10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2015
[   ]	TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transitional period from ______ to ______

Commission File No. 000-54988

PSM HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	87-0445475
(State or other jurisdiction of incorporation of organization)	(I.R.S. Employer Identification Number)
1109 N. Bryant Ave., Suite 110 Edmond, Oklahoma	73034
(Address of principal executive office)	(Zip code)

(Registrant’s telephone number, including area code): (405) 753-1900

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 [   ]

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 [   ]

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 [   ]	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 Exchange Act).

Yes [   ]  No [X]

As of November 23, 2015, there were 42,104,648 shares of registrant’s common stock outstanding. 

PSM HOLDINGS, INC.

Report on Form 10-Q

For the quarter ended September 30, 2015

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	4
Item 1. Financial Statements	4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3. Quantitative and Qualitative Disclosures about Market Risk	29
Item 4. Controls and Procedures	29
PART II - OTHER INFORMATION	29
Item 1A. Risk Factors	29
Item 6. Exhibits	30
SIGNATURES	30

2

Forward-Looking Statements

This report contains statements that plan for or anticipate the future.  Forward-looking statements include statements about the future of operations involving the mortgage brokerage or loan business, statements about our future business plans and strategies, and most other statements that are not historical in nature.  In this report, forward-looking statements are generally identified by the words “anticipate,” “plan,” “intend,” “believe,” “expect,” “estimate,” and the like.  Although management believes that any forward-looking statements it makes in this document are reasonable, because forward-looking statements involve future risks and uncertainties, there are factors that could cause actual results to differ materially from those expressed or implied.  For example, some of the uncertainties that could affect the accuracy of forward-looking statements include the following:

● The competitive and regulatory pressures faced by us in the mortgage industry;

● The hiring and retention of key employees;

● Expectations and the assumptions relating to the execution and timing of growth strategies;

● The assumption of unknown risks or liabilities from past or future business combination transactions;

● Any decline in the economy;

● A significant increase in interest rates;

● A failure to increase our warehouse lines of credit to facilitate additional loan originations and related revenue;

● A loss of significant capacity in our warehouse lines of credit;

● The loss from any default on mortgage loans originated by us before they are sold to third parties;

● The loss of branch offices from our network;

● Uncertainty of the secondary mortgage market;

● Inability to expand market presence through recruiting;

● Failure to successfully generate loan originations or otherwise market our services;

● Failure to meet minimum capital requirements to maintain our Full Eagle or licensing with The U.S. Department of Housing and Urban Development (HUD) or other state regulatory agencies;

● Any continued default in our agreements with preferred shareholders;

● Failure to raise sufficient funds for operating needs during periods of reduced cash flows; and

● Failure to comply with debt covenants which could result in the immediate repayment of secured and unsecured notes payable.

In light of the significant uncertainties inherent in the forward-looking statements made in this report, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

Introductory Comment

Throughout this Quarterly Report on Form 10-Q, unless otherwise designated, the terms “we,” “us,” “our,” “the Company,” and “our Company” refer to PSM Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries.

3

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

PSM HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30, 2015 (Unaudited)			June 30, 2015
ASSETS
Current Assets:
Cash & cash equivalents	$	664,545		$	898,200
Accounts receivable		990,016			987,635
Loans held for sale, net		21,847,806			25,459,142
Prepaid expenses		150,487			98,505
Other assets		6,156			4,828
Total current assets		23,659,010			27,448,310
Property and equipment, net		288,696			278,005
Cash restricted for surety bonds		732,500			732,500
Loans receivable		87,778			87,778
Employee advances		143,415			56,851
Goodwill		1,809,429			1,809,429
Other intangible assets, net of accumulated amortization, September 30, 2015 and June 30, 2015 - $117,349		970,083			970,083
Security deposits		60,687			56,017
Total Assets	$	27,751,598		$	31,438,973
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	950,207		$	1,077,788
Line of credit - related party		134,335			135,263
Warehouse lines of credit payable- related party		21,495,306			24,836,939
Short term financing		32,117			14,972
Notes payable - related party		115,000			120,000
Notes payable - non related party		750,000			750,000
Dividends payable - related party		1,117,504			801,333
Dividends payable - non related party		612,004			442,050
Accrued liabilities		663,818			596,940
Cash held in escrow for renovation loans		94,089			76,660
Total current liabilities		25,964,380			28,851,945
Total Liabilities		25,964,380			28,851,945
Commitment & Contingencies		-			-
Stockholders' Equity:
Preferred stock, $0.001 par value, 10,000,000 shares authorized:
Convertible Series A, 3,700 shares outstanding at September 30, 2015 and June 30, 2015		4			4
Convertible Series B, 2,000 shares outstanding at September 30, 2015 and June 30, 2015		2			2
Convertible Series C, 1,800 shares outstanding at September 30, 2015 and June 30, 2015		2			2
Convertible Series D, 1,400 shares outstanding at September 30, 2015 and June 30, 2015		1			1
Convertible Series E, 822.5 shares outstanding at September 30, 2015 and June 30, 2015		1			1
Common stock, $0.001 par value, 400,000,000 shares authorized, 40,354,648 shares issued and outstanding at September 30, 2015 and June 30, 2015		40,355			40,355
Treasury stock, at cost: shares held 1,771,600 at September 30, 2015 and June 30, 2015		(294,769	)		(294,769	)
Additional paid in capital		24,990,598			25,370,967
Accumulated deficit		(22,948,976	)		(22,529,535	)
Total stockholders' equity		1,787,218			2,587,028
Total Liabilities and Stockholders' Equity	$	27,751,598		$	31,438,973

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

PSM HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

	For the three months ended September 30,
	2015			2014
Revenues
Revenues - related party	$	-		$	200,108
Revenues - non related party		5,149,860			3,385,784
Total revenues		5,149,860			3,585,892
Operating expenses
Selling, general & administrative		5,510,087			3,780,387
Depreciation and amortization		19,643			34,760
Total operating expenses		5,529,730			3,815,147
Loss from operations		(379,870	)		(229,255	)
Non-operating income (expense):
Interest expense		(40,270	)		(5,420	)
Interest and dividend income		1,654			1,539
Realized gain (loss) on sale of assets		(955	)		-
Total non-operating income (expense)		(39,571	)		(3,881	)
Loss from continuing operations before income tax		(419,441	)		(233,136	)
Provision for income tax		-			-
Net loss		(419,441	)		(233,136	)
Dividends on preferred stock		(486,125	)		(133,500	)
Net income (loss) available to common shareholders	$	(905,566	)	$	(366,636	)
Net loss per common share and equivalents - basic and diluted loss from operations	$	(0.02	)	$	(0.01	)
Weighted average shares of share capital outstanding - basic & diluted		40,354,648			27,576,440

Weighted average number of shares used to compute basic and diluted loss per share for the three months ended September 30, 2015 and 2014 is the same since the effect of dilutive securities is anti-dilutive.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

PSM HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	For the three months ended September 30,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(419,441	)	$	(233,136	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		19,643			34,760
Restricted cash		-			23,201
Disposition of property and equipment		955			-
Share based payment awards		105,757			14,281
(Increase) decrease in current assets:
Accounts receivable		(2,380	)		255,492
Mortgage loans held for sale		3,611,335			4,695,409
Prepaid expenses		(51,982	)		(55,529	)
Employee advances		(86,565	)		(15,374	)
Other current assets		(1,327	)		14,646
Increase (decrease) in current liabilities:
Accounts payable		(127,582	)		(12,683	)
Accrued liabilities		66,878			(322,814	)
Renovation escrow		17,430			(11,719	)
Net cash provided by operating activities		3,139,756			4,386,534
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of assets		7,035			-
Purchase of property and equipment		(38,324	)		(10,000	)
Cash received from (paid for) security deposits		(4,670	)		12,089
Net cash (used) in provided by investing activities		(35,959	)		2,089
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash borrowed (paid) on short term financing		17,145			7,029
Cash paid for preferred dividends		-			(133,500	)
Cash proceeds from warehouse lines of credit - non related party		-			1,609,894
Cash payments on warehouse lines of credit - non related party		-			(2,083,894	)
Cash proceeds from warehouse lines of credit - related party		127,124,679			60,238,491
Cash payments on warehouse lines of credit - related party		(130,466,313	)		(64,637,726	)
Cash (payments) proceeds on loan receivable		(928	)		1,120
Cash (payments) proceeds on note payable from related party		(5,000	)		120,000
Net cash used in financing activities		(3,330,417	)		(4,878,586	)
NET DECREASE IN CASH & CASH EQUIVALENTS		(233,655	)		(489,963	)
CASH & CASH EQUIVALENTS, BEGINNING BALANCE		898,200			764,931
CASH & CASH EQUIVALENTS, ENDING BALANCE	$	664,545		$	274,968

See Note 4 - Statement of Cash Flows Additional Disclosures

The accompanying notes are an integral part of these unaudited consolidated financial statements.

6

PSM HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Background

As used herein and except as otherwise noted, the terms “Company” or “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

The Company is considered one reporting unit based on its one line of business and the way that management reviews results. 

The Company originates mortgage loans funded either directly off its warehouse lines of credit or through brokering transactions to other third parties. Approximately 95% of the Company’s mortgage origination volume is banked off of its current warehouse lines. The Company has relationships with multiple investors who purchase the loans funded on its warehouse lines. All of the Company’s lending activities are conducted by its subsidiary, Prime Source Mortgage, Inc., a Delaware corporation (“PSMI”).

Historically, a significant portion of the Company’s business has been referral based and purchase oriented (versus refinance). The Company does not directly participate in the secondary markets and further does not maintain a servicing portfolio. Approximately 75% of the Company’s total loan applications are generated from business contacts and previous client referrals. Realtor referrals and other lead sources account for the balance of loan applications.

PSMI is currently licensed in Arizona, Arkansas, California, Colorado, Florida, Kansas, Missouri, Montana, New Jersey, New Mexico, North Dakota, Oklahoma, Oregon, Texas, Utah, Virginia, and Washington.

7

PSMI solicits and receives applications for secured residential mortgage loans. As a licensed mortgage broker/banker, PSMI offers mortgage banking services using its existing warehouse lines of credit.  The warehouse lines of credit are available for funding of mortgage loans for a short term period.  The warehouse lines are secured by the underlying mortgage loans and are renewed annually.  The warehouse lines of credit are repaid typically within an overall average of 15 days when the loan is sold to a third party.  PSMI does not intend to hold and service the loans. These lines of credit can only be used to fund mortgage loans and cannot provide operating funds for the Company.  It is estimated that approximately 95% of all of the residential mortgage loans processed by us are currently being closed using these available warehouse lines of credit.  Warehouse capacity with our primary warehouse provider, a related party, is adequate to support our current volumes, as well as anticipated growth. 

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, 2015, which were filed with the Securities and Exchange Commission on October 13, 2015 on Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending June 30, 2016.

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 financial statements. The financial statements and notes are the representation of the Company’s management who is responsible for their integrity and objectivity. The 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 WWYH, Inc., and WWYH's wholly-owned subsidiary Prime Source Mortgage, Inc. All material intercompany transactions have been eliminated in the consolidation.

Use of Estimates

Management uses estimates and assumptions in preparing 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 intangibles, estimated depreciable lives of property, plant and equipment, 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 include cash on hand and cash in checking and savings accounts, and all investment instruments with an original maturity of three months or less.

Restricted Cash

The Company has certain cash balances set aside as collateral to secure various bonds required pursuant to the licensing requirements in some of the states in which it conducts business.

Accounts Receivable

Accounts receivable represent commissions earned and fees charged on closed loans that the Company has not received. 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.

8

Employee Advances and Loans Receivable

Employee advances and loans 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.

Although the Company does not intend to be a loan servicer, from time to time it is necessary for certain loans to be serviced for a period of time. Even in these situations the Company intends to service the loan only for the amount of time necessary to get the loan sellable to a third party investor. As of September 30, 2015, the Company had ten such loans that required servicing before they could be sold to an investor. All ten loans were performing and nine were carried on the books at their fair value, determined using current secondary market prices for loans with similar coupons, maturities and credit quality. As of September 30, 2015, the Company accrued a loan loss of $100,000 on one jumbo loan underwritten by a third party service provider in which the Company will have to offer a discount to the ultimate purchaser. Under agreements between the service provider and the Company, each company will incur fifty percent of the loss, so the Company is responsible for fifty percent of the accrued loss The Company has not recorded any adjustment to the fair value for any of the other nine loans as any accrued gain or loss would not be material to the Company.

As noted above, 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.

Prepaid Expenses

Prepaid expenses are advance payments for products or services that will be used in operations during the next 12 or more months. Prepaid expenses consist of prepaid insurance, rents and prepaid investor relations and other third party services provided by outside consultants and amounted to $150,487 and $98,505 at September 30, 2015 and June 30, 2015, respectively.

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 (years)	5
Computer equipment (years)	5

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and other intangible assets with an indefinite useful life are not subject to amortization but are reviewed for impairment annually or more frequently whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans 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.

9

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 was $148,676 and $156,922 for the three months ended September 30, 2015 and 2014, respectively. 

Share Based Payment Plan

The Company grants stock options and restricted stock to certain executive officers, key employees, directors and independent contractors. Stock options have been granted for a fixed number of shares, vest equally over a three-year period and are valued using the Black-Scholes option pricing model. Stock grants have been awarded for a fixed number of shares with a value equal to the fair value of the Company’s common stock on the grant date. Stock-based compensation expense is recorded net of estimated forfeitures for the three months ended September 30, 2015 and 2014 based on the stock-based awards that were expected to vest during such periods. Under the 2012 and 2015 Stock Incentive Plans, the Company can grant restricted stock, restricted stock units, options, or other equity based awards to employees, related parties, and unrelated contractors in connection with the performance of services provided to the Company by the awardees.

Revenue Recognition

The Company’s revenue is derived primarily from revenue earned from the origination and sale of mortgage loans. Revenues earned from origination of mortgage loans is recognized on the earlier of the settlement date of the underlying transaction or the funding date of the loan. Loans are funded through warehouse lines of credit and are sold to investors, typically within 15 days. The gain or loss on the sale of loans is realized on the date the loans are sold.

10

Loss Per Common Share

Basic and diluted loss per common share is computed by dividing the loss available to common stockholders 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 had been converted to common stock because the effect would be anti-dilutive. The weighted average number of common shares outstanding during the three months ended September 30, 2015 and 2014 were 40,354,648 and 27,576,440, respectively. Loss per common share from continuing operations for the three months ended September 30, 2015 and 2014 was $(0.02) and $(0.01), respectively.

Compensated Absences

The Company records an accrual for accrued vacation at each period end. Other compensated absences are expensed as incurred.

Reclassification

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

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. 

NOTE 2 – ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable is 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 did not record an allowance for doubtful accounts as of September 30, 2015 or June 30, 2015.

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

	September 30,
	2015			June 30,
	(Unaudited)			2015
Fixtures and equipment	$	649,435		$	623,834
Less: Accumulated depreciation		(360,739	)		(345,829	)
Property and equipment, net	$	288,696		$	278,005

Depreciation expense for the three months ended September 30, 2015 was $19,643 compared to depreciation expense for the three months ended September 30, 2014 of $18,087.

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NOTE 4 – STATEMENTS OF CASH FLOWS ADDITIONAL DISCLOSURES

Supplemental information for cash flows at September 30, 2015 and 2014 consist of:

	September 30,		September 30,
	2015		2014
	(Unaudited)		(Unaudited)
Supplemental Cash Flow Disclosures:
Cash paid for interest	$	38,246	$	3,994
Stock issued for services	$	-	$	-
Stock and stock options issued to employees as bonus	$	105,757	$	14,281

NOTE 5 – RELATED PARTY TRANSACTIONS

President/Chief Executive Officer and Director

On March 26, 2015, the Company entered into an Executive Employment Agreement (the “Agreement”) with Mr. Gadawski to serve as its Chief Financial Officer, Chief Operating Officer, and Chief Executive Officer. In addition, Mr. Gadawski also assumed the roles of President, Chief Executive Officer, and Director of PSMI. The Agreement is effective April 1, 2015 and the term of the Agreement is three years, ending on March 31, 2018. Under the Agreement, Mr. Gadawski’s annual base salary is $250,000 (“Base Salary”). If the Agreement is extended, the Base Salary will be reviewed no less frequently than annually, but at no time during the term of the Agreement will Mr. Gadawski’s Base Salary be decreased. If the Company is reasonably unable to pay the Base Salary for any pay period, the Company and Mr. Gadawski may agree that the Base Salary be paid with shares of common stock under the Company’s 2015 Stock Incentive Plan at a 25% discount to the fair market price of the stock at the end of the pay period. As a signing bonus for entering into the Agreement, the Company granted to Mr. Gadawski options to purchase up to 10,000,000 shares of common stock. Mr. Gadawski is eligible to participate in any incentive bonus pool maintained for persons including executive officers of the Company. He will be eligible to receive an annual bonus as per the incentive bonus pool of up to 100% of the then applicable Base Salary, less applicable withholding taxes. In addition, the Company provides Mr. Gadawski a car allowance in the amount of $750 per month as well as reimburse him for the cost of annual automobile insurance.

For the three months ended September 30, 2015, the Company recorded compensation expense of $62,500 and a car allowance of $2,250 pursuant to the Agreement. For the three months ended September 30, 2014, the Company recorded compensation expense of $52,003. The Company also pays monthly health insurance premiums for Mr. Gadawski and his family, currently in the amount of $292 per month.

Other Directors

On February 7, 2013, the Company entered into a consulting agreement with an entity controlled by one of the Company’s directors. The agreement calls for monthly compensation of $15,000 per month for strategic advisory and investor relations services for each month that services are provided. For the three months ended September 30, 2015 and 2014, the Company recorded consulting expense of $15,000 and $0 respectively. This director has at times agreed to suspend providing strategic consulting services to the Company to assist in the Company’s cash needs at the time. Thus there was no expense for months when services were not provided.

