Nevada
|
333-151807
|
90-0332127
|
(State or Other Jurisdiction of Incorporation)
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
1112 N. Main Street, Roswell, NM
|
88201
|
(Address of Principal Executive Offices)
|
(Zip Code)
|
[ ]
|
Written communications pursuant to Rule 425 under the Securities Act
|
|
[ ]
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
|
|
[ ]
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
|
|
[ ]
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
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(A)
|
Financial statements of businesses acquired
|
Fidelity Mortgage Company
Independent Auditor's Report – June 15, 2011
Balance Sheet at September 30, 2010 and 2009
Statement of Operations and Retained Earnings for the years ended September 30, 2010 and 2009
Statements of Cash Flows for the years ended September 30, 2010 and 2009
Notes to Financial Statements
Balance Sheet at June 30, 2011 (Unaudited) and September 30, 2010
Statement of Operations for the nine months ended June 30, 2011 and 2010 (Unaudited)
Statement of Shareholders’ Equity for the nine months ended June 30, 2011 (Unaudited)
Statements of Cash Flows for the nine months ended June 30, 2011 and 2010 (Unaudited)
Notes to Financial Statements (Unaudited)
|
||
(B)
|
Pro-forma financial information (page 16)
|
PSM Holdings, Inc.
|
|||
Date: October 20, 2011
|
By:
|
/s/ Ron Hanna
|
|
Ron Hanna, President
|
(A)
|
Financial statements of businesses acquired
|
Fidelity Mortgage Company
|
||||||||
Statements of Cash Flows for the Year Ended
|
||||||||
September 30, 2010 and 2009
|
||||||||
2010
|
2009
|
|||||||
Cash Flows Operating Activities
|
||||||||
Net income (loss)
|
$ | (213,288 | ) | $ | (27,751 | ) | ||
Adjustments to reconcile net income to net cash provided by
|
||||||||
operating activities:
|
||||||||
Depreciation
|
68,005 | 73,452 | ||||||
Decrease an advance to employees
|
- | - | ||||||
Increase deferred income tax
|
1,961 | |||||||
(Increase) decrease in accounts receivable and other
|
5,634 | 95,290 | ||||||
Increase (decrease) in accounts payable
|
(17,453 | ) | 31,337 | |||||
Increase (decrease) in pension plan
|
(49,649 | ) | (10,987 | ) | ||||
(Increase) decrease in income taxes
|
(7,844 | ) | ||||||
Increase in accrued expenses
|
1,363 | 7,208 | ||||||
Net cash (used) provided by operating activities
|
(205,388 | ) | 162,666 | |||||
Cash flows from investing activities
|
||||||||
Increase in notes receivable
|
(3,870 | ) | 4,927 | |||||
Sale of property
|
- | (136,076 | ) | |||||
Investment Income
|
436 | 727 | ||||||
Interest expense
|
(25,723 | ) | (3,334 | ) | ||||
Loan proceeds
|
- | 455,000 | ||||||
Acquisition of property for investment purpose
|
- | (529,900 | ) | |||||
Acquisition of property and equipment
|
- | (13,608 | ) | |||||
Net cash (used) by investing activities
|
(29,157 | ) | (222,264 | ) | ||||
Cash flows from financing activities
|
||||||||
Loan proceeds
|
- | 188,000 | ||||||
Dividends
|
(9,809 | ) | - | |||||
Net cash provided by financing activities
|
(9,809 | ) | 188,000 | |||||
Net increase (decrease) in cash and cash equivalents
|
(244,354 | ) | 128,402 | |||||
Cash and cash equivalents - beginning
|
259,010 | 130,608 | ||||||
Cash and cash equivalents - ending
|
$ | 14,656 | $ | 259,010 | ||||
Supplemental cash flow disclosures
|
||||||||
Cash paid for:
|
||||||||
Interest
|
25,723 | 3,334 | ||||||
Income taxes
|
- | 8,146 | ||||||
Items not effecting cash flows: Purchase of treasury stock on a note for $1,000,000.
