SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒

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

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

For the quarterly period ended ~~June 30, 2017~~March 31, 2018

☐

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

☐ 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~~

	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

~~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)

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

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

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

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

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☐	Smaller reporting company ☑

	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).

Yes ☐ No ☑

APPLICABLE ONLY TO CORPORATE ISSUERS

As of ~~August 14, 2017,~~May 15, 2018, the registrant had outstanding 9,390,997 shares of common stock, $0.001 par value per share.

Western Capital Resources, Inc.

Index


		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13 15

Item 4. Controls and Procedures		21 20

PART II. OTHER INFORMATION
Item ~~5. Other Information~~6. Exhibits		2221

~~Item 6. Exhibits~~SIGNATURES		22

~~SIGNATURES~~		23

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)~~

June 30, 2017 December 31, 2016
ASSETS

CURRENT ASSETS
Cash $ 10,060,406 $ 14,159,975
Loans receivable (less allowance for losses of $729,000 and $1,036,000, respectively) 3,939,432 4,438,276
Accounts receivable (less allowance for losses of $124,000 and $96,000, respectively) 1,800,686 1,716,867
Inventory 9,652,531 9,095,460
Prepaid expenses and other 3,630,208 3,727,284
TOTAL CURRENT ASSETS 29,083,263 33,137,862

NOTES RECEIVABLE 3,433,856 2,920,112

PROPERTY AND EQUIPMENT, net 10,353,039 9,696,620

GOODWILL 5,796,528 5,796,528

INTANGIBLE ASSETS, net 7,257,050 7,536,945

OTHER 1,310,465 1,122,585

TOTAL ASSETS $ 57,234,201 $ 60,210,652

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses $ 9,054,923 $ 13,002,381
Other current liabilities 2,195,895 2,242,372
Income taxes payable — 265,813
Note payable – short-term 21,064 55,819
Current portion long-term debt 1,780,000 1,780,000
Current portion capital lease obligations 45,806 54,020
Deferred revenue 1,502,252 1,427,358
TOTAL CURRENT LIABILITIES 14,599,940 18,827,763

LONG-TERM LIABILITIES
Notes payable, net of current portion 6,732,855 8,681,545
Capital lease obligations, net of current portion 71,386 94,762
Deferred income taxes 1,673,000 1,775,000
Other 177,842 143,080
TOTAL LONG-TERM LIABILITIES 8,655,083 10,694,387

TOTAL LIABILITIES 23,255,023 29,522,150

COMMITMENTS AND CONTINGENCIES (Note 11)

EQUITY

WESTERN SHAREHOLDERS’ EQUITY
Common stock, $0.001 par value, 12,500,000 shares authorized, 9,390,997 and 9,497,871 shares issued and outstanding. 939 950
Additional paid-in capital 29,015,990 28,997,087
Retained earnings 4,934,644 1,643,996
TOTAL WESTERN SHAREHOLDERS’ EQUITY 33,951,573 30,642,033

NONCONTROLLING INTERESTS 27,605 46,469

TOTAL EQUITY 33,979,178 30,688,502

TOTAL LIABILITIES AND EQUITY $ 57,234,201 $ 60,210,652

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2018		December 31, 2017
	(Unaudited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	9,125,283	$	21,295,819
Short-term investments		44,386,857		32,292,902
Loans receivable (net of allowance for losses of $698,000 and $833,000, respectively)		3,362,498		4,310,003
Accounts receivable (net of allowance for losses of $57,000 and $16,000, respectively)		2,191,743		764,071
Inventory (net of allowance of $577,000 and $576,000, respectively)		10,010,703		9,130,842
Prepaid expenses and other		3,691,137		3,762,974
Escrow and other receivables		3,285,231		3,482,770
TOTAL CURRENT ASSETS		76,053,452		75,039,381

INVESTMENTS		2,000,000		3,000,000

PROPERTY AND EQUIPMENT, net		11,116,899		11,347,234

GOODWILL		5,796,528		5,796,528

INTANGIBLE ASSETS, net		4,819,669		4,987,769

ESCROW FUNDS RECEIVABLE		3,250,000		3,250,000

OTHER		668,807		823,244

TOTAL ASSETS	$	103,705,355	$	104,244,156

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	11,996,557	$	11,897,968
Other current liabilities		1,198,493		1,354,558
Income taxes payable		18,725,244		18,730,647
Note payable – short-term		29,250		51,992
Current portion capital lease obligations		47,858		47,174
Deferred revenue		1,164,450		1,073,600
TOTAL CURRENT LIABILITIES		33,161,852		33,155,939

LONG-TERM LIABILITIES
Notes payable, net of current portion		789,216		789,216
Capital lease obligations, net of current portion		38,934		51,172
Deferred income taxes		1,379,000		1,456,000
Other		98,259		98,259
TOTAL LONG-TERM LIABILITIES		2,305,409		2,394,647

TOTAL LIABILITIES		35,467,261		35,550,586

COMMITMENTS AND CONTINGENCIES (Note 14)

EQUITY

WESTERN SHAREHOLDERS’ EQUITY
Common stock, $0.001 par value, 12,500,000 shares authorized, 9,390,997 shares issued and outstanding.		939		939
Additional paid-in capital		29,031,741		29,031,741
Retained earnings		37,262,637		37,903,204
TOTAL WESTERN SHAREHOLDERS’ EQUITY		66,295,317		66,935,884

NONCONTROLLING INTERESTS		1,942,777		1,757,686

TOTAL EQUITY		68,238,094		68,693,570

TOTAL LIABILITIES AND EQUITY	$	103,705,355	$	104,244,156

See notes to condensed consolidated financial statements

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
	Three Months Ended March 31,
	2018			2017
REVENUES
Sales and associated fees	$	23,817,194		$	24,559,130
Financing fees and interest		2,174,546			2,233,409
Other revenue		4,467,019			4,899,158
		30,458,759			31,691,697

COST OF REVENUES
Cost of sales		12,166,033			12,067,936
Provisions for loans receivable losses		200,202			237,581
		12,366,235			12,305,517

GROSS PROFIT		18,092,524			19,386,180

OPERATING EXPENSES
Salaries, wages and benefits		9,317,793			8,892,652
Occupancy		3,422,218			2,911,292
Advertising, marketing and development		2,029,315			1,906,553
Depreciation		558,989			326,196
Amortization		214,808			54,401
Other		2,695,240			2,741,787
		18,238,363			16,832,881

OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS		(145,839	)		2,553,299

OTHER INCOME (EXPENSES):
Interest and dividend income		167,511			64,075
Interest expense		(87,598	)		(57,371	)
		79,913			6,704

INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		(65,926	)		2,560,003

PROVISION FOR INCOME TAX EXPENSE (BENEFIT) FOR CONTINUING OPERATIONS		(80,000	)		951,000


NET INCOME FROM CONTINUING OPERATIONS		14,074			1,609,003

LESS NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(185,091	)		—

NET INCOME (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS		(171,017	)		1,609,003

DISCONTINUED OPERATIONS
Income from operations of discontinued operations		—			1,070,321
Less provision for income taxes for discontinued operations		—			(412,000	)
Net income from discontinued operations		—			658,321
Less net income from discontinued operations attributable to noncontrolling interests		—			(5,085	)
Net income from discontinued operations attributable to Western common shareholders		—			653,236
NET INCOME (LOSS) ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS	$	(171,017	)	$	2,262,239

EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS
FROM CONTINUING OPERATIONS - Basic and diluted	$	(0.02	)	$	0.17
FROM DISCONTINUED OPERATIONS - Basic and diluted	$	—		$	0.07
FROM CONTINUING AND DISCONTINUED OPERATIONS - Basic and diluted	$	(0.02	)	$	0.24

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		9,390,997			9,472,934

See notes to condensed consolidated financial statements

WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Three Months Ended
	March 31, 2018			March 31, 2017
OPERATING ACTIVITIES
Net income from continuing operations	$	14,074		$	1,609,003
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		558,989			326,196
Amortization		214,808			54,401
Share based compensation		—			8,899
Deferred income taxes		(77,000	)		66,000
Investments discount amortization		(99,991	)		—
Loss (gain) on disposal of property and equipment		170,448			(270	)
Changes in operating assets and liabilities:
Loans receivable		947,505			908,337
Accounts receivable		(1,427,672	)		(1,085,312	)
Inventory		(960,909	)		(1,246,831	)
Prepaid expenses and other assets		157,752			(831,683	)
Accounts payable and accrued expenses		93,186			298,300
Deferred revenue and other current liabilities		(65,215	)		(15,825	)
Operating cash flows from discontinued operations		—			354,253
Net cash and cash equivalents provided by (used in) operating activities		(474,025	)		445,468

INVESTING ACTIVITIES
Purchases of investments		(11,961,900	)		—
Proceeds from held-to-maturity investments		1,000,000			—
Purchase of property and equipment		(350,021	)		(754,130	)
Acquisition of stores, net of cash acquired		(76,707	)		—
Advances on note receivable, net		—			(517,844	)
Proceeds from installment sale receivable		185,963			—
Proceeds from the disposal of property, plant and equipment		10,000			14,459
Cash received from discontinued operations		—			3,147,493
Net cash and cash equivalents provided by (used in) investing activities		(11,192,665	)		1,889,978

FINANCING ACTIVITIES
Payments on notes payable – short-term, net		(22,742	)		(25,799	)
Payments on line of credit, net		—			(853,544	)
Payments on notes payable – long-term		—			(501,669	)
Common stock redemption		—			(480,928	)
Payments on capital leases		(11,554	)		(11,960	)
Payment of dividends		(469,550	)		(234,775	)
Financing activities of discontinued operations		—			(3,178,348	)
Net cash and cash equivalents used in financing activities		(503,846	)		(5,287,023	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(12,170,536	)		(2,951,577	)

CASH AND CASH EQUIVALENTS
Beginning of period		21,295,819			14,159,975
End of period	$	9,125,283		$	11,208,398

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Income taxes paid	$	2,403		$	7,169
Interest paid	$	20,869		$	135,686

~~WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES~~

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

Three months ended Six months ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
REVENUES
Sales and associated fees $ 24,739,956 $ 19,064,101 $ 49,299,086 $ 39,079,643
Financing fees and interest 2,119,747 2,340,968 4,353,156 4,825,188
Royalty and franchise fees, net 3,021,402 2,595,614 6,054,028 5,390,370
Other revenue 5,909,306 3,171,743 11,719,147 6,312,511
Total Revenues 35,790,411 27,172,426 71,425,417 55,607,712

COST OF REVENUES
Cost of sales 12,753,066 9,377,949 24,811,820 19,815,834
Provisions for loans receivable losses 250,734 428,613 488,315 731,485
Other 729,476 603,667 1,377,673 1,157,081
Total Cost of Revenues 13,733,276 10,410,229 26,677,808 21,704,400

GROSS PROFIT 22,057,135 16,762,197 44,747,609 33,903,312

OPERATING EXPENSES
Salaries, wages and benefits 10,252,169 6,677,803 20,243,560 13,426,753
Occupancy 3,172,317 1,897,270 6,126,373 3,871,075
Advertising, marketing and development 2,294,251 2,266,522 4,303,401 4,217,531
Depreciation 374,225 295,157 724,513 571,749
Amortization 139,374 140,873 279,893 281,863
Other 3,073,413 2,511,751 6,614,080 5,250,977
Total Operating Expenses 19,305,749 13,789,376 38,291,820 27,619,948

OPERATING INCOME 2,751,386 2,972,821 6,455,789 6,283,364

OTHER INCOME (EXPENSES):
Interest income 67,564 957 131,639 2,009
Interest expense (110,415 ) (150,714 ) (248,567 ) (319,725 )
Total Other Income (Expense) (42,851 ) (149,757 ) (116,928 ) (317,716 )

INCOME BEFORE INCOME TAXES 2,708,535 2,823,064 6,338,861 5,965,648

INCOME TAX EXPENSE 957,000 1,034,000 2,320,000 2,201,000

NET INCOME 1,751,535 1,789,064 4,018,861 3,764,648

Less net income attributable to noncontrolling interests (7,436 ) (4,553 ) (12,521 ) (8,738 )

NET INCOME ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS $ 1,744,099 $ 1,784,511 $ 4,006,340 $ 3,755,910

EARNINGS PER SHARE ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS
Basic and diluted $ 0.19 $ 0.19 $ 0.42 $ 0.40

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted 9,390,997 9,497,534 9,431,739 9,497,534

See notes to condensed consolidated financial statements.

