10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2012 or

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number:   000-52015

Western Capital Resources, Inc.

(Exact Name of Registrant as Specified in its Charter)

Minnesota	47-0848102
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

11550 “I” Street, Suite 150, Omaha, Nebraska 68137

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (402) 551-8888

N/A

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

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

Large accelerated filer  o	Accelerated filer  o
Non-accelerated filer  o	Smaller reporting company  þ

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

Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS

As of August 14, 2012, the registrant had outstanding 5,397,780 shares of common stock, no par value per share.

Western Capital Resources, Inc.

Index

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 4. Controls and Procedures	21
PART II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities	21
Item 5. Other Information	21
Item 6. Exhibits	21
SIGNATURES	22

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONTENTS

	Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Income	4
Condensed Consolidated Statements of Cash Flows	5
Notes to Condensed Consolidated Financial Statements	6

2

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2012 (Unaudited)			December 31, 2011
ASSETS
CURRENT ASSETS
Cash	$	1,762,704		$	1,909,442
Loans receivable (less allowance for losses of $905,000 and $1,001,000)		4,562,096			4,887,813
Inventory		705,517			756,528
Prepaid expenses and other		435,704			451,751
Deferred income taxes		379,000			413,000
TOTAL CURRENT ASSETS		7,845,021			8,418,534
PROPERTY AND EQUIPMENT		798,919			757,747
GOODWILL		12,672,569			12,393,869
INTANGIBLE ASSETS		293,805			309,552
OTHER		162,782			142,074
TOTAL ASSETS	$	21,773,096		$	22,021,776
LIABILITIES AND  SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	2,301,110		$	2,323,730
Note payable – short-term		-			1,000,000
Current portion long-term debt		558,412			695,123
Preferred dividend payable		4,600,000			3,550,000
Deferred revenue		287,718			314,561
TOTAL CURRENT LIABILITIES		7,747,240			7,883,414
LONG-TERM LIABILITIES
Notes payable – long-term		1,200,000			1,210,065
Deferred income taxes		642,000			530,000
TOTAL LONG-TERM LIABILITIES		1,842,000			1,740,065
TOTAL LIABILITES		9,589,240			9,623,479
SHAREHOLDERS’ EQUITY
Series A convertible preferred stock 10% cumulative dividends, $0.01 par value, $2.10 stated value, 10,000,000 shares authorized, issued and outstanding		100,000			100,000
Common stock, no par value, 240,000,000 shares authorized, 5,397,780 and 7,446,007 shares issued and outstanding		-			-
Additional paid-in capital		17,914,543			18,221,777
Accumulated deficit		(5,830,687	)		(5,923,480	)
TOTAL SHAREHOLDERS’ EQUITY		12,183,856			12,398,297
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	21,773,096		$	22,021,776

See notes to condensed consolidated financial statements.

3

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three months ended						Six months ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
REVENUES
Payday loan fees	$	2,351,757		$	2,169,854		$	4,659,658		$	4,495,601
Phones and accessories		1,628,329			808,948			4,370,025			2,395,863
Cricket service fees		1,483,342			440,224			3,478,367			994,920
Installment interest income		248,156			126,168			444,665			126,168
Check cashing fees		146,595			154,603			342,407			387,145
Other income and fees		69,790			340,285			149,617			679,016
		5,927,969			4,040,082			13,444,739			9,078,713
STORE EXPENSES
Salaries and benefits		1,605,796			1,033,563			3,293,188			2,145,608
Phone and accessories cost of sales		1,095,938			433,344			2,931,013			1,391,241
Occupancy		559,443			395,934			1,111,751			813,997
Provisions for loan losses		356,118			275,216			632,508			454,089
Advertising		80,259			83,287			157,380			164,887
Depreciation		70,680			62,931			139,925			127,024
Amortization of intangible assets		56,846			113,043			116,247			228,648
Other		771,458			512,041			1,523,736			1,122,018
		4,596,538			2,909,359			9,905,748			6,447,512
INCOME FROM STORES		1,331,431			1,130,723			3,538,991			2,631,201
GENERAL & ADMINISTRATIVE EXPENSES
Salaries and benefits		429,354			405,888			957,086			851,815
Depreciation		5,614			5,688			11,106			9,708
Interest expense		51,267			63,573			129,388			156,765
Other		274,445			224,859			578,618			514,829
		760,680			700,008			1,676,198			1,533,117
INCOME BEFORE INCOME TAXES		570,751			430,715			1,862,793			1,098,084
INCOME TAX EXPENSE		217,000			161,000			720,000			416,000
NET INCOME		353,751			269,715			1,142,793			682,084
SERIES A CONVERTIBLE PREFERRED STOCK DIVIDENDS (assumes all paid)		(525,000	)		(525,000	)		(1,050,000	)		(1,050,000	)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	(171,249	)	$	(255,285	)	$	92,793		$	(367,916	)
NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted	$	(0.03	)	$	(0.03	)	$	0.02		$	(0.05	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
Basic and diluted		5,397,780			7,446,007			5,955,027			7,446,007

See notes to condensed consolidated financial statements.

4

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months Ended
	June 30, 2012			June 30, 2011
OPERATING ACTIVITIES
Net Income	$	1,142,793		$	682,084
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		151,031			136,732
Amortization		116,247			228,648
Deferred income taxes		146,000			159,000
Loss on disposal of property and equipment		-			27,342
Changes in operating assets and liabilities
Loans receivable		325,717			285,141
Inventory		51,011			33,026
Prepaid expenses and other assets		(261	)		(150,151	)
Accounts payable and accrued liabilities		(22,620	)		(656,504	)
Deferred revenue		(26,843	)		(64,579	)
Net cash provided by operating activities		1,883,075			680,739
INVESTING ACTIVITIES
Purchase of property and equipment		(122,203	)		(84,123	)
Acquisitions, net of cash acquired		(453,600	)		-
Net cash used by investing activities		(575,803	)		(84,123	)
FINANCING ACTIVITIES
Payments on notes payable – short-term		(1,000,000	)		(1,000,000	)
Payments on notes payable – long-term		(346,776	)		(363,759	)
Advances from notes payable – long-term		200,000			-
Common stock redemption		(307,234	)		-
Net cash used by financing activities		(1,454,010	)		(1,363,759	)
NET DECREASE IN CASH		(146,738	)		(767,143	)
CASH
Beginning of period		1,909,442			2,092,386
End of period	$	1,762,704		$	1,325,243
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid	$	368,969		$	732,984
Interest paid	$	140,404		$	163,652

See notes to condensed consolidated financial statements.

5

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation, Nature of Business and Summary of Significant Accounting Policies –

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared according to the instructions to Form 10-Q and Section 210.8-03(b) of Regulation S-X of the Securities and Exchange Commission (SEC) and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in our Form 10-K as of and for the year ended December 31, 2011. The condensed consolidated balance sheet at December 31, 2011, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP.

Nature of Business

Western Capital Resources, Inc. (WCR), through its wholly owned operating subsidiaries, Wyoming Financial Lenders, Inc. (WFL) and PQH Wireless, Inc. (PQH), collectively referred to as the “Company,” provides retail financial services and retail cellular phone sales to individuals primarily in the Midwestern and Southwestern United States.  As of June 30, 2012, the Company operated 52 “payday” stores in nine states (Colorado, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming) and operated 50 Cricket wireless retail stores in 14 states (Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon, Texas and Washington).  The condensed consolidated financial statements include the accounts of WCR, WFL, and PQH. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company, through its “payday” division, provides non-recourse cash advance loans, small unsecured installment loans, check cashing and other money services.  The short-term consumer loans, known as cash advance loans or “payday” loans, are in amounts that typically range from $100 to $500. Cash advance loans provide customers with cash in exchange for a promissory note with a maturity of generally two to four weeks and the customer’s post-dated personal check for the aggregate amount of the cash advanced plus a fee. The fee varies from state to state, based on applicable regulations and generally ranges from $15 to $22 for each whole or partial increment of $100 borrowed. To repay the cash advance loan, a customer may pay with cash, in which case their personal check is returned to them, or allow the check to be presented to the bank for collection. Installment loans provide customers with cash in exchange for a promissory note with a maturity of generally three to six months. The fee and interest rate on installment loans vary based on applicable regulations. Like cash advance or “payday” loans, installment loans are unsecured.

The Company also provides title loans and other ancillary consumer financial products and services that are complementary to its cash advance-lending business, such as check-cashing services, money transfers and money orders.  In our check-cashing business, we primarily cash payroll checks, but we also cash government assistance, tax refund and insurance checks or drafts. Our fees for cashing payroll checks average approximately 2.5% of the face amount of the check, subject to local market conditions, and this fee is deducted from the cash given to the customer for the check. We display our check-cashing fees in full view of our customers on a menu board in each store and provide a detailed receipt for each transaction. Although we have established guidelines for approving check-cashing transactions, we have no preset limit on the size of the checks we will cash.

Our loans and other related services are subject to state regulations (which vary from state to state), federal regulations and local regulations, where applicable.

The Company also operates a Cricket Wireless Retail division that is a premier dealer for Cricket Communications, Inc., reselling cellular phones and accessories and accepting service payments from Cricket customers.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect certain reported amounts and disclosures in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant management estimates relate to the loans receivable allowance, allocation of and carrying value of goodwill and intangible assets, inventory valuation and obsolescence, and deferred taxes and tax uncertainties.

6

Revenue Recognition

The Company recognizes fees on cash advance loans on a constant-yield basis ratably over the loans’ terms. Title and installment loan fees and interest are recognized using the interest method except that installment loan origination fees are recognized as they become non-refundable and installment loan maintenance fees are recognized when earned. The Company records revenue from check cashing fees, sales of phones, and accessories and fees from all other services in the period in which the sale or service is completed.  

Loans Receivable Allowance

We maintain a loan loss allowance for anticipated losses for our payday, installment and title loans. To estimate the appropriate level of the loan loss allowance, we consider the amount of outstanding loans owed to us, historical loans charged off, current and expected collection patterns and current economic trends. Our current payday loan loss allowance is based on our net write offs, typically expressed as a percentage of loan amounts originated for the last 24 months applied against the principal balance of outstanding loans that we write off. Our current installment loan loss allowance also factors in the delinquency status of loans within the installment portfolio. The Company also periodically performs a look-back analysis on its loan loss allowance to verify that the historical allowance established tracks with the actual subsequent loan write-offs and recoveries. The Company is aware that, as conditions change, it may also need to make additional allowances in future periods.

Included in loans receivable are payday loans that are currently due or past due and payday loans that have not been repaid.  This generally is evidenced where a customer’s personal check has been deposited and the check has been returned due to non-sufficient funds in the customer’s account, a closed account, or other reasons.  Also included in loans receivable are current and delinquent installment and title loans. Loans are carried at cost less the loans receivable allowance.  The Company does not specifically reserve for any individual loan.  The Company aggregates loan types for purposes of estimating the loss allowance using a methodology that analyzes historical portfolio statistics and management’s judgment regarding recent trends noted in the portfolio.  This methodology takes into account several factors, including the maturity of the store location, charge-off and recovery rates and delinquency status of installment loans.  The Company utilizes a software program to assist with the tracking of its historical portfolio statistics All returned payday items are charged off after 180 days, as collections after that date have not been significant.  The loans receivable allowance is reviewed monthly and any adjustment to the loan loss allowance as a result of historical loan performance, current and expected collection patterns and current economic trends is recorded.

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing the income (loss) available to common shareholders by the weighted average number of common shares outstanding for the year. Diluted net income (loss) per common share is computed by dividing the net income (loss) available to common shareholders by the sum of the weighted average number of common shares outstanding plus potentially dilutive common share equivalents (convertible preferred shares) when dilutive. All shares of potentially dilutive Series A Convertible Preferred Stock outstanding at June 30, 2012 and 2011 were anti-dilutive and therefore excluded from the dilutive net income (loss) per share computation.  

Segment Reporting

The Company has grouped its operations into two segments – Payday Operations and Cricket Wireless Retail Operations. The Payday Operations segment provides financial and ancillary services. The Cricket Wireless Retail Operations segment is a dealer for Cricket Communications, Inc., reselling cellular phones and accessories and serving as a payment center for Cricket customers.

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08 “Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment.” ASU 2011-08 allows an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should perform additional steps to determine if there is goodwill impairment. The amendments are effective for annual and interim goodwill tests performed for fiscal years beginning after December 15, 2011, early adoption being permitted. The Company adopted this standard with no material impact on its consolidated financial statements.

7

In May 2011, the FASB issued ASU No. 2011-04 “Fair Value Measurement (Topic820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” ASU 2011-04 results in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. For public entities, ASU 2011-04 is effective for interim or annual reporting periods ending on or after December 15, 2011. The Company adopted this standard with no material impact on its consolidated financial statements.

No other new accounting pronouncement issued or effective during the fiscal quarter has had or is expected to have a material impact on the condensed consolidated financial statements.

2. Risks Inherent in the Operating Environment –

The Company’s payday or short-term consumer loan activities are highly regulated under numerous local, state, and federal laws and regulations, which are subject to change. New laws or regulations could be enacted that could have a negative impact on the Company’s lending activities. Over the past few years, consumer advocacy groups and certain media reports have advocated governmental and regulatory action to prohibit or severely restrict deferred presentment cash advances.

The Federal Trade Commission has issued an FTC Consumer Alert (Federal Trade Commission, March 2008, Consumer Alert entitled “Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives”) that discourages consumers from obtaining payday loans such as the loans we offer, primarily on the basis that the types of loans we offer are very costly and consumers should consider alternatives to accepting a payday loan. For further information, you may obtain a copy of the alert at www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt060.shtm.  The federal government also passed legislation, the 2007 Military Authorization Act, prohibiting us from offering or making our loans to members of the military when the interest and fees calculated as an annual percentage rate exceeds 36%. This limitation effectively prohibits us from utilizing our present business model for cash advance or “payday” lending when dealing with members of the U.S. military, and as a result we do not and do not plan to conduct payday lending business with U.S. military personnel. These facts evidence the widespread belief that our charges relating to our loans are too expensive to be good for consumers. Some consumer advocates and others have characterized payday lending as “predatory.” As a result, there are frequently attempts in the various state legislatures, and occasionally in the U.S. Congress, to limit, restrict or prohibit payday lending. 

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed by the U.S. Congress and signed into law. Under the Act, a new Consumer Financial Protection Bureau will consolidate most federal regulation of financial services offered to consumers, and replace the Office of Thrift Supervision’s seat on the FDIC Board. Almost all credit providers, including mortgage lenders, providers of payday loans, other nonbank financial companies, and banks and credit unions with assets over $10 billion, will be subject to new regulations to be passed by the Bureau. While the Bureau does not appear to have authority to make rules limiting interest rates or fees charged, the scope and extent of the Bureau’s authority will nonetheless be broad, and it is expected that the Bureau will address issues such as rollovers or extensions of payday loans and compliance with federal rules and regulations. Future restrictions on the payday lending industry could have serious consequences for the Company.

Any adverse change in present federal laws or regulations that govern or otherwise affect payday lending could result in our curtailment or cessation of operations in certain jurisdictions or locations. Furthermore, any failure to comply with any applicable federal laws or regulations could result in fines, litigation, the closure of one or more store locations or negative publicity. Any such change or failure would have a corresponding impact on our results of operations and financial condition, primarily through a decrease in revenues resulting from the cessation or curtailment of operations, decrease in our operating income through increased legal expenditures or fines, and could also negatively affect our general business prospects as well if we are unable to effectively replace such revenues in a timely and efficient manner or if negative publicity effects our ability to obtain additional financing a needed.

During the 2010 legislative session in Colorado, House Bill 10-1351 was passed into law. This bill amended the Colorado Deferred Deposit Loan Act, the existing payday lending law. The law became effective August 11, 2010 and modified traditional payday lending by changing the single payment advance (with no minimum term) into a single or multiple payment loan with a minimum six month term. It also limited the amount and type of fees that can be charged on these loans, effectively reducing by one-half the fees that can be charged and when the fees may be realized. At present, the Company continues to operate its sole store in Colorado while the impact to profitability of this new law is being assessed.

In May 2010, new laws were enacted in Wisconsin that restrict the number of times a consumer may renew (or rollover) a payday loan. Previously, there were no limits to the number of rollovers permitted. Effective January 1, 2011, consumers in Wisconsin are only allowed to renew a payday loan once, and then lenders are required to offer a 60-day, interest free, payment plan to consumers. As a result of these changes, we introduced an installment loan product in Wisconsin in 2011.

On November 2, 2010, voters in Montana passed Petition Initiative I-164. Effective January 1, 2011, Petition Initiative I-164 capped fees on payday loans at an imputed interest rate of 36%. The Company discontinued its operations in that state on December 31, 2010.

8

The passage of federal or state laws and regulations could, at any point, essentially prohibit the Company from conducting its payday lending business in its current form. Any such legal or regulatory change would certainly have a material and adverse effect on the Company, its operating results, financial condition and prospects, and perhaps even its viability.

For the six months ended June 30, 2012 and 2011, the Company had significant revenues by state (shown as a percentage of applicable division’s revenue) as follows:

Payday Division							Cricket Wireless Division
	2012 % of Revenues			2011 % of Revenues				2012 % of Revenues			2011 % of Revenues
Nebraska		26	%		28	%	Missouri		16	%		28	%
Wyoming		15	%		15	%	Nebraska		13	%		20	%
North Dakota		18	%		18	%	Texas		12	%		14	%
Iowa		12	%		13	%	Indiana		11	%		26	%
							Oklahoma		10	%		0	%

3. Loans Receivable –

At June 30, 2012 and December 31, 2011 our outstanding loans receivable aging was as follows:

	June 30, 2012			December 31, 2011
Current	$	4,244,920		$	4,625,852
1-30		365,295			296,983
31 – 60		231,199			219,830
61 – 90		202,658			222,929
91 – 120		126,675			170,622
121 – 150		136,948			188,983
151 – 180		159,401			163,614
		5,467,096			5,888,813
Allowance for losses		(905,000	)		(1,001,000	)
	$	4,562,096		$	4,887,813

4. Loans Receivable Allowance –

As a result of the Company’s collection efforts, it historically writes off approximately 42% of the returned payday items.  Based on days past the check return date, write-offs of payday returned items historically have tracked at the following approximate percentages: 1 to 30 days – 42%; 31 to 60 days – 66%; 61 to 90 days – 83%; 91 to 120 days – 87%; and 121 to 180 days – 90%.  A rollforward of the Company’s loans receivable allowance for the six months ended June 30, 2012 and 2011 is as follows:

	Six Months Ended June 30,
	2012			2011
Loans receivable allowance, beginning of period	$	1,001,000		$	1,165,000
Provision for loan losses charged to expense		632,508			454,089
Charge-offs, net		(728,508	)		(778,089	)
Loans receivable allowance, end of period	$	905,000		$	841,000

5. Segment Information –

Segment information related to the three months ended June 30, 2012 and 2011 is set forth below:

	Three Months Ended June 30, 2012							Three Months Ended June 30, 2011
	Payday		Cricket Wireless			Total		Payday		Cricket Wireless			Total
Revenues from external customers	$	2,839,713	$	3,088,256		$	5,927,969	$	2,603,830	$	1,436,252		$	4,040,082
Net income	$	372,601	$	(18,850	)	$	353,751	$	335,670	$	(65,955	)	$	269,715

9

	Six Months Ended June 30, 2012						Six Months Ended June 30, 2011
	Payday		Cricket Wireless		Total		Payday		Cricket Wireless			Total
Revenues from external customers	$	5,628,830	$	7,815,909	$	13,444,739	$	5,244,827	$	3,833,886		$	9,078,713
Net income (loss)	$	741,374	$	401,419	$	1,142,793	$	715,238	$	(33,154	)	$	682,084
Total segment assets	$	14,728,243	$	7,044,853	$	21,773,096	$	14,500,282	$	4,911,842		$	19,412,124

6. Notes Payable –

On January 26, 2011, WERCS extended the maturity of the promissory note made by WERCS to WFL, pursuant to the Business Loan Agreement dated April 1, 2010 and an accompanying $2,000,000 promissory note to WFL, to April 1, 2012. In March 2011, as required by the terms of the note extension, the Company paid $1,000,000 toward the principal balance on the WERCS promissory note. On March 14, 2012, the Company repaid the remaining principal balance and all accrued and unpaid interest under the WERCS credit facility.

The Company drew an additional $200,000 on the existing note payable with River City Equity, Inc, a related party, during the first quarter 2012. Total advanced on the $2,000,000 credit facility as of June 30, 2012 was $1,200,000. The note is collateralized by substantially all assets of Western Capital Resources, Inc.

7. Preferred Stock Dividend –

Reconciliations of the cumulative preferred stock dividend payable are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Balance due, beginning of the period	$	4,075,000	$	1,975,000	$	3,550,000	$	1,450,000
Current quarter preferred dividends payable		525,000		525,000		1,050,000		1,050,000
Preferred dividends paid		-		-		-		-
Balance due, end of the period	$	4,600,000	$	2,500,000	$	4,600,000	$	2,500,000

In addition, the Company has $525,000 of second quarter unaccrued cumulative preferred dividends from June 30, 2012 and 2011 that became due and payable July 15, 2012 and 2011, respectively.

8. Other Expense –

A breakout of other expense is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Store expenses
Bank fees	$	75,617	$	59,519	$	157,237	$	134,848
Collection costs		106,828		97,976		235,526		205,930
Repairs & maintenance		61,332		26,171		95,523		73,466
Supplies		98,596		42,938		186,521		77,342
Telephone		43,645		32,910		77,479		66,564
Utilities and network lines		159,487		108,017		335,659		235,441
Other		225,953		144,510		435,791		328,427
	$	771,458	$	512,041	$	1,523,736	$	1,122,018
General & administrative expenses
Professional fees	$	61,291	$	41,355	$	147,214	$	164,870
Management and consulting fees		137,692		117,117		271,442		217,117
Other		75,462		66,387		159,962		132,842
	$	274,445	$	224,859	$	578,618	$	514,829

10

9. Acquisitions –

In February 2012, the Company acquired three Cricket corporate-owned stores. Two of the stores are located in McAllen, Texas and one in Laredo, Texas.

In May 2012, the Company acquired two Cricket dealer-owned stores in separate transactions. One was located in Omaha, Nebraska and the other in Spokane, Washington.

	Fair Value
Other current assets	$	1,600
Property and equipment		72,500
Intangible assets		98,000
Goodwill		278,700
Other non-current assets		4,400
	$	455,200

The results of the operations for the acquired locations have been included in the condensed consolidated financial statements since the date of the acquisitions. The following table presents the unaudited pro forma results of continuing operations for the three and six months ended June 30, 2012 and 2011, as if the acquisitions had been consummated at the beginning of each period presented. The pro forma results of continuing operations are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisitions occurred at the beginning of the year presented or the results which may occur in the future.

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012		2011
Pro forma revenue	$	5,963,000		$	4,370,000		$	13,770,000	$	9,989,000
Pro forma net income	$	358,000		$	306,000		$	1,194,000	$	815,000
Pro forma net income (loss) per common share – basic and diluted	$	(0.03	)	$	(0.03	)	$	0.02	$	(0.03	)

In April 2012 the Company executed an Asset Purchase Agreement to acquire one Cricket retail storefront for a purchase price of $160,000. As a condition of the agreement, the Company will also open two and relocate one existing Cricket retail storefronts.

10. Material Definitive Agreement –

On June 22, 2012, Western Capital Resources, Inc. (through its wholly owned subsidiary PC Doctors Acquisition, Inc., a Delaware corporation) entered into an Asset Purchase Agreement with PC Doctors, LLC, a Wisconsin limited liability company, Tecguard, LLC, a Wisconsin limited liability company, and Robert Posteluk. PC Doctors is engaged in the business of selling cellular phones, internet service, tablets, computers, accessories and computer services, and Tecguard is engaged in the business of selling protection plans for cellular phones and computers. The businesses are conducted primarily in the State of Wisconsin.

Under the Asset Purchase Agreement, Western Capital would acquire substantially all of the assets of PC Doctors and Tecguard for a purchase price of $3.20 million (subject to a working capital adjustment), plus potential additional payments aggregating $1.55 million contingent upon the earnings of the buyer subsidiary for the years ended December 31, 2012 and 2013. The Asset Purchase Agreement contains customary representations and warranties respecting the business and assets of PC Doctors and Tecguard, as well as customary indemnification covenants. The closing of the transactions contemplated by the Asset Purchase Agreement is subject to customary conditions, including the completion of a due diligence investigation by Western Capital to its reasonable satisfaction. The Asset Purchase Agreement may be terminated if, among other customary reasons, the closing has not occurred on or prior to July 22, 2013 (or such later date as the parties may agree upon).

11

Also on June 22, 2012, the Company entered into a non-binding term sheet with WCR, LLC, a Delaware limited liability company and the controlling shareholder of the company, for the provision of a short-term loan the proceeds of which would be used to satisfy the Company’s financial obligations at the closing of the transaction with PC Doctors, LLC, Tecguard, LLC and Robert Posteluk. The Company’s ability to fulfill its obligations at the closing of such transaction depends upon its ability to secure this or other available financing through the completion of definitive documentation. The non-binding term sheet outlines the material terms of the lending arrangement proposed by the parties, including a loan of up to $3.5 million in principal amount, accruing interest at the rate of 11% per annum, payable on the six-month anniversary of the loan, with a $25,000 commitment fee payable upon execution of definitive documentation. The loan would be secured by a security interest in all of the assets of the Company (subordinate to the rights of River City Equity, Inc.), and involve no financial covenants or prepayment penalties.

11. Consulting Agreement –

On March 7, 2012, a consulting agreement with Mr. Richard Miller, the Chairman of the Board, was approved by the Company’s Board of Directors. The agreement provides for consulting fees in the amount of $100,000 and contains the same terms and conditions as the earlier agreement that expired March 31, 2012.

12. Management and Advisory Agreement –

Effective June 21, 2012, the Company entered into an Amended and Restated Management and Advisory Agreement with Blackstreet Capital Management, LLC, a Delaware limited liability company. The amended and restated agreement increases the management fee payable to Blackstreet to the greater of (i) $330,750 per year (subject to annual increases of five percent) or (ii) five percent of Western Capital’s EBITDA. The amended and restated agreement also requires the Company to pay Blackstreet a fee in an amount equal to two percent of the gross proceeds of any debt or equity financing, and a fee in an amount equal to $400,000 (plus a $60,000 increase in the management fee payable under the agreement) upon the closing of an acquisition in consideration for Blackstreet’s referral to the Company of such acquisition opportunity and assistance in the performance of due diligence services relating thereto. The Company will not, however, be obligated to accept and pursue any acquisition referrals made by Blackstreet. Finally, the amended and restated agreement provides that a termination fee will be paid to Blackstreet in the event that the Company terminates the agreement in connection with a sale of all or substantially all of the assets of the Company to, or any merger or other transaction with, an unaffiliated entity, which transaction results in the holders of a majority of the stock of the Company immediately prior to such transaction owning less than 50% of the stock of the Company (or any successor entity) after giving effect to the transaction.

13. Rights Offering –

On June 18, 2012 the Company filed a registration statement with the SEC on Form S-1 relating to the proposed distribution of subscription rights (for no consideration) to the existing shareholders of the Company and the related public offer and sale of common stock to such shareholders .

Gross proceeds from the sale of shares of common stock, assuming the exercise of all subscription rights to be distributed up to the maximum amount contemplated in the registration statement, would be $4.5 million.

14. Common Stock Repurchases –

In February and March 2012, the Company repurchased an aggregate of 2,048,227 shares of its common stock from four shareholders at $0.15 per share for a total repurchase cost of $307,234.

15. Subsequent Events –

Form S-1/A Registration Statement Under the Securities Act of 1933.

On July 26, 2012, the Company filed Form S-1/A, Registration Statement Under the Securities Act of 1933. This amended the filing made on June 18, 2012.

Material Definitive Agreement

On August 10, 2012, the Company terminated the Asset Purchase Agreement with PC Doctors, LLC, a Wisconsin limited liability company, Tecguard, LLC, a Wisconsin limited liability company, and Robert Posteluk, dated as of June 22, 2012, by exercising its termination rights under that agreement following the completion of the Company’s initial due-diligence investigation.

