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 March 31, 2013 or

¨ 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 ¨

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 ¨

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  ¨	Accelerated filer  ¨
Non-accelerated filer  ¨	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 ¨ No þ

APPLICABLE ONLY TO CORPORATE ISSUERS

As of May 14, 2013, the registrant had outstanding 60,220,165 shares of common stock, no par value per share.

Western Capital Resources, Inc.

Index

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 4. Controls and Procedures	17
PART II. OTHER INFORMATION
Item 6. Exhibits	18
SIGNATURES	19

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

	March 31, 2013 (Unaudited)			December 31, 2012
ASSETS
CURRENT ASSETS
Cash	$	2,398,242		$	2,246,619
Loans receivable (less allowance for losses of $1,001,000 and $1,191,000)		4,134,780			5,084,510
Inventory		1,142,673			1,084,510
Prepaid expenses and other		434,186			486,239
Deferred income taxes		414,000			484,000
TOTAL CURRENT ASSETS		8,523,881			9,385,878
PROPERTY AND EQUIPMENT		823,578			855,719
GOODWILL		12,774,069			12,774,069
INTANGIBLE ASSETS		221,164			230,891
OTHER		132,154			126,991
TOTAL ASSETS	$	22,474,846		$	23,373,548
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	1,934,688		$	3,119,786
Note payable – short-term		405,163			405,163
Current portion long-term debt		29,278			210,065
Deferred revenue		233,963			293,294
TOTAL CURRENT LIABILITIES		2,603,092			4,028,308
LONG-TERM LIABILITIES
Note payable – long-term		2,750,000			2,750,000
Deferred income taxes		924,000			871,000
TOTAL LONG-TERM LIABILITIES		3,674,000			3,621,000
TOTAL LIABILITIES		6,277,092			7,649,308
SHAREHOLDERS’ EQUITY
Common stock, no par value, 240,000,000 shares authorized, 60,220,165 and 60,397,780 shares issued and outstanding.		-			-
Additional paid-in capital		22,353,600			22,371,362
Accumulated deficit		(6,155,846	)		(6,647,122	)
TOTAL SHAREHOLDERS’ EQUITY		16,197,754			15,724,240
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	22,474,846		$	23,373,548

See notes to condensed consolidated financial statements.

3

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended
	March 31, 2013		March 31, 2012
REVENUES
Payday loan fees	$	2,395,993	$	2,307,901
Phones and accessories		3,321,920		2,741,696
Cellular sales & service fees		1,726,573		1,995,025
Installment interest income		257,642		196,509
Check cashing fees		152,638		195,812
Other income and fees		234,320		79,827
		8,089,086		7,516,770
STORE EXPENSES
Phone and accessories cost of sales		2,561,842		1,835,075
Salaries and benefits		1,756,526		1,687,392
Occupancy		651,237		552,308
Provisions for loan losses		321,347		276,390
Advertising		88,887		77,121
Depreciation		81,653		69,245
Amortization of intangible assets		39,227		59,401
Other		910,751		752,278
		6,411,470		5,309,210
INCOME FROM STORES		1,677,616		2,207,560
GENERAL & ADMINISTRATIVE EXPENSES
Salaries and benefits		514,014		527,732
Depreciation		6,192		5,492
Interest expense		83,617		78,121
Other		282,517		304,173
		886,340		915,518
INCOME BEFORE INCOME TAXES		791,276		1,292,042
INCOME TAX EXPENSE		300,000		503,000
NET INCOME		491,276		789,042
SERIES A CONVERTIBLE PREFERRED STOCK DIVIDENDS (assumes all paid)		-		(525,000	)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	491,276	$	264,042
NET INCOME PER COMMON SHARE –
Basic and diluted	$	0.01	$	0.04
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING –
Basic and diluted		60,320,814		6,512,273

See notes to condensed consolidated financial statements.

4

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Three Months Ended
	March 31, 2013			March 31, 2012
OPERATING ACTIVITIES
Net Income	$	491,276		$	789,042
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		87,845			74,737
Amortization		39,227			59,401
Deferred income taxes		123,000			102,000
Changes in operating assets and liabilities:
Loans receivable		949,730			1,062,305
Inventory		(58,163	)		95,742
Prepaid expenses and other assets		46,890			(29,764	)
Accounts payable and accrued liabilities		(1,185,098	)		151,776
Deferred revenue		(59,331	)		(64,356	)
Net cash provided by operating activities		435,376			2,240,883
INVESTING ACTIVITIES
Purchases of property and equipment		(55,704	)		(21,157	)
Purchases of intangible assets		(29,500	)		-
Acquisition of stores, net of cash acquired		-			(356,100	)
Net cash used by investing activities		(85,204	)		(377,257	)
FINANCING ACTIVITIES
Payments on notes payable – short-term		-			(1,000,000	)
Payments on notes payable – long-term		(180,787	)		(179,000	)
Advances from notes payable – long-term		-			200,000
Common stock redemption		(17,762	)		(307,234	)
Net cash used by financing activities		(198,549	)		(1,286,234	)
NET INCREASE IN CASH		151,623			577,392
CASH
Beginning of year		2,246,619			1,909,442
End of year	$	2,398,242		$	2,486,834
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid	$	219,000		$	18,966
Interest paid	$	82,362		$	87,728

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 months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. 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, 2012. The condensed consolidated balance sheet at December 31, 2012, 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), Express Pawn, Inc. (EP), and PQH, Inc. (PQH), collectively referred to as the “Company”, provides retail financial services and retail cellular phone sales to individuals primarily in the Midwestern United States.  The Company operated 51 “Payday” stores and one payday/pawn store in nine states (Colorado, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming) as of March 31, 2013. The Company operated 50 cellular retail stores in 14 states (Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon, Texas, and Washington) as of March 31, 2013.  The consolidated financial statements include the accounts of WCR, WFL, PQH, and EP. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company, through its “Consumer Finance” division, provides non-recourse cash advance and installment loans, collateralized non-recourse pawn loans, check cashing and other money services.  The short-term uncollateralized non-recourse consumer loans, known as “cash advance” 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 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 per each $100 borrowed. To repay a 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 and are unsecured. The fee and interest rate on installment loans vary based on applicable regulations.

In August 2012, we opened our first pawn store by converting an existing payday location into a joint payday/pawn store. The company provides collateralized non-recourse loans, commonly known as “pawn loans”, with a maturity of four months. Allowable service charges will vary by state and loan size. Our pawn loans earn 15% per month. The loan amount varies depending on the valuation of each item pawned. We generally lend from 30% to 55% of the collateral’s estimated resale value depending on an evaluation of several factors. Customers then have the option to redeem the pawned merchandise during the term or at expiration of the pawn loan or forfeiting the merchandise to us on expiration. At our pawn stores we sell merchandise that was acquired through either customer forfeiture of pawn collateral or second-hand merchandise purchased from customers or consigned to us.

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.

6

The Company also operates a “Cellular Retail” division that is an authorized Cricket dealer selling cellular phones and accessories, providing ancillary services and accepting service payments from 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, percentage of existing pawn loans that will be forfeited, 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 recognizes fees on redeemed pawn loans on a constant-yield basis ratably over the loans’ terms. No fees are recognized on forfeited pawn loans. The Company records revenue from check cashing fees, sales of phones, accessories, and pawn inventory, and fees from all other services in the period in which the sale or service is completed.  

Loans Receivable Allowance

The Company maintains a loan loss allowance for anticipated losses for our payday and installment loans. We do not record loan losses or charge-offs of pawn or title loans because the value of the collateral exceeds the loan amount. To estimate the appropriate level of the loan loss allowance, we consider the amount of outstanding loan principal, interest and fees, historical charge offs, current and expected collection patterns and current economic trends. Our current loan loss allowance is based on our historical net write off percentage, net charge offs to loan principal, interest and fee amounts that originated during the last 24 months, applied against the balance of loan principal, interest and fees outstanding. The Company also periodically performs a look-back analysis on its loan loss allowance to verify 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 unpaid principal, interest and fee balances of payday, installment, pawn and title loans that have not reached their maturity date, and “late” payday loans that have reached maturity within the last 180 days and have remaining outstanding balances.  Late payday loans generally are unpaid loans 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.   Loans are carried at cost plus accrued interest or fees less payments made and 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 and charge-off and recovery rates.  The Company utilizes a software program to assist with the tracking of its historical portfolio statistics.   All returned 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 Per Common Share

Basic net income per common share is computed by dividing the income available to common shareholders by the weighted average number of common shares outstanding for the year. There were no dilutive securities at March 31, 2013. Diluted net income per common share, applicable to the three months ended March 31, 2012, is computed by dividing the net income 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 March 31, 2012 were anti-dilutive and therefore excluded from the dilutive net income per share computation.  

Segment Reporting

The Company has grouped its operations into two segments – Consumer Finance division and Cellular Retail division. The Consumer Finance division provides financial and ancillary services. The Cellular Retail division is an authorized Cricket and Revol dealer selling cellular phones and accessories, providing ancillary services and accepting service payments from customers.

7

Recent Accounting Pronouncements

No 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 Consumer Finance division 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 as 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 with reduced profitability due to these regulatory changes.

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.

As evidenced in the previous paragraphs, 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.

8

For the three months ended March 31, 2013 and 2012, the Company had significant revenues by state (shown as a percentage of applicable division’s revenue when over 10%) as follows:

Consumer Finance Division							Cellular Retail Division
	2013 % of Revenues			2012 % of Revenues				2013 % of Revenues			2012 % of Revenues
Nebraska		29	%		26	%	Missouri		10	%		18	%
Wyoming		15	%		15	%	Nebraska		22	%		13	%
North Dakota		18	%		18	%	Texas		13	%		11	%
Iowa		11	%		12	%	Indiana		*	%		12	%
							Oklahoma		*	%		10	%

* Less than 10%

3. Loans Receivable –

At March 31, 2013 and December 31, 2012 our outstanding loans receivable aging was as follows:

March 31, 2013
	Payday			Installment			Pawn & Title		Total
Current	$	3,507,129		$	276,574		$	153,667	$	3,937,370
1-30		195,274			47,605			-		242,879
31-60		163,147			25,307			-		188,454
61-90		190,109			14,196			-		204,305
91-120		184,823			7,323			-		192,146
121-150		179,651			2,705			-		182,356
151-180		187,026			1,244			-		188,270
		4,607,159			374,954			153,667		5,135,780
Allowance for losses		(935,000	)		(66,000	)		-		(1,001,000	)
	$	3,672,159		$	308,954		$	153,667	$	4,134,780

December 31, 2012
	Payday			Installment			Pawn & Title		Total
Current	$	4,318,517		$	391,137		$	171,344	$	4,880,998
1-30		269,091			47,538			-		316,629
31-60		234,514			16,285			-		250,799
61-90		216,717			3,201			-		219,918
91-120		202,642			1,051			-		203,693
121-150		215,562			388			-		215,950
151-180		187,523			-			-		187,523
		5,644,566			459,600			171,344		6,275,510
Allowance for losses		(1,119,000	)		(72,000	)		-		(1,191,000	)
	$	4,525,566		$	387,600		$	171,344	$	5,084,510

4. Loans Receivable Allowance –

As a result of the Company’s collection efforts, it historically writes off approximately 41% 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 – 41%; 31 to 60 days – 66%; 61 to 90 days – 83%; 91 to 120 days – 86%; and 121 to 180 days – 91%.  A rollforward of the Company’s loans receivable allowance for the three months ended March 31, 2013 and 2012 is as follows:

