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, 2017

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

Commission File Number:   000-52015

Western Capital Resources, Inc.

(Exact Name of Registrant as Specified in its Charter)

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

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

(Address of Principal Executive Offices) (Zip Code)

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

N/A

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

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS

As of May 15, 2017, the registrant had outstanding 9,390,997 shares of common stock, $0.001 par value per share.

Western Capital Resources, Inc.

Index

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 4. Controls and Procedures	18
PART II. OTHER INFORMATION
Item 6. Exhibits	19
SIGNATURES	20

2 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONTENTS

	Page
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Income	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7

3 

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	March 31, 2017		December 31, 2016
ASSETS
CURRENT ASSETS
Cash	$	11,208,398	$	14,159,975
Loans receivable (less allowance for losses of $880,000 and $1,036,000, respectively)		3,529,939		4,438,276
Accounts receivable (less allowance for losses of $123,000 and $96,000, respectively)		3,408,305		1,716,867
Inventory		10,342,291		9,095,460
Prepaid expenses and other		4,346,777		3,727,284
TOTAL CURRENT ASSETS		32,835,710		33,137,862
NOTES RECEIVABLE		3,437,956		2,920,112
PROPERTY AND EQUIPMENT, net		10,086,273		9,696,620
GOODWILL		5,796,528		5,796,528
INTANGIBLE ASSETS, net		7,396,426		7,536,945
OTHER		1,220,022		1,122,585
TOTAL ASSETS	$	60,772,915	$	60,210,652
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	11,805,009	$	13,002,381
Other current liabilities		2,065,419		2,242,372
Income taxes payable		1,614,644		265,813
Note payable – short-term		30,020		55,819
Current portion long-term debt		1,780,000		1,780,000
Current portion capital lease obligations		47,100		54,020
Deferred revenue		1,819,987		1,427,358
TOTAL CURRENT LIABILITIES		19,162,179		18,827,763
LONG-TERM LIABILITIES
Notes payable, net of current portion		7,326,332		8,681,545
Capital lease obligations, net of current portion		82,102		94,762
Deferred income taxes		1,812,000		1,775,000
Other		162,272		143,080
TOTAL LONG-TERM LIABILITIES		9,382,706		10,694,387
TOTAL LIABILITIES		28,544,885		29,522,150
COMMITMENTS AND CONTINGENCIES (Note 12)
EQUITY
WESTERN SHAREHOLDERS’ EQUITY
Common stock, $0.001 par value, 12,500,000 shares authorized, 9,390,997 and 9,497,871 shares issued and outstanding.		939		950
Additional paid-in capital		29,008,229		28,997,087
Retained earnings		3,190,543		1,643,996
TOTAL WESTERN SHAREHOLDERS’ EQUITY		32,199,711		30,642,033
NONCONTROLLING INTERESTS		28,319		46,469
TOTAL EQUITY		32,228,030		30,688,502
TOTAL LIABILITIES AND EQUITY	$	60,772,915	$	60,210,652

See notes to condensed consolidated financial statements

.

4 

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

	Three Months Ended
	March 31, 2017			March 31, 2016
REVENUES
Sales and associated fees	$	24,559,130		$	20,015,542
Financing fees and interest		2,233,409			2,484,220
Royalty and franchise fees, net		3,032,626			2,794,756
Other revenue		5,809,841			3,140,768
		35,635,006			28,435,286
COST OF REVENUES
Cost of sales		12,058,754			10,437,885
Provisions for loans receivable losses		237,581			302,872
Other		648,197			553,414
		12,944,532			11,294,171
GROSS PROFIT		22,690,474			17,141,115
OPERATING EXPENSES
Salaries, wages and benefits		9,991,391			6,748,950
Occupancy		2,954,056			1,970,527
Advertising, marketing and development		2,009,150			1,951,009
Depreciation		350,288			276,592
Amortization		140,519			140,990
Other		3,540,669			2,742,504
		18,986,073			13,830,572
OPERATING INCOME		3,704,401			3,310,543
OTHER INCOME (EXPENSES):
Interest income		64,075			1,052
Interest expense		(138,152	)		(169,011	)
		(74,077	)		(167,959	)
INCOME BEFORE INCOME TAXES		3,630,324			3,142,584
INCOME TAX EXPENSE		1,363,000			1,167,000
NET INCOME		2,267,324			1,975,584
Less net income attributable to noncontrolling interests		(5,085	)		(4,185	)
NET INCOME ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS	$	2,262,239		$	1,971,399
EARNINGS PER SHARE ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS
Basic and diluted	$	0.24		$	0.21
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		9,472,934			9,497,534

See notes to condensed consolidated financial statements

5 

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Three Months Ended
	March 31, 2017			March 31, 2016
OPERATING ACTIVITIES
Net Income	$	2,267,324		$	1,975,584
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		350,288			276,592
Amortization		140,519			140,990
Share based compensation		11,142			21,071
Deferred income taxes		37,000			344,000
Loss on disposal of property and equipment		(270	)		-
Changes in operating assets and liabilities:
Loans receivable		908,337			938,663
Accounts receivable		(1,691,438	)		(1,489,252	)
Inventory		(1,246,831	)		(913,193	)
Prepaid expenses and other assets		(716,930	)		574,563
Accounts payable and accrued expenses		151,459			(1,547,364	)
Deferred revenue and other current liabilities		215,676			(145,861	)
Accrued liabilities and other – long-term		19,192			(2,643	)
Net cash provided by operating activities		445,468			173,150
INVESTING ACTIVITIES
Purchases of property and equipment		(754,130	)		(432,211	)
Acquisition of stores, net of cash acquired		-			(466,836	)
Proceeds from disposal of property and equipment		14,459			-
Advances on note receivable, net		(517,844	)		-
Net cash used by investing activities		(1,257,515	)		(899,047	)
FINANCING ACTIVITIES
Payments on notes payable – short-term, net		(25,799	)		-
Payments on line of credit, net		(853,544	)		-
Payments on notes payable – long-term		(501,669	)		(975,002	)
Common stock redemption		(480,928	)		-
Advances on capital lease		-			185,318
Payments on capital lease		(19,580	)		(26,018	)
Subsidiary dividends to noncontrolling interests		(23,235	)		-
Dividend paid		(234,775	)		-
Net cash used in financing activities		(2,139,530	)		(815,702	)
NET DECREASE IN CASH		(2,951,577	)		(1,541,599	)
CASH
Beginning of period		14,159,975			7,847,669
End of period	$	11,208,398		$	6,306,070
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid	$	7,169		$	1,483,301
Interest paid	$	135,686		$	166,131

See notes to condensed consolidated financial statements.

6 

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

For further information, refer to the Condensed Consolidated Financial Statements and footnotes thereto included in our Form 10-K for the year ended December 31, 2016. The condensed consolidated balance sheet at December 31, 2016, 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) is a parent company owning operating subsidiaries, with percentage owned shown parenthetically, as summarized below.

· Franchise

o AlphaGraphics, Inc. (AGI) (99.2%) – franchisor of 253 domestic and 25 international AlphaGraphics Business Centers which specialize in the planning, production, and management of visual communications for businesses and individuals throughout the world.

· Cellular Retail

o PQH Wireless, Inc. (PQH) (100%) – operates cellular retail stores (191 owned and operated plus 53 operated under management agreement as of March 31, 2017), as an exclusive dealer of the Cricket brand.

· Direct to Consumer

o J & P Park Acquisitions, Inc. (JPPA) (100%) – an online and direct marketing distribution retailer of live plants, seeds, holiday gifts and garden accessories selling its products under Park Seed, Jackson & Perkins, and Wayside Gardens brand names as well as a wholesaler under the Park Wholesale brand.

o Restorers Acquisition, Inc. (RAI) (100%) – an online and direct marketing distribution retailer of home improvement and restoration products operating under Van Dyke’s Restorers.

o J & P Real Estate, LLC (JPRE) (100%) – owns real estate utilized as JPPA’s distribution and warehouse facility and the corporate offices of JPPA and RAI.