~~WESTERN CAPITAL RESOURCES, INC. AND SUBSIDIARIES~~
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)~~

Six Months Ended
June 30, 2017 June 30, 2016
OPERATING ACTIVITIES
Net Income $ 4,018,861 $ 3,764,648
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 724,513 571,749
Amortization 279,893 281,863
Share based compensation 18,903 35,167
Deferred income taxes (102,000 ) 313,000
Loss on disposal of property and equipment 24,530 9,953
Changes in operating assets and liabilities:
Loans receivable 498,844 459,191
Accounts receivable (83,819 ) 445,254
Inventory (557,071 ) 380,291
Prepaid expenses and other assets (90,804 ) 973,187
Accounts payable and accrued expenses (4,213,269 ) (3,118,195 )
Deferred revenue and other current liabilities 28,417 (390,943 )
Accrued liabilities and other – long-term 34,762 22,069
Net cash provided by operating activities 581,760 3,747,234

INVESTING ACTIVITIES
Purchases of property and equipment (1,419,921 ) (929,291 )
Acquisition of stores, net of cash acquired — (588,241 )
Advances on note receivable, net (513,744 ) —
Proceeds from disposal of property and equipment 14,459 —
Net cash used by investing activities (1,919,206 ) (1,517,532 )

FINANCING ACTIVITIES
Payments on notes payable – short-term (34,755 ) —
Payments on line of credit, net (998,426 ) —
Advances on notes payable – long-term — 418,301
Payments on notes payable – long-term (950,264 ) (1,801,638 )
Common stock redemption (480,928 ) —
Advances on capital lease — 185,318
Payments on capital lease (31,590 ) (54,542 )
Subsidiary dividends to noncontrolling interests (31,385 ) —
Dividend paid (234,775 ) (237,467 )
Net cash used in financing activities (2,762,123 ) (1,490,028 )

NET INCREASE (DECREASE) IN CASH (4,099,569 ) 739,674

CASH
Beginning of period 14,159,975 7,847,669
End of period $ 10,060,406 $ 8,587,343

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Income taxes paid $ 3,401,436 $ 1,490,444
Interest paid $ 239,290 $ 451,271

Non-cash Investing and Financing Activities:
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)

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”)~~(GAAP) have been omitted.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three ~~and six~~ month ~~periods~~period ended ~~June 30, 2017~~March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2018.

For further information, refer to the Condensed Consolidated Financial Statements and footnotes thereto included in our Form 10-K for the year ended December 31, ~~2016.~~2017. The condensed consolidated balance sheet at December 31, ~~2016,~~2017, has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP.

Nature of Business

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

●

~~Franchise~~

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

●

Cellular Retail

o○

PQH Wireless, Inc. (PQH) (100%) – operates 236 cellular retail stores ~~(215 owned and operated plus 53 operated under management agreement~~ as of ~~June 30, 2017)~~March 31, 2018 (179 100% owned plus 57 through a 70% owned subsidiary), as an exclusive dealer of the Cricket brand.

●

Direct to Consumer

o○

J & P Park Acquisitions, Inc. (JPPA) (100%) – an online and direct marketing distribution retailer of 1) live plants, seeds, holiday gifts and garden accessories selling its products under Park Seed, Jackson & Perkins, and Wayside Gardens brand names and 2) home improvement and restoration products operating under the Van Dyke’s Restorers brand, as well as a seed wholesaler under the Park Wholesale brand.

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

o○

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

●

Consumer Finance

o○

Wyoming Financial Lenders, Inc. (WFL) (100%) – owns and operates “payday” stores (40 as of ~~June 30, 2017)~~March 31, 2018) in seven states (Colorado, Iowa, Kansas, Nebraska, North Dakota, Wisconsin and Wyoming) providing sub-prime short-term uncollateralized non-recourse “cash advance” or “payday” loans typically ranging from $100 to $500 with a maturity of generally two to four weeks, sub-prime short-term uncollateralized non-recourse installment loans typically ranging from $300 to $800 with a maturity of six months, check cashing and other money services to individuals.

o○

Express Pawn, Inc. (EPI) (100%) – owns and operates retail pawn stores (three as of ~~June 30, 2017)~~March 31, 2018) in Nebraska and Iowa providing collateralized non-recourse pawn loans and retail sales of ~~primarily used merchandise.~~merchandise obtained from forfeited pawn loans or purchased from customers.

●

Discontinued Operations 2017 - Franchise

○

AlphaGraphics, Inc. (AGI) – franchisor of domestic and international AlphaGraphics Business Centers which specialize in the planning, production, and management of visual communications for businesses and individuals throughout the world. AGI was sold on October 2, 2017.

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,”~~as” “PQH,” “JPPA,” ~~“RAI,”~~ “JPRE,” ~~“WFL”~~“WFL,” “EPI” or ~~“EPI”~~“AGI” are references only to those companies.

Basis of Consolidation

The consolidated financial statements include the accounts of the WCR, its wholly owned subsidiaries and other entities in which the Company owns a controlling financial interest. For financial interests in which the Company owns a controlling financial interest, the Company applies the provisions of ~~ASC~~Financial Accounting Standards Board Accounting Standards Codification (ASC) 810, “Consolidation” 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.~~consolidation, with the exception of the presentation of dividends received from discontinued subsidiary operations in the Condensed Consolidated Statement of Cash Flows.

Use of Estimates

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

Reclassifications

Certain Statements of Income and Statements of Cash Flows 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 six month periods~~months ended ~~June 30, 2017.~~March 31, 2018.

In accordance with ASC 205-20-45-6, interest on debt required to be paid as a result of our Franchise segment disposal transaction has been allocated to discontinued operations and, in accordance with ASC 205-20-45-9, general corporate overhead has not been allocated to discontinued operations. These re-allocations and related income tax have been made in the presentation of our prior financial statements and accompanying notes.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ~~(“FASB”) and the International Accounting Standards Board (“IASB”) jointly~~(FASB) issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under US ~~GAAP and IFRS.~~GAAP. This ~~converged~~ standard is effective for annual and interim periods beginning after December 15, 2017. The Company ~~is currently assessing~~has adopted this standard as of January 1, 2018 applying it on a retrospective basis as of the ~~potential effects~~date adopted and determined it had no impact on our financial condition, results of operations and consolidated financial statements.

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

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

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

Risks Inherent in the Operating Environment –

Regulatory

The Company’s Consumer Finance segment activities are highly regulated under numerous ~~local,~~federal, state, and ~~federal~~local 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~~After several years of research, debate, and public hearings, in October 2017 the U.S. Consumer Financial Protection Bureau ~~has indicated that it will use its authority~~(CFPB) issued new rules for payday lending. The proposed rules, scheduled to ~~further regulate~~go into effect in August 2019, would impose significant restrictions on the ~~payday~~ industry, and ~~has been actively involved~~it is expected that a large number of lenders would be forced to close their stores. The CFPB’s studies projected a reduction in the ~~enforcement~~number of ~~existing consumer-protection laws applicable to~~lenders by 50%, while industry studies forecast a much higher attrition rate. At this time it is uncertain whether the ~~payday industry.~~rule will be implemented as announced, rewritten with more favorable terms for the industry, or thrown out altogether. If the rule is implemented as written, it could have a significant and negative impact on business conducted within our Consumer Finance segment.

~~Any~~The above rule or any other adverse change in present ~~local,~~federal, state, ~~and federal~~or local 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,~~federal, state or ~~federal~~local laws or regulations could result in fines, litigation, closure of one or more store ~~location closure~~locations or negative publicity. Any such change or failure would have a corresponding impact on the Company’s and segment’s results of operations and financial condition, primarily through a decrease in revenues resulting from the cessation or curtailment of operations, decrease in operating income through increased legal expenditures or fines, and could also negatively affect the Company’s general business prospects due to lost or decreased operating income or if negative publicity ~~effects~~affects its ability to obtain additional financing as needed.

