SECURITIES AND EXCHANGE COMMISSION

~~Washington, D.C. 20549~~

~~Form 10-Q~~

xWashington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, ~~2016~~ 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. Yesþ ☑ Noo ☐

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). Yesþ ☑ Noo ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” ~~and~~ “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 ☐

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. ☐

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

Yeso ☐ Noþ ☑

APPLICABLE ONLY TO CORPORATE ISSUERS

As of November 14, ~~2016,~~2017, the registrant had outstanding ~~9,497,860~~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		1617

Item 4. Controls and Procedures		25

PART II. OTHER INFORMATION
Item 5. Other Information		26

Item 6. Exhibits		26

SIGNATURES		27

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~~Operations	5

Condensed Consolidated Statements of Cash Flows	6

Notes to Condensed Consolidated Financial Statements	7

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


	September 30, 2016		December 31, 2015		September 30, 2017		December 31, 2016
ASSETS

CURRENT ASSETS
Cash	$	7,895,897	$	7,847,669	$	8,628,397	$	14,159,975
Loans receivable (less allowance for losses of $993,000 and $1,177,000, respectively)		4,411,062		4,884,438
Accounts receivable (less allowance for losses of $166,000 and $272,000, respectively)		2,260,911		1,963,192
Inventory		8,856,267		7,617,850
Loans receivable (less allowance for losses of $784,000 and $1,036,000, respectively)						4,081,657		4,438,276
Accounts receivable (less allowance for doubtful accounts of $19,000 and $13,000, respectively)						994,966		696,657
Inventory, net						9,846,062		9,095,460
Prepaid income taxes						1,106,133		—
Prepaid expenses and other		2,805,092		2,589,749		4,164,032		3,399,433
Other current assets held for sale						1,509,914		1,348,061
TOTAL CURRENT ASSETS		26,229,229		24,902,898		30,331,161		33,137,862

NOTE RECEIVABLE						—		2,920,112

PROPERTY AND EQUIPMENT, net		9,314,175		8,561,321		11,586,783		9,409,234

GOODWILL		13,355,592		13,355,591		5,796,529		5,796,528

INTANGIBLE ASSETS, net		7,677,512		8,018,616		5,277,826		1,295,559

DEFERRED INCOME TAXES						263,000		518,000

OTHER		877,494		783,907		1,065,936		1,001,466

NONCURRENT ASSETS HELD FOR SALE						6,441,241		6,649,891

TOTAL ASSETS	$	57,454,002	$	55,622,333	$	60,762,476	$	60,728,652

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts payable	$	3,836,177	$	4,577,118
Accrued expenses and other liabilities		5,486,943		6,232,267
Accounts payable and accrued expenses					$	10,613,642	$	11,626,627
Other current liabilities						1,293,210		1,198,311
Income taxes payable		151,869		1,135,031		—		95,551
Note payable – short-term		84,009		-		74,831		55,819
Current portion long-term debt		1,100,000		4,900,008		1,780,000		1,780,000
Current portion capital lease obligations		60,464		23,860		46,485		46,400
Deferred revenue and other		1,226,142		1,796,338
Deferred revenue						1,044,198		1,173,660
Current liabilities held for sale						2,270,928		2,851,395
TOTAL CURRENT LIABILITIES		11,945,604		18,664,622		17,123,294		18,827,763

LONG-TERM LIABILITIES
Notes payable, net of current portion		6,776,829		3,096,452		6,014,885		8,681,545
Capital lease obligations, net of current portion		106,167		33,347		63,216		94,762
Deferred income taxes		4,521,000		3,889,000
Other		120,539		80,403
Long-term liabilities held for sale						2,363,924		2,436,080
TOTAL LONG-TERM LIABILITIES		11,524,535		7,099,202		8,442,025		11,212,387

TOTAL LIABILITIES		23,470,139		25,763,824		25,565,319		30,040,150

COMMITMENTS AND CONTINGENCIES (Note 13)
COMMITMENTS AND CONTINGENCIES (Note 14)

EQUITY

WESTERN SHAREHOLDERS’ EQUITY
Common stock, $0.001 and no par value, 12,500,000 shares authorized, 9,497,860 and 9,497,534 issued and outstanding. (Note 8)		950		-
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		28,982,705		28,934,392		29,031,808		28,997,087
Retained earnings		4,959,387		898,038		4,481,291		1,643,996
TOTAL WESTERN SHAREHOLDERS’ EQUITY		33,943,042		29,832,430		33,514,038		30,642,033

NONCONTROLLING INTERESTS		40,821		26,079		1,683,119		46,469

TOTAL EQUITY		33,983,863		29,858,509		35,197,157		30,688,502

TOTAL LIABILITIES AND EQUITY	$	57,454,002	$	55,622,333	$	60,762,476	$	60,728,652

See notes to condensed consolidated financial statements

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS (Unaudited)

	Three months ended						Nine months ended						Three months ended						Nine months ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015			September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
REVENUES
Sales and associated fees	$	13,066,705		$	13,403,791		$	52,146,348		$	27,039,059		$	18,535,592		$	13,066,705		$	67,834,678		$	52,146,348
Financing fees and interest		2,562,569			2,865,842			7,387,757			8,007,438			2,342,285			2,562,569			6,695,439			7,387,757
Royalty and franchise fees, net		3,056,046			2,803,405			8,446,416			7,883,214
Other revenue		3,840,147			2,878,430			10,152,658			6,259,541			5,255,124			2,618,391			15,051,477			7,147,375
Total Revenues		22,525,467			21,951,468			78,133,179			49,189,252			26,133,001			18,247,665			89,581,594			66,681,480

COST OF REVENUES
Cost of sales		6,544,212			7,324,815			26,360,046			15,329,353			9,599,712			6,555,044			34,434,610			26,393,767
Provisions for loans receivable losses		444,689			572,959			1,176,174			1,351,427			326,998			444,689			815,313			1,176,174
Other		662,410			200,303			1,819,491			730,143
Total Cost of Revenues		7,651,311			8,098,077			29,355,711			17,410,923			9,926,710			6,999,733			35,249,923			27,569,941

GROSS PROFIT		14,874,156			13,853,391			48,777,468			31,778,329			16,206,291			11,247,932			54,331,671			39,111,539

OPERATING EXPENSES
Salaries, wages and benefits		7,040,838			6,236,073			20,467,591			14,733,576			9,384,142			5,928,774			27,515,294			17,041,464
Occupancy		2,081,592			2,016,406			5,949,389			4,729,718			3,573,785			2,021,416			9,618,698			5,769,871
Advertising, marketing and development		1,076,102			1,142,751			5,293,633			1,513,578			998,433			983,487			5,117,015			5,021,984
Depreciation		309,584			234,122			881,333			444,814			438,822			282,633			1,114,513			797,192
Amortization		140,647			141,783			422,510			359,133			216,253			54,528			323,911			164,154
Other		2,795,326			2,280,809			8,049,581			5,754,519			2,469,726			1,954,320			7,878,396			5,978,859
Total Operating Expense		13,444,089			12,051,944			41,064,037			27,535,338
Total Operating Expenses														17,081,161			11,225,158			51,567,827			34,773,524

OPERATING INCOME		1,430,067			1,801,447			7,713,431			4,242,991
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS														(874,870	)		22,774			2,763,844			4,338,015

OTHER INCOME (EXPENSES):
Interest income		955			995			2,964			3,065			346			955			131,985			2,964
Interest expense		(93,665	)		(198,048	)		(413,390	)		(401,299	)		(121,647	)		(93,366	)		(370,213	)		(320,017	)
Total Other Income (Expenses)		(92,710	)		(197,053	)		(410,426	)		(398,234	)
Total Other Income (Expense)														(121,301	)		(92,411	)		(238,228	)		(317,053	)

INCOME BEFORE INCOME TAXES		1,337,357			1,604,394			7,303,005			3,844,757
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES														(996,171	)		(69,637	)		2,525,616			4,020,962

INCOME TAX EXPENSE		551,000			724,293			2,752,000			1,696,813
PROVISION FOR INCOME TAXES FOR CONTINUING OPERATIONS														(386,000	)		10,000			863,000			1,485,000

NET INCOME		786,357			880,101			4,551,005			2,147,944
NET INCOME (LOSS) FROM CONTINUING OPERATIONS														(610,171	)		(79,637	)		1,662,616			2,535,962

Less net income attributable to noncontrolling interests		(6,004	)		(6,498	)		(14,742	)		(12,485	)
LESS NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NONCONTROLLING INTEREST														(99,865	)		—			(99,865	)		—

NET INCOME (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS														(710,036	)		(79,637	)		1,562,751			2,535,962

DISCONTINUED OPERATIONS
Income from operations of discontinued operations														1,171,159			1,406,994			3,988,232			3,282,043
Provision for income taxes for discontinued operations														440,000			541,000			1,511,000			1,267,000
Income from discontinued operations														731,159			865,994			2,477,232			2,015,043
Less net income from discontinued operations attributable to noncontrolling interests														(4,925	)		(6,004	)		(17,446	)		(14,742	)
Net income from discontinued operations attributable to Western common shareholders														726,234			859,990			2,459,786			2,000,301
NET INCOME ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS	$	780,353		$	873,603		$	4,536,263		$	2,135,459		$	16,198		$	780,353		$	4,022,537		$	4,536,263

EARNINGS PER SHARE ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS
Basic and diluted	$	0.08		$	0.09		$	0.48		$	0.30
EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS
FROM CONTINUING OPERATIONS - Basic and diluted													$	(0.08	)	$	(0.01	)	$	0.17		$	0.27
FROM DISCONTINUED OPERATIONS - Basic and diluted													$	0.08		$	0.09		$	0.26		$	0.21
FROM CONTINUING AND DISCONTINUED OPERATIONS - Basic and diluted													$	0.00		$	0.08		$	0.43		$	0.48

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		9,497,608			9,497,689			9,497,559			7,177,176
Basic and diluted from discontinued operations														9,390,997			9,497,608			9,418,009			9,497,559

See notes to condensed consolidated financial statements.