· Consumer Finance

o Wyoming Financial Lenders, Inc. (WFL) (100%) – owns and operates “payday” stores (40 as of March 31, 2017) in seven states (Colorado, Iowa, Kansas, Nebraska, North Dakota, Wisconsin and Wyoming) providing sub-prime short-term uncollateralized non-recourse “cash advance” or “payday” loans typically ranging from $100 to $500 with a maturity of generally two to four weeks, sub-prime short-term uncollateralized non-recourse installment loans typically ranging from $300 to $800 with a maturity of six months, check cashing and other money services to individuals.

o Express Pawn, Inc. (EPI) (100%) – owns and operates retail pawn stores (three as of March 31, 2017) in Nebraska and Iowa providing collateralized non-recourse pawn loans and retail sales of merchandise obtained from forfeited pawn loans or purchased from customers.

References in these financial statement notes to “Company” or “we” refer to Western Capital Resources, Inc. and its subsidiaries. References to specific companies within our enterprise, such “AGI,” “PQH,” “JPPA,” “RAI,” “JPRE,” “WFL” or “EPI” are references only to those companies.

7 

Basis of Consolidation

The consolidated financial statements include the accounts of the WCR, its wholly owned subsidiaries and other entities in which the Company owns a controlling financial interest. For financial interests in which the Company owns a controlling financial interest, the Company applies the provisions of ASC 810 applicable to reporting the equity and net income or loss attributable to noncontrolling interests. All significant intercompany balances and transactions of the Company have been eliminated in consolidation.

Use of Estimates

The preparation of 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 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 notes and loans receivable allowance, carrying value and impairment of long-lived goodwill and intangible assets, inventory valuation and obsolescence, estimated useful lives of property and equipment, gift certificate and merchandise credits liability and deferred taxes and tax uncertainties.

Reclassifications

Certain Statements of Income reclassifications have been made in the presentation of our prior financial statements and accompanying notes to conform to the presentation as of and for the three months ended March 31, 2017.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US GAAP and IFRS. This converged standard is effective for annual and interim periods beginning after December 15, 2017. The Company is currently assessing the potential effects on our financial condition, results of operations and consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) related to recognition of lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that annual period, with early adoption permitted and to be applied using a modified retrospective approach. The Company is currently evaluating the impact the ASU will have on our financial condition, results of operations and consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) related to the measurement of credit losses on financial instruments. The standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. This ASU is effective for annual reporting periods beginning after December 15, 2018 and interim periods within that annual period, with early adoption permitted and the standard to be applied using a modified retrospective approach. The Company is currently evaluating the impact the ASU will have on our financial condition, results of operations and consolidated financial statements.

No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the consolidated financial statements.

2. Risks Inherent in the Operating Environment –

Regulatory

The Company’s Consumer Finance segment activities are highly regulated under numerous local, state, and federal laws, regulations and rules, which are subject to change. New laws, regulations or rules could be enacted or issued, interpretations of existing laws, regulations or rules may change and enforcement action by regulatory agencies may intensify. Over the past several years, consumer advocacy groups and certain media reports have advocated governmental and regulatory action to prohibit or severely restrict sub-prime lending activities of the kind conducted by the Company. The federal Consumer Financial Protection Bureau has indicated that it will use its authority to further regulate the payday industry and has been actively assessing significant penalties or seeking settlement payments.

Any adverse change in present local, state, and federal laws or regulations that govern or otherwise affect lending could result in the Consumer Finance segment’s curtailment or cessation of operations in certain or all jurisdictions or locations. Furthermore, any failure to comply with any applicable local, state or federal laws or regulations could result in fines, litigation, closure of one or more store locations or negative publicity. Any such change or failure would have a corresponding impact on the Company’s and segment’s results of operations and financial condition, primarily through a decrease in revenues resulting from the cessation or curtailment of operations, decrease in operating income through increased legal expenditures or fines, and could also negatively affect the Company’s general business prospects due to lost or decreased operating income or if negative publicity effects its ability to obtain additional financing as needed.

8 

In addition, the passage of federal or state laws and regulations or changes in interpretations of them could, at any point, essentially prohibit the Consumer Finance segment from conducting its 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 the viability of the Consumer Finance segment.

3. Loans Receivable –

The Consumer Finance segment’s outstanding loans receivable aging was as follows:

March 31, 2017
	Payday			Installment			Pawn & Title		Total
Current	$	2,911,699		$	188,774		$	275,963	$	3,376,436
1-30		199,317			32,807			-		232,124
31-60		133,955			20,032			-		153,987
61-90		170,483			15,082			-		185,565
91-120		148,190			11,078			-		159,268
121-150		143,073			7,556			-		150,629
151-180		145,807			6,123			-		151,930
		3,852,524			281,452			275,963		4,409,939
Less Allowance		(812,000	)		(68,000	)		-		(880,000	)
	$	3,040,524		$	213,452		$	275,963	$	3,529,939
December 31, 2016
	Payday			Installment			Pawn & Title		Total
Current	$	3,683,603		$	272,703		$	284,460	$	4,240,766
1-30		253,297			44,433			-		297,730
31-60		201,375			27,905			-		229,280
61-90		185,072			18,747			-		203,819
91-120		159,435			15,737			-		175,172
121-150		176,625			8,889			-		185,514
151-180		134,171			7,824			-		141,995
		4,793,578			396,238			284,460		5,474,276
Less Allowance		(953,000	)		(83,000	)		-		(1,036,000	)
	$	3,840,578		$	313,238		$	284,460	$	4,438,276

4. Loans Receivable Allowance –

A rollforward of the Consumer Finance segment’s loans receivable allowance is as follows:

	Three Months Ended  March 31, 2017			Year Ended December 31, 2016
Loans receivable allowance, beginning of period	$	1,036,000		$	1,177,000
Provision for loan losses charged to expense		237,581			1,605,867
Charge-offs, net		(393,581	)		(1,746,867	)
Loans receivable allowance, end of period	$	880,000		$	1,036,000

5. Accounts Receivable –

A breakdown of accounts receivables by segment as of March 31, 2017 and December 31, 2016 are as follows:

March 31, 2017
	Franchise			Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	1,691,336		$	235,525	$	1,595,258		$	9,186	$	3,531,305
Less allowance		(65,000	)		-		(58,000	)		-		(123,000	)
Net account receivable	$	1,626,336		$	235,525	$	1,537,258		$	9,186	$	3,408,305

9 

December 31, 2016
	Franchise			Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	1,103,210		$	333,800	$	363,426		$	12,431	$	1,812,867
Less allowance		(83,000	)		-		(13,000	)		-		(96,000	)
Net account receivable	$	1,020,210		$	333,800	$	350,426		$	12,431	$	1,716,867

6. Operating Lease Liability –

The Company leases retail and office facilities under operating leases with terms ranging from month to month to six years, with rights to extend for additional periods. Future minimum base lease payments (in thousands) are approximately as follows:

Year Ending December 31,	Operating Leases
2017 (remainder)	$	5,221
2018		5,959
2019		5,060
2020		2,992
2021		2,132
Thereafter		459
Total minimum base lease payments	$	21,823

7. Notes Payable – Long Term –

	March 31, 2017			December 31, 2016
Revolving credit facility (with a credit limit of $3,000,000) to a financial institution with monthly payments of interest only at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2018	$	144,882		$	998,426
Note payable to a financial institution with monthly principal payment of $58,333 plus interest at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021		2,916,667			3,091,667
Note payable to a financial institution with monthly principal payment of $56,667 plus interest at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing December 1, 2021		3,173,333			3,400,000
Subsidiary note payable to a financial institution with monthly principal payment of $33,334 plus annual paydowns equal to JPRE’s net cash flow from operations due within 120 days of the calendar year end plus interest at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by JPRE assets, maturing June 5, 2019 when remaining principal balance is due		2,871,450			2,971,452
Total		9,106,332			10,461,545
Less current maturities		(1,780,000	)		(1,780,000	)
	$	7,326,332		$	8,681,545

At March 31, 2017 approximately $5,765,000 of credit was available under the credit facilities.

8. Equity –

In March 2017, the Company redeemed 106,874 shares of common stock for $480,928 in a private and unsolicited transaction.