In addition, the passage of federal, state or ~~state~~local 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.	3.Cash Equivalents and Investments –

The following table shows the Company’s cash equivalents and held-to-maturity investments, by significant investment category, recorded as cash equivalents or short- and long-term investments as of March 31, 2018 and December 31, 2017:

	March 31, 2018		December 31, 2017
Cash and cash equivalents
Operating accounts	$	8,778,235	$	10,524,923
Certificates of deposit		—		750,000
Money Market Mutual Funds - U.S. Treasury obligations		347,048		10,020,896
Subtotal		9,125,283		21,295,819

Held to Maturity Investments
Certificates of deposit		14,297,734		13,250,000
T-Bill Zero CPN		32,089,123		22,042,902
Subtotal		46,386,857		35,292,902

TOTAL	$	55,512,140	$	56,588,721

As of March 31, 2018, held to maturity securities consisted of the following:

	Cost		Accrued Interest		Amortized Discount		Amortized Cost		Unrealized Gain (Loss)			Estimated Fair Value

Certificates of Deposit	$	14,250,000	$	47,734	$	—	$	14,297,734	$	(87,544	)	$	14,210,190
Treasury Bills	$	31,961,012	$	—	$	128,111	$	32,089,123	$	(1,897	)	$	32,087,226

4.	Loans Receivable –

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

June 30, 2017
March 31, 2018												March 31, 2018
	Payday			Installment			Pawn & Title		Total				Payday			Installment			Pawn & Title		Total
Current	$	3,266,323		$	224,554		$	302,681	$	3,793,558			$	2,773,711		$	190,525		$	263,650	$	3,227,886
1-30		250,525			35,028			—		285,553				166,548			38,121			—		204,669
31-60		152,745			16,978			—		169,723				108,590			23,535			—		132,125
61-90		104,203			10,381			—		114,584				145,640			15,484			—		161,124
91-120		94,127			7,164			—		101,291				97,171			9,294			—		106,465
121-150		77,661			4,855			—		82,516				112,903			3,299			—		116,202
151-180		117,909			3,298			—		121,207				110,344			1,683			—		112,027
		4,063,493			302,258			302,681		4,668,432				3,514,907			281,941			263,650		4,060,498
Less Allowance		(652,000	)		(77,000	)		—		(729,000	)			(627,000	)		(71,000	)		—		(698,000	)
	$	3,411,493		$	225,258		$	302,681	$	3,939,432			$	2,887,907		$	210,941		$	263,650	$	3,362,498

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

December 31, 2017
	Payday			Installment			Pawn & Title		Total
Current	$	3,550,077		$	271,926		$	318,361	$	4,140,364
1-30		216,376			47,356			—		263,732
31-60		187,916			27,766			—		215,682
61-90		150,278			17,976			—		168,254
91-120		110,943			11,870			—		122,813
121-150		131,171			4,748			—		135,919
151-180		93,222			3,017			—		96,239
		4,439,983			384,659			318,361		5,143,003
Less Allowance		(745,000	)		(88,000	)		—		(833,000	)
	$	3,694,983		$	296,659		$	318,361	$	4,310,003

4.5.

Loans Receivable Allowance –

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

	Six Months Ended June 30, 2017			Year Ended December 31, 2016			Three Months Ended March 31, 2018			Year Ended December 31, 2017
Loans receivable allowance, beginning of period	$	1,036,000		$	1,177,000		$	833,000		$	1,036,000
Provision for loan losses charged to expense		488,315			1,605,867			200,202			1,122,144
Charge-offs, net		(795,315	)		(1,746,867	)		(335,202	)		(1,325,144	)
Loans receivable allowance, end of period	$	729,000		$	1,036,000		$	698,000		$	833,000

5.6.

Accounts Receivable –

A breakdown of accounts receivables by segment as of March 31, 2018 and December 31, 2017 are as follows:

June 30, 2017
March 31, 2018														March 31, 2018
	Franchise			Cellular Retail		Direct to Consumer			Consumer Finance		Total				Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	1,427,065		$	267,494	$	224,139		$	5,988	$	1,924,686			$	315,549	$	1,920,585		$	12,609	$	2,248,743
Less allowance		(100,000	)		—		(24,000	)		—		(124,000	)			—		(57,000	)		—		(57,000	)
Net account receivable	$	1,327,065		$	267,494	$	200,139		$	5,988	$	1,800,686			$	315,549	$	1,863,585		$	12,609	$	2,191,743

December 31, 2017
	Cellular Retail		Direct to Consumer			Consumer Finance		Total
Accounts receivable	$	399,459	$	365,476		$	15,136	$	780,071
Less allowance		—		(16,000	)		—		(16,000	)
Net account receivable	$	399,459	$	349,476		$	15,136	$	764,071

7.	Inventory –

Finished goods inventory, net of allowance, by segment consists of the following:

	Three Months Ended March 31, 2018		Year Ended December 31, 2017
Cellular Retail	$	5,742,969	$	5,287,932
Direct to Consumer		3,457,377		2,988,052
Consumer Finance		810,357		854,858
	$	10,010,703	$	9,130,842

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

6.8.

Notes Payable – Long Term –

June 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% (4.625% at June 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% (4.625% at June 30, 2017), securedby substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021 2,741,667 3,091,667
Note payable to a financial institution with monthly principal payment of $56,667 plus interest at LIBOR plus 3.5% (4.625% at June 30, 2017), securedby substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing December 1, 2021 2,999,740 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% (4.625% at June 30, 2017), securedby JPRE assets, maturing June 5, 2019 when remaining principal balance is due 2,771,448 2,971,452
Total 8,512,855 10,461,545
Less current maturities (1,780,000 ) (1,780,000 )
$ 6,732,855 $ 8,681,545

	March 31, 2018		December 31, 2017
Subsidiary subordinated note payable to seller with monthly interest only payments at 6%, guaranteed by PQH, maturingAugust 5, 2022 whentheprincipal balance is due.		789,216		789,216
Total		789,216		789,216
Less current maturities		—		—
	$	789,216	$	789,216

The Company is party to a Credit Agreement with a financial institution entered into on April 22, 2016 and subject to subsequent amendments. The Credit Agreement provides the Company with a revolving line of credit facility in an aggregate amount up to $3,000,000, having a maturity date of April 21, 2018 and an acquisition loan facility in an aggregate amount of up to $9,000,000, having a maturity date of April 21, 2018. The revolver and 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. Funds advanced under the acquisition loan facility mature five years from the date of advance. At ~~June 30, 2017 and December~~March 31, ~~2016, approximately $6,259,000 and $4,510,000~~2018, the entire $12,000,000 of credit was available under the credit ~~facilities, respectively.~~facilities. See Notes 14 and 15 for additional terms, conditions and amendment related to the Credit Agreement.