12

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

Forward-Looking Statements

Some of the statements made in this report are “forward-looking statements,” as that term is defined under Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based upon our current expectations and projections about future events. Whenever used in this report, the words “believe,” “anticipate,” “intend,” “estimate,” “expect” and similar expressions, or the negative of such words and expressions, are intended to identify forward-looking statements, although not all forward-looking statements contain such words or expressions. The forward-looking statements in this report are primarily located in the material set forth under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (Part I, Item 2), but may be found in other parts of this report as well. These forward-looking statements generally relate to our plans, objectives and expectations for future operations and are based upon management’s current estimates and projections of future results or trends. Although we believe that our plans and objectives reflected in or suggested by these forward-looking statements are reasonable, we may not achieve these plans or objectives. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. We will not necessarily update forward-looking statements even though our situation may change in the future.

Specific factors that might cause actual results to differ from our expectations or may affect the value of the common stock, include, but are not limited to:

· Changes in local, state or federal laws and regulations governing lending practices, or changes in the interpretation of such laws and regulations;

· Litigation and regulatory actions directed toward our industry or us, particularly in certain key states and/or nationally;

· Our need for additional financing, and

· Unpredictability or uncertainty in financing markets which could impair our ability to grow our business through acquisitions.

Other factors that could cause actual results to differ from those implied by the forward-looking statements in this report are more fully described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Industry data and other statistical information used in this report are based on independent publications, government publications, reports by market research firms or other published independent sources.  Some data are also based on our good faith estimates, derived from our review of internal surveys and the independent sources listed above.  Although we believe these sources are reliable, we have not independently verified the information.

General Overview

We provide (through Wyoming Financial Lenders, Inc.) retail financial services to individuals primarily in the Midwestern and Southwestern United States. These services include non-recourse cash advance loans, small unsecured installment loans, check cashing and other money services. As of June 30, 2012, we operated 52 “payday” stores in nine states (Colorado, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming).  

We provide short-term consumer loans—known as “payday” or “cash advance” loans—in amounts that typically range from $100 to $500. Cash advance loans provide customers with cash in exchange for a promissory note with a maturity of generally two to four weeks and the customer’s post-dated personal check for the aggregate amount of the cash advance, plus a fee. The fee varies from state to state based on applicable regulations, and generally ranges from $15 to $22 for each whole or partial increment of $100 borrowed. To repay the cash advance loan, a customer may pay with cash, in which case their personal check is returned to them, or allow the check to be presented to the bank for collection. Installment loans provide customers with cash in exchange for a promissory note with a maturity of generally three to six months. The fee and interest rate on installment loans vary based on applicable regulations. Like cash advance or payday loans, installment loans are unsecured. All of our payday loans, installment loans and other services are subject to state regulations (which vary from state to state), federal regulations and local regulation, where applicable.

We also operate (through PQH Wireless, Inc.) Cricket Wireless retail stores as an authorized dealer of Cricket Wireless products and services. Authorized dealers are permitted to sell the Cricket line and generally locate their store operations in areas with a strong potential customer base where Cricket does not maintain a corporate storefront. These locations are generally within the urban core or surrounding areas of a community. We are an authorized premier Cricket dealer, and as such, we are only permitted to sell the Cricket line of prepaid cellular phones at our Cricket retail stores. As of June 30, 2012, we operated 50 Cricket wireless retail stores in 14 states (Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon, Texas and Washington).  

13

Our expenses primarily relate to the operations of our various stores.  The most significant expenses include salaries and benefits for our store employees, phones and accessories, provisions for payday loan losses and occupancy expenses for our leased real estate.  Our other significant expenses are general and administrative, which includes compensation of employees, professional fees for compliance, external reporting, audit and legal services, and management / consulting fees.

With respect to our cost structure, phone and accessory cost of sales and salaries and benefits are two of our largest costs and are driven primarily by the number of storefronts operated throughout the period and seasonal fluctuation in sales volumes.   Occupancy costs make up our third largest expense item.  Our provision for losses is also a significant expense.  We have experienced seasonality in our Cricket operations, with the first and fourth quarters typically being our strongest periods as a result of broader economic factors, such as holiday spending habits at the end of each year and income tax refunds during the first quarter.

We evaluate our stores based on revenue growth, gross profit contributions and loss ratio (which is losses as a percentage of payday loan fees), with consideration given to the length of time the branch has been open and its geographic location.  We evaluate changes in comparable branch financial and other measures on a routine basis to assess operating efficiency.  We define comparable branches as those branches that are open during the full periods for which a comparison is being made.  For example, comparable branches for the annual analysis we undertook as of December 31, 2011 have been open at least 24 months on that date.  We monitor newer branches for their progress toward profitability and rate of loan growth, units sold, or payment volume.

The contraction of the payday loan industry has followed, and continues to be significantly affected by, payday lending legislation and regulation in the various states and nationally.  We actively monitor and evaluate legislative and regulatory initiatives in each of the states and nationally, and are involved with the efforts of the various industry lobbying efforts.  To the extent that states enact legislation or regulations that negatively impacts payday lending, whether through preclusion, fee reduction or loan caps, our business could be adversely affected.  In Nebraska, legislation was introduced in 2008 (but did not advance) to ban all cash advance or payday loans in Nebraska.  Despite the defeat of this legislation, since we derived approximately 28% of our 2011 and 26% of our year-to-date 2012 total payday revenues in Nebraska, any subsequent attempts to pass similar legislation in Nebraska, or other legislation that would restrict our ability to make cash advance loans in Nebraska, would pose significant risks to our business.

In an effort to expand our geographic reach, our strategic expansion plans involve the expansion and diversification of our product and service offerings.  For this reason, we have focused, and expect to continue to focus, a significant amount of time and resources on the development of our Cricket Wireless retail stores.  In an effort to expand our product and service offerings within the Payday division we intend to introduce pawn stores into a limited number of existing payday locations. We believe that successful expansion, both geographically and product- and service-wise, will help to mitigate the regulatory and economic risk inherent in our business by making us less reliant on (i) cash advance lending alone and (ii) any particular aspect of our business that is concentrated geographically.

Discussion of Critical Accounting Policies

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America applied on a consistent basis.  The preparation of these financial statements requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  We evaluate these estimates and assumptions on an ongoing basis.  We base these estimates on the information currently available to us and on various other assumptions that we believe are reasonable under the circumstances.  Actual results could vary materially from these estimates under different assumptions or conditions.

Our significant accounting policies are discussed in Note 1, “Basis of Presentation, Nature of Business and Summary of Significant Accounting Policies,” of the notes to our condensed consolidated financial statements included in this report.  We believe that the following critical accounting policies affect the more significant estimates and assumptions used in the preparation of our condensed consolidated financial statements.

Loans Receivable Allowance

We maintain a loan loss allowance for anticipated losses for our payday, installment and title loans. To estimate the appropriate level of the loan loss allowance, we consider the amount of outstanding loans owed to us, historical loans charged off, current and expected collection patterns and current economic trends. Our current payday loan loss allowance is based on our net write offs, typically expressed as a percentage of loan amounts originated for the last 24 months applied against the balance of outstanding loans that we write off. Our current installment loan loss allowance also factors in the delinquency status of loans within the installment loan portfolio. We also periodically perform a look-back analysis on its loan loss allowance to verify that the historical allowance established tracks with the actual subsequent loan write-offs and recoveries. We are aware that, as conditions change, we may also need to make additional allowances in future periods.

14

Included in loans receivable are cash advance loans that are currently due or past due and cash advance loans that have not been repaid.  This generally is evidenced where a customer’s personal check has been deposited and the check has been returned due to non-sufficient funds in the customer’s account, a closed account, or other reasons.  Also included in loans receivable are current and delinquent installment and title loans. Loans are carried at cost less the loans receivable allowance.  The Company does not specifically reserve for any individual loan.  The Company aggregates loans for purposes of estimating the allowance using a methodology that analyzes historical portfolio statistics and management’s judgment regarding recent trends noted in the portfolio.  This methodology takes into account several factors, including the maturity of the store location, charge-off and recovery rates, and delinquency status of installment loans.  The Company utilizes a software program to assist with the tracking of its historical portfolio statistics.  As a result of the Company’s collection efforts, it historically writes off approximately 42% of the returned items.  Based on days past the check return date, write-offs of returned items historically have tracked at the following approximate percentages: 1 to 30 days – 42%; 31 to 60 days – 66%; 61 to 90 days – 83%; 91 to 120 days – 87%; and 121 to 180 days – 90%.  All returned payday items are charged off after 180 days, as collections after that date have not been significant.  The loan loss allowance is reviewed monthly and any adjustment to the loan loss allowance as a result of historical loan performance, current and expected collection patterns and current economic trends is recorded.

A rollforward of the Company’s loans receivable allowance for the six months ended June 30, 2012 and 2011 is as follows:

	Six Months Ended June 30,
	2012			2011
Loans receivable allowance, beginning of period	$	1,001,000		$	1,165,000
Provision for loan losses charged to expense		632,508			454,089
Charge-offs, net		(728,508	)		(778,089	)
Loans receivable allowance, end of period	$	905,000		$	841,000

Valuation of Long-lived and Intangible Assets

The Company assesses the impairment of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable; goodwill is analyzed on an annual basis. Factors that could trigger an impairment review include significant underperformance relative to expected historical or projected future cash flows, significant changes in the manner of use of acquired assets or the strategy for the overall business, and significant negative industry trends. When management determines that the carrying value of long-lived and intangible assets may not be recoverable, impairment is measured based on the excess of the assets’ carrying value over the estimated fair value.

Results of Operations – Three Months Ended June 30, 2012 Compared to Three Months Ended June 30, 2011

For the three-month period ended June 30, 2012, net income was $.35 million compared to net income of $.27 million for the three months ended June 30, 2011. During the three months ended June 30, 2012, income from operations before income taxes was $.57 million compared to $.43 million for the three months ended June 30, 2011. Year over year, we operated one additional payday store and 21 additional Cricket storefronts. The major components of revenues, store expenses, general and administrative expenses, and income tax expense are discussed below.

Revenues

The following table summarizes our revenues for the three months ended June 30, 2012 and 2011, respectively:

	Three Months Ended June 30,							Three Months Ended June 30,
	2012		2011		% Change Year Over Year			2012			2011
								(percentage of revenues)
Payday loan fees	$	2,351,757	$	2,169,854		8.4	%		39.7	%		53.8	%
Phones and accessories		1,628,329		808,948		101.3	%		27.5	%		20.0	%
Cricket service fees		1,483,342		440,224		237.0	%		25.0	%		10.9	%
Installment interest income		248,156		126,168		96.7	%		4.2	%		3.1	%
Check cashing fees		146,595		154,603		(5.2	)%		2.4	%		3.8	%
Other income and fees		69,790		340,285		(79.5	)%		1.2	%		8.4	%
Total	$	5,927,969	$	4,040,082		46.7	%		100.0	%		100.0	%

15

Revenues totaled $5.93 million for the three months ended June 30, 2012, compared to $4.04 million for the three months ended June 30, 2011. The increase in total revenues resulted primarily from higher Cricket division revenue which can be attributed to our recent acquisitions. During the three-month periods ended June 30, 2012 and 2011, we originated approximately $16.60 million and $16.23 million in cash advance loans, respectively. Our average cash advance loan (including fees) totaled approximately $381 and $378 during the three-month periods ended June 30, 2012 and 2011, respectively. Our average fee for the three-month periods ended June 30, 2012 and 2011 was $55.

Store Expenses

The following table summarizes our store expenses for the three months ended June 30, 2012 and 2011, respectively:

	Three Months Ended June 30,							Three Months Ended June 30,
	2012		2011		% Change Year Over Year			2012			2011
								(percentage of revenues)
Store Expenses:
Salaries and benefits	$	1,605,796	$	1,033,563		55.4	%		27.0	%		25.5	%
Phone and accessories cost of sales		1,095,938		433,344		152.9	%		18.5	%		10.7	%
Occupancy		559,443		395,934		41.3	%		9.4	%		9.8	%
Provisions for loan losses		356,118		275,216		29.4	%		6.0	%		6.8	%
Advertising		80,259		83,287		(3.6	)%		1.4	%		2.1	%
Depreciation		70,680		62,931		12.3	%		1.2	%		1.6	%
Amortization of intangible assets		56,846		113,043		(49.7	)%		1.0	%		2.8	%
Other		771,458		512,041		50.7	%		13.0	%		12.7	%
	$	4,596,538	$	2,909,359		58.0	%		77.5	%		72.0	%

As the table above demonstrates, total expenses associated with store operations for the three months ended June 30, 2012 were $4.60 million, compared to $2.91 million for the three months ended June 30, 2011, or a 58.0% increase for the interim periods. The major components of these expenses are salaries and benefits for our store employees, provision for loan losses, costs of sales for phones and accessories, occupancy costs relating to our store leaseholds, advertising expenses, depreciation of store equipment and leasehold improvements, amortization of intangible assets and other expenses associated with store operations.

Overall, our most significant store expenses for the three months ended June 30, 2012 and 2011 related to phone and accessory costs, salaries and benefits for our store employees, occupancy costs and provision for loan losses. A discussion and analysis of the various components of our store expenses appears below.

Salaries and Benefits. Payroll and related costs at the store level were $1.61 million compared to $1.03 million for the three-month periods ended June 30, 2012 and 2011, respectively.

Phone and Accessories Cost of Sales. For the three months ended June 30, 2012, our costs of sales were $1.10 million compared to $.43 million for the same period in 2011. The increase in our Cricket Wireless segment phone and accessory costs resulted from operating additional storefronts in 2012 and from a change in the structure of dealer compensation from Cricket, which change decreased our margins while increasing fees to dealers.

16

Occupancy Costs. Occupancy expenses, consisting mainly of store leases, were $.56 million for the three months ended June 30, 2012 versus $.40 million for the three months ended June 30, 2011.

Provisions for Loan Losses. For the three months ended June 30, 2012, our provisions for loan losses were $.36 million compared to $.28 million for the three months ended June 30, 2011. Our provisions for loan losses represented approximately 13.8% and 12.2% of our loan fee revenue for the three months ended June 30, 2012 and 2011, respectively. The increase can be attributed to our introduction of an installment loan product which has higher loss rates than payday loans. Due to the inability to foretell the scope and duration of the current economic recovery, there exists uncertainty in how significant our total 2012 loan losses may or may not be and how they may differ from 2011.

Advertising. Advertising and marketing expenses remained consistent at $.08 million for the three months ended June 30, 2012 and 2011. In general, we expect that our marketing and advertising expenses for 2012 to remain consistent.

Depreciation. Depreciation, relating to store equipment and leasehold improvements, increased to $.07 million for the three months ended June 30, 2012 compared to $.06 million for the three months ended June 30, 2011.

Amortization of Intangible Assets. Amortization of intangible assets decreased to $.06 million for the three months ended June 30, 2012 from $.11 million for the three month ended June 30, 2011.

Other Store Expenses. Other expenses increased to $.77 million for the three months ended June 30, 2012 from $.51 million for the three months ended June 30, 2011.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the three months ended June 30, 2012 and 2011, respectively:

	Three Months Ended June 30,							Three Months Ended June 30,
	2012		2011		% Change Year Over Year			2012			2011
								(percentage of revenues)
General & Administrative Expenses:
Salaries and benefits	$	429,354	$	405,888		5.8	%		7.2	%		10.0	%
Depreciation		5,614		5,688		(1.3	)%		0.1	%		0.1	%
Interest expense		51,267		63,573		(19.4	)%		0.9	%		1.6	%
Other expense		274,445		224,859		22.1	%		4.6	%		5.6	%
	$	760,680	$	700,008		8.7	%		12.8	%		17.3	%

Total general and administrative costs for the three months ended June 30, 2012 were $.76 million compared to $.70 million for the period ended June 30, 2011. For the three months ended June 30, 2012, the major components of these costs were salaries and benefits for our corporate headquarters operations and executive management, interest expense, and other general and administrative expenses. A discussion and analysis of the various components of our general and administrative costs appears below:

Salaries and Benefits. Salaries and benefits expenses for the three months ended June 30, 2012 were $.43 million, a $.02 million increase from the $.41 million in such expenses during period ended June 30, 2011

Interest. Interest expense for the three months ended June 30, 2012 was $.05 million compared to $.06 million for the three months ended June 30, 2011.

Other General and Administrative Expenses. Other general and administrative expenses, such as professional fees, management and consulting fees, utilities, office supplies, and other minor costs associated with corporate headquarters activities, increased $.05 million to $.27 million for the three months ended June 30, 2012 compared to $.22 million from the three months ended June 30, 2011.

17

Income Tax Expense

Income tax expense for the three months ended June 30, 2012 was $.22 million compared to income tax expense of $.16 million for the three months ended June 30, 2011, an effective rate of 38% and 37%, respectively.

Results of Operations – Six Months Ended June 30, 2012 Compared to Six Months Ended June 30, 2011

For the six-month period ended June 30, 2012, net income was $1.14 million compared to net income of $.68 million for the six months ended June 30, 2011. During the six months ended June 30, 2012, income from operations before income taxes was $1.86 million compared to $1.10 million for the six months ended June 30, 2011. The major components of revenues, store expenses, general and administrative expenses, and income tax expense are discussed below.

Revenues

The following table summarizes our revenues for the six months ended June 30, 2012 and 2011, respectively:

	Three Months Ended June 30,							Three Months Ended June 30,
	2012		2011		% Change Year Over Year			2012			2011
								(percentage of revenues)
Payday loan fees	$	4,659,658	$	4,495,601		3.6	%		34.7	%		49.5	%
Phones and accessories		4,370,025		2,395,863		82.4	%		32.5	%		26.4	%
Cricket service fees		3,478,367		994,920		249.6	%		25.9	%		10.9	%
Installment interest income		444,665		126,168		252.4	%		3.3	%		1.4	%
Check cashing fees		342,407		387,145		(11.6	)%		2.5	%		4.3	%
Other income and fees		149,617		679,016		(78.0	)%		1.1	%		7.5	%
Total	$	13,444,739	$	9,078,713		48.1	%		100.0	%		100.0	%

Revenues totaled $13.4 million for the six months ended June 30, 2012, compared to $9.08 million for the six months ended June 30, 2011. The increase in total revenues resulted primarily from higher Cricket division revenue which can be attributed to our recent acquisitions. During the six-month periods ended June 30, 2012 and 2011, we originated approximately $32.37 million and $31.45 million in cash advance loans, respectively. Our average loan (including fees) totaled approximately $382 and $378 during the six-month periods ended June 30, 2012 and 2011, respectively. Our average fee for each of the six-month periods ended June 30, 2012 and 2011 was $55.

Store Expenses

The following table summarizes our store expenses for the six months ended June 30, 2012 and 2011, respectively:

	Six Months Ended June 30,							Six Months Ended June 30,
	2012		2011		% Change Year Over Year			2012			2011
								(percentage of revenues)
Store Expenses:
Salaries and benefits	$	3,293,188	$	2,145,608		53.5	%		24.5	%		23.6	%
Phone and accessories cost of sales		2,931,013		1,391,241		110.7	%		21.8	%		15.3	%
Occupancy		1,111,751		813,997		36.6	%		8.3	%		9.0	%
Provisions for loan losses		632,508		454,089		39.3	%		4.7	%		5.0	%
Advertising		157,380		164,887		(4.6	)%		1.2	%		1.8	%
Depreciation		139,925		127,024		10.2	%		1.0	%		1.4	%
Amortization of intangible assets		116,247		228,648		(49.2	)%		0.9	%		2.5	%
Other		1,523,736		1,122,018		35.8	%		11.3	%		12.4	%
	$	9,905,748	$	6,447,512		53.6	%		73.7	%		71.0	%

18

As the table above demonstrates, total expenses associated with store operations for the six months ended June 30, 2012 were $9.91 million, compared to $6.45 million for the six months ended June 30, 2011, or a 53.6% increase for the interim periods. The major components of these expenses are salaries and benefits for our store employees, provision for loan losses, costs of sales for phones and accessories, occupancy costs relating to our store leaseholds, advertising expenses, depreciation of store equipment and leasehold improvements, amortization of intangible assets and other expenses associated with store operations.

Overall, our most significant store expenses for the six months ended June 30, 2012 and 2011 related to phone and accessory costs, salaries and benefits for our store employees, occupancy costs and provision for loan losses. A discussion and analysis of the various components of our store expenses appears below.

Salaries and Benefits. Payroll and related costs at the store level were $3.29 million compared to $2.15 million for the six-month periods ended June 30, 2012 and 2011, respectively

Phone and Accessories Cost of Sales. For the six months ended June 30, 2012, our costs of sales were $2.93 million compared to $1.39 million for the same period in 2011. The increase in our Cricket Wireless segment phone and accessory costs resulted from operating additional storefronts in 2012 and from a change in the structure of dealer compensation from Cricket, which change decreased our margins while increasing fees to dealers.

Occupancy Costs. Occupancy expenses, consisting mainly of store leases, were $1.11 million for the six months ended June 30, 2012 versus $.81 million for the six months ended June 30, 2011.

Provisions for Loan Losses. For the six months ended June 30, 2012, our provisions for loan losses were $.63 million compared to $.45 million for the six months ended June 30, 2011. Our provisions for loan losses represented approximately 12.4% and 9.8% of our loan fee revenue for the six months ended June 30, 2012 and 2011, respectively. The increase can be attributed to our introduction of an installment loan product which has higher default rates than payday loans. Due to the inability to foretell the scope and duration of the current economic recovery, there exists uncertainty in how significant our total 2012 loan losses may or may not be and how they may differ from 2011.

Advertising. Advertising and marketing expenses remained consistent at $.16 million for each of the six months ended June 30, 2012 and 2011. In general, we expect that our marketing and advertising expenses for 2012 will remain consistent.

Depreciation. Depreciation, relating to store equipment and leasehold improvements, increased to $.14 million for the six months ended June 30, 2012 compared to $.13 million for the six months ended June 30, 2011.

Amortization of Intangible Assets. Amortization of intangible assets decreased from $.23 million for the six months ended June 30, 2011 to $.17 million for the six month ended June 30, 2012.

Other Store Expenses. Other expenses increased to $1.52 million for the six months ended June 30, 2012 from $1.12 million for the six months ended June 30, 2011.

General and Administrative Expenses

The following table summarizes our general and administrative expenses for the six months ended June 30, 2012 and 2011, respectively:

	Six Months Ended June 30,							Six Months Ended June 30,
	2012		2011		% Change Year Over Year			2012			2011
								(percentage of revenues)
General & Administrative Expenses:
Salaries and benefits	$	957,086	$	851,815		12.4	%		7.1	%		9.4	%
Depreciation		11,106		9,708		14.4	%		0.1	%		0.1	%
Interest expense		129,388		156,765		(17.5	)%		1.0	%		1.7	%
Other expense		578,618		514,829		12.4	%		4.3	%		5.7	%
	$	1,676,198	$	1,533,117		9.3	%		12.5	%		16.9	%

19

Total general and administrative costs for the six months ended June 30, 2012 were $1.68 million compared to $1.53 million for the period ended June 30, 2011. For the six months ended June 30, 2012, the major components of these costs were salaries and benefits for our corporate headquarters operations and executive management, interest expense, and other general and administrative expenses. A discussion and analysis of the various components of our general and administrative costs appears below:

Salaries and Benefits. Salaries and benefits expenses for the six months ended June 30, 2012 were $.96 million, a $.11 million increase from the $.85 million in such expenses during period ended June 30, 2011

Interest. Interest expense for the six months ended June 30, 2012 was $.13 million compared to $.16 million for the six months ended June 30, 2011.

Other General and Administrative Expenses. Other general and administrative expenses, such as professional fees, management and consulting fees, utilities, office supplies, and other minor costs associated with corporate headquarters activities, increased $.07 million to $.58 million for the six months ended June 30, 2012 compared to $.51 million from the six months ended June 30, 2011.

Income Tax Expense

Income tax expense for the six months ended June 30, 2012 was $.72 million compared to income tax expense of $.42 million for the six months ended June 30, 2011, an effective rate of 39% and 38%, respectively.

Liquidity and Capital Resources

Summary cash flow data is as follows:

	Six Months Ended June 30,
	2012			2011
Cash flows provided (used) by:
Operating activities	$	1,883,075		$	680,739
Investing activities		(575,803	)		(84,123	)
Financing activities		(1,454,010	)		(1,363,759	)
Net increase (decrease) in cash		(146,738	)		(767,143	)
Cash, beginning of period		1,909,442			2,092,386
Cash, end of period	$	1,762,704		$	1,325,243

At June 30, 2012, we had cash of $1.76 million compared to cash of $1.33 million on December 31, 2011. We believe that our available cash, combined with expected cash flows from operations will be sufficient to fund our liquidity and capital expenditure requirements through June 30, 2013. Our expected short-term uses of available cash include the funding of operating activities (including anticipated increases in payday loans), the financing of expansion activities, including new store openings or store acquisitions and the repayment of long-term debt.

Because of the constant threat of regulatory changes to the payday lending industry, we believe it will be difficult for us to obtain debt financing from traditional financial institutions. Financing we may obtain from alternate sources is likely to involve higher interest rates.

On October 18, 2011, we entered into a borrowing arrangement with River City Equity, Inc. and delivered a related long-term promissory note in favor of River City Equity. The borrowing arrangement allows us to borrow up to $2,000,000 at an interest rate of 12% per annum, with interest payable on a monthly basis. The note matures on September 30, 2013, on which date all unpaid principal and accrued but unpaid interest thereon is due and payable. The note includes a prepayment penalty and, under certain circumstances, permits River City Equity to obtain a security interest in all of the Company’s assets. As of June 30, 2012, $1,200,000 had been advanced under this arrangement.

Our overall cash and liquidity position has been significantly enhanced by the past and current willingness of the holders of our Series A Convertible Preferred Stock to not insist that the Company pay dividends to those stockholders to the greatest extent permitted by Minnesota state law. Minnesota state law indicates that a corporation can only pay a dividend in circumstances where the corporation will be able to pay its debts in the ordinary course of business after making the dividend. If our preferred shareholders were to insist that the Company pay dividends to the greatest extent permitted by state law (as required by the terms of the preferred stock), our liquidity position would likely be negatively affected, perhaps materially, such that we would be required to arrange for or engage in additional borrowing to ensure that we would have capital available to fund cash advance loans and otherwise.

20

On June 22, 2012, the Company entered into an Asset Purchase Agreement with PC Doctors and Tecguard for a purchase price of $3.2 million. To fund this acquisition, the Company has entered into a non-binding term sheet with WCR, LLC, the controlling shareholder of the Company, for the provision of a short-term loan the proceeds of which would be used to satisfy the Company’s financial obligations at the closing of the transaction with PC Doctors, LLC and Tecguard, LLC. The Company intends to pay off this short-term financing with proceeds from a proposed rights offering in connection with which the Company filed a registration statement on Form S-1 with the SEC on June 18, 2012 and amended the registration statement by filing Form S-1/A on July 26, 2012.

Off-Balance Sheet Arrangements  

The Company had no off-balance sheet arrangements as of June 30, 2012.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance the objectives of the control system are met.

As of June 30, 2012, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as such term is defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures are effective as of June 30, 2012.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 3. Defaults upon Senior Securities

As of June 30, 2012, the Company had outstanding accrued but unpaid cumulated dividends on its Series A Convertible Preferred Stock aggregating to $4,600,000. Our Series A Convertible Preferred Stock ranks senior to our common stock.

Item 5. Other Information

On August 10, 2012, the Company terminated the Asset Purchase Agreement with PC Doctors, LLC, a Wisconsin limited liability company, Tecguard, LLC, a Wisconsin limited liability company, and Robert Posteluk, dated as of June 22, 2012, by exercising its termination rights under that agreement following the completion of the Company’s initial due-diligence investigation.