10 

9. Cash Dividends –

Date declared		February 24, 2017
Record date		March 17, 2017
Date paid		March 24, 2017
Dividend per share of common stock	$	0.025

10. Other Operating Expense –

A breakout of other expense is as follows:

	For The Three Months Ended March 31,
	2017		2016
Bank fees	$	550,349	$	438,034
Collection costs		89,894		116,188
Conference expense		289,206		265,405
Insurance		250,008		181,476
Management and advisory fees		223,481		221,025
Professional and consulting fees		811,130		595,210
Supplies		332,072		183,274
Other		994,529		741,892
	$	3,540,669	$	2,742,504

11. Segment Information –

Segment information related to the three month periods ended March 31, 2017 and 2016 is presented below:

Three Months Ended March 31, 2017 (in thousands)
	Franchise		Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Total
Revenue from external customers	$	3,943	$	17,045	$	11,904	$	2,743	$	-		$	35,635
Net income (loss)	$	635	$	620	$	866	$	254	$	(108	)	$	2,267
Total segmented assets	$	8,879	$	24,794	$	15,429	$	8,047	$	3,624		$	60,773

Three Months Ended March 31, 2016 (in thousands)
	Franchise		Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Total
Revenue from external customers	$	3,612	$	9,775	$	12,064	$	2,984	$	-		$	28,435
Net income (loss)	$	523	$	371	$	904	$	312	$	(135	)	$	1,975
Total segmented assets	$	9,481	$	14,746	$	16,779	$	13,747	$	698		$	55,451

12. Commitments and Contingencies –

Pursuant to the Company’s numerous employment agreements, bonuses of approximately $331,000 were accrued for the three month period ended March 31, 2017.

13. Subsequent Events –

We evaluated all events or transactions that occurred after March 31, 2017 up through the date we issued these financial statements. During this period we did not have any material subsequent events that impacted our financial statements.

11 

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 embodied in our forward-looking statements, or that might affect the value of the common stock, include but are not limited to:

· the seasonal nature of the products sold in our Direct to Consumer segment - a significant portion of pre-tax net income contributed by the segment is earned during the months of March through May and December, consequently the third quarter of each year typically results in a net loss;

· the success of new stores related to our expansion plans in the Cellular Retail segment;

· 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 us or the industries in which we operate, particularly in certain key states or nationally;

· our need for additional financing;

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

· changes in Cricket dealer compensation;

· failure of or disruption caused by a significant vendor;

· outside factors that affect our ability to obtain product and fulfill orders; and

· our ability to successfully operate or integrate recent or future business 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, 2016.

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.

OVERVIEW

Western Capital Resources, Inc. (“WCR” or “Western Capital”) is a holding company with a controlling interest in subsidiaries operating in the following industries and operating segments:

12 

Our “Franchise” segment is comprised of AlphaGraphics, Inc. (99.2% owned), the franchisor of AlphaGraphics® customized print and marketing solutions. Our “Cellular Retail” segment is comprised of an authorized Cricket Wireless dealer and involves the retail sale of cellular phones and accessories to consumers through our wholly owned subsidiary PQH Wireless, Inc. and its subsidiaries. Our “Direct to Consumer” segment consists of (1) a wholly owned online and direct marketing distribution retailer of live plants, seeds, holiday gifts and garden accessories selling its products under Park Seed, Jackson & Perkins and Wayside Gardens brand names as well as a wholesaler under the Park Wholesale brand, and (2) a wholly owned online and direct marketing distribution retailer of home improvement and restoration products operating as Van Dyke’s Restorers. Our “Consumer Finance” segment consists of retail financial services conducted through our wholly owned subsidiaries Wyoming Financial Lenders, Inc. and Express Pawn, Inc. Throughout this report, we collectively refer to WCR and its consolidated subsidiaries as “we,” the “Company,” and “us.”

Following is key financial data for the three month period ended March 31, 2017 and 2016:

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.

13 

Loan Loss Allowance

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. All returned items are charged-off after 180 days, as collections after that date have not been significant. Loans are carried at cost plus accrued interest or fees through maturity date, less payments made and a loans receivable allowance.

The Company does not specifically reserve for any individual payday, installment or title 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 (1) the amount of loan principal, interest and fee outstanding, (2) historical charge offs from loans that originated during the last 24 months, (3) current and expected collection patterns and (4) current economic trends. The Company utilizes a software program to assist with the tracking of its historical portfolio statistics. A loan loss allowance is maintained for anticipated losses for payday and installment loans based primarily on our historical percentages by loan type of net charge offs, applied against the applicable 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. Loan losses or charge-offs of pawn or title loans are not recorded because the value of the collateral exceeds the loan amount. See Note 4 to our condensed consolidated financial statements included in this report for a rollforward of our loans receivable allowance.

Valuation of Long-lived and Intangible Assets

We assess the possibility of impairment of long-lived and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. 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 events or trends. In addition, we conduct an annual goodwill impairment test as of October 1 each year. We assess our goodwill for impairment at the reporting unit level by applying a fair value test. This fair value test involves a two-step process. The first step is to compare the carrying value of our net assets to our fair value. If the fair value is determined to be less than the carrying value, a second step is performed to measure the amount of the impairment, if any.

Results of Operations – Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

Net income attributable to our common shareholders was $2.26 million, or $0.24 per share (basic and diluted), for the quarter ended March 31, 2017, compared to $1.97 million, or $0.21 per share (basic and diluted), for the quarter ended March 31, 2016.

We expect segment operating results and earnings per share to change throughout 2017 due, at least in part, to the seasonality of the Direct to Consumer and Cellular Retail segments, growth in the Cellular Retail segment, and potential mergers and acquisitions activity.

Following is a discussion of operating results by segment.

14 

The following table provides quarter-over-quarter revenues and net income attributable to WCR common shareholders by operating segment (in thousands):

	Franchise			Cellular Retail			Direct to Consumer			Consumer Finance			Corporate			Total
Three Months Ended March 31, 2017
Revenues	$	3,943		$	17,045		$	11,904		$	2,743		$	-		$	35,635
% of total revenue		11.1	%		47.8	%		33.4	%		7.7	%		-	%		100.0	%
Net income (loss)	$	635		$	620		$	866		$	254		$	(108	)	$	2,267
Net income (loss) attributable to WCR common shareholders	$	630		$	620		$	866		$	254		$	(108	)	$	2,262
Three Months Ended March 31, 2016
Revenues	$	3,612		$	9,775		$	12,064		$	2,984		$	-		$	28,435
% of total revenue		12.7	%		34.4	%		42.4	%		10.5	%		-	%		100.0	%
Net income (loss)	$	523		$	371		$	904		$	312		$	(135	)	$	1,975
Net income (loss) attributable to WCR common shareholders	$	519		$	371		$	904		$	312		$	(135	)	$	1,971

15 

Franchise

The table below summarizes the number of AlphaGraphics business centers owned and operated by franchisees during the quarter ended March 31, 2017 and 2016:

	Beginning		New		Closed			Ending
2017
US Centers		256		-		(3	)		253
International Centers		25		-		-			25
Total		281		-		(3	)		278
2016
US Centers		254		4		(1	)		257
International Centers		25		-		-			25
Total		279		4		(1	)		282

Our U.S. franchisees reported approximate center sales for the quarter ended March 31, 2017 and 2016 as follows:

	2017		2016
Total gross U.S. network-wide center sales	$	69,084,000	$	67,786,000

Our revenues in the Franchise segment for the quarter ended March 31, 2017 and 2016 were $3.94 million versus $3.61 million, an increase of 9.1%. Segment net income period over period increased 23% to $0.64 million from $0.52 million in the prior year period.

Cellular Retail

A summary table of the number of Cricket cellular retail stores we operated during the quarter ended March 31, 2017 and 2016 follows:

	2017		2016
Beginning		198		99
Acquired/ Launched		46		14
Closed		-		(2	)
Ending		244		111

The Cellular Retail segment revenues and contribution to net income each increased period over period. Both increases are primarily attributable to the 53 additional mature stores we operated under a store operating agreement beginning in November 2016. In addition to operating these additional mature locations, we also operated another 80 locations, most of which had been launched within the fourth quarter of 2016 and first quarter of 2017.

Direct to Consumer

The Direct to Consumer segment has seasonal sources of revenue and historically experiences a greater proportion of annual revenue and net income in the months of March through May and December due to the seasonal products it sells. For the current quarter, the Direct to Consumer segment had net income of $0.87 million compared to net income of $0.90 million for the comparable prior year period. Revenues for the three month period ended March 31, 2017 were $11.90 million compared to the comparable period in 2016 of $12.06 million.