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

Nine Months Ended
September 30, 2017 September 30, 2016
OPERATING ACTIVITIES
Net Income $ 1,662,616 $ 2,535,962
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation – continuing operations 1,114,513 797,192
Amortization – continuing operations 323,911 164,154
Share based compensation 34,721 49,263
Deferred income taxes 117,000 632,000
Loss on disposal of property and equipment 22,030 8,014
Changes in operating assets and liabilities:
Loans receivable 356,619 473,376
Accounts receivable (298,309 ) 28,186
Inventory (750,602 ) (1,238,417 )
Prepaid expenses and other assets (1,746,082 ) (620,529 )
Accounts payable and accrued expenses (891,043 ) (1,898,140 )
Deferred revenue and other current liabilities (34,563 ) (452,611 )
Operating cash flows from discontinued operations 2,047,050 1,778,505
Net cash provided by operating activities 1,957,861 2,256,955

INVESTING ACTIVITIES
Purchase of property and equipment– continuing operations (1,999,408 ) (1,227,121 )
Acquisition of stores, net of cash acquired (188,325 ) (588,241 )
Advances on note receivable, net (513,744 ) —
Proceeds from disposal of property and equipment 16,959 109,350
Investing activities of discontinued operations (30,023 ) (17,594 )
Net cash used by investing activities (2,714,541 ) (1,723,606 )

FINANCING ACTIVITIES
Payments on notes payable – short-term (63,303 ) —
Advances (Payments) on line of credit, net (998,426 ) 1,538,708
Advances on note payable – long-term — 418,301
Payments on notes payable – long-term– continuing operations (2,457,450 ) (451,640 )
Common stock redemption (480,928 ) —
Advances on capital lease — 185,318
Payments on capital lease (31,461 ) (75,894 )
Dividend paid (704,325 ) (474,914 )
Financing activities of discontinued operations (39,005 ) (1,625,000 )
Net cash used in financing activities (4,774,898 ) (485,121 )

NET CHANGE IN CASH (5,531,578 ) 48,228

CASH
Beginning of period 14,159,975 7,847,669
End of period $ 8,628,397 $ 7,895,897

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Income taxes paid $ 3,648,839 $ 3,103,162
Interest paid $ 354,601 $ 550,231

Noncash investing and financing activities:
Note receivable balance applied to acquisition of stores (Note 11) $ 3,433,856 $ —
Financed acquisition of stores (Note 11) $ 789,216 $ —
Noncontrolling interest’s equity contribution in acquisition of stores (Note 11) $ 1,550,724 $ —
Long-term debt proceeds used to pay off debt and interest $ — $ 3,021,699
Long-term debt proceeds used to pay prepaid financing costs $ — $ 60,000

See notes to condensed consolidated financial statements.

5
~~WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES~~
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)~~
Nine Months Ended
September 30, 2016 September 30, 2015
OPERATING ACTIVITIES
Net Income $ 4,551,005 $ 2,147,944
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 881,333 444,814
Amortization 422,510 359,133
Share based compensation 49,263 76,538
Deferred income taxes 632,000 390,000
Loss on disposal of property and equipment 8,014 -
Changes in operating assets and liabilities:
Loans receivable 473,376 233,848
Accounts receivable (297,719 ) (492,684 )
Inventory (1,238,417 ) (1,645,395 )
Prepaid expenses and other assets (224,921 ) (612,532 )
Accounts payable and accrued liabilities (2,469,429 ) (468,720 )
Deferred revenue and other current liabilities (570,196 ) (137,896 )
Accrued liabilities and other 40,136 (21,252 )
Net cash provided by operating activities 2,256,955 273,798

INVESTING ACTIVITIES
Purchases of property and equipment (1,244,715 ) (507,075 )
Acquisition of stores, net of cash acquired (588,241 ) (2,608,500 )
Cash received through acquisitions - 2,470,930
Proceeds from sale of property and equipment 109,350 -
Net cash used by investing activities (1,723,606 ) (644,645 )

FINANCING ACTIVITIES
Payments on notes payable – short-term - (120,000 )
Advances on line of credit, net 1,538,708 -
Advances on note payable – long-term 418,301 -
Payments on notes payable – long-term, net (2,076,640 ) (191,668 )
Advances (payments) on capital leases, net 109,424 (42,107 )
Dividend paid (474,914 ) -
Net cash used in financing activities (485,121 ) (353,775 )

NET INCREASE (DECREASE) IN CASH 48,228 (724,622 )

CASH
Beginning of period 7,847,669 4,273,350
End of period $ 7,895,897 $ 3,548,728

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Income taxes paid $ 3,103,162 $ 1,759,171
Interest paid $ 550,231 $ 392,751

Noncash investing and financing activities:
Net assets acquired in JPPA/RAI/JPRE acquisition $ - $ 6,123,398
Deposit applied to purchase of intangibles $ - $ 50,000
Long-term debt proceeds used to pay off debt and interest $ 3,021,699 $ -
Long-term debt proceeds used to pay prepaid financing costs $ 60,000 $ -
~~See notes to condensed consolidated financial statements.~~

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)~~(“SEC”) and, therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month ~~period~~periods ended September 30, ~~2016~~2017 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2016.~~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, ~~2015.~~2016. The condensed consolidated balance sheet at December 31, ~~2015,~~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”)~~(WCR) is a parent company owning operating subsidiaries, with percentage owned shown parenthetically, as summarized ~~below:~~below.

·● Franchise
o○ AlphaGraphics, Inc. ~~(“AGI”)~~(AGI) (99.2%) - disposed of October 3, 2017 – see notes 12, and 15) – franchisor of ~~258~~ 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. ~~and subsidiaries (“PQH”)~~(PQH) (100%) – ~~owns and~~ operates ~~126~~ cellular retail stores (280 as of September 30, 2017), as an exclusive dealer of the Cricket brand.

·● Direct to Consumer
o○ J & P Park Acquisitions, Inc. ~~(“JPPA”~~(JPPA) (100%) ~~(100% – Acquired July 1, 2015)~~ – 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”~~(RAI) (100%) ~~(100% – Acquired July 1, 2015)~~ – 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”~~(JPRE) (100%) ~~(100% – Acquired July 1, 2015)~~ – 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”)~~(WFL) (100%) – owns and operates 45 “payday” stores (40 as of September 30, 2017) in ~~eight~~seven states (Colorado, Iowa, Kansas, Nebraska, North ~~Dakota, South~~ 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”)~~(EPI) (100%) – owns and operates ~~three~~ retail pawn stores (three as of September 30, 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.~~primarily used merchandise.

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 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 ~~condensed~~ consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect certain reported amounts and disclosures in the ~~condensed~~ consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Significant management estimates relate to the 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 ~~customer~~merchandise credits liability and deferred taxes and tax uncertainties.

Reclassifications

Certain Statements of ~~Income~~Operations 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 and nine ~~months~~month periods ended September 30, ~~2016.~~2017.
In accordance with appropriate accounting rules, the Company has reclassified its previously reported financial results to exclude the results of the discontinued operations of the Franchise segment and these results are presented on a historical basis as a separate line in the Company’s condensed consolidated statements of operations and condensed consolidated balance sheets entitled “held for sale.” Also in accordance with appropriate accounting rules, continuing corporate overhead costs previously allocated to discontinued operations has been reallocated to continuing operations. The notes to the condensed consolidated financial statements have been revised to reflect only the results of continuing operations, except where noted.

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.~~GAAP and IFRS. This converged standard ~~including subsequent updates,~~ 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 November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. The Company early adopted ASU 2015-17 during our first quarter of fiscal year 2016 on a retrospective basis. Accordingly, we reclassified the current deferred taxes to noncurrent on our December 31, 2015 Condensed Consolidated Balance Sheet, which decreased current deferred tax assets by $0.56 million and decreased noncurrent deferred tax liabilities by $0.56 million.
In February 2016, the FASB issued ASU ~~No.~~ 2016-02, ~~“Leases~~Leases (Topic 842)~~” (“ASU 2016-02”). The standard requires recognizing~~, related to recognition of lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU ~~2016-02~~ is effective for ~~fiscal years, and interim~~annual reporting periods ~~within those years,~~ beginning after December 15, ~~2018. Early~~2018, including interim periods within that annual period, with early adoption is permitted and ~~the standard is~~ to be applied using a modified ~~retrospectively~~retrospective approach. The Company is currently evaluating the impact ~~that~~the ASU ~~2016-02~~ will have on our financial condition, results of operations and consolidated financial statements.

In June 2016, the FASB issued ASU ~~No.~~ 2016-13, ~~“Financial~~Financial Instruments - Credit Losses (Topic 326)~~: Measurement~~, related to the measurement of ~~Credit Losses~~credit losses on ~~Financial Instruments” (“ASU 2016-13”).~~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 ~~2016-13~~ is effective for ~~fiscal years, and interim~~annual reporting periods ~~within those years, beginning after December 15, 2019. Early adoption is permitted earlier as of the fiscal years~~ beginning after December 15, 2018 ~~including~~and interim periods within ~~those fiscal years~~that annual period, with early adoption permitted and the standard is to be applied using a modified ~~retrospectively~~retrospective approach. The Company is currently evaluating the impact ~~that~~the ASU ~~2016-13~~ will have on our financial condition, results of operations and consolidated financial statements.

No other new accounting pronouncements issued or effective during the fiscal ~~quarter~~year have had or are expected to have a material impact on ~~our condensed~~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 ~~enforcing~~involved in the enforcement of existing ~~regulations within its jurisdiction.~~consumer-protection laws applicable to the payday industry.

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~~location closure 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 business we conduct in 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 business we conduct in the Consumer Finance segment.

3. ~~Loans Receivable –~~
3.         Loans Receivable –

~~At September 30, 2016 and December 31, 2015, the~~The Consumer Finance segment’s outstanding loans receivable aging was as follows:

September 30, 2016
September 30, 2017 September 30, 2017
Payday Installment Pawn &
Title Total Payday Installment Pawn & Title Total
Current $ 3,645,540 $ 248,820 $ 282,212 $ 4,176,572 $ 3,348,335 $ 258,785 $ 317,367 $ 3,924,487
1-30 290,044 46,460 - 336,504 227,700 51,146 — 278,846
31-60 249,995 23,836 - 273,831 188,750 25,247 — 213,997
61-90 175,254 15,287 - 190,541 120,350 12,936 — 133,286
91-120 150,320 10,087 - 160,407 127,408 5,623 — 133,031
121-150 131,000 3,684 - 134,684 97,366 1,659 — 99,025
151-180 129,724 1,799 - 131,523 81,905 1,080 — 82,985
4,771,877 349,973 282,212 5,404,062 4,191,814 356,476 317,367 4,865,657
Less Allowance (920,000 ) (73,000 ) - (993,000 ) (695,000 ) (89,000 ) — (784,000 )
$ 3,851,877 $ 276,973 $ 282,212 $ 4,411,062 $ 3,496,814 $ 267,476 $ 317,367 $ 4,081,657

December 31, 2015
Payday Installment Pawn &
Title Total
Current $ 4,065,706 $ 291,947 $ 286,514 $ 4,644,167
1-30 332,217 43,179 - 375,396
31-60 263,486 24,233 - 287,719
61-90 199,526 16,293 - 215,819
91-120 196,123 9,417 - 205,540
121-150 160,386 4,985 - 165,371
151-180 165,237 2,189 - 167,426
5,382,681 392,243 286,514 6,061,438
Less Allowance (1,081,000 ) (96,000 ) - (1,177,000 )
$ 4,301,681 $ 296,243 $ 286,514 $ 4,884,438
4. ~~Loans Receivable Allowance –~~
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

As a result of the Consumer Finance segment’s collection efforts, it historically writes off approximately 43% of returned payday items.  Based on days past the check return date, write-offs of payday returned items historically have tracked at the following approximate percentages: 1 to 30 days4.         Loans Receivable Allowance – ~~43%; 31 to 60 days – 65%; 61 to 90 days – 83%; 91 to 120 days – 89%; 121 to 150 days – 91%; and 151 + days – 93%.~~