Item 6. Exhibits  

Exhibit	Description
10.1	Consulting Agreement with Ric Miller Consulting, Inc., dated as of April 1, 2012 (incorporated by reference to Exhibit 10.17 to the registrant’s Form 10-K filed on March 30, 2012).
10.2	Asset Purchase Agreement by and among PC Doctors Acquisition, Inc., PC Doctors, LLC, Tecguard, LLC and Robert Posteluk, dated June 22, 2012 (filed herewith).
10.3	Amended and Restated Management and Advisory Agreement with Blackstreet Capital Management, LLC (effective June 21, 2012) (filed herewith).
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101.INS	XBRL Instance Document (filed herewith).
101.SCH	XBRL Schema Document (filed herewith).
101.CAL	XBRL Calculation Linkbase Document (filed herewith).
101.DEF	XBRL Definition Linkbase Document (filed herewith).
101.LAB	XBRL Label Linkbase Document (filed herewith).
101.PRE	XBRL Presentation Linkbase Document (filed herewith).

21

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 14, 2012	Western Capital Resources, Inc.
	(Registrant)
	By:	/s/ John Quandahl
		John Quandahl
		Chief Executive Officer and Chief Operating Officer
	By:	/s/ Stephen Irlbeck
		Stephen Irlbeck
		Chief Financial Officer

22

EX-10.2

EXECUTION COPY

Exhibit 10.2

ASSET PURCHASE AGREEMENT

DATED AS OF JUNE 22, 2012

BY AND AMONG

PC DOCTORS ACQUISITION, INC.,

PC DOCTORS, LLC,

TECGUARD, LLC

AND

ROBERT POSTELUK

TABLE OF CONTENTS

		Page
ARTICLE 1 PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES		1
Section 1.1	Purchase and Sale of Assets	1
Section 1.2	Excluded Assets	2
Section 1.3	Assumption of Liabilities; Excluded Liabilities.	3
Section 1.4	Purchase Price	4
Section 1.5	Payment of Purchase Price	5
Section 1.6	Purchase Price Adjustment.	6
Section 1.7	Allocation of Purchase Price	7
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF POSTELUK		7
Section 2.1	Authorization	7
Section 2.2	Consents and Approvals	8
Section 2.3	No Violation	8
Section 2.4	No Brokers or Finders	8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLERS		8
Section 3.1	Authorization	8
Section 3.2	Consents and Approvals	9
Section 3.3	No Violation	9
Section 3.4	No Brokers or Finders	9
Section 3.5	Organization	9
Section 3.6	Financial Statements and Financial Data	9
Section 3.7	Absence of Undisclosed Liabilities.	10
Section 3.8	Absence of Changes or Events	10
Section 3.9	Assets	11
Section 3.10	Proprietary Rights	11
Section 3.11	Contracts	12
Section 3.12	Litigation	13
Section 3.13	Compliance with Applicable Laws	13
Section 3.14	Real Property	13
Section 3.15	Taxes	13
Section 3.16	Insurance Policies	14
Section 3.17	Employee Benefit Plans	14
Section 3.18	Employees and Labor Matters	15
Section 3.19	Permits	15
Section 3.20	Environmental Matters	15
Section 3.21	Transactions with Affiliates	16
Section 3.22	Accounts Receivable	16
Section 3.23	Vendors	16
Section 3.24	Disclosure	16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER		16
Section 4.1	Organization	16

i

Section 4.2	Authorization	17
Section 4.3	No Violation	17
Section 4.4	Consents and Approvals	17
Section 4.5	No Brokers or Finders	17
Section 4.6	Financing	17
ARTICLE 5 INDEMNIFICATION		18
Section 5.1	Survival	18
Section 5.2	Indemnification by Sellers and Posteluk	18
Section 5.3	Indemnification by Buyer	18
Section 5.4	Indemnification Procedure.	19
Section 5.5	Failure to Give Timely Notice	19
Section 5.6	Limitations on Indemnification Obligation	20
Section 5.7	Payments	20
Section 5.8	Purchase Price Adjustment	21
Section 5.9	Exclusive Remedy	21
ARTICLE 6 CLOSING		21
Section 6.1	Closing	21
Section 6.2	Conditions to Sellers’ Obligations	21
Section 6.3	Conditions to Buyer’s Obligations	22
Section 6.4	Deliveries by Sellers	23
Section 6.5	Deliveries by Buyer	23
ARTICLE 7 COVENANTS AND OTHER AGREEMENTS		24
Section 7.1	Non-Competition; Confidentiality	24
Section 7.2	Employees of the Business; Employee Benefit Matters	25
Section 7.3	Nonassignable Contracts	26
Section 7.4	Further Assurances	26
Section 7.5	Transfer Taxes	26
Section 7.6	Conduct of the Business Pending Closing	27
Section 7.7	Exclusive Dealings	28
Section 7.8	Investigation by Buyer	28
Section 7.9	Notification	29
Section 7.10	Public Announcements	29
Section 7.11	Required Consents	29
Section 7.12	Sellers’ Waiver	29
Section 7.13	Tax Matters	30
Section 7.14	Financial Covenants	30
Section 7.15	Excluded Liabilities; Assumed Contractual Obligations	30
Section 7.16	Subordination	30
ARTICLE 8 MISCELLANEOUS		30
Section 8.1	Notices	30
Section 8.2	General Definitions	32
Section 8.3	Entire Agreement; Amendment	36

ii

Section 8.4	Counterparts; Deliveries	36
Section 8.5	Third Parties	37
Section 8.6	Expenses	37
Section 8.7	Waiver	37
Section 8.8	Governing Law	37
Section 8.9	Assignments	37
Section 8.10	Headings	37
Section 8.11	Jurisdiction of Courts	37
Section 8.12	Waiver of Jury Trial	38
Section 8.13	Construction	38
Section 8.14	Invalid Provisions	38
Section 8.15	Interpretation; Disclosure Schedules	38
Section 8.16	Independent Investigation	38
Section 8.17	Termination	39
Section 8.18	Effect of Termination	39

iii

INDEX OF DEFINED TERMS

	Section
Accounting Firm	Section 1.4
Accounts Receivable	Section 1.1
Accrued Commissions	Section 1.3
Accrued Vacation Obligations	Section 1.3
Acquired Assets	Section 1.1
Acquired Contracts	Section 1.1
Acquired Proprietary Rights	Section 1.1
Affiliate	Section 8.2
Affiliated Group	Section 8.2
Agreement	Preamble
Allocation	Section 1.7
Assumed Contractual Obligations	Section 1.3
Assumed Liabilities	Section 1.3
Balance Sheet	Section 3.6
Base Purchase Price	Section 1.4
Bill of Sale	Section 6.4
Business	Recitals
Business Day	Section 8.2
Business Names	Section 8.2
Buyer	Preamble
Buyer Indemnified Parties	Section 5.2
Buyer Indemnified Party	Section 5.2
Closing	Section 6.1

iv

Closing Date	Section 6.1
Closing Net Working Capital	Section 8.2
Closing Statement	Section 1.6
Closing Statement Dispute Notice	Section 1.6
Code	Section 8.2
Confidential Information	Section 7.1
Contingent Consideration	Section 1.4
Contract	Section 8.2
Current Accounts Payable	Section 1.3
Current Accounts Receivable	Section 8.2
Direct Claim	Section 5.4
Disclosure Schedules	Section 8.15
EBITDA	Section 8.2
Effective Time	Section 6.1
Employee Benefit Plan	Section 8.2
Environmental Law	Section 8.2
Equipment	Section 1.1
ERISA	Section 8.2
ERISA Affiliate	Section 8.2
Estimated Closing Working Capital	Section 1.6
Excluded Assets	Section 1.2
Excluded Contracts	Section 1.2
Excluded Liabilities	Section 1.3
Expenses	Section 8.2
Financial Statements	Section 3.6

v

Financing Defaults	Section 7.16
Fundamental Representations	Section 5.1
GAAP	Section 8.2
Governmental Authority	Section 2.2
Guarantee	Section 8.2
Hazardous Materials	Section 8.2
Indebtedness	Section 8.2
Indemnified Party	Section 5.4
Indemnifying Party	Section 5.4
Intellectual Property	Section 8.2
Laws	Section 2.3
Leased Real Property	Section 3.14
Letter of Intent	Section 8.2
Liens	Section 8.2
Losses	Section 5.2
Material Adverse Effect	Section 8.2
Orders	Section 2.3
Ordinary Course of Business	Section 8.2
Outside Date	Section 8.17
Owned Proprietary Rights	Section 3.10
Parties	Preamble
Patents	Section 8.2
PC Doctors	Preamble
PC Doctors Business	Recitals
Permits	Section 3.19

vi

Permitted Liens	Section 8.2
Person	Section 8.2
Posteluk	Preamble
Proceedings	Section 3.12
Purchase Price	Section 1.4
Required Consents	Section 8.2
Restricted Parties	Section 7.1
Sellers	Preamble
Seller Indemnified Parties	Section 5.3
Seller Indemnified Party	Section 5.3
Sellers’ Knowledge	Section 8.2
Software	Section 8.2
Tax	Section 8.2
Tax Returns	Section 8.2
TecGuard	Preamble
TecGuard Business	Recitals
Term	Section 7.1
Third-Party Claim	Section 5.4
Top Vendors	Section 3.23
Trademarks	Section 8.2
Transaction Documents	Section 2.1
Transactions	Section 8.2
Transfer Taxes	Section 8.2
Transferred Employees	Section 7.2
2012 EBITDA Dispute Period	Section 1.4

vii

2012 EBITDA Statement	Section 1.4
2012 EBITDA Statement Dispute Notice	Section 1.4
2012 Financials	Section 1.4
2013 EBITDA Dispute Period	Section 1.4
2013 EBITDA Statement	Section 1.4
2013 EBITDA Statement Dispute Notice	Section 1.4
2013 Financials	Section 1.4

viii

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of June 22, 2012, is by and among PC Doctors Acquisition, Inc., a Delaware corporation (“Buyer”); PC Doctors, LLC, a Wisconsin limited liability company (“PC Doctors”); TecGuard, LLC, a Wisconsin limited liability company (“TecGuard” and, together with PC Doctors, each a “Seller” and collectively, “Sellers”); and Robert Posteluk, individually (“Posteluk”).

RECITALS

A.           PC Doctors is engaged in the business of selling cellular phones, internet service, tablets, computers, accessories and computer services (the “PC Doctors Business”).

B.           TecGuard is engaged in the business of selling protection plans for cellular phones and computers (the “TecGuard Business” and, together with the PC Doctors Business, the “Business”).

C.           Posteluk is the sole member of Sellers.

D.           Sellers desire to sell to Buyer and Buyer desires to purchase from Sellers, substantially all of the assets of Sellers, all on the terms and conditions set forth herein.

AGREEMENT

In consideration of the mutual promises and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer, Sellers and Posteluk (collectively, the “Parties”) hereby agree as follows (capitalized terms used but not defined otherwise in this Agreement are defined in Section 8.2):

ARTICLE 1
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES

Section 1.1           Purchase and Sale of Assets. On and subject to the terms and conditions herein set forth, Sellers hereby agree to sell, assign, transfer, convey and deliver to Buyer as of the Effective Time, and Buyer, in reliance upon the representations, warranties and covenants of Sellers and Posteluk contained herein, hereby agrees to acquire as of the Effective Time, all right, title and interest in and to all assets of Sellers, other than the Excluded Assets (collectively, the “Acquired Assets”), free and clear of any and all Liens, other than Permitted Liens, wherever located and whether or not said Acquired Assets appear or are reflected upon the books and records of Sellers. The Acquired Assets shall include, without limitation, all of Sellers’ right, title and interest in and to the following:

(a)          all cash and cash equivalents;

(b)          all accounts receivable, notes or other evidences of indebtedness of, or right to receive payment from, any Person held by Sellers (the “Accounts Receivable”);

(c)          all inventory, parts and supplies;

(d)          all deposits, credits, pre-paid expenses, deferred charges, advance payments, security deposits, claims for refunds, and prepaid items relating to the Business or the Acquired Assets other than those associated with Excluded Liabilities;

(e)          all rights under the Contracts listed on Schedule 1.1(e), which shall include, for the avoidance of doubt, any residual payments owed to Sellers with respect to Verizon Wireless or Element customer activations on or prior to the Closing Date (the “Acquired Contracts”);

(f)          all Intellectual Property relating to or used in the Business (including the Business Names and associated logos and the domain names www.pearcewireless.com, pcdrs.net, pcdrs.com, tecguard.us, tecguardprotection.com and pearcemobile.com) (collectively, the “Acquired Proprietary Rights”), including all goodwill associated therewith;

(g)          all telephone numbers, fax numbers, email addresses, directory listings, advertising, business forms, files, documents and books and records related to the Business in whatever form, including, without limitation, customer lists, customer prospect lists, customer addresses, work schedules, supplier lists, mailing lists, promotional materials and purchasing materials, and all Intellectual Property relating thereto;

(h)          all equipment, furniture, fixtures, leasehold improvements, computers, tools, parts, supplies, and other personal property owned by Sellers relating to the Business, including, without limitation, the items listed on Schedule 1.1(h) (the “Equipment”);

(i)          all rights of Sellers in and to the Permits relating to the Business, to the extent transferrable;

(j)          all of Sellers’ rights under express or implied warranties from suppliers or manufacturers of Sellers’ Inventory or equipment; and

(k)          all causes of action, claims, warranties (to the extent transferrable), guarantees, refunds, rights of recovery and set off of every kind and character of Sellers relating to the Business, including, without limitation, rights and claims against suppliers and customers and insurance claims

Section 1.2          Excluded Assets. Notwithstanding anything to the contrary herein, the following properties and assets of Sellers shall be retained by Sellers following the Closing and are expressly excluded from the purchase and sale contemplated by this Agreement (collectively, the “Excluded Assets”):

(a)          all rights of Sellers under or in connection with, or to enforce the obligations of Buyer under or in connection with, this Agreement and/or each Transaction Document;

2

(b)          Sellers’ corporate minute books and Tax Returns, including all supporting schedules, attachments, work papers and similar documents;

(c)         all accounts receivable due from either Seller or Posteluk;

(d)         all refunds of, and credits for, Taxes paid by Sellers, even if such refund or credit is received after the Closing Date or applied as a payment or credit against future Taxes payable;

(e)          the claims, properties and assets set forth on Schedule 1.2(e); and

(f)          all rights of Sellers under all Contracts except the Acquired Contracts (the “Excluded Contracts”).

Section 1.3          Assumption of Liabilities; Excluded Liabilities.

(a)          At the Effective Time, subject to the terms and conditions set forth in this Agreement, Buyer will assume and become solely liable for only the following liabilities and obligations (the “Assumed Liabilities”): (i) the Assumed Contractual Obligations, (ii) the Current Accounts Payable incurred in the Ordinary Course of Business and included in the Closing Statement, (iii) accrued vacation obligations, other than those of Posteluk, included in the Closing Statement (“Accrued Vacation Obligations”), (iv) accrued commissions included in the Closing Statement (“Accrued Commissions”), (v) any other current liabilities required by GAAP to be accrued to the extent such liabilities are included in the Closing Statement and (vi) up to the aggregate amount of $312,000 in liabilities relating to protection plans sold by TecGuard prior to the Closing Date. “Assumed Contractual Obligations” means all obligations of Sellers to be performed after the Effective Time under any Acquired Contract, in each case only to the extent that such obligations do not result from (i) a breach or inaccuracy of any covenant, representation or warranty of Sellers under this Agreement, (ii) a breach or default by Sellers under such Acquired Contract or any penalty or acceleration in connection therewith, (iii) the failure of Sellers to pay any amounts due and owing prior to the Effective Time in connection with such Acquired Contract or (iv) an Employee Benefit Plan. “Current Accounts Payable” means the accounts payable of the Sellers that are current under the applicable vendor’s terms.

(b)          Notwithstanding anything to the contrary contained in this Agreement or any Transaction Document but subject to the provisions of Section 7.5, Buyer will not assume, agree to pay, perform or discharge or in any way be responsible for any liabilities of Sellers, whether existing prior to or as of the Closing Date or arising thereafter, except for the Assumed Liabilities, including, but not limited to, any liability relating to the protection plans sold by TecGuard prior to the Closing Date in excess of the aggregate amount $312,000 (collectively, the “Excluded Liabilities”). Buyer does not assume and will not be bound by or obligated or responsible for, and shall have no liability for, any Excluded Liabilities of any kind, character or description, it being understood that Buyer is expressly disclaiming any express or implied assumption of any Excluded Liabilities.

3

Section 1.4           Purchase Price.

(a)          The aggregate purchase price for the Acquired Assets and the rights and benefits conferred herein, including, without limitation, the covenants of Sellers and Posteluk set forth in Section 7.1 of this Agreement, (the “Purchase Price”) shall be $3,200,000 (the “Base Purchase Price”), subject to adjustment as provided in Section 1.6 hereof, plus the Contingent Consideration, if any. “Contingent Consideration” means the sum of (i) $550,000 for the fiscal year ending December 31, 2012 if the EBITDA of Buyer for such fiscal year, as set forth in the 2012 EBITDA Statement (as hereinafter defined) is equal to or greater than $1,750,000, and (ii) $1,000,000 if the EBITDA of Buyer for the fiscal year ending December 31, 2013, as set forth in the 2013 EBITDA Statement (as hereinafter defined), is equal to or greater than $2,000,000. For the avoidance of doubt, Buyer shall have no obligation to pay the Contingent Consideration or any portion thereof for any period if the applicable EBITDA amount is not achieved for such period.

(b)          On or prior to the first to occur of (i) five Business Days after the completion of Buyer’s audited financial statements for the year ended December 31, 2012 (the “2012 Financials”) or (ii) May 15, 2013, Buyer shall deliver to Sellers a statement (the “2012 EBITDA Statement”) setting forth Buyer’s calculation of EBITDA for the fiscal year ending December 31, 2012 and including a copy of the 2012 Financials. The 2012 EBITDA Statement delivered by Buyer to Sellers shall be deemed to be final, binding and conclusive on the Parties unless Sellers notify Buyer in writing (a “2012 EBTIDA Statement Dispute Notice”) of a dispute of any amounts reflected on the 2012 EBITDA Statement within 30 days after Sellers’ receipt of the 2012 EBITDA Statement (the “2012 EBITDA Dispute Period”). The 2012 EBITDA Statement Dispute Notice shall state in reasonable detail the basis for Sellers’ objection. The sole permissible grounds for objection shall be that EBITDA was not calculated in accordance with the definition thereof. In the event of such a dispute, Sellers and Buyer shall attempt to reconcile their differences, and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the Parties. Any amounts not disputed in the 2012 EBITDA Statement Dispute Notice (if one is delivered) shall be deemed to be accepted by Sellers as final, binding and conclusive. If Sellers and Buyer are unable to reach a resolution within 20 days after Buyer’s receipt of the 2012 EBITDA Statement Dispute Notice, Sellers and Buyer shall submit the amounts remaining in dispute for resolution to an independent accounting firm of national reputation that has not been engaged by any of the Parties within the preceding two years mutually appointed by Sellers and Buyer (the “Accounting Firm”). Any determination by the Accounting Firm shall not be outside the range defined by the respective amounts in the 2012 EBITDA Statement proposed by Buyer and Sellers’ proposed adjustments thereto in the 2012 EBITDA Statement Dispute Notice. The Accounting Firm shall, within 30 days after such submission, determine and report to the Parties upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the Parties, absent manifest error or willful misconduct. Each of Buyer, on the one hand, and Sellers and Posteluk, jointly and severally, on the other hand, shall bear that percentage of the fees and expenses of the Accounting Firm equal to the proportion (expressed as a percentage) of the dollar value of the disputed amounts determined in favor of the other Party by the Accounting Firm, as determined by the Accounting Firm.

4

(c)          On or prior to the first to occur of (i) five Business Days after the completion of Buyer’s financial statements for the year ended December 31, 2013 (the “2013 Financials”) or (ii) May 15, 2014, Buyer shall deliver to Sellers a statement (the “2013 EBITDA Statement”) setting forth Buyer’s calculation of EBITDA for the fiscal year ending December 31, 2013 and including a copy of the 2013 Financials. The 2013 EBITDA Statement delivered by Buyer to Sellers shall be deemed to be final, binding and conclusive on the Parties unless Sellers notify Buyer in writing (a “2013 EBTIDA Statement Dispute Notice”) of a dispute of any amounts reflected on the 2013 EBITDA Statement within 30 days after Sellers’ receipt of the 2013 EBITDA Statement (the “2013 EBITDA Dispute Period”). The 2013 EBITDA Statement Dispute Notice shall state in reasonable detail the basis for Sellers’ objection. The sole permissible grounds for objection shall be that EBITDA was not calculated in accordance with the definition thereof. In the event of such a dispute, Sellers and Buyer shall attempt to reconcile their differences, and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the Parties. Any amounts not disputed in the 2013 EBITDA Statement Dispute Notice (if one is delivered) shall be deemed to be accepted by Sellers as final, binding and conclusive. If Sellers and Buyer are unable to reach a resolution within 20 days after Buyer’s receipt of the 2013 EBITDA Statement Dispute Notice, Sellers and Buyer shall submit the amounts remaining in dispute for resolution to an Accounting Firm. Any determination by the Accounting Firm shall not be outside the range defined by the respective amounts in the 2013 EBITDA Statement proposed by Buyer and Sellers’ proposed adjustments thereto in the 2013 EBITDA Statement Dispute Notice. The Accounting Firm shall, within 30 days after such submission, determine and report to the Parties upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the Parties, absent manifest error or willful misconduct. Each of Buyer, on the one hand, and Sellers and Posteluk, jointly and severally, on the other hand, shall bear that percentage of the fees and expenses of the Accounting Firm equal to the proportion (expressed as a percentage) of the dollar value of the disputed amounts determined in favor of the other Party by the Accounting Firm, as determined by the Accounting Firm.

Section 1.5           Payment of Purchase Price.

(a)          At the Closing, Buyer shall deliver, by wire transfer of immediately available funds to the account(s) designated in advance by Sellers in writing, an amount equal to the Base Purchase Price.

(b)          The Contingent Consideration pursuant to Section 1.4(a)(i), if any, shall be payable three Business Days after the first to occur of: (i) Sellers’ notice to Buyer that they agree with the 2012 EBITDA Statement, (ii) the expiration of the 2012 EBITDA Dispute Period with no 2012 EBITDA Dispute Notice having been sent, (iii) the date on which the 2012 EBITDA is agreed upon by the Parties, (iv) the date on which the 2012 EBITDA is determined by the Accounting Firm or (v) the date on which the 2012 EBITDA is otherwise finally determined. The Contingent Consideration pursuant to Section 1.4(a)(ii), if any, shall be payable three Business Days after first to occur of (i) Sellers’ notice to Buyer that they agree with the 2013 EBITDA Statement, (ii) the expiration of the 2013 EBITDA Dispute Period with no 2013 EBITDA Dispute Notice having been sent, (iii) the date on which the 2013 EBITDA is agreed upon by the Parties, (iv) the date on which the 2013 EBITDA is determined by the Accounting Firm or (v) the date on which 2013 EBITDA is otherwise finally determined.

5

(c)          Any amount due pursuant to Section 1.4 which is not paid within 10 Business Days after it is due in accordance with this Section 1.5 shall bear interest at the rate of 7% per annum from the due date until the date paid.

Section 1.6           Purchase Price Adjustment.

(a)          No later than three Business Days prior to the Closing Date, Sellers shall prepare and deliver to Buyer a good faith estimate of the Closing Net Working Capital of Sellers as of the Closing Date (the “Estimated Closing Working Capital”). This estimate shall be prepared in accordance with GAAP. If the Estimated Closing Working Capital is less than One Million, One Hundred Thousand Dollars ($1,100,000), the Base Purchase Price payable at Closing by Buyer shall be reduced on a dollar for dollar basis by such difference.

(b)          Within 60 days after the Closing, Buyer shall prepare and deliver to Sellers a statement setting forth the Closing Net Working Capital (the “Closing Statement”) in the form attached hereto as Exhibit 1.6(b). The Closing Statement shall be accompanied by supporting schedules and information and work papers.

(c)          The Closing Statement delivered by Buyer to Sellers shall be deemed to be final, binding and conclusive on the Parties unless Sellers notify Buyer in writing (a “Closing Statement Dispute Notice”) of a dispute of any amounts reflected on the Closing Statement within 30 days after Sellers’ receipt of the Closing Statement. The Closing Statement Dispute Notice shall state in reasonable detail the basis for Sellers’ objection. The sole permissible grounds for objection shall be that Closing Net Working Capital was not calculated in accordance with the definition thereof. In the event of such a dispute, Sellers and Buyer shall attempt to reconcile their differences, and any resolution by them as to any disputed amounts shall be final, binding and conclusive on the Parties. Any amounts not disputed in the Closing Statement Dispute Notice (if one is delivered) shall be deemed to be accepted by Sellers as final, binding and conclusive. If Sellers and Buyer are unable to reach a resolution within 20 days after Buyer’s receipt of the Closing Statement Dispute Notice, Sellers and Buyer shall submit the amounts remaining in dispute for resolution to an Accounting Firm. Any determination by the Accounting Firm shall not be outside the range defined by the respective amounts in the Closing Statement proposed by Buyer and Sellers’ proposed adjustments thereto in the Closing Statement Dispute Notice. The Accounting Firm shall, within 30 days after such submission, determine and report to the Parties upon such remaining disputed amounts, and such report shall be final, binding and conclusive on the Parties, absent manifest error or willful misconduct. Each of Buyer, on the one hand, and Sellers and Posteluk, jointly and severally, on the other hand, shall bear that percentage of the fees and expenses of the Accounting Firm equal to the proportion (expressed as a percentage) of the dollar value of the disputed amounts determined in favor of the other Party by the Accounting Firm, as determined by the Accounting Firm.

6

(d)          If the Closing Net Working Capital is less than the Estimated Closing Working Capital, then the Purchase Price shall be decreased by such deficiency, and Sellers shall pay to Buyer by wire transfer to the account designated by Buyer, the amount of such deficiency within 10 Business Days after the amount of such payment has been finally determined in accordance with this Section 1.6.

(e)          Any amount due pursuant to Section 1.6(d) which is not paid within 10 Business Days after such amount has been finally determined in accordance with this Section 1.6 shall bear interest at the rate of 7% per annum from the due date until the date paid.

Section 1.7           Allocation of Purchase Price. Buyer and Sellers shall allocate the Purchase Price and the Assumed Liabilities (along with any other items constituting consideration for purposes of Section 1060 of the Code) among the Acquired Assets and the restrictive covenants in accordance with Schedule 1.7 and Section 1060 of the Code and the Treasury Regulations thereunder (and any similar provision of state, local or foreign Law, as appropriate) (the “Allocation”). The Allocation (including any adjustment thereto as determined jointly by Buyer and Sellers) shall be binding upon the Parties. Buyer and Sellers shall not take any position for Tax purposes (whether in audits, Tax Returns or otherwise) that is inconsistent with or contrary to the Allocation unless required to do so by applicable Law.

ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF POSTELUK

Posteluk hereby represents and warrants to Buyer that:

Section 2.1           Authorization. He has all requisite power and authority to execute, deliver and perform his obligations under this Agreement and each agreement, document, certificate or instrument executed in connection with this Agreement (collectively, the “Transaction Documents”) to which he is a party. The execution and delivery of this Agreement and the Transaction Documents to which he is a party, the performance by him of his obligations hereunder and thereunder, and the consummation by him of the Transactions have been duly authorized, and no other act or proceeding on his part is necessary to consummate the Transactions. This Agreement and the Transaction Documents to which he is a party have been duly executed and delivered by him and, assuming due execution by Buyer, constitute his legal, valid and binding obligation, enforceable against him in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting the rights of creditors generally, and the availability of equitable remedies.

7

Section 2.2           Consents and Approvals. No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any multi-national, national, state, provincial, local, governmental, judicial, quasi-governmental, administrative or other authority, agency, commission or organization (collectively, “Governmental Authority”) or other Person is required to be made, obtained or given by him in connection with his authorization, execution, delivery and performance of this Agreement and the Transaction Documents to which he is a party, or his consummation of the Transactions.