16 

Consumer Finance

A summary table of the number of consumer finance locations we operated during the quarters ended March 31, 2017 and 2016 follows:

	2017		2016
Beginning		41		47
Acquired/ Launched		-		-
Closed		-		-
Ending		41		47

Our Consumer Finance segment revenues decreased for the quarter ended March 31, 2017 compared to the quarter ended March 31, 2016. We closed two underperforming store locations and another 4 locations due to state legislative changes between the comparable periods. Revenue decreased 8.1% period over period while net income decreased 18.6%.

Corporate

Costs related to our Corporate segment were $0.11 million for the quarter ended March 31, 2017 compared to $0.14 million for the quarter ended March 31, 2016.

Liquidity and Capital Resources

Summary cash flow data is as follows:

	Three Months Ended March 31,
	2017			2016
Cash flows provided (used) by:
Operating activities	$	445,468		$	173,150
Investing activities		(1,257,515	)		(899,047	)
Financing activities		(2,139,530	)		(815,702	)
Net decrease in cash		(2,951,577	)		(1,541,599	)
Cash, beginning of period		14,159,975			7,847,669
Cash, end of period	$	11,208,398		$	6,306,070

At March 31, 2017, we had cash of $11.21 million compared to cash of $6.31 million on March 31, 2017. Both comparable periods include cash flows utilized for growth in our Cellular Retail segment. We believe that our available cash, combined with expected cash flows from operations and available financing under credit facilities of approximately $5.77 million, will be sufficient to fund our scheduled debt repayments and the Cellular Retail segment anticipated capital expenditures through March 31, 2018.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of March 31, 2017.

17 

 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.

We utilize the Committee of Sponsoring Organization’s Internal Control – Integrated Framework, 2013 version, for the design, implementation and assessment of the effectiveness of our disclosure controls and procedures and internal control over financial reporting.

As of March 31, 2017, our Chief Executive Officer and Chief Financial Officer carried out an assessment 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 this assessment, our Chief Executive Officer and Chief Financial Officer concluded our disclosure controls and procedures are effective as of March 31, 2017.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

18

PART II. OTHER INFORMATION

Item 6. Exhibits

Exhibit	Description
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).

19

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 15, 2017	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

20

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 15, 2017	/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 15, 2017	/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, 2017 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 15, 2017

/s/ Stephen Irlbeck

Stephen Irlbeck

Chief Financial Officer

May 15, 2017

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	May 15, 2017
Document And Entity Information
Entity Registrant Name	WESTERN CAPITAL RESOURCES, INC.
Entity Central Index Key	0001363958
Document Type	10-Q
Trading Symbol	WCRS
Document Period End Date	Mar. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		9,390,997
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2017

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
CURRENT ASSETS
Cash	$ 11,208,398	$ 14,159,975
Loans receivable (less allowance for losses of $880,000 and $1,036,000, respectively)	3,529,939	4,438,276
Accounts receivable (less allowance for losses of $123,000 and $96,000, respectively)	3,408,305	1,716,867
Inventory	10,342,291	9,095,460
Prepaid expenses and other	4,346,777	3,727,284
TOTAL CURRENT ASSETS	32,835,710	33,137,862
NOTES RECEIVABLE	3,437,956	2,920,112
PROPERTY AND EQUIPMENT, net	10,086,273	9,696,620
GOODWILL	5,796,528	5,796,528
INTANGIBLE ASSETS, net	7,396,426	7,536,945
OTHER	1,220,022	1,122,585
TOTAL ASSETS	60,772,915	60,210,652
CURRENT LIABILITIES
Accounts payable and accrued expenses	11,805,009	13,002,381
Other current liabilities	2,065,419	2,242,372
Income taxes payable	1,614,644	265,813
Note payable - short-term	30,020	55,819
Current portion long-term debt	1,780,000	1,780,000
Current portion capital lease obligations	47,100	54,020
Deferred revenue	1,819,987	1,427,358
TOTAL CURRENT LIABILITIES	19,162,179	18,827,763
LONG-TERM LIABILITIES
Notes payable, net of current portion	7,326,332	8,681,545
Capital lease obligations, net of current portion	82,102	94,762
Deferred income taxes	1,812,000	1,775,000
Other	162,272	143,080
TOTAL LONG-TERM LIABILITIES	9,382,706	10,694,387
TOTAL LIABILITIES	28,544,885	29,522,150
WESTERN SHAREHOLDERS' EQUITY
Common stock, $0.001 par value, 12,500,000 shares authorized, 9,390,997 and 9,497,871 shares issued and outstanding.	939	950
Additional paid-in capital	29,008,229	28,997,087
Retained earnings	3,190,543	1,643,996
TOTAL WESTERN SHAREHOLDERS' EQUITY	32,199,711	30,642,033
NONCONTROLLING INTERESTS	28,319	46,469
TOTAL EQUITY	32,228,030	30,688,502
TOTAL LIABILITIES AND EQUITY	$ 60,772,915	$ 60,210,652

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Loans receivable, allowance	$ 880,000	$ 1,036,000
Accounts receivable, allowance	$ 123,000	$ 96,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized	12,500,000	12,500,000
Common stock, issued	9,390,997	9,497,871
Common stock, outstanding	9,390,997	9,497,871

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
REVENUES
Sales and associated fees	$ 24,559,130	$ 20,015,542
Financing fees and interest	2,233,409	2,484,220
Royalty and franchise fees, net	3,032,626	2,794,756
Other revenue	5,809,841	3,140,768
Total Revenues	35,635,006	28,435,286
COST OF REVENUES
Cost of sales	12,058,754	10,437,885
Provisions for loans receivable losses	237,581	302,872
Other	648,197	553,414
Total Cost of Revenues	12,944,532	11,294,171
GROSS PROFIT	22,690,474	17,141,115
OPERATING EXPENSES
Salaries, wages and benefits	9,991,391	6,748,950
Occupancy	2,954,056	1,970,527
Advertising, marketing and development	2,009,150	1,951,009
Depreciation	350,288	276,592
Amortization	140,519	140,990
Other	3,540,669	2,742,504
Total Operating Expense	18,986,073	13,830,572
OPERATING INCOME	3,704,401	3,310,543
OTHER INCOME (EXPENSES):
Interest income	64,075	1,052
Interest expense	(138,152)	(169,011)
Total Other Income (Expenses)	(74,077)	(167,959)
INCOME BEFORE INCOME TAXES	3,630,324	3,142,584
INCOME TAX EXPENSE	1,363,000	1,167,000
NET INCOME	2,267,324	1,975,584
Less net income attributable to noncontrolling interests	(5,085)	(4,185)
NET INCOME ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS	$ 2,262,239	$ 1,971,399
EARNINGS PER SHARE ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS
Basic and diluted (in dollars per share)	$ 0.24	$ 0.21
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted (in shares)	9,472,934	9,497,534

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
OPERATING ACTIVITIES
Net Income	$ 2,267,324	$ 1,975,584
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	350,288	276,592
Amortization	140,519	140,990
Share based compensation	11,142	21,071
Deferred income taxes	37,000	344,000
Loss on disposal of property and equipment	(270)
Changes in operating assets and liabilities:
Loans receivable	908,337	938,663
Accounts receivable	(1,691,438)	(1,489,252)
Inventory	(1,246,831)	(913,193)
Prepaid expenses and other assets	(716,930)	574,563
Accounts payable and accrued expenses	151,459	(1,547,364)
Deferred revenue and other current liabilities	215,676	(145,861)
Accrued liabilities and other - long-term	19,192	(2,643)
Net cash provided by operating activities	445,468	173,150
INVESTING ACTIVITIES
Purchases of property and equipment	(754,130)	(432,211)
Acquisition of stores, net of cash acquired		(466,836)
Proceeds from disposal of property and equipment	14,459
Advances on note receivable, net	(517,844)
Net cash used by investing activities	(1,257,515)	(899,047)
FINANCING ACTIVITIES
Payments on notes payable - short-term, net	(25,799)
Payments on line of credit, net	(853,544)
Payments on notes payable - long-term	(501,669)	(975,002)
Common stock redemption	(480,928)
Advances on capital lease		185,318
Payments on capital lease	(19,580)	(26,018)
Subsidiary dividends to noncontrolling interests	(23,235)
Dividend paid	(234,775)
Net cash used in financing activities	(2,139,530)	(815,702)
NET DECREASE IN CASH	(2,951,577)	(1,541,599)
CASH
Beginning of period	14,159,975	7,847,669
End of period	11,208,398	6,306,070
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income taxes paid	7,169	1,483,301
Interest paid	$ 135,686	$ 166,131

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

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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

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 month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

For further information, refer to the Condensed Consolidated Financial Statements and footnotes thereto included in our Form 10-K for the year ended December 31, 2016. The condensed consolidated balance sheet at December 31, 2016, 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) is a parent company owning operating subsidiaries, with percentage owned shown parenthetically, as summarized below.