One of the Company’s directors is a principal stockholder and director of a management company that provides two revolving warehouse lines of credit to the Company. Amounts outstanding on the credit lines as of September 30, 2015 and June 30, 2015 were $21,495,306 and $24,836,939 which were offset by $21,847,806 and $25,459,142 of funding receivables as of September 30, 2015 and June 30, 2015, respectively (See Note 8).

This entity also provided a line of credit to the Company that had an outstanding balance of $134,335 and $135,263 as of September 30, 2015 and June 30, 2015, respectively.

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Former Directors

Effective January 1, 2011, the Company entered into an employment agreement with Mr. Jeff Smith to serve as its Executive Vice-President. Pursuant to the terms of the employment agreement, 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 Mr. Smith and his family. On January 1, 2014, the employment agreement was renewed for one year with annual compensation of $250,000. On December 24, 2014, the term of the employment agreement was amended to a month-to-month basis. Effective January 31, 2015, Mr. Smith resigned from all positions with the Company and its subsidiaries, and accordingly his employment agreement was not renewed. For the three months ended September 30, 2014, the Company recorded (i) $42,200 in compensation expense, (ii) $2,100 in car allowance, and (iii) $1,040 in life and health insurance benefits.

On September 12, 2014, the Company entered into a loan agreement with Mr. Smith (the “Lender”). Under the terms of the loan agreement, the Lender loaned $120,000 to the Company for its operating expenses and the expenses of its operating subsidiary, as well as to fund growth of the Company. The funds were received by the Company on September 12, 2014. The loan is evidenced by a 10% Convertible Promissory Note which bears interest at 10% per annum and matures September 12, 2016, unless extended through mutual consent. The note is convertible at the per share rate of common stock sold pursuant to a Qualified Offering by the Company. The term “Qualified Offering” means one or more offerings (whether or not proceeds are received by the Company pursuant to such offering) of debt or equity securities of the Company to non-affiliates in the aggregate amount of at least $1,000,000 commenced after the note issuance date. The conversion price is determined by the lowest of either the offering price per common share or the conversion or exercise price for common stock in any such Qualified Offering. In addition, the Lender received four tenths (0.40) of one common stock purchase warrant for each $1.00 loaned to the Company (totaling 48,000 warrants). Each five-year warrant is exercisable at $0.40 per share, subject to adjustment in the event of the issuance of additional common shares or common stock equivalents at less than the exercise price. The warrants also provide for cashless exercise. The warrants are not transferable or assignable without the prior consent of the Company. Effective September 12, 2015, the Company executed a one year note extension with the lender. As part of the extension, the Company made a principal reduction payment in the amount of $5,000. The balance of the loan, $115,000, accrues interest at 10% annually.

On March 15, 2011, the Company entered into an employment agreement with a director of the Company at the time in connection with the acquisition of United Community Mortgage Corp. The term of the employment agreement was for two years, with automatic one-year extensions unless notice is given by either party. The individual resigned as a director of the Company concurrent with the capital raise completed on February 5, 2013. The agreement provided for an annual base salary of $120,000 with increases based upon increases in originations at the respective branch and incentive payments upon securing additional branches for PSMI. In January 2015, the Company amended the agreement reducing the base compensation and adding in incentive compensation for recruiting. The Company recorded total compensation expense of $46,607 and $41,213 for the three months ended September 30, 2015 and 2014, respectively.

Loans Receivable

Loans receivable from a former related party as of September 30, 2015 consists of:

			Balance due September 30,		Balance due
	Original		2015		June 30,
	Loan		(Unaudited)		2015
Secured loans to NWBO Corporation (NWBO)	$	167,000	$	87,778	$	87,778
Accrued interest due from NWBO		-		5,555		4,228
		167,000		93,333		92,006
Less allowance for uncollectible amounts		-		-		-
	$	167,000	$	93,333	$	92,006

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The Company entered into two Commercial Security Agreements dated November 16, 2006 and February 16, 2007 (the “Security Agreements”) with NWBO securing the loan amount of $167,000 with 150,000 shares of the Company’s common stock held by NWBO.  On June 15, 2012, the Company renegotiated the Security Agreements with Nationwide and agreed to amend (i) the annual interest rate on the Security Agreements to 6%, and (ii) the maturity dates to September 30, 2013. On May 13, 2014, the Company extended the maturity dates to October 15, 2014. All other terms and conditions of the Security Agreements remained the same. The Company recorded interest income of $1,327 and $1,201 from the loan receivable from NWBO for each of the three months ended September 30, 2015 and 2014. On September 8, 2015, the Company executed a note extension and general release agreement with NWBO which contains a general agreement among the parties that no further commitments are required by either side. It further allows NWBO to utilize its technology with other companies. Finally, the note extension calls for quarterly principal payments based on how many “installations” of the NWBO technology exist during the quarter.

NOTE 6 –EMPLOYEE ADVANCES

From time to time the Company advances payroll amounts to employees. The advances are short-term in nature. Employee advances amounted to $143,415 and $56,851 as of September 30, 2015 and June 30, 2015, respectively.

NOTE 7 – INTANGIBLE ASSETS

Intangible assets consist of:

	September 30,
	2015 (Unaudited)			June 30, 2015
Intangible assets not subject to amortization:
FHA "Full Eagle" status	$	938,790		$	938,790
Goodwill		1,809,429			1,809,429
State licenses		31,293			31,293
		2,779,512			2,779,512
Less: Impairments		-			-
Total		2,779,512			2,779,512
Intangible assets subject to amortization:
Customer lists		117,349			117,349
Less: Accumulated amortization – customer lists		(117,349	)		(117,349	)
Total		-			-
Total Intangible assets, net	$	2,779,512		$	2,779,512

It is the Company’s policy to assess the carrying value of its intangible assets for impairment on an annual basis, or more frequently, if warranted by circumstances. The Company completed an annual impairment test of goodwill as of June 30, 2015 and no impairment losses were incurred. As of that date, the fair value of equity exceeded the carrying value (including goodwill) by 300%, indicating no impairment of goodwill. This test involved the use of estimates related to the fair value of the goodwill, and requires a significant degree of judgment and the use of subjective assumptions. The fair value of the goodwill and other intangible assets was determined using a discounted cash flow method. This method required management to make estimates related to future revenue, expenses and income tax rates.

The valuation methodology assumes the Company will generate an operating profit beginning in the next fiscal year ending June 30, 2016. Although the Company has made significant improvements in the last six quarters in maximizing revenue per funded loan and in reducing fixed and variable expenses, the Company has never generated an annual operating profit.

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Any of the following events or changes in circumstances could reasonably be expected to negatively affect the Company’s key assumptions:

● Significant change in mortgage interest rates;

● Loss of the Company’s primary warehouse lender;

● Additional or new regulatory and compliance requirements that restrict its plan for growth;

● The loss of key production personnel; or

● Any default on our obligation to preferred shareholders or secured note holders.

NOTE 8 – WAREHOUSE LINES OF CREDIT

The Company has two warehouse lines of credit available as of September 30, 2015 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 related party mortgage banker for up to $1,000,000 bearing an annual interest rate of 5%. On October 13, 2013, the warehouse line of credit was increased to $75,000,000 for the purpose of funding residential mortgage loans.  The warehouse line of credit matures on October 10, 2016. The outstanding balance on this line of credit as of September 30, 2015 was $5,965,849;

(ii) On November 18, 2011, the Company entered into a “Repo” warehouse line of credit agreement with a related party mortgage banker for up to $5,000,000 bearing an annual interest rate of 5% for funding residential mortgage loans. Pursuant to the terms of the agreement, the Company could be required to repurchase the loan subject to certain terms and conditions. On October 10, 2013, the warehouse line of credit was increased to $75,000,000 and now matures on October 10, 2016. The outstanding balance on this line of credit as of September 30, 2015 was $15,529,457.

The warehouse lines of credit provide short term funding for mortgage loans originated by the Company’s branch offices. The warehouse lines of credit are repaid when the loans are sold to third party investors, typically within 15 days for most loans. Subsequent to September 30, 2015, approximately 98% of the loans outstanding on the credit lines have been purchased by the secondary investors.

The Company does not intend to hold and service the loans. The Company had $21,847,806 in loans held for sale against the warehouse lines of credit as of September 30, 2015. 

NOTE 9 – NOTES PAYABLE

On February 18, 2015, the Company executed a loan agreement, security agreement, and promissory note (collectively the “Loan”) with an unrelated third party lender. The Loan requires monthly interest only payments at fourteen percent annually (14%) beginning March 1, 2015. The principle balance will become due on February 1, 2016. The amount of the Loan is $750,000 and can be increased to $1,000,000 at the sole discretion of the lender. The Loan is secured by all the Company’s tangible and intangible assets, except as such assets are needed to meet the minimum net worth requirement of HUD. The Company incurred legal fees and other loan costs of $50,000 in the aggregate which were deducted from proceeds received by the Company. The Loan restricts the amount of the proceeds that can be used to settle payables already incurred. See Note 17 “Subsequent Events”.

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NOTE 10 – ACCRUED LIABILITIES

Accrued liabilities consisted of:

	September 30,
	2015 (Unaudited)		June 30, 2015
Credit card charges	$	67,089	$	77,103
Accrued payroll		347,757		248,594
Borrower escrows		154,787		161,325
Other liabilities		94,585		109,918
	$	663,818	$	596,940

NOTE 11 – STOCKHOLDERS’ EQUITY AND ISSUANCES

The Company’s capitalization at September 30, 2015 was 400,000,000 authorized common shares and 10,000,000 authorized preferred shares, both with a par value of $0.001 per share.

Preferred Stock

On November 26, 2014, the Company entered into a Stock Purchase Agreement dated effective November 24, 2014 (the “Series E SPA”) providing for the issuance and sale of up to $1,250,000 of the Company’s Series E 6% Convertible Preferred Stock (1,250 shares) at a purchase price of $1,000 per share (the “Series E Preferred Stock”). The first closing of the Series E SPA occurred on November 26, 2014, with 612.5 shares of Series E Preferred Stock being sold to LB Merchant PSMH-3, LLC, an entity controlled by Michael Margolies, a director and principal shareholder of the Company (the “Purchaser”). Each share of Series E Preferred Stock is convertible into a number of shares of common stock of the Company equal to the quotient of (i) $1,000 (subject to adjustment for stock splits, stock dividends, recapitalizations, and the like) plus the amount of accrued but unpaid dividends, divided by (ii) the conversion price then in effect. The initial conversion price is $0.01, subject to adjustment. The holders of Series E Preferred Stock are entitled to certain voting rights designated in the certificate of designation for the series. Holders of the shares of Series E Preferred Stock are entitled to receive cumulative cash dividends at the rate per share (as a percentage of the stated value per share) of 6% per annum from the date of issuance, payable quarterly in arrears on April 15, July 15, October 15 and January 15, beginning on January 15, 2015.

On December 15, 2014, the second closing of the Series E SPA occurred with 210 shares of Series E Preferred Stock being sold to the Purchaser. In total, the Company sold to the Purchaser 822.5 shares of Series E Preferred Stock convertible into 82,250,000 common shares. The holders of Series E Preferred Stock are entitled to certain voting rights designated in the certificate of designation for the series.

Holders of the Series E Preferred Stock will have demand and piggyback registration rights for the common stock issuable upon conversion of the Series E Preferred Stock. The registration rights are pari passu with the registration rights of the Company’s Series A 6% Convertible Preferred Stock (“Series A Preferred Stock”), Series B 6% Convertible Preferred Stock (“Series B Preferred Stock”), Series C 6% Convertible Preferred Stock (“Series C Preferred Stock”), and Series D 6% Convertible Preferred Stock (“Series D Preferred Stock”).

In connection with the first closing of the Series E SPA, the Company amended the Stock Purchase Agreement dated February 3, 2013 and amended on April 1, 2014 (the “Series A & B SPA”), entered into in connection with the sale of the Series A Preferred Stock and Series B Preferred Stock and also amended the original Stock Purchase Agreement dated April 1, 2014 (the “Series C & D SPA”), entered into in connection with the sale of the Series C Preferred Stock and Series D Preferred Stock. The amendments permitted the issuance of the Series E Preferred Stock senior to dividend and liquidation rights of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock.

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Pursuant to the provisions of the Certificates of Designation for the Series A Preferred Stock and Series B Preferred Stock regarding adjustments in conversion price, because the Company issued and sold additional shares at a price less than the current $0.24 conversion price of the Series A Preferred Stock and Series B Preferred Stock, the conversion price was adjusted to $0.10 per share. After this adjustment to the conversion price of the Series A Preferred Stock and Series B Preferred Stock, the Series A Preferred Stock and Series B Preferred Stock would convert into a total of 57,000,000 shares of common stock (adjusted from 24,782,609).

Pursuant to the provisions of the Certificates of Designation for the Series C Preferred Stock and Series D Preferred Stock regarding adjustments in conversion price, because the Company issued and sold additional shares at a price less than the current $0.08 conversion price of the Series C Preferred Stock and Series D Preferred Stock, the conversion price was adjusted to $0.04 per share. After this adjustment to the conversion price of the Series C Preferred Stock and Series D Preferred Stock, the Series C Preferred Stock and Series D Preferred Stock would convert into a total of 80,000,000 shares of common stock (adjusted from 40,000,000).

Default on Preferred Dividends

On January 23, 2015, an event of default occurred due to the Company’s non-payment of dividends due the preferred holders on October 15, 2014 and January 15, 2015. After the occurrence of the default event, the preferred dividend rate automatically, as of January 23, 2015, increased to a rate per annum of 20% of the Stated Value (as defined in the Certificates of Designation for the Preferred Stock), payable in cash on a monthly basis on the 15^th day of each month until the event of default is cured, upon which the preferred dividend will return to a rate of 6% per annum of the Stated Value. The Company did not cure the default, nor make any additional or required dividend payments that were due February 15, 2015 and the 15^th of each month thereafter.

Following is the status of the share based payment plans during the three months ended September 30, 2015 and 2014:

2012 Stock Incentive Plan and 2015 Stock Incentive Plan

On December 12, 2011, the stockholders of the Company authorized and approved the 2012 Stock Incentive Plan (the “2012 Plan”) to issue up to 6,000,000 shares of Common Stock of the Company at $0.001 par value per share. The 2012 Plan became effective January 1, 2012.

On March 26, 2015 (the “Effective Date”) the Board of Directors of the Company approved the 2015 Stock Incentive Plan (the “2015 Plan”). Awards may be made under the 2015 Plan for up to 40,000,000 shares of common stock of the Company at $0.001 par value per share. 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 2015 Plan. No awards can be granted under the 2015 Plan after the expiration of 10 years from the Effective Date, but awards previously granted may extend beyond that date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards.

On July 8, 2015, the Board of Directors granted four-year options to various employees to purchase an aggregate of 150,000 shares of common stock at $0.181 per share vesting over a three-year period. The options were granted under the Company’s 2015 Stock Incentive Plan. The fair value of options was determined to be $12,321 calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rates of 0.33%, volatility of 130.6%, a four-year term and dividend yield of 0%.

On August 17, 2015, the Board of Directors granted four-year options to various employees to purchase an aggregate of 100,000 shares of common stock at $0.18 per share vesting over a three-year period. The options were granted under the Company’s 2015 Stock Incentive Plan. The fair value of options was determined to be $7,805 calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rates of 0.33%, volatility of 118.47%, a four-year term and dividend yield of 0%.

On September 14, 2015, the Board of Directors granted four-year options to various employees to purchase an aggregate of 500,000 shares of common stock at $0.187 per share vesting over a three-year period. The options were granted under the Company’s 2015 Stock Incentive Plan. The fair value of options was determined to be $50,051 calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rates of 0.33%, volatility of 112.19%, a four-year term and dividend yield of 0%.

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As of September 30, 2015, the Company has granted 5,466,671 shares of common stock or stock options valued at $257,155 to employees and a consultant under the 2012 Plan and 533,329 common shares remained unissued and available for future issuances under the 2012 Plan. Under the 2015 Plan, the Company has granted 18,600,000 shares valued at $1,074,696 and 21,400,000 remained unissued and available for future issuance under the 2015 Plan

A summary of stock option activity for the last two years is as follows:

	For the three months ended September 30,
	2015					2014
				Weighted-					Weighted-
				Average					Average
	Number of			Exercise		Number of			Exercise
	Shares			Price		Shares			Price
Options outstanding at beginning of the period		24,760,000		$	0.13		2,910,000			0.14
Options granted		750,000			0.185		-			-
Options exercised		-			-		-			-
Options forfeited/expired		(2,691,667	)		0.206		(166,667	)		0.40
Options outstanding at end of the period		22,818,333		$	0.125		2,743,333		$	0.14
Options exercisable as of September 30		928,333		$	0.17		158,533		$	0.36

Other Stock Issuances

The Company did not issue any common stock for either the three months ended September 30, 2015 or 2014.

Repurchase of Stock

On July 3, 2014, the Company purchased 1,500,000 shares of its common stock from two former employees, directors and related parties. The Company paid for the shares by exchanging certain assets valued at $227,752. The shares are reflected as treasury stock on the accompanying balance sheet..

On July 14, 2014, the Company purchased 250,000 shares of its common stock from a former employee, director and related party. The Company paid for the shares by exchanging certain assets valued at $44,271. The shares are reflected as treasury stock on the accompanying balance sheet.

Total common shares issued and outstanding at September 30, 2015 was 40,354,648.