|
FIDELITY MORTGAGE COMPANY
|
||||||||
BALANCE SHEET
|
||||||||
June 30
|
September 30,
|
|||||||
2011
|
2010
|
|||||||
(UNAUDITED)
|
||||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$ | 254,980 | $ | 14,656 | ||||
Loan fees receivable
|
39,761 | 38,963 | ||||||
Income tax refund
|
1,800 | 1,800 | ||||||
Notes receivable
|
1,169,812 | 77,143 | ||||||
Total Current Assets
|
1,466,353 | 132,562 | ||||||
Property and Equipment:
|
||||||||
Furniture, fixtures and equipment
|
606,448 | 624,270 | ||||||
Building improvements
|
30,306 | 30,306 | ||||||
Less - accumulated depreciation
|
(596,456 | ) | (503,273 | ) | ||||
Property and Equipment - Net
|
40,298 | 151,303 | ||||||
Other Assets
|
||||||||
Investment property
|
361,312 | 529,900 | ||||||
Total Assets
|
$ | 1,867,963 | $ | 813,765 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable - pension plan
|
$ | - | $ | 279 | ||||
Accounts payable
|
68,481 | 5,822 | ||||||
Accrued expenses
|
- | 11,131 | ||||||
Bank loan payable
|
451,293 | 451,293 | ||||||
Notes payable
|
1,942,136 | 1,181,898 | ||||||
Related party advances
|
85,809 | - | ||||||
Total Current Liabilities
|
2,547,719 | 1,650,423 | ||||||
Deferred income taxes
|
- | 13,750 | ||||||
Total Liabilities
|
2,547,719 | 1,664,173 | ||||||
Stockholders' Equity
|
||||||||
Common stock, 50,000 shares authorized, 11,900 shares issued
and outstanding, no par value
|
71,140 | 71,140 | ||||||
Less Treasury stock
|
(1,000,000 | ) | (1,000,000 | ) | ||||
Retained earnings
|
249,104 | 78,452 | ||||||
Total Stockholders' Equity
|
(679,756 | ) | (850,408 | ) | ||||
Total Liabilities and Stockholders' Equity
|
$ | 1,867,963 | $ | 813,765 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
|
FIDELITY MORTGAGE COMPANY
|
||||||||
STATEMENT OF OPERATIONS
|
||||||||
(UNAUDITED)
|
||||||||
For the nine months ended June 30,
|
||||||||
2011
|
2010
|
|||||||
Revenues
|
||||||||
Loan placement fees
|
$ | 427,013 | $ | 1,738,767 | ||||
Other revenue
|
1,541,464 | - | ||||||
Total revenue
|
1,968,477 | 1,738,767 | ||||||
Operating expenses
|
||||||||
Selling, general & administrative expenses
|
1,672,833 | 1,783,453 | ||||||
Depreciation
|
10,863 | 11,227 | ||||||
Total operating expenses
|
1,683,696 | 1,794,680 | ||||||
Net income (loss) from operations
|
284,781 | (55,913 | ) | |||||
Other income (expense)
|
||||||||
Interest income
|
193 | 355 | ||||||
Interest expense
|
(84,723 | ) | (38,820 | ) | ||||
Other
|
(29,599 | ) | 1,067 | |||||
Total other income (expense)
|
(114,129 | ) | (37,398 | ) | ||||
Provision for income tax
|
- | - | ||||||
Net profit (loss)
|
$ | 170,652 | $ | (93,311 | ) | |||
The accompanying notes are an integral part of these unaudited financial statements.
|
FIDELITY MORTGAGE COMPANY
|
||||||||||||||||||||
STATEMENT OF SHAREHOLDERS' EQUITY
|
||||||||||||||||||||
FOR THE NINE MONTHS ENDED JUNE 30, 2011
|
||||||||||||||||||||
(UNAUDITED)
|
||||||||||||||||||||
Common stock
|
Treasury
|
Retained
|
||||||||||||||||||
Shares
|
Amount
|
Stock
|
Earnings
|
Total
|
||||||||||||||||
Balance - September 30, 2010
|
11,900 | $ | 71,140 | $ | (1,000,000 | ) | $ | 78,452 | $ | (850,408 | ) | |||||||||
Net profit
|
- | - | - | 170,652 | 170,652 | |||||||||||||||
Balance - June 30, 2011
|
11,900 | $ | 71,140 | $ | (1,000,000 | ) | $ | 249,104 | $ | (679,756 | ) | |||||||||
The accompanying notes are an integral part of these unaudited financial statements.