7.9.

~~Equity~~Income Taxes –

InThe provision for income taxes for continuing operations is 121.3% and 37.1% of income before the provision for income taxes for the three month period ended March 31, 2018 and 2017, respectively. The significant difference in rate is the ~~Company redeemed 106,874 shares~~result of ~~common stock for $480,928 in a private and unsolicited transaction.~~the 2018 net income attributable to noncontrolling interests not being subjected to income tax at the corporate level. Rather the “passthrough” taxable income is taxed to the noncontrolling interests at an individual level.

8.10.

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		January 18, 2018
Record date	July 14, 2017		February 9, 2018
Date paid	July 24, 2017		February 14, 2018
Dividend per share of common stock	$	0.025	$	0.05

9.11.

Other Operating Expense –

A breakout of other expense is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,				For The Three Months Ended March 31,
	2017		2016		2017		2016		2018		2017
Bank fees	$	594,390	$	497,084	$	1,144,739	$	935,118	$	502,564	$	532,175
Collection costs		91,528		109,963		181,422		226,151		84,605		89,894
Conference expense		26		29,151		289,232		294,556
Insurance		265,791		173,326		515,799		344,889		205,295		240,740
Management and advisory fees		201,662		203,504		425,143		424,529		193,710		153,481
Professional and consulting fees		596,460		447,735		1,407,590		1,042,945		543,096		662,089
Supplies		420,672		176,650		752,744		359,924		217,436		324,136
Other		902,884		874,338		1,897,411		1,622,865		948,534		739,272
	$	3,073,413	$	2,511,751	$	6,614,080	$	5,250,977	$	2,695,240	$	2,741,787

~~10.~~12.

Discontinued Operations –

As more fully disclosed in Note 19 of the Notes to Consolidated Financial Statements for the year ended December 31, 2017, on October 3, 2017 the Company closed on the sale of its franchise segment.

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 this business have been reflected as discontinued operations in the unaudited Condensed Consolidated Statements of Operations for the three month periods ended March 31, 2017, and consist of the following:

	Three Months Ended
	March 31, 2017
REVENUES OF DISCONTINUED OPERATIONS	$	3,943,309

COST OF REVENUES OF DISCONTINUED OPERATIONS		648,197

GROSS PROFIT OF DISCONTINUED OPERATIONS		3,295,112

OPERATING EXPENSES OF DISCONTINUED OPERATIONS:
Salaries, wages and benefits		1,098,739
Occupancy		42,764
Advertising, marketing and development		102,597
Depreciation		24,092
Amortization		86,118
Other		789,700
		2,144,010

OPERATING INCOME OF DISCONTINUED OPERATIONS		1,151,102

OTHER INCOME (EXPENSE) OF DISCONTINUED OPERATIONS
Interest expense		(80,781	)

INCOME BEFORE INCOME TAXES OF DISCONTINUED OPERATIONS		1,070,321

PROVISION FOR INCOME TAXES OF DISCONTINUED OPERATIONS		412,000

NET INCOME OF DISCONTINUED OPERATIONS		658,321

Less net income of discontinued operations attributable to noncontrolling interests		(5,085	)

NET INCOME OF DISCONTINUED OPERATIONS ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS	$	653,236

In accordance with the provisions of ASC 205-20, the Company has separately reported the cash flow activity of the discontinued operations of the Franchise segment in the Consolidated Statements of Cash Flows. The cash flow activity from discontinued operations have been reflected as discontinued operations in the Consolidated Statements of Cash Flows for the three month period ended March, 2017, and consist of the following:

	Three Months Ended
	March 31, 2017
DISCONTINUED OPERATING ACTIVITIES
Net income of discontinued operations	$	658,321
Adjustments to reconcile net income of discontinued operations to net cash provided by operating activities of discontinued operations:
Depreciation		24,092
Amortization		86,118
Share based compensation		2,243
Deferred income taxes		(29,000	)
Changes in operating assets and liabilities:
Accounts receivable		(606,126	)
Prepaid expenses and other assets		114,753
Accounts payable and accrued expenses		(597,356	)
Deferred revenue and other current liabilities		682,016
Other liabilities – long-term		19,192
Net cash provided by operating activities of discontinued operations	$	354,253

FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS
Principal payments on capital lease obligations	$	(7,620	)
Dividends to shareholders		(3,170,728	)
Net cash used in financing activities of discontinued operations	$	(3,178,348	)

13.

Segment Information –

Segment information related to the three ~~and six~~ month periods ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~for continuing operations is presented below:

Three Months Ended June 30, 2017
(in thousands)

Franchise

Cellular
Retail
Direct to
Consumer Consumer
Finance Corporate Total

Revenue from external customers $ 4,033 $ 17,087 $ 12,127 $ 2,543 $ — $ 35,790
Net income (loss) $ 930 $ (331 ) $ 1,103 $ 201 $ (151 ) $ 1,752
Expenditures for segmented assets $ 13 $ 531 $ 122 $ — $ — $ 666

Three Months Ended March 31, 2018 (in thousands)
	Cellular Retail			Direct to Consumer		Consumer Finance		Corporate			Total

Revenue from external customers	$	17,107		$	10,681	$	2,671	$	—		$	30,459
Net income (loss)	$	(375	)	$	329	$	331	$	(271	)	$	14
Total segment assets	$	27,567		$	15,092	$	7,003	$	54,043		$	103,705
Expenditures for segmented assets	$	117		$	310	$	—	$	—		$	427

Three Months Ended March 31, 2017 (in thousands)
	Cellular Retail		Direct to Consumer		Consumer Finance		Corporate			Discontinued Operations		Total

Revenue from external customers	$	17,045	$	11,904	$	2,743	$	—		$	—	$	31,692
Net income (loss)	$	669	$	866	$	254	$	(180	)	$	—	$	1,609
Total segment assets	$	24,794	$	15,429	$	8,047	$	4,076		$	8,879	$	61,225
Expenditures for segmented assets	$	673	$	81	$	—	$	—		$	—	$	754

Three Months Ended June 30, 2016
(in thousands)

Franchise

Cellular
Retail
Direct to
Consumer Consumer
Finance Corporate Total

Revenue from external customers $ 3,562 $ 8,083 $ 12,689 $ 2,838 $ — $ 27,172
Net income (loss) $ 568 $ 74 $ 1,103 $ 262 $ (218 ) $ 1,789
Expenditures for segment assets $ 7 $ 580 $ 24 $ 7 $ — $ 618

Six Months Ended June 30, 2017
(in thousands)