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Warrant issuances

On September 12, 2014, the Company entered into a loan agreement with the Lender defined in Note 5. Under the terms of the loan agreement, the Lender agreed to loan $120,000 for operating expenses of the Company and its operating subsidiary, as well as to fund growth of the Company. The funds were received by the Company on September 12, 2014. The loan is evidenced by a 10% Convertible Promissory Note which bears interest at 10% per annum and matures September 12, 2015, unless extended through mutual consent. The note is convertible at the per share rate of common stock sold pursuant to a Qualified Offering by the Company. The term “Qualified Offering” means one or more offerings (whether or not proceeds are received by the Company pursuant to such offering) of debt or equity securities of the Company to non-affiliates in the aggregate amount of at least $1,000,000 commenced after the note issuance date. The conversion price is determined by the lowest of either the offering price per common share or the conversion or exercise price for common stock in any such Qualified Offering. In addition, the Lender received four tenths (0.40) of one common stock purchase warrant for each $1.00 loaned to the Company (totaling 48,000 warrants). Each five-year warrant is exercisable at $0.40 per share, subject to adjustment in the event of the issuance of additional common shares or common stock equivalents at less than the exercise price. The warrants also provide for cashless exercise. The warrants are not transferable or assignable without the prior consent of the Company.

Pursuant to the Preferred Series E Stock transaction in November and December 2014, and in accordance with the placement agent agreement, the Company issued warrants to purchase 13,160,000 shares of the Company’s common stock to the placement agent and its associates as placement fees in the above transaction. The warrants are exercisable at $0.011 and expire on November 26, 2019. The fair value of warrants was determined to be $124,698 calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rates of 0.88%, volatility of 174.98%, a five-year term and dividend yield of 0%. Since the warrants were issued in conjunction with the capital raise, no expense was recorded in the accompanying financial statements.

The 454,000 warrants issued in February and March 2014, as amended, contained provisions requiring adjustment to the exercise price in the event the Company were to issue or sell additional shares of common stock pursuant to convertible securities or common stock equivalents at a price per share less than the exercise price of these warrants. Given the exercise price of the Series E Preferred Stock of $0.01 (less than the exercise price of the warrants of $0.24), the adjusted exercise price of these warrants became $0.10 at the first closing of the Series E SPA.

The 76,000 warrants issued in September and November 2014 contained provisions requiring adjustment to the exercise price in the event the Company were to issue or sell additional shares of common stock pursuant to convertible securities or common stock equivalents at a price per share less than the exercise price of these warrants. Given the exercise price of the Series E Preferred Stock of $0.01 (less than the exercise price of the warrants of $0.40), the adjusted exercise price of these warrants became $0.125 at the first closing of the Series E SPA.

The Company has a total of 3,582,810 warrants outstanding as of September 30, 2015 at exercise prices ranging between $0.088 and $0.44. The warrants have expiration dates ranging from February 5, 2018 through December 15, 2019.

NOTE 12 – INCOME (LOSS) PER COMMON SHARE

The Company’s outstanding options and warrants to acquire common stock totaled 26,401,143 as of September 30, 2015. These common stock equivalents may dilute earnings per share.

Basic and diluted loss per common share is computed by dividing the loss available to common stockholders 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 had been converted to common stock because the effect would be anti-dilutive. The weighted average number of common shares outstanding during the three months ended September 30, 2015 and 2014 was 40,354,648 and 27,576,440, respectively. Loss per common share from continuing operations for the three months ended September 30, 2015 and 2014 was $(0.02) and $(0.01), respectively.

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NOTE 13 – COMMITMENTS

Assets pledged as security

On February 17, 2015, the Company executed a note in the amount of $1,000,000 and a related security agreement with Quintium Private Opportunities Fund, LP. Only $750,000 of the note has been disbursed and is outstanding. The original loan documents contained a pledge of all the assets of the Company’s wholly owned subsidiaries, including PSMI. As the PSMI assets were pledged, it caused PSMI to fail its net worth requirements with HUD as of June 30, 2015 and September 30, 2015. See subsequent events under Note 18.

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. 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.

On September 8, 2015, the Company executed a note extension (effective April 15, 2015) with NWBO in which the maturity date was extended until September 30, 2016 and NWBO agreed to fixed payments of principal based on the number of installations of the NWBO technology. In addition, the Company executed a termination agreement in which NWBO and the Company mutually released one another from any obligations under the original license agreement.

Lease Commitments

The Company leases approximately 2,181 square feet of office space in Edmond, Oklahoma, which is used for the principal executive offices and as the operating location of PSMI. The one-year lease was executed May 7, 2015, and the monthly lease payments are $3,464.

The Company leases office space for its branches and property and equipment under cancellable and non-cancellable lease commitments. The monthly rent for office premises and property and equipment is $94,283. The leases expire between October 2015 and December 2018. Total rent expense recorded for the three months ended September 30, 2015 and 2014 was $243,207 and $172,235, respectively.

Total minimum lease commitments for branch offices and property and equipment leases at September 30, 2015 are as follows:

For the year ended June 30,	Amount
2016	$	486,696
2017		177,191
2018		149,067
2019		27,636
2020
Total	$	840,590

NOTE 14 – 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.

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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 all the assets and liabilities, other than warehouse lines of credit, loans held for sale which were all level 1 inputs, and intangible assets which were level three inputs, were determined using Level 2 inputs The carrying amounts and fair values of the Company’s financial instruments at September 30, 2015 and June 30, 2015 are as follows:

	September 30, 2015				June 30, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	664,545	$	664,545	$	898,200	$	898,200
Restricted cash		732,500		732,500		732,500		732,500
Accounts receivable		990,016		990,016		987,635		987,635
Loans held for sale		21,847,806		21,847,806		25,459,142		25,459,142
Prepaid expenses		150,487		150,487		98,505		98,505
Loans receivable		87,778		87,778		87,778		87,778
Employee advances		143,415		143,415		56,851		56,851
Security deposits		60,687		60,687		56,017		56,017
Intangible assets		2,779,512		2,779,512		2,779,512		2,779,512
Financial liabilities:
Accounts payable	$	950,207	$	950,207	$	1,077,788	$	1,077,788
Line of credit – related party		134,335		134,335		135,263		135,263
Warehouse lines of credit - related party		21,495,306		21,495,306		24,836,939		24,836,939
Notes payable – related party		115,000		115,000		120,000		120,000
Notes payable – non related party		750,000		750,000		750,000		750,000
Preferred dividends payable – related party		1,117,504		1,117,504		801,333		801,333
Preferred dividends payable – non related party		612,004		612,004		442,050		442,050
Accrued liabilities		663,818		663,818		596,940		596,940
Borrower escrows		94,089		94,089		76,660		76,660

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NOTE 15 - INDUSTRY RISKS AND GOING CONCERN

The Company is not current in paying all the costs and expenses of the parent company. It is unlikely that the Company will be able to cure the default and pay current the dividends due the Series A, B, C, D and E preferred shareholders. Further, the Company may be unable to pay the principal balance of the Quintium note when due on February 1, 2016 and there is no assurance that the lender will be willing to extend the maturity on acceptable terms if at all.

In addition, the Company is dependent on either the operations of its wholly owned subsidiary PSMI to generate the cash needed to meet the expenses of the Company or in raising capital. Although PSMI has generated a cumulative operating profit since February, there is no guaranteed that it will continue to do so. PSMI has been successful in attracting new groups to their platform, which could increase volume and revenue in future quarters. If PSMI is unable to develop these new offices into profitable and the Company is unable to raise additional capital if necessary, the Company may not be able to meet its obligations and these factors would give rise to uncertainty about the Company’s continuing as a going concern.

Management is continuing to implement cost reduction strategies. Management is also considering an additional capital raise which, if successful, would be highly dilutive to the holdings of the current common shareholders.

There is no certainty that the Company will be successful in these initiatives in a timely enough manner to curtail the continuing consolidated losses and meet short term debt obligations.

NOTE 16 - CONCENTRATIONS

Concentration of Warehouse Lenders

The Company entered into two warehouse line of credit agreements with a mortgage banker whose former Executive Vice President is a member of the Board of Directors of the Company, for up to $75,000,000 each, bearing annual interest rates of 5% each, for funding residential mortgage loans. Per the terms of the agreements, the Company could be required to repurchase the loans subject to certain terms and conditions. The outstanding combined balance on these two warehouse lines of credit as of September 30, 2015 was $21,495,306. Subsequent to September 30, 2015, approximately 98% of the loans outstanding on the credit lines have been purchased by investors.

Concentration of Credit Risk

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2015. As of September 30, 2015, the Company’s bank balances in some instances exceed FDIC insured amounts.

NOTE 17 – SUBSEQUENT EVENTS

Modification of loan and security agreement

On October 1, 2015, we executed modifications to the loan agreement and related documents with Quintium Opportunities Fund, LP. The modified documents exclude from the loan collateral any acceptable assets of PSMI that are necessary to satisfy the minimum net worth requirements as stipulated by HUD guidelines. The modifications also increased the interest rate to 18% annually.

Conversion of Series D preferred shares

On October 23, 2015, holders of the Series D preferred shares converted 80 shares into 2,000,000 shares of common stock.

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Annual Recertification with HUD

PSMI has not yet completed its annual recertification with HUD. The recertification was due on or before September 30, 2015. On October 1, 2015, PSMI filed a notice of material event with HUD detailing that it had not meet the HUD minimum net worth requirement due to the pledge of assets relating to the loan with Quintium Opportunities Fund, LP. The recertification process is expected to be completed before the end of calendar year.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of our balance sheets and statements of income.  This section should be read in conjunction with our Annual Report on Form 10-K for the year ended June 30, 2015, and our interim financial statements and accompanying notes to these financial statements filed with this report.

Overview

PSM Holdings, Inc. (the “Company” or “PSMH”) originates mortgage loans funded either directly off our warehouse lines of credit or through brokering transactions to other third parties. Approximately 95% of our mortgage origination volume is banked off of our current warehouse lines. We have relationships with multiple investors who purchase the loans funded on our warehouse lines. All of our lending activities are conducted by our subsidiary, Prime Source Mortgage, Inc. (“PSMI”).

Historically, a significant portion of our business has been referral based and purchase orientated (versus refinance). We do not directly participate in the secondary markets and further do not maintain a servicing portfolio. Approximately 75% of total loan applications are generated from business contacts and previous client referrals. Realtor referrals and other lead sources account for the balance of loan applications.

We have retail offices located around the United States from which we derive revenue from the loan origination volume from these offices. We are able to leverage our warehouse lines of credit relationships with related parties in order to provide us the funding capacity to support our anticipated growth. PSMI is licensed in 17 states and operates out of approximately 22 offices around the country.

Current Environment

Regulatory changes from federal and state authorities have placed a significant amount of pressure on mortgage companies across the United States. The regulatory changes have applied operational pressure for deeper and more disciplined internal processes, limitations on loan officer compensation and increased compliance requirements all making it difficult for small to mid-market mortgage firms to operate profitably as independent businesses. This dynamic has spurred consolidation in the industry as many firms feel the need to join larger more established platforms. This industry shift has forced the remaining mortgage businesses to either make the financial investments in their business to operate in today’s environment or become part of a more stable, mature operation that is better suited to compete in a contracting market.

Plan of Operation

In May 2014, we rolled out our delegated lending platform to all of our field offices. Under our delegated model, we generate income in multiple ways including yield spread on originated loans, file fees and volume bonus or delivery incentives from investors. Our Capital Markets and field operations team is based in Murrieta, CA. We closed our first loan as a fully delegated lender in October 2013.

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Like most lenders in our industry, our production volumes have fluctuated greatly over the last three years. The following table represents a production matrix reflecting our past production by number of loans and dollar volume:

Three months ended September 30,	Number of		Dollar
	Loans		Production
2015		527	$	127,124,679
2014		287	$	62,561,983
2013		724	$	128,945,541

As a result of the market consolidation in the mortgage banking industry, we continue to recruit and onboard new entities, as well as work with existing offices to increase their loan originators, locations, and production.  During the three months ended September 30, 2015, we added a total of 9 new locations (7 in California and 2 in Washington). We anticipate these new locations adding to our production numbers in future quarters.

We will continue to recruit loan originators and existing mortgage banking or broker operations as we believe our current infrastructure can support a significant scaling of our operations without the need for additional resources or capital.

Results of Operations

Our consolidated results of operations for the three months ended September 30, 2015 and 2014, include the operating results of our wholly-owned subsidiary WWYH, Inc. (an inactive company) and results of operations of PSMI.

We reported a net loss from operations of $419,441 for the three months ended September 30, 2015 compared to a loss of $233,136 for the same period ended September 30, 2014.  The increase in our net loss from operations is directly attributable to an increase in non-cash amortization of employee stock options (we issued nearly 22,000,000 stock options to employees and officers during the first six months of calendar 2015) which accounted for approximately $106,000 of amortization expense during the current quarter. In addition, in the current period, the Company invested in the opening of nine new offices incurring startup expenses while the offices built their production pipelines.

Revenues

Total revenues increased by $1,563,968 to $5,149,860 for the three months ended September 30, 2015, as compared to $3,585,892 for the same period in 2014.  We closed 527 loans for a total loan production of $127,124,679 during the three months ended September 30, 2015, as compared to 287 loans for a total production of $62,561,983 for the comparable prior year period.  Our production was higher in the current quarter primarily due to us having additional offices this period when compared to prior year’s period. Our revenue per loan decreased by $2,772, or 21.7% primarily due to our Box Home Loans division which operated on lower margins than our typical retail offices. This division was not on our platform during the three months ended September 30, 2014.

Operating Expenses

Our total operating expenses increased by $1,714,583 for the three months ended September 30, 2015, to $5,529,730 as compared to $3,815,147 for the comparable period in the prior year. The increase for the three month period is a direct result of our new offices and increased production. Commission and salaries expense increased by $450,160 for the three months ended September 30, 2015, to $2,488,613. Loan level expenses such as warehouse and investor interest, lender credits and warehouse fees increased from $525,044 for quarter ended September 30, 2014 to $859,352 for the quarter ended September 30, 2015. This increase is a direct result of increased production volume.

Advertising expense relates primarily to costs associated with generating leads and programs designed to maintain contact with borrowers. Advertising expenses were relatively flat between the periods, $148,676 and $156,922 for the three months ended September 30, 2015 and 2014, respectively. Total rent expense was $243,207 for the three months ended September 30, 2015 compared to $172,234 for the three months ended September 30, 2014. The increase in rent expense is due to having more offices in the current period compared to the prior period. Professional and legal fees increased by $538,685 to $625,412 for the current three month period versus $86,727 for the prior period. The increase was due to contract services (underwriting, processing, etc)we hired for the Box Home Loans division. This division was not on the platform in 2014.

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Stock bonus related to the amortization of the value of stock options issued to employees was $105,757 for the three months ended September 30, 2015 compared to $15,820 in the prior year period. We issued nearly 22,000,000 options during the first six months of calendar 2015. The value of the options amortizes over the vesting period of thirty-six months. Depreciation and amortization were $19,643 and $34,760 for the three months ended September 30, 2015 and 2014, respectively. Our asset balances were significantly lower in the current period based on utilizing some of our assets in the prior year to re-purchase shares of stock from former employees.

Non-operating income (expense)

We incurred non-operating expense of $39,571 and $3,881 for the three months ended September 30, 2015 and 2014, respectively. The single largest contributor in each period was interest expense which totaled $40,270 in the current three month period compared to $5,420 in the prior year period. The increase in the three months ended September 30, 2015 relates to the short term note with Quintium Advisors, LP that we issued in February 2015. The note accrued interest at 14% during the quarter.

Liquidity and Capital Resources

Our cash and cash equivalents were $664,545 as of September 30, 2015, compared to $898,200 as of June 30, 2014. As shown in the accompanying consolidated financial statements, we recorded a net loss of $419,441 for the three months ended September 30, 2015, compared to a net loss of $233,136 for the comparable prior year period. Our current assets were less than our current liabilities by $2,305,370 as of September 30, 2015. We have never generated an annual net income. We believe certain cost saving initiatives, closing of certain offices and originating and funding loans on our delegated platform, should allow us to reduce our losses and ultimately achieve profitability. Our growth strategy includes adding additional branch offices and loan officers. There is no assurance that our current working capital will allow us to pursue our growth strategy, and in order to expand our business, we may need to sell additional shares of our common stock or borrow funds from private lenders to help finance the anticipated growth. There are no assurances that we can raise additional capital if necessary, and as such, our liquidity and capital resources may be adversely affected. 

Operating Activities

Net cash provided by operating activities for the three months ended September 30, 2015 was $3,139,756 resulting primarily from sale of our loans held for sale of $3,611,335 and our net loss of $(419,441). Other items impacting our cash provided by operating activities was the pay down of our accounts payable and accrued liabilities by a combined $(60,704), an increase in our prepaid expenses of $(51,982) and employee advances of $(86,565). Net cash provided by operating activities in the prior period was $4,386,534, which was primarily a result of the sale of loans held for sale in the amount of $4,695,409. Other items impacting the cash provided by operating activities was a pay down of accrued liabilities and accounts payable amounting to $(335,497), collection of accounts receivable amounting to $255,492, a reduction in prepaid expenses of $(55,529), and our net loss of $(233,136).

Investing Activities

Net cash used in investing activities for the three months ended September 30, 2015, was $(35,959) resulting from $(38,324) in purchases of property and equipment and a $(4,670) increase in cash paid for security deposits. For the three months ended September 30, 2014, net cash provided by investing activities was $2,089 which was a result of cash used to purchase property and equipment totaling $(10,000) and collection of security deposits in the amount of $12,089. We do not currently have material commitments for capital expenditures and do not anticipate entering into any such commitments during the next twelve months.

