
| 150,000 | | |
| 105,959 | |
| Net cash used in operating activities | |
| (815,209 | ) | |
| (539,087 | ) |
| | |
| | | |
| | |
| Cash flows from investing activities: | |
| | | |
| | |
| Acquisition of property and equipment | |
| (8,000 | ) | |
| (19,335 | ) |
| Proceeds from disposition of assets | |
| 19,000 | | |
| - | |
| Net cash provided by (used in) investing activities | |
| 11,000 | | |
| (19,335 | ) |
| | |
| | | |
| | |
| Cash flows from financing activities: | |
| | | |
| | |
| Net borrowings (repayments) on line of credit | |
| (68,571 | ) | |
| 348,847 | |
| Proceeds from notes payable | |
| 1,037,978 | | |
| 596,051 | |
| Due from related party | |
| - | | |
| (72,800 | ) |
| Bank overdraft | |
| 64,157 | | |
| 85,542 | |
| Payments on notes payable | |
| (319,819 | ) | |
| (190,701 | ) |
| Payments on capital leases | |
| (44,916 | ) | |
| (31,424 | ) |
| Net cash provided by financing activities | |
| 668,829 | | |
| 735,515 | |
| | |
| | | |
| | |
| Net increase (decrease) in cash and cash equivalents | |
| (135,380 | ) | |
| 177,093 | |
| | |
| | | |
| | |
| Cash and cash equivalents at beginning of period | |
| 182,305 | | |
| 5,212 | |
| Cash and cash equivalents at end of period | |
$ | 46,925 | | |
$ | 182,305 | |
| | |
| | | |
| | |
| Supplemental disclosure of cash flow information: | |
| | | |
| | |
| Cash paid for interest | |
$ | 279,374 | | |
$ | 390,103 | |
| Cash paid for income taxes | |
$ | - | | |
$ | - | |
| | |
| | | |
| | |
| Supplemental disclosure of non cash financing activities: | |
| | | |
| | |
| Borrowings on capital leases | |
$ | - | | |
$ | 167,702 | |
| Shares issued for deferred financing costs | |
| - | | |
| 149,274 | |
| Settlement of liabilities and deferred financing costs through line of credit and notes payable | |
| - | | |
| 270,000 | |
| Debt discount from derivative liability | |
| 832,572 | | |
| - | |
| Interest added to principal | |
| 759,008 | | |
| - | |
| Shares issued to settle unpaid salary | |
| 130,000 | | |
| - | |
| Shares issued for settlement of debt | |
| 5,100 | | |
| - | |
| Shares issued for conversion of debt | |
| 446,489 | | |
| - | |
| Resolution of derivative liability | |
| 1,144,321 | | |
| - | |
The accompanying notes form an integral
part of these consolidated financial statements
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Organization
and Business |
Organization and Business
M. Line Holdings, Inc. (“we”, “our”,
the “Company”) was incorporated in Nevada on September 24, 1997. The Company and its subsidiaries are engaged in the
following businesses:
| a) | Acquiring, refurbishing and selling pre-owned CNC machine-tool
equipment through Elite Machine Tool Company (“Elite”), its wholly owned
subsidiary, the machine sales group. |
| b) | Precision Aerospace & Technologies, Inc., (formerly Eran
Engineering, Inc.) (“Precision”), its wholly owned subsidiary, manufactures
precision metal component parts for the aerospace, medical and defense, industries. This
is the precision manufacturing group. |
| c) | M Line Holdings, inc. is currently providing financial
and management advice to customers. this business will be managed by M Line Financial Services, Inc. (formed subsequent to this
financial year end) and will be part of the new financial and technology group set up in Fiscal 2015. |
| 2. | Basis
of Presentation and Significant Accounting Policies |
Basis of Presentation
The accompanying financial statements are prepared in accordance
with accounting principles generally accepted in the United States of America.
Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of M Line Holdings, Inc. and its wholly-owned subsidiaries: Elite and Precision. All intercompany accounts and transactions
have been eliminated.
Business Segments
FASB ASC Topic 280: Segment Reporting
(“ASC 280”) 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 institutions in which the Company has its accounts have
financial difficulties, the Company’s cash balances could be at risk.
Sales from significant customers representing
10% or more of sales consist of the following customers for the years ended June 30:
| | |
Year ended
June 30, 2014 | | |
Year ended June
30, 2013 | |
| Percent of sales | |
| 18.00 | | |
| 16.76 | |
| Number of customers | |
| 2 | | |
| 1 | |
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
Two customers, included in the Precision
Manufacturing segment represents a significant concentration. Sales to these customers as a percentage of sales within the Precision
Manufacturing Segment are as follows for the years ended June 30:
| | |
Year ended June 30, | |
| | |
2014 | | |
2013 | |
| % of segment sales significant customer sales concentration | |
| 76 | | |
| 45 | |
Accounts receivable from these customers at June 30, 2014 and
2013 were $84,174 and $254,757 respectively.
The Company’s Precision Manufacturing
segment operated a single manufacturing facility located in Tustin, California. The company has moved its location to a facility
in Anaheim, California. on July 1, 2014. A major interruption in the manufacturing operations at this facility would have a material
adverse effect on the consolidated financial position and results of operations of the Company.
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, collectability 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 managment expectations. As of June 30, 2014 and 2013, accounts receivable totals were $2,321,344
and $990,010 net of an allowance for bad debt expense of $45,534 and $29,566 respectively.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inventories
Inventories are stated at the lower of cost or market, cost
being determined using the first in, first out (“FIFO”) method. The Company provides inventory reserves for obsolescence
and other matters based on management’s review of current inventory levels. The Company includes labor and overhead costs
directly associated with manufacturing its products in inventory costs.
Deferred financing fees
The Company incurs costs in connection with its line of credit
which may consist of legal, finders and due diligence fees. Such costs are deferred and amortized to interest expense over the
term of the line of credit. Amortization of deferred financing fees for the years ended June 30, 2014 and 2013 amounted to $199,516
and $99,758, respectively.
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.
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. 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 that there was no impairment to its long-lived assets for the years ended June 30, 2014 and 2013.
Income Taxes
The Company accounts for income taxes
in accordance with FASB ASC Topic 740-10, Income Taxes, (“ASC 740”) which requires recognition of deferred
tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial
statement and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences
are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense represents the tax payable for the period and the change during the period in deferred tax
assets and liabilities.
The Company accounts for uncertain tax
positions in accordance with ASC 740, which prescribes a recognition threshold and measurement attribute for financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on various
related matters such as de-recognition, interest, penalties and disclosures required. The Company recognizes interest and penalties,
if any, related to unrecognized tax benefits in income tax expense.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Contingencies and Litigation
The Company evaluates contingent liabilities
including threatened or pending litigation. 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 collectability is reasonably assured.
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 Computer
Numerically Controlled 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 thirty days. Historically,
warranty costs have been inconsequential. Generally, the Company does not accept returns of equipment. Warranty expense, included
in cost of sales, for the years ended June 30, 2014 and 2013 amounted to $96,955 and $68,364, respectively.
Payments received before all of the relevant
criteria for revenue recognition are satisfied are recorded as customer deposits.
Revenues generated from financial
services are recognized at the time the services are performed.
revenues generated by M Line Holdings, inc. consist of the
following services including, financial advice, raising new capital, advice and support in relation to new stock listings,
reverse mergers etc. and where applicable sales support.
Cost of Goods Sold
The Company includes the following in cost of goods sold; materials, production labor, tooling, depreciation,
outside services and an apportionment of S.G & A.
Advertising
The Company expenses the cost of advertising
when incurred as selling expenses. Advertising expenses were $6,266 and $17,901, for the years ended June 30, 2014 and 2013, respectively.
Stock-Based Compensation
The Company accounts for share-based awards issued to employees
in accordance with FASB ASC 718. Accordingly, employee share-based payment compensation is measured at the grant date, based on
the fair value of the award, and is recognized as an expense over the requisite service period or vesting period. Additionally,
share-based awards to non-employees are expensed over the period in which the related services are rendered at their fair value.
The Company accounts for share based awards issued to non-employees in accordance with FASB ASC 505. This requires us to estimate
the value of securities used for compensation and to charge such amounts to expense over the periods benefited. The estimated
fair value at the date of the award of options or warrants for our common stock is estimated using the Blach-Scholes pricing
model as follows: Expected volatility is based on the historical volitility of our stock. the risk free interest rate is based
on the US Treasury constant maturity rates as of the grant date. The expected life of the option is based on historical exercise
behaviour and expected future experience.
Net Loss per Share
Basic net 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 loss per share amounts are identical as the Company
does not have potentially dilutive securities.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets
for cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, line of credit and notes payable approximates
fair value due to the immediate or short-term maturity of these financial instruments. The fair value of long-term notes approximates
the carrying amounts based upon the expected borrowing rate for debt with similar remaining maturities and comparable risk.
Reclassification
Certain reclassification has been made
to the previous year’s financial statements to conform to current year presentation with no effect on previously reported
net loss.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements
that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements
that have been issued that might have a material impact on its financial position or results of operations.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 3. | Going
Concern and Management Plans. |
The Company’s consolidated financial
statements are prepared using generally accepted accounting principles in the United States of America applicable to
a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
However, the Company has an accumulated deficit of $19,473,263 as of June 30, 2014, negative working capital and negative cash
flows from operations for the year ended June 30, 2014.
The Company recognizes that the difficulty
in raising new funds and the high cost of current funding has impacted the working capital needs of the Company.
The consolidated financial statements
do not include any adjustments relating to the recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its
ability to retain its current short term financing and ultimately to generate sufficient cash flow to meet its obligations on
a timely basis in order to attain profitability.
To date the Company has funded its
operations from both internally generated cash flow and external sources. The Company will continue to pursue additional external
capitalization opportunities, as necessary, to fund its long-term goals and objectives.
The Company has
taken significant steps to resolve these issues. The Company has pursued various sources of financing including asset
based lending in order to relieve its cash flow deficiencies.
The Company has signed documention with both TCA
Global Credit Master Fund, LLC ("TCA") and a lending source that will result in the repayment of $1,200,000 of the
outstanding amount due TCA over a fifteen month period. The Company continues to negotiate for other capital that will pay
off any balance due TCA.
The Company's future plans include the acquisition of
another machine tool shop and another CNC machinery sales company. These acquisitions will add revenue and profit and will
help to make the Company more attractive to prospective capital sources.
Inventories consist of the following at June 30:
| | |
June 30, 2014 | | |
June 30, 2013 | |
| Finished goods and components | |
$ | 1,112,647 | | |
$ | 971,099 | |
| CNC machines held for sale | |
| 152,000 | | |
| 364,583 | |
| Work in progress | |
| 327,620 | | |
| 415,108 | |
| Raw materials and parts | |
| 14,336 | | |
| 5,120 | |
| | |
| 1,606,603 | | |
| 1,755,910 | |
| Less: Reserve for inventories | |
| (175,921 | ) | |
| (200,000 | ) |
| | |
$ | 1,430,682 | | |
$ | 1,555,910 | |
As of June 30, 2014 and 2013, the amount
due from related parties includes an amount due from an officer of Elite amounting to $0 and $99,348 respectively.
As of June 30, 2014 and 2013, the
Company owes $35,954 and $43,454 respectively, to one of its officers for expenses paid on behalf of the Company.
During the year ended June 30,
2014, two officers of the Company waived their salaries for the year totalling $390,000. The waived salaries were credited to
additional paid in capital.
Property and equipment consists of the following at June 30:
| |
Estimated
Useful life
(in years) | | |
2014 | | |
2013 | |
| Machinery and equipment | |
| 7 | | |
$ | 2,440,562 | | |
$ | 2,603,313 | |
| Fixtures, Fixtures and office equipment | |
| 3 to 5 | | |
| 345,682 | | |
| 341,308 | |
| Vehicles | |
| 5 | | |
| 23,276 | | |
| 23,276 | |
| Leasehold improvements | |
| 3 | | |
| 105,298 | | |
| 105,298 | |
| Total | |
| | | |
| 2,914,818 | | |
| 3,073,195 | |
| Less accumulated depreciation | |
| | | |
| 2,512,342 | | |
| 2,516,640 | |
| | |
| | | |
$ | 402,476 | | |
$ | 556,555 | |
Depreciation expense was $162,079 and $173,532 for the years
ended June 30, 2014 and 2013, respectively.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 7. | Accrued
Expenses and Other |
Accrued expenses and other consist of the following at
June 30:
| | |
June 30, 2014 | | |
June 30, 2013 | |
| Compensation and related benefits | |
$ | 2,023,064 | | |
$ | 1,934,314 | |
| Audit fees | |
| 46,000 | | |
| 72,500 | |
| Other | |
| 525,552 | | |
| 781,883 | |
| | |
$ | 2,594,616 | | |
$ | 2,788,697 | |
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:
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | |
June 30, 2014 | | |
June 30, 2013 | |
| 2014 | |
$ | 53,901 | | |
$ | 54,501 | |
| 2015 | |
| 46,426 | | |
| 54,501 | |
| 2016 | |
| - | | |
| 36,241 | |
| 2017 | |
| - | | |
| - | |
| Total minimum lease payments | |
| 100,327 | | |
| 145,243 | |
| Less amount representing interest | |
| - | | |
| - | |
| Present value of future minimum lease payments | |
| 100,327 | | |
| 145,243 | |
| Less current portion of capital lease obligations | |
| (53,901 | ) | |
| (54,501 | ) |
| Capital lease obligations, net of current portion | |
$ | 46,426 | | |
$ | 90,742 | |
Main Credit: As of June
30, 2014 the Company owed $0 principal, which sum was paid in full in July 2013.
TCA Global Credit Master Fund, LLC:
The line of credit with Main Credit was replaced on April
30, 2013 with a line of credit from TCA Global Credit Master Fund, LLC (“TCA”) in the amount of $10 million. As
of June 30, 2014, the Company has drawn $1,700,000 from the line of which $2,330,453, including interest, is outstanding as of
June 30, 2014. Amounts drawn from the line of credit are subject to interest and matured on October 31, 2013. The line
was automatically renewed for a further six months and expired on April 30, 2014. The Company has entered into a
settlement agreement with TCA that results in the repayment of $1,200,000 of the TCA debt over a
fifiteen month period. The line of credit with TCA is secured by the receivables and inventory and a second position on the
equipment of Precision. and the inventory and receivables of Elite together with a blanket lien over all of
the Company’s assets.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Notes payable as of June 30 consist of:
| | |
June 30, | | |
June 30, | |
| | |
2014 | | |
2013 | |
| Notes payable to a financial institution, secured by the underlying equipment in
aggregate monthly installments of varying amounts, on a reducing balance method, with the balance due in October 2016. | |
$ | 247,811 | | |
$ | 422,940 | |
| | |
| | | |
| | |
| An unsecured note payable to a corporation in respect of accounting software payable in monthly
installments of $ 1,923. This note was disputed and was written off in the absence of any collection activity for over four
years. | |
| - | | |
| 46,811 | |
| | |
| | | |
| | |
| One unsecured 5% convertible notes payable to a financial institution due March 4, 2015 | |
| 110,000 | | |
| - | |
| | |
| | | |
| | |
| An unsecured 12% convertible note payable to a financial institution due February 12, 2016 | |
| 50,631 | | |
| - | |
| | |
| | | |
| | |
| An unsecured 12% convertible note payable to a financial institution due January 31, 2015 | |
| 21,500 | | |
| - | |
| | |
| | | |
| | |
| Two unsecured 8% convertible notes payable in the sum of $110,751, to a financial
institution due February 12, 2015 | |
| 50,000 | | |
| - | |
| | |
| | | |
| | |
| Two unsecured notes payable in the sum of $150,000, each, to a financial institution due in
full in November 2011 and March 31, 2012. The Company is currently in default and has negotiated to pay the notes in
monthly installments of $20,000 commencing November 2012. | |
| 75,459 | | |
| 354,459 | |
| | |
| | | |
| | |
| Two unsecured 8% convertible notes payable in the sum of $110,674 to a financial
institution with $50,000 due on February 6, 2015 and $55,674 due on May 30, 2015 | |
| 105,674 | | |
| - | |
| | |
| | | |
| | |
| Three unsecured 8% convertible notes payable in the sum of $160,674 each, to a financial
institution with $50,000 due on February 6, 2015 and $110,674 due on June 10, 2015 | |
| 160,674 | | |
| - | |
| | |
| | | |
| | |
| Three unsecured 8% convertible notes payable to a financial institution $50,000 due April 25,
2015, $75,000 due on December 25, 2015 and $125,662 due October 3, 2015 | |
| 225,562 | | |
| - | |
| | |
| | | |
| | |
| Two unsecured 8% convertible notes payable to a financial institution both due May 30, 2015 | |
| 160,674 | | |
| - | |
| | |
| | | |
| | |
| An unsecured 8% convertible note payable to a financial institution on due June 10, 2015 | |
| 50,000 | | |
| - | |
| | |
| | | |
| | |
| An unsecured note payable to a corporation in weekday amounts of $700, increasing to $1,650,
in September 2013 and ending in December 2013. This note is in default but a settlement reached with monthly payments being
made will pay off the note by June 25, 2015 | |
| 40,300 | | |
| 125,600 | |
| | |
| | | |
| | |
| An unsecured note payable to a corporation in weekday amounts of $691 each, through December
2013. This note is in default but a settlement reached with monthly payments being made will pay off this note by
October 15, 2015 | |
| 57,120 | | |
| 115,050 | |
| | |
| | | |
| | |
| An unsecured note payable to a corporation in weekday amounts of $841 each, through February
2014. This note is in default. | |
| 105,350 | | |
| - | |
| Less Debt Discount | |
| (317,977 | ) | |
| (69,996 | ) |
| TOTAL | |
| 1,142,778 | | |
| 994,864 | |
| Less - Current Portion | |
| 1,018,755 | | |
| 675,961 | |
| Long Term Portion | |
$ | 124,023 | | |
$ | 318,903 | |
| | |
| | | |
| | |
| 2015 | |
| 124,023 | | |
| 123,780 | |
| 2016 | |
| - | | |
| 123,780 | |
| 2017 | |
| - | | |
| 71,343 | |
| 2018 | |
| - | | |
| - | |
| Thereafter | |
| - | | |
| - | |
| | |
| 124,023 | | |
| 318,903 | |
In connection with one of the notes, the Company issued 17 million warrants that have a term of 5 years
and an exercise price of $0.003 per share. The exercise price on these warrants contain a reset provision in the event shares are
sold by the Company at a price lower than the exercise price. Consequently, the warrants were accounted for as derivatives and
the fair value of such warrants amounting to $54,400 were recognized as a debt discount and amortized over the term of the note.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | |
June 30,2014 | | |
June 30,2013 | |
| An unsecured note payable to a corporation in settlement of a lawsuit payable in
12 monthly payments of $5,000. | |
$ | 210,000 | | |
| 60,000 | |
| | |
| | | |
| | |
| Unsecured notes payable to various parties in settlement of lawsuits payable
in full. | |
| 77,500 | | |
| 77,500 | |
| | |
| | | |
| | |
| | |
$ | 287,500 | | |
| 137,500 | |
| 12. | Commitments and Contingencies |
Leases
The Company leased its manufacturing and office facilities
under non-cancelable operating lease arrangements.
Rent expense under operating leases was $545,177 and $460,565
for the years ended June 30, 2014 and 2013, respectively.
Future rent under lease agreements for the next five years
are as follows:
| 2015 | |
| 233,530 | |
| 2016 | |
| 287,242 | |
| 2017 | |
| 295,859 | |
| 2018 | |
| 304,735 | |
| 2019 | |
| 313,877 | |
| Thereafter | |
| 1,777,349 | |
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | James
M. Cassidy v. Gateway International Holdings, Inc., American Arbitration Association,
Case No. 73-194-32755-08. |
The Company was served with a Demand for Arbitration
and Statement of Claim, which was filed on September 16, 2008.
The Statement of Claim alleges that claimant is an
attorney who performed services for the Company pursuant to an agreement dated April 2, 2007 between the Company and the claimant.
The Statement of Claim alleges that the Company breached the agreement and seeks compensatory damages in the amount of $195,000
plus interest, attorneys’ fees and costs. Management denies the allegations of the Statement of Claim and will vigorously
defend against these allegations. An arbitrator has not yet been selected, and a trial date has not yet been scheduled.
No provision has been made in the June 30, 2014 financial
statements with respect to this matter. because the Company has assessed the litigation as having no merit and the likelihood
of any liability pursuant to this litigation is remote.
| 2. | CNC Manufacturing v. All American CNC Sales, Inc., Elite
Machine Tool Company/Sales & Services, CNC Repos, Superior
Court for the State of California, County of Riverside, Case No. RIC 509650. |
Plaintiff filed this Complaint on October 2, 2008.
The Complaint alleges causes of action for breach of
contract and rescission and claims that All American breached the agreement with CNC Manufacturing by failing to deliver a machine
that conforms to the specifications requested by CNC Manufacturing, and requests damages totaling $138,750. Elite Machine filed
an Answer timely, on January 15, 2009.
Abstract of Judgment and Writ were issued August 17,
2012.
The company entered into a settlement agreement for
a settlement in the total amount of $37,500. However, no payments have been made to date.
A provision has been made in the June 30, 2014 financial
statements with respect to this matter in the sum of $37,500.
| 3. | Donald
Yu v. M Line Holdings, Inc., et al.; Case
No. 30-2012-00574019- CU-BC-CJC |
This is an employment dispute asserted by a former
employee against M Line Holdings and two corporate insiders, Jitu Banker and Anthony Anish, in their respective individual
capacities. The action was filed in Orange County Superior Court on June 4, 2012. The parties entered into a settlement agreement
and stipulation for judgment against M Line Holdings, only, on about May 12, 2013. Pursuant to the terms and conditions
of the settlement agreement, M Line agreed to pay $21,450.00 in three (3) equal installments. M Line Holdings failed
to make payment on a timely basis, and plaintiff filed a stipulated judgment against M Line Holdings on June 12, 2013.
Plaintiff also filed default judgments against Messrs. Banker and Anish.
In response, defendants filed a motion
to set aside the defaults and vacate the default judgments against Messers. Banker and Anish as well as renegotiate the terms
of the prior settlement with Plaintiff. On or about September 30, 2013, the parties entered into a supplemental settlement
agreement and mutual release wherein the Company agreed to pay plaintiff the sum of $24,000 in two (2) equal installments. The
first installment of $12,000 has already been paid.
The final installment of $12,000 was due on or before
October 30, 2013, and has not been paid at this time. A judgment remains outstanding against the Company in the sum of $12,000.00.
| 4. | Subramani
Srinivasan, et al. v. M Line Holdings, Inc., et al.; Case No. 30-2014-00724484-CU-CO-CJC |
This is a breach of contract, fraud, and related causes
of action against Defendants Eran Engineering, Inc.; Bart Webb; Precision Aerospace and Technologies, Inc. (erroneously sued as
“Precision Aerospace Technologies, Inc.”); M-Line Holdings, Inc.; Anthony Anish; Jitu Banker; Larry Consalvi; and
Elite Machine Tools (collectively, “Defendants”).
The parties entered into a settlement agreement against
the corporate defendants on or about January 22, 2015. Pursuant to the terms and conditions of the settlement agreement, the corporate
defendants agreed to pay $20,000 in three (3) equal installments on or before April 30, 2015.
As of June 2, 2015, the corporate defendants have paid
$20,000 and this case has been dismissed, which
effectively terminates all litigation in its entirety.
| 5. | Can
Capital Asset Servicing, Inc. v. E.M. Tool Company, Inc., et al.; Case No. 30-2014-00727606-
CU-CL-CJC |
This is a breach of contract and related claims arising
out of a business loan, and alleges that E.M. Tool failed to pay Can Capital all amounts due under the loan agreement in the principal
sum of $58,313, plus interest, costs and attorneys’ fees.
On or about November 2014, the
parties entered into a settlement agreement and stipulated judgment.
Pursuant to the terms and conditions of the settlement
agreement, the Company agreed to pay plaintiff the sum of $50,000 in installments on or before May 15, 2015.
As of May 13, 2015, the defendants have made partial
payments, and still owe plaintiff $25,500. Plaintiff provided notice of its intent to file the stipulated judgment on May 7, 2015,
and commence collection efforts if payment of $10,000 is not paid prior thereto and those payments have been made.
This amount has been provided for in the June 30, 2014 finacial statements.
| 6. | Fadal
Machining v. All American CNC Sales, et al., Los Angeles Superior Court, Los
Angeles, California,Case No. BC415693. |
The Complaint was filed on June 12, 2009.
The Complaint alleges causes of action for breach of
contract and common counts against All American CNC seeking damages in the amount of at least $163,579, and arises from a claim
by Fadal that All American failed to pay amounts due. On June 26, 2009, Fadal amended the complaint to include M Line Holdings,
Inc. as a defendant.
A settlement agreement in the amount of $60,000 was
signed on May 31, 2011.
The Company had made a provision in the sum of
$60,000 in the financial statements as of June 30, 2013, which amount has been increased to $210,000 in the financial
statements as of June 30, 2014 as no payments that were due under the settlement agreement have been made. The increase to
$210,000 includes the original amount due to the Plaintiff plus accrued interest. Judgment was entered on June 16, 2011, and a
Writ was issued on February 24, 2012.
| 7. | Fox Hills
Machining v. CNC Repos, Orange County Superior Court, Orange County, California,
Case No. 30-2009-00121514. |
The complaint was filed on April 14, 2009.
The complaint alleges causes of action for Declaratory
Relief, Breach of Contract, Fraud, Common Counts, and Negligent Misrepresentation, claiming the Defendant failed to pay Fox Hills
Machining for the sale of two machines from Fox Hills to CNC Repos. The damages sought in the complaint are estimated to be approximately
$40,000. Court records show that a stipulated judgment was entered on August 27, 2012 and a writ was issued on September 9, 2012.
However, an agreement has been entered into with Fox
Hills Machinery to pay off the judgment in the sum of $48,673. A sum of $40,000 has been paid in installments of $10,000 each
and the final payment of $8,673 being made on December 9, 2013.
No provision is required in this matter in the June
30, 2014 financial statements as the plaintiff has been paid in full.
| 8. | C. William Kircher Jr. v. M Line
Holdings, Inc. Orange County Superior Court Case No. 00397576 |
A former attorney for M Line Holdings, Inc. has sued
seeking damages for failure to pay legal fees in the amount of $120,166.
The parties reached a settlement. The terms of the
settlement call for 12 payments of $5,000 per month commencing August 25, 2011 and the issuance of 150,000 shares of common stock.
The Company has issued the 150,000 shares of common stock and made two payments to date. The Company has a provision in the sum
of $50,000 in the financial statements as of June 30, 2014.
The Company currently is in default of its payment
obligations under the settlement. Plaintiff currently is seeking to obtain a Judgment as a result of the breach of the settlement
agreement.
| 9. | Timothy D. Consalvi v. M Line Holdings,
Inc. et.al., Orange County Superior Court Case No, 00308489. |
A former president of All American CNC Sales, Inc.
has filed suit against the Company seeking payment on an alleged severance obligation by the Company. The Complaint does not specify
the damages sought. The parties then reached a settlement in the principal sum of $40,000 to be documented in due course. Meanwhile
a default was entered against the Company, which management believes was in error because a settlement was already reached by
the principal parties involved. The default has since been vacated, and the Company has answered the complaint and has filed a
motion for leave to file a cross complaint.
A settlement of $50,000 was reached in this case, requiring
payments commencing on March 11, 2011 for 10 months. The first two month’s payments were made; however, the Company currently
is in default of the terms of this settlement agreement. Mr. Consalvi filed his stipulated judgment on March 5, 2012. Abstract
of judgment and Writ were issued on March 13, 2012.
A provision in the sum of $40,000 has been made in
the financial statements as of June 30, 2014.
To date there has been no further action on this case,
and the Company plans to resolve this matter as soon as possible.
| 10. | All Direct Travel Services, Inc. v. Jitu Banker, M Line
holdings, Inc., Airworks International, Inc., case number 30-2011-00472824-CL-CO-CJC |
This case was settled as to Jitu Banker and the Company
for $2,000 payable on February 25, 2013. We do not yet have sufficient information to determine what the potential outcome of
this may be or whether or to what extent it would or could have a financial impact on the Company. A default judgment was entered
on January 6, 2012.
To date there has been no further action on this case,
and the Company plans to resolve this matter as soon as possible.
| 11. | Douglas Technologies Group, Inc. v Elite Machine Tool
Company and Lawrence Consalvi, et al., case number 30-2013-00657906-CU-FR-CJC. |
This suit was filed subsequent to June 30, 2013 in respect
of an alleged deficiency in the machine supplied to Douglas Technologies. The company decided to settle the lawsuit and thereby
entered into a settlement agreement with the customer.
This case was settled on November 5, 2013 for $50,000 requiring
a payment of $10,000 on November 15, 2013 with the balance being paid in 8 monthly installments of $5,000 each.
No provision is required in this matter in the June 30,
2014 financial statements as the plaintiff has been paid in full
| 12. | Alu Forge, Inc., dba American Handforge
. v Jitu Banker, Precision Aerospace & Technologies, Inc., and M Line Holdings, Inc.,
et al., case number 30-2013-00670772-CL-BC-CJC. |
This suit was filed in respect of materials supplied to
the company. The company decided to settle the lawsuit and thereby entered into a settlement agreement with the plaintiff.
The case was settled on October 31, 2013 for $19,500 with
payments of $5,250.00 on October 31, 2013, $5,250 on November 30, 2013 and the balance of $9,000 on December 31, 2013.
The Company has made all of the required
payments and therefore no provision is required in the financial statements as of June 30, 2014
| 13. | Yates,
Fontenot, Smith & Brum, LLC v. M Line Holdings, Inc. (formerly Gateway International
Holdings, Inc.), et al.; Case No. 30-2013-00630586 |
The above-referenced matter is an unlawful detainer action
concerning certain real property located at 2672 Dow Avenue, Tustin, California. The unlawful detainer action was filed against
the Company by its landlord Yates, Fontenot, et al. on February 15, 2013.
On or about September 2013, the parties settled the action
for an agreed upon sum payable in installments through January 5, 2014. Assuming all payment obligations are made, plaintiff shall
file a request for dismissal with prejudice of the entire action by or before March 14, 2014.
All of the payments due to Plaintiff has been made and
no provision is required as of June 30, 2014.
The Company moved out of its Tustin location
in July 2014 and agreed the surrender of its lease with the landlord, Yates, Fontenot, Smith and Brum, LLC. No further action
will be taken on this matter.
| 14. | TCA Global Credit Master Fund, L.P. vs M LI ne Holdings,
Inc. EM Tool Company, Inc. dba Elite Machine Tool, Precision Aerospace and Technologies,
Inc., Anthony Anish and Jitendra Banker case # CACE-14-012871 |
Plaintiff filed this case on July 1, 2014 in Broward County,
Florida.
The complaint alleges that defendants owe the Plaintiff
the amount due under the revolving note, and is claiming foreclosure of the collateral, breach of the credit agreement and a claim
against the individuals under the validity agreement due to the non-payment.
The Plaintiff obtained a default judgment however due to
a settlement agreement reached on September 5, 2014 ceased any further legal activity. The Defendants were unable to honor the
agreement and Plaintiff continued to obtain sister state in California and Nevada.
On February 23, 2015 a new settlement agreement was signed
between the parties under which plaintiff agreed to accept two methods of repayment, the first being $1,200,000 paid over a fifteen
month period commencing as soon as the Company was up to date with its filings and the balance of funding would come from a new
asset based lending program that Defendants were in the process of arranging.
The Company has provided for $2,330,453 in the
financial statements that includes all interest and fees due to Plaintiff through June 30, 2014.
| 15. | Global Vantage Ltd., a California Corporation vs Eran
Engineering, Inc. Precision Aerospace and Technologies, Inc., M Line Holdings, Inc.,
Anthony Anish, Lawrence Consalvi and Kenneth Collini |
Plaintiff filed this complaint on August 7, 2014 in Orange
County, California.
The complaint alleges that defendants owe funds that are
due for the lease of certain equipment or plaintiffs want repossession of the equipment.
The plaintiffs obtained Judgments in February 2015 and the
equipment has been returned to plaintiff. However, defendants are filing an appeal against this judgment.
Litigation is subject
to inherent uncertainties, and unfavorable rulings could occur. If an unfavorable ruling were to occur in any of the
above matters, there could be a material adverse effect on our client’s financial condition, results of operations or liquidity.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision (benefit) for income taxes is comprised of the following
for the years ended June 30:
| | |
Year ended | | |
Year ended | |
| | |
June 30, | | |
June 30, | |
| | |
2014 | | |
2013 | |
| | |
| | |
| |
| Current tax expense | |
$ | - | | |
$ | - | |
| Federal | |
| - | | |
| 360 | |
| State | |
| 1,894 | | |
| 2,770 | |
| Deferred | |
| - | | |
| (16,710 | ) |
| | |
$ | 1,894 | | |
$ | (13,580 | ) |
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 | | |
Year ended | |
| | |
June 30, | | |
June 30, | |
| | |
2014 | | |
2013 | |
| Federal tax at statutory rate | |
| 34 | % | |
| 34 | % |
| Permanent differences: | |
| | | |
| | |
| State income tax, net of federal benefit | |
| 9 | % | |
| 9 | % |
| Change in valuation allowance | |
| (28 | )% | |
| (20 | )% |
| Other | |
| (15 | )% | |
| (23 | )% |
| | |
| 0 | % | |
| 0 | % |
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.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| Deferred tax assets at June 30, 2014 and 2013 consist of: | |
| | |
| |
| | |
Year ended
June 30, | | |
Year ended
June 30, | |
| |
2014 | | |
2012 | |
| Deferred tax asset - current | |
| | |
| |
| Allowances for bad debt | |
$ | 19,507 | | |
$ | 12,666 | |
| Reserve for inventories | |
| 75,364 | | |
| 85,680 | |
| Accrued expenses | |
| 11,470 | | |
| 12,884 | |
| Other | |
| 15,390 | | |
| 15,390 | |
| | |
| | | |
| | |
| | |
$ | 121,731 | | |
$ | 126,620 | |
| | |
| | | |
| | |
| Deferred tax assets-non-current | |
| | |
| |
| | |
| | |
| |
| Net operating loss carry forwards | |
$ | 3,381,274 | | |
$ | 1,414,764 | |
| Depreciation | |
| 9,768 | | |
| 9,767 | |
| Amortization of intangibles | |
| 50,212 | | |
| 40,822 | |
| | |
$ | 3,441,254 | | |
$ | 1,465,353 | |
| | |
| | | |
| | |
Total deferred tax asset
| |
$ | 3,562,985 | | |
$ | 1,591,973 | |
Valuation allowance
| |
| (3,562,985 | ) | |
| (1,591,973 | ) |
Net deferred tax asset
| |
$ | - | | |
$ | - | |
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, 2014
and 2013 the Company had federal and state net operating loss (“NOL”) carry forwards of approximately $7.9
million and $7.7 million, respectively, net of Internal Revenue Code (“IRC”) Section 382 limitations. If not used, these
carry forwards will begin expiring between 2012 and 2021. These net operating losses are available to offset future regular
and alternative minimum taxable income.
The Company has recorded as of June 30,
2014 a valuation allowance of approximately $2.7 million, as it believes that it is more likely than not that the deferred
tax assets will not be realizable in future years. Management has based its assessment on available historical and projected
operating results.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company’s articles of incorporation authorize up to 1,000,000,000
shares of $0.001 par value common stock. Shares of common or preferential stock may be issued in one or more classes or series
at such time as the Board of Directors determine.
The Company’s articles of incorporation authorize up to 20,000,000
shares of $0.001 par value preferred stock.
The Company designated 200,000 shares as Series A preferred shares.
The Series A preferred shares are not entitled to dividends but are convertible to common shares.
During the year ended June 30, 2013, the Company issued the following
shares of common stock:
| ● | 14,840,000 common shares were issued to financial advisors
in payment of services to the company. The Company valued these shares at the market price on the issuance date in the sum of
$467,942. |
| ● | The Company also issued 8,500,000 common shares in lieu
of salaries and expenses due on behalf of related parties. The shares were valued at $168,700 based on the market price of
the shares at the grant dates. |
During the year ended June 30, 2013, the Company issued 200,000
Series A Preferred shares to a lender in connection with the line of credit.
During the year ended June 30, 2014, the Company issued the following
shares of common stock:
| ● | 12,805,130 shares were issued to financial advisors and
other parties in payment of services to the Company. The Company valued the shares at the market price on the issuance dates in
the sum of $67,451. |
| ● | 136,062,209 shares were issued to financial institutions
in connection with the conversion of debt and accrued interest totaling $446,489. |
| ● | 5,100,000 shares were issued to a financial advisor in respect of consulting services provided to the Company. These
shares were valued at market price on the issuance date in the sum of $40,290. The Company recognized a loss on settlement
of $35,190. |
The Company also issued 6,000,000 shares in lieu of
payroll and 13,000,000 shares to settle unpaid salaries due to officers. The shares were valued at $190,000 based on the
market price of the shares at the grant date.
During the year ended June 30, 2014, the company
did not issue any Preferred shares.
Non-Qualified Stock Option Plan
In November 2006, the Board 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.
| 16. | Fair Value of Financial Instruments |
Fair value is defined as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value
maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy
based on three levels of inputs, of which the first two are considered observable and the last unobservable.
| ● |
Level 1 - |
Quoted prices in active markets for identical assets
or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical
assets. |
| ● |
Level 2 - |
Quoted prices for similar assets and liabilities in active markets;
quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in
which all significant inputs and significant value drivers are observable in active markets. These are typically obtained
from readily-available pricing sources for comparable instruments. |
| ● |
Level 3 - |
Unobservable inputs, where there is little or no market activity
for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market
participants would use in pricing the asset or liability, based on the best information available in the circumstances. |
The following table presents the derivative financial instrument,
the Company’s only financial liability measured and recorded at fair value on the Company’s consolidated balance sheets
on a recurring basis and their level of hierarchy:
As of June 30, 2014:
| | |
Amount | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| Embedded conversion derivative liability | |
$ | 634,769 | | |
$ | - | | |
$ | - | | |
$ | 634,769 | |
| Total | |
$ | 634,769 | | |
$ | - | | |
$ | - | | |
$ | 634,769 | |
As of June 30, 2013:
| | |
| Amount | | |
| Level 1 | | |
| Level 2 | | |
| Level 3 | |
| Embedded conversion derivative liability | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| Total | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
The following table provides a summary of the changes in fair
value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis
using significant unobservable inputs:
| Balance at June 30, 2013 | |
$ | - | |
| Fair value of warrant derivative liabilities at issuance, recorded as debt discount | |
| 832,572 | |
| Settlement of derivative liabilities to additional paid in capital | |
| (1,144,321 | ) |
| Unrealized derivative loss included in other expense | |
| 946,518 | |
| Balance at June 30, 2014 | |
$ | 634,769 | |
The fair value of the derivative liability is calculated at
the time of issuance and the Company records a derivative liability for the calculated value. Changes in the fair value of the
derivative liability are recorded in other income (expense) in the consolidated statements of operations.
The following are the assumptions used for derivative instrument
valued using the Black Scholes option pricing model:
| |
|
At Issuance |
|
|
June 30, 2014 |
|
| 50% of the market value of stock on measurement date |
|
$ |
0.01 - 0.03 |
|
|
$ |
0.04 - 0.025 |
|
| Risk-free interest rate |
|
|
0.07 - 0.13 |
% |
|
|
0.07 – 0.44 |
% |
| Dividend yield |
|
|
0 |
% |
|
|
0 |
% |
| Volatility factor |
|
|
256 - 343 |
% |
|
|
255 -334 |
% |
| Term |
|
|
0.26 - 2 years |
|
|
|
0.25 – 1.9 years |
|
| 17. |
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, 2014:
Segment Information for the year ended
June 30, 2014 | |
Machine Sales | | |
Precision
Manufacturing | | |
Corporate | | |
Total | |
| | |
| | |
| | |
| | |
| |
| Revenue | |
$ | 6,593,151 | | |
$ | 2,106,971 | | |
$ | 1,000 | | |
$ | 8,701,122 | |
| | |
| | | |
| | | |
| | | |
| | |
| Interest expense | |
| 158,718 | | |
| 270,615 | | |
| 1,454,672 | | |
| 1,884,005 | |
| Depreciation and amortization | |
| 1,500 | | |
| 160,579 | | |
| - | | |
| 162,079 | |
| Loss before taxes | |
| (636,758 | ) | |
| (1,028,070 | ) | |
| (3,364,064 | ) | |
| (5,028,892 | ) |
| Total assets | |
| 374,911 | | |
| 1,783,300 | | |
| 85,138 | | |
| 2,243,349 | |
| Capital expenditures | |
$ | - | | |
$ | 8,000 | | |
$ | - | | |
$ | 8,000 | |
| | |
| | | |
| | | |
| | | |
| | |
Segment Information for the year ended
June 30, 2013 | |
| Machine Sales | | |
| Precision
Manufacturing | | |
| Corporate | | |
| Total | |
| Revenue | |
$ | 5,810,909 | | |
$ | 3,513,776 | | |
$ | - | | |
$ | 9,324,685 | |
| Interest expense | |
| 44,913 | | |
| 266,400 | | |
| 186,052 | | |
| 497,365 | |
| Depreciation and amortization | |
| 3,000 | | |
| 166,745 | | |
| 3,787 | | |
| 173,532 | |
| Loss before taxes | |
| (55,673 | ) | |
| (1,361,221 | ) | |
| (2,989,954 | ) | |
| (4,406,848 | ) |
| Total assets | |
| 1,077,202 | | |
| 2,384,185 | | |
| 235,702 | | |
| 3,697,089 | |
| Capital expenditures | |
$ | - | | |
$ | 19,335 | | |
$ | - | | |
$ | 19,335 | |
At June 30, 2014 the 2,100,000 shares of common stock of OR Holdings, Inc. held by M Line Holdings, Inc.
was traded on the GXG Stock exchange in Europe. At that date the market value of the shares was $1.00 (.70 Euros) per share. However,
since that date, OR Holdings, Inc. suspended its trading in advance of a move to Marche Libre Stock Exchange in Europe and the
new listing has not been completed as yet. As a result revenue from financial services provided by M Line was reduced to a notional
value of $1,000.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sales are derived principally from customers located within the
United States
Long-lived assets consist of property and equipment that are
located within the United States.
M-LINE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. Subsequent Events
a. On July 1, 2014, the Company moved its corporate office and
its precision manufacturing facility to our new facility at 2320 E Orangethorpe Avenue, Anaheim, CA 92806. The Company’s
new lease is for a period from July 1, 2015 until August 31, 2024, The rent commenced at $23,353 per month and increases annually. The Company has an option for a ten year extension of the lease on final terms
to be agreed.
b. On January 15 2015, the effective date, the Company entered
into a settlement agreement with TCA. Under the terms of the agreement, TCA will receive $100,000 as soon as all the Company’s
filings are current and will then receive $80,000 per month for 13 months and $60,000 in the 15th month. These payments
may be accelerated at any time. In addition the balance of the note due TCA will be paid through financing being obtained from an asset
based lender. TCA will release their liens on the Company at that time.
c. Since July 1, 2014 the Company has converted notes and
unpaid interest totalling $306,977 to 668,818,367 common shares.
d. Since July 1, 2014 the Company has raised funds through a 10% convertible note for $330,000 of which $257,000 has been funded. The note is convertible at the lower
of $0.001 or 50% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to
the date of conversion.
e. In October 2014, M Line Holdings, Inc. formed a new wholly
owned subsidiary, M Line Machinery Funding, Inc. This Company which has not traded to date, will be used for machinery
finance and also for any other financial services provided by the Company to prospective customers. The name has been changed
to M Line Financial Services, Inc.
f. On March 3, 2015, a total of 200,000,000 shares were issued
to two officers in lieu of payroll
g. On October 14, 2014, the Company issued to one of its officers 10 million shares of its blank check preferred
stock (designated as Series A Preferred Stock) which are non-convertible, zero dividend and zero interest and carry a voting power
equivalent to 50% of the Company’s outstanding common and preferred stock.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There are no items required to be reported under this Item.
Item 9A 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, 2014, to ensure that information required to be disclosed by us in the reports filed or submitted
by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities
Exchange Commission’s rules and forms, including to ensure that information required to be disclosed by us in the reports filed
or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive
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, 2014, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material
weaknesses identified and described in Item 9A(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, 2014. 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 two material weaknesses that have caused
management to conclude that, as of June 30, 2014, 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. In
addition there is a material weakness due to a lack of resources to handle technical and financial reporting maters for complex
and unusual matters. 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 and accounting provisions. As a result we were delayed in our ability to calculate certain
accounting provisions, such as inventory valuation and deferred taxes. While we believe these provisions are accounted
for correctly in the attached audited financial statements our lack of internal controls led to a delay in the filing of this
Annual Report. We were required to provide written documentation of key internal controls over financial reporting
beginning with our fiscal year ended June 30, 2009. 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. Management also recognized a material weakness due to the lack of resources in handling technical and
financial reporting for complex and unusual transactions.
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.
(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.
(d) Changes
in Internal Control over Financial Reporting
There are no changes to report during our fiscal quarter ended
June 30, 2014.
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 |
| Bruce Barren |
|
74 |
|
Chief Executive Officer (8/13) / Director (8/13) |
| |
|
|
|
|
| Anthony L. Anish |
|
66 |
|
Chief Operating Officer (8/13) / Secretary (6/11)
Director 6/11 |
| |
|
|
|
|
| Jitu Banker |
|
74 |
|
Chief Financial Officer (3/09) / Director (1/09) |
| |
|
|
|
|
| George Colin |
|
84 |
|
Chairman of the Board (8/13) / Director (1/09) |
Bruce Barren is the CEO of
the company. Bruce has been involved in the aerospace
industry for some 45 years working with companies that manufacture component parts and defense electronics, including as
CEO of Hydro-Mill and as a key advisor of Mexmill both of which were sold at 1x plus revenue. Mr. Barren is also Group Chairman
of the EMCO/Hanover Group (see website: www.emcohanover.com), which, since its inception in 1971, has concluded more than $3+
billion in financial transactions worldwide as international merchant bankers. He has been involved in 200+ business turnarounds
and emerging businesses, either as an advisor or CEO.
Anthony Anish became a Director in
early 2011 and is currently the COO and Company Secretary Mr. Anish has expensive business and financing experience having been
involved in many growth businesses both in the USA but also in England. Mr. Anish has been managing M Line Holdings, Inc. since
March 2009 and has overseen the recovery of the group during the very difficult economic downturn. Mr. Anish qualified as a member
of the Institute of Chartered Accountants in London, England in 1971.
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. 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
George Colin is the Chairman of the Board. Since
1994 Mr. Colin has been an independent consultant for numerous corporations regarding general business 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. 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.
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:
| |
|
|
|
No. of |
|
No. of |
| |
|
No. of Late |
|
Transactions |
|
Failures to |
| Name |
|
Reports |
|
Reported Late |
|
File |
| George Colin |
|
0 |
|
0 |
|
0 |
| Jitu Banker |
|
0 |
|
0 |
|
0 |
| |
|
|
|
|
|
|
| Anthony Anish |
|
0 |
|
0 |
|
0 |
| Money Line Capital, Inc. |
|
0 |
|
0 |
|
0 |
Board Meetings and Committees
During the fiscal year ended June 30, 2014, 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 $100,000 in the fiscal year ended June 30, 2014, 2013 and 2012 (“Named
Executive Officers”):
Name and
principal position | |
Year | |
Salary
($) | | |
Bonus
$ | | |
Stock
Awards
($)* | | |
Option
Awards
($)* | | |
Non-Equity
Incentive Plan
Compensation
($) | | |
Nonqualified
Deferred
Compensation
($) | | |
All Other
Compensation
($) | | |
Total
($) | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
George Colin (1)
Chief Executive Officer | |
2014 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
2013 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
2012 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Jitu Banker (2)
Chief Financial Officer | |
2014 | |
| # | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
2013 | |
| 135,000 | | |
| 200,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 335,000 | |
| | |
2012 | |
| 180,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 180,000 | |
Anthony Anish (3)
Chief Operations Officer/Secretary | |
2014 | |
| # | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
2013 | |
| 135,000 | | |
| 200,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 335,000 | |
| | |
2012 | |
| 96,912 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 96,912 | |
Bruce Barren(4)
CEO | |
2014 | |
| 90,000# | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 90,000 | |
| * |
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, 2014 financial statements. |
| |
|
| # |
Salaries in the amounts of $210,000 for Mr. Anish and $180,000 for Mr. Banker due per the terms of their respective employment
agreements were waived. These salaries were expensed in the profit and loss account and credited to paid in capital. Mr. Barren
received 3,000,000 shares at the time he became CEO and 6,000,000 shares during the fiscal year in lieu of payroll. |
| (1) |
George M. Colin was hired as our Chief Executive Officer on December 9, 2008 and resigned
on August 8, 2013 |
| |
|
| (2) |
Jitu Banker was hired as our CFO in March 31, 2009. |
| |
|
| (3) |
Anthony Anish was hired as our Secretary on June 7, 2011 |
| |
|
| (4) |
Bruce Barren was hired as our CEO on August 8, 2013 |
| + |
These amounts were accrued in 2013. |
Employment Contracts
We have written employment agreements with two of our executive
officers, Mr. Anthony Anish and Mr. Jitu Banker
Agreement with Anthony Anish. On July 1, 2011, we entered
into an employment agreement with Anthony L Anish to serve as our Chief Operating Officer and Secretary, of M Line Holdings, Inc.
, at a compensation rate of $210,000 per annum. The initial term of this employment agreement is for three years commencing July
1, 2011, with renewals based on the mutual consent of employee and the company unless terminated by either party. The agreement
also provides that for a period of 12 months following termination of the employment agreement, Mr. Anish 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) 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 (iii) use or employ any of our information for his own benefit or
in any way adverse to our interests. This contract was replaced with a new contract on January 1, 2015.
Agreement with Jitu Banker. On July 1, 2011, we entered
into an employment agreement with Jitu Banker to serve as our Chief Financial Officer, of M Line Holdings, Inc. at a compensation
rate of $180,000 per annum. The initial term of this employment agreement is for three years commencing July 1, 2011, with renewals
based on the mutual consent of employee and the company unless terminated by either party. The agreement also provides that for
a period of 12 months following termination of the employment agreement, Mr. Banker shall not (i) compete with respect to any
services or products of the Company which are either offered or are being developed by the Company, (ii) disclose any information
about our affairs including trade secrets, know-how, customer lists, business plans, operational methods, policies, suppliers,
customers or other such Company information, nor (iii) use or employ any of our information for his own benefit or in any way
adverse to our interests. This contract was replaced with a new contract on January 1, 2015.
Director Compensation
The following table sets forth director compensation
as of June 30, 2014:
| | |
| | |
| | |
| | |
| | |
Nonqualified | | |
| | |
| |
| | |
Fees Earned | | |
| | |
| | |
Non-Equity | | |
Deferred | | |
| | |
| |
| | |
or Paid in | | |
| | |
| | |
Incentive Plan | | |
Compensation | | |
All Other | | |
| |
| | |
Cash | | |
Stock Awards | | |
Option Awards | | |
Compensation | | |
Earnings | | |
Compensation | | |
Total | |
| Name | |
($) | | |
($) * | | |
($) * | | |
($) | | |
($) | | |
($) | | |
($) | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| George Colin (1) | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Jitu Banker (2) | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Bruce Barren (3) | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | | |
| -0- | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Anthony Anish (4) | |
| -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) |
Bruce Barren was appointed to our Board of Directors on August 8, 2013. |
| |
(4) |
Anthony Anish was appointed to our Board of Directors on June 7, 2011. |
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, 2014:
| | |
| 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 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Anthony Anish | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Bruce Barren | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of June
30, 2014, 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) | |
| 3,790,468 | | |
| 1.56 | % |
| Common Stock | |
Jitu Banker (2) | |
| 12,350,000 | (4) | |
| 5.08 | % |
| Common Stock | |
Anthony Anish (2) | |
| 13,432,500 | | |
| 5.52 | % |
| Common Stock | |
Bruce Barren (2) | |
| 9,000,000 | | |
| 3.70 | % |
| Common Stock | |
Money Line Capital, Inc.
17702 Mitchell North, Suite 201
Irvine, CA 92614 | |
| 7,068,748 | (6) | |
| 2.91 | % |
| Common Stock | |
All Directors and Officers As a group (4 persons) | |
| 38,572,544 | | |
| 15.86 | % |
| |
(1) |
Unless otherwise indicated, based on 243,178,484 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 1,110,000 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.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
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.
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, 2014, $28,533 remains outstanding.
Joseph Gledhill Note. We had a second unsecured note payable
outstanding to Joseph T.W. Gledhill, a former officer and director, and a current stockholder, which was 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 was 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.
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, 2014, Malone
Bailey charged $83,383, in fees for professional services for the audit of our financial statements and the review of our
Form 10-Q quarterly financial statements. During the year ended June 30, 2013, Malone Bailey charged $55,000 in fees for
professional services for the audit of our financial statements and Kabani and Co. charged $55,000 for the review of our
Form 10-Q quarterly financial statements.
Tax Fees
During the year ended June 30, 2014, MaloneBailey billed us $0
for professional services for tax preparation. During the year ended June 30, 2013, Kabani & Company billed
us $0 for professional services for tax preparation.
All Other Fees
During the year ended June 30, 2014, neither Kabani & Company
nor MaloneBailey billed us any amounts for any other fees. During the year ended June 30, 2013, Kabani & Company did
not bill us any amounts for any other fees.
Of the fees described above for the year ended June 30, 2014, 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:
| Report of Registered Public Accounting Firm |
F-1 |
| |
|
| Consolidated Balance Sheets as of June 30, 2014 and 2013 |
F-2 |
| |
|
| Consolidated Statements of Operations for the years ended June 30, 2014 and 2013 |
F-3 |
| |
|
| Consolidated Statements of Shareholders’ Deficit for the years ended June 30, 2014
and 2013 |
F-4 |
| |
|
| Consolidated Statements of Cash Flows for the years ended June 30, 2014 and 2013 |
F-5 |
| |
|
| Notes to Consolidated Financial Statements |
F-6 |
(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 |
| |
|
|
| 3.3 (2) |
|
Amended By Laws of M Line Holdings, inc. a Nevada Corporation |
| |
|
|
| 10.1 (1) |
|
Asset Purchase Agreement with CNC Repos, Inc. and certain of its shareholders dated October
1, 2007 |
| |
|
|
| 10.2 (1) |
|
Commercial Real Estate Lease dated February 15, 2007 for the office space located in Tustin,
CA |
| |
|
|
| 10.3 (1) |
|
Commercial Real Estate Lease dated November 15, 2007 for the office space located in Anaheim,
CA |
| |
|
|
| 10.4 (1) |
|
Employment Agreement with Timothy D. Consalvi dated February 1, 2007 |
| 10.5 (1) |
|
Employment Agreement with Anthony L. Anish dated January 1, 2015 |
| |
|
|
| |
|
|
| 10.6 (2) |
|
Employment Agreement with Jitendra Banker dated January 1, 2015 |
| |
|
|
| 10.7 (1) |
|
Settlement Agreement with TCA Global Credit Master Fund, LP |
| |
|
|
| 10.8 (1) |
|
|
| |
|
|
| 10.9 (1) |
|
Fee Agreement with Steve Kasprisin dated April 30, 2008 |
| |
|
|
| 10.10 (3) |
|
Separation Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence
A. Consalvi dated September 26, 2008 |
| |
|
|
| 10.11 (4) |
|
Sales Agent Agreement by and between Gateway International Holdings, Inc., and Mr. Lawrence
A. Consalvi dated September 30, 2008 |
| |
|
|
| 10.12 (4) |
|
Loan Agreements with Pacific Western Bank dated September 20, 2008 |
| |
|
|
| 10.13 (5) |
|
Assignment of Promissory Note and Consent Thereto by and between M Line Holdings, Inc. and
Money Line Capital, Inc. dated March 24, 2009 |
| |
|
|
| 10.14 (5) |
|
M Line Holdings, Inc. Demand Note for up to $500,000 dated March 25, 2009 |
| |
|
|
| 10.15 (6) |
|
Letter of Intent by and between M Line Holdings, Inc. and Money Line Capital, Inc. dated
June 30, 2010 |
| |
|
|
| 10.16 (8) |
|
Securities Purchase Agreement and Convertible Promissory Note with Asher Enterprises, Inc.
dated April 26, 2010 (filed herewith) |
| |
|
|
| 10.17 (8) |
|
|
| |
|
|
| 10.18 (8) |
|
Commercial Real Estate Lease with SG&H Partners, L.P. for Anaheim Property dated July
1, 2015 |
| |
|
|
| 10.19 (8) |
|
Business Loan Agreement with Pacific Western Bank dated June 7, 2010 |
| |
|
|
| 10.20 (8) |
|
Loan and Security Agreement and Note with Utica Leaseco, LLC (filed herewith) |
| |
|
|
| 10.21 (8) |
|
Note and Stock Purchase Agreements with Spagus Capital Partners, LLC (filed herewith) |
| |
|
|
| 10.19 (9) |
|
Loan Agreements with TCA Global Master Credit Fund, LP |
| |
|
|
| 10.19(10) |
|
Convertible note agreement with Gel properties, LLC |
| |
|
|
| 10.20 (10) |
|
Convertible Note agreement with LG Funding, LLC |
| |
|
|
| 10.21 (10) |
|
Covertible Note agreements with Beaufort Capital, LLC |
| |
|
|
| 10.22 (10) |
|
Covertible Note agreements with Union Capital, Inc. |
| |
|
|
| 10.23 (10) |
|
Convertible Note agreements with Coventry Funding, Inc. |
| |
|
|
| 10.24 (10) |
|
Convertible Note agreements with Iconic Holdings, Inc. |
| |
|
|
| 10.25 (10) |
|
Convertible Note with Adar Bays,
LLC |
| |
|
|
| 10.26 |
|
Convertible Note with JMJ Financial |
| |
|
|
| 10.23 |
|
Addendum No. 2 dated September 30, 2011 to Commercial Real Estate Lease dated February 15,
2007 for the office space located in Tustin, CA |
| |
|
|
| 10.24 |
|
Executive Employee Agreement with Barton Webb dated July 25, 2011 |
| |
|
|
| 21 (7) |
|
List of Subsidiaries |
| |
|
|
| 31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of George Colin (filed herewith). |
| |
|
|
| 31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Jitu Banker (filed herewith). |
| |
|
|
| 32.1 |
|
Section 1350 Certification of George Colin (filed herewith). |
| |
|
|
| 32.2 |
|
Section 1350 Certification of Jitu Banker (filed herewith). |
(1) Incorporated by reference from our Registration Statement on
Form 10-12G filed with the Commission on May 16, 2008.
(2) Incorporated by reference from our Registration Statement on
First Amended Form 10-12G/A filed with the Commission on July 16, 2008.
(3) Incorporated by reference from our First Amended Current Report
on Form 8-K/A filed with the Commission on October 10, 2008.
(4) Incorporated by reference from our Quarterly Report
on Form 10-Q for the period ended September 30, 2008, as filed with the Commission on November 13, 2008.
(5) Incorporated by reference from our Current Report
on Form 8-K filed with the Commission on April 24, 2009.
(6) Incorporated by reference from our Current Report
on Form 8-K filed with the Commission on July 6, 2009.
(7) Incorporated by reference from our Annual Report
on Form 10-K for the period ended June 30, 2009, as filed with the Commission on October 13, 2009.
(8) Incorporated by reference from our Annual Report
on Form 10-K for the period ended June 30, 2010, as filed with the Commission on November 12, 2010.
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: June 23, 2015 |
/s/ Bruce Barren |
| |
By: |
Bruce Barren |
| |
|
Chief Executive Officer |
| |
|
and a Director |
| |
|
|
| Dated: June 23, 2015 |
/s/ Jitu Banker |
| |
By: |
Jitu Banker |
| |
|
Chief Financial Officer |
| |
|
and a Director |
| |
|
|
| Dated: June 23, 2015 |
/s/ Anthony Anish |
| |
By: |
Anthony Anish |
| |
|
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.
| Dated: June 23, 2015 |
/s/ Bruce Barren |
| |
By: |
Bruce Barren |
| |
|
Chief Executive Officer |
| |
|
and a Director |
| |
|
|
| Dated: June 23, 2015 |
/s/ Jitu Banker |
| |
By: |
Jitu Banker |
| |
|
Chief Financial Officer |
| |
|
and a Director |
| |
|
|
| Dated: June 23, 2015 |
/s/ Anthony Anish |
| |
By: |
Anthony Anish |
| |
|
Secretary and a Director |
Exhibit 10.5
Employment Agreement
THIS IS AN AGREEMENT,
effective as of January 1, 2015 by and between M Line Holdings, Inc. (“M Line”) (the “Company”) and Anthony
Anish (the “Executive”). As used herein, the term “Agreement” shall mean this Employment Agreement and all
schedules and exhibits thereto (as supplemented and amended from time to time).
WHEREAS, the Company
desires to employ the Executive, and the Executive desires to be employed by the Company;
NOW, THEREFORE, in
consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which consideration is hereby acknowledged, and the continued employment of Executive, the parties agree as follows:
1. Definition
of Terms. The following terms referred to in this Agreement shall have the following meanings for purposes of this Agreement:
(a) Cause.
“Cause” is defined as (i) a material act of dishonesty made by Executive in connection with Executive’s
responsibilities as an employee that leads to material harm to the Company, (ii) Executive’s conviction of, or plea of guilty
or nolo contendere to, a felony, (iii) an act by Executive which constitutes gross misconduct or fraud and which is materially
injurious to the Company.
(b) Change
of Control. “Change of Control” of the Company is defined as: (i) a merger or consolidation of the Company in
which the stockholders of the Company immediately prior to such transaction would own, in the aggregate, less than 50% of the
total combined voting power of all classes of capital stock of the surviving entity normally entitled to vote for the election
of directors of the surviving entity or (ii) the sale by the Company of all or substantially all the Company’s assets in
one transaction or in a series of related transactions.
2. Employment.
The Company hereby
employs the Executive, and the Executive hereby accepts employment with the Company, upon the terms and conditions hereinafter
set forth.
During the Term, Executive
shall serve as a Director and Chief Operating Officer (“COO”) or a position agreed to by the Company’s Board of Directors
(“Board”). In such capacity, Executive will perform such duties on behalf of the Company consistent with his position
as COO and as may be assigned to him from time to time by the Company’s Board.
Executive agrees to
abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein which may
be adopted from time to time by the Company
1. Term.
The term of the Executive’s
employment under this Agreement will commence on the date first set forth above and will continue for a period of three (3) years
unless earlier terminated pursuant to Section 6 of this Agreement (“Term”).
2. Extent
of Services.
During the Term, the
Executive will devote his full time and best efforts to the performance of his duties under this Agreement. Executive shall at
all times endeavor to act in good faith and in a manner consistent with the best interests of the Company. Without limiting the
foregoing, the Executive agrees not to accept or perform consulting services, or other “free lance” activities, for any
other business or non-profit entity, unless otherwise agreed to in writing by the Board. Furthermore, the Executive may only serve
on the board of directors or other board of a for-profit and/or charitable corporation during the term of his employment with the
Company if such service is specifically approved in writing by the Board and so long as such position does not violate any other
provisions of this Agreement or interfere with the Executive’s ability to perform his job duties hereunder. A list of the organization(s)
of which Executive serves as a director, a description of each such organization’s activities, and the time commitment required
by Executive in the service of each such organization(s).
3. Compensation
and Benefits.
4.1 For
services rendered by Executive as COO of the Company, the Company shall pay Executive a base salary of $10,000 bi-weekly,
which annualizes to $260,000. This salary will be paid 75% in cash and 25% in shares of the Company at the then market value
less 30% discount from market value.
4.2 Quarterly
Bonus.
Executive shall be
entitled to a quarterly bonus due within three weeks of the end of each quarter. This bonus is based on the gross profit of the
business and is payable as follows:
| |
First $2,000,000 gross profit, |
0% commission |
| |
|
|
| |
Thereafter |
2% commission |
The quarterly bonus is paid on revenues
of the M Line Holdings group of companies and will be reviewed every six months to reflect any acquisitions.
4.3 Annual
Bonus. Executive shall also be eligible to be considered a discretionary annual bonus after the completion of the audited
financial statements of the Company for each completed calendar year of employment, the granting of which and the amount of which,
if any, is to be determined in the sole discretion of the Board. If the Board decides to grant Executive an annual bonus, then
such granted annual bonus payable within sixty (60) days after completion of the audited financial statements of the Company
for the applicable year (the “Discretionary Bonus”);
4.4. Benefits.
The Executive will be entitled to receive or participate in such retirement, medical, dental, life, supplemental life and other
benefit programs or plans as are available to other senior executives of the Company.
4.5 Company
Vehicle. Company will pay the car payment on executive’s vehicle and will provide a car allowance of $750 per month. Executive
will be responsible for insurance, and maintenance on the car
4.6 Change
of Control.
(a) Termination Following A Change of Control.
If, within twelve (12) months following a Change of Control, the Company terminates Executive other than for Cause or Executive
voluntarily terminates as a result of a Constructive Termination, then, provided Executive also executes a general release in a
form determined by the Company at the time of termination:
(i) Executive
will be entitled to receive a severance payment equal to nine (9) months of Executive’s base salary as in effect as of the date
of such termination, less applicable withholding, payable in a lump sum within thirty (30) days of the termination;
(ii) The
vesting of shares subject to all stock options granted by the Company to Executive prior to the Change of Control which, assuming
Executive’s continued employment with the Company, would have become vested and exercisable within eighteen (18) months following
the date of termination or Constructive Termination shall accelerate and become vested and exercisable as of the date of termination;
and
(iii) if
(1) Executive constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of the Internal Revenue Code of 1986, as amended,
and (2) Executive elects continuation coverage pursuant to Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”),
within the time period prescribed pursuant to COBRA, reimbursement for health care coverage under COBRA, until the earlier of (x)
the date Employee is no longer eligible to receive continuation coverage pursuant to COBRA, (y) six (6) months following such termination,
or (z) for such shorter period until Executive obtains new employment offering health insurance coverage.