Section 2.3           No Violation. His execution, delivery and performance of this Agreement and the Transaction Documents to which he is a party and the consummation of the Transactions by him will not:

(a)          result in the breach of any of the terms or conditions of, or constitute a default under, or in any manner release any party thereto from any obligation under, or otherwise affect any of his rights under, any mortgage, note, bond, indenture, Contract or other instrument or obligation of any kind or nature, in any case whether written or oral, by which he may be bound or affected;

(b)          violate or conflict with any law, rule, regulation, statute, ordinance, treaty, constitution, directive or code of any Governmental Authority (collectively, “Laws”) to which he is subject; or

(c)          violate or conflict with any order, permit, writ, injunction, judgment or decree (collectively, “Orders”) applicable to him.

Section 2.4           No Brokers or Finders. Other than Wall Street Private Equity (the fees of which shall be Expenses of Sellers), no agent, broker, investment banker or other Person acting on his behalf, or under his authority, is or will be entitled to any brokers’ or finders’ fee or any other commission or similar fee directly or indirectly from any of the Parties in connection with any of the transactions contemplated hereby.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS

Each Seller hereby, jointly and severally, represents and warrants to Buyer that:

Section 3.1           Authorization. Each Seller has all requisite limited liability company power and authority to execute, deliver and perform its obligations under this Agreement and each of the Transaction Documents to which it is a party. The execution and delivery of this Agreement and the Transaction Documents to which either Seller is a party, the performance by Sellers of their obligations hereunder and thereunder, and the consummation by Sellers of the Transactions have been duly authorized by all necessary limited liability company action, and no other act or proceeding on the part of either Seller is necessary to consummate the Transactions. This Agreement and the Transaction Documents to which either Seller is a party have been duly executed and delivered by such Seller and, assuming due execution by Buyer, constitute the legal, valid and binding obligation of such Seller, enforceable against such Seller in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting the rights of creditors generally, and the availability of equitable remedies.

8

Section 3.2           Consents and Approvals. Except as set forth on Schedule 3.2, no consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any Governmental Authority or other Person is required to be made, obtained or given by Sellers in connection with the authorization, execution, delivery and performance by Sellers of this Agreement and the Transaction Documents to which either Seller is a party, or the consummation of the Transactions by Sellers.

Section 3.3           No Violation. The execution, delivery and performance by Sellers of this Agreement and the Transaction Documents to which either Seller is a party and the consummation of the Transactions by Sellers will not:

(a)           result in the breach of any of the terms or conditions of, or constitute a default under, or in any manner release any party thereto from any obligation under, or otherwise affect any rights of Sellers under, any mortgage, note, bond, indenture, Contract or other instrument or obligation of any kind or nature, in any case whether written or oral, by which either Seller or the Acquired Assets may be bound or affected, assuming the consents listed on Schedule 3.2 are obtained;

(b)           violate or conflict with any Law to which either Seller is subject;

(c)           violate or conflict with any Order applicable to either Seller or result in any limitation on or cancellation of any permit applicable to either Seller;

(d)           violate any provision of the charter or governing documents of either Seller; or

(e)           result in the creation or imposition of any Lien upon any Acquired Asset.

Section 3.4           No Brokers or Finders. Other than Wall Street Private Equity (the fees of which shall be Expenses of Seller), no agent, broker, investment banker or other Person acting on behalf of Seller, or under the authority thereof, is or will be entitled to any brokers’ or finders’ fee or any other commission or similar fee directly or indirectly from any of the Parties in connection with any of the transactions contemplated hereby.

Section 3.5           Organization. PC Doctors is a limited liability company duly organized and validly existing and in good standing under the laws of the State of Wisconsin. TecGuard is a limited liability company duly organized and validly existing and in good standing under the laws of the State of Wisconsin. Each Seller has all requisite power and authority to own, lease and operate the Acquired Assets owned by such Seller and to carry on the Business as now being conducted.

Section 3.6           Financial Statements and Financial Data.

(a)          Schedule 3.6(a) contains copies of the following financing statements of Sellers (collectively, the “Financial Statements”):

9

(i)          the unaudited balance sheet of each Seller as of December 31, 2009, December 31, 2010 and December 31, 2011 and the related income statements for the years then ended; and

(ii)         the unaudited balance sheet of each Seller as of [March 31,] 2012 (the “Balance Sheet”) and the unaudited related income statements for the three-month period then ended.

(b)          Each of the Financial Statements (i) is true, complete and correct in all material respects, (ii) is consistent with the books and records of Sellers (which, in turn, accurately and fairly reflect in all material respects all the transactions of, acquisitions and dispositions of assets by, and incurrence of liabilities by, Sellers), (iii) fairly and accurately presents in all material respects Sellers’ results of operations for the periods covered thereby, and (iv) has been prepared in accordance with GAAP consistently applied throughout the periods covered thereby. None of the Financial Statements contains any material items of a special or nonrecurring nature, except as expressly stated therein.

Section 3.7           Absence of Undisclosed Liabilities.

(a)          Sellers do not have any material liabilities of any nature affecting the Business or the Acquired Assets arising out of any transaction, series of transactions, action or inaction entered into or occurring on or prior to the date hereof, or any state of facts or condition existing on or prior to the date hereof, in each case which would be required to be disclosed on a balance sheet in accordance with GAAP, except for liabilities incurred in the Ordinary Course of Business since the date of the Balance Sheet.

(b)          There are not now, nor have there been during the past year, any Guarantees outstanding.

Section 3.8           Absence of Changes or Events. Except as disclosed on the Financial Statements or as set forth on Schedule 3.8, since December 31, 2011, Sellers have conducted the Business in the Ordinary Course of Business. Without limiting the generality of the foregoing, since December 31, 2011, except as disclosed on Schedule 3.8, there has not been:

(a)          one or more events, occurrences, developments or states of circumstances or facts which, individually or in the aggregate, has had, or could reasonably be expected to have, a Material Adverse Effect;

(b)          any amendment, termination, cancellation or non-renewal of any material Contract relating to the Business;

(c)          any acquisition, disposition or abandonment by either Seller of any business or line of business or the disposition of assets, which acquisition, disposition or abandonment relates to the Business, whether by merger, purchase or sale of stock, purchase or sale of assets or otherwise, other than the sale of inventory in the ordinary course of business or the disposition of obsolete inventory or equipment;

10

(d)          any damage, destruction or other casualty loss (whether or not covered by insurance) materially affecting the Business, the Acquired Assets, or either Seller;

(e)          any delay or postponement of any payment of any accounts payable or any other liability relating to the Business, or any extension or agreement to extend the payment date of any such accounts payable or other liability relating to the Business, in any case, other than in the ordinary course of business consistent with past practices;

(f)          any change in the methods or procedures for billing or collection of customer accounts or recording of customer accounts receivable or reserves for doubtful accounts or cancellation of any debts or waivers of any claims or rights of substantial value;

(g)          any change by either Seller in its method of accounting or accounting practice (other than changes required under applicable Law or GAAP) or any failure by either Seller to maintain its books, accounts and records in the ordinary course of business consistent with past practices;

(h)          any acceleration or delay in the sale or delivery of any products or services of the Business in a manner inconsistent with past practices; or

(i)          any binding commitment by either Seller to do any of the foregoing.

Section 3.9          Assets

(a)          Sellers own good title to all of the Acquired Assets, free and clear of any and all Liens. Sellers have the right to convey, and upon consummation of the Transactions, Sellers will have conveyed to Buyer, and Buyer will be vested with good title to, the Acquired Assets, free and clear of all Liens except for Permitted Liens. The Acquired Assets constitute all of the assets necessary to operate the Business as presently conducted.

(b)          Except as set forth on Schedule 3.9(b)(i), there are no material personal property, inventory, supplies, contracts or other rights or assets owned by any Affiliate of Sellers that are used in the Business, or have been used in the Business at any time since December 31, 2010. Except as set forth on Schedule 3.9(b)(ii), none of the Acquired Assets are used for any purpose other than in the operation of the Business.

Section 3.10        Proprietary Rights

(a)          Sellers own all right, title and interest in and to, or possess a license or other rights to use, all Acquired Proprietary Rights as currently used by Sellers, free and clear of all Liens.

(b)          Schedule 3.10(b) contains a complete list of all of Sellers’ patents and patent applications, registered or applied-for trademarks and service marks, domain names, and copyright registrations and applications for registration thereof; including the name of the registered owner, date of registration or application and name of registration body where the registration or application was made. None of the registrations or applications set forth on such Schedule are, to Sellers’ Knowledge, subject to any challenge, opposition, nullity proceeding or interference or threats to commence same.

11

(c)          To Sellers’ Knowledge, except for Intellectual Property which is owned by third parties, the Acquired Proprietary Rights were developed by employees of Sellers acting within the scope of their employment or by consultants or contractors who have assigned all of their right, title and interest in and to such Intellectual Property (“Owned Proprietary Rights”). No current or prior officer, manager, employee or consultant of Sellers claims, and Sellers are not aware of any grounds to assert a claim to, any ownership interest in any such Owned Proprietary Rights as a result of having been involved in the development, thereof while employed or engaged by Sellers or otherwise.

(d)          Upon consummation of the Transactions, all Acquired Proprietary Rights will, immediately subsequent to the Effective Time, be owned or licensed by Buyer on such terms and conditions as are identical to those terms and conditions pursuant to which such Acquired Proprietary Rights are owned or licensed by Sellers immediately prior to the Effective Time.

(e)          All Owned Proprietary Rights are valid and enforceable in all jurisdictions in which the Business is conducted. The conduct of the Business and Sellers’ use of any of the Acquired Proprietary Rights have not infringed, misappropriated or otherwise violated, and are not infringing, misappropriating or otherwise violating, any Intellectual Property of any Person (provided that the foregoing representation and warranty shall not be applicable to the extent that a breach thereof arises from or relates to infringement, misappropriation or other violation of Intellectual Property by a Seller’s licensor for which such Seller does not have Knowledge); no Proceeding against Sellers have been commenced or is, to Sellers’ Knowledge, threatened, challenging the validity, enforceability, ownership, or use of any Acquired Proprietary Rights; and Sellers have not received any written notice of infringement or other violation, or any other challenge in regard to the validity, enforceability, ownership or use of or to any Acquired Proprietary Rights. To Sellers’ Knowledge, no Person is infringing, misappropriating or otherwise violating any Acquired Proprietary Rights.

(f)          Sellers have taken all reasonable measures to safeguard and maintain the confidentiality of all material confidential information and trade secrets of the Business. To Sellers’ Knowledge, no current or former equityholder, officer, employee, independent contractor or agent of Sellers has made a material disclosure of, or otherwise used in an unauthorized manner, any confidential information of the Business.

Section 3.11         Contracts. Sellers have provided Buyer with true, correct and complete copies of all Acquired Contracts. Sellers are not in default, and no event has occurred that with the giving of notice or passage of time or both would constitute a default, under any Acquired Contract. To Sellers’ Knowledge, no other party to any Acquired Contract is in default thereunder nor, to Sellers’ Knowledge, has any event occurred that with the giving of notice or the passage of time or both would constitute a default by any other party to any such Acquired Contract. Except as set forth on Schedule 3.11, each Acquired Contract is in full force and effect, is valid and enforceable against the parties thereto in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting the rights of creditors generally and the availability of equitable remedies, and is not subject to any claims, charges, set-offs or defenses.

12

Section 3.12         Litigation. Except as set forth on Schedule 3.12, there is not currently and, since December 31, 2010 there has not been any suit, action, proceeding, claim, Order, investigation or grievance (collectively, “Proceedings”), pending before any court or any other Governmental Authority or, to Sellers’ Knowledge, threatened against either Seller or any of the current or former officers, directors or employees of either Seller with respect to either Seller or the Business or the Acquired Assets. Except as set forth on Schedule 3.12, neither Seller is subject to any Order of any court or other Governmental Authority. Neither Seller is engaged in any Proceeding that relates to the Business or any of the Acquired Assets to recover monies due it or for damages sustained by it or to cause a third party to act or refrain from acting in a certain manner.

Section 3.13         Compliance with Applicable Laws. Except as set forth on Schedule 3.13, Sellers are and have been in compliance with all Laws in connection with the conduct, ownership, use, occupancy or operation of the Business and the Acquired Assets, except for instances of noncompliance that would not reasonably be expected to result in any Material Adverse Effect, and neither Seller has received written notice of any violation of any Law by either Seller in connection with the conduct, ownership, use, occupancy or operation of the Business or the Acquired Assets.

Section 3.14         Real Property. Neither Seller owns any real property. Schedule 3.14 lists all real property leased by either Seller (the “Leased Real Property”). Sellers do not have any past due obligation as lessee under any real property lease identified on Schedule 3.14. To Sellers’ Knowledge, there is no pending or threatened condemnation or other governmental taking of any Leased Real Property or any part thereof. There are no special, general or other assessments pending against either Seller.

Section 3.15         Taxes. Except as set forth on Schedule 3.15:

(a)          Each Seller has timely filed all material Tax Returns that it was required to file with the appropriate Governmental Authorities in all jurisdictions in which such returns are required to be filed. All such Tax Returns accurately and correctly reflect the Taxes of each Seller for the periods covered thereby and are complete in all material respects. All Taxes due and payable by either Seller on or prior to the Closing Date have been or will be timely paid. To Sellers’ Knowledge, there is no basis for any Governmental Authority to assess any additional Taxes on either Seller for any period for which Tax Returns of such Seller have been filed. No claim has ever been made by an authority in a jurisdiction where either Seller does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no encumbrances on any of the Acquired Assets or assets of either Seller that arose in connection with any failure (or alleged failure) to pay any Tax.

13

(b)          Each Seller has withheld or collected and paid or deposited in accordance with law all material Taxes required to have been withheld or collected and paid or deposited by such Seller in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

(c)          There is no dispute or claim concerning any liability relating to Taxes of either Seller either (i) claimed or raised by any Governmental Authority in writing or (ii) as to which such Seller or its managers or officers (and employees responsible for Tax matters) has Knowledge. There are no Tax statements of deficiency assessed against or agreed to by either Seller since its inception. No examination or audit of any Tax Return of either Seller by any Governmental Authority is currently in progress or, to Sellers’ Knowledge, threatened or contemplated.

(d)          Each Seller is a “disregarded entity” of Posteluk for federal income tax purposes.

Section 3.16        Insurance Policies. Attached hereto as Schedule 3.16(a) is a list of all policies of fire, liability, business interruption, and other forms of insurance and all fidelity bonds and surety bonds held by or applicable to Sellers, the Business or the Acquired Assets at any time within the past three years, which schedule sets forth in respect of each such policy the policy name, policy number, carrier, term, type of coverage, deductible amount or self-insured retention amount, limits of coverage, and annual premium. Except as disclosed on Schedule 3.17 attached hereto, there has been no material change in the type of insurance coverage maintained by Sellers during the past five years, nor has there been any time during such period in which Sellers had no insurance coverage. No insurance policy of either Seller has been cancelled within the last three years and, to Sellers’ Knowledge, no threat has been made to cancel any insurance policy of either Seller within such period. No pending claims made by or on behalf of either Seller under such policies have been denied. All premiums payable with respect to such policies have been timely paid, or adequate arrangements for payment have been made.

Section 3.17         Employee Benefit Plans.

(a)          Schedule 3.17(a) sets forth a correct and complete list of all Employee Benefit Plans. Each Employee Benefit Plan has been in substantial compliance and currently substantially complies in form and in operation in all respects with all applicable Law, and has been and is operated substantially in accordance with its terms, except for instances of noncompliance as would not result in harm to Buyer. Except as would not result in harm to Buyer, all contributions (including all employer and employee contributions) have been timely made to each applicable Employee Benefit Plan.

14

(b)          Within the past six years, neither Seller nor any ERISA Affiliate has at any time participated in or made contributions to or had any other liability or potential liability with respect to a plan that is (i) a “multiemployer plan” within the meaning of Section 3(37) and Section 4001 of ERISA, (ii) a “multiple employer plan” within the meaning of Section 413(c) of the Code, (iii) a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA or (iv) any plan subject to Section 412 or 432 0f the Code or to Title IV of ERISA.

Section 3.18         Employees and Labor Matters. Set forth on Schedule 3.18(a) is a list of the employees of the Business, setting forth each such Person’s name, title, location, and current rate of compensation. Except as set forth on Schedule 3.18(a), no Person listed thereon has received any bonus or increase in compensation since, and there has been no “general increase” in the compensation or rate of compensation payable to any employees of the Business since December 31, 2011, nor since such date has either Seller made any promise to the employees of the Business orally or in writing, of any bonus or increase in compensation, whether or not legally binding. Neither Seller is a party to or obligated with respect to any collective bargaining agreement with any labor union or other representative of employees or any employee benefits provided for by any such agreement. With respect to the Business, no strike, work stoppage, slowdown, material labor dispute or union organizational activity has occurred at any time since January 1, 2010 or is pending or, to Sellers’ Knowledge, threatened against Seller. No employee of the Business is currently on short-term disability or long-term disability or on any other leave of absence. Schedule 3.18(b) sets forth the name, work location and date of termination of any employee of either Seller whose employment with one of the Sellers was involuntarily terminated within 91 days prior to the date hereof.

Section 3.19         Permits. A true and complete list of all governmental permits and licenses necessary for the operation of the Business in the manner that it is presently conducted is set forth on Schedule 3.19 (collectively, “Permits”). Each Seller has all such Permits and is in compliance in all material respects with all terms and conditions of any such Permit. No action or proceeding seeking or contemplating the revocation or suspension of any Permit is pending or, to Sellers’ Knowledge, threatened.

Section 3.20         Environmental Matters.

(a)          No written notice, notification, demand, request for information, citation, summons, complaint or order has been received by, and no Proceeding is pending or, to Sellers’ Knowledge, threatened against either Seller, in each case which is unresolved, with respect to any matters arising out of any Environmental Law and related to either Seller, the assets, properties or Business.

(b)          Each Seller is in compliance with all Environmental Laws, and possesses and is in compliance with all material permits, authorizations and licenses required for its current operations under applicable Environmental Laws, except for instances of noncompliance that would not reasonably be expected to result in any Material Adverse Effect.

15

Section 3.21         Transactions with Affiliates. Except as set forth on Schedule 3.21, there are no loans, leases or other continuing transactions between Sellers or between either Seller on the one hand and (i) any officer, manager or employee of either Seller; or (ii) Posteluk; or (iii) any respective family member or affiliate of such officer, manager or employee or Posteluk on the other hand. Except as set forth on Schedule 3.21, none of either Seller, Posteluk, or officer, manager, employee or Affiliate of either Seller or Posteluk possesses, directly or indirectly, any financial interest in, or is a stockholder, director, officer, member, manager, employee or Affiliate of, any corporation, firm, association or business organization which is a client, supplier, distributor, broker, lessor, lessee, sublessor, sublessee or competitor of either Seller. There are no assets or contracts used in connection with or related to the Business, which are owned by Posteluk or anyone other than one of Sellers.

Section 3.22         Accounts Receivable. The Accounts Receivable represent bona fide obligations arising from sales made by Sellers in the Ordinary Course of Business, and the reserves and allowances established by Sellers with respect thereto are in accordance with Sellers’ policies and procedures and are reasonable, taking into account current market conditions and the historical patterns of the Business. Except as set forth on Schedule 3.22, none of the Accounts Receivable is subject to discount and all Accounts Receivable are collectible in the Ordinary Course of Business subject to ordinary reserves. Seller has not received and does not expect to receive any written notice from or on behalf of any account debtor asserting any defense to payment or right of setoff with respect to any of the Accounts Receivable. No contest with respect to the amount or validity of any Account Receivable is pending. The values at which Accounts Receivable are carried on the Financial Statements reflect the policies and past procedures of Sellers, are consistent with past practice and are in accordance with GAAP, consistently applied.

Section 3.23         Vendors. Schedule 3.23 attached hereto sets forth Sellers’ top four vendors (the “Top Vendors”). Except as set forth on Schedule 3.23, there are no material outstanding disputes with any Top Vendor, and no Top Vendor has give notice that it will not do business with (or that it will materially reduce its business with) Sellers in the future or with Buyer following the consummation of the transactions contemplated by this Agreement. Sellers are not delinquent on any payments to the Top Vendors.

Section 3.24         Disclosure. Each Seller and Posteluk recognize that Buyer is basing its decision to consummate the acquisition of the Acquired Assets in reliance upon Posteluk’s and Sellers’ representations and warranties, the Financial Statements, covenants and information in Posteluk’s and Sellers’ Disclosure Schedules. No representation or warranty by Posteluk or Sellers contained in this Agreement or any other document, certificate or other instrument delivered to or to be delivered by or on behalf of Sellers or Posteluk pursuant to this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary, in light of the circumstances under which it was made, in order to make the statements herein not misleading.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Sellers that:

Section 4.1           Organization. Buyer is a corporation duly organized and validly existing under the laws of Delaware. Buyer has the corporate power and authority to own all of its properties and assets and to conduct its business, except where the failure to have such power would not have a material adverse effect on its business.

16

Section 4.2           Authorization. The execution and delivery of this Agreement and the Transaction Documents to which Buyer is a party, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer of the Transactions have been duly authorized by all necessary corporate action and no other act or proceeding on the part of Buyer is necessary to consummate the Transactions. Buyer has all requisite power and authority to enter into, execute and deliver this Agreement and the Transaction Documents to which Buyer is a party and to perform its obligations hereunder and thereunder. Assuming the due authorization, execution and delivery hereof by Sellers and Posteluk, this Agreement and the Transaction Documents to which Buyer is a party constitute the valid and legally binding obligations of Buyer, enforceable in accordance with their terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar Laws affecting the rights of creditors generally, and the availability of equitable remedies.

Section 4.3           No Violation. The execution, delivery and performance by Buyer of this Agreement and the Transaction Documents to which Buyer is a party and the consummation of the Transactions do not and will not:

(a)           result in the breach of any of the terms or conditions of, or constitute a default under, or in any manner release any party thereto from any obligation under, any mortgage, note, bond, indenture, Contract or other instrument or obligation of any kind or nature by which Buyer may be bound or affected;

(b)           violate any Laws or conflict with any Order; or

(c)           violate any provision of the certificate of incorporation or bylaws of Buyer.

Section 4.4           Consents and Approvals. No consent, approval or authorization of, or declaration, filing or registration with, or notice to, any Governmental Authority is required to be made, obtained or given by Buyer in connection with Buyer’s authorization, execution and delivery of this Agreement or the Transaction Documents to which Buyer is a party, the performance by Buyer of its obligations hereunder and thereunder, and the consummation by Buyer of the Transactions.

Section 4.5           No Brokers or Finders. No agent, broker, investment banker or other Person acting on behalf of Buyer or its Affiliates, or under the authority thereof, is or will be entitled to any brokers’ or finders’ fee or any other commission or similar fee directly or indirectly from any of the Parties in connection with any of the transactions contemplated hereby.

Section 4.6           Financing. Buyer will have as of Closing, available cash to pay on a timely basis all of the consideration payable under Article 1 as required by this Agreement, and to make all other necessary payments in connection with the Transactions and to pay all related Expenses of Buyer.

17

ARTICLE 5
INDEMNIFICATION

Section 5.1           Survival. The representations and warranties made herein and in any certificate delivered in connection herewith shall survive for a period of 12 months following the Closing Date, at which time they shall expire; provided, however, that (i) the representations and warranties set forth in Sections 3.15 and 3.20 shall survive the Closing until the expiration of the applicable statute of limitations and (ii) the representations and warranties set forth in Article 2 and Sections  3.1, 3.3, 3.5, 3.9(a) and Article 4 of this Agreement shall survive indefinitely. Notwithstanding the foregoing, any claim for fraud or willful misconduct shall survive indefinitely. The representations and warranties identified in the immediately preceding sentence are referred to herein as the “Fundamental Representations”. If written notice of a claim has been given prior to the expiration of the applicable representations and warranties, then notwithstanding any statement herein to the contrary, the relevant representations and warranties shall survive as to such claim, until such claim is finally resolved. Unless a specified period is set forth in this Agreement or in a Transaction Document (in which event such specified period will control), all agreements and covenants contained in this Agreement and in any Transaction Documents will survive the Closing and remain in effect indefinitely.

Section 5.2           Indemnification by Sellers and Posteluk. From and after the Closing, Sellers and Posteluk agree, jointly and severally, to indemnify, defend and save Buyer and its Affiliates, equityholders, officers, directors, employees, agents and representatives (each, a “Buyer Indemnified Party” and collectively, the “Buyer Indemnified Parties”) harmless from and against any and all liabilities, deficiencies, demands, claims, Proceedings, causes of action, assessments, losses, costs, expenses, interest, fines, penalties and damages (including fees and expenses of attorneys and accountants and costs of investigation) (individually and collectively, the “Losses”) suffered, sustained or incurred by any Buyer Indemnified Party arising out of or otherwise by virtue of: (a) any breach of any of the representations or warranties of Sellers or Posteluk contained in Article 2 or 3 of this Agreement or in any Transaction Document; (b) the failure of Sellers or Posteluk to perform any of their or his covenants or obligations contained in this Agreement, the Transaction Documents or in any exhibit or schedule hereto or thereto; or (c) any Excluded Liability.

Section 5.3           Indemnification by Buyer. From and after the Closing, Buyer agrees to indemnify, defend and save Sellers, Posteluk and Sellers’ officers, directors, employees, agents and representatives (each, a “Seller Indemnified Party” and collectively the “Seller Indemnified Parties”) harmless from and against any and all Losses sustained or incurred by any Seller Indemnified Party arising out of or otherwise by virtue of: (a) any breach of any of the representations and warranties of Buyer contained in Article 4 of this Agreement or in the Transaction Documents, (b) the failure of Buyer to perform any of its covenants or obligations contained in this Agreement or the Transaction Documents or in any exhibit or schedule attached hereto or thereto or (c) any Assumed Liability.

18

Section 5.4           Indemnification Procedure.

(a)           If a Buyer Indemnified Party or a Seller Indemnified Party seeks indemnification under this Article 5, such party (the “Indemnified Party”) shall give written notice to the other party (the “Indemnifying Party”) of the facts and circumstances giving rise to the claim. In that regard, if any Proceeding, liability or obligation shall be brought or asserted by any third party which, if adversely determined, would entitle the Indemnified Party to indemnity pursuant to this Article 5 (a “Third-Party Claim”), the Indemnified Party shall promptly notify the Indemnifying Party of such Third-Party Claim in writing, specifying the basis of such claim and the facts pertaining thereto, and the Indemnifying Party, if the Indemnifying Party so elects, shall assume and control the defense thereof (and shall consult with the Indemnified Party with respect thereto), including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all necessary expenses. If the Indemnifying Party elects to assume control of the defense of a Third-Party Claim, the Indemnified Party shall have the right to employ counsel separate from counsel employed by the Indemnifying Party in any such action and to participate in the defense thereof, but the fees and expenses of such counsel employed by the Indemnified Party shall be at the expense of the Indemnified Party unless (x) the Indemnifying Party has been advised by the Indemnifying Party’s counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party, or (y) the Indemnifying Party has failed to assume the defense and employ counsel; in which case the fees and expenses of the Indemnified Party’s counsel shall be paid by the Indemnifying Party. All claims other than Third-Party Claims (a “Direct Claim”) may be asserted by the Indemnified Party giving notice to the Indemnifying Party. Absent an emergency or other extenuating circumstance, the Indemnified Party shall give written notice to the Indemnifying Party of such Direct Claim prior to taking any material actions to remedy such Direct Claim.

(b)           In no event shall the Indemnified Party pay or enter into any settlement of any claim or consent to any judgment with respect to any Third-Party Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, conditioned or delayed) if such settlement or judgment would require the Indemnifying Party to pay any amount. The Indemnifying Party may enter into a settlement or consent to any judgment without the consent of the Indemnified Party so long as (i) such settlement or judgment involves monetary damages only and (ii) a term of the settlement or judgment is that the Person or Persons asserting such Third-Party Claim unconditionally release all Indemnified Parties from all liability with respect to such claim; otherwise the consent of the Indemnified Party shall be required in order to enter into any settlement of, or consent to the entry of a judgment with respect to, any Third-Party Claim, which consent shall not be unreasonably withheld, conditioned or delayed.