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Financing Activities

Net cash used in financing activities for the three months ended September 30, 2015 and 2014 amounted to $(3,330,417) and $(4,878,586), respectively. In both periods, repayments on our warehouse lines of credit were greater than the proceeds received on the warehouse lines of credit by $(3,341,633) and $(4,872,935) for September 30, 2015 and 2014, respectively. In the prior year period, cash paid for preferred dividends amounted to $(133,500) and we generated cash proceeds of $120,000 on a note from a related party.

As a result of the above activities, we experienced a net decrease in cash of $233,655 for the three months ended September 30, 2015. Our ability to continue as a going concern is still dependent on our success in attracting profitable and stable mortgage businesses to join our lending platform, expanding the business of our existing branches, raising temporary operating cash, and controlling our costs as we execute our growth and expansion plans.  

Critical Accounting Policies and Estimates

Management’s discussion and analysis of its financial condition and results of operations are based upon our unaudited consolidated financial statements, which have been prepared in accordance with U.S. GAAP.  Our financial statements reflect the selection and application of accounting policies which require management to make estimates and judgments.  (See Note 1 to our unaudited consolidated financial statements, “Nature of Business and Summary of Significant Accounting Policies”.)  We believe that the following paragraphs reflect accounting policies that currently affect our financial condition and results of operations:

Share Based Payment Plan

Under the 2012 and 2015 Stock Incentive Plans, we can grant stock or options to employees, related parties, and outside contractors in connection with the performance of services provided to us by the awardees. We use the fair value method to account for employee stock compensation costs and to account for share based payments to non-employees.

Revenue Recognition

Our revenue is derived primarily from revenue earned from the origination of mortgage loans that are funded on our warehouse lines of credit and sold to third party investors.  Revenue is recognized as earned on the date the loan is funded.  

Recent Accounting Pronouncements

We have evaluated the possible effects on it financial statements of the following accounting pronouncements:

Accounting Standards Update 2015-16—Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments

In September 2015, the FASB issued ASU2015-16, Simplifying the Accounting for Measurement-Period Adjustments. The amendments in this Update require that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments in this Update require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The amendments in this Update are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. We are currently evaluating the guidance under ASU 2015-16 and have not yet determined the impact, if any, on our consolidated financial statements.

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Accounting Standards Update 2015-07— Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)

In May 2015, the FASB issued ASU 2015-07, Fair Value Measurement (Topic 820) :Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent). The amendments in this Update remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. We are currently evaluating the guidance under ASU 2015-07 and have not yet determined the impact, if any, on our consolidated financial statements.

Accounting Standards Update 2015-05—Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement

In April 2015, the FASB issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The amendments in this Update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. For public business entities, the Board decided that the amendments will be effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. We are currently evaluating the guidance under ASU 2015-05 and have not yet determined the impact, if any, on our consolidated financial statements.

Accounting Standards Update No. 2015-03—Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs

In April 2015, the FASB issued ASU 2015-03 Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. We are currently evaluating the guidance under ASU 2015-03 and have not yet determined the impact, if any, on our consolidated financial statements.

Accounting Standards Update No. 2015-01— Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items

In January 2015, the FASB issued ASU 2015-01 Income Statement—Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. This Update eliminates from GAAP the concept of extraordinary items. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We are currently evaluating the guidance under ASU 2015-01 and have not yet determined the impact, if any, on our consolidated financial statements.

Accounting Standards Update No. 2014-18— Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination

In December 2014, the FASB issued ASU 2014-18 Business Combinations (Topic 805): Accounting for Identifiable Intangible Assets in a Business Combination. An entity within the scope of this Update that elects the accounting alternative to recognize or otherwise consider the fair value of intangible assets as a result of any in-scope transactions should no longer recognize separately from goodwill (1) customer-related intangible assets unless they are capable of being sold or licensed independently from the other assets of the business and (2) noncompetition agreements. The decision to adopt the accounting alternative in this Update must be made upon the occurrence of the first transaction within the scope of this accounting alternative in fiscal years beginning after December 15, 2015, and the effective date of adoption depends on the timing of that first in-scope transaction. We are currently evaluating the guidance under ASU 2014-18 and have not yet determined the impact, if any, on our consolidated financial statements.

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Accounting Standards Update No. 2014-16— Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity

In November 2014, the FASB issued ASU 2014-16 Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The objective of this Update is to eliminate the use of different methods in practice and thereby reduce existing diversity under GAAP in the accounting for hybrid financial instruments issued in the form of a share. The amendments clarify how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. Specifically, the amendments clarify that an entity should consider all relevant terms and features—including the embedded derivative feature being evaluated for bifurcation—in evaluating the nature of the host contract. Furthermore, the amendments clarify that no single term or feature would necessarily determine the economic characteristics and risks of the host contract. Rather, the nature of the host contract depends upon the economic characteristics and risks of the entire hybrid financial instrument. The amendments in this Update are effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December15, 2015. We are currently evaluating the guidance under ASU 2014-16 and have not yet determined the impact, if any, on our consolidated financial statements.

Accounting Standards Update 2014-15 – Presentation of Financial Statements – Going Concern

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements-Going Concern. The amendments in this update provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, the amendments should reduce diversity in the timing and content of footnote disclosures. The amendments in ASU 2014-15 are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We are currently evaluating the guidance under ASU 2014-15 and have not yet determined the impact, if any, on our consolidated financial statements.

Accounting Standards Update 2014-12 – Compensation—Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period

In June 2014, the FASB issued ASU 2014-12, Compensation—Stock Compensation (Topic 718) Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The amendments in this update require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. For all entities, the amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. We are currently evaluating the guidance under ASU 2014-12 and have not yet determined the impact, if any, on our consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity, capital expenditures or capital resources.

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Item 3.  Quantitative and Qualitative Disclosures about Market Risk

This item is not required under Regulation S-K for “smaller reporting companies.”

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer, who is also our principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, Kevin Gadawski, our principal executive officer and principal financial officer, concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to PSM Holdings, Inc., including our consolidated subsidiaries, required to be disclosed in our SEC reports (i) is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. There were no changes in our internal control over financial reporting during the quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1A. Risk Factors

We incurred a consolidated net operating loss from continuing operations of $419,441 for the three months ended September 30, 2015. We have never achieved an annual profit. Unless we are able to reverse or mitigate the losses through onboarding profitable operations and making all current office locations profitable, we may not be able to be profitable or to continue operations under our current operating model.

Operating losses as reported in our current unaudited financial statements will make it more difficult to attract and onboard additional mortgage operations. If we are unable to onboard a significant number of new profitable operations, we may not generate sufficient revenues to continue current operations.

There are no assurances that we will be able to successfully recruit additional profitable mortgage operations to our platform, or that we will be able to successfully modify our current cost structure. If we are unsuccessful in these initiatives, our revenue and profitability may continue to decline and we may not have enough capital to continue to implement our growth plans. Further, we may be required to raise additional operating capital which would require the issuance of additional equity securities which would dilute our current shareholders.

See also “Item 1A – Risk Factors” as disclosed in Form 10-K for the year ended June 30, 2015, as filed with the Securities and Exchange Commission on October 13, 2015.

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Item 6.  Exhibits

31.1 Rule 13a-14 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

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: November 23, 2015	By:	/s/ Kevin Gadawski
		Kevin Gadawski, President, CEO & CFO (Principal Executive and Financial Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Kevin Gadawski, certify that:

1. I have reviewed this Form 10-Q quarterly report of PSM Holdings, Inc. for the quarter ended September 30, 2015;

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. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange 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 my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me 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 my 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. I have disclosed, based on my 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.

Date:  November 23, 2015

/s/ Kevin Gadawski

Kevin Gadawski, President and Chief Financial Officer

(Principal Executive & Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of PSM Holdings, Inc. (the “Company”) on Form 10- Q for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission (the “Report”), the undersigned principal executive and principal financial officer of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  November 23, 2015

/s/ Kevin Gadawski

Kevin Gadawski, President and Chief Financial Officer

(Principal Executive and Financial Officer)

XML

Note 6 - Employee Advances (Details) - USD ($)	Sep. 30, 2015	Jun. 30, 2015
Note 6 - Employee Advances (Details) [Line Items]
Due from Employees, Current	$ 143,415	$ 56,851
Employee [Member]
Note 6 - Employee Advances (Details) [Line Items]
Due from Employees, Current	$ 143,415	$ 56,851

XML

Note 13 - Commitments (Details)		3 Months Ended
	May. 07, 2015	Sep. 30, 2015 USD ($) ft²	Sep. 30, 2014 USD ($)	Feb. 18, 2015 USD ($)	Feb. 17, 2015 USD ($)
Note 13 - Commitments (Details) [Line Items]
Area of Real Estate Property (in Square Feet) | ft²		2,181
Lessee Leasing Arrangements, Operating Leases, Term of Contract	1 year
Monthly Rent Payments		$ 3,464
Operating Leases, Rent Expense, Net		$ 243,207	$ 172,235
Initial Five Year Term of Agreement [Member]
Note 13 - Commitments (Details) [Line Items]
Bonus Cash Percentage Under NWBO License Agreement		15.00%
First Automatic Renewal Term [Member]
Note 13 - Commitments (Details) [Line Items]
Bonus Cash Percentage Under NWBO License Agreement		20.00%
Second Automatic Renewal Term [Member]
Note 13 - Commitments (Details) [Line Items]
Bonus Cash Percentage Under NWBO License Agreement		25.00%
Third Automatic Renewal Term [Member]
Note 13 - Commitments (Details) [Line Items]
Bonus Cash Percentage Under NWBO License Agreement		30.00%
Branches Office Space [Member]
Note 13 - Commitments (Details) [Line Items]
Monthly Rent Payments		$ 94,283
The Loan [Member]
Note 13 - Commitments (Details) [Line Items]
Debt Instrument, Maximum Borrowing Capacity				$ 1,000,000
Debt Instrument, Face Amount				$ 750,000
The Loan [Member] | Quintium Private Opportunities Fund, L.P. [Member]
Note 13 - Commitments (Details) [Line Items]
Debt Instrument, Maximum Borrowing Capacity					$ 1,000,000
Debt Instrument, Face Amount					$ 750,000

XML

Note 11 - Stockholders' Equity and Issuances (Details) - Stock Option Activity - $ / shares				3 Months Ended
	Sep. 14, 2015	Aug. 17, 2015	Jul. 08, 2015	Sep. 30, 2015	Sep. 30, 2014
Stock Option Activity [Abstract]
Options outstanding at beginning of the period				24,760,000	2,910,000
Options outstanding at beginning of the period				$ 0.13	$ 0.14
Options granted	500,000	100,000	150,000	750,000
Options granted	$ 0.187	$ 0.18	$ 0.181	$ 0.185
Options forfeited/expired				(2,691,667)	(166,667)
Options forfeited/expired				$ 0.206	$ 0.40
Options outstanding at end of the period				22,818,333	2,743,333
Options outstanding at end of the period				$ 0.125	$ 0.14
Options exercisable as of September 30				928,333	158,533
Options exercisable as of September 30				$ 0.17	$ 0.36

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Note 2 - Allowance for Doubtful Accounts (Details) - USD ($)	Sep. 30, 2015	Sep. 30, 2014
Disclosure Text Block Supplement [Abstract]
Allowance for Doubtful Accounts Receivable	$ 0	$ 0

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Note 4 - Statements of Cash Flows Additional Disclosures (Tables)

3 Months Ended

Sep. 30, 2015

Supplemental Cash Flow Elements [Abstract]

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	September 30,		September 30,
	2015		2014
	(Unaudited)		(Unaudited)
Supplemental Cash Flow Disclosures:
Cash paid for interest	$	38,246	$	3,994
Stock issued for services	$	-	$	-
Stock and stock options issued to employees as bonus	$	105,757	$	14,281

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Note 14 - Fair Value Measurements (Details) - The Fair Value of the Assets and Liabilities - USD ($)	Sep. 30, 2015	Jun. 30, 2015
Financial assets:
Cash and cash equivalents	$ 664,545	$ 898,200
Cash and cash equivalents	664,545	898,200
Restricted cash	732,500	732,500
Accounts receivable	990,016	987,635
Accounts receivable	990,016	987,635
Loans held for sale	21,847,806	25,459,142
Loans held for sale	21,847,806	25,459,142
Prepaid expenses	150,487	98,505
Prepaid expenses	150,487	98,505
Loans receivable	87,778	87,778
Loans receivable	87,778	87,778
Employee advances	143,415	56,851
Employee advances	143,415	56,851
Security deposits	60,687	56,017
Security deposits	60,687	56,017
Intangible assets	2,779,512	2,779,512
Intangible assets	2,779,512	2,779,512
Financial liabilities:
Accounts payable	950,207	1,077,788
Accounts payable	950,207	1,077,788
Line of credit – related party	134,335	135,263
Line of credit – related party	134,335	135,263
Warehouse lines of credit - related party	21,495,306	24,836,939
Warehouse lines of credit - related party	21,495,306	24,836,939
Notes payable – related party	115,000	120,000
Notes payable – related party	115,000	120,000
Notes payable – non related party	750,000	750,000
Notes payable – non related party	750,000	750,000
Preferred dividends payable – related party	1,117,504	801,333
Preferred dividends payable – related party	1,117,504	801,333
Preferred dividends payable – non related party	612,004	442,050
Preferred dividends payable – non related party	612,004	442,050
Accrued liabilities	663,818	596,940
Accrued liabilities	663,818	596,940
Borrower escrows	94,089	76,660
Borrower escrows	$ 94,089	$ 76,660

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Note 8 - Warehouse Lines of Credit (Details) - USD ($)			2 Months Ended	3 Months Ended
	Nov. 18, 2011	Aug. 03, 2008	Nov. 22, 2015	Sep. 30, 2015	Jun. 30, 2015	Oct. 13, 2013	Oct. 10, 2013
Note 8 - Warehouse Lines of Credit (Details) [Line Items]
Line of Credit Facility, Interest Rate During Period				5.00%
Loans Receivable Held-for-sale, Net, Not Part of Disposal Group				$ 21,847,806	$ 25,459,142
Subsequent Event [Member]
Note 8 - Warehouse Lines of Credit (Details) [Line Items]
Percentage of Loans Purchased by Secondary Lenders			98.00%
Warehouse Line of Credit August 2008 [Member]
Note 8 - Warehouse Lines of Credit (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		$ 1,000,000				$ 75,000,000
Line of Credit Facility, Interest Rate During Period		5.00%
Long-term Line of Credit				5,965,849
Warehouse Line of Credit November 2011 [Member]
Note 8 - Warehouse Lines of Credit (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 5,000,000						$ 75,000,000
Long-term Line of Credit				$ 15,529,457
Warehouse Line of Credit June 2009 [Member]
Note 8 - Warehouse Lines of Credit (Details) [Line Items]
Line of Credit Facility, Interest Rate During Period	5.00%
Warehouse Line Of Credit [Member]
Note 8 - Warehouse Lines of Credit (Details) [Line Items]
Average Days Until Repayment On Line of Credit				15 days

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Note 5 - Related Party Transactions (Details) - USD ($)										3 Months Ended		12 Months Ended			48 Months Ended
	Sep. 14, 2015	Sep. 12, 2015	Aug. 17, 2015	Jul. 08, 2015	Apr. 01, 2015	Sep. 12, 2014	Feb. 07, 2013	Jun. 15, 2012	Mar. 15, 2011	Sep. 30, 2015	Sep. 30, 2014	Jun. 30, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2014	Nov. 30, 2014	Mar. 31, 2014	Feb. 16, 2007
Note 5 - Related Party Transactions (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)	500,000		100,000	150,000						750,000
Line of Credit, Current										$ 134,335		$ 135,263
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)																$ 0.125	$ 0.24
Director [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Long-term Line of Credit										21,495,306		24,836,939
Notes Receivable, Related Parties										21,847,806		25,459,142
Line of Credit, Current										134,335		135,263
Warrant Issued in Connection with Debt, Shares per $1 Debt (in Shares)						0.40
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)						48,000
Warrant Term						5 years
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)						$ 0.40
Former Executive Vice President [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Warrant Issued in Connection with Debt, Shares per $1 Debt (in Shares)						0.40
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)						48,000
Warrant Term						5 years
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)						$ 0.40
Annual Base Salary [Member] | Chief Executive Officer [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Officers' Compensation					$ 250,000
Monthly Car Allowance [Member] | Chief Executive Officer [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party					$ 750
Monthly Car Allowance [Member] | Former Executive Vice President [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party															$ 700
Compensation Expense [Member] | Chief Executive Officer [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party										62,500	$ 52,003
Compensation Expense [Member] | Former Executive Vice President [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party											42,200
Compensation Expense [Member] | Director IMP [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party										46,607	41,213
Car Allowance [Member] | Chief Executive Officer [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party										2,250
Car Allowance [Member] | Former Executive Vice President [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party											2,100
Monthly Allowance for Health Benefits [Member] | Chief Executive Officer [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party										292
Monthly Allowance for Health Benefits [Member] | Former Executive Vice President [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party															1,290
Monthly Strategic Advisory and Investor Relation Services [Member] | Director [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Related Party Transaction, Amounts of Transaction							$ 15,000
Strategic Advisory and Investor Relation Services [Member] | Director [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party										$ 15,000	0
Annual Compensation [Member] | Former Executive Vice President [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Officers' Compensation													$ 250,000		$ 200,000
Annual Compensation [Member] | Director UCMC [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Related Party Transaction, Amounts of Transaction									$ 120,000
Allowance For Health Benefits [Member] | Former Executive Vice President [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Costs and Expenses, Related Party											$ 1,040
NWBO [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Notes Payable, Related Parties																		$ 167,000
Shares Securing Loans (in Shares)																		150,000
Related Party Transaction, Rate								6.00%
Interest Income, Related Party												$ 1,327		$ 1,201
2015 Stock Incentive Plan [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)										18,600,000
Annual Bonus,Percentage of Base Salary					100.00%
2015 Stock Incentive Plan [Member] | Chief Executive Officer [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross (in Shares)					10,000,000
2015 Stock Incentive Plan [Member] | Common Stock [Member] | Chief Executive Officer [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Discount from Market Price, Offering Date					25.00%
Convertible Promissory Note [Member] | Director [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Proceeds from Convertible Debt						$ 120,000
Debt Instrument, Interest Rate During Period						10.00%
Qualified Offering, Minimum Amount						$ 1,000,000
Convertible Promissory Note [Member] | Former Executive Vice President [Member]
Note 5 - Related Party Transactions (Details) [Line Items]
Proceeds from Convertible Debt						$ 120,000
Debt Instrument, Interest Rate During Period						10.00%
Qualified Offering, Minimum Amount						$ 1,000,000
Extension on Debt		1 year
Repayments of Convertible Debt		$ 5,000
Convertible Debt										$ 115,000
Debt Instrument, Interest Rate, Stated Percentage										10.00%