(b) Accrued
Wages and Vacation; Expenses. Without regard to the reason for, or the timing of, Executive’s termination of employment:
(i) the Company shall pay Executive any unpaid base salary due for periods prior to the date of termination; (ii) the Company
shall pay Executive all of Executive’s accrued and unused PTO through the date of (not deferred) termination; and (iii)
following submission of proper expense reports by Employee, the Company shall reimburse Employee for all expenses reasonably
and necessarily incurred by Employee in connection with the business of the Company prior to the date of termination. These
payments shall be made promptly upon termination and within the period of time mandated by law.
4.7. Limitation on Payments. In the
event that the benefits provided for in this Agreement or otherwise payable to Employee (i) constitute “parachute payments”
within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code
(the “Excise Tax”), then Executive’s benefits under this Agreement shall be either
(a) delivered
in full, or
(b) delivered
as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis,
of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999
of the Code.
Unless the Company and Executive otherwise
agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants
(the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes.
For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and
4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants
may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may
reasonably incur in connection with any calculations contemplated by this Section.
4.8 No
Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor
shall any such payment be reduced by any earnings that Employee may receive from any other source.
4. 9 Vacation. The Executive shall
be entitled to accrue a total of four (4) weeks of paid vacation annually, at a rate of 1.75 days per month. Such vacation shall
be taken with reasonable notice to the Board and at such time and in such intervals as are mutually acceptable to the Executive
and the Company. Any accrued vacation must be taken in the year it accrued. Any accrued unused vacation at the end of the calendar
year will be carried over into subsequent years. Executive agrees not to take more than two (2) weeks vacation at the same time.
4.10 Expenses. The Company will,
upon substantiation thereof, promptly reimburse the Executive for all reasonable expenses of types authorized by the in the ordinary
course of business and incurred by the Executive in connection with the Company’s business affairs. The Executive must submit a
statement of these expenses with supporting documentation in accordance with accounting and reporting requirements as the Company
may from time to time establish.
4.11 Termination. A termination of the Executive’s
employment with the Company for any reason by either party or for non-renewal by either party will be deemed a termination of this
Agreement and the Executive shall be deemed to have resigned from any Board or other positions held with the Company. Either party
may terminate this Agreement prior to the end of the Term by giving ninety (90) days prior written notice of such termination,
provided that if Executive gives notice of termination, the Company may, in its sole discretion, accelerate his last day of employment
without waiting for the end of the notice period and if the Company chooses to accelerate the Executive’s last day of employment,
the Executive will be entitled to pay for the notice period remaining after the Executive’s last day of employment and if terminated
by the company will also be entitled to the severance payment described in section 4.6 (a) (i).
5.1 Non-Disclosure.
(a) The
Executive agrees that all information and know-how, whether or not in writing, of a proprietary, secret or confidential nature
concerning the Company’s business or financial affairs (collectively, “Proprietary Information”) learned by him during
the Employment Period or at any time prior to the Employment Period by virtue of Executive’s prior relationship with the Company,
is and will be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information includes
creative ideas and concepts; contemplated or planned business ventures, projects, developments, media or marketing plans, research
data, financial data, personnel data, computer programs, and client, customer and supplier lists, whether or not copyrightable,
trademarkable or licensable. As applied to any actual past or present client of the Company, Proprietary Information shall include
all of the foregoing. With respect to any potential client of the Company, Proprietary Information shall be limited to such of
the foregoing as may be received by the Company or developed by or for the Company in connection with any actual or proposed solicitation
of business from such potential client, whether initiated by the Company, the potential client or otherwise. At all times during
and after the Employment Period, Executive will not, directly or indirectly, disclose any Proprietary Information to others outside
the Company or, directly or indirectly, use the Proprietary Information for any unauthorized purposes or for his own benefit or
the benefit of a third party without written approval by the Board, either during or after his employment, except: (i) as required
in the course of performing her duties hereunder; (ii) if such Proprietary Information has become public knowledge without the
fault of the Executive; or (iii) as authorized or required to be released by a court of competent jurisdiction or governmental
agency.
(b) The
Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, notebooks, program listings, or
other written, photographic, or other tangible material, whether created by the Executive or by or with others to which Executive
has access by virtue of his employment by the Company or which he creates or comes into his custody or possession during the Employment
Period, is the exclusive property of the Company, to be used by the Executive only in the performance of his duties for the Company.
(c) The
Executive agrees that his obligation not to disclose or use information, know-how and records of the types set forth in paragraphs
(a) and (b) above also extends to such types of information, know-how, records and tangible property of customers of the Company
or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Executive
in the course of the Company’s business.
5.2 Ownership
of Developments.
(a) The
Executive will make full and prompt disclosure to the Company of all inventions, improvements, ideas, concepts, approaches, discoveries,
methods, developments, software and works of authorship, whether or not copyrightable, trademarkable, patentable or licensable,
which are created, made, conceived or reduced to practice by the Executive or under his direction or jointly with others during
his employment by the Company, whether or not during normal working hours or on the premises of the Company (all of which are collectively
referred to in this Agreement as “Developments”). All Developments are considered “works made for hire” to
the extent permitted under the copyright laws of the United States.
(b) The
Executive agrees to assign and does hereby assign to the Company (or any person or entity designated by the Company) all his right,
title and interest in and to all Developments and all related patents, patent applications, copyrights, copyright applications,
goodwill, and any works described above that are not considered “works made for hire” under the copyright laws of the
United States. This Section 7.2(b) shall not apply to Developments which: (i) do not relate to the present or planned business,
or research and development, of the Company; (ii) and which are not made and conceived by the Executive (xx) during the course
of his job duties for the Company, (yy) on the Company’s or its affiliates’ premises, or (zz) using the Company’s tools, devices,
equipment, financial resources, Proprietary Information or any other Company property or resources.
(c) The
Executive agrees to cooperate fully with the Company both during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights, patents and trademarks (both in the United States and foreign countries)
relating to Developments. The Executive further agrees to promptly disclose all Developments to the Company, and, upon request,
promptly take all reasonable actions and execute and deliver, without further consideration, such assignments and other good and
sufficient instruments of transfer and conveyance, and all other such documents as, in the opinion of the Company, shall be effective
to vest in the Company full title thereto, or to secure for the Company the full benefit thereof, including, without limitation,
the execution of all documents and the doing of all acts necessary and proper to file, obtain, maintain and enforce patent applications,
patents copyrights and all other available forms of protection in the United States and all other countries of the world. To protect
the Company in case Executive fails to do so, Executive hereby irrevocably appoints the President of the Company as my attorney-in-fact,
empowered solely to execute in my name and deliver such documents.
5.3 Non-Solicitation.
(a) Executive
acknowledges that, prior to and during the course of his employment with the Company, Executive has been and will be exposed to,
provided with, given access to the Company’s Proprietary Information and has had and will have contacts with the Company’s customers,
potential customers, vendors and distribution network. Executive also acknowledges that the Company invests substantial time, money
and other resources in hiring, educating and training employees and developing in its employees skills and knowledge specific to
the Company and its business. As a result, Executive agrees to the restrictions set forth in this Section 7.3 for a period of six
months only following termination or if the Executive leaves for any reason and acknowledges that such restrictions are tailored,
reasonable and necessary to protect the legitimate business interests, including Proprietary Information, goodwill and employee
relationships, of the Company.
(b) During
the term and for a period of six months after the Executive’s employment with the Company is terminated, for any reason, by the
Company or the Executive, the Executive will not, without the Board’s prior written approval, directly or indirectly, on behalf
of himself or any other person or entity, in any geographic location in which the Company conducts business:
(i) recruit,
solicit or induce, or attempt to induce, or assist any individual or entity to recruit, solicit or induce, or attempt to induce,
any employee or consultant of the Company to terminate his or her employment or consulting relationship with or otherwise cease
or diminish his or her relationship with the Company or otherwise interfere with the relationship between any employee or consultant
of the Company and the Company; or
(ii) solicit,
divert or take away, or attempt to divert or to take away, or assist any individual or entity to solicit, divert or take away,
or attempt to divert or to take away, the business or patronage of any of the clients, customers or accounts, or prospective clients,
customers or accounts, of the Company. For purposes of this Section 7.3, a prospective client, customer or account is any individual
or entity whose business is solicited by the Company, proposed to be solicited by the Company or who approaches the Company with
respect to possibly becoming a client, customer, or account at any time during the Employment Period.
5.4 Enforcement,
Remedies.
(a) If
any restriction set forth in this entire Section 5 is found by any court of competent jurisdiction to be unenforceable because
it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of activities or geographic areas to which it may be enforceable.
(b) The
restrictions contained in this Section 5 are necessary for the protection of the business and goodwill of the Company and are considered
by the Executive to be reasonable for this purpose. The Executive agrees that any breach of this Section 5 will cause the Company
substantial and irreparable harm for which monetary damages are not adequate and, therefore, in the event of any such breach, in
addition to such other remedies which may be available, the Executive agrees to the award of specific performance and grant of
injunctive relief to the Company requiring compliance with the provisions of Section 5 and the Company shall not be required to
post a bond or provide any other security in connection with such award or grant of injunctive relief.
5.5 Survival
of Obligation. The obligations of the Executive under this Section 7 will survive the termination of this Agreement.
6. Notices.
All notices under this Agreement must be in writing and must be delivered by hand or mailed by certified or registered
mail, postage prepaid, return receipt requested, to the parties as follows:
| If to the Company: |
M Line Holdings, Inc. |
| |
2320 E Orangethorpe Avenue |
| |
Anaheim, CA 92806 |
| |
|
| If to the Executive: |
To the address set forth below the signature of the Executive |
or to such other address as is specified in a notice complying
with this Section 8. Any such notice is deemed given on the date delivered by hand or three days after the date of mailing.
7. Modification
or Amendment. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by
a Company officer duly authorized by the Board or a member of the Board, on the one hand, and the Executive, on the other hand.
10. Waiver.
A waiver of any conditions or provisions of this Agreement in a given instance shall not be deemed a waiver of such conditions
or provisions at any other time in the future. No failure or delay by the Company in exercising any right, power, or remedy under
this Agreement shall operate as a waiver of any such right power or remedy.
11. Choice
of Law. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the
State of California without regard to its conflicts of laws principles.
12. Successors.
This Agreement shall be binding upon, and shall inure to the benefit of, the Employee and his estate, but the Executive may not
assign or pledge this Agreement or any rights arising under it. Without the Executive’s consent, the Company may assign this Agreement
to any affiliate or to a successor to substantially all the business and assets of the Company.
13. Survival.
The provisions of Section 7 hereof shall survive termination of this Agreement or termination of the Executive’s employment with
the Company or any successor or assign regardless of the reason for such termination.
14. Validity
and Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and effect.
17. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together
shall constitute the same instrument.
18. Entire
Agreement. The Executive acknowledges that, with respect to the subject matter hereof, this Agreement contains the entire understanding
and agreement between the Executive and the Company, superseding any previous oral or written communication, representation, understanding
or agreement with the Company or any representative thereof.
| Anthony L. Anish |
|
M Line Holdings, inc. |
| |
|
|
| /s/ Anthony L. Anish |
|
/s/ Bruce W. Barren |
| Date: January 1, 2015. |
|
By: Bruce Barren |
| Address: |
|
Its: CEO |
| 2214 Avalon Street |
|
Date: January 1, 2015 |
| Costa Mesa, CA 92627 |
|
|
Exhibit 10.6
Employment Agreement
THIS IS AN AGREEMENT,
effective as of January 1, 2015 by and between M Line Holdings, Inc. (“M Line”) (the “Company”) and Jitu Banker
(the “Executive”). As used herein, the term “Agreement” shall mean this Employment Agreement and all schedules
and exhibits thereto (as supplemented and amended from time to time).
WHEREAS, the Company
desires to employ the Executive, and the Executive desires to be employed by the Company;
NOW, THEREFORE, in
consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which consideration is hereby acknowledged, and the continued employment of Executive, the parties agree as follows:
1. Definition
of Terms. The following terms referred to in this Agreement shall have the following meanings for purposes of this Agreement:
(a) Cause.
“Cause” is defined as (i) a material act of dishonesty made by Executive in connection with Executive’s responsibilities
as an Executive that leads to material harm to the Company, (ii) Executive’s conviction of, or plea of guilty or nolo contendere
to, a felony, (iii) an act by Executive which constitutes gross misconduct or fraud and which is materially injurious to the Company.
(b) Change of
Control. “Change of Control” of the Company is defined as: (i) a merger or consolidation of the Company in
which the stockholders of the Company immediately prior to such transaction would own, in the aggregate, less than 50% of the
total combined voting power of all classes of capital stock of the surviving entity normally entitled to vote for the
election of directors of the surviving entity or (ii) the sale by the Company of all or substantially all the Company’s
assets in one transaction or in a series of related transactions.
2. Employment.
The Company hereby
employs the Executive, and the Executive hereby accepts employment with the Company, upon the terms and conditions hereinafter
set forth.
During the Term, Executive
shall serve as a Director and Chief Financial Officer (“CFO”) or a position agreed to by the Company’s Board of Directors
(“Board”). In such capacity, Executive will perform such duties on behalf of the Company consistent with his position
as CFO and as may be assigned to him from time to time by the Company’s Board.
Executive agrees to
abide by the rules, regulations, instructions, personnel practices and policies of the Company and any changes therein which may
be adopted from time to time by the Company
1. Term.
The term
of the Executive’s employment under this Agreement will commence on January 1, 2015 will continue for a period of three (3) years
unless earlier terminated pursuant to Section 6 of this Agreement (“Term”).
2. Extent
of Services.
During the
Term, the Executive will devote his full time and best efforts to the performance of his duties under this Agreement. Executive
shall at all times endeavor to act in good faith and in a manner consistent with the best interests of the Company. Without limiting
the foregoing, the Executive agrees not to accept or perform full or part-time employment or consulting services, or other “free
lance” activities, for any other business or non-profit entity, unless otherwise agreed to in writing by the Board. Furthermore,
the Executive may only serve on the board of directors or other board of a for-profit and/or charitable corporation during the
term of his employment with the Company if such service is specifically approved in writing by the Board and so long as such position
does not violate any other provisions of this Agreement or interfere with the Executive’s ability to perform his job duties hereunder.
A list of the organization(s) of which Executive serves as a director, a description of each such organization’s activities, and
the time commitment required by Executive in the service of each such organization(s).
3. Compensation
and Benefits.
4.1 For
services rendered by Executive as COO of the Company, the Company shall pay Executive a base salary of $8,100 bi-weekly, which
annualizes to $210,600. This salary will be paid 75% in cash and 25% in shares of the Company at the then market value less 30%
discount from market value.
4.2 Quarterly
Bonus.
Executive
shall be entitled to a quarterly bonus due within three weeks of the end of each quarter. This bonus is based on the gross profit
of the business and is payable as follows:
First $2,000,000
gross profit, 0% commission
Thereafter 2%
commission
The quarterly bonus is paid
on revenues of the M Line Holdings group of companies and will be reviewed every six months to reflect any acquisitions.
4.3 Annual
Bonus. Executive shall also be eligible to be considered a discretionary annual bonus after the completion of the audited
financial statements of the Company for each completed calendar year of employment, the granting of which and the amount of which,
if any, is to be determined in the sole discretion of the Board. If the Board decides to grant Executive an annual bonus, then
such granted annual bonus payable within sixty (60) days after completion of the audited financial statements of the Company for
the applicable year (the “Discretionary Bonus”);
4.4. Benefits. The Executive
will be entitled to receive or participate in such retirement, medical, dental, life, supplemental life and other benefit programs
or plans as are available to other senior executives of the Company.
4.5 Company
Vehicle. Company will pay the car payment on executive’s vehicle and will provide a car allowance of $750 per month. Executive
will be responsible for insurance, and maintenance on the car
4.6 Change
of Control.
(a) Termination Following
A Change of Control. If, within twelve (12) months following a Change of Control, the Company terminates Executive other than
for Cause or Executive voluntarily terminates as a result of a Constructive Termination, then, provided Executive also executes
and a general release in a form determined by the Company at the time of termination:
(i) Executive
will be entitled to receive a severance payment equal to nine (9) months of Employee’s base salary as in effect as of the date
of such termination, less applicable withholding, payable in a lump sum within thirty (30) days of the termination;
(ii) The
vesting of shares subject to all stock options granted by the Company to Executive prior to the Change of Control which, assuming
Executive’s continued employment with the Company, would have become vested and exercisable within eighteen (18) months following
the date of termination or Constructive Termination shall accelerate and become vested and exercisable as of the date of termination;
and
(iii) if
(1) Executive constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of the Internal Revenue Code of 1986, as amended,
and (2) Employee elects continuation coverage pursuant to Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”),
within the time period prescribed pursuant to COBRA, reimbursement for health care coverage under COBRA, until the earlier of (x)
the date Employee is no longer eligible to receive continuation coverage pursuant to COBRA, (y) six (6) months following such termination,
or (z) for such shorter period until Employee obtains new employment offering health insurance coverage.
(b) Accrued Wages and Vacation;
Expenses. Without regard to the reason for, or the timing of, Executive’s termination of employment: (i) the Company shall
pay Executive any unpaid base salary due for periods prior to the date of termination; (ii) the Company shall pay Executive all
of Executive’s accrued and unused PTO through the date of (not deferred) termination; and (iii) following submission of proper
expense reports by Executive, the Company shall reimburse Executive for all expenses reasonably and necessarily incurred by Executive
in connection with the business of the Company prior to the date of termination. These payments shall be made promptly upon termination
and within the period of time mandated by law.
4.7. Limitation on Payments. In the
event that the benefits provided for in this Agreement or otherwise payable to Employee (i) constitute “parachute payments”
within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code
(the “Excise Tax”), then Executive’s benefits under this Agreement shall be either
(a) delivered
in full, or
(b) delivered
as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax,
whichever of the foregoing amounts, taking into account the
applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis,
of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999
of the Code.
Unless the Company and Executive otherwise
agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants
(the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes.
For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and
4999 of the Code. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants
may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may
reasonably incur in connection with any calculations contemplated by this Section.
4.8 No
Duty to Mitigate. Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor
shall any such payment be reduced by any earnings that Employee may receive from any other source.
4.9 Vacation.
The Executive shall be entitled to accrue a total of four (4) weeks of paid vacation annually, at a rate of 1.75 days per month.
Such vacation shall be taken with reasonable notice to the Board and at such time and in such intervals as are mutually acceptable
to the Executive and the Company. Any accrued vacation must be taken in the year it accrued. Any accrued unused vacation at the
end of the calendar year will be carried over into subsequent years. Executive agrees not to take more than two (2) weeks vacation
at the same time.
4.10 Expenses.
The Company will, upon substantiation thereof, promptly reimburse the Executive for all reasonable expenses of types authorized
in the ordinary course of business and incurred by the Executive in connection with the Company’s business affairs. The Executive
must submit a statement of these expenses with supporting documentation in accordance with accounting and reporting requirements
as the Company may from time to time establish.
4.11 Termination.
A termination of the Executive’s employment with the Company for any reason by either party or for non-renewal by either party
will be deemed a termination of this Agreement and the Executive shall be deemed to have resigned from any Board or other positions
held with the Company. Either party may terminate this Agreement prior to the end of the Term by giving ninety (90) days prior
written notice of such termination, provided that if Executive gives notice of termination, the Company may, in its sole discretion,
accelerate his last day of employment without waiting for the end of the notice period and if the Company chooses to accelerate
the Executive’s last day of employment, the Executive will be entitled to pay for the notice period remaining after the Executive’s
last day of employment and if terminated by the company will also be entitled to the severance payment described in section 4 6
(a) (i).
5.1 Non-Disclosure.
(a) The
Executive agrees that all information and know-how, whether or not in writing, of a proprietary, secret or confidential nature
concerning the Company’s business or financial affairs (collectively, “Proprietary Information”) learned by him during
the Employment Period or at any time prior to the Employment Period by virtue of Executive’s prior relationship with the Company,
is and will be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information includes
creative ideas and concepts; contemplated or planned business ventures, projects, developments, media or marketing plans, research
data, financial data, personnel data, computer programs, and client, customer and supplier lists, whether or not copyrightable,
trademarkable or licensable. As applied to any actual past or present client of the Company, Proprietary Information shall include
all of the foregoing. With respect to any potential client of the Company, Proprietary Information shall be limited to such of
the foregoing as may be received by the Company or developed by or for the Company in connection with any actual or proposed solicitation
of business from such potential client, whether initiated by the Company, the potential client or otherwise. At all times during
and after the Employment Period, Executive will not, directly or indirectly, disclose any Proprietary Information to others outside
the Company or, directly or indirectly, use the Proprietary Information for any unauthorized purposes or for his own benefit or
the benefit of a third party without written approval by the Board, either during or after his employment, except: (i) as required
in the course of performing her duties hereunder; (ii) if such Proprietary Information has become public knowledge without the
fault of the Executive; or (iii) as authorized or required to be released by a court of competent jurisdiction or governmental
agency.
(b) The
Executive agrees that all files, letters, memoranda, reports, records, data, sketches, drawings, notebooks, program listings, or
other written, photographic, or other tangible material, whether created by the Executive or by or with others to which Executive
has access by virtue of his employment by the Company or which he creates or comes into his custody or possession during the Employment
Period, is the exclusive property of the Company, to be used by the Executive only in the performance of his duties for the Company.
(c) The
Executive agrees that his obligation not to disclose or use information, know-how and records of the types set forth in paragraphs
(a) and (b) above also extends to such types of information, know-how, records and tangible property of customers of the Company
or suppliers to the Company or other third parties who may have disclosed or entrusted the same to the Company or to the Executive
in the course of the Company’s business.
5.2 Ownership
of Developments.
(a) The
Executive will make full and prompt disclosure to the Company of all inventions, improvements, ideas, concepts, approaches, discoveries,
methods, developments, software and works of authorship, whether or not copyrightable, trademarkable, patentable or licensable,
which are created, made, conceived or reduced to practice by the Executive or under his direction or jointly with others during
his employment by the Company, whether or not during normal working hours or on the premises of the Company (all of which are collectively
referred to in this Agreement as “Developments”). All Developments are considered “works made for hire” to
the extent permitted under the copyright laws of the United States.
(b) The
Executive agrees to assign and does hereby assign to the Company (or any person or entity designated by the Company) all his right,
title and interest in and to all Developments and all related patents, patent applications, copyrights, copyright applications,
goodwill, and any works described above that are not considered “works made for hire” under the copyright laws of the
United States. This Section 7.2(b) shall not apply to Developments which: (i) do not relate to the present or planned business,
or research and development, of the Company; (ii) and which are not made and conceived by the Executive (xx) during the course
of his job duties for the Company, (yy) on the Company’s or its affiliates’ premises, or (zz) using the Company’s tools, devices,
equipment, financial resources, Proprietary Information or any other Company property or resources.
(c) The
Executive agrees to cooperate fully with the Company both during and after his employment with the Company, with respect to the
procurement, maintenance and enforcement of copyrights, patents and trademarks (both in the United States and foreign countries)
relating to Developments. The Executive further agrees to promptly disclose all Developments to the Company, and, upon request,
promptly take all reasonable actions and execute and deliver, without further consideration, such assignments and other good and
sufficient instruments of transfer and conveyance, and all other such documents as, in the opinion of the Company, shall be effective
to vest in the Company full title thereto, or to secure for the Company the full benefit thereof, including, without limitation,
the execution of all documents and the doing of all acts necessary and proper to file, obtain, maintain and enforce patent applications,
patents copyrights and all other available forms of protection in the United States and all other countries of the world. To protect
the Company in case Executive fails to do so, Executive hereby irrevocably appoints the President of the Company as my attorney-in-fact,
empowered solely to execute in my name and deliver such documents.
5.3 Non-Solicitation.
(a) Executive
acknowledges that, prior to and during the course of his employment with the Company, Executive has been and will be exposed to,
provided with, given access to the Company’s Proprietary Information and has had and will have contacts with the Company’s customers,
potential customers, vendors and distribution network. Executive also acknowledges that the Company invests substantial time, money
and other resources in hiring, educating and training employees and developing in its employees skills and knowledge specific to
the Company and its business. As a result, Executive agrees to the restrictions set forth in this Section 7.3 for a period of six
months only following termination or if the Executive leaves for any reason and acknowledges that such restrictions are tailored,
reasonable and necessary to protect the legitimate business interests, including Proprietary Information, goodwill and employee
relationships, of the Company.
(b) During
the term and for a period of six months after the Executive’s employment with the Company is terminated, for any reason, by the
Company or the Executive, the Executive will not, without the Board’s prior written approval, directly or indirectly, on behalf
of himself or any other person or entity, in any geographic location in which the Company conducts business:
(i) recruit,
solicit or induce, or attempt to induce, or assist any individual or entity to recruit, solicit or induce, or attempt to induce,
any employee or consultant of the Company to terminate his or her employment or consulting relationship with or otherwise cease
or diminish his or her relationship with the Company or otherwise interfere with the relationship between any employee or consultant
of the Company and the Company; or
(ii) solicit,
divert or take away, or attempt to divert or to take away, or assist any individual or entity to solicit, divert or take away,
or attempt to divert or to take away, the business or patronage of any of the clients, customers or accounts, or prospective clients,
customers or accounts, of the Company. For purposes of this Section 7.3, a prospective client, customer or account is any individual
or entity whose business is solicited by the Company, proposed to be solicited by the Company or who approaches the Company with
respect to possibly becoming a client, customer, or account at any time during the Employment Period.
5.4 Enforcement,
Remedies.
(a) If
any restriction set forth in this entire Section 5 is found by any court of competent jurisdiction to be unenforceable because
it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be
interpreted to extend only over the maximum period of time, range of activities or geographic areas to which it may be enforceable.
(b) The
restrictions contained in this Section 5 are necessary for the protection of the business and goodwill of the Company and are considered
by the Executive to be reasonable for this purpose. The Executive agrees that any breach of this Section 5 will cause the Company
substantial and irreparable harm for which monetary damages are not adequate and, therefore, in the event of any such breach, in
addition to such other remedies which may be available, the Executive agrees to the award of specific performance and grant of
injunctive relief to the Company requiring compliance with the provisions of Section 5 and the Company shall not be required to
post a bond or provide any other security in connection with such award or grant of injunctive relief.
5.5 Survival
of Obligation. The obligations of the Executive under this Section 7 will survive the termination of this Agreement.
6. Notices.
All notices under this Agreement must be in writing and must be delivered by hand or mailed by certified or registered mail, postage
prepaid, return receipt requested, to the parties as follows:
| If to the Company: |
M Line Holdings, Inc. |
| |
2320 E Orangethorpe Avenue |
| |
Anaheim, CA 92806 |
| |
|
| If to the Executive: |
To the address set forth below the signature of the Executive |
or to such other address as is specified in a notice
complying with this Section 8. Any such notice is deemed given on the date delivered by hand or three days after the date of mailing.
7. Modification
or Amendment. No provisions of this Agreement may be modified, waived, or discharged except by a written document signed by
a Company officer duly authorized by the Board or a member of the Board, on the one hand, and the Executive, on the other hand.
10. Waiver.
A waiver of any conditions or provisions of this Agreement in a given instance shall not be deemed a waiver of such conditions
or provisions at any other time in the future. No failure or delay by the Company in exercising any right, power, or remedy under
this Agreement shall operate as a waiver of any such right power or remedy.
11. Choice
of Law. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the
State of California without regard to its conflicts of laws principles.
12. Successors.
This Agreement shall be binding upon, and shall inure to the benefit of, the Employee and his estate, but the Executive may not
assign or pledge this Agreement or any rights arising under it. Without the Executive’s consent, the Company may assign this Agreement
to any affiliate or to a successor to substantially all the business and assets of the Company.
13. Survival.
The provisions of Section 7 hereof shall survive termination of this Agreement or termination of the Executive’s employment with
the Company or any successor or assign regardless of the reason for such termination.
14. Validity
and Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and effect.
17. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together
shall constitute the same instrument.
18. Entire
Agreement. The Executive acknowledges that, with respect to the subject matter hereof, this Agreement contains the entire understanding
and agreement between the Executive and the Company, superseding any previous oral or written communication, representation, understanding
or agreement with the Company or any representative thereof.
| Jitu Banker |
|
M Line Holdings, inc. |
| |
|
|
| /s/ Jitu Banker |
|
/s/ Bruce
W. Barren |
| Date: January 1, 2015. |
|
By: Bruce Barren |
| Address: |
|
Its: CEO |
| 36 Rimani Drive |
|
Date: January 1, 2015 |
| Mission Viejo, CA 92692 |
|
|
Exhibit 10.7(1)
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND
AMENDMENT TO CREDIT AGREEMENT (the “Amendment”) is dated effective as of the 15th day of
January, 2015, by and between M LINE HOLDINGS, INC., a Nevada corporation (the “Issuing Borrower”),
E.M. TOOL COMPANY, INC., a California corporation, and PRECISION AEROSPACE AND TECHNOLOGIES, INC., a Nevada corporation
(each of the foregoing, including the Issuing Borrower, hereinafter sometimes individually referred to as a “Borrower”
and all such entities sometimes hereinafter collectively referred to as “Borrowers”), JITENDRA BANKER,
an individual, and ANTHONY ANISH, an individual (collectively, the “Guarantors”), and TCA
GLOBAL CREDIT MASTER FUND, LP, a Cayman Islands limited partnership (the “Lender”).
RECITALS
WHEREAS,
the Borrowers and the Lender executed that certain Credit Agreement dated as of March 31, 2013, but made effective as of April
30, 2013 (the “Original Credit Agreement”), together with First Amendment to Credit Agreement dated
as of September 27, 2013 (the “First Amendment”) (the Original Credit Agreement and First Amendment,
together with all other renewals, extensions, future advances, amendments, modifications, substitutions, or replacements thereof,
sometimes collectively referred to as the “Credit Agreement”); and
WHEREAS,
pursuant to the Credit Agreement, the Borrowers executed and delivered to Lender that certain Revolving Note dated as of as of
March 31, 2013, but made effective as of April 30, 2013, evidencing a Revolving Loan under the Credit Agreement in the amount
of One Million Seven Hundred Thousand Dollars ($1,700,000) (the “Revolving Note”); and
WHEREAS,
in connection with the Credit Agreement and the Revolving Note, the Borrowers and the Guarantors executed and delivered to the
Lender various ancillary documents referred to in the Credit Agreement as the Loan Documents; and
WHEREAS, the Borrowers’
obligations under the Credit Agreement and the Revolving Note are secured by the following, all of which are included within the
Loan Documents: (i) a Security Agreement dated as of March 31, 2013, but made effective as of April 30, 2013, from the Borrowers
in favor of the Lender (the “Security Agreement”), pursuant to which the Lender has a continuing, perfected,
first-priority security interest encumbering all of the “Collateral” (as such term is defined in the Security Agreement)
of each of the Borrowers; (ii) a Validity Guaranty dated as of March 31, 2013, but made effective as of April 30, 2013, from Guarantors
in favor of Lender (the “Validity Guaranty”); and (iii) UCC-1 Financing Statements naming the
Borrowers, as debtor, and Lender, as secured party, one filed with the Secretary of State of the State of Nevada under filing
No. 2013011251-3, and one filed with the Secretary of State of the State of California under filing No. 13-7359071723 (collectively,
the “UCC-1’s”), among other Loan Documents; and
WHEREAS, the Borrowers,
the Guarantors, and Lender entered into that certain Settlement Agreement dated as of September 8, 2014 (the “Settlement
Agreement”) in connection with the obligations of the Borrowers under the Credit Agreement and Revolving Note; and
WHEREAS, the Borrowers
and Guarantors are currently in default of their respective obligations under the Credit Agreement, Settlement Agreement, and
other Loan Documents (the “Existing Default”); and
WHEREAS,
the Borrowers, the Guarantors, and Lender desire to enter into certain agreements with respect to the Credit Agreement and the
other Loan Documents, all as more specifically set forth in this Amendment;
NOW, THEREFORE,
in consideration of the premises and the mutual covenants of the parties hereinafter expressed and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereto, each intending to be legally bound, agree as follows:
1. Recitals.
The recitations set forth in the preamble of this Amendment are true and correct and incorporated herein by this reference.
2. Capitalized
Terms. All capitalized terms used in this Amendment shall have the same meaning ascribed to them in the Credit Agreement, except
as otherwise specifically set forth herein. In addition, the other definitional and interpretation provisions of Sections 1.2,
1.3 and 1.4 of the Credit Agreement shall be deemed to apply to all terms and provisions of this Amendment, unless the express
context otherwise requires.
3. Conflicts.
In the event of any conflict or ambiguity by and between the terms and provisions of this Amendment and the terms and provisions
of the Credit Agreement, the terms and provisions of this Amendment shall control, but only to the extent of any such conflict
or ambiguity.
4. Modification
of Note. From and after the date hereof, the Revolving Note shall be and is hereby severed, split, divided and apportioned
into two (2) separate and distinct notes, as follows:
(a) Replacement
Revolving Note A evidencing a principal indebtedness of One Hundred Thousand and No/100 Dollars ($100,000.00), and which is
being executed and delivered by Borrowers to Lender simultaneously herewith (the “Replacement Note
A”). Replacement Note A shall be and remain secured by the Security Agreement, the Validity Guaranty, the UCC-1’s, and all other applicable Loan Documents.
(b) Replacement
Revolving Note B evidencing a principal indebtedness of Two Million Three Hundred Sixty-Eight Thousand Three Hundred Ninety-Five
and 90/100 Dollars ($2,368,395.90), and which is being executed and delivered by Borrowers to Lender simultaneously herewith (the
“Replacement Note B”, and together with Replacement Note A, collectively, the “Replacement
Notes”). Replacement Note B shall be and remain secured by the Security Agreement, the Validity Guaranty, the UCC-1’s,
and all other applicable Loan Documents.
(c) The
Replacement Notes are being executed and delivered simultaneously herewith in substitution for and to supersede the Revolving Note
in its entirety. It is the intention of the Borrowers and Lender that while the Replacement Notes replace and supersede the Revolving
Note, in its entirety, it is not in payment or satisfaction of the Revolving Note, but rather is the substitute of one evidence
of debt for another without any intent to extinguish the old. Nothing contained in this Amendment or in the Replacement Notes shall
be deemed to extinguish the indebtedness and obligations evidenced by the Revolving Note or constitute a novation of the indebtedness
evidenced by the Revolving Note.
(d) Notwithstanding
the splitting of the Revolving Note into the Replacement Notes in the principal amounts as contemplated by this Amendment, Borrowers
understand and acknowledge that all sums received by Lender in payment of the Replacement Notes, or either one of them, shall
be applied by Lender in accordance with the terms of the Credit Agreement, first to outstanding fees, charges and other costs due
and payable under the Credit Agreement and other Loan Documents, second to accrued and unpaid interest, and last to outstanding
principal. By way of example, and not in limitation, if Replacement Note A is sold as contemplated under the Debt Purchase Agreement,
upon Lender’s receipt of the purchase price therefor, such amounts received by Lender shall be applied to the total indebtedness
evidenced by the Replacement Notes in the order described above.
(e) Borrowers
understand and acknowledge that in connection with the Debt Purchase Agreement, it may necessary or desirable, in Lender’s
sole and absolute discretion, to have the Borrowers further sever, split, divide and apportion the Replacement Notes further to
accomplish the sale of the Outstanding Claims to Purchaser in various tranches, as more specifically set forth in the Debt Purchase
Agreement. In that regard, within no later than three (3) Business Days after request therefor is made by Lender to Borrowers from
time to time, the Borrowers agree to further sever, split, divide and apportion the Replacement Notes, or any of them (or any replacement
notes issued in replacement thereof from time to time), and to execute and deliver such replacement notes to Lender within such
time frames as required or requested by Lender from time to time.
5. Sale
of Replacement Notes.
(a) The
parties acknowledge that Lender is entering into this Amendment in connection with the contemplated sale of the indebtedness represented
by the Replacement Notes to Iconic Holdings I, LLC (“Purchaser”) under the terms of a Debt Purchase Agreement
(the “Debt Purchase Agreement”) to be entered into promptly after the execution of this Amendment. In
that regard, the Borrowers and Guarantors hereby represent and warrant to Lender as follows, which representations and warranties
shall be true and correct as of the date hereof, and which representations and warranties shall be deemed re-made and be true and
correct as of each sale of the Replacement Notes:
(i) All
amounts of any nature or kind due and owing by the Borrowers and Guarantors to Lender under the Credit Agreement and the other
Loan Documents, and represented by the Replacement Notes or any other Loan Documents (collectively, the “Outstanding
Claims”) are bona fide Outstanding Claims against the Borrowers and Guarantors, respectively and as applicable, and
are enforceable obligations of the Borrowers and Guarantors, respectively and as applicable, arising in the ordinary course of
business, for services and financial accommodations rendered to the Borrowers by Lender in good faith. The Outstanding Claims are
currently due and owing and are payable in full.
(ii) The
amount of the Replacement Notes, respectively and as applicable, is the amount due to Lender with respect thereto as of the date
hereof, and neither the Borrowers, nor the Guarantors are entitled to any discounts, allowances or other deductions with respect
thereto. The aggregate amount of the indebtedness evidenced by the Replacement Notes was funded by Lender to Borrowers at least
x six months preceding
the date hereof, or ¨
one year preceding the date hereof.
(iii) The
Outstanding Claims are not subject to dispute by the Borrowers or Guarantors, and the Borrowers and Guarantors are unconditionally
obligated to pay the full amount of all Outstanding Claims without defense, counterclaim or offset.
(iv) Except
for the Credit Agreement and other Loan Documents, including this Amendment and the Settlement Agreement, there has been no modification,
compromise, forbearance, or waiver (written or oral) entered into or given by Lender to Borrowers or Guarantors with respect to
the Outstanding Claims.
(v) Intentionally
left blank.
(vi) That
the Credit Agreement and each of the Loan Documents executed by the Borrowers and Guarantors, including the Settlement Agreement,
respectively and as applicable, and all obligations due and owing thereunder, are valid and binding obligations of the Borrowers
and Guarantors, respectively and as applicable, enforceable against the Borrowers and Guarantors in accordance with their respective
terms.
(b) The
Borrowers and Guarantors acknowledge that the Outstanding Claims are being sold by Lender to Purchaser in accordance with the Debt
Purchase Agreement, and that payment of the purchase price by Purchaser to Lender for such Outstanding Claims is conditioned upon
the Borrowers’ strict compliance with the terms of certain agreements to be entered into between the Borrowers and Purchaser
(the “Iconic Agreements”). Borrowers hereby covenant and agree to strictly comply with each and every
term and provision of the Iconic Agreements, including, without limitation, timely issuance and delivery of Common Stock to Purchaser
upon conversion by Purchaser of any convertible notes then in Purchaser’s possession. In addition, Borrowers and Guarantors
hereby acknowledge that if the Issuing Borrower fails to issue and deliver its Common Stock to Purchaser in strict accordance with
the terms of the Iconic Agreements, then the Outstanding Claims (or any portion thereof for which the purchase price therefor remains
unpaid) shall be and remain a valid and effective debt of the Borrowers and Guarantors, respectively and as applicable, to Lender,
enforceable in accordance with its terms, and such Outstanding Claims, and all collateral and security rights related thereto (except
with respect to any portion of the Outstanding Claims sold to Purchaser and for which the purchase price therefor was paid to Lender),
shall not be deemed or construed as having been compromised, settled, exchanged, extinguished, modified, or otherwise impaired
in any manner whatsoever.
(c) The
Borrowers and Guarantors understand and acknowledge that Lender is relying on the representations, warranties and covenants of
the Borrowers and Guarantors set forth in this Amendment in order to enter into the Debt Purchase Agreement, and the foregoing
representations, warranties and acknowledgements by the Borrowers and Guarantors are a material inducement for Lender to agree
to a sale of the Outstanding Claims to Purchaser, and without this acknowledgement, Lender would not have sold the Outstanding
Claims to Purchaser.
6. Ratification.
The Borrowers and Guarantors each hereby acknowledge, represent, warrant and confirm to Lender that: (i) each of the Loan Documents
executed by the Borrowers and Guarantors, including the Settlement Agreement, are valid and binding obligations of the Borrowers
and Guarantors, respectively and as applicable, enforceable against the Borrowers and Guarantors in accordance with their respective
terms; (ii) all Obligations of the Borrowers and Guarantors under the Credit Agreement, all other Loan Documents and this Amendment,
including the Settlement Agreement, shall be and continue to be and remain (after execution of this Amendment and the Debt Purchase
Agreement) secured by and under the Loan Documents, including the Security Agreement, the Validity Guaranty, and the UCC-1’s;
(iii) there are no defenses, setoffs, counterclaims, cross-actions or equities in favor of the Borrowers or Guarantors, to or against
the enforcement of any of the Loan Documents, and to the extent any of the Borrowers or Guarantors have any defenses, setoffs,
counterclaims, cross-actions or equities against Lender and/or against the enforceability of any of the Loan Documents, the Borrowers
and Guarantors each acknowledge and agree that same are hereby fully and unconditionally waived by the Borrowers and Guarantors;
and (iv) no oral representations, statements, or inducements have been made by Lender, or any agent or representative of Lender,
with respect to the Credit Agreement, this Amendment, the Settlement Agreement, or any other Loan Documents, or the Debt Purchase
Agreement.
7. Additional
Confirmations. The Borrowers hereby represent, warrant and covenant as follows: (i) that the Lender’s Liens and security
interests in all of the “Collateral” (as such term is defined in the Credit Agreement and the Security Agreement) are
and remain valid, perfected, first-priority security interests in such Collateral, subject only to Permitted Liens and as otherwise
released in accordance with the terms of the Settlement Agreement and the Debt Purchase Agreement, and the Borrowers have not granted
any other Liens or security interests of any nature or kind in favor of any other Person affecting any of such Collateral.
8. Lender’s
Conduct. As of the date of this Amendment, the Borrowers and Guarantors hereby acknowledge and admit that: (i) the Lender has
acted in good faith and has fulfilled and fully performed all of its obligations under or in connection with the Credit Agreement
or any other Loan Documents; and (ii) that there are no other promises, obligations, understandings or agreements with respect
to the Credit Agreement or the Loan Documents, except as expressly set forth herein, or in the Credit Agreement and other Loan
Documents.
9. Redefined
Terms. The term “Loan Documents,” as defined in the Credit Agreement and as used in this Amendment, shall be deemed
to refer to and include this Amendment, the Replacement Notes, the Settlement Agreement, and all other documents or instruments
executed in connection with this Amendment.
10. Affirmation
of Validity Guaranty. The Guarantors do hereby acknowledge and agree as follows: (i) Guarantors acknowledge having reviewed
the terms of this Amendment, and agree to the terms thereof; (ii) that the Validity Guaranty, and all representations, warranties,
covenants, agreements and guaranties made by Guarantors thereunder, and any other Loan Documents by which the Guarantors may be
bound, shall and do hereby remain, are effective and continue to apply to the Loan Documents, and with respect to all obligations
of the Borrowers under the Loan Documents, as amended by this Amendment; (iii) that this Amendment shall not in any way adversely
affect or impair the obligations of the Guarantors to Lender under any of the Loan Documents; and (iv) the Validity Guaranty is
hereby ratified, confirmed and continued, all as of the date of this Amendment.
11. Representations
and Warranties of the Borrowers. The Borrowers hereby make the following representations and warranties to the Lender:
(a) Authority
and Approval of Agreement; Binding Effect. The execution and delivery by the Borrowers of this Amendment, the Replacement Notes,
and all other documents executed and delivered in connection herewith and therewith, and the performance by Borrowers of all of
their Obligations hereunder and thereunder, have been duly and validly authorized and approved by the Borrowers and their respective
board of directors pursuant to all applicable laws and no other corporate action or consent on the pail of the Borrowers, their
board of directors, stockholders or any other Person is necessary or required by the Borrowers to execute this Amendment, the Replacement
Notes, and the documents executed and delivered in connection herewith and therewith, to consummate the transactions contemplated
herein or therein, or perform all of the Borrowers’ Obligations hereunder or thereunder. This Amendment, the Replacement
Notes, and each of the documents executed and delivered in connection herewith and therewith have been duly and validly executed
by the Borrowers (and the officer executing this Amendment and all such other documents for each Borrower is duly authorized to
act and execute same on behalf of each Borrower) and constitute the valid and legally binding agreements of the Borrowers, enforceable
against the Borrowers in accordance with their respective terms.
12. Indemnification.
Each Borrower and Guarantors, jointly and severally, hereby indemnifies and holds the Lender Indemnitees, their successors
and assigns, and each of them, harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and distributions of any kind or nature, payable by any of the Lender Indemnitees to
any Person, including reasonable attorneys’ and paralegals’ fees and expenses, court costs, settlement amounts, costs
of investigation and interest thereon from the time such amounts are due at the highest non-usurious rate of interest permitted
by applicable law (collectively, the “Claims”), through all negotiations, mediations, arbitrations,
trial and appellate levels, as a result of, or arising out of, or relating to any matters relating to this Amendment, the Credit
Agreement or any other Loan Documents, including the assertion of a claim or ruling by a Governmental Authority that documentary
stamp tax, intangible tax or any penalties or interest associated therewith must be paid by reason of the execution and delivery
of any of the Replacement Notes. The foregoing indemnification obligations shall survive the termination of the Credit Agreement
or any of the Loan Documents, repayment of the Obligations, and the sale of any portion of the Outstanding Claims.
13. Release.
As a material inducement for Lender to enter into this Amendment, each of the Borrowers and Guarantors does hereby release, waive,
discharge, covenant not to sue, acquit, satisfy and forever discharges each of the Lender Indemnitees and their respective successors
and assigns, from any and all Claims whatsoever in law or in equity which the Borrowers or Guarantors ever had, now have, or which
any successor or assign of the Borrowers or Guarantors hereafter can, shall or may have against any of the Lender Indemnitees or
their successors and assigns, for, upon or by reason of any matter, cause or thing whatsoever related to the Credit Agreement,
this Amendment or any other Loan Documents, through the date hereof. The Borrowers and Guarantors further expressly agree that
the foregoing release and waiver agreement is intended to be as broad and inclusive as permitted by the laws governing the Credit
Agreement. In addition to, and without limiting the generality of foregoing, the Borrowers and Guarantors further covenant with
and warrant unto the Lender and each of the other Lender Indemnitees, that as of the date hereof, there exists no claims, counterclaims,
defenses, objections, offsets or other Claims against Lender or any other Lender Indemnitees, or the obligation of the Borrowers
and Guarantors to comply with the terms and provisions of the Credit Agreement, this Amendment and all other Loan Documents. The
foregoing release shall survive the termination of the Credit Agreement or any of the Loan Documents, repayment of the Obligations,
and the sale of any portion of the Outstanding Claims.
14. Effect
on Agreement and Loan Documents. Except as expressly amended by this Amendment, all of the terms and provisions of the Credit
Agreement and the Loan Documents shall remain and continue in full force and effect after the execution of this Amendment, are
hereby ratified and confirmed, and incorporated herein by this reference.
15. Waiver.
This Amendment shall not be deemed or construed in any manner as a waiver by the Lender of any Claims, defaults, Events of Default,
breaches or misrepresentations by the Borrowers or Guarantors under the Credit Agreement, any other Loan Documents, or any of Lender’s
rights or remedies in connection therewith.
16. Execution.
This Amendment may be executed in one or more counterparts, all of which taken together shall be deemed and considered one and
the same Amendment, and same shall become effective when counterparts have been signed by each party and each party has delivered
its signed counterpart to the other party. In the event that any signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format file or other similar format file, such signature shall be deemed an original for all purposes
and shall create a valid and binding obligation of the party executing same with the same force and effect as if such facsimile
or “.pdf” signature page was an original thereof.
17. Fees
and Expenses.
(a) Document
Review and Legal Fees; Due Diligence. The Borrowers hereby agree to pay to the Lender or its counsel a legal fee equal to
Three Thousand Five Hundred and No/100 Dollars ($3,500.00) for the preparation, negotiation and execution of this Amendment and
all other documents in connection herewith. Borrowers and Lender agree and acknowledge that the foregoing fees and costs contemplated
hereby have been paid and received by Lender’s counsel.
18. Additional
Agreements. Not later than five (5) Business Days after the execution of this Amendment by Borrowers and Guarantors, Borrowers
and Guarantors shall cause their legal counsel to withdraw and file the appropriate notice of withdrawal, with prejudice, of that
certain Motion to Vacate Entry of Sister-State Judgment filed by Borrowers, Guarantors, and others, with the Superior Court of
California, County of Orange — Central Justice Center, in Case No. 30-2014-00761998-CU-EN-CJC. Failure of the Borrowers
and Guarantors to withdraw such motion as hereby required shall be an additional and immediate Event of Default under the Credit
Agreement and all other Loan Documents. In addition, not later than five (5) Business Days after the execution of this Amendment
by Borrowers and Guarantors, Borrowers and Guarantors shall cause their legal counsel to file a notice of withdrawal, with prejudice,
of all objections and alleged grounds to vacate TCA’s Sister-State Judgment entered against them in the District Court of
Nevada, County of Clark, in Case No. A-15-711963-F Dept. No. XXV.
[Signatures on
the following page]
IN WITNESS WHEREOF, the parties hereto
have duly executed this Amendment as of the day and year first above written.
| BORROWERS: |
| |
| M LINE HOLDINGS, INC., |
| a Nevada corporation |
| By: |
/s/ Anthony L. Anish |
|
|
| Name: |
ANTHONY L. ANISH |
|
|
| Title: |
COO |
|
|
| E.M. TOOL COMPANY, INC., |
|
PRECISION AEROSPACE AND |
|
| a California corporation |
|
TECHNOLOGIES, INC., |
|
| |
|
a Nevada corporation |
|
| |
|
|
|
| By: |
/s/ Anthony L. Anish |
|
By: |
/s/ Anthony L. Anish |
|
| Name: |
ANTHONY L. ANISH |
|
Name: |
ANTHONY L. ANISH |
|
| Title: |
PRES |
|
Title: |
PRES |
|
| |
|
|
|
|
|
| JITENDRA BANKER, |
|
ANTHONY ANISH |
|
| an Individual |
|
an Individual |
|
| |
|
|
|
|
| By: |
/s/ J. Banker |
|
By: |
/s/ Anthony L. Anish |
|
| Name: |
J. BANKER |
|
Name: |
ANTHONY L. ANISH |
|
| LENDER: |
|
|
| |
|
|
| TCA GLOBAL CREDIT MASTER FUND, LP |
|
| |
|
|
| By: |
TCA Global Credit Fund GP, Ltd. |
|
| Its: |
General Partner |
|
| |
|
|
| By: |
/s/ Robert
Press |
|
| |
Robert Press, Director |
|
Exhibit 10.19
SECURITIES PURCHASE AGREEMENT
This SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of May 30, 2014, by and between M Line Holdings, Inc., a
Nevada corporation, with headquarters located at 2672 Dow Avenue, Tustin, CA 92780 (the “Company”), and GEL PROPERTIES,
LLC, a Delaware limited liability company, with its address at 16192 Coastal Highway, Lewes, DE 19958 (the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded
by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under
the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer
desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement two 8%
convertible notes of the Company, in the forms attached hereto as Exhibit A and B in the aggregate principal amount of $100,000.00
(with the first note being in the amount of $50,000.00 and the second note being in the amount of $50,000.00 (together with any
note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof,
the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common
Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The first of the two notes
(the “First Note”) shall be paid for by the Buyer as set forth herein. The second note (the “Second Note”)
shall initially be paid for by the issuance of an offsetting $50,000.00 secured note issued to the Company by the Buyer (“Buyer
Note”), provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note in cash such that
the Second Note may not be converted until it has been paid for in cash.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto; and
NOW THEREFORE, the Company and the
Buyer severally (and not jointly) hereby agree as follows:
1. Purchase
and Sale of Note.
a. Purchase
of Note. On each Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase
from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages
hereto.
| /s/ Anthony L. Anish |
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| Company Initials |
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b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds
to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal
amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and
(ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase
Price.
c. Closing
Date. The date and time of the first issuance and sale of the Note pursuant to this Agreement (the “Closing Date”)
shall be on or about May 30, 2014, or such other mutually agreed upon time. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties. Subsequent
Closings shall occur when the Buyer Note is repaid. The Closing of the Second Note shall be on or before the dates specified in
the Buyer Note.
2. Buyer’s
Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment
Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares”
and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public
sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided,
however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D
(an “Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so
long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries
nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect
Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands
that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute
a breach of any of the Company’s representations and warranties made herein.
/s/ Anthony L. Anish
e. Governmental
Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer
or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities
are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company,
at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in
comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to
an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”))
of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the
1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of
the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined
in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g. Legends.
The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be
sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can
then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
/s/ Anthony L. Anish
“NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth
above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it
is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an
effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without
any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions,
to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion
shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements,
if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer
of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business days, it will be
considered an Event of Default under the Note.
h. Authorization;
Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf
of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency.
The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
3. Representations
and Warranties of the Company. The Company represents and warrants to the Buyer that:
/s/ Anthony L. Anish
a. Organization
and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other)
to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.
b. Authorization;
Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the
Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation
for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s
Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required,
(iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign this Agreement and the other documents executed in
connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the
Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
c. Issuance
of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance
with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances
with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder thereof.
d. Acknowledgment
of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance
of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion
Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
/s/ Anthony L. Anish
e. No
Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of
the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation
or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which
with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its subsidiaries
is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries
is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a material adverse effect). All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the-Counter Quotations Bureau
(the “OTCQB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCQB in the foreseeable
future, nor are the Company’s securities “chilled” by FINRA. The Company and its subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing.
f. Absence
of Litigation. Except as disclosed in the Company’s public filings, there is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or
their officers or directors in their capacity as such, that could have a material adverse effect. Schedule 3(f) contains a complete
list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the
Company or any of its subsidiaries, without regard to whether it would have a material adverse effect. The Company and its subsidiaries
are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity
of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives
or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s
decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.
h. No
Integrated Offering. Neither the Company, nor any of its affiliates, nor ay person acting on its or their behalf, has directly
or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would
require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer
will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its securities.
/s/ Anthony L. Anish
i. Title
to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would
not have a material adverse effect. Any real property and facilities held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.
j. Breach
of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth
in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered
an Event of default under the Note.
4. COVENANTS.
a. Expenses.
At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”),
including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees
for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions
in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated
by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for
reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice
by the Buyer. The Company’s obligation with respect to this transaction is to reimburse Buyer’ expenses shall be $2500
in legal fees (and proportional amounts for the Second Note) which shall be deduced from each Note when funded.
b. Listing.
The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the
Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer
owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCQB or any equivalent replacement exchange,
the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock
Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”)
and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the OTCQB
and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the
Common Stock for listing on such exchanges and quotation systems.
/s/ Anthony L. Anish
c. Corporate
Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCQB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
d. No
Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision
applicable to the Company or its securities.
e. Breach
of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.
5. Governing
Law; Miscellaneous.
a. Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county
of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The
Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s
fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice thereof Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts;
Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by
facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
/s/ Anthony L.
Anish
c. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of,
this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
e. Entire
Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement
may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company, to:
M Line Holdings, Inc.
2672 Dow Avenue
Tustin, CA 92780
Attn: Bruce Barren, CEO
If to the Buyer:
GEL PROPERTIES, LLC
16192 Coastal Highway
Lewes, DE 19958
Attn: Samuel Eisenberg
/s/ Anthony L. Anish
Each party shall provide notice to the other party
of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities
in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act,
without the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival.
The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result
of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth
in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
j. Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
k. No
Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.
1. Remedies.
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for
a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.
/s/ Anthony L. Anish
IN WITNESS WHEREOF, the undersigned Buyer
and the Company have caused this Agreement to be duly executed as of the date first above written.
M Line Holdings, Inc.
| By: |
/s/ Anthony L. Anish |
|
| |
Anthony L. Anish |
|
| |
Chief Operating Officer |
|
| GEL PROPERTIES, LLC. |
|
| |
|
| By: |
|
|
| Name: |
Samuel Eisenberg |
|
| Title: |
Manager |
|
AGGREGATE SUBSCRIPTION AMOUNT:
| Aggregate Principal Amount of Note: |
$100,000.00 |
Aggregate Purchase Price:
Note 1: $50,000.00 less $2,500.00 in legal
fees and $4,750.00 in third party due diligence fees to Anubis Capital Partners, LLC.
Note 2: $50,000.00 less $2,500.00 in legal
fees and $4,750.00 in third party due diligence fees to Anubis Capital Partners, LLC.
EXHIBIT A
144 NOTE - $50K
/s/ Anthony L. Anish
EXHIBIT B
BACK END NOTE 1
$50K
/s/ Anthony L. Anish
THIS NOTE
AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US $50,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 30, 2015
BACK END NOTE
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of GEL PROPERTIES, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand Dollars exactly (U.S.
$50,000.00) on May 30, 2015 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder
at the rate of 8% per annum commencing on May 30, 2014. The interest will be paid to the Holder in whose name this Note is registered
on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note
are payable at 16192 Coastal Highway, Lewes, DE 19958, initially, and if changed, last appearing on the records of the Company
as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding
principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the
Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company.
The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy
and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest
shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
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| Initials |
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2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”),
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without
restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 55%
of the lowest closing bid price of the Common Stock as reported on the OTCQB marketplace which the Company’s
shares are traded or any market upon which the Common Stock may be traded in the future (“Exchange”), for the
ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such
Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in
blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the
Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead of 55%
while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
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| Initials |
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(c) This
Note may not be prepaid, except that if the $50,000 Rule 144 convertible redeemable note issued by the Company of even date herewith
is redeemed by the Company within 6 months of the issuance date of such Note, all obligations of the Company under this Note and
all obligations of the Holder under the Holder issued Back End Note will be automatically be deemed satisfied and this Note and
the Holder issued Back End Note will be automatically be deemed cancelled and of no further force or effect.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the un-paid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as deter-mined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
| /s/ Anthony L. Anish |
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| Initials |
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8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note shall
be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder and not cure such breach within 10 days; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged with-in sixty (60) days after such appointment; or
(e) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of one hundred thousand dollars ($100,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) Intentionally
Deleted;
| /s/ Anthony L. Anish |
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| Initials |
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(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 5 business days of the request of the Holder ; or
(m) The
Company’s Common Stock has a closing bid price of less than $0.003 per share for at least 5 consecutive trading days; or
(n) The
aggregate dollar trading volume of the Company’s Common Stock is less than forty thousand dollars ($40,000.00) in any 5 consecutive
trading days; or
(o) The
Company shall cease to be “current” in its filings with the Securities and Exchange Commission; or.
(p) The
Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at any time thereafter, unless
cured (except for 8(m) and 8(n) which are incurable defaults, the sole remedy of which is to allow the Holder to cancel
both this Note and the Holder Issued Note, and in each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of
16% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
Further, if the Note becomes due and payable, the Holder may use the outstanding principal and interest due under the Note to offset
any payment obligations it may have to the Company. In the event of a breach of 8(k) the penalty shall be $250 per day the shares
are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall
increase to $500 per day beginning on the 10th day. Once cash funded, the penalty for a breach of Section 8(p) shall
be an increase of the outstanding principal amounts by 20%. Once cash funded, in the event of a breach of Section 8(i), the outstanding
principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under
this Note shall increase by 10%.
If the Holder shall
commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney,
then, if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other
costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
| /s/ Anthony L. Anish |
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| Initials |
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9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a “144-
3(a)(9)” opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. Prior
to cash funding of this Note, The Company will issue irrevocable transfer agent instructions reserving 3x the number of shares
of Common Stock necessary to allow the holder to convert this note based on the discounted conversion price set forth in Section
4(a) herewith and in accordance with the conversion procedure set forth in Section 12 of the $50,000 144 note issued on even date
herewith. The reserve shall be replenished as needed to allow for conversions of this Note. Upon full conversion of this Note,
the reserve representing this Note shall be cancelled. The Company will pay all transfer agent costs associated with issuing and
delivering the shares.
13. The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
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| Initials |
|
IN WITNESS WHEREOF, the Company has caused
this Note to be duly execut-ed by an officer thereunto duly authorized.
Dated: 5/30/14
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M Line Holdings, Inc. |
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By: |
/s/ Anthony L. Anish |
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Title: |
COO |
| /s/ Anthony L. Anish |
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| Initials |
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $__________ of the above Note into ___________ Shares
of Common Stock of M Line Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If Shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect
thereto.
Date of Conversion: ______________________________________________________
Applicable Conversion Price: _______________________________________________
Signature: ______________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _______________________________________________________________
_______________________________________________________________
SSN or EIN: _____________________
Shares are to be registered in the following name: _______________________________
Name: _________________________________________________________________
Address: _______________________________________________________________
Tel: _____________________________________
Fax: _____________________________________
SSN or EIN: _______________________________
Shares are to be sent or delivered to the following
account:
Account Name: _________________________________________________________
Address: _______________________________________________________________
| /s/ Anthony L. Anish |
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| Initials |
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THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. LENDERS SHOULD BE AWARE THAT THEY MAY
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
GEL PROPERTIES, LLC
COLLATERALIZED SECURED PROMISSORY NOTE
BACK END NOTE
| $50,000.00 |
|
Lewes, DE |
| |
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May 30, 2014 |
FOR VALUE
RECEIVED, GEL Properties, LLC, a Delaware Limited Liability Company (the “Company”) hereby absolutely and unconditionally
promises to pay to M Line Holdings, Inc (the “Lender”), or order, the principal amount of Fifty Thousand Dollars ($50,0000)
no later than January 30, 2015, unless the Lender does not meet the “current information requirements” required under
Rule 144 of the Securities Act of 1933, as amended, in which case the Company may declare the offsetting note issued by the Lender
on the same date herewith to be in Default (as defined in that note) and cross cancel its payment obligations under this Note as
well as the Lenders payment obligations under the offsetting note. This Full Recourse Note shall bear simple interest at the rate
of 8%.
| 2. | Repayments and Prepayments; Security. |
a. All
principal under this Note shall be due and payable no later than January 30, 2015, unless the Lender does not meet the “current
information requirements” required under Rule 144 of the Securities Act of 1933, as amended, in which case the Company may
declare the offsetting note issued by the Lender on the same date herewith to be in Default (as defined in that note) and cross
cancel its payment obligations under this Note as well as the Lenders payment obligations under the offsetting note.
b. The
Company may pay this Note at any time. This note may not be assigned by the Lender, except by operation of law.
/s/ Anthony L. Anish
c. This
Note shall initially be secured by the pledge of the $50,000.00 8% convertible promissory note issued to the Company by the Lender
on even date herewith (the “Lender Note”). The Company may exchange this collateral for other collateral with an
appraised value of at least $50,000.00, by providing 3 days prior written notice to the Lender. If the Lender does not object
to the substitution of collateral in that 3 day period, such substitution of collateral shall be deemed to have been accepted
by the Lender. All collateral shall be retained by New Venture Attorneys, P.C., which shall act as the escrow agent for the
collateral for the benefit of the Lender. The Company may not effect any conversions under the Lender Note until it has made full
cash payment for the portion of the Lender Note being converted.
_________
Lender Initials to Acceptance of bolded section above.
| 3. | Events of Default; Acceleration. |
a. The
principal amount of this Note is subject to prepayment in whole or in part upon the occurrence and during the continuance of any
of the following events (each, an “Event of Default”): the initiation of any bankruptcy, insolvency, moratorium, receivership
or reorganization by or against the Company, or a general assignment of assets by the Company for the benefit of creditors. Upon
the occurrence of any Event of Default, the entire unpaid principal balance of this Note and all of the unpaid interest accrued
thereon shall be immediately due and payable. The Company may offset amounts due to the Lender under this Note by similar amounts
that may be due to the Company by the Lender resulting from breaches under the Lender Note.
b. No
remedy herein conferred upon the Lender is intended to be exclusive of any other remedy and each and every remedy shall be cumulative
and in addition to every other remedy hereunder, now or hereafter existing at law or in equity or otherwise. The Company accepts
and agrees that this Note is a full recourse note and that the Holder may exercise any and all remedies available to it under law.
a. All
notices, reports and other communications required or permitted hereunder shall be in writing and may be delivered in person, by
telecopy with written confirmation, overnight delivery service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed (i) if to a Lender, at such Lender’s address as the Lender shall have furnished
the Company in writing and (ii) if to the Company at such address as the Company shall have furnished the Lender(s) in writing.
b. Each
such notice, report or other communication shall for all purposes under this Note be treated as effective or having been given
when delivered if delivered personally or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited
in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or, if sent
by electronic communication with confirmation, upon the delivery of electronic communication.
/s/ Anthony L. Anish
a. Neither
this Note nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by a signed statement in
writing.
b. No
failure or delay by the Lender to exercise any right hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other right, power or privilege. The provisions of this Note are severable
and if any one provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, such invalidity
or unenforceability shall affect only such provision in such jurisdiction. This Note expresses the entire understanding of the
parties with respect to the transactions contemplated hereby. The Company and every endorser and guarantor of this Note regardless
of the time, order or place of signing hereby waives presentment, demand, protest and notice of every kind, and assents to any
extension or postponement of the time for payment or any other indulgence, to any substitution, exchange or release of collateral,
and to the addition or release of any other party or person primarily or secondarily liable.
c. If
Lender retains an attorney for collection of this Note, or if any suit or proceeding is brought for the recovery of all, or any
part of, or for protection of the indebtedness respected by this Note, then the Company agrees to pay all costs and expenses of
the suit or proceeding, or any appeal thereof, incurred by the Lender, including without limitation, reasonable attorneys’
fees.
d. This
Note shall for all purposes be governed by, and construed in accordance with the laws of the State of New York (without reference
to conflict of laws).
e. This
Note shall be binding upon the Company’s successors and assigns, and shall inure to the benefit of the Lender’s successors
and assigns.