• Franchise

o AlphaGraphics, Inc. (AGI) (99.2%) – franchisor of 253 domestic and 25 international AlphaGraphics Business Centers which specialize in the planning, production, and management of visual communications for businesses and individuals throughout the world.

• Cellular Retail

o PQH Wireless, Inc. (PQH) (100%) – operates cellular retail stores (191 owned and operated plus 53 operated under management agreement as of March 31, 2017), as an exclusive dealer of the Cricket brand.

• Direct to Consumer

o J & P Park Acquisitions, Inc. (JPPA) (100%) – an online and direct marketing distribution retailer of live plants, seeds, holiday gifts and garden accessories selling its products under Park Seed, Jackson & Perkins, and Wayside Gardens brand names as well as a wholesaler under the Park Wholesale brand.

o Restorers Acquisition, Inc. (RAI) (100%) – an online and direct marketing distribution retailer of home improvement and restoration products operating under Van Dyke’s Restorers.

o J & P Real Estate, LLC (JPRE) (100%) – owns real estate utilized as JPPA’s distribution and warehouse facility and the corporate offices of JPPA and RAI.

• Consumer Finance

o Wyoming Financial Lenders, Inc. (WFL) (100%) – owns and operates “payday” stores (40 as of March 31, 2017) in seven states (Colorado, Iowa, Kansas, Nebraska, North Dakota, Wisconsin and Wyoming) providing sub-prime short-term uncollateralized non-recourse “cash advance” or “payday” loans typically ranging from $100 to $500 with a maturity of generally two to four weeks, sub-prime short-term uncollateralized non-recourse installment loans typically ranging from $300 to $800 with a maturity of six months, check cashing and other money services to individuals.

o Express Pawn, Inc. (EPI) (100%) – owns and operates retail pawn stores (three as of March 31, 2017) in Nebraska and Iowa providing collateralized non-recourse pawn loans and retail sales of merchandise obtained from forfeited pawn loans or purchased from customers.

References in these financial statement notes to “Company” or “we” refer to Western Capital Resources, Inc. and its subsidiaries. References to specific companies within our enterprise, such “AGI,” “PQH,” “JPPA,” “RAI,” “JPRE,” “WFL” or “EPI” are references only to those companies.

Basis of Consolidation

The consolidated financial statements include the accounts of the WCR, its wholly owned subsidiaries and other entities in which the Company owns a controlling financial interest. For financial interests in which the Company owns a controlling financial interest, the Company applies the provisions of ASC 810 applicable to reporting the equity and net income or loss attributable to noncontrolling interests. All significant intercompany balances and transactions of the Company have been eliminated in consolidation.

Use of Estimates

The preparation of 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 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 notes and loans receivable allowance, carrying value and impairment of long-lived goodwill and intangible assets, inventory valuation and obsolescence, estimated useful lives of property and equipment, gift certificate and merchandise credits liability and deferred taxes and tax uncertainties.

Reclassifications

Certain Statements of Income reclassifications have been made in the presentation of our prior financial statements and accompanying notes to conform to the presentation as of and for the three months ended March 31, 2017.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US GAAP and IFRS. This converged standard is effective for annual and interim periods beginning after December 15, 2017. The Company is currently assessing the potential effects on our financial condition, results of operations and consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) related to recognition of lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that annual period, with early adoption permitted and to be applied using a modified retrospective approach. The Company is currently evaluating the impact the ASU will have on our financial condition, results of operations and consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) related to the measurement of credit losses on financial instruments. The standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. This ASU is effective for annual reporting periods beginning after December 15, 2018 and interim periods within that annual period, with early adoption permitted and the standard to be applied using a modified retrospective approach. The Company is currently evaluating the impact the ASU will have on our financial condition, results of operations and consolidated financial statements.

No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the consolidated financial statements.

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Risks Inherent in the Operating Environment

3 Months Ended

Mar. 31, 2017

Risks and Uncertainties [Abstract]

Risks Inherent in the Operating Environment

2. Risks Inherent in the Operating Environment –

Regulatory

The Company’s Consumer Finance segment activities are highly regulated under numerous local, state, and federal laws, regulations and rules, which are subject to change. New laws, regulations or rules could be enacted or issued, interpretations of existing laws, regulations or rules may change and enforcement action by regulatory agencies may intensify. Over the past several years, consumer advocacy groups and certain media reports have advocated governmental and regulatory action to prohibit or severely restrict sub-prime lending activities of the kind conducted by the Company. The federal Consumer Financial Protection Bureau has indicated that it will use its authority to further regulate the payday industry and has been actively assessing significant penalties or seeking settlement payments.

Any adverse change in present local, state, and federal laws or regulations that govern or otherwise affect lending could result in the Consumer Finance segment’s curtailment or cessation of operations in certain or all jurisdictions or locations. Furthermore, any failure to comply with any applicable local, state or federal laws or regulations could result in fines, litigation, closure of one or more store locations or negative publicity. Any such change or failure would have a corresponding impact on the Company’s and segment’s results of operations and financial condition, primarily through a decrease in revenues resulting from the cessation or curtailment of operations, decrease in operating income through increased legal expenditures or fines, and could also negatively affect the Company’s general business prospects due to lost or decreased operating income or if negative publicity effects its ability to obtain additional financing as needed.

In addition, the passage of federal or state laws and regulations or changes in interpretations of them could, at any point, essentially prohibit the Consumer Finance segment from conducting its 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 the viability of the Consumer Finance segment.

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Loans Receivable

3 Months Ended

Mar. 31, 2017

Receivables [Abstract]

Loans Receivable

3.       Loans Receivable –

The Consumer Finance segment’s outstanding loans receivable aging was as follows:

March 31, 2017
		Payday		Installment		Pawn & Title		Total
Current	$	2,911,699	$	188,774	$	275,963	$	3,376,436
1-30		199,317		32,807		-		232,124
31-60		133,955		20,032		-		153,987
61-90		170,483		15,082		-		185,565
91-120		148,190		11,078		-		159,268
121-150		143,073		7,556		-		150,629
151-180		145,807		6,123		-		151,930
		3,852,524		281,452		275,963		4,409,939
Less Allowance		(812,000)		(68,000)		-		(880,000)
	$	3,040,524	$	213,452	$	275,963	$	3,529,939

December 31, 2016
		Payday		Installment		Pawn & Title		Total
Current	$	3,683,603	$	272,703	$	284,460	$	4,240,766
1-30		253,297		44,433		-		297,730
31-60		201,375		27,905		-		229,280
61-90		185,072		18,747		-		203,819
91-120		159,435		15,737		-		175,172
121-150		176,625		8,889		-		185,514
151-180		134,171		7,824		-		141,995
		4,793,578		396,238		284,460		5,474,276
Less Allowance		(953,000)		(83,000)		-		(1,036,000)
	$	3,840,578	$	313,238	$	284,460	$	4,438,276

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Loans Receivable Allowance

3 Months Ended

Mar. 31, 2017

Provision for Loan and Lease Losses [Abstract]

Loans Receivable Allowance

4.       Loans Receivable Allowance –

A rollforward of the Consumer Finance segment’s loans receivable allowance is as follows:

		Three Months Ended March 31, 2017		Year Ended December 31, 2016
Loans receivable allowance, beginning of period	$	1,036,000	$	1,177,000
Provision for loan losses charged to expense		237,581		1,605,867
Charge-offs, net		(393,581)		(1,746,867)
Loans receivable allowance, end of period	$	880,000	$	1,036,000

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Accounts Receivable

3 Months Ended

Mar. 31, 2017

Receivables [Abstract]

Accounts Receivable

5. Accounts Receivable –

A breakdown of accounts receivables by segment as of March 31, 2017 and December 31, 2016 are as follows:

March 31, 2017
	Franchise			Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	1,691,336		$	235,525	$	1,595,258		$	9,186	$	3,531,305
Less allowance		(65,000	)		-		(58,000	)		-		(123,000	)
Net account receivable	$	1,626,336		$	235,525	$	1,537,258		$	9,186	$	3,408,305