|
FIDELITY MORTGAGE COMPANY
|
||||||||
STATEMENTS OF CASH FLOWS
|
||||||||
(UNAUDITED)
|
||||||||
For the nine months ended June 30,
|
||||||||
2011
|
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net profit (loss)
|
$ | 170,652 | $ | (93,311 | ) | |||
Adjustments to reconcile net profit (loss) to cash cash used by operating activities:
|
||||||||
Depreciation
|
10,863 | 11,227 | ||||||
Decrease in loan fees receivable
|
(798 | ) | 46,330 | |||||
Increase in income tax refund
|
- | (398 | ) | |||||
Increase in notes receivable
|
(1,092,669 | ) | (46,447 | ) | ||||
Decrease in accounts payable
|
62,380 | (73,203 | ) | |||||
Decrease in accrued expenses
|
(11,131 | ) | (7,793 | ) | ||||
Decrease in deferred income taxes
|
(13,750 | ) | (13,750 | ) | ||||
Net cash used in operating activities
|
(874,454 | ) | (177,345 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Cash proceeds from sale of property and equipment
|
100,142 | 63,975 | ||||||
Proceeds from Investment property
|
168,588 | - | ||||||
Net cash provided by investing activities
|
268,730 | 63,975 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Cash payments of notes payable
|
760,238 | - | ||||||
Cash poceeds frm notes payable
|
- | 2,016 | ||||||
Cash proceeds from shareholder
|
85,809 | - | ||||||
Net cash provided by financing activities
|
846,048 | 2,016 | ||||||
Net increase (decrease) in cash and cash equivalents
|
240,324 | (111,355 | ) | |||||
Cash and cash equivalents - beginning of the period
|
14,656 | 259,010 | ||||||
Cash and cash equivalents - end of the period
|
$ | 254,980 | $ | 147,655 | ||||
SUPPLEMENTAL CASH FLOW DISCLOSURES:
|
||||||||
Cash paid for interest
|
$ | 114,322 | $ | 38,820 | ||||
Cash paid for income taxes
|
$ | - | $ | - | ||||
The accompanying notes are an integral part of these unaudited financial statements.
|
Note A -
|
Summary of Significant Accounting Policies
|
Note B -
|
Related Party Transactions
|
Note C -
|
Commitments and Contingencies
|
Note D -
|
Concentrations of Credit Risk
|
Note E -
|
Income taxes
|
Deferred income tax expense consists of the following at June 30, 2011:
|
$ | - | ||
Current income tax expense
|
119,823 | |||
Deferred income tax expense prior
|
$ | 119,823 | ||
Total deferred income tax expense
|
Note F -
|
Advertising
|
Note G -
|
Operating Leases
|
Note H -
|
Notes Receivable
|
Note I -
|
Investment Property and Related Obligations
|
Note J -
|
Notes Payable |
Note K -
|
Treasury Stock |
Year
|
Principal
|
Interest
|
||||||||
2011
|
$ | 51,877 | $ | 39,713 | ||||||
2012
|
79,915 | 53,310 | ||||||||
2013
|
84,844 | 48,431 | ||||||||
2014
|
90,077 | 43,148 | ||||||||
2015
|
95,633 | 37,592 | ||||||||
2016-2020 | 574,260 | 91,863 | ||||||||
$ | 976,606 | $ | 314,057 |
Note L -
|
Subsequent Events |
Historical
|
||||||||||||||||||||||
Acquirer
|
Acquiree
|
Pro-forma Adjustments
|
||||||||||||||||||||
PSM Holdings
|
Fidelity Mortgage
|
Debit
|
Credit
|
Pro-Forma
|
||||||||||||||||||
ASSETS
|
||||||||||||||||||||||
Current Assets:
|
||||||||||||||||||||||
Cash & cash equivalents
|
$ | 21,470 | $ | 254,980 | A1 | 254,980 | $ | 19,265 | ||||||||||||||
7,795 | A2 | |||||||||||||||||||||
C1 | 10,000 | |||||||||||||||||||||
Accounts receivable, net
|
40,768 | 39,761 | A1 | 39,761 | 81,696 | |||||||||||||||||
40,928 | A2 | |||||||||||||||||||||
Prepaid expenses
|
192,000 | 1,800 | A1 | 1,800 | 192,000 | |||||||||||||||||
Mortgage note receivable
|
1,169,812 | A1 | 1,169,812 | |||||||||||||||||||
Other assets
|
4,202 | - | 4,202 | |||||||||||||||||||
Total current assets
|
258,440 | 1,466,353 | 297,163 | |||||||||||||||||||
Property and equipment, net
|
25,321 | 40,298 | A1 | 40,298 | 64,412 | |||||||||||||||||
39,091 | A2 | |||||||||||||||||||||
Intangible assets, net
|
1,595,576 | 412,186 | A2 | 2,007,762 | ||||||||||||||||||
Customer list
|
- | - | 750,000 | A2 | 750,000 | |||||||||||||||||
Loan receivable
|
88,898 | 88,898 | ||||||||||||||||||||