/s/ Anthony L. Anish
IN WITNESS WHEREOF, the Company has caused
this Note to be executed by its duly authorized officer to take effect as of the date first hereinabove written.
| |
GEL PROPERTIES, LLC |
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By: |
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Title: |
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APPROVED: |
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M LINE HOLDINGS, INC. |
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By: |
/s/ Anthony L. Anish |
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Title: |
COO |
/s/ Anthony L. Anish
THIS NOTE AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US $60,673.97
REPLACEMENT
NOTE- ORIGINALLY ISSUED 9/29/2011 IN THE AMOUNT OF $150,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 30 2015
FOR VALUE
RECEIVED, M Line Holdings, Inc. (the “Company”) promises to pay to the order of GEL PROPERTIES, LLC and its authorized
successors and permitted assigns (“Holder”), the aggregate principal face amount of Sixty Thousand Six Hundred
Seventy Three Dollars and 97/100 cents exactly (U.S. $60,673.97) on May 30, 2015 (“Maturity Date”) and to pay
interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on May 30, 2014. The interest will
be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers
of this Note. The principal of, and interest on, this Note are payable at 16192 Coastal Highway, Lewes, DE 19958, initially, and
if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The
Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any
amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder
at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a
payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent
of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to
paragraph 4(b) herein.
This Note is subject to the following additional
provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”),
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”)
without restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal
to 55% of the lowest closing bid price of the Common Stock as reported on the OTCQB marketplace which the
Company’s shares are traded or any market upon which the Common Stock may be traded in the future (“Exchange”),
for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided
such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern
Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered
within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering
the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the
Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof
in blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the
event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead
of 55% while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
|
(c) The
Notes may be prepaid with the following penalties: (i) if the note is prepaid within 90 days of the issuance date, then at 125%
of the face amount plus any accrued interest; (ii) if the note is prepaid within 91 days after the issuance date but less than
151 days after the issuance date, then at 140% of the face amount plus any accrued interest and (iii) if the note is prepaid within
151 days after the issuance date but less than 180 days after the issuance date, then at 150% of the face amount plus any accrued
interest. This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days
of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
| /s/ Anthony L. Anish |
|
| Initials |
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7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
| /s/ Anthony L. Anish |
|
| Initials |
|
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder; or
(m) The
Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n) The
Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at
any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been
waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the
Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 16%
per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th
day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case of a breach
of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the
outstanding principal due under this Note shall increase by 10%.
If the Holder
shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney,
then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other
costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way 5 be affected or impaired thereby.
| /s/ Anthony L. Anish |
|
| Initials |
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10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144-3(a(9)
opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 69,444,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
The Holder will initially submit a conversion notice/request for a tranche of shares to be issued with an agreed to conversion
price equal to $1000 (an “Initial Tranche Request”). The shares that are the subject to the Initial Trance Request
may be subsequently reconverted and repriced as follows: (i) the Holder shall immediately reduce the outstanding balance of the
Note by $1,000 and simultaneously send to the Company a live” or “repriced” conversion notice for the $1,000
priced using the conversion formula set forth in Section 4(a) of this Note, (ii) As the balance of the shares in the Initial Tranche
Request are converted via the delivery of the “live” or “repriced” conversion notice, the balance of the
Note shall be reduced using the formula set forth in Section 4(a) of this Note, as if such shares had originally been converted
as set forth in Section 4(a). By way of example, if the Tranche Conversion Request was for 1,000,000 shares and the face amount
of the Note was $25,000 the Holder would initially reduce $1,000 from the face amount leaving a balance of $24,000 and send the
Company a repriced conversion notice deducting that number of shares from the Initial Tranche Request necessary to equal $1,000
using the formula set forth in Section 4(a). Additionally, if, the following day, the Holder sent a “live” or “repriced”
conversion notice to the Company for 25,000 shares and, using the formula set forth in Section 4(a) the true conversion price
would have been $6,000, then the Holder shall make an additional reduction of $6,000 on the Note and shall indicate both the Note
balance and the share reserve balance on the “live” conversion notice. This process shall be repeated until there is
no balance remaining outstanding on the Note. Upon full conversion of this Note, the any shares remaining in the Share Reserve
shall be cancelled.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
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IN WITNESS WHEREOF, the Company
has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: May 30, 2014
| |
M LINE HOLDINGS, INC |
| |
|
| |
By: |
/s/ Anthony L. Anish |
| |
|
Anthony L. Anish, Chief Operating Officer |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $__________ of the above Note into ___________ Shares
of Common Stock of M Line Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If Shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect
thereto.
Date of Conversion: ______________________________________________________
Applicable Conversion Price: _______________________________________________
Signature: ______________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _______________________________________________________________
_______________________________________________________________
SSN or EIN: _____________________
Shares are to be registered in the following name: ___________________________________
Name: _________________________________________________________________
Address: _______________________________________________________________
Tel: _____________________________________
Fax: _____________________________________
SSN or EIN: _______________________________
Shares are to be sent or delivered to the following
account:
Account Name: __________________________________________________________
Address: _______________________________________________________________
| /s/ Anthony L. Anish |
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| Initials |
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DISBURSEMENT AUTHORIZATION
(MEMORANDUM)
TO: GEL PROPERTIES, LLC.
FROM: M LINE HOLDINGS, INC
DATE: May 30, 2014
RE: Disbursement of Funds
In connection with
the funding of an aggregate of $50,000 pursuant to that certain Convertible Redeemable Note dated as of May 30, 2014 (the “Agreement”),
you are hereby directed to disburse such funds as follows:
| 1. | $2,500.00 to New Venture Attorneys, P.C. in accordance
with the wire transfer instructions attached as Schedule A hereto; |
| 2. | $4,750 to Anubis Capital Partners, LLC, in accordance with
the wire transfer instructions attached as Schedule B hereto; and |
| 3. | $42,750 to M Line Holdings, Inc. in accordance with the
wire transfer instructions attached as Schedule C hereto; |
*with identical payments to be
made on cash funding of $50,000 back end note
| |
/s/ Anthony L. Anish |
| |
Anthony L. Anish, Chief Operating Officer |
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT A
NEW VENTURE ATTORNEYS
WIRING INFORMATION
Please wire funds to:
Bank of America
Routing No: 026009593
Acct No.: 164109387780
| Beneficiary: |
New Venture Attorneys, PC, IOLTA account |
| |
|
| Attorney info: |
New Venture Attorneys, P.C. |
| |
900 E. Hamilton Ave, Suite 100 |
| |
Campbell, CA 95008 |
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT B
ANUBIS CAPITAL PARTNERS WIRING INFO
Capital One, N.A.
8989 Preston Road
Frisco, TX 75034
| Routing No: |
111901014 |
| Acct No.: |
3622044799 |
| Beneficiary: |
Anubis Capital Partners |
2550 Midway Road Suite 198
Carrolton, TX 75006
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT C
[WIRING INFO FOR ISSUER]
| /s/ Anthony L. Anish |
|
| Company Initials |
|
THIS NOTE AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US $50,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 30 2015
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of GEL PROPERTIES, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand Dollars exactly (U.S.
$50,000.00) on May 30, 2015 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder
at the rate of 8% per annum commencing on May 30, 2014. The interest will be paid to the Holder in whose name this Note is registered
on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note
are payable at 16192 Coastal Highway, Lewes, DE 19958, initially, and if changed, last appearing on the records of the Company
as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding
principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the
Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company.
The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy
and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest
shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. ice charge will be made for such registration or transfer or exchange, except that Holder shall pay
any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
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| Initials |
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2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”),
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after
180 days, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s
common stock (the “Common Stock”) without restrictive legend of any nature, at a price (“Conversion
Price”) for each share of Common Stock equal to 55% of the lowest closing bid price of the Common Stock
as reported on the OTCQB marketplace which the Company’s shares are traded or any market upon which the Common Stock
may be traded in the future (“Exchange”), for the ten prior trading days including the day upon
which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered by fax or other electronic
method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include
the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded.
Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days
of receipt by the Company of the Notice of Conversion. Once the Holder has received such shares of Common Stock, the Holder shall
surrender this Note to the Company, executed by the Holder evidencing such Holder’s intention to convert this Note or a
specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued, but unpaid interest shall be subject
to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded to the nearest whole share. In the event the Company experiences a DTC “Chill”
on its shares, the conversion price shall be decreased to 45% instead of 55% while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
|
(c) The
Notes may be prepaid with the following penalties: (i) if the note is prepaid within 90 days of the issuance date, then at 125%
of the face amount plus any accrued interest; (ii) if the note is prepaid within 91 days after the issuance date but less than
151 days after the issuance date, then at 140% of the face amount plus any accrued interest and (iii) if the note is prepaid within
151 days after the issuance date but less than 180 days after the issuance date, then at 150% of the face amount plus any accrued
interest. This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days
of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
| /s/ Anthony L. Anish |
|
| Initials |
|
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
| /s/ Anthony L. Anish |
|
| Initials |
|
(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder; or
(m) The
Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n) The
Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at any time
thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 16%
per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the
10th day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%.
In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not
paid at maturity, the outstanding principal due under this Note shall increase by 10%.
If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder
prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
| /s/ Anthony L. Anish |
|
| Initials |
|
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a(9)
opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 69,444,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
The Holder will initially submit a conversion notice/request for a tranche of shares to be issued with an agreed to conversion
price equal to $1000 (an “Initial Tranche Request”). The shares that are the subject to the Initial Trance Request
may be subsequently reconverted and repriced as follows: (i) the Holder shall immediately reduce the outstanding balance of the
Note by $1,000 and simultaneously send to the Company a live” or “repriced” conversion notice for the $1,000
priced using the conversion formula set forth in Section 4(a) of this Note, (ii) As the balance of the shares in the Initial Tranche
Request are converted via the delivery of the “live” or “repriced” conversion notice, the balance of the
Note shall be reduced using the formula set forth in Section 4(a) of this Note, as if such shares had originally been converted
as set forth in Section 4(a). By way of example, if the Tranche Conversion Request was for 1,000,000 shares and the face amount
of the Note was $25,000 the Holder would initially reduce $1,000 from the face amount leaving a balance of $24,000 and send the
Company a repriced conversion notice deducting that number of shares from the Initial Tranche Request necessary to equal $1,000
using the formula set forth in Section 4(a). Additionally, if, the following day, the Holder sent a “live” or “repriced”
conversion notice to the Company for 25,000 shares and, using the formula set forth in Section 4(a) the true conversion price
would have been $6,000, then the Holder shall make an additional reduction of $6,000 on the Note and shall indicate both the Note
balance and the share reserve balance on the “live” conversion notice. This process shall be repeated until there is
no balance remaining outstanding on the Note. Upon full conversion of this Note, the any shares remaining in the Share Reserve
shall be cancelled.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS
WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: May 30, 2014
| |
M LINE HOLDINGS, INC |
| |
|
| |
By: |
/s/ Anthony L. Anish |
| |
|
Anthony L. Anish, Chief Operating officer |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $__________ of the above Note into ___________ Shares
of Common Stock of M Line Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If Shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect
thereto.
Date of Conversion: ______________________________________________________
Applicable Conversion Price: _______________________________________________
Signature: ______________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _______________________________________________________________
______________________________________________________________
SSN or EIN: _____________________
Shares are to be registered in the following name: ____________________________________
Name: _________________________________________________________________
Address: _______________________________________________________________
Tel: _____________________________________
Fax: _____________________________________
SSN or EIN: _______________________________
Shares are to be sent or delivered to the following
account:
Account Name: __________________________________________________________
Address: _______________________________________________________________
UNANIMOUS CONSENT IN LIEU OF A SPECIAL
MEETING OF DIRECTORS OF
M LINE HOLDINGS, INC.
The undersigned, being all of the directors
of M Line Holdings, Inc, a corporation of the State of Nevada (the “Corporation”), do hereby authorize and approve
the actions set forth in the following resolutions without the formality of convening a meeting, and do hereby consent to the following
actions of this Corporation, which actions are hereby deemed affective as of the date hereof:
RESOLVED: That officers of this
Corporation are authorized and directed to amend and restate a $50,000 portion (plus accrued interest) of a $150,000.00
note issued to Spagus Capital Partners, LLC on September 29, 2011 into a new promissory note to GEL Properties, LLC, in the amount
of $60,673.97 to provide conversion features equal to 55% of the lowest closing bid price of the last day of 10 trading days prior
to conversion, as well as 8% interest and become due and payable on May 30, 2015; and
RESOLVED: That the officers of this
Corporation are authorized and directed to issue a $50,000 promissory note to GEL Properties, LLC, which provides conversion
features equal to 55% of the lowest closing bid price of the Corporation’s Common Stock for the last 10 trading days prior
to conversion, as well as 8% per annum interest and become due and payable on May 30, 2015; and
RESOLVED FURTHER: That the officers
of this corporation are authorized and directed to execute transfer agent instructions with the Company’s transfer
agent to irrevocably reserve 138,888,000 shares of the Company’s Common Stock with the transfer agent for the benefit of
GEL Properties, LLC for conversion of the above aforementioned notes and
RESOLVED FURTHER: That
officers of this Corporation are authorized and directed to issue an additional promissory note in the amount of
$50,000.00 to GEL Properties, LLC which provides conversion features equal to 55% of the lowest closing bid price of the
Corporation’s Common Stock for the last 10 trading days prior to conversion, as well as 8% per annum interest and
become due and payable on May 30, 2015; and
RESOLVED FURTHER: That the aforementioned notes
shall be paid for by GEL Properties, LLC by the payment to the Corporation of $50,000 and by the issuance of a $50,000
promissory note of GEL Properties, LLC secured by assets with a fair market value of not less than $50,000.00; and
RESOLVED FURTHER, that each of the
officers of the Corporation be, and they hereby are, authorized and empowered to execute and deliver such documents, instruments
and papers and to take any and all other action as they or any of them may deem necessary or appropriate of the purpose of carrying
out the intent of the foregoing resolutions and the transactions contemplated thereby; and that the authority of such officers
to execute and deliver any such documents, instruments and papers and to take any such other action shall be conclusively evidenced
by their execution and delivery thereof or their taking thereof.
The undersigned, by affixing their signatures
hereto, do hereby consent to, authorize and approve the foregoing actions in their capacity as a majority of the direction of M
Line Holdings, Inc.
Dated: May 30, 2014
| /s/ Bruce Barren |
|
| Bruce Barren |
|
| /s/ George Colin |
|
| George Colin |
|
| /s/ Jitu Banker |
|
| Jitu Banker |
|
| /s/ Anthony L. Anish |
|
| Anthony Anish |
|
DEBT PURCHASE AGREEMENT
This Debt Purchase
Agreement (the “Agreement”) made as of this 30th day of February, 2014, by and between GEL Properties, LLC
(the “Buyer”) and Spagus Capital Partners, LLC (the “Seller”).
| 1. | PURCHASE AND SALE OF THE CONVERTIBLE NOTE |
Upon the terms and conditions herein contained,
at the Closing (as hereinafter defined), the Seller hereby sells, assigns and transfers to the Buyer and the Buyer agrees to purchase
from the Seller the “Transferred Rights” of the Seller and all rights thereto. Transferred Rights shall mean all rights
with respect to $50,000 in principal and proportional accrued interest (the “Assigned Portion”) under that promissory
note in the amount of $150,000 issued by M Line Holdings, Inc. (“Borrower” or “Company”) on September 29,
2011, a true and correct copy which has been provided to New Venture Attorneys, P.C. (the “Note”). By its signatures
hereto the Borrower accepts the assignment of the Transferred Rights to Buyer and agrees that Buyer may convert the Transferred
Rights into shares of the Company’s common stock.
The purchase price for the Assigned Portion
of the Note shall be the Buyer’s payment of Fifty Thousand Dollars ($50,000.00) to the Seller, for the Assigned Portion (the
“Purchase Price”).
The closing of the transactions contemplated
by this Agreement (the “Closing”) shall take place simultaneously with the delivery of the Purchase Price via wire
transfer of immediately available funds against the assignment of the Note. The funds will be wired as set forth in Exhibit A.
4. REPRESENTATIONS AND WARRANTIES
OF SELLER The Seller hereby represents and warrants to the Buyer as follows:
4.1 Status
of the Seller and the Note. The Seller is the beneficial owner of the Note. The Note is currently outstanding and Seller is
informed by Company that the Note represents a bona fide debt obligation of the Company.
4.2 Authorization;
Enforcement. (i) Seller has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to sell each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Seller and the consummation by it of the transactions contemplated hereby (including, without limitation,
the sale of the Note to the Buyer) have been duly authorized by the Seller and no further consent or authorization of the Seller
or its members is required, (iii) this Agreement has been duly executed and delivered by the Seller, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general
application.
4.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Seller and the consummation by the Seller of the
transactions contemplated hereby (including, without limitation, the sale of the Note to the Buyer) will not (i) conflict with
or result in a violation of any provision of its certificate of formation or other organizational documents, or (ii) violate or
conflict with or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time
or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, note, bond, indenture or other instrument to which Seller are a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which Seller are subject) applicable to Seller or the Note is bound or affected. The Seller is
not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver
or perform any of its obligations under this Agreement in accordance with the terms hereof.
4.4 Title;
Rule 144 Matters. Seller has good and marketable title to the Note. Seller is not an “Affiliate” of the Company,
as that term is defined in Rule 144 of the Securities Act of 1933, as amended (the “1933 Act”), as such Buyer will
be able to track the holding period of the Seller.
4.5 Consent
of the Company.
(i) The Company,
as evidence by its signature at the foot of this Agreement, hereby represents and warrants that, upon delivery to the Company of
the Note, the Company shall promptly cause to be issued to and in the name of Buyer one of more new executed Notes in the aggregate
amount of $50,000.00 plus accrued interest but otherwise having the sale terms (including, but not necessarily limited to, referring
to the original issue date) as in the Note. The Note may contain the same restrictive legend as provided in the original Note,
but no stop transfer order. The Note is currently outstanding and represents a bona fide debt obligation of the Company.
(ii) The
signature by the Company also represents the Company’s agreement to treat Buyer as a party to, and having all the rights
of the Seller with respect to the Transferred Rights.
5. REPRESENTATIONS,
WARRANTIES AND ACKNOWLEDGEMENTS OF THE BUYER. The Buyer hereby represents warrants and acknowledges to the Seller as follows:
5.1 Sophisticated
Investor. The Buyer has sufficient knowledge and experience of financial and business matters, is able to evaluate the merits
and risks of the partial purchase of the Note and has had substantial experience in previous private and public purchases of securities.
5.2 Authorization;
Enforcement. (i) Buyer has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to purchase each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Buyer and the consummation by it of the transactions contemplated hereby (including, without limitation,
the purchase of the Note by the Buyer) have been duly authorized by the Buyer and no further consent or authorization of the Buyer
or its members is required, (iii) this Agreement has been duly executed and delivered by the Buyer, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general application.
5.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Buyer and the consummation by the Buyer of the
transactions contemplated hereby will not (i) conflict with or result in a violation of any provision of its certificate of formation
or other organizational documents, or (ii) violate or conflict with or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement, note, bond, indenture or other instrument to which Buyer
is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory organizations to which Buyer is subject) applicable to Seller
or the Note is bound or affected. The Buyer is not required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its obligations under this Agreement in accordance with the terms hereof.
6. MISCELLANEOUS
6.1 Binding
Effect; Benefits. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective
successors and permitted assigns. Except as otherwise set forth herein, this Agreement may not be assigned by any party hereto
without the prior written consent of the other party hereto. Except as otherwise set forth herein, nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns
any rights, remedies, obligations or liabilities under or by any reason of this Agreement.
6.2 Notices.
All notices, requests, demands and other communications which are required to be or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person, or transmitted by telecopy or telex, or upon receipt
after dispatch by certified or registered first class mail, postage prepaid, return receipt requested, to the party to whom the
same is so given or made, at the following addresses (or such others as shall be provided in writing hereafter):
GEL Properties, LLC
16192
Coastal Highway
Lewes,
DE 19958
Attn: Samuel Eisenberg
Spagus Capital Partners, LLC
250 F. Centerville Road
Warwick, RI 02886
6.3 Entire
Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
6.4 Further
Assurances. After the Closing, at the request of either party, the other party shall execute, acknowledge and deliver, without
further consideration, all such further assignments, conveyances, endorsements, deeds, powers of attorney, consents and other documents
and take such other action as may be reasonably requested to consummate the transactions contemplated by this Agreement.
6.5 Headings.
The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be part of
this Agreement or to affect the meaning or interpretation of this Agreement.
6.6 Counterparts.
This Agreement may be executed in any number of counterparts and by facsimile, each of which, when executed, shall be deemed to
be an original and all of which together shall be deemed to be one and the same instrument.
6.7 Governing
Law. This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by
the laws of the State of New York, without giving effect to the conflicts of law principles thereof.
6.8 Severability.
If any term or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the Agreement shall be valid and enforced to the fullest extent permitted
by law.
6.9 Amendments.
This Agreement may not be modified or changed except by an instrument or instruments in writing executed by the parties hereto.
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed as of the date first above written.
| |
BUYER: |
| |
|
| |
GEL PROPERTIES, LLC |
| |
|
| |
By: |
|
| |
Samuel Eisenberg, Managing Member |
| |
|
| |
SELLER: |
| |
|
| |
SPAGUS CAPITAL PARTNERS, LLC |
| |
|
| |
By: |
|
| |
|
| |
Title: |
|
| ACCEPTED AND AGREED: |
|
| |
|
| M LINE HOLDINGS, INC |
|
| |
|
| By: |
/s/ Anthony L. Anish |
|
| |
|
|
| Title: |
COO |
|
EXHIBIT A
WIRE INSTRUCTIONS FOR SELLER
PLEASE WIRE YOUR FUNDS TO THE FOLLOWING
PLEASE INSERT COMPLETE BANK WIRING INFO INCLUDING BANK ADDRESS
AS WELL AS ADDRESS
NON-AFFILIATION LETTER
May 30, 2014
Counsel to M LINE HOLDINGS, INC.
Counsel to GEL Properties, LLC
Gentlemen:
Please let
this letter serve as confirmation that Spagus Capital Partners, LLC is not now, and has not been during the preceding 90 days,
an officer, director, 10% or more shareholder of M LINE HOLDINGS, INC. or in any other way an “affiliate” (as that
term is defined in Rule 144(a)(1) adopted pursuant to the Securities Act of 1933, as amended) of such issuer.
| Very Truly yours, |
|
| |
|
| SPAGUS CAPITAL PARTNERS, LLC |
|
| |
|
| By: |
|
|
| |
|
|
| Title: |
|
|
DEBT PURCHASE AGREEMENT
This Debt Purchase Agreement (the
“Agreement”) made as of this 6th day of February, 2014, by and between GEL Properties, LLC (the “Buyer”)
and Spagus Capital Partners, LLC (the “Seller”).
1. PURCHASE AND SALE OF THE CQNVERTIBLE
NOTE
Upon the terms and conditions herein
contained, at the Closing (as hereinafter defined), the Seller hereby sells, assigns and transfers to the Buyer and the Buyer agrees
to purchase from the Seller the “Transferred Rights” of the Seller and all rights thereto. Transferred Rights shall
mean all rights with respect to $50,000 in principal and proportional accrued interest (the “Assigned Portion”) under
that promissory note in the amount of $150,000 issued by M Line Holdings, Inc. (“Borrower” or “Company”)
on May 31, 2011, a true and correct copy which has been provided to New Venture Attorneys, P.C. (the “Note”). By its
signatures hereto the Borrower accepts the assignment of the Transferred Rights to Buyer and agrees that Buyer may convert the
Transferred Rights into shares of the Company’s common stock.
2. CONSIDERATION
The purchase price for the Assigned
Portion of the Note shall be the Buyer’s payment of Fifty Thousand Dollars ($50,000.00) to the Seller, for the Assigned Portion
(the “Purchase Price”).
3. CLOSING
The closing of the transactions contemplated
by this Agreement (the “Closing”) shall take place simultaneously with the delivery of the Purchase Price via wire
transfer of immediately available funds against the assignment of the Note. The funds will be wired as set forth in Exhibit A.
4. REPRESENTATIONS AND WARRANTIES
OF SELLER The Seller hereby represents and warrants to the Buyer as follows:
4.1
Status of the Seller and the Note. The Seller is the beneficial owner of the Note. The Note is currently outstanding and
Seller is informed by Company that the Note represents a bona fide debt obligation of the Company.
4.2 Authorization;
Enforcement. (i) Seller has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to sell each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Seller and the consummation by it of the transactions contemplated hereby (including, without limitation,
the sale of the Note to the Buyer) have been duly authorized by the Seller and no further consent or authorization of the Seller
or its members is required, (iii) this Agreement has been duly executed and delivered by the Seller, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general
application.
4.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Seller and the consummation by the Seller of the
transactions contemplated hereby (including, without limitation, the sale of the Note to the Buyer) will not (i) conflict with
or result in a violation of any provision of its certificate of formation or other organizational documents, or (ii) violate or
conflict with or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time
or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, note, bond, indenture or other instrument to which Seller are a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which Seller are subject) applicable to Seller or the Note is bound or affected. The Seller is
not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver
or perform any of its obligations under this Agreement in accordance with the terms hereof.
4.4 Title:
Rule 144 Matters. Seller has good and marketable title to the Note. Seller is not an “Affiliate” of the Company,
as that term is defined in Rule 144 of the Securities Act of 1933, as amended (the “1933 Act”), as such Buyer will
be able to track the holding period of the Seller.
| 4.5 | Consent of the Company. |
(i)
The Company, as evidence by its signature at the foot of this Agreement, hereby represents and warrants that, upon delivery
to the Company of the Note, the Company shall promptly cause to be issued to and in the name of Buyer one of more new executed
Notes in the aggregate amount of $50,000.00 but otherwise having the sale terms (including, but not necessarily limited to, referring
to the original issue date) as in the Note. The Note may contain the same restrictive legend as provided in the original Note,
but no stop transfer order. The Note is currently outstanding and represents a bona fide debt obligation of the Company.
(ii)
The signature by the Company also represents the Company’s agreement to treat Buyer as a party to, and having all the rights
of the Seller with respect to the Transferred Rights.
5.
REPRESENTATIONS, WARRANTIES AND ACKNOWLEDGEMENTS OF THE BUYER. The Buyer hereby represents warrants and acknowledges
to the Seller as follows:
5.1 Sophisticated
Investor. The Buyer has sufficient knowledge and experience of financial and business matters, is able to evaluate the merits
and risks of the partial purchase of the Note and has had substantial experience in previous private and public purchases of securities.
5.2 Authorization:
Enforcement (i) Buyer has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to purchase each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Buyer and the consummation by it of the transactions contemplated hereby (including, without limitation,
the purchase of the Note by the Buyer) have been duly authorized by the Buyer and no further consent or authorization of the Buyer
or its members is required, (iii) this Agreement has been duly executed and delivered by the Buyer, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general application.
5.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Buyer and the consummation by the Buyer of the
transactions contemplated hereby will not (i) conflict with or result in a violation of any provision of its certificate of formation
or other organizational documents, or (ii) violate or conflict with or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement, note, bond, indenture or other instrument to which Buyer
is a party, or (iii) result in a violation of any law, rule, regulation, order, Judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory organizations to which Buyer is subject) applicable to Seller
or the Note is bound or affected. The Buyer is not required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its obligations under this Agreement in accordance with the terms hereof.
6.1 Binding
Effect: Benefits. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective
successors and permitted assigns. Except as otherwise set forth herein, this Agreement may not be assigned by any party hereto
without the prior written consent of the other party hereto. Except as otherwise set forth herein, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted
assigns any rights, remedies, obligations or liabilities under or by any reason of this Agreement.
6.2 Notices.
All notices, requests, demands and other communications which are required to be or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person, or transmitted by telecopy or telex, or upon receipt
after dispatch by certified or registered first class mail, postage prepaid, return receipt requested, to the party to whom the
same is so given or made, at the following addresses (or such others as shall be provided in writing hereafter):
GEL Properties, LLC
16192 Coastal
Highway
Lewes, DE 19958
Attn: Samuel Eisenberg
Spagus Capital Partners, LLC
250 F. Centerville Road
Warwick, RI 02886
6.3 Entire
Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
6.4 Further
Assurances. After the Closing, at the request of either party, the other party shall execute, acknowledge and deliver,
without further consideration, all such further assignments, conveyances, endorsements, deeds, powers of attorney, consents
and other documents and take such other action as may be reasonably requested to consummate the transactions contemplated by
this Agreement.
6.5 Headings.
The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be part of
this Agreement or to affect the meaning or interpretation of this Agreement.
6.6 Counterparts.
This Agreement may be executed in any number of counterparts and by facsimile, each of which, when executed, shall be deemed to
be an original and all of which together shall be deemed to be one and the same instrument.
6.7 Governing
Law. This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by
the laws of the State of New York, without giving effect to the conflicts of law principles thereof.
6.8
Severability. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term
and provision of the Agreement shall be valid and enforced to the fullest extent permitted by law.
6.9 Amendments.
This Agreement may not be modified or changed except by an instrument or instruments in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed as of the date first above written.
| |
BUYER: |
| |
GEL PROPERTIES, LLC |
| |
|
|
| |
By: |
/s/ Samuel
Eisenberg |
|
| |
Samuel Eisenberg, Managing Member |
| |
|
| |
SELLER: |
| |
|
| |
SPAGUS CAPITAL PARTNERS, LLC |
| |
|
| |
By: |
/s/ Armand C. Spaziano |
|
| |
Title: |
Principal |
|
| ACCEPTED AND AGREED: |
|
| |
|
| M LINE HOLDINGS, INC |
|
| |
|
| By: |
/s/ Anthony L. Anish |
|
| |
|
| Title: |
COO |
|
EXHIBIT A
WIRE INSTRUCTIONS FOR SELLER
PLEASE WIRE YOUR FUNDS TO THE FOLLOWING
PLEASE INSERT COMPLETE BANK WIRING INFO INCLUDING BANK ADDRESS
AS WELL AS ADDRESS
NON-AFFILIATION LETTER
February 6, 2014
Counsel to M LINE HOLDINGS, INC.
Counsel to GEL Properties, LLC
Gentlemen:
Please let this letter
serve as confirmation that Spagus Capital Partners, LLC is not now, and has not been during the preceding 90 days, an officer,
director, 10% or more shareholder of M LINE HOLDINGS, INC. or in any other way an “affiliate” of (as that term is defined
in Rule 144(8)(1) adopted pursuant to the Securities Act of 1933, as amended), of such issuer.
| Very Truly yours, |
|
| |
|
| SPAGUS CAPITAL PARTNERS, LLC |
|
| |
|
| By: |
/s/ Armand C. Spaziano |
|
| |
|
| Title: |
Principal |
|
Restated
6% Convertible Redeemable Note dated
(Spagus
Capital Partners LLC Note Dated 05/31/11)
NOTICE
OF CONVERSION
(To be Executed
by the Registered Holder in order to Convert the Note)
Two Thousand /100 Dollar Conversion
The undersigned
hereby irrevocably elects to convert $2,000.00 of the above note into Shares of Common Stock M Lie Holdings Inc
(MLHC) (Company) according to the conditions set forth in such note, as of the date written below.
If Shares are to be issued in
the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with
respect thereto.
Date of Conversion March 3, 2014
Applicable Conversion
Price $0.00845 = 236,686 Shares
| Signature |
/s/ Samuel Eisenberg |
|
| |
Samuel Eisenberg |
|
| |
Officer |
|
| |
|
|
| |
[Print Name of Holder and Title of Signer] |
|
Address: GEL PROPERTIES, LLC 16192 Coastal Hwy Lewes, DE 19958
SSN or EIN: 27-5333179
Shares are to be registered in the following name:
GEL PROPERTIES LLC
Address:
Shares are to be sent or delivered to the following
account:
Account Name: GEL PROPERTIES, LLC
Account No.
Address: C/o Legend Securities 45 Broadway
32nd Floor
New York NY 10006
Attn: Moshe Greenfeld
| Date & Closing Bid Price |
Balance of |
| 02/24/2014 $0.013 |
Debenture |
| |
$55,250.68 |
 |
2672 Dow Avenue, Tustin, CA 92780
tel: 714.630.6253 • fax: 714.619.2339
email: tony@mlineholdings.com
web site: www.mlineholdings.com |
February 6, 2014
V Stock Transfer LLC
77 Spruce Street, Suite 201
Cedarhurst, NY 11516
Ladies and Gentlemen:
M Line Holdings,
Inc., a Nevada corporation (the “Company”) and Gel Properties, LLC have entered into two Convertible Promissory Notes
in the principal amount of $50,000.00, each (collectively, the “Note”).
A copy of
the Note is attached hereto. You should familiarize yourself with your issuance and delivery obligations, as Transfer Agent, contained
therein. The shares to be issued are to be registered in the names of the registered holder of the securities submitted for conversion
or exercise.
You are hereby
irrevocably authorized and instructed to reserve a sufficient number of shares of common stock (“Common Stock”) of
the Company (initially, 32,000,000 shares of Common Stock for the subject Note which should be held in reserve for the Investor
pursuant to the subject Note as of this date) for issuance upon full conversion of the Note and the convertible promissory note
referenced herein in accordance with the terms thereof. The amount of Common Stock so reserved may be increased, from time to time,
by written instructions of the Company and the Investor.
The ability to convert
the Note in a timely manner is a material obligation of the Company pursuant to the Note. Your firm is hereby irrevocably authorized
and instructed to issue shares of Common Stock of the Company (without any restrictive legend) to the Investor without any further
action or confirmation by the Company by either (i) electronically by crediting the account of a Prime Broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission system, provided that the Company has been made FAST/DRS eligible
by DTCC (DWAC), or (ii) in certificated form without any legend which would restrict the transfer of the shares, and you should
remove all stop-transfer instructions relating to such shares: (A) upon your receipt from the Investor dated within 90 days from
the date of the issuance or transfer request, of: (i) a notice of conversion (“Conversion Notice”) executed by the
Investor; and (ii) an opinion of counsel of the Investor, in form, substance and scope customary for opinions of counsel in comparable
transactions (and satisfactory to the transfer agent), to the effect that the shares of Common Stock of the Company issued to the
Investor pursuant to the Conversion Notice are not “restricted securities” as defined in Rule 144 and should be issued
to the Investor without any restrictive legend; and (B) the number of shares to be issued is less than 4.99% of the total issued
common stock of the Company.
The Company
hereby requests that your firm act immediately, without delay and without the need for any action or confirmation by the Company
with respect to the issuance of Common Stock pursuant to any Conversion Notices received from the Investor.
The Investor
and the Company understands that Island Stock Transfer shall not be required to perform any issuances or transfers of shares if
(a) the Company or request violates, or be in violation of, any terms of the Transfer Agent Agreement, (b) such an issuance or
transfer of shares be in violation of any state or federal securities laws or regulation or (c) the issuance or transfer of shares
be prohibited or stopped as required or directed by a court order
The Company
shall indemnify you and your officers, directors, principals, partners, agents and representatives, and hold each of them harmless
from and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements of its
attorneys) incurred by or asserted against you or any of them arising out of or in connection the instructions set forth herein,
the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of defending yourself
or themselves against any claim or liability hereunder, except that the Company shall not be liable hereunder as to matters in
respect of which it is determined that you have acted with gross negligence or in bad faith. You shall have no liability to the
Company in respect to any action taken or any failure to act in respect of this if such action was taken or omitted to be taken
in good faith, and you shall be entitled to rely in this regard on the advice of counsel.
The Board
of Directors of the Company has approved the foregoing (irrevocable instructions) and does hereby extend the Company’s irrevocable
agreement to indemnify your firm for all loss, liability or expense in carrying out the authority and direction herein contained
on the terms herein set forth.
The Company agrees
that in the event that the Transfer Agent resigns as the Company’s transfer agent, the Company shall engage a suitable replacement
transfer agent that will agree to serve as transfer agent for the Company and be bound by the terms and conditions of these irrevocable
Instructions within five (5) business days. The Investor and the Company agree that the Transfer Agent shall not be required to
perform any issuances or transfers of shares as of the date of the termination of the transfer agreement.
The Investor is intended
to be and are third party beneficiaries hereof, and no amendment or modification to the instructions set forth herein may be made
without the consent of the Investor.
| |
Very truly yours, |
| |
|
| |
M LINE HOLDINGS, INC., INC. |
| |
|
| |
/s/ Anthony L. Anish |
| |
Officer’s name Anthony L. Anish |
| |
Officer’s position Chief Executive Officer |
| Acknowledged and Agreed: |
|
| |
|
| V Stock Transfer, LLC |
|
| By: |
/s/ Yoel Goldfeder |
|
| Name: |
Yoel Goldfeder |
|
| Title: |
CEO |
|
THE SECURITIES
OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)
US $50,000.00
M LINE HOLDINGS, INC
8% CONVERTIBLE REDEEMABLE NOTE
DUE FEBRUARY 6, 2015
FOR VALUE
RECEIVED, M Line Holdings, Inc. (the “Company”) promises to pay to the order of GEL PROPERTIES, LLC and its authorized
successors and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand dollars
exactly (U.S. $50,000.00) on February 6, 2015 (“Maturity Date”) and to pay interest on the principal amount
outstanding hereunder at the rate of 8% per annum commencing on February 6, 2014. The interest will be paid to the Holder in whose
name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of,
and interest on, this Note are payable at 16192 Coastal Highway, Lewes, DE, 19958, initially, and if changed, last appearing on
the records of the Company as designated in writing by the Holder hereof from time to time, The Company will pay each interest
payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be
deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing
on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal
hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such
check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1.
This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested
by the Holder surrendering the same, No service charge will be made for such registration or transfer or exchange, except that
Holder shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2.
The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3.
This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”)
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4.
(a) The Holder of this Note is entitled, at its option, at any
time after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”)
without restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal
to 55% of the lowest closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange
which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”),
for the seven prior trading days including the day upon which a Notice of Conversion is received by the Company
(provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M.
Eastern Standard or Daylight Savings Time if the Holder wishes to included the same day closing price). If the shares have not
been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the
Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of
Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed
by the Holder evidencing such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by
proper assignment hereof in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.
In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased
to 45% instead of 55% while that “Chill” is in effect.
(b)
Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the
Company in Common. Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company
for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall
be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
|
(c)
During the first six months this Note is in effect, the Company may redeem this Note by paying to the Holder an amount as follows:
(i) if the redemption is within the first 90 days this Note is in effect, then for an amount equal to 125% of the unpaid principal
amount of this Note along with any interest that would have accrued during them term, (ii) if the redemption is after the 91st
day this Note is in effect but less than the 150th day this Note is in effect, then for an amount equal to 140% of
the unpaid principal amount of this Note along with any prepaid and earned interest, (iii) if the redemption is after the 151st
day this Note is in effect but less than the 180th day this Note is in effect, then for an amount equal to 150% of
the unpaid principal amount of this Note along with any prepaid and earned interest. This Note may not be redeemed after 180 days.
The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption
will be invalid and the Company may not redeem this Note
(d)
Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of
related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the
Common Stock, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is
not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company
and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common
Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall,
upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through
the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together
with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion
Price.
(e)
In case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective
provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or
convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note,
immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration
received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the
Company or successor person or entity acting in good faith.
5.
No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6.
The Company hereby expressly waives demand and presentment for payment, notice of non-payment,
protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking
any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing
and to be owing hereto.
| /s/ Anthony L. Anish |
|
| Initials |
|
7.
The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred
by the Holder in collecting any amount due under this Note.
8. If one or more of the following described “Events of Default” shall occur:
(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b)
Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c)
The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation
of the Company under this Note or any other note issued to the Holder; or
(d)
The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make
an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment
of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for
bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief,
all under federal or state laws as applicable; or
(e)
A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within thirty (30) days after such appointment; or
(f)
Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody
or control of the whole or any substantial portion of the properties or assets of the Company; or
(g)
One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h)
defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered ad failed
to cure such default within the appropriate grace period; or
| /s/ Anthony L. Anish |
|
| Initials |
|
(i)
The Company shall have its Common Stock delisted from an exchange (including the OTCBB
exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10
consecutive days;
(j)
If a majority of the members of the Board of Directors of the Company on the date hereof
are no longer serving as members of the Board;
(k)
The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within
3 business days of its receipt of a Notice of Conversion; or
(1)
The Company shall not replenish the reserve ‘set forth in Section 12, within 3 business days of the request of the
Holder.
Then, or
at any time thereafter, unless cured, and in each and every such case, unless’ such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of
24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by
law. In the event of a breach of 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning
on the 10th day.
If the Holder
shall commence an action or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney,
then the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum
extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected
or impaired thereby.
10.
Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed
by the Company and the Holder.
11.
The Company represents that it is not a “shell” issuer and has never been a “shell”
issuer or that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has
reported form 10 type information indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel
to either (i) write a 144- 3(a)(9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s
counsel.
| /s/ Anthony L. Anish |
|
| Initials |
|
12.
The Company shall issue irrevocable transfer agent instructions reserving 16,000,000 shares of its Common Stock for conversions
under this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this
Note. Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay
all costs associated with issuing and delivering the shares.
13.
The Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14.
This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to
be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder
and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State
of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this
Agreement shall be effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the Company
has caused this Note to be duly executed by an officer thereunto duly authorized.
| |
M LINE HOLDINGS, INC |
| |
|
| |
By: |
/s/ Anthony L. Anish |
| |
Title: |
COO |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $__________ of the above Note into ___________ Shares
of Common Stock of M Line Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of
the date written below.
If Shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
Date of Conversion:_______________________________________________________________
Applicable Conversion Price:_________________________________________________________
Signature:_______________________________________________________________________
[Print Name of Holder and Title of Signer]
Address:_______________________________________________________________________
SSN or EIN:_________________________
Shares are to be registered in the following name:____________________________________________________
Name:__________________________________________________________________________
Address:________________________________________________________________________
Tel:______________________________________
Fax:______________________________________
SSN or EIN:________________________________
Shares are to be sent or delivered to the following account:
Account Name:__________________________________________________________________
Address:_______________________________________________________________________
| /s/ Anthony L. Anish |
|
| Initials |
|
 |
Silicon Valley, CA Office
900 East Hamilton Ave, #100
Campbell, CA 95008
(408) 879-7440
(916) 782-1474 (fax) |
Other Offices
Reno, NV |
March 5, 2014
VStock Transfer, LLC
77 Spruce Street, Suite 201
Cedarhurst, New York 11516
Re: Irrevocable Transfer Agent Instructions
| Re: | Rule 144 Share issuance for M Line Holdings, Inc. |
Ladies and Gentlemen:
The undersigned
has been requested to render this opinion with respect to the issuance of 236,686 shares without the restricted securities legend
(the “144 Shares”) of common stock of M Line Holdings, Inc. (the “Company”) by GEL Properties, LLC (“Seller”)
pursuant to Rule 144 of the Securities Act of 1933, as amended (the “Act”).
In connection
with this opinion, the undersigned has reviewed documentation relating to the proposed issuance of the 144 Shares, including the
following documents (i) copies of the original $150,000.00 promissory note issued to Spagus Capital Partners, LLC on 5/31/2011,
(ii) an assignment of $60,750.68 ($50,000 in principal and $10,750.68 in accrued interest) of that note to the Seller on February
6, 2014, (iii) a restated note in the amount of $60,750.68 issued to the Seller by the Company on February 6, 2014 reflecting the
assignment of debt from Spagus Capital Partners, LLC (iv) a conversion notice thereunder and (v) irrevocable transfer agent instructions
approving issuance. In addition, the undersigned has made such examination of the facts as the undersigned has deemed appropriate
in the circumstances. The undersigned has made no attempt to independently verify any information provided by the Seller or the
Company, and relies on the Seller’s and the Company’s representations to permit you to remove the restrictive legend
from the 144 Shares.
The
analysis supporting the removal of the legend is as follows: Section 3(a)(9) of the Securities Act of 1933, as amended,
permits the exchange of debt securities for those of equity securities issued by the same issuer, provided that the four
requirements of Section 3(a)(9) are met. Those requirements are (i) same issuer the securities being exchanged
must be the same as the issuer of the new securities, (ii) no additional consideration from the security
holder, (iii) offer only to security holders and (iv) no remuneration for solicitation. In the
present case, all four criteria are met. The issuer M Line Holdings, Inc, is the same issuer for both the debt security being
surrendered and the common stock being issued in exchange. GEL Properties, LLC, the holder, is not being asked to party with
anything of value besides the outstanding securities. This exchange offer is a private exchange offer limit to certain
existing security holders and there was no commission or remuneration paid in connection with this.
Rule 144(d)(iii) allows
the tacking of securities received in conversions provided that (i) the identity of the issuer is the same (“same issuer
requirement”) (ii) the securities have been acquired from the issuer solely in exchange for other securities of the same
issuer (“clean exchange requirement”). Under the current view of the Securities and Exchange Commission, tacking is
permitted as long as the securities surrendered involve investment risk. In this case, all these requirements are met. The “same
issuer requirement” is met, as described above, the clean exchange requirement is met as described above, and the note was
assigned in consideration of a full recourse promissory note, which meets the “investment risk” requirement.
|
Silicon Valley, CA Office
900 East Hamilton Ave, #100
Campbell, CA 95008
(408) 879-7440
(916) 782-1474 (fax) |
Other Offices
Reno, NV |
In summary,
the Seller has represented to us that (i) the 144 Shares are to be issued on March 5, 2014 to be held in as security for conversion
of indebtedness owed to the Seller for debt that arose on in excess of 12 months ago for good and valid consideration (ii) the
Seller is not an “affiliate” of the Company (as that term is defined in Rule 144(a)(1) adopted pursuant to the Act,
as amended), (iii) the Company is “current” in its reporting obligations as it filed its Form 10Q for the period ended
December 31, 2013 on February 11, 2014 and (iv) the Seller has a present intent to dispose of the Shares as required under Rule
144. Based on our review of the Company’s public filings, including but not limited to the past 10K filing filed by the Company,
the Company is not a “shell company” as that term is defined under the Act and has not been so for at least 12 months.
Based upon the foregoing and assuming such 144 Shares are sold in compliance with the applicable provisions of Rule 144, the undersigned
is of the opinion that that the removal of the restrictive legend on the 144 Shares in connection with the subsequent sale of the
144 Shares by the Seller would be exempt from registration under the Act pursuant to Rule 144 and the legend may be removed.
The Company will pay all costs associated with the issuance
of this certificate.
Please process as set forth in the conversion notice.
This opinion
letter (i) has been furnished to you at your request, and I consider it to be a confidential communication which may not be furnished,
reproduced, distributed, disclosed to anyone, or quoted from or referred to without my prior written consent, except to the registered
holder, the registered holder’s broker, auditors, counsel, appropriate regulatory and governmental authorities, and to satisfy
any and all court orders, (ii) is rendered solely for your information and assistance and may not be relied upon by any other person
or for any other purpose not stipulated above without my prior consent.
| Very Truly Yours |
|
| |
|
| /s/ Tomer Tal, Esq. |
|
| New Venture Attorneys, P.C |
|
| By: Tomer Tal, Esq. |
|
SECURED PROMISSORY NOTE
M LINE HOLDINGS, INC.
FOR
VALUE RECEIVED, the undersigned, M LINE HOLDINGS, INC., a Nevada corporation (the “Maker”), hereby promises
to pay to the order of SPAGUS CAPITAL PARTNERS, LLC, a Rhode Island limited liability company (together with its successors and
permitted assigns, the “Holder”), in accordance with the terms hereinafter provided, the principal amount
of One Hundred Fifty Thousand Dollars ($150,000) (the “Principal”), together with accrued and unpaid interest
on or before the Maturity Date (as defined below) in accordance with the terms of this Note.
Except
as otherwise set forth herein, all payments under or pursuant to this Secured Promissory Note (this “Note”)
shall be made in United States Dollars in immediately available funds to the Holder at the address provided in Section 3.1,
or at such other place as the Holder may designate from time to time in writing to the Maker. This Note is being issued pursuant
to a Note and Stock Purchase Agreement, dated as of the date herewith (the “Purchase Agreement”). Capitalized
terms used herein have the respective meanings ascribed thereto in the Purchase Agreement unless otherwise defined herein.
ARTICLE I.
TERMS OF NOTE
1.1
Maturity Date. The Maker shall pay to the Holder the outstanding principal and accrued but unpaid interest hereunder on
or before the “Maturity Date,” which shall be on the six-month anniversary of the date hereof.
1.2 Interest.
The principal amount of this Note shall bear simple interest from the date hereof until such principal amount shall become due
and payable (whether upon maturity, by acceleration or otherwise) at the rate of eight percent (8.0%) per annum (the “Interest
Rate”), computed on the basis of 360 days per year for the actual number of days elapsed, including the first day but excluding
the last day occurring in the period for which such interest is payable, to be paid pursuant to the provisions of Section 1.1.
No interest shall be due and payable until June 30, 2011, at which time all accrued interest shall be due and payable and thereafter,
accrued and unpaid interest on the then outstanding Principal shall be due on the last calendar day of the month until this Note
shall be paid in full. While any Event of Default has occurred and is continuing, the Interest Rate shall be eighteen percent (18.0%).
1.3
Prepayment. The Maker may prepay the outstanding principal and accrued but unpaid interest hereunder, in whole or in part,
at any time prior to the Maturity Date.
1.4 Seniority
of Note. This Note shall be senior to all other Indebtedness of the Maker other than Indebtedness arising under the line of
credit with Pacific Western Bank and other indebtedness as set out on exhibit “A”. Notwithstanding the prior sentence,
“Holder” shall be senior or senior subordinated on all M Line Holdings, Inc. assets where possible and no future indebtedness
shall be occurred without written consent of Holder. “Indebtedness” shall mean, without duplication (i)
all indebtedness for borrowed money, (ii) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services, including (without limitation) “capital leases”
in surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness
created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with
respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all monetary
obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease, and (vii) all indebtedness referred to in clauses (i)
through (vi) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to
be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any person, even though the person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness.
1.5
Security. The obligations of the Maker hereunder shall be secured by, and the Holder shall be entitled to the rights and
security granted by the Maker pursuant to, the Security Agreement dated as of even date herewith by the Maker for the benefit
of the Holder (the “Security Agreement”).
ARTICLE II.
DEFAULT AND REMEDIES
2.1
Event of Default. The occurrence of any of the following events or conditions shall constitute an event of default hereunder
(each, an “Event of Default”):
(a)
The Maker shall fail to make when due any payments on this Note;
(b)
any breach of a representation or warranty of the Maker contained in this Note, the Security Agreement or the Purchase Agreement
which remains uncured after 10 days from the written notice thereof and which breach shall have a material adverse effect on (i)
the financial condition of the Maker, (ii) the value of the Collateral (as defined under the Security Agreement) or (iii) the
ability of the Maker to perform under its obligations this Note or the Security Agreement;
(c)
any breach of a material representation, warrant or covenant of the Maker contained in the Registration Rights Agreement;
(d)
any default in the material observance or performance by the Maker of any covenant or agreement contained in this Note which default
remains uncured after 10 days after written notice thereof and which default shall have a material adverse effect on (i) the financial
condition of the Maker, (ii) the value of the Collateral (as defined under the Security Agreement) or (iii) the ability of the
Maker to perform under its obligations this Note or the Security Agreement;
(e)
the Maker shall: (i) file a voluntary petition or assignment in bankruptcy or a voluntary petition or assignment or answer seeking
liquidation, reorganization, arrangement, readjustment of his debts, or any other relief under the Bankruptcy Reform Act of 1978,
as amended (the “Bankruptcy Code”), or under any other act or law pertaining to insolvency or debtor
relief, whether State, Federal, or foreign, now or hereafter existing; (ii) enter into any agreement indicating consent to, approval
of, or acquiescence in, any such petition or proceeding; (iii) apply for or permit the appointment, by consent or acquiescence,
of a receiver, custodian or trustee of all or a substantial part of his property; (iv) make an assignment for the benefit of creditors;
(v) be unable or shall fail to pay his debts generally as such debts become due; and
(f)
there occurs (i)
a filing or issuance against the Maker of an involuntary petition in bankruptcy or seeking liquidation, reorganization, arrangement,
readjustment of its debts or any other relief under the Bankruptcy Code, or under any other act or law pertaining to insolvency
or debtor• relief, whether State, Federal or foreign, now or hereafter existing; (ii) the involuntary appointment of a receiver,
liquidator, custodian or trustee of the Maker or for all or a substantial part of his property; or (iii) the issuance of a warrant
of attachment, execution or similar process against all or any substantial part of the property of the Maker and such shall not
have been discharged (or provision shall not have been made for such discharge), or stay of execution thereof shall not have been
procured, within sixty (60) days from the date of entry thereof
2.2
Acceleration. If an Event of Default occurs under Sections 2.1(d) or (e) then the outstanding Principal and
interest under this Note shall automatically become immediately due and payable, without presentment, demand, protest or notice
of any kind, all of which are expressly waived. If any other Event of Default occurs and is continuing, the Holder, by written
notice to the Maker, may declare the outstanding Principal and interest under this Note to be immediately due and payable.
(a)
Upon the occurrence of an Event of Default, the Holder may avail itself’ of any legal or equitable rights which the
Holder may have at law or in equity or under this Note, including, but not limited to, the right to accelerate the
indebtedness due under this Note as described in the preceding Section 2.2. The remedies of the Holder as provided
herein shall be distinct and cumulative, and may be pursued singly, successively or together, at the sole discretion of the
Holder, and may be exercised as often as occasion therefor shall arise.
(b) Forbearance
by the Holder to exercise its rights with respect to any failure or breach by the Maker shall not constitute a waiver of the right
as to the same or any subsequent failure or breach, and no single or partial exercise of any right or remedy shall preclude other
or further exercise of the same or any other right or remedy. The Holder shall have no duty to exercise any or all of the rights
and remedies herein provided or contemplated. The acceptance by the Holder of any payment hereunder that is less than payment in
full of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any of the
foregoing rights or remedies at that time, or nullify any prior exercise of any such rights or remedies without the express written
consent of the Holder.
(c)
Notwithstanding anything contained herein to the contrary, upon the occurrence of any event described in Section 2.1, regardless
of whether such event is cured within the cure period listed therein, the Maker shall become immediately obligated to pay,
to Lender or its designated Affiliate, a management oversight fee equal to five percent (5%) of the Maker’s net revenues,
calculated pursuant to GAAP as consistently and historically applied by the Maker (the “Management Fee”).
The Management Fee shall be due and payable to Holder on the earlier to occur of the Maker’s filing of its Quarterly Report
on Form 10-Q or Annual Report on Form 10-K (as applicable), or the 45th day following the end of the Maker’s fiscal quarter.
The Maker’s obligation to pay the Lender the Management Fee shall terminate after the fourth quarterly payment has been
made by the Maker. In the event that any financial statement contained in the Commission Reports is restated, resulting in either
a previously made over- or underpayment of the Management Fee, the amount of such over- or underpayment shall be made by or to
the Maker, as applicable, within ten business days following the filing of such restated financial statement contained in an amended
Commission Report.
ARTICLE III.
MISCELLANEOUS
| 3.1 | Notices. All notices under this Note shall be given as set forth in the Purchase Agreement. |
3.2
Amendments: Waivers. No provision of this Note may be waived, modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by the Maker and the Holder or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this
Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair
the exercise of any such right.
3.3
Headings. The headings herein are for convenience only, do not constitute a part of this Note and shall not be deemed to
limit or affect any of the provisions hereof.
3.4
Successors and Assigns. This Note shall be binding upon and inure to the benefit of the parties and their successors and
permitted assigns. The Holder may not assign this Note or any rights or obligations hereunder without the prior written consent
of the Maker (other than by merger, consolidation or sale of all or substantially all of the Maker’s assets).
3.5
Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be
governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles
of conflicts of law thereof, and federal law, if applicable.
3.6
Severability. If any term, provision, covenant or restriction of this Note is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and
shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to
find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the intention
of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any
of such that may be hereafter declared invalid, illegal, void or unenforceable.
3.7
Replacement of Note. On receipt of evidence reasonably satisfactory to the Maker of the loss, theft, destruction
or mutilation of this Note, and, in each case of loss, theft or destruction, delivery of an indemnity agreement reasonably satisfactory
in form and substance to the Maker or, in the case of mutilation, on surrender and cancellation of this Note, the Maker at the
Holder’s expense shall execute and deliver, in lieu of this Note, a new note of like tenor.
3.8 Maximum
Interest. In no event shall the amount of interest due or payable hereunder exceed the maximum rate of interest allowed
by applicable law, and in the event any such payment is inadvertently paid by the Maker or inadvertently received by
the Holder, then such excess sum shall be credited as a payment of principal, unless the Maker shall notify the Holder, in
writing, that the Maker elects to have such excess sum returned to it forthwith. It is the express intent hereof that the
Maker not pay and the Holder not receive, directly or indirectly in any manner whatsoever, interest in excess of that which
may be legally paid by the Maker under applicable law. Accordingly, if interest in excess of the legal maximum is contracted
for, charged, or received: (1) this Note shall be automatically reformed so that the effective rate of interest shall be
reduced to the maximum rate of interest permitted by applicable law, for the purpose of determining this rate and to the
extent permitted by applicable law, all interest contracted for, charged, or received shall be amortized, prorated, and
spread throughout the full term of this Note so that the effective rate of interest is uniform throughout the life of this
Note, and (ii) any excess of interest over the maximum amount allowed under applicable law shall be applied as a credit
against the then unpaid principal amount hereof.
3.9
Time is of the Essence. Time is of the essence of this Note and, in case this Note is collected by law or through an attorney
at law, or under advice herefrom, the Maker agrees to pay all costs of collection including reasonable attorneys’ fees and
expenses.
IN WITNESS WHEREOF, the Maker has hereunto
executed this instrument as of the day and year first above written.
| M LINE HOLDINGS, INC. |
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Address for Notice: |
| |
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2672 Dow Avenue |
| |
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Tustin, CA 92780 |
| By: |
/s/ George Colin |
|
Attn: President |
| |
Name: George Colin |
|
Fax: |
| |
Title: Chief Executive Officer |
|
|
EXHIBIT A
Hwacheon Machinery, Inc. holds a general
lien against the assets of M Line holdings as security for an amount due them by All American CNC Sales, Inc. a company whose business
has been discontinued by M Line Holdings, Inc. The debt is being repaid based on a payment schedule that continues through December
2012.
THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)
US $60,750.68
M LINE HOLDINGS, INC
8% CONVERTIBLE REDEEMABLE NOTE
DUE FEBRUARY 6, 2015
REPLACEMENT NOTE- ORIGINALLY ISSUED MAY 31, 2011
IN THE AMOUNT OF $150,000.00
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of GEL PROPERTIES, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Sixty Thousand Seven Hundred Fifty
dollars and 68/100 cents (U.S. $60,750.68) on February 6, 2015 (“Maturity Date”) and to pay interest on the
principal amount outstanding hereunder at the rate of 8% per annum commencing on February 6, 2015. The interest will be paid to
the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note.
The principal of, and interest on, this Note are payable at 16192 Coastal Highway, Lewes, DE, 19958, initially, and if changed,
last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will
pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required
by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address
appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding
principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented
by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1.
This Note is exchangeable for an equal aggregate principal amount of Notes
of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such
registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection
therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2.
The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3.
This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”)
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4.
(a) The Holder of this Note is entitled, at its option, at any time
after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”)
without restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal
to 55% of the lowest closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange
which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”),
for the seven prior trading days including the day upon which a Notice of Conversion is received by the Company
(provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M.
Eastern Standard or Daylight Savings Time if the Holder wishes to included the same day closing price). If the shares have not
been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the
Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of
Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed
by the Holder evidencing such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by
proper assignment hereof in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.
In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased
to 45% instead of 55% while that “Chill” is in effect.
(b)
Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the
Company in Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company
for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall
be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
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| |
|
(c)
This Note may not be prepaid.
(d)
Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of
related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the
Common Stock, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is
not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company
and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common
Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall,
upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through
the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together
with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion
Price.
(e)
In case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective
provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or
convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note,
immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration
received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the
Company or successor person or entity acting in good faith.
5.
No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6.
The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice
of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7.
The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred
by the Holder in collecting any amount due under this Note.
8.
If one or more of the following described “Events of Default” shall occur:
| /s/ Anthony L. Anish |
|
| Initials |
|
| |
|
(a)
The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the
Company; or
(b)
Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c)
The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation
of the Company under this Note or any other note issued to the Holder; or
(d)
The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3)
make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a
petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for
bankruptcy relief, all under federal or state laws as applicable; or
(e)
A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within thirty (30) days after such appointment; or
(f)
Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody
or control of the whole or any substantial portion of the properties or assets of the Company; or
(g)
One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h)
defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and
failed to cure such default within the appropriate grace period; or
(i)
The Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock
trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j)
If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the
Board;
| /s/ Anthony L. Anish |
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| Initials |
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| |
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(k)
The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within
3 business days of its receipt of a Notice of Conversion; or
(l)
The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
Then, or
at any time thereafter, unless cured, and in each and every such case, unless such Event of Default shall have been waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of
24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by
law. In the event of a breach of 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning
on the 10th day.
If the Holder
shall commence an action or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney,
then the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
9.
In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum
extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected
or impaired thereby.
10.
Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed
by the Company and the Holder.
11.
The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if
it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10
type information indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i)
write a 144- 3(a)(9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s
counsel.
12.
The Company shall issue irrevocable transfer agent instructions reserving 16,000,000 shares of its Common Stock for
conversions under this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for
conversions of this Note. Upon full conversion of this Note, the any shares remaining in the Share Reserve shall be
cancelled. The Company shall pay all costs associated with issuing and delivering the shares.
| /s/ Anthony L. Anish |
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| Initials |
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| |
|
13.
The Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14.
This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to
be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder
and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State
of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this
Agreement shall be effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
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| |
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IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by an officer thereunto duly authorized.
Dated: 2/6/14
| |
M LINE HOLDINGS, INC |
| |
|
| |
By: |
/s/ Anthony L. Anish |
| |
|
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Title: |
COO |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $__________ of the above Note into ___________ Shares
of Common Stock of M Line Holdings, Inc (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If Shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect
thereto.
Date of Conversion: ______________________________________________________
Applicable Conversion Price: _______________________________________________
Signature: ______________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _______________________________________________________________
______________________________________________________________
SSN or EIN: _____________________
Shares are to be registered in the following name: _______________________________
Name: _________________________________________________________________
Address: ______________________________________________________________
Tel: _____________________________________
Fax: _____________________________________
SSN or EIN: ______________________________
Shares are to be sent or delivered to the following
account:
Account Name: _________________________________________________________
Address: _______________________________________________________________
| /s/ Anthony L. Anish |
|
| Initials |
|
|
Silicon Valley, CA Office
900 East Hamilton Ave, #100
Campbell, CA 95008
(408) 879-7440
(916) 782-1474 (fax) |
Other Offices
Reno, NV |
March 5, 2014
VStock Transfer, LLC
77 Spruce Street, Suite 201
Cedarhurst, New York 11516
Re: Irrevocable Transfer Agent Instructions
| Re: | Rule 144 Share issuance for M Line Holdings, Inc. |
Ladies and Gentlemen:
The undersigned
has been requested to render this opinion with respect to the issuance of 236,686 shares without the restricted securities legend
(the “144 Shares”) of common stock of M Line Holdings, Inc. (the “Company”) by GEL Properties, LLC (“Seller”)
pursuant to Rule 144 of the Securities Act of 1933, as amended (the “Act”).
In connection
with this opinion, the undersigned has reviewed documentation relating to the proposed issuance of the 144 Shares, including the
following documents (i) copies of the original $150,000.00 promissory note issued to Spagus Capital Partners, LLC on 5/31/2011,
(ii) an assignment of $60,750.68 ($50,000 in principal and $10,750.68 in accrued interest) of that note to the Seller on February
6, 2014, (iii) a restated note in the amount of $60,750.68 issued to the Seller by the Company on February 6, 2014 reflecting the
assignment of debt from Spagus Capital Partners, LLC (iv) a conversion notice thereunder and (v) irrevocable transfer agent instructions
approving issuance. In addition, the undersigned has made such examination of the facts as the undersigned has deemed appropriate
in the circumstances. The undersigned has made no attempt to independently verify any information provided by the Seller or the
Company, and relies on the Seller’s and the Company’s representations to permit you to remove the restrictive legend
from the 144 Shares.
The
analysis supporting the removal of the legend is as follows: Section 3(a)(9) of the Securities Act of 1933, as amended,
permits the exchange of debt securities for those of equity securities issued by the same issuer, provided that the four
requirements of Section 3(a)(9) are met. Those requirements are (i) same issuer the securities being
exchanged must be the same as the issuer of the new securities, (ii) no additional consideration from the security
holder, (iii) offer only to security holders and (iv) no remuneration for solicitation. In the present
case, all four criteria are met. The issuer M Line Holdings, Inc, is the same issuer for both the debt security being
surrendered and the common stock being issued in exchange. GEL Properties, LLC, the holder, is not being asked to party with
anything of value besides the outstanding securities. This exchange offer is a private exchange offer limit to certain
existing security holders and there was no commission or remuneration paid in connection with this.
Rule 144(d)(iii) allows
the tacking of securities received in conversions provided that (i) the identity of the issuer is the same (“same issuer
requirement”) (ii) the securities have been acquired from the issuer solely in exchange for other securities of the same
issuer (“clean exchange requirement”). Under the current view of the Securities and Exchange Commission, tacking is
permitted as long as the securities surrendered involve investment risk. In this case, all these requirements are met. The “same
issuer requirement” is met, as described above, the clean exchange requirement is met as described above, and the note was
assigned in consideration of a full recourse promissory note, which meets the “investment risk” requirement.
|
Silicon
Valley, CA Office
900
East Hamilton Ave, #100
Campbell,
CA 95008
(408)
879-7440
(916)
782-1474 (fax) |
Other
Offices
Reno,
NV |
In summary,
the Seller has represented to us that (i) the 144 Shares are to be issued on March 5, 2014 to be held in as security for conversion
of indebtedness owed to the Seller for debt that arose on in excess of 12 months ago for good and valid consideration (ii) the
Seller is not an “affiliate” of the Company (as that term is defined in Rule 144(a)(1) adopted pursuant to the Act,
as amended), (iii) the Company is “current” in its reporting obligations as it filed its Form 10Q for the period ended
December 31, 2013 on February 11, 2014 and (iv) the Seller has a present intent to dispose of the Shares as required under Rule
144. Based on our review of the Company’s public filings, including but not limited to the past 10K filing filed by the Company,
the Company is not a “shell company” as that term is defined under the Act and has not been so for at least 12 months.
