M Line Holdings Inc (MLHC)

[River00]

Hi Guys and Ladies,

Just a few thoughts to share. I'm long MLHC, so you can take any bullish comments with a grain of salt.

In the Amended Supplemental Info and Disclosure filing for March 31, 2019 (the most recent filing that we have), Mr. Anish and Mr. Banker disclosed that MLHC held a 58.6% ownership in Square Chain Corp. (SQCC). In the corresponding March 31, 2019 disclosure from SQCC , there were 190,323,159 outstanding common shares and 30,000 outstanding preferred shares. So, as of March 31st, this year, MLHC may have held approximately 111,546,951 shares of SQCC (which corresponds to 58.6% of the outstanding shares). SQCC's Supplemental Information Disclosure for March 31, 2019 (published in August), notes that there has been a change in control of SQCC. None of the subsequent SQCC Supplemental Information disclosures (i.e. for Jun 30, 2019 and for Sep 30, 2019), indicate a change in control. So, although we don't have any material disclosures from MLHC for events past March 31, 2019, it's not unreasonable to consider that MLHC still owns the 111,546,951 shares of SQCC.

The recent SQCC Supplemental Information disclosure for Sep 30, 2019, indicates that a further 200 million shares were issued to MLHC on Sep 30, 2019, possibly for the aquisition of Best Choice Food and Beverage, Inc from MLHC on June 12, 2019 (which was noted in the Subsequent Events section of SQCC's March 31 Annual Report.)

This puts MLHC's share count for SQCC at about 311,546,951 or about 61.5 % of the 560,316,159 common and preferred outstanding shares of SQCC reported for Sep 30, 2019. SQCC's shares closed Friday at $0.0089, giving SQCC a market cap of about $4.5 million. (SQCC is a very low float stock, so its share price can fluctuate easily and this valuation should be taken with a grain of salt). This would value MLHC's shares in SQCC at about $2.77 million. Given, MLHC's Mar 31, 2019 reported outstanding common and preferred shares of 8,134,224,426, this corresponds to a value of $0.00034 per share of MLHC (or about 340% higher than the last traded share price of $0.0001). It's definitely in MLHC's best interest that Square Chain does really well.

Why would MLHC sell assets to its sudsidiary, SQCC? I guess only Mr. Anish and Mr. Banker really know. But here are a few more things to consider. As of Mar. 31, 2019, Mr. Anish and Mr. Banker owned 218,432,728 shares and 112,325,250 shares of MLHC, respectively. As of Sep 30, 2019, they both owned 12,500,000 shares of SQCC. So, their ownership stake of MLHC is 2.69% and 1.38%, respectively, while their ownership stake of SQCC is 2.47% and 2.47%, respectively. Not so different.

If you take a look at what Mr. Anish and Mr. Banker accomplished with MLHC between the Dec 31, 2018 and Mar 31, 2019 reports, they absolutely killed it. They increased MLHC's assets by $7,041,541, while liabilities only increased by $1,708,029. That means that in 3 months, they increased shareholder equity by $5,333,512. Think about that. In a company showing book shareholder equity of about -$9.6 million (on Dec 31, 2018), they reduced that deficit by more than half in 3 months. Where did that increase in shareholder equity come from? In that 3 month period from Jan 1, 2019 - Mar 31, 2019, MLHC reported a net income of $2,218,515! (The balance of the increase in equity came from selling common stock, which saw an increase in value of $3,706,068 over the 3 months). If you look at where that net income came from, there was a $6.3 million gain on sale of investments. Meanwhile, SQCC's statement of cash flows for the year ending March 31, 2019, showed that it spent $8,871,028 on acquisition of tangible and intangible property. In other words, it's not unreasonable to suggest that by selling some assets from MLHC to SQCC, Mr. Anish and Mr. Banker were able to use the much stronger balance sheets of SQCC to crystallize some of the gains accruing in acqusitions made by MLHC, thereby improving the balance sheet of MLHC. In other words, the sale of assets was, I think, a good thing for MLHC. I would also suggest that, based on the performance of MLHC during these 3 months ending Mar 31, 2019, one of the fastest ways for MLHC to increase shareholder equity is by buying and flipping businesses and properties, not by accumulating revenue from them. Doing so makes use of Mr. Anish's and Mr. Banker's ability to find ways to fund these acquisitions.

At the end of the recent Sep 30, 2019 semi-annual report for SQCC, Mr. Anish and Mr. Banker indicate that much of the equity in the Caravel was sold to finance the operations of Caravel. From this, it's likely that Caravel needed funding in order to grow, even back in January - March of this year. Moving the owvership stake in Caravel from MLHC to SQCC may have also been a way to try to obtain growth funds for Caravel on better terms, because of SQCC's healthier balance sheet.

A few final comments.

MLHC has recently been trading at a low price, which even fell below $0.0001 in recent weeks. Perhaps this is a true reflection of MLHC's value (though, as mentioned, the stake in SQCC alone is currently worth $0.00034 per share at Friday's closing price). In the Amended Supplemental Information disclosure for MLHC, ending March 31, 2019, the terms of the last convertible note issued were "50% of the lowest closing price in the last 10 trading days prior to conversion". Presumably, additional convertible notes have been issued by MLHC since Mar 31, 2019, with similar terms. If that is the case, then there is a group of such note holders, who are incentivized to dump small amounts of MLHC shares for as little as possible, in order to achieve a very low closing price to convert their notes at.

I haven't mentioned the value of the restaurant properties. In the subsequent events section of the SQCC Mar 31, 2019 annual report, it states that 100% of the share capital of M Line Property Holdings, Inc was sold back to MLHC on June 12, 2019. The June 30, 2019 quarterly report for SQCC indicates that $4,063,446 cash flowed to SQCC for the disposal of property and equipment. It also indicates a loss of $2,809,304 due to 'aquisition of intangible assets', which could be due to a loss of goodwill in the sale of the restaurant properties. So, these properties might be valued anywhere from $1,254,142 to $4,063,446 as of June 30, 2019. A recent Google review for the Castle Rock bar and grill indicates that it might have recently closed and possibly re-opened under new ownership. Not too clear what is going on with the restaurants.

Of course, if MLHC does submit its late reports (for June 30, 2019 at least), lots of things could change. But, at least based on what happened between Jan 1 and Mar 31, 2019, things were looking up for MLHC.

Lastly, for folks reaching out to Mr. Anish directly, if don't mind me saying so, you're playing with fire and should be glad that he doesn't respond, or that his responses only seem to contain restatements of publicly available information. Otherwise, you could be getting into trading based on insider information.

I don't expect to post again; but I hope that you find the above helpful! Happy holidays everyone and I hope you all make a lot of money in your trading!