Section 5.5           Failure to Give Timely Notice. A failure by an Indemnified Party to provide notice as provided in Section 5.4 will not affect the rights or obligations of any Person except and only to the extent that, as a result of such failure, any Person entitled to receive such notice was damaged as a result of such failure to give timely notice. Nothing contained in this Section 5.5 shall be deemed to extend the period for which Sellers’ representations and warranties will survive Closing as set forth in Section 5.1 above.

19

Section 5.6           Limitations on Indemnification Obligation. Notwithstanding anything in this Agreement to the contrary, the liability of Sellers and Posteluk to the Buyer Indemnified Parties with respect to claims for indemnification pursuant to Section to 5.2 is subject to the following:

(a)          Sellers and Posteluk shall not be liable to the Buyer Indemnified Parties for Losses arising under Section 5.2(a) to the extent that the amounts otherwise indemnifiable for such breaches exceeds an aggregate maximum of $640,000; provided, however, that the foregoing limitation shall not apply to claims for Losses arising from (i) a breach of the representations and warranties set forth in Article 2 or Sections 3.1, 3.2, 3.3, 3.4, 3.5, or 3.15 or (ii) any Excluded Liability or Lien not otherwise assumed hereby by Buyer, including any Third Party Claim relating to any Excluded Liability.

(b)          Sellers and Posteluk shall not be liable to the Buyer Indemnified Parties for Losses arising under Section 5.2(a) until and unless the aggregate amounts indemnifiable for such breaches exceeds $60,000. In the event the Buyer Indemnified Parties’ claim for Losses, in the aggregate, exceed $60,000, the Buyer Indemnified Parties shall be entitled to indemnification hereunder for all such Losses.

(c)          Sellers and Posteluk shall not be liable to the Buyer Indemnified Parties for Losses arising under Section 5.2(a) unless the claim therefor is asserted in writing on or prior to the expiration of the applicable survival period.

(d)          Notwithstanding anything contained herein to the contrary, no Buyer Indemnified Party shall be entitled to make any claims for indemnification with respect to any matter to the extent (i) the Purchase Price has been adjusted after the date hereof to reflect such matter or Buyer has unsuccessfully asserted a claim pursuant to Section 1.6 to adjust the Purchase Price with respect to such matter or (ii) any reserve with respect thereto was included on the Closing Statement or the Balance Sheet (but only to the extent of such reserve amount).

(e)          Buyer shall use its commercially reasonable efforts to pursue all legal rights and remedies available in order to minimize the Losses for which indemnification is provided to the Buyer Indemnified Parties by Sellers and Posteluk under this Article 5, including its commercially reasonable efforts to pursue insurance proceeds or other reimbursement or indemnity arrangements; provided that, nothing herein shall be deemed to require Buyer to pursue any such other legal rights and remedies prior to bringing any claim for indemnification hereunder.

(f)          Except with regard to indemnification for claims actually paid to third parties, Losses payable by an Indemnifying Party under this Article 5 shall not include punitive damages, damages related to mental or emotional distress, exemplary damages or damages calculated as a multiple of earnings.

Section 5.7          Payments. Payments of all amounts owing by an Indemnifying Party under this Article 5 shall be made promptly upon the determination in accordance with this Article 5 that an indemnification obligation is owing by the Indemnifying Party to the Indemnified Party.

20

Section 5.8           Purchase Price Adjustment. Any indemnification received under this Article 5 shall be treated by Buyer, Sellers, Posteluk and their respective Affiliates for Tax purposes as an adjustment to the Purchase Price.

Section 5.9           Exclusive Remedy. Any claim or cause of action (whether such claim sounds in tort, contract or otherwise and including statutory rights and remedies) based upon, relating to or arising out of this Agreement or the Transactions or otherwise in respect of the status, operations, condition or ownership of Sellers or their respective businesses or properties on or prior to the Closing Date must be brought by either party in accordance with the provisions and applicable limitations of this Article 5, which in the absence of fraud or willful misconduct shall constitute the sole and exclusive remedy of all Parties, their Affiliates, successors and assigns and all Persons who may claim any rights through them, for any such claim or cause of action.

ARTICLE 6
CLOSING

Section 6.1           Closing. The Transactions shall be consummated at a closing (the “Closing”), which shall take place at 10:00 a.m., Chicago time on the date three Business Days after each party has satisfied the conditions to closing set forth in Sections 6.2 and 6.3 at the offices of Katten Muchin Rosenman LLP, 525 W. Monroe, Suite 1900, Chicago, Illinois 60661, remotely via the exchange of executed documents and other closing deliverables or at such other time and place as may be agreed to by the Parties in writing. The date on which the Closing occurs shall be referred to as the “Closing Date.” The Closing shall be deemed effective at 12:01 a.m. on the Closing Date (the “Effective Time”).

Section 6.2           Conditions to Sellers’ Obligations. The obligations of Sellers to effect the Closing shall be subject to the satisfaction at or prior to the Closing of the following conditions, any one or more of which may be waived by Sellers:

(a)          There shall not be in effect any injunction, order or decree of a court of competent jurisdiction that prohibits or delays consummation of any material part of the Transactions.

(b)          (i) The representations and warranties of Buyer set forth in this Agreement shall be true and correct in all material respects (except in each case for those representations and warranties qualified as to “material,” “materiality,” “Material Adverse Effect” or similar expressions, which shall be true and correct in all respects) as of the date of this Agreement and as of the Closing Date (except to the extent that any representation and warranty expressly speaks as of a date earlier than the Closing Date, in which case such representation and warranty shall speak solely as of such earlier date), and (ii) Buyer shall have performed and complied in all material respects with the agreements contained in this Agreement required to be performed and complied with by it prior to or at the Closing (except in each case for those agreements that are qualified as to “material,” “materiality,” “Material Adverse Effect” or similar expressions, which shall have been performed or complied with in all respects).

21

(c)          No action or proceeding shall have been instituted by any Governmental Authority and, at what would otherwise have been the Closing Date, remain pending to restrain or prohibit any material part of the Transactions or to seek any material divestiture or to revoke or suspend any material license, permit, order or approval by reason of any of the Transactions; nor shall any Governmental Authority have notified any party to this Agreement or any of their respective Affiliates that consummation of any material part of the Transactions would constitute a violation of the laws of any jurisdiction or that it intends to commence an action or proceeding to restrain or prohibit any material part of the Transactions or to require such material divestiture, revocation or suspension; unless, in either such case, such Governmental Authority shall have withdrawn such notice and abandoned such action or proceeding.

Section 6.3           Conditions to Buyer’s Obligations. The obligations of Buyer to effect the Closing shall be subject to the satisfaction at or prior to the Closing of the following conditions, any one or more of which may be waived by Buyer:

(a)          There shall not be in effect any injunction, order or decree of a court of competent jurisdiction that prohibits or delays consummation of any material part of the Transactions.

(b)          (i) The representations and warranties of Sellers and Posteluk set forth in this Agreement shall be true and correct in all material respects (except in each case for those representations and warranties qualified as to “material,” “materiality,” “Material Adverse Effect” or similar expressions, which shall be true and correct in all respects) as of the date of this Agreement and as of the Closing Date (except to the extent that any representation and warranty expressly speaks as of a date earlier than the Closing Date, in which case such representation and warranty shall speak solely as of such earlier date), and (ii) each of Sellers and Posteluk shall have performed and complied in all material respects with the agreements contained in this Agreement required to be performed and complied with by it or him prior to or at the Closing (except in each case for those agreements that are qualified as to “material,” “materiality,” “Material Adverse Effect” or similar expressions, which shall have been performed or complied with in all respects).

(c)          No action or proceeding shall have been instituted by any Governmental Authority and, at what would otherwise have been the Closing Date, remain pending to restrain or prohibit any material part of the Transactions or to seek any material divestiture or to revoke or suspend any material license, permit, order or approval by reason of any of the Transactions; nor shall any Governmental Authority have notified any party to this Agreement or any of their respective Affiliates that consummation of any material part of the Transactions would constitute a violation of the laws of any jurisdiction or that it intends to commence an action or proceeding to restrain or prohibit any material part of the Transactions or to require such material divestiture, revocation or suspension; unless, in either such case, such Governmental Authority shall have withdrawn such notice and abandoned such action or proceeding.

22

(d)          The Required Consents shall have been obtained by Sellers.

(e)          Buyer has completed its due diligence investigation of Sellers’ results of operations to its reasonable satisfaction.

Section 6.4          Deliveries by Sellers. At the Closing, Sellers shall deliver or cause to be delivered to Buyer:

(a)          a Bill of Sale and Assignment and Assumption Agreement (the “Bill of Sale”) and such other assignments and instruments of conveyance and transfer duly executed by Sellers, as shall be effective to vest Buyer with full and complete right, title and interest in and to the Acquired Assets, free and clear of all Liens;

(b)          a certificate executed and delivered by Posteluk attesting and certifying as to the organizational documents of Sellers (including Sellers’ charters, certified as of a recent date by the Secretary of State of the State of Wisconsin, and Sellers’ limited liability company agreements);

(c)          certificate of good standing of each Seller issued not earlier than five days prior to the Closing Date by the Secretary of State of the State of Wisconsin;

(d)          all Required Consents;

(e)          evidence satisfactory to Buyer that all Liens on the Acquired Assets have been released;

(f)          amendments to the leases for the real property located in Hayward, Neillsville, Rapids, Adams and the corporate office adding a six-month termination provision, duly executed by all parties thereto;

(g)          a non-foreign affidavit dated as of the Closing Date sworn under penalty of perjury and in form and substance required under the Treasury Regulation pursuant to Section 1445 of the Code from each Seller stating that it is not a “Foreign Person” as defined in Section 1445 of the Code; and

(h)          such other documents and instruments as Buyer may reasonably require in order to effectuate the Transactions.

All documents and instruments delivered to Buyer shall be in form and substance reasonably satisfactory to Buyer.

Section 6.5          Deliveries by Buyer. At the Closing, Buyer shall deliver or cause to be delivered to Sellers:

(a)          federal funds wire transfer in an amount equal to the Base Purchase Price;

23

(b)          the Bill of Sale, duly executed by Buyer; and

(c)          such other documents and instruments as Sellers may reasonably require in order to effectuate the Transactions.

All documents and instruments delivered to Sellers shall be in form and substance reasonably satisfactory to Sellers.

ARTICLE 7
COVENANTS AND OTHER AGREEMENTS

Section 7.1           Non-Competition; Confidentiality. The Parties agree that Buyer is relying on the covenants and agreements set forth in this Section 7.1, that without such covenants Buyer would not enter into this Agreement or the Transactions, and that the Purchase Price is sufficient consideration to make the covenants and agreements set forth herein enforceable.

(a)          Non-competition. In furtherance of the transfer of the Acquired Assets to Buyer hereunder by virtue of the Transactions, to more effectively protect the value of the Acquired Assets so transferred, and to induce Buyer to consummate the Transactions, Sellers and Posteluk (the “Restricted Parties”) covenant and agree that, during the Term (as defined below), the Restricted Parties will not, nor will the Restricted Parties permit any of their Affiliates to, invest in, provide assistance to, engage or participate in (whether directly or indirectly, individually or as an investor, owner, securityholder, partner, member, director, manager, officer, employee, consultant, sales representative, lender, distributor or agent of any other Person), or receive any compensation or economic benefit in connection with, any business that is considered to be competitive with the Business or any portion thereof, anywhere in the United States of America. Notwithstanding the foregoing, nothing contained in this Section 7.1(a) shall prohibit any Restricted Party or any of its Affiliates from owning less than two percent of any class of stock listed on a national securities exchange or traded in the over-the-counter market or being employed by Buyer to work in the Business. Posteluk’s ownership of a 49% membership interest in PEARCE Companies LLC, a 50% membership interest in S&R Enterprises LLC and a 51% membership interest in PEARCE Printing LLC shall not be deemed to violate Section 7.1(a), provided, that such entities shall not compete with the Business. The “Term” shall mean the period beginning on the Closing Date and ending upon the fourth anniversary of the Closing Date.

24

(b)          Confidentiality. The Restricted Parties recognize and acknowledge that (i) as of the Closing, they have knowledge of confidential and proprietary information concerning Buyer, the Business and the Acquired Assets (“Confidential Information”) and (ii) may continue to have access to Confidential Information after the Closing. In light of the foregoing, from and after the Closing, each Restricted Party shall, and shall cause his or its Affiliates to, maintain the confidentiality of, and refrain from using or disclosing to any Person, all Confidential Information. Notwithstanding the foregoing, (A) Posteluk, while employed by Buyer, may use the Confidential Information in furtherance of Buyer’s interests, (B) the Restricted Parties may disclose any Confidential Information as required by Law and (C) the Restricted Parties may disclose Confidential Information that is in the public domain or is known to the Person to whom it was or may be disclosed through no wrongful act on the part of such Restricted Party, any of his or its Affiliates or any of his or its agents. In the event that any Restricted Party reasonably believes after consultation with counsel that it or he is required by Law to disclose any Confidential Information, such Restricted Party will (x) provide Buyer with prompt notice before such disclosure in order that Buyer may attempt to obtain a protective order or other assurance that confidential treatment will be accorded to such Confidential Information and (y) cooperate with Buyer in attempting to obtain such order or assurance. For the avoidance of doubt, this Section 7.1(b) shall not apply to any disclosures made by any Restricted Party in connection with or relating to the preparation, audit or review of Tax Returns, any inquiries by any Governmental Authority relating to Taxes, or any claim asserting liability for Taxes.

(c)          Interference with Relationships. During the Term, except as requested by or on behalf of Buyer, no Restricted Parties or any of its or his Affiliates shall, directly or indirectly, employ, engage or recruit, solicit, contact or approach for employment or engagement, or participate as an employee, agent, independent contractor, owner, securityholder, director, manager, partner, member or in any other individual or representative capacity in any business that employs, engages or recruits, solicits, contacts or approaches for employment or engagement, any Transferred Employee (other than Posteluk), or otherwise seek or attempt to influence or alter any such Transferred Employee’s relationship with Buyer.

(d)          Blue-Pencil. If any court of competent jurisdiction shall at any time deem the term of any particular restrictive covenant contained in this Section 7.1 too lengthy or the geographic area covered too extensive, the other provisions of this Section 7.1 shall nevertheless stand, the Term shall be deemed to be the longest period permissible by Law under the circumstances and geographic area covered shall be deemed to comprise the largest territory permissible by Law under the circumstances. The court in each case shall reduce the Term and/or geographic area covered to permissible duration or size.

Section 7.2           Employees of the Business; Employee Benefit Matters

(a)          Buyer shall offer employment to substantially all employees of the Business who are in good standing as of the Closing Date on terms substantially similar to those in effect on the date hereof. Those employees who accept such offers of employment shall be referred to herein as the “Transferred Employees”. Each Seller shall use reasonable efforts to assist Buyer in hiring each Transferred Employee. From the date hereof until the first to occur of the Closing Date or the termination of this Agreement, each Seller shall not take any action, directly or indirectly, to prevent or discourage any such Transferred Employee from being employed by Buyer as of the Closing Date. Each Seller shall be responsible for (i) any claims, liabilities or obligations arising, accrued or incurred on or prior to the Closing Date under applicable Law under such Seller’s Employee Benefit Plans, such Seller’s worker’s compensation, unemployment and disability arrangements, employment or severance agreements, any stock options or other equity based, bonus, incentive or deferred compensation or severance plan or arrangement and (ii) the collection of premiums and all related costs of benefits offered under the continuation of benefits provisions of COBRA for all employees of the Sellers and their dependents who are not Transferred Employees. Nothing herein shall be construed or interpreted to impose on Buyer any obligation for the continuation of employment of any employee for any period of time following the Closing or limitation on its ability to determine compensation or benefits provided to any employee, who becomes a Transferred Employee except, with respect to Posteluk, as provided in the employment agreement between Posteluk and Buyer.

25

(b)          Each Seller shall be responsible for and shall, as of the Closing Date, have fully paid and satisfied in full all amounts owed to any employee, including wages, salaries, severance pay, any employment, incentive, compensation or bonus agreements or other benefits or payments (including without limitation all payments, obligations and other entitlements associated with any Employee Benefit Plan) relating to the period of employment by such Seller, or on account of the termination thereof, and each Seller shall indemnify Buyer and hold Buyer harmless from any liabilities or Liens thereunder. Notwithstanding the foregoing, Buyer shall be responsible for all Accrued Vacation Obligations and Accrued Commissions.

Section 7.3           Nonassignable Contracts. To the extent that the assignment hereunder by Sellers to Buyer of any Acquired Contract is not permitted or is not permitted without the consent of any other party to the Acquired Contract, this Agreement shall not be deemed to constitute an assignment of any such Acquired Contract if such consent is not given or if such assignment otherwise would constitute a breach of, or cause a loss of contractual benefits under, any such Acquired Contract, and Buyer shall not assume any obligations or liabilities thereunder. With respect to any such Acquired Contract, Sellers and Posteluk shall continue to use their respective reasonable efforts to obtain such consents and shall cooperate with Buyer in any arrangement designed to provide Buyer with the rights and benefits (subject to the obligations) under any such Acquired Contracts.

Section 7.4           Further Assurances.

(a)          Each of the Parties shall act in good faith and use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary or advisable to consummate the Transactions as soon as reasonably practicable. If all of the conditions to a Party’s obligation to close hereunder shall have been satisfied, such party shall diligently proceed to close.

(b)          Each of the Parties agrees that subsequent to the Closing Date upon the reasonable request of any other Party, it shall execute and deliver, or cause to be executed and delivered, such further reasonable instruments and take such other commercially reasonable actions as may be necessary to carry out the Transactions or to vest, perfect or confirm ownership of the Acquired Assets in Buyer.

Section 7.5           Transfer Taxes. To the extent there are any, Sellers, shall pay all transfer, documentary, sales, use, stamp, registration, recording and other such Taxes and governmental fees (including any penalties and interest), as applicable, incurred in connection with the sale and transfer of the Acquired Assets. The Parties will cooperate to the extent reasonably necessary to make such filings or returns as may be required. The Parties will cooperate with each other and use their commercially reasonable efforts to minimize the Taxes attributable to the transfer of the Acquired Assets, subject to applicable Law.

26

Section 7.6           Conduct of the Business Pending Closing. Except as set forth on Schedule 7.6, from the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms:

(a)          Sellers shall conduct their operations in the Ordinary Course of Business, and they shall use their commercially reasonable efforts to preserve the present relationships between Sellers and their respective suppliers, distributors, customers and other Persons having business relationships with them; and

(b)          without limiting the generality of the foregoing, neither Seller shall, except with Buyer’s prior written consent:

(i)          make or grant any increases in salary or other compensation or bonuses to employees or grant any employee any severance or termination pay or establish, adopt, enter into or amend in any material respect any Employee Benefit Plan, except as required by Law;

(ii)         make any general adjustment in the type or hours of work of its employees;

(iii)        acquire, exchange, lease, license or dispose of any properties or assets of a Company, other than in the Ordinary Course of Business;

(iv)        enter into or amend any agreement, arrangement or transaction with Posteluk or any of his Affiliates, except for the amendments to real estate leases contemplated by Section 6.4(f) and cash distributions to Posteluk as Sellers’ sole member;

(v)         amend or repeal any of Sellers’ organizational or governing documents;

(vi)        incur any indebtedness or grant or permit any of its assets or property to become subject to, any Lien (other than Permitted Liens);

(vii)       terminate or amend any agreement any material Acquired Contract or enter into any new material agreement, except in the ordinary course of business;

(viii)      change any method of accounting for Tax purposes;

(ix)         make or amend any elections for Tax purposes;

27

(x)          adopt a taxable year other than the calendar year;

(xi)         engage in any other transaction outside of the Ordinary Course of Business, except as may be contemplated by this Agreement; or

(xii)        enter into any agreement or arrangement to take any of the foregoing actions.

Notwithstanding the foregoing, Sellers are expressly permitted to make distributions to their sole member, Posteluk, and to pay down the principal and interest on their indebtedness.

Section 7.7           Exclusive Dealings. From the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, none of Sellers, Posteluk, nor any of their respective officers, employees, agents, representatives or Affiliates shall, without Buyer’s prior written consent, (i) directly or indirectly communicate (excluding any communication rejecting any proposal made by any Person other than Buyer), engage, or participate in negotiations or proposals regarding, or provide information with respect to, or otherwise cooperate with, facilitate or encourage any effort or attempt by any person or entity other than Buyer to do or seek, an acquisition of all or any part of the equity interests or assets of Sellers (by merger, consolidation, stock purchase, asset purchase or otherwise) (ii) directly or indirectly, solicit, initiate, entertain or encourage any proposal or offer (other than with respect to Buyer) related to or in connection with the any such acquisition described above or (iii) enter into any understanding, letter of intent or agreement in connection with the foregoing.

Section 7.8           Investigation by Buyer. From the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, Buyer may, through its representatives (including its counsel, accountants, lenders, and consultants), make such investigations of the properties, offices and operations of Sellers and such audit of the financial condition of Sellers as it deems necessary or advisable in connection with the Transactions, including, without limitation, any investigations enabling it to familiarize itself with such properties, offices, operations, financial condition and employees. Sellers shall permit Buyer and its authorized representatives to have reasonable access to the premises and to all books and records and Tax Returns of Sellers, and Buyer shall have the right to make copies thereof and excerpts therefrom. In connection with such review, and upon prior notice to Sellers, Buyer and its representatives may contact and communicate with key employees, suppliers, customers, lenders and creditors of Sellers, in each case subject to Sellers’ reasonable limitations. Sellers shall timely furnish Buyer with such financial and operating data and other information with respect to Sellers and their operations as Buyer may from time to time reasonably request. Representatives of Buyer shall be entitled to hold meetings and conferences during normal working hours with Sellers’ employees upon reasonable notice to Sellers, to explain and answer questions about the conditions, policies and benefits of employment in Buyer’s organization. Sellers shall be entitled to have one or more representatives attend all such meetings.

28

Section 7.9           Notification. From the date hereof until the Closing Date, Sellers and Posteluk shall give prompt notice to Buyer of (a) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which has caused any representation or warranty of Seller or Posteluk contained herein to be untrue or inaccurate in any material respect and (b) any material failure of Sellers or Posteluk to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by Sellers or Posteluk hereunder. From the date hereof until the Closing Date, Buyer shall give prompt notice to Sellers and Posteluk of (a) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which has caused any representation or warranty of Buyer contained herein to be untrue or inaccurate in any material respect and (b) any material failure of Buyer to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by Buyer hereunder. Such disclosures shall amend and supplement the appropriate Schedules delivered on the date hereof. Notwithstanding any provision in this Agreement to the contrary, unless such disclosure constitutes a Material Adverse Effect and Buyer provides Sellers with a termination notice pursuant to Section 8.16 within five Business Days after delivery by Sellers and Posteluk of such notice pursuant to this Section 7.9, Buyer shall be deemed to have waived its right to terminate this Agreement or prevent the consummation of the transactions contemplated by this Agreement or to seek indemnity with respect to such disclosed matter after the Closing.

Section 7.10         Public Announcements. Prior to or at the Closing, any announcement related to the Transactions shall be approved and agreed upon by Buyer and Posteluk. Thereafter, Buyer, on the one hand, and Posteluk, on the other hand, shall, to the extent feasible, consult with each other before issuing, and provide each other reasonable opportunity to review and comment upon, any press release or other public statements with respect to the Transactions and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law, court process, or the rules of a national stock exchange.

Section 7.11         Required Consents. Notwithstanding that it shall be solely Sellers’ obligation to obtain from third parties all of the Required Consents, Sellers and Buyer shall make good faith efforts, and cooperate with one another, (a) to execute any required novation, and secure all Required Consents, including the preparation and submission of all required filings, and all other consents required in order to enable Sellers and Buyer to effect the transactions contemplated hereby in accordance with the terms and conditions hereof and (b) to effect all such registrations, filings and notices with or to third parties and Governmental Authorities, as may be reasonably required by or with respect to Buyer or Sellers, respectively, in connection with the transactions contemplated by this Agreement.

Section 7.12         Sellers’ Waiver. Each Seller covenants that it will forever waive any rights under any non-competition, non-disclosure, non-solicitation or similar provisions it has under any employment, non-compete or other arrangements with any their respective former employees who are to be become Transferred Employees after the Closing or otherwise relate to the Acquired Assets.

29

Section 7.13         Tax Matters. Each Seller and Posteluk shall pay all Taxes relating to the Business or the Acquired Assets that are due or that accrue prior to the Closing Date even if such Taxes are payable after the Closing Date. Buyer shall pay all Taxes relating to the Acquired Assets or the Buyer’s operation of the Business that accrue for periods after the Closing Date. Following the Closing, Buyer and each Seller shall cooperate fully, as and to the extent reasonably requested by the other party and at the expense of the other party, in connection with the filing of any Tax Returns and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. Buyer agrees to retain all books and records with respect to Tax matters pertinent to each Seller relating to any Taxable period beginning before the Closing Date until the expiration of the applicable statute of limitations of the respective Taxable Periods, and to abide by all record retention agreements entered into with any taxing authority. Each Seller and Buyer hereto will cooperate in the preparation and filing of all Tax Returns and other documents relating to Transfer Taxes, including any that would relate to an applicable exemption or reduction for such Taxes.

Section 7.14         Financial Covenants. Buyer is not assuming any inter-company debt by and between, or by and among, either Seller, Posteluk or any Affiliate of Seller or Posteluk or any negative cash or book balances of Sellers.

Section 7.15         Excluded Liabilities; Assumed Contractual Obligations. Each Seller shall make full and timely payment of all Excluded Liabilities. Buyer agrees to fully perform and provide services under the Assumed Contracts in accordance with their terms.

Section 7.16         Subordination. In the event Buyer obtains debt financing for the Business at any time while the Contingent Consideration remains outstanding, each Seller agrees that all of its rights to payment of the Contingent Consideration shall be subordinated to the payment of any amounts due and owing to such lender. In connection therewith, each Seller agrees to take all action as may be reasonably necessary to effectuate the foregoing including, without limitation executing a customary subordination agreement with the party providing such debt financing; provided, that, (i) payments of Contingent Consideration may only be blocked during times when an event of default under such debt financing has occurred and is continuing or would occur as a result of Buyer making such payments of Contingent Consideration then due (collectively, “Financing Defaults”); (ii) any payment of Contingent Consideration (or portion thereof) that is not made when and as due and owing as a result of the occurrence of a Financing Default shall be made immediately upon the cure or waiver of such Financing Default; and (iii) if the Buyer has not made a payment of Contingent Consideration that otherwise has become due and owing (including any such failure resulting from the operation of such subordination terms), then Buyer shall not (y) make any dividend, distribution or other payment in respect of its equity interests, or (z) redeem or otherwise repurchase any of its equity interest, in each case, unless and until such payment of Contingent Consideration has been paid in full to the Sellers.

ARTICLE 8
MISCELLANEOUS

Section 8.1           Notices. All notices, reports, records or other communications that are required or permitted to be given to the Parties under this Agreement shall be sufficient in all respects if given in writing and delivered in person, by facsimile (if a facsimile number has been provided and is in effect), by overnight courier or by registered or certified mail, postage prepaid, return receipt requested, to the receiving Party at the following address:

30

If to Sellers or to Posteluk:

Robert Posteluk

S 752 Dexter Dr.