Franchise

Cellular
Retail
Direct to
Consumer Consumer
Finance Corporate Total

Revenue from external customers $ 7,977 $ 34,131 $ 24,031 $ 5,286 $ — $ 71,425
Net income (loss) $ 1,565 $ 289 $ 1,968 $ 455 $ (258 ) $ 4,019
Total segmented assets $ 8,729 $ 23,338 $ 12,520 $ 8,684 $ 3,963 $ 57,234
Expenditures for segment assets $ 13 $ 1,204 $ 203 $ — $ — $ 1,420

~~Six Months Ended June 30, 2016 (in thousands)~~

Franchise
Cellular Retail
Direct to Consumer Consumer Finance Corporate Total

Revenue from external customers $ 7,174 $ 17,858 $ 24,754 $ 5,822 $ — $ 55,608
Net income (loss) $ 1,083 $ 454 $ 2,007 $ 574 $ (353 ) $ 3,765
Total segment assets $ 9,681 $ 14,779 $ 14,393 $ 15,531 $ 374 $ 54,758
Expenditures for segment assets $ 15 $ 1,447 $ 38 $ 18 $ — $ 1,518

~~11.~~
14. Commitments and Contingencies –

Employment Agreements

Pursuant to the Company’s numerous employment agreements, bonuses for continuing operation of approximately ~~$112,000~~$73,000 and ~~$443,000~~$256,000 were accrued for the three ~~and six~~ month periods ended ~~June 30,~~March 31, 2018 and 2017, respectively.

Credit Facility

~~12. Subsequent Events –~~The Company is party to a Credit Agreement with a financial institution. Certain Company subsidiaries are guarantors of the borrowings and obligations under the Credit Agreement. All borrowings under the Credit Agreement are secured by substantially all assets of WCR and the guarantor subsidiaries.

The Credit Agreement requires WCR to meet certain financial tests, including a leverage ratio 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 sale 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 period ended March 31, 2018.

Assigned Leases

The Company’s Cellular Retail segment has transferred operations of 37 locations to other dealers. Minimum lease payments of assigned or assumed non-cancelable operating leases related to transferred locations in which a release has not been obtained from the lessor are approximately $3,000,000 as of March 31, 2018.

15.

Subsequent Events –

Credit Facility

On April 26, 2018 the Company entered into a Fourth Loan Modification Agreement related to the Credit Agreement with a financial institution, pursuant to which, among other things, the maturity date of the Credit Agreement was extended to April 21, 2020 and the financial covenants were modified by removing the consolidated leverage ratio and consolidated fixed charge coverage ratio covenants and adding a minimum liquidity covenant.

Dividend Declared

Our Board of Directors declared the following dividend:

Date declared	May 2, 2018
Record date	May 17, 2018
Date paid	May 24, 2018
Dividend per share of common stock	$	0.05

We evaluated all events or transactions that occurred after ~~June 30, 2017~~March 31, 2018 up through the date we issued these financial statements. During this period we did not have any material subsequent events that impacted our financial ~~statements other than those listed below.~~

~~Asset Purchase Agreement~~

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 $7,200,000, 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 30, 2017, PQH operated the store locations under a management agreement. Effective July 1, 2017, we consummated the acquisition transaction by acquiring all 53 locations through a subsidiary of PQH, and the seller exercised its option to retain a 30% ownership interest in the acquired business. As a result, PQH owns 70% of the newly formed subsidiary and the seller owns the remaining 30% of that subsidiary.

~~Credit Facility~~

~~In July 2017, the Company made a $1 million payment to pay down the outstanding balance of the term debt which matures April 21, 2021 (see Note 6 for further information).~~

statements.

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 segment;

●

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

●

litigation and regulatory actions directed toward us or the industries in which we operate, particularly in certain key states or nationally;

●

our need for additional financing;

●

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

●

changes in Cricket dealer compensation;

●

failure of or disruption caused by a significant vendor;

●

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

●

our ability to successfully operate or integrate recent or future business acquisitions.

Other factors that could cause actual results to differ from those implied by the forward-looking statements in this report are more fully described in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2017.

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~~is also based on our good faith estimates, derived from our review of internal surveys and the independent sources listed above. Although we believe these sources are reliable, we have not independently verified the information.

OVERVIEW

Western Capital Resources, Inc. ~~(“WCR”~~(WCR or ~~“Western Capital”)~~Western Capital), a Delaware corporation originally incorporated in Minnesota in 2001 and reincorporated in Delaware in 2016, is a holding company ~~with~~having a controlling interest in subsidiaries operating in the following industries and operating segments:

(FLOW CHART)

~~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.~~subsidiaries, one of which is 70% owned. Our “Direct to Consumer” segment consists of ~~(1)~~ a wholly owned online and direct marketing distribution retailer of live plants, seeds, holiday gifts and garden accessories selling its products under Park Seed, Jackson & Perkins and Wayside Gardens brand names and home improvement and restoration products operating as Van Dyke’s Restorers as well as a wholesaler under the Park Wholesale ~~brand, and (2) a wholly owned online and direct marketing distribution retailer of home improvement and restoration products operating as Van Dyke’s Restorers.~~brand. Our “Consumer Finance” segment consists of retail financial services conducted through our wholly owned subsidiaries Wyoming Financial Lenders, Inc. and Express Pawn, Inc. Throughout this report, we collectively refer to WCR and its consolidated subsidiaries as “we,” the “Company,” and “us.”

~~Following is key financial data for the three and six month periods ended June 30, 2017 and 2016:~~

Discussion of Critical Accounting Policies

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

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

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.

~~We do~~The Company does not specifically reserve for any individual payday, installment or title loan. ~~We aggregate~~The Company aggregates loan types for purposes of estimating the loss allowance using a methodology that analyzes historical portfolio statistics and management’s judgment regarding recent trends noted in the portfolio. This methodology takes into account several factors, including (1) the amount of loan principal, interest and fee outstanding, (2) historical charge offs from loans that originated during the last 24 months, (3) current and expected collection patterns and (4) current economic trends. ~~We utilize~~The Company utilizes a software program to assist with the tracking of its historical portfolio statistics. A loan loss allowance is maintained for anticipated losses for payday and installment loans based primarily on our historical percentages by loan type of net charge offs, applied against the applicable balance of loan principal, interest and fees outstanding. WeThe Company also periodically ~~perform~~performs a look-back analysis on its loan loss allowance to verify the historical allowance established tracks with the actual subsequent loan write-offs and recoveries. ~~We are~~The Company is aware that as conditions change, it may also need to make additional allowances in future periods. Loan losses or charge-offs of pawn or title loans are not recorded because the value of the collateral exceeds the loan amount. See Note 45 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, other than goodwill, 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~~

Goodwill

Goodwill represents the excess of acquisition cost over the fair value of identifiable finite lived net assets acquired and is not amortized. Goodwill is tested for impairment ~~test~~annually as of October 1, ~~each year.~~or more frequently if events or changes in circumstances indicate potential impairment. We ~~assess our~~test for goodwill ~~for~~ impairment at the reporting unit level, ~~by applying~~which aligns with the Company’s segments. We perform a qualitative assessment to determine if a quantitative impairment test is necessary. If quantitative testing is necessary based on a qualitative assessment, we apply 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 ~~June 30, 2017~~March 31, 2018 Compared to Three Months Ended ~~June 30, 2016~~March 31, 2017

Net income (loss) for continuing operations attributable to our common shareholders was ~~$1.74~~$(0.17) million, or ~~$0.19~~($0.02) per share (basic and diluted), for the quarter ended ~~June 30, 2017,~~March 31, 2018, compared to ~~$1.78~~$1.61 million, or ~~$0.19~~$0.17 per share (basic and diluted), for the quarter ended ~~June 30, 2016.~~March 31, 2017.

