Note 7 - Acquisition of Entities

12 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

NOTE 7 – ACQUISITION OF ENTITIES

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 (“Brookside”). At the closing, Brookside 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 stockholders of Brookside received a total of 800,000 shares of the Company’s Common Stock valued at $720,000, as adjusted, 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. Additionally, as per the transaction documents, the Company issued an additional 125,504 shares on May 16, 2012, valued at $87,853 to cover any tax liability incurred by the former stockholders of Brookside. The common shares issued to the stockholders of Brookside 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 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		385,417
Intangible asset – customer list		297,563
Total consideration paid	$	807,853

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 (“Founders”). 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 stockholder of Founders received 250,000 shares of the Company’s 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 stockholder of Founders 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 July 1, 2011:

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 (“Fidelity”). 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 stockholders of Fidelity received 1,785,714 shares of the Company’s 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 stockholders 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		349,739
		390,668
Liabilities assumed		-
Net assets acquired		390,668
Goodwill		859,332
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 (“IMP”).  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 stockholder of IMP received 1,285,714 shares of the Company’s 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 stockholder 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”) as adjusted, recorded in the accompanying financial statements at June 30, 2014 and 2013, are based on their estimated fair values at the date of their acquisition. Immediately after the closing of mergers, the Company obtained full control of the operations of 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 June 30, 2014.

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 June 30, 2014.

United Community Mortgage Corp.

On March 15, 2011, the Company completed its acquisition of United Community Mortgage Corp. (“UCMC”), a New Jersey corporation. The Company purchased all of the tangible assets and all issued and outstanding shares of UCMC common stock and preferred stock in exchange for 2,392,858 shares of the Company’s Common Stock valued at $1,675,000. The common shares were valued at the actual date of issuance of such shares.

Estimated fair value of assets acquired on March 16, 2011:
Tangible assets acquired			$	587,568
Intangible assets acquired:
FHA "Full Eagle" Status	$	938,790
State licenses		31,293
Customer list		117,349
				1,087,432
Total assets acquired				1,675,000
Liabilities assumed				-
Net assets acquired			$	1,675,000
Consideration paid			$	1,675,000

The Company recorded the assets acquired at their fair value in the accompanying financial statements as of June 30, 2014 and 2013. The value of the shares issued by the Company in connection with the acquisition of UCMC exceeded the fair value of the net assets acquired. The purchase price allocation for UCMC is based on management’s estimates and overall industry experience relating to acquiring a licensed mortgage broker with “Full Eagle” status in the states of New York and New Jersey. Immediately after the execution of the definitive agreement, the Company obtained effective control over UCMC. Accordingly, the operating results of UCMC have been consolidated with those of the Company starting March 16, 2011.

In January of 2014, the principals associated with Brookside (our Tulsa office), Fidelity (our Grand Junction office) and IMP (our Iowa office) resigned from all positions with the Company. In April of 2014, the Company sold certain assets to our former employee and manager of the Tulsa office. In exchange for the assets, the Company received 210,500 shares of the Company’s stock. The assets were valued at $44,000 and we recorded a loss on the sale of $22,950.

As of June 30, 2014, management was still evaluating whether to operate in Iowa and Grand Junction. No operations had been conducted at those locations since the departure of our former employees.