Based upon the foregoing and assuming such 144 Shares are sold in compliance with the applicable provisions of Rule 144, the undersigned
is of the opinion that that the removal of the restrictive legend on the 144 Shares in connection with the subsequent sale of the
144 Shares by the Seller would be exempt from registration under the Act pursuant to Rule 144 and the legend may be removed.
The Company will pay all costs associated with the issuance
of this certificate.
Please process as set forth in the conversion notice.
This opinion
letter (i) has been furnished to you at your request, and I consider it to be a confidential communication which may not be furnished,
reproduced, distributed, disclosed to anyone, or quoted from or referred to without my prior written consent, except to the registered
holder, the registered holder’s broker, auditors, counsel, appropriate regulatory and governmental authorities, and to satisfy
any and all court orders, (ii) is rendered solely for your information and assistance and may not be relied upon by any other person
or for any other purpose not stipulated above without my prior consent.
| Very Truly Yours |
|
| |
|
| /s/ Tomer Tal, Esq. |
|
| New Venture Attorneys, P.C |
|
| By: Tomer Tal, Esq. |
|
SECURED PROMISSORY NOTE
M LINE HOLDINGS, INC.
FOR
VALUE RECEIVED, the undersigned, M LINE HOLDINGS, INC., a Nevada corporation (the “Maker”), hereby promises
to pay to the order of SPAGUS CAPITAL PARTNERS, LLC, a Rhode Island limited liability company (together with its successors and
permitted assigns, the “Holder”), in accordance with the terms hereinafter provided, the principal amount of
One Hundred Fifty Thousand Dollars ($150,000) (the “Principal”), together with accrued and unpaid interest
on or before the Maturity Date (as defined below) in accordance with the terms of this Note.
Except
as otherwise set forth herein, all payments under or pursuant to this Secured Promissory Note (this “Note”) shall
be made in United States Dollars in immediately available funds to the Holder at the address provided in Section 3.1, or
at such other place as the Holder may designate from time to time in writing to the Maker. This Note is being issued pursuant
to a Note and Stock Purchase Agreement, dated as of the date herewith (the “Purchase Agreement”). Capitalized
terms used herein have the respective meanings ascribed thereto in the Purchase Agreement unless otherwise defined herein.
ARTICLE I.
TERMS
OF NOTE
1.1
Maturity Date. The Maker shall pay to the Holder the outstanding principal and accrued but unpaid interest hereunder on
or before the “Maturity Date,” which shall be on the six-month anniversary of the date hereof.
1.2 Interest.
The principal amount of this Note shall bear simple interest from the date hereof until such principal amount shall become due
and payable (whether upon maturity, by acceleration or otherwise) at the rate of eight percent (8.0%) per annum (the “Interest
Rate”), computed on the basis of 360 days per year for the actual number of days elapsed, including the first day but excluding
the last day occurring in the period for which such interest is payable, to be paid pursuant to the provisions of Section 1.1.
No interest shall be due and payable until June 30, 2011, at which time all accrued interest shall be due and payable and thereafter,
accrued and unpaid interest on the then outstanding Principal shall be due on the last calendar day of the month until this Note
shall be paid in full. While any Event of Default has occurred and is continuing, the Interest Rate shall be eighteen percent (18.0%).
1.3 Prepayment. The Maker may prepay the outstanding principal and accrued but unpaid interest hereunder, in whole or in part,
at any time prior to the Maturity Date.
1.4 Seniority
of Note. This Note shall be senior to all other Indebtedness of the Maker other than Indebtedness arising under the line of
credit with Pacific Western Bank and other indebtedness as set out on exhibit “A”. Notwithstanding the prior sentence,
“Holder” shall be senior or senior subordinated on all M Line Holdings, Inc. assets where possible and no future indebtedness
shall be occurred without written consent of Holder. “Indebtedness” shall mean, without duplication (i)
all indebtedness for borrowed money, (ii) all obligations issued,
undertaken or assumed as the deferred purchase price of property or services, including (without limitation) “capital leases”
in surety bonds and other similar instruments, (iv) all obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (v) all indebtedness
created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with
respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (vi) all monetary
obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently
applied for the periods covered thereby, is classified as a capital lease, and (vii) all indebtedness referred to in clauses (i)
through (vi) above secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to
be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any person, even though the person which owns such assets or property has not assumed or
become liable for the payment of such indebtedness.
1.5 Security. The obligations of the Maker hereunder shall be secured by, and the Holder shall be entitled to the rights and
security granted by the Maker pursuant to, the Security Agreement dated as of even date herewith by the Maker for the benefit
of the Holder (the “Security Agreement”).
ARTICLE II.
DEFAULT AND REMEDIES
2.1 Event
of Default. The occurrence of any of the following events or conditions shall constitute an event of default hereunder (each,
an “Event of Default”):
(a)
The Maker shall fail to make when due any payments on this Note;
(b) any breach of a representation or warranty of the Maker contained in this Note, the Security Agreement or the Purchase Agreement
which remains uncured after 10 days from the written notice thereof and which breach shall have a material adverse effect on (i)
the financial condition of the Maker, (ii) the value of the Collateral (as defined under the Security Agreement) or (iii) the
ability of the Maker to perform under its obligations this Note or the Security Agreement;
(c) any breach of a material representation, warrant or covenant of the Maker contained in the Registration Rights Agreement;
(d) any default in the material observance or performance by the Maker of any covenant or agreement contained in this Note which default
remains uncured after 10 days after written notice thereof and which default shall have a material adverse effect on (i) the financial
condition of the Maker, (ii) the value of the Collateral (as defined under the Security Agreement) or (iii) the ability of the
Maker to perform under its obligations this Note or the Security Agreement;
(e)
the Maker shall: (i) file a voluntary petition or assignment in bankruptcy or a voluntary petition or assignment or answer seeking
liquidation, reorganization, arrangement, readjustment of his debts, or any other relief under the Bankruptcy Reform Act of 1978,
as amended (the “Bankruptcy Code”), or under any other act or law pertaining to insolvency or debtor
relief, whether State, Federal, or foreign, now or hereafter existing; (ii) enter into any agreement indicating consent to, approval
of, or acquiescence in, any such petition or proceeding; (iii) apply for or permit the appointment, by consent or acquiescence,
of a receiver, custodian or trustee of all or a substantial part of his property; (iv) make an assignment for the benefit of creditors;
(v) be unable or shall fail to pay his debts generally as such debts become due; and
(f)
there occurs (i)
a filing or issuance against the Maker of an involuntary petition in bankruptcy or seeking liquidation, reorganization, arrangement,
readjustment of its debts or any other relief under the Bankruptcy Code, or under any other act or law pertaining to insolvency
or debtor relief, whether State, Federal or foreign, now or hereafter existing; (ii) the involuntary appointment of a receiver,
liquidator, custodian or trustee of the Maker or for all or a substantial part of his property; or (iii) the issuance of a warrant
of attachment, execution or similar process against all or any substantial part of the property of the Maker and such shall not
have been discharged (or provision shall not have been made for such discharge), or stay of execution thereof shall not have been
procured, within sixty (60) days from the date of entry thereof
2.2
Acceleration. If an Event of Default occurs under Sections 2.1(d) or (e), then the outstanding Principal
and interest under this Note shall automatically become immediately due and payable, without presentment, demand, protest or notice
of any kind, all of which are expressly waived. If any other Event of Default occurs and is continuing, the Holder, by written
notice to the Maker, may declare the outstanding Principal and interest under this Note to be immediately due and payable.
(a)
Upon the occurrence of an Event of Default, the Holder may avail itself of any legal or equitable rights which the Holder
may have at law or in equity or under this Note, including, but not limited to, the right to accelerate the indebtedness due under
this Note as described in the preceding Section 2.2. The remedies of the Holder as provided herein shall be distinct
and cumulative, and may be pursued singly, successively or together, at the sole discretion of the Holder, and may be exercised
as often as occasion therefor shall arise.
(b) Forbearance
by the Holder to exercise its rights with respect to any failure or breach by the Maker shall not constitute a waiver of the right
as to the same or any subsequent failure or breach, and no single or partial exercise of any right or remedy shall preclude other
or further exercise of the same or any other right or remedy. The Holder shall have no duty to exercise any or all of the rights
and remedies herein provided or contemplated. The acceptance by the Holder of any payment hereunder that is less than payment in
full of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any of the
foregoing rights or remedies at that time, or nullify any prior exercise of any such rights or remedies without the express written
consent of the Holder.
(c)
Notwithstanding anything contained herein to the contrary, upon the occurrence of any event described in Section 2.1, regardless
of whether such event is cured within the cure period listed therein, the
Maker shall become immediately obligated to pay, to Lender or its designated Affiliate, a management oversight
fee equal to five percent (5%) of the Maker’s net revenues, calculated pursuant to GAAP as consistently and historically
applied by the Maker (the “Management Fee”), The Management Fee shall be due and payable to Holder on the earlier
to occur of the Maker’s filing of its Quarterly Report on Form 10-Q or Annual Report on Form 10-K (as applicable), or the
45th day following the end of the Maker’s fiscal quarter. The Maker’s obligation to pay the Lender the Management
Fee shall terminate after the fourth quarterly payment has been made by the Maker. In the event that any financial statement contained
in the Commission Reports is restated, resulting in either a previously made over- or underpayment of the Management Fee, the
amount of such over- or underpayment shall be made by or to the Maker, as applicable, within ten business days following the filing
of such restated financial statement contained in an amended Commission Report.
ARTICLE III.
MISCELLANEOUS
| 3.1 | Notices. All notices under this Note shall be given as set forth in the Purchase
Agreement. |
3.2
Amendments: Waivers. No provision of this Note may be waived, modified, supplemented or amended except in a written instrument
signed, in the case of an amendment, by the Maker and the Holder or, in the case of a waiver, by the party against whom enforcement
of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this
Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair
the exercise of any such right.
3.3
Headings. The headings herein are for convenience only, do not constitute a part of this Note and shall not be deemed to
limit or affect any of the provisions hereof.
3.4 Successors and Assigns. This Note shall be binding upon and inure to the benefit of the parties and their successors and
permitted assigns. The Holder may not assign this Note or any rights or obligations hereunder without the prior written consent
of the Maker (other than by merger, consolidation or sale of all or substantially all of the Maker’s assets).
3.5
Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Note shall be
governed by and construed and enforced in accordance with the internal laws of the State of California, without regard to the principles
of conflicts of law thereof, and federal law, if applicable.
3.6
Severability. If any term, provision, covenant or restriction of this Note is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full force and effect
and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts
to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including
any of such that may be hereafter declared invalid, illegal, void or unenforceable.
3.7
Replacement of Note. On receipt of evidence reasonably satisfactory to the Maker of the loss, theft, destruction
or mutilation of this Note, and, in each case of loss, theft or destruction, delivery of an indemnity agreement reasonably satisfactory
in form and substance to the Maker or, in the case of mutilation, on surrender and cancellation of this Note, the Maker at the
Holder’s expense shall execute and deliver, in lieu of this Note, a new note of like tenor.
3.8 Maximum
Interest. In no event shall the amount of interest due or payable hereunder exceed the maximum rate of interest allowed
by applicable law, and in the event any such payment is inadvertently paid by the Maker or inadvertently received by
the Holder, then such excess sum shall be credited as a payment of principal, unless the Maker shall notify the Holder, in
writing, that the Maker elects to have such excess sum returned to it forthwith. It is the express intent hereof that the
Maker not pay and the Holder not receive, directly or indirectly in any manner whatsoever, interest in excess of that which
may be legally paid by the Maker under applicable law. Accordingly, if interest in excess of the legal maximum is contracted
for, charged, or received: (i) this Note shall be automatically reformed so that the effective rate of interest shall be
reduced to the maximum rate of interest permitted by applicable law, for the purpose of determining this rate and to the
extent permitted by applicable law, all interest contracted for, charged, or received shall be amortized, prorated, and
spread throughout the full term of this Note so that the effective rate of interest is uniform throughout the life of this
Note, and (ii) any excess of interest over the maximum amount allowed under applicable law shall be applied as a credit
against the then unpaid principal amount hereof.
3.9
Time is of the Essence. Time is of the essence of this Note and, in case this Note is collected by law or through an attorney
at law, or under advice herefrom, the Maker agrees to pay all costs of collection including reasonable attorneys’ fees and
expenses.
IN WITNESS WHEREOF, the Maker has hereunto
executed this instrument as of the day and year first above written.
| M LINE HOLDINGS, INC. |
|
Address for Notice: |
| |
|
2672 Dow Avenue |
| |
|
Tustin, CA 92780 |
| By: |
/s/ George Colin |
|
Attn: President |
| |
Fax: |
| |
Name: George Colin |
|
|
| |
Title: Chief Executive Officer |
|
|
EXHIBIT A
Hwacheon Machinery, Inc. holds a general
lien against the assets of M Line holdings as security for an amount due them by All American CNC Sales, Inc. a company whose business
has been discontinued by M Line Holdings, Inc. The debt is being repaid based on a payment schedule that continues through December
2012.
THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)
US $60,750.68
M LINE HOLDINGS, INC
8% CONVERTIBLE REDEEMABLE NOTE
DUE FEBRUARY 6, 2015
REPLACEMENT NOTE- ORIGINALLY ISSUED MAY 31, 2011
IN THE AMOUNT OF $150,000.00
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of GEL PROPERTIES, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Sixty Thousand Seven Hundred Fifty
dollars and 68/100 cents (U.S. $60,750.68) on February 6, 2015 (“Maturity Date”) and to pay interest on the
principal amount outstanding hereunder at the rate of 8% per annum commencing on February 6, 2015. The interest will be paid to
the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note.
The principal of, and interest on, this Note are payable at 16192 Coastal Highway, Lewes, DE, 19958, initially, and if changed,
last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will
pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required
by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address
appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding
principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented
by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1.
This Note is exchangeable for an equal aggregate principal amount of Notes
of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such
registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection
therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2.
The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3.
This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”)
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4.
(a) The Holder of this Note is entitled, at its option, at any time
after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”)
without restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal
to 55% of the lowest closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange
which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”),
for the seven
prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice
of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or
Daylight Savings Time if the Holder wishes to included the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof
in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the
event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead
of 55% while that “Chill” is in effect.
(b)
Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the
Company in Common Stock (“Interest Shares”), The Holder may, at any time, send in a Notice of Conversion to the Company
for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall
be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
|
(c)
This Note may not be prepaid.
(d)
Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of
related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the
Common Stock, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is
not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company
and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common
Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall,
upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through
the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together
with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion
Price.
(e)
In case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective
provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or
convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note,
immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration
received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the
Company or successor person or entity acting in good faith.
5.
No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6.
The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice
of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for
hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7.
The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred
by the Holder in collecting any amount due under this Note.
8.
If one or more of the following described “Events of Default” shall occur:
| /s/ Anthony L. Anish |
|
| Initials |
|
(a)
The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the
Company; or
(b)
Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c)
The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation
of the Company under this Note or any other note issued to the Holder; or
(d)
The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3)
make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the
appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a
petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for
bankruptcy relief, all under federal or state laws as applicable; or
(e)
A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within thirty (30) days after such appointment; or
(f)
Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody
or control of the whole or any substantial portion of the properties or assets of the Company; or
(g)
One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h)
defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and
failed to cure such default within the appropriate grace period; or
(i)
The Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock
trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j)
If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the
Board;
| /s/ Anthony L. Anish |
|
| Initials |
|
(k)
The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within
3 business days of its receipt of a Notice of Conversion; or
(l)
The Company shall not replenish the reserve set forth in Section 12, with- in 3 business days of the request of the Holder.
Then, or
at any time thereafter, unless cured, and in each and every such case, unless such Event of Default shall have been waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of
24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by
law. In the event of a breach of 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning
on the 10th day.
If the Holder
shall commence an action or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney,
then the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
9.
In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum
extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected
or impaired thereby.
10.
Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed
by the Company and the Holder.
11.
The Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if
it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10
type information indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i)
write a 144- 3(a)(9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s
counsel.
12.
The Company shall issue irrevocable transfer agent instructions reserving 16,000,000 shares of its Common Stock for
conversions under this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for
conversions of this Note. Upon full conversion of this Note, the any shares remaining in the Share Reserve shall be
cancelled. The Company shall pay all costs associated with issuing and delivering the shares.
| /s/ Anthony L. Anish |
|
| Initials |
|
13.
The Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14.
This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to
be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder
and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State
of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this
Agreement shall be effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by an officer thereunto duly authorized.
Dated: 2/6/14
| |
M LINE HOLDINGS, INC |
| |
|
| |
By: |
/s/ Anthony L. Anish |
| |
|
| |
Title: |
COO |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $__________ of the above Note into ___________ Shares
of Common Stock of M Line Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If Shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect
thereto.
Date of Conversion: ______________________________________________________
Applicable Conversion Price: _______________________________________________
Signature: ______________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _______________________________________________________________
______________________________________________________________
SSN or EIN: _____________________
Shares are to be registered in the following name: _______________________________
Name: _________________________________________________________________
Address: ______________________________________________________________
Tel: _____________________________________
Fax: _____________________________________
SSN or EIN: ______________________________
Shares are to be sent or delivered to the following
account:
Account Name: _________________________________________________________
Address: _______________________________________________________________
| /s/ Anthony L. Anish |
|
| Initials |
|
|
2672 Dow Avenue,
Tustin, CA 92780
tel: 714.630.6253 • fax: 714.619.2339
email: tony@mlineholdings.com
web site: www.mlineholdings.com |
February 12, 2014
VStock Transfer, LLC
77 Spruce Street, Suite 201
Cedarhurst, NY 11516
Ladies and Gentlemen:
M Line Holdings, Inc., a Nevada
corporation (the “Company”) and JMJ Financial (the “Investor”) entered into a $335,000 Promissory Note
(the “Note”) dated February 12, 2014. A copy of the Note is attached hereto. You should familiarize yourself with your
issuance and delivery obligations, as Transfer Agent, contained therein. The shares to be issued are to be registered in the names
of the registered holder of the securities submitted for conversion.
You are hereby irrevocably authorized
and instructed to reserve a sufficient number of shares of common stock (“Common Stock”) of the Company (at least 60,000,000
(sixty million) shares of Common stock for the Note which should be held in reserve for the Investor as of this date) for issuance
upon full conversion of the Note in accordance with the terms thereof. The amount of Common Stock so reserved may be increased,
from time to time, by written instructions of the Company and the Investor. In the event of a reverse stock split the reserve should
remain unchanged unless instructed by the Investor and the Company.
The ability to process a notice of conversion
under the Note (a “Conversion Notice”) in a timely manner is a material obligation of the Company pursuant to the
Note. Your film is hereby irrevocably authorized and instructed to issue shares of Common Stock of the Company (without any restrictive
legend) to the Investor without any further action or confirmation by the Company (from the reserve, but in the event there
are insufficient reserve shares of Common Stock to accommodate a Conversion Notice (defined below) your firm and the Company agree
that the Conversion Notice should be completed using authorized but unissued shares of Common Stock that the Company has in its
treasury): (A) upon your receipt from the Investor of: (i) a Conversion Notice executed by the Investor; and (ii) an opinion of
counsel of the Investor, in form, substance and scope customary for opinions of counsel in comparable transactions (and satisfactory
to the transfer agent), to the effect that the shares of Common Stock of the Company issued to the Investor pursuant to the Conversion
Notice are not “restricted securities” as defined in Rule 144 and should be issued to the Investor without any restrictive
legend, provided that the Company is current on its SEC filings; and. (B) the number of shares to be issued is less than 4.99%
of the total issued common stock of the Company.
The Company hereby requests that
your firm act immediately, without delay and without the need for any action or confirmation by the Company with respect to the
issuance of Common Stock pursuant to any Conversion Notices received from the Investor.
The Company shall indemnify you and your
officers, directors, principals, partners, agents and representatives, and hold each of them harmless from and against any and
all loss, liability, damage, claim or expense (including the reasonable fees and disbursements of its attorneys) incurred by or
asserted against you or any of them arising out of or in connection the instructions set forth herein, the performance of your
duties hereunder and otherwise in respect hereof, including the costs and expenses of defending yourself or themselves against
any claim or liability hereunder, except that the Company shall not be liable hereunder as to matters in respect of which it is
determined that you have acted with gross negligence or in bad faith (which gross negligence or bad faith must be determined by
a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). You shall have no liability to
the Company in respect to any action taken or any failure to act in respect of this if such action was taken or omitted to be taken
in good faith, and you shall be entitled to rely in this regard on the advice of counsel.
The Board
of Directors of the Company has approved the foregoing (irrevocable instructions) and does hereby extend the Company’s irrevocable
agreement to indemnify your firm for all loss, liability or expense in carrying out the authority and direction herein contained
on the terms herein set forth.
If the Company’s account
is in arrears with the Transfer Agent, the Transfer Agent shall not have any obligation to act upon these instructions; however
the Investor shall have the option to cure the outstanding balance with the Transfer Agent.
The Company agrees that in the event
that the Transfer Agent resigns as the Company’s transfer agent, or if the Company decides to switch or terminate the current
Transfer Agent, the Company shall engage a suitable replacement transfer agent that will agree to serve as transfer agent for the
Company and be bound by the terms and conditions of these Irrevocable Instructions within five (5) business days.
The Investor is intended to be
and is third party beneficiary hereof, and no amendment or modification to the instructions set forth herein may be made without
the consent of the Investor.
| |
Very truly yours, |
| |
|
| |
M Line Holdings, Inc. |
| |
|
| |
By: |
/s/ Bruce W.
Barren |
| |
|
Bruce Barren |
| |
|
Chief Executive Officer |
| |
|
| Acknowledged and Agreed: |
|
| |
|
 |
|
| JMJ Financial / Its Principal |
|
| |
VStock Transfer, LLC |
|
| |
|
|
| |
By: |
/s/ Yoel Goldfeder |
|
| |
Name: |
Yoel Goldfeder |
|
| |
Title: |
CEO |
|
DEBT PURCHASE AGREEMENT
This Debt Purchase Agreement (the
“Agreement”) made as of this 6th day of February, 2014, by and between GEL Properties, LLC (the “Buyer”)
and Spagus Capital Partners, LLC (the “Seller”).
1. PURCHASE
AND SALE OF THE CONVERTIBLE NOTE
Upon the terms and conditions herein
contained, at the Closing (as hereinafter defined), the Seller hereby sells, assigns and transfers to the Buyer and the Buyer agrees
to purchase from the Seller the “Transferred Rights” of the Seller and all rights thereto. Transferred Rights shall
mean all rights with respect to $50,000 in principal and proportional accrued interest (the “Assigned Portion”) under
that promissory note in the amount of $150,000 issued by M Line Holdings, Inc. (“Borrower” or “Company”)
on May 31, 2011, a true and correct copy which has been provided to New Venture Attorneys, P.C. (the “Note”). By Its
signatures hereto the Borrower accepts the assignment of the Transferred Rights to Buyer and agrees that Buyer may convert the
Transferred Rights into shares of the Company’s common stock.
2. CONSIDERATION
The purchase price for the Assigned
Portion of the Note shall be the Buyer’s payment of Fifty Thousand Dollars ($50,000.00) to the Seller, for the Assigned Portion
(the “Purchase Price”).
3. CLOSING
The closing of the transactions contemplated
by this Agreement (the “Closing”) shall take place simultaneously with the delivery of the Purchase Price via wire
transfer of immediately available funds against the assignment of the Note. The funds will be wired as set forth in Exhibit A.
4. REPRESENTATIONS AND WARRANTIES
OF SELLER The Seller hereby represents and warrants to the Buyer as follows:
4.1
Status of the Seller and the Note. The Seller is the beneficial owner of the Note. The Note is currently outstanding and
Seller is informed by Company that the Note represents a bona fide debt obligation of the Company.
4.2 Authorization;
Enforcement. (i) Seller has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to sell each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Seller and the consummation by it of the transactions contemplated hereby (including, without limitation,
the sale of the Note to the Buyer) have been duly authorized by the Seller and no further consent or authorization of the Seller
or its members is required, (iii) this Agreement has been duly executed and delivered by the Seller, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general
application.
4.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Seller and the consummation by the Seller of the
transactions contemplated hereby (including, without limitation, the sale of the Note to the Buyer) will not (i) conflict with
or result in a violation of any provision of its certificate of formation or other organizational documents, or (ii) violate or
conflict with or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time
or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, note, bond, indenture or other instrument to which Seller are a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which Seller are subject) applicable to Seller or the Note is bound or affected. The Seller is
not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver
or perform any of its obligations under this Agreement in accordance with the terms hereof.
4.4 Title:
Rule 144 Matters. Seller has good and marketable title to the Note. Seller is not an “Affiliate” of the Company,
as that term is defined in Rule 144 of the Securities Act of 1933, as amended (the “1933 Act”), as such Buyer will
be able to track the holding period of the Seller.
| 4.5 | Consent of the Company. |
(i)
The Company, as evidence by its signature at the foot of this Agreement, hereby represents and warrants that, upon delivery
to the Company of the Note, the Company shall promptly cause to be issued to and in the name of Buyer one of more new executed
Notes in the aggregate amount of $50,000.00 but otherwise having the sale terms (including, but not necessarily limited to, referring
to the original issue date) as in the Note. The Note may contain the same restrictive legend as provided in the original Note,
but no stop transfer order. The Note is currently outstanding and represents a bona fide debt obligation of the Company.
(ii)
The signature by the Company also represents the Company’s agreement to treat Buyer as a party to, and having all the rights
of the Seller with respect to the Transferred Rights.
5. REPRESENTATIONS WARRANTIES
AND ACKNOWLEDGEMENTS OF THE BUYER. The Buyer hereby represents warrants and acknowledges to the Seller as follows:
5.1 Sophisticated
Investor. The Buyer has sufficient knowledge and experience of financial and business matters, is able to evaluate the merits
and risks of the partial purchase of the Note and has had substantial experience in previous private and public purchases of securities.
5.2 Authorization:
Enforcement (i) Buyer has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to purchase each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Buyer and the consummation by it of the transactions contemplated hereby (including, without limitation,
the purchase of the Note by the Buyer) have been duly authorized by the Buyer and no further consent or authorization of the Buyer
or its members is required, (iii) this Agreement has been duly executed and delivered by the Buyer, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general application.
5.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Buyer and the consummation by the Buyer of the
transactions contemplated hereby will not (i) conflict with or result in a violation of any provision of its certificate of formation
or other organizational documents, or (ii) violate or conflict with or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement, note, bond, indenture or other instrument to which Buyer
is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory organizations to which Buyer is subject) applicable to Seller
or the Note is bound or affected. The Buyer is not required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its obligations under this Agreement in accordance with the terms hereof.
6.1 Binding
Effect; Benefits. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective
successors and permitted assigns. Except as otherwise set forth herein, this Agreement may not be assigned by any party hereto
without the prior written consent of the other party hereto. Except as otherwise set forth herein, nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted
assigns any rights, remedies, obligations or liabilities under or by any reason of this Agreement.
6.2 Notices.
All notices, requests, demands and other communications which are required to be or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person, or transmitted by telecopy or telex, or upon receipt
after dispatch by certified or registered first class mail, postage prepaid, return receipt requested, to the party to whom the
same is so given or made, at the following addresses (or such others as shall be provided in writing hereafter):
GEL Properties, LLC
16192 Coastal Highway
Lewes, DE 19958
Attn: Samuel Eisenberg
Spagus Capital Partners, LLC
250 F. Centerville Road
Warwick, RI 02886
6.3 Entire
Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
6.4 Further
Assurances. After the Closing, at the request of either party, the other party shall execute, acknowledge and deliver,
without further consideration, all such further assignments, conveyances, endorsements, deeds, powers of attorney, consents
and other documents and take such other action as may be reasonably requested to consummate the transactions contemplated by
this Agreement.
6.5 Headings.
The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be part of
this Agreement or to affect the meaning or interpretation of this Agreement.
6.6 Counterparts.
This Agreement may be executed in any number of counterparts and by facsimile, each of which, when executed, shall be deemed to
be an original and all of which together shall be deemed to be one and the same instrument.
6.7 Governing
Law. This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by
the laws of the State of New York, without giving effect to the conflicts of law principles thereof.
6.8
Severability. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term
and provision of the Agreement shall be valid and enforced to the fullest extent permitted by law.
6.9 Amendments.
This Agreement may not be modified or changed except by an instrument or instruments in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be duly executed as of the date first above written.
| |
BUYER: |
| |
GEL PROPERTIES, LLC |
| |
|
|
| |
By: |
Samuel Eisenberg |
|
| |
Samuel Eisenberg, Managing Member |
| |
|
| |
SELLER: |
| |
|
| |
SPAGUS CAPITAL PARTNERS, LLC |
| |
|
| |
By: |
/s/ Armand C. Spaziano |
|
| |
Title: |
Principal |
|
| ACCEPTED AND AGREED: |
|
| |
|
| M LINE HOLDNGS, INC |
|
| |
|
| By: |
/s/ Anthony L. Anish |
|
| |
|
| Title: |
COO |
|
EXHIBIT A
WIRE INSTRUCTIONS FOR SELLER
PLEASE WIRE YOUR FUNDS TO THE FOLLOWING
PLEASE INSERT COMPLETE BANK WIRING INFO INCLUDING BANK ADDRESS
AS WELL AS ADDRESS
NON-AFFILIATION LETTER
February 6, 2014
Counsel to M LINE HOLDINGS, INC.
Counsel to GEL Properties, LLC
Gentlemen:
Please let this letter
serve as confirmation that Spagus Capital Partners, LLC is not now, and has not been during the preceding 90 days, an officer,
director, 10% or more shareholder of M LINE HOLDINGS, INC. or in any other way an “affiliate” of (as that term is defined
in Rule 144(a)(1) adopted pursuant to the Securities Act of 1933, as amended), of such issuer.
| Very Truly yours, |
|
| |
|
| SPAGUS CAPITAL PARTNERS, LLC |
|
| |
|
| By: |
/s/ Armand C. Spaziano |
|
| |
|
| Title: |
Principal |
|
Restated
6% Convertible Redeemable Note dated
(Spagus
Capital Partners LLC Note Dated 05/31/11)
NOTICE
OF CONVERSION
(To be Executed
by the Registered Holder in order to Convert the Note)
Two Thousand /100 Dollar Conversion
The undersigned
hereby irrevocably elects to convert $2,000.00 of the above note into Shares of Common Stock M Lie Holdings Inc
(MLHC) (Company) according to the conditions set forth in such note, as of the date written below.
If
Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes
and charges payable with respect thereto.
Date of Conversion March
3, 2014
Applicable Conversion
Price $0.00845 = 236,686 Shares
| Signature |
/s/ Samuel Eisenberg |
|
| |
Samuel Eisenberg |
|
| |
Officer |
|
| |
|
|
| |
[Print Name of Holder and Title of Signer] |
|
Address:
GEL PROPERTIES, LLC 16192 Coastal Hwy Lewes, DE 19958
SSN or EIN: 27-5333179
Shares are to be registered in the following name:
GEL PROPERTIES LLC
Address:
Shares are to be sent or delivered to the following
account:
Account Name: GEL PROPERTIES, LLC
Account No.
Address: C/o Legend Securities 45 Broadway
32nd Floor
New York NY 10006
Attn: Moshe Greenfeld
| Date & Closing Bid Price |
Balance of |
| 02/24/2014 $0.013 |
Debenture |
| |
$55,250.68 |
|
2672 Dow Avenue, Tustin, CA 92780
tel: 714.630.6253 • fax: 714.619.2339
email: tony@mlineholdings.com
web site: www.mlineholdings.com |
February 6, 2014
V Stock Transfer LLC
77 Spruce Street, Suite 201
Cedarhurst, NY 11516
Ladies and Gentlemen:
M Line Holdings,
Inc., a Nevada corporation (the “Company”) and Gel Properties, LLC have entered into two Convertible Promissory
Notes in the principal amount of $50,000.00, each (collectively, the “Note”).
A copy of
the Note is attached hereto. You should familiarize yourself with your issuance and delivery obligations, as Transfer Agent, contained
therein, The shares to be issued are to be registered in the names of the registered holder of the securities submitted for conversion
or exercise.
You are
hereby irrevocably authorized and instructed to reserve a sufficient number of shares of common stock (“Common Stock”)
of the Company (initially, 32,000,000 shares of Common Stock for the subject Note which should be held in reserve for the
Investor pursuant to the subject Note as of this date) for issuance upon full conversion of the Note and the convertible promissory
note referenced herein in accordance with the terms thereof. The amount of Common Stock so reserved may be increased, from time
to time, by written instructions of the Company and the Investor.
The ability to convert
the Note in a timely manner is a material obligation of the Company pursuant to the Note. Your firm is hereby irrevocably authorized
and instructed to issue shares of Common Stock of the Company (without any restrictive legend) to the Investor without any further
action or confirmation by the Company by either (i) electronically by crediting the account of a Prime Broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission system, provided that the Company has been made FAST/DRS eligible
by DTCC (DWAC), or (ii) in certificated form without any legend which would restrict the transfer of the shares, and you should
remove all stop-transfer instructions relating to such shares: (A) upon your receipt from the Investor dated within 90 days from
the date of the issuance or transfer request, of: (i) a notice of conversion (“Conversion Notice”) executed by the
Investor; and (ii) an opinion of counsel of the Investor, in form, substance and scope customary for opinions of counsel in comparable
transactions (and satisfactory to the transfer agent), to the effect that the shares of Common Stock of the Company issued to the
Investor pursuant to the Conversion Notice are not “restricted securities” as defined in Rule 144 and should be issued
to the Investor without any restrictive legend; and (B) the number of shares to be issued is less than 4.99% of the total issued
common stock of the Company.
The Company
hereby requests that your firm act immediately, without delay and without the need for any action or confirmation by the Company
with respect to the issuance of Common Stock pursuant to any Conversion Notices received from the Investor.
The Investor
and the Company understands that Island Stock Transfer shall not be required to perform any issuances or transfers of shares if
(a) the Company or request violates, or be in violation of, any terms of the Transfer Agent Agreement, (b) such an issuance or
transfer of shares be in violation of any state or federal securities laws or regulation or (c) the issuance or transfer of shares
be prohibited or stopped as required or directed by a court order
The Company
shall indemnify you and your officers, directors, principals, partners, agents and representatives, and hold each of them harmless
from and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements of its
attorneys) incurred by or asserted against you or any of them arising out of or in connection the instructions set forth herein,
the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of defending yourself
or themselves against any claim or liability hereunder, except that the Company shall not be liable hereunder as to matters in
respect of which it is determined that you have acted with gross negligence or in bad faith. You shall have no liability to the
Company in respect to any action taken or any failure to act in respect of this if such action was taken or omitted to be taken
in good faith, and you shall be entitled to rely in this regard on the advice of counsel.
The Board
of Directors of the Company has approved the foregoing (irrevocable instructions) and does hereby extend the Company’s irrevocable
agreement to indemnify your firm for all loss, liability or expense in carrying out the authority and direction herein contained
on the terms herein set forth.
The Company agrees
that in the event that the Transfer Agent resigns as the Company’s transfer agent, the Company shall engage a suitable replacement
transfer agent that will agree to serve as transfer agent for the Company and be bound by the terms and conditions of these irrevocable
Instructions within five (5) business days. The Investor and the Company agree that the Transfer Agent shall not be required to
perform any issuances or transfers of shares as of the date of the termination of the transfer agreement.
The Investor is intended
to be and are third party beneficiaries hereof, and no amendment or modification to the instructions set forth herein may be made
without the consent of the Investor.
| |
Very truly yours, |
| |
|
| |
M LINE HOLDINGS, INC. |
| |
|
| |
/s/ Anthony L. Anish |
| |
Officer’s name Anthony L. Anish |
| |
Officer’s position Chief Executive Officer |
| Acknowledged and Agreed: |
|
| |
|
| V Stock Transfer; LLC |
|
| By: |
/s/ Yoel Goldfeder |
|
| Name: |
Yoel Goldfeder |
|
| Title: |
CEO |
|
THE SECURITIES
OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)
US $50,000.00
M LINE HOLDINGS, INC
8% CONVERTIBLE REDEEMABLE NOTE
DUE FEBRUARY 6, 2015
FOR VALUE
RECEIVED, M Line Holdings, Inc. (the “Company”) promises to pay to the order of GEL PROPERTIES, LLC and its authorized
successors and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand dollars
exactly (U.S. $50,000.00) on February 6, 2015 (“Maturity Date”) and to pay interest on the principal amount
outstanding hereunder at the rate of 8% per annum commencing on February 6, 2014. The interest will be paid to the Holder in whose
name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of,
and interest on, this Note are payable at 16192 Coastal Highway, Lewes, DE, 19958, initially, and if changed, last appearing on
the records of the Company as designated in writing by the Holder hereof from time to time, The Company will pay each interest
payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be
deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing
on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal
hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such
check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1.
This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested
by the Holder surrendering the same, No service charge will be made for such registration or transfer or exchange, except that
Holder al pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
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| Initials |
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2.
The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3.
This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”)
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4.
(a) The Holder of this Note is entitled, at its option, at any
time after 180 days, and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”)
without restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal
to 55% of the lowest closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange
which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”),
for the seven prior trading days including the day upon which a Notice of Conversion is received by the Company
(provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M.
Eastern Standard or Daylight Savings Time if the Holder wishes to included the same day closing price). If the shares have not
been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the
Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of
Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed
by the Holder evidencing such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by
proper assignment hereof in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.
In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased
to 45% instead of 55% while that “Chill” is in effect.
(b)
Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the
Company in Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company
for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall
be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
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| Initials |
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(c)
During the first six months this Note is in effect, the Company may redeem this Note by paying to the Holder an amount as follows:
(i) if the redemption is within the first 90 days this Note is in effect, then for an amount equal to 125% of the unpaid principal
amount of this Note along with any interest that would have accrued during them term, (ii) if the redemption is after the 91st
day this Note is in effect but less than the 150th day this Note is in effect, then for an amount equal to 140% of
the unpaid principal amount of this Note along with any prepaid and earned interest, (iii) if the redemption is after the 151st
day this Note is in effect but less than the 180th day this Note is in effect, then for an amount equal to 150% of
the unpaid principal amount of this Note along with any prepaid and earned interest. This Note may not be redeemed after 180 days.
The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption
will be invalid and the Company may not redeem this Note
(d)
Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of
related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the
Common Stock, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is
not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company
and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common
Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall,
upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through
the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together
with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion
Price.
(e)
In case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective
provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or
convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of
Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note,
immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration
received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the
Company or successor person or entity acting in good faith.
5.
No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the
principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6.
The Company hereby expressly waives demand and presentment for payment, notice of non-payment,
protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking
any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing
and to be owing hereto.
| /s/ Anthony L. Anish |
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| Initials |
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7.
The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred
by the Holder in collecting any amount due under this Note.
8. If one or more of the following described “Events of Default” shall occur:
(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b)
Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c)
The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation
of the Company under this Note or any other note issued to the Holder; or
(d)
The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make
an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment
of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for
bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief,
all under federal or state laws as applicable; or
(e)
A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within thirty (30) days after such appointment; or
(f)
Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody
or control of the whole or any substantial portion of the properties or assets of the Company; or
(g)
One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h)
defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered ad failed
to cure such default within the appropriate grace period; or
| /s/ Anthony L. Anish |
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| Initials |
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(i)
The Company shall have its Common Stock delisted from an exchange (including the OTCBB
exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10
consecutive days;
(j)
If a majority of the members of the Board of Directors of the Company on the date hereof
are no longer serving as members of the Board;
(k)
The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within
3 business days of its receipt of a Notice of Conversion; or
(1)
The Company shall not replenish the reserve ‘set forth in Section 12, within 3 business days of the request of the
Holder.
Then, or
at any time thereafter, unless cured, and in each and every such case, unless’ such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of
24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by
law. In the event of a breach of 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning
on the 10th day.
If the Holder
shall commence an action or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney,
then the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum
extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected
or impaired thereby.
10.
Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed
by the Company and the Holder.
| /s/ Anthony L. Anish |
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| Initials |
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11. The Company represents that it
is not a “shell” issuer and has never been a “shell” issuer or that if it previously has been a “shell”
issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer
a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinion to allow for
salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12.
The Company shall issue irrevocable transfer agent instructions reserving 16,000,000 shares of its Common Stock for conversions
under this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this
Note. Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay
all costs associated with issuing and delivering the shares.
13.
The Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits,
recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14.
This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to
be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder
and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State
of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this
Agreement shall be effective as an original.
| /s/ Anthony L. Anish |
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| Initials |
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IN WITNESS WHEREOF, the Company
has caused this Note to be duly executed by an officer thereunto duly authorized.
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M LINE HOLDINGS, INC |
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By: |
/s/ Anthony L. Anish |
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Title: |
COO |
| /s/ Anthony L. Anish |
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| Initials |
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $__________ of the above Note into ___________ Shares
of Common Stock of M Line Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If Shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect
thereto.
Date of Conversion: ______________________________________________________
Applicable Conversion Price: _______________________________________________
Signature: ______________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _______________________________________________________________
______________________________________________________________
SSN or EIN: _____________________
Shares are to be registered in the following name: __________________________________________________
Name: _________________________________________________________________
Address: ______________________________________________________________
Tel: _____________________________________
Fax: _____________________________________
SSN or EIN: ______________________________
Shares are to be sent or delivered to the following
account:
Account Name: _________________________________________________________
Address: _______________________________________________________________
| /s/ Anthony L. Anish |
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| Initials |
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Exhibit 10.20
DEBT PURCHASE AGREEMENT
This Debt Purchase
Agreement (the “Agreement”) made as of this 10th day of June, 2014, by and between LG Capital Funding, LLC
(the “Buyer”) and Spagus Capital Partners, LLC (the “Seller”).
1. PURCHASE AND SALE OF THE
CONVERTIBLE NOTE
Upon the terms and
conditions herein contained, at the Closing (as hereinafter defined), the Seller hereby sells, assigns and transfers to the Buyer
and the Buyer agrees to purchase from the Seller the “Transferred Rights” of the Seller and all rights thereto. Transferred
Rights shall mean all rights with respect to $50,000 in principal and proportional accrued interest (the “Assigned Portion”)
under that promissory note in the amount of $150,000 issued by M Line Holdings, Inc. (“Borrower” or “Company”)
on September 29, 2011, a true and correct copy which has been provided to New Venture Attorneys, P.C. (the “Note”).
By its signatures hereto the Borrower accepts the assignment of the Transferred Rights to Buyer and agrees that Buyer may convert
the Transferred Rights into shares of the Company’s common stock.
2. CONSIDERATION
The purchase price
for the Assigned Portion of the Note shall be the Buyer’s payment of Fifty Thousand Dollars ($50,000.00) to the Seller, for
the Assigned Portion (the “Purchase Price”).
3. CLOSING
The closing of the
transactions contemplated by this Agreement (the “Closing”) shall take place simultaneously with the delivery of the
Purchase Price via wire transfer of immediately available funds against the assignment of the Note. The funds will be wired as
set forth in Exhibit A.
4. REPRESENTATIONS
AND WARRANTIES OF SELLER The Seller hereby represents and warrants to the Buyer as follows:
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4.1 |
Status of the Seller and the Note. The Seller is the beneficial owner of the Note. The Note is currently outstanding and Seller is informed by Company that the Note represents a bona fide debt obligation of the Company. |
4.2 Authorization;
Enforcement. (i) Seller has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to sell each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Seller and the consummation by it of the transactions contemplated hereby (including, without limitation,
the sale of the Note to the Buyer) have been duly authorized by the Seller and no further consent or authorization of the Seller
or its members is required, (iii) this Agreement has been duly executed and delivered by the Seller, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general
application.
4.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Seller and the consummation by the Seller of the
transactions contemplated hereby (including, without limitation, the sale of the Note to the Buyer) will not (i) conflict with
or result in a violation of any provision of its certificate of formation or other organizational documents, or (ii) violate or
conflict with or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time
or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, note, bond, indenture or other instrument to which Seller are a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which Seller are subject) applicable to Seller or the Note is bound or affected. The Seller is
not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver
or perform any of its obligations under this Agreement in accordance with the terms hereof.
4.4 Title;
Rule 144 Matters. Seller has good and marketable title to the Note. Seller is not an “Affiliate” of the Company,
as that term is defined in Rule 144 of the Securities Act of 1933, as amended (the “1933 Act”), as such Buyer will
be able to track the holding period of the Seller.
4.5 Consent
of the Company.
(i) The
Company, as evidence by its signature at the foot of this Agreement, hereby represents and warrants that, upon delivery to the
Company of the Note, the Company shall promptly cause to be issued to and in the name of Buyer one of more new executed Notes in
the aggregate amount of $50,000.00 plus accrued interest but otherwise having the sale terms (including, but not necessarily limited
to, referring to the original issue date) as in the Note. The Note may contain the same restrictive legend as provided in the original
Note, but no stop transfer order. The Note is currently outstanding and represents a bona fide debt obligation of the Company.
(ii) The
signature by the Company also represents the Company’s agreement to treat Buyer as a party to, and having all the rights
of the Seller with respect to the Transferred Rights.
5. REPRESENTATIONS, WARRANTIES AND
ACKNOWLEDGEMENTS OF THE BUYER. The Buyer hereby represents warrants and acknowledges to the Seller as follows:
5.1 Sophisticated
Investor. The Buyer has sufficient knowledge and experience of financial and business matters, is able to evaluate the merits
and risks of the partial purchase of the Note and has had substantial experience in previous private and public purchases of securities.
5.2 Authorization;
Enforcement. (i) Buyer has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to purchase each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Buyer and the consummation by it of the transactions contemplated hereby (including, without limitation,
the purchase of the Note by the Buyer) have been duly authorized by the Buyer and no further consent or authorization of the Buyer
or its members is required, (iii) this Agreement has been duly executed and delivered by the Buyer, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general application.
5.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Buyer and the consummation by the Buyer of the
transactions contemplated hereby will not (i) conflict with or result in a violation of any provision of its certificate of formation
or other organizational documents, or (ii) violate or conflict with or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement, note, bond, indenture or other instrument to which Buyer
is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory organizations to which Buyer is subject) applicable to Seller
or the Note is bound or affected. The Buyer is not required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its obligations under this Agreement in accordance with the terms hereof.
6. MISCELLANEOUS
6.1 Binding
Effect; Benefits. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective
successors and permitted assigns. Except as otherwise set forth herein, this Agreement may not be assigned by any party hereto
without the prior written consent of the other party hereto. Except as otherwise set forth herein, nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns
any rights, remedies, obligations or liabilities under or by any reason of this Agreement.
6.2 Notices.
All notices, requests, demands and other communications which are required to be or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person, or transmitted by telecopy or telex, or upon receipt
after dispatch by certified or registered first class mail, postage prepaid, return receipt requested, to the party to whom the
same is so given or made, at the following addresses (or such others as shall be provided in writing hereafter):
(a) If to the Buyer to:
LG Capital Funding, LLC
1218 Union Street, Suite #2
Brooklyn, NY 11225
Attn: Joseph Lerman
(b) If to the Seller to:
Spagus Capital Partners, LLC
250 F. Centerville Road
Warwick, RI 02886
6.3 Entire
Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
6.4 Further
Assurances. After the Closing, at the request of either party, the other party shall execute, acknowledge and deliver, without
further consideration, all such further assignments, conveyances, endorsements, deeds, powers of attorney, consents and other documents
and take such other action as may be reasonably requested to consummate the transactions contemplated by this Agreement.
6.5 Headings.
The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be part of
this Agreement or to affect the meaning or interpretation of this Agreement.
6.6 Counterparts.
This Agreement may be executed in any number of counterparts and by facsimile, each of which, when executed, shall be deemed to
be an original and all of which together shall be deemed to be one and the same instrument.
6.7 Governing
Law. This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by
the laws of the State of New York, without giving effect to the conflicts of law principles thereof.
6.8 Severability.
If any term or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the Agreement shall be valid and enforced to the fullest extent permitted
by law.
6.9 Amendments.
This Agreement may not be modified or changed except by an instrument or instruments in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be duly executed as of the date first above written.
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BUYER: |
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LG CAPITAL FUNDING, LLC |
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By: |
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Joseph Lerman, Managing Member |
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SELLER: |
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SPAGUS CAPITAL PARTNERS, LLC |
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By: |
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Title: |
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| ACCEPTED AND AGREED: |
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| M LINE HOLDINGS, INC |
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| By: |
/s/ Anthony L. Anish |
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| Title: |
COO |
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EXHIBIT A
WIRE INSTRUCTIONS FOR SELLER
PLEASE WIRE YOUR FUNDS TO THE FOLLOWING
PLEASE INSERT COMPLETE BANK WIRING INFO INCLUDING BANK ADDRESS
AS WELL AS ADDRESS
NON-AFFILIATION
LETTER
June 10, 2014
Counsel to M LINE HOLDINGS, INC.
Counsel to LG Capital Funding, LLC
Gentlemen:
Please let this letter serve as confirmation
that Spagus Capital Partners, LLC is not now, and has not been during the preceding 90 days, an officer, director, 10% or more
shareholder of M LINE HOLDINGS, INC. or in any other way an “affiliate” (as that term is defined in Rule 144(a)(1)
adopted pursuant to the Securities Act of 1933, as amended) of such issuer.
| Very Truly yours, |
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| SPAGUS CAPITAL PARTNERS, LLC |
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| By: |
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| Title: |
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THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”) |
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US $60,673.97
REPLACEMENT NOTE- ORIGINALLY ISSUED 9/29/2011 IN THE AMOUNT
OF $150,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE JUNE 10, 2015
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Sixty Thousand Six Hundred Seventy
Three Dollars and 97/100 cents exactly (U.S. $60,673.97) on June 10, 2015 (“Maturity Date”) and to pay interest
on the principal amount outstanding hereunder at the rate of 8% per annum commencing on June 10, 2014. The interest will be paid
to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this
Note. The principal of, and interest on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225, initially, and
if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company
will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts
required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the
last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment
of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the
sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph
4(b) herein.
This Note is subject to the following additional
provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
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| Initials |
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2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”),
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in
Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a) The
Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without
restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 50%
of the lowest closing bid price of the Common Stock as reported on the OTCQB marketplace which the Company’s
shares are traded or any market upon which the Common Stock may be traded in the future (“Exchange”), for the
fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company (provided
such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in
blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the
Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 40% instead of 50%
while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
|
(c) This
Note may not be prepaid.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
| /s/ Anthony L. Anish |
|
| Initials |
|
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
| /s/ Anthony L. Anish |
|
| Initials |
|
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder; or
(m) The
Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n) The
Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at any time thereafter, unless
cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s
sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further)
notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note
or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period
of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded
by law. Upon an Event of Default, interest shall accrue at a default interest rate of 16% per annum or, if such rate is usurious
or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k)
the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was
delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach
of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding
principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under
this Note shall increase by 10%.
If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails
in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred
in the investigation, preparation and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
| /s/ Anthony L. Anish |
|
| Initials |
|
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a(9)
opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 150,000,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note and
another $50,000 note issued by the Company to the Holder on even date herewith . Upon full conversion of this Note, the any shares
remaining in the Share Reserve shall be cancelled.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by an officer thereunto duly authorized.
Dated: June 10, 2014
| |
M LINE HOLDINGS, INC |
| |
|
| |
By: |
/s/ Tony Anish |
| |
|
|
| |
|
Tony Anish, Chief Operating Officer |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby
irrevocably elects to convert $___________ of the above Note into ___________ Shares of Common Stock of M Line Holdings, Inc. (“Shares”)
according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued
in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with
respect thereto.
| Applicable Conversion Price: |
|
| Signature: |
|
| |
[Print Name of Holder and Title of Signer] |
| Shares are to be registered in the following name: |
|
Shares are to be sent or delivered to the following account:
| /s/ Anthony L. Anish |
|
| Initials |
|
| |
THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”) |
|
US $50,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE JUNE 10, 2015
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand Dollars exactly (U.S.
$50,000.00) on June 10, 2015 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder
at the rate of 8% per annum commencing on June 10, 2014. The interest will be paid to the Holder in whose name this Note is registered
on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are
payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225, initially, and if changed, last appearing on the records of the Company
as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding
principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the
Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company.
The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and
discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest
shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional
provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”),
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in
Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a) The
Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without
restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 50%
of the lowest closing bid price of the Common Stock as reported on the OTCQB marketplace which the Company’s
shares are traded or any market upon which the Common Stock may be traded in the future (“Exchange”), for the
fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company (provided
such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in
blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the
Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 40% instead of 50%
while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
|
(c) The
Notes may be prepaid with the following penalties: (i) if the note is prepaid within 90 days of the issuance date, then at 125%
of the face amount plus any accrued interest; (ii) if the note is prepaid within 91 days after the issuance date but less than
151 days after the issuance date, then at 140% of the face amount plus any accrued interest and (iii) if the note is prepaid within
151 days after the issuance date but less than 180 days after the issuance date, then at 150% of the face amount plus any accrued
interest. This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days
of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
| /s/ Anthony L. Anish |
|
| Initials |
|
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
| /s/ Anthony L. Anish |
|
| Initials |
|
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder; or
(m) The
Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n) The
Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at any time thereafter, unless
cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s
sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further)
notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note
or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period
of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded
by law. Upon an Event of Default, interest shall accrue at a default interest rate of 16% per annum or, if such rate is usurious
or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k)
the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered
to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach of Section 8(n)
shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding principal
due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under this Note
shall increase by 10%.
If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails
in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred
in the investigation, preparation and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
| /s/ Anthony L. Anish |
|
| Initials |
|
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a(9)
opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 150,000,000 shares of its Common Stock for conversions under
this Note and another note issued by the Company to the Holder on even date herewith (the “Share Reserve”). The reserve
shall be replenished as needed to allow for conversions of this Note. Upon full conversion of this Note, the any shares remaining
in the Share Reserve shall be cancelled.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by an officer thereunto duly authorized.
Dated: June 10, 2014
| |
M LINE HOLDINGS, INC |
| |
|
|
| |
By: |
/s/ Tony Anish |
| |
|
|
| |
|
Tony Anish, Chief Operating Officer |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby
irrevocably elects to convert $____________ of the above Note into ____________ Shares of Common Stock of M Line Holdings, Inc.
(“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
| Applicable Conversion Price: |
|
| Signature: |
|
| |
[Print Name of Holder and Title of Signer] |
| Shares are to be registered in the following name: |
|
Shares are to be sent or delivered to the following account:
| /s/ Anthony L. Anish |
|
| Initials |
|
UNANIMOUS CONSENT IN LIEU OF A SPECIAL
MEETING OF DIRECTORS OF
M LINE HOLDINGS, INC.
The undersigned, being all of the directors
of M Line Holdings, Inc, a corporation of the State of Nevada (the “Corporation”), do hereby authorize and approve
the actions set forth in the following resolutions without the formality of convening a meeting, and do hereby consent to the following
actions of this Corporation, which actions are hereby deemed affective as of the date hereof:
RESOLVED: That officers of
this Corporation are authorized and directed to amend and restate a $50,000 portion (plus accrued interest) of a $150,000.00
note issued to Spagus Capital Partners, LLC on September 29, 2011 into a new promissory note to LG Capital Funding, LLC, in the
amount of $60,673.97 to provide conversion features equal to 55% of the lowest closing bid price of the last day of 10 trading
days prior to conversion, as well as 8% interest and become due and payable on June 10, 2015; and
RESOLVED: That the officers of this
Corporation are authorized and directed to issue a $50,000 promissory note to LG Capital Funding, LLC, which provides conversion
features equal to 50% of the lowest closing bid price of the Corporation’s Common Stock for the last 15 trading days prior
to conversion, as well as 8% per annum interest and become due and payable on June 10, 2015; and
RESOLVED FURTHER: That the officers
of this corporation are authorized and directed to execute transfer agent instructions with the Company’s transfer
agent to irrevocably reserve 150,000,000 shares of the Company’s Common Stock with the transfer agent for the benefit of
LG Capital Funding, LLC for conversion of the above aforementioned notes and
RESOLVED FURTHER: That officers
of this Corporation are authorized and directed to issue an additional promissory note in the amount of $50,000.00 to LG
Capital Funding, LLC which provides conversion features equal to 50% of the lowest closing bid price of the Corporation’s
Common Stock for the last 15 trading days prior to conversion, as well as 8% per annum interest and become due and payable on June
10, 2015; and
RESOLVED FURTHER: That the aforementioned notes shall
be paid for by LG Capital Funding, LLC by the payment to the Corporation of $50,000 and by the issuance of a $50,000 promissory
note of LG Capital Funding, LLC secured by assets with a fair market value of not less than $50,000.00; and
RESOLVED FURTHER, that each of the
officers of the Corporation be, and they hereby are, authorized and empowered to execute and deliver such documents, instruments
and papers and to take any and all other action as they or any of them may deem necessary or appropriate of the purpose of carrying
out the intent of the foregoing resolutions and the transactions contemplated thereby; and that the authority of such officers
to execute and deliver any such documents, instruments and papers and to take any such other action shall be conclusively evidenced
by their execution and delivery thereof or their taking thereof.
The undersigned, by affixing their signatures
hereto, do hereby consent to, authorize and approve the foregoing actions in their capacity as a majority of the direction of M
Line Holdings, Inc.
Dated: June 10, 2014
| /s/ Bruce Barren |
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| Bruce Barren |
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| /s/ George Colin |
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| George Colin |
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| /s/ Jitu Banker |
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| Jitu Banker |
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| /s/ Anthony Anish |
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| Anthony Anish |
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THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. LENDERS SHOULD BE AWARE THAT THEY MAY
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
LG CAPITAL FUNDING, LLC
COLLATERALIZED SECURED PROMISSORY NOTE
BACK END NOTE
| $50,000.00 |
Brooklyn, NY |
| |
June 10, 2014 |
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1. |
Principal and Interest |
FOR VALUE RECEIVED,
LG Capital Funding, LLC, a New York Limited Liability Company (the “Company”) hereby absolutely and unconditionally
promises to pay to M Line Holdings, Inc (the “Lender”), or order, the principal amount of Fifty Thousand Dollars ($50,0000)
no later than February 10, 2015, unless the Lender does not meet the “current information requirements” required under
Rule 144 of the Securities Act of 1933, as amended, in which case the Company may declare the offsetting note issued by the Lender
on the same date herewith to be in Default (as defined in that note) and cross cancel its payment obligations under this Note as
well as the Lenders payment obligations under the offsetting note. This Full Recourse Note shall bear simple interest at the rate
of 8%.
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2. |
Repayments and Prepayments; Security. |
a. All
principal under this Note shall be due and payable no later than February 10, 2015, unless the Lender does not meet the “current
information requirements” required under Rule 144 of the Securities Act of 1933, as amended, in which case the Company may
declare the offsetting note issued by the Lender on the same date herewith to be in Default (as defined in that note) and cross
cancel its payment obligations under this Note as well as the Lenders payment obligations under the offsetting note.
b. The
Company may pay this Note at any time. This note may not be assigned by the Lender, except by operation of law.
c. This
Note shall initially be secured by the pledge of the $50,000.00 8% convertible promissory note issued to the Company by the Lender
on even date herewith (the “Lender Note”). The Company may exchange this collateral for other collateral with an
appraised value of at least $50,000.00, by providing 3 days prior written notice to the Lender. If the Lender does not object
to the substitution of collateral in that 3 day period, such substitution of collateral shall be deemed to have been accepted by
the Lender. All collateral shall be retained by New Venture Attorneys, P.C., which shall act as the escrow agent for
the collateral for the benefit of the Lender. The Company may not effect any conversions under the Lender Note until it has made
full cash payment for the portion of the Lender Note being converted.
______
Lender Initials to Acceptance of bolded section above.
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3. |
Events of Default; Acceleration. |
a. The
principal amount of this Note is subject to prepayment in whole or in part upon the occurrence and during the continuance of any
of the following events (each, an “Event of Default”): the initiation of any bankruptcy, insolvency, moratorium, receivership
or reorganization by or against the Company, or a general assignment of assets by the Company for the benefit of creditors. Upon
the occurrence of any Event of Default, the entire unpaid principal balance of this Note and all of the unpaid interest accrued
thereon shall be immediately due and payable. The Company may offset amounts due to the Lender under this Note by similar amounts
that may be due to the Company by the Lender resulting from breaches under the Lender Note.
b. No
remedy herein conferred upon the Lender is intended to be exclusive of any other remedy and each and every remedy shall be cumulative
and in addition to every other remedy hereunder, now or hereafter existing at law or in equity or otherwise. The Company accepts
and agrees that this Note is a full recourse note and that the Holder may exercise any and all remedies available to it under law.
a. All
notices, reports and other communications required or permitted hereunder shall be in writing and may be delivered in person, by
telecopy with written confirmation, overnight delivery service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed (i) if to a Lender, at such Lender’s address as the Lender shall have furnished
the Company in writing and (ii) if to the Company at such address as the Company shall have furnished the Lender(s) in writing.
b. Each
such notice, report or other communication shall for all purposes under this Note be treated as effective or having been given
when delivered if delivered personally or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited
in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or, if sent
by electronic communication with confirmation, upon the delivery of electronic communication.
a. Neither
this Note nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by a signed statement in
writing.
b. No
failure or delay by the Lender to exercise any right hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other right, power or privilege. The provisions of this Note are severable
and if any one provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, such invalidity
or unenforceability shall affect only such provision in such jurisdiction. This Note expresses the entire understanding of the
parties with respect to the transactions contemplated hereby. The Company and every endorser and guarantor of this Note regardless
of the time, order or place of signing hereby waives presentment, demand, protest and notice of every kind, and assents to any
extension or postponement of the time for payment or any other indulgence, to any substitution, exchange or release of collateral,
and to the addition or release of any other party or person primarily or secondarily liable.
c. If
Lender retains an attorney for collection of this Note, or if any suit or proceeding is brought for the recovery of all, or any
part of, or for protection of the indebtedness respected by this Note, then the Company agrees to pay all costs and expenses of
the suit or proceeding, or any appeal thereof, incurred by the Lender, including without limitation, reasonable attorneys’
fees.
d. This
Note shall for all purposes be governed by, and construed in accordance with the laws of the State of New York (without reference
to conflict of laws).
e. This
Note shall be binding upon the Company’s successors and assigns, and shall inure to the benefit of the Lender’s successors
and assigns.
IN WITNESS WHEREOF, the Company has caused
this Note to be executed by its duly authorized officer to take effect as of the date first hereinabove written.
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LG CAPITAL FUNDING, LLC |
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By: |
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Title: |
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APPROVED: |
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M LINE HOLDINGS, INC. |
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By: |
/s/ Anthony L. Anish |
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Title: |
COO |
DISBURSEMENT AUTHORIZATION
(MEMORANDUM)
TO: LG CAPITAL FUNDING, LLC.
FROM: M LINE HOLDINGS, INC
DATE: June 10, 2014
RE: Disbursement of Funds
In connection with
the funding of an aggregate of $50,000 pursuant to that certain Convertible Redeemable Note dated as of June 10, 2014 (the “Agreement”),
you are hereby directed to disburse such funds as follows:
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1. |
$2,500.00 to New Venture Attorneys, P.C. in accordance with the wire transfer instructions attached as Schedule A hereto; |
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2. |
$4,750 to Anubis Capital Partners, LLC, in accordance with the wire transfer instructions attached as Schedule B hereto; and |
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3. |
$42,750 to M Line Holdings, Inc. in accordance with the wire transfer instructions attached as Schedule C hereto; |
*with identical payments to be made on ash funding
of $50,000 back end note
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/s/ Tony Anish |
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Tony Anish, Chief Operating Officer |
EXHIBIT A
NEW VENTURE ATTORNEYS
WIRING INFORMATION
| Please wire funds to: |
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| Bank of America |
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| Routing No: 026009593 |
| Acct No.: 164109387780 |
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| Beneficiary: |
New Venture Attorneys, PC, IOLTA account |
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| Attorney info: |
New Venture Attorneys, P.C.
900 E. Hamilton Ave, Suite 100
Campbell, CA 95008 |
| /s/ Anthony L. Anish |
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| Company Initials |
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EXHIBIT B
ANUBIS CAPITAL PARTNERS WIRING INFO
Capital One, N.A.
8989 Preston Road
Frisco, TX 75034
Routing No: 111901014
Acct No.: 3622044799
Beneficiary: Anubis Capital Partners
2550 Midway Road Suite 198
Carrolton, TX 75006
| /s/ Anthony L. Anish |
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| Company Initials |
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EXHIBIT C
[WIRING INFO FOR ISSUER]
| Beneficiary: |
M Line Holdings, Inc. |
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2672 Dow Avenue |
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Tustin, CA 92780 |
| Bank Account Number: |
23414-69572 |
| Bank: |
Bank of America |
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14222 Culver Drive |
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Irvine, CA 92620 |
| /s/ Anthony L. Anish |
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| Company Initials |
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THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”) |
|
US $50,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE JUNE 10, 2015
BACK END NOTE
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand Dollars exactly (U.S. $50,000.00)
on May 30, 2015 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate
of 8% per annum commencing on May 30, 2014. The interest will be paid to the Holder in whose name this Note is registered on the
records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable
at 1218 Union Street, Suite #2, Brooklyn, NY 11225, initially, and if changed, last appearing on the records of the Company as
designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal
due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of
this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding
of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the
liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable
in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional
provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
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| Initials |
|
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”),
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in
Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without
restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 50%
of the lowest closing bid price of the Common Stock as reported on the OTCQB marketplace which the Company’s
shares are traded or any market upon which the Common Stock may be traded in the future (“Exchange”), for the
fifteen prior trading days including the day upon which a Notice of Conversion is received by the Company (provided
such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in
blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the
Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 40% instead of 50%
while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
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| Initials |
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(c) This
Note may not be prepaid, except that if the $50,000 Rule 144 convertible redeemable note issued by the Company of even date herewith
is redeemed by the Company within 6 months of the issuance date of such Note, all obligations of the Company under this Note and
all obligations of the Holder under the Holder issued Back End Note will be automatically be deemed satisfied and this Note and
the Holder issued Back End Note will be automatically be deemed cancelled and of no further force or effect.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
| /s/ Anthony L. Anish |
|
| Initials |
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7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note shall
be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder and not cure such breach within 10 days; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of one hundred thousand dollars ($100,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
| /s/ Anthony L. Anish |
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| Initials |
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(j) Intentionally
Deleted;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(l) The
Company shall not replenish the reserve set forth in Section 12, within 5 business days of the request of the Holder ; or
(m) The
Company’s Common Stock has a closing bid price of less than $0.003 per share for at least 5 consecutive trading days; or
(n) The
aggregate dollar trading volume of the Company’s Common Stock is less than forty thousand dollars ($40,000.00) in any 5 consecutive
trading days; or
(o) The
Company shall cease to be “current” in its filings with the Securities and Exchange Commission; or.