Employee advances
|
152,155 | 152,155 | ||||||||||||||||||||
Note receivable
|
360,000 | 360,000 | ||||||||||||||||||||
Investment property
|
- | 361,312 | A1 | 361,312 | - | |||||||||||||||||
Security deposits
|
8,375 | - | 8,375 | |||||||||||||||||||
Total Assets
|
$ | 2,488,765 | $ | 1,867,963 | $ | 3,728,765 | ||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||
Current Liabilities:
|
||||||||||||||||||||||
Accounts payable
|
$ | 134,797 | $ | 68,481 | 68,481 | A1 | $ | 134,797 | ||||||||||||||
Accrued liabilities
|
39,028 | - | 39,028 | |||||||||||||||||||
Notes payable
|
- | 1,027,946 | 1,027,946 | A1 | - | |||||||||||||||||
Bank loan payable
|
451,293 | 451,293 | A1 | - | ||||||||||||||||||
Accrued stock payable
|
778,000 | - | 778,000 | |||||||||||||||||||
Total current liabilities
|
951,825 | 1,547,720 | 951,825 | |||||||||||||||||||
Long-term Liabilities:
|
||||||||||||||||||||||
Due to related party
|
120,000 | - | 120,000 | |||||||||||||||||||
Total long-term liabilities
|
120,000 | - | 120,000 | |||||||||||||||||||
Total Liabilities
|
1,071,825 | 1,547,720 | 1,071,825 | |||||||||||||||||||
Stockholders' Equity:
|
||||||||||||||||||||||
Common stock
|
18,614 | 71,140 | 71,140 | A1 | 20,400 | |||||||||||||||||
A2 | 1,786 | |||||||||||||||||||||
Treasury stock
|
(22,747 | ) | - | (22,747 | ) | |||||||||||||||||
Additional paid in capital
|
11,281,710 | - | A2 | 1,248,214 | 12,529,924 | |||||||||||||||||
Retained earnings (deficit)
|
(9,860,637 | ) | 249,103 | 249,103 | A1 | (9,870,637 | ) | |||||||||||||||
10,000 | C1 | |||||||||||||||||||||
Total stockholders' equity
|
1,416,940 | 320,243 | 2,656,940 | |||||||||||||||||||
Total Liabilities and Stockholders' Equity
|
$ | 2,488,765 | $ | 1,867,963 | $ | 3,127,963 | $ | 3,127,963 | $ | 3,728,765 |
Historical
|
||||||||||||||||||||||
Acquirer
|
Acquiree
|
Pro Forma Adjustments
|
||||||||||||||||||||
PSM Holdings
|
Fidelity Mortgage
|
Debit
|
Credit
|
Pro Forma
|
||||||||||||||||||
Revenues
|
$ | 3,863,446 | $ | 2,657,575 | $ | 6,521,021 | ||||||||||||||||
Operating expenses
|
A3 | 457,358 | ||||||||||||||||||||
Selling, general & administrative
|
5,896,999 | 2,497,540 | 10,000 | C1 | 7,947,181 | |||||||||||||||||
Depreciation and amortization
|
81,002 | 14,605 | 75,000 | A4 | 170,607 | |||||||||||||||||
Total operating expenses
|
5,978,001 | 2,512,145 | 8,117,788 | |||||||||||||||||||
Income (loss) from operations
|
(2,114,555 | ) | 145,430 | (1,596,767 | ) | |||||||||||||||||
Non-operating income (expense):
|
||||||||||||||||||||||
Interest expense
|
(6,896 | ) | (36,355 | ) | (43,251 | ) | ||||||||||||||||
Interest and dividend
|
6,945 | - | 6,945 | |||||||||||||||||||
Realized gain (loss) on sale of assets
|
5,057 | - | 5,057 | |||||||||||||||||||
Other Income (Expense)
|
32,024 | (7,722 | ) | 24,302 | ||||||||||||||||||
Total non-operating income (expense)
|
37,130 | (44,077 | ) | (6,947 | ) | |||||||||||||||||
Income (loss) from continuing operations before income tax
|
(2,077,425 | ) | 101,353 | (1,603,714 | ) | |||||||||||||||||
Provision for income tax
|
- | - | - | |||||||||||||||||||
Net income (loss)
|
(2,077,425 | ) | 101,353 | 85,000 | 457,358 | (1,603,714 | ) | |||||||||||||||
Other comprehensive income (loss):
|
||||||||||||||||||||||
Unrealized gain (loss) on marketable securities
|
(2,666 | ) | - | (2,666 | ) | |||||||||||||||||
Comprehensive income (loss)
|
$ | (2,080,091 | ) | $ | 101,353 | $ | 85,000 | $ | 457,358 | $ | (1,606,380 | ) | ||||||||||
Net loss per common share and equivalents -
|
||||||||||||||||||||||
basic and diluted loss from operations
|
$ | (0.09 | ) | |||||||||||||||||||
Weighted average shares of share capital outstanding
|
||||||||||||||||||||||
- basic & diluted
|
17,075,538 | |||||||||||||||||||||
Weighted average number of shares used to compute basic and diluted loss per share for the year ended June 30, 2011 is the same since the effect of dilutive securities is anti-dilutive.