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Note 17 - Subsequent Events (Details) - shares	Oct. 23, 2015	Oct. 01, 2015	Feb. 18, 2015
Subsequent Event [Member] | Common Stock [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Conversion of Stock, Shares Issued	2,000,000
Subsequent Event [Member] | Series D Preferred Stock [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Conversion of Stock, Shares Converted	80
The Loan [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage			14.00%
The Loan [Member] | Subsequent Event [Member] | Quintium Private Opportunities Fund, L.P. [Member]
Note 17 - Subsequent Events (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		18.00%

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Note 12 - Income (Loss) Per Common Share (Details) - $ / shares	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	26,401,143
Weighted Average Number of Shares Outstanding, Basic and Diluted	40,354,648	27,576,440
Income (Loss) from Continuing Operations, Per Basic and Diluted Share (in Dollars per share)	$ 0.02	$ (0.01)

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Note 4 - Statements of Cash Flows Additional Disclosures

3 Months Ended

Sep. 30, 2015

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

NOTE 4 – STATEMENTS OF CASH FLOWS ADDITIONAL DISCLOSURES

Supplemental information for cash flows at September 30, 2015 and 2014 consist of:

	September 30,		September 30,
	2015		2014
	(Unaudited)		(Unaudited)
Supplemental Cash Flow Disclosures:
Cash paid for interest	$	38,246	$	3,994
Stock issued for services	$	-	$	-
Stock and stock options issued to employees as bonus	$	105,757	$	14,281

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Note 9 - Notes Payable (Details) - The Loan [Member]	Feb. 18, 2015 USD ($)
Note 9 - Notes Payable (Details) [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	14.00%
Debt Instrument, Face Amount	$ 750,000
Debt Instrument, Maximum Borrowing Capacity	1,000,000
Debt Issuance Cost	$ 50,000

XML

Note 11 - Stockholders' Equity and Issuances (Tables)

3 Months Ended

Sep. 30, 2015

Stockholders' Equity Note [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	For the three months ended September 30,
	2015					2014
				Weighted-					Weighted-
				Average					Average
	Number of			Exercise		Number of			Exercise
	Shares			Price		Shares			Price
Options outstanding at beginning of the period		24,760,000		$	0.13		2,910,000			0.14
Options granted		750,000			0.185		-			-
Options exercised		-			-		-			-
Options forfeited/expired		(2,691,667	)		0.206		(166,667	)		0.40
Options outstanding at end of the period		22,818,333		$	0.125		2,743,333		$	0.14
Options exercisable as of September 30		928,333		$	0.17		158,533		$	0.36

XML

Note 10 - Accrued Liabilities (Tables)

3 Months Ended

Sep. 30, 2015

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

	September 30,
	2015 (Unaudited)		June 30, 2015
Credit card charges	$	67,089	$	77,103
Accrued payroll		347,757		248,594
Borrower escrows		154,787		161,325
Other liabilities		94,585		109,918
	$	663,818	$	596,940

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Note 10 - Accrued Liabilities (Details) - Accrued Liabilities - USD ($)	Sep. 30, 2015	Jun. 30, 2015
Accrued Liabilities [Abstract]
Credit card charges	$ 67,089	$ 77,103
Accrued payroll	347,757	248,594
Borrower escrows	154,787	161,325
Other liabilities	94,585	109,918
	$ 663,818	$ 596,940

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Note 13 - Commitments (Tables)

3 Months Ended

Sep. 30, 2015

Disclosure Text Block Supplement [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

For the year ended June 30,	Amount
2016	$	486,696
2017		177,191
2018		149,067
2019		27,636
2020
Total	$	840,590

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Note 14 - Fair Value Measurements (Tables)

3 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	September 30, 2015				June 30, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	664,545	$	664,545	$	898,200	$	898,200
Restricted cash		732,500		732,500		732,500		732,500
Accounts receivable		990,016		990,016		987,635		987,635
Loans held for sale		21,847,806		21,847,806		25,459,142		25,459,142
Prepaid expenses		150,487		150,487		98,505		98,505
Loans receivable		87,778		87,778		87,778		87,778
Employee advances		143,415		143,415		56,851		56,851
Security deposits		60,687		60,687		56,017		56,017
Intangible assets		2,779,512		2,779,512		2,779,512		2,779,512
Financial liabilities:
Accounts payable	$	950,207	$	950,207	$	1,077,788	$	1,077,788
Line of credit – related party		134,335		134,335		135,263		135,263
Warehouse lines of credit - related party		21,495,306		21,495,306		24,836,939		24,836,939
Notes payable – related party		115,000		115,000		120,000		120,000
Notes payable – non related party		750,000		750,000		750,000		750,000
Preferred dividends payable – related party		1,117,504		1,117,504		801,333		801,333
Preferred dividends payable – non related party		612,004		612,004		442,050		442,050
Accrued liabilities		663,818		663,818		596,940		596,940
Borrower escrows		94,089		94,089		76,660		76,660

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Note 3 - Property and Equipment

3 Months Ended

Sep. 30, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

	September 30,
	2015			June 30,
	(Unaudited)			2015
Fixtures and equipment	$	649,435		$	623,834
Less: Accumulated depreciation		(360,739	)		(345,829	)
Property and equipment, net	$	288,696		$	278,005

Depreciation expense for the three months ended September 30, 2015 was $19,643 compared to depreciation expense for the three months ended September 30, 2014 of $18,087.

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Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details)		3 Months Ended
	May. 18, 2005 shares	Sep. 30, 2015 USD ($) $ / shares shares	Sep. 30, 2014 USD ($) $ / shares shares	Jun. 30, 2015 USD ($) $ / shares shares	Dec. 14, 2011 $ / shares shares	Aug. 17, 2001 $ / shares shares
Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details) [Line Items]
Common Stock, Shares Authorized (in Shares)		400,000,000		400,000,000	100,000,000
Common Stock, Par or Stated Value Per Share (in Dollars per share) | $ / shares		$ 0.001		$ 0.001	$ 0.001
Number of Reportable Segments		1
Percentage of Loan Applications From Business Contacts and Previous Client Referrals		75.00%
Percentage of Residential Mortgage Loans Processed Using Warehouse Lines of Credit		95.00%
Prepaid Expense, Current (in Dollars) | $		$ 150,487		$ 98,505
Advertising Expense (in Dollars) | $		$ 148,676	$ 156,922
Weighted Average Number of Shares Outstanding, Basic and Diluted (in Shares)		40,354,648	27,576,440
Earnings Per Share, Basic and Diluted (in Dollars per share) | $ / shares		$ (0.02)	$ (0.01)
Warehouse Line Of Credit [Member]
Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details) [Line Items]
Average Days Until Repayment On Line of Credit		15 days
Computer Equipment [Member]
Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life		5 years
PrimeSource Mortgage Inc [Member]
Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details) [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares (in Shares)	10,250,000
Business Acquisition, Percentage of Voting Interests Acquired	92.00%
Loans Requiring Servicing Before Being Sold [Member] | Performing Financial Instruments [Member]
Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details) [Line Items]
Mortgage Loans on Real Estate, Number of Loans		10
Loans Requiring Servicing Before Being Sold [Member] | Estimate of Fair Value Measurement [Member] | Performing Financial Instruments [Member]
Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details) [Line Items]
Mortgage Loans on Real Estate, Number of Loans		9
Durban Holdings, Inc. [Member]
Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details) [Line Items]
Common Stock, Shares Authorized (in Shares)						100,000,000
Common Stock, Par or Stated Value Per Share (in Dollars per share) | $ / shares						$ 0.001
Jumbo Loan [Member] | Loans Requiring Servicing Before Being Sold [Member] | Performing Financial Instruments [Member]
Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details) [Line Items]
Loans Held-for-sale, Accrued Loss (in Dollars) | $		$ 100,000
Loans Held-for-sale, Percentage of Accrued Loss		50.00%
Mortgage Origination Volume [Member]
Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details) [Line Items]
Concentration Risk, Percentage		95.00%
Minimum [Member] | Furniture and Fixtures [Member]
Note 1 - Nature of Business and Summary of Significant Accounting Policies (Details) [Line Items]
Property, Plant and Equipment, Useful Life		5 years

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Note 7 - Intangible Assets (Details) - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2015	Jun. 30, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill, Impairment Loss		$ 0
Valuation Allowance Of Equity	300.00%

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2015	Jun. 30, 2015
Current Assets:
Cash & cash equivalents	$ 664,545	$ 898,200
Accounts receivable	990,016	987,635
Loans held for sale, net	21,847,806	25,459,142
Prepaid expenses	150,487	98,505
Other assets	6,156	4,828
Total current assets	23,659,010	27,448,310
Property and equipment, net	288,696	278,005
Cash restricted for surety bonds	732,500	732,500
Loans receivable	87,778	87,778
Employee advances	143,415	56,851
Goodwill	1,809,429	1,809,429
Other intangible assets, net of accumulated amortization, September 30, 2015 and June 30, 2015 - $117,349	970,083	970,083
Security deposits	60,687	56,017
Total Assets	27,751,598	31,438,973
Current Liabilities:
Accounts payable	950,207	1,077,788
Line of credit - related party	134,335	135,263
Warehouse lines of credit payable- related party	21,495,306	24,836,939
Short term financing	32,117	14,972
Notes payable - related party	115,000	120,000
Notes payable - non related party	750,000	750,000
Dividends payable - related party	1,117,504	801,333
Dividends payable - non related party	612,004	442,050
Accrued liabilities	663,818	596,940
Cash held in escrow for renovation loans	94,089	76,660
Total current liabilities	25,964,380	28,851,945
Total Liabilities	$ 25,964,380	$ 28,851,945
Commitment & Contingencies
Preferred stock, $0.001 par value, 10,000,000 shares authorized:
Common stock, $0.001 par value, 400,000,000 shares authorized, 40,354,648 shares issued and outstanding at September 30, 2015 and June 30, 2015	$ 40,355	$ 40,355
Treasury stock, at cost: shares held 1,771,600 at September 30, 2015 and June 30, 2015	(294,769)	(294,769)
Additional paid in capital	24,990,598	25,370,967
Accumulated deficit	(22,948,976)	(22,529,535)
Total stockholders' equity	1,787,218	2,587,028
Total Liabilities and Stockholders' Equity	27,751,598	31,438,973
Series A Preferred Stock [Member]
Preferred stock, $0.001 par value, 10,000,000 shares authorized:
Convertible Preferred Stock	4	4
Series B Preferred Stock [Member]
Preferred stock, $0.001 par value, 10,000,000 shares authorized:
Convertible Preferred Stock	2	2
Series C Preferred Stock [Member]
Preferred stock, $0.001 par value, 10,000,000 shares authorized:
Convertible Preferred Stock	2	2
Series D Preferred Stock [Member]
Preferred stock, $0.001 par value, 10,000,000 shares authorized:
Convertible Preferred Stock	1	1
Series E Preferred Stock [Member]
Preferred stock, $0.001 par value, 10,000,000 shares authorized:
Convertible Preferred Stock	$ 1	$ 1

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Note 11 - Stockholders' Equity and Issuances (Details) - USD ($)											2 Months Ended		3 Months Ended
	Sep. 14, 2015	Aug. 17, 2015	Jul. 08, 2015	Mar. 26, 2015	Jan. 23, 2015	Dec. 15, 2014	Nov. 26, 2014	Sep. 12, 2014	Jul. 14, 2014	Jul. 03, 2014	Dec. 31, 2014	Mar. 31, 2014	Sep. 30, 2015	Nov. 30, 2014	Sep. 30, 2014	Jun. 30, 2015	Dec. 14, 2011	Dec. 12, 2011
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Common Stock, Shares Authorized													400,000,000			400,000,000	100,000,000
Preferred Stock, Shares Authorized													10,000,000			10,000,000
Common Stock, Par or Stated Value Per Share (in Dollars per share)													$ 0.001			$ 0.001	$ 0.001
Preferred Stock, Par or Stated Value Per Share (in Dollars per share)													$ 0.001			$ 0.001
Stock Issued During Period, Shares, New Issues													0		0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	500,000	100,000	150,000										750,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price (in Dollars per share)	$ 0.187	$ 0.18	$ 0.181										$ 0.185
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value (in Dollars)	$ 50,051	$ 7,805	$ 12,321
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Risk Free Interest Rate	0.33%	0.33%	0.33%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate	112.19%	118.47%	130.60%
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term	4 years	4 years	4 years
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	0.00%	0.00%	0.00%
Common Stock, Shares, Outstanding													40,354,648			40,354,648
Common Stock, Shares, Issued													40,354,648			40,354,648
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)												$ 0.24		$ 0.125
Warrants Issued During Period												454,000		76,000
Class of Warrant or Right, Outstanding													3,582,810
Employee Stock Option [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	4 years	4 years	4 years
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years	3 years	3 years
Placement Agent and Associates [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Class of Warrant or Right, Number of Securities Called by Warrants or Rights											13,160,000
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)											$ 0.011
Class of Warrant or Rights, Fair Value (in Dollars)											$ 124,698
Warrant [Member] | Placement Agent and Associates [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Fair Value Assumptions, Risk Free Interest Rate											0.88%
Fair Value Assumptions, Expected Volatility Rate											174.98%
Fair Value Assumptions, Expected Term											5 years
Fair Value Assumptions, Expected Dividend Rate											0.00%
Minimum [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)													$ 0.088
Maximum [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)													0.44
Director [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Warrant Issued in Connection with Debt, Shares per $1 Debt								0.40
Class of Warrant or Right, Number of Securities Called by Warrants or Rights								48,000
Warrant Term								5 years
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)								$ 0.40
Series E Preferred Stock [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Preferred Stock, Dividend Rate, Percentage							6.00%
Series E Preferred Stock [Member] | Series E SPA [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Preferred Stock, Stock Purchase Agreement, Authorized Amount (in Dollars)							$ 1,250,000
Convertible Preferred Stock, Shares Reserved for Future Issuance							1,250
Share Price (in Dollars per share)							$ 1,000
Series E Preferred Stock [Member] | Director [Member] | LB Merchant PSMH-3, LLC [Member] | Series E SPA [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Stock Issued During Period, Shares, New Issues						210
Convertible Preferred Stock, Conversion Quotient, Base Amount (in Dollars)							$ 1,000
Convertible Preferred Stock, Conversion Price Per Share (in Dollars per share)							$ 0.01
Preferred Stock, Shares Issued						822.5
Convertible Preferred Stock, Shares Issued upon Conversion						82,250,000
Series A and B Preferred Stock [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Convertible Preferred Stock, Conversion Price Per Share (in Dollars per share)													$ 0.10
Convertible Preferred Stock, Shares Issued upon Conversion													57,000,000
Series C and Series D Preferred Stock [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Convertible Preferred Stock, Conversion Price Per Share (in Dollars per share)													$ 0.04
Convertible Preferred Stock, Shares Issued upon Conversion													80,000,000
Series A B C and D Preferred Stock [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Preferred Stock, Dividend Rate, Percentage					6.00%
Prior Certificates of Designation [Member] | Series A and B Preferred Stock [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Convertible Preferred Stock, Conversion Price Per Share (in Dollars per share)													$ 0.24
Convertible Preferred Stock, Shares Issued upon Conversion													24,782,609
Prior Certificates of Designation [Member] | Series C and Series D Preferred Stock [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Convertible Preferred Stock, Conversion Price Per Share (in Dollars per share)													$ 0.08
Convertible Preferred Stock, Shares Issued upon Conversion													40,000,000
Increased Rate of Dividend [Member] | Series A B C and D Preferred Stock [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Preferred Stock, Dividend Rate, Percentage					20.00%
Adjusted Exercise Price [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)												$ 0.10
Director [Member] | Series E Preferred Stock [Member] | LB Merchant PSMH-3, LLC [Member] | Series E SPA [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Stock Issued During Period, Shares, New Issues							612.5
2012 Stock Incentive Plan [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Common Stock, Par or Stated Value Per Share (in Dollars per share)																		$ 0.001
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized																		6,000,000
2015 Stock Incentive Plan [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Common Stock, Par or Stated Value Per Share (in Dollars per share)				$ 0.001
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				40,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period				10 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross													18,600,000
Stock Granted, Value, Share-based Compensation, Net of Forfeitures (in Dollars)													$ 1,074,696
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant													21,400,000
2012 Plan [Member] | Employees and Consultants [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross													5,466,671
Stock Granted, Value, Share-based Compensation, Net of Forfeitures (in Dollars)													$ 257,155
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant													533,329
Convertible Promissory Note [Member] | Director [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Proceeds from Convertible Debt (in Dollars)								$ 120,000
Debt Instrument, Interest Rate During Period								10.00%
Qualified Offering, Minimum Amount (in Dollars)								$ 1,000,000
Asset Purchase Agreement [Member] | Former Employees, Directors and Related Parties [Member]
Note 11 - Stockholders' Equity and Issuances (Details) [Line Items]
Stock Repurchased and Retired During Period, Shares									250,000	1,500,000
Non Monetary Transaction,Sale of Asset (in Dollars)									$ 44,271	$ 227,752

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Note 1 - Nature of Business and Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2015

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Background

As used herein and except as otherwise noted, the terms “Company” or “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

The Company is considered one reporting unit based on its one line of business and the way that management reviews results. 

