10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2011 

o TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transitional period from ______ to ______

Commission File No. 333-151807

PSM HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	90-0332127
(State or other jurisdiction of incorporation of organization)	(I.R.S. Employer Identification Number)
1112 N. Main Street, Roswell, New Mexico	88201
(Address of principal executive office)	(Zip code)

 (Registrant’s telephone number, including area code):  (575) 624-4170

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 twelve 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding twelve months (or for such shorter period that the registrant was required to submit and post such files). Yes [X]   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company [X]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o  No [X]

As of February 14, 2012, there were 26,872,683  shares of registrant’s common stock outstanding.

RDGPreambleEnd

EXPLANATORY NOTE

The sole purpose of this Amendment to the Registrant’s Quarterly Report on Form 10-Q for the period ended December 31, 2011 (the “10-Q”), is to furnish the Interactive Data File exhibits pursuant to Rule 405 of Regulation S-T. No other changes have been made to the 10-Q, and this Amendment has not been updated to reflect events occurring subsequent to the filing of the 10-Q.

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Item 6.  Exhibits

31.1	Rule 15d-14(a) Certification by Principal Executive Officer and Principal Financial Officer*
32.1	Section 1350 Certification of Principal Executive Officer and Principal Financial Officer*
101.  INS	XBRL Instance Document**
101.  SCH	XBRL Taxonomy Extension Schema Document**
101.  CAL	XBRL Taxonomy Extension Calculation Linkbase Document**
101.  DEF	XBRL Taxonomy Extension Definition Linkbase Document**
101.  LAB	XBRL Taxonomy Extension Label Linkbase Document**
101.  PRE	XBRL Taxonomy Extension Presentation Linkbase Document**

* Filed previously in PSM HOLDINGS, INC. Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2011, filed with the Securities and Exchange Commission on February 14, 2012.

** Filed with this Form 10-Q/A for PSM HOLDINGS, INC.

3

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PSM HOLDINGS, INC.
Date: February 15, 2012	By:	/s/ Ron Hanna
		Ron Hanna, President Chief Executive and Principal Financial Officer

4

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Note 4 - Statements Of Cash Flows Additional Disclosures

6 Months Ended

Dec. 31, 2011

Note 4 - Statements Of Cash Flows Additional Disclosures Disclosure

Note 4 - Statements Of Cash Flows Additional Disclosures

NOTE 4  STATEMENTS OF CASH FLOWS ADDITIONAL DISCLOSURES

Supplemental disclosures for cash flows at December 31, 2011 and 2010 consist of:

	December 31, 2011 (Unaudited)			December 31, 2010 (Unaudited)
Supplemental Cash Flow Disclosures:
Cash paid for interest	$	2,292		$	3,102
Cash paid for income taxes	$	-		$	-
Supplemental Disclosures for Non-Cash Investing and Financing Activities were as follows:
Acquisition of Brookside, Founders, Fidelity & IMP:
Accounts receivable, net	$	(49,617	)	$	-
Other assets		(25,702	)		-
Property and equipment, net		(224,680	)		-
Employee advances		(22,174	)		-
Intangible assets		(2,409,900	)		-
Security deposit		(7,818	)		-
Accounts payable		23,417			-
Accrued liabilities		10,046			-
Common stock		4,122			-
Additional paid in capital		2,872,306			-
Stock issued to employees as bonus	$	809,045		$	-
Stock issued to consultant for services	$	369,340		$	-

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Note 3 - Property And Equipment

6 Months Ended

Dec. 31, 2011

Note 3 - Property And Equipment Disclosure

Note 3 - Property And Equipment

NOTE 3  PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

	December 31, 2011 (Unaudited)			June 30, 2011
Fixtures and equipment	$	1,252,020		$	241,894
Accumulated depreciation		(1,025,242	)		(216,573	)
Property and equipment, net	$	226,778		$	25,321

Depreciation expense for the three month and six month periods ended December 31, 2011 and 2010 was $14,362 and $25,365, and $2,317 and $4,960, respectively.

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Consolidated Balance Sheets (USD $)	Dec. 31, 2011	Jun. 30, 2011
ASSETS
Cash & cash equivalents	$ 359,816	$ 21,470
Accounts receivable, net	469,367	40,768
Loans held for sale	11,034,269
Prepaid expenses	39,300	192,000
Other assets	9,581	4,202
Total current assets	11,912,333	258,440
Property and equipment, net	226,778	25,321
Loan receivable	88,898	88,898
Employee advances	146,713	152,155
Notes receivable	360,000	360,000
Intangible assets, net of accumulated amortization, December 31, 2011 - $387,853 and June 30, 2011 - $316,855	3,932,849	1,595,576
Security deposits	16,193	8,375
Total Assets	16,683,764	2,488,765
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable	263,334	134,797
Accrued stock payable		778,000
Warehouse lines of credit payable	11,034,269
Accrued liabilities	373,433	39,028
Total current liabilities	11,671,036	951,825
Long-term Liabilities:
Due to related party		120,000
Total long-term liabilities		120,000
Total Liabilities	11,671,036	1,071,825
Stockholders' Equity:
Common stock, $0.001 par value, 100,000,000 shares authorized, 26,340,583 and 18,614,159 shares issued and outstanding at December 31, 2011 and June 30, 2011	26,340	18,614
Treasury stock, at cost: shares held 21,600 at December 31, 2011 and June 30, 2011	(22,747)	(22,747)
Additional paid in capital	16,542,034	11,281,710
Accumulated deficit	(11,532,899)	(9,860,637)
Total stockholders' equity	5,012,728	1,416,940
Total Liabilities and Stockholders' Equity	$ 16,683,764	$ 2,488,765

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Note 1 - Nature Of Business And Summary Of Significant Accounting Policies

6 Months Ended

Dec. 31, 2011

Note 1 - Nature Of Business And Summary Of Significant Accounting Policies Disclosure

Note 1 - Nature Of Business And Summary Of Significant Accounting Policies

NOTE 1  NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Background

As used herein and except as otherwise noted, the term “Company” and “PSMH” shall mean PSM Holdings, Inc., a Delaware corporation.

The Company was incorporated under the laws of the State of Utah on March 12, 1987, as Durban Enterprises, Inc. On July 19, 2001, Durban Enterprises, Inc., created a wholly-owned subsidiary called Durban Holdings, Inc., a Nevada corporation, to facilitate changing the domicile of the Company to Nevada.  On August 17, 2001, Durban Enterprises, Inc. merged with and into Durban Holdings, Inc., leaving the Nevada Corporation as the survivor.  The Company retained the originally authorized 100,000,000 shares at $0.001 par value.