	Three Months Ended March 31,
	2013			2012
Loans receivable allowance, beginning of period	$	1,191,000		$	1,001,000
Provision for loan losses charged to expense		321,000			276,000
Charge-offs, net		(511,000	)		(413,000	)
Loans receivable allowance, end of period	$	1,001,000		$	864,000

9

5. Note Payable – Short Term –

The Company’s short-term debt is as follows:

	March 31, 2013		December 31, 2012
Note payable to shareholders related to preferred stock conversion to common, due and payable, if no earlier payment demand is made, on April 30, 2013.  The note accrues no interest.	$	405,163	$	405,163

6. Notes Payable – Long Term –

The Company’s long-term debt is as follows:

	March 31, 2013			December 31, 2012
Note payable (with a credit limit of $3,000,000) to River City Equity, Inc., a related party, with interest payable monthly at 12% due March 31, 2014 and upon certain events  can be collateralized by substantially all assets of WCR.	$	2,750,000		$	2,750,000
Note payable to a related party with interest payable monthly at 10%, due March 1, 2013 and collateralized by substantially all assets of select locations of PQH.		-			94,397
Note payable to a related party with interest payable monthly at 10%, due April 1, 2013 and collateralized by substantially all assets of select locations of PQH.		29,278			115,668
Total		2,779,278			2,960,065
Less current maturities		(29,278	)		(210,065	)
	$	2,750,000		$	2,750,000

7. Other Expense –

A breakout of other expense is as follows:

	Three Months Ended March 31,
	2013		2012
Store expenses
Bank fees	$	106,943	$	81,620
Collection costs		111,733		128,698
Repair and Maintenance		65,254		34,191
Supplies		74,480		87,925
Telephone		39,581		33,834
Utilities and network lines		200,845		176,172
Other		311,915		209,838
	$	910,751	$	752,278
General & administrative expenses
Professional fees	$	115,103	$	85,923
Management and consulting fees		107,687		133,750
Other		59,727		84,500
	$	282,517	$	304,173

8. Segment Information –

The Company has grouped its operations into two segments – Consumer Finance and Cellular Retail.  The Consumer Finance segment provides financial and ancillary services.  The Cellular Retail segment is a dealer for Cricket and Revol cellular carriers selling cellular phones and accessories, ancillary services and serving as a payment center for customers.

10

Segment information related to the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31, 2013						Three Months Ended March 31, 2012
	Consumer Finance		Cellular Retail		Total		Consumer Finance		Cellular Retail		Total
Revenues	$	3,057,290	$	5,031,796	$	8,089,086	$	2,789,116	$	4,727,654	$	7,516,770
Net income	$	410,341	$	80,935	$	491,276	$	368,771	$	420,271	$	789,042
Total segment assets	$	15,133,343	$	7,341,503	$	22,474,846	$	14,677,536	$	6,984,468	$	21,662,004

9. Subsequent Events –

Compensatory Agreement with CEO

On April 11, 2013, the Company entered into an Amended and Restated Employment Agreement with its Chief Executive Officer, Mr. John Quandahl, to be effective as of April 1, 2013, due to the fact that the Company’s earlier Employment Agreement with Mr. Quandahl expired as of March 31, 2013. The amended and restated agreement has a term of three years and contains other terms and conditions that are identical to those of the original agreement. Specifically, the amended and restated agreement provides an annual base salary and eligibility for an annual performance-based cash bonus pool for management.

The performance-based bonus provisions of the amended and restated agreement permit members of the Company’s management to receive annual bonus payments based on adjusted EBITDA targets annually established by the Board of Directors. If the Company’s actual adjusted EBITDA performance for a particular annual period ranges from 85-100% of the established adjusted EBITDA target, management will be entitled to receive a cash bonus consisting of 7.5% of the actual adjusted EBITDA. Mr. Quandahl’s share of the bonus pool for any particular year is expected to be 10-50% (but may be more), and the bonus pool will be payable to other management-level participants in the bonus pool, if any, selected from time to time by the Board of Directors in its discretion. If the Company’s actual adjusted EBITDA performance for a particular annual period is less than 85% of the established adjusted EBITDA target, no bonus will be payable, and if such performance exceeds 100% of the established adjusted EBITDA target, the bonus pool will include 15% of the amount by which such performance exceeds the target. In addition to the adjusted EBITDA threshold, the amended and restated agreement also contains capital expenditure and working capital thresholds.

The amended and restated agreement also contains customary non-solicitation and non-competition provisions as well as provisions for severance payments upon termination by the Company without cause or upon termination by Mr. Quandahl with good reason.

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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 heading “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, 2012.

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

Consumer finance operations are conducted under our wholly owned subsidiaries, Wyoming Financial Lenders, Inc. and Express Pawn, Inc., primarily in the Midwestern and Southwestern United States. Services provided include short-term loans (non-recourse “cash advance” or “payday” loans, small unsecured installment loans, collateralized non-recourse pawn loans and title loans), check cashing and other money services. As of March 31, 2013, we operated 51 “payday” stores and one payday/pawn store in nine states (Colorado, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming).  

The Company provides short-term unsecured consumer 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.

The Company provides unsecured installment loans 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. The Company provides collateralized non-recourse loans, commonly known as “pawn loans”, with a maturity of four months. Allowable service charges will vary by state and loan size. Our pawn loans earn 15% per month. The loan amount varies depending on the valuation of each item pawned. We generally lend from 30% to 55% of the collateral’s estimated resale value depending on an evaluation of several factors. Customers then have the option to redeem the pawned merchandise during the term or at expiration of the pawn loan or forfeit the merchandise to us on expiration. At our pawn stores we sell merchandise that was acquired through either customer forfeiture of pawn collateral or second-hand merchandise purchased from customers or consigned to us.

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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.

All of our loan and other services are subject to state regulations (which vary from state to state), federal regulations and local regulation, where applicable.

Cellular retail operations are conducted under our wholly owned subsidiary, PQH Wireless, Inc. This division operates retail stores selling cellular phones and accessories. We are an authorized Cricket dealer selling cellular phones and accessories, providing ancillary services and accepting service payments from customers. Our cellular phone offerings include prepaid cellular phone service that functions for a period of time for a flat fee, without usage limitations and without any long-term contract or commitment required from the consumer. Authorized dealers are permitted to sell the carrier’s line and generally locate their store operations in areas with a strong potential customer base where the carrier 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 March 31, 2013, 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).

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 size and 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 net store profits, revenue growth, gross profit contributions and, for payday stores, loss ratio (which is losses as a percentage of payday loan fees), with consideration given to the length of time the store has been open and its geographic location.  We evaluate changes in comparable store financial and other measures on a routine basis to assess operating efficiency.  We define comparable stores as those that are open during the full periods for which a comparison is being made.  For example, comparable stores for the annual analysis we undertook as of December 31, 2012 have been open at least 24 months on that date.  We monitor newer stores 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 27% of our 2012 and 29% of our year-to-date 2013 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.

To further diversify 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 conversion of select payday locations to joint pawn/payday locations and development of our cellular retail stores.  In an effort to expand our product and service offerings within the Payday division, we intend to either introduce pawn stores into a limited number of existing payday locations and launch or buy additional pawn store 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 and installment lending alone and (ii) any particular aspect of our business that is concentrated geographically.

A summary table of the number of stores operated during the periods ended March 31, 2013 and 2012 follows:

	3 Months Ended March 31, 2013						3 Months Ended March 31, 2012
	Payday		Payday/Pawn		Wireless		Payday		Payday/Pawn		Wireless
Beginning		51		1		57		52		-		45
Acquired / Launched		-		-		-		-		-		3
Converted		-		-		-		-		-		-
Closed		-		-		7		-		-		-
Ending		51		1		50		52		-		48

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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 and installment loans. We do not record loan losses or charge-offs of pawn or title loans because the value of the collateral exceeds the loan amount. To estimate the appropriate level of the loan loss allowance, we consider the amount of outstanding loan principal, interest and fees, historical charge offs, current and expected collection patterns and current economic trends. Our current loan loss allowance is based on our historical net write off percentage, net charge offs to loan principal, interest and fee amounts that originated during the last 24 months , applied against the balance of loan principal, interest and fees outstanding. The Company also periodically performs a look-back analysis on its loan loss allowance to verify 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 unpaid principal, interest and fees of payday, installment, pawn and title loans that have not reached their maturity date and “late” payday loans that have reached maturity within the last 180 days and have remaining outstanding balances.  Late payday loans generally are unpaid loans 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.  Loans are carried at cost plus accrued interest or fees less payments made and 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 and charge-off and recovery rates.  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 41% 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 – 41%; 31 to 60 days – 66%; 61 to 90 days – 83%; 91 to 120 days – 86%; and 121 to 180 days – 91%.  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 three months ended March 31, 2013 and 2012 is as follows:

	Three Months Ended March 31,
	2013			2012
Loans receivable allowance, beginning of period	$	1,191,000		$	1,001,000
Provision for loan losses charged to expense		321,000			276,000
Charge-offs, net		(511,000	)		(413,000	)
Loans receivable allowance, end of period	$	1,001,000		$	864,000

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.

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Results of Operations – Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012

For the three-month period ended March 31, 2013, net income was $.49 million compared to net income of $.79 million for the three months ended March 31, 2012. During the three months ended March 31, 2013, income from operations before income taxes was $.79 million compared to $1.29 million for the three months ended March 31, 2012. Current versus prior year, throughout some point of the quarters, we operated nine additional cellular retail storefronts and one pawn store. 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 March 31, 2013 and 2012, respectively: 

	Three Months Ended March 31,				% Change Year			Three Months Ended March 31,
	2013		2012		Over Year			2013			2012
								(percentage of revenues)
Payday loan fees	$	2,395,993	$	2,307,901		3.8	%		29.6	%		30.7	%
Phones and accessories		3,321,920		2,741,696		21.2	%		41.1	%		36.5	%
Cellular sales & service fees		1,726,573		1,995,025		(13.5	)%		21.3	%		26.5	%
Installment interest income		257,642		196,509		31.1	%		3.2	%		2.6	%
Check cashing fees		152,638		195,812		(22.0	)%		1.9	%		2.6	%
Other income and fees		234,320		79,827		193.5	%		2.9	%		1.1	%
Total	$	8,089,086	$	7,516,770		7.6	%		100.0	%		100.0	%

Revenues totaled $8.09 million for the three months ended March 31, 2013, compared to $7.52 million for the three months ended March 31, 2012. The increase in total revenues resulted primarily from higher Cellular retail division revenue, which can be attributed to a higher per unit selling price of phones and from approximately $170,000 of pawn revenues that were zero in 2012. A breakdown of phone units sold shows in increase of higher priced “smart” phones and a decrease for lower priced “feature” phones. For the Consumer Finance division, during the three-month periods ended March 31, 2013 and 2012, we originated approximately $16.4 million and $15.8 million in cash advance loans, respectively. Our average cash advance loan (including fees) totaled approximately $398 and $383 during the three-month periods ended March 31, 2013 and 2012, respectively. Our average fee for the three-month periods ended March 31, 2013 and 2012 was $57 and $54, respectively.