We expect segment operating results and earnings per share to change throughout ~~2017~~2018 due, at least in part, to the seasonality of the Direct to Consumer and Cellular Retail segments, ~~growth~~retraction in the Cellular Retail 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 for the quarters ended March 31, 2018 and March 31, 2017 (in thousands):

	Franchise			Cellular Retail			Direct to Consumer			Consumer Finance			Corporate			Total			Cellular Retail			Direct to Consumer			Consumer Finance			Corporate			Total
Three Months Ended June 30, 2017
Revenues	$	4,033		$	17,087		$	12,127		$	2,543		$	—		$	35,790
Three Months Ended March 31, 2018
Revenue																			$	17,107		$	10,681		$	2,671		$	—		$	30,459
% of total revenue		11.3	%		47.7	%		33.9	%		7.1	%		—	%		100.0	%		56.1	%		35.1	%		8.8	%		—	%		100.0	%
Net income (loss)	$	930		$	(331	)	$	1,103		$	201		$	(151	)	$	1,752		$	(375	)	$	329		$	331		$	(271	)	$	14
Net income (loss) attributable to noncontrolling interests																			$	185		$	—		$	—		$	—		$	185
Net income (loss) attributable to WCR common shareholders	$	922		$	(331	)	$	1,103		$	201		$	(151	)	$	1,744		$	(560	)	$	329		$	331		$	(271	)	$	(171	)

Three Months Ended June 30, 2016
Revenues	$	3,562		$	8,083		$	12,689		$	2,838		$	—		$	27,172
Three Months Ended March 31, 2017
Revenue																			$	17,045		$	11,904		$	2,743		$	—		$	31,692
% of total revenue		13.1	%		29.8	%		46.7	%		10.4	%		—	%		100.0	%		53.8	%		37.5	%		8.7	%		—	%		100.0	%
Net income (loss)	$	568		$	74		$	1,103		$	262		$	(218	)	$	1,789		$	669		$	866		$	254		$	(180	)	$	1,609
Net income (loss) attributable to noncontrolling interests																			$	—		$	—		$	—		$	—		$	—
Net income (loss) attributable to WCR common shareholders	$	564		$	74		$	1,103		$	262		$	(218	)	$	1,785		$	669		$	866		$	254		$	(180	)	$	1,609

~~Franchise~~

~~The table below summarizes the number of AlphaGraphics business centers owned and operated by franchisees during the quarter ended June 30, 2017 and 2016:~~

Beginning New Closed Ending
2017
US Centers 253 2 (2 ) 253
International Centers 25 — — 25
Total 278 2 (2 ) 278

2016
US Centers 257 2 (1 ) 258
International Centers 25 — — 25
Total 282 2 (1 ) 283

~~Our U.S. franchisees reported approximate center sales for the quarters ended June 30, 2017 and 2016 as follows:~~

2017 2016
Total gross U.S. network-wide center sales $ 68,421,000 $ 70,875,000

Our revenues in the Franchise segment for the quarter ended June 30, 2017 and 2016 were $4.03 million versus $3.56 million, an increase of 13.2%. The fiscal period on which franchisees pay royalties was changed to a calendar year effective January 1, 2017. Because most franchisees pay royalties on a decreasing scale, revenue is higher at the beginning of the calculation period, decreasing throughout the year. In the current quarter, franchisees are in the second quarter of the calculation period compared to the fourth quarter of the calculation period in the quarter ended June 30, 2016, thus accounting for the period over period increase. Segment net income period over period increased 63.2% to $0.93 million from $0.57 million in the prior year period, an increase of 63.7%.

Cellular Retail

A summary table of the number of Cricket cellular retail stores we operated during the quarter ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ follows:

	2017			2016			2018			2017
Beginning		244			111			278			198
Acquired/ Launched		32			9			1			46
Closed		(8	)		(4	)
Closed/Transferred								(43	)		—
Ending		268			116			236			244

The Cellular Retail segment ~~revenues increase period over period is~~has achieved substantial growth in location count since the beginning of 2017 as a result of ~~operating significantly more stores in~~our expansion initiative. While some newly launched locations are performing well, others have been slow to ramp up. Due to the ~~current quarter. Included in the growth~~underperformance, as is evident in the number of locations ~~are 53 mature stores~~closed or transferred to other Cricket dealers thus far in 2018, we ~~operated under~~have accelerated store count reductions that we had anticipated occurring at a ~~store operating agreement beginning in November 2016. In addition~~later date. Because the growth initiative included leased properties with three to ~~operating these~~five year terms, there will be additional ~~mature locations, we also operated another 80 locations, most~~costs incurred to terminate leases or sublet leased properties of which were launched within the fourth quarter of 2016 and first quarter of 2017. While the launching of the new locations contributed to revenue growth, it also contributed to the decline in segment net income period over period.

closed locations.

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 income of ~~$1.10 million.~~$0.33 million compared to net income of $0.87 million for the comparable prior year period. Revenues for the three month period ended ~~June 30, 2017~~March 31, 2018 were ~~$12.13~~$10.68 million compared to $11.90 million for the comparable period in ~~2016~~2017. In 2018 we have experienced some delays in sales due to weather conditions and shipping zones not opening up as early as 2017. In the quarter ended March 31, 2018 we incurred approximately $222,000 of ~~$12.69 million.~~nonrecurring expenses to relocate distribution for our Van Dyke’s Restorers brand. Distribution services previously provided by an outsourced 3PL will now be performed in-house from our South Carolina facility.

Consumer Finance

A summary table of the number of consumer finance locations we operated during the quarters ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ follows:

2017 2016
Beginning 41 47
Acquired/ Launched — —
Closed — (1 )
Ending 41 46

	2018		2017
Beginning		41		41
Acquired/ Launched		—		—
Closed		—		—
Ending		41		41

Our Consumer Finance segment revenues decreased $0.72 million, or 2.6%, for the quarter ended ~~June 30, 2017~~March 31, 2018 compared to the quarter ended ~~June 30, 2016~~March 31, 2017. Our net income for the same period increased 30.3% over the same period of the prior year largely due to ~~the closing~~reduction of ~~five locations in South Dakota at the end of 2016. Revenue decreased 10.4% period over period while net~~ongoing expenses and income ~~decreased 23.3%.~~tax expense.