On May 18, 2005, Durban Holdings, Inc. completed the acquisition of all of the outstanding stock of PrimeSource Mortgage, Inc., a Texas corporation, by a stock for stock exchange in which the stockholders of PrimeSource Mortgage, Inc. received 10,250,000 shares, or approximately 92% of the outstanding stock of the Company.  Following the acquisition, effective May 18, 2005, the name of the parent “Durban Holdings, Inc.”, was changed to “PSM Holdings, Inc.” For reporting purposes, the acquisition was treated as an acquisition of the Company by PrimeSource Mortgage, Inc. (reverse acquisition) and a recapitalization of PrimeSource Mortgage, Inc. The historical financial statements prior to May 18, 2005, are those of PrimeSource Mortgage, Inc. Goodwill was not recognized from the transaction.

On December 14, 2011, PSM Holdings, Inc., created a wholly-owned subsidiary called PSM Holdings, Inc., a Delaware corporation, to facilitate changing the domicile of the Company to Delaware. On December 29, 2011, PSM Holdings, Inc. merged with and into PSM Holdings, Inc., leaving the Delaware Corporation as the survivor.  The Company retained the originally authorized 100,000,000 shares at $0.001 par value.

Business Activity

PrimeSource Mortgage, Inc., a wholly-owned subsidiary of PSM Holdings, Inc. was incorporated February 15, 1991 under the laws of the State of Texas. PrimeSource Mortgage, Inc. became a wholly-owned subsidiary of PSM Holdings, Inc., a Nevada corporation, on May 18, 2005.  On March 15, 2011, PrimeSource Mortgage Inc. completed the acquisition of United Community Mortgage Corp. (“UCMC”), a New Jersey corporation, and UCMC became a wholly-owned subsidiary of PrimeSource Mortgage, Inc.

PSM Holdings, Inc., through its wholly owned subsidiaries, is engaged in the businesses of mortgage banking, in which PSMH both originates and funds mortgage loans through its own warehouse lines of credit, as well as mortgage brokerage, in which PSMH originates mortgage loans funded by third-party lenders.

On June 9, 2011, UCMC entered into an Agreement and Plan of Merger with Brookside Mortgage, LLC, an Oklahoma limited liability company (“Brookside”). The merger transaction closed effective July 1, 2011, and at the closing, Brookside merged into UCMC. On July 6, 2011, the Company issued 800,000 shares of its common stock valued at $720,000 as consideration for acquisition of Brookside. Post closing one of the principal owners was elected to the Company’s Board of Directors.

On June 30, 2011, UCMC entered into an Agreement and Plan of Merger with Founders Mortgage, LLC, a Missouri limited liability company (“Founders”). The merger transaction closed effective July 1, 2011 and at the closing, Founders merged into UCMC.  On July 6, 2011, the Company issued 250,000 shares of its common stock valued at $225,000 as consideration for acquisition of Founders.

On August 8, 2011, UCMC entered into an Agreement and Plan of Merger with Fidelity Mortgage Company, a Colorado corporation (“Fidelity”). The merger transaction closed effective August 1, 2011 and at the closing, Fidelity merged into UCMC. On August 18, 2011, the Company issued 1,785,714 shares of its common stock valued at $1,250,000 as consideration for acquisition of Fidelity. In January 2012, the principal owner of Fidelity was elected to the Company’s Board of Directors.

On October 13, 2011, UCMC entered into an Agreement and Plan of Merger with Iowa Mortgage Professionals, Inc., an Iowa corporation (“IMP”). The merger transaction closed effective November 1, 2011 and at the closing IMP merged into UCMC. On November 1, 2011, the Company issued 1,285,714 shares of its common stock valued at $681,428 as consideration for the acquisition of IMP. In January 2012, the principal owner of IMP was elected to the Company’s Board of Directors.

The Company primarily operates and is licensed in the following 13 states: Arkansas, Colorado, Florida, Iowa, Montana, Missouri, Nebraska, New Jersey, New Mexico, New York, Oklahoma, Texas and Utah.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for the presentation of interim financial information, but do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.  It is recommended that these consolidated financial statements be read in conjunction with the audited financial statements for the year ended June 30, 2011 which were filed with the Securities and Exchange Commission on October 13, 2011 in the Form 10-K for the year ended June 30, 2011. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended December 31, 2011 are not necessarily indicative of the results that may be expected for the year ending June 30, 2012.

Summary of Significant Accounting Policies

The following summary of significant accounting policies of the Company is presented to assist in the understanding of the Company’s consolidated financial statements. The consolidated financial statements and notes are the representation of PSM Holdings, Inc.’s management who is responsible for their integrity and objectivity.  The consolidated financial statements of the Company conform to accounting principles generally accepted in the United States of America (GAAP). The Financial Accounting Standards Board (FASB) is the accepted standard-setting body for establishing accounting and financial reporting principles.

Principles of Consolidation

The consolidated financial statements include the accounts of PSM Holdings, Inc., its wholly-owned subsidiary PrimeSource Mortgage, Inc., and PrimeSource Mortgage Inc.’s wholly-owned subsidiary UCMC. All material intercompany transactions have been eliminated in the consolidation.

Use of Estimates

Management uses estimates and assumptions in preparing its consolidated financial statements.  Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Accordingly, actual results could differ from those estimates. Significant estimates include the value of other non-current assets, estimated depreciable lives of property, plant and equipment, estimated valuation of intangible assets and related amortization, estimated valuation of deferred tax assets due to net operating loss carry-forwards and estimates of uncollectible amounts of loans and notes receivable.

Cash and Cash Equivalents

For the purposes of the statement of cash flows, cash and cash equivalents includes cash on hand and cash in checking and savings accounts, and all investment instruments with an original maturity of three months or less.

Accounts Receivable

Accounts receivable represent commissions earned on closed loans and fees charged to new branch offices that the Company has not yet received payment. Accounts receivable are stated at the amount management expects to collect from balances outstanding at period-end. The Company estimates the allowance for doubtful accounts based on an analysis of specific accounts and an assessment of the customer of branch owner’s ability to pay.

Employee Advances, Loans and Notes Receivable

Employee advances, loans and notes receivable are stated at the unpaid principal balance. Interest income is recognized in the period in which it is earned.

Loans Held For Sale

The Company originates all of its residential real estate loans with the intent to sell them in the secondary market. Loans held for sale consist primarily of residential first and second mortgage loans that are secured by residential real estate throughout the United States.

Loans held for sale are recorded at fair value, with the exception of any loans that have been repurchased from investors on which we did not elect the fair value option. As of December 31, 2011 and June 30, 2011, no such loans were impaired and carried on the balance sheet at the lower of cost or market value assessed on an individual loan basis.