Store Expenses

The following table summarizes our store expenses for the three months ended March 31 2013 and 2012, respectively:

	Three Months Ended March 31,				% Change Year			Three Months Ended March 31,
	2013		2012		Over Year			2013			2012
								(percentage of revenues)
Store Expenses:
Phone and accessories cost of sales	$	2,561,842	$	1,835,075		39.6	%		31.7	%		24.4	%
Salaries and benefits		1,756,526		1,687,392		4.1	%		21.6	%		22.5	%
Occupancy		651,237		552,308		17.9	%		8.1	%		7.3	%
Provisions for loan losses		321,347		276,390		16.3	%		4.0	%		3.7	%
Advertising		88,887		77,121		15.3	%		1.1	%		1.0	%
Depreciation		81,653		69,245		17.9	%		1.0	%		0.9	%
Amortization of intangible assets		39,227		59,401		(34.0	)%		0.5	%		0.8	%
Other		910,751		752,278		21.1	%		11.3	%		10.0	%
	$	6,411,470	$	5,309,210		20.8	%		79.3	%		70.6	%

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As the table above demonstrates, total expenses associated with store operations for the three months ended March 31, 2013 were $6.41 million, compared to $5.31 million for the three months ended March 31, 2012, or a 20.8% increase for the interim periods. The major components of these expenses are phone and accessories costs of sales, salaries and benefits for our store employees, occupancy costs relating to our store leaseholds, provisions for loan losses, 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 March 31, 2013 and 2012 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.

Phone and Accessories Cost of Sales. For the three months ended March 31, 2013, our costs of sales were $2.56 million compared to $1.84 million for the same period in 2012. The increase in our Cellular Retail segment phone and accessory costs resulted from a higher per unit cost per phone year over year which is in line with the increased sales of smart phones discussed in the previous section. Our gross profit per phone unit varies little between a smart or feature phone, resulting in a decreasing gross profit from phone sales.

Salaries and Benefits. Payroll and related costs at the store level were $1.76 million compared to $1.69 million for the three-month periods ended March 31, 2013 and 2012, respectively. The increase is attributed to operating the additional cellular and pawn stores.

Occupancy Costs. Occupancy expenses, consisting mainly of store leases, were $.65 million for the three months ended March 31, 2013 versus $.55 million for the three months ended March 31, 2012. The increase is attributed to operating the additional cellular and pawn stores.

Provisions for Loan Losses. For the three months ended March 31, 2013, our provisions for loan losses were $.32 million compared to $.28 million for the three months ended March 31, 2012. Our provisions for loan losses represented approximately 12.1% and 11.20% of our payday and installment loan revenue for the three months ended March 31, 2013 and 2012, respectively. The increase can be attributed to the higher default rate associated with installment lending. Due to the inability to foretell the scope and duration of the current economic recovery, there exists uncertainty in how significant our total 2013 loan losses may or may not be and how they may differ from 2012.

Advertising. Advertising and marketing expenses were $.09 million and $.08 million for the three months ended March 31, 2013 and 2012, respectively. In general, we expect that our marketing and advertising expenses for 2013 will remain consistent.

Depreciation. Depreciation, relating to store equipment and leasehold improvements, increased to $.08 million for the three months ended March 31, 2013 compared to $.07 million for the three months ended March 31, 2012.

Amortization of Intangible Assets. Amortization of intangible assets decreased to $.04 million for the three months ended March 31, 2013 from $.06 million for the three month period ended March 31, 2012.

Other Store Expenses. Other expenses increased to $.91 million for the three months ended March 31, 2013 from $.75 million for the three months ended March 31, 2012.

General and Administrative Expenses

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

	Three Months Ended March 31,				% Change Year			Three Months Ended  March 31,
	2013		2012		Over Year			2013			2012
								(percentage of revenues)
General & Administrative Expenses:
Salaries and benefits	$	514,014	$	527,732		(2.6	)%		6.4	%		7.1	%
Depreciation		6,192		5,492		12.7	%		0.1	%		0.1	%
Interest expense		83,617		78,121		7.0	%		1.0	%		1.0	%
Other expense		282,517		304,173		(7.1	)%		3.5	%		4.0	%
	$	886,340	$	915,518		(3.2	)%		11.0	%		12.2	%

Total general and administrative costs for the three months ended March 31, 2013 were $.89 million compared to $.92 million for the period ended March 31, 2012. For the three months ended March 31, 2013 and 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:

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Salaries and Benefits. Salaries and benefits expenses for the three months ended March 31, 2013 were $.51 million, a $.02 million decrease from the $.53 million in such expenses during the period ended March 31, 2012.

Interest. Interest expense for the three months ended March 31, 2013 and 2012 was $.08 million.

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, decreased $.02 million to $.28 million for the three months ended March 31, 2013 compared to $.30 million from the three months ended March 31, 2012.

Income Tax Expense

Income tax expense for the three months ended March 31, 2013 was $.30 million compared to income tax expense of $.50 million for the three months ended March 31, 2012, an effective rate of 38% and 39%, respectively.

Liquidity and Capital Resources

Summary cash flow data is as follows:

	Three Months Ended March 31,
	2013			2012
Cash flows provided (used) by:
Operating activities	$	435,376		$	2,240,883
Investing activities		(85,204	)		(377,257	)
Financing activities		(198,549	)		(1,286,234	)
Net increase in cash		151,623			577,392
Cash, beginning of period		2,246,619			1,909,442
Cash, end of period	$	2,398,242		$	2,486,834

At March 31, 2013, we had cash of $2.40 million compared to cash of $2.49 million on March 31, 2012. 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 March 31, 2014. 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 short-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.

Credit Facilities

On October 18, 2011, the Company 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 promissory note was amended on December 7, 2012. The borrowing arrangement allows the Company to borrow up to $3,000,000 at an interest rate of 12% per annum, with interest payable on a monthly basis. The note matures on March 31, 2014, 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 March 31, 2013, $2,750,000 has been advanced under this arrangement.

Off-Balance Sheet Arrangements  

The Company had no off-balance sheet arrangements as of March 31, 2013.

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.

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As of March 31, 2013, 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 March 31, 2013.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 6. Exhibits  

Exhibit	Description
10.1	Amended and Restated Employment Agreement with John Quandahl, effective April 1, 2013 (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).

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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: May 14, 2013	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

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EX-10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “Agreement”) is by and between Western Capital Resources, Inc., a Minnesota corporation (the “Company”), and John Quandahl (“Executive”), and entered into effective as of April 1, 2013.

INTRODUCTION

A.           The Company engages in the business of (i) short term consumer finance, including without limitation, payday lending, check cashing, title lending, prepaid debit cards and related activities and (ii) the retail sale of wireless phones, plans and accessories, including without limitation the sale of used cellular phones, phone flashing and related activities (such activities being hereinafter collectively referred to as the “Business”).

B.           The Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company to ensure that the Company will have the continued dedication and service of Executive, in the roles of the Company’s Chief Executive and Chief Operating Officer, and to obtain the benefit of certain covenants set forth herein; and Executive desires to serve the Company in such roles and provide the Company with such covenants.

C.           The parties hereto entered into that certain Employment Agreement dated as of March 31, 2010, and now desire to amend and restate such agreement as contained herein.

AGREEMENT

Now, Therefore, in consideration of the foregoing and the mutual promises, terms, covenants and conditions set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows:

1.          Certain Definitions.

1.1           “Code” means the Internal Revenue Code of 1986, as amended, including and succeeding provisions of law and any regulations promulgated by the United States Treasury Department thereunder.

1.2           “Employment Period” means the period during which Company employs the Executive.

1.3           “Good Cause” means any one or more of the following: (a) Executive has committed an act constituting a misdemeanor involving moral turpitude or a felony under the laws of the United States or any state or political subdivision thereof or any other jurisdiction; (b) Executive has committed an act constituting a breach of fiduciary duty, gross negligence or willful misconduct; (c) Executive has engaged in conduct which violates the Company’s then existing internal policies or procedures and which is detrimental to the Business or the reputation, character or standing of the Company or any of its affiliates; (d) Executive has committed an act of fraud, dishonesty or misrepresentation that is detrimental to the Business or the reputation, character or standing of the Company or any of its affiliates; (e) Executive has engaged in a conflict of interest or self-dealing without the prior written approval of the Board; (f) Executive has materially breached his obligations as set forth in this Agreement or has neglected or failed to satisfactorily perform his material duties and responsibilities as chief executive officer of the Company; (g) Executive has become bankrupt or insolvent; or (h) Executive has been repeatedly or continuously absent from the Company without the permission of the Chairman of the Board.

1.4           “Good Reason” means a termination by Executive of Executive’s employment hereunder upon the occurrence of any of the following events taking place without Executive’s prior written approval: (a) Executive’s demotion from his position as Chief Executive Officer; (b) the Company’s failure to obtain the assumption of this Agreement by any successor or assign of the Company that is a purchaser of all or substantially all of the assets of the Company (or that otherwise is a purchaser of all or substantially all of the Business); or (c) the required relocation of the place at which Executive must render a majority of his ordinary duties hereunder by more than 60 miles from such current place (i.e., 11550 “I” Street, Suite 150, Omaha, NE 68137); provided however, that notwithstanding anything to the contrary herein, the Company’s hiring of a Chief Operating Officer shall not constitute “Good Reason.”

2.          Employment and Duties.

2.1           The Company agrees to continue to employ Executive for the Employment Period, and Executive agrees to remain in the employ of the Company for the Employment Period. The term of this Agreement shall continue until such time as the employment of Executive is terminated pursuant to Section 7 below.

2.2           The Company is employing Executive hereunder as the Company’s Chief Executive Officer and Chief Operating Officer. In this regard, Executive agrees to perform such duties and responsibilities, in good faith and for the exclusive benefit of the Company, as are prescribed for his office under the Minnesota Business Corporation Act, the Company’s Amended and Restated Bylaws (as may be further amended or restated from time to time), and as otherwise reasonably directed by the Chairman of the Board, to the extent such direction is reasonable and consistent with the position of a Chief Executive Officer of a corporation.

2.3           Executive’s entire business time, attention, energies and skills shall be devoted to the Company and the Business; provided, however, that Executive shall nonetheless be entitled to participate in social, civic or professional associations or engage in passive outside investment activities which may require a limited portion of time and effort to manage (consistent at all times with Company’s policies and procedures), so long as such activities do not interfere with the performance of Executive’s duties nor compete, in any way, with the products or services offered by or through Company.

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3.          Compensation. For services rendered by Executive during the Employment Period, the Company shall compensate Executive as follows:

3.1           Executive shall receive an annual base salary of $246,000 (the ”Base Salary”) which will be paid in accordance with the Company’s normal payroll cycle. During the Employment Period, the Board will review the Base Salary no less frequently than annually and may, in connection with any review, increase Executive’s Base Salary. Any decision by the Board to increase the Base Salary shall not serve to limit or reduce any other obligation of the Company to Executive under this Agreement.