The Company originates mortgage loans funded either directly off its warehouse lines of credit or through brokering transactions to other third parties. Approximately 95% of the Company’s mortgage origination volume is banked off of its current warehouse lines. The Company has relationships with multiple investors who purchase the loans funded on its warehouse lines. All of the Company’s lending activities are conducted by its subsidiary, Prime Source Mortgage, Inc., a Delaware corporation (“PSMI”).

Historically, a significant portion of the Company’s business has been referral based and purchase oriented (versus refinance). The Company does not directly participate in the secondary markets and further does not maintain a servicing portfolio. Approximately 75% of the Company’s total loan applications are generated from business contacts and previous client referrals. Realtor referrals and other lead sources account for the balance of loan applications.

PSMI is currently licensed in Arizona, Arkansas, California, Colorado, Florida, Kansas, Missouri, Montana, New Jersey, New Mexico, North Dakota, Oklahoma, Oregon, Texas, Utah, Virginia, and Washington.

PSMI solicits and receives applications for secured residential mortgage loans. As a licensed mortgage broker/banker, PSMI offers mortgage banking services using its existing warehouse lines of credit.  The warehouse lines of credit are available for funding of mortgage loans for a short term period.  The warehouse lines are secured by the underlying mortgage loans and are renewed annually.  The warehouse lines of credit are repaid typically within an overall average of 15 days when the loan is sold to a third party.  PSMI does not intend to hold and service the loans. These lines of credit can only be used to fund mortgage loans and cannot provide operating funds for the Company.  It is estimated that approximately 95% of all of the residential mortgage loans processed by us are currently being closed using these available warehouse lines of credit.  Warehouse capacity with our primary warehouse provider, a related party, is adequate to support our current volumes, as well as anticipated growth. 

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, 2015, which were filed with the Securities and Exchange Commission on October 13, 2015 on Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending June 30, 2016.

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 financial statements. The financial statements and notes are the representation of the Company’s management who is responsible for their integrity and objectivity. The 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 WWYH, Inc., and WWYH's wholly-owned subsidiary Prime Source Mortgage, Inc. All material intercompany transactions have been eliminated in the consolidation.

Use of Estimates

Management uses estimates and assumptions in preparing 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 intangibles, estimated depreciable lives of property, plant and equipment, 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 include cash on hand and cash in checking and savings accounts, and all investment instruments with an original maturity of three months or less.

Restricted Cash

The Company has certain cash balances set aside as collateral to secure various bonds required pursuant to the licensing requirements in some of the states in which it conducts business.

Accounts Receivable

Accounts receivable represent commissions earned and fees charged on closed loans that the Company has not received. 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.

Employee Advances and Loans Receivable

Employee advances and loans 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.

Although the Company does not intend to be a loan servicer, from time to time it is necessary for certain loans to be serviced for a period of time. Even in these situations the Company intends to service the loan only for the amount of time necessary to get the loan sellable to a third party investor. As of September 30, 2015, the Company had ten such loans that required servicing before they could be sold to an investor. All ten loans were performing and nine were carried on the books at their fair value, determined using current secondary market prices for loans with similar coupons, maturities and credit quality. As of September 30, 2015, the Company accrued a loan loss of $100,000 on one jumbo loan underwritten by a third party service provider in which the Company will have to offer a discount to the ultimate purchaser. Under agreements between the service provider and the Company, each company will incur fifty percent of the loss, so the Company is responsible for fifty percent of the accrued loss The Company has not recorded any adjustment to the fair value for any of the other nine loans as any accrued gain or loss would not be material to the Company.

As noted above, 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.

Prepaid Expenses

Prepaid expenses are advance payments for products or services that will be used in operations during the next 12 or more months. Prepaid expenses consist of prepaid insurance, rents and prepaid investor relations and other third party services provided by outside consultants and amounted to $150,487 and $98,505 at September 30, 2015 and June 30, 2015, respectively.

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 (years)	5
Computer equipment (years)	5

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and other intangible assets with an indefinite useful life are not subject to amortization but are reviewed for impairment annually or more frequently whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans 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 was $148,676 and $156,922 for the three months ended September 30, 2015 and 2014, respectively. 

Share Based Payment Plan

The Company grants stock options and restricted stock to certain executive officers, key employees, directors and independent contractors. Stock options have been granted for a fixed number of shares, vest equally over a three-year period and are valued using the Black-Scholes option pricing model. Stock grants have been awarded for a fixed number of shares with a value equal to the fair value of the Company’s common stock on the grant date. Stock-based compensation expense is recorded net of estimated forfeitures for the three months ended September 30, 2015 and 2014 based on the stock-based awards that were expected to vest during such periods. Under the 2012 and 2015 Stock Incentive Plans, the Company can grant restricted stock, restricted stock units, options, or other equity based awards to employees, related parties, and unrelated contractors in connection with the performance of services provided to the Company by the awardees.

Revenue Recognition

The Company’s revenue is derived primarily from revenue earned from the origination and sale of mortgage loans. Revenues earned from origination of mortgage loans is recognized on the earlier of the settlement date of the underlying transaction or the funding date of the loan. Loans are funded through warehouse lines of credit and are sold to investors, typically within 15 days. The gain or loss on the sale of loans is realized on the date the loans are sold.

Loss Per Common Share

Basic and diluted loss per common share is computed by dividing the loss available to common stockholders 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 had been converted to common stock because the effect would be anti-dilutive. The weighted average number of common shares outstanding during the three months ended September 30, 2015 and 2014 were 40,354,648 and 27,576,440, respectively. Loss per common share from continuing operations for the three months ended September 30, 2015 and 2014 was $(0.02) and $(0.01), respectively.

Compensated Absences

The Company records an accrual for accrued vacation at each period end. Other compensated absences are expensed as incurred.

Reclassification

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

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. 

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Note 3 - Property and Equipment (Details) - Property and Equipment - USD ($)	Sep. 30, 2015	Jun. 30, 2015
Property and Equipment [Abstract]
Fixtures and equipment	$ 649,435	$ 623,834
Less: Accumulated depreciation	(360,739)	(345,829)
Property and equipment, net	$ 288,696	$ 278,005

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Note 17 - Subsequent Events

3 Months Ended

Sep. 30, 2015

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE 17 – SUBSEQUENT EVENTS

Modification of loan and security agreement

On October 1, 2015, we executed modifications to the loan agreement and related documents with Quintium Opportunities Fund, LP. The modified documents exclude from the loan collateral any acceptable assets of PSMI that are necessary to satisfy the minimum net worth requirements as stipulated by HUD guidelines. The modifications also increased the interest rate to 18% annually.

Conversion of Series D preferred shares

On October 23, 2015, holders of the Series D preferred shares converted 80 shares into 2,000,000 shares of common stock.

Annual Recertification with HUD

PSMI has not yet completed its annual recertification with HUD. The recertification was due on or before September 30, 2015. On October 1, 2015, PSMI filed a notice of material event with HUD detailing that it had not meet the HUD minimum net worth requirement due to the pledge of assets relating to the loan with Quintium Opportunities Fund, LP. The recertification process is expected to be completed before the end of calendar year.

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Note 4 - Statements of Cash Flows Additional Disclosures (Details) - Supplemental Disclosures for Cash Flows - USD ($)	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Supplemental Cash Flow Disclosures:
Cash paid for interest	$ 38,246	$ 3,994
Stock issued for services	0	0
Stock and Stock Options Issued as Employee Bonus [Member]
Supplemental Cash Flow Disclosures:
Stock and stock options issued to employees as bonus	$ 105,757	$ 14,281

XML

Note 3 - Property and Equipment (Tables)

3 Months Ended

Sep. 30, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

	September 30,
	2015			June 30,
	(Unaudited)			2015
Fixtures and equipment	$	649,435		$	623,834
Less: Accumulated depreciation		(360,739	)		(345,829	)
Property and equipment, net	$	288,696		$	278,005

XML

Note 2 - Allowance for Doubtful Accounts

3 Months Ended

Sep. 30, 2015

Disclosure Text Block Supplement [Abstract]

Allowance for Credit Losses [Text Block]

NOTE 2 – ALLOWANCE FOR DOUBTFUL ACCOUNTS

Accounts receivable is 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 did not record an allowance for doubtful accounts as of September 30, 2015 or June 30, 2015.

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Sep. 30, 2015	Jun. 30, 2015
Intangible assets, accumulated amortization (in Dollars)	$ 117,349	$ 117,349
Preferred stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Common stock par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock shares authorized	400,000,000	400,000,000
Common stock shares outstanding	40,354,648	40,354,648
Common stock shares issued	40,354,648	40,354,648
Treasury stock shares held	1,771,600	1,771,600
Series A Preferred Stock [Member]
Convertible Preferred Stock, Shares Outstanding	3,700	3,700
Series B Preferred Stock [Member]
Convertible Preferred Stock, Shares Outstanding	2,000	2,000
Series C Preferred Stock [Member]
Convertible Preferred Stock, Shares Outstanding	1,800	1,800
Series D Preferred Stock [Member]
Convertible Preferred Stock, Shares Outstanding	1,400	1,400
Series E Preferred Stock [Member]
Convertible Preferred Stock, Shares Outstanding	822.5	822.5

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Note 12 - Income (Loss) Per Common Share

3 Months Ended

Sep. 30, 2015

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE 12 – INCOME (LOSS) PER COMMON SHARE

The Company’s outstanding options and warrants to acquire common stock totaled 26,401,143 as of September 30, 2015. These common stock equivalents may dilute earnings per share.

Basic and diluted loss per common share is computed by dividing the loss available to common stockholders 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 had been converted to common stock because the effect would be anti-dilutive. The weighted average number of common shares outstanding during the three months ended September 30, 2015 and 2014 was 40,354,648 and 27,576,440, respectively. Loss per common share from continuing operations for the three months ended September 30, 2015 and 2014 was $(0.02) and $(0.01), respectively.

XML

Document And Entity Information - shares	3 Months Ended
	Sep. 30, 2015	Nov. 23, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	PSM HOLDINGS INC
Document Type	10-Q
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding		42,104,648
Amendment Flag	false
Entity Central Index Key	0001362180
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2015
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1

XML

Note 13 - Commitments

3 Months Ended

Sep. 30, 2015

Disclosure Text Block Supplement [Abstract]

Commitments Disclosure [Text Block]

NOTE 13 – COMMITMENTS

Assets pledged as security

On February 17, 2015, the Company executed a note in the amount of $1,000,000 and a related security agreement with Quintium Private Opportunities Fund, LP. Only $750,000 of the note has been disbursed and is outstanding. The original loan documents contained a pledge of all the assets of the Company’s wholly owned subsidiaries, including PSMI. As the PSMI assets were pledged, it caused PSMI to fail its net worth requirements with HUD as of June 30, 2015 and September 30, 2015. See subsequent events under Note 18.

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. 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.

On September 8, 2015, the Company executed a note extension (effective April 15, 2015) with NWBO in which the maturity date was extended until September 30, 2016 and NWBO agreed to fixed payments of principal based on the number of installations of the NWBO technology. In addition, the Company executed a termination agreement in which NWBO and the Company mutually released one another from any obligations under the original license agreement.

Lease Commitments

The Company leases approximately 2,181 square feet of office space in Edmond, Oklahoma, which is used for the principal executive offices and as the operating location of PSMI. The one-year lease was executed May 7, 2015, and the monthly lease payments are $3,464.

The Company leases office space for its branches and property and equipment under cancellable and non-cancellable lease commitments. The monthly rent for office premises and property and equipment is $94,283. The leases expire between October 2015 and December 2018. Total rent expense recorded for the three months ended September 30, 2015 and 2014 was $243,207 and $172,235, respectively.

Total minimum lease commitments for branch offices and property and equipment leases at September 30, 2015 are as follows:

For the year ended June 30,	Amount
2016	$	486,696
2017		177,191
2018		149,067
2019		27,636
2020
Total	$	840,590

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Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Revenues
Revenues - related party		$ 200,108
Revenues - non related party	$ 5,149,860	3,385,784
Total revenues	5,149,860	3,585,892
Operating expenses
Selling, general & administrative	5,510,087	3,780,387
Depreciation and amortization	19,643	34,760
Total operating expenses	5,529,730	3,815,147
Loss from operations	(379,870)	(229,255)
Non-operating income (expense):
Interest expense	(40,270)	(5,420)
Interest and dividend income	1,654	1,539
Realized gain (loss) on sale of assets	(955)
Total non-operating income (expense)	(39,571)	(3,881)
Loss from continuing operations before income tax	(419,441)	(233,136)
Provision for income tax	0	0
Net loss	(419,441)	(233,136)
Dividends on preferred stock	(486,125)	(133,500)
Net income (loss) available to common shareholders	$ (905,566)	$ (366,636)
Net loss per common share and equivalents - basic and diluted loss from operations (in Dollars per share)	$ (0.02)	$ (0.01)
Weighted average shares of share capital outstanding - basic & diluted (in Shares)	40,354,648	27,576,440

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Note 7 - Intangible Assets

3 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE 7 – INTANGIBLE ASSETS

Intangible assets consist of:

	September 30,
	2015 (Unaudited)			June 30, 2015
Intangible assets not subject to amortization:
FHA "Full Eagle" status	$	938,790		$	938,790
Goodwill		1,809,429			1,809,429
State licenses		31,293			31,293
		2,779,512			2,779,512
Less: Impairments		-			-
Total		2,779,512			2,779,512
Intangible assets subject to amortization:
Customer lists		117,349			117,349
Less: Accumulated amortization – customer lists		(117,349	)		(117,349	)
Total		-			-
Total Intangible assets, net	$	2,779,512		$	2,779,512

It is the Company’s policy to assess the carrying value of its intangible assets for impairment on an annual basis, or more frequently, if warranted by circumstances. The Company completed an annual impairment test of goodwill as of June 30, 2015 and no impairment losses were incurred. As of that date, the fair value of equity exceeded the carrying value (including goodwill) by 300%, indicating no impairment of goodwill. This test involved the use of estimates related to the fair value of the goodwill, and requires a significant degree of judgment and the use of subjective assumptions. The fair value of the goodwill and other intangible assets was determined using a discounted cash flow method. This method required management to make estimates related to future revenue, expenses and income tax rates.

The valuation methodology assumes the Company will generate an operating profit beginning in the next fiscal year ending June 30, 2016. Although the Company has made significant improvements in the last six quarters in maximizing revenue per funded loan and in reducing fixed and variable expenses, the Company has never generated an annual operating profit.

Any of the following events or changes in circumstances could reasonably be expected to negatively affect the Company’s key assumptions:

● Significant change in mortgage interest rates;

● Loss of the Company’s primary warehouse lender;

● Additional or new regulatory and compliance requirements that restrict its plan for growth;

● The loss of key production personnel; or

● Any default on our obligation to preferred shareholders or secured note holders.

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Note 6 - Employee Advances

3 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Financing Receivables [Text Block]

NOTE 6 –EMPLOYEE ADVANCES

From time to time the Company advances payroll amounts to employees. The advances are short-term in nature. Employee advances amounted to $143,415 and $56,851 as of September 30, 2015 and June 30, 2015, respectively.

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Accounting Policies, by Policy (Policies)

3 Months Ended

Sep. 30, 2015

Accounting Policies [Abstract]

Company Background [Policy Text Block]

Company Background

As used herein and except as otherwise noted, the terms “Company” or “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.

Nature of Operations [Policy Text Block]

Business Activity

The Company is considered one reporting unit based on its one line of business and the way that management reviews results. 

The Company originates mortgage loans funded either directly off its warehouse lines of credit or through brokering transactions to other third parties. Approximately 95% of the Company’s mortgage origination volume is banked off of its current warehouse lines. The Company has relationships with multiple investors who purchase the loans funded on its warehouse lines. All of the Company’s lending activities are conducted by its subsidiary, Prime Source Mortgage, Inc., a Delaware corporation (“PSMI”).

Historically, a significant portion of the Company’s business has been referral based and purchase oriented (versus refinance). The Company does not directly participate in the secondary markets and further does not maintain a servicing portfolio. Approximately 75% of the Company’s total loan applications are generated from business contacts and previous client referrals. Realtor referrals and other lead sources account for the balance of loan applications.

PSMI is currently licensed in Arizona, Arkansas, California, Colorado, Florida, Kansas, Missouri, Montana, New Jersey, New Mexico, North Dakota, Oklahoma, Oregon, Texas, Utah, Virginia, and Washington.

PSMI solicits and receives applications for secured residential mortgage loans. As a licensed mortgage broker/banker, PSMI offers mortgage banking services using its existing warehouse lines of credit.  The warehouse lines of credit are available for funding of mortgage loans for a short term period.  The warehouse lines are secured by the underlying mortgage loans and are renewed annually.  The warehouse lines of credit are repaid typically within an overall average of 15 days when the loan is sold to a third party.  PSMI does not intend to hold and service the loans. These lines of credit can only be used to fund mortgage loans and cannot provide operating funds for the Company.  It is estimated that approximately 95% of all of the residential mortgage loans processed by us are currently being closed using these available warehouse lines of credit.  Warehouse capacity with our primary warehouse provider, a related party, is adequate to support our current volumes, as well as anticipated growth.

Basis of Accounting, Policy [Policy Text Block]

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, 2015, which were filed with the Securities and Exchange Commission on October 13, 2015 on Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending June 30, 2016.