The fair value of loans held for sale is determined using current secondary market prices for loans with similar coupons, maturities and credit quality. Loans held for sale are pledged as collateral under the Company’s warehouse lines of credit. The Company relies substantially on the secondary mortgage market as all of the loans originated are sold into this market.

Interest on mortgage loans held for sale is recognized as earned and is only accrued if deemed collectible. Interest is generally deemed uncollectible when a loan becomes three months or more delinquent or when a loan has a defect affecting its salability. Delinquency is calculated based on the contractual due date of the loan. Loans are written off when deemed uncollectible.

Investments in Marketable Securities

Investments consist of equity securities categorized as available-for-sale which includes securities that are not classified in either the held-to-maturity category or the trading category.  The securities are recognized at fair value, with unrealized holding gains and losses included as other comprehensive income, net of any deferred income taxes and reported as a net amount in a separate component of stockholders’ equity until realized.  Interest and dividends earned on investment securities are recognized in the period in which they are received.  Interest and dividends are reported in the non-operating income section of the Consolidated Statements of Operations and Comprehensive Income (Loss).

Property and Equipment

Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows. Expenditures for maintenance and repairs are charged to expense as incurred.

Furniture, fixtures and office equipment	5-7 years
Computer equipment	5 years

Goodwill and Indefinite-Lived Intangible Assets

Goodwill acquired in business combinations is assigned to the reporting entity that is expected to benefit from the combination as of the acquisition date. Goodwill impairment is determined using a two-step process. The first step of the process is to compare the fair value of a reporting unit with its carrying amount, including goodwill. In performing the first step, the Company determines the fair value of its reporting entity by using a discounted cash flow ("DCF") analysis. Determining fair value using a DCF analysis requires the exercise of significant judgments, including judgments about appropriate discount rates, perpetual growth rates and the amount and timing of expected future cash flows. If the fair value of a reporting entity exceeds its carrying amount, goodwill of the reporting entity is not impaired and the second step of the impairment test is not required. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is required to be performed to measure the amount of impairment, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting entity’s goodwill with the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying amount of the reporting entity’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The impairment test for indefinite-lived intangible assets involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Long-Lived Assets and Intangible Assets with Definite Lives

Long-lived assets, including property and equipment and intangible assets with definite lives, are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying amount is deemed to not be recoverable, an impairment loss is recorded as the amount by which the carrying amount of the long-lived asset exceeds its fair value. Amortization of definite lived intangible assets is recorded on a straight-line basis over their estimated lives.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the bases of certain assets and liabilities for financial and tax reporting.  The deferred taxes represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled.  In addition, there is the deferred tax asset which represents the economic value of various tax carryovers.

Taxes Collected and Remitted to Governmental Authorities

When applicable, the Company collects gross receipts taxes from its customers and remits them to the required governmental authorities.  Related revenues are reported net of applicable taxes collected and remitted to governmental authorities.

Advertising

Advertising costs are expensed as incurred.  Advertising expense for the three month and six month periods ended December 31, 2011 and 2010 were $96,559 and $148,143, and $2,123 and $5,018, respectively.

Share Based Payment Plan

Under the 2002 Stock Option/Stock Issuance Plan, the Company can grant stock or options to employees, related parties, and unrelated contractors in connection with the performance of services provided to the Company by the awardees. The Company uses the fair value method to account for employee stock compensation costs and to account for share based payments to non-employees.

Revenue Recognition

The Company’s revenue is derived primarily from revenue earned from the origination and sale of mortgage loans. Loans are funded through warehouse lines of credit and are sold to investors, typically with 5 to 7 days. The gain or loss on the sale of loans is realized on the date the loans are sold.

The Company receives an override fee on the warehouse lines of credit on loans closed on the lines. The revenue is recognized as earned on the earlier of the settlement date or the funding date of the loan.

Reclassification

Certain accounts in the prior-period financial statements have been reclassified for comparative purposes to conform with the presentation in the current quarter financial statements.

Recent Accounting Pronouncements

The Company has evaluated the possible effects on its financial statements of the accounting pronouncements and accounting standards that have been issued or proposed by FASB that do not require adoption until a future date, and that are not expected to have a material impact on the consolidated financial statements upon adoption.

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Note 2 - Allowance For Doubtful Accounts

6 Months Ended

Dec. 31, 2011

Note 2 - Allowance For Doubtful Accounts Disclosure

Note 2 - Allowance For Doubtful Accounts

NOTE 2  ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable are presented on the balance sheet net of estimated uncollectible amounts. The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful.  The Company recorded an allowance for doubtful accounts of $0 as of December 31, 2011 and June 30, 2011, respectively.

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Consolidated Balance Sheets (Parentheticals) (USD $)	Dec. 31, 2011	Jun. 30, 2011
ASSETS
Accumulated amortization	$ 387,853	$ 316,855
Stockholders' Equity:
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	26,340,583	18,614,159
Common stock, shares outstanding	26,340,583	18,614,159
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Treasury stock, shares held	21,600	21,600

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Note 12 - Loss Per Common Share

6 Months Ended

Dec. 31, 2011

Note 12 - Loss Per Common Share Disclosure

Note 12 - Loss Per Common Share

NOTE 12  LOSS PER COMMON SHARE

Basic and diluted loss per common share is computed by dividing the loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share does not reflect per share amounts that would have resulted if diluted potential common stock has been converted to common stock because the effect would be anti-dilutive. The weighted average number of common shares outstanding during the three and six months ended December 31, 2011 and 2010 were 25,419,651 and 23,016,625, and 14,180,143 and 14,166,152, respectively. Loss per common share for the three and six months ended December 31, 2011 and 2010 was $0.02 and $0.07, and $0.00 and $0.00, respectively.

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Document And Entity Information	6 Months Ended
	Dec. 31, 2011	Feb. 14, 2012
Entity Information
Entity Registrant Name	PSM HOLDINGS INC
Entity Central Index Key	0001362180
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding		26,872,683
Document Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Dec. 31, 2011
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2

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Note 13 - Fair Value Measurements

6 Months Ended

Dec. 31, 2011

Note 13 - Fair Value Measurements Disclosure

Note 13 - Fair Value Measurements

NOTE 13  FAIR VALUE MEASUREMENTS

The Company uses a hierarchy that prioritizes the inputs used in measuring fair value such that the highest priority is given to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).  The three levels of the fair value hierarchy are described below:

Level 1	Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level 2	Inputs to the valuation methodology include: ?     Quoted prices for similar assets or liabilities in active markets; ?     Quoted prices for identical or similar assets or liabilities in inactive markets; ?     Inputs other than quoted prices that are observable for the asset or liability; ?     Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3	Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs.  See Note 1 for discussion of valuation methodologies used to measure fair value of investments.