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

Nine Months Ended
September 30, 2016
Year Ended
December 31, 2015

Nine Months Ended
September 30, 2017

Year Ended
December 31, 2016

Loans receivable allowance, beginning of period $ 1,177,000 $ 1,219,000 $ 1,036,000 $ 1,177,000
Provision for loan losses charged to expense 1,176,174 1,904,893 815,313 1,605,867
Charge-offs, net (1,360,174 ) (1,946,893 ) (1,067,313 ) (1,746,867 )
Loans receivable allowance, end of period $ 993,000 $ 1,177,000 $ 784,000 $ 1,036,000

5.         Accounts Receivable –

5. ~~Accounts Receivable –~~
A breakdown of accounts receivables for continuing operations by segment are as offollows:
September 30, 2017
Cellular Retail Direct to Consumer Consumer Finance Total
Accounts receivable $ 342,876 $ 657,868 $ 13,222 $ 1,013,966
Less allowance — (19,000 ) — (19,000 )
Net account receivable $ 342,876 $ 638,868 $ 13,222 $ 994,966
December 31, 2016
Cellular Retail Direct to Consumer Consumer Finance Total
Accounts receivable $ 333,800 $ 363,426 $ 12,431 $ 709,657
Less allowance — (13,000 ) — (13,000 )
Net account receivable $ 333,800 $ 350,426 $ 12,431 $ 696,657
6.         Notes Payable – Long Term –
September 30,
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% (4.75% at September 30, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2018 $ — $ 998,426
Note payable to a financial institution with monthly principal payment of $58,333 plus interest at LIBOR plus 3.5% (4.75% at September 30, 2017), securedby substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021 1,502,959 3,091,667
Note payable to a financial institution with monthly principal payment of $56,667 plus interest at LIBOR plus 3.5% (4.75% at September 30, 2017), securedby substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing December 1, 2021 2,831,264 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% (4.75% at September 30, 2017), securedby JPRE assets, maturing June 5, 2019 when remaining principal balance is due 2,671,446 2,971,452
Subsidiary note payable to seller with monthly interest payments only at 6%, maturing June 30, 2022 789,216 —
Total 7,794,885 10,461,545
Less current maturities (1,780,000 ) (1,780,000 )
$ 6,014,885 $ 8,681,545
At September 30, ~~2016~~2017 and December 31, ~~2015 are as follows:~~
September 30, 2016
Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Total
Accounts receivable $ 1,624,351 $ 172,813 $ 619,568 $ 10,179 $ 2,426,911
Less allowance (149,000 ) - (17,000 ) - (166,000 )
Net account receivable $ 1,475,351 $ 172,813 $ 602,568 10,179 $ 2,260,911
December 31, 2015
Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Total
Accounts receivable $ 1,332,446 $ 148,346 $ 754,400 $ - $ 2,235,192
Less allowance (183,000 ) - (89,000 ) - (272,000 )
Net account receivable $ 1,149,446 $ 148,346 $ 665,400 - $ 1,963,192
6. ~~Deferred Revenue and Other Liabilities –~~
~~Deferred revenue and other liabilities consist of the following:~~
September 30, 2016 December 31, 2015
Deferred financing fees $ 265,779 $ 285,452
Deferred franchise development and service fees 130,500 264,000
Merchandise credits and gift card liability 694,302 1,127,470
Other 135,561 119,416
Total $ 1,226,142 $ 1,796,338

7. ~~Notes Payable – Long Term~~
September 30, 2016 December 31, 2015
Note payable (with a credit limit of $3,000,000) to River City Equity, Inc., a related party, with interest payable monthly at 12% due June 30, 2016 and upon certain events can be collateralized by substantially all assets of WCR, excluding any equity interest in AGI (terminated May 2016) $ $ 3,000,000
Note payable to a financial institution with monthly principal payment of $58,333 plus interest at LIBOR plus 3.5% (4.125% at September 30, 2016), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021 3,266,667 -
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% (4.125% at September 30, 2016), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2018 1,538,708 -
Subsidiary note payable to a financial institution with quarterly principal payments of $375,000 plus interest at prime rate plus 2.5%, secured by the AGI’s assets, maturing March 2017 (terminated May 2016) - 1,625,000
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% (4.125% at September 30, 2016), secured by JPRE assets, maturing June 5, 2019 when remaining principal balance is due 3,071,454 3,371,460
Total 7,876,829 7,996,460
Less current maturities (1,100,000 ) (4,900,008 )
$ 6,776,829 $ 3,096,452
~~Future minimum long-term principal payments are as follows:~~
Year     Amount
1 $ 1,100,000
2 2,638,716
3 2,971,446
4 700,000
5 466,667
Thereafter -
$ 7,876,829
On April 22, 2016, WCR entered into a Credit Agreement with a financial institution. The Credit Agreement provides the Company with an acquisition loan facility in an aggregate amount of up to $9,000,000, having a commitment maturity date of April 21, 2018. Funds advanced under the acquisition loan facility bear interest at a floating per annum rate equal to one-month LIBOR plus 3.50%, adjusted on a monthly basis, and mature five years from the date of advance. At closing, $3,500,000 was advanced under the acquisition loan replacing the $3,000,000 River City Equity debt and $500,000 of other term debt. At September 30, 2016, approximately ~~$7,195,000~~$7,666,000 and $4,510,000 of credit was available under the ~~acquisition and revolving~~ credit ~~facilities.~~facilities, respectively.

~~See Note 13 for additional terms and conditions related to the Credit Agreement.~~7.         Equity –

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

8.         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
Date declared May 12, 2017
Record date July 14, 2017
Date paid July 24, 2017
Dividend per share of common stock $ 0.025
Date declared August 28, 2017
Record date September 18, 2017
Date paid September 29, 2017
Dividend per share of common stock $ 0.025

On January 20, 2016, our shareholders approved a plan to reincorporate Western Capital Resources, Inc. in Delaware at a special meeting of the shareholders called for that purpose. The reincorporation was completed May 11, 2016.9.         Other Operating Expense –

9. ~~Cash Dividends –~~
Date declared May 24, 2016 August 11, 2016
Record date June 6, 2016 September 14, 2016
Date paid June 15, 2016 September 21, 2016
Dividend per share of common stock $ 0.025 $ 0.025
~~10.~~ ~~Other Operating Expense –~~

A breakout of other expense is as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
2016 2015 2016 2015
Bank fees $ 337,939 $ 310,419 $ 1,273,057 $ 595,164
Collection costs 85,306 99,587 311,457 319,890
Conference expense 468,124 460,602 762,680 671,287
Insurance 184,106 110,788 528,995 286,783
Management and advisory fees 195,425 125,754 619,954 400,057
Professional and consulting fees 488,978 483,575 1,531,923 1,401,683
Supplies 231,995 167,480 591,919 496,116
Other 803,453 522,604 2,429,596 1,583,539
$ 2,795,326 $ 2,280,809 $ 8,049,581 $ 5,754,519
~~11.~~ ~~Pro Forma Information –~~
Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Bank fees $ 379,245 $ 320,156 $ 1,484,460 $ 1,216,555
Collection costs 94,197 85,306 275,619 311,457
Insurance 260,419 174,699 757,690 502,025
Management and advisory fees 193,710 195,425 537,853 577,954
Professional and consulting fees 555,977 368,527 1,704,803 1,174,323
Supplies 341,808 222,745 1,080,325 555,099
Other 644,370 587,462 2,037,646 1,641,446
$ 2,469,726 $ 1,954,320 $ 7,878,396 $ 5,978,859

~~Effective~~10.       Segment Information –
Segment information related to the three and nine month periods ended September 30, 2017 and 2016 for continuing operations is presented below:
Three Months Ended September 30, 2017
(in thousands)

Cellular Retail
Direct to Consumer Consumer
Finance Corporate Total

Revenue from external customers $ 18,301 $ 4,983 $ 2,849 $ — $ 26,133
Net income (loss) $ (223 ) $ (462 ) $ 326 $ (251 ) $ (610 )
Expenditures for segmented assets $ 6,408 $ 139 $ 1 $ 7 $ 6,555
Three Months Ended September 30, 2016
(in thousands)

Cellular Retail
Direct to Consumer Consumer
Finance Corporate Total

Revenue from external customers $ 9,294 $ 5,945 $ 3,009 $ — $ 18,248
Net income (loss) $ 72 $ (325 ) $ 391 $ (218 ) $ (80 )
Expenditures for segmented assets $ 241 $ 50 $ 21 $ — $ 312

Nine Months Ended September 30, 2017
(in thousands)

Cellular
Retail
Direct to
Consumer Consumer
Finance Corporate Discontinued
Operations Total

Revenue from external customers $ 52,432 $ 29,014 $ 8,136 $ — $ — $ 89,582
Net income (loss) $ 65 $ 1,507 $ 781 $ (690 ) $ — $ 1,663
Total segmented assets $ 28,375 $ 13,462 $ 8,080 $ 2,162 $ 8,683 $ 60,762
Expenditures for segment assets $ 7,612 $ 341 $ 1 $ 8 $ — $ 7,962
Nine Months Ended September 30, 2016
(in thousands)

Cellular
Retail
Direct to
Consumer Consumer
Finance Corporate Discontinued
Operations Total

Revenue from external customers $ 27,152 $ 30,699 $ 8,830 $ — $ — $ 66,681
Net income (loss) $ 526 $ 1,682 $ 964 $ (636 ) $ — $ 2,536
Total segmented assets $ 16,472 $ 14,723 $ 15,735 $ 413 $ 10,111 $ 57,454
Expenditures for segment assets $ 1,688 $ 88 $ 39 $ — $ — $ 1,815
11.       Acquisition –
In 2016, PQH entered into an agreement to acquire 20 Cricket Wireless retail locations, with an option to purchase an additional 33 locations. The aggregate purchase price for all 53 locations was approximately $6,000,000, subject to reduction in the event that the seller exercised an option to retain a 30% ownership in the acquired business. From November 22, 2016 through June ~~1, 2015,~~30, 2017, PQH purchased with cash all outstanding membership interests in four separate limited liability companies (Green Communications, LLC, an Arizona LLC, Green Communications, LLC, an Oregon LLC, Green Communications, LLC,operated the store locations under a ~~Washington LLC and Go Green, LLC an Arizona LLC).~~management agreement. Effective July 1, ~~2015,~~2017, we consummated the ~~Company acquired~~acquisition transaction by acquiring a ~~100%~~70% interest in all 53 locations through a subsidiary of PQH, and the seller, upon exercising its option to retain a 30% ownership interest in the ~~businesses~~acquired business, contributed its interest to the subsidiary. As a result, PQH owns 70% of ~~RAI, JPPA,~~the newly formed subsidiary and ~~JPRE, by completing a merger and contribution transaction.~~the seller owns the remaining 30% of that subsidiary.