3.2           Executive shall be eligible for an annual performance-based cash bonus (the “Annual Bonus”). The Annual Bonus will be based upon an “EBITDA Target” established by the Board on an annual basis (and reasonably agreeable to Executive) prior to the conclusion of the first quarter of each fiscal year, with the initial EBITDA Target for fiscal year 2010 being $4 million. The Annual Bonus will be payable in connection with an “Annual Bonus Pool” that the Board will establish, under which Executive and certain other key executives or management-level employees identified by Executive and reasonably acceptable to the Board will be eligible to participate and receive performance-based bonuses similar to Executive’s Annual Bonus hereunder. Each year during the Employment Term, Executive’s share of payments from the Annual Bonus Pool, if any, will be reasonably determined by the Board based upon the number of participants in the Annual Bonus Pool but shall be in an amount to be determined by the Executive up to a maximum of 50% of the Annual Bonus Pool. Under the Annual Bonus Pool, (a) if the Company’s actual EBITDA for a calendar year (as defined below) is 85%-100% of the applicable EBITDA Target, then the Annual Bonus Pool will equal 7.5% of Actual EBITDA; (b) if Actual EBITDA is less than 85% of the applicable EBITDA Target, then the Annual Bonus Pool will be zero and no bonuses (including the Annual Bonus for which Executive is eligible) will be paid; and (c) if Actual EBITDA exceeds the applicable EBITDA Target, then the Annual Bonus Pool will equal 7.5% of that portion of the Actual EBITDA equaling the EBITDA Target, and 15% of that portion of the Actual EBITDA exceeding the EBITDA Target. Payments under the Annual Bonus Pool, including Executive’s Annual Bonus, will be payable only if (i) budgeted working capital and capital expenditure targets and thresholds approved by the Board in the Company’s annual budget or on or prior to the conclusion of the first quarter of each fiscal year are met, and (ii) an audit of the Company’s financial statements has been performed and establishes that Executive (and any other participants in the Annual Bonus Pool) is eligible to receive such payments. In addition, the Annual Bonus Pool for fiscal year 2010 shall be prorated based on a percentage determined by (1) the number of days in fiscal year 2010 from the date of this Agreement through the end of fiscal year 2010 divided by (2) the number of days during fiscal year 2010. The Company’s payment of the Annual Bonus, if any, will be subject to standard deductions and withholdings by the Company. As used herein, “Actual EBITDA” shall mean, for any 12-month fiscal year period, an amount equal to the sum of the amounts for such period of (a) net income, plus (b) interest expense, plus (c) provisions for taxes based on income, plus (d) total depreciation expense, plus (e) total amortization expense, plus (f) any management fees payable to Blackstreet Capital Management, LLC.

3.3           In addition to Base Salary and the Annual Bonus payable as above provided, Executive shall be entitled during the Employment Period to participate in all current incentive, savings, and retirement plans, practices, policies and programs made available from time to time to other management-level employees of the Company and its subsidiaries.

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3.4           Executive and Executive’s qualified family members, as the case may be, shall be eligible to participate in, and shall receive all benefits under, the welfare benefit plans, practices, policies and programs (specifically including but not limited to health insurance benefits) made available from time to time to other management-level employees of the Company and its subsidiaries.

3.5           During the Employment Period, Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in connection with the Business of the Company in accordance with the applicable policies, practices and procedures of the Company and its subsidiaries.

3.6           During the Employment Period, Executive shall be entitled to four weeks of paid vacation per year, provided that any vacation not used in a calendar year shall be permanently lost and not carried over any subsequent calendar year.

3.7           Executive shall report to the Chairman of the Board (as elected by the shareholders of the Company), and any change in the Chairman shall not constitute Good Reason.

4.          Inventions.

4.1           Executive agrees that any Invention (as defined below) shall be the sole and exclusive property of the Company, and further agrees to: (a) promptly and fully inform the Company in writing of any such Inventions; (b) assign to the Company all of Executive’s rights in and to such Inventions, and to applications for patents and/or copyright registrations and to patents and/or copyright registrations granted upon such Inventions in the United States or in any foreign country; and (c) promptly acknowledge and deliver to the Company, without charge to the Company but at the Company’s expense, such written instruments and do such other acts as may be necessary, in the reasonable opinion of the Company, to obtain and maintain patents and/or copyright registrations and to vest the entire rights, interest in and title thereto in the Company.

4.2           Executive and the Company understand that the provisions of this Agreement requiring assignment of Inventions to the Company will not apply to any particular Invention that: (a) Executive develops entirely on his own time, completely outside of Executive’s working hours; and (b) Executive develops without using Company equipment, supplies, facilities or trade-secret or Confidential Information (as defined below); and (c) does not result from any work performed by Executive for the Company; and (d) does not, at the time of conception or reduction to practice, directly relate to the Company’s Business or to its actual or demonstrably anticipated research or development. Any such Invention meeting all of the criteria set forth in clauses (a) through (d) above will be owned entirely by Executive, even if developed by Executive during the term of this Agreement or otherwise during the time period of his employment with the Company. Finally, Executive agrees and covenants that he will not individually file any patent applications relating to Inventions without first obtaining an express release from a duly authorized Company representative.

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4.3           For purposes of this Agreement, the term “Inventions” means all discoveries, improvements, inventions, ideas and works of authorship, whether patentable or copyrightable, conceived or made by Executive either solely or jointly with others, and relating to any consultation, work or services performed by Executive with, for on behalf of or in conjunction with the Company or based on or derived from Confidential Information.

5.          Confidential Information.

5.1           Executive will hold all Confidential Information (as defined below) in the strictest confidence and never use, disclose or publish any Confidential Information without the prior express written permission obtained from a representative duly authorized by the Board. Executive agrees to maintain control over any Confidential Information obtained prior to or during the term of this Agreement, and restrict access thereto to the Company’s employees, agents or other associated parties who have a need to use such Confidential Information for its intended purpose.

5.2           Promptly upon the Company’s written request, all records and any compositions, articles, devices and other items which disclose or embody Confidential Information, including all copies or specimens thereof in Executive’s possession, whether prepared or made by Executive or others, will be destroyed by Executive and Executive will certify in writing to the Company that he has destroyed all Confidential Information and embodiments thereof as required under this Agreement.

5.3           For purposes of this Agreement, the term “Confidential Information” shall mean all information developed by Executive as a result of his work with, for, on behalf of or in conjunction with the Company and any information relating to the Company’s processes and products, including information relating to research, development, manufacturing, know-how, formulae, product ideas, inventions, trade secrets, patents, patent applications, systems, products, programs and techniques and any secret, proprietary or confidential information, knowledge or data of the Company, except such information that was developed by Executive prior to his employment by the Company. All information disclosed to Executive or to which Executive obtains access, whether originated by Executive or by others, which is treated by the Company as “Confidential Information,” or which Executive has a reasonable basis to believe is “Confidential Information,” will be presumed to be “Confidential Information” for purposes of this Agreement. Notwithstanding the foregoing, the term “Confidential Information” will not apply to information which (i) Executive can establish by documentation was known to Executive prior to its receipt by Executive from the Company, (ii) is lawfully disclosed to Executive by a third party not deriving such information from the Company, (iii) is presently in the public domain or becomes a part of the public domain through no fault of Executive, or (iv) is required to be disclosed pursuant to applicable law, rule, regulation, or court or administrative order; provided, however, that Executive shall take reasonable steps to obtain confidential treatment for such items and shall promptly advise the Company of Executive’s notice of any such requirement in order to permit the Company to obtain such confidential treatment on its own behalf.

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6.         No Solicitation of Customers or Employees. Executive acknowledges that the Company has invested substantial time, effort and expense in compiling its confidential, proprietary and trade secret information and in assembling its present staff of personnel. In order to protect the business value of the Company’s confidential, proprietary and trade secret information, during Executive’s employment with the Company and for three years immediately following the termination of that employment with the Company, Executive agrees: (a) that all information regarding customers and prospective customers of the Company, of which Executive learns during his employment with the Company, constitutes “Confidential Information” of the Company; (b) not to, directly or indirectly, induce or solicit any of the Company’s employees (or employees of subsidiaries) to leave their employment with the Company or any subsidiaries; and (c) that he shall not be employed, hired, engaged or otherwise retained (as an employee, consultant or in any other capacity) by WERCS, a Wyoming corporation, or any of its past or present officers, directors or shareholders, or any entity owned or controlled by or affiliated with (directly or indirectly) any of the foregoing without the unanimous prior written consent of the Board.

7.          Termination and Effect. This Agreement will begin on the date first written above and shall continue until the three-year anniversary of such date. Nevertheless, Executive’s employment under this Agreement may be earlier terminated in any of the followings ways: (a) immediately (and automatically) upon Executive’s death; (b) by the Company upon not less than 14 days prior written notice to Executive of the Company’s desire to terminate this Agreement as a result of Executive’s incapacity due to physical or mental illness or injury resulting in Executive’s absence from his full-time duties hereunder for four consecutive weeks, subject to Executive’s right to cure (no more than two times per calendar year) during the 14-day period; (c) by the Company immediately for Good Cause; (d) by the Company upon not less than 14 days prior written notice to Executive for any reason or no reason; (e) by Executive immediately for Good Reason; or (f) by Executive upon not less than 60 days prior written notice to the Company for any reason or no reason.

8.          Effects of Termination. Following any termination of Executive’s employment under this Agreement, all compensation and benefits provided to Executive under this Agreement shall cease to accrue as of the date of such termination (with Executive entitled to all Base Salary and benefits hereunder accrued through the effective date of termination), except as set forth in the paragraphs below.

8.1           In the case of a termination arising under Section 7(a) from Executive’s death or under Section 7(b) from Executive’s incapacity, the Company shall, for a period of one month following such death, pay to the estate of Executive an amount equal to Executive’s monthly payment of Base Salary and continue the welfare benefit programs contemplated under Section 3.4 above, including paying all premiums for coverage for Executive’s dependent family members under all health, hospitalization, disability, dental, life and other insurance plans that the Company maintained at the time of Executive’s death.

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8.2           In the case of a termination arising under Section 7(d) from the Company’s termination without Good Cause, or under Section 7(e) from Executive’s termination with Good Reason, then, subject in all cases to Executive’s execution and delivery to the Company of a release and waiver of claims in customary and negotiated form, the Company shall: (a) pay Executive severance pay in the form of continuation of Executive’s then-current Base Salary, less standard deductions and withholdings, for a period of 12 months from the effective date of Executive’s termination of employment with Company, with such payments to be made at the same time as the Base Salary otherwise would have been payable had Executive not been terminated; and (b) if Executive elects continued coverage under COBRA, reimburse Executive for his health insurance premiums (for both Executive and his family) for a period of 12 months from the effective date of Executive’s termination of employment with Company, to the extent that the Company was paying such premiums at the time of termination.

8.3           In the case of a termination arising under Section 7(c) from the Company’s termination with Good Cause or under Section 7(f) from the resignation of the Executive, then (a) no severance or continued benefits shall be due to Executive and (b), if there are any damages to the Company arising by virtue of the events, actions or omissions constituting Good Cause, then the Company shall be entitled to offset the amount of any such damages against any amounts owed to Executive under this Section 8.

9.          Return of Company Property. All records, designs, patents, business plans, financial statements, manuals, memoranda, lists, and other property delivered to or compiled by Executive by or on behalf of the Company (or its subsidiaries or other affiliates) or its representatives, vendors, or customers that pertain to the Business of the Company shall be and remain the property of the Company and be subject at all times to its discretion and control. Likewise, all correspondence, reports, records, charts, advertising materials, and other similar data pertaining to the Business, activities, or future plans of the Company. Any such information or data that is collected by or in the possession of Executive shall be delivered promptly to the Company upon termination of Executive’s employment.

10.         Non-Competition Covenant.

10.1         In consideration of the various benefits provided by the Company to Executive under this Agreement, Executive agrees to be bound by the restrictive covenant set forth in this Section. In this regard, Executive recognizes and acknowledges the competitive and proprietary nature of the Business. Accordingly, Executive agrees that, during the applicable Restricted Period (as defined below), Executive shall not, without the prior written consent of the Company (which the Company may withhold or condition in its sole and absolute discretion), for himself or on behalf of any other person or entity, directly or indirectly, either as principal, agent, shareholder, lender, consultant, officer, director, employee, agent, representative or in any other capacity, own, manage, operate or control, or be concerned, connected or employed by, or otherwise associate in any manner with, or engage in or have any financial interest in, any enterprise engaging in the Restricted Business (as defined below) anywhere in the Restricted Territory (as defined below).