The valuation methodologies described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values.  Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The fair value of the assets and liabilities was determined using Level 2 inputs.  The carrying amounts and fair values of the Company’s financial instruments at December 31, 2011 and June 30, 2011are as follows:

	December 31, 2011 (Unaudited)				June 30, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	359,816	$	359,816	$	21,470	$	21,470
Accounts receivable		469,367		469,367		40,768		40,768
Loans held for sale		11,034,269		11,034,269		-		-
Prepaid expenses		39,300		39,300		192,000		192,000
Loan receivable		88,898		88,898		88,898		88,898
Notes receivable		360,000		360,000		360,000		360,000
Financial liabilities:
Accounts payable	$	263,335	$	263,335	$	134,797	$	134,797
Warehouse line of credit		11,034,269		11,034,269		-		-
Accrued stock payable		-		-		778,000		778,000
Accrued liabilities		373,433		373,433		39,028		39,028
Due to a related party		-		-		120,000		120,000

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Consolidated Statements Of Operations And Comprehensive Loss (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2011	Dec. 31, 2010
Revenues	$ 3,427,053	$ 1,243,410	$ 5,609,288	$ 2,414,314
Operating expenses
Brokerage commission	1,851,157	973,764	2,611,258	1,919,808
Selling, general & administrative	2,180,416	228,659	4,642,016	492,922
Depreciation and amortization	3,722	17,049	97,992	34,425
Total operating expenses	4,035,295	1,219,472	7,351,266	2,447,155
Loss from operations	(608,242)	23,938	(1,741,978)	(32,841)
Non-operating income (expense):
Interest expense	(606)	(2,775)	(2,317)	(4,540)
Interest and dividend	2,956	(2,599)	5,785	1,324
Realized gain on sale of securities				5,057
Other Income	65,127	11,743	66,248	13,175
Total non-operating income (expense)	67,477	6,369	69,716	15,016
Loss from continuing operations before income tax	(540,765)	30,307	(1,672,262)	(17,825)
Net loss	(540,765)	30,307	(1,672,262)	(17,825)
Other comprehensive income (loss):
Unrealized loss on marketable securities				(2,666)
Comprehensive loss	$ (540,765)	$ 30,307	$ (1,672,262)	$ (20,491)
Net loss per common share and equivalents - basic and diluted loss from operations	$ (0.02)	$ 0.00	$ (0.07)	$ 0.00
Weighted average shares of share capital outstanding - basic & diluted	25,419,651	14,180,143	23,016,625	14,166,152

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Note 7 - Acquisitions Of Entites

6 Months Ended

Dec. 31, 2011

Note 7 - Acquisitions Of Entites Disclosure

Note 7 - Acquisitions Of Entites

NOTE 7  ACQUISITIONS OF ENTITES

Brookside Mortgage, LLC

On June 9, 2011, the Company entered into an Agreement and Plan of Merger with Brookside Mortgage, LLC, an Oklahoma limited liability company. At the closing, Brookside Mortgage merged into United Community Mortgage Corp., a wholly-owned subsidiary of PrimeSource Mortgage, Inc., which is our wholly-owned subsidiary. The merger transaction closed effective July 1, 2011. The shareholders of Brookside received a total of 800,000 shares of our common stock valued at $720,000 in exchange for all the outstanding stock of Brookside. The common stock issued was valued at the fair value of the stock on the date of closing. The common shares issued to the shareholders of Brookside has not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Estimated fair value of the assets acquired on July 1, 2011:

Cash and cash equivalents	$	30,000
Accounts receivable		8,689
Deposits		21,011
Employee advances		10,130
Other assets  - Escrow		225
Furniture & equipment, net		77,350
Security deposits		3,443
		150,848
Liabilities assumed		(25,975	)
Net assets acquired		124,873
Goodwill		297,564
Intangible asset – Customer List		297,563
Total consideration paid	$	720,000

Founders Mortgage, LLC

On June 30, 2011, the Company entered into an Agreement and Plan of Merger with Founders Mortgage, LLC, a Missouri limited liability company. At closing, Founders merged into United Community Mortgage Corp., a wholly-owned subsidiary of PrimeSource Mortgage, Inc., which is our wholly-owned subsidiary. The merger transaction closed effective July 1, 2011. The shareholder of Founders received 250,000 shares of our common stock valued at $225,000 in exchange for all of the outstanding stock of Founders. The common stock issued was valued at the fair value of the stock on the date of closing. The common shares issued to the shareholder of Founders has not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Cash and cash equivalents	$	90,000
Employee advances		12,044
Office Equipment		37,387
Security deposits		4,375
Other assets		1,083
		144,889
Liabilities assumed		-
Net assets acquired		144,889
Intangible asset – Customer List		80,111
Total consideration paid	$	225,000

Fidelity Mortgage Company

On August 8, 2011, the Company entered into an Agreement and Plan of Merger with Fidelity Mortgage Company, a Colorado Corporation. At the closing, Fidelity merged into United Community Mortgage Corp., a wholly-owned subsidiary of PrimeSource Mortgage, Inc., which is our wholly-owned subsidiary. The merger transaction closed effective August 1, 2011. On August 8, 2011, the closing was held for the Merger Agreement with Fidelity. The shareholders of Fidelity received 1,785,714 shares of our common stock valued at $1,250,000 in the merger transaction in exchange for all the outstanding stock of Fidelity. The common stock issued was valued at the fair value of the stock on the date of closing. The common shares issued to the principal shareholders of Fidelity have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Estimated fair value of the assets acquired on August 1, 2011:

Accounts receivable	$	40,929
Furniture and equipment, net		39,091
		80,020
Liabilities assumed		-
Net assets acquired		80,020
Goodwill		1,169,980
Total consideration paid	$	1,250,000

Iowa Mortgage Professionals, Inc.