Spencer, WI 54479

Facsimile: [_________]

with a copy (which shall not constitute notice) to:

Katten Muchin Rosenman LLP
525 West Monroe Street
Chicago, IL 60661-3693
Facsimile: (312) 902-1061
Attention: Nancy Laethem Stern

If to Buyer:

PC Doctors Acquisition, Inc.
5425 Wisconsin Avenue, Suite 701
Chevy Chase, MD 20815
Facsimile: (240) 223-1331
Attention: President

with a copy (which shall not constitute notice) to:

Blackstreet Capital Management, LLC

5425 Wisconsin Avenue, Suite 701

Chevy Chase, MD 20815

Facsimile: (240) 223-1331

Attention: Murry N. Gunty

and

Patton Boggs

8484 Westpark Drive, Ninth Floor

McLean, Virginia 22102

Facsimile: (703) 744-8001

Attention: Alan Noskow

or such other address as such Party may have given to the other Parties by notice pursuant to this Section 8.1. Notice shall be deemed given on (a) the date such notice is personally delivered, (b) upon actual receipt or refusal if sent by certified or registered mail, (c) one Business Day after the date of delivery to the overnight courier if sent by overnight courier, or (d) the next succeeding Business Day after transmission by facsimile.

31

Section 8.2           General Definitions. For the purposes of this Agreement, the following terms have the meaning set forth below:

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person, or any entity in which any such Person or Persons own, collectively, 10% or more, and any officer, director or executive employee of such Person or any Family Member of such Person and includes any past or present Affiliate of any such Person.

“Affiliated Group” means an affiliated group as defined in Section 1504 of the Code (or analogous combined, consolidated or unitary group defined under state, local or foreign income Tax Law).

“Business Day” means any day that is not a Saturday or a Sunday or a day on which banks located in Chicago, Illinois are authorized or required to be closed.

“Business Names” means the following trade names “Pearce Wireless”, “PC Doctors” and “TecGuard”.

“Closing Net Working Capital” means (a) all cash and cash equivalents, deposits and other prepaid items, Current Accounts Receivable and inventory, as recorded in the accounts of Sellers, minus (b) all Current Accounts Payable, as recorded in the accounts of Sellers, all credit card liabilities, all Accrued Vacation Obligations, all Accrued Commissions and other current liabilities as required by GAAP to be accrued, in each case as of 12:01 a.m. on the Closing Date, as determined in accordance with GAAP, applied consistently with the past practice of Sellers to the extent such past practice is in accordance with GAAP; provided, however, that the Closing Net Working Capital shall not take into account any assets or liabilities of Sellers that are Excluded Assets or Excluded Liabilities.

“Code” means the Internal Revenue Code of 1986, as amended.

“Contract” means any contract, agreement, purchase order, sales order, lease, license, commitment, arrangement or obligation, whether written or oral.

“Current Accounts Receivable” means accounts receivable that are current within the applicable Seller’s terms and do not exceed 45 days.

“EBITDA” means net income plus interest expense, income taxes, depreciation and amortization, with each such item computed in accordance with GAAP applied in a manner consistent with Sellers’ past practice to the extent such past practice is in accordance with GAAP.

“Employee Benefit Plan” means any of the following (whether written, unwritten, terminated or subject to ERISA or not) which is sponsored or maintained by Sellers: (a) all “employee welfare benefit plans,” as defined in Section 3(1) of ERISA, including, without limitation, any medical plan, life insurance plan, short-term or long-term disability plan, dental plan, and sick leave; (b) all “employee pension benefit plans,” as defined in Section 3(2) of ERISA, including, without limitation, any excess benefit, top hat or deferred compensation plan or any nonqualified deferred compensation or retirement plan or arrangement or any qualified defined contribution or defined benefit plan; and (c) all other material plans, policies, programs, arrangements, and agreements that provide employee benefits or benefits to any current or former employee, including, without limitation, any severance agreement or plan, material fringe benefit plan or program, bonus or incentive plan, stock option, restricted stock, stock bonus or deferred bonus plan, salary reduction, change-of-control or employment agreement (or consulting agreement with a former employee).

32

“Environmental Law” shall mean any federal, state or local law, statute, rule or regulation relating to the environment, including, without limitation, any statute, regulation or order pertaining to (i) treatment, storage, disposal, generation and transportation of Hazardous Materials, (ii) air, water and noise pollution, (iii) groundwater and soil contamination, (iv) the release or threatened release into the environment of Hazardous Materials, including without limitation emissions, discharges, injections, spills, escapes or dumping of pollutants or contaminants, (v) the protection of wild life, marine sanctuaries and wetlands, including without limitation all endangered and threatened species, (vi) storage tanks, vessels and containers, (vii) underground and other storage tanks or vessels, abandoned, disposed or discarded barrels, containers and other closed receptacles used to store Hazardous Materials, (viii) health and safety of employees and other persons; (ix) manufacture, processing, use, distribution, treatment, storage, disposal, transportation or handling of Hazardous Materials and (x) any other applicable Law in effect relating to pollution or protection of the environment. As used above, the terms “release” and “environment” shall have the meaning set forth in the federal CERCLA.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” means Sellers, any subsidiary, and predecessor of any of them and any other Person who constitutes or has constituted all or part of a controlled group or was or is under common control with, or whose employees were or are treated as employed by, any of Sellers, any subsidiary and/or any predecessor or any of them, under Section 414(t) the Code.

“Expenses” means all legal and accounting fees and expenses and other fees and expenses incurred or to be incurred by a Party in negotiating and preparing this Agreement, the Transaction Documents and all other documents executed in connection herewith and in closing and carrying out the Transactions.

“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board.

“Guarantee” means any obligation, contingent or otherwise, of Sellers directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person. The term “guarantee” when used as a verb has a corresponding meaning.

“Hazardous Materials” means petroleum, PCBs and any other chemicals, materials, substances or wastes which are defined or regulated as of the date of this Agreement and the Closing Date as “hazardous substances” or “hazardous wastes” under any applicable Environmental Law.

33

“Indebtedness” means, without duplication: (a) all indebtedness for borrowed money or funded debt owed by Sellers, (b) all Guarantees, (c) all liabilities of Sellers evidenced by notes, bonds or debentures, (d) all liabilities of Sellers secured by any Liens, (e) the capitalized portion of lease liabilities of Sellers under any capital lease, (f) all liabilities of Sellers arising from installment purchases of property or representing the deferred purchase price of property or services in respect of which Sellers are liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the ordinary course), and (g) any interest, principal, prepayment penalty, fees, or expenses, to the extent due or owing in respect of those items listed in clauses (a) through (f) above.

“Intellectual Property” means, collectively, in the United States and all countries or jurisdictions foreign thereto, (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all Patents, (b) all Trademarks, all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrights in any work of authorship (including without limitation databases, software, and mask works) and all applications, registrations, and renewals in connection therewith, (d) all trade secrets and confidential business information (including confidential ideas, research and development, proprietary product formulas, compositions, manufacturing and production processes, technical and other data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans), (e) computer software and firmware (including source code, executable code, data, databases, user interfaces and related documentation) (collectively, “Software”), (f) all other proprietary and intellectual property rights, and (g) all income, royalties, damages and payments related to any of the foregoing (including damages and payments for past, present or future infringements, misappropriations or other conflicts with any intellectual property), and the right to sue and recover for past, present or future infringements, misappropriations or other conflict with any intellectual property.

“Letter of Intent” means the letter of intent entered into by Buyer and Sellers, dated April 10, 2012.

“Liens” means security interests, charges, claims, mortgages, pledges, hypothecations, encumbrances, liens, assessments, options, rights of first refusal and restrictions on ownership (not including restrictions on ownership imposed on Sellers or others in the ordinary course by owners and licensors of Intellectual Property).

“Material Adverse Effect” means any effect, occurrence, development or change that has had, or could reasonably be expected to have, a materially adverse effect on the assets, liabilities, results of operations or financial condition of Sellers taken as a whole; provided however, that in no event shall any of the following, individually or in the aggregate, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has occurred, a Material Adverse Effect: (a) changes in conditions in the U.S. or global economy generally or the U.S. or global capital, credit or financial markets generally, including changes in commercial bank loan interest risks or currency exchange rates; (b) changes in, or required by, applicable Law or general legal, tax, regulatory or political conditions; (c) changes required by GAAP; (d) acts of war (whether or not declared), armed hostilities, sabotage or terrorism occurring after the date of this Agreement or the continuation, escalation or worsening of any such acts of war, armed hostilities, sabotage or terrorism threatened or underway as of the date of this Agreement; (e) earthquakes, hurricanes, floods or other natural disasters; (f) changes generally affecting the cellular telephone industry; (g) the effect of the negotiation, execution, announcement or pendency of this Agreement or the Transactions; (h) any affirmative action knowingly taken by Buyer or any of its Affiliates; or (i) the failure by Sellers to meet any projections, estimates or budgets for any period prior to, on or after the date of this Agreement (but excluding herefrom any effect, event, development, occurrence or change underlying such failure to the extent such effect, event, development, occurrence or change would otherwise constitute a Material Adverse Effect).

34

“Ordinary Course of Business” shall, with respect to either Seller, refer to an action taken to the extent such action: (i) is consistent in nature, scope and magnitude with the past customs and practices of such Seller and is taken in the ordinary course of the normal day-to-day operations of such Seller; and (ii) would not reasonably be expected to have a Material Adverse Effect upon such Seller, the Financial Statements, the Business or the transactions contemplated by the Transaction Documents.

“Patents” means all letters patent and pending applications for patents of the United States and all countries and jurisdictions foreign thereto and all reissues, reexaminations, divisions, continuations, continuations-in-part, revisions, and extensions thereof.

“Permitted Liens” means (a) Liens for Taxes not yet due and payable, (b) statutory Liens of landlords for amounts not yet due and payable, (c) Liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business and (d) Liens described on Schedule 8.2(a).

“Person” means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated association, corporation or other entity or any Governmental Authority.

“Required Consents” means all consents listed or required to be listed on Schedule 3.2.

“Sellers’ Knowledge” and each phrase having equivalent meaning (e.g., “known to Sellers” or “to the Knowledge of Sellers” or “for which Sellers have Knowledge) shall mean the actual knowledge of each of the Persons listed on Schedule 8.2(b) and the knowledge that such Persons would have obtained after making reasonable inquiry of employees of the Business and reasonable diligence of Sellers’ records with respect to the matter in question.

“Tax” means any multi-national, federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, entertainment, amusement, severance, stamp, occupation, premium, windfall profit, customs, duties, real property, personal property, ad valorem, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, including any interest, penalties or additions to Tax or additional amounts in respect of the foregoing; the foregoing shall include any transferee or secondary liability for a Tax and any liability assumed or created by agreement or arising as a result of being (or ceasing to be) a member of any Affiliated Group (or being included (or required to be included) in any Tax Return relating thereto).

35

“Tax Returns” means returns, declarations, reports, claims for refund, information returns, forms or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Tax of any Person or the administration of any laws, regulations or administrative requirements relating to any Tax.

“Trademarks” mean, in the United States and all countries and jurisdictions foreign thereto, registered trademarks, registered service marks, trademark and service mark applications, unregistered trademarks and service marks, registered trade names and unregistered trade names, trade dress, logos, slogans, and Internet domain names, together with all translations, adaptations, derivations, combinations and renewals thereof.

“Transactions” means the transactions contemplated by the Transaction Documents.

“Transfer Taxes” means any stamp or other sales, transfer, use, value added, excise registration, stamp or similar transaction transfer Tax or fee imposed under the Laws of the United States or any state, country or municipality or other Governmental Authority, arising as a result of the Transactions.

Section 8.3           Entire Agreement; Amendment. This Agreement, including the exhibits and schedules hereto, the Transactions Documents and the instruments and agreements executed in connection herewith and therewith contain all of the terms, conditions and representations and warranties agreed upon by the Parties relating to the subject matter of this Agreement and supersede all prior and contemporaneous agreements, negotiations, correspondence, undertakings and communications of the Parties, oral or written, respecting such subject matter, including the Letter of Intent. Notwithstanding the foregoing, the Confidentiality Agreement dated January 23, 2012 among Blackstreet Capital Management, LLC, Wall Street Equity Group, Inc. and Sellers shall remain in full force and effect until the Closing, and Buyer shall be bound thereby as if a party thereto. This Agreement shall not be amended or modified except by an agreement in writing duly executed by the Parties.

Section 8.4           Counterparts; Deliveries. This Agreement may be executed simultaneously in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. This Agreement, the Transaction Documents and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or other electronic transmission, shall be treated in all manner and respects and for all purposes as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any Party or to any such agreement or instrument, each other Party or thereto shall re-execute original forms thereof and deliver them to all other Parties, except that the failure of any Party to comply with such a request shall not render this Agreement invalid or unenforceable. No Party shall raise the use of a facsimile machine or other electronic transmission to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or other electronic transmission as a defense to the formation or enforceability of a contract and each Party forever waives any such defense.

36

Section 8.5           Third Parties. Nothing in this Agreement, express or implied, is intended to confer any right or remedy under or by reason of this Agreement on any Person other than the Parties, the Buyer Indemnified Parties, the Seller Indemnified Parties and their respective heirs, representatives, successors and permitted assigns, nor is anything set forth herein intended to affect or discharge the liability of any third Persons to any Party, nor shall any provision give any third party any right of subrogation or action over or against any Party.

Section 8.6           Expenses. Each of the Parties shall be responsible for the payment of all Expenses incurred by it, him or her in connection with this Agreement and all documents executed in connection herewith, including, without limitation, legal and accounting fees and expenses; provided, however, that Sellers shall pay the expenses of Posteluk.

Section 8.7           Waiver. No failure of any Party to exercise any right or remedy given to such Party under this Agreement or otherwise available to such Party or to insist upon strict compliance by any other Party with its or his obligations hereunder, and no custom or practice of the Parties in variance with the terms hereof, shall constitute a waiver of any Party’s right to demand exact compliance with the terms hereof, unless such waiver is set forth in writing and executed by such Party. Any such written waiver shall be limited to those items specifically waived therein and shall not be deemed to waive any future breaches or violations of the same or any other obligation unless, and to the extent, set forth therein.

Section 8.8           Governing Law. This Agreement shall be construed and governed in accordance with the internal laws of the State of Delaware without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of a jurisdiction other than Delaware.

Section 8.9           Assignments. This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Neither party may assign its rights or delegate its responsibilities, liabilities and obligations under this Agreement, at any time whether prior to or following the Closing Date without consent of the other Parties; provided, however, that Buyer may assign any and all of its rights and interests hereunder to any bank or other financial institution which has extended credit to Buyer or any of its Affiliates.

Section 8.10         Headings. The subject headings of articles and sections of this Agreement are included for purposes of convenience of reference only and shall not affect the construction or interpretation of any of its provisions.

Section 8.11         Jurisdiction of Courts. Any Proceeding initiated over any dispute arising out of or relating to the Transaction Documents or any of the Transactions shall be initiated in any federal or state court located within the State of Delaware, however, the Parties further agree that venue for all such matters shall lie exclusively in those courts. The Parties hereby irrevocably waive, to the fullest extent permitted by applicable Law, any objection that they may now or hereafter have, including, without limitation, any claim of forum non conveniens, to venue in the courts located in the State of Delaware. The Parties agree that a judgment in any such dispute may be enforced in other jurisdictions by Proceedings on the judgment or in any other manner provided by Law.

37

Section 8.12         Waiver of Jury Trial. Each of the Parties hereby irrevocably waives any and all right to trial by jury of any claim or cause of action in any legal proceeding arising out of or related to the Transaction Documents or the Transactions or any course of conduct, course of dealing, statements (whether verbal or written) or actions of any Party. The Parties each agree that any and all such claims and causes of action shall be tried by the court without a jury. Each of the Parties further waives any right to seek to consolidate any such legal proceeding in which a jury trial has been waived with any other legal proceeding in which a jury trial cannot or has not been waived.

Section 8.13         Construction. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Party.

Section 8.14         Invalid Provisions. Except for Section 7.1 which shall be governed by Section 7.1(d), if any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law, and if the rights or obligations of any Party under this Agreement will not be materially and adversely affected thereby, (a) such provision will be fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance here from and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible.

Section 8.15         Interpretation; Disclosure Schedules. All pronouns and any variation thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the Person, or the context, may require. The use of the working “including” in this Agreement shall be by way of example rather than limitation. The schedules referred to herein and delivered pursuant to and attached to this Agreement (collectively, “Disclosure Schedules”) are integral parts of this Agreement.

Section 8.16         Independent Investigation. In entering into this Agreement and each of the related agreements, Buyer acknowledges and agrees that, except for the specific representations and warranties of Posteluk and Sellers contained in Article 2 and Article 3 hereof, none of Sellers, Posteluk or nor any of their Affiliates or representatives makes or has made any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information (including any financial statements and any projections, estimates or other forward-looking information) provided (including in any management presentations, information or descriptive memorandum, supplemental information or other materials or information with respect to any of the above) or otherwise made available to Buyer or any of its Affiliates, shareholders, controlling Persons or representatives.

38

Section 8.17         Termination. This Agreement may be terminated by written notice given to all Parties hereto prior to the Closing in the manner provided in Section 8.1:

(a)          at any time prior to the Closing Date by agreement in writing among the Parties;

(b)          By Buyer, on the one hand, or Sellers and Posteluk, on the other hand, if the Closing shall not have occurred on the date which is 30 days from the date of this Agreement (or such other date as may have been agreed upon in writing by Buyer and Sellers) (the “Outside Date”) for any reason including as a result of the condition in Section 6.3(e) not being satisfied to Buyer’s satisfaction in its sole discretion, other than as a result of the terminating party’s default hereunder;

(c)          By Buyer, provided it is not then in breach of its obligations hereunder, if either Seller or Posteluk (i) fails to perform or comply with any covenant or agreement contained in this Agreement in any material respect when performance thereof or compliance therewith is due and has failed to cure such breach within 10 Business Days after receipt by such Seller or Posteluk of written notice of such breach from Buyer (but only to the extent such breach is capable of being cured), or (ii) shall have breached in any material respect any representations or warranties contained in this Agreement (except in each case for those representations and warranties qualified as to material, Material Adverse Effect or similar expressions, which shall be true in all respects); or

(d)          By Sellers and Posteluk, provided none of them is then in breach of its or his obligations hereunder, if Buyer (i) fails to perform or comply with any covenant or agreement contained in this Agreement in any material respect when performance thereof or compliance therewith is due and has failed to cure such breach within 10 Business Days after receipt by Buyer of written notice of such breach from Sellers or Posteluk (but only to the extent such breach is capable of being cured), or (ii) shall have breached in any material respect any representations or warranties contained in this Agreement (except in each case for those representations and warranties qualified as to material, Material Adverse Effect or similar expressions, which shall be true in all respects).

Section 8.18         Effect of Termination. The rights of termination under Section 8.16 are in addition to any other rights Buyer or Sellers may have under this Agreement and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 8.17, all further obligations of Buyer and Sellers under this Agreement will terminate, except that Article 5 and Article 8 shall survive the termination of this Agreement; provided that (a) if this Agreement is terminated by Buyer because of a breach of this Agreement by Sellers or Posteluk or because one or more of the conditions to Buyer’s obligations to consummate the Transactions under this Agreement is not satisfied as a result of either Seller’s or Posteluk’s failure to comply with its obligations under this Agreement, Buyer’s right to pursue remedies (consistent with this Agreement) shall survive such termination unimpaired; and (b) if this Agreement is terminated by Sellers or Posteluk because of a breach of this Agreement by Buyer or because one or more of the conditions to Sellers’ obligations to consummate the Transactions under this Agreement is not satisfied as a result of Buyer’s failure to comply with its obligations under this Agreement, Sellers’ and Posteluk’s right to pursue remedies (consistent with this Agreement) shall survive such termination unimpaired.

39

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURE PAGE FOLLOWS.]

40

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written.

SELLERS:
PC DOCTORS, LLC
By:
	Robert Posteluk
	its sole member
TECGUARD, LLC
By:
	Robert Posteluk
	its sole member
BUYER:
PC DOCTORS ACQUISITION, INC.
By:
Name:
Its:
POSTELUK:
Robert Posteluk, individually

Signature Page to Asset Purchase Agreement 

EX-10.3

Exhibit 10.3

AMENDED AND RESTATED

MANAGEMENT AND ADVISORY AGREEMENT

This AMENDED AND RESTATED MANAGEMENT AND ADVISORY AGREEMENT (the "Agreement"), dated as of June ____, 2012, is by and between Western Capital Resources, Inc., a Minnesota corporation (the "Company"), and Blackstreet Capital Management, LLC, a Delaware limited liability company ("BCM").

WHEREAS, the Company and BCM are parties to that certain Management and Advisory Agreement dated as of May 12, 2010 (the “Original Agreement”) pursuant to which, among other things, the Company retained BCM to provide certain management and advisory services to the Company; and

WHEREAS, the Company desires to retain BCM to provide certain management and advisory services to the Company in light of, among other things, the Company’s prior internal control issues, the highly regulated business in which the Company is involved, the increasing complexity of the Company’s multiple business lines, and the diminished staffing of the Company at the management level and increasing strain on such management since the departure of prior management at the conclusion of fiscal 2008; and

WHEREAS, the parties desire to amend and restate the Original Agreement to make certain clarifications with respect to the payment of fees and the ability of the Company to terminate the Original Agreement, among other things; and

WHEREAS, BCM will continue to provide advisory and other services to the Company in connection with any subsequent actions by the Company including but not limited to any debt or equity financing from third party lenders relating to the above; and

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

1. Management Services. During the term of this Agreement (the "Term"), BCM hereby agrees:

(a) to provide the Company with financial, managerial, strategic and operational advice in connection with its day-to-day operations, including, without limitation:

(i) advice with respect to the investment of funds and cash management;

(ii) advice with respect to the development and implementation of strategies for improving the operating, marketing and financial performance of the Company and its subsidiaries;

(iii) advice with regard to growth of new stores, including but not limited to arranging acquisition and financing of such growth;

(iv) assistance with support for various corporate functions of the Company as well as administrative support in light of the Company’s reduced staffing;

(v) advice and assistance with respect to analytical services;

(vi) advice and assistance with respect to lobbying and other regulatory and compliance needs of the Company through BCM’s political and professional contacts and associations (including without limitation membership in the CFSA and a deep and long-standing relationship with one of the largest and most prestigious lobbying firm in the country) and BCM’s knowledge base in the Company’s business areas;

(vii) advice and assistance with respect to installing and monitor controls and procedures at the Company, which is a specialty of BCM and which the Company is in need of in light of deficiencies in internal controls being identified for the past two years; and

(viii) advice and assistance with respect to establishing and implementing daily and weekly reporting with checks and balances, to avoid management integrity issues that have previously affected the Company and prevent such issues from happening in the future.

(b) to allow certain of its qualified personnel to serve on the board of directors (or observe board meetings) of the Company and its subsidiaries, if any (or their equivalents).

(c) to assist the Company in obtaining debt or equity financing

2. Payment of Fees. During the Term, the Company agrees:

(a) to pay to BCM (or an affiliate of BCM designated by it) a management fee equal to the greater of 1) 5% of EBITDA per annum or 2) $330,750 per annum (increasing 5% per year) in exchange for the services provided to the Company by BCM, as more fully described in Section 1 of this Agreement, with such fee being payable by the Company monthly in advance by wire transfer of immediately available funds; and

(b) to pay BCM, in connection with the closing of any debt or equity financing from any third party, a fee in an amount equal to two percent (2%) of the total amount of funds committed in such financing. Such fee shall be payable directly to BCM from the proceeds of the financing

(c) to pay BCM, in connection with referring any add on acquisitions to the Company and performing due diligence and turnaround services in connection with such acquisitions, a fee in the amount of $400,000 at the closing of such acquisitions and to subsequently increase management fees paid to BCM in Section 2(a) by $60,000 per annum for each add on acquisition in exchange for the services provided to the Company and any add on acquisitions unless such fees are reduced or waived in their entirety by BCM in its sole discretion.

3.           Term of Agreement.  The Agreement shall continue in full force and effect, until the earlier of (i) termination by mutual consent of the parties or (ii) upon written notice from the Company to BCM, in connection with any sale of all or substantially all of the assets of the Company or any merger or other transaction in which the holders of a majority of the outstanding stock of the Company immediately prior to such transaction own less than 50% of the stock of the Company (or any successor entity) after giving effect to such transaction in all cases to an unaffiliated third party. Upon any termination by the Company pursuant to subsection (ii) in the preceding sentence, the Company shall be required to pay a termination fee to BCM in an amount equal to the result of (a) the total fees payable pursuant to Section 2(b) above during the twelve (12) month period immediately preceding termination multiplied by (b) three (3). The foregoing termination fee shall be payable to BCM within two (2) business days of delivery of written notice of termination by the Company. The obligations of the Company under Section 4 below shall survive any such termination.

4. Expenses; Indemnity.

4.1           Expenses. The Company agrees to pay on demand all expenses incurred by BCM and/or any of its affiliates in connection with this Agreement and the provision of services hereunder, including but not limited to: (i) the fees and disbursements of (a) Patton Boggs, LLP, or any other special counsel to BCM, (b) Todres, or any other accountant to the Company and (c) any other consultants or advisors retained by the parties in clauses (a) and (d) arising in connection with the preparation, negotiation and execution of this Agreement and any other agreement executed in connection herewith or the consummation of the transactions contemplated hereby and thereby, including, without limitation, amendments, modifications, restructurings, add on acquisitions and waivers, and exercises and preservations of rights and remedies, and (ii) the out-of-pocket expenses incurred by BCM or any of its affiliates in connection with the provision of services hereunder or the attendance at any meeting of the board of directors (or their equivalent or any committee thereof) of the Company or any of its subsidiaries, if any.

Patton Boggs LLP’s or any other legal counsel retained (each, “Counsel”) in connection with the provision of services on behalf the Company in its role as special counsel to BCM, may create an attorney-client relationship between such Counsel and the Company. The Company acknowledges that Patton Boggs (and, to the extent applicable, any such other Counsel) has represented and continues to represent BCM on numerous matters both related and unrelated to the Company. By signing below, the Company acknowledges Patton Boggs’ (and, to the extent applicable, any such other Counsel’s) representation of BCM and recognizes and expressly acknowledges that any joint representation of the Company’s interests shall not be deemed to constitute or give rise to any conflict of interest relating to any Counsel’s continued representation of BCM on matters relating to the Company, this Agreement or otherwise. If, at any time during the course of any Counsel’s representation of the Company there arises an actual or potential conflict with BCM, it is expressly agreed by the parties that (1) such Counsel may continue to represent BCM; (2) nothing stated during such Counsel’s representation of BCM and the Company shall be construed to mean that suchCounsel could not continue to represent BCM; (3) any and all confidences, secrets or other privileged communications that any of the Company or BCM has communicated to such Counsel may be shared with BCM; and (4) if such information is shared with BCM, BCM retains the right to waive the confidentiality of such information, even if doing so may raise questions about compliance with applicable legal or regulatory requirements. Having been apprised of these potential conflicts and adverse consequences, the Company, by signing below confirms that it has concluded that they do not outweigh the benefits to it of such Counsel’s joint representation and each of the Company and BCM, by signing below, consent to such joint representation and acknowledge receipt of disclosure of the existence and nature of possible conflicts of interest among BCM and the Company and the possible adverse consequences of such joint representation.

4.2           Indemnity and Liability. In consideration of the execution and delivery of this Agreement by BCM, the Company hereby agrees to indemnify, exonerate and hold each of BCM, and its partners, members, shareholders, affiliates, persons for which they are acting as nominees, trustees, directors, officers, fiduciaries, employees and agents and each of the partners, members, shareholders, affiliates, trustees, directors, officers, fiduciaries, employees and agents of each of the foregoing (collectively, the "Indemnities") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities and damages, and expenses in connection therewith, including without limitation attorneys' fees and disbursements (collectively, the "Indemnified Liabilities"), incurred by the Indemnities or any of them as a result of, or arising out of, or relating to the execution, delivery, performance, enforcement or existence of this Agreement except for any such Indemnified Liabilities arising on account of any Indemnity's willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. None of the Indemnities shall be liable to the Company or any of its affiliates for any act or omission suffered or taken by such Indemnity that does not constitute willful misconduct.

5.               Independent Contractor. The Company and BCM agree and acknowledge that BCM shall perform services hereunder as an independent contractor, retaining control over and responsibility for its own operations and personnel. Neither BCM nor its employees shall be considered employees or agents of the Company as a result of this Agreement or the services provided hereunder.