The provisional fair value of the purchase consideration together with the corresponding fair value of the contribution by noncontrolling interests was allocated to the net tangible assets acquired. We accounted for the acquisition of stores as the purchase of a business under GAAP under the acquisition method of accounting. The assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of our company. The fair value of the net assets acquired was approximately $6,000,000. The excess of the aggregate fair value over the net tangible assets has been treated as a gain on bargain purchase in accordance with ASC 805. The purchase price allocation was based, in part, on management’s knowledge of wireless retail business and is preliminary. Once we complete our analysis to finalize the purchase price allocation, which includes finalizing the valuation report, it is reasonably possible that, there could be significant changes to the preliminary values below. Under the purchase method of accounting, the assets acquired and liabilities assumed were recorded at their provisional fair values as of the purchase date as follows:
July 1, 2017
Inventory $ 217,000
Property and equipment 1,332,000
Intangible assets 4,306,000
Other assets 103,000
Net assets acquired $ 5,958,000
12.       Discontinued Operations –
On September 29, 2017, the Board of Directors of the Company authorized the Company to enter into a sale agreement (see Note 15) for 100% of its stock holdings of AGI, the sole business comprising the Company’s Franchise segment.

In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations of the Franchise segment in the Condensed Consolidated Balance Sheets. The assets and liabilities have been reflected as held for sale in the unaudited Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016, and consist of the following:

September 30, 2017
(unaudited)

December 31, 2016
(unaudited)

OTHER CURRENT ASSETS:
Accounts receivable (less allowance for losses of $145,000 and $83,000, respectively) $ 1,306,762 $ 1,020,210
Prepaid expenses and other 203,152 327,851
TOTAL OTHER CURRENT ASSETS $ 1,509,914 $ 1,348,061

NONCURRENT ASSETS:
Property and equipment, net $ 243,147 $ 287,386
Intangible assets, net 5,983,031 6,241,386
Other 215,063 121,119
TOTAL NONCURRENT ASSETS $ 6,441,241 $ 6,649,891

CURRENT LIABILITIES
Accounts payable and accrued expenses $ 841,097 $ 1,375,754
Other liabilities 1,142,999 1,044,061
Income taxes payable — 170,262
Current portion capital lease obligations — 7,620
Deferred revenue and other 286,832 253,698
TOTAL CURRENT LIABILITIES $ 2,270,928 $ 2,851,395

LONG-TERM LIABILITIES
Deferred income taxes $ 2,155,000 $ 2,293,000
Other 208,924 143,080
TOTAL LONG-TERM LIABILITIES $ 2,363,924 $ 2,436,080
In accordance with the provisions of ASC 205-20, the Company has not included the results of operations of the Franchise segment in the results from continuing operations. The results of operations for ~~the acquired~~this business have been ~~included~~reflected as discontinued operations in the ~~consolidated financial statements since~~unaudited Condensed Consolidated Statements of Operations for the ~~dates~~nine month periods ended September 30, 2017 and 2016, and consist of the ~~acquisition.~~ following:
Nine Months Ended

September 30, 2017
(unaudited)

September 30, 2016
(unaudited)

REVENUES $ 12,298,655 $ 11,451,699

COST OF REVENUES 2,098,486 1,819,491

GROSS PROFIT 10,200,169 9,632,208

OPERATING EXPENSES:
Salaries, wages and benefits 3,194,025 3,426,127
Occupancy 140,428 179,518
Advertising, marketing and development 436,566 271,649
Depreciation 74,263 84,141
Amortization 258,356 258,356
Other 2,108,299 2,037,001
6,211,937 6,256,792

OPERATING INCOME 3,988,232 3,375,416

INTEREST EXPENSE — (93,373 )

INCOME BEFORE INCOME TAXES 3,988,232 3,282,043

PROVISION FOR INCOME TAXES 1,511,000 1,267,000

NET INCOME 2,477,232 2,015,043

Less net income attributable to noncontrolling interests (17,446 ) (14,742 )

NET INCOME ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS $ 2,459,786 $ 2,000,301

13.       Pro Forma –
As more fully disclosed in Notes 12 and 15 herein, the Company sold 100% of its stock holdings of AGI on October 3, 2017.The following table presents the unaudited results of continuing operations for the three and nine ~~months~~month periods ended September 30, ~~2016~~2017 and ~~the unaudited pro forma results of operations for the three and nine months ended~~ September 30, ~~2015~~2016 (in thousands, except for per share data) as if the ~~acquisitions~~disposition of the discontinued operations had been consummated at the beginning of ~~2015.~~2016. The pro forma net income below excludes ~~the~~interest expense on debt required to be paid off at closing of the ~~transactions.~~disposition transaction and related tax effect. The pro forma results of continuing operations are prepared for comparative purposes only and do not necessarily reflect the results that would have occurred had the ~~acquisition~~disposition occurred at the beginning of the ~~2015~~2016 or the results which may occur in the future.
Three Months Ended September 30, 2017
(in thousands)

Cellular Retail
Direct to Consumer Consumer Finance Corporate Total

Revenue $ 18,301 $ 4,983 $ 2,849 $ — $ 26,133
% of total revenue 70.0 % 19.1 % 10.9 % — % 100.0 %
Net income $ (190 ) $ (462 ) $ 326 $ (251 ) $ (577 )
Net income attributable to noncontrolling interests $ 100 $ — $ — $ — $ 100
Net income attributable to Western common shareholders $ (290 ) $ (462 ) $ 326 $ (251 ) $ (677 )
Earnings per share attributable to Western common shareholders – basic and diluted $ (0.031 ) $ (0.049 ) $ 0.035 $ (0.027 ) $ (0.072 )
Three Months Ended September 30, 2016
(in thousands)

Cellular Retail
Direct to Consumer Consumer Finance Corporate Total

Revenue $ 9,294 $ 5,945 $ 3,099 $ — $ 18,248
% of total revenue 50.9 % 32.6 % 16.5 % — % 100.0 %
Net income $ 95 $ (325 ) $ 391 $ (218 ) $ (57 )
Net income attributable to noncontrolling interests $ — $ — $ — $ — $ —
Net income attributable to Western common shareholders $ 95 $ (325 ) $ 391 $ (218 ) $ (57 )
Earnings per share attributable to Western common shareholders – basic and diluted $ 0.010 $ (0.034 ) $ 0.041 $ (0.023 ) $ (0.006 )
Nine Months Ended September 30, 2017
(in thousands)

Cellular Retail
Direct to Consumer Consumer Finance Corporate Total

Revenue $ 52,432 $ 29,014 $ 8,136 $ — $ 89,582
% of total revenue 58.5 % 32.4 % 9.1 % — % 100.0 %
Net income $ 183 $ 1,507 $ 781 $ (690 ) $ 1,781
Net income attributable to noncontrolling interests $ 100 $ — $ — $ — $ 100
Net income attributable to Western common shareholders $ 83 $ 1,507 $ 781 $ (690 ) $ 1,681
Earnings per share attributable to Western common shareholders – basic and diluted $ 0.009 $ 0.160 $ 0.083 $ (0.073 ) $ 0.179

Nine Months Ended September 30, 2016
(in thousands)

Cellular Retail
Direct to Consumer Consumer Finance Corporate Total

Revenue $ 27,152 $ 30,699 $ 8,830 $ — $ 66,681
% of total revenue 40.7 % 46.0 % 13.3 % — % 100.0 %
Net income $ 565 $ 1,682 $ 964 $ (636 ) $ 2,575
Net income attributable to noncontrolling interests $ — $ — $ — $ — $ —
Net income attributable to Western common shareholders $ 565 $ 1,682 $ 964 $ (636 ) $ 2,575
Earnings per share attributable to Western common shareholders – basic and diluted $ 0.059 $ 0.177 $ 0.102 $ (0.067 ) $ 0.271

Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Corporate Total
Three Months Ended September 30, 2016
Revenue $ 4,278 $ 9,294 $ 5,944 $ 3,009 $ - $ 22,525
% of total revenue 19.0 % 41.2 % 26.4 % 13.4 % -% 100.0 %
Net income (loss) $ 749 $ 73 $ (325 ) $ 391 $ (102 ) $ 786
Net income attributable to noncontrolling interests $ 6 $ - $ - $ - $ - $ 6
Net income (loss) attributable to WCR common shareholders $ 743 $ 73 $ (325 ) $ 391 $ (102 ) $ 780
Earnings (loss) per share attributable to WCR common shareholders – basic and diluted $ 0.078 $ 0.008 $ (0.034 ) $ 0.041 $ (0.011 ) $ 0.082

Three Months Ended September 30, 2015
Pro forma revenue $ 3,675 $ 9,537 $ 5,442 $ 3,297 $ - $ 21,951
% of total pro forma revenue 16.7 % 43.5 % 24.8 % 15.0 % -% 100.0 %
Pro forma net income (loss) $ 829 $ 443 $ (569 ) $ 390 $ (167 ) $ 926
Pro forma net income attributable to noncontrolling interests $ 6 $ - $ - $ - $ - $ 6
Pro forma net income (loss) attributable to WCR common shareholders $ 823 $ 443 $ (569 ) $ 390 $ (167 ) $ 920
Pro forma earnings (loss) per share attributable to WCR common shareholders – basic and diluted $ 0.087 $ 0.047 $ (0.060 ) $ 0.041 $ (0.018 ) $ 0.097
Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Corporate Total
Nine Months Ended September 30, 2016
Revenue $ 11,452 $ 27,152 $ 30,699 $ 8,830 $ - $ 78,133
% of total revenue 14.6 % 34.8 % 39.3 % 11.3 % -% 100.0 %
Net income (loss) $ 1,834 $ 526 $ 1,682 $ 964 $ (455 ) $ 4,551
Net income attributable to noncontrolling interests $ 15 $ - $ - $ - $ - $ 15
Net income (loss) attributable to WCR common shareholders $ 1,819 $ 526 $ 1,682 $ 964 $ (455 ) $ 4,536
Earnings (loss) per share attributable to WCR common shareholders – basic and diluted $ 0.192 $ 0.055 $ 0.177 $ 0.102 $ (0.048 ) $ 0.478

Nine Months Ended September 30, 2015
Pro forma revenue $ 9,641 $ 29,632 $ 30,296 $ 9,451 $ - $ 79,020
% of total pro forma revenue 12.2 % 37.5 % 38.3 % 12.0 % -% 100.0 %
Pro forma net income (loss) $ 1,585 $ 967 $ 1,365 $ 932 $ (408 ) $ 4,441
Pro forma net income attributable to noncontrolling interests $ 13 $ - $ - $ - $ - $ 13
Pro forma net income (loss) attributable to WCR common shareholders $ 1,572 $ 967 $ 1,365 $ 932 $ (408 ) $ 4,428
Pro forma earnings (loss) per share attributable to WCR common shareholders – basic and diluted $ 0.165 $ 0.102 $ 0.144 $ 0.098 $ (0.043 ) $ 0.466

~~12.~~ ~~Segment Information –~~
~~Segment information related to the three and nine month periods ended September 30, 2016 and 2015 is presented below:~~
~~Three Months Ended September 30, 2016~~
~~(in thousands)~~
Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Corporate Total