On October 18, 2011, the Company entered into an Agreement and Plan of Merger with Iowa Mortgage Professionals, Inc., an Iowa Corporation.  At the closing, IMP merged into United Community Mortgage Corporation, a wholly-owned subsidiary of PrimeSource Mortgage, Inc., which is our wholly-owned subsidiary.  The merger transaction closed effective November 1, 2011. On November 1, 2011, the closing was held for the Merger Agreement with IMP.  The shareholder of IMP received 1,285,714 shares of our common stock valued at $681,428 in the merger transaction in exchange for all the outstanding stock of IMP.  The common stock issued was valued at the fair value of the stock on the date of closing.  The common shares issued to the principal shareholder of IMP have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Estimated fair value of the assets acquired on November 1, 2011:

Cash and cash equivalents	$	50,000
Other current assets		3,383
Furniture and equipment, net		70,852
		124,235
Liabilities assumed		(7,487	)
Net assets acquired		116,748
Goodwill		564,680
Total consideration paid	$	681,428

The purchase price allocation for the assets acquired and liabilities assumed for Brookside, Founders, Fidelity, and IMP (“Acquirees”) recorded in the accompanying financial statements at December 31, 2011, are based on their estimated fair values at the date of their acquisition. Immediately after the closing of mergers, the Company obtained effective control over the Acquirees. Accordingly, the operating results of the Acquirees have been consolidated with those of the Company beginning the closing dates of the mergers of Acquirees through December 31, 2011.

The fair value of the shares issued by the Company in connection with the acquisition of the Acquirees exceeded the fair market value of the net assets acquired. Thus identifiable intangible assets customer lists and goodwill were generated, and these amounts are recorded as a non-current asset on the Balance Sheet at December 31, 2011.

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Note 6 - Note Receivable And Employee Advances

6 Months Ended

Dec. 31, 2011

Note 6 - Note Receivable And Employee Advances Disclosure

Note 6 - Note Receivable And Employee Advances

NOTE 6  NOTE RECEIVABLE AND EMPLOYEE ADVANCES

On December 1, 2010, the Company’s subsidiary UCMC executed a Promissory Note with an unrelated third party for a principal sum of $360,000. Interest shall accrue on the outstanding principal balance at a variable interest rate per annum equal to the sum of the LIBOR Rate plus 0.55%. Interest shall be paid quarterly in arrears commencing March 1, 2011 and continuing on the last business day of each fiscal quarter thereafter except that the entire unpaid interest shall be due and payable in full on or before the maturity date. The principal and unpaid interest shall be due and payable in full on December 1, 2016. The Promissory Note is secured by real estate parcels. The Company recorded an interest income of $819 and $1,522 for the three and six months ended December 31, 2011. Interest receivable on this note amounted to $2,341and $1,617 as of December 31, 2011 and June 30, 2011. The Promissory Note balance recorded as of December 31, 2011 and June 30, 2011, was $360,000.

On December 31, 2010, PrimeSource Mortgage, Inc., a subsidiary of the Company, executed a Letter of Repayment with three employees in the amount of $189,654 for funds advanced to them as a loan. These loans are unsecured, non-interest bearing and due on demand. Payments of these loans are made from the portion of commissions earned by these employees. If the employees’ employment is terminated for any reason, the loan outstanding will become due and payable in full or specific arrangements will be made. The Company recorded an allowance for uncollectible advances of $33,862 as of December 31, 2011 and June 30, 2011. During the three and six months ended December 31, 2011, the Company received $4,845 and $5,442 in payments generated by earnings for the services provided by the employees offset against their advances. Employee advances recorded as of December 31, 2011 and June 30, 2011 was $146,713 and $152,155, respectively.

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Note 14 - Industry Risks

6 Months Ended

Dec. 31, 2011

Note 14 - Industry Risks Disclosure

Note 14 - Industry Risks

NOTE 14  INDUSTRY RISKS

The mortgage industry has gone through a significant consolidation over the past four years. The foreclosures in 2010 and 2011 have caused a credit tightening, making qualifying for loans more difficult for borrowers. The Company has not experienced credit losses because the Company either has sold the loan prior to or shortly after closing or simply does not fund the loans they originate. The U.S. housing market as a whole has undergone a significant contraction with lenders and investors tightening their credit standards, making the mortgage origination volumes flat in 2010 and 2011. The lower rates in 2010 and 2011 have brought the market back to some degree. Because of the Company's long standing practices of dealing primarily with buyers who qualify for loans in the standard market, having their loans sold in advance, and forming relationships with quality lenders, management believes the impact of the current industry crisis on the Company will be minimal, although it cannot be determined with any certainty.

The Company has acquired five operating entities since the beginning of calendar 2011 based upon their past profitability performance.  The Company cannot predict with certainty that these entities will perform at the same or better profitable level in future based upon the consolidation in the mortgage and housing industry.

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Note 10 - Stockholders' Equity And Issuances

6 Months Ended

Dec. 31, 2011

Note 10 - Stockholders' Equity And Issuances Disclosure

Note 10 - Stockholders' Equity And Issuances

NOTE 10  STOCKHOLDERS’ EQUITY AND ISSUANCES

The Company’s capitalization at December 31, 2011 was 100,000,000 authorized common shares and 10,000,000 authorized preferred shares, both with a par value of $0.001 per share.

Following is the status of the share based payment plans during the six months ended December 31, 2011:

2002 Stock Option/Stock Issuance Plan

In December 2011, the Company increased the number of shares authorized under the Company’s 2002 Stock Option/Stock Issuance Plan to 3,250,000 shares of common stock for non-statutory and incentive stock options and stock grants under the plan which is subject to adjustment in the event of stock split, stock dividends, and other situations. This plan expires on December 31, 2011, although pursuant to the terms of the plan any options and unvested stock issuances outstanding at that time under the plan will continue to have full force and effect in accordance with the provisions of the documents evidencing such options or issuances. At December 31, 2011, there were no options and 337,806 unissued shares outstanding under this plan.

During the six months ended December 31, 2011, the Company issued under the 2002 Stock Option/Stock Issuance Plan, 1,654,000 shares of common stock valued at $1,178,385 to employees as a bonus and to consultants for services. These share issuances included 1,100,000 shares of common stock valued at $778,000 previously recorded as an expense for the year ended June 30, 2011. The shares were issued at their fair value on the date of issuance.  The Company uses the fair value method to account for employee stock compensation costs and to account for share based payments to non-employees.

Other Stock Issuances

On July 6, 2011, the Company issued 1,050,000 shares of restricted common stock valued at $945,000 for acquisition of Brookside and Founders Mortgage. The shares were issued to the shareholders of Brookside and Founders for acquiring their 100% ownership interest, and were valued at the closing share price on the date of closing of transaction.

On August 18, 2011, the Company issued 1,785,714 shares of restricted common stock valued at $1,250,000 for acquisition of Fidelity Mortgage Company. The shares were issued to the shareholders of Fidelity for acquiring their 100% ownership interest, and were valued at the closing share price on the date of closing of transaction.

On September 30, 2011, the Company issued 1,000,000 shares of its common stock to two accredited investors, one of which is a director of the Company, and received cash proceeds of $500,000 upon their exercise to purchase warrants at $0.50 per share.