6.                Non-Assignability of Agreement. Neither party shall have the right to assign this Agreement without the consent of the other party hereto. BCM acknowledges that its services under this Agreement are unique. Accordingly, any purported assignment by BCM without the consent of the Company shall be void. Notwithstanding the foregoing, BCM may assign all or part of its rights and obligations hereunder to any affiliate of BCM which provides services similar to those called for by this Agreement, in which event BCM shall be released of all of its rights and obligations hereunder.

7.               Waiver. No amendment or waiver of any term, provision or condition of this Agreement shall be effective unless in writing and executed by each of BCM and the Company. No waiver on any one occasion shall extend to or effect or be construed as a waiver of any right or remedy on any future occasion. No course of dealing of any person nor any delay or omission in exercising any right or remedy shall constitute an amendment of this Agreement or a waiver of any right or remedy of any party hereto.

8.               Maryland Law, etc.

8.1           Choice of Law. This Agreement shall be governed by and construed in accordance with the domestic substantive laws of the State of Maryland without giving effect to any choice or conflict of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction.

8.2           Consent to Jurisdiction, etc. Each of the parties agrees that all actions, suits or proceedings arising out of or based upon this Agreement or the subject matter hereof shall be brought and maintained exclusively in the federal and state courts of the State of Maryland, specifically in Montgomery County, MD. Each of the parties hereto by execution hereof (i) hereby irrevocably submits to the jurisdiction of the federal and state courts in Montgomery County, in the State of Maryland for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives, to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution, that any such action, suit or proceeding may not be brought or maintained in one of the above-named courts, that any such action, suit or proceeding brought or maintained in one of the above-named courts should be dismissed on grounds of forum non conveniens., should be transferred to any court other than one of the above-named courts, should be stayed by virtue of the pendency of any other action, suit or proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by any of the above-named courts. Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of the State of Maryland, agrees that service of process by registered or certified mail, return receipt requested, at the address specified in or pursuant to Section 10 is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a defense or otherwise, in any such action, suit or proceedings any claim that service of process made in accordance with Section 10 does not constitute good and sufficient service of process. The provisions of this Section 8.2 shall not restrict the ability of any party to enforce in any court any judgment obtained in a federal or state court of the State of Maryland.

8.3           Waiver of Jury Trial. To the extent not prohibited by applicable law which cannot be waived, each of the parties hereto hereby waives, and covenants that he or it will not assert (whether as plaintiff, defendant, or otherwise), any right to trial by jury in any forum in respect of any issue, claim, demand, cause of action, action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof, in each case whether now existing or hereafter arising and whether in contract or tort or otherwise. Each of the parties hereto acknowledges that it has been informed by each other party that the provisions of this Section 8.3 constitute a material inducement upon which such party is relying and will rely in entering into this Agreement and the transaction contemplated hereby. Any of the parties hereto may file an original counterpart or a copy of this Section 8.3 with any court as written evidence of the consent of each of the parties hereto to the waiver of his or its right to trial by jury.

9.                Entire Agreement. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof.

10.              Notice. All notices, demands, and communications of any kind which any party may require or desire to serve upon any other party under this Agreement shall be in writing (including telecopier facsimile or similar writing) and shall be served upon such other party and such other party's copied persons as specified below by personal delivery or telecopier transmission to its address or telecopier number set forth below or to such other telecopy number and address as any party shall have specified by notice to each other party or by mailing a copy thereof by certified or registered mail, or by Federal Express or any other reputable overnight courier service, postage prepaid, with return receipt requested, addressed to such party and copies persons at such addresses. In the case of service by personal delivery, it shall be deemed complete on the first business day after the date of actual delivery to such address. In the case of service by telecopier transmission, it shall be deemed complete on the first business day after the date of receipt of answerback or other confirmation of receipt at such telecopier number. In case of service by mail or by overnight courier, it shall be deemed complete, whether or not received, on the third day after the date of mailing as shown by the registered or certified mail receipt or courier service receipt. Notwithstanding the foregoing, notice to any party or copied person of change of address or telecopy number shall be deemed complete only upon actual receipt by an officer or agent of such party or copied person.

If to the Company, to it at:

Western Capital Resouces, Inc.

11550 “I” Street, Suite 150

Omaha, NE  68137

Attn: Chief Executive Officer

If to BCM, to it at:

Blackstreet Capital Management, LLC

5425 Wisconsin Avenue
Suite 701

Chevy Chase, MD 20815
Telecopy: (240) 332-1333
Attn: Murry N. Gunty

with a copy to:

Patton Boggs LLP

2550 M Street, NW

Washington, DC 20037-1350

Attn: Doug Boggs

Telecopy: (202) 457-6103

11.             Counterparts, Facsimile Signature. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. This Amendment will become effective when duly executed and delivered by each party hereto. Counterpart signature pages to this Amendment may be delivered by facsimile or electronic delivery (i.e., by email of a PDF signature page) and each such counterpart signature page will constitute an original for all purposes.

12.             Severability. If in any judicial or arbitral proceedings a court or arbitrator shall refuse to enforce any provision of this Agreement, then such unenforceable provision shall be deemed eliminated from this Agreement for the purpose of such proceedings to the extent necessary to permit the remaining provisions to be enforced. To the full extent, however, that the provisions of any applicable law may be waived, they are hereby waived to the end that this Agreement be deemed to be valid and binding agreement enforceable in accordance with its terms, and in the event that any provision hereof shall be found to be invalid or unenforceable, such provision shall be construed by limiting it so as to be valid and enforceable to the maximum extent consistent with and possible under applicable law.

13.     Subordination Agreement. The obligations of the Company to BCM under this Agreement are subordinated to the prior payment in full of any senior debt of the Company and any subordinated debt provided by Blackstreet Capital Partners II, L.P. or its affiliates. Notwithstanding anything to the contrary contained herein, the Company may, at its option and without prior notice to BCM, defer any payment hereunder, which, absent this sentence, would be due hereunder if, for so long as and to the extent that any such payment would be in violation of the terms of any subordination agreement in place with respect to such senior or subordinated debt, and the Company shall not be deemed in default of this Agreement as a result of the deferral of any such payment pursuant to this sentence.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

IN WITNESS WHEREOF, the parties have executed this Management and Advisory Agreement as of the date first above written.

WESTERN CAPITAL RESOURCES, INC.
By:
Name:	John Quandahl
Title:	Chief Executive Officer
BLACKSTREET CAPITAL MANAGEMENT, LLC
By:
Name:	Murry N. Gunty
Title:	Manager

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certification

I, John Quandahl, Chief Executive Officer of Western Capital Resources, Inc. certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Western Capital Resources, Inc.;
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.	The registrant’s other certifying officer(s) and I are 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 registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us 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 our 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.	The registrant’s other certifying officer(s) and I have disclosed, based on our 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 small business issuer’s internal control over financial reporting.

Dated:  August 14, 2012	/s/ John Quandahl
	JOHN QUANDAHL
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

Certification

I, Stephen Irlbeck, Chief Financial Officer of Western Capital Resources, Inc. certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Western Capital Resources, Inc.;
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.	The registrant’s other certifying officer(s) and I are 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 registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us 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 our 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.	The registrant’s other certifying officer(s) and I have disclosed, based on our 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 small business issuer’s internal control over financial reporting.

Dated:  August 14, 2012	/s/ Stephen Irlbeck
	STEPHEN IRLBECK
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Western Capital Resources, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Quandahl, Chief Executive Officer of the Company and I, Stephen Irlbeck, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §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.

/s/ John Quandahl

John Quandahl

Chief Executive Officer

August 14, 2012

/s/ Stephen Irlbeck

Stephen Irlbeck

Chief Financial Officer

August 14, 2012

XML

Acquisitions (Details 1) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Pro forma revenue	$ 5,963,000	$ 4,370,000	$ 13,770,000	$ 9,989,000
Pro forma net income	$ 358,000	$ 306,000	$ 1,194,000	$ 815,000
Pro forma net income (loss) per common share - basic and diluted (in dollars per share)	$ (0.03)	$ (0.03)	$ 0.02	$ (0.03)

XML

Segment Information (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Revenues from external customers	$ 5,927,969	$ 4,040,082	$ 13,444,739	$ 9,078,713
Net Income	353,751	269,715	1,142,793	682,084
Total segment assets	21,773,096	19,412,124	21,773,096	19,412,124	22,021,776
Payday Division [Member]
Revenues from external customers	2,839,713	2,603,830	5,628,830	5,244,827
Net Income	372,601	335,670	741,374	715,238
Total segment assets	14,728,243	14,500,282	14,728,243	14,500,282
Cricket Wireless Division [Member]
Revenues from external customers	3,088,256	1,436,252	7,815,909	3,833,886
Net Income	(18,850)	(65,955)	401,419	(33,154)
Total segment assets	$ 7,044,853	$ 4,911,842	$ 7,044,853	$ 4,911,842

XML

Segment Information (Tables)

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

Segment information related to the three months ended June 30, 2012 and 2011 is set forth below:

	Three Months Ended June 30, 2012							Three Months Ended June 30, 2011
	Payday		Cricket Wireless			Total		Payday		Cricket Wireless			Total
Revenues from external customers	$	2,839,713	$	3,088,256		$	5,927,969	$	2,603,830	$	1,436,252		$	4,040,082
Net income	$	372,601	$	(18,850	)	$	353,751	$	335,670	$	(65,955	)	$	269,715

	Six Months Ended June 30, 2012						Six Months Ended June 30, 2011
	Payday		Cricket Wireless		Total		Payday		Cricket Wireless			Total
Revenues from external customers	$	5,628,830	$	7,815,909	$	13,444,739	$	5,244,827	$	3,833,886		$	9,078,713
Net income (loss)	$	741,374	$	401,419	$	1,142,793	$	715,238	$	(33,154	)	$	682,084
Total segment assets	$	14,728,243	$	7,044,853	$	21,773,096	$	14,500,282	$	4,911,842		$	19,412,124

XML

Consulting Agreement (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012
Related Party Transaction, Amounts Of Transaction	$ 100,000
Related Party Transaction Date Of Agreement	Mar. 07, 2012

XML

Other Expense (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Store expenses
Bank fees	$ 75,617	$ 59,519	$ 157,237	$ 134,848
Collection costs	106,828	97,976	235,526	205,930
Repairs & maintenance	61,332	26,171	95,523	73,466
Supplies	98,596	42,938	186,521	77,342
Telephone	43,645	32,910	77,479	66,564
Utilities and network lines	159,487	108,017	335,659	235,441
Other	225,953	144,510	435,791	328,427
Total Store expenses	771,458	512,041	1,523,736	1,122,018
General & administrative expenses
Professional fees	61,291	41,355	147,214	164,870
Management and consulting fees	137,692	117,117	271,442	217,117
Other	75,462	66,387	159,962	132,842
Total General & administrative expenses	$ 274,445	$ 224,859	$ 578,618	$ 514,829

XML

Loans Receivable Allowance

6 Months Ended

Jun. 30, 2012

Provision For Loan and Lease Losses [Abstract]

Allowance for Credit Losses [Text Block]

4. Loans Receivable Allowance –

As a result of the Company’s collection efforts, it historically writes off approximately 42% of the returned payday items.  Based on days past the check return date, write-offs of payday returned items historically have tracked at the following approximate percentages: 1 to 30 days – 42%; 31 to 60 days – 66%; 61 to 90 days – 83%; 91 to 120 days – 87%; and 121 to 180 days – 90%.  A rollforward of the Company’s loans receivable allowance for the six months ended June 30, 2012 and 2011 is as follows:

	Six Months Ended June 30,
	2012			2011
Loans receivable allowance, beginning of period	$	1,001,000		$	1,165,000
Provision for loan losses charged to expense		632,508			454,089
Charge-offs, net		(728,508	)		(778,089	)
Loans receivable allowance, end of period	$	905,000		$	841,000

XML

Management and Advisory Agreement (Details Textual) (Blackstreet Capital Management, LLC [Member])	0 Months Ended
	Jun. 21, 2012
Blackstreet Capital Management, LLC [Member]
Management Fee Payable, Description	The amended and restated agreement increases the management fee payable to Blackstreet to the greater of (i) $330,750 per year (subject to annual increases of five percent) or (ii) five percent of Western Capital's EBITDA.
Other Fee Payable, Description	The amended and restated agreement also requires the Company to pay Blackstreet a fee in an amount equal to two percent of the gross proceeds of any debt or equity financing, and a fee in an amount equal to $400,000 (plus a $60,000 increase in the management fee payable under the agreement) upon the closing of an acquisition in consideration for Blackstreet's referral to the Company of such acquisition opportunity and assistance in the performance of due diligence services relating thereto.
Termination Fee Trigger	50.00%

XML

Risks Inherent in the Operating Environment (Details) (Geographic Concentration Risk [Member])	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Payday Division [Member] | Nebraska [Member]
Revenues percentage by state	26.00%	28.00%
Payday Division [Member] | Wyoming [Member]
Revenues percentage by state	15.00%	15.00%
Payday Division [Member] | North Dakota [Member]
Revenues percentage by state	18.00%	18.00%
Payday Division [Member] | Iowa [Member]
Revenues percentage by state	12.00%	13.00%
Cricket Wireless Division [Member] | Nebraska [Member]
Revenues percentage by state	13.00%	20.00%
Cricket Wireless Division [Member] | Missouri [Member]
Revenues percentage by state	16.00%	28.00%
Cricket Wireless Division [Member] | Texas [Member]
Revenues percentage by state	12.00%	14.00%
Cricket Wireless Division [Member] | Indiana [Member]
Revenues percentage by state	11.00%	26.00%
Cricket Wireless Division [Member] | Oklahoma [Member]
Revenues percentage by state	10.00%	0.00%

XML

Acquisitions (Tables)

6 Months Ended

Jun. 30, 2012

Business Combinations [Abstract]

Schedule of Purchase Price Allocation [Table Text Block]

	Fair Value
Other current assets	$	1,600
Property and equipment		72,500
Intangible assets		98,000
Goodwill		278,700
Other non-current assets		4,400
	$	455,200

Business Acquisition, Pro Forma Information [Table Text Block]

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012		2011
Pro forma revenue	$	5,963,000		$	4,370,000		$	13,770,000	$	9,989,000
Pro forma net income	$	358,000		$	306,000		$	1,194,000	$	815,000
Pro forma net income (loss) per common share – basic and diluted	$	(0.03	)	$	(0.03	)	$	0.02	$	(0.03	)

XML

Rights Offering (Details Textual) (USD $) In Millions, unless otherwise specified	0 Months Ended
	Jun. 21, 2012
Non-Transferable Subscription Rights, Gross Proceeds From Sale Of Common Stock	$ 4.5

XML

Loans Receivable (Details) (USD $)	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Allowance for losses	$ (905,000)	$ (1,001,000)	$ (841,000)	$ (1,165,000)
Outstanding loans receivable, Net	4,562,096	4,887,813
Loans Receivable [Member]
Outstanding loans receivable, Current	4,244,920	4,625,852
Outstanding loans receivable, Gross	5,467,096	5,888,813
Allowance for losses	(905,000)	(1,001,000)
Outstanding loans receivable, Net	4,562,096	4,887,813
Delinquent 0 To 30 Days [Member] | Loans Receivable [Member]
Outstanding loans receivable, Gross	365,295	296,983
Delinquent 31 To 60 Days [Member] | Loans Receivable [Member]
Outstanding loans receivable, Gross	231,199	219,830
Delinquent 61 To 90 Days [Member] | Loans Receivable [Member]
Outstanding loans receivable, Gross	202,658	222,929
Delinquent 91 To 120 Days [Member] | Loans Receivable [Member]
Outstanding loans receivable, Gross	126,675	170,622
Delinquent 121 To 150 Days [Member] | Loans Receivable [Member]
Outstanding loans receivable, Gross	136,948	188,983
Delinquent 151 To 180 Days [Member] | Loans Receivable [Member]
Outstanding loans receivable, Gross	$ 159,401	$ 163,614

XML

Loans Receivable Allowance (Details) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Loans receivable allowance, beginning of period	$ 1,001,000	$ 1,165,000
Provision for loan losses charged to expense	632,508	454,089
Charge-offs, net	(728,508)	(778,089)
Loans receivable allowance, end of period	$ 905,000	$ 841,000

XML

Loans Receivable

6 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

3. Loans Receivable –

At June 30, 2012 and December 31, 2011 our outstanding loans receivable aging was as follows:

	June 30, 2012			December 31, 2011
Current	$	4,244,920		$	4,625,852
1-30		365,295			296,983
31 – 60		231,199			219,830
61 – 90		202,658			222,929
91 – 120		126,675			170,622
121 – 150		136,948			188,983
151 – 180		159,401			163,614
		5,467,096			5,888,813
Allowance for losses		(905,000	)		(1,001,000	)
	$	4,562,096		$	4,887,813

XML

Loans Receivable Allowance (Details Textual)	Jun. 30, 2012
Written Off Upto 30 Days [Member]
Percentage Of Historical Written Off	42.00%
Written Off From 31 To 60 Days [Member]
Percentage Of Historical Written Off	66.00%
Written Off From 61 To 90 Days [Member]
Percentage Of Historical Written Off	83.00%
Written Off From 91 To 120 Days [Member]
Percentage Of Historical Written Off	87.00%
Written Off From 121 To 180 Days [Member]
Percentage Of Historical Written Off	90.00%

XML

Acquisitions (Details Textual) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
Number of Businesses Acquired	2	5
Purchase Obligation, Due in Next Twelve Months	$ 160,000	$ 160,000
Date Purchase Obligation Arose		Apr. 30, 2012

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Cash	$ 1,762,704	$ 1,909,442
Loans receivable (less allowance for losses of $905,000 and $1,001,000)	4,562,096	4,887,813
Inventory	705,517	756,528
Prepaid expenses and other	435,704	451,751
Deferred income taxes	379,000	413,000
TOTAL CURRENT ASSETS	7,845,021	8,418,534
PROPERTY AND EQUIPMENT	798,919	757,747
GOODWILL	12,672,569	12,393,869
INTANGIBLE ASSETS	293,805	309,552
OTHER	162,782	142,074
TOTAL ASSETS	21,773,096	22,021,776
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities	2,301,110	2,323,730
Note payable - short-term	0	1,000,000
Current portion long-term debt	558,412	695,123
Preferred dividend payable	4,600,000	3,550,000
Deferred revenue	287,718	314,561
TOTAL CURRENT LIABILITIES	7,747,240	7,883,414
LONG-TERM LIABILITIES
Notes payable - long-term	1,200,000	1,210,065
Deferred income taxes	642,000	530,000
TOTAL LONG-TERM LIABILITIES	1,842,000	1,740,065
TOTAL LIABILITES	9,589,240	9,623,479
SHAREHOLDERS' EQUITY
Common stock, no par value, 240,000,000 shares authorized, 5,397,780 and 7,446,007 shares issued and outstanding	0	0
Additional paid-in capital	17,914,543	18,221,777
Accumulated deficit	(5,830,687)	(5,923,480)
TOTAL SHAREHOLDERS' EQUITY	12,183,856	12,398,297
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	21,773,096	22,021,776
Series A Convertible Preferred Stock [Member]
SHAREHOLDERS' EQUITY
Series A convertible preferred stock 10% cumulative dividends, $0.01 par value, $2.10 stated value, 10,000,000 shares authorized, issued and outstanding	$ 100,000	$ 100,000

XML

Common Stock Repurchases (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012
Stock Repurchased and Retired During Period, Shares	2,048,227
Stock Repurchased and Retired During Period Cost Per Share	$ 0.15
Stock Repurchased and Retired During Period, Value	$ 307,234

XML

Basis of Presentation, Nature of Business and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

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

1. Basis of Presentation, Nature of Business and Summary of Significant Accounting Policies –

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared according to the instructions to Form 10-Q and Section 210.8-03(b) of Regulation S-X of the Securities and Exchange Commission (SEC) and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in our Form 10-K as of and for the year ended December 31, 2011. The condensed consolidated balance sheet at December 31, 2011, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP.

Nature of Business

Western Capital Resources, Inc. (WCR), through its wholly owned operating subsidiaries, Wyoming Financial Lenders, Inc. (WFL) and PQH Wireless, Inc. (PQH), collectively referred to as the “Company,” provides retail financial services and retail cellular phone sales to individuals primarily in the Midwestern and Southwestern United States.  As of June 30, 2012, the Company operated 52 “payday” stores in nine states (Colorado, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming) and operated 50 Cricket wireless retail stores in 14 states (Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon, Texas and Washington).  The condensed consolidated financial statements include the accounts of WCR, WFL, and PQH. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company, through its “payday” division, provides non-recourse cash advance loans, small unsecured installment loans, check cashing and other money services.  The short-term consumer loans, known as cash advance loans or “payday” loans, are in amounts that typically range from $100 to $500. Cash advance loans provide customers with cash in exchange for a promissory note with a maturity of generally two to four weeks and the customer’s post-dated personal check for the aggregate amount of the cash advanced plus a fee. The fee varies from state to state, based on applicable regulations and generally ranges from $15 to $22 for each whole or partial increment of $100 borrowed. To repay the cash advance loan, a customer may pay with cash, in which case their personal check is returned to them, or allow the check to be presented to the bank for collection. Installment loans provide customers with cash in exchange for a promissory note with a maturity of generally three to six months. The fee and interest rate on installment loans vary based on applicable regulations. Like cash advance or “payday” loans, installment loans are unsecured.

The Company also provides title loans and other ancillary consumer financial products and services that are complementary to its cash advance-lending business, such as check-cashing services, money transfers and money orders.  In our check-cashing business, we primarily cash payroll checks, but we also cash government assistance, tax refund and insurance checks or drafts. Our fees for cashing payroll checks average approximately 2.5% of the face amount of the check, subject to local market conditions, and this fee is deducted from the cash given to the customer for the check. We display our check-cashing fees in full view of our customers on a menu board in each store and provide a detailed receipt for each transaction. Although we have established guidelines for approving check-cashing transactions, we have no preset limit on the size of the checks we will cash.

Our loans and other related services are subject to state regulations (which vary from state to state), federal regulations and local regulations, where applicable.

The Company also operates a Cricket Wireless Retail division that is a premier dealer for Cricket Communications, Inc., reselling cellular phones and accessories and accepting service payments from Cricket customers.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect certain reported amounts and disclosures in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant management estimates relate to the loans receivable allowance, allocation of and carrying value of goodwill and intangible assets, inventory valuation and obsolescence, and deferred taxes and tax uncertainties.

Revenue Recognition

The Company recognizes fees on cash advance loans on a constant-yield basis ratably over the loans’ terms. Title and installment loan fees and interest are recognized using the interest method except that installment loan origination fees are recognized as they become non-refundable and installment loan maintenance fees are recognized when earned. The Company records revenue from check cashing fees, sales of phones, and accessories and fees from all other services in the period in which the sale or service is completed.  

Loans Receivable Allowance

We maintain a loan loss allowance for anticipated losses for our payday, installment and title loans. To estimate the appropriate level of the loan loss allowance, we consider the amount of outstanding loans owed to us, historical loans charged off, current and expected collection patterns and current economic trends. Our current payday loan loss allowance is based on our net write offs, typically expressed as a percentage of loan amounts originated for the last 24 months applied against the principal balance of outstanding loans that we write off. Our current installment loan loss allowance also factors in the delinquency status of loans within the installment portfolio. The Company also periodically performs a look-back analysis on its loan loss allowance to verify that the historical allowance established tracks with the actual subsequent loan write-offs and recoveries. The Company is aware that, as conditions change, it may also need to make additional allowances in future periods.

Included in loans receivable are payday loans that are currently due or past due and payday loans that have not been repaid.  This generally is evidenced where a customer’s personal check has been deposited and the check has been returned due to non-sufficient funds in the customer’s account, a closed account, or other reasons.  Also included in loans receivable are current and delinquent installment and title loans. Loans are carried at cost less the loans receivable allowance.  The Company does not specifically reserve for any individual loan.  The Company aggregates loan types for purposes of estimating the loss allowance using a methodology that analyzes historical portfolio statistics and management’s judgment regarding recent trends noted in the portfolio.  This methodology takes into account several factors, including the maturity of the store location, charge-off and recovery rates and delinquency status of installment loans.  The Company utilizes a software program to assist with the tracking of its historical portfolio statistics All returned payday items are charged off after 180 days, as collections after that date have not been significant.  The loans receivable allowance is reviewed monthly and any adjustment to the loan loss allowance as a result of historical loan performance, current and expected collection patterns and current economic trends is recorded.

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing the income (loss) available to common shareholders by the weighted average number of common shares outstanding for the year. Diluted net income (loss) per common share is computed by dividing the net income (loss) available to common shareholders by the sum of the weighted average number of common shares outstanding plus potentially dilutive common share equivalents (convertible preferred shares) when dilutive. All shares of potentially dilutive Series A Convertible Preferred Stock outstanding at June 30, 2012 and 2011 were anti-dilutive and therefore excluded from the dilutive net income (loss) per share computation.  

Segment Reporting

The Company has grouped its operations into two segments – Payday Operations and Cricket Wireless Retail Operations. The Payday Operations segment provides financial and ancillary services. The Cricket Wireless Retail Operations segment is a dealer for Cricket Communications, Inc., reselling cellular phones and accessories and serving as a payment center for Cricket customers.

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08 “Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment.” ASU 2011-08 allows an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should perform additional steps to determine if there is goodwill impairment. The amendments are effective for annual and interim goodwill tests performed for fiscal years beginning after December 15, 2011, early adoption being permitted. The Company adopted this standard with no material impact on its consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04 “Fair Value Measurement (Topic820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” ASU 2011-04 results in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. For public entities, ASU 2011-04 is effective for interim or annual reporting periods ending on or after December 15, 2011. The Company adopted this standard with no material impact on its consolidated financial statements.

No other new accounting pronouncement issued or effective during the fiscal quarter has had or is expected to have a material impact on the condensed consolidated financial statements.

XML

Preferred Stock Dividend (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Balance due, beginning of the period	$ 4,075,000	$ 1,975,000	$ 3,550,000	$ 1,450,000
Current quarter preferred dividends payable	525,000	525,000	1,050,000	1,050,000
Preferred dividends paid	0	0	0	0
Balance due, end of the period	$ 4,600,000	$ 2,500,000	$ 4,600,000	$ 2,500,000

XML

Risks Inherent in the Operating Environment (Tables)

6 Months Ended

Jun. 30, 2012

Risks and Uncertainties [Abstract]

Disclosure Of Significant Revenue Percentages By State By Division Table Text Block

For the six months ended June 30, 2012 and 2011, the Company had significant revenues by state (shown as a percentage of applicable division’s revenue) as follows:

Payday Division							Cricket Wireless Division
	2012 % of Revenues			2011 % of Revenues				2012 % of Revenues			2011 % of Revenues
Nebraska		26	%		28	%	Missouri		16	%		28	%
Wyoming		15	%		15	%	Nebraska		13	%		20	%
North Dakota		18	%		18	%	Texas		12	%		14	%
Iowa		12	%		13	%	Indiana		11	%		26	%
							Oklahoma		10	%		0	%

XML

Preferred Stock Dividend (Details Textual) (USD $)	3 Months Ended
	Jun. 30, 2012
Unaccrued Related Party Transaction Amount	$ 525,000
Subsequent Accrued Related Party Transaction Date	Jul. 15, 2012

XML

Loans Receivable Allowance (Tables)

6 Months Ended

Jun. 30, 2012

Provision For Loan and Lease Losses [Abstract]

Schedule Of Credit Losses For Financing Receivables, Current [Table Text Block]

A rollforward of the Company’s loans receivable allowance for the six months ended June 30, 2012 and 2011 is as follows:

	Six Months Ended June 30,
	2012			2011
Loans receivable allowance, beginning of period	$	1,001,000		$	1,165,000
Provision for loan losses charged to expense		632,508			454,089
Charge-offs, net		(728,508	)		(778,089	)
Loans receivable allowance, end of period	$	905,000		$	841,000

XML

Risks Inherent in the Operating Environment

6 Months Ended

Jun. 30, 2012

Risks and Uncertainties [Abstract]

Risks Inherent in Operating Environment Disclosure [Text Block]

2. Risks Inherent in the Operating Environment –

The Company’s payday or short-term consumer loan activities are highly regulated under numerous local, state, and federal laws and regulations, which are subject to change. New laws or regulations could be enacted that could have a negative impact on the Company’s lending activities. Over the past few years, consumer advocacy groups and certain media reports have advocated governmental and regulatory action to prohibit or severely restrict deferred presentment cash advances.