(p) The Company shall
lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at any time thereafter, unless
cured (except for 8(m) and 8(n) which are incurable defaults, the sole remedy of which is to allow the Holder to cancel
both this Note and the Holder Issued Note, and in each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of
16% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
Further, if the Note becomes due and payable, the Holder may use the outstanding principal and interest due under the Note to offset
any payment obligations it may have to the Company. In the event of a breach of 8(k) the penalty shall be $250 per day the shares
are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall
increase to $500 per day beginning on the 10th day. Once cash funded, the penalty for a breach of Section 8(p) shall
be an increase of the outstanding principal amounts by 20%. Once cash funded, in the event of a breach of Section 8(i), the outstanding
principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under
this Note shall increase by 10%.
If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then, if the Holder
prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.
| /s/ Anthony L. Anish |
|
| Initials |
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9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a “144-
3(a)(9)” opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. Prior
to cash funding of this Note, The Company will issue irrevocable transfer agent instructions reserving 3x the number of shares
of Common Stock necessary to allow the holder to convert this note based on the discounted conversion price set forth in Section
4(a). The reserve shall be replenished as needed to allow for conversions of this Note. Upon full conversion of this Note, the
reserve representing this Note shall be cancelled. The Company will pay all transfer agent costs associated with issuing and delivering
the shares.
13. The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by an officer thereunto duly authorized.
| |
M LINE HOLDINGS ING. |
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|
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By: |
/s/ Anthony L. Anish |
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|
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Title: |
COO |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby
irrevocably elects to convert $_________ of the above Note into _________Shares of Common Stock of M Line Holdings, Inc. (“Shares”)
according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued
in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with
respect thereto.
| Applicable Conversion Price: |
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| Signature: |
|
| |
[Print Name of Holder and Title of Signer] |
| Shares are to be registered in the following name: |
|
Shares are to be sent or delivered to the following account:
| /s/ Anthony L. Anish |
|
| Initials |
|
 |
2672 Dow Avenue, Tustin, CA 92780
tel: 714.630.6253 • fax: 714.619.2339
email: tony@mlineholdings.com
web site: www.mlineholdings.com |
June 10, 2014
VStock Transfer, LLC
71 Spruce Street
Suite 201
Cedarhurst, NY 11516
Re: Irrevocable Transfer Agent Instructions
Ladies and Gentlemen:
On June 10, 2014, M
Line Holdings, Inc., a Nevada corporation (the “Company”) executed two 8% Convertible Promissory Notes in the amount
of $50,000.00 and $60,697.23 (collectively, the “Note”) with LG Capital Funding, LLC (the “Investor”).
Effective upon an
increase in the authorized capital sufficient to allow such a conversion of which you are properly notified together with confirmation
of the reserve, you are hereby irrevocably authorized and instructed to reserve One Hundred Fifty Million (150,000,000) shares
of common stock (“Common Stock”) of the Company for issuance upon for conversion of the Note in accordance with the
terms thereof. The amount of Common Stock so reserved may be increased, from time to time, by written instructions of the Company
and the Investor. Once the reserve shares have been issued Vstock Transfer, LLC shall have no further duty or obligation to issue
shares until the reserve has been increased by the Company and the Investor. You are hereby further irrevocably authorized and
directed to issue the shares of Common Stock so reserved upon your receipt from the Investor of a notice of conversion (“Notice
of Conversion”) executed by the Investor in accordance with the terms of the Notice of Conversion. You shall have no duty
or obligation to confirm the accuracy or the information set forth on the Notice of Conversion. Once the Company repays the principal,
plus interest, plus default interest (if any) of any of the Note at the maturity date, upon written (e-mail being acceptable) confirmation
by the Investor or Investor Counsel as well as the Company, Transfer Agent shall have no further obligation to maintain a reserve
on behalf of the Investor or to issue any share of Common Stock to the Investor under the terms of that Note.
The Company must be
participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program
in order for the shares to be delivered electronically. The shares to be issued are to be registered in the names of the registered
holder of the securities submitted for conversion or exercise.
The shares will be
issued within three (3) business day upon receipt of the Notice of Conversion. If the Company’s account is at least 30 days
past due, the Investor is responsible for the prepaid Transfer Agent transfer and shipping fees. In no event shall the Transfer
Agent be required to issue and deliver share certificates without the prior payment of its fees for the certificates to be issued.
The Company and the
Investor intend that these instructions require the placement of a restrictive legend on all applicable share certificates unless
the requirements listed below are met and the Investor provides the Transfer agent with an acceptable legal opinion stating that
share certificates can be issued without a legend. So long as you have previously received a legal opinion from the Company (or
Investor counsel) that the shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
any restriction and the number of shares to be issued are less than 4.99% of the total issued and outstanding common stock of the
Company, such shares should be transferred, at the option of the holder of the Notes as specified in the Notice of Conversion,
either (i) electronically by crediting the account of a Prime Broker with the Depository Trust Company through its Deposit Withdrawal
Agent Commission system if the Company is a participant or (ii) in certificated form without any legend which would restrict the
transfer of the shares, and you should remove all stop-transfer instructions relating to such shares. Until such time as you are
advised by Investor counsel that the shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144
without any restriction and the number of shares to be issued are less than 4.99% of the total issued and outstanding common stock
of the Company, you are hereby instructed to place the following legends on the certificates:
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF INVESTOR
COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth
above shall be removed and you are instructed to issue a certificate without such legend to the holder of any shares upon which
it is stamped, if: (a) such shares are registered for sale under an effective registration statement filed under the 1933 Act or
otherwise may be sold pursuant to Rule 144 without any restriction and the number of shares to be issued is less than 4.99% of
the total issued common stock of the Company, (b) such holder provides the Company and the transfer agent with an opinion of counsel,
in fat in, substance and scope customary for opinions of counsel in comparable transactions (and satisfactory to the transfer agent),
to the effect that a public sale or transfer of such security may be made without registration under the 1933 Act and such sale
or transfer is effected and (c) such holder provides the Company and the transfer agent with reasonable assurances that such shares
can be sold pursuant to Rule 144. Nothing herein shall be construed to require the Transfer Agent to take any action which would
violate state or federal rules, regulations or law. If an instruction herein would require such a violation, such instructions,
but not any other term herein, shall be void and unenforceable.
The Company shall indemnify
and defend you and your officers, directors, principals, partners, agents and representatives, and hold each of them harmless from
and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements of its and Transfer
Agent’s attorney) incurred by or asserted against you or any of them arising out of or in connection with the instructions
set forth herein, the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of
defending yourself or themselves against any claim or liability hereunder, except that the Company shall not be liable hereunder
as to matters in respect of which it is determined that you have acted with gross negligence or in bad faith (which gross negligence,
bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction). You shall have no liability to the Company or the Investor in respect to any action taken or any failure to act
in respect of this if such action was taken or omitted to be taken in good faith, and you shall be entitled to rely in this regard
on the advice of counsel.
The Company agrees
that in the event that the Transfer Agent resigns as the Company’s transfer agent, the Company shall engage a suitable replacement
transfer agent that will agree to serve as transfer agent for the Company and be bound by the terms and conditions of these Irrevocable
Instructions within five (5) business days. The Company and the Investor agree that any action which names the Transfer Agent as
a party shall be brought in a court of general jurisdiction in New York, New York and no other court.
The Investor is intended
to be a party to these instructions and are third party beneficiaries hereof, and no amendment or modification to the instructions
set forth herein may be made without the consent of the Investor.
| Very truly yours, |
|
| |
|
| M LINE HOLDINGS, INC. |
|
| |
|
| By: |
/s/ Anthony L. Anish |
|
| |
|
|
| Title: |
COO |
|
| Acknowledged and Agreed: |
|
| |
|
| VSTOCK TRANSFER, LLC |
|
| |
|
| By: |
|
|
| |
|
|
| Title: |
|
|
THE SECURITIES OFFERED HEREBY
HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)
US $50,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE FEBRUARY 6, 2015
BACK END NOTE
FOR VALUE
RECEIVED, M Line Holdings, Inc., (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its
authorized successors and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand
dollars exactly (U.S. $50,000.00) on February 6, 2015 (“Maturity Date”) and to pay interest on the
principal amount outstanding hereunder at the rate of 8% per annum commencing on February 6, 2014. The interest will be paid
to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of
this Note. The principal of, and interest on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225,
initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from
time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the
Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire
transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check
or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability
for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in
Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by
the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that
Holder shall
pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”)
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, after the requisite Rule 144 holding period and after full cash payment for
the shares convertible hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into
shares of the Company’s common stock (the “Common Stock”) without restrictive legend of any nature, at
a price (“Conversion Price”) for each share of Common Stock equal to 55% of the lowest closing bid price
of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are
traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the seven
prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice
of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or
Daylight Savings Time if the Holder wishes to included the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof
in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of
shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the
event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead
of 55% while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
|
(c) This
Note may not be prepaid, except that if the $50,000 Rule 144 convertible redeemable note issued by the Company of even date herewith
is redeemed by the Company within 6 months of the issuance date of such Note, this Note will automatically terminate, as will
he offsetting Holder issued $50,000 note.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving
entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of
items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request
of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of
redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the
amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective provision
to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this
Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification,
capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could
have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such
Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders
of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person
or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
| /s/ Anthony L. Anish |
|
| Initials |
|
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note shall
be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder and not cure such breach within 10 days; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within thirty (30) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of one hundred thousand dollars ($100,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) defaulted
on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such
default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) Intentionally
Deleted;
| /s/ Anthony L. Anish |
|
| Initials |
|
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder ; or
(m) The
Company’s Common Stock has a closing bid price of less than $0.015 per share for at least 5 consecutive trading days;
or
(n) The
aggregate dollar trading volume of the Company’s Common Stock is less than forty thousand dollars ($40,000.00) in any 5 consecutive
trading days; or
(o) The
Company shall cease to be “current” in its filings with the Securities and Exchange Commission.
Then, or at any time thereafter, unless
cured (except for 8(m) and 8(n) which are incurable defaults the sole remedy of which is to allow the Holder to cancel
offsetting back end notes issued to the Company), and in each and every such case, unless such Event of Default shall have been
waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the
Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of
18% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
Further, if the Note becomes due and payable, the Holder may use the outstanding principal and interest due under the Note to offset
any payment obligations it may have to the Company. In the event of a breach of 8(k) the penalty shall be $250 per day the shares
are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall
increase to $500 per day beginning on the 10th day.
If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney, then the Holder shall
be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation
and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged
or terminated other than by a written instrument signed by the Company and the Holder.
| /s/ Anthony L. Anish |
|
| Initials |
|
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9)
opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. Prior
to cash funding of this Note, The Company will issue irrevocable transfer agent instructions reserving 4x the number of shares
of Common Stock necessary to allow the holder to convert this note based on the discounted conversion price set forth in Section
4(a) of the $65,000 Rule 144 note issued by the Company on even date herewith. The reserve shall be replenished as needed to allow
for conversions of this Note. Upon full conversion of this Note, the reserve representing this Note shall be cancelled. The Company
will pay all transfer agent costs associated with issuing and delivering the shares.
13. The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the Company
has caused this Note to be duly executed by an officer thereunto duly authorized.
| |
M LINE HOLDINGS, INC. |
| |
|
| |
By: |
/s/ Anthony L. Anish |
| |
|
|
| |
Title: |
COO |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby irrevocably elects
to convert $ _____________ of the above Note into _________ Shares of Common Stock of M Line Holdings, Inc. (“Shares”)
according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
| Date of Conversion: ____________________________________________________________ |
|
| Applicable Conversion Price: ______________________________________________________ |
|
| Signature: ____________________________________________________________________ |
|
| [Print Name of Holder and Title of Signer] |
|
SSN or EIN: ________________________
Shares are to be registered in the following name: __________________________________
| Name: _______________________________________________________________________ |
|
| Address: _____________________________________________________________________ |
|
| Tel: _________________________________________________________________________ |
|
| Fax: _______________________________ |
|
| SSN or EIN: _________________________ |
|
Shares are to be sent or delivered to the following account:
| Account Name: ________________________________________________________________ |
|
| Address: _____________________________________________________________________ |
|
| /s/ Anthony L. Anish |
|
| Initials |
|
DISBURSEMENT AUTHORIZATION
(MEMORANDUM)
TO: LG CAPITAL FUNDING, LLC.
FROM: M LINE HOLDINGS, INC.
DATE: February 6, 2014
RE: Disbursement of Funds
In connection with
the funding of an aggregate of $50,000 pursuant to that certain Convertible Redeemable Note dated as of February 6, 2014 (the “Agreement”),
you are hereby directed to disburse such funds as follows:
| 1. | $2,500.00 to New Venture Attorneys, P.C. in accordance
with the wires transfer instructions attached as Schedule A, hereto; |
| 2. | $4,750.00 to Anubis Capital Partners in accordance with
the wire transfer instructions attached as Schedule B, hereto; and |
| 3. | $42,750 to M Line Holdings Inc., in accordance with the
wire transfer instructions attached as Schedule C, hereto; |
| • | Additional payments are to be made when each $50,000 back end note is cash funded in the amounts of $2,500 to New Venture Attoryys
PC an $4,750_to Anubis Capital Partners |
| |
/s/ Anthony L. Anish |
| |
Title: |
COO |
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT A
NEW VENTURE ATTORNEYS
WIRING INFORMATION
Please wire funds to:
Bank of America
Routing No: 026009593
Acct No.: 164109387780
| Beneficiary: |
New Venture Attorneys, PC, IOLTA account |
| |
|
| Attorney info: |
New Venture Attorneys, P.C.
900 E. Hamilton Ave, Suite 100
Campbell, CA 95008 |
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT B
ANUBIS CAPITAL PARTNERS WIRING INFO
Capital One, N.A.
8989 Preston Road
Frisco, TX 75034
| Routing No: |
111901014 |
| Acct No.: |
3622044799 |
Beneficiary: Anubis Capital Partners
2550 Midway Road Suite 198
Carrolton, TX 75006
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT C
[WIRING INFO FOR ISSUER]
Bank of America
14222 Culver Drive
Irvine, CA 92620
Routing 121000358
Account Number: 23414 69572
Beneficiary:
M Line Holdings, Inc.
2672 Dow Avenue
Tustin, CA 92780
| /s/ Anthony L. Anish |
|
| Company Initials |
|
THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. LENDERS SHOULD
BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER
OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
LG CAPITAL FUNDING, LLC
COLLATERALIZED SECURED PROMISSORY NOTE
BACK END NOTE
| $50,000.00 |
Brooklyn, NY |
| . |
February 5, 2014 |
FOR VALUE RECEIVED,
LG Capital Funding, LLC, a Delaware Limited Liability Company (the “Company”) hereby absolutely and unconditionally
promises to pay to M Line Holdings, Inc. (the “Lender”), or order, the principal amount of Fifty Thousand Dollars ($50,000)
no later than November 5, 2014, unless the Lender does not meet the “current information requirements” required under
Rule 144 of the Securities Act of 1933, as amended, in which case the Company may declare the offsetting note issued by the Lender
on the same date herewith to be in Default (as defined in that note) and cross cancel its payment obligations under this Note as
well as the Lenders payment obligations under the offsetting note. This Full Recourse Note shall bear simple interest at the rate
of 8%.
| 2. | Repayments and Prepayments; Security. |
a. All
principal under this Note shall be due and payable no later than November 5, 2014, unless the Lender does not meet the “current
information requirements” required under Rule 144 of the Securities Act of 1933, as amended, in which case the Company may
declare the offsetting note issued by the Lender on the same date herewith to be in Default (as defined in that note) and cross
cancel its payment obligations under this Note as well as the Lenders payment obligations under the offsetting note.
b. The
Company may pay this Note at any time. This note may not be assigned by the Lender, except by operation of law.
c. This
Note shall initially be secured by the pledge of the $50,000 8% convertible promissory note issued to the Company by the Lender
on even date herewith (the “Lender Note”). The Company may exchange this collateral for other collateral with an appraised
value of at least $50,000.00, without prior notice to the Lender. All collateral shall be retained by New Venture Attorneys, P.C.,
which shall act as the escrow agent for the collateral for the benefit of the Lender. The Company may not effect any conversions
under the Lender Note until it has made full cash payment for the portion of the Lender Note being converted.
| 3. | Events of Default; Acceleration. |
a. The
principal amount of this Note is subject to prepayment in whole or in part upon the occurrence and during the continuance of any
of the following events (each, an “Event of Default”): the initiation of any bankruptcy, insolvency, moratorium, receivership
or reorganization by or against the Company, or a general assignment of assets by the Company for the benefit of creditors. Upon
the occurrence of any Event of Default, the entire unpaid principal balance of this Note and all of the unpaid interest accrued
thereon shall be immediately due and payable. The Company may offset amounts due to the Lender under this Note by similar amounts
that may be due to the Company by the Lender resulting from breaches under the Lender Note.
b. No
remedy herein conferred upon the Lender is intended to be exclusive of any other remedy and each and every remedy shall be cumulative
and in addition to every other remedy hereunder, now or hereafter existing at law or in equity or otherwise. The Company accepts
and agrees that this Note is a full recourse note and that the Holder may exercise any and all remedies available to it under law.
a. All
notices, reports and other communications required or permitted hereunder shall be in writing and may be delivered in person, by
telecopy with written confirmation, overnight delivery service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed (i) if to a Lender, at such Lender’s address as the Lender shall have furnished
the Company in writing and (ii) if to the Company at such address as the Company shall have furnished the Lender(s) in writing.
b. Each
such notice, report or other communication shall for all purposes under this Note be treated as effective or having been given
when delivered if delivered personally or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited
in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or, if sent
by electronic communication with confirmation, upon the delivery of electronic communication.
a. Neither
this Note nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by a signed statement in
writing.
b. No
failure or delay by the Lender to exercise any right hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other right, power or privilege. The provisions of this Note are severable
and if any one provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, such invalidity
or unenforceability shall affect only such provision in such jurisdiction. This Note expresses the entire understanding of the
parties with respect to the transactions contemplated hereby. The Company and every endorser and guarantor of this Note regardless
of the time, order or place of signing hereby waives presentment, demand, protest and notice of every kind, and assents to any
extension or postponement of the time for payment or any other indulgence, to any substitution, exchange or release of collateral,
and to the addition or release of any other party or person primarily or secondarily liable.
c. If
Lender retains an attorney for collection of this Note, or if any suit or proceeding is brought for the recovery of all, or any
part of, or for protection of the indebtedness respected by this Note, then the Company agrees to pay all costs and expenses of
the suit or proceeding, or any appeal thereof, incurred by the Lender, including without limitation, reasonable attorneys’
fees.
d. This
Note shall for all purposes be governed by, and construed in accordance with the laws of the State of New York (without reference
to conflict of laws).
e. This
Note shall be binding upon the Company’s successors and assigns, and shall inure to the benefit of the Lender’s successors
and assigns.
IN WITNESS WHEREOF, the Company has caused
this Note to be executed by its duly authorized officer to take effect as of the date first hereinabove written.
| |
LG CAPITAL FUNDING, LLC |
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By: |
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Title: |
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THE SECURITIES OFFERED HEREBY
HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)
US $50,000.00
M LINE HOLDINGS, INC
8% CONVERTIBLE REDEEMABLE NOTE
DUE FEBRUARY 6, 2015
FOR VALUE
RECEIVED, M Line Holdings, Inc. (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized
successors and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand dollars exactly
(U.S. $50,000.00) on February 6, 2015 (“Maturity Date”) and to pay interest on the principal amount outstanding
hereunder at the rate of 8% per annum commencing on February 6, 2014. The interest will be paid to the Holder in whose name this
Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest
on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225, initially, and if changed, last appearing on the
records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment
and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted
or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the
records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder
and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or
wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional
provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
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| Initials |
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2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”)
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after 180 days, and
after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal face amount of this
Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without restrictive
legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 55% of the lowest
closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s
shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for
the seven prior trading days including the day upon which a Notice of Conversion is received by the Company
(provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M.
Eastern Standard or Daylight Savings Time if the Holder wishes to included the same day closing price). If the shares have not
been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the
Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of
Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed
by the Holder evidencing such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by
proper assignment hereof in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.
In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased
to 45% instead of 55% while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
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| Initials |
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(c) During
the first six months this Note is in effect, the Company may redeem this Note by paying to the Holder an amount as follows: (i)
if the redemption is within the first 90 days this Note is in effect, then for an amount equal to 125% of the unpaid principal
amount of this Note along with any interest that would have accrued during them term, (ii) if the redemption is after the 91st
day this Note is in effect but less than the 150th day this Note is in effect, then for an amount equal to 140% of the
unpaid principal amount of this Note along with any prepaid and earned interest, (iii) if the redemption is after the 151st day
this Note is in effect but less than the 180th day this Note is in effect, then for an amount equal to 150% of the unpaid
principal amount of this Note along with any prepaid and earned interest. This Note may not be redeemed after 180 days. The redemption
must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid
and the Company may not redeem this Note
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving
entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of
items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request
of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of
redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the
amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective provision
to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this
Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification,
capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could
have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such
Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders
of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person
or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
| /s/ Anthony L. Anish |
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| Initials |
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6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within thirty (30) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) defaulted
on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such
default within the appropriate grace period; or
| /s/ Anthony L. Anish |
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| Initials |
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(i) The
Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
Then, or at
any time thereafter, unless cured, and in each and every such case, unless such Event of Default shall have been waived in writing
by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the
Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest
or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration
of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies
afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of 24% per annum or, if such rate
is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of
8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice
was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day.
If the Holder shall
commence an action or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney, then
the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
| /s/ Anthony L. Anish |
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| Initials |
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11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously has
been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information indicating
it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9) opinion
to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 16,000,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all costs
associated with issuing and delivering the shares.
13. The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
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| Initials |
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IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by an officer thereunto duly authorized.
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M LINE HOLDINGS, INC. |
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By: |
/s/ Anthony L. Anish |
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Title: |
COO |
| /s/ Anthony L. Anish |
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| Initials |
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby
irrevocably elects to convert $ _____________ of the above Note into _____________ Shares of Common Stock of M Line Holdings,
Inc (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
| Date of Conversion: ____________________________________________________________ |
|
| Applicable Conversion Price: _____________________________________________________ |
|
| Signature: ____________________________________________________________________ |
|
| [Print Name of Holder and Title of Signer] |
|
| SSN or EIN: |
__________________________ |
| Shares are to be registered in the following name: __________________________________________________ |
| Name: _______________________________________________________________________ |
|
| Address: _____________________________________________________________________ |
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| Tel: _________________________________________________________________________ |
|
| Fax: _______________________________ |
|
| SSN or EIN: _________________________ |
|
Shares are to be sent or delivered to the following account:
| Account Name: ________________________________________________________________ |
|
| Address: _____________________________________________________________________ |
|
| /s/ Anthony L. Anish |
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| Initials |
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SECURITIES PURCHASE AGREEMENT
This SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of February 6, 2014, by and between M Line Holdings, Inc.,
a Nevada corporation, with headquarters located at 2672 Dow Avenue, Tustin, CA 92780 (the “Company”), and LG
CAPITAL FUNDING, LLC, a New York limited liability company, with its address at 1218 Union Street, Suite #2, Brooklyn,
NY 11225 (the “Buyer”).
WHEREAS:
A. The Company and
the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the
rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the
Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer desires to
purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement two 8% convertible
notes of the Company, in the forms attached hereto as Exhibit A and B in the aggregate principal amount of $100,000.00 (with the
first note being in the amount of $50,000.00 and the second note being in the amount of $50,000.00 (together with any note(s) issued
in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”),
convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the
terms and subject to the limitations and conditions set forth in such Note. The first of the two notes (the “First Note”)
shall be paid for by the Buyer as set forth herein. The second note (the “Second Note”) shall initially be paid for
by the issuance of an offsetting $50,000.00 secured note issued to the Company by the Buyer (“Buyer Note”), provided
that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note in cash such that the Second Note may
not be converted until it has been paid for in cash.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto; and
NOW THEREFORE, the
Company and the Buyer severally (and not jointly) hereby agree as follows:
1. Purchase
and Sale of Note.
a. Purchase
of Note. On each Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase
from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages
hereto.
| /s/ Anthony L. Anish |
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| Company Initials |
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b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds
to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal
amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and
(ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase
Price.
c. Closing Date.
The date and time of the first issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall
be on or about February 6, 2014, or such other mutually agreed upon time. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties. Subsequent
Closings shall occur when the Buyer Note is repaid. The Closing of the Second Note shall be on or before the dates specified in
the Buyer Note.
2. Buyer’s
Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment
Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion
Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards
the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act;
provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant
to a registration statement or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an
“Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for
so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries
nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or
affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that
may constitute a breach of any of the Company’s representations and warranties made herein.
e. Governmental
Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer
or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities
are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company,
at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in
comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to
an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”))
of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the
1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of
the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined
in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g. Legends.
The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may
be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that
can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following faun (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
“NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES.”
The legend set forth
above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it
is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an
effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without
any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions,
to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion
shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements,
if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer
of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business days, it will be
considered an Event of Default under the Note.
h. Authorization;
Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf
of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency.
The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
3. Representations
and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization
and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other)
to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.
b.
Authorization; Enforcement. (i) The Company has all requisite corporate
power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby
and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of
this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby
(including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion
Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and
no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this
Agreement has been duly executed and delivered by the Company by its authorized representative, and such
authorized representative is the true and official representative with authority to sign this Agreement and the other
documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon
execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its terms.
c. Issuance
of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in
accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens,
claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar
rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
d. Acknowledgment
of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the
Company.
e. No
Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of
the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation
or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which
with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its subsidiaries
is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries
is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a material adverse effect). All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the-Counter Quotations Bureau
(the “OTCQB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCQB in the foreseeable
future, nor are the Company’s securities “chilled” by FINRA. The Company and its subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing.
f. Absence
of Litigation. Except as disclosed in the Company’s public filings, there is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or
their officers or directors in their capacity as such, that could have a material adverse effect. Schedule 3(f) contains a complete
list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the
Company or any of its subsidiaries, without regard to whether it would have a material adverse effect. The Company and its subsidiaries
are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the
capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company
further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation
and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the
Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its
representatives.
h. No
Integrated Offering. Neither the Company, nor any of its affiliates, nor ay person acting on its or their behalf, has directly
or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would
require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer
will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its securities.
i. Title
to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would
not have a material adverse effect. Any real property and facilities held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.
j. Breach
of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth
in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered
an Event of default under the Note.
4. COVENANTS.
a. Expenses.
At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”),
including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees
for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions
in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated
by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for
reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice
by the Buyer. The Company’s obligation with respect to this transaction is to reimburse Buyer’ expenses shall be $2500
in legal fees (and proportional amounts for the Second Note) which shall be deduced from each Note when funded.
b. Listing.
The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the
Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer
owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCQB or any equivalent replacement exchange,
the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock
Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”)
and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the OTCQB
and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the
Common Stock for listing on such exchanges and quotation systems.
c. Corporate
Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCQB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
d. No
Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision
applicable to the Company or its securities.
e. Breach
of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.
5. Governing
Law; Miscellaneous.
a. Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county
of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The
Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s
fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts;
Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by
facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
c. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of,
this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
e. Entire
Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement
may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company, to:
M Line Holdings, Inc.
2672 Dow Avenue
Tustin, CA 92780
Attn: Anthony Anish
If to the Buyer:
LG CAPITAL FUNDING, LLC
1218 Union Street, Suite #2
Brooklyn, NY 11225
Attn: Joseph Lerman
Each party shall provide notice to the other party
of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities
in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act,
without the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival.
The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result
of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth
in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
j. Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
k. No
Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.
1. Remedies.
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for
a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, the undersigned
Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
| M Line Holdings, Inc. |
|
| |
|
|
| By: |
/s/ Anthony L. Anish |
|
| |
Anthony L. Anish |
|
| |
Chief Operations Officer |
|
| LG CAPITAL FUNDING, LLC. |
|
| |
|
|
| By: |
|
|
| Name: Joseph Lerman |
|
| Title: Manager |
|
| AGGREGATE SUBSCRIPTION AMOUNT: |
|
| |
|
| Aggregate Principal Amount of Note: |
$50,000.00 |
| |
|
| Aggregate Purchase Price: |
|
$50,000.00 less $2,500.00 in legal fees
and $4,750.00 in third party due diligence fees. With similar payments to be repeated on the cash funding of Note 2.
EXHIBIT A
144 NOTE - $50K
EXHIBIT
B
BACK END NOTES 1
$50K
|
2672 Dow Avenue, Tustin, CA 92780
tel: 714.630.6253 • fax: 714.619.2339
email: tony@mlineholdings.com
web site: www.mlineholdings.com |
February 6, 2014
V Stock Transfer
77 Spruce Street, Suite 201
Cedarhurst, NY 11516
Ladies and Gentlemen:
M Line Holdings, Inc.,
a Nevada corporation (the “Company”) and LG Capital Funding, LLC have entered into two Convertible Promissory
Notes in the principal amount of $50,000.00, each (collectively, the “Note”).
A copy of the Note
is attached hereto. You should familiarize yourself with your issuance and delivery obligations, as Transfer Agent, contained therein.
The shares to be issued are to be registered in the names of the registered holder of the securities submitted for conversion or
exercise.
You are hereby irrevocably
authorized and instructed to reserve a sufficient number of shares of common stock (“Common Stock”) of the Company
(initially, 32,000,000 shares of Common Stock for the subject Note which should be held in reserve for the Investor pursuant
to the subject Note as of this date) for issuance upon full conversion of the Note and the convertible promissory note referenced
herein in accordance with the terms thereof. The amount of Common Stock so reserved may be increased, from time to time, by written
instructions of the Company and the Investor.
The ability to convert
the Note in a timely manner is a material obligation of the Company pursuant to the Note. Your firm is hereby irrevocably authorized
and instructed to issue shares of Common Stock of the Company (without any restrictive legend) to the Investor without any further
action or confirmation by the Company by either (i) electronically by crediting the account of a Prime Broker with the Depository
Trust Company through its Deposit Withdrawal Agent Commission system, provided that the Company has been made FAST/DRS eligible
by DTCC (DWAC), or (ii) in certificated form without any legend which would restrict the transfer of the shares, and you should
remove all stop-transfer instructions relating to such shares: (A) upon your receipt from the Investor dated within 90 days from
the date of the issuance or transfer request, of: (i) a notice of conversion (“Conversion Notice”) executed by the
Investor; and (ii) an opinion of counsel of the Investor, in form, substance and scope customary for opinions of counsel in comparable
transactions (and satisfactory to the transfer agent), to the effect that the shares of Common Stock of the Company issued to the
Investor pursuant to the Conversion Notice are not “restricted securities” as defined in Rule 144 and should be issued
to the Investor without any restrictive legend; and (B) the number of shares to be issued is less than 4.99% of the total issued
common stock of the Company.
THE SECURITIES OFFERED HEREBY
HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)
US $60,750.68
M LINE HOLDINGS, INC
8% CONVERTIBLE REDEEMABLE NOTE
DUE FEBRUARY 6, 2015
REPLACEMENT NOTE- ORIGINALLY ISSUED MAY
31, 2011
IN THE AMOUNT OF $150,000.00
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Sixty Thousand Seven Hundred Fifty
dollars and 68/100 cents (U.S. $60,750.68) on February 6, 2015 (“Maturity Date”) and to pay interest on the
principal amount outstanding hereunder at the rate of 8% per annum commencing on February 6, 2015. The interest will be paid
to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this
Note. The principal of, and interest on, this Note are payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225, initially,
and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time.
The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less
any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such
Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute
a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent
of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant
to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1.
This Note is exchangeable for an equal aggregate principal amount
of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be
made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges
payable in connection therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”)
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after 180 days,
and after full cash payment for the shares convertible hereunder, to convert all or any amount of the principal face amount of
this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without restrictive
legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 55% of the lowest
closing bid price of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company’s
shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for
the seven prior trading days including the day upon which a Notice of Conversion is received by the Company
(provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M.
Eastern Standard or Daylight Savings Time if the Holder wishes to included the same day closing price). If the shares have not
been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the
Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of
Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed
by the Holder evidencing such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by
proper assignment hereof in blank. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share.
In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased
to 45% instead of 55% while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or
a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
|
(c) This
Note may not be prepaid.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving
entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of
items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request
of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of
redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the
amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective provision
to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this
Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification,
capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could
have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such
Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders
of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person
or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
| /s/ Anthony L. Anish |
|
| Initials |
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(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within thirty (30) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or
control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) defaulted
on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such
default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
| /s/ Anthony L. Anish |
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| Initials |
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(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(l) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
Then, or at
any time thereafter, unless cured, and in each and every such case, unless such Event of Default shall have been waived in writing
by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the
Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest
or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein
or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration
of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies
afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of 24% per annum or, if such rate
is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of
8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice
was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day.
If the Holder
shall commence an action or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney,
then the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9)
opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 16,000,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
Upon full conversion of this Note, the any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all
costs associated with issuing and delivering the shares.
| /s/ Anthony L. Anish |
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13. The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
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IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by an officer thereunto duly authorized,
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M LINE HOLDINGS, INC. |
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By: |
/s/ Anthony L. Anish |
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Title: |
COO |
| /s/ Anthony L. Anish |
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby irrevocably elects
to convert $ ______________ of the above Note into ____________ Shares of Common Stock of M Line Holdings, Inc (“Shares”)
according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect
thereto.
| Date of Conversion: ____________________________________________________________ |
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| Applicable Conversion Price: _____________________________________________________ |
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| Signature: ___________________________________________________________________ |
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| [Print Name of Holder and Title of Signer] |
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| SSN or EIN: __________________________ |
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| Shares are to be registered in the following name: ________________________________________________ |
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| Name: _______________________________________________________________________ |
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| Address: _____________________________________________________________________ |
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| Tel: __________________________________ |
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| Fax: __________________________________ |
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| SSN or EIN: ____________________________ |
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Shares are to be sent or delivered to the following
account:
| Account Name: ________________________________________________________________ |
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| Address: _____________________________________________________________________ |
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| /s/ Anthony L. Anish |
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| Initials |
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Exhibit 10.21
AMENDED AND RESTATED SECURITIES EXCHANGE AND SETTLEMENT
AGREEMENT
This Amended
and Restated Securities Exchange and Settlement Agreement, dated as of August 15, 2014 (this “Agreement”), between
M Line Holdings, Inc., a Nevada corporation (inclusive of any Subsidiaries, “Issuer”), and Beaufort Capital
Partners LLC (“Investor”) (Issuer and Investor may hereinafter be referred to individually as a “Party”
or jointly as the “Parties”).
WHEREAS,
Issuer issued a certain amended debt security in the form of an Credit Loan Note in the principal face amount of one hundred thousand
dollars (USD$100,000) to Utica Leaseco, LLC (“Original Holder”) as of July 1, 2014, which Credit Loan
Note was issued to the Original Holder on October 8, 2012 and tacks back to such date, a copy of which Credit Loan Note is annexed
hereto as Exhibit A and made a part hereof (the “Debt Securities Instrument”);
WHEREAS, pursuant
to a certain Debt Securities Assignment and Purchase Agreement between Original Holder and Investor, and confirmed by the Issuer,
dated as of July 1, 2014, a copy of which is annexed hereto as Exhibit B (the “Debt Assignment and Purchase Agreement”),
Investor has heretofore acquired from Original Holder all rights and interest in and to the debt securities reflected in the Debt
Securities Instrument, in the principal and interest amount of one hundred thousand dollars (USD$100,000.00) (the “Debt
Securities”) in consideration of a cash sum following such securities having become eligible for resale based on certain
conditions pursuant to exemption from registration under Rule 144 (such securities acquisition, the “144 Debt Conveyance”),
and Investor is now the sole Beneficial Owner of the Debt Securities;
WHEREAS,
notwithstanding that, in accordance with its stated terms, the Debt Securities Instrument is silent as to its rights of exchange
or convertibility into shares of the common stock of Issuer, $0.001 par value per share (the “Issuer Common Stock”),
and without regard to the non-existence of terms of an existing “conversion” provision in the Debt Securities Instrument,
Investor desires to exchange the Debt Securities from time to time hereinafter for equity securities in the form of unrestricted
shares of Issuer Common Stock, and Issuer desires to facilitate such exchange, in each case pursuant to their respective economic
interests and in each case as more specifically and filly set forth herein; and
WHEREAS,
subject to certain conditions, and pursuant to Section 3(a)(9) of the Securities Act, one or more exchanges of the Debt Securities
for shares of Issuer Common Stock (each, a “3(a)(9) Exchange”) while beneficially held by Investor is/are eligible
to be effected without registration as more specifically and frilly provided herein;
NOW, THEREFORE, the
Parties hereby acknowledge, represent, warrant, covenant and agree, in each case as applicable, as follows for the benefit of each
other as well as the benefit of the securities legal counsel and securities transfer agent professionals involved in the 144 Debt
Conveyance and any one or more 3(a)(9) Exchanges hereunder (such transactions collectively, the “Transactions”):
1. Recitals.
The foregoing recitals are hereby incorporated by reference into this Agreement and made a part hereof.
2. Definitions.
For purposes of this Agreement, the following terms, when appearing in their capitalized forms as follows, shall have the corresponding
assigned meanings:
“144
Debt Conveyance” – shall have the meaning specified in the second paragraph of the recitals to this Agreement.
“3(a)(9) Exchange”
– shall have the meaning specified in the fifth paragraph of the recitals to this Agreement.
“Affiliate”
– with respect to any specified Person, any other Person who, directly or indirectly, through one or more intermediaries,
Controls, is Controlled By, or is Under Common Control With, such specified Person.
“Agreement” – shall have the
meaning specified in the preamble above.
“Authorization”
– any authorization, approval, consent, certificate, license, permit or franchise of or from any Governmental Authority or
pursuant to any Law.
“Beneficial
Owner” – with respect to any shares means a Person who shall be deemed to be the beneficial owner of such shares
(i) which such Person or any of its Affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange
Act) beneficially owns, directly or indirectly, (ii) which such Person or any of its Affiliates or associates has, directly or
indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant
to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options,
or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding, (iii) which are beneficially owned,
directly or indirectly, by any other Persons with whom such Person or any of its Affiliates or associates or any Person with whom
such Person or any of its Affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any such shares, or (iv) pursuant to Section 13(d) of the Exchange Act and any rules or regulations
promulgated thereunder.
“Clearing
Date” – the first date upon which both (i) the Exchange Shares under any Exchange Notice have been deposited into
the Investor’s designated brokerage account, and (ii) the Investor has thereafter received confirmation from its brokerage
firm that it may execute trades involving such Exchange Shares.
“Control”
(including “Controlled By” and “Under Common Control With”) – the possession, directly
or indirectly or as trustee or executor, of the power to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise.
“Current
Form 10 Information” – for a given registrant/company, such information as is or may be required by the SEC to
satisfy the financial and other disclosure requirements of SEC Form 10 within the meaning of Rule 144.
“Current
Public Information” – in an appropriate format the information concerning a given issuer specified in paragraphs
(a)(5)(i) to (xiv) inclusive, and paragraph (a)(5)(xvi), of Rule 15c2-11 of the Rules and Regulations promulgated under the Exchange
Act.
“Debt
Securities” – shall have the meaning specified in the second paragraph of the recitals to this Agreement.
“Debt
Securities Instrument” – shall have the meaning specified in the first paragraph of the recitals to this Agreement.
“DTC”
– The Depository Trust Company, a subsidiary of DTCC.
“DTCC” – The Depository Trust
& Clearing Corporation.
“DTC Eligibility”
/ “DTC Eligible” – in respect of a given security, its eligibility to be traded electronically in book-entry
form through DTC.
“DWAC” – DTC’s Deposit
Withdrawal Agent Commission system.
“Exchange
Act” – the Securities and Exchange Act of 1934, as amended.
“Exchange Amount” – shall
have the meaning specified in Section 2.1 of this Agreement.
“Exchange
Cap” – the maximum number of shares of Issuer Common Stock that Issuer may issue pursuant to this Agreement and
the transactions contemplated hereby without (i) breaching Issuer’s obligations under the applicable rules of The Nasdaq
Stock Market or any other Principal Market on which the Issuer Common Stock may be listed or• quoted, or (ii) obtaining stockholder
approval under the applicable rules of The Nasdaq Stock Market or any other Principal Market on which the Issuer Common Stock may
be listed or quoted.
“Exchange
Notice” – a written notice to the Investor executed by a duly authorized officer of the Issuer and including an
Exchange Request, in each case as the same may be deemed amended in accordance with Section 2.4,3.4.
“Exchange Notice Date” – shall
have the meaning specified in Section 2.4.1 of this
“Exchange
Notice Date/Time Stamp” – shall have the meaning specified in Section 2.4.1 of this Agreement.
“Exchange Request” – shall
have the meaning specified in Section 2.1 of this Agreement.
“Exchange Shares” – shall
have the meaning specified in Section 2.1 of this Agreement.
“Exchange
Shares Delivery Period” – in relation to any given Exchange Notice, the period commencing upon the date and time
indicated in the Exchange Notice Date/Time Stamp and continuing thereafter for twenty-eight (28) Trading Hours.
“FAST
Program” – DTC’s Fast Automated Securities Transfer program, participation in which is a required for DTC
Eligibility.
“FINRA” – shall mean the Financial
Industry Regulatory Authority.
“Governmental
Authority” means any entity or body exercising executive, legislative, judicial, regulatory or administrative functions
of or pertaining to United States federal, state, local, or municipal government, foreign, international, multinational or other
government, including any department, commission, board, agency, bureau, subdivision, instrumentality, official or other regulatory,
administrative or judicial authority thereof, and any non-governmental regulatory body to the extent that the rules and regulations
or orders of such body have the force of Law.
“Gypsy
Swap” – any series of transactions in which, by arrangement or otherwise, the resale of an outstanding unrestricted
security by the then holder thereof results, directly or indirectly, and no matter the sequence of such transactions, in a capital
infusion into the issuing company.
“Investor” – shall have the
meaning specified in the preamble to this Agreement.
“Investor Holding Period” –
shall have the meaning specified in Section 2.1 of this Agreement.
“Issuer” – shall have the
meaning specified in the preamble to this Agreement.
“Issuer
Common Stock” – shall have the meaning specified in the fourth paragraph of the recitals to this Agreement.
“Issuer’s Share
Delivery Obligation” – shall have the meaning specified in Section 2.4.3.3 of this Agreement.
“Knowledge”
– of a given Person, and with respect to any fact or matter, the actual knowledge of the directors and executive officers
of such Person and each of its Subsidiaries, together with such knowledge that such directors, executive officers and other employees
could be expected to discover after due investigation concerning the existence of the fact or matter in question.
“Law”
means any statute, law (including common law), constitution, treaty, ordinance, code, order, decree, judgment, rule, regulation
and any other binding requirement or determination of any Governmental Authority.
“Liens”
means any liens, claims, charges, security interests, mortgages, pledges, easements, conditional sale or other title retention
agreements, defects in title, covenants or other restrictions of any kind, including, any restrictions on the use, voting, transfer
or other attributes of ownership.
“Material
Adverse Effect” – with respect to any Person, any state of facts, development, event, circumstance, condition,
occurrence or effect that, individually or taken collectively with all other preceding facts, developments, events, circumstances,
conditions, occurrences or effects (a) is materially adverse to the condition (financial or otherwise), business, operations or
results of operations of such Person, or (b) impairs the ability of such Person to perform its obligations under this Agreement.
“Officer’s
Certificate” – shall have the meaning specified in Section 2.4.3.2 of this Agreement.
“Officer’s
Certificate Deadline” – shall have the meaning specified in Section 2.4.3,2 of this Agreement.
“Officer’s
Certificate Delivery Obligation” – shall have the meaning specified in Section 2.4.3.2 of this Agreement.
“Order” –
any award, injunction, judgment, decree, stay, order, ruling, subpoena or verdict, or other decision entered, issued or rendered
by any Governmental Authority.
“Original
Holder” – shall have the meaning specified in the first paragraph of the recitals to this Agreement.
“OTC” – over-the-counter.
“OTCPink”
– the OTCMarkets tier for companies that are not SEC Reporting Companies but that regularly file and make available Current
Public Information reports and that are current in such filings as of the date hereof
“OTCOB”
– the base level OTCMarkets tier for SEC Reporting Companies.
“Ownership
Limitation” – at any given point in time, 4.99%.
“Parties” – shall have the
meaning specified in the preamble to this Agreement.
“Person”
– an individual, a corporation, a partnership, a limited liability company, a trust, an unincorporated association, Governmental
Authority, a person (including, without limitation, a “person” as defined in Section I3(d)(3) of the Exchange Act),
or any political subdivision, agency or instrumentality of a Governmental Authority, or any other entity or body.
“Pricing Period”
– in relation to any Exchange Shares, the twenty (20) Trading Days immediately preceding the date upon which Investor shall
have delivered to Issuer the corresponding Exchange Notice.
“Principal
Market” – as of any given date, whichever of the New York Stock Exchange, the Nasdaq Global Select Market, the
Nasdaq Global Market, the Nasdaq Capital Market, the American Stock Exchange, the OTCQB, or the OTCPink is at the time the principal
trading exchange or market for the Issuer Common Stock,
“Proceeding”
or “Proceedings” – any actions, suits, claims, hearings, arbitrations, mediations, Proceedings (public
or private) or governmental investigations that have been brought by any Governmental Authority or any other Person.
“Rule 144”
– Rule 144 promulgated under the Securities Act.
“Rule 405”
– Rule 405 of Regulation S-T.
“SEC” – shall mean the U.S.
Securities and Exchange Commission.
“SEC Reporting
Company” – any company with a class of common stock registered under Section 12 of the Exchange Act and that,
as of the date hereof is, and for at least the ninety (90) day period immediately preceding the date hereof has been, subject
to the periodic and other reporting requirements of either Section 13 or 15(d) of the Exchange Act.
“Securities
Act” – the Securities Act of 1933, as amended.
“Shell Company”
– a company having no or nominal operations and either (a) no or nominal assets, (b) assets consisting solely of cash and
cash equivalents, or (c) assets consisting of any amount of cash and cash equivalents and nominal other assets.
“Stock Price”
– on any given Trading Day, the lowest traded stock price (as reported by a direct feed service) of the Issuer Common Stock
on the Principal Market’ or, if the Issuer Common Stock is not traded on a Principal Market, the highest reported bid price
for the Issuer Common Stock, as provided by FINRA.
“Trading Day”
– any day during which the Principal Market shall be open for business.
“Trading Hours”
– for any given Trading Day, those hours between 9:30 am (U.S.) Eastern Time and 4:30 pin (U.S.) Eastern Time.
“Transactions”
– shall have the meaning specified in the sixth paragraph of the recitals to this Agreement.
“Transfer
Agent” – as of any given date, the transfer agent firm engaged by Issuer to perform securities transfer agent
and related services for the Issuer and which, as of the date of this Agreement, is VStock Transfer, 77 Spruce Street, Suite 201,
Cedarhurst, NY, 11516.
“Transfer
Agent Instruction Letter” – shall have the meaning specified in Section 2.4.3.1 of this Agreement.
“Transfer
Agent Instruction Delivery Deadline” – shall have the meaning specified in Section 2.4.3.1 of this Agreement.
“Transfer
Agent Instruction Delivery Requirement” – shall have the meaning specified in Section 2.4.3.1 of this Agreement.
“Transfer
Agent Legal Opinion Letter” – shall have the meaning specified in Section 2.4.3.2of this Agreement.
2. The
3(a)(9) Exchange(s).
2.1 (a)
Generally. Subject to the terms, conditions and limitations of this Agreement, for so long as any amounts payable under
the Debt Securities remain (i) unexchanged for shares of Issuer Common Stock hereunder, or (ii) unpaid and outstanding (such period
being deemed the “Investor Holding Period”), the Investor shall have a continuing right in its sole and exclusive
discretion, through the delivery by Investor to Issuer of an Exchange Notice, to elect to exchange as part of a 3(a)(9) Exchange
(in each instance, an “Exchange Request”) all or any part of the amount of any principal and/or accrued but
unpaid interest thereon (as set forth within any such Exchange Notice, the “Exchange Amount”) for a number
of fully-paid and non-assessable shares of Issuer Common Stock equal to the lower of (A) the Exchange Amount divided by
$.0001 and (B) the Exchange Amount divided by fifty percent (50%) of the Stock Price during the Pricing Period (such result
in each instance constituting the “Exchange Shares”); provided, however, that any and all obligations
under the Debt Securities shall remain unaffected during such Investor Holding Period for all or any part thereof remaining unexchanged,
including without limitation any events or other terms of default. In connection with this provision, the Debt Securities Instrument
shall be deemed to have been incorporated by reference herein with all rights and obligations attendant thereto and arising thereunder
to be continuing unaffected hereby but only insofar as not in conflict at any given time with any superseding provisions of this
Agreement.
(b) Exception.
Notwithstanding the paragraph above, if the Issuer’s share price, as reported on its Principal Market, at any time on or
before October 7, 2014 (i) loses the bid (ie..0001 on the ask with zero market makers on the bid level 2), (ii) loses DTC eligibility,
or (iii) becomes “chilled for deposit”, then the fixed Exchange Amount shall be divided by .00001 in order to calculate
the Exchange Shares.
2.2 Certain
Acknowledgments and Covenants. Each of Issuer and Investor hereby (a) acknowledge that they are aware and understand that,
in order to be eligible for exemption from registration under the Securities Act, any 3(a)(9) Exchange(s) hereunder may not involve
(i) any additional consideration beyond the Debt Securities being surrendered/exchanged by the Investor, or (H) any payment by
the Issuer of any commission or other remuneration either directly or indirectly for the solicitation of such exchange(s), and
(b) covenant that any 3(a)(9) Exchange(s) hereunder shall not involve (i) any additional consideration beyond the Debt Securities
being surrendered/exchanged by the Investor, or (ii) any payment by the Issuer of any commission or other remuneration either
directly or indirectly for the solicitation of such exchange(s).
2.3 Resale
Eligibility of Exchange Shares. Given the issuance date and nature of the Debt Securities, the eligibility for resale exemption
from registration of the 144 Debt Conveyance, and the fact that a duly qualified 3(a)(9) Exchange does nothing to affect the tradeability
status of the securities exchanged, any Exchange Shares, upon issuance, shall be eligible for unrestricted resale under Section
4(l) of the Securities Act.
2.4 Mechanics
and Related Matters.
2.4.1 Delivery
of Exchange Notice. Any given Exchange Notice shall be deemed to have been delivered to the Issuer as of the date (the “Exchange
Notice Date”) and time of dispatch by email to the Issuer as set forth on the email so dispatched, provided, however,
that no reasonably compelling basis upon which to challenge such date and time exists and has been provided to Investor (in
each case, the “Exchange Notice Date/Time Stamp”).
2.4.2 Certain
Exchange Notice Limitations. Anything in this Agreement to the contrary notwithstanding, in no event shall any Exchange Notice
be deemed valid (i) if and to the extent that fulfillment of the Exchange Request contained therein would cause the aggregate
number of shares of Issuer Common Stock beneficially owned by the Investor and its affiliates, including those in relation to
which it/they have a right to acquire within sixty (60) days, to exceed the Ownership Limitation, or (ii) if at such time the
Issuer Common Stock is listed or quoted on The Nasdaq Stock Market or any other U.S. national securities exchange, and to the
extent that that fulfillment of the Exchange Request contained therein would cause the aggregate number of shares of Issuer Common
Stock issued pursuant to this Agreement, when combined with all shares of Issuer Common Stock issued pursuant to any transactions
with which they may be aggregated with other transactions for purposes of and under applicable rules of The Nasdaq Stock Market
or any other Principal Market on which the Common Stock may at such time be listed or quoted, would cause the aggregate number
of shares of Issuer Common Stock that would be deemed issued pursuant to this Agreement, to exceed the Exchange Cap. In the event
that any Exchange Notice shall have been delivered by Investor to Issuer but is invalid to any extent in accordance with the foregoing,
such Exchange Notice shall be void ab initio but only to the extent of such invalidity.
2.4.3 Delivery
and Settlement of Exchange Shares.
2.4.3.1 Transfer
Agent Instruction Requirement. Upon receipt of an Exchange Notice, Issuer shall immediately, but in no event more than two
(2) Trading Days (the “Transfer Agent Instruction Delivery Deadline”), deliver a letter to Transfer Agent,
by email as a .pdf attachment and with a cc (courtesy copy) email to Investor, such letter to be in the form annexed hereto as
Exhibit D and incorporated by reference herein, inclusive of the unanimous written board consent annexed thereto (the “Transfer
Agent Instruction Letter”), in each case filled in as appropriate based on the information set forth in the corresponding
Exchange Notice, or deemed set forth in the corresponding Exchange Notice in accordance with Section 2.4.3.4 below (the “Transfer
Agent Instruction Delivery Requirement”).
2.4.3.2 Officer’s
Certificates. In connection with the delivery of any Exchange Shares, the cost of obtaining any formal written legal opinion
reasonably requested by Transfer Agent, including any one or more concluding that such Exchange Shares be delivered free of any
restrictive legend (each, a “Transfer Agent Legal Opinion Letter”), shall be borne by Investor, and it shall
be within the exclusive discretion of Investor as to what legal firm shall be engaged for this purpose. Promptly upon delivery
via email by Investor’s designated counsel to the president and chief executive officer of Issuer at the email address provided
in Section 5 of this Agreement (but in no event more than two [2] Trading Days) (the “Officer’s Certificate
Deadline”) of any officer’s certificates identified in such email as being required by Investor’s designated
counsel for purposes of Investor’s designated counsel being able to deliver the Transfer Agent Legal Opinion Letter (each,
an “Officer’s Certificate”), the president and chief executive officer of Issuer shall duly execute and
return to Investor’s designated counsel, in .pdf format at the email address from which the corresponding unexecuted Officer’s
Certificate(s) had been received, such duly executed Officer’s Certificate (the “Officer’s Certificate Delivery
Obligation”).
2.4.3.3 Share
Delivery Obligation. Subject only to the limitations set forth in Section 2.4.2 above and any delays in delivery to Transfer
Agent of the Transfer Agent Legal Opinion Letter, and within the applicable Exchange Share Delivery Period, Issuer shall be obligated
to and shall take any and all steps required to either (a) if Transfer Agent is not participating in the DTC FAST Program during
the applicable Exchange Share Delivery Period, and/or the Exchange Shares are not DTC Eligible, deliver for settlement to the
window of Investor’s brokerage account (as designated in the Transfer Agent Instruction Letter) physical certificates representing
the Exchange Shares deliverable pursuant to the corresponding Exchange Request, or (b) if Transfer Agent is participating in the
DTC FAST Program during the applicable Exchange Share Delivery Period, and/or the Exchange Shares are DTC Eligible, cause such
transfer agent to effectuate delivery and settlement of such Exchange Shares electronically, in book-entry form, by appropriately
crediting the account of the Investor’s prime broker (as designated in the Transfer Agent Instruction Letter) with DTC through
its DWAC System and providing proof satisfactory to the Investor thereof (in relation to any given Exchange Request, the “Issuer’s
Share Delivery Obligation”).
3. Representations
and Warranties of Issuer. Issuer hereby represents and warrants to Investor, which representations and warranties, excepting
(c) below, shall be deemed to be repeated by Issuer on each day on which any amounts payable under the Debt Securities, including
interest, remain (i) unexchanged for shares of Issuer Common Stock hereunder, or (ii) unpaid and outstanding, that:
(a) it
is a corporation duly organized, validly existing, and in good standing
under the Laws of the State of Nevada;
(b)
it has taken all requisite corporate and other action to authorize, and it has full corporate power and authority without
any required further action, to (i) carry on its present business as currently conducted, (ii) own its properties and
assets, (iii) execute, deliver, and perform all of its obligations under this Agreement, (iv) have borrowed and to repay with
interest the indebtedness evidenced by the Debt Securities, and (v) issue and deliver to Investor or its designee any and
all Exchange Shares potentially deliverable pursuant to this Agreement;
(c) its
capitalization as of the date of this Agreement includes (i) five hundred million (500,000,000) shares of Issuer Common Stock authorized,
of which two hundred thirty seven million two hundred sixty one thousand eight hundred and eighteen (237,261,818) shares are issued
and outstanding, and (ii) ten million (10,000,000) of Issuer preferred stock, par value $0.001 per share authorized, of 200,000
are issued and outstanding, and seven (7) notes/debentures in the combined amount of two hundred eighty five thousand dollars ($285,000)
that, in accordance with their terms, are “convertible” into capital stock of Issuer, issued and outstanding;
(d) the
Debt Securities constitute a legal, valid and binding, and past due obligation of Issuer, enforceable against Issuer in accordance
with the terms thereof, subject to applicable bankruptcy, reorganization, insolvency, or similar Laws affecting creditors’
rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law), there is no dispute relating to the validity of such obligation, and any defenses
to its validity have been waived in their entirety;
(e)
the execution, delivery and performance of this Agreement, the payment of all amounts due under the
Debt Securities by Issuer, and the consummation of the Transactions, do not and will not (i) violate any provision of its
articles of incorporation or bylaws, (ii) conflict with or result in the breach of any material provision of, or give rise to
a default under, any agreement with respect to indebtedness or of any other material agreement to which Issuer is a party or
by which it or any of its properties or assets are bound, (iii) conflict with any Law, statute, rule or regulation
or any Order, judgment or ruling of any court or other agency of government to which it is subject or any of its
properties or assets may be bound or affected, in each case except where such conflict would not have a Material Adverse
Effect on Issuer, or (iv) result in the creation or imposition of any Lien, charge, mortgage, encumbrance or other security
interest or any segregation of assets or revenues or other preferential arrangement (whether or not constituting a security
interest) with respect to any present or future assets, revenues or rights to the receipt of income of Issuer;
(f) it
is currently an SEC Reporting Company.
(g)
it is not a Shell Company, and, if it ever was a Shell Company, it (i) has ceased to be a Shell Company; (ii) has filed all reports
and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the twelve (12) month
period immediately preceding the date of this Agreement (or for such shorter period as it has been required to file such reports
and materials), other than current reports on Form 8-K, and (iii) has filed Current Form 10 Information with the SEC reflecting
its status as an entity that is no longer a Shell Company, and at least one (1) year has elapsed since such Current Form 10 Information
was filed;
(h)
the Issuer Common Stock currently trades publicly on the OTCQB market on under the symbol “MLHC” and is not
currently subject to any trading halts, suspensions, delistings or similar actions imposed by the SEC, FINRA, or any other
regulatory or similar authorities and no members of its management or board of directors is aware or has any reason to be
aware of any such threatened halts, suspensions, delistings or similar actions;
(i) the Issuer
Common Stock is currently DTC Eligible, Transfer Agent is participating in the DTC FAST Program, and no DTC “chill”
has been imposed upon the Issuer Common Stock;
(j) its
management understands what a Gypsy Swap is and that such arrangements are deemed to constitute unlawful schemes to evade the
registration requirements of the Securities Act, and has no knowledge of any such arrangements in connection with the
Transactions;
(k) there
are no legal actions, suits, arbitration proceedings, investigations or other Proceedings pending or, to the reasonable knowledge
of Issuer’s officers or directors, threatened against Issuer which, if resolved unfavorably would have a Material Adverse
Effect on the financial condition of Issuer or the validity or enforceability of, or Issuer’s ability to perform its obligations
under, the Debt Securities and/or this Agreement; and
(l) all
governmental and other consents, authorizations, approvals, licenses and orders that were required to have been obtained by Issuer
with respect to the Debt Securities and/or its issuance were duly obtained and remain in full force and effect and all conditions
of any such consents, Authorizations, approvals, licenses and orders have been complied with.
4. Covenants
of Issuer. In addition to the other obligations hereunder and under the Debt Securities, and for so long as any amounts payable
under the Debt Securities, including interest, remain (i) unexchanged for shares of Issuer Common Stock hereunder, or (ii) unpaid
and outstanding, Issuer hereby covenants to the Investor as follows:
(a) upon
issuance, any Exchange Shares shall be duly authorized, fully paid and nonassessable;
(b) it
shall refrain from disclosing, and shall cause its officers, directors, employees and agents to refrain from disclosing, any material
non-public information to Investor without also disseminating such information to the public in accordance with applicable Law,
unless prior to disclosure of such information Issuer identifies such information as being material non-public information and
provides Investor with the opportunity to accept or refuse to accept such material non-public information for review;
(c) it
shall timely file all reports required by it to be filed, in each case in full compliance with the content requirements thereof,
and shall meet all other of its obligations under the Exchange Act;
(d) it
shall take any and all steps as may be necessary to insure that the Issuer Common Stock continues to trade publicly and does not
become the subject of any trading halts, suspensions, delistings or similar actions imposed by the SEC, FINRA, or any other regulatory
or similar authorities;
(e) it
shall take any and all steps as may be necessary to insure that the Issuer Common Stock continues to be DTC Eligible, that Transfer
Agent continue to participate in the DTC FAST Program, and that no DTC “chill” is imposed upon the Issuer Common Stock;
(f) it
shall take any and all steps as may be necessary to insure that it avoid becoming or otherwise being deemed by the SEC a Shell
Company;
(g) it
shall not issue any shares of Issuer Conunon Stock under this Agreement which, when aggregated with all other shares of Issuer
Common Stock then beneficially owned by Investor and its affiliates, including those in relation to which it/they have a right
to acquire within sixty (60) days, would result in the beneficial ownership by Investor and its affiliates to exceed the Ownership
Limitation, and, upon the written or telephonic request of Investor from time to time, Issuer shall confirm to Investor within
one (1) Trading Day of such request the number of shares of Issuer Common Stock then outstanding;
(h) it
shall not initiate or otherwise execute any share buybacks of the Issuer Common Stock that would have the effect of increasing
Investor’s percentage beneficial ownership together with its affiliates, including those in relation to which it/they have
a right to acquire within sixty (60) days, to exceed the Ownership Limitation;
(i) if
the Common Stock is listed or quoted on The Nasdaq Stock Market or any other U.S. national securities exchange during the Investor
Holding Period, it shall not issue any shares of Issuer Common Stock pursuant to this Agreement to the extent that after giving
effect thereto, the aggregate number of all shares of Issuer Common Stock that would be issued pursuant to this Agreement, together
with all shares of Issuer Common Stock issued pursuant to any transactions that may be aggregated with the transactions contemplated
by this Agreement under applicable rules of The Nasdaq Stock Market or any other Principal Market on which the Issuer Common Stock
may be listed or quoted, would exceed the Exchange Cap, unless and until Issuer elects to solicit stockholder approval of the transactions
contemplated by this Agreement and the stockholders of Issuer have in fact so approved the transactions contemplated by this Agreement
in accordance with the applicable rules and regulations of The Nasdaq Stock Market, any other Principal Market on which the Issuer
Conunon Stock may be listed or quoted, and the Issuer’s articles of incorporation and bylaws; and
(j) it
shall not knowingly be a participant in any Gypsy Swap in connection with the Transactions or otherwise.
5. Notices.
Except as otherwise expressly set forth herein, any notice, demand or request relating to any matter set forth herein shall be
made in writing and shall be deemed effective when hand delivered or when mailed, postage pre-paid by registered or certified mail
return receipt requested, when picked-up by or delivered to a recognized overnight courier service, or when sent by email to either
Issuer at its address below, or to Investor at its address below, or such other address as either Party shall have notified the
other in writing as provided herein from and after the date hereof.
If to Issuer:
M Line Holdings, Inc.
2672 Dow Avenue
Tustin, CA 92780
Att: Tony Anish
If to Investor:
Beaufort Capital Partners LLC
660 White Plains Road, Suite
455 Tarrytown, NY 10591
Att: Leib Schaeffer
6. Governing
Law. This Agreement and the Exhibits hereto shall be governed by and interpreted and enforced in accordance with the Laws
of the State of New York, without giving effect to any choice of Law or conflict of Laws rules or provisions (whether of the State
of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of
New York.
7. Headings.
The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
8. Counterparts.
This Agreement may be executed and delivered (including by facsimile or email .pdf file format attachment transmission) in one
or more counterparts, and by the different Parties hereto in separate counterparts, each of which when executed and delivered shall
be deemed to be an original but all of which taken together shall constitute one and the same agreement.
9. Integration:
Modification. This Agreement, including the Exhibits hereto, constitutes the entirety of the rights and obligations of each
of the Investor and Issuer with respect to the subject matter hereof. No provision of this Agreement may be modified except by
an instrument in writing signed by the Party against whom the enforcement of any such modification is or may be sought.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF,
the Parties have caused this Agreement to be executed by the respective officers thereunto duly authorized, in each case as of
the date first written above.
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“ISSUER” |
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M LINE HOLDINGS, INC. |
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By: |
/s/ Tony Anish |
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Name: Tony Anish |
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Title: President |
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“INVESTOR” |
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BEAUFORT CAPITAL PARTNERS LLC |
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By: |
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Name: Leib Schaeffer |
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Title: Managing Member |
Exhibit 10.22
THIS
NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US $50,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 30, 2015
BACK END NOTE
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of UNION CAPITAL, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand Dollars exactly (U.S.