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10.2         Nothing contained in this Agreement shall preclude Executive from purchasing or owning common stock or equity in any company engaging in the Restricted Business if such stock is publicly traded and Executive’s holdings therein do not exceed one percent of the issued and outstanding capital stock of such company. If any part of this Section should be determined by a court of competent jurisdiction to be unreasonable in duration, geographic area, or scope, then this Section is intended to and shall extend only for such period of time, in such geographic area and with respect to such activity as is determined by such court to be reasonable.

10.3         For purposes of this Agreement: (a) “Restricted Period” means the period commencing on the date of this Agreement and ending, as applicable, on either (i) the three-year anniversary of the expiration or termination of this Agreement (except for any termination covered in the following clause (ii)), or (ii) the two-year anniversary of any termination of this Agreement occurring without Good Cause or with Good Reason under Section 7(c) or 7(e), respectively; (b) “Restricted Business” means the Business of the Company (including its subsidiaries) as conducted as of the date of expiration or termination of this Agreement (and as previously conducted within the two years prior to the date of such expiration or termination or proposed to be conducted as of the date of such expiration or termination), including any substantially similar business that is competitive with the Business; and (c) “Restricted Territory” means anywhere in the United States where the Company, directly or indirectly through any of its subsidiaries, conducts the Business as of the date of expiration or termination of this Agreement, including anywhere the Company proposes to conduct the Business within six months of the date of such expiration or termination.

11.         Indemnification. In the event Executive is made a party to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative (other than an action directly by the Company against Executive), by reason of or in connection with the fact that Executive is or was performing services to the Company under this Agreement or prior to this Agreement, then the Company shall indemnify Executive against all expenses (including reasonable attorneys’ fees), judgments, fines and amounts paid in settlement, as actually and reasonably incurred by Executive in connection therewith to the maximum extent permitted by applicable law. In the event that both Executive and the Company are made a party to the same third-party action, complaint, suit or proceeding, the Company agrees to engage competent legal representation, and Executive agrees to use the same representation, provided that if counsel selected by the Company shall have a conflict of interest that prevents such counsel from representing Executive, Executive may engage separate counsel and the Company shall pay all reasonable attorneys’ fees of such separate counsel. To the maximum extent permitted by law, Executive shall not be entitled to indemnification or expense advances under this Agreement in any case where he has exhibited gross negligence or willful misconduct, or performed criminal or fraudulent acts; and the Company may withhold expense advances if it reasonably determines that Executive is not entitled to indemnification hereunder because of gross negligence or willful misconduct, or the performance of criminal or fraudulent acts.

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12.          Parachute Payments. If any payment or benefit Executive would receive from the Company pursuant to or in connection with a “Change in Control” as defined below (any “Payment”) would (i) constitute a “parachute payment” within the meaning of Code §280G, and (ii) but for this sentence, be subject to the excise tax imposed by Code §4999 (the “Excise Tax”), then such Payment shall be adjusted to equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment (prior to adjustment) that would result in no portion of the Payment being subject to the Excise Tax or (y) the largest portion of the Payment (prior to adjustment), which, after taking into account all applicable federal, state and local employment taxes, income taxes and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater amount of the Payment (than that calculated under clause (x) above) notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order unless Executive elects, in writing, a different order (provided, however, that such election shall be subject to the Company’s approval if made on or after the effective date of the event that triggers the Payment): reduction of cash payments; cancellation of accelerated vesting of stock options (if any); and reduction of employee benefits. In the event that acceleration of vesting of the stock options is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of Executive’s stock options (i.e., the earliest granted stock option will be cancelled last) unless Executive elects, in writing, a different order for cancellation. Notwithstanding anything to the contrary herein, Executive shall be responsible for any costs and expenses (whether or not incurred by the Company) in connection with any reductions made (or the determination thereof) pursuant to this Section 12. For purposes of this Section, “Change in Control” shall have the meaning (or any corresponding meaning) contained in the Treasury Regulations promulgated under Code §280G.

13.        No Conflicting Agreements. Executive represents and warrants to the Company that the execution of this Agreement by Executive and Executive’s employment by the Company, and the performance of Executive’s duties hereunder, will not violate or be a breach of any agreement with any former employer, client or any other person, firm or entity to which Executive is a party. Executive also represents and warrants that except for his affiliation with WCR, LLC, a Delaware limited liability company, he is not affiliated in any manner (whether as a stockholder, member, partner, manager, director, officer, employee or otherwise) with any person or entity that has any business relationship with the Company. Furthermore, Executive agrees to indemnify the Company from and against any and all losses, liabilities, damages and claims, including but not limited to reasonable attorneys’ fees and costs and expenses of investigation, arising from any third-party claim made against the Company and based upon or arising out of any non-competition or confidentiality agreement between or among Executive and any such third party.

14.         Assignment; Binding Effect. Executive understands that the Company is employing him on the basis of his personal qualifications, experience and skills. Therefore, Executive agrees that he cannot assign all or any portion of Executive’s obligations of performance under this Agreement. Subject to the preceding two sentences, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective heirs, legal representatives, and permitted successors and assigns.

15.         Complete Agreement. This Agreement is not a promise of future employment. Except as specifically provided herein, Executive has received no oral representations, and has no other understandings or agreements with the Company (oral or written) or any of its officers, directors or representatives covering the same subject matter as this Agreement. This written Agreement is the final, complete and exclusive statement and expression of the agreement between the Company and Executive pertaining to Executive’s employment. This written Agreement may not be later modified except in a writing signed by a duly authorized officer of the Company and Executive, and no term of this Agreement may be waived except by a writing signed by the party waiving the benefit of such term. This Agreement hereby supersedes any other employment agreements or understandings, written or oral, between the Company and Executive.

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16.Notice. Whenever any notice is required hereunder, it shall be given in writing addressed as follows:

If to the Company:	11550 “I” Street, Suite 150
	Omaha, NE 68137
	Attention:  Chief Financial Officer and  Chairman of the Board
With a copy to:	Maslon Edelman Borman & Brand, LLP
	3300 Wells Fargo Center
	90 South Seventh Street
	Minneapolis, MN 55402
	Attention:  Paul D. Chestovich
If to Executive:	John Quandahl
	10602 Ridgemont Circle
	Omaha, NE 68136

Notice shall be deemed given and effective on the earlier of three days after the deposit in the U.S. mail of a writing addressed as above and sent first-class mail, certified, return receipt requested, or when actually received. Either party may change the address for notice by notifying the other party of such change in accordance with this Section.

17.         Severability. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative.

18.         Dispute Resolution.

18.1         To the greatest extent possible, the parties will endeavor to resolve any disputes relating to the Agreement through amicable negotiations. Failing an amicable settlement, any controversy, claim or dispute arising under or relating to this Agreement, including the existence, validity, interpretation, performance, termination or breach of this Agreement, will finally be settled by binding arbitration before a single arbitrator (the “Arbitration Tribunal”) which will be jointly appointed by the parties. The Arbitration Tribunal shall self-administer the arbitration proceedings utilizing the Commercial Rules of the American Arbitration Association (“AAA”); provided, however, the AAA shall not be involved in administration of the arbitration. The arbitrator must be a retired judge of a state or federal court of the United States or a licensed lawyer with at least 15 years of corporate or commercial law experience. If the parties cannot agree on an arbitrator, either party may request a court of competent jurisdiction to appoint an arbitrator, which appointment will be final.

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18.2         The arbitration will be held in Wilmington, Delaware. Each party will have discovery rights as provided by the Federal Rules of Civil Procedure within the limits imposed by the arbitrator; provided, however, that all such discovery will be commenced and concluded within 60 days of the selection of the arbitrator. It is the intent of the parties that any arbitration will be concluded as quickly as reasonably practicable. Once commenced, the hearing on the disputed matters will be held four days a week until concluded, with each hearing date to begin at 9:00 a.m. and to conclude at 5:00 p.m. The arbitrator will use all reasonable efforts to issue the final written report containing award or awards within a period of five business days after closure of the proceedings. Failure of the arbitrator to meet the time limits of this Section will not be a basis for challenging the award. The Arbitration Tribunal will not have the authority to award punitive damages to either party. Each party will bear its own expenses, but the parties will share equally the expenses of the Arbitration Tribunal. The Arbitration Tribunal shall award attorneys’ fees and other related costs payable by the losing party to the successful party as it deems equitable. This Agreement will be enforceable, and any arbitration award will be final and non-appealable, and judgment thereon may be entered in any court of competent jurisdiction. Notwithstanding the foregoing, claims for injunctive relief may be brought in a state or federal court in the state court in Delaware.

19.         Equitable Relief. Executive acknowledges and agrees that it would be difficult to fully compensate the Company for damages resulting from the breach or threatened breach of the covenants contained in Sections 4, 5, 6 and 10 of this Agreement, and that any such breach would cause the Company irreparable harm. Accordingly, the Company will be entitled to seek injunctive relief, including but not limited to temporary restraining orders, preliminary injunctions and permanent injunctions, to enforce the terms thereof, without the need to demonstrate irreparable harm or post any bond. This right to injunctive relief will not, however, diminish any of the Company’s other legal rights hereunder or at law.

20.         Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Delaware, notwithstanding the conflicts-of-law provisions of such state.

21.         WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER OR UNDER ANY OF THE OTHER DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 21 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

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22.         Further Assurances. Each party shall, without further consideration, execute such additional documents as may be reasonably required in order to carry out the purpose and intent of this Agreement.

23.         Counterparts and Delivery. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. Counterpart signatures delivered by facsimile or other means of electronic transmission shall be valid and binding to the same as signatures delivered in original.

*      *     *     *     *

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In Witness Whereof, the parties hereto have executed this Agreement as of the date first above written.

COMPANY:	EXECUTIVE:
WESTERN CAPITAL RESOURCES, INC.
By:
Name:	John Quandahl
Its:

Signature Page to Employment Agreement

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: May 14, 2013	/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: May 14, 2013	/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 March 31, 2013 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

May 14, 2013

/s/ Stephen Irlbeck

Stephen Irlbeck

Chief Financial Officer

May 14, 2013

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Subsequent Events (Details Textual) (Subsequent Event [Member])	3 Months Ended
	Mar. 31, 2013
Subsequent Event [Member]
Deferred Compensation Arrangement with Individual, Description	If the Company’s actual adjusted EBITDA performance for a particular annual period ranges from 85-100% of the established adjusted EBITDA target, management will be entitled to receive a cash bonus consisting of 7.5% of the actual adjusted EBITDA. Mr. Quandahl’s share of the bonus pool for any particular year is expected to be 10-50% (but may be more), and the bonus pool will be payable to other management-level participants in the bonus pool, if any, selected from time to time by the Board of Directors in its discretion. If the Company’s actual adjusted EBITDA performance for a particular annual period is less than 85% of the established adjusted EBITDA target, no bonus will be payable, and if such performance exceeds 100% of the established adjusted EBITDA target, the bonus pool will include 15% of the amount by which such performance exceeds the target. In addition to the adjusted EBITDA threshold, the amended and restated agreement also contains capital expenditure and working capital thresholds.