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 financial statements. The financial statements and notes are the representation of the Company’s management who is responsible for their integrity and objectivity. The 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.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

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

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

Management uses estimates and assumptions in preparing 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 intangibles, estimated depreciable lives of property, plant and equipment, 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, Unrestricted Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

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

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Restricted Cash

The Company has certain cash balances set aside as collateral to secure various bonds required pursuant to the licensing requirements in some of the states in which it conducts business.

Receivables, Policy [Policy Text Block]

Accounts Receivable

Accounts receivable represent commissions earned and fees charged on closed loans that the Company has not received. 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.

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

Employee Advances and Loans Receivable

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

Finance, Loan and Lease Receivables, Held-for-sale, Policy [Policy Text Block]

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.

Although the Company does not intend to be a loan servicer, from time to time it is necessary for certain loans to be serviced for a period of time. Even in these situations the Company intends to service the loan only for the amount of time necessary to get the loan sellable to a third party investor. As of September 30, 2015, the Company had ten such loans that required servicing before they could be sold to an investor. All ten loans were performing and nine were carried on the books at their fair value, determined using current secondary market prices for loans with similar coupons, maturities and credit quality. As of September 30, 2015, the Company accrued a loan loss of $100,000 on one jumbo loan underwritten by a third party service provider in which the Company will have to offer a discount to the ultimate purchaser. Under agreements between the service provider and the Company, each company will incur fifty percent of the loss, so the Company is responsible for fifty percent of the accrued loss The Company has not recorded any adjustment to the fair value for any of the other nine loans as any accrued gain or loss would not be material to the Company.

As noted above, 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.

Prepaid Expenses [Policy Text Block]

Prepaid Expenses

Prepaid expenses are advance payments for products or services that will be used in operations during the next 12 or more months. Prepaid expenses consist of prepaid insurance, rents and prepaid investor relations and other third party services provided by outside consultants and amounted to $150,487 and $98,505 at September 30, 2015 and June 30, 2015, respectively.

Property, Plant and Equipment, Policy [Policy Text Block]

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 (years)	5
Computer equipment (years)	5

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill and Indefinite-Lived Intangible Assets

Goodwill and other intangible assets with an indefinite useful life are not subject to amortization but are reviewed for impairment annually or more frequently whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. The annual evaluation for impairment of goodwill and indefinite-lived intangibles is based on valuation models that incorporate assumptions and internal projections of expected future cash flows and operating plans 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.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

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 Tax, Policy [Policy Text Block]

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 [Policy Text Block]

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 Costs, Policy [Policy Text Block]

Advertising

Advertising costs are expensed as incurred. Advertising expense was $148,676 and $156,922 for the three months ended September 30, 2015 and 2014, respectively.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Share Based Payment Plan

The Company grants stock options and restricted stock to certain executive officers, key employees, directors and independent contractors. Stock options have been granted for a fixed number of shares, vest equally over a three-year period and are valued using the Black-Scholes option pricing model. Stock grants have been awarded for a fixed number of shares with a value equal to the fair value of the Company’s common stock on the grant date. Stock-based compensation expense is recorded net of estimated forfeitures for the three months ended September 30, 2015 and 2014 based on the stock-based awards that were expected to vest during such periods. Under the 2012 and 2015 Stock Incentive Plans, the Company can grant restricted stock, restricted stock units, options, or other equity based awards to employees, related parties, and unrelated contractors in connection with the performance of services provided to the Company by the awardees.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company’s revenue is derived primarily from revenue earned from the origination and sale of mortgage loans. Revenues earned from origination of mortgage loans is recognized on the earlier of the settlement date of the underlying transaction or the funding date of the loan. Loans are funded through warehouse lines of credit and are sold to investors, typically within 15 days. The gain or loss on the sale of loans is realized on the date the loans are sold.

Earnings Per Share, Policy [Policy Text Block]

Loss Per Common Share

Basic and diluted loss per common share is computed by dividing the loss available to common stockholders 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 had been converted to common stock because the effect would be anti-dilutive. The weighted average number of common shares outstanding during the three months ended September 30, 2015 and 2014 were 40,354,648 and 27,576,440, respectively. Loss per common share from continuing operations for the three months ended September 30, 2015 and 2014 was $(0.02) and $(0.01), respectively.

Compensated Absences Policy [Policy Text Block]

Compensated Absences

The Company records an accrual for accrued vacation at each period end. Other compensated absences are expensed as incurred.

Reclassification, Policy [Policy Text Block]

Reclassification

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

New Accounting Pronouncements, Policy [Policy Text Block]

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.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

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Note 14 - Fair Value Measurements

3 Months Ended

Sep. 30, 2015

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 14 – 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 all the assets and liabilities, other than warehouse lines of credit, loans held for sale which were all level 1 inputs, and intangible assets which were level three inputs, were determined using Level 2 inputs The carrying amounts and fair values of the Company’s financial instruments at September 30, 2015 and June 30, 2015 are as follows:

	September 30, 2015				June 30, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets:
Cash and cash equivalents	$	664,545	$	664,545	$	898,200	$	898,200
Restricted cash		732,500		732,500		732,500		732,500
Accounts receivable		990,016		990,016		987,635		987,635
Loans held for sale		21,847,806		21,847,806		25,459,142		25,459,142
Prepaid expenses		150,487		150,487		98,505		98,505
Loans receivable		87,778		87,778		87,778		87,778
Employee advances		143,415		143,415		56,851		56,851
Security deposits		60,687		60,687		56,017		56,017
Intangible assets		2,779,512		2,779,512		2,779,512		2,779,512
Financial liabilities:
Accounts payable	$	950,207	$	950,207	$	1,077,788	$	1,077,788
Line of credit – related party		134,335		134,335		135,263		135,263
Warehouse lines of credit - related party		21,495,306		21,495,306		24,836,939		24,836,939
Notes payable – related party		115,000		115,000		120,000		120,000
Notes payable – non related party		750,000		750,000		750,000		750,000
Preferred dividends payable – related party		1,117,504		1,117,504		801,333		801,333
Preferred dividends payable – non related party		612,004		612,004		442,050		442,050
Accrued liabilities		663,818		663,818		596,940		596,940
Borrower escrows		94,089		94,089		76,660		76,660

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Note 10 - Accrued Liabilities

3 Months Ended

Sep. 30, 2015

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

NOTE 10 – ACCRUED LIABILITIES

Accrued liabilities consisted of:

	September 30,
	2015 (Unaudited)		June 30, 2015
Credit card charges	$	67,089	$	77,103
Accrued payroll		347,757		248,594
Borrower escrows		154,787		161,325
Other liabilities		94,585		109,918
	$	663,818	$	596,940

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Note 8 - Warehouse Lines of Credit

3 Months Ended

Sep. 30, 2015

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 8 – WAREHOUSE LINES OF CREDIT

The Company has two warehouse lines of credit available as of September 30, 2015 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 related party mortgage banker for up to $1,000,000 bearing an annual interest rate of 5%. On October 13, 2013, the warehouse line of credit was increased to $75,000,000 for the purpose of funding residential mortgage loans.  The warehouse line of credit matures on October 10, 2016. The outstanding balance on this line of credit as of September 30, 2015 was $5,965,849;

(ii) On November 18, 2011, the Company entered into a “Repo” warehouse line of credit agreement with a related party mortgage banker for up to $5,000,000 bearing an annual interest rate of 5% for funding residential mortgage loans. Pursuant to the terms of the agreement, the Company could be required to repurchase the loan subject to certain terms and conditions. On October 10, 2013, the warehouse line of credit was increased to $75,000,000 and now matures on October 10, 2016. The outstanding balance on this line of credit as of September 30, 2015 was $15,529,457.

The warehouse lines of credit provide short term funding for mortgage loans originated by the Company’s branch offices. The warehouse lines of credit are repaid when the loans are sold to third party investors, typically within 15 days for most loans. Subsequent to September 30, 2015, approximately 98% of the loans outstanding on the credit lines have been purchased by the secondary investors.

The Company does not intend to hold and service the loans. The Company had $21,847,806 in loans held for sale against the warehouse lines of credit as of September 30, 2015. 

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Note 9 - Notes Payable

3 Months Ended

Sep. 30, 2015

Note Payable [Abstract]

Note Payable [Text Block]

NOTE 9 – NOTES PAYABLE

On February 18, 2015, the Company executed a loan agreement, security agreement, and promissory note (collectively the “Loan”) with an unrelated third party lender. The Loan requires monthly interest only payments at fourteen percent annually (14%) beginning March 1, 2015. The principle balance will become due on February 1, 2016. The amount of the Loan is $750,000 and can be increased to $1,000,000 at the sole discretion of the lender. The Loan is secured by all the Company’s tangible and intangible assets, except as such assets are needed to meet the minimum net worth requirement of HUD. The Company incurred legal fees and other loan costs of $50,000 in the aggregate which were deducted from proceeds received by the Company. The Loan restricts the amount of the proceeds that can be used to settle payables already incurred. See Note 17 “Subsequent Events”.

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Note 11 - Stockholders' Equity and Issuances

3 Months Ended

Sep. 30, 2015

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 11 – STOCKHOLDERS’ EQUITY AND ISSUANCES

The Company’s capitalization at September 30, 2015 was 400,000,000 authorized common shares and 10,000,000 authorized preferred shares, both with a par value of $0.001 per share.

Preferred Stock

On November 26, 2014, the Company entered into a Stock Purchase Agreement dated effective November 24, 2014 (the “Series E SPA”) providing for the issuance and sale of up to $1,250,000 of the Company’s Series E 6% Convertible Preferred Stock (1,250 shares) at a purchase price of $1,000 per share (the “Series E Preferred Stock”). The first closing of the Series E SPA occurred on November 26, 2014, with 612.5 shares of Series E Preferred Stock being sold to LB Merchant PSMH-3, LLC, an entity controlled by Michael Margolies, a director and principal shareholder of the Company (the “Purchaser”). Each share of Series E Preferred Stock is convertible into a number of shares of common stock of the Company equal to the quotient of (i) $1,000 (subject to adjustment for stock splits, stock dividends, recapitalizations, and the like) plus the amount of accrued but unpaid dividends, divided by (ii) the conversion price then in effect. The initial conversion price is $0.01, subject to adjustment. The holders of Series E Preferred Stock are entitled to certain voting rights designated in the certificate of designation for the series. Holders of the shares of Series E Preferred Stock are entitled to receive cumulative cash dividends at the rate per share (as a percentage of the stated value per share) of 6% per annum from the date of issuance, payable quarterly in arrears on April 15, July 15, October 15 and January 15, beginning on January 15, 2015.

On December 15, 2014, the second closing of the Series E SPA occurred with 210 shares of Series E Preferred Stock being sold to the Purchaser. In total, the Company sold to the Purchaser 822.5 shares of Series E Preferred Stock convertible into 82,250,000 common shares. The holders of Series E Preferred Stock are entitled to certain voting rights designated in the certificate of designation for the series.

Holders of the Series E Preferred Stock will have demand and piggyback registration rights for the common stock issuable upon conversion of the Series E Preferred Stock. The registration rights are pari passu with the registration rights of the Company’s Series A 6% Convertible Preferred Stock (“Series A Preferred Stock”), Series B 6% Convertible Preferred Stock (“Series B Preferred Stock”), Series C 6% Convertible Preferred Stock (“Series C Preferred Stock”), and Series D 6% Convertible Preferred Stock (“Series D Preferred Stock”).

In connection with the first closing of the Series E SPA, the Company amended the Stock Purchase Agreement dated February 3, 2013 and amended on April 1, 2014 (the “Series A & B SPA”), entered into in connection with the sale of the Series A Preferred Stock and Series B Preferred Stock and also amended the original Stock Purchase Agreement dated April 1, 2014 (the “Series C & D SPA”), entered into in connection with the sale of the Series C Preferred Stock and Series D Preferred Stock. The amendments permitted the issuance of the Series E Preferred Stock senior to dividend and liquidation rights of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock.

Pursuant to the provisions of the Certificates of Designation for the Series A Preferred Stock and Series B Preferred Stock regarding adjustments in conversion price, because the Company issued and sold additional shares at a price less than the current $0.24 conversion price of the Series A Preferred Stock and Series B Preferred Stock, the conversion price was adjusted to $0.10 per share. After this adjustment to the conversion price of the Series A Preferred Stock and Series B Preferred Stock, the Series A Preferred Stock and Series B Preferred Stock would convert into a total of 57,000,000 shares of common stock (adjusted from 24,782,609).

Pursuant to the provisions of the Certificates of Designation for the Series C Preferred Stock and Series D Preferred Stock regarding adjustments in conversion price, because the Company issued and sold additional shares at a price less than the current $0.08 conversion price of the Series C Preferred Stock and Series D Preferred Stock, the conversion price was adjusted to $0.04 per share. After this adjustment to the conversion price of the Series C Preferred Stock and Series D Preferred Stock, the Series C Preferred Stock and Series D Preferred Stock would convert into a total of 80,000,000 shares of common stock (adjusted from 40,000,000).

Default on Preferred Dividends

On January 23, 2015, an event of default occurred due to the Company’s non-payment of dividends due the preferred holders on October 15, 2014 and January 15, 2015. After the occurrence of the default event, the preferred dividend rate automatically, as of January 23, 2015, increased to a rate per annum of 20% of the Stated Value (as defined in the Certificates of Designation for the Preferred Stock), payable in cash on a monthly basis on the 15^th day of each month until the event of default is cured, upon which the preferred dividend will return to a rate of 6% per annum of the Stated Value. The Company did not cure the default, nor make any additional or required dividend payments that were due February 15, 2015 and the 15^th of each month thereafter.

Following is the status of the share based payment plans during the three months ended September 30, 2015 and 2014:

2012 Stock Incentive Plan and 2015 Stock Incentive Plan

On December 12, 2011, the stockholders of the Company authorized and approved the 2012 Stock Incentive Plan (the “2012 Plan”) to issue up to 6,000,000 shares of Common Stock of the Company at $0.001 par value per share. The 2012 Plan became effective January 1, 2012.

On March 26, 2015 (the “Effective Date”) the Board of Directors of the Company approved the 2015 Stock Incentive Plan (the “2015 Plan”). Awards may be made under the 2015 Plan for up to 40,000,000 shares of common stock of the Company at $0.001 par value per share. 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 2015 Plan. No awards can be granted under the 2015 Plan after the expiration of 10 years from the Effective Date, but awards previously granted may extend beyond that date. Awards may consist of both incentive and non-statutory options, restricted stock units, stock appreciation rights, and restricted stock awards.

On July 8, 2015, the Board of Directors granted four-year options to various employees to purchase an aggregate of 150,000 shares of common stock at $0.181 per share vesting over a three-year period. The options were granted under the Company’s 2015 Stock Incentive Plan. The fair value of options was determined to be $12,321 calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rates of 0.33%, volatility of 130.6%, a four-year term and dividend yield of 0%.

On August 17, 2015, the Board of Directors granted four-year options to various employees to purchase an aggregate of 100,000 shares of common stock at $0.18 per share vesting over a three-year period. The options were granted under the Company’s 2015 Stock Incentive Plan. The fair value of options was determined to be $7,805 calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rates of 0.33%, volatility of 118.47%, a four-year term and dividend yield of 0%.

On September 14, 2015, the Board of Directors granted four-year options to various employees to purchase an aggregate of 500,000 shares of common stock at $0.187 per share vesting over a three-year period. The options were granted under the Company’s 2015 Stock Incentive Plan. The fair value of options was determined to be $50,051 calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rates of 0.33%, volatility of 112.19%, a four-year term and dividend yield of 0%.

As of September 30, 2015, the Company has granted 5,466,671 shares of common stock or stock options valued at $257,155 to employees and a consultant under the 2012 Plan and 533,329 common shares remained unissued and available for future issuances under the 2012 Plan. Under the 2015 Plan, the Company has granted 18,600,000 shares valued at $1,074,696 and 21,400,000 remained unissued and available for future issuance under the 2015 Plan

A summary of stock option activity for the last two years is as follows:

	For the three months ended September 30,
	2015					2014
				Weighted-					Weighted-
				Average					Average
	Number of			Exercise		Number of			Exercise
	Shares			Price		Shares			Price
Options outstanding at beginning of the period		24,760,000		$	0.13		2,910,000			0.14
Options granted		750,000			0.185		-			-
Options exercised		-			-		-			-
Options forfeited/expired		(2,691,667	)		0.206		(166,667	)		0.40
Options outstanding at end of the period		22,818,333		$	0.125		2,743,333		$	0.14
Options exercisable as of September 30		928,333		$	0.17		158,533		$	0.36

Other Stock Issuances

The Company did not issue any common stock for either the three months ended September 30, 2015 or 2014.

Repurchase of Stock

On July 3, 2014, the Company purchased 1,500,000 shares of its common stock from two former employees, directors and related parties. The Company paid for the shares by exchanging certain assets valued at $227,752. The shares are reflected as treasury stock on the accompanying balance sheet..

On July 14, 2014, the Company purchased 250,000 shares of its common stock from a former employee, director and related party. The Company paid for the shares by exchanging certain assets valued at $44,271. The shares are reflected as treasury stock on the accompanying balance sheet.

Total common shares issued and outstanding at September 30, 2015 was 40,354,648.