December 31, 2016
	Franchise			Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	1,103,210		$	333,800	$	363,426		$	12,431	$	1,812,867
Less allowance		(83,000	)		-		(13,000	)		-		(96,000	)
Net account receivable	$	1,020,210		$	333,800	$	350,426		$	12,431	$	1,716,867

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Operating Lease Liability

3 Months Ended

Mar. 31, 2017

Leases [Abstract]

Operating Lease Liability

6. Operating Lease Liability –

The Company leases retail and office facilities under operating leases with terms ranging from month to month to six years, with rights to extend for additional periods. Future minimum base lease payments (in thousands) are approximately as follows:

Year Ending December 31,	Operating Leases
2017 (remainder)	$	5,221
2018		5,959
2019		5,060
2020		2,992
2021		2,132
Thereafter		459
Total minimum base lease payments	$	21,823

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Notes Payable - Long Term

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Notes Payable - Long Term

7.       Notes Payable – Long Term –

		March 31, 2017		December 31, 2016
Revolving credit facility (with a credit limit of $3,000,000) to a financial institution with monthly payments of interest only at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2018	$	144,882	$	998,426
Note payable to a financial institution with monthly principal payment of $58,333 plus interest at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021		2,916,667		3,091,667
Note payable to a financial institution with monthly principal payment of $56,667 plus interest at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing December 1, 2021		3,173,333		3,400,000
Subsidiary note payable to a financial institution with monthly principal payment of $33,334 plus annual paydowns equal to JPRE’s net cash flow from operations due within 120 days of the calendar year end plus interest at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by JPRE assets, maturing June 5, 2019 when remaining principal balance is due		2,871,450		2,971,452
Total		9,106,332		10,461,545
Less current maturities		(1,780,000)		(1,780,000)
	$	7,326,332	$	8,681,545

At March 31, 2017 approximately $5,765,000 of credit was available under the credit facilities.

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Equity

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Equity

8. Equity –

In March 2017, the Company redeemed 106,874 shares of common stock for $480,928 in a private and unsolicited transaction.

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Cash Dividends

3 Months Ended

Mar. 31, 2017

Dividends [Abstract]

Cash Dividends

9.       Cash Dividends –

Date declared		February 24, 2017
Record date		March 17, 2017
Date paid		March 24, 2017
Dividend per share of common stock	$	0.025

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Other Operating Expense

3 Months Ended

Mar. 31, 2017

Other Income and Expenses [Abstract]

Other Operating Expense

10.       Other Operating Expense –

A breakout of other expense is as follows:

	For The Three Months Ended March 31,
		2017		2016
Bank fees		$	550,349	$	438,034
Collection costs			89,894		116,188
Conference expense			289,206		265,405
Insurance			250,008		181,476
Management and advisory fees			223,481		221,025
Professional and consulting fees			811,130		595,210
Supplies			332,072		183,274
Other			994,529		741,892
		$	3,540,669	$	2,742,504

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Segment Information

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Information

11. Segment Information –

Segment information related to the three month periods ended March 31, 2017 and 2016 is presented below:

Three Months Ended March 31, 2017 (in thousands)
	Franchise		Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Total
Revenue from external customers	$	3,943	$	17,045	$	11,904	$	2,743	$	-		$	35,635
Net income (loss)	$	635	$	620	$	866	$	254	$	(108	)	$	2,267
Total segmented assets	$	8,879	$	24,794	$	15,429	$	8,047	$	3,624		$	60,773

Three Months Ended March 31, 2016 (in thousands)
	Franchise		Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Total
Revenue from external customers	$	3,612	$	9,775	$	12,064	$	2,984	$	-		$	28,435
Net income (loss)	$	523	$	371	$	904	$	312	$	(135	)	$	1,975
Total segmented assets	$	9,481	$	14,746	$	16,779	$	13,747	$	698		$	55,451

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

12.       Commitments and Contingencies –

Pursuant to the Company’s numerous employment agreements, bonuses of approximately $331,000 were accrued for the three month period ended March 31, 2017.

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Subsequent Events

3 Months Ended

Mar. 31, 2017

Subsequent Events [Abstract]

Subsequent Events

13. Subsequent Events –

We evaluated all events or transactions that occurred after March 31, 2017 up through the date we issued these financial statements. During this period we did not have any material subsequent events that impacted our financial statements.

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

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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 month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

For further information, refer to the Condensed Consolidated Financial Statements and footnotes thereto included in our Form 10-K for the year ended December 31, 2016. The condensed consolidated balance sheet at December 31, 2016, 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

Nature of Business

Western Capital Resources, Inc. (WCR) is a parent company owning operating subsidiaries, with percentage owned shown parenthetically, as summarized below.

• Franchise

o AlphaGraphics, Inc. (AGI) (99.2%) – franchisor of 253 domestic and 25 international AlphaGraphics Business Centers which specialize in the planning, production, and management of visual communications for businesses and individuals throughout the world.

• Cellular Retail

o PQH Wireless, Inc. (PQH) (100%) – operates cellular retail stores (191 owned and operated plus 53 operated under management agreement as of March 31, 2017), as an exclusive dealer of the Cricket brand.

• Direct to Consumer

o J & P Park Acquisitions, Inc. (JPPA) (100%) – an online and direct marketing distribution retailer of live plants, seeds, holiday gifts and garden accessories selling its products under Park Seed, Jackson & Perkins, and Wayside Gardens brand names as well as a wholesaler under the Park Wholesale brand.

o Restorers Acquisition, Inc. (RAI) (100%) – an online and direct marketing distribution retailer of home improvement and restoration products operating under Van Dyke’s Restorers.

o J & P Real Estate, LLC (JPRE) (100%) – owns real estate utilized as JPPA’s distribution and warehouse facility and the corporate offices of JPPA and RAI.

• Consumer Finance

o Wyoming Financial Lenders, Inc. (WFL) (100%) – owns and operates “payday” stores (40 as of March 31, 2017) in seven states (Colorado, Iowa, Kansas, Nebraska, North Dakota, Wisconsin and Wyoming) providing sub-prime short-term uncollateralized non-recourse “cash advance” or “payday” loans typically ranging from $100 to $500 with a maturity of generally two to four weeks, sub-prime short-term uncollateralized non-recourse installment loans typically ranging from $300 to $800 with a maturity of six months, check cashing and other money services to individuals.

o Express Pawn, Inc. (EPI) (100%) – owns and operates retail pawn stores (three as of March 31, 2017) in Nebraska and Iowa providing collateralized non-recourse pawn loans and retail sales of merchandise obtained from forfeited pawn loans or purchased from customers.

References in these financial statement notes to “Company” or “we” refer to Western Capital Resources, Inc. and its subsidiaries. References to specific companies within our enterprise, such “AGI,” “PQH,” “JPPA,” “RAI,” “JPRE,” “WFL” or “EPI” are references only to those companies.

Basis of Consolidation

Basis of Consolidation

The consolidated financial statements include the accounts of the WCR, its wholly owned subsidiaries and other entities in which the Company owns a controlling financial interest. For financial interests in which the Company owns a controlling financial interest, the Company applies the provisions of ASC 810 applicable to reporting the equity and net income or loss attributable to noncontrolling interests. All significant intercompany balances and transactions of the Company have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of 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 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 notes and loans receivable allowance, carrying value and impairment of long-lived goodwill and intangible assets, inventory valuation and obsolescence, estimated useful lives of property and equipment, gift certificate and merchandise credits liability and deferred taxes and tax uncertainties.

Reclassifications

Reclassifications

Certain Statements of Income reclassifications have been made in the presentation of our prior financial statements and accompanying notes to conform to the presentation as of and for the three months ended March 31, 2017.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) jointly issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US GAAP and IFRS. This converged standard is effective for annual and interim periods beginning after December 15, 2017. The Company is currently assessing the potential effects on our financial condition, results of operations and consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) related to recognition of lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that annual period, with early adoption permitted and to be applied using a modified retrospective approach. The Company is currently evaluating the impact the ASU will have on our financial condition, results of operations and consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) related to the measurement of credit losses on financial instruments. The standard requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. This ASU is effective for annual reporting periods beginning after December 15, 2018 and interim periods within that annual period, with early adoption permitted and the standard to be applied using a modified retrospective approach. The Company is currently evaluating the impact the ASU will have on our financial condition, results of operations and consolidated financial statements.