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Loans Receivable Allowance (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Loans receivable allowance, beginning of period	$ 1,191,000	$ 1,001,000
Provision for loan losses charged to expense	321,000	276,000
Charge-offs, net	(511,000)	(413,000)
Loans receivable allowance, end of period	$ 1,001,000	$ 864,000

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Loans Receivable Allowance

3 Months Ended

Mar. 31, 2013

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 41% 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 – 41%; 31 to 60 days – 66%; 61 to 90 days – 83%; 91 to 120 days – 86%; and 121 to 180 days – 91%.  A rollforward of the Company’s loans receivable allowance for the three months ended March 31, 2013 and 2012 is as follows:

	Three Months Ended March 31,
	2013			2012
Loans receivable allowance, beginning of period	$	1,191,000		$	1,001,000
Provision for loan losses charged to expense		321,000			276,000
Charge-offs, net		(511,000	)		(413,000	)
Loans receivable allowance, end of period	$	1,001,000		$	864,000

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Notes Payable - Long Term (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Notes Payable	$ 2,779,278	$ 2,960,065
Less current maturities	(29,278)	(210,065)
Notes Payable, Noncurrent	2,750,000	2,750,000
Note Payable to River City Equity [Member]
Notes Payable	2,750,000	2,750,000
Note Payable to Related Party1 [Member]
Notes Payable	0	94,397
Note Payable to Related Party2 [Member]
Notes Payable	$ 29,278	$ 115,668

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Note Payable - Short Term (Details Textual) (Notes Payable to Shareholder [Member])	3 Months Ended
	Mar. 31, 2013
Notes Payable to Shareholder [Member]
Debt Instrument, Maturity Date	Apr. 30, 2013

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Notes Payable - Long Term (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2013
Note Payable to River City Equity [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 3,000,000
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate	12.00%
Debt Instrument, Maturity Date	Mar. 31, 2014
Note Payable to Related Party1 [Member]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate	10.00%
Debt Instrument, Maturity Date	Mar. 01, 2013
Note Payable to Related Party2 [Member]
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate	10.00%
Debt Instrument, Maturity Date	Apr. 01, 2013

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Other Expense (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Store expenses
Bank fees	$ 106,943	$ 81,620
Collection costs	111,733	128,698
Repair and Maintenance	65,254	34,191
Supplies	74,480	87,925
Telephone	39,581	33,834
Utilities and network lines	200,845	176,172
Other	311,915	209,838
Total Store expenses	910,751	752,278
General & administrative expenses
Professional fees	115,103	85,923
Management and consulting fees	107,687	133,750
Other	59,727	84,500
Total General & administrative expenses	$ 282,517	$ 304,173

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Loans Receivable

3 Months Ended

Mar. 31, 2013

Receivables [Abstract]

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

3. Loans Receivable –

At March 31, 2013 and December 31, 2012 our outstanding loans receivable aging was as follows:

March 31, 2013
	Payday			Installment			Pawn & Title		Total
Current	$	3,507,129		$	276,574		$	153,667	$	3,937,370
1-30		195,274			47,605			-		242,879
31-60		163,147			25,307			-		188,454
61-90		190,109			14,196			-		204,305
91-120		184,823			7,323			-		192,146
121-150		179,651			2,705			-		182,356
151-180		187,026			1,244			-		188,270
		4,607,159			374,954			153,667		5,135,780
Allowance for losses		(935,000	)		(66,000	)		-		(1,001,000	)
	$	3,672,159		$	308,954		$	153,667	$	4,134,780

December 31, 2012
	Payday			Installment			Pawn & Title		Total
Current	$	4,318,517		$	391,137		$	171,344	$	4,880,998
1-30		269,091			47,538			-		316,629
31-60		234,514			16,285			-		250,799
61-90		216,717			3,201			-		219,918
91-120		202,642			1,051			-		203,693
121-150		215,562			388			-		215,950
151-180		187,523			-			-		187,523
		5,644,566			459,600			171,344		6,275,510
Allowance for losses		(1,119,000	)		(72,000	)		-		(1,191,000	)
	$	4,525,566		$	387,600		$	171,344	$	5,084,510

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Segment Information (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Revenues	$ 8,089,086	$ 7,516,770
Net income	491,276	789,042
Total segment assets	22,474,846	21,662,004	23,373,548
Consumer Finance [Member]
Revenues	3,057,290	2,789,116
Net income	410,341	368,771
Total segment assets	15,133,343	14,677,536
Cellular Retail [Member]
Revenues	5,031,796	4,727,654
Net income	80,935	420,271
Total segment assets	$ 7,341,503	$ 6,984,468

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2013	Dec. 31, 2012
ASSETS
Cash	$ 2,398,242	$ 2,246,619
Loans receivable (less allowance for losses of $1,001,000 and $1,191,000)	4,134,780	5,084,510
Inventory	1,142,673	1,084,510
Prepaid expenses and other	434,186	486,239
Deferred income taxes	414,000	484,000
TOTAL CURRENT ASSETS	8,523,881	9,385,878
PROPERTY AND EQUIPMENT	823,578	855,719
GOODWILL	12,774,069	12,774,069
INTANGIBLE ASSETS	221,164	230,891
OTHER	132,154	126,991
TOTAL ASSETS	22,474,846	23,373,548
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities	1,934,688	3,119,786
Note payable - short-term	405,163	405,163
Current portion long-term debt	29,278	210,065
Deferred revenue	233,963	293,294
TOTAL CURRENT LIABILITIES	2,603,092	4,028,308
LONG-TERM LIABILITIES
Note payable - long-term	2,750,000	2,750,000
Deferred income taxes	924,000	871,000
TOTAL LONG-TERM LIABILITIES	3,674,000	3,621,000
TOTAL LIABILITIES	6,277,092	7,649,308
SHAREHOLDERS' EQUITY
Common stock, no par value, 240,000,000 shares authorized, 60,220,165 and 60,397,780 shares issued and outstanding.	0	0
Additional paid-in capital	22,353,600	22,371,362
Accumulated deficit	(6,155,846)	(6,647,122)
TOTAL SHAREHOLDERS' EQUITY	16,197,754	15,724,240
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 22,474,846	$ 23,373,548

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

3 Months Ended

Mar. 31, 2013

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 months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. 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, 2012. The condensed consolidated balance sheet at December 31, 2012, 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), Express Pawn, Inc. (EP), and PQH, Inc. (PQH), collectively referred to as the “Company”, provides retail financial services and retail cellular phone sales to individuals primarily in the Midwestern United States.  The Company operated 51 “Payday” stores and one payday/pawn store in nine states (Colorado, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming) as of March 31, 2013. The Company operated 50 cellular retail stores in 14 states (Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon, Texas, and Washington) as of March 31, 2013.  The consolidated financial statements include the accounts of WCR, WFL, PQH, and EP. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company, through its “Consumer Finance” division, provides non-recourse cash advance and installment loans, collateralized non-recourse pawn loans, check cashing and other money services.  The short-term uncollateralized non-recourse consumer loans, known as “cash advance” 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 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 per each $100 borrowed. To repay a 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 and are unsecured. The fee and interest rate on installment loans vary based on applicable regulations.

In August 2012, we opened our first pawn store by converting an existing payday location into a joint payday/pawn store. The company provides collateralized non-recourse loans, commonly known as “pawn loans”, with a maturity of four months. Allowable service charges will vary by state and loan size. Our pawn loans earn 15% per month. The loan amount varies depending on the valuation of each item pawned. We generally lend from 30% to 55% of the collateral’s estimated resale value depending on an evaluation of several factors. Customers then have the option to redeem the pawned merchandise during the term or at expiration of the pawn loan or forfeiting the merchandise to us on expiration. At our pawn stores we sell merchandise that was acquired through either customer forfeiture of pawn collateral or second-hand merchandise purchased from customers or consigned to us.

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 “Cellular Retail” division that is an authorized Cricket dealer selling cellular phones and accessories, providing ancillary services and accepting service payments from 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, percentage of existing pawn loans that will be forfeited, 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 recognizes fees on redeemed pawn loans on a constant-yield basis ratably over the loans’ terms. No fees are recognized on forfeited pawn loans. The Company records revenue from check cashing fees, sales of phones, accessories, and pawn inventory, and fees from all other services in the period in which the sale or service is completed.  

Loans Receivable Allowance

The Company maintains a loan loss allowance for anticipated losses for our payday and installment loans. We do not record loan losses or charge-offs of pawn or title loans because the value of the collateral exceeds the loan amount. To estimate the appropriate level of the loan loss allowance, we consider the amount of outstanding loan principal, interest and fees, historical charge offs, current and expected collection patterns and current economic trends. Our current loan loss allowance is based on our historical net write off percentage, net charge offs to loan principal, interest and fee amounts that originated during the last 24 months, applied against the balance of loan principal, interest and fees outstanding. The Company also periodically performs a look-back analysis on its loan loss allowance to verify 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 unpaid principal, interest and fee balances of payday, installment, pawn and title loans that have not reached their maturity date, and “late” payday loans that have reached maturity within the last 180 days and have remaining outstanding balances.  Late payday loans generally are unpaid loans 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.   Loans are carried at cost plus accrued interest or fees less payments made and 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 and charge-off and recovery rates.  The Company utilizes a software program to assist with the tracking of its historical portfolio statistics.   All returned 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 Per Common Share

Basic net income per common share is computed by dividing the income available to common shareholders by the weighted average number of common shares outstanding for the year. There were no dilutive securities at March 31, 2013. Diluted net income per common share, applicable to the three months ended March 31, 2012, is computed by dividing the net income 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 March 31, 2012 were anti-dilutive and therefore excluded from the dilutive net income per share computation.  

Segment Reporting

The Company has grouped its operations into two segments – Consumer Finance division and Cellular Retail division. The Consumer Finance division provides financial and ancillary services. The Cellular Retail division is an authorized Cricket and Revol dealer selling cellular phones and accessories, providing ancillary services and accepting service payments from customers.

Recent Accounting Pronouncements

No 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.