Revenue from external customers $ 4,278 $ 9,294 $ 5,944 $ 3,009 $ - $ 22,525
Net income (loss) $ 749 $ 73 $ (325 ) $ 391 $ (102 ) $ 786
Expenditures for segmented assets $ 3 $ 241 $ 50 $ 21 $ - $ 315
~~Three Months Ended September 30, 2015~~
~~(in thousands)~~
Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Corporate Total

Revenue from external customers $ 3,675 $ 9,537 $ 5,442 $ 3,297 $ - $ 21,951
Net income (loss) $ 829 $ 443 $ (569 ) $ 390 $ (213 ) $ 880
Expenditures for segmented assets $ - $ - $ 186 $ 29 $ - $ 215
~~Nine Months Ended September 30, 2016~~
~~(in thousands)~~
Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Corporate Total

Revenue from external customers $ 11,452 $ 27,152 $ 30,699 $ 8,830 $ - $ 78,133
Net income (loss) $ 1,834 $ 526 $ 1,682 $ 964 $ (455 ) $ 4,551
Total segment assets $ 10,111 $ 16,472 $ 14,723 $ 15,735 $ 413 $ 57,454
Expenditures for segmented assets $ 19 $ 1,688 $ 89 $ 39 $ - $ 1,835
~~Nine Months Ended September 30, 2015~~
~~(in thousands)~~
Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Corporate Total

Revenue from external customers $ 9,641 $ 24,655 $ 5,442 $ 9,451 $ - $ 49,189
Net income (loss) $ 1,585 $ 910 $ (569 ) $ 932 $ (710 ) $ 2,148
Total segment assets $ 9,379 $ 12,823 $ 13,568 $ 16,299 $ 544 $ 52,613
Expenditures for segmented assets $ 91 $ 3,656 $ 186 $ 45 $ 14 $ 3,992
~~13.~~ 14.       Commitments and Contingencies –
~~Employment Agreements~~
The Company is party to an Amended and Restated Employment Agreement with its Chief Executive Officer, Mr. John Quandahl. Among other things, this agreement contains provisions for an annual performance-based cash bonus pool for management. The agreement was amended April 1, 2016 to extend the term through March 2019.

Pursuant to the Company’s numerous employment agreements, bonuses of approximately ~~$390,000~~$92,000 and ~~$1,083,000~~$411,000 were accrued for the three and nine month periods ended September 30, ~~2016,~~2017, respectively.

~~Credit Facility~~

15.      Subsequent Events –
Sale of Franchise Segment
On October 2, 2017, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with U.S. Business Holdings, Inc. (the “Purchaser”), MBE WorldWide S.p.A. (as guarantor for the Purchaser), BC Alpha, LLC (“BCA”, a wholly owned subsidiary of BC Alpha Holdings II, LLC), and BC Alpha Holdings II, LLC (“BCAH”, a wholly owned subsidiary of the Company). Pursuant to the Agreement, BCA sold all of its shares of capital stock of AGI to the Purchaser. This sale, which closed on October 3, 2017, constitutes the sale of the Company’s franchise segment. The cash purchase price paid by the Purchaser pursuant to the Agreement was $61,500,000, subject to post-closing working capital adjustments. BCA, BCAH, the Company and the Purchaser also agreed to make a joint election under Section 338(h)(10) of the Internal Revenue Code, which treats the transaction as an asset purchase for tax purposes subject to satisfaction of applicable legal requirements.
Pursuant to the Agreement, the Company, BCA and BCAH made customary representations and warranties regarding AGI and its business, and agreed to certain covenants, including customary non-compete and no-solicit covenants related to the AGI business for a period of three years from the closing date. In addition, the Agreement requires the Company to indemnify the Purchaser for damages resulting from or arising out of any inaccuracy or breach of any representation, warranty or covenant of the Company, BCA or BCAH in the Agreement and for certain other matters. The Company’s indemnification obligations generally survive for 24 months following the closing. The Company’s maximum aggregate liability for indemnification claims for any such inaccuracies or breaches is generally limited to an indemnification escrow of $6,500,000, 50% of which (less any indemnification claims) is to be disbursed 12 months following the closing, with the remaining balance (less any indemnification claims) to be disbursed 24 months following the closing.
As a result of the transaction, the Company received approximately $49,000,000 in proceeds from the sale, after taking into account the impact of the estimated working capital and similar purchase price adjustments, the escrowing of $6,500,000 of sale proceeds, the payoff of the Company’s current balance on its Fifth Third acquisition credit facility of approximately $4,300,000, and the payoff of an aggregate amount of approximately $1,600,000 in transaction costs and pre-closing AGI liabilities related to the cancellation and redemption of securities at the AGI level that occurred prior to the transaction.
In connection with the transaction, the Company also entered into a Consent and Third Loan Modification Agreement (the “Modification Agreement”) with Fifth Third Bank, as lender (“Fifth Third”), which amended that certain Credit Agreement between the Company and Fifth Third, dated April 22, 2016, ~~WCR entered into a Credit Agreement with a financial institution. Certain company subsidiaries are~~as amended (the “Credit Agreement”) to (i) release Fifth Third’s liens on the assets of AGI, BCA and BCAH, (ii) remove AGI, BCA and BCAH as guarantors of the ~~borrowings and~~Company’s obligations under the Credit ~~Agreement. All borrowings under~~Agreement, and (iii) release Fifth Third’s lien on the ~~Credit Agreement are secured by substantially all assets of WCR and the guarantor subsidiaries.~~Company’s equity interests in BCAH.

~~The Credit Agreement requires WCR to meet certain financial tests, including~~Real Estate Debt Payoff
On October 12, 2017 the Company paid off the subsidiary note payable with Fifth Third which had a ~~leverage ratio~~maturity date of June 5, 2019 and a fixed charge coverage ratio, as defined in the Credit Agreement. Subject to certain exceptions, the Credit Agreement contains covenants limiting the company’s ability to (or to permit the guarantor subsidiaries to) merge or consolidate with, or engage in a salebalance of substantially all assets to, any party, but WCR or any guarantor subsidiary generally may nonetheless merge with another party if (i) WCR or guarantor subsidiary is the entity surviving such merger, and (ii) immediately after giving effect to such merger, no default shall have occurred and be continuing under the Credit Agreement. Subject to certain exceptions, the Credit Agreement also contains covenants limiting WCR’s ability to (or to permit the guarantor subsidiaries to) create liens on assets, incur additional indebtedness, make certain types of investments, and pay dividends or make certain other types of restricted payments, but WCR may nonetheless pay dividends to its shareholders if (a) there are no outstanding loans or unpaid interest under the revolving credit facility, and (b) no default shall have occurred and be continuing under the Credit Agreement. Some covenant waivers were granted by the financial institution during the three months ended September 30, 2016.$2,638,112.

~~Cellular Retail Growth Commitment~~Risks Inherent in Our Consumer Finance Segment

~~Effective June 6, 2016, PQH entered into~~
In October 2017, the Consumer Financial Protection Bureau issued final rules affecting the payday lending industry and other market participants who make available certain kinds of high-interest loans. Those rules will generally require lenders to take steps to reasonably determine that borrowers will be able repay the loans according to their terms without needing to reborrow within the following 30 days. The rules also generally prohibit lenders from directly withdrawing payment from a ~~Cricket Wireless Exclusive Dealer Agreement Amendment for Retail Expansion. Per~~borrower’s bank account after two prior consecutive attempted withdrawals have failed. Finally, the ~~agreement, PQH commits~~rules prohibit lenders from making loans to ~~open~~customers who have earlier taken out three “covered” loans (i.e., payday loans and certain other kinds of high-interest loans) within 30 days of each other until at least ~~150 locations by December 31, 2017, including 50 locations by December 31, 2016. Also~~30 days have passed from the date on which the last such covered loan is no longer outstanding. These rules will become effective ~~June 6, 2016, Cricket Wireless, LLC has increased certain compensation arrangements in~~on or about July 2019, and are expected to have a material impact on the ~~existing dealer agreement and will provide a subsidy for each location opened during the term of the agreement.~~
~~14.~~ ~~Subsequent Events –~~
~~Wireless Retail Transaction~~industry.

PQH entered into an Asset Purchase Agreement for the acquisition of 20 Cricket Wireless retail locations for $2,050,000 and an option to purchase an additional 33 locations for an aggregate purchase price of $7,200,000. In addition, if PQH exercised its option, seller has an option to retain a 30% ownership in the 53 store transaction, with a corresponding adjustment to the purchase price. It is anticipated that the transaction will close in November 2016.
~~Consumer Finance Segment Law Change~~
On November 8, 2016, South Dakota voters approved a measure effectively banning payday lending in South Dakota. Unless delayed, the effective date of the measure will be November 16, 2016. Revenue generated in South Dakota is approximately 5% of Consumer Finance segment year to date revenue through September 30, 2016.
~~The Company~~We evaluated all ~~other~~ events or transactions that occurred after September 30, ~~2016~~2017 up through ~~November 14, 2016,~~ the date we issued these financial statements. During this period we did not have any ~~additional~~ material subsequent events that impacted our financial ~~statements.~~statements other than those listed above.

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 Direct to Consumer segment is seasonal in nature and is earned during the months of March through May and December, and 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 ~~Wireless~~ segment;

·● changes in local, state or federal laws and regulations governing lending practices, or changes in the interpretation of such laws and ~~regulations;~~regulations, affecting our Consumer Finance segment;

·● 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;

· ~~the impact on us, as a Cricket dealer, of the AT&T acquisition of the Cricket Wireless business;~~
·● 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, ~~2015.~~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.

17
OVERVIEW

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

~~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 ~~and distributor~~ of live plants, seeds, holiday gifts and garden accessories ~~operating in the retail market~~selling its products under ~~the~~ Park Seed, Jackson & Perkins and Wayside Gardens ~~trade~~brand names ~~and in the wholesale market~~as well as a wholesaler under the Park Wholesale ~~trade name,~~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 are actual and~~~~pro forma~~ ~~revenues by operating~~On October 3, 2017 the Company sold 100% of its stock holdings of AlphaGraphics, Inc. (“AGI”), the sole business comprising the Company’s franchise segment, for an aggregate purchase price of $61,500,000 (subject to adjustment) and as more fully explained in Note 15 “Subsequent Events” of the ~~three and nine month periods~~notes to our condensed consolidated financial statements included in this report. AGI net income applicable to the Company’s shareholders for the nine-month period ended September 30, ~~2016 and 2015:~~2017 was $2.46 million, which represents 61.15% of the total net income applicable to the Company’s shareholders for the period.

We intend to use the net proceeds, after payment of income taxes and debt reduction, for future acquisitions.

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.