No other new accounting pronouncements issued or effective during the fiscal year have had or are expected to have a material impact on the consolidated financial statements.

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Loans Receivable (Table)

3 Months Ended

Mar. 31, 2017

Receivables [Abstract]

Schedule of outstanding loans receivable aging

The Consumer Finance segment’s outstanding loans receivable aging was as follows:

March 31, 2017
		Payday		Installment		Pawn & Title		Total
Current	$	2,911,699	$	188,774	$	275,963	$	3,376,436
1-30		199,317		32,807		-		232,124
31-60		133,955		20,032		-		153,987
61-90		170,483		15,082		-		185,565
91-120		148,190		11,078		-		159,268
121-150		143,073		7,556		-		150,629
151-180		145,807		6,123		-		151,930
		3,852,524		281,452		275,963		4,409,939
Less Allowance		(812,000)		(68,000)		-		(880,000)
	$	3,040,524	$	213,452	$	275,963	$	3,529,939

December 31, 2016
		Payday		Installment		Pawn & Title		Total
Current	$	3,683,603	$	272,703	$	284,460	$	4,240,766
1-30		253,297		44,433		-		297,730
31-60		201,375		27,905		-		229,280
61-90		185,072		18,747		-		203,819
91-120		159,435		15,737		-		175,172
121-150		176,625		8,889		-		185,514
151-180		134,171		7,824		-		141,995
		4,793,578		396,238		284,460		5,474,276
Less Allowance		(953,000)		(83,000)		-		(1,036,000)
	$	3,840,578	$	313,238	$	284,460	$	4,438,276

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Loans Receivable Allowance (Tables)

3 Months Ended

Mar. 31, 2017

Provision for Loan and Lease Losses [Abstract]

Schedule of loans receivable allowance

A rollforward of the Consumer Finance segment’s loans receivable allowance is as follows:

		Three Months Ended March 31, 2017		Year Ended December 31, 2016
Loans receivable allowance, beginning of period	$	1,036,000	$	1,177,000
Provision for loan losses charged to expense		237,581		1,605,867
Charge-offs, net		(393,581)		(1,746,867)
Loans receivable allowance, end of period	$	880,000	$	1,036,000

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Accounts Receivable (Tables)

3 Months Ended

Mar. 31, 2017

Receivables [Abstract]

Schedule of accounts receivables

A breakdown of accounts receivables by segment as of March 31, 2017 and December 31, 2016 are as follows:

March 31, 2017
	Franchise			Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	1,691,336		$	235,525	$	1,595,258		$	9,186	$	3,531,305
Less allowance		(65,000	)		-		(58,000	)		-		(123,000	)
Net account receivable	$	1,626,336		$	235,525	$	1,537,258		$	9,186	$	3,408,305

December 31, 2016
	Franchise			Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	1,103,210		$	333,800	$	363,426		$	12,431	$	1,812,867
Less allowance		(83,000	)		-		(13,000	)		-		(96,000	)
Net account receivable	$	1,020,210		$	333,800	$	350,426		$	12,431	$	1,716,867

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Operating Lease Liability (Tables)

3 Months Ended

Mar. 31, 2017

Leases [Abstract]

Schedule of future minimum base lease payments

Future minimum base lease payments (in thousands) are approximately as follows:

Year Ending December 31,	Operating Leases
2017 (remainder)	$	5,221
2018		5,959
2019		5,060
2020		2,992
2021		2,132
Thereafter		459
Total minimum base lease payments	$	21,823

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Notes Payable - Long Term (Tables)

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Schedule of long-term debt instruments

		March 31, 2017		December 31, 2016
Revolving credit facility (with a credit limit of $3,000,000) to a financial institution with monthly payments of interest only at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2018	$	144,882	$	998,426
Note payable to a financial institution with monthly principal payment of $58,333 plus interest at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021		2,916,667		3,091,667
Note payable to a financial institution with monthly principal payment of $56,667 plus interest at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing December 1, 2021		3,173,333		3,400,000
Subsidiary note payable to a financial institution with monthly principal payment of $33,334 plus annual paydowns equal to JPRE’s net cash flow from operations due within 120 days of the calendar year end plus interest at LIBOR plus 3.5% (4.375% at March 31, 2017), secured by JPRE assets, maturing June 5, 2019 when remaining principal balance is due		2,871,450		2,971,452
Total		9,106,332		10,461,545
Less current maturities		(1,780,000)		(1,780,000)
	$	7,326,332	$	8,681,545

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Cash Dividends (Tables)

3 Months Ended

Mar. 31, 2017

Dividends [Abstract]

Schedule of cash dividends payable

Date declared		February 24, 2017
Record date		March 17, 2017
Date paid		March 24, 2017
Dividend per share of common stock	$	0.025

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Other Operating Expense (Tables)

3 Months Ended

Mar. 31, 2017

Other Income and Expenses [Abstract]

Schedule of other operating expense

A breakout of other expense is as follows:

	For The Three Months Ended March 31,
		2017		2016
Bank fees		$	550,349	$	438,034
Collection costs			89,894		116,188
Conference expense			289,206		265,405
Insurance			250,008		181,476
Management and advisory fees			223,481		221,025
Professional and consulting fees			811,130		595,210
Supplies			332,072		183,274
Other			994,529		741,892
		$	3,540,669	$	2,742,504

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Segment Information (Tables)

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Schedule of segment information

Segment information related to the three month periods ended March 31, 2017 and 2016 is presented below:

Three Months Ended March 31, 2017 (in thousands)
	Franchise		Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Total
Revenue from external customers	$	3,943	$	17,045	$	11,904	$	2,743	$	-		$	35,635
Net income (loss)	$	635	$	620	$	866	$	254	$	(108	)	$	2,267
Total segmented assets	$	8,879	$	24,794	$	15,429	$	8,047	$	3,624		$	60,773

Three Months Ended March 31, 2016 (in thousands)
	Franchise		Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Total
Revenue from external customers	$	3,612	$	9,775	$	12,064	$	2,984	$	-		$	28,435
Net income (loss)	$	523	$	371	$	904	$	312	$	(135	)	$	1,975
Total segmented assets	$	9,481	$	14,746	$	16,779	$	13,747	$	698		$	55,451

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Basis of Presentation, Nature of Business and Summary of Significant Accounting Policies (Details Narrative)	3 Months Ended
	Mar. 31, 2017 USD ($) Number
Franchising [Member] | Alpha Graphics, Inc. [Member]
Number of domestic business centers	253
Number of international business centers	25
Percentage of equity method investment	99.20%
Cellular Retail [Member] | PQH Wireless, Inc. [Member]
Number of stores	191
Percentage of equity method investment	100.00%
Cellular Retail [Member] | PQH Wireless, Inc. [Member] | Management Agreement [Member]
Number of stores	53
Consumer Finance [Member] | Wyoming Financial Lenders, Inc. [Member]
Number of stores	40
Percentage of equity method investment	100.00%
Number of states in which entity operates	7
Consumer Finance [Member] | Wyoming Financial Lenders, Inc. [Member] | Minimum [Member] | Payday [Member]
Non-recourse debt | $	$ 100
Consumer Finance [Member] | Wyoming Financial Lenders, Inc. [Member] | Minimum [Member] | Installment [Member]
Non-recourse debt | $	300
Consumer Finance [Member] | Wyoming Financial Lenders, Inc. [Member] | Maximum [Member] | Payday [Member]
Non-recourse debt | $	500
Consumer Finance [Member] | Wyoming Financial Lenders, Inc. [Member] | Maximum [Member] | Installment [Member]
Non-recourse debt | $	$ 800
Consumer Finance [Member] | Express Pawn, Inc. [Member]
Number of stores	3
Percentage of equity method investment	100.00%
Number of states in which entity operates	2
Direct to Consumer [Member] | JPPA [Member]
Percentage of equity method investment	100.00%
Direct to Consumer [Member] | RAI [Member]
Percentage of equity method investment	100.00%
Direct to Consumer [Member] | JPRE [Member]
Percentage of equity method investment	100.00%