Warrant issuances

On September 12, 2014, the Company entered into a loan agreement with the Lender defined in Note 5. Under the terms of the loan agreement, the Lender agreed to loan $120,000 for operating expenses of the Company and its operating subsidiary, as well as to fund growth of the Company. The funds were received by the Company on September 12, 2014. The loan is evidenced by a 10% Convertible Promissory Note which bears interest at 10% per annum and matures September 12, 2015, unless extended through mutual consent. The note is convertible at the per share rate of common stock sold pursuant to a Qualified Offering by the Company. The term “Qualified Offering” means one or more offerings (whether or not proceeds are received by the Company pursuant to such offering) of debt or equity securities of the Company to non-affiliates in the aggregate amount of at least $1,000,000 commenced after the note issuance date. The conversion price is determined by the lowest of either the offering price per common share or the conversion or exercise price for common stock in any such Qualified Offering. In addition, the Lender received four tenths (0.40) of one common stock purchase warrant for each $1.00 loaned to the Company (totaling 48,000 warrants). Each five-year warrant is exercisable at $0.40 per share, subject to adjustment in the event of the issuance of additional common shares or common stock equivalents at less than the exercise price. The warrants also provide for cashless exercise. The warrants are not transferable or assignable without the prior consent of the Company.

Pursuant to the Preferred Series E Stock transaction in November and December 2014, and in accordance with the placement agent agreement, the Company issued warrants to purchase 13,160,000 shares of the Company’s common stock to the placement agent and its associates as placement fees in the above transaction. The warrants are exercisable at $0.011 and expire on November 26, 2019. The fair value of warrants was determined to be $124,698 calculated using the Black-Scholes option pricing model using the assumptions of risk free discount rates of 0.88%, volatility of 174.98%, a five-year term and dividend yield of 0%. Since the warrants were issued in conjunction with the capital raise, no expense was recorded in the accompanying financial statements.

The 454,000 warrants issued in February and March 2014, as amended, contained provisions requiring adjustment to the exercise price in the event the Company were to issue or sell additional shares of common stock pursuant to convertible securities or common stock equivalents at a price per share less than the exercise price of these warrants. Given the exercise price of the Series E Preferred Stock of $0.01 (less than the exercise price of the warrants of $0.24), the adjusted exercise price of these warrants became $0.10 at the first closing of the Series E SPA.

The 76,000 warrants issued in September and November 2014 contained provisions requiring adjustment to the exercise price in the event the Company were to issue or sell additional shares of common stock pursuant to convertible securities or common stock equivalents at a price per share less than the exercise price of these warrants. Given the exercise price of the Series E Preferred Stock of $0.01 (less than the exercise price of the warrants of $0.40), the adjusted exercise price of these warrants became $0.125 at the first closing of the Series E SPA.

The Company has a total of 3,582,810 warrants outstanding as of September 30, 2015 at exercise prices ranging between $0.088 and $0.44. The warrants have expiration dates ranging from February 5, 2018 through December 15, 2019.

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Note 3 - Property and Equipment (Details) - USD ($)	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Property, Plant and Equipment [Abstract]
Depreciation	$ 19,643	$ 18,087

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Note 16 - Concentrations (Details) - USD ($)	3 Months Ended	14 Months Ended
	Sep. 30, 2015	Nov. 22, 2015	Jun. 30, 2015
Note 16 - Concentrations (Details) [Line Items]
Line of Credit Facility, Interest Rate During Period	5.00%
Warehouse Agreement Borrowings, Related Parties	$ 21,495,306		$ 24,836,939
Subsequent Event [Member]
Note 16 - Concentrations (Details) [Line Items]
Percentage of Loans Purchased by Investors		98.00%
Mortgage Banker [Member]
Note 16 - Concentrations (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 75,000,000

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Note 16 - Concentrations

3 Months Ended

Sep. 30, 2015

Risks and Uncertainties [Abstract]

Concentration Risk Disclosure [Text Block]

NOTE 16 - CONCENTRATIONS

Concentration of Warehouse Lenders

The Company entered into two warehouse line of credit agreements with a mortgage banker whose former Executive Vice President is a member of the Board of Directors of the Company, for up to $75,000,000 each, bearing annual interest rates of 5% each, for funding residential mortgage loans. Per the terms of the agreements, the Company could be required to repurchase the loans subject to certain terms and conditions. The outstanding combined balance on these two warehouse lines of credit as of September 30, 2015 was $21,495,306. Subsequent to September 30, 2015, approximately 98% of the loans outstanding on the credit lines have been purchased by investors.

Concentration of Credit Risk

The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through September 30, 2015. As of September 30, 2015, the Company’s bank balances in some instances exceed FDIC insured amounts.

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Note 5 - Related Party Transactions (Tables)

3 Months Ended

Sep. 30, 2015

Related Party Transactions [Abstract]

Loan Receivable from Related Party [Table Text Block]

			Balance due September 30,		Balance due
	Original		2015		June 30,
	Loan		(Unaudited)		2015
Secured loans to NWBO Corporation (NWBO)	$	167,000	$	87,778	$	87,778
Accrued interest due from NWBO		-		5,555		4,228
		167,000		93,333		92,006
Less allowance for uncollectible amounts		-		-		-
	$	167,000	$	93,333	$	92,006

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Note 13 - Commitments (Details) - Total Minimum Lease Commitments	Sep. 30, 2015 USD ($)
Total Minimum Lease Commitments [Abstract]
2016	$ 486,696
2017	177,191
2018	149,067
2019	27,636
2020
Total	$ 840,590

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Note 7 - Intangible Assets (Details) - Intangible Assets - USD ($)	3 Months Ended	12 Months Ended
	Sep. 30, 2015	Jun. 30, 2015
Intangible assets not subject to amortization:
Indefinite lived intangible assets	$ 2,779,512	$ 2,779,512
Goodwill	1,809,429	1,809,429
Less: Impairments	0	0
Intangible assets subject to amortization:
Less: Accumulated amortization – customer lists	(117,349)	(117,349)
Total	0	0
Total Intangible assets, net	2,779,512	2,779,512
FHA "Full Eagle" Status [Member]
Intangible assets not subject to amortization:
Indefinite lived intangible assets	938,790	938,790
State Licenses [Member]
Intangible assets not subject to amortization:
Indefinite lived intangible assets	31,293	31,293
Gross Intangible Assets [Member]
Intangible assets not subject to amortization:
Indefinite lived intangible assets	2,779,512	2,779,512
Customer Lists [Member]
Intangible assets subject to amortization:
Customer lists	117,349	117,349
Less: Accumulated amortization – customer lists	$ (117,349)	$ (117,349)

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Consolidated Statement of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (419,441)	$ (233,136)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	19,643	34,760
Restricted cash		23,201
Disposition of property and equipment	955
Share based payment awards	105,757	14,281
(Increase) decrease in current assets:
Accounts receivable	(2,380)	255,492
Mortgage loans held for sale	3,611,335	4,695,409
Prepaid expenses	(51,982)	(55,529)
Employee advances	(86,565)	(15,374)
Other current assets	(1,327)	14,646
Increase (decrease) in current liabilities:
Accounts payable	(127,582)	(12,683)
Accrued liabilities	66,878	(322,814)
Renovation escrow	17,430	(11,719)
Net cash provided by operating activities	3,139,756	4,386,534
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of assets	7,035
Purchase of property and equipment	(38,324)	(10,000)
Cash received from (paid for) security deposits	(4,670)	12,089
Net cash (used) in provided by investing activities	(35,959)	2,089
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash borrowed (paid) on short term financing	17,145	7,029
Cash paid for preferred dividends		(133,500)
Cash (payments) proceeds on loan receivable	(928)	1,120
Cash (payments) proceeds on note payable from related party	(5,000)	120,000
Net cash used in financing activities	(3,330,417)	(4,878,586)
NET DECREASE IN CASH & CASH EQUIVALENTS	(233,655)	(489,963)
CASH & CASH EQUIVALENTS, BEGINNING BALANCE	898,200	764,931
CASH & CASH EQUIVALENTS, ENDING BALANCE	664,545	274,968
Warehouse Line Of Credit [Member]
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Proceeds from Line of Credit		1,609,894
Cash Payments on Warehouse Line of Credit		(2,083,894)
Affiliated Entity [Member] | Warehouse Line Of Credit [Member]
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash Proceeds from Line of Credit	127,124,679	60,238,491
Cash Payments on Warehouse Line of Credit	$ (130,466,313)	$ (64,637,726)

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Note 5 - Related Party Transactions

3 Months Ended

Sep. 30, 2015

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

NOTE 5 – RELATED PARTY TRANSACTIONS

President/Chief Executive Officer and Director

On March 26, 2015, the Company entered into an Executive Employment Agreement (the “Agreement”) with Mr. Gadawski to serve as its Chief Financial Officer, Chief Operating Officer, and Chief Executive Officer. In addition, Mr. Gadawski also assumed the roles of President, Chief Executive Officer, and Director of PSMI. The Agreement is effective April 1, 2015 and the term of the Agreement is three years, ending on March 31, 2018. Under the Agreement, Mr. Gadawski’s annual base salary is $250,000 (“Base Salary”). If the Agreement is extended, the Base Salary will be reviewed no less frequently than annually, but at no time during the term of the Agreement will Mr. Gadawski’s Base Salary be decreased. If the Company is reasonably unable to pay the Base Salary for any pay period, the Company and Mr. Gadawski may agree that the Base Salary be paid with shares of common stock under the Company’s 2015 Stock Incentive Plan at a 25% discount to the fair market price of the stock at the end of the pay period. As a signing bonus for entering into the Agreement, the Company granted to Mr. Gadawski options to purchase up to 10,000,000 shares of common stock. Mr. Gadawski is eligible to participate in any incentive bonus pool maintained for persons including executive officers of the Company. He will be eligible to receive an annual bonus as per the incentive bonus pool of up to 100% of the then applicable Base Salary, less applicable withholding taxes. In addition, the Company provides Mr. Gadawski a car allowance in the amount of $750 per month as well as reimburse him for the cost of annual automobile insurance.

For the three months ended September 30, 2015, the Company recorded compensation expense of $62,500 and a car allowance of $2,250 pursuant to the Agreement. For the three months ended September 30, 2014, the Company recorded compensation expense of $52,003. The Company also pays monthly health insurance premiums for Mr. Gadawski and his family, currently in the amount of $292 per month.

Other Directors

On February 7, 2013, the Company entered into a consulting agreement with an entity controlled by one of the Company’s directors. The agreement calls for monthly compensation of $15,000 per month for strategic advisory and investor relations services for each month that services are provided. For the three months ended September 30, 2015 and 2014, the Company recorded consulting expense of $15,000 and $0 respectively. This director has at times agreed to suspend providing strategic consulting services to the Company to assist in the Company’s cash needs at the time. Thus there was no expense for months when services were not provided.

One of the Company’s directors is a principal stockholder and director of a management company that provides two revolving warehouse lines of credit to the Company. Amounts outstanding on the credit lines as of September 30, 2015 and June 30, 2015 were $21,495,306 and $24,836,939 which were offset by $21,847,806 and $25,459,142 of funding receivables as of September 30, 2015 and June 30, 2015, respectively (See Note 8).

This entity also provided a line of credit to the Company that had an outstanding balance of $134,335 and $135,263 as of September 30, 2015 and June 30, 2015, respectively.

Former Directors

Effective January 1, 2011, the Company entered into an employment agreement with Mr. Jeff Smith to serve as its Executive Vice-President. Pursuant to the terms of the employment agreement, 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 Mr. Smith and his family. On January 1, 2014, the employment agreement was renewed for one year with annual compensation of $250,000. On December 24, 2014, the term of the employment agreement was amended to a month-to-month basis. Effective January 31, 2015, Mr. Smith resigned from all positions with the Company and its subsidiaries, and accordingly his employment agreement was not renewed. For the three months ended September 30, 2014, the Company recorded (i) $42,200 in compensation expense, (ii) $2,100 in car allowance, and (iii) $1,040 in life and health insurance benefits.

On September 12, 2014, the Company entered into a loan agreement with Mr. Smith (the “Lender”). Under the terms of the loan agreement, the Lender loaned $120,000 to the Company for its operating expenses and the expenses of its operating subsidiary, as well as to fund growth of the Company. The funds were received by the Company on September 12, 2014. The loan is evidenced by a 10% Convertible Promissory Note which bears interest at 10% per annum and matures September 12, 2016, unless extended through mutual consent. The note is convertible at the per share rate of common stock sold pursuant to a Qualified Offering by the Company. The term “Qualified Offering” means one or more offerings (whether or not proceeds are received by the Company pursuant to such offering) of debt or equity securities of the Company to non-affiliates in the aggregate amount of at least $1,000,000 commenced after the note issuance date. The conversion price is determined by the lowest of either the offering price per common share or the conversion or exercise price for common stock in any such Qualified Offering. In addition, the Lender received four tenths (0.40) of one common stock purchase warrant for each $1.00 loaned to the Company (totaling 48,000 warrants). Each five-year warrant is exercisable at $0.40 per share, subject to adjustment in the event of the issuance of additional common shares or common stock equivalents at less than the exercise price. The warrants also provide for cashless exercise. The warrants are not transferable or assignable without the prior consent of the Company. Effective September 12, 2015, the Company executed a one year note extension with the lender. As part of the extension, the Company made a principal reduction payment in the amount of $5,000. The balance of the loan, $115,000, accrues interest at 10% annually.

On March 15, 2011, the Company entered into an employment agreement with a director of the Company at the time in connection with the acquisition of United Community Mortgage Corp. The term of the employment agreement was for two years, with automatic one-year extensions unless notice is given by either party. The individual resigned as a director of the Company concurrent with the capital raise completed on February 5, 2013. The agreement provided for an annual base salary of $120,000 with increases based upon increases in originations at the respective branch and incentive payments upon securing additional branches for PSMI. In January 2015, the Company amended the agreement reducing the base compensation and adding in incentive compensation for recruiting. The Company recorded total compensation expense of $46,607 and $41,213 for the three months ended September 30, 2015 and 2014, respectively.

Loans Receivable

Loans receivable from a former related party as of September 30, 2015 consists of:

			Balance due September 30,		Balance due
	Original		2015		June 30,
	Loan		(Unaudited)		2015
Secured loans to NWBO Corporation (NWBO)	$	167,000	$	87,778	$	87,778
Accrued interest due from NWBO		-		5,555		4,228
		167,000		93,333		92,006
Less allowance for uncollectible amounts		-		-		-
	$	167,000	$	93,333	$	92,006

The Company entered into two Commercial Security Agreements dated November 16, 2006 and February 16, 2007 (the “Security Agreements”) with NWBO securing the loan amount of $167,000 with 150,000 shares of the Company’s common stock held by NWBO.  On June 15, 2012, the Company renegotiated the Security Agreements with Nationwide and agreed to amend (i) the annual interest rate on the Security Agreements to 6%, and (ii) the maturity dates to September 30, 2013. On May 13, 2014, the Company extended the maturity dates to October 15, 2014. All other terms and conditions of the Security Agreements remained the same. The Company recorded interest income of $1,327 and $1,201 from the loan receivable from NWBO for each of the three months ended September 30, 2015 and 2014. On September 8, 2015, the Company executed a note extension and general release agreement with NWBO which contains a general agreement among the parties that no further commitments are required by either side. It further allows NWBO to utilize its technology with other companies. Finally, the note extension calls for quarterly principal payments based on how many “installations” of the NWBO technology exist during the quarter.

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Note 7 - Intangible Assets (Tables)

3 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill [Table Text Block]

	September 30,
	2015 (Unaudited)			June 30, 2015
Intangible assets not subject to amortization:
FHA "Full Eagle" status	$	938,790		$	938,790
Goodwill		1,809,429			1,809,429
State licenses		31,293			31,293
		2,779,512			2,779,512
Less: Impairments		-			-
Total		2,779,512			2,779,512
Intangible assets subject to amortization:
Customer lists		117,349			117,349
Less: Accumulated amortization – customer lists		(117,349	)		(117,349	)
Total		-			-
Total Intangible assets, net	$	2,779,512		$	2,779,512

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Note 5 - Related Party Transactions (Details) - Loans Receivable from Related Party - NWBO [Member] - USD ($)	Sep. 30, 2015	Jun. 30, 2015
Note 5 - Related Party Transactions (Details) - Loans Receivable from Related Party [Line Items]
Secured loans to NWBO Corporation (NWBO)	$ 167,000
Secured loans to NWBO Corporation (NWBO)	87,778	$ 87,778
Accrued interest due from NWBO	5,555	4,228
	167,000
	93,333	92,006
Less allowance for uncollectible amounts	0
Less allowance for uncollectible amounts	0	0
	167,000
	$ 93,333	$ 92,006

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Note 15 - Industry Risks and Going Concern

3 Months Ended

Sep. 30, 2015

Disclosure Text Block Supplement [Abstract]

Additional Financial Information Disclosure [Text Block]

NOTE 15 - INDUSTRY RISKS AND GOING CONCERN

The Company is not current in paying all the costs and expenses of the parent company. It is unlikely that the Company will be able to cure the default and pay current the dividends due the Series A, B, C, D and E preferred shareholders. Further, the Company may be unable to pay the principal balance of the Quintium note when due on February 1, 2016 and there is no assurance that the lender will be willing to extend the maturity on acceptable terms if at all.

In addition, the Company is dependent on either the operations of its wholly owned subsidiary PSMI to generate the cash needed to meet the expenses of the Company or in raising capital. Although PSMI has generated a cumulative operating profit since February, there is no guaranteed that it will continue to do so. PSMI has been successful in attracting new groups to their platform, which could increase volume and revenue in future quarters. If PSMI is unable to develop these new offices into profitable and the Company is unable to raise additional capital if necessary, the Company may not be able to meet its obligations and these factors would give rise to uncertainty about the Company’s continuing as a going concern.

Management is continuing to implement cost reduction strategies. Management is also considering an additional capital raise which, if successful, would be highly dilutive to the holdings of the current common shareholders.

There is no certainty that the Company will be successful in these initiatives in a timely enough manner to curtail the continuing consolidated losses and meet short term debt obligations.