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~~We do not specifically reserve for any individual payday, installment or title loan. ~~The Company aggregates~~We aggregate 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~~We utilize 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~~We also periodically ~~performs~~perform 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~~We are 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 September 30, ~~2016~~2017 Compared to Three Months Ended September 30, ~~2015~~2016

Net income attributable to our common shareholders was $0.02 million, or $0.00 per share (basic and diluted), for the quarter ended September 30, 2017, compared to net income of $0.78 million, or $0.08 per share (basic and diluted), for the quarter ended September 30, ~~2016, compared~~2016. Net loss from continuing operations attributable to ~~$0.87~~our common shareholders was $0.71 million, or ~~$0.09~~($0.08) per share (basic and diluted), for the quarter ended September 30, ~~2015.~~2017, compared to net loss of $0.08 million, or ($0.01) per share (basic and diluted), for the quarter ended September 30, 2016. Net income from discontinued operations attributable to our common shareholders was $0.73 million, or $0.08 per share (basic and diluted), for the quarter ended September 30, 2017 compared to $0.86 million, or $0.09 per share (basic and diluted) for the quarter ended September 30, 2016.

We expect segment operating results and earnings per share to change throughout ~~2016~~2017 due, at least in part, to the seasonality of the Direct to Consumer and Cellular Retail segments, growth in the Cellular Retail segment, discontinued operations of our Franchise segment, and potential mergers and acquisitions activity.

Following is a discussion of operating results by segment.

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

Cellular Retail Direct to Consumer Consumer Finance Corporate Total
Three Months Ended September 30, 2017
Revenues $ 18,301 $ 4,983 $ 2,849 $ — $ 26,133
% of total revenue 70.0 % 19.1 % 10.9 % — % 100.0 %
Net income (loss) $ (223 ) $ (462 ) $ 326 $ (251 ) $ (610 )
Net income (loss) attributable to WCR common shareholders $ (323 ) $ (462 ) $ 326 $ (251 ) $ (710 )
Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Corporate Total
Three Months Ended September 30, 2016
Revenues $ 4,278 $ 9,294 $ 5,944 $ 3,009 $ - $ 22,525 $ 9,294 $ 5,945 $ 3,009 $ — $ 18,248
% of total revenue 19.0 % 41.2 % 26.4 % 13.4 % -% 100.0 % 50.9 % 32.6 % 16.5 % — % 100.0 %
Net income (loss) $ 749 $ 73 $ (325 ) $ 391 $ (102 ) $ 786 $ 72 $ (325 ) $ 391 $ (218 ) $ (80 )
Net income (loss) attributable to WCR common shareholders $ 743 $ 73 $ (325 ) $ 391 $ (102 ) $ 780 $ 72 $ (325 ) $ 391 $ (218 ) $ (80 )

Three Months Ended September 30, 2015
Revenues $ 3,675 $ 9,537 $ 5,442 $ 3,297 $ - $ 21,951
% of total revenue 16.7 % 43.5 % 24.8 % 15.0 % -% 100.0 %
Net income (loss) $ 829 $ 443 $ (569 ) $ 390 $ (213 ) $ 880
Net income (loss) attributable to WCR common shareholders $ 823 $ 443 $ (569 ) $ 390 $ (213 ) $ 874

~~Franchise~~
~~The table below summarizes the number of AlphaGraphics business centers owned and operated by franchisees during the quarters ended September 30, 2016 and 2015:~~
Beginning New Closed Ending
2016
US Centers 258 1 (1 ) 258
International Centers 25 - - 25
Total 283 1 (1 ) 283

2015
US Centers 250 4 (2 ) 252
International Centers 26 - - 26
Total 276 4 (2 ) 278
~~Our U.S. franchisees reported approximate center sales for the quarters ended September 30 as follows:~~
2016 2015
Total gross U.S. network-wide center sales $ 69,849,000 $ 67,193,000
Revenues and net income for the quarters ended September 30, 2016 and 2015 were $4.28 million versus $3.68 million and $0.75 million versus $0.83 million, respectively. Contributing to the revenue growth of 16.40% was a 9.01% increase in royalty and franchise development fee revenue and a 150.78% increase in services revenue which includes revenue from new low margin services added in 2016. The revenue growth of 3.89% was offset with the increase direct cost of services provided and a 13.61% increase in operating costs, resulting in the segment net income decrease to $0.75 million from $0.83 million in the prior year comparable quarter.
Cellular Retail
A summary table of the number of Cricket cellular retail stores we operated during the ~~quarters~~quarter ended September 30, ~~2016~~2017 and ~~2015~~2016 follows:

2016 2015 2017 2016
Beginning 116 110 268 116
Acquired/ Launched 10 - 15 10
Closed - (8 ) (3 ) —
Ending 126 102 280 126

The Cellular Retail ~~division~~segment revenues ~~and contribution to net income each decreased~~increase period over period is a result of operating significantly more stores period over period. ~~A significant portion~~Included in the growth in the number of locations are 53 mature stores we acquired a 70% ownership interest in effective July 1, 2017. We had previously operated these locations since November 22, 2016 under the management agreement. In addition to operating these additional mature locations, we also operated an additional 100 locations (net of closed locations), most of which were launched. While the launching of the new locations contributed to revenue is from phone sales and there are two factors that have influenced a decline in phone revenue period over period. Prior year comparable quarter volume was positively influenced by customer migrations to Cricket Wireless’ new GSM network, so a volume decrease was anticipated. Discounting of phones isgrowth, it also a significant factor affecting revenue and discounts increased approximately $1.35 million period over period. These discounts also reduce cost of phones and do not impact gross profit or net income. While phone sales revenue decreased period over period, dealer compensation and customer fees increased 17.9%. Other factors contributingcontributed to the decline in segment net income ~~are growth related and include increased marketing and development costs, infrastructure costs and depreciation expense.~~period over period.

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 and comparable prior year period, the Direct to Consumer segment had net loss of ($0.46) million and ($0.33) million, ~~compared to a net loss of ($0.57) million for the comparable prior year period.~~respectively. Revenues for the three month period ended September 30, ~~2016~~2017 were ~~$5.94~~$4.98 million compared to ~~pro forma revenues for~~ the comparable period in ~~2015~~2016 of ~~$5.44 million, an increase in of 9.2%~~$5.95 million.

Consumer Finance

A summary table of the number of consumer finance locations we operated during the quarters ended September 30, ~~2016~~2017 and ~~2015~~2016 follows:

2016 2015 2017 2016
Beginning 46 51 41 46
Acquired/ Launched - - — —
Closed (1 ) - — (1 )
Ending 45 51 41 45

Our Consumer Finance segment revenues decreased ~~8.7%~~ for the quarter ended September 30, ~~2016~~2017 compared to the quarter ended September 30, ~~2015. We sold or closed 6 underperforming store~~2016 due to the closing of five locations ~~between the comparable periods and regional economic downturns~~ in ~~the Midwest, primarily Wyoming, North Dakota and~~ South Dakota ~~continue to contribute to revenue declines. Reductions in net bad debt and operating costs have helped to keep~~at the end of 2016. Revenue decreased 5.32% period over period while net income ~~flat quarter over quarter.~~decreased 16.62%.

Corporate

Costs related to our Corporate segment were ~~$0.10~~$0.25 million for the quarter ended September 30, ~~2016~~2017 compared to ~~$0.21~~$0.22 million for the quarter ended September 30, ~~2015.~~2016. In accordance with authoritative guidance applicable to discontinued operations, prior year comparable Corporate costs have been increased from those reported in previously filed reports as a result of continuing corporate overhead previously allocated to discontinued operations being reallocated to corporate.

Results of Operations – Nine Months Ended September 30, ~~2016~~2017 Compared to Nine Months Ended September 30, ~~2015~~2016

Net income attributable to our common shareholders was $4.02 million, or $0.43 per share (basic and diluted), for the nine-month period ended September 30, 2017, compared to net income of $4.54 million, or $0.48 per share (basic and diluted), for the ~~nine months~~nine-month period ended September 30, ~~2016, compared~~2016. Net income from continuing operations attributable to ~~$2.14~~our common shareholders was $1.56 million, or ~~$0.30~~$0.17 per share (basic and diluted), for the ~~comparable~~nine-month period ~~in 2015 and~~ended September 30, 2017, compared to ~~pro forma~~ net income ~~for the prior comparable period~~ of ~~$4.43~~$2.54 million, or ~~$0.47~~$0.27 per share (basic and diluted)~~. As further discussed below, The Franchise, Direct~~, for the nine-month period ended September 30, 2016. Net income from discontinued operations attributable to ~~Consumer~~our common shareholders was $2.46 million, or $0.26 per share (basic and ~~Consumer Finance operating segments each contributed~~diluted), for the nine-month period ended September 30, 2017 compared to ~~the increase in~~ net income of $2.00 million, or $0.21 per share (basic and diluted) for the ~~year over year~~nine-month period ~~while the Retail Wireless segment decreased.~~ended September 30, 2016.

~~As previously noted, we~~We expect segment operating results and earnings per share to change throughout ~~2016~~2017 due, at least in part, to the seasonality of the Direct to Consumer and Cellular Retail segments, growth in the Cellular Retail segment, discontinued operations of our Franchise segment, and potential mergers and acquisitions activity.

Following is a discussion of operating results by segment.

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

Cellular Retail Direct to Consumer Consumer Finance Corporate Total
Nine Months Ended September 30, 2017
Revenues $ 52,432 $ 29,014 $ 8,136 $ — $ 89,582
% of total revenue 58.5 % 32.4 % 9.1 % — % 100.0 %
Net income (loss) $ 65 $ 1,507 $ 781 $ (690 ) $ 1,663
Net income (loss) attributable to WCR common shareholders $ (35 ) $ 1,507 $ 781 $ (690 ) $ 1,563
Franchise Cellular
Retail Direct to
Consumer Consumer
Finance Corporate Total
Nine Months Ended September 30, 2016
Revenues $ 11,452 $ 27,152 $ 30,699 $ 8,830 $ - $ 78,133 $ 27,152 $ 30,699 $ 8,830 $ — $ 66,681
% of total revenue 14.6 % 34.8 % 39.3 % 11.3 % -% 100.0 % 40.7 % 46.0 % 13.3 % — % 100.0 %
Net income (loss) $ 1,834 $ 526 $ 1,682 $ 964 $ (455 ) $ 4,551 $ 526 $ 1,682 $ 964 $ (636 ) $ 2,536
Net income (loss) attributable to WCR common shareholders $ 1,819 $ 526 $ 1,682 $ 964 $ (455 ) $ 4,536 $ 526 $ 1,682 $ 964 $ (636 ) $ 2,536

Nine Months Ended September 30, 2015
Revenues $ 9,641 $ 24,655 $ 5,442 $ 9,451 $ - $ 49,189
% of total revenue 19.6 % 50.1 % 11.1 % 19.2 % -% 100.0 %
Net income (loss) $ 1,585 $ 910 $ (569 ) $ 932 $ (710 ) $ 2,148
Net income (loss) attributable to WCR common shareholders $ 1,572 $ 910 $ (569 ) $ 932 $ (710 ) $ 2,135