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Loans Receivable (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	$ 4,409,939	$ 5,474,276
Less Allowance	(880,000)	(1,036,000)
Notes, Loans and Financing Receivable, Net, current	3,529,939	4,438,276
Current [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	3,376,436	4,240,766
1 To 30 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	232,124	297,730
31 to 60 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	153,987	229,280
61 To 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	185,565	203,819
91 To 120 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	159,268	175,172
121 To 150 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	150,629	185,514
151 To 180 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	151,930	141,995
Payday and Title Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	3,852,524	4,793,578
Less Allowance	(812,000)	(953,000)
Notes, Loans and Financing Receivable, Net, current	3,040,524	3,840,578
Payday and Title Loans [Member] | Current [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	2,911,699	3,683,603
Payday and Title Loans [Member] | 1 To 30 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	199,317	253,297
Payday and Title Loans [Member] | 31 to 60 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	133,955	201,375
Payday and Title Loans [Member] | 61 To 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	170,483	185,072
Payday and Title Loans [Member] | 91 To 120 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	148,190	159,435
Payday and Title Loans [Member] | 121 To 150 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	143,073	176,625
Payday and Title Loans [Member] | 151 To 180 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	145,807	134,171
Installment Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	281,452	396,238
Less Allowance	(68,000)	(83,000)
Notes, Loans and Financing Receivable, Net, current	213,452	313,238
Installment Loans [Member] | Current [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	188,774	272,703
Installment Loans [Member] | 1 To 30 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	32,807	44,433
Installment Loans [Member] | 31 to 60 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	20,032	27,905
Installment Loans [Member] | 61 To 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	15,082	18,747
Installment Loans [Member] | 91 To 120 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	11,078	15,737
Installment Loans [Member] | 121 To 150 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	7,556	8,889
Installment Loans [Member] | 151 To 180 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	6,123	7,824
Pawn Title [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	275,963	284,460
Less Allowance
Notes, Loans and Financing Receivable, Net, current	275,963	284,460
Pawn Title [Member] | Current [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current	275,963	284,460
Pawn Title [Member] | 1 To 30 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current
Pawn Title [Member] | 31 to 60 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current
Pawn Title [Member] | 61 To 90 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current
Pawn Title [Member] | 91 To 120 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current
Pawn Title [Member] | 121 To 150 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current
Pawn Title [Member] | 151 To 180 Days [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Notes, Loans and Financing Receivable, Gross, Current

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Loans Receivable Allowance (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Allowance for Loan and Lease Losses [Roll Forward]
Loans receivable allowance, beginning of period	$ 1,036,000	$ 1,177,000
Provision for loan losses charged to expense	237,581	1,605,867
Charge-offs, net	(393,581)	(1,746,867)
Loans receivable allowance, end of period	$ 880,000	$ 1,036,000

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Accounts Receivable (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Accounts receivable	$ 3,531,305	$ 1,812,867
Less allowance	(123,000)	(96,000)
Net account receivable	3,408,305	1,716,867
Franchise [Member]
Accounts receivable	1,691,336	1,103,210
Less allowance	(65,000)	(83,000)
Net account receivable	1,626,336	1,020,210
Cellular Retail [Member]
Accounts receivable	235,525	333,800
Less allowance
Net account receivable	235,525	333,800
Direct to Consumer [Member]
Accounts receivable	1,595,258	363,426
Less allowance	(58,000)	(13,000)
Net account receivable	1,537,258	350,426
Consumer Finance [Member]
Accounts receivable	9,186	12,431
Less allowance
Net account receivable	$ 9,186	$ 12,431

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Operating Lease Liability (Details)	Mar. 31, 2017 USD ($)
Leases [Abstract]
2017 (remainder)	$ 5,221,000
2018	5,959,000
2019	5,060,000
2020	2,992,000
2021	2,132,000
Thereafter	459,000
Total minimum base lease payments	$ 21,823,000

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Notes Payable - Long Term (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Total	$ 9,106,332	$ 10,461,545
Less current maturities	(1,780,000)	(1,780,000)
Notes payable, noncurrent	7,326,332	8,681,545
Note Payable To River City Equity, Inc. [Member]
Debt Instrument [Line Items]
Total
Credit Facilities Overview [Member]
Debt Instrument [Line Items]
Total	144,882	998,426
Note Payable To Financial Institution [Member]
Debt Instrument [Line Items]
Total
Note Payable To Financial Institution Two [Member]
Debt Instrument [Line Items]
Total	2,916,667	3,091,667
Note Payable To Financial Institution Three [Member]
Debt Instrument [Line Items]
Total	3,173,333	3,400,000
Note Payable To Financial Institution Four [Member]
Debt Instrument [Line Items]
Total	$ 2,871,450	$ 2,971,452

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Notes Payable - Long Term (Details Narrative)

3 Months Ended

Mar. 31, 2017

USD ($)

Credit Facilities Overview [Member]

Debt Instrument [Line Items]

Maximum borrowing capacity

$ 3,000,000

Remaining maximum borrowing capacity

$ 5,765,000

Note Payable To Financial Institution Two [Member]

Debt Instrument [Line Items]

Maturity date

Apr. 21, 2021

Principal periodic payment

$ 58,333

Description of variable rate

LIBOR plus 3.5% (4.375% at March 31 2017)

Debt collateral

Secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries.

Note Payable To Financial Institution Three [Member]

Debt Instrument [Line Items]

Maturity date

Dec. 01, 2021

Principal periodic payment

$ 56,667

Description of variable rate

LIBOR plus 3.5% (4.375% at March 31 2017)

Debt collateral

Secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries.

Note Payable To Financial Institution Four [Member]

Debt Instrument [Line Items]

Maturity date

Jun. 05, 2019

Principal periodic payment

$ 33,334

Description of variable rate

LIBOR plus 3.5% (4.375% at March 31 2017)

Debt collateral

secured by JPRE assets

Note Payable To Financial Institution [Member]

Debt Instrument [Line Items]

Maturity date

Apr. 21, 2018

Description of variable rate

LIBOR plus 3.5% (4.375% at March 31, 2017)

Debt collateral

Secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries.

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Equity (Details Narrative)	3 Months Ended
	Mar. 31, 2017 USD ($) shares
Equity [Abstract]
Common stock redemption | $	$ 480,928
Common stock redemption (in shares) | shares	106,874

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Cash Dividends (Details) - Dividends [Member]	3 Months Ended
	Mar. 31, 2017 $ / shares
Date declared	Feb. 24, 2017
Record date	Mar. 17, 2017
Date paid	Mar. 24, 2017
Dividend per share of common stock (in dollars per share)	$ 0.025

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Other Operating Expense (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Other Income and Expenses [Abstract]
Bank fees	$ 550,349	$ 438,034
Collection costs	89,894	116,188
Conference expense	289,206	265,405
Insurance	250,008	181,476
Management and advisory fees	223,481	221,025
Professional and consulting fees	811,130	595,210
Supplies	332,072	183,274
Other	994,529	741,892
Total other expenses	$ 3,540,669	$ 2,742,504

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Segment Information (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Segment Reporting Information [Line Items]
Revenue from external customers	$ 35,635,006	$ 28,435,286
Net income (loss)	2,267,324	1,975,584
Total segment assets	60,772,915	55,451,000	$ 60,210,652
Franchise [Member]
Segment Reporting Information [Line Items]
Revenue from external customers	3,943,000	3,612,000
Net income (loss)	635,000	523,000
Total segment assets	8,879,000	9,481,000
Cellular Retail [Member]
Segment Reporting Information [Line Items]
Revenue from external customers	17,045,000	9,775,000
Net income (loss)	620,000	371,000
Total segment assets	24,794,000	14,746,000
Direct to Consumer [Member]
Segment Reporting Information [Line Items]
Revenue from external customers	11,904,000	12,064,000
Net income (loss)	866,000	904,000
Total segment assets	15,429,000	16,779,000
Consumer Finance [Member]
Segment Reporting Information [Line Items]
Revenue from external customers	2,743,000	2,984,000
Net income (loss)	254,000	312,000
Total segment assets	8,047,000	13,747,000
Corporate [Member]
Segment Reporting Information [Line Items]
Revenue from external customers
Net income (loss)	(108,000)	(135,000)
Total segment assets	$ 3,624,000	$ 698,000

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Commitments and Contingencies (Details Narrative)	3 Months Ended
	Mar. 31, 2017 USD ($)
Employment Agreement [Member]
Amount of bonus	$ 331,000