$50,000.00) on May 30, 2015 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder
at the rate of 8% per annum commencing on May 30, 2014. The interest will be paid to the Holder in whose name this Note is registered
on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are
payable at 338 Crown Street, Brooklyn, NY 11225, initially, and if changed, last appearing on the records of the Company as designated
in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due
upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this
Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding
of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the
liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable
in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional
provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
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| Initials |
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2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”),
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in
Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a) The Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without
restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 55%
of the lowest closing bid price of the Common Stock as reported on the OTCQB marketplace which the Company’s
shares are traded or any market upon which the Common Stock may be traded in the future (“Exchange”), for the
ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such
Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in
blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the
Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead of 55%
while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
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| Initials |
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(c) This
Note may not be prepaid, except that if the $50,000 Rule 144 convertible redeemable note issued by the Company of even date herewith
is redeemed by the Company within 6 months of the issuance date of such Note, all obligations of the Company under this Note and
all obligations of the Holder under the Holder issued Back End Note will be automatically be deemed satisfied and this Note and
the Holder issued Back End Note will be automatically be deemed cancelled and of no further force or effect.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
| /s/ Anthony L. Anish |
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| Initials |
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8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note shall
be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder and not cure such breach within 10 days; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of one hundred thousand dollars ($100,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (15) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) Intentionally
Deleted;
| /s/ Anthony L. Anish |
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(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(l) The
Company shall not replenish the reserve set forth in Section 12, within 5 business days of the request of the Holder ; or
(m) The
Company’s Common Stock has a closing bid price of less than $0.003 per share for at least 5 consecutive trading days; or
(n) The
aggregate dollar trading volume of the Company’s Common Stock is less than forty thousand dollars ($40,000.00) in any 5 consecutive
trading days; or
(o) The
Company shall cease to be “current” in its filings with the Securities and Exchange Commission; or.
(p) The Company shall lose the “bid”
price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at any time thereafter, unless
cured (except for 8(m) and 8(n) which are incurable defaults, the sole remedy of which is to allow the Holder to cancel
both this Note and the Holder Issued Note, and in each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of
16% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
Further, if the Note becomes due and payable, the Holder may use the outstanding principal and interest due under the Note to offset
any payment obligations it may have to the Company. In the event of a breach of 8(k) the penalty shall be $250 per day the shares
are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall
increase to $500 per day beginning on the 10th day. Once cash funded, the penalty for a breach of Section 8(p) shall
be an increase of the outstanding principal amounts by 20%. Once cash funded, in the event of a breach of Section 8(i), the outstanding
principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under
this Note shall increase by 10%.
If the Holder shall
commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then,
if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs
and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
| /s/ Anthony L. Anish |
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| Initials |
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9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a “144-
3(a)(9)” opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. Prior
to cash funding of this Note, The Company will issue irrevocable transfer agent instructions reserving 3x the number of shares
of Common Stock necessary to allow the holder to convert this note based on the discounted conversion price set forth in Section
4(a) herewith and in accordance with the conversion procedure set forth in Section 12 of the $50,000 144 note issued on even date
herewith. The reserve shall be replenished as needed to allow for conversions of this Note. Upon full conversion of this Note,
the reserve representing this Note shall be cancelled. The Company will pay all transfer agent costs associated with issuing and
delivering the shares.
13. The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
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| Initials |
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IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by an officer thereunto duly authorized.
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M LINE HOLDINGS, INC. |
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By: |
/s/ Anthony L. Anish |
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Title: |
COO |
| /s/ Anthony L. Anish |
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby irrevocably elects
to convert $__________ of the above Note into __________ Shares of Common Stock of M Line Holdings, Inc. (“Shares”)
according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
| Applicable Conversion Price: |
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| Signature: |
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[Print Name of Holder and Title of Signer] |
| Shares are to be registered in the following name: |
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Shares are to be sent or delivered to the following account:
| /s/ Antony L. Anish |
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| Initials |
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SECURITIES PURCHASE AGREEMENT
This SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of May 30, 2014, by and between M Line Holdings, Inc., a
Nevada corporation, with headquarters located at 2672 Dow Avenue, Tustin, CA 92780 (the “Company”), and UNION CAPITAL,
LLC, a Delaware limited liability company, with its address at 16192 Coastal Highway, Lewes, DE 19958 (the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded
by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under
the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer
desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement two 8%
convertible notes of the Company, in the forms attached hereto as Exhibit A and B in the aggregate principal amount of $100,000.00
(with the first note being in the amount of $50,000.00 and the second note being in the amount of $50,000.00 (together with any
note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof,
the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common
Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The first of the two notes
(the “First Note”) shall be paid for by the Buyer as set forth herein. The second note (the “Second Note”)
shall initially be paid for by the issuance of an offsetting $50,000.00 secured note issued to the Company by the Buyer (“Buyer
Note”), provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note in cash such that
the Second Note may not be converted until it has been paid for in cash.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto; and
NOW THEREFORE, the Company and the
Buyer severally (and not jointly) hereby agree as follows:
1. Purchase
and Sale of Note.
a. Purchase
of Note. On each Closing Date (as defined below), the
Company shall issue
and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately
below the Buyer’s name on the signature pages hereto.
| /s/ Anthony L. Anish |
|
| Company Initials |
|
b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds
to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal
amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and
(ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase
Price.
c. Closing
Date. The date and time of the first issuance and sale of the Note pursuant to this Agreement (the “Closing Date”)
shall be on or about May 30, 2014, or such other mutually agreed upon time. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties. Subsequent
Closings shall occur when the Buyer Note is repaid. The Closing of the Second Note shall be on or before the dates specified in
the Buyer Note.
2. Buyer’s
Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment
Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares”
and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public
sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided,
however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor”
as that term is defined in Rule 501(a) of Regulation
D (an “Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the
Securities are being
offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability
of such exemptions and the eligibility of the Buyer to acquire the Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for so
long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries
nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect
Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands
that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute
a breach of any of the Company’s representations and warranties made herein.
/s/ Anthony L. Anish
e. Governmental
Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer
or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under
the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold
pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost
of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable
transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from
such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate”
(as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees
to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the
Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor
rule) (“Regulation 5”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of
counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall
be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act)
may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities
laws or to comply with the tetins and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything
else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin
account or other lending arrangement.
g. Legends.
The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be
sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can
then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
/s/ Anthony L. Anish
“NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth
above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it
is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an
effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without
any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions,
to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion
shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements,
if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer
of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business days, it will be
considered an Event of Default under the Note.
h. Authorization.,
Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf
of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency.
The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
3. Representations
and Warranties of the Company. The Company represents and warrants to the Buyer that:
/s/ Anthony L. Anish
a. Organization
and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other)
to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.
b. Authorization;
Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the
Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation
for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s
Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required,
(iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign this Agreement and the other documents executed in
connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the
Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
c. Issuance
of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance
with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances
with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder thereof.
d. Acknowledgment
of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance
of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion
Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
/s/ Anthony L. Anish
e. No
Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of
the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation
or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which
with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its subsidiaries
is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries
is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a material adverse effect). All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the-Counter Quotations Bureau
(the “OTCQB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCQB in the foreseeable
future, nor are the Company’s securities “chilled” by FINRA. The Company and its subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing.
f. Absence
of Litigation. Except as disclosed in the Company’s public filings, there is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or
their officers or directors in their capacity as such, that could have a material adverse effect. Schedule 3(f) contains a complete
list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the
Company or any of its subsidiaries, without regard to whether it would have a material adverse effect. The Company and its subsidiaries
are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity
of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives
or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s
decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.
h. No
Integrated Offering. Neither the Company, nor any of its affiliates, nor ay person acting on its or their behalf, has directly
or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would
require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer
will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its securities.
/s/ Anthony L. Anish
i. Title
to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would
not have a material adverse effect. Any real property and facilities held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.
j. Breach
of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth
in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered
an Event of default under the Note.
4. COVENANTS.
a. Expenses.
At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”),
including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees
for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions
in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated
by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for
reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice
by the Buyer. The Company’s obligation with respect to this transaction is to reimburse Buyer’ expenses shall be $2500
in legal fees (and proportional amounts for the Second Note) which shall be deduced from each Note when funded.
b. Listing.
The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the
Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer
owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCQB or any equivalent replacement exchange,
the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock
Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”)
and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the OTCQB
and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the
Common Stock for listing on such exchanges and quotation systems.
/s/ Anthony L. Anish
c. Corporate
Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCQB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
d. No
Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision
applicable to the Company or its securities.
e. Breach
of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.
5. Governing
Law; Miscellaneous.
a. Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county
of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The
Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s
fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice thereof Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts;
Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by
facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
/s/ Anthony L.
Anish
c. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of,
this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
e. Entire
Agreement Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement
may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company, to:
M Line Holdings, Inc.
2672 Dow Avenue
Tustin, CA 92780
Attn: Bruce Barren, CEO
If to the Buyer:
UNION CAPITAL, LLC
338 Crown Street
Brooklyn, NY 11225
Attn: Yakov Borenstein
/s/ Anthony L. Anish
Each party shall provide notice to the other party
of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities
in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act,
without the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival.
The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result
of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth
in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
j. Further
Assurances. Each party shall do and perform, or cause to
be done and
performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments
and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
k. No
Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.
1. Remedies.
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for
a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.
/s/ Anthony L. Anish
IN WITNESS WHEREOF, the undersigned Buyer
and the Company have caused this Agreement to be duly executed as of the date first above written.
M Line Housing Inc.
| By: |
/s/ Anthony L. Anish |
|
| |
Anthony L. Anish |
|
| |
Chief Operating Officer |
|
| UNION CAPITAL, LLC. |
|
| |
|
| By: |
|
|
| Name: |
Yakov Borenstein |
|
| Title: |
Manager |
|
AGGREGATE SUBSCRIPTION AMOUNT:
| Aggregate Principal Amount of Note: |
$100,000.00 |
Aggregate Purchase Price:
Note 1: $50,000.00 less $2,500.00 in legal
fees and $4,750.00 in third party due diligence fees to Anubis Capital Partners, LLC.
Note 2: $50,000.00 less $2,500.00 in legal
fees and $4,750.00 in third party due diligence fees to Anubis Capital Partners, LLC.
/s/ Anthony L. Anish
EXHIBIT A
144 NOTE - $50K
/s/
Anthony L. Anish
EXHIBIT B
BACK END NOTE 1
$50K
/s/ Anthony L. Anish
THIS NOTE AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US $50,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 30 2015
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of UNION CAPITAL PROPERTIES, LLC and its authorized
successors and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand Dollars exactly
(U.S. $50,000.00) on May 30, 2015 (“Maturity Date”) and to pay interest on the principal amount out-standing
hereunder at the rate of 8% per annum commencing on May 30, 2014. The interest will be paid to the Holder in whose name this Note
is registered on the records of the Company re-garding registration and transfers of this Note. The principal of, and interest
on, this Note are payable at 16192 Coastal Highway, Lewes, DE 19958, initially, and if changed, last appearing on the records of
the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the
outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld,
to the Holder of this Note by check or wire transfer addressed to such Holder at the last address ap-pearing on the records of
the Company. The forwarding of such check or wire transfer shall con-stitute a payment of outstanding principal hereunder and shall
satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer.
In-terest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. ice charge will be made for such registration or transfer or exchange, except that Holder shall pay
any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”), and applicable
state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment
for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered
on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the
Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the
right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective
transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice
of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of
such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after
180 days, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s
common stock (the “Common Stock”) without restrictive legend of any nature, at a price (“Conversion
Price”) for each share of Common Stock equal to 55% of the lowest closing bid price of the Common Stock
as reported on the OTCQB marketplace which the Company’s shares are traded or any market upon which the Common Stock
may be traded in the future (“Exchange”), for the ten prior trading days including the day upon which
a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered by fax or other electronic method
of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same
day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such
conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt
by the Company of the Notice of Conversion. Once the Holder has received such shares of Common Stock, the Holder shall surrender
this Note to the Company, executed by the Holder evidencing such Holder’s intention to convert this Note or a specified portion
hereof, and accompanied by proper assignment hereof in blank. Accrued, but unpaid interest shall be subject to conversion. No fractional
shares or scrip representing frac-tions of shares will be issued on conversion, but the number of shares issuable shall be rounded
to the nearest whole share. In the event the Company experiences a DTC “Chill” on its shares, the conversion
price shall be decreased to 45% instead of 55% while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
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(c) The
Notes may be prepaid with the following penalties: (i) if the note is prepaid within 90 days of the issuance date, then at 125%
of the face amount plus any accrued interest; (ii) if the note is prepaid within 91 days after the issuance date but less than
151 days after the issuance date, then at 140% of the face amount plus any accrued interest and (iii) if the note is prepaid within
151 days after the issuance date but less than 180 days after the issuance date, then at 150% of the face amount plus any accrued
interest. This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days
of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the un-paid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as deter-mined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
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7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged with-in sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
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(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder; or
(m) The
Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n) The
Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at any time
thereafter, unless cured within 5 days, and in each and every such case, un-less such Event of Default shall have been waived in
writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and
in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, with-out presentment, demand,
protest or (further) notice of any kind (other than notice of accelera-tion), all of which are hereby expressly waived, anything
herein or in any note or other instru-ments contained to the contrary notwithstanding, and the Holder may immediately, and without
expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provid-ed herein or any other
rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 16% per annum
or, if such rate is usurious or not permit-ted by current law, then at the highest rate of interest permitted by law. In the event
of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion
notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty
for a breach of Section 8(n) shall be an in-crease of the outstanding principal amounts by 20%. In case of a breach of Section
8(i), the out-standing principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding
principal due under this Note shall increase by 10%.
If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, in-cluding, without limitation, engaging an attorney, then if the Holder
prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
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10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a(9)
opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 69,444,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
The Holder will initially submit a conversion notice/request for a tranche of shares to be issued with an agreed to conversion
price equal to $1000 (an “Initial Tranche Request”). The shares that are the subject to the Initial Trance Request
may be subsequently reconverted and repriced as follows: (i) the Holder shall immediately reduce the outstanding balance of the
Note by $1,000 and simultane-ously send to the Company a live” or “repriced” conversion notice for the $1,000
priced using the conversion formula set forth in Section 4(a) of this Note, (ii) As the balance of the shares in the Initial Tranche
Request are converted via the delivery of the “live” or “repriced” conversion notice, the balance of the
Note shall be reduced using the formula set forth in Section 4(a) of this Note, as if such shares had originally been converted
as set forth in Section 4(a). By way of ex-ample, if the Tranche Conversion Request was for 1,000,000 shares and the face amount
of the Note was $25,000 the Holder would initially reduce $1,000 from the face amount leaving a bal-ance of $24,000 and send the
Company a repriced conversion notice deducting that number of shares from the Initial Tranche Request necessary to equal $1,000
using the formula set forth in Section 4(a). Additionally, if, the following day, the Holder sent a “live” or “repriced”
conver-sion notice to the Company for 25,000 shares and, using the foimula set forth in Section 4(a) the true conversion price
would have been $6,000, then the Holder shall make an additional reduc-tion of $6,000 on the Note and shall indicate both the Note
balance and the share reserve balance on the “live” conversion notice. This process shall be repeated until there is
no balance remain-ing outstanding on the Note. Upon full conversion of this Note, the any shares remaining in the Share Reserve
shall be cancelled.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
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IN WITNESS
WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: May 30, 2014
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M LINE HOLDINGS, INC |
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By: |
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Anthony L. Anish, Chief Operating officer |
| /s/ Anthony L. Anish |
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $__________ of the above Note into ___________ Shares
of Common Stock of M Line Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If Shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect
thereto.
Date of Conversion: ______________________________________________________
Applicable Conversion Price: _______________________________________________
Signature: ______________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _______________________________________________________________
______________________________________________________________
SSN or EIN: _____________________
Shares are to be registered in the following name: _______________________________
Name: _________________________________________________________________
Address: ______________________________________________________________
Tel: _____________________________________
Fax: _____________________________________
SSN or EIN: ______________________________
Shares are to be sent or delivered to the following
account:
Account Name: _________________________________________________________
Address: _______________________________________________________________
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THIS NOTE
AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES
AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US $50,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 30, 2015
BACK END NOTE
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of UNION CAPITAL, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand Dollars exactly (U.S. $50,000.00)
on May 30, 2015 (“Maturity Date”) and to pay interest on the principal amount out-standing hereunder at the
rate of 8% per annum commencing on May 30, 2014. The interest will be paid to the Holder in whose name this Note is registered
on the records of the Company re-garding registration and transfers of this Note. The principal of, and interest on, this Note
are payable at 16192 Coastal Highway, Lewes, DE 19958, initially, and if changed, last appearing on the records of the Company
as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding
principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the
Holder of this Note by check or wire transfer addressed to such Holder at the last address ap-pearing on the records of the Company.
The forwarding of such check or wire transfer shall con-stitute a payment of outstanding principal hereunder and shall satisfy
and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. In-terest
shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
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2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”), and applicable
state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due present-ment
for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered
on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the
Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the
right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective
transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice
of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of
such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without
restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 55%
of the lowest closing bid price of the Common Stock as reported on the OTCQB marketplace which the Company’s
shares are traded or any market upon which the Common Stock may be traded in the future (“Exchange”), for the
ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such
Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in
blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the
Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead of 55%
while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
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(c) This
Note may not be prepaid, except that if the $50,000 Rule 144 convertible redeemable note issued by the Company of even date herewith
is redeemed by the Company within 6 months of the issuance date of such Note, all obligations of the Company under this Note and
all obligations of the Holder under the Holder issued Back End Note will be automatically be deemed satisfied and this Note and
the Holder issued Back End Note will be automatically be deemed cancelled and of no further force or effect.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the un-paid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as deter-mined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
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8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note shall
be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder and not cure such breach within 10 days; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged with-in sixty (60) days after such appointment; or
(e) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of one hundred thousand dollars ($100,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) Intentionally
Deleted;
| /s/ Anthony L. Anish |
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(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 5 business days of the request of the Holder ; or
(m) The
Company’s Common Stock has a closing bid price of less than $0.003 per share for at least 5 consecutive trading days; or
(n) The
aggregate dollar trading volume of the Company’s Common Stock is less than forty thousand dollars ($40,000.00) in any 5 consecutive
trading days; or
(o) The
Company shall cease to be “current” in its filings with the Securities and Exchange Commission; or.
(p) The
Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at any time thereafter, unless
cured (except for 8(m) and 8(n) which are incurable de-faults, the sole remedy of which is to allow the Holder to cancel
both this Note and the Holder Issued Note, and in each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any subse-quent default) at the option of the Holder
and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (fur-ther) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwith-standing, and the Holder may immediately,
and without expiration of any period of grace, en-force any and all of the Holder’s rights and remedies provided herein or
any other rights or reme-dies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of
16% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
Further, if the Note becomes due and payable, the Holder may use the outstanding principal and interest due under the Note to offset
any payment obligations it may have to the Company. In the event of a breach of 8(k) the penalty shall be $250 per day the shares
are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall
increase to $500 per day beginning on the 10th day. Once cash funded, the penalty for a breach of Section 8(p) shall
be an increase of the outstanding principal amounts by 20%. Once cash funded, in the event of a breach of Section 8(i), the outstanding
principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the out-standing principal due under
this Note shall increase by 10%.
If the Holder shall
commence an action or proceeding to enforce any provisions of this Note, in-cluding, without limitation, engaging an attorney,
then, if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other
costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
| /s/ Anthony L. Anish |
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9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, dis charged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issu-er. Further. The Company will instruct its counsel to either (i) write a “144-
3(a)(9)” opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. Prior
to cash funding of this Note, The Company will issue irrevocable transfer agent instructions reserving 3x the number of shares
of Common Stock necessary to al-low the holder to convert this note based on the discounted conversion price set forth in Section
4(a) herewith and in accordance with the conversion procedure set forth in Section 12 of the $50,000 144 note issued on even date
herewith. The reserve shall be replenished as needed to allow for conversions of this Note. Upon full conversion of this Note,
the reserve representing this Note shall be cancelled. The Company will pay all transfer agent costs associated with issu-ing and
delivering the shares.
13. The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the Company has caused
this Note to be duly execut-ed by an officer thereunto duly authorized.
Dated:___________
| |
M Line Holdings, Inc. |
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By: |
/s/ Anthony L. Anish |
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Title: |
COO |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $__________ of the above Note into ___________ Shares
of Common Stock of M Line Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If Shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect
thereto.
Date of Conversion: ______________________________________________________
Applicable Conversion Price: _______________________________________________
Signature: ______________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _______________________________________________________________
______________________________________________________________
SSN or EIN: _____________________
Shares are to be registered in the following name: _______________________________
Name: _________________________________________________________________
Address: ______________________________________________________________
Tel: _____________________________________
Fax: _____________________________________
SSN or EIN: ______________________________
Shares are to be sent or delivered to the following
account:
Account Name: _________________________________________________________
Address: _______________________________________________________________
| /s/ Anthony L. Anish |
|
| Initials |
|
THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. LENDERS SHOULD BE AWARE THAT THEY MAY
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
UNION CAPITAL, LLC
COLLATERALIZED SECURED PROMISSORY NOTE
BACK END NOTE
| $50,000.00 |
|
Brooklyn, NY |
| |
|
May 30, 2014 |
FOR VALUE
RECEIVED, Union Capital, LLC, a Delaware Limited Liability Company (the “Company”) hereby absolutely and unconditionally
promises to pay to M Line Holdings, Inc (the “Lender”), or order, the principal amount of Fifty Thousand Dollars ($50,0000)
no later than January 30, 2015, unless the Lender does not meet the “current information requirements” required under
Rule 144 of the Securities Act of 1933, as amended, in which case the Company may declare the offsetting note issued by the Lender
on the same date herewith to be in Default (as defined in that note) and cross cancel its payment obligations under this Note as
well as the Lenders payment obligations under the offsetting note. This Full Recourse Note shall bear simple interest at the rate
of 8%.
| 2. | Repayments and Prepayments; Security. |
a. All
principal under this Note shall be due and payable no later than January 30, 2015, unless the Lender does not meet the “current
information requirements” required under Rule 144 of the Securities Act of 1933, as amended, in which case the Company may
declare the offsetting note issued by the Lender on the same date herewith to be in Default (as defined in that note) and cross
cancel its payment obligations under this Note as well as the Lenders payment obligations under the offsetting note.
b. The
Company may pay this Note at any time. This note may not be assigned by the Lender, except by operation of law.
/s/ Anthony L.
Anish
c. This
Note shall initially be secured by the pledge of the $50,000.00 8% convertible promissory note issued to the Company by the Lender
on even date herewith (the “Lender Note”). The Company may exchange this collateral for other collateral with an
appraised value of at least $50,000.00, by providing 3 days prior written notice to the Lender. If the Lender does not object to
the substitution of collateral in that 3 day period, such substitution of collateral shall be deemed to have been accepted by the
Lender. All collateral shall be retained by New Venture Attorneys, P.C., which shall act as the escrow agent for the collateral
for the benefit of the Lender. The Company may not effect any conversions under the Lender Note until it has made full cash payment
for the portion of the Lender Note being converted.
_________
Lender Initials to Acceptance of bolded section above.
| 3. | Events of Default; Acceleration. |
a. The
principal amount of this Note is subject to prepayment in whole or in part upon the occurrence and during the continuance of any
of the following events (each, an “Event of Default”): the initiation of any bankruptcy, insolvency, moratorium, receivership
or reorganization by or against the Company, or a general assignment of assets by the Company for the benefit of creditors. Upon
the occurrence of any Event of Default, the entire unpaid principal balance of this Note and all of the unpaid interest accrued
thereon shall be immediately due and payable. The Company may offset amounts due to the Lender under this Note by similar amounts
that may be due to the Company by the Lender resulting from breaches under the Lender Note.
b. No
remedy herein conferred upon the Lender is intended to be exclusive of any other remedy and each and every remedy shall be cumulative
and in addition to every other remedy hereunder, now or hereafter existing at law or in equity or otherwise. The Company accepts
and agrees that this Note is a full recourse note and that the Holder may exercise any and all remedies available to it under law.
a. All
notices, reports and other communications required or permitted hereunder shall be in writing and may be delivered in person, by
telecopy with written confirmation, overnight delivery service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed (i) if to a Lender, at such Lender’s address as the Lender shall have furnished
the Company in writing and (ii) if to the Company at such address as the Company shall have furnished the Lender(s) in writing.
b.
Each such notice, report or other communication shall for all purposes under this Note be
treated as effective or having been given when delivered if delivered personally or, if sent by mail, at the earlier of its
receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United
States mail, addressed and mailed as aforesaid, or, if sent by electronic communication with confirmation, upon the delivery
of electronic communication.
/s/ Anthony L. Anish
a. Neither
this Note nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by a signed statement in
writing.
b. No
failure or delay by the Lender to exercise any right hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other right, power or privilege. The provisions of this Note are severable
and if any one provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, such invalidity
or unenforceability shall affect only such provision in such jurisdiction. This Note expresses the entire understanding of the
parties with respect to the transactions contemplated hereby. The Company and every endorser and guarantor of this Note regardless
of the time, order or place of signing hereby waives presentment, demand, protest and notice of every kind, and assents to any
extension or postponement of the time for payment or any other indulgence, to any substitution, exchange or release of collateral,
and to the addition or release of any other party or person primarily
or secondarily liable.
c. If
Lender retains an attorney for collection of this Note, or if any suit or proceeding is brought for the recovery of all, or any
part of, or for protection of the indebtedness respected by this Note, then the Company agrees to pay all costs and expenses of
the suit or proceeding, or any appeal thereof, incurred by the Lender, including without limitation, reasonable attorneys’
fees.
d. This
Note shall for all purposes be governed by, and construed in accordance with the laws of the State of New York (without reference
to conflict of laws).
e. This
Note shall be binding upon the Company’s successors and assigns, and shall inure to the benefit of the Lender’s successors
and assigns.
/s/ Anthony L. Anish
IN WITNESS WHEREOF, the Company has caused
this Note to be executed by its duly authorized officer to take effect as of the date first hereinabove written.
| |
UNION CAPITAL, LLC |
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By: |
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Title: |
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APPROVED: |
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M LINFJI IOL IN |
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By: |
/s/ Anthony L. Anish |
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Title: |
COO |
THIS NOTE AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US $60,673.97
REPLACEMENT
NOTE- ORIGINALLY ISSUED 9/29/2011 IN THE AMOUNT OF $150,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 30 2015
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of UNION CAPITAL, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand Dollars exactly (U.S. $50,000.00)
on May 30, 2015 (“Maturity Date”) and to pay interest on the principal amount out-standing hereunder at the
rate of 8% per annum commencing on May 30, 2014. The interest will be paid to the Holder in whose name this Note is registered
on the records of the Company re-garding registration and transfers of this Note. The principal of, and interest on, this Note
are payable at 338 Crown Street, Brooklyn, NY 11225, initially, and if changed, last appearing on the records of the Company as
designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal
due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of
this Note by check or wire transfer addressed to such Holder at the last address ap-pearing on the records of the Company. The
forwarding of such check or wire transfer shall con-stitute a payment of outstanding principal hereunder and shall satisfy and
discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. In-terest
shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional
provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”), and applicable
state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment
for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered
on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the
Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the
right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective
transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice
of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of
such Notice of Conversion shall be the Conversion Date.
4. (a)
The Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without
restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 55%
of the lowest closing bid price of the Common Stock as reported on the OTCQB marketplace which the Company’s
shares are traded or any market upon which the Common Stock may be traded in the future (“Exchange”), for the
ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice
of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight
Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business
days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common
Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder has received
such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder’s
intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued, but
unpaid interest shall be subject to conversion. No fractional shares or scrip representing frac-tions of shares will be issued
on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the Company experiences
a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead of 55% while that “Chill”
is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
|
(c) The
Notes may be prepaid with the following penalties: (i) if the note is prepaid within 90 days of the issuance date, then at 125%
of the face amount plus any accrued interest; (ii) if the note is prepaid within 91 days after the issuance date but less than
151 days after the issuance date, then at 140% of the face amount plus any accrued interest and (iii) if the note is prepaid within
151 days after the issuance date but less than 180 days after the issuance date, then at 150% of the face amount plus any accrued
interest. This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days
of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being re-ferred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the un-paid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as deter-mined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
| /s/ Anthony L. Anish |
|
| Initials |
|
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Se-curities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged with-in sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
| /s/ Anthony L. Anish |
|
| Initials |
|
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder; or
(m) The
Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n) The
Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at
any time thereafter, unless cured within 5 days, and in each and every such case, un-less such Event of Default shall have been
waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the
Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, with-out presentment,
demand, protest or (further) notice of any kind (other than notice of accelera-tion), all of which are hereby expressly waived,
anything herein or in any note or other instru-ments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provid-ed herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 16%
per annum or, if such rate is usurious or not permit-ted by current law, then at the highest rate of interest permitted by law.
In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th
day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th
day. The penalty for a breach of Section 8(n) shall be an in-crease of the outstanding principal amounts by 20%. In case of a breach
of Section 8(i), the out-standing principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the
outstanding principal due under this Note shall increase by 10%.
If the Holder
shall commence an action or proceeding to enforce any provisions of this Note, in-cluding, without limitation, engaging an attorney,
then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other
costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid
or unenforceable, such provision shall be ad-justed rather than voided, if possible, so that it is enforceable to the maximum
extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way 5 be
affected or impaired thereby.
| /s/ Anthony L. Anish |
|
| Initials |
|
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issu-er. Further. The Company will instruct its counsel to either (i) write a 144- 3(a(9)
opinion to al-low for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 69,444,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
The Holder will initially submit a conversion notice/request for a tranche of shares to be issued with an agreed to conversion
price equal to $1000 (an “Initial Tranche Request”). The shares that are the subject to the Initial Trance Request
may be subsequently reconverted and repriced as follows: (i) the Holder shall immediately reduce the outstanding balance of the
Note by $1,000 and simultane-ously send to the Company a live” or “repriced” conversion notice for the $1,000
priced using the conversion formula set forth in Section 4(a) of this Note, (ii) As the balance of the shares in the Initial Tranche
Request are converted via the delivery of the “live” or “repriced” conversion notice, the balance of the
Note shall be reduced using the formula set forth in Section 4(a) of this Note, as if such shares had originally been converted
as set forth in Section 4(a). By way of ex-ample, if the Tranche Conversion Request was for 1,000,000 shares and the face amount
of the Note was $25,000 the Holder would initially reduce $1,000 from the face amount leaving a bal-ance of $24,000 and send the
Company a repriced conversion notice deducting that number of shares from the Initial Tranche Request necessary to equal $1,000
using the formula set forth in Section 4(a). Additionally, if, the following day, the Holder sent a “live” or “repriced”
conver-sion notice to the Company for 25,000 shares and, using the formula set forth in Section 4(a) the true conversion price
would have been $6,000, then the Holder shall make an additional reduc-tion of $6,000 on the Note and shall indicate both the Note
balance and the share reserve balance on the “live” conversion notice. This process shall be repeated until there is
no balance remain-ing outstanding on the Note. Upon full conversion of this Note, the any shares remaining in the Share Reserve
shall be cancelled.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the Company
has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: May 30, 2014
| |
M LINE HOLDINGS, INC |
| |
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By: |
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Anthony L. Anish, Chief Operating officer |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The
undersigned hereby irrevocably elects to convert $__________ of the above Note into ___________ Shares
of Common Stock of M Line Holdings, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date
written below.
If Shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect
thereto.
Date of Conversion: ______________________________________________________
Applicable Conversion Price: _______________________________________________
Signature: ______________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _______________________________________________________________
______________________________________________________________
SSN or EIN: _____________________
Shares are to be registered in the following name: _______________________________
Name: _________________________________________________________________
Address: ______________________________________________________________
Tel: _____________________________________
Fax: _____________________________________
SSN or EIN: ______________________________
Shares are to be sent or delivered to the following
account:
Account Name: _________________________________________________________
Address: _______________________________________________________________
| /s/ Anthony L. Anish |
|
| Initials |
|
| |
2672 Dow Avenue, Tustin, CA 92780
tel: 714.630.6253 • fax: 714.619.2339
email: tony@mlineholdings.com
web site: www.mlineholdings.com |
May 30, 2014
VStock Transfer, LLC
71 Spruce Street
Suite 201
Cedarhurst, NY 11516
Re: Irrevocable Transfer Agent Instructions
Ladies and Gentlemen:
On May 27,
2014, M Line Holdings, Inc., a Nevada corporation (the “Company”) executed two 8% Convertible Promissory Notes in the
amount of $50,000.00 and $60,697.23 (collectively, the “Note”) with Union Capital,
LLC (the “Investor”).
You are hereby irrevocably
authorized and instructed to reserve One Hundred Thirty Eight Million Eight Hundred Eighty Eight Thousand (138,888,000) shares
of common stock (“Common Stock”) of the Company for issuance upon for conversion of the Note in accordance with the
terms thereof. The amount of Common Stock so reserved may be increased, from time to time, by written instructions of the Company
and the Investor. Once the reserve shares have been issued Vstock Transfer, LLC shall have no further duty or obligation to issue
shares until the reserve has been increased by the Company and the Investor. You are hereby further irrevocably authorized and
directed to issue the shares of Common Stock so reserved upon your receipt from the Investor of a notice of conversion (“Notice
of Conversion”) executed by the Investor in accordance with the terms of the Notice of Conversion. You shall have no duty
or obligation to confirm the accuracy or the information set forth on the Notice of Conversion. Once the Company repays the principal,
plus interest, plus default interest (if any) of any of the Note at the maturity date, upon written (e-mail being acceptable) confirmation
by the Investor or Investor Counsel as well as the Company, Transfer Agent shall have no further obligation to maintain a reserve
on behalf of the Investor or to issue any share of Common Stock to the Investor under the terms of that Note.
The Company must
be participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program
in order for the shares to be delivered electronically. The shares to be issued are to be registered in the names of the registered
holder of the securities submitted for conversion or exercise.
The shares will of
the Notice of Conversion. If the Company’s account is at least 30 days past due, the Investor is responsible for the prepaid
Transfer Agent transfer and shipping fees. In no event shall the Transfer Agent be required to issue and deliver share certificates
without the prior payment of its fees for the certificates to be issued.
The Company and the
Investor intend that these instructions require the placement of a restrictive legend on all applicable share certificates unless
the requirements listed below are met and the Investor provides the Transfer agent with an acceptable legal opinion stating that
share certificates can be issued without a legend. So long as you have previously received a legal opinion from the Company (or
Investor counsel) that the shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
any restriction and the number of shares to be issued are less than 4.99% of the total issued and outstanding common stock of the
Company, such shares should be transferred, at the option of the holder of the Notes as specified in the Notice of Conversion,
either (i) electronically by crediting the account of a Prime Broker with the Depository Trust Company through its Deposit Withdrawal
Agent Commission system if the Company is a participant or (ii) in certificated form without any legend which would restrict the
transfer of the shares, and you should remove all stop-transfer instructions relating to such shares. Until such time as you are
advised by Investor counsel that the shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144
without any restriction and the number of shares to be issued are less than 4.99% of the total issued and outstanding common stock
of the Company, you are hereby instructed to place the following legends on the certificates:
THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION
OF INVESTOR COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION
IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend
set forth above shall be removed and you are instructed to issue a certificate without such legend to the holder of any shares
upon which it is stamped, if: (a) such shares are registered for sale under an effective registration statement filed under the
1933 Act or otherwise may be sold pursuant to Rule 144 without any restriction and the number of shares to be issued is less than
4.99% of the total issued common stock of the Company, (b) such holder provides the Company and the transfer agent with an opinion
of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions (and satisfactory to the
transfer agent), to the effect that a public sale or transfer of such security may be made without registration under the 1933
Act and such sale or transfer is effected and (c) such holder provides the Company and the transfer agent with reasonable assurances
that such shares can be sold pursuant to Rule 144. Nothing herein shall be construed to require the Transfer Agent to take any
action which would violate state or federal rules, regulations or law. If an instruction herein would require such a violation,
such instructions, but not any other term herein, shall be void and unenforceable.
The Company shall indemnify
and defend you and your officers, directors, principals, partners, agents and representatives, and hold each of them harmless from
and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements of its and Transfer
Agent’s attorney) incurred by or asserted against you or any of them arising out of or in connection with the instructions
set forth herein, the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of
defending yourself or themselves against any claim or liability hereunder, except that the Company shall not be liable hereunder
as to matters in respect of which it is determined that you have acted with gross negligence or in bad faith (which gross negligence,
bad faith or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction). You shall have no liability to the Company or the Investor in respect to any action taken or any failure to act
in respect of this if such action was taken or omitted to be taken in good faith, and you shall be entitled to rely in this regard
on the advice of counsel.
The Company agrees
that in the event that the Transfer Agent resigns as the Company’s transfer agent, the Company shall engage a suitable replacement
transfer agent that will agree to serve as transfer agent for the Company and be bound by the terms and conditions of these Irrevocable
Instructions within five (5) business days. The Company and the Investor agree that any action which names the Transfer Agent as
a party shall be brought in a court of general jurisdiction in New York, New York and no other court.
The Investor
is intended to be a party to these instructions and are third party beneficiaries hereof, and no amendment or modification to the
instructions set forth herein may be made without the consent of the Investor.
| Very truly yours, |
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| M LINE HOLDINGS, INC. |
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| By: |
/s/ Anthony L. Anish |
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| Title: |
COO |
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| Acknowledged and Agreed: |
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| VSTOCK TRANSFER, LLC |
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| By: |
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| Title: |
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DISBURSEMENT AUTHORIZATION
(MEMORANDUM)
TO: UNION CAPITAL, LLC.
FROM: M LINE HOLDINGS, INC
DATE: May 30, 2014
RE: Disbursement of Funds
In connection with
the funding of an aggregate of $50,000 pursuant to that certain Convertible Redeemable Note dated as of May 30, 2014 (the “Agreement”),
you are hereby directed to disburse such funds as follows:
| 1. | $2,500.00 to New Venture Attorneys, P.C. in accordance
with the wire transfer instructions attached as Schedule A hereto; |
| 2. | $4,750 to Anubis Capital Partners, LLC, in accordance with
the wire transfer instructions attached as Schedule B hereto; and |
| 3. | $42,750 to M Line Holdings, Inc. in accordance with the
wire transfer instructions attached as Schedule C hereto; |
*with identical payments to be
made on cash nding o
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/s/ Anthony L. Anish |
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Anthony L. Anish, Chief Operating Officer |
| /s/ Anthony L. Anish |
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| Company Initials |
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EXHIBIT A
NEW VENTURE ATTORNEYS
WIRING INFORMATION
Please wire funds to:
Bank of America
Routing No: 026009593
Acct No.: 164109387780
| Beneficiary: |
New Venture Attorneys, PC, IOLTA account |
| Attorney info: |
New Venture Attorneys, P.C. |
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900 E. Hamilton Ave, |
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Suite 100 Campbell, CA 95008 |
| /s/ Anthony L. Anish |
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| Company Initials |
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EXHIBIT B
ANUBIS CAPITAL PARTNERS WIRING INFO
Capital One, N.A.
8989 Preston Road
Frisco, TX 75034
| Routing No: |
111901014 |
| Acct No.: |
3622044799 |
| Beneficiary: |
Anubis Capital Partners |
2550 Midway Road Suite 198
Carrolton, TX 75006
| /s/ Anthony L. Anish |
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| Company Initials |
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EXHIBIT C
[WIRING INFO FOR ISSUER]
| /s/ Anthony L. Anish |
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| Company Initials |
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DEBT PURCHASE AGREEMENT
This Debt Purchase
Agreement (the “Agreement”) made as of this 30th day of February, 2014, by and between Union Capital, LLC
(the “Buyer”) and Spagus Capital Partners, LLC (the “Seller”).
| 1. | PURCHASE AND SALE OF THE CONVERTIBLE NOTE |
Upon the terms and conditions herein contained,
at the Closing (as hereinafter defined), the Seller hereby sells, assigns and transfers to the Buyer and the Buyer agrees to purchase
from the Seller the “Transferred Rights” of the Seller and all rights thereto. Transferred Rights shall mean all rights
with respect to $50,000 in principal and proportional accrued interest (the “Assigned Portion”) under that promissory
note in the amount of $150,000 issued by M Line Holdings, Inc. (“Borrower” or “Company”) on September 29,
2011, a true and correct copy which has been provided to New Venture Attorneys, P.C. (the “Note”). By its signatures
hereto the Borrower accepts the assignment of the Transferred Rights to Buyer and agrees that Buyer may convert the Transferred
Rights into shares of the Company’s common stock.
The purchase price for the Assigned Portion
of the Note shall be the Buyer’s payment of Fifty Thousand Dollars ($50,000.00) to the Seller, for the Assigned Portion (the
“Purchase Price”).
The closing of the transactions contemplated
by this Agreement (the “Closing”) shall take place simultaneously with the delivery of the Purchase Price via wire
transfer of immediately available funds against the assignment of the Note. The funds will be wired as set forth in Exhibit A.
4. REPRESENTATIONS AND WARRANTIES
OF SELLER The Seller hereby represents and warrants to the Buyer as follows:
4.1 Status
of the Seller and the Note. The Seller is the beneficial owner of the Note. The Note is currently outstanding and Seller is
informed by Company that the Note represents a bona fide debt obligation of the Company.
4.2 Authorization;
Enforcement. (i) Seller has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to sell each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Seller and the consummation by it of the transactions contemplated hereby (including, without limitation,
the sale of the Note to the Buyer) have been duly authorized by the Seller and no further consent or authorization of the Seller
or its members is required, (iii) this Agreement has been duly executed and delivered by the Seller, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general
application.
4.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Seller and the consummation by the Seller of the
transactions contemplated hereby (including, without limitation, the sale of the Note to the Buyer) will not (i) conflict with
or result in a violation of any provision of its certificate of formation or other organizational documents, or (ii) violate or
conflict with or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time
or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, note, bond, indenture or other instrument to which Seller are a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which Seller are subject) applicable to Seller or the Note is bound or affected. The Seller is
not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver
or perform any of its obligations under this Agreement in accordance with the terms hereof.
4.4 Title;
Rule 144 Matters. Seller has good and marketable title to the Note. Seller is not an “Affiliate” of the Company,
as that term is defined in Rule 144 of the Securities Act of 1933, as amended (the “1933 Act”), as such Buyer will
be able to track the holding period of the Seller.
4.5 Consent
of the Company.
(i) The Company,
as evidence by its signature at the foot of this Agreement, hereby represents and warrants that, upon delivery to the Company of
the Note, the Company shall promptly cause to be issued to and in the name of Buyer one of more new executed Notes in the aggregate
amount of $50,000.00 plus accrued interest but otherwise having the sale terms (including, but not necessarily limited to, referring
to the original issue date) as in the Note. The Note may contain the same restrictive legend as provided in the original Note,
but no stop transfer order. The Note is currently outstanding and represents a bona fide debt obligation of the Company.
(ii) The
signature by the Company also represents the Company’s agreement to treat Buyer as a party to, and having all the rights
of the Seller with respect to the Transferred Rights.
5. REPRESENTATIONS, WARRANTIES AND
ACKNOWLEDGEMENTS OF THE BUYER. The Buyer hereby represents warrants and acknowledges to the Seller as follows:
5.1 Sophisticated
Investor. The Buyer has sufficient knowledge and experience of financial and business matters, is able to evaluate the merits
and risks of the partial purchase of the Note and has had substantial experience in previous private and public purchases of securities.
5.2 Authorization;
Enforcement. (i) Buyer has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to purchase each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Buyer and the consummation by it of the transactions contemplated hereby (including, without limitation,
the purchase of the Note by the Buyer) have been duly authorized by the Buyer and no further consent or authorization of the Buyer
or its members is required, (iii) this Agreement has been duly executed and delivered by the Buyer, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general application.
5.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Buyer and the consummation by the Buyer of the
transactions contemplated hereby will not (i) conflict with or result in a violation of any provision of its certificate of formation
or other organizational documents, or (ii) violate or conflict with or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement, note, bond, indenture or other instrument to which Buyer
is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory organizations to which Buyer is subject) applicable to Seller
or the Note is bound or affected. The Buyer is not required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third
party in order for it to execute, deliver or perform any of its obligations under this Agreement in accordance with the terms hereof.
6.1 Binding
Effect; Benefits. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective
successors and permitted assigns. Except as otherwise set forth herein, this Agreement may not be assigned by any party hereto
without the prior written consent of the other party hereto. Except as otherwise set forth herein, nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns
any rights, remedies, obligations or liabilities under or by any reason of this Agreement.
6.2 Notices.
All notices, requests, demands and other communications which are required to be or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person, or transmitted by telecopy or telex, or upon receipt
after dispatch by certified or registered first class mail, postage prepaid, return receipt requested, to the party to whom the
same is so given or made, at the following addresses (or such others as shall be provided in writing hereafter):
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(a) |
If to the Buyer to: |
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Union Capital, LLc |
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16192 Coastal Highway |
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Lewes, DE 19958 |
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Attn: Samuel Eisenberg |
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(b) |
If to the Seller to: |
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Spagus Capital Partners, LLC |
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250 F. Centerville Road |
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Warwick, RI 02886 |
6.3 Entire
Agreement. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, oral and
written, between the parties hereto with respect to the subject matter hereof.
6.4 Further
Assurances. After the Closing, at the request of either party, the other party shall execute, acknowledge and deliver, without
further consideration, all such further assignments, conveyances, endorsements, deeds, powers of attorney, consents and other documents
and take such other action as may be reasonably requested to consummate the transactions contemplated by this Agreement.
6.5 Headings.
The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be part of
this Agreement or to affect the meaning or interpretation of this Agreement.
6.6 Counterparts.
This Agreement may be executed in any number of counterparts and by facsimile, each of which, when executed, shall be deemed to
be an original and all of which together shall be deemed to be one and the same instrument.
6.7 Governing
Law. This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by
the laws of the State of New York, without giving effect to the conflicts of law principles thereof.
6.8 Severability.
If any term or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the Agreement shall be valid and enforced to the fullest extent permitted
by law.
6.9 Amendments.
This Agreement may not be modified or changed except by an instrument or instruments in writing executed by the parties hereto.
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed as of the date first above written.
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BUYER: |
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UNION CAPITAL, LLC |
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By: |
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Samuel Eisenberg, Managing Member |
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SELLER: |
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SPAGUS CAPITAL PARTNERS, LLC |
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By: |
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Title: |
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| ACCEPTED AND AGREED: |
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| M LINE HOLDINGS, INC |
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| By: |
/s/ Anthony L. Anish |
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| Title: |
COO |
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EXHIBIT A
WIRE INSTRUCTIONS FOR SELLER
PLEASE WIRE YOUR FUNDS TO THE FOLLOWING
PLEASE INSERT COMPLETE BANK WIRING INFO INCLUDING BANK ADDRESS
AS WELL AS ADDRESS
NON-AFFILIATION LETTER
May 30, 2014
Counsel to M LINE HOLDINGS, INC.
Counsel to Union Capital,
LLC
Gentlemen:
Please let
this letter serve as confirmation that Spagus Capital Partners, LLC is not now, and has not been during the preceding 90 days,
an officer, director, 10% or more shareholder of M LINE HOLDINGS, INC. or in any other way an “affiliate” (as that
term is defined in Rule 144(a)(1) adopted pursuant to the Securities Act of 1933, as amended) of such issuer.
| Very Truly yours, |
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| SPAGUS CAPITAL PARTNERS, LLC |
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| By: |
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| Title: |
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UNANIMOUS CONSENT IN LIEU OF A SPECIAL
MEETING OF DIRECTORS OF
M LINE HOLDINGS, INC.
The undersigned, being all of the directors
of M Line Holdings, Inc, a corporation of the State of Nevada (the “Corporation”), do hereby authorize and approve
the actions set forth in the following resolutions without the formality of convening a meeting, and do hereby consent to the following
actions of this Corporation, which actions are hereby deemed affective as of the date hereof:
RESOLVED: That officers of this
Corporation are authorized and directed to amend and restate a $50,000 portion (plus accrued interest) of a $150,000.00
note issued to Spagus Capital Partners, LLC on September 29, 2011 into a new promissory note to Union Capital, LLC, in the amount
of $60,673.97 to provide conversion features equal to 55% of the lowest closing bid price of the last day of 10 trading days prior
to conversion, as well as 8% interest and become due and payable on May 30, 2015; and
RESOLVED: That the officers of this
Corporation are authorized and directed to issue a $50,000 promissory note to Union Capital,
LLC, which provides conversion features equal to 55% of the lowest closing bid price of the Corporation’s Common Stock for
the last 10 trading days prior to conversion, as well as 8% per annum interest and become due and payable on May 30, 2015; and
RESOLVED FURTHER: That the officers
of this corporation are authorized and directed to execute transfer agent instructions with the Company’s transfer
agent to irrevocably reserve 138,888,000 shares of the Company’s Common Stock with the transfer agent for the benefit of
Union Capital, LLC for conversion of the above aforementioned notes and
RESOLVED FURTHER: That
officers of this Corporation are authorized and directed to issue an additional promissory note in the amount of
$50,000.00 to Union Capital, LLC which provides conversion features equal to 55% of the
lowest closing bid price of the Corporation’s Common Stock for the last 10 trading days prior to conversion, as well as
8% per annum interest and become due and payable on May 30, 2015; and
RESOLVED FURTHER: That the aforementioned
notes shall be paid for by Union Capital, LLC by the payment to the Corporation of $50,000
and by the issuance of a $50,000 promissory note of Union Capital, LLC secured by assets with
a fair market value of not less than $50,000.00; and
RESOLVED FURTHER, that each of the
officers of the Corporation be, and they hereby are, authorized and empowered to execute and deliver such documents, instruments
and papers and to take any and all other action as they or any of them may deem necessary or appropriate of the purpose of carrying
out the intent of the foregoing resolutions and the transactions contemplated thereby; and that the authority of such officers
to execute and deliver any such documents, instruments and papers and to take any such other action shall be conclusively evidenced
by their execution and delivery thereof or their taking thereof.
The undersigned, by affixing their signatures
hereto, do hereby consent to, authorize and approve the foregoing actions in their capacity as a majority of the direction of M
Line Holdings, Inc.
Dated: May 30, 2014
| /s/ Bruce W. Barren |
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| Bruce Barren |
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| /s/ George Cohn |
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| George Cohn |
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| /s/ Jitu Banker |
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| Jitu Banker |
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| /s/ Anthony L. Anish |
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| Anthony Anish |
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Exhibit 10.23
THE SECURITIES OFFERED HEREBY
HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)
US $50,000.00
M LINE HOLDINGS, INC
8% CONVERTIBLE REDEEMABLE NOTE
DUE FEBRUARY 12, 2015
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of COVENTRY ENTERPRISES, LLC and its authorized
successors and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand dollars exactly
(U.S. $50,000.00) on February 12, 2015 (“Maturity Date”) and to pay interest on the principal amount outstanding
hereunder at the rate of 8% per annum commencing on February 12, 2014. The interest will be paid to the Holder in whose name this
Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest
on, this Note are payable at 80 S.W. 8th Street, Suite 200 Miami, FL 33130, initially, and if changed, last appearing on the records
of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and
the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or
withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records
of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and
shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire
transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional
provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
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| Initials |
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2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”)
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in
Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a) The
Holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible
hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s
common stock (the “Common Stock”) without restrictive legend of any nature, at a price (“Conversion
Price”) for each share of Common Stock equal to 55% of the lowest closing bid price of the Common Stock
as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon
which the Common Stock may be traded in the future (“Exchange”), for the seven
prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion
is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings
Time if the Holder wishes to included the same day closing price). If the shares have not been delivered within 3 business days,
the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common
Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder has received
such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder’s
intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued but
unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the Company experiences
a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead of 55% while that “Chill”
is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
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| Initials |
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(c) During
the first six months this Note is in effect, the Company may redeem this Note by paying to the Holder an amount as follows: (i)
if the redemption is within the first 90 days this Note is in effect, then for an amount equal to 125% of the unpaid principal
amount of this Note along with any interest that would have accrued during them term, (ii) if the redemption is after the 91st
day this Note is in effect but less than the 150th day this Note is in effect, then for an amount equal to 140% of the
unpaid principal amount of this Note along with any prepaid and earned interest, (iii) if the redemption is after the 151st day
this Note is in effect but less than the 180th day this Note is in effect, then for an amount equal to 150% of the unpaid
principal amount of this Note along with any prepaid and earned interest. This Note may not be redeemed after 180 days. The redemption
must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid
and the Company may not redeem this Note
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving
entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items
(i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the
Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption,
or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of
accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective provision
to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this
Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification,
capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could
have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such
Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders
of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person
or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
| /s/ Anthony L. Anish |
|
| Initials |
|
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within thirty (30) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) defaulted
on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such
default within the appropriate grace period; or
| /s/ Anthony L. Anish |
|
| Initials |
|
(i) The
Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
Then, or at any time thereafter, unless
cured, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion,
the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any
kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce
any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an
Event of Default, interest shall be accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted
by current law, then at the highest rate of interest permitted by law. In the event of a breach of 8(k) the penalty shall be $250
per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company.
This penalty shall increase to $500 per day beginning on the 10th day.
If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney, then the Holder shall
be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation
and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
| /s/ Anthony L. Anish |
|
| Initials |
|
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a)(9)
opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 16,000,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all costs
associated with issuing and delivering the shares.
13. The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the
Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: 2/12/2014
| |
M LINE HOLDINGS, INC |
| |
|
| |
By: |
/s/ Anthony L. Anish |
| |
|
|
| |
Title: |
COO |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby
irrevocably elects to convert $ _______ of the above Note into ______ Shares of Common Stock of M Line Holdings, Inc (“Shares”)
according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued
in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with
respect thereto.
| Applicable Conversion Price: |
|
| Signature: |
|
| |
[Print Name of Holder and Title of Signer] |
| Shares are to be registered in the following name: |
|
Shares are to be sent or delivered to the following account:
| /s/ Anthony L. Anish |
|
| Initials |
|
THE SECURITIES OFFERED HEREBY
HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT)
US $60,750.68
M LINE HOLDINGS, INC
8% CONVERTIBLE REDEEMABLE NOTE
DUE FEBRUARY 12, 2015
REPLACEMENT NOTE- ORIGINALLY ISSUED MAY
31, 2011
IN THE AMOUNT OF $150,000.00
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of COVENTRY ENTERPRISES, LLC and its authorized
successors and permitted assigns (“Holder”), the aggregate principal face amount of Sixty Thousand Seven Hundred
Fifty dollars and 68/100 cents (U.S. $60,750.68) on February 12, 2015 (“Maturity Date”) and to pay interest
on the principal amount outstanding hereunder at the rate of 8% per annum commencing on February 12, 2015. The interest will be
paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of
this Note. The principal of, and interest on, this Note are payable at 80 S.W. 8th Street, Suite 200 Miami, FL 33130, initially,
and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time.
The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less
any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such
Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute
a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent
of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to
paragraph 4(b) herein.
This Note is subject to the following additional
provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”)
and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void.
Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name
this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note
be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this
Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth
in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this
Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of
receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4. (a) The
Holder of this Note is entitled, at its option, at any time after 180 days, and after full cash payment for the shares convertible
hereunder, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s
common stock (the “Common Stock”) without restrictive legend of any nature, at a price (“Conversion
Price”) for each share of Common Stock equal to 55% of the lowest closing bid price of the Common Stock
as reported on the National Quotations Bureau OTCQB exchange which the Company’s shares are traded or any exchange upon
which the Common Stock may be traded in the future (“Exchange”), for the seven prior trading
days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered
by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the
Holder wishes to included the same day closing price). If the shares have not been delivered within 3 business days, the Notice
of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the
Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder has received such shares
of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder’s intention
to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued but unpaid interest
shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but
the number of shares issuable shall be rounded to the nearest whole share. In the event the Company experiences a DTC “Chill”
on its shares, the conversion price shall be decreased to 45% instead of 55% while that “Chill” is in effect.
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
|
| Initials |
|
(c) This
Note may not be prepaid.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving
entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items
(i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the
Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption,
or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of
accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective provision
to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this
Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification,
capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could
have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such
Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders
of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person
or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
| /s/ Anthony L. Anish |
|
| Initials |
|
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within thirty (30) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) defaulted
on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such
default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(i) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
| /s/ Anthony L. Anish |
|
| Initials |
|
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
Then, or at any time thereafter, unless
cured, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion,
the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any
kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce
any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an
Event of Default, interest shall be accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted
by current law, then at the highest rate of interest permitted by law. In the event of a breach of 8(k) the penalty shall be $250
per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company.
This penalty shall increase to $500 per day beginning on the 10th day.
If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including without limitation engaging an attorney, then the Holder shall
be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation
and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it
previously has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10
type information indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either
(i) write a 144- 3(a)(9) opinion to allow for salability of the conversion shares or (ii) accept such opinion from
Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 16,000,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
Upon full conversion of this Note, the any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all
costs associated with issuing and delivering the shares.
| /s/ Anthony L. Anish |
|
| Initials |
|
13. The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the
Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: 2/12/2014
| |
M LINE HOLDING, INC |
| |
|
| |
By: |
/s/ Anthony L. Anish |
| |
|
|
| |
Title: |
COO |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby
irrevocably elects to convert $ _______ of the above Note into ______ Shares of Common Stock of M Line Holdings, Inc (“Shares”)
according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued
in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with
respect thereto.
| Applicable Conversion Price: |
|
| Signature: |
|
| |
[Print Name of Holder and Title of Signer] |
| Shares are to be registered in the following name: |
|
Shares are to be sent or delivered to the following account:
| /s/ Anthony L. Anish |
|
| Initials |
|
DISBURSEMENT AUTHORIZATION
(MEMORANDUM)
TO: COVENTRY ENTERPRISES, LLC.
FROM: M LINE HOLDINGS, INC.
DATE: February 12, 2014
RE: Disbursement of Funds
In connection with
the funding of an aggregate of $50,000 pursuant to that certain Convertible Redeemable Note dated as of February 12, 2014 (the
“Agreement”), you are hereby directed to disburse such funds as follows:
| 1. | $2,500.00 to New Venture Attorneys, P.C. in accordance
with the wires transfer instructions attached as Schedule A, hereto; |
| 2. | $4,750.00 to Anubis Capital Partners in accordance with
the wire transfer instructions attached as Schedule B, hereto; and |
| 3. | $42,750 to M Line Holdings Inc., in accordance with the
wire transfer instructions attached as Schedule C, hereto; |
| |
/s/ Anthony L. Anish |
| |
|
| |
Title: COO |
EXHIBIT A
NEW VENTURE ATTORNEYS
WIRING INFORMATION
Please wire funds to:
Bank of America
Routing No: 026009593
Acct No.: 164109387780
| Beneficiary: | New Venture Attorneys, PC, IOLTA account |
| Attorney info: | New Venture Attorneys, P.C. |
900 E. Hamilton Ave, Suite 100
Campbell, CA 95008
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT B
ANUBIS CAPITAL PARTNERS WIRING INFO
Capital One, N.A.
8989 Preston Road
Frisco, TX 75034
Routing No: 111901014
Acct No.: 3622044799
Beneficiary: Anubis Capital Partners
2550 Midway Road Suite 198
Carrolton, TX 75006
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT C
[WIRING INFO FOR ISSUER]
Bank of America
14222 Culver Drive
Irvine, CA 92620
Routing 121000358
Account Number: 23414 69572
Beneficiary:
M Line Holdings, Inc.
2672 Dow Avenue
Tustin, CA 92780
| /s/ Anthony L. Anish |
|
| Company Initials |
|
DEBT PURCHASE AGREEMENT
This Debt Purchase
Agreement (the “Agreement”) made as of this 12th day of February, 2014, by and between Coventry Enterprises,
LLC (the “Buyer”) and Spagus Capital Partners, LLC (the “Seller”).
1. PURCHASE
AND SALE OF THE CONVERTIBLE NOTE
Upon the terms and
conditions herein contained, at the Closing (as hereinafter defined), the Seller hereby sells, assigns and transfers to the Buyer
and the Buyer agrees to purchase from the Seller the “Transferred Rights” of the Seller and all rights thereto. Transferred
Rights shall mean all rights with respect to $50,000 in principal and proportional accrued interest (the “Assigned Portion”)
under that promissory note in the amount of $150,000 issued by M Line Holdings, Inc. (“Borrower” or “Company”)
on May 31, 2011, a true and correct copy which has been provided to New Venture Attorneys, P.C. (the “Note”). By its
signatures hereto the Borrower accepts the assignment of the Transferred Rights to Buyer and agrees that Buyer may convert the
Transferred Rights into shares of the Company’s common stock.
2. CONSIDERATION
The purchase price
for the Assigned Portion of the Note shall be the Buyer’s payment of Fifty Thousand Dollars ($50,000.00) to the Seller, for
the Assigned Portion (the “Purchase Price”).
3. CLOSING
The closing of the
transactions contemplated by this Agreement (the “Closing”) shall take place simultaneously with the delivery of the
Purchase Price via wire transfer of immediately available funds against the assignment of the Note. The funds will be wired as
set forth in Exhibit A.
4. REPRESENTATIONS
AND WARRANTIES OF SELLER The Seller hereby represents and warrants to the Buyer as follows:
4.1 Status
of the Seller and the Note. The Seller is the beneficial owner of the Note. The Note is currently outstanding and Seller is
informed by Company that the Note represents a bona fide debt obligation of the Company.
4.2 Authorization;
Enforcement. (i) Seller has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to sell each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Seller and the consummation by it of the transactions contemplated hereby (including, without limitation,
the sale of the Note to the Buyer) have been duly authorized by the Seller and no further consent or authorization of the Seller
or its members is required, (iii) this Agreement has been duly executed and delivered by the Seller, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating
to, or affecting generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general
application.
4.3 No
Conflicts. The execution, delivery and performance of this Agreement by the Seller and the consummation by the Seller of the
transactions contemplated hereby (including, without limitation, the sale of the Note to the Buyer) will not (i) conflict with
or result in a violation of any provision of its certificate of formation or other organizational documents, or (ii) violate or
conflict with or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time
or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, note, bond, indenture or other instrument to which Seller are a party, or (iii) result in a violation of any law,
rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any
self-regulatory organizations to which Seller are subject) applicable to Seller or the Note is bound or affected. The Seller is
not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver
or perform any of its obligations under this Agreement in accordance with the terms hereof.
4.4 Title;
Rule 144 Matters. Seller has good and marketable title to the Note. Seller is not an “Affiliate” of the Company,
as that term is defined in Rule 144 of the Securities Act of 1933, as amended (the “1933 Act”), as such Buyer will
be able to track the holding period of the Seller.
4.5 Consent
of the Company.
(i) The
Company, as evidence by its signature at the foot of this Agreement, hereby represents and warrants that, upon delivery to the
Company of the Note, the Company shall promptly cause to be issued to and in the name of Buyer one of more new executed Notes in
the aggregate amount of $50,000.00 plus accrued interest, but otherwise having the sale terms (including, but not necessarily limited
to, referring to the original issue date) as in the Note. The Note may contain the same restrictive legend as provided in the original
Note, but no stop transfer order. The Note is currently outstanding and represents a bona fide debt obligation of the Company.
(ii) The
signature by the Company also represents the Company’s agreement to treat Buyer as a party to, and having all the rights
of the Seller with respect to the Transferred Rights.
5. REPRESENTATIONS,
WARRANTIES AND ACKNOWLEDGEMENTS OF THE BUYER. The Buyer hereby represents warrants and acknowledges to the Seller as follows:
5.1 Sophisticated
Investor. The Buyer has sufficient knowledge and experience of financial and business matters, is able to evaluate the merits
and risks of the partial purchase of the Note and has had substantial experience in previous private and public purchases of securities.
5.2 Authorization;
Enforcement. (i) Buyer has all requisite corporate power and authority to enter into and perform the Agreement and to consummate
the transactions contemplated hereby and to purchase each Note, in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Buyer and the consummation by it of the transactions contemplated hereby (including, without limitation,
the purchase of the Note by the Buyer) have been duly authorized by the Buyer and no further consent or authorization of the Buyer
or its members is required, (iii) this Agreement has been duly executed and delivered by the Buyer, and (iv) this Agreement constitutes
a legal, valid and binding obligation of the Buyer enforceable against the Buyer in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting
generally, the enforcement of creditors’ rights and remedies or by other equitable principles of general application.
5.3 No Conflicts.
The execution, delivery and performance of this Agreement by the Buyer and the consummation by the Buyer of the transactions contemplated
hereby will not (i) conflict with or result in a violation of any provision of its certificate of formation or other organizational
documents, or (ii) violate or conflict with or result in a breach of any provision of, or constitute a default (or an event which
with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, note, bond, indenture or other instrument to which Buyer is a party, or (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations
of any self-regulatory organizations to which Buyer is subject) applicable to Seller or the Note is bound or affected. The Buyer
is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver
or perform any of its obligations under this Agreement in accordance with the terms hereof.
6. MISCELLANEOUS
6.1 Binding
Effect; Benefits. This Agreement shall inure to the benefit of, and shall be binding upon, the parties hereto and their respective
successors and permitted assigns. Except as otherwise set forth herein, this Agreement may not be assigned by any party hereto
without the prior written consent of the other party hereto. Except as otherwise set forth herein, nothing in this Agreement, expressed
or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns
any rights, remedies, obligations or liabilities under or by any reason of this Agreement.
6.2 Notices.
All notices, requests, demands and other communications which are required to be or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when delivered in person, or transmitted by telecopy or telex, or upon receipt
after dispatch by certified or registered first class mail, postage prepaid, return receipt requested, to the party to whom the
same is so given or made, at the following addresses (or such others as shall be provided in writing hereafter):
(a) If
to the Buyer to:
Coventry Enterprises, LLC
80 S.W. 8th Street,
Suite 200
Miami, FL 33130
Attn: Jack Bodenstein
(b) If
to the Seller to:
Spagus Capital Partners, LLC
250 F. Centerville Road
Warwick, RI 02886
6.3 Entire Agreement.
This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, oral and written, between
the parties hereto with respect to the subject matter hereof.