On November 1, 2011, the Company issued 1,285,714 shares of restricted common stock valued at $681,428 for acquisition of Iowa Mortgage Professionals, Inc. The shares were issued to the shareholder of IMP for acquiring its 100% ownership interest, and were valued at the closing share price on the date of closing of transaction.

In July 2011, the Company commenced a private placement offering to raise up to $975,000 through the sale of up to 13 Units at $75,000 per Unit, with each Unit consisting of 100,000 shares of common stock and 100,000 warrants. The warrants issued in conjunction with the offering are exercisable at $1.00 per share and are exercisable starting on the closing date of the offering and expiring September 14, 2014. Through December 31, 2011, the Company sold 950,996 shares to accredited investors for cash proceeds of $713,247.

Total common shares issued and outstanding under all stock plans at December 31, 2011 were 26,340,583.

During the six months ended December 31, 2011, there were no stock options granted under the 2002 Stock Option/Stock Issuance Plan.

Warrant issuances

On March 28, 2011, the Company granted 500,000 warrants to a director and 500,000 warrants to an accredited investor/shareholder in conjunction with purchasing 1,000,000 units at $0.50 per unit, each unit comprising of one common share and one warrant. The warrants are exercisable at any time through September 30, 2011. On September 30, 2011, the accredited investor and the director exercised their warrants and the Company received cash proceeds of $500,000.

During the six months ended December 31, 2011, the Company issued to accredited investors 950,996 warrants to purchase 950,996 shares of common stock at an exercise price of $1.00.  The warrants are exercisable at any time through September 14, 2014. The fair value of warrants was $256,918 calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rates of 0.20% and 0.36%, volatility of 152.22% and 119.07%, 3 years term and dividend yield of 0%. Since the warrants were issued in conjunction with capital raising, no expense was recorded in the accompanying financial statements as of December 31, 2011.

On March 25, 2010, the Company granted 2,000,000 warrants to the Chairman of the Board of Directors and 2,000,000 warrants to the President of the Company for their past services, at the exercise price of $1.00 per share for a five-year term.

The Company has 4,950,996 warrants outstanding as of December 31, 2011 at an exercise price of $1.00.

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Note 8 - Intangible Assets

6 Months Ended

Dec. 31, 2011

Note 8 - Intangible Assets Disclosure

Note 8 - Intangible Assets

NOTE 8  INTANGIBLE ASSETS

Intangible assets consist of:

	December 31, 2011  (Unaudited)			June 30, 2011
Intangible assets not subject to amortization:
FHA "Full Eagle" Status Permit	$	938,790		$	938,790
Goodwill		2,032,224			-
State Licenses		31,294			31,293
		3,002,308			970,083
Less: Impairments		-			-
Balance	$	3,002,308		$	970,083
Intangible assets subject to amortization:
Customer list	$	495,023		$	117,349
NWBO License		824,999			824,999
		1,320,022			942,348
Less: accumulated amortization		(389,483	)		(316,855	)
Balance	$	930,541		$	625,493
Total Intangible Assets, net	$	3,932,847		$	1,595,576

It is the Company’s policy to assess the carrying value of its intangible assets for impairment on a quarterly basis, or more frequently, if warranted by circumstances. Management has determined that the intangible assets acquired as a result of acquisitions are not impaired because the Company accumulated a positive regulatory reputation for running a well-documented, process oriented mortgage lending operation with Full Eagle status in place. The Company acquired two profitable operations effective July 1, 2011, one effective August 1, 2011, and one effective November 1, 2011 because of its attaining Full Eagle status. Therefore, no impairment expense was recorded in the accompanying financial statements as of December 31, 2011.

The amount allocated for the purchase of Customer List as a result of its acquisitions of UCMC, Brookside, Founders, Fidelity, and IMP amounted to $495,023. The Company amortizes Customer Lists over a period of 3 to 8 years. Amortization expense recorded for the three and six months ended December 31, 2011 and 2010 was $35,151and $23,605, and $17,049 and $34,425, respectively. Management re-evaluated the amortization period of Customer List and increased the amortization period from 5 to 8 years based upon the Company’s historical experience with returning clients obtaining loans for funding new purchases and refinances. Amortization expense to be recognized for the year ending June 30, 2012 was $43,163, for 2013 and 2014 was $86,326, and for each of the years from 2015 to through 2019 was $47,209.

On April 14, 2006, the Company entered into a five-year renewable license agreement with Nationwide By Owner, Inc. (“NWBO”), a Texas based company engaged in the business of marketing real property for sale by owners. In the course of its business, NWBO generates a proprietary system which produces a database of sales leads containing home buyer and home seller information for persons seeking financing on the purchase or refinancing of real property. The license agreement permits exclusive use of the database to be used to generate leads for the origination of mortgage applications for submission to PrimeSource Mortgage, Inc. The initial cost of the license was $150,000 paid in cash, and issuance of 150,000 shares of PSM Holdings, Inc. stock in favor of NWBO and its principals, at a fair value for consideration received of $674,999 on the date of issue. The total consideration for the cost of license amounted to $824,999. The Company is amortizing the cost of the license over fourteen years, which is the initial five-year period of the agreement, plus three automatic three year renewal terms. Amortization expense recorded for each of the three and six months ended December 31, 2011 and 2010 was $14,732 and $29,465, and $14,732 and $29,465, respectively. Amortization expense to be recognized for each of the years ending June 30, 2012 through 2019 is $58,929 and for the year ending June 30, 2020 is $46,652.

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Note 9 - Warehouse Lines Of Credit

6 Months Ended

Dec. 31, 2011

Note 9 - Warehouse Lines Of Credit Disclosure

Note 9 - Warehouse Lines Of Credit

NOTE 9 WAREHOUSE LINES OF CREDIT

The Company has four warehouse lines of credit available for its funding of mortgage loans for a short term period.  (i) On August 3, 2008, the Company entered into a warehouse line of credit agreement with a mortgage banker for up to $1,000,000 bearing an annual interest rate of 5% and on November 1, 2011, the warehouse line of credit was increased to $5,000,000 for the purpose of funding residential mortgage loans, (ii) On June 11, 2009, the Company entered into a warehouse line of credit with a mortgage banker for up to $1,000,000 which was modified on June 19, 2009 to increase the credit line to up to $4,000,000. The annual interest rate on the new line is Wall Street Journal Prime Interest Rate plus ½ per cent, (iii) On September 30, 2010, the Company entered into a warehouse line of credit with a mortgage banker for up to $1,000,000 for a one year term, unconditionally guaranteed for payment by its Executive Vice-President. The warehouse line was renewed for a one year term expiring on September 30, 2012. The unpaid balance on the lines of credit bears an interest rate equal to prime interest rate plus 2% with a floor of 7%, and (iv) On September 30, 2011, the Company entered into a warehouse line of credit with a mortgage banker for up to $500,000 bearing interest equal to Prime Interest Rate plus 2% and in no event be less than 7% per annum.