The Federal Trade Commission has issued an FTC Consumer Alert (Federal Trade Commission, March 2008, Consumer Alert entitled “Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives”) that discourages consumers from obtaining payday loans such as the loans we offer, primarily on the basis that the types of loans we offer are very costly and consumers should consider alternatives to accepting a payday loan. For further information, you may obtain a copy of the alert at www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt060.shtm.  The federal government also passed legislation, the 2007 Military Authorization Act, prohibiting us from offering or making our loans to members of the military when the interest and fees calculated as an annual percentage rate exceeds 36%. This limitation effectively prohibits us from utilizing our present business model for cash advance or “payday” lending when dealing with members of the U.S. military, and as a result we do not and do not plan to conduct payday lending business with U.S. military personnel. These facts evidence the widespread belief that our charges relating to our loans are too expensive to be good for consumers. Some consumer advocates and others have characterized payday lending as “predatory.” As a result, there are frequently attempts in the various state legislatures, and occasionally in the U.S. Congress, to limit, restrict or prohibit payday lending. 

In July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed by the U.S. Congress and signed into law. Under the Act, a new Consumer Financial Protection Bureau will consolidate most federal regulation of financial services offered to consumers, and replace the Office of Thrift Supervision’s seat on the FDIC Board. Almost all credit providers, including mortgage lenders, providers of payday loans, other nonbank financial companies, and banks and credit unions with assets over $10 billion, will be subject to new regulations to be passed by the Bureau. While the Bureau does not appear to have authority to make rules limiting interest rates or fees charged, the scope and extent of the Bureau’s authority will nonetheless be broad, and it is expected that the Bureau will address issues such as rollovers or extensions of payday loans and compliance with federal rules and regulations. Future restrictions on the payday lending industry could have serious consequences for the Company.

Any adverse change in present federal laws or regulations that govern or otherwise affect payday lending could result in our curtailment or cessation of operations in certain jurisdictions or locations. Furthermore, any failure to comply with any applicable federal laws or regulations could result in fines, litigation, the closure of one or more store locations or negative publicity. Any such change or failure would have a corresponding impact on our results of operations and financial condition, primarily through a decrease in revenues resulting from the cessation or curtailment of operations, decrease in our operating income through increased legal expenditures or fines, and could also negatively affect our general business prospects as well if we are unable to effectively replace such revenues in a timely and efficient manner or if negative publicity effects our ability to obtain additional financing a needed.

During the 2010 legislative session in Colorado, House Bill 10-1351 was passed into law. This bill amended the Colorado Deferred Deposit Loan Act, the existing payday lending law. The law became effective August 11, 2010 and modified traditional payday lending by changing the single payment advance (with no minimum term) into a single or multiple payment loan with a minimum six month term. It also limited the amount and type of fees that can be charged on these loans, effectively reducing by one-half the fees that can be charged and when the fees may be realized. At present, the Company continues to operate its sole store in Colorado while the impact to profitability of this new law is being assessed.

In May 2010, new laws were enacted in Wisconsin that restrict the number of times a consumer may renew (or rollover) a payday loan. Previously, there were no limits to the number of rollovers permitted. Effective January 1, 2011, consumers in Wisconsin are only allowed to renew a payday loan once, and then lenders are required to offer a 60-day, interest free, payment plan to consumers. As a result of these changes, we introduced an installment loan product in Wisconsin in 2011.

On November 2, 2010, voters in Montana passed Petition Initiative I-164. Effective January 1, 2011, Petition Initiative I-164 capped fees on payday loans at an imputed interest rate of 36%. The Company discontinued its operations in that state on December 31, 2010.

The passage of federal or state laws and regulations could, at any point, essentially prohibit the Company from conducting its payday lending business in its current form. Any such legal or regulatory change would certainly have a material and adverse effect on the Company, its operating results, financial condition and prospects, and perhaps even its viability.

For the six months ended June 30, 2012 and 2011, the Company had significant revenues by state (shown as a percentage of applicable division’s revenue) as follows:

Payday Division							Cricket Wireless Division
	2012 % of Revenues			2011 % of Revenues				2012 % of Revenues			2011 % of Revenues
Nebraska		26	%		28	%	Missouri		16	%		28	%
Wyoming		15	%		15	%	Nebraska		13	%		20	%
North Dakota		18	%		18	%	Texas		12	%		14	%
Iowa		12	%		13	%	Indiana		11	%		26	%
							Oklahoma		10	%		0	%

XML

CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $)	Jun. 30, 2012	Dec. 31, 2011
Allowance for losses (in dollars)	$ 905,000	$ 1,001,000
Common stock, shares authorized	240,000,000	240,000,000
Common stock, shares issued	5,397,780	7,446,007
Common stock, shares outstanding	5,397,780	7,446,007
Series A Convertible Preferred Stock [Member]
Series A convertible preferred stock, cumulative dividends	10.00%	10.00%
Series A convertible preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Series A convertible preferred stock, stated value (in dollars per share)	$ 2.10	$ 2.10
Series A convertible preferred stock, shares authorized	10,000,000	10,000,000
Series A convertible preferred stock, shares issued	10,000,000	10,000,000
Series A convertible preferred stock, shares outstanding	10,000,000	10,000,000

XML

Management and Advisory Agreement

6 Months Ended

Jun. 30, 2012

Management and Advisory Agreement [Abstract]

Management and Advisory Agreement [Text Block]

12. Management and Advisory Agreement –

Effective June 21, 2012, the Company entered into an Amended and Restated Management and Advisory Agreement with Blackstreet Capital Management, LLC, a Delaware limited liability company. The amended and restated agreement increases the management fee payable to Blackstreet to the greater of (i) $330,750 per year (subject to annual increases of five percent) or (ii) five percent of Western Capital’s EBITDA. The amended and restated agreement also requires the Company to pay Blackstreet a fee in an amount equal to two percent of the gross proceeds of any debt or equity financing, and a fee in an amount equal to $400,000 (plus a $60,000 increase in the management fee payable under the agreement) upon the closing of an acquisition in consideration for Blackstreet’s referral to the Company of such acquisition opportunity and assistance in the performance of due diligence services relating thereto. The Company will not, however, be obligated to accept and pursue any acquisition referrals made by Blackstreet. Finally, the amended and restated agreement provides that a termination fee will be paid to Blackstreet in the event that the Company terminates the agreement in connection with a sale of all or substantially all of the assets of the Company to, or any merger or other transaction with, an unaffiliated entity, which transaction results in the holders of a majority of the stock of the Company immediately prior to such transaction owning less than 50% of the stock of the Company (or any successor entity) after giving effect to the transaction.

XML

DOCUMENT AND ENTITY INFORMATION	6 Months Ended
	Jun. 30, 2012	Aug. 14, 2012
Entity Registrant Name	WESTERN CAPITAL RESOURCES, INC.
Entity Central Index Key	0001363958
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	WCRS.OB
Entity Common Stock, Shares Outstanding		5,397,780
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2012
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012

XML

Rights Offering

6 Months Ended

Jun. 30, 2012

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

13. Rights Offering –

On June 18, 2012 the Company filed a registration statement with the SEC on Form S-1 relating to the proposed distribution of subscription rights (for no consideration) to the existing shareholders of the Company and the related public offer and sale of common stock to such shareholders .

Gross proceeds from the sale of shares of common stock, assuming the exercise of all subscription rights to be distributed up to the maximum amount contemplated in the registration statement, would be $4.5 million.

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
REVENUES
Payday loan fees	$ 2,351,757	$ 2,169,854	$ 4,659,658	$ 4,495,601
Phones and accessories	1,628,329	808,948	4,370,025	2,395,863
Cricket service fees	1,483,342	440,224	3,478,367	994,920
Installment interest income	248,156	126,168	444,665	126,168
Check cashing fees	146,595	154,603	342,407	387,145
Other income and fees	69,790	340,285	149,617	679,016
Revenues, Total	5,927,969	4,040,082	13,444,739	9,078,713
STORE EXPENSES
Salaries and benefits	1,605,796	1,033,563	3,293,188	2,145,608
Phone and accessories cost of sales	1,095,938	433,344	2,931,013	1,391,241
Occupancy	559,443	395,934	1,111,751	813,997
Provisions for loan losses	356,118	275,216	632,508	454,089
Advertising	80,259	83,287	157,380	164,887
Depreciation	70,680	62,931	139,925	127,024
Amortization of intangible assets	56,846	113,043	116,247	228,648
Other	771,458	512,041	1,523,736	1,122,018
Store Expenses	4,596,538	2,909,359	9,905,748	6,447,512
INCOME FROM STORES	1,331,431	1,130,723	3,538,991	2,631,201
GENERAL & ADMINISTRATIVE EXPENSES
Salaries and benefits	429,354	405,888	957,086	851,815
Depreciation	5,614	5,688	11,106	9,708
Interest expense	51,267	63,573	129,388	156,765
Other	274,445	224,859	578,618	514,829
General and Administrative Expense, Total	760,680	700,008	1,676,198	1,533,117
INCOME BEFORE INCOME TAXES	570,751	430,715	1,862,793	1,098,084
INCOME TAX EXPENSE	217,000	161,000	720,000	416,000
NET INCOME	353,751	269,715	1,142,793	682,084
SERIES A CONVERTIBLE PREFERRED STOCK DIVIDENDS (assumes all paid)	(525,000)	(525,000)	(1,050,000)	(1,050,000)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$ (171,249)	$ (255,285)	$ 92,793	$ (367,916)
NET INCOME (LOSS) PER COMMON SHARE
Basic and diluted (in dollars per share)	$ (0.03)	$ (0.03)	$ 0.02	$ (0.05)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
Basic and diluted (in shares)	5,397,780	7,446,007	5,955,027	7,446,007

XML

Preferred Stock Dividend

6 Months Ended

Jun. 30, 2012

Due To Related Parties, Current [Abstract]

Related Party Transactions Disclosure [Text Block]

7. Preferred Stock Dividend –

Reconciliations of the cumulative preferred stock dividend payable are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Balance due, beginning of the period	$	4,075,000	$	1,975,000	$	3,550,000	$	1,450,000
Current quarter preferred dividends payable		525,000		525,000		1,050,000		1,050,000
Preferred dividends paid		-		-		-		-
Balance due, end of the period	$	4,600,000	$	2,500,000	$	4,600,000	$	2,500,000

In addition, the Company has $525,000 of second quarter unaccrued cumulative preferred dividends from June 30, 2012 and 2011 that became due and payable July 15, 2012 and 2011, respectively.

XML

Notes Payable

6 Months Ended

Jun. 30, 2012

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

6. Notes Payable –

On January 26, 2011, WERCS extended the maturity of the promissory note made by WERCS to WFL, pursuant to the Business Loan Agreement dated April 1, 2010 and an accompanying $2,000,000 promissory note to WFL, to April 1, 2012. In March 2011, as required by the terms of the note extension, the Company paid $1,000,000 toward the principal balance on the WERCS promissory note. On March 14, 2012, the Company repaid the remaining principal balance and all accrued and unpaid interest under the WERCS credit facility.

The Company drew an additional $200,000 on the existing note payable with River City Equity, Inc, a related party, during the first quarter 2012. Total advanced on the $2,000,000 credit facility as of June 30, 2012 was $1,200,000. The note is collateralized by substantially all assets of Western Capital Resources, Inc.

XML

Loans Receivable (Tables)

6 Months Ended

Jun. 30, 2012

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

At June 30, 2012 and December 31, 2011 our outstanding loans receivable aging was as follows:

	June 30, 2012			December 31, 2011
Current	$	4,244,920		$	4,625,852
1-30		365,295			296,983
31 – 60		231,199			219,830
61 – 90		202,658			222,929
91 – 120		126,675			170,622
121 – 150		136,948			188,983
151 – 180		159,401			163,614
		5,467,096			5,888,813
Allowance for losses		(905,000	)		(1,001,000	)
	$	4,562,096		$	4,887,813

XML

Common Stock Repurchases

6 Months Ended

Jun. 30, 2012

Equity [Abstract]

Treasury Stock [Text Block]

14. Common Stock Repurchases –

In February and March 2012, the Company repurchased an aggregate of 2,048,227 shares of its common stock from four shareholders at $0.15 per share for a total repurchase cost of $307,234.

XML

Material Definitive Agreement

6 Months Ended

Jun. 30, 2012

Material Definitive Agreement [Abstract]

Material Definitive Agreement [Text Block]

10. Material Definitive Agreement –

On June 22, 2012, Western Capital Resources, Inc. (through its wholly owned subsidiary PC Doctors Acquisition, Inc., a Delaware corporation) entered into an Asset Purchase Agreement with PC Doctors, LLC, a Wisconsin limited liability company, Tecguard, LLC, a Wisconsin limited liability company, and Robert Posteluk. PC Doctors is engaged in the business of selling cellular phones, internet service, tablets, computers, accessories and computer services, and Tecguard is engaged in the business of selling protection plans for cellular phones and computers. The businesses are conducted primarily in the State of Wisconsin.

Under the Asset Purchase Agreement, Western Capital would acquire substantially all of the assets of PC Doctors and Tecguard for a purchase price of $3.20 million (subject to a working capital adjustment), plus potential additional payments aggregating $1.55 million contingent upon the earnings of the buyer subsidiary for the years ended December 31, 2012 and 2013. The Asset Purchase Agreement contains customary representations and warranties respecting the business and assets of PC Doctors and Tecguard, as well as customary indemnification covenants. The closing of the transactions contemplated by the Asset Purchase Agreement is subject to customary conditions, including the completion of a due diligence investigation by Western Capital to its reasonable satisfaction. The Asset Purchase Agreement may be terminated if, among other customary reasons, the closing has not occurred on or prior to July 22, 2013 (or such later date as the parties may agree upon).

Also on June 22, 2012, the Company entered into a non-binding term sheet with WCR, LLC, a Delaware limited liability company and the controlling shareholder of the company, for the provision of a short-term loan the proceeds of which would be used to satisfy the Company’s financial obligations at the closing of the transaction with PC Doctors, LLC, Tecguard, LLC and Robert Posteluk. The Company’s ability to fulfill its obligations at the closing of such transaction depends upon its ability to secure this or other available financing through the completion of definitive documentation. The non-binding term sheet outlines the material terms of the lending arrangement proposed by the parties, including a loan of up to $3.5 million in principal amount, accruing interest at the rate of 11% per annum, payable on the six-month anniversary of the loan, with a $25,000 commitment fee payable upon execution of definitive documentation. The loan would be secured by a security interest in all of the assets of the Company (subordinate to the rights of River City Equity, Inc.), and involve no financial covenants or prepayment penalties.

XML

Other Expense

6 Months Ended

Jun. 30, 2012

Other Cost and Expense Disclosure, Operating [Abstract]

Other Operating Expense Detail [Text Block]

8. Other Expense –

A breakout of other expense is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Store expenses
Bank fees	$	75,617	$	59,519	$	157,237	$	134,848
Collection costs		106,828		97,976		235,526		205,930
Repairs & maintenance		61,332		26,171		95,523		73,466
Supplies		98,596		42,938		186,521		77,342
Telephone		43,645		32,910		77,479		66,564
Utilities and network lines		159,487		108,017		335,659		235,441
Other		225,953		144,510		435,791		328,427
	$	771,458	$	512,041	$	1,523,736	$	1,122,018
General & administrative expenses
Professional fees	$	61,291	$	41,355	$	147,214	$	164,870
Management and consulting fees		137,692		117,117		271,442		217,117
Other		75,462		66,387		159,962		132,842
	$	274,445	$	224,859	$	578,618	$	514,829

XML

Acquisitions

6 Months Ended

Jun. 30, 2012

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

9. Acquisitions –

In February 2012, the Company acquired three Cricket corporate-owned stores. Two of the stores are located in McAllen, Texas and one in Laredo, Texas.

In May 2012, the Company acquired two Cricket dealer-owned stores in separate transactions. One was located in Omaha, Nebraska and the other in Spokane, Washington.

	Fair Value
Other current assets	$	1,600
Property and equipment		72,500
Intangible assets		98,000
Goodwill		278,700
Other non-current assets		4,400
	$	455,200

The results of the operations for the acquired locations have been included in the condensed consolidated financial statements since the date of the acquisitions. The following table presents the unaudited pro forma results of continuing operations for the three and six months ended June 30, 2012 and 2011, as if the acquisitions had been consummated at the beginning of each period presented. The pro forma results of continuing operations are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the acquisitions occurred at the beginning of the year presented or the results which may occur in the future.

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012		2011
Pro forma revenue	$	5,963,000		$	4,370,000		$	13,770,000	$	9,989,000
Pro forma net income	$	358,000		$	306,000		$	1,194,000	$	815,000
Pro forma net income (loss) per common share – basic and diluted	$	(0.03	)	$	(0.03	)	$	0.02	$	(0.03	)

In April 2012 the Company executed an Asset Purchase Agreement to acquire one Cricket retail storefront for a purchase price of $160,000. As a condition of the agreement, the Company will also open two and relocate one existing Cricket retail storefronts.

XML

Consulting Agreement

6 Months Ended

Jun. 30, 2012

Consulting Agreement Disclosure [Abstract]

Consulting Agreement Disclosure [Text Block]

11. Consulting Agreement –

On March 7, 2012, a consulting agreement with Mr. Richard Miller, the Chairman of the Board, was approved by the Company’s Board of Directors. The agreement provides for consulting fees in the amount of $100,000 and contains the same terms and conditions as the earlier agreement that expired March 31, 2012.

XML

Notes Payable (Details Textual) (USD $)	3 Months Ended	6 Months Ended
	Mar. 31, 2012	Jun. 30, 2012	Jun. 30, 2011
Line Of Credit Facility, Maximum Borrowing Capacity	$ 2,000,000
Debt Instrument, Maturity Date		Apr. 01, 2012
Repayments of Notes Payable	1,000,000
Advances from notes payable - long-term	200,000	200,000	0
River City Equity Inc [Member]
Line Of Credit Facility, Maximum Borrowing Capacity		2,000,000
Advances from notes payable - long-term	200,000
Line of Credit Facility, Amount Outstanding		$ 1,200,000

XML

Basis of Presentation, Nature of Business and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Basis of Accounting [Text Block]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared according to the instructions to Form 10-Q and Section 210.8-03(b) of Regulation S-X of the Securities and Exchange Commission (SEC) and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in our Form 10-K as of and for the year ended December 31, 2011. The condensed consolidated balance sheet at December 31, 2011, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect certain reported amounts and disclosures in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant management estimates relate to the loans receivable allowance, allocation of and carrying value of goodwill and intangible assets, inventory valuation and obsolescence, and deferred taxes and tax uncertainties.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company recognizes fees on cash advance loans on a constant-yield basis ratably over the loans’ terms. Title and installment loan fees and interest are recognized using the interest method except that installment loan origination fees are recognized as they become non-refundable and installment loan maintenance fees are recognized when earned. The Company records revenue from check cashing fees, sales of phones, and accessories and fees from all other services in the period in which the sale or service is completed.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

Loans Receivable Allowance

We maintain a loan loss allowance for anticipated losses for our payday, installment and title loans. To estimate the appropriate level of the loan loss allowance, we consider the amount of outstanding loans owed to us, historical loans charged off, current and expected collection patterns and current economic trends. Our current payday loan loss allowance is based on our net write offs, typically expressed as a percentage of loan amounts originated for the last 24 months applied against the principal balance of outstanding loans that we write off. Our current installment loan loss allowance also factors in the delinquency status of loans within the installment portfolio. The Company also periodically performs a look-back analysis on its loan loss allowance to verify that the historical allowance established tracks with the actual subsequent loan write-offs and recoveries. The Company is aware that, as conditions change, it may also need to make additional allowances in future periods.

Included in loans receivable are payday loans that are currently due or past due and payday loans that have not been repaid.  This generally is evidenced where a customer’s personal check has been deposited and the check has been returned due to non-sufficient funds in the customer’s account, a closed account, or other reasons.  Also included in loans receivable are current and delinquent installment and title loans. Loans are carried at cost less the loans receivable allowance.  The Company does not specifically reserve for any individual loan.  The Company aggregates loan types for purposes of estimating the loss allowance using a methodology that analyzes historical portfolio statistics and management’s judgment regarding recent trends noted in the portfolio.  This methodology takes into account several factors, including the maturity of the store location, charge-off and recovery rates and delinquency status of installment loans.  The Company utilizes a software program to assist with the tracking of its historical portfolio statistics All returned payday items are charged off after 180 days, as collections after that date have not been significant.  The loans receivable allowance is reviewed monthly and any adjustment to the loan loss allowance as a result of historical loan performance, current and expected collection patterns and current economic trends is recorded.

Earnings Per Share, Policy [Policy Text Block]

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing the income (loss) available to common shareholders by the weighted average number of common shares outstanding for the year. Diluted net income (loss) per common share is computed by dividing the net income (loss) available to common shareholders by the sum of the weighted average number of common shares outstanding plus potentially dilutive common share equivalents (convertible preferred shares) when dilutive. All shares of potentially dilutive Series A Convertible Preferred Stock outstanding at June 30, 2012 and 2011 were anti-dilutive and therefore excluded from the dilutive net income (loss) per share computation.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

The Company has grouped its operations into two segments – Payday Operations and Cricket Wireless Retail Operations. The Payday Operations segment provides financial and ancillary services. The Cricket Wireless Retail Operations segment is a dealer for Cricket Communications, Inc., reselling cellular phones and accessories and serving as a payment center for Cricket customers.

New Accounting Pronouncements Policy [Policy Text Block]

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08 “Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment.” ASU 2011-08 allows an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should perform additional steps to determine if there is goodwill impairment. The amendments are effective for annual and interim goodwill tests performed for fiscal years beginning after December 15, 2011, early adoption being permitted. The Company adopted this standard with no material impact on its consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04 “Fair Value Measurement (Topic820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS.” ASU 2011-04 results in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. For public entities, ASU 2011-04 is effective for interim or annual reporting periods ending on or after December 15, 2011. The Company adopted this standard with no material impact on its consolidated financial statements.

No other new accounting pronouncement issued or effective during the fiscal quarter has had or is expected to have a material impact on the condensed consolidated financial statements.

XML

Preferred Stock Dividend (Tables)

6 Months Ended

Jun. 30, 2012

Due To Related Parties [Abstract]

Schedule Of Related Party Transactions [Table Text Block]

Reconciliations of the cumulative preferred stock dividend payable are as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Balance due, beginning of the period	$	4,075,000	$	1,975,000	$	3,550,000	$	1,450,000
Current quarter preferred dividends payable		525,000		525,000		1,050,000		1,050,000
Preferred dividends paid		-		-		-		-
Balance due, end of the period	$	4,600,000	$	2,500,000	$	4,600,000	$	2,500,000

XML

Material Definitive Agreement (Details Textual) (USD $)	3 Months Ended	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2012
PC Doctors and Tecguard [Member]
Definitive Agreement Business Acquisition Purchase Price Obligation	$ 3,200,000	$ 3,200,000
Business Acquisition, Contingent Consideration, Potential Cash Payment	1,550,000	1,550,000
Non Binding Term Sheet [Member]
Line of Credit Facility, Remaining Borrowing Capacity	3,500,000	3,500,000
Loan, Accrued Interest Percentage	11.00%	11.00%
Loan, Commitment Fee Amount	$ 25,000
Non Binding Term Sheet Execution Date		Jun. 22, 2012

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
OPERATING ACTIVITIES
Net Income	$ 1,142,793	$ 682,084
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	151,031	136,732
Amortization	116,247	228,648
Deferred income taxes	146,000	159,000
Loss on disposal of property and equipment	0	27,342
Changes in operating assets and liabilities
Loans receivable	325,717	285,141
Inventory	51,011	33,026
Prepaid expenses and other assets	(261)	(150,151)
Accounts payable and accrued liabilities	(22,620)	(656,504)
Deferred revenue	(26,843)	(64,579)
Net cash provided by operating activities	1,883,075	680,739
INVESTING ACTIVITIES
Purchase of property and equipment	(122,203)	(84,123)
Acquisitions, net of cash acquired	(453,600)	0
Net cash used by investing activities	(575,803)	(84,123)
FINANCING ACTIVITIES
Payments on notes payable - short-term	(1,000,000)	(1,000,000)
Payments on notes payable - long-term	(346,776)	(363,759)
Advances from notes payable - long-term	200,000	0
Common stock redemption	(307,234)	0
Net cash used by financing activities	(1,454,010)	(1,363,759)
NET DECREASE IN CASH	(146,738)	(767,143)
CASH
Beginning of period	1,909,442	2,092,386
End of period	1,762,704	1,325,243
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid	368,969	732,984
Interest paid	$ 140,404	$ 163,652

XML

Segment Information

6 Months Ended

Jun. 30, 2012

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

5. Segment Information –

Segment information related to the three months ended June 30, 2012 and 2011 is set forth below:

	Three Months Ended June 30, 2012							Three Months Ended June 30, 2011
	Payday		Cricket Wireless			Total		Payday		Cricket Wireless			Total
Revenues from external customers	$	2,839,713	$	3,088,256		$	5,927,969	$	2,603,830	$	1,436,252		$	4,040,082
Net income	$	372,601	$	(18,850	)	$	353,751	$	335,670	$	(65,955	)	$	269,715

	Six Months Ended June 30, 2012						Six Months Ended June 30, 2011
	Payday		Cricket Wireless		Total		Payday		Cricket Wireless			Total
Revenues from external customers	$	5,628,830	$	7,815,909	$	13,444,739	$	5,244,827	$	3,833,886		$	9,078,713
Net income (loss)	$	741,374	$	401,419	$	1,142,793	$	715,238	$	(33,154	)	$	682,084
Total segment assets	$	14,728,243	$	7,044,853	$	21,773,096	$	14,500,282	$	4,911,842		$	19,412,124

XML

Other Expense (Tables)

6 Months Ended

Jun. 30, 2012

Other Cost and Expense Disclosure, Operating [Abstract]

Other Operating Expense Detail [Text Block]

8. Other Expense –

A breakout of other expense is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Store expenses
Bank fees	$	75,617	$	59,519	$	157,237	$	134,848
Collection costs		106,828		97,976		235,526		205,930
Repairs & maintenance		61,332		26,171		95,523		73,466
Supplies		98,596		42,938		186,521		77,342
Telephone		43,645		32,910		77,479		66,564
Utilities and network lines		159,487		108,017		335,659		235,441
Other		225,953		144,510		435,791		328,427
	$	771,458	$	512,041	$	1,523,736	$	1,122,018
General & administrative expenses
Professional fees	$	61,291	$	41,355	$	147,214	$	164,870
Management and consulting fees		137,692		117,117		271,442		217,117
Other		75,462		66,387		159,962		132,842
	$	274,445	$	224,859	$	578,618	$	514,829

XML

Acquisitions (Details) (USD $)	Jun. 30, 2012
Other current assets	$ 1,600
Property and equipment	72,500
Intangible assets	98,000
Goodwill	278,700
Other non-current assets	4,400
Total Assets Acquired	$ 455,200

XML

Subsequent Events

6 Months Ended

Jun. 30, 2012

Subsequent Events [Abstract]

Subsequent Events [Text Block]

15. Subsequent Events –

Form S-1/A Registration Statement Under the Securities Act of 1933.

On July 26, 2012, the Company filed Form S-1/A, Registration Statement Under the Securities Act of 1933. This amended the filing made on June 18, 2012.

Material Definitive Agreement

On August 10, 2012, the Company terminated the Asset Purchase Agreement with PC Doctors, LLC, a Wisconsin limited liability company, Tecguard, LLC, a Wisconsin limited liability company, and Robert Posteluk, dated as of June 22, 2012, by exercising its termination rights under that agreement following the completion of the Company’s initial due-diligence investigation.