|
FIDELITY MORTGAGE COMPANY
|
||||||||
ACQUISITION BALANCE SHEET
|
||||||||
AUGUST 1, 2011
|
||||||||
(UNAUDITED)
|
||||||||
Cash and cash equivalents
|
$ | 7,795 | ||||||
Accounts receivable
|
40,929 | |||||||
Property and equipment
|
636,754 | |||||||
Less Accumulated depreciation
|
(597,663 | ) | ||||||
Property and equipment, net
|
39,091 | |||||||
Total assets acquired
|
87,814 | |||||||
Liabilities assumed
|
- | |||||||
Net assets acquired
|
87,814 | |||||||
Goodwill
|
412,186 | |||||||
Customer list
|
750,000 | |||||||
Total purchase price
|
$ | 1,250,000 | ||||||
Common stock - 1,785,714 shares
|
$ | 1,786 | ||||||
Paid in Capital
|
1,248,214 | |||||||
Total purchase price
|
$ | 1,250,000 |
A. Fidelity Mortgage:
|
Debit
|
Credit
|
|||||||||
A1 |
Cash and cash equivalents
|
$ | 254,980 | ||||||||
Accounts receivable
|
39,761 | ||||||||||
Prepaid expenses
|
1,800 | ||||||||||
Mortgage notes receivable
|
1,169,812 | ||||||||||
Property and equipment
|
40,298 | ||||||||||
Investment property
|
361,312 | ||||||||||
Accounts payable
|
68,481 | ||||||||||
Notes payable
|
1,027,946 | ||||||||||
Bank loan payable
|
451,293 | ||||||||||
Common stock
|
71,140 | ||||||||||
Retained earnings
|
249,103 | ||||||||||
To remove the book value of assets and liabilities of the acquiree.
|
|||||||||||
A2 |
Cash and cash equivalents
|
$ | 7,795 | ||||||||
Accounts receivable
|
40,928 | ||||||||||
Property and equipment
|
39,091 | ||||||||||
Goodwill
|
412,186 | ||||||||||
Customer list
|
750,000 | ||||||||||
Common stock
|
$ | 1,786 | |||||||||
Additional paid in capital
|
1,248,214 | ||||||||||
To record at fair value of assets acquired and liabilities assumed
pursuant to the purchase agreement.
|
|||||||||||
A3 |
Accumulated deficit
|
$ | 457,358 | ||||||||
Selling, general and administrative expenses
|
$ | 457,358 | |||||||||
To record selling, general & administrative expenses incurred by
acquiree that will not be incurred as result of acquisition by acquiror.
|
|||||||||||
A4 |
Amortization expense
|
$ | 75,000 | ||||||||
Accumulated amortization
|
$ | 75,000 | |||||||||
To record the amortization of customer list for the year ended
June 30, 2011.
|
|||||||||||
C. PSM Holdings, Inc.
|
|||||||||||
C1 |
Accumulated deficit
|
$ | 10,000 | ||||||||
Cash
|
$ | 10,000 | |||||||||
To record non-recurring professional fees (acquirer expense)
incurred in the acquisitions for the year ended June 30, 2011.
|
|||||||||||
Total
|
$ | 3,660,321 | $ | 3,660,321 |