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

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

Segment information related to the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31, 2013						Three Months Ended March 31, 2012
	Consumer Finance		Cellular Retail		Total		Consumer Finance		Cellular Retail		Total
Revenues	$	3,057,290	$	5,031,796	$	8,089,086	$	2,789,116	$	4,727,654	$	7,516,770
Net income	$	410,341	$	80,935	$	491,276	$	368,771	$	420,271	$	789,042
Total segment assets	$	15,133,343	$	7,341,503	$	22,474,846	$	14,677,536	$	6,984,468	$	21,662,004

XML

Loans Receivable (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012	Mar. 31, 2012	Dec. 31, 2011
Outstanding loans receivable, Gross	$ 5,135,780	$ 6,275,510
Allowance for losses	(1,001,000)	(1,191,000)	(864,000)	(1,001,000)
Outstanding loans receivable, Net	4,134,780	5,084,510
Payday and Title Loans [Member]
Outstanding loans receivable, Gross	4,607,159	5,644,566
Allowance for losses	(935,000)	(1,119,000)
Outstanding loans receivable, Net	3,672,159	4,525,566
Installment Loans [Member]
Outstanding loans receivable, Gross	374,954	459,600
Allowance for losses	(66,000)	(72,000)
Outstanding loans receivable, Net	308,954	387,600
Pawn & Title [Member]
Outstanding loans receivable, Gross	153,667	171,344
Allowance for losses	0	0
Outstanding loans receivable, Net	153,667	171,344
Current [Member]
Outstanding loans receivable, Gross	3,937,370	4,880,998
Current [Member] | Payday and Title Loans [Member]
Outstanding loans receivable, Gross	3,507,129	4,318,517
Current [Member] | Installment Loans [Member]
Outstanding loans receivable, Gross	276,574	391,137
Current [Member] | Pawn & Title [Member]
Outstanding loans receivable, Gross	153,667	171,344
Delinquent 1 to 30 Days [Member]
Outstanding loans receivable, Gross	242,879	316,629
Delinquent 1 to 30 Days [Member] | Payday and Title Loans [Member]
Outstanding loans receivable, Gross	195,274	269,091
Delinquent 1 to 30 Days [Member] | Installment Loans [Member]
Outstanding loans receivable, Gross	47,605	47,538
Delinquent 1 to 30 Days [Member] | Pawn & Title [Member]
Outstanding loans receivable, Gross	0	0
Delinquent 31 to 60 Days [Member]
Outstanding loans receivable, Gross	188,454	250,799
Delinquent 31 to 60 Days [Member] | Payday and Title Loans [Member]
Outstanding loans receivable, Gross	163,147	234,514
Delinquent 31 to 60 Days [Member] | Installment Loans [Member]
Outstanding loans receivable, Gross	25,307	16,285
Delinquent 31 to 60 Days [Member] | Pawn & Title [Member]
Outstanding loans receivable, Gross	0	0
Delinquent 61 to 90 Days [Member]
Outstanding loans receivable, Gross	204,305	219,918
Delinquent 61 to 90 Days [Member] | Payday and Title Loans [Member]
Outstanding loans receivable, Gross	190,109	216,717
Delinquent 61 to 90 Days [Member] | Installment Loans [Member]
Outstanding loans receivable, Gross	14,196	3,201
Delinquent 61 to 90 Days [Member] | Pawn & Title [Member]
Outstanding loans receivable, Gross	0	0
Delinquent 91 to 120 Days [Member]
Outstanding loans receivable, Gross	192,146	203,693
Delinquent 91 to 120 Days [Member] | Payday and Title Loans [Member]
Outstanding loans receivable, Gross	184,823	202,642
Delinquent 91 to 120 Days [Member] | Installment Loans [Member]
Outstanding loans receivable, Gross	7,323	1,051
Delinquent 91 to 120 Days [Member] | Pawn & Title [Member]
Outstanding loans receivable, Gross	0	0
Delinquent 121 to 150 Days [Member]
Outstanding loans receivable, Gross	182,356	215,950
Delinquent 121 to 150 Days [Member] | Payday and Title Loans [Member]
Outstanding loans receivable, Gross	179,651	215,562
Delinquent 121 to 150 Days [Member] | Installment Loans [Member]
Outstanding loans receivable, Gross	2,705	388
Delinquent 121 to 150 Days [Member] | Pawn & Title [Member]
Outstanding loans receivable, Gross	0	0
Delinquent 151 to 180 Days [Member]
Outstanding loans receivable, Gross	188,270	187,523
Delinquent 151 to 180 Days [Member] | Payday and Title Loans [Member]
Outstanding loans receivable, Gross	187,026	187,523
Delinquent 151 to 180 Days [Member] | Installment Loans [Member]
Outstanding loans receivable, Gross	1,244	0
Delinquent 151 to 180 Days [Member] | Pawn & Title [Member]
Outstanding loans receivable, Gross	$ 0	$ 0

XML

Risks Inherent in the Operating Environment

3 Months Ended

Mar. 31, 2013

Risks and Uncertainties [Abstract]

Concentration Risk Disclosure [Text Block]

2. Risks Inherent in the Operating Environment –

The Company’s Consumer Finance division 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 as 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 with reduced profitability due to these regulatory changes.

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.

As evidenced in the previous paragraphs, 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 three months ended March 31, 2013 and 2012, the Company had significant revenues by state (shown as a percentage of applicable division’s revenue when over 10%) as follows:

Consumer Finance Division							Cellular Retail Division
	2013 % of Revenues			2012 % of Revenues				2013 % of Revenues			2012 % of Revenues
Nebraska		29	%		26	%	Missouri		10	%		18	%
Wyoming		15	%		15	%	Nebraska		22	%		13	%
North Dakota		18	%		18	%	Texas		13	%		11	%
Iowa		11	%		12	%	Indiana		*	%		12	%
							Oklahoma		*	%		10	%

* Less than 10%

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Allowance for losses (in dollars)	$ 1,001,000	$ 1,191,000
Common stock, shares authorized	240,000,000	240,000,000
Common stock, shares issued	60,220,165	60,397,780
Common stock, shares outstanding	60,220,165	60,397,780

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Loans Receivable (Tables)

3 Months Ended

Mar. 31, 2013

Receivables [Abstract]

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

At March 31, 2013 and December 31, 2012 our outstanding loans receivable aging was as follows:

March 31, 2013
	Payday			Installment			Pawn & Title		Total
Current	$	3,507,129		$	276,574		$	153,667	$	3,937,370
1-30		195,274			47,605			-		242,879
31-60		163,147			25,307			-		188,454
61-90		190,109			14,196			-		204,305
91-120		184,823			7,323			-		192,146
121-150		179,651			2,705			-		182,356
151-180		187,026			1,244			-		188,270
		4,607,159			374,954			153,667		5,135,780
Allowance for losses		(935,000	)		(66,000	)		-		(1,001,000	)
	$	3,672,159		$	308,954		$	153,667	$	4,134,780

December 31, 2012
	Payday			Installment			Pawn & Title		Total
Current	$	4,318,517		$	391,137		$	171,344	$	4,880,998
1-30		269,091			47,538			-		316,629
31-60		234,514			16,285			-		250,799
61-90		216,717			3,201			-		219,918
91-120		202,642			1,051			-		203,693
121-150		215,562			388			-		215,950
151-180		187,523			-			-		187,523
		5,644,566			459,600			171,344		6,275,510
Allowance for losses		(1,119,000	)		(72,000	)		-		(1,191,000	)
	$	4,525,566		$	387,600		$	171,344	$	5,084,510

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DOCUMENT AND ENTITY INFORMATION	3 Months Ended
	Mar. 31, 2013	May 14, 2013
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		60,220,165
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2013
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013

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Loans Receivable Allowance (Tables)

3 Months Ended

Mar. 31, 2013

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 three months ended March 31, 2013 and 2012 is as follows:

	Three Months Ended March 31,
	2013			2012
Loans receivable allowance, beginning of period	$	1,191,000		$	1,001,000
Provision for loan losses charged to expense		321,000			276,000
Charge-offs, net		(511,000	)		(413,000	)
Loans receivable allowance, end of period	$	1,001,000		$	864,000

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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
REVENUES
Payday loan fees	$ 2,395,993	$ 2,307,901
Phones and accessories	3,321,920	2,741,696
Cellular sales & service fees	1,726,573	1,995,025
Installment interest income	257,642	196,509
Check cashing fees	152,638	195,812
Other income and fees	234,320	79,827
Revenues	8,089,086	7,516,770
STORE EXPENSES
Phone and accessories cost of sales	2,561,842	1,835,075
Salaries and benefits	1,756,526	1,687,392
Occupancy	651,237	552,308
Provisions for loan losses	321,347	276,390
Advertising	88,887	77,121
Depreciation	81,653	69,245
Amortization of intangible assets	39,227	59,401
Other	910,751	752,278
Store Expenses	6,411,470	5,309,210
INCOME FROM STORES	1,677,616	2,207,560
GENERAL & ADMINISTRATIVE EXPENSES
Salaries and benefits	514,014	527,732
Depreciation	6,192	5,492
Interest expense	83,617	78,121
Other	282,517	304,173
General and Administrative Expense	886,340	915,518
INCOME BEFORE INCOME TAXES	791,276	1,292,042
INCOME TAX EXPENSE	300,000	503,000
NET INCOME	491,276	789,042
SERIES A CONVERTIBLE PREFERRED STOCK DIVIDENDS (assumes all paid)	0	(525,000)
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$ 491,276	$ 264,042
NET INCOME PER COMMON SHARE -
Basic and diluted (in dollars per share)	$ 0.01	$ 0.04
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
Basic and diluted (in shares)	60,320,814	6,512,273

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Other Expense

3 Months Ended

Mar. 31, 2013

Other Cost and Expense Disclosure, Operating [Abstract]

Schedule of Other Operating Cost and Expense, by Component [Table Text Block]

A breakout of other expense is as follows:

	Three Months Ended March 31,
	2013		2012
Store expenses
Bank fees	$	106,943	$	81,620
Collection costs		111,733		128,698
Repair and Maintenance		65,254		34,191
Supplies		74,480		87,925
Telephone		39,581		33,834
Utilities and network lines		200,845		176,172
Other		311,915		209,838
	$	910,751	$	752,278
General & administrative expenses
Professional fees	$	115,103	$	85,923
Management and consulting fees		107,687		133,750
Other		59,727		84,500
	$	282,517	$	304,173

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Notes Payable - Long Term

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Long-term Debt [Text Block]

6. Notes Payable – Long Term –

The Company’s long-term debt is as follows:

	March 31, 2013			December 31, 2012
Note payable (with a credit limit of $3,000,000) to River City Equity, Inc., a related party, with interest payable monthly at 12% due March 31, 2014 and upon certain events  can be collateralized by substantially all assets of WCR.	$	2,750,000		$	2,750,000
Note payable to a related party with interest payable monthly at 10%, due March 1, 2013 and collateralized by substantially all assets of select locations of PQH.		-			94,397
Note payable to a related party with interest payable monthly at 10%, due April 1, 2013 and collateralized by substantially all assets of select locations of PQH.		29,278			115,668
Total		2,779,278			2,960,065
Less current maturities		(29,278	)		(210,065	)
	$	2,750,000		$	2,750,000

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Risks Inherent in the Operating Environment (Details) (Geographic Concentration Risk [Member])	3 Months Ended
	Mar. 31, 2013		Mar. 31, 2012
Consumer Finance Division [Member] | Nebraska [Member]
Revenues percentage by state	29.00%		26.00%
Consumer Finance Division [Member] | Wyoming [Member]
Revenues percentage by state	15.00%		15.00%
Consumer Finance Division [Member] | North Dakota [Member]
Revenues percentage by state	18.00%		18.00%
Consumer Finance Division [Member] | Iowa [Member]
Revenues percentage by state	11.00%		12.00%
Cellular Retail Division [Member] | Nebraska [Member]
Revenues percentage by state	22.00%		13.00%
Cellular Retail Division [Member] | Missouri [Member]
Revenues percentage by state	10.00%		18.00%
Cellular Retail Division [Member] | Texas [Member]
Revenues percentage by state	13.00%		11.00%
Cellular Retail Division [Member] | Indiana [Member]
Revenues percentage by state	0.00%	[1]	12.00%
Cellular Retail Division [Member] | Oklahoma [Member]
Revenues percentage by state	0.00%	[1]	10.00%

[1] Less than 10%

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Note Payable - Short Term (Tables)

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Schedule of Short-term Debt [Table Text Block]

The Company’s short-term debt is as follows:

	March 31, 2013		December 31, 2012
Note payable to shareholders related to preferred stock conversion to common, due and payable, if no earlier payment demand is made, on April 30, 2013.  The note accrues no interest.	$	405,163	$	405,163

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

3 Months Ended

Mar. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Accounting, Policy [Policy 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 months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. 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, 2012. The condensed consolidated balance sheet at December 31, 2012, 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 [Policy Text Block]

Nature of Business

Western Capital Resources, Inc. (WCR), through its wholly owned operating subsidiaries, Wyoming Financial Lenders, Inc. (WFL), Express Pawn, Inc. (EP), and PQH, Inc. (PQH), collectively referred to as the “Company”, provides retail financial services and retail cellular phone sales to individuals primarily in the Midwestern United States.  The Company operated 51 “Payday” stores and one payday/pawn store in nine states (Colorado, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Utah, Wisconsin and Wyoming) as of March 31, 2013. The Company operated 50 cellular retail stores in 14 states (Arizona, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Missouri, Nebraska, Ohio, Oklahoma, Oregon, Texas, and Washington) as of March 31, 2013.  The consolidated financial statements include the accounts of WCR, WFL, PQH, and EP. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company, through its “Consumer Finance” division, provides non-recourse cash advance and installment loans, collateralized non-recourse pawn loans, check cashing and other money services.  The short-term uncollateralized non-recourse consumer loans, known as “cash advance” 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 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 per each $100 borrowed. To repay a 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 and are unsecured. The fee and interest rate on installment loans vary based on applicable regulations.