The lines of credit provide short term funding for mortgage loans originated by the branch offices. The lines of credit are repaid within 5 to 7 days when the loan is sold to third party investors. The Company does not intend to hold and service the loans. The lines are used strictly to fund mortgage loans and not to provide operating funds for the Company. The Company had $11,034,269 in loans outstanding against the warehouse line of credit (i) listed above, and had obtained commitments from the third party investors to purchase the loans outstanding against this line of credit, thus offsetting the loans payable on this line against the loans receivable of the same amounts from the third party investors as of December 31, 2011. Although the outstanding amount on a warehouse credit line exceeded the authorized amount of the credit line as of December 31, 2011, the Company obtained a waiver from the mortgage banker, and all amounts were satisfied through the sale to third party investors as described above. The Company has recorded the amounts receivable against the loans and related liability against the lines of credit of the same amount in the accompanying financial statements as of December 31, 2011. The Company has not borrowed funds from the three credit lines (ii), (iii) and (iv) as of December 31, 2011.

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Note 11 - Commitments

6 Months Ended

Dec. 31, 2011

Note 11 - Commitments Disclosure

Note 11 - Commitments

NOTE 11  COMMITMENTS

Nationwide By Owners License

The agreement between NWBO and the Company calls for the establishment of a National Processing Center for the collection, origination and tracking of the sales lead database. As agreed to by NWBO and the Company, the National Processing Center has been delayed until a written approval has been obtained between NWBO and a national marketing company. There are several on-going conversations taking place at this time, but no agreement has been executed. NWBO continues to provide the platform that produces a database of sales leads containing home buyer and home seller information for persons seeking financing on the purchase or refinancing of real property for exclusive use by the Company. Upon completion of a National Processing Center, the Company has also committed to provide year-end bonuses under the license agreement which the parties can elect to take in cash, stock, or any combination of the two. Bonus cash will be calculated by multiplying the annual net profit of the National Processing Center by the following percentage rates: 15% for the initial five year term of the license agreement, 20% for the first automatic renewal term, 25% for the second automatic renewal term, and 30% for the third automatic renewal term and all subsequent annual renewal terms. Should the parties elect to take all or part of the bonus in common stock, the number of shares awarded will be calculated according to the base value of the shares as defined in the agreement. No accrual has been recorded for the year-end bonuses because the National Processing Center has not been established.

Pursuant to the agreement with NWBO, the Company has also committed to pursue obtaining, in good faith and diligently, the appropriate licenses to originate mortgages in all 50 states of the United States of America.

Historically the Company has not gathered data on the number of leads and loans closed, and commissions earned and paid, relating to the NWBO license since the branch offices are independently owned and operated and may choose not to use these lead generating opportunities. Because some of the branches have taken advantage of the NWBO opportunity, management has recently begun tracking some of the results from those offices. From the seven offices that have used the NWBO technology, management believes there are approximately 20% of the loans being derived from the NWBO signs. However, management also believes there are other benefits from the association for the branches in the form of marketing exposure and the control of a transaction. If a prospective buyer calls the telephone number on the NWBO sign while looking for a property, and if they are not already working with a realtor, the branch office has the opportunity not only to generate the loan business, but may also refer a lead prospect to a producing realtor in the market area.

The Company has developed a method to measure the value of the NWBO license. The method is a computation based on income from new and existing branches and an estimate of the value NWBO. The computation is prepared each quarter. The computed value of the license is compared to the book value of the license at the end of each quarter to determine if there is any impairment in the carrying value of the license. The book value is determined by the original cost of the license less accumulated amortization as of the end of the quarter. The value of the license recorded on the balance sheet is its book value. The book value of the license was less than the computed value at December 31, 2011 and June 30, 2011.

Lease commitments

The Company leases office space in an office building that is 100% owned by an LLC whose members are the Company’s Executive Vice President and his immediate family. The terms under the lease agreement is of month-to-month operating lease, and there are no future non-cancelable lease commitments due by the Company. Total rents paid during the three and six months ended December 31, 2011 and 2010 were $10,125 and $20,250, and $9,735 and $19,470, respectively.

The Company rents property and equipment under a rental agreement with cancellable term. Total rent recorded as expense under the agreement for the three and six months ended December 31, 2011 and 2010 were $16,226 and $27,481, and $1,246 and $2,798, respectively.

The Company leases office space for its branches under cancellable and non-cancellable lease commitments. The monthly rent for office premises is $109,959. The leases expire between February 2012 and December 2016. Total rent expense recorded for the three and six months ended December 31, 2011 and 2010 was $189,860 and $274,631, and $9,735 and $19,470, respectively.

Total minimum lease commitments for property and equipment leases and branch offices at December 31, 2011 are as follows:

For the year ended June 30,	Amount
2012	$	280,814
2013		256,549
2014		166,668
2015		168,662
2016		170,648
After 2016		85,002
Total	$	1,128,343

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Consolidated Statements Of Cash Flows (Unaudited) (USD $)	6 Months Ended
	Dec. 31, 2011	Dec. 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (1,672,262)	$ (17,825)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Bad debts	90,433	3,907
Depreciation and amortization	97,992	34,425
Share based payment awards	389,045
Stock issued to third parties for services	11,340	26,751
Stock issued to branchowners as commission		25,267
Loss on sale of marketable securities		(5,057)
(Increase) decrease in current assets:
Accounts receivable	(447,241)	84,448
Prepaid expenses	152,700	60,000
Other current assets	20,323	5,452
Increase (decrease) in current liabilities:
Accounts payable	105,119	(159,062)
Accrued liabilities	324,359	(22,523)
Net cash provided by (used in) operating activities	(928,192)	35,783
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of marketable securities		32,812
Purchase of property and equipment	(2,142)	(1,584)
Cash advanced to employees	5,442
Cash received as part of acquisitions	170,000
Net cash provided by investing activities	173,300	31,228
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from sale of stock	713,238
Cash proceeds from exercise of warrants	500,000
Cash payment on loan from related party	(120,000)	(20,000)
Net cash provided by (used in) financing activities	1,093,238	(20,000)
NET INCREASE IN CASH & CASH EQUIVALENTS	338,346	47,011
CASH & CASH EQUIVALENTS, BEGINNING BALANCE	21,470	75,763
CASH & CASH EQUIVALENTS, ENDING BALANCE	$ 359,816	$ 122,774

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Note 5 - Related Party Transactions

6 Months Ended

Dec. 31, 2011

Note 5 - Related Party Transactions Disclosure

Note 5 - Related Party Transactions

NOTE 5  RELATED PARTY TRANSACTIONS

President/Chief Executive Officer and Director

The Company entered into an Employment Agreement (the “Agreement”) with its President/Chief Executive Officer effective January 1, 2011. Pursuant to the terms of the Agreement, the Company agreed to issue 750,000 shares of common stock valued at $525,000 as a signing bonus to induce him to enter into the Agreement, pay an annual compensation of $225,000, a monthly car allowance of $750, and a monthly allowance of $800 for health benefits for the officer and his family. The Company recorded $56,250 and $112,500 in compensation expense, $2,250 and $4,500 in car allowance and $1,600 and $4,000 in health insurance benefit for the three and six months ended December 31, 2011, and $19,611 of the compensation remains payable at December 31, 2011. The Company did not incur any compensation expense for the three and six months ended December 31, 2010.