6.4 Further
Assurances. After the Closing, at the request of either party, the other party shall execute, acknowledge and deliver, without
further consideration, all such further assignments, conveyances, endorsements, deeds, powers of attorney, consents and other documents
and take such other action as may be reasonably requested to consummate the transactions contemplated by this Agreement.
6.5 Headings.
The section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be part of
this Agreement or to affect the meaning or interpretation of this Agreement.
6.6 Counterparts.
This Agreement may be executed in any number of counterparts and by facsimile, each of which, when executed, shall be deemed to
be an original and all of which together shall be deemed to be one and the same instrument.
6.7 Governing
Law. This Agreement shall be construed as to both validity and performance and enforced in accordance with and governed by
the laws of the State of New York, without giving effect to the conflicts of law principles thereof.
6.8 Severability.
If any term or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the Agreement shall be valid and enforced to the fullest extent permitted
by law.
6.9 Amendments.
This Agreement may not be modified or changed except by an instrument or instruments in writing executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be duly executed as of the date first above written.
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BUYER: |
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COVENTRY ENTERPRISES, LLC |
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/s/ Jack Bodenstein |
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Jack Bodenstein, Managing Member |
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SELLER: |
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SPAGUS CAPITAL PARTNERS, LLC |
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By: |
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Title: |
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| M LINE HOLDINGS, INC |
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| By: |
/s/ Anthony L. Anish |
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| Title: |
COO |
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EXHIBIT A
WIRE INSTRUCTIONS FOR SELLER
PLEASE WIRE YOUR FUNDS TO THE FOLLOWING
PLEASE INSERT COMPLETE BANK WIRING INFO INCLUDING BANK ADDRESS
AS WELL AS ADDRESS
NON-AFFILIATION LETTER
February 12, 2014
Counsel to M LINE HOLDINGS, INC.
Counsel to Coventry Enterprises, LLC
Gentlemen:
Please let this letter serve as confirmation
that Spagus Capital Partners, LLC is not now, and has not been during the preceding 90 days, an officer, director, 10% or more
shareholder of M LINE HOLDINGS, INC. or in any other way an “affiliate” of (as that term is defined in Rule 144(a)(1)
adopted pursuant to the Securities Act of 1933, as amended), of such issuer.
Very Truly yours,
SPAGUS CAPITAL PARTNERS, LLC
UNANIMOUS CONSENT IN LIEU OF A SPECIAL
MEETING OF DIRECTORS OF
M LINE HOLDINGS, INC.
The undersigned, being all of the directors
of M Line Holdings, Inc., a corporation of the State of Nevada, (the “Corporation”), do hereby authorize and approve
the actions set forth in the following resolutions without the formally of convening a meeting, and do hereby consent to the following
actions of this Corporation, which actions are hereby deemed affective as of the date hereof:
RESOLVED: That officers of this
Corporation are authorized and directed to amend and restate a $50,000 portion of a $150,000.00 note issued to Spagus Capital
Partners, LLC on May 31, 2011 into a new promissory note to Coventry Enterprises, LLC, in the amount of $60,750.68 (which includes
accrued interest) to provide conversion features equal to 55% of the lowest closing bid price of the last day of 7 trading days
prior to conversion, as well as 8% interest and become due and payable on February 12, 2015; and
RESOLVED: That the officers of this
corporation are authorized and directed to issue a $50,000 promissory note to Coventry Enterprises, LLC, which provides
conversion features equal to 55% of the lowest closing bid price of the last day of 7 trading days prior to conversion, as well
as 8% interest and become due and payable on February 12, 2015; and
RESOLVED FURTHER: That the officers
of this corporation are authorized to corporation and directed to execute transfer agent instructions with the Company’s
transfer agent to irrevocably reserve 32,000,000 shares of the Company’s Common Stock with the transfer agent for the benefit
of Coventry Enterprises, LLC for conversion of the above aforementioned notes and
RESOLVED FURTHER, that each of the
officers of the Corporation be, and they hereby are authorized and empowered to execute and deliver such documents, instruments
and papers and to take any and all other action as they or any of them may deem necessary or appropriate of the purpose of carrying
out the intent of the foregoing resolutions and the transactions contemplated thereby; and that the authority of such officers
to execute and deliver any such documents, instruments and papers and to take any such other action shall be conclusively evidenced
by their execution and delivery thereof or their taking thereof.
The undersigned, by affixing their signatures
hereto, do hereby consent to, authorize and approve the foregoing actions in their capacity as a majority of the direction of M
Line Holdings, Inc.
Dated: February 6, 2014
| /s/ Bruce W. Barren |
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/s/ Anthony L. Anish |
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| [/s/ Illegible] |
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[/s/ Illegible] |
SECURITIES PURCHASE AGREEMENT
This SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of February 12, 2014, by and between M Line Holdings, Inc.,
a Nevada corporation, with headquarters located at 2672 Dow Avenue, Tustin, CA 92780 (the “Company”), and COVENTRY
ENTERPRISES, LLC, a limited liability company, with its address at 80 S.W. 8th Street, Suite 200 Miami, FL
33130 (the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded
by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under
the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer
desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement an 8%
convertible note of the Company, in the form attached hereto as Exhibit A in the aggregate principal amount of $50,000.00 (together
with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the
terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the
“Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto; and
NOW THEREFORE, the
Company and the Buyer severally (and not jointly) hereby agree as follows:
1. Purchase
and Sale of Note.
a. Purchase
of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase
from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages
hereto.
b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds
to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal
amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and
(ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase
Price.
| /s/ Anthony L. Anish |
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| Company Initials |
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c. Closing
Date. The date and time of the first issuance and sale of the Note pursuant to this Agreement (the “Closing Date”)
shall be on or about February 12, 2014, or such other mutually agreed upon time. The closing of the transactions contemplated
by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.
2. Buyer’s
Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment
Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion
Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards
the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act;
provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D
(an “Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with
all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, and for
so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company. Notwithstanding
the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information
unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries
nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or
affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that
may constitute a breach of any of the Company’s representations and warranties made herein.
e. Governmental
Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer
or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered
under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities
are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company,
at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in
comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to
an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”))
of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited
Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the
1933 Act (or a successor rule) (“Regulation 5”), and the Buyer shall have delivered to the Company, at the cost of
the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions,
which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only
in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined
in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any
state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a
bona fide margin account or other lending arrangement.
g. Legends.
The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may
be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that
can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
“NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth
above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it
is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an
effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without
any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions,
to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion
shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements,
if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer
of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business days, it will be
considered an Event of Default under the Note.
h. Authorization;
Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf
of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i. Residency.
The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.
3. Representations
and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization
and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and
other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated
and conducted.
b. Authorization;
Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the
Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation
for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s
Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required,
(iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign this Agreement and the other documents executed
in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery
by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
c. Issuance
of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance
with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances
with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder thereof.
d. Acknowledgment
of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance
of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion
Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
e. No
Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the
Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance
of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation
or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of
its subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including
federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or
its securities are subject) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company
or any of its subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate, have a material adverse effect). All consents, authorizations,
orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained
or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the-Counter
Quotations Bureau (the “OTCQB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCQB
in the foreseeable future, nor are the Company’s securities “chilled” by FINRA. The Company and its subsidiaries
are unaware of any facts or circumstances which might give rise to any of the foregoing.
f. Absence
of Litigation. Except as disclosed in the Company’s public filings, there is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to
the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries,
or their officers or directors in their capacity as such, that could have a material adverse effect. Schedule 3(f) contains a
complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting
the Company or any of its subsidiaries, without regard to whether it would have a material adverse effect. The Company and its
subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the
capacity of aim’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company
further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective
representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation
and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the
Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its
representatives.
h. No
Integrated Offering. Neither the Company, nor any of its affiliates, nor ay person acting on its or their behalf, has directly
or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would
require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the
Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes
of any shareholder approval provisions applicable to the Company or its securities.
i. Title
to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would
not have a material adverse effect. Any real property and facilities held under lease by the Company and its subsidiaries are
held by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.
j. Breach
of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth
in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered
an Event of default under the Note.
4. COVENANTS.
a. Expenses.
At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”),
including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees
for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of
provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions
contemplated by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate
payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission
of an invoice by the Buyer. The Company’s obligation with respect to this transaction is to reimburse Buyer’ expenses
shall be $2500 in legal fees which shall be deduced from the Note when funded.
b. Listing.
The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the
Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer
owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCQB or any equivalent replacement exchange,
the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock
Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”)
and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the
OTCQB and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility
of the Common Stock for listing on such exchanges and quotation systems.
c. Corporate
Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCQB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
d. No
Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of
the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval
provision applicable to the Company or its securities.
e. Breach
of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.
5. Governing
Law; Miscellaneous.
a. Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county
of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The
Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s
fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid
or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that
it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may
prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding
in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts;
Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto
by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
c. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation
of, this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
e. Entire
Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement
may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company, to:
M Line Holdings, Inc.
2672 Dow Avenue
Tustin, CA 92780
Attn: Anthony Anish
If to the Buyer:
COVENTRY ENTERPRISES, LLC
80 S.W. 8th Street, Suite 200
Miami, FL 33130
Attn: Jack Bodenstein
Each party shall provide notice to the other
party of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities
in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act,
without the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival.
The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the
closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to
indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a
result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set
forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they
are incurred.
j. Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
k. No
Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.
1. Remedies.
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for
a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach
by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, the undersigned Buyer
and the Company have caused this Agreement to be duly executed as of the date first above written.
| |
M Line Holdings, Inc. |
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| By: |
/s/ Anthony L. Anish |
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Anthony L. Anish |
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Chief Operating Officer |
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| COVENTRY ENTERPRISES, LLC. |
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| By: |
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| Name: Jack Bodenstein |
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| Title: Manager |
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| AGGREGATE SUBSCRIPTION AMOUNT: |
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| Aggregate Principal Amount of Note: |
$50,000.00 |
Aggregate Purchase Price:
$50,000.00 less $2,500.00 in legal fees and $4,750.00 in third
party due diligence fees.
EXHIBIT A
144 NOTE - $50K
Exhibit 10.24
NOTARIZED CERTIFICATE OF CORPORATE SECRETARY
OF
M LINE HOLDINGS, INC
(Two Pages)
The undersigned, ANTHONY L. ANISH is the
duly elected Corporate Secretary of M Line Holdings, Inc, a Nevada corporation (the “Company”).
I hereby warrant and
represent that I have undertaken a complete and thorough review of the Company’s corporate and financial books and records
including, but not limited to, the Company’s records relating to the following:
| (A) | that certain issuance of that certain
convertible promissory note dated March 4, 2014 (the “Note Issuance Date”)
issued to Iconic Holdings, LLC (the “Holder”) in the stated original principal
amount of two hundred twenty thousand dollars ($220,000) (the “Note”); |
| (B) | the Company’s Board of Directors duly approved the issuance of the Note to the Holder. |
| (C) | The Company has not received and does not contemplate receiving any new consideration from any
persons in connection with any later conversion of the Note and the issuance of the Company’s Common Stock upon any said
conversion. |
| (D) | To my best knowledge and after completing the aforementioned review of the Company’s shareholder
and corporate records, I am able to certify that the Holder (and the persons affiliated with the Holder) are not officers, directors,
or directly or indirectly, ten percent (10.00%) or more stockholders of the Company and none of said persons have had any such
status in the one hundred (100) days immediately preceding the date of this Certificate. |
| (E) | The Company’s Board of Directors have approved duly adopted resolutions approving the Irrevocable
Instructions to the Company’s Stock Transfer Agent attached to the Note Purchase Agreement, dated March 4, 2014. |
M Line Holdings, Inc
Notarized Certificate of Corporate Secretary
March 4, 2014
| (F) | The Company is not, nor has it been, a “shell company” as described in Rule 144(i)(1)(i)
of the Securities Act of 1933, as amended. |
| (G) | I understand the constraints imposed under Rule 144 on those persons who are or may be deemed to
be “affiliates,” as that term is defined in Rule 144(a)(1) of the Securities Act of 1933. |
| (H) | I understand that all of the representations set forth in this Certificate will be relied upon
by counsel to Iconic Holdings, LLC in connection with the preparation of a legal opinion. |
I hereby affix my signature to this Notarized
Certificate and hereby confirm the accuracy of the statements made herein.
| Signed: |
/s/ Anthony L. Anish |
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Date: |
3/4/2014 |
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| Name: |
ANTHONY L. ANISH |
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Title: |
CO SECRETARY |
SUBSCRIBED AND SWORN TO BEFORE ME ON
THIS _________ DAY OF _____________________ 2014.
Commission Expires: ____________
| SEE ATTACHED |
|
| Notary Public |
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M Line Holdings, Inc
Notarized Certificate of Corporate Secretary
March 4, 2014
JURAT
| State of California |
| County of |
ORANGE |
} ss. |
Subscribed and sworn to (or affirmed) before
me on this 28th day of Feb., 2014, by Anthony Leon Anish, proved to me on the basis of satisfactory evidence to be the
person(s) who appeared before me.
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/s/ kevin cannon |
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Signature of Notary |
| (seal) |
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OPTIONAL INFORMATION
| Date of Document |
2/28/2014 |
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Thumbprint of Signer |
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| Type or Title of Document |
Notarized Certificate of Corporate Secretary |
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| Number of Pages in Document |
2 pages + Jurat |
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| Document in a Foreign Language |
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| Type of Satisfactory Evidence: |
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| ¨ |
Personally Known with Paper Identification |
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| x |
Paper Identification CA.D.L. |
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| ¨ |
Credible Witness(es) |
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| Capacity of Signer: |
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¨ |
Check here if |
| ¨ |
Trustee |
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no thumbprint |
| ¨ |
Power of Attorney |
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or fingerprint |
| ¨ |
CEO / CFO / COO |
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is available. |
| ¨ |
President / Vice-President / Secretary / Treasurer |
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| ¨ |
Other: _______________________________ |
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NOTE PURCHASE AGREEMENT
This Note Purchase
Agreement (the “Agreement”) is made as of March 4, 2014 by and between M Line Holdings, Inc. a Nevada corporation
with principal offices at 2672 Dow Avenue, Tustin, CA 92780 (the “Company”) and Iconic Holdings, LLC, a Delaware
LLC with principal offices at 7200 Wisconsin Ave. Suite 206, Bethesda, MD 20814 (the “Purchaser”). As used herein,
the term “Parties” shall be used to refer to the Company and Purchaser jointly.
WHEREAS:
| A. | The Parties jointly warrant and represent that they have
a pre-existing relationship prior to the date of this Agreement. |
| B. | Purchaser warrants and represents that it is sophisticated
and experienced in acquiring the debt instruments issued by small early-stage companies that have not achieve profitability, positive
cash flow or both. |
| C. | Purchaser warrants and represents that it
is an “accredited investor,” as that term is defined in Rule 501 of the Securities
Act of 1933, as amended (the “1933 Act”). |
| D. | Purchaser warrants and represents that prior
to entering into this Agreement that it has received and completed its review of the Company’s corporate and financial statements
as included in the filings and disclosures as listed for the Company with the Securities and Exchange Commission which has allowed
Purchaser to make an informed investment decision with respect to purchase of that certain Convertible Promissory Note in the
stated original principal amount of Two Hundred Twenty Thousand Dollars ($220,000.00) (the “Note”) attached in
Exhibit A and dated March 4, 2014. |
| E. | The Purchaser acknowledges and agrees that it is acquiring
the Note for investment purposes only and not with a view to a distribution. |
| F. | The Purchaser acknowledges and agrees that: (i) the Note
is a “restricted security,” as that term is defined in the 1933 Act and (ii) no registration rights have been granted
to Purchaser to register the Note. |
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:
Section 1. SALE
AND ISSUANCE OF THE NOTE. In consideration of the Company’s receipt of the initial sum of One Hundred
Ten Thousand Dollars ($110,000.00) at Closing (as defined in Section 2.1), the Company shall sell to the Purchaser, and the Purchaser
shall purchase from the Company (the “Issuance”) the Note upon the terms set forth in this Agreement. In addition,
a copy of that certain Action of the Board of Directors, dated March 4, 2014 (the “Action of the Board of Directors”)
is attached in Exhibit A, attached hereto.
M Line Holdings, Inc.
$220,000 Note Purchase Agreement
March 4, 2014
Section 2. THE CLOSING.
2.1. PLACE
OF CLOSING AND PROCEDURE AT CLOSING. The closing of the issuance of the Note to the Purchaser (the “Closing”)
shall take place simultaneously with and upon the satisfaction of the following conditions:
(1) the Company’s execution and
delivery to the Purchaser of the following: (a) an executed copy of this Agreement; (b) an executed copy of the Note; (c) a signed
copy of the Irrevocable Instructions to the Transfer Agent; and (d) the signed Action of the Board of Directors.
(2) the Purchaser’s execution of
a wire transfer to the Company no later than one (1) business day following the Closing as follows: the sum of one hundred thousand
dollars ($100,000.00) in cash shall be remitted and delivered to the Company and ten thousand dollars ($10,000.00) shall be retained
by the Purchaser through an original issue discount for due diligence and legal bills related to this transaction.
(3) the Purchaser reserves the right
to pay additional consideration at any time and in any amount it desires, at its sole discretion.
Section 3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the
Purchaser as follows:
3.1.
ORGANIZATION. The Company is duly organized, validly existing and in good standing under the laws of the State of Nevada and is
qualified to conduct its business as a foreign corporation in each jurisdiction where the failure to be so qualified would have
a material adverse effect on the Company.
3.2. AUTHORIZATION
OF AGREEMENT, ETC. The execution, delivery and performance by the Company of this Agreement, the Note, and each other document
or instrument contemplated hereby or thereby (collectively, the “Financing Documents”) have been duly authorized
by all requisite corporate action by the Company and delivered by the Company. Each of the Financing Documents, when executed
and delivered by the Company, constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws affecting creditors’ rights and remedies generally, and subject as to enforceability to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in equity).
M Line Holdings, Inc.
$220,000 Note Purchase Agreement
March 4, 2014
Section 4. REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER.
The Purchaser hereby represents and warrants to the
Company as follows:
4.1. AUTHORIZATION OF THE DOCUMENTS. Purchaser
has all requisite power and authority (corporate or otherwise) to execute, deliver and perform the Financing Documents to which
it is a party and the transactions contemplated thereby, and the execution, delivery and performance by such Purchaser of the Financing
Documents to which it is a party have been duly authorized by all requisite action by such Purchaser and each such Financing Document,
when executed and delivered by the Purchaser, constitutes a valid and binding obligation of such Purchaser, enforceable against
such Purchaser in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
4.2. INVESTMENT
REPRESENTATIONS. The Purchaser warrants and represents that:
| (a) | the Purchaser is an accredited investor (as that term is defined in Rule 501(a)(1) of Regulation D of the 1933 Act; |
| (b) | the Purchaser is sophisticated and experienced in acquiring the securities of small public companies; |
| (c) | the Purchaser has reviewed the Company’s Annual and Quarterly Reports together with the audited financial statements
contained therein; |
| (d) | the Purchaser has had sufficient opportunity to review and evaluate the risks and uncertainties associated with the purchase
of the Company’s securities; |
| (e) | the Purchaser is acquiring the Note from the Company for investment purposes only and not with a view to a distribution. |
4.3 RESTRICTED
SECURITY. Purchaser understands and acknowledges that the Note has not been, and when issued will not be, registered with the Securities
and Exchange Commission. Purchaser warrants and represents that it has fully reviewed the restricted securities legend and the
terms thereof with its financial, legal, investment, and business advisors and that it has not relied upon the Company or any other
person for any advice in connection with the purchase of the Note, this Agreement, or both of them.
4.4 LEGAL COUNSEL.
Purchaser has consulted with its own independent legal, tax, investment, and other advisors of its own choosing prior to entering
into this Agreement.
4.5 ABSENCE
OF REGISTRATION RIGHTS. Purchaser understands and agrees that it is not acquiring and has not been granted any registration rights
with respect to the Note. The Note is a restricted security and the Purchaser understands that there is no trading market for the
Note and no such market will likely ever develop.
M Line Holdings, Inc.
$220,000 Note Purchase Agreement
March 4, 2014
Section 5. BROKERS AND FINDERS.
The Company shall
not be obligated, unless previously detailed in Section 2.1(2), to pay any commission, brokerage fee or finder’s fee based
on any alleged agreement or understanding between the Purchaser and a third person in respect of the transactions contemplated
hereby. The Purchaser hereby agrees to indemnify the Company against any claim by any third person for any commission, brokerage
or finder’s fee or other payment with respect to this Agreement or the transactions contemplated hereby based on any alleged
agreement or understanding between the Purchaser and such third person, whether express or implied from the actions of the Purchaser.
Section 6. SUCCESSORS AND ASSIGNS.
This Agreement shall bind and
inure to the benefit of the Company, the Purchaser and their respective successors and assigns.
Section 7. ENTIRE AGREEMENT.
This Agreement
and the other writings and agreements referred to in this Agreement or delivered pursuant to this Agreement contain the entire
understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among
the parties with respect thereto.
Section 8. NOTICES.
All notices,
demands and requests of any kind to be delivered to any party in connection with this Agreement shall be personally served, sent
via facsimile or e-mail, or sent in writing via an internationally recognized overnight courier or by registered or certified mail,
return receipt requested and postage prepaid to the address of each party listed on the first page of this Agreement or to such
other address as the party to whom notice is to be given may have furnished to the other parties to this Agreement in writing in
accordance with the provisions of this Section 8. Any such notice or communication shall be deemed to have been received (i) in
the case of personal delivery, on the date of such delivery, (ii) in the case of facsimile or e-mail, immediately (iii) in the
case of an internationally-recognized overnight courier, on the next business day after the date when sent and (iv) in the case
of mailing, on the third business day following that on which the piece of mail containing such communication is posted.
Section 9. AMENDMENTS.
This Agreement may not be modified
or amended, or any of the provisions of this Agreement waived, except by written agreement of the Company and the Purchaser.
Section 10. ATTORNEYS’ FEES.
In the event of a dispute between
the parties concerning the enforcement or interpretation of this Agreement, the prevailing party in such dispute, whether by legal
proceedings or otherwise, shall be reimbursed immediately for the reasonably incurred attorneys’ fees and other costs and
expenses by the other parties to the dispute.
M Line Holdings, Inc.
$220,000 Note Purchase Agreement
March 4, 2014
Section 11. GOVERNING LAW AND ARBITRATION.
(A) All questions
concerning the construction, interpretation and validity of this Agreement shall be governed by and construed and enforced in accordance
with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether
in the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than
the State of California. In furtherance of the foregoing, the internal law of the State of California will control the interpretation
and construction of this Agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive
law of some other jurisdiction would ordinarily or necessarily apply.
Section 12. CAPTIONS AND EXHIBIT A.
The captions by which
the sections and subsections of this Agreement are identified are for convenience only, and shall have no effect whatsoever upon
its interpretation. Exhibit A is attached hereto and each of the attachments listed in Exhibit A are each with Exhibit A incorporated
by reference herein.
Section 13. SEVERANCE.
If any provision of
this Agreement is held to be illegal or invalid by a court of competent jurisdiction, such provision shall be deemed to be severed
and deleted; and neither such provision, nor its severance and deletion, shall affect the validity of the remaining provisions.
Section 14. COUNTERPARTS.
This Agreement may
be executed in any number of counterparts, and each such counterpart of this Agreement shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement. Facsimile counterpart signatures to this Agreement shall
be acceptable and binding.
[The remainder of this page has been left
intentionally blank.]
M Line Holdings, Inc.
$220,000 Note Purchase Agreement
March 4, 2014
IN WITNESS WHEREOF, each of the
undersigned has duly executed this Note Purchase Agreement as of the date first written above.
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FOR THE COMPANY: |
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M Line Holdings, Inc. |
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By: |
/s/ Anthony L. Anish |
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Name: |
ANTHONY L. ANISH |
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Its: |
COO / CO SEC |
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FOR THE PURCHASER: |
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Iconic Holdings, LLC |
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By: |
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Name: |
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Title: Managing Member |
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[SIGNATURE PAGE TO NOTE PURCHASE AGREEMENT]
[The remainder of this page has been left
intentionally blank.]
M Line Holdings, Inc.
$220,000 Note Purchase Agreement
March 4, 2014
EXHIBIT A
(Copy of Convertible Promissory Note,
Board Resolution, and Irrevocable Instructions to
Stock Transfer Agent, are each attached hereto.)
| 1. | Copy of Convertible Promissory Note |
| 2. | Copy of the Board Resolution of the Borrower |
| 3. | Copy of Irrevocable Instructions to Stock Transfer Agent |
[The remainder of this page has been left
intentionally blank.]
M Line Holdings, Inc.
$220,000 Note Purchase Agreement
March 4, 2014
ATTACHED TO NOTE PURCHASE AGREEMENT
Irrevocable Transfer Agent Instructions
DATE: March 4, 2014
V Stock Transfer
77 Spruce Street, Suite 201
Cedarhurst NY 11516
Ladies and Gentlemen:
On behalf
of M Line Holdings, Inc., a Nevada corporation (the “Company”), reference is made to that certain
Note Purchase Agreement, dated as of March 4, 2014, and the Convertible Promissory Note with principle value of S220,000 (the
“Note”), dated March 4, 2014 (both of which are jointly referred to as the “Agreement”),
by and between the Company and Iconic Holdings, LLC, a Delaware limited liability company (the
“Holder”). A copy of each of the above are attached hereto. Pursuant to the terms of the Note the holder
is given the right to convert all or any portion of the Note into shares of common stock (the “Shares”) of
the Company, par value $0.001 per share (the “Common Stock” or “Subject Shares”). We ask
that you familiarize yourself with your issuance and delivery obligations as Transfer Agent, contained herein.
You are hereby
irrevocably authorized and instructed to reserve a sufficient number of shares of common stock (“Common Stock”) of
the Company (initially 55,000,000 shares) for issuance upon partial or full conversion of the Note in accordance with the
terms thereof (the “Reserve Shares”). Following the submission of any conversion notice for the Note
by the Holder, this reserve amount shall automatically be increased back to 55,000,000 shares until the Note has
been fully retired, at which point this reserve will be extinguished. In the event that the amount of Reserve Shares are exhausted
prior to the full conversion of the Note, for any reason, you are authorized and instructed to immediately issue, upon receipt
of a Conversion Notice for any remaining portion of the Note such additional shares of Common Stock due and owing to Holder and
arising out of said conversion from the remaining authorized and unissued common stock of the company.
The ability to convert
the Note in a timely manner is a material obligation of the Company pursuant to the Note. Your firm is hereby irrevocably authorized
and instructed to issue shares of Common Stock of the Company (without any restrictive legend) to the Investor without any
further action or confirmation by the Company upon your receipt from the Investor of (a) a notice of conversion (“Conversion
Notice”) executed by the Investor; and (b) an opinion of counsel of the Investor, in form, substance and scope customary
for opinions of counsel in comparable transactions (and satisfactory to the transfer agent), to the effect that the shares of
Common Stock of the Company issued to the Investor pursuant to the Conversion Notice are not “restricted securities”
as defined in Rule 144 and should be issued to the Investor without any restrictive legend.
The Company
hereby requests that your firm act immediately, without delay and without the need for any action or confirmation by the Company
with respect to the issuance of Common Stock pursuant to any Conversion Notices received from the Investor. Your firm will not
delay in processing any Conversion Notices owing to the fact that the Company is in arrears of its fees and other monies owed to
your firm, provided that the Investor agrees that each time a Conversion Notice is delivered to your firm, the Investor agrees
to pay the cost of processing the Conversion Notice a sum not to exceed $150.00 for each such transaction.
The Company
hereby directs you, upon request by the Investor or Investor’s broker dealer, to immediately provide any capitalization structure
information pertaining to the number of common shares of the Company that are issued and outstanding, authorized, reserved, or
in the public float without any further action or confirmation by the Company.
The Company
shall indemnify you and your officers, directors, principals, partners, agents and representatives, and hold each of them harmless
from and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements of its
attorneys) incurred by or asserted against you or any of them arising out of or in connection with the instructions set forth herein,
the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of defending yourself
or themselves against any claim or liability hereunder, except that the Company shall not be liable hereunder as to matters in
respect of which it is determined that you have acted with gross negligence or in bad faith (which gross negligence, bad faith
or willful misconduct must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction).
You shall have no liability to the Company in respect to any action taken or any failure to act in respect of this if such action
was taken or omitted to be taken in good faith, and you shall be entitled to rely in this regard on the advice of counsel.
The Board
of Directors of the Company has approved the foregoing (irrevocable instructions) and does hereby extend the Company’s irrevocable
agreement to indemnify your firm for all loss, liability or expense in carrying out the authority and direction herein contained
on the terms herein set forth.
The Company agrees that in the event that
the Transfer Agent resigns as the Company’s transfer agent, the Company shall engage a suitable replacement transfer agent
that will agree to serve as transfer agent for the Company and be bound by the terms and conditions of these Irrevocable Instructions
within five (5) business days.
The Investor is intended to be and are
third party beneficiaries hereof, and no amendment or modification to the instructions set forth herein may be made without the
consent of the Investor.
Please execute
this letter in the space indicated to acknowledge your agreement to act in accordance with these instructions and return a copy
of this agreement to the Company and to the Holder.
Very truly yours,
M LINE HOLDINGS, INC
| By: |
/s/ Anthony L. Anish |
|
| Name: |
ANTHONY L. ANISH |
|
| Title: |
COO / CO SEC |
|
Acknowledged and Agreed:
V STOCK TRANSFER
Note: March 4, 2014
NEITHER THESE SECURITIES
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
THIS NOTE
DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION OR CONVERSION. AS A RESULT, FOLLOWING ANY
REDEMPTION OR CONVERSION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN
THE PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.
5% CONVERTIBLE PROMISSORY NOTE
OF
M LINE HOLDINGS, INC
Issuance Date: March 4, 2014
Total Face Value of Note: $220,000
Original Issue Discount: $22,000
This
Note (“Note” or “Note”)
is a duly authorized Convertible Promissory Note of M LINE HOLDINGS, INC, a corporation duly
organized and existing under the laws of the State of Nevada (the “Company”), designated as the Company’s
5% Convertible Promissory Note Due March 4, 2015 (“Maturity Date”) in the principal amount of Two Hundred Twenty
Thousand Dollars ($220,000) (the “Note”).
For
Value Received, the Company hereby promises to pay to the order of
Iconic Holdings, LLC or its registered assigns or successors-in-interest
(“Holder”) the principal sum of Two Hundred Twenty Thousand Dollars ($220,000) together with
all accrued but unpaid interest, if any, on the Maturity Date, to the extent such principal amount and interest has not been repaid
or converted into the Company’s Common Stock, $0.001 par value per share (the “Common Stock”), in
accordance with the terms hereof.
The initial Purchase
Price will be one hundred ten thousand dollars ($110,000) of consideration upon execution of the Note Purchase Agreement and all
supporting documentation. The Purchase Price shall be paid according to Section 2.1 of the Note Purchase Agreement. The Holder
reserves the right to pay additional consideration at any time and in any amount it desires, at its sole discretion. The principle
sum owed by the Company shall be prorated to the amount of consideration paid by the Holder and only the consideration received
by the Company, plus prorated interest, fees and original issue discount, shall be deemed owed by the Company. The original issue
discount is set at ten percent (10%) of any consideration paid. The Company is not responsible to repay any unfunded portion of
this Note.
$220,000.00 Convertible Note
M Line Holdings, Inc.
Iconic Holdings, LLC
Any consideration
paid to the Company shall incur a one-time interest charge of five percent (5%) at the time of investment. In the Event of Default
pursuant to Section 2.00(e), additional interest will accrue at the rate equal to the lower of fifteen percent (15%) per annum
or the highest rate permitted by law (the “Default Rate”).
This Note may be prepaid in whole or in
part according to the following schedule:
Within 90 days, this
Note may be prepaid at a 20% premium plus interest. Within 91 to 120 days, this Note may be prepaid at a 30% premium plus interest.
Within 121 to 150 days, this Note may be prepaid at a 35% premium plus interest. Within 151 to 180 days, this Note may be prepaid
at a 40% premium plus intererst. After 180 days this Note may not be prepaid without prior written consent of the Holder. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below), the
same shall instead be due on the next succeeding day which is a Business Day.
For purposes hereof the following terms
shall have the meanings ascribed to them below:
“Business
Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the City
of New York are authorized or required by law or executive order to remain closed.
“Conversion
Price” shall be equal to a forty five percent (45%) discount to the lowest price of the Company’s
common stock during the twenty (20) consecutive trading days prior to the date on which Holder elects to convert all or part of
the Note. If the Company is placed on “chilled” status with the Depository Trust Company (“DTC”),
the discount will be increased by ten percent (10%) until such chill is remedied.
“Principal
Amount” shall refer to the sum of (i) the original principal amount of this Note, (ii) all accrued
but unpaid interest hereunder, and (iii) any default payments owing under the Agreements but not previously paid or added to the
Principal Amount.
“Trading Day”
shall mean a day on which there is trading on the Principal Market.
“Underlying
Shares” means the shares of common stock into which the Note is convertible (including interest or
principal payments in common stock as set forth herein) in accordance with the terms hereof.
The following terms and conditions shall
apply to this Note:
$220,000.00 Convertible Note
M Line Holdings, Inc.
Iconic Holdings, LLC
Section 1.00 Conversion.
(a) Conversion Right. Subject to
the terms hereof and restrictions and limitations contained herein, the Holder shall have the right, at the Holder’s option,
at any time to convert the outstanding Principal Amount and Interest under this Note in whole or in part.
(b) The
date of any Conversion Notice hereunder and any Payment Date shall be referred to herein as the “Conversion Date”.
(i) Stock
Certificates or DWAC. The Company will deliver to the Holder, or Holder’s authorized designee, no later than two (2)
Trading Days after the Conversion Date, a certificate or certificates (which certificate(s) shall be free of restrictive legends
and trading restrictions) representing the number of shares of Common Stock being acquired upon the conversion of this Note. In
lieu of delivering physical certificates representing the shares of Common Stock issuable upon conversion of this Note, provided
the Company’s transfer agent is participating in the DTC Fast Automated Securities Transfer (“FAST”)
program, upon request of the Holder, the Company shall use commercially reasonable efforts to cause its transfer agent to electronically
transmit such shares issuable upon conversion to the Holder (or its designee), by crediting the account of the Holder’s
(or such designee’s) prime broker with DTC through its Deposits and Withdrawal at Custodian (DWAC) program (provided that
the same time periods herein as for stock certificates shall apply).
If the Company fails
to deliver to the Holder such certificate or certificates (or shares through DTC) pursuant to this Section (free of any restrictions
on transfer or legends) prior to the third Trading Day after the Conversion Date, the Company shall pay to the Holder as liquidated
damages, in cash, an amount equal to Two Thousand Dollars ($2,000) per day, until such certificate or certificates are delivered.
The Company acknowledges that it would be extremely difficult or impracticable to determine the Holder’s actual damages and
costs resulting from a failure to deliver the Common stock and the inclusion herein of any such additional amounts are the agreed
upon liquidated damages representing a reasonable estimate of those damages and costs. Such liquidated damages will be added to
the principal value of the Note.
(c) Reservation
and Issuance of Underlying Securities. The Company covenants that it will at all times reserve and keep available out of its
authorized and unissued Common Stock solely for the purpose of issuance upon conversion of this Note (including repayments in stock),
free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than three
times (3x) the number of shares of Common Stock as shall be issuable (taking into account the adjustments under this
Section 1 but without regard to any ownership limitations contained herein) upon the conversion of this Note in Common Stock. These
shares shall be reserved in proportion with the Consideration actually received by the Company and the total reserve will be increased
with future payments of consideration by Holder. The Company covenants that all shares of Common Stock that shall be issuable will,
upon issue, be duly authorized, validly issued, fully-paid, non-assessable and freely-tradable. The Company agrees that this is
a material term of this Note.
$220,000.00 Convertible Note
M Line Holdings, Inc.
Iconic Holdings, LLC
(d) Conversion Limitation. The holder will not submit
a conversion to the Company that would result in the Holder owning more than 9.99% of the total outstanding shares of the Company.
Section 2.00 Defaults
and Remedies.
(e) Events of Default.
An “Event of Default” is: (i) a default in payment of any amount due hereunder which default continues for more
than five (5) business days after the due date; (ii) a default in the timely issuance of underlying shares upon and in accordance
with terms hereof, which default continues for three (3) Business Days after the Company has received notice informing the Company
that it has failed to issue shares or deliver stock certificates within the third (3rd)
day following the Conversion Date; (iii) failure by the Company for three (3) days after notice has been received by the Company
to comply with any material provision of the Purchase Agreement (including without limitation the failure to issue the requisite
number of shares of Common Stock upon conversion hereof; (iv) a material breach by the Company of its representations or warranties
in the Exchange Agreement; (v) any default after any cure period under, or acceleration prior to maturity of, any mortgage, indenture
or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed
by the Company in excess of $50,000 or for money borrowed the repayment of which is guaranteed by the Company in excess of $50,000,
whether such indebtedness or guarantee now exists or shall be created hereafter; (vi) any failure of the Company to satisfy its
“filing” obligations under the rules and guidelines issued by OTC Markets News Service, OTC Markets.com
and their affiliates; (vii) Any failure of the Company to provide the Holder with information
related to the corporate structure including, but not limited to, the number of authorized and outstanding shares, public float,
etc. within one (1) day of request by Holder; (viii) failure to have sufficient number of authorized but unissued shares of the
Company’s Common Stock available for any conversion; (ix) failure of Company’s stock to maintain a bid price in its
trading market which occurs for at least three (3) consecutive days; (x) any delisting for any reason; (xi) failure by Company
to pay any of its Transfer Agent fees or to maintain a Transfer Agent of record; (xii) any trading suspension imposed by the Securities
and Exchange Commission under Sections 12(j) or 12(k) of the 1934 Act; (xiii) if the Company is subject to any Bankruptcy Event;
(xiv) failure of the Company to remain compliant with DTC, thus incurring a “chilled” status with DTC; or (xv) failure
of the Company to abide by the terms of the right of first refusal contained in Section 3.00 (i).
Remedies. If an
Event of Default occurs and is continuing with respect to the Note, the Holder may declare all of the then outstanding Principal
Amount of this Note, including any interest due thereon, to be due and payable immediately without further action or notice. In
the event of such acceleration, the amount due and owing to the Holder shall be increased to one hundred and fifty percent (150%)
of the outstanding Principal Amount of the Note held by the Holder plus all accrued and unpaid interest, fees, and liquidated damages,
if any. Additionally, this Note shall bear interest on any unpaid principal from and after the occurrence and during the continuance
of an Event of Default at a rate of twenty percent (20%). Finally, the Note will accrue liquidated damages of one thousand dollars
($1,000) per day from and after the occurrence and during the continuance of an Event of Default. The Company acknowledges that
it would be extremely difficult or impracticable to determine the Holder’s actual damages and costs resulting from an Event
of Default and any such additional amounts are the agreed upon liquidated damages representing a reasonable estimate of those damages
and costs. The remedies under this Note shall be cumulative and added to the principal value of the Note.
$220,000.00 Convertible Note
M Line Holdings, Inc.
Iconic Holdings, LLC
Section 3.00 General.
(f) Payment of Expenses.
The Company agrees to pay all reasonable charges and expenses, including attorneys’ fees and expenses, which may be incurred
by the Holder in successfully enforcing this Note and/or collecting any amount due under this Note.
(g) Assignment, Etc.
The Holder may assign or transfer this Note to any transferee at its sole discretion. This Note shall be binding upon the Company
and its successors and shall inure to the benefit of the Holder and its successors and permitted assigns.
(h) Governing Law; Jurisdiction.
(i) Governing
Law. This note will be governed by and construed in accordance with the laws of the state of California without regard to any
conflicts of laws or provisions thereof that would otherwise require the application of the law of any other jurisdiction.
(ii) Jurisdiction.
Any dispute or claim arising to or in any way related to this Note or the rights and obligations of each of the parties hereto
shall be settled by binding arbitration in San Diego, California. All arbitration shall be conducted in accordance with the rules
and regulations of the American Arbitration Association (“AAA”). AAA shall designate an arbitrator from an
approved list of arbitrators following both parties’ review and deletion of those arbitrators on the approved list having
a conflict of interest with either party. The Company agrees that a final non-appealable judgment in any such suit or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on such judgment or in any other lawful manner.
(ii) No Jury
Trial. The Company hereto knowingly and voluntarily waives any and all rights it may have to a trial by jury with respect to
any litigation based on, or arising out of, under, or in connection with, this note.
(i) Right of First
Refusal. From and after the date of this Note and at all times hereafter while the Note is outstanding, the Parties agree that
in the event that the Company receives any written or oral proposal (the “Proposal”) containing one or more
offers to provide additional capital or financing in an amount equal to or exceeding an aggregate of fifty thousand dollars ($50,000.00)
(the “Financing Amount”), the Company agrees that it shall provide a copy of all documents received relating
to the Proposal together with a complete and accurate description of the Proposal to the Holder and all amendments, revisions,
and supplements thereto (the “Proposal Documents”) no later than three (3) business days from the receipt of
the Proposal Documents. Following receipt of the Proposal Documents from the Company, the Holder shall have the right (the “Right
of First Refusal”), for a period of five (5) business days thereafter (the “Exercise Period”), to
invest, at similar or better terms to the Company, in an amount equal to or greater than the Financing Amount, upon written notice
to the Company that the Holder is exercising the Right of First Refusal provided hereby. In furtherance of the Right of First Refusal,
the Company agrees that it will cooperate and assist Holder in conducting a due diligence investigation of the Company and its
corporate and financial affairs and provide Holder with information and documents that Holder may reasonably request so as to allow
the Holder to make an informed investment decision. However, the Company and Holder agree that Holder shall have no more than five
(5) calendar days from and after the expiration of the Exercise Period to exercise its Right of First Refusal hereunder. This Right
of First Refusal shall extend to all purchases of debt held by current shareholders, vendors, or creditors.
$220,000.00 Convertible Note
M Line Holdings, Inc.
Iconic Holdings, LLC
IN WITNESS WHEREOF, the
Company has caused this Convertible Promissory Note to be duly executed on the day and in the year first above written.
| |
M LINE HOLDINGS, INC. |
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By: |
Anthony L. Anish |
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Name: |
ANTHONY L. ANISH |
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Title: |
COO / CO SEC |
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Date: |
3/4/14 |
| This Note is acknowledged as: |
Note of March 4, 2014 |
$220,000.00 Convertible Note
M Line Holdings, Inc.
Iconic Holdings, LLC
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the Holder in order to convert that certain
$220,000 Convertible Promissory Note identified as the Note)
| DATE: |
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| FROM: |
Iconic Holdings, LLC |
| |
Re: |
$220,000 Convertible Promissory Note (this “Note”) originally issued by M LINE HOLDINGS, INC., a Nevada corporation, to Iconic Holdings, LLC on March 4, 2014. |
The undersigned on behalf of Iconic
Holdings, LLC, hereby elects to convert $ ________________________ of the aggregate outstanding Principal Amount (as defined
in the Note) indicated below of this Note into shares of Common Stock, $0.001 par value per share, of M LINE HOLDINGS, INC. (the
“Company”) according to the conditions hereof, as of the date written below. If shares are to be issued in the name
of a person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged
to the holder for any conversion, except for such transfer taxes, if any. The undersigned represents as of the date hereof that,
after giving effect to the conversion of this Note pursuant to this Conversion Notice, the undersigned will not exceed the “Restricted
Ownership Percentage” contained in this Note.
Conversion information:
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Date to Effect Conversion |
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Aggregate Principal Amount of Note Being Converted |
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Aggregate Interest on Amount Being Converted |
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Number of Shares of Common Stock to be Issued |
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Applicable Conversion Price |
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Signature |
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$220,000.00 Convertible Note
M Line Holdings, Inc.
Iconic Holdings, LLC
Exhibit 10.24(10)
DEBT PURCHASE
AGREEMENT
THIS DEBT
PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of the 15th day of January,
2015, by and among TCA GLOBAL CREDIT MASTER FUND, LP, a Cayman Islands limited partnership, with an address of 3960 Howard
Hughes Parkway, Suite 500, Las Vegas, NV 89169 (“Assignor” or “Lender”), ICONIC
HOLDINGS, LLC, a Delaware limited liability company, with an address of 7200 Wisconsin Ave., Suite 206, Bethesda, MD 20816
(“Assignee”), and M LINE HOLDINGS, INC., a Nevada corporation (the “Issuing Borrower”),
E.M. TOOL COMPANY, INC., a California corporation, and PRECISION AEROSPACE AND TECHNOLOGIES, INC. (f/k/a Eran Engineering,
Inc.), a Nevada corporation (together with the Issuing Borrower, the “Borrowers”).
WITNESSETH
WHEREAS,
the Borrowers and Lender entered into a Credit Agreement dated as of March 31, 2013, but made effective as of April 30, 2013,
together with First Amendment to Credit Agreement dated effective as of September 27, 2013 (collectively, together with any other
amendments, renewals, substitutions, replacements or modifications from time to time, the “Credit Agreement”);
and
WHEREAS,
pursuant to the Credit Agreement, the Borrowers executed and delivered to Lender that certain Revolving Note dated as of March
31, 2013, but made effective as of April 30, 2013, evidencing Revolving Loans under the Credit Agreement (the “Revolving
Note”); and
WHEREAS,
the Borrowers, other guarantors, and Lender entered into that certain Settlement Agreement dated as of September 8, 2014 (the
“Settlement Agreement”) in connection with the obligations of the Borrowers under the Credit Agreement
and Revolving Note; and
WHEREAS,
Assignee desires to purchase from Lender, and Lender is amenable to selling and assigning to Assignee, Assignor’s right,
title and interest in and to a portion of the monetary obligations evidenced by the Revolving Note, such portion being equal to
One Million Two Hundred Thousand Dollars ($1,200,000.00) of the monetary obligations evidenced by the Revolving Note (the “Assigned
Debt”), which Assigned Debt shall be purchased by Assignee in tranches as more specifically hereinafter set forth;
and
WHEREAS,
on or prior to each “Purchase Tranche Closing” (as hereinafter defined), as directed by Lender, the Borrowers agree
to sever, split, divide and apportion the Revolving Note (or any replacement notes issued in replacement thereof as hereby contemplated,
as applicable) into two separate and distinct replacement notes, each in substantially the same form as the Revolving Note, one
for the amount of the portion of the Assigned Debt being sold and assigned at such Purchase Tranche Closing (the portion of the
Assigned Debt being sold and assigned at each separate Purchase Tranche Closing, as applicable, being referred to as the “Applicable
Assigned Debt”), and one for the remaining amount of the overall debt evidenced by the Revolving Note (or any replacement
notes issued in replacement thereof as hereby contemplated, as applicable);
NOW, THEREFORE,
in consideration of the mutual covenants hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged and agreed, Assignor, Assignee, and Borrowers hereby covenant and agree as follows:
1. Recitals.
The recitations set forth in the preamble of this Agreement are true and correct and incorporated herein by this reference.
2. Agreement
to Assign Assigned Debt.
(a) Purchase
Tranche Closings. Provided there is no default or breach under this Agreement, and that no event has occurred that, with
the passage of time, the giving of notice, or both, would constitute a default or breach under this Agreement, then Assignor
hereby agrees to sell and assign to Assignee, and Assignee hereby agrees to purchase from Assignor, the Assigned Debt, which
Assigned Debt shall be sold in fifteen (15) separate tranches (each of such tranches hereinafter referred to as a “Purchase
Tranche”), each of such separate Purchase Tranches to be sold and assigned on the respective dates and
for the respective amounts set forth in the schedule attached hereto as Exhibit “A” (each closing
of a Purchase Tranche referred to as a “Purchase Tranche Closing” and the purchase price to be paid
for each Applicable Assigned Debt at each Purchase Tranche Closing, as shown on such attached schedule, referred to as the “Applicable
Purchase Price”); provided, however, nothing herein shall prevent Assignee from electing to purchase a greater
portion of the Assigned Debt than that set forth in the attached schedule for any given Purchase Tranche Closing, up to the
aggregate amount of the Assigned Debt, by written notice to Assignor delivered prior to the applicable Purchase Tranche
Closing.
(b) Deliveries
at Each Purchase Tranche Closing. At each Purchase Tranche Closing: (i) Lender shall execute and deliver to Assignee, an assignment
of the Applicable Assigned Debt being sold and assigned at such Purchase Tranche Closing, substantially in the form attached hereto
as Exhibit “B” (each, an “Assignment”); (ii) Lender shall deliver to Assignee
the original replacement note for the Applicable Assigned Debt being sold and assigned at such Purchase Tranche Closing (subject
to receipt of same by Lender from Borrowers as provided in Section 2(c) below); and (iii) Assignee shall pay to Lender the Applicable
Purchase Price for the Applicable Assigned Debt being sold and assigned at such Purchase Tranche Closing, by wire transfer of
good and cleared U.S. currency to an account designated by Lender.
(c) Borrowers’
Obligation to Sever Notes. On or prior to each Purchase Tranche Closing, and within no later than three (3) business days
after request therefor is made by Lender to Borrowers, the Borrowers agree to sever, split, divide and apportion the Revolving
Note (or any replacement notes issued in replacement thereof as hereby contemplated, as applicable) into two separate and distinct
replacement notes, each in substantially the same form as the Revolving Note. One of such replacement notes shall be for a principal
amount equal to the Applicable Purchase Price corresponding to the Applicable Assigned Debt for the applicable Purchase Tranche
Closing, and the second replacement note shall be for a principal amount equal to the remaining amount of the overall debt then
existing and evidenced by the Revolving Note (or any replacement notes issued in replacement thereof as hereby contemplated, as
applicable). In order to clarify the foregoing, as an example, on or prior to the first Purchase Tranche Closing contemplated
hereby, upon request by Lender, the Borrowers shall provide to Lender two replacement notes in replacement of the Revolving Note,
one for $100,000, which is the Applicable Purchase Price for the Applicable Assigned Debt being sold and assigned at the first
Purchase Tranche Closing, and the second for $2,368,395.90 (as of January 15, 2015), which is the amount of the overall debt evidenced
by the Revolving Note, less the Applicable Purchase Price for the first replacement note being sold and assigned at the first
Purchase Tranche Closing. This second replacement note shall then be severed in the same manner for the second Purchase Tranche
Closing, and this foregoing process of severing and issuing replacement notes shall be repeated for each Purchase Tranche Closing,
until the Assigned Debt is sold and assigned in full, or this Agreement is otherwise earlier terminated in accordance with its
terms. Assignee acknowledges and understands that Lender’s obligation to sell, assign and deliver each original replacement
note representing the Applicable Assigned Debt at each Purchase Tranche Closing is subject to and conditioned upon Borrowers executing
and delivering such replacement notes to Lender in accordance with this Agreement. Immediately after the sale, assignment and
transfer of each replacement note representing the Applicable Assigned Debt, and payment of the Applicable Purchase Price therefor
to Assignor, Assignee will exchange any replacement note evidencing the Applicable Assigned Debt received from Assignor with the
Borrowers for a new replacement or exchange note in Assignee’s name (an “Exchange Note”) upon
terms and conditions acceptable to Assignee and as otherwise agreed upon between Borrowers and Assignee. In connection therewith,
the Borrowers also agree to execute supporting documents for each Exchange Note including, but not limited to, a board resolution
for the issuance of each Exchange Note, an exchange agreement, and a letter of instruction with its transfer agent reserving shares
for the conversion of each Exchange Note, all as may be required by Assignee.
(d) Remaining
Debt. Assignee acknowledges that at each Purchase Tranche Closing, and subject to Lender’s receipt of the Applicable
Purchase Price, only the Applicable Assigned Debt represented by the specific replacement note representing the applicable Purchase
Tranche shall be deemed sold and assigned hereunder, it being acknowledged by Assignee that the remaining portion of the debt
evidenced by the Revolving Note (or any replacement notes issued in replacement thereof as hereby contemplated, as applicable)
shall not be sold or assigned thereby unless and until additional replacement notes for additional Purchase Tranches are thereafter
sold in accordance with this Agreement and the Applicable Purchase Price therefor is received by Lender. Moreover, any portion
of the debt evidenced by the Revolving Note other than the Assigned Debt (the “Remaining Debt”) shall
not be part of this Agreement and shall not be subject to sale or assignment hereunder.
(e) No
Security Rights. Assignee hereby agrees and acknowledges that the sale, transfer and assignment of the Assigned Debt, or any
portion thereof, shall be a sale, transfer and assignment of the monetary obligations evidenced by such Assigned Debt (or portion
thereof) only, and shall not include, and such sale, transfer and assignment expressly excludes, the Remaining Debt, as well as
excluding any and all security rights, rights to any collateral, or any other security interests or rights of Assignor of any
nature or kind related to, arising under, or pursuant to, the Credit Agreement, any other “Loan Documents” (as defined
in the Credit Agreement) related thereto, or any other security agreements, UCC financing statements, or any other documents or
instruments relating to the obligations of the Borrowers to Assignor (collectively, the “Security Rights”),
it being agreed and acknowledged that all Security Rights shall remain with Assignor, as security for any portion of the Assigned
Debt not assigned at any Purchase Tranche Closing, the Remaining Debt, or any other obligations of Borrowers to Assignor.
(f) Additional
Lender Agreements.
(i) Subsequent
Acquisitions. The parties acknowledge and recognize that pursuant to the terms of the Credit Agreement, Borrowers are prohibited
from engaging, closing or otherwise undertaking any number of transactions, including acquisitions, without the prior written consent
of the Lender. In this regard, the Lender agrees that, provided there is no default or breach under this Agreement by Assignee
or Borrowers, and that no event has occurred that, with the passage of time, the giving of notice, or both, would constitute a
default or breach under this Agreement by Assignee or Borrowers, then Assignor hereby agrees that it will not unreasonably withhold
its consent to any proposed acquisitions sought to be undertaken by Borrowers after the Effective Date. Borrowers agree to provide
to Lender any and all information requested by Lender with respect to any such contemplated acquisitions, so that Lender can promptly
evaluate same in connection with its decision to grant or withhold such required consent.
(ii) Prior
Release of Equipment. Lender hereby confirms that the definition of “Collateral” under the Security Agreement
executed and delivered in connection with the Credit Agreement has been and remains effectively amended to exclude the five (5)
pieces of equipment listed on Exhibit “A” to the Settlement Agreement from the lien and encumbrance
of Lender’s security interest under the Security Agreement.
3. Conditions
to Purchases.
(a) Initial
Purchase. The initial Purchase Tranche contemplated hereunder shall not be closed and funded unless and until the
following initial conditions precedent (the “Initial Conditions”) are first satisfied, or
waived by Assignee in writing:
(i) Increase
in Borrower’s Authorized Shares. The Issuing Borrower shall have increased its authorized shares of “Common Stock”
(as defined in the Credit Agreement) to not less than 10 billion shares; and
(ii) Current
Filings. The Issuing Borrower shall be current in all of its required filings with the Securities and Exchange Commission
(the “SEC”).
Borrowers agree to diligently
pursue satisfaction of the foregoing Initial Conditions, and Borrowers and Assignee hereby agree to keep Lender fully apprised
of the progress in satisfying such Initial Conditions. In the event the foregoing Initial Conditions are not satisfied on or prior
to a date that is forty-five (45) days from the Effective Date, then this Agreement shall automatically terminate upon the end
of such forty-five (45) day period (unless Assignee waives such Initial Conditions in writing on or prior to the end of such forty-five
(45) day period), whereupon this Agreement shall be deemed terminated. In the event the Initial Conditions are not fulfilled due
to certain matters which are not within the control of Borrowers, the forty-five (45) day period will be extended, in the reasonable
discretion of Assignor, provided Borrowers are not then in default and are diligently prosecuting the fulfillment of the Initial
Conditions. In no event, however, shall such time period be extended beyond seventy-five (75) days from the Effective Date. Matters
which would provide a reasonable basis for approval of an extension include delay by the external auditors or a regulatory or governmental
agency delay.
(b) Additional
Purchases. If the first Purchase Tranche Closing is consummated hereunder, and the Applicable Purchase Price therefor is paid
and received by Lender as contemplated under this Agreement, then Assignee’s obligation to purchase any additional Purchase
Tranches as hereby contemplated is a binding and continuing obligation of Assignee; provided, however, Assignee shall have the
right to terminate such obligation at any time during the term of this Agreement upon the occurrence of any of the following events
(each a “Trigger Event”): (i) the Issuing Borrower fails to stay current in its filing obligations with
the SEC; (ii) trading of the Issuing Borrower’s Common Stock on the OTCPINK is stopped or halted for any reason; (iii) any
suspension of electronic trading or settlement services by the Depository Trust Company (“DTC”) with
respect to the Common Stock occurs and is continuing, or any receipt by the Issuing Borrower of any notice from DTC to the effect
that a suspension of electronic trading or settlement services by DTC with respect to the Common Stock is being imposed or is
contemplated (unless, prior to such suspension, DTC shall have notified the Issuing Borrower in writing that DTC has determined
not to impose any such suspension); (iv) the Issuing Borrower is in default with its transfer agent (the “Transfer
Agent”), or the Transfer Agent fails to issue to Assignee any shares of the Issuing Borrower’s Common
Stock which may be due to Assignee in connection with any conversion rights exercised by Assignee under any promissory notes purchased
by Assignee hereunder, or notes issued in replacement thereof; (v) the Issuing Borrower fails to maintain its active status with
the State of Nevada; (vi) Borrowers shall default (beyond any applicable notice and cure periods) in any of their obligations
to Assignee under the promissory notes purchased by Assignee hereunder, or notes issued in replacement thereof, or any other obligations
of Borrowers to Assignee; (vii) the Issuing Borrower’s average daily dollar trading volume over any five-day period is less
than $10,000 per day; (viii) the Issuing Borrower fails to maintain any share reserve required by Assignee; or (ix) any shares
of Common Stock issued upon conversion of the Assigned Debt cannot be sold under Rule 144 as a result of any failure to meet the
requirements of Rule 144 not caused by Purchaser. Upon the occurrence of a Trigger Event, in the event Assignee desires to terminate
its obligation to purchase Purchase Tranches as hereby contemplated, Assignee shall deliver to Lender written notice of such termination
delivered within five (5) days of the occurrence of the Trigger Event (which notice shall include a statement of the Trigger Event
that has occurred and reasonable evidence of the occurrence thereof), whereupon Assignee’s obligation to purchase any additional
Purchase Tranches thereafter shall immediately terminate and be of no further force or effect.
4. Representations
and Warranties of Assignor. Assignor makes the following representations and warranties to Assignee, each of which shall be
deemed made as of the Effective Date, and re-made as of each Purchase Tranche Closing:
(a) Assignor
is the legal and equitable owner of Assignor’s right, title and interest in and to the Assigned Debt, except for any portion
of the Assigned Debt previously sold and assigned to Assignee pursuant to this Agreement; and
(b) Assignor
has not sold, transferred, assigned, pledged, hypothecated, or otherwise encumbered the Assigned Debt, or any portion thereof,
except for any portion of the Assigned Debt previously sold and assigned to Assignee pursuant to this Agreement; and
(c) The
Assignor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization
with full right, corporate, partnership or other applicable power and authority to enter into and to consummate the transactions
contemplated by this Agreement and otherwise to carry out its obligations hereunder, and the execution, delivery and performance
by the Assignor of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate, partnership,
or similar action on the part of the Assignor.
(d) Except
for the foregoing representations and warranties, this Agreement and each Assignment is made by Assignor without recourse, representation
or warranty of any nature or kind, express or implied, and Assignor specifically disclaims any warranty, guaranty or representation,
oral or written, past, present or future with respect to the Assigned Debt, any portion thereof, or any instruments evidencing
same, including, without limitation: (i) the validity, effectiveness or enforceability of the Assigned Debt, any portion thereof,
or any instruments evidencing same; (ii) the validity, existence, or priority of any lien or security interest securing the obligations
of Borrowers or any other Credit Parties evidenced by the Assigned Debt, any portion thereof, or any instruments evidencing same;
(iii) the existence of, or basis for, any claim, counterclaim, defense or offset relating to the Assigned Debt, any portion thereof,
or any instruments evidencing same; (iv) the financial condition of the Borrowers, or any other Credit Parties or guarantor or
obligor liable under the Assigned Debt, any portion thereof, or any instruments evidencing same, or the ability of any such parties
to pay or perform their respective obligations under the Assigned Debt, any portion thereof, or any instruments evidencing same;
(v) the compliance of the Assigned Debt, any portion thereof, or any instruments evidencing same with any laws, ordinances or
regulations of any governmental agency or other body; (vi) the value or condition of any collateral securing the obligations under
the Assigned Debt, any portion thereof, or any instruments evidencing same; and (vii) the future performance of the Borrowers
or any other Credit Parties or guarantor or obligor liable under the Assigned Debt, any portion thereof, or any instruments evidencing
same. Assignee acknowledges and represents to Assignor that Assignee has been given the opportunity to undertake its own investigations
of the Borrowers, the Assigned Debt, any portion thereof, or any instruments evidencing same, and having undertaken and performed
all such investigations as Assignee deemed necessary or desirable, Assignee represents, warrants and agrees that it is relying
solely on its own investigation of the Borrowers, the Assigned Debt, any portion thereof, or any instruments evidencing same,
and not any information whatsoever provided or to be provided by Assignor, or any representation or warranty of Assignor. This
Agreement, and each Assignment of the Assigned Debt, or portion thereof, as provided for herein is made on an “AS
IS,” “WHERE IS” basis, with all faults, and Assignee, by acceptance of this Agreement and
each Assignment, shall be deemed to have agreed and acknowledged that Assignor has fully performed, discharged and complied with
all of Assignor’s obligations, representations, warranties, covenants and agreements hereunder, that Assignor is discharged
therefrom, and that Assignor shall have no further liability with respect thereto, except only for those express warranties contained
in this Agreement, and Assignee, by such acceptance, expressly acknowledges that ASSIGNOR MAKES NO WARRANTY OR REPRESENTATIONS,
EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, RELATING TO THE ASSIGNED DEBT, ANY PORTION THEREOF, OR ANY INSTRUMENTS EVIDENCING
SAME, EXCEPT AS SPECIFICALLY SET FORTH HEREIN.
5. Representations
and Warranties of Assignee. Assignee makes the following representations and warranties to Assignor,
each of which shall be deemed made as of the Effective Date, and re-made as of each Purchase Tranche Closing:
(a) The
Assignee is a legally recognized entity duly organized, validly existing and in good standing under the laws of the jurisdiction
of its organization with full right, corporate, partnership of other applicable power and authority to enter into and to consummate
the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder, and the execution, delivery
and performance by the Assignee of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate
or similar action on the part of the Assignee.
(b) This
Agreement, when executed and delivered by the Assignee, will constitute a valid and legally binding obligation of the Assignee,
enforceable against the Assignee in accordance with its terms, except: (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and any other laws of general application affecting enforcement of creditors’ rights generally;
or (ii) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
(c) The
Assignee: (i) either alone or together with its representatives, has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of this investment and make an informed decision to so invest, and has so evaluated
the risks and merits of such investment; (ii) has the ability to bear the economic risks of this investment and can afford a complete
loss of such investment; (iii) understands the terms of and risks associated with the acquisition of the Assigned Debt, or any
portion thereof, or any instruments evidencing same, including, without limitation, a lack of liquidity, price transparency or
pricing availability and risks associated with the industry in which the Borrower operates; (iv) has had the opportunity to review
the Borrowers, its business, its financial condition, its prospects, the Credit Agreement, the Assigned Debt, any portion thereof,
or any instruments evidencing same, all as the Assignee has determined to be necessary in connection with this Agreement and the
assignments contemplated hereby.
(d) The
Assignee understands that: (i) the Assigned Debt, any portion thereof, or any instruments evidencing same, have not been registered
under the Securities Act of 1933 (the “Securities Act”) or the securities laws of any state; (ii) the
Assigned Debt, any portion thereof, or any instruments evidencing same, is and will be “restricted securities” as
said term is defined in Rule 144 of the Rules and Regulations promulgated under the Securities Act (“Rule 144”);
(iii) the Assigned Debt, any portion thereof, or any instruments evidencing same, may not be sold, pledged or otherwise transferred
unless a registration statement for such transaction is effective under the Securities Act and any applicable state securities
laws, or unless an exemption from such registration is available with respect to such transaction; and (iv) the Assigned Debt,
any portion thereof, or any instruments evidencing same, will restrictive legends as to the foregoing in customary form.
(e) The
Assignee is not accepting this Agreement or any Assignment as a result of any advertisement, article, notice or other communication
regarding the Assigned Debt, any portion thereof, or any instruments evidencing same published in any newspaper, magazine, internet
or social media, broadcast over television or radio, presented at any seminary, or under any other media generally circulated or
available to the public or any other general solicitation or general advertisement.
(f) Neither
the execution and delivery of this Agreement, or any Assignment, nor the consummation of the transactions contemplated hereby,
does or will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, governmental agency, or court to which the Assignee is subject or any provision of its organizational
documents or other similar governing instruments, or conflict with, violate or constitute a default under any agreement, credit
facility, debt or other instrument or understanding to which the Assignee is a party, The Assignee has consulted such legal, tax
and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with this Agreement and
the assignment of the Assigned Debt, any portion thereof, or any instruments evidencing same as contemplated hereby.
(g) There
is no action, suit, proceeding, judgment, claim or investigation pending, or to the knowledge of the Assignee, threatened against
the Assignee which could reasonably be expected in any manner to challenge or seek to prevent, enjoin, alter or materially delay
any of the transactions contemplated hereby.
(h) No
authorization, consent, approval or other order of, or declaration to or filing with, any governmental agency or body or other
Person is required for the valid authorization, execution, delivery and performance by the Assignee of this Agreement and the consummation
of the transactions contemplated hereby.