Pro Forma Nine Months Ended September 30, 2015

Pro Forma Revenues $ 9,641 $ 29,632 $ 30,296 $ 9,451 $ - $ 79,020
Pro Forma % of total revenue 12.2 % 37.5 % 38.3 % 12.0 % -% 100.0 %
Pro Forma Net income (loss) $ 1,585 $ 967 $ 1,365 $ 932 $ (408 ) $ 4,441
Pro Forma Net income (loss) attributable to WCR common shareholders $ 1,572 $ 967 $ 1,365 $ 932 $ (408 ) $ 4428

23
~~Franchise~~

~~The table below summarizes the number of AlphaGraphics business centers owned and operated by franchisees during the nine month periods ended September, 2016 and 2015:~~
Beginning New Closed Ending
2016
US Centers 254 7 (3 ) 258
International Centers 25 - - 25
Total 279 7 (3 ) 283

2015
US Centers 242 14 (4 ) 252
International Centers 32 - (6 ) 26
Total 274 14 (10 ) 278
~~Our U.S. franchisees reported approximate center sales for the nine month periods ended September 30 as follows:~~
2016 2015
Total gross U.S. network-wide center sales $ 208,510,000 $ 199,346,000
Revenues for the nine month period ended September 30, 2016 and 2015 were $11.45 million and $9.64 million, respectively. Contributing to the revenue growth of 18.78% was a 7.14% increase in royalty and franchise development fee revenue and a 122.04% increase in services revenue, primarily attributable to revenue from new low margin services added in 2016. The revenue growth, net of direct costs and together with a 6.18% increase in operating costs period over period resulted in the segment net income increase to $1.83 million from $1.59 million for the prior year comparable period.
Cellular Retail
A summary table of the number of Cricket cellular retail stores we operated during the nine month periods ended September 30, ~~2016~~2017 and ~~2015~~2016 follows:

2016 2015 2017 2016
Beginning 99 61 198 99
Acquired/ Launched 33 49 93 33
Closed (6 ) (8 ) (11 ) (6 )
Ending 126 102 280 126

~~Average store revenue and gross profit was down~~The increase in Cellular Retail segment revenues in the current nine month period ~~over~~compared to the same period ~~as expected since~~in the prior ~~period volume was positively influenced by customer migrations~~year is due to ~~Cricket Wireless’ new GSM network. Discounted phone prices (with a corresponding decrease in cost) have also contributed to~~operating approximately 154 additional locations during at least some portion of the decrease in revenue. However, dealer compensation and customer fee revenue, both with no direct cost of revenues associated with the revenue, each have increased. Increased operating costs include one-time store consolidation costs in addition to cost incurred related to expansion efforts. Management expects to realize the benefit of these non-recurring costscomparable periods. Included in the ~~mid-term.~~increased location count are 53 locations we operated under a management agreement effective November 22, 2016 and subsequently acquired a 70% ownership interest in effective July 1, 2017.

Direct to Consumer

~~On July 1, 2015, we added our newest segment,~~The Direct to ~~Consumer.~~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. Revenues for the nine month period ended September 30, ~~2016~~2017 were $29.01 million compares to $30.70 million ~~up a marginal 1.3% from pro forma revenues~~ for the comparable period in 2015 of $30.30 million. For the nine month period ended September 30, 2016, the Direct to Consumer segment had net income of $1.68 million and pro forma net income of $1.37 million in the comparable period of the prior year, a 22.6% increase.2016.

Consumer Finance

A summary table of the number of consumer finance locations we operated during the nine month periods ended September 30, ~~2016~~2017 and ~~2015~~2016 follows:

2016 2015 2017 2016
Beginning 47 51 41 47
Acquired/ Launched - - — —
Closed (2 ) - — (2 )
Ending 45 51 41 45

Our Consumer Finance segment revenues decreased ~~6.57%~~ for the ~~nine months ended September 30, 2016 from the comparable~~ nine month period ended September 30, ~~2015. Same store payday and installment lending revenue decreased 3.76%. The impact~~2017 compared to the nine month period ended September 30, 2016 as a result of the ~~regional economic downturns~~store closings in ~~the Midwest, primarily Wyoming, North Dakota and~~ South Dakota ~~have contributed significantly to~~at the ~~decrease in same store revenue~~end of 2016. Revenue decreased 7.86% period over ~~period. Similarly to the quarter over quarter results, reductions in~~period while net ~~bad debt and operating costs have helped to keep the net results relatively stable period over period.~~income decreased 18.98%.

Corporate

Costs related to our Corporate segment were ~~$0.46~~$0.69 million for the nine ~~months~~month period ended September 30, ~~2016~~2017 compared to ~~$0.71~~$0.64 million for the nine ~~months~~month period ended September 30, ~~2015. The nine month period~~2016. As previously noted in ~~2015 included approximately $0.32 million in transaction related costs.~~this report, continuing corporate overhead costs previously allocated to the discontinued operations has been reallocated to corporate.

Liquidity and Capital Resources

Summary cash flow data is as follows:

Nine Months Ended September 30, Nine Months Ended September 30,
2016 2015 2017 2016
Cash flows provided (used) by:
Operating activities $ 2,256,955 $ 273,798 $ 1,957,861 $ 2,256,955
Investing activities (1,723,606 ) (644,645 ) (2,714,541 ) (1,723,606 )
Financing activities (485,121 ) (353,775 ) (4,774,898 ) (485,121 )
Net increase (decrease) in cash 48,228 (724,622 )

Net decrease in cash (5,531,578 ) 48,228
Cash, beginning of period 7,847,669 4,273,350 14,159,975 7,847,669
Cash, end of period $ 7,895,897 $ 3,548,728 $ 8,628,397 $ 7,895,897

At September 30, ~~2016,~~2017, we had cash of ~~$7.90~~$8.63 million compared to cash of ~~$3.55~~$7.90 million on September 30, ~~2015.~~2016. Both comparable periods include cash flows utilized for growth in our Cellular Retail segment. ~~We believe that~~In July of 2017, we reduced our ~~available cash, combined~~outstanding credit facility balance by $1 million.
As previously noted, effective July 1, 2017 we closed on an acquisition of Cricket retail stores. Prior to closing, we advanced funds pursuant to a Note Receivable arrangement with ~~expected~~the sellers. Advances made pre-closing were included in investing activities and at closing the Note Receivable balance was applied to the purchase price. Included in the amount applied, which is not included in cash flows from ~~operations~~investing activities for the nine months ended September 30, 2017 was $2.92 million advanced in 2016. Amounts advanced in 2016 together with amounts advanced in 2017 and ~~available financing,~~paid at closing totaled approximately $3.62 million.
As previously noted, on October 3, 2017 we sold all of our shares of capital stock of our discontinued franchise operations. The transaction resulted in $49 million of liquidity to the Company. Post-closing we extinguished an additional $2.7 million of debt. The balance of approximately $46 million will be ~~sufficient~~used to ~~fund our scheduled debt repayments~~pay an estimated $22 million of income taxes and ~~the Cellular Retail segment anticipated capital expenditures through September 30, 2017.~~for acquisitions.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, ~~2016.~~2017.

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’sInternal 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 September 30, ~~2016,~~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 September 30, ~~2016~~.2017.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

25
��

PART II. OTHER INFORMATION
Item 5. Other Information
On November 1, 2017, the Company entered into a Second Amended and Restated Management and Advisory Agreement with Blackstreet Capital Management, LLC, dated July 21, 2012, as earlier amended on each of October 1, 2014 and July 1, 2015. The amended and restated agreement eliminates the Company’s unilateral right to terminate the agreement in connection with a change in control of the Company. As a result, any termination of the amended and restated agreement in connection with a change in control of the Company will require the mutual consent of both the Company and Blackstreet Capital Management.

Item 6. Exhibits

Exhibit Description

~~31.1~~2.1 Purchase and Sale Agreement with U.S. Business Holdings, Inc. and MBE WorldWide S.p.A, dated effective as of October 2, 2017 (filed herewith).
10.1 Amended and Restated Employment Agreement with Angel Donchev, dated effective as of August 16, 2017 (filed herewith).
10.2 Second Amended and Restated Management and Advisory Agreement with Blackstreet Capital Management, LLC, dated effective as of November 1, 2017 (filed herewith).
10.3 Consent and Second Loan Modification Agreement with Fifth Third Bank, dated effective as of July 1, 2017 (filed herewith).
10.4 Consent and Third Loan Modification Agreement with Fifth Third Bank, dated effective as of October 3, 2017 (filed herewith).
31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101.INS XBRL Instance Document (filed herewith).

101.SCH XBRL Schema Document (filed herewith).

101.CAL XBRL Calculation Linkbase Document (filed herewith).

101.DEF XBRL Definition Linkbase Document (filed herewith).

101.LAB XBRL Label Linkbase Document (filed herewith).

101.PRE XBRL Presentation Linkbase Document (filed herewith).

26

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: November 14, ~~2016~~2017 Western Capital Resources, Inc.
(Registrant)

By: /s/ John Quandahl
John Quandahl
Chief Executive Officer and Chief Operating Officer

By: /s/ ~~Stephen Irlbeck~~Angel Donchev
~~Stephen Irlbeck~~Angel Donchev
Chief Financial Officer

27

December 31, 2015
	Payday			Installment			Pawn & Title		Total
Current	$	4,065,706		$	291,947		$	286,514	$	4,644,167
1-30		332,217			43,179			-		375,396
31-60		263,486			24,233			-		287,719
61-90		199,526			16,293			-		215,819
91-120		196,123			9,417			-		205,540
121-150		160,386			4,985			-		165,371
151-180		165,237			2,189			-		167,426
		5,382,681			392,243			286,514		6,061,438
Less Allowance		(1,081,000	)		(96,000	)		-		(1,177,000	)
	$	4,301,681		$	296,243		$	286,514	$	4,884,438

	Nine Months Ended September 30, 2016			Year Ended December 31, 2015			Nine Months Ended September 30, 2017			Year Ended December 31, 2016
Loans receivable allowance, beginning of period	$	1,177,000		$	1,219,000		$	1,036,000		$	1,177,000
Provision for loan losses charged to expense		1,176,174			1,904,893			815,313			1,605,867
Charge-offs, net		(1,360,174	)		(1,946,893	)		(1,067,313	)		(1,746,867	)
Loans receivable allowance, end of period	$	993,000		$	1,177,000		$	784,000		$	1,036,000

September 30, 2017
	Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	342,876	$	657,868		$	13,222	$	1,013,966
Less allowance		—		(19,000	)		—		(19,000	)
Net account receivable	$	342,876	$	638,868		$	13,222	$	994,966

	September 30, 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% (4.75% at September 30, 2017), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2018	$	—		$	998,426
Note payable to a financial institution with monthly principal payment of $58,333 plus interest at LIBOR plus 3.5% (4.75% at September 30, 2017), securedby substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021		1,502,959			3,091,667
Note payable to a financial institution with monthly principal payment of $56,667 plus interest at LIBOR plus 3.5% (4.75% at September 30, 2017), securedby substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing December 1, 2021		2,831,264			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% (4.75% at September 30, 2017), securedby JPRE assets, maturing June 5, 2019 when remaining principal balance is due		2,671,446			2,971,452
Subsidiary note payable to seller with monthly interest payments only at 6%, maturing June 30, 2022		789,216			—
Total		7,794,885			10,461,545
Less current maturities		(1,780,000	)		(1,780,000	)
	$	6,014,885		$	8,681,545