Executive Vice-President and Director

The Company entered into an Employment Agreement (the “EA”) with its Executive Vice-President effective January 1, 2011. Pursuant to the terms of the EA, the Company agreed to pay an annual compensation of $200,000, a monthly car allowance of $700, and a monthly allowance of $1,290 for health benefits for the officer and his family. The Company recorded $50,000 and $100,000 in compensation expense, $2,100 and $4,200 in car allowance and $459 and $3,036 in health insurance benefit for the three and six months ended December 31, 2011, and $16,667 of compensation remains payable at December 31, 2011. During the three and six months ended December 31, 2010, the Company recorded a compensation expense of $18,750 and $37,500, $1,500 and $3,000 in car allowance and $3,524 and $7,391 in health benefits.

The Company leases office space in a building that is 100% owned by an LLC whose members are the Company’s Executive Vice-President and his immediate family. The terms under the lease agreement is of month-to-month operating lease. Total rents paid for the office lease for the three and six months ended December 31, 2011 and 2010 were $10,125 and $20,250, and $9,735 and $19,470, respectively.

In 2008, the Company entered into an unsecured revolving line of credit arrangement with this officer to borrow funds for up to $120,000. The term of the credit arrangement is for five years at an adjustable interest rate of the Prime Rate minus 0.76%. The balance of the advance payable to this officer at December 31, 2011 was $0. The revolving credit line is still available to the Company to borrow funds up to $120,000. Interest paid to the officer for borrowings under the revolving line of credit arrangements amounted to $246 and $902, and $704 and $1,437, for the three and six months ended December 31, 2011 and 2010, respectively.

Other Directors

On March 15, 2011, the Company entered into an employment agreement with Edward Kenmure III, a director of the Company, in connection with our acquisition of United Community Mortgage Corp. The term of his employment agreement is for two years, with automatic one-year extensions unless notice is given by either party. The agreement provides for an annual base salary of $120,000 with increases based upon increases in originations at his branch and incentive payments upon securing additional branches for PSMI. The Company recorded a compensation expense of $30,000 and $60,000 for the three and six months ended December 31, 2011.

On July 1, 2011, the Company entered into an employment agreement with Greg Mahaney, a director of the Company, in connection with our acquisition of Brookside Mortgage. The term of his employment agreement is for two years, with automatic one-year extensions unless notice is given by either party. The agreement provides for an annual base salary of $120,000 plus bonus equal to 25% of the net profit earned by Brookside branch in excess of $400,000 annual profits earned. The Company recorded a compensation expense of $30,000 and $60,000 for the three and six months ended December 31, 2011.

Loan receivable from a related party as of December 31, 2011 and June 30, 2011 consists of:

	Original loan		Balance due December 31, 2011 (Unaudited)		Balance due June 30, 2011
Secured loans to NWBO Corporation (NWBO) bearing annual interest at 9.25% with no defined payment terms	$	167,000	$	88,898	$	88,898
Accrued interest due from NWBO				6,441		2,584
	$	167,000	$	95,339	$	91,482
Less allowance for uncollectible amounts		-		-		-
	$	167,000	$	95,339	$	91,482

The Company entered into two Commercial Security Agreements dated November 16, 2006 and February 16, 2007 with NWBO securing the loan amount of $167,000 with 150,000 shares of the Company’s own common stock held by NWBO. The Company recorded interest income of $2,126 and $4,252 and $2,149 and $4,297, from the loan receivable from NWBO for the three and six months ended December 31, 2011 and 2010, respectively.

The Company conducted business with the Farmington, New Mexico Branch office which is owned by a director of the Company. Commissions paid under the branch agreement for the three and six months ended December 31, 2011 and 2010 were $62,804 and $100,755, and $76,448 and $128,332, respectively. At December 31, 2011 and June 30, 2011, the Company owed $0 to the Farmington Branch in commissions. This director resigned from the Board on January 3, 2012 to concentrate in expanding his branch operations.

One of the Company’s directors is a principal of a management company that provides a revolving warehouse line of credit to the Company. Amounts outstanding on the credit line as of December 31, 2011 and June 30, 2011 amounted to $11,034,269 and $1,103,672 which were offset by an equal amount of funding receivable as of December 31, 2011 and June 30, 2011, respectively. (See Note 9).

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Note 15 - Subsequent Events

6 Months Ended

Dec. 31, 2011

Note 15 - Subsequent Events Disclosure

Note 15 - Subsequent Events

NOTE 15  SUBSEQUENT EVENTS

Subsequent events have been evaluated through February 14, 2012, the date these financial statements were issued.

In December 2011, the Board of Directors adopted the 2012 Stock Incentive Plan (the “2012 Plan”) to be effective commencing January 1, 2012, for a period of 10 years. Under the terms of the 2012 Plan awards may be made for up to 6,000,000 shares of common stock of the Company. All of the Company’s employees, officers and directors, as well as consultants and advisors to the Company are eligible to be granted awards under the 2012 Plan. Awards under the 2012 Plan include the granting of options, restricted stock, restricted stock units, and performance awards.  As of February 14, 2012, the Company issued 357,100 shares to employees as stock awards under the 2012 Plan.

On January 16, 2012, the Company issued 125,000 shares of its restricted common stock valued at $66,250 to a consultant for providing public relations and investor relation services for the Company.

On January 31, 2012, the Company entered into a business advisory and consulting agreement with a consultant, pursuant to the terms of which the Company agreed to sell each month 50,000 shares of its common stock at par value of $0.001 per share for consultant’s services. The Company agreed to issue 50,000 shares on the first day of each month starting February 1, 2012 until such time it has issued 600,000 shares of its common stock. On February 1, 2012, the Company issued 50,000 shares of its restricted common stock to the consultant for providing business advisory and consulting services to the Company.