In August 2012, we opened our first pawn store by converting an existing payday location into a joint payday/pawn store. The company provides collateralized non-recourse loans, commonly known as “pawn loans”, with a maturity of four months. Allowable service charges will vary by state and loan size. Our pawn loans earn 15% per month. The loan amount varies depending on the valuation of each item pawned. We generally lend from 30% to 55% of the collateral’s estimated resale value depending on an evaluation of several factors. Customers then have the option to redeem the pawned merchandise during the term or at expiration of the pawn loan or forfeiting the merchandise to us on expiration. At our pawn stores we sell merchandise that was acquired through either customer forfeiture of pawn collateral or second-hand merchandise purchased from customers or consigned to us.

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 “Cellular Retail” division that is an authorized Cricket dealer selling cellular phones and accessories, providing ancillary services and accepting service payments from customers.

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, percentage of existing pawn loans that will be forfeited, 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 recognizes fees on redeemed pawn loans on a constant-yield basis ratably over the loans’ terms. No fees are recognized on forfeited pawn loans. The Company records revenue from check cashing fees, sales of phones, accessories, and pawn inventory, 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

The Company maintains a loan loss allowance for anticipated losses for our payday and installment loans. We do not record loan losses or charge-offs of pawn or title loans because the value of the collateral exceeds the loan amount. To estimate the appropriate level of the loan loss allowance, we consider the amount of outstanding loan principal, interest and fees, historical charge offs, current and expected collection patterns and current economic trends. Our current loan loss allowance is based on our historical net write off percentage, net charge offs to loan principal, interest and fee amounts that originated during the last 24 months, applied against the balance of loan principal, interest and fees outstanding. The Company also periodically performs a look-back analysis on its loan loss allowance to verify 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 unpaid principal, interest and fee balances of payday, installment, pawn and title loans that have not reached their maturity date, and “late” payday loans that have reached maturity within the last 180 days and have remaining outstanding balances.  Late payday loans generally are unpaid loans 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.   Loans are carried at cost plus accrued interest or fees less payments made and 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 and charge-off and recovery rates.  The Company utilizes a software program to assist with the tracking of its historical portfolio statistics.   All returned 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 Per Common Share

Basic net income per common share is computed by dividing the income available to common shareholders by the weighted average number of common shares outstanding for the year. There were no dilutive securities at March 31, 2013. Diluted net income per common share, applicable to the three months ended March 31, 2012, is computed by dividing the net income 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 March 31, 2012 were anti-dilutive and therefore excluded from the dilutive net income per share computation.  

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

The Company has grouped its operations into two segments – Consumer Finance division and Cellular Retail division. The Consumer Finance division provides financial and ancillary services. The Cellular Retail division is an authorized Cricket and Revol dealer selling cellular phones and accessories, providing ancillary services and accepting service payments from customers.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

No 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.

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Segment Information

3 Months Ended

Mar. 31, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

8. Segment Information –

The Company has grouped its operations into two segments – Consumer Finance and Cellular Retail.  The Consumer Finance segment provides financial and ancillary services.  The Cellular Retail segment is a dealer for Cricket and Revol cellular carriers selling cellular phones and accessories, ancillary services and serving as a payment center for customers.

Segment information related to the three months ended March 31, 2013 and 2012:

	Three Months Ended March 31, 2013						Three Months Ended March 31, 2012
	Consumer Finance		Cellular Retail		Total		Consumer Finance		Cellular Retail		Total
Revenues	$	3,057,290	$	5,031,796	$	8,089,086	$	2,789,116	$	4,727,654	$	7,516,770
Net income	$	410,341	$	80,935	$	491,276	$	368,771	$	420,271	$	789,042
Total segment assets	$	15,133,343	$	7,341,503	$	22,474,846	$	14,677,536	$	6,984,468	$	21,662,004

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Subsequent Events

3 Months Ended

Mar. 31, 2013

Subsequent Events [Abstract]

Subsequent Events [Text Block]

9. Subsequent Events –

Compensatory Agreement with CEO

On April 11, 2013, the Company entered into an Amended and Restated Employment Agreement with its Chief Executive Officer, Mr. John Quandahl, to be effective as of April 1, 2013, due to the fact that the Company’s earlier Employment Agreement with Mr. Quandahl expired as of March 31, 2013. The amended and restated agreement has a term of three years and contains other terms and conditions that are identical to those of the original agreement. Specifically, the amended and restated agreement provides an annual base salary and eligibility for an annual performance-based cash bonus pool for management.

The performance-based bonus provisions of the amended and restated agreement permit members of the Company’s management to receive annual bonus payments based on adjusted EBITDA targets annually established by the Board of Directors. If the Company’s actual adjusted EBITDA performance for a particular annual period ranges from 85-100% of the established adjusted EBITDA target, management will be entitled to receive a cash bonus consisting of 7.5% of the actual adjusted EBITDA. Mr. Quandahl’s share of the bonus pool for any particular year is expected to be 10-50% (but may be more), and the bonus pool will be payable to other management-level participants in the bonus pool, if any, selected from time to time by the Board of Directors in its discretion. If the Company’s actual adjusted EBITDA performance for a particular annual period is less than 85% of the established adjusted EBITDA target, no bonus will be payable, and if such performance exceeds 100% of the established adjusted EBITDA target, the bonus pool will include 15% of the amount by which such performance exceeds the target. In addition to the adjusted EBITDA threshold, the amended and restated agreement also contains capital expenditure and working capital thresholds.

The amended and restated agreement also contains customary non-solicitation and non-competition provisions as well as provisions for severance payments upon termination by the Company without cause or upon termination by Mr. Quandahl with good reason.

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Risks Inherent in the Operating Environment (Tables)

3 Months Ended

Mar. 31, 2013

Risks and Uncertainties [Abstract]

Disclosure of Significant Revenue, Percentages by State by Division [Table Text Block]

For the three months ended March 31, 2013 and 2012, the Company had significant revenues by state (shown as a percentage of applicable division’s revenue when over 10%) as follows:

Consumer Finance Division							Cellular Retail Division
	2013 % of Revenues			2012 % of Revenues				2013 % of Revenues			2012 % of Revenues
Nebraska		29	%		26	%	Missouri		10	%		18	%
Wyoming		15	%		15	%	Nebraska		22	%		13	%
North Dakota		18	%		18	%	Texas		13	%		11	%
Iowa		11	%		12	%	Indiana		*	%		12	%
							Oklahoma		*	%		10	%

* Less than 10%

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Other Expense (Tables)

3 Months Ended

Mar. 31, 2013

Other Cost and Expense Disclosure, Operating [Abstract]

Schedule of Other Operating Cost and Expense, by Component [Table Text Block]

A breakout of other expense is as follows:

	Three Months Ended March 31,
	2013		2012
Store expenses
Bank fees	$	106,943	$	81,620
Collection costs		111,733		128,698
Repair and Maintenance		65,254		34,191
Supplies		74,480		87,925
Telephone		39,581		33,834
Utilities and network lines		200,845		176,172
Other		311,915		209,838
	$	910,751	$	752,278
General & administrative expenses
Professional fees	$	115,103	$	85,923
Management and consulting fees		107,687		133,750
Other		59,727		84,500
	$	282,517	$	304,173

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Loans Receivable Allowance (Details Textual)	Mar. 31, 2013
Percentage of Historical Written Off	41.00%
Delinquent 1 to 30 Days [Member]
Percentage of Historical Written Off	41.00%
Delinquent 31 to 60 Days [Member]
Percentage of Historical Written Off	66.00%
Delinquent 61 to 90 Days [Member]
Percentage of Historical Written Off	83.00%
Delinquent 91 to 120 Days [Member]
Percentage of Historical Written Off	86.00%
Delinquent 121 to 180 Days [Member]
Percentage of Historical Written Off	91.00%

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
OPERATING ACTIVITIES
Net Income	$ 491,276	$ 789,042
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	87,845	74,737
Amortization	39,227	59,401
Deferred income taxes	123,000	102,000
Changes in operating assets and liabilities:
Loans receivable	949,730	1,062,305
Inventory	(58,163)	95,742
Prepaid expenses and other assets	46,890	(29,764)
Accounts payable and accrued liabilities	(1,185,098)	151,776
Deferred revenue	(59,331)	(64,356)
Net cash provided by operating activities	435,376	2,240,883
INVESTING ACTIVITIES
Purchases of property and equipment	(55,704)	(21,157)
Purchases of intangible assets	(29,500)	0
Acquisition of stores, net of cash acquired	0	(356,100)
Net cash used by investing activities	(85,204)	(377,257)
FINANCING ACTIVITIES
Payments on notes payable - short-term	0	(1,000,000)
Payments on notes payable - long-term	(180,787)	(179,000)
Advances from notes payable - long-term	0	200,000
Common stock redemption	(17,762)	(307,234)
Net cash used by financing activities	(198,549)	(1,286,234)
NET INCREASE IN CASH	151,623	577,392
CASH
Beginning of year	2,246,619	1,909,442
End of year	2,398,242	2,486,834
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid	219,000	18,966
Interest paid	$ 82,362	$ 87,728

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Note Payable - Short Term

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Short-term Debt [Text Block]

5. Note Payable – Short Term –

The Company’s short-term debt is as follows:

	March 31, 2013		December 31, 2012
Note payable to shareholders related to preferred stock conversion to common, due and payable, if no earlier payment demand is made, on April 30, 2013.  The note accrues no interest.	$	405,163	$	405,163

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Note Payable - Short Term (Details) (USD $)	Mar. 31, 2013	Dec. 31, 2012
Note payable to shareholders related to preferred stock conversion to common, due and payable, if no earlier payment demand is made, on April 30, 2013. The note accrues no interest.	$ 405,163	$ 405,163

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Notes Payable - Long Term (Tables)

3 Months Ended

Mar. 31, 2013

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

The Company’s long-term debt is as follows:

	March 31, 2013			December 31, 2012
Note payable (with a credit limit of $3,000,000) to River City Equity, Inc., a related party, with interest payable monthly at 12% due March 31, 2014 and upon certain events  can be collateralized by substantially all assets of WCR.	$	2,750,000		$	2,750,000
Note payable to a related party with interest payable monthly at 10%, due March 1, 2013 and collateralized by substantially all assets of select locations of PQH.		-			94,397
Note payable to a related party with interest payable monthly at 10%, due April 1, 2013 and collateralized by substantially all assets of select locations of PQH.		29,278			115,668
Total		2,779,278			2,960,065
Less current maturities		(29,278	)		(210,065	)
	$	2,750,000		$	2,750,000