September 30, 2016
	Franchise			Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	1,624,351		$	172,813	$	619,568		$	10,179	$	2,426,911
Less allowance		(149,000	)		-		(17,000	)		-		(166,000	)
Net account receivable	$	1,475,351		$	172,813	$	602,568			10,179	$	2,260,911

	September 30, 2016		December 31, 2015
Deferred financing fees	$	265,779	$	285,452
Deferred franchise development and service fees		130,500		264,000
Merchandise credits and gift card liability		694,302		1,127,470
Other		135,561		119,416
Total	$	1,226,142	$	1,796,338

	September 30, 2016			December 31, 2015
Note payable (with a credit limit of $3,000,000) to River City Equity, Inc., a related party, with interest payable monthly at 12% due June 30, 2016 and upon certain events can be collateralized by substantially all assets of WCR, excluding any equity interest in AGI (terminated May 2016)	$			$	3,000,000
Note payable to a financial institution with monthly principal payment of $58,333 plus interest at LIBOR plus 3.5% (4.125% at September 30, 2016), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021		3,266,667			-
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% (4.125% at September 30, 2016), secured by substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2018		1,538,708			-
Subsidiary note payable to a financial institution with quarterly principal payments of $375,000 plus interest at prime rate plus 2.5%, secured by the AGI’s assets, maturing March 2017 (terminated May 2016)		-			1,625,000
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% (4.125% at September 30, 2016), secured by JPRE assets, maturing June 5, 2019 when remaining principal balance is due		3,071,454			3,371,460
Total		7,876,829			7,996,460
Less current maturities		(1,100,000	)		(4,900,008	)
	$	6,776,829		$	3,096,452

Year	Amount
1	$	1,100,000
2		2,638,716
3		2,971,446
4		700,000
5		466,667
Thereafter		-
	$	7,876,829

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

Date declared	May 12, 2017
Record date	July 14, 2017
Date paid	July 24, 2017
Dividend per share of common stock	$	0.025

Date declared	August 28, 2017
Record date	September 18, 2017
Date paid	September 29, 2017
Dividend per share of common stock	$	0.025

Date declared		May 24, 2016		August 11, 2016
Record date		June 6, 2016		September 14, 2016
Date paid		June 15, 2016		September 21, 2016
Dividend per share of common stock	$	0.025	$	0.025

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Bank fees	$	337,939	$	310,419	$	1,273,057	$	595,164
Collection costs		85,306		99,587		311,457		319,890
Conference expense		468,124		460,602		762,680		671,287
Insurance		184,106		110,788		528,995		286,783
Management and advisory fees		195,425		125,754		619,954		400,057
Professional and consulting fees		488,978		483,575		1,531,923		1,401,683
Supplies		231,995		167,480		591,919		496,116
Other		803,453		522,604		2,429,596		1,583,539
	$	2,795,326	$	2,280,809	$	8,049,581	$	5,754,519

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Bank fees	$	379,245	$	320,156	$	1,484,460	$	1,216,555
Collection costs		94,197		85,306		275,619		311,457
Insurance		260,419		174,699		757,690		502,025
Management and advisory fees		193,710		195,425		537,853		577,954
Professional and consulting fees		555,977		368,527		1,704,803		1,174,323
Supplies		341,808		222,745		1,080,325		555,099
Other		644,370		587,462		2,037,646		1,641,446
	$	2,469,726	$	1,954,320	$	7,878,396	$	5,978,859

Three Months Ended September 30, 2017 (in thousands)

	Cellular Retail			Direct to Consumer			Consumer Finance		Corporate			Total

Revenue from external customers	$	18,301		$	4,983		$	2,849	$	—		$	26,133
Net income (loss)	$	(223	)	$	(462	)	$	326	$	(251	)	$	(610	)
Expenditures for segmented assets	$	6,408		$	139		$	1	$	7		$	6,555

Three Months Ended September 30, 2016 (in thousands)

	Cellular Retail		Direct to Consumer			Consumer Finance		Corporate			Total

Revenue from external customers	$	9,294	$	5,945		$	3,009	$	—		$	18,248
Net income (loss)	$	72	$	(325	)	$	391	$	(218	)	$	(80	)
Expenditures for segmented assets	$	241	$	50		$	21	$	—		$	312

Nine Months Ended September 30, 2017 (in thousands)

	Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Discontinued Operations		Total

Revenue from external customers	$	52,432	$	29,014	$	8,136	$	—		$	—	$	89,582
Net income (loss)	$	65	$	1,507	$	781	$	(690	)	$	—	$	1,663
Total segmented assets	$	28,375	$	13,462	$	8,080	$	2,162		$	8,683	$	60,762
Expenditures for segment assets	$	7,612	$	341	$	1	$	8		$	—	$	7,962

Nine Months Ended September 30, 2016 (in thousands)

	Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Discontinued Operations		Total

Revenue from external customers	$	27,152	$	30,699	$	8,830	$	—		$	—	$	66,681
Net income (loss)	$	526	$	1,682	$	964	$	(636	)	$	—	$	2,536
Total segmented assets	$	16,472	$	14,723	$	15,735	$	413		$	10,111	$	57,454
Expenditures for segment assets	$	1,688	$	88	$	39	$	—		$	—	$	1,815

	July 1, 2017
Inventory	$	217,000
Property and equipment		1,332,000
Intangible assets		4,306,000
Other assets		103,000
Net assets acquired	$	5,958,000

	September 30, 2017 (unaudited)		December 31, 2016 (unaudited)
OTHER CURRENT ASSETS:
Accounts receivable (less allowance for losses of $145,000 and $83,000, respectively)	$	1,306,762	$	1,020,210
Prepaid expenses and other		203,152		327,851
TOTAL OTHER CURRENT ASSETS	$	1,509,914	$	1,348,061

NONCURRENT ASSETS:
Property and equipment, net	$	243,147	$	287,386
Intangible assets, net		5,983,031		6,241,386
Other		215,063		121,119
TOTAL NONCURRENT ASSETS	$	6,441,241	$	6,649,891

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	841,097	$	1,375,754
Other liabilities		1,142,999		1,044,061
Income taxes payable		—		170,262
Current portion capital lease obligations		—		7,620
Deferred revenue and other		286,832		253,698
TOTAL CURRENT LIABILITIES	$	2,270,928	$	2,851,395

LONG-TERM LIABILITIES
Deferred income taxes	$	2,155,000	$	2,293,000
Other		208,924		143,080
TOTAL LONG-TERM LIABILITIES	$	2,363,924	$	2,436,080

	Nine Months Ended
	September 30, 2017 (unaudited)			September 30, 2016 (unaudited)

REVENUES	$	12,298,655		$	11,451,699

COST OF REVENUES		2,098,486			1,819,491

GROSS PROFIT		10,200,169			9,632,208

OPERATING EXPENSES:
Salaries, wages and benefits		3,194,025			3,426,127
Occupancy		140,428			179,518
Advertising, marketing and development		436,566			271,649
Depreciation		74,263			84,141
Amortization		258,356			258,356
Other		2,108,299			2,037,001
		6,211,937			6,256,792

OPERATING INCOME		3,988,232			3,375,416

INTEREST EXPENSE		—			(93,373	)

INCOME BEFORE INCOME TAXES		3,988,232			3,282,043

PROVISION FOR INCOME TAXES		1,511,000			1,267,000

NET INCOME		2,477,232			2,015,043

Less net income attributable to noncontrolling interests		(17,446	)		(14,742	)

NET INCOME ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS	$	2,459,786		$	2,000,301

Nine Months Ended September 30, 2017 (in thousands)
	Cellular Retail			Direct to Consumer			Consumer Finance			Corporate			Total

Revenue	$	52,432		$	29,014		$	8,136		$	—		$	89,582
% of total revenue		58.5	%		32.4	%		9.1	%		—	%		100.0	%
Net income	$	183		$	1,507		$	781		$	(690	)	$	1,781
Net income attributable to noncontrolling interests	$	100		$	—		$	—		$	—		$	100
Net income attributable to Western common shareholders	$	83		$	1,507		$	781		$	(690	)	$	1,681
Earnings per share attributable to Western common shareholders – basic and diluted	$	0.009		$	0.160		$	0.083		$	(0.073	)	$	0.179

	~~12.~~	~~Segment Information –~~

		~~Segment information related to the three and nine month periods ended September 30, 2016 and 2015 is presented below:~~

	Beginning		New		Closed			Ending
2016
US Centers		258		1		(1	)		258
International Centers		25		-		-			25
Total		283		1		(1	)		283

2015
US Centers		250		4		(2	)		252
International Centers		26		-		-			26
Total		276		4		(2	)		278

		2016				2015
Total gross U.S. network-wide center sales		$	69,849,000			$	67,193,000

	Nine Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2017			2016
Cash flows provided (used) by:
Operating activities	$	2,256,955		$	273,798		$	1,957,861		$	2,256,955
Investing activities		(1,723,606	)		(644,645	)		(2,714,541	)		(1,723,606	)
Financing activities		(485,121	)		(353,775	)		(4,774,898	)		(485,121	)
Net increase (decrease) in cash		48,228			(724,622	)


Net decrease in cash								(5,531,578	)		48,228
Cash, beginning of period		7,847,669			4,273,350			14,159,975			7,847,669
Cash, end of period	$	7,895,897		$	3,548,728		$	8,628,397		$	7,895,897

Exhibit		Description

~~31.1~~2.1		Purchase and Sale Agreement with U.S. Business Holdings, Inc. and MBE WorldWide S.p.A, dated effective as of October 2, 2017 (filed herewith).

10.1		Amended and Restated Employment Agreement with Angel Donchev, dated effective as of August 16, 2017 (filed herewith).

10.2		Second Amended and Restated Management and Advisory Agreement with Blackstreet Capital Management, LLC, dated effective as of November 1, 2017 (filed herewith).

10.3		Consent and Second Loan Modification Agreement with Fifth Third Bank, dated effective as of July 1, 2017 (filed herewith).

10.4		Consent and Third Loan Modification Agreement with Fifth Third Bank, dated effective as of October 3, 2017 (filed herewith).

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32		Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101.INS		XBRL Instance Document (filed herewith).

101.SCH		XBRL Schema Document (filed herewith).

101.CAL		XBRL Calculation Linkbase Document (filed herewith).

101.DEF		XBRL Definition Linkbase Document (filed herewith).

101.LAB		XBRL Label Linkbase Document (filed herewith).

101.PRE		XBRL Presentation Linkbase Document (filed herewith).

Dated: November 14, ~~2016~~2017	Western Capital Resources, Inc.
	(Registrant)

	By:	/s/ John Quandahl
		John Quandahl
		Chief Executive Officer and Chief Operating Officer

	By:	/s/ ~~Stephen Irlbeck~~Angel Donchev
		~~Stephen Irlbeck~~Angel Donchev
		Chief Financial Officer