(i) The
Assignee hereby acknowledges that the Assigned Debt, any portion thereof, or any instruments evidencing same may only be disposed
of in compliance with state and federal securities laws. The Assignee further acknowledges that in connection with any transfer
of the Assigned Debt, any portion thereof, or any instruments evidencing same subsequent to the date hereof and other than pursuant
to an effective registration statement, or an applicable exemption to such registration requirements, the Borrower and/or the Borrower’s
transfer agent may require an opinion of counsel, the form and substance of which opinion shall be reasonably satisfactory to the
Borrower and/or the Borrower’s transfer agent, as applicable.
6. Borrower
Acknowledgments. Borrowers hereby represent and warrant that the obligations evidenced by the Revolving Note, including, without
limitation, all obligations for the Assigned Debt and the Remaining Debt, are valid and enforceable obligations of the Borrowers
subject to no defenses, setoffs, counterclaims, cross-actions or equities in favor of the Borrowers, and to the extent the Borrowers
have any defenses, setoffs, counterclaims, cross-actions or equities against Assignor and/or against the enforceability of any
such obligations, the Borrowers acknowledge and agree that same are hereby fully and unconditionally waived by the Borrowers. The
Borrowers further acknowledge their obligations under Section 2(c) above, and agree to timely and promptly deliver replacement
notes to Lender as required by this Agreement. The Borrowers further acknowledge that the Assigned Debt only represents a portion
of the obligations due or owing under the Revolving Note, and that the Assigned Debt is only being assigned hereunder in Purchase
Tranches as contemplated above. In that regard, the Borrowers further acknowledge that the Remaining Debt, and any portion of the
Assigned Debt for which the Applicable Purchase Price therefor has not been received by Lender, are and remain valid and enforceable
obligations of the Borrowers. Borrowers agree and acknowledge that each of them is and shall remain liable to pay the Remaining
Debt, and any portion of the Assigned Debt for which the Applicable Purchase Price therefor has not been received by Lender, as
same becomes due in accordance with the terms of the Credit Agreement and the Revolving Note, or any replacement notes issued in
replacement thereof as hereby contemplated, and nothing contained herein shall be deemed or construed any waiver or to otherwise
excuse performance by Borrowers under their obligations to Lender.
7.
RELEASE. AS A MATERIAL INDUCEMENT FOR LENDER TO AGREE TO ENTER INTO THIS AGREEMENT, BORROWERS AND ASSIGNEE HEREBY RELEASE
LENDER, TOGETHER WITH ALL OF ITS PARTNERS AND AFFILIATES, AND THE OFFICERS, MEMBERS, DIRECTORS, PARTNERS, EMPLOYEES, AGENTS AND
ATTORNEYS OF EACH OF THE FOREGOING, FROM ALL CLAIMS, CAUSES OF ACTION AND LIABILITIES OF ANY NATURE OR KIND IN ANY WAY RELATING,
DIRECTLY OR INDIRECTLY, TO THE ASSIGNED DEBT, ANY COLLATERAL SECURING ANY OBLIGATIONS THEREUNDER, THIS AGREEMENT, OR ANY OTHER
DEBTS OR OBLIGATIONS IN ANY WAY RELATING TO THE CREDIT AGREEMENT, TO THE EXTENT ARISING ON OR PRIOR TO THE DATE HEREOF, INCLUDING,
WITHOUT LIMITATION, ANY AND ALL CLAIMS ARISING FROM OR RELATING TO NEGOTIATIONS, DEMANDS, REQUESTS OR EXERCISE OF REMEDIES IN CONNECTION
WITH THE ASSIGNED DEBT, THIS AGREEMENT, ANY OTHER DEBTS OR OBLIGATIONS IN ANY WAY RELATING TO THE CREDIT AGREEMENT, AND ANY AND
ALL FEES OR CHARGES COLLECTED IN CONNECTION WITH TIIE ASSIGNED DEBT, THIS AGREEMENT, OR ANY OTHER DEBTS OR OBLIGATIONS IN ANY WAY
RELATING TO THE, CREDIT AGREEMENT. MOREOVER UPON DELIVERY OF EACH ASSIGNMENT HEREUNDER, THE FOREGOING RELEASE SHALL BE DEEMED AUTOMATICALLY
RE-MADE AND EFFECTIVE FOR ALL CLAIMS, CAUSES OF ACTION AND LIABILITIES OF ANY NATURE OR KIND COVERED HEREBY TO THE EXTENT ARISING
ON OR PRIOR TO THE DATE OF SUCH ASSIGNMENT.
8. Default
and Termination.
(a) Breach
By Assignor. In the event Assignor shall breach any of its covenants or agreements hereunder, and such breach is not cured
within thirty (30) days after Assignor’s receipt of written notice of such breach from Assignee, which notice shall specify
the breach with specificity, then Assignee’s sole and exclusive remedy hereunder shall be to terminate this Agreement upon
written notice to Assignor, whereupon this Agreement shall terminate and Assignor and Assignee shall have no further obligation,
each to the other, under this Agreement. Assignor and Assignee agree that the foregoing exclusive remedy will be adequate and
each of them agrees that Assignee shall not have any other remedies, at law or in equity, for any breach by Assignor not cured
within any applicable notice and cure period, other than termination of this Agreement as hereby provided.
(b) Breach
By Assignee. In the event Assignee shall breach any of its covenants or agreements hereunder, and such breach is not cured
within thirty (30) days after Assignee’s receipt of written notice of such breach from Assignor, which notice shall specify
the breach with specificity, then Assignor’s sole and exclusive remedy hereunder shall be to terminate this Agreement upon
written notice to Assignee, whereupon this Agreement shall terminate and Assignor and Assignee shall have no further obligation,
each to the other, under this Agreement. Assignor and Assignee agree that the foregoing exclusive remedy will be adequate and each
of them agrees that Assignor shall not have any other remedies, at law or in equity, for any breach by Assignee not cured within
any applicable notice and cure period, other than termination of this Agreement as hereby provided. Notwithstanding the foregoing
to the contrary, the foregoing notice and cure period shall not be applicable with respect to Assignee’s failure to pay the
Applicable Purchase Price at a Purchase Tranche Closing, and any such failure shall be deemed an immediate breach hereunder, entitling
Assignor to avail itself of the exclusive termination remedy hereby provided immediately upon such failure to pay the Applicable
Purchase Price at a Purchase Tranche Closing.
(c) Breach
by Borrower. Any breach by Borrower under this Agreement, if such breach is not cured within thirty (30) days after Borrower’s
receipt of written notice of such breach from the party alleging such breach, shall be deemed an event of default by Borrower under
the Credit Agreement, and any such breach may be enforced by Assignor through any remedies available to Assignor, at law or in
equity, or under the Credit Agreement. Borrower shall have no rights to enforce this Agreement as against Assignor or Assignee,
nor shall any breach or default by Assignor or Assignee hereunder in any way abrogate, limit, or otherwise affect Borrower’s
obligations under the Credit Agreement and related Loan Documents.
9. Waiver;
Forbearance. The parties recognize and acknowledge that by entering into this Agreement, the Lender is not waiving any
rights of remedies it may have under any of the Loan Documents, any defaults of Events of Default arising thereunder, of any
judgments previously obtained by Lender in connection therewith (collectively, the “Existing
Rights”); provided, however, that Lender hereby agrees that, commencing on the “Debt Condition
Date” (as hereinafter defined), Lender agrees that it shall not thereafter enforce, and Lender shall thereafter forbear
from pursuing enforcement of, any of its Existing Rights, unless and until an additional default or Event of Default occurs
(either by Borrower or any other Person other than Lender) under the Credit Agreement, any other Loan Documents, this
Agreement, or any of the “Payment Agreements” (as hereinafter defined), whereupon the foregoing forbearance shall
automatically become null and void and of no further force or effect, without any further notice or demand from Lender. For
purposes of this Agreement, the term “Debt Condition Date” shall mean the date when the following
two conditions are satisfied to Lender’s reasonable satisfaction: (i) Borrower enters into a comprehensive set of
agreements with other third parties (the “Payment Agreements”), pursuant to which Borrowers intend
to pay off in full the entire amount of the Assigned Debt and Remaining Debt, or any other transaction which would satisfy
the judgments and the entire amount of the Assigned Debt and the Remaining Debt, which Payment Agreements are intended to
include, without limitation, this Agreement and another asset based lending credit facility for Borrowers; and (ii) the
Payment Agreements are reviewed and approved by Lender, such approval not to be unreasonably withheld.
Notwithstanding anything contained in this Agreement, the forbearance described in this Section 9 shall commence upon the
filing of the Motion to Vacate in accordance with the Second Amendment to the Credit Agreement, being executed simultaneously
herewith. In addition, notwithstanding anything contained in this Agreement to the contrary, the Lender shall have the right,
at any time, to accept payment in full of the then outstanding Assigned Debt and Remaining Debt, whether in connection with
the Payment Agreements, or otherwise, and in such event, Lender shall have the absolute right to terminate this Agreement
with respect to any portion of the Assigned Debt not yet sold and assigned to Assignee as of such date. Assignee and or
Borrowers may prepay the Assigned Debt and the Remaining Debt, whether in connection with the Payment Agreements, or
otherwise, without penalty.
10.
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada, which
also govern the Revolving Note.
11. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors
and assigns.
12. Headings.
The headings of the paragraphs of this Agreement have been included only for convenience, and shall not be deemed in any manner
to modify or limit any of the provisions of this Agreement or used in any manner in the interpretation of this Agreement.
13. Interpretation.
Whenever the context so requires in this Agreement, all words used in the singular shall be construed to have been used in the
plural (and vice versa), each gender shall be construed to include any other genders, and the word “Person”
shall be construed to include a natural person, a corporation, a firm, a partnership, a joint venture, a trust, an estate
or any other entity.
14. Partial
Invalidity. Each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. If any
provision of this Agreement or the application of such provision to any person or circumstances shall, to any extent, be invalid
or unenforceable, then the remainder of this Agreement, or the application of such provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be affected by such invalidity or unenforceability.
15. Execution.
This Agreement may be executed in one or more counterparts, all of which taken together shall be deemed and considered one and
the same Agreement, and same shall become effective when counterparts have been signed by each party and each party has delivered
its signed counterpart to the other party. In the event that any signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format file or other similar format file, such signature shall be deemed an original for all purposes
and shall create a valid and binding obligation of the party executing same with the same force and effect as if such facsimile
or “.pdf” signature page was an original thereof.
16. Effective
Date. For purposes of this Agreement, the “Effective Date” shall mean the date when this Agreement
becomes fully executed by all parties hereto.
[Signatures on the following page]
IN WITNESS WHEREOF, Assignor, Assignee,
and Borrower have executed this Agreement as of the date above first written.
| |
Assignor: |
| |
|
| |
TCA GLOBAL CREDIT MASTER FUND, LP |
| |
By: |
TCA Global Credit Fund GP, Ltd. |
| |
Its: |
General Partner |
| |
|
|
| |
By: |
/s/ Robert
Press |
| |
|
Robert Press, Director |
| |
|
|
| |
Date: |
2/25/15 |
| |
Assignee: |
| |
|
| |
ICONIC HOLDINGS, LLC, a Delaware limited liability
company |
| |
|
|
| |
By: |
/s/ Robert
Papiri |
| |
Name: |
Robert Papiri |
| |
Title: |
Manager |
| |
|
|
| |
Date: |
February 24, 2015 |
IN WITNESS WHEREOF, Assignor, Assignee,
and Borrower have executed this Agreement as of the date above first written.
Borrowers:
M LINE HOLDINGS, INC.,
a Nevada corporation
| By: |
/s/ Anthony L. Anish |
|
|
| Name: |
ANTHONY L. ANISH |
|
|
| Title: |
COO |
|
|
| Date: |
2/23/15 |
|
|
| |
|
|
| E.M. TOOL COMPANY, INC., |
|
PRECISION AEROSPACE AND |
| a California corporation |
|
TECHNOLOGIES, INC., |
| |
|
a Nevada corporation |
| |
|
|
| By: |
/s/ Anthony
L. Anish |
|
By: |
/s/ Anthony
L. Anish |
| Name: |
ANTHONY L. ANISH |
|
Name: |
ANTHONY L. ANISH |
| Title: |
PRES |
|
Title: |
PRES |
| Date: |
2/23/15 |
|
Date: |
2/23/15 |
EXHIBIT “A”
PURCHASE TRANCHES
| Purchase Tranche Number | |
Applicable Purchase Price | | |
Date for Purchase Tranche
Closing |
| | |
| | | |
|
| 1 | |
$ | 100,000 | | |
Within three (3) business days after satisfaction or waiver of Initial Conditions |
| | |
| | | |
|
| 2 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 3 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 4 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 5 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 6 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 7 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 8 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 9 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 10 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 11 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 12 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 13 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 14 | |
$ | 80,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
| | |
| | | |
|
| 15 | |
$ | 60,000 | | |
20 Trading Days after prior Purchase Tranche Closing |
EXHIBIT “B”
FORM OF ASSIGNMENT
Exhibit 10.25
SECURITIES PURCHASE AGREEMENT
This SECURITIES
PURCHASE AGREEMENT (the “Agreement”), dated as of June 10, 2014, by and between M Line Holdings, Inc.,
a Nevada corporation, with headquarters located at 2672 Dow Avenue, Tustin, CA 92780 (the “Company”), and ADAR
BAYS, LLC, a Delaware limited liability company, with its address at 3411 Indian Creek Drive, Suite 403, Miami Beach, FL 33140
(the “Buyer”).
WHEREAS:
A. The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded
by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under
the Securities Act of 1933, as amended (the “1933 Act”);
B. Buyer
desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement two 8%
convertible notes of the Company, in the forms attached hereto as Exhibit A and B in the aggregate principal amount of $100,000.00
(with the first note being in the amount of $50,000.00 and the second note being in the amount of $50,000.00 (together with any
note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof,
the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common
Stock”), upon the terms and subject to the limitations and conditions set forth in such Note. The first of the two notes
(the “First Note”) shall be paid for by the Buyer as set forth herein. The second note (the “Second Note”)
shall initially be paid for by the issuance of an offsetting $50,000.00 secured note issued to the Company by the Buyer (“Buyer
Note”), provided that prior to conversion of the Second Note, the Buyer must have paid off the Buyer Note in cash such that
the Second Note may not be converted until it has been paid for in cash.
C. The
Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth
immediately below its name on the signature pages hereto; and
NOW THEREFORE,
the Company and the Buyer severally (and not jointly) hereby agree as follows:
1. Purchase
and Sale of Note.
a. Purchase
of Note. On each Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase
from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages
hereto.
| /s/ Anthony L. Anish |
|
| Company Initials |
|
b. Form
of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and
sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds
to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal
amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and
(ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase
Price.
c. Closing
Date. The date and time of the first issuance and sale of the Note pursuant to this Agreement (the “Closing Date”)
shall be on or about June 10, 2014, or such other mutually agreed upon time. The closing of the transactions contemplated by this
Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties. Subsequent
Closings shall occur when the Buyer Note is repaid. The Closing of the Second Note shall be on or before the dates specified in
the Buyer Note.
2. Buyer’s
Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment
Purpose. As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of
or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares”
and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public
sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided,
however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum
or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
b. Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an
“Accredited Investor”).
c. Reliance
on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the
Buyer to acquire the Securities.
d. Information.
The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished
with all materials relating to the business, finances and operations of the Company and materials relating to the offer and
sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been,
and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company.
Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not
disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure
to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or
representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and
warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant
degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company’s
representations and warranties made herein.
e. Governmental
Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer
or Re-sale. The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under
the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold
pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost
of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable
transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from
such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate”
(as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees
to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the
Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor
rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of
counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall
be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act)
may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything
else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement.
g. Legends.
The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be
sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can
then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such Securities):
“NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN
A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”
The legend set forth
above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it
is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an
effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without
any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions,
to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion
shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those
represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements,
if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer
of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business days, it will be
considered an Event of Default under the Note.
h. Authorization;
Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf
of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
i.
Residency. The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature
pages hereto.
3. Representations
and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization
and Qualification. The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other)
to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.
b. Authorization;
Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the
Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation
for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s
Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required,
(iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized
representative is the true and official representative with authority to sign this Agreement and the other documents executed in
connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the
Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
c. Issuance
of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance
with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances
with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the
Company and will not impose personal liability upon the holder thereof.
d. Acknowledgment
of Dilution. The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance
of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion
Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
e. No
Conflicts. The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of
the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation
or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which
with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its subsidiaries
is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state
securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are
subject) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries
is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a material adverse effect). All consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the-Counter Quotations Bureau
(the “OTCQB”) and does not reasonably anticipate that the Common Stock will be delisted by the OTCQB in the foreseeable
fixture, nor are the Company’s securities “chilled” by FINRA. The Company and its subsidiaries are unaware of
any facts or circumstances which might give rise to any of the foregoing.
f. Absence
of Litigation. Except as disclosed in the Company’s public filings, there is no action, suit, claim, proceeding, inquiry
or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or
their officers or directors in their capacity as such, that could have a material adverse effect. Schedule 3(f) contains a complete
list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the
Company or any of its subsidiaries, without regard to whether it would have a material adverse effect. The Company and its subsidiaries
are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. Acknowledgment
Regarding Buyer’ Purchase of Securities. The Company acknowledges and agrees that the Buyer is acting solely in the capacity
of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives
or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely
incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s
decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.
h. No
Integrated Offering. Neither the Company, nor any of its affiliates, nor ay person acting on its or their behalf, has directly
or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would
require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer
will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any
shareholder approval provisions applicable to the Company or its securities.
i. Title
to Property. The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries,
in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would
not have a material adverse effect. Any real property and facilities held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.
j. Breach
of Representations and Warranties by the Company. If the Company breaches any of the representations or warranties set forth
in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered
an Event of default under the Note.
4. COVENANTS.
a. Expenses.
At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”),
including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees
for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions
in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated
by the Documents. When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for
reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice
by the Buyer. The Company’s obligation with respect to this transaction is to reimburse Buyer’ expenses shall be $2500
in legal fees (and proportional amounts for the Second Note) which shall be deduced from each Note when funded.
b. Listing.
The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the
Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing
of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer
owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCQB or any equivalent replacement exchange,
the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock
Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s
reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”)
and such exchanges, as applicable. The Company shall promptly provide to the Buyer copies of any notices it receives from the OTCQB
and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the
Common Stock for listing on such exchanges and quotation systems.
c. Corporate
Existence. So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or
substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s
obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded
corporation whose Common Stock is listed for trading on the OTCQB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
d. No
Integration. The Company shall not make any offers or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the
Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision
applicable to the Company or its securities.
e. Breach
of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies
available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.
5. Governing
Law; Miscellaneous.
a. Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard
to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated
by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county
of New York. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.
The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable
attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection
herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative
to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other
provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served
in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof
via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted
by law.
b. Counterparts;
Signatures by Facsimile. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by
facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
c. Headings.
The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of,
this Agreement.
d. Severability.
In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect
the validity or enforceability of any other provision hereof.
e. Entire
Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company
nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement
may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.
f. Notices.
All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return
receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted
by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine,
at the address or number designated below (if delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered other than on a business day during normal business
hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company, to:
M Line Holdings, Inc.
2672 Dow Avenue
Tustin, CA 92780
Attn: Bruce Barren, CEO
If to the Buyer:
ADAR BAYS, LLC
3411 Indian Creek Drive, Suite
403
Miami Beach, FL 33140
Attn: Samuel Eisenberg
Each party shall provide notice to the other party
of any change in address.
g. Successors
and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written
consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities
in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act,
without the consent of the Company.
h. Third
Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
i. Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall
survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company
agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising
as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants
set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as
they are incurred.
j. Further
Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.
k. No
Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against any party.
l. Remedies.
The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating
the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for
a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by
the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies
at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing
or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing
economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, the undersigned Buyer
and the Company have caused this Agreement to be duly executed as of the date first above written.
M Line Holdings, Inc.
| By: |
/s/ Anthony L.
Anish |
|
| |
Anthony L. Anish |
|
| |
Chief Operating Officer |
|
ADAR BAYS, LLC.
| By: |
|
|
| Name: |
Samuel Eisenberg |
|
| Title: |
Manager |
|
AGGREGATE SUBSCRIPTION AMOUNT:
| Aggregate Principal Amount of Note: |
$100,000.00 |
Aggregate Purchase Price:
Note 1: $50,000.00 less $2,500.00 in legal
fees and $4,750.00 in third party due diligence fees to Anubis Capital Partners, LLC.
Note 2: $50,000.00 less $2,500.00 in legal
fees and $4,750.00 in third party due diligence fees to Anubis Capital Partners, LLC.
EXHIBIT A
144 NOTE - $50K
EXHIBIT B
BACK END NOTE 1
$50K
THIS NOTE AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US $50,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE JUNE 10, 2015
BACK END NOTE
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of ADAR BAYS, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand Dollars exactly (U.S.
$50,000.00) on June 10, 2015 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder
at the rate of 8% per annum commencing on June 10, 2014. The interest will be paid to the Holder in whose name this Note is registered
on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note
are payable at 3411 Indian Creek Drive, Suite 403, Miami Beach, FL 33140, initially, and if changed, last appearing on the records
of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and
the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or
withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records
of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and
shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire
transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by
the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that
Holder shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
|
| Initials |
|
2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”), and applicable
state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment
for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered
on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the
Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the
right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective
transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice
of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of
such Notice of Conversion shall be the Conversion Date.
4. (a) The
Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without
restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 55%
of the lowest closing bid twice of the Common Stock as reported on the OTCQB marketplace which the Company’s
shares are traded or any market upon which the Common Stock may be traded in the future (“Exchange”), for the
ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such
Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in
blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the
Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead of 55%
while that “Chill” is in effect
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). The Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
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(c) This
Note may not be prepaid, except that if the $50,000 Rule 144 convertible redeemable note issued by the Company of even date herewith
is redeemed by the Company within 6 months of the issuance date of such Note, all obligations of the Company under this Note and
all obligations of the Holder under the Holder issued Back End Note will be automatically be deemed satisfied and this Note and
the Holder issued Back End Note will be automatically be deemed cancelled and of no further force or effect.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
| /s/ Anthony L. Anish |
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8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note shall
be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder and not cure such breach within 10 days; or
(d) The
Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of one hundred thousand dollars
($100,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall
remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five
(5) days prior to the date of any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
(j) Intentionally
Deleted;
| /s/ Anthony L. Anish |
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(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business
days of its receipt of a Notice of Conversion; or
(1) The
Company shall not replenish the reserve set forth in Section 12, within 5 business days of the request of the Holder ; or
(m) The
Company’s Common Stock has a closing bid price of less than $0.003 per share for at least 5 consecutive trading days; or
(n) The
aggregate dollar trading volume of the Company’s Common Stock is less than forty thousand dollars ($40,000.00) in any 5 consecutive
trading days; or
(o) The
Company shall cease to be “current” in its filings with the Securities and Exchange Commission; or.
(p) The
Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at any time thereafter, unless
cured (except for 8(m) and 8(n) which are incurable defaults, the sole remedy of which is to allow the Holder to cancel
both this Note and the Holder Issued Note, and in each and every such case, unless such Event of Default shall have been waived
in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder
and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment,
demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately,
and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or
any other rights or remedies afforded by law. Upon an Event of Default, interest shall be accrue at a default interest rate of
16% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.
Further, if the Note becomes due and payable, the Holder may use the outstanding principal and interest due under the Note to offset
any payment obligations it may have to the Company. In the event of a breach of 8(k) the penalty shall be $250 per day the
shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty
shall increase to $500 per day beginning on the 10th day. Once cash funded, the penalty for a breach of Section 8(p)
shall be an increase of the outstanding principal amounts by 20%. Once cash funded, in the event of a breach of Section 8(i), the
outstanding principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal
due under this Note shall increase by 10%.
If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then, if the Holder
prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses
incurred in the investigation, preparation and prosecution of such action or proceeding.
| /s/ Anthony L. Anish |
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9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a “144-
3(a)(9)” opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. Prior
to cash funding of this Note, The Company will issue irrevocable transfer agent instructions reserving 3x the number of shares
of Common Stock necessary to allow the holder to convert this note based on the discounted conversion price set forth in Section
4(a) herewith and in accordance with the conversion procedure set forth in Section 12 of the $50,000 144 note issued on even date
herewith. The reserve shall be replenished as needed to allow for conversions of this Note. Upon full conversion of this Note,
the reserve representing this Note shall be cancelled. The Company will pay all transfer agent costs associated with issuing and
delivering the shares.
13. The
Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
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IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by an officer thereunto duly authorized.
| Dated: |
6/10/14 |
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M Line Holdings, Inc. |
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By: |
/s/ Anthony L. Anish |
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Title: |
COO |
| /s/ Anthony L. Anish |
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby
irrevocably elects to convert $_________ of the above Note into ________ Shares of Common Stock of M Line Holdings, Inc. (“Shares”)
according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
| Applicable Conversion Price: |
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| Signature: |
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[Print Name of Holder and Title of Signer] |
| Shares are to be registered in the following name: |
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Shares are to be sent or delivered to the following account:
| /s/ Anthony L. Anish |
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THIS NOTE AND THE COMMON
STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT”)
US $50,000.00
M LINE HOLDINGS, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE MAY 30 2015
FOR VALUE RECEIVED,
M Line Holdings, Inc. (the “Company”) promises to pay to the order of ADAR BAYS, LLC and its authorized successors
and permitted assigns (“Holder”), the aggregate principal face amount of Fifty Thousand Dollars exactly (U.S. $50,000.00)
on May 30, 2015 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate
of 8% per annum commencing on May 30, 2014. The interest will be paid to the Holder in whose name this Note is registered on the
records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable
at 3411 Indian Creek Drive, Suite 403, Miami Beach, FL 33140, initially, and if changed, last appearing on the records of the Company
as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding
principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the
Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company.
The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and
discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest
shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1. This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith.
| /s/ Anthony L. Anish |
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2. The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”), and applicable
state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment
for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered
on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the
Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the
right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective
transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice
of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of
such Notice of Conversion shall be the Conversion Date.
4. (a) The
Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) without
restrictive legend of any nature, at a price (“Conversion Price”) for each share of Common Stock equal to 55%
of the lowest closing bid price of the Common Stock as reported on the OTCQB marketplace which the Company’s
shares are traded or any market upon which the Common Stock may be traded in the future (“Exchange”), for the
ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such
Notice of Conversion is delivered by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard
or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within
3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the
shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder
has received such shares of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing
such Holder’s intention to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in
blank. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares
will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. In the event the
Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead of 55%
while that “Chill” is in effect
(b) Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock (“Interest Shares”). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
| /s/ Anthony L. Anish |
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| Initials |
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(c) The
Notes may be prepaid with the following penalties: (i) if the note is prepaid within 90 days of the issuance date, then at 125%
of the face amount plus any accrued interest; (ii) if the note is prepaid within 91 days after the issuance date but less than
151 days after the issuance date, then at 140% of the face amount plus any accrued interest and (iii) if the note is prepaid within
151 days after the issuance date but less than 180 days after the issuance date, then at 150% of the face amount plus any accrued
interest. This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days
of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock,
other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into
another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares
of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”),
then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus
accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid
principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately
prior to such Sale Event at the Conversion Price.
(e) In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
5. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
| /s/ Anthony L. Anish |
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| Initials |
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7. The
Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by
the Holder in collecting any amount due under this Note.
8. If
one or more of the following described “Events of Default” shall occur:
(a) The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or
(b) Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or
(c) The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or
(d) The
Company shall (I) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment
for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief,
consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal
or state laws as applicable; or
(e) A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or
(g) One
or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in
the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or
(h) The
Company shall have defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered
and failed to cure such default within the appropriate grace period; or
(i) The
Company shall have its Common Stock delisted from a market (including the OTCQB marketplace) or, if the Common Stock trades on
an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;
| /s/ Anthony L. Anish |
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| Initials |
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(j) If
a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The
Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3
business days of its receipt of a Notice of Conversion; or
(l) The
Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder; or
(m) The
Company shall not be “current” in its filings with the Securities and Exchange Commission; or
(n) The
Company shall lose the “bid” price for its stock and a market (including the OTCBB marketplace or other exchange)
Then, or at any time thereafter, unless
cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s
sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further)
notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note
or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period
of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded
by law. Upon an Event of Default, interest shall accrue at a default interest rate of 16% per annum or, if such rate is usurious
or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k)
the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was
delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach
of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding
principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under
this Note shall increase by 10%.
If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails
in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred
in the investigation, preparation and prosecution of such action or proceeding.
9. In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
| /s/ Anthony L. Anish |
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| Initials |
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10. Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.
11. The
Company represents that it is not a “shell” issuer and has never been a “shell” issuer or that if it previously
has been a “shell” issuer that at least 12 months have passed since the Company has reported form 10 type information
indicating it is no longer a “shell issuer. Further. The Company will instruct its counsel to either (i) write a 144- 3(a(9)
opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder’s counsel.
12. The
Company shall issue irrevocable transfer agent instructions reserving 77,922,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). The reserve shall be replenished as needed to allow for conversions of this Note.
The Holder will initially submit a conversion notice/request for a tranche of shares to be issued with an agreed to conversion
price equal to $1000 (an “Initial Tranche Request”). The shares that are the subject to the Initial Trance Request
may be subsequently reconverted and repriced as follows: (i) the Holder shall immediately reduce the outstanding balance of the
Note by $1,000 and simultaneously send to the Company a live” or “repriced” conversion notice for the $1,000
priced using the conversion formula set forth in Section 4(a) of this Note, (ii) As the balance of the shares in the Initial Tranche
Request are converted via the delivery of the “live” or “repriced” conversion notice, the balance of the
Note shall be reduced using the formula set forth in Section 4(a) of this Note, as if such shares had originally been converted
as set forth in Section 4(a). By way of example, if the Tranche Conversion Request was for 1,000,000 shares and the face amount
of the Note was $25,000 the Holder would initially reduce $1,000 from the face amount leaving a balance of $24,000 and send the
Company a repriced conversion notice deducting that number of shares from the Initial Tranche Request necessary to equal $1,000
using the formula set forth in Section 4(a). Additionally, if, the following day, the Holder sent a “live” or “repriced”
conversion notice to the Company for 25,000 shares and, using the formula set forth in Section 4(a) the true conversion price would
have been $6,000, then the Holder shall make an additional reduction of $6,000 on the Note and shall indicate both the Note balance
and the share reserve balance on the “live” conversion notice. This process shall be repeated until there is no balance
remaining outstanding on the Note. Upon full conversion of this Note, the any shares remaining in the Share Reserve shall be cancelled.
13. The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.
14. This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This
Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be
effective as an original.
| /s/ Anthony L. Anish |
|
| Initials |
|
IN WITNESS WHEREOF, the Company has caused
this Note to be duly executed by an officer thereunto duly authorized.
Dated: May 30, 2014
| |
M LINE HOLDINGS, INC |
| |
|
| |
By: |
/s/ Anthony L. Anish |
| |
|
|
| |
Anthony L. Anish, Chief Operating Officer |
| /s/ Anthony L. Anish |
|
| Initials |
|
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Note)
The undersigned hereby
irrevocably elects to convert $________ of the above Note into ________ Shares of Common Stock of M Line Holdings, Inc. (“Shares”)
according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of
a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
| Applicable Conversion Price: |
|
| Signature: |
|
| |
[Print Name of Holder and Title of Signer] |
| Shares are to be registered in the following name: |
|
Shares are to be sent or delivered to the following account:
| /s/ Anthony L. Anish |
|
| Initials |
|
THIS NOTE HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. LENDERS SHOULD BE AWARE THAT THEY MAY
BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
ADAR BAYS, LLC
COLLATERALIZED SECURED PROMISSORY NOTE
BACK END NOTE
| $50,000.00 |
Miami, FL |
| |
June 10, 2014 |
FOR VALUE
RECEIVED, Adar Bays, LLC, a Florida Limited Liability Company (the “Company”) hereby absolutely and unconditionally
promises to pay to M Line Holdings, Inc (the “Lender”), or order, the principal amount of Fifty Thousand Dollars ($50,0000)
no later than February 10, 2015, unless the Lender does not meet the “current information requirements” required under
Rule 144 of the Securities Act of 1933, as amended, in which case the Company may declare the offsetting note issued by the Lender
on the same date herewith to be in Default (as defined in that note) and cross cancel its payment obligations under this Note as
well as the Lenders payment obligations under the offsetting note. This Full Recourse Note shall bear simple interest at the rate
of 8%.
| 2. | Repayments and Prepayments; Security. |
a. All
principal under this Note shall be due and payable no later than February 10, 2015, unless the Lender does not meet the “current
information requirements” required under Rule 144 of the Securities Act of 1933, as amended, in which case the Company may
declare the offsetting note issued by the Lender on the same date herewith to be in Default (as defined in that note) and cross
cancel its payment obligations under this Note as well as the Lenders payment obligations under the offsetting note.
b. The
Company may pay this Note at any time. This note may not be assigned by the Lender, except by operation of law.
c. This
Note shall initially be secured by the pledge of the $50,000.00 8% convertible promissory note issued to the Company by the Lender
on even date herewith (the “Lender Note”). The Company may exchange this collateral for other collateral with an
appraised value of at least $50,000.00, by providing 3 days prior written notice to the Lender. If the Lender does not object
to the substitution of collateral in that 3 day period, such substitution of collateral shall be deemed to have been accepted
by the Lender. All collateral shall be retained by New Venture Attorneys, P.C., which shall act as the escrow agent for the collateral
for the benefit of the Lender. The Company may not effect any conversions under the Lender Note until it has made full cash payment
for the portion of the Lender Note being converted.
_______
Lender Initials to Acceptance of bolded section above.
| 3. | Events of Default; Acceleration. |
a. The
principal amount of this Note is subject to prepayment in whole or in part upon the occurrence and during the continuance of any
of the following events (each, an “Event of Default”): the initiation of any bankruptcy, insolvency, moratorium, receivership
or reorganization by or against the Company, or a general assignment of assets by the Company for the benefit of creditors. Upon
the occurrence of any Event of Default, the entire unpaid principal balance of this Note and all of the unpaid interest accrued
thereon shall be immediately due and payable. The Company may offset amounts due to the Lender under this Note by similar amounts
that may be due to the Company by the Lender resulting from breaches under the Lender Note.
b. No
remedy herein conferred upon the Lender is intended to be exclusive of any other remedy and each and every remedy shall be cumulative
and in addition to every other remedy hereunder, now or hereafter existing at law or in equity or otherwise. The Company accepts
and agrees that this Note is a full recourse note and that the Holder may exercise any and all remedies available to it under law.
a. All
notices, reports and other communications required or permitted hereunder shall be in writing and may be delivered in person, by
telecopy with written confirmation, overnight delivery service or U.S. mail, in which event it may be mailed by first-class, certified
or registered, postage prepaid, addressed (i) if to a Lender, at such Lender’s address as the Lender shall have furnished
the Company in writing and (ii) if to the Company at such address as the Company shall have furnished the Lender(s) in writing.
b. Each
such notice, report or other communication shall for all purposes under this Note be treated as effective or having been given
when delivered if delivered personally or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited
in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or, if sent
by electronic communication with confirmation, upon the delivery of electronic communication.
a. Neither
this Note nor any provisions hereof may be changed, waived, discharged or terminated orally, but only by a signed statement in
writing.
b. No
failure or delay by the Lender to exercise any right hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other right, power or privilege. The provisions of this Note are severable
and if any one provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, such invalidity
or unenforceability shall affect only such provision in such jurisdiction. This Note expresses the entire understanding of the
parties with respect to the transactions contemplated hereby. The Company and every endorser and guarantor of this Note regardless
of the time, order or place of signing hereby waives presentment, demand, protest and notice of every kind, and assents to any
extension or postponement of the time for payment or any other indulgence, to any substitution, exchange or release of collateral,
and to the addition or release of any other party or person primarily or secondarily liable.
c. If
Lender retains an attorney for collection of this Note, or if any suit or proceeding is brought for the recovery of all, or any
part of, or for protection of the indebtedness respected by this Note, then the Company agrees to pay all costs and expenses of
the suit or proceeding, or any appeal thereof, incurred by the Lender, including without limitation, reasonable attorneys’
fees.
d. This
Note shall for all purposes be governed by, and construed in accordance with the laws of the State of New York (without reference
to conflict of laws).
e. This
Note shall be binding upon the Company’s successors and assigns, and shall inure to the benefit of the Lender’s successors
and assigns.
IN WITNESS WHEREOF, the Company has caused
this Note to be executed by its duly authorized officer to take effect as of the date first hereinabove written.
| |
ADAR BAYS, LLC |
| |
|
| |
By: |
|
| |
|
|
| |
Title: |
|
| |
|
| |
APPROVED: |
| |
|
| |
M LINE HOLDINGS, INC. |
| |
|
| |
By: |
/s/ Anthony L. Anish |
| |
|
| |
Title: |
COO |
DISBURSEMENT AUTHORIZATION
(MEMORANDUM)
TO: ADAR BAYS, LLC.
FROM: M LINE HOLDINGS, INC
DATE: June 10, 2014
RE: Disbursement of Funds
In connection with
the funding of an aggregate of $50,000 pursuant to that certain Convertible Redeemable Note dated as of May 30, 2014 (the “Agreement”),
you are hereby directed to disburse such funds as follows:
| 1. | $2,500.00 to New Venture Attorneys, P.C. in accordance with the wire transfer instructions attached as Schedule A hereto; |
| 2. | $4,750 to Anubis Capital Partners, LLC, in accordance with the wire transfer instructions attached as Schedule B hereto; and |
| 3. | $42,750 to M Line Holdings, Inc. in accordance with the wire transfer instructions attached as Schedule C hereto; |
*with identical payments to be made on cash
funding of $50,000 back end note
| |
/s/ Anthony L.
Anish |
| |
Anthony L. Anish, Chief Operating officer |
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT A
NEW VENTURE ATTORNEYS
WIRING INFORMATION
Please wire funds to:
Bank of America
Routing No: 026009593
Acct No.: 164109387780
| Beneficiary: | New Venture Attorneys, PC, IOLTA account |
| Attorney info: | New
Venture Attorneys, P.C. |
900 E. Hamilton Ave, Suite 100
Campbell, CA 95008
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT B
ANUBIS CAPITAL PARTNERS WIRING INFO
Capital One, N.A.
8989 Preston Road
Frisco, TX 75034
Routing No: 111901014
Acct No.: 3622044799
Beneficiary: Anubis Capital Partners
2550 Midway Road Suite 198
Carrolton, TX 75006
| /s/ Anthony L. Anish |
|
| Company Initials |
|
EXHIBIT C
[WIRING INFO FOR ISSUER]
| Beneficiary: |
M Line Holdings, Inc. |
| |
2672 Dow Avenue |
| |
Tustin, CA 92780 |
| |
|
| Bank Account Number: 23414-69572 |
| |
| Bank Routing: 121000358 |
| |
| Bank: |
Bank of America |
| |
14222 Culver Drive |
| |
Irvine, CA 92620 |
| /s/ Anthony L. Anish |
|
| Company Initials |
|
UNANIMOUS CONSENT IN LIEU OF A SPECIAL
MEETING OF DIRECTORS OF
M LINE HOLDINGS, INC.
The undersigned, being all of the directors
of M Line Holdings, Inc, a corporation of the State of Nevada (the “Corporation”), do hereby authorize and approve
the actions set forth in the following resolutions without the formality of convening a meeting, and do hereby consent to the following
actions of this Corporation, which actions are hereby deemed affective as of the date hereof:
RESOLVED: That the officers of this
Corporation are authorized and directed to issue a $50,000 promissory note to Adar Bays, LLC, which provides conversion
features equal to 55% of the lowest closing bid price of the Corporation’s Common Stock for the last 10 trading days prior
to conversion, as well as 8% per annum interest and become due and payable on June 10, 2015; and
RESOLVED FURTHER: That the officers
of this corporation are authorized and directed to execute transfer agent instructions with the Company’s transfer
agent to irrevocably reserve 77,922,000 shares of the Company’s Common Stock with the transfer agent for the benefit of Adar
Bays, LLC for conversion of the above aforementioned notes and
RESOLVED FURTHER: That officers
of this Corporation are authorized and directed to issue an additional promissory note in the amount of $50,000.00 to Adar
Bays, LLC which provides conversion features equal to 55% of the lowest closing bid price of the Corporation’s Common Stock
for the last 10 trading days prior to conversion, as well as 8% per annum interest and become due and payable on June 10, 2015;
and
RESOLVED FURTHER: That the aforementioned
notes shall be paid for by Adar Bays, LLC by the payment to the Corporation of $50,000 and by the issuance of a $50,000
promissory note of Adar Bays, LLC secured by assets with a fair market value of not less than $50,000.00; and
RESOLVED FURTHER, that each of the
officers of the Corporation be, and they hereby are, authorized and empowered to execute and deliver such documents, instruments
and papers and to take any and all other action as they or any of them may deem necessary or appropriate of the purpose of carrying
out the intent of the foregoing resolutions and the transactions contemplated thereby; and that the authority of such officers
to execute and deliver any such documents, instruments and papers and to take any such other action shall be conclusively evidenced
by their execution and delivery thereof or their taking thereof.
The undersigned, by affixing their signatures
hereto, do hereby consent to, authorize and approve the foregoing actions in their capacity as a majority of the direction of M
Line Holdings, Inc.
| Dated: June 10, 2014 |
|
| |
|
| /s/ Bruce Barren |
|
| Bruce Barren |
|
| |
|
| /s/ George Colin |
|
| George Colin |
|
| |
|
| /s/ Jitu Banker |
|
| Jitu Banker |
|
| |
|
| /s/ Anthony
Anish |
|
| Anthony Anish |
|
| |
2672 Dow Avenue, Tustin, CA 92780
tel: 714.630.6253 • fax: 714.619.2339
email: tony@mlineholdings.com
web site: www.mlineholdings.com |
June 10, 2014
VStock Transfer, LLC
71 Spruce Street
Suite 201
Cedarhurst, NY 11516
Re: Irrevocable Transfer Agent Instructions
Ladies and Gentlemen:
On June 10,
2014, M Line Holdings, Inc., a Nevada corporation (the “Company”) executed an 8% Convertible Promissory Notes in the
amount of $50,000.00 (collectively, the “Note”) with Adar Bays, LLC (the “Investor”).
Effective upon in
increase in the authorized capital sufficient to allow such a conversion of which you are properly notified together with confirmation
of the reserve, you are hereby irrevocably authorized and instructed to reserve Seventy Seven Million Nine Hundred Twenty Two
(77,922,000) shares of common stock (“Common Stock”) of the Company for issuance upon for conversion of the Note in
accordance with the terms thereof. The amount of Common Stock so reserved may be increased, from time to time, by written instructions
of the Company and the Investor. Once the reserve shares have been issued Vstock Transfer, LLC shall have no further duty or obligation
to issue shares until the reserve has been increased by the Company and the Investor. You are hereby further irrevocably authorized
and directed to issue the shares of Common Stock so reserved upon your receipt from the Investor of a notice of conversion (“Notice
of Conversion”) executed by the Investor in accordance with the terms of the Notice of Conversion. You shall have no duty
or obligation to confirm the accuracy or the information set forth on the Notice of Conversion. Once the Company repays the principal,
plus interest, plus default interest (if any) of any of the Note at the maturity date, upon written (e-mail being acceptable) confirmation
by the Investor or Investor Counsel as well as the Company, Transfer Agent shall have no further obligation to maintain a reserve
on behalf of the Investor or to issue any share of Common Stock to the Investor under the terms of that Note.
The Company must be
participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program
in order for the shares to be delivered electronically. The shares to be issued are to be registered in the names of the registered
holder of the securities submitted for conversion or exercise.
The shares will be
issued within three (3) business day upon receipt of the Notice of Conversion. If the Company’s account is at least 30 days
past due, the Investor is responsible for the prepaid Transfer Agent transfer and shipping fees. In no event shall the Transfer
Agent be required to issue and deliver share certificates without the prior payment of its fees for the certificates to be issued.
The Company and the
Investor intend that these instructions require the placement of a restrictive legend on all applicable share certificates unless
the requirements listed below are met and the Investor provides the Transfer agent with an acceptable legal opinion stating that
share certificates can be issued without a legend. So long as you have previously received a legal opinion from the Company (or
Investor counsel) that the shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144 without
any restriction and the number of shares to be issued are less than 4.99% of the total issued and outstanding common stock of the
Company, such shares should be transferred, at the option of the holder of the Notes as specified in the Notice of Conversion,
either (i) electronically by crediting the account of a Prime Broker with the Depository Trust Company through its Deposit Withdrawal
Agent Commission system if the Company is a participant or (ii) in certificated form without any legend which would restrict the
transfer of the shares, and you should remove all stop-transfer instructions relating to such shares. Until such time as you are
advised by Investor counsel that the shares have been registered under the 1933 Act or otherwise may be sold pursuant to Rule 144
without any restriction and the number of shares to be issued are less than 4.99% of the total issued and outstanding common stock
of the Company, you are hereby instructed to place the following legends on the certificates:
THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF INVESTOR
COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT REGISTRATION IS NOT REQUIRED
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.
The legend set forth
above shall be removed and you are instructed to issue a certificate without such legend to the holder of any shares upon which
it is stamped, if: (a) such shares are registered for sale under an effective registration statement filed under the 1933 Act or
otherwise may be sold pursuant to Rule 144 without any restriction and the number of shares to be issued is less than 4.99% of
the total issued common stock of the Company, (b) such holder provides the Company and the transfer agent with an opinion of counsel,
in form, substance and scope customary for opinions of counsel in comparable transactions (and satisfactory to the transfer agent),
to the effect that a public sale or transfer of such security may be made without registration under the 1933 Act and such sale
or transfer is effected and (c) such holder provides the Company and the transfer agent with reasonable assurances that such shares
can be sold pursuant to Rule 144. Nothing herein shall be construed to require the Transfer Agent to take any action which would
violate state or federal rules, regulations or law, If an instruction herein would require such a violation, such instructions,
but not any other term herein, shall be void and unenforceable.
The
Company shall indemnify and defend you and your officers, directors, principals, partners, agents and representatives, and
hold each of them harmless from and against any and all loss, liability, damage, claim or expense (including the reasonable
fees and disbursements of its and Transfer Agent’s attorney) incurred by or asserted against you or any of them arising
out of or in connection with the instructions set forth herein, the performance of your duties hereunder and otherwise in
respect hereof, including the costs and expenses of defending yourself or themselves against any claim or liability
hereunder, except that the Company shall not be liable hereunder as to matters in respect of which it is determined that you
have acted with gross negligence or in bad faith (which gross negligence, bad faith or willful misconduct must be determined
by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). You shall have no
liability to the Company or the Investor in respect to any action taken or any failure to act in respect of this if such
action was taken or omitted to be taken in good faith, and you shall be entitled to rely in this regard on the advice of
counsel.
The Company agrees
that in the event that the Transfer Agent resigns as the Company’s transfer agent, the Company shall engage a suitable replacement
transfer agent that will agree to serve as transfer agent for the Company and be bound by the terms and conditions of these Irrevocable
Instructions within five (5) business days. The Company and the Investor agree that any action which names the Transfer Agent as
a party shall be brought in a court of general jurisdiction in New York, New York and no other court.
The Investor is intended
to be a party to these instructions and are third party beneficiaries hereof, and no amendment or modification to the instructions
set forth herein may be made without the consent of the Investor.
| Very truly yours, |
|
| |
|
| M LINE HOLDINGS, INC. |
|
| |
|
| By: |
/s/ Anthony L. Anish |
|
| |
|
|
| Title: |
COO |
|
| |
|
| Acknowledged and Agreed: |
|
| |
|
| VSTOCK TRANSFER, LLC |
|
| |
|
| By: |
|
|
| |
|
|
| Title: |
|
|
Exhibit 10.26
|
2672 Dow Avenue, Tustin, CA
92780
Tel: 714.630.6253 ·
fax: 714.619.2339
email:
tony@mlineholdings.com
Web
site: www.mlineholdings.com |
February 12, 2013
VStock Transfer, LLC
77 Spruce Street, Suite 201
Cedarhurst, NY 11516
Ladies and Gentlemen:
M Line Holdings, Inc., a Nevada corporation
(the “Company”) and JMJ Financial (the “Investor”) entered into a $335,000 Promissory Note (the “Note”)
dated February 12, 2014. A copy of the Note is attached hereto. You should familiarize
yourself with your issuance and delivery obligations, as Transfer Agent, contained therein. The shares to be issued are to be
registered in the names of the registered holder of the securities submitted for conversion.
You are hereby irrevocably authorized and
instructed to reserve a sufficient number of shares of common stock (“Common Stock”) of the Company (at least 60,000,000
(sixty million) shares of Common stock for the Note which should be held in reserve for the Investor as of this date) for issuance
upon full conversion of the Note in accordance with the terms thereof. The amount of Common Stock so reserved may be increased,
from time to time, by written instructions of the Company and the Investor. In the event of a reverse stock split the reserve should
remain unchanged unless instructed by the Investor and the Company.
The ability to process a notice
of conversion under the Note (a “Conversion Notice”) in a timely manner is a material obligation of the Company pursuant
to the Note. Your firm is hereby irrevocably authorized and instructed to issue shares of Common Stock of the Company (without
any restrictive legend) to the Investor without any further action or confirmation by the Company (from the reserve,
but in the event there are insufficient reserve shares of Common Stock to accommodate a Conversion Notice (defined below)
your firm and the Company agree that the Conversion Notice should be completed using authorized but unissued shares of Common
Stock that the Company has in its treasury): (A) upon your receipt from the Investor of: (i) a Conversion Notice executed by the
Investor; and (ii) an opinion of counsel of the Investor, in form, substance and scope customary for opinions of counsel in comparable
transactions (and satisfactory to the transfer agent), to the effect that the shares of Common Stock of the Company issued to
the Investor pursuant to the Conversion Notice are not “restricted securities” as defined in Rule 144 and should be
issued to the Investor without any restrictive legend, provided that the Company is current on its SEC filings; and (B) the number
of shares to be issued is less than 4.99% of the total issued common stock of the Company.
The Company hereby requests that your firm act immediately,
without delay and without the need for any action or confirmation by the Company with respect to the issuance of Common Stock pursuant
to any Conversion Notices received from the Investor.
The
Company shall indemnify you and your officers, directors, principals, partners, agents and representatives, and hold each of them
harmless from and against any and all loss, liability, damage, claim or expense (including the reasonable fees and disbursements
of its attorneys) incurred by or asserted against you or any of them arising out of or in connection the instructions set forth
herein, the performance of your duties hereunder and otherwise in respect hereof, including the costs and expenses of defending
yourself or themselves against any claim or liability hereunder, except that the Company shall not be liable hereunder as to matters
in respect of which it is determined that you have acted with gross negligence or in bad faith (which gross negligence or bad faith
must be determined by a final, non-appealable order, judgment, decree or ruling of a court of competent jurisdiction). You shall
have no liability to the Company in respect to any action taken or any failure to act in respect of this if such action
was taken or omitted to be taken in good faith, and you shall be entitled to rely in this regard on the advice of counsel.
The Board
of Directors of the Company has approved the foregoing (irrevocable instructions) and does hereby extend the Company’s irrevocable
agreement to indemnify your firm for all loss, liability or expense in carrying out the authority and direction herein contained
on the terms herein set forth.
If the Company’s account
is in arrears with the Transfer Agent, the Transfer Agent shall not have any obligation to act upon these instructions; however
the Investor shall have the option to cure the outstanding balance with the Transfer Agent.
The Company agrees that in the event
that the Transfer Agent resigns as the Company’s transfer agent, or if the Company decides to switch or terminate the current
Transfer Agent, the Company shall engage a suitable replacement transfer agent that will agree to serve as transfer agent for the
Company and be bound by the terms and conditions of these Irrevocable Instructions within five (5) business days.
The Investor is intended to be and
is third party beneficiary hereof, and no amendment or modification to the instructions set forth herein may be made without the
consent of the Investor.
| |
Very truly yours, |
| |
|
| |
M Line Holdings, Inc. |
| |
|
|
| |
By: |
/s/ Bruce Barren |
| |
|
Bruce Barren |
| |
|
Chief Executive Officer |
| Acknowledged and Agreed: |
|
|
|
| |
|
| JMJ Financial / Its Principal |
|
| MLHC |
|
|
Interest free if paid in full |
| |
$335,000 PROMISSORY NOTE |
within 3 months |
FOR VALUE
RECEIVED, M Line Holdings, Inc., a Nevada corporation (the “Borrower”) with at least 75,016,275 common shares issued
and outstanding, promises to pay to JMJ Financial, a Nevada sole proprietorship, or its Assignees (the “Lender”) the
Principal Sum along with the Interest Rate and any other fees according to the terms herein. This Note will become effective only
upon execution by both parties and delivery of the first payment of Consideration by the Lender (the “Effective Date”).
The Principal Sum
is $335,000 (three hundred thirty five thousand) plus accrued and unpaid interest and any other fees. The Consideration is $300,000
(three hundred thousand) payable by wire (there exists a $35,000 original issue discount (the “OID”)). The Lender shall
pay $27,500 of Consideration upon closing of this Note. The Lender may pay additional Consideration to the Borrower in such amounts
and at such dates as Lender may choose in its sole discretion. THE PRINCIPAL SUM DUE TO LENDER SHALL BE PRORATED BASED ON THE
CONSIDERATION ACTUALLY PAID BY LENDER (PLUS AN APPROXIMATE 10% ORIGINAL ISSUE DISCOUNT THAT IS PRORATED BASED ON THE CONSIDERATION
ACTUALLY PAID BY THE LENDER AS WELL AS ANY OTHER INTEREST OR FEES) SUCH THAT THE BORROWER IS ONLY REQUIRED TO REPAY THE AMOUNT
FUNDED AND THE BORROWER IS NOT REQUIRED TO REPAY ANY UNFUNDED PORTION OF THIS NOTE. The Maturity Date is two years from the
Effective Date of each payment (the “Maturity Date”) and is the date upon which the Principal Sum of this Note, as
well as any unpaid interest and other fees, shall be due and payable. The Conversion Price is the lesser of $0.0235 or 60% of the
lowest trade price in the 25 trading days previous to the conversion (In the case that conversion shares are not deliverable by
DWAC an additional 10% discount will apply; and if the shares are ineligible for deposit into the DTC system and only eligible
for Xclearing deposit an additional 5% discount shall apply; in the case of both an additional cumulative 15% discount shall apply).
Unless otherwise agreed in writing by both parties, at no time will the Lender convert any amount of the Note into common stock
that would result in the Lender owning more than 4.99% of the common stock outstanding.
1. ZERO
Percent Interest for the First Three Months. The Borrower may repay this Note at any time on or before 90 days from
the Effective Date, after which the Borrower may not make further payments on this Note prior to the Maturity Date without written
approval from Lender. If the Borrower repays a payment of Consideration on or before 90 days from the Effective Date of that
payment, the Interest Rate on that payment of Consideration shall be ZERO PERCENT (0%). If Borrower does not repay a payment
of Consideration on or before 90 days from its Effective Date, a one-time Interest charge of 12% shall be applied to the Principal
Sum. Any interest payable is in addition to the OID, and that OID (or prorated OID, if applicable) remains payable regardless of
time and manner of payment by Borrower.
2. Conversion.
The Lender has the right, at any time after the Effective Date, at its election, to convert all or part of the outstanding and
unpaid Principal Sum and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock
of the Borrower as per this conversion formula: Number of shares receivable upon conversion equals the dollar conversion amount
divided by the Conversion Price. Conversions may be delivered to Borrower by method of Lender’s choice (including but not
limited to email, facsimile, mail, overnight courier, or personal delivery), and all conversions shall be cashless and not require
further payment from the Lender. If no objection is delivered from Borrower to Lender regarding any variable or calculation of
the conversion notice within 24 hours of delivery of the conversion notice, the Borrower shall have been thereafter deemed to have
irrevocably confirmed and irrevocably ratified such notice of conversion and waived any objection thereto. The Borrower shall deliver
the shares from any conversion to Lender (in any name directed by Lender) within 3 (three) business days of conversion notice delivery.
3. Conversion
Delays. If Borrower fails to deliver shares in accordance with the timeframe stated in Section 2, Lender, at any time prior
to selling all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the
unsold shares and have the rescinded conversion amount returned to the Principal Sum with the rescinded conversion shares returned
to the Borrower (under Lender’s and Borrower’s expectations that any returned conversion amounts will tack back to
the original date of the Note). In addition, for each conversion, in the event that shares are not delivered by the fourth business
day (inclusive of the day of conversion), a penalty of $2,000 per day will be assessed for each day after the third business day
(inclusive of the day of the conversion) until share delivery is made; and such penalty will be added to the Principal Sum of the
Note (under Lender’s and Borrower’s expectations that any penalty amounts will tack back to the original date of the
Note).
4. Reservation
of Shares. At all times during which this Note is convertible, the Borrower will reserve from its authorized and unissued Common
Stock to provide for the issuance of Common Stock upon the full conversion of this Note. The Borrower will at all times reserve
at least 60,000,000 shares of Common Stock for conversion.
5. Piggyback
Registration Rights. The Borrower shall include on the next registration statement the Borrower files with SEC (or on the subsequent
registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to
do so will result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than $25,000, being
immediately due and payable to the Lender at its election in the form of cash payment or addition to the balance of this Note.
6. Terms
of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of
any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security
that was not similarly provided to the Lender in this Note, then the Borrower shall notify the Lender of such additional or more
favorable term and such term, at Lender’s option, shall become a part of the transaction documents with the Lender. The types
of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to,
terms addressing conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price,
private placement price per share, and warrant coverage.
7. Default.
The following are events of default under this Note: (i) the Borrower shall fail to pay any principal under the Note when due and
payable (or payable by conversion) thereunder; or (ii) the Borrower shall fail to pay any interest or any other amount under the
Note when due and payable (or payable by conversion) thereunder; or (iii) a receiver, trustee or other similar official shall be
appointed over the Borrower or a material part of its assets and such appointment shall remain uncontested for twenty (20) days
or shall not be dismissed or discharged within sixty (60) days; or (iv) the Borrower shall become insolvent or generally fails
to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any; or
(v) the Borrower shall make a general assignment for the benefit of creditors; or (vi) the Borrower shall file a petition for relief
under any bankruptcy, insolvency or similar law (domestic or foreign); or (vii) an involuntary proceeding shall be commenced or
filed against the Borrower; or (viii) the Borrower shall lose its status as “DTC Eligible” or the borrower’s
shareholders shall lose the ability to deposit (either electronically or by physical certificates, or otherwise) shares into the
DTC System; or (ix) the Borrower shall become delinquent in its filing requirements as a fully-reporting issuer registered with
the SEC; or (x) the Borrower shall fail to meet all requirements to satisfy the availability of Rule 144 to the Lender or its assigns
including but not limited to timely fulfillment of its filing requirements as a fully-reporting issuer registered with the SEC,
requirements for XBRL filings, and requirements for disclosure of financial statements on its website.
8. Remedies.
In the event of any default, the outstanding principal amount of this Note, plus accrued but unpaid interest, liquidated damages,
fees and other amounts owing in respect thereof through the date of acceleration, shall become, at the Lender’s election,
immediately due and payable in cash at the Mandatory Default Amount. The Mandatory Default Amount means the greater of (i) the
outstanding principal amount of this Note, plus all accrued and unpaid interest, liquidated damages, fees and other amounts hereon,
divided by the Conversion Price on the date the Mandatory Default Amount is either demanded or paid in full, whichever has a lower
Conversion Price, multiplied by the VWAP on the date the Mandatory Default Amount is either demanded or paid in full, whichever
has a higher VWAP, or (ii) 150% of the outstanding principal amount of this Note, plus 100% of accrued and unpaid interest, liquidated
damages, fees and other amounts hereon. Commencing five (5) days after the occurrence of any event of default that results in the
eventual acceleration of this Note, the interest rate on this Note shall accrue at an interest rate equal to the lesser of 18%
per annum or the maximum rate permitted under applicable law. In connection with such acceleration described herein, the Lender
need not provide, and the Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and the Lender
may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Lender at any time prior to payment
hereunder and the Lender shall have all rights as a holder of the note until such time, if any, as the Lender receives full payment
pursuant to this Section 8. No such rescission or annulment shall affect any subsequent event of default or impair any right consequent
thereon. Nothing herein shall limit Lender’s right to pursue any other remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief with respect to the Borrower’s failure to timely
deliver certificates representing shares of Common Stock upon conversion of the Note as required pursuant to the terms hereof.
9. No
Shorting. Lender agrees that so long as this Note from Borrower to Lender remains outstanding, Lender will not enter into or
effect “short sales” of the Common Stock or hedging transaction which establishes a net short position with respect
to the Common Stock of Borrower. Borrower acknowledges and agrees that upon delivery of a conversion notice by Lender, Lender immediately
owns the shares of Common Stock described in the conversion notice and any sale of those shares issuable under such conversion
notice would not be considered short sales.
10. Assignability.
The Borrower may not assign this Note. This Note will be binding upon the Borrower and its successors and will inure to the benefit
of Lender and its successors and assigns and may be assigned by Lender to anyone without Borrower’s approval.
11. Governing
Law. This Note will be governed by, and construed and enforced in accordance with, the laws of the State of Nevada, without
regard to the conflict of laws principles thereof. Any action brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts of Florida or in the federal courts located in Miami-Dade
County, in the State of Florida. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction of
such courts.
12.
Delivery of Process by Lender to Borrower. In the event of any
action or proceeding by Lender against Borrower, and only by Lender against Borrower, service of copies of summons and/or
complaint and/or any other process which may be served in any such action or proceeding may be made by Lender via U.S. Mail,
overnight delivery service such as FedEx or UPS, email, fax, or process server, or by mailing or otherwise delivering a copy
of such process to the Borrower at its last known attorney as set forth in its most recent SEC filing.
13. Attorney
Fees. In the event any attorney is employed by either party to this Note with regard to any legal or equitable action, arbitration
or other proceeding brought by such party for the enforcement of this Note or because of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Note, the prevailing party in such proceeding will be entitled
to recover from the other party reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other
relief to which the prevailing party may be entitled.
14. Opinion
of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender has the right to
have any such opinion provided by its counsel. Lender also has the right to have any such opinion provided by Borrower’s
counsel.
15. Notices.
Any notice required or permitted hereunder (including Conversion Notices) must be in writing and either personally served, sent
by facsimile or email transmission, or sent by overnight courier. Notices will be deemed effectively delivered at the time of transmission
if by facsimile or email, and if by overnight courier the business day after such notice is deposited with the courier service
for delivery.
| Borrower: |
|
Lender: |
| |
|
|
| /s/ Bruce Barren |
|
|
| Bruce Barren |
|
JMJ Financial |
| M Line Holdings, Inc. |
|
Its Principal |
| Chief Executive Officer |
|
|
[Signature Page to $335,000 Promissory
Note]
Broker-Dealer Wire Instruction Letter
To: JMJ Financial
M Line Holdings, Inc. requests that
JMJ Financial initially deduct a $2,500 fee and a 10% fee from all future Consideration the Lender advances to the Borrower under
the $335,000 Promissory Note dated February 12, 2014, between M Line Holdings, Inc. and JMJ Financial and that JMJ Financial concurrently
wires the fee directly to Equinox Securities (which operates as a licensed broker/dealer).
The 10% fee is funds belonging to M Line
Holdings, Inc. and deemed full and valid Consideration for payment of the Note. M Line Holdings, Inc. is simply requesting that
it’s funds be transferred to Equinox Securities on its behalf.
| |
|
|
|
|
| /s/ Bruce Barren |
|
Date: |
|
|
| Bruce Barren |
|
|
|
|
| M Line Holdings, Inc. |
|
|
|
|
| Chief Executive Officer |
|
|
|
|
| |
|
|
|
|
| |
|
Date: |
|
|
| Robert Gray |
|
|
|
|
| Equinox Securities |
|
|
|
|
EXHIBIT 31.1
Rule 13a-14(a)/15d-14(a)
Certification of Chief Executive Officer
I, George Colin, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of M Line Holdings, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant‘s
internal control over financial reporting. |
| Dated: June 23, 2015 |
|
|
| |
|
/s/ Bruce Barren |
| |
By: |
Bruce Barren |
| |
|
Chief Executive Officer |
EXHIBIT 31.2
Rule 13a-14(a)/15d-14(a)
Certification of Chief Financial Officer
I, Jitu Banker, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of M Line Holdings, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures
to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting
that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant‘s internal control over financial reporting. |
| Dated: June 23, 2015. |
|
|
| |
|
/s/ Jitu Banker |
| |
By: |
Jitu Banker |
| |
|
Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 USC, SECTION
1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the
Annual Report of M Line Holdings, Inc. (the “Company”) on Form 10-K for the year ended June 30, 2014, as filed with
the Securities and Exchange Commission on or about the date hereof (the “Report”), I, George Colin, Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The
Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) Information
contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: June 23, 2015 |
/s/ Bruce Barren |
| |
By: Bruce Barern |
| |
Its: Chief Executive Officer |
A signed original of this written statement
required by Section 906 has been provided to M Line Holdings, Inc. and will be retained by M Line Holdings, Inc. and furnished
to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 USC, SECTION
1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY
ACT OF 2002
In connection with the
Annual Report of M Line Holdings, Inc. (the “Company”) on Form 10-K for the year ended June 30, 2014, as filed with
the Securities and Exchange Commission on or about the date hereof (the “Report”), I, Jitu Banker, Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The
Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) Information
contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: June 23, 2015 |
/s/ Jitu Banker |
| |
By: Jitu Banker |
| |
Its: Chief Financial Officer |
A signed original of this written statement
required by Section 906 has been provided to M Line Holdings, Inc. and will be retained by M Line Holdings, Inc. and furnished
to the Securities and Exchange Commission or its staff upon request.
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