Corporate

Costs related to our Corporate segment were ~~$0.15~~$0.27 million for the quarter ended ~~June 30, 2017~~March 31, 2018 compared to ~~$0.22~~$0.18 million for the quarter ended ~~June 30, 2016.~~

~~Results of Operations – Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016~~

Net income attributable to our common shareholders was $4.01 million, or $0.42 per share (basic and diluted), for the six month period ended June 30, 2017, compared to $3.76 million, or $0.40 per share (basic and diluted), for the six month period ended June 30, 2016.

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

~~Following is a discussion of operating results by segment.~~

March 31, 2017. The ~~following table provides~~ period over period ~~revenues~~increase is primarily due to interest expense. Because we have no outstanding balances on the parent level credit facility and no operating segment is receiving direct benefit from it, current period unused line fees and amortization of loan costs have been treated as a corporate expense.

Consolidated Income Tax Expense

Provision for income tax benefit for continuing operations for the quarter ended March 31, 2018 was ($0.08) million compared to income tax expense of $0.95 million for the quarter ended March 31, 2017 for an effective rate of 121.30% and 37.10%, respectively.

The significant difference in rate is the result of the 2018 net income attributable to ~~WCR common shareholders by operating segment (in thousands):~~

Franchise Cellular Retail Direct to Consumer Consumer Finance Corporate Total
Six Months Ended June 30, 2017
Revenues $ 7,977 $ 34,131 $ 24,031 $ 5,286 $ — $ 71,425
% of total revenue 11.2 % 47.8 % 33.6 % 7.4 % — 100.0 %
Net income (loss) $ 1,565 $ 289 $ 1,968 $ 455 $ (258 ) $ 4,019
Net income (loss) attributable to WCR common shareholders $ 1,552 $ 289 $ 1,968 $ 455 $ (258 ) $ 4,006

Six Months Ended June 30, 2016
Revenues $ 7,174 $ 17,858 $ 24,754 $ 5,822 $ — $ 55,608
% of total revenue 12.9 % 32.1 % 44.5 % 10.5 % — % 100.0 %
Net income (loss) $ 1,083 $ 454 $ 2,007 $ 574 $ (353 ) $ 3,765
Net income (loss) attributable to WCR common shareholders $ 1,074 $ 454 $ 2,007 $ 574 $ (353 ) $ 3,756

~~Franchise~~

~~The table below summarizes~~noncontrolling interests not being subjected to income tax at the ~~number of AlphaGraphics business centers owned and operated by franchisees during~~corporate level. Rather the ~~six month periods ended June 30, 2017 and 2016:~~

Beginning New Closed Ending
2017
US Centers 256 2 (5 ) 253
International Centers 25 — — 25
Total 281 2 (5 ) 278

2016
US Centers 254 6 (2 ) 258
International Centers 25 — — 25
Total 279 6 (2 ) 283

~~Our U.S. franchisees reported approximate center sales for the six month periods ended June 30, 2017 and 2016 as follows:~~

2017 2016
Total gross U.S. network-wide center sales $ 137,505,000 $ 138,661,000

Our revenues in the Franchise segment for the six month periods ended June 30, 2017 and 2016 were $7.98 million versus $7.17 million, an increase of 11.3%. As discussed in the quarter over quarter analysis, the change in the royalty calculation fiscal year“passthrough” taxable income is ~~the primary driver for the period over period increase. Segment net income period over period increased 45.4% to $1.57 million from $1.08 million in the prior year period.~~

~~Cellular Retail~~

~~A summary table of the number of Cricket cellular retail stores we operated during the six month periods ended June 30, 2017 and 2016 follows:~~

2017 2016
Beginning 198 99
Acquired/ Launched 78 23
Closed (8 ) (6 )
Ending 268 116

~~The increase in Cellular Retail segment revenues in the current six month period compared~~taxed to the same period in the prior year is due to the 53 additional mature stores that we are operating under a store operating agreement which began in November 2016 plus operating approximately 100 additional locations which we have launched or taken over since the end of the prior year period. Effective July 1, 2017, we acquired a 70% ownership interest in the 53 locations under the management agreement, with seller retaining the remaining 30% percent interest.noncontrolling interests at an individual level.

~~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. Revenues for the six month period ended June 30, 2017 were $24.03 million compares to $24.8 million for the comparable period in 2016.

~~Consumer Finance~~

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

2017 2016
Beginning 41 47
Acquired/ Launched — —
Closed — (1 )
Ending 41 46

Our Consumer Finance segment revenues decreased for the six month period ended June 30, 2017 compared to the six month period ended June 30, 2016 as a result of the store closings in South Dakota at the end of 2016. Revenue decreased 9.21% period over period while net income decreased 20.7%.

~~Corporate~~

~~Costs related to our Corporate segment were $0.26 million for the six month period ended June 30, 2017 compared to $0.35 million for the six month period ended June 30, 2016.~~

Liquidity and Capital Resources

Summary cash flow data is as follows:

	Six Months Ended June 30,						Three Months Ended March 31,
	2017			2016			2018			2017
Cash flows provided (used) by:
Operating activities	$	581,760		$	3,747,234		$	(474,025	)	$	445,468
Investing activities		(1,919,206	)		(1,517,532	)		(11,192,665	)		1,889,978
Financing activities		(2,762,123	)		(1,490,028	)		(503,846	)		(5,287,023	)
Net decrease in cash		(4,099,569	)		739,674			(12,170,536	)		(2,951,577	)
Cash, beginning of period		14,159,975			7,847,669			21,295,819			14,159,975
Cash, end of period	$	10,060,406		$	8,587,343		$	9,125,283		$	11,208,398

At ~~June 30, 2017,~~March 31, 2018, we had cash and cash equivalents of ~~$10.06~~$9.13 million and highly liquid investments of $46.4 million compared to cash and cash equivalents of ~~$8.59~~$11.21 million on ~~June 30, 2016. Both comparable periods include cash flows utilized for growth in our Cellular Retail segment. In July of 2017,~~March 31, 2017. For 2018, we ~~reduced our outstanding credit facility balance by $1 million. We~~ believe that our available cash, combined with expected cash flows from operations and ~~available financing under credit facilities of approximately $6.26 million,~~our held-to-maturity investments, will be sufficient to fund our ~~scheduled debt repayments~~liquidity and capital expenditure requirements through March of 2019. We also have a $3,000,000 revolving credit facility and a $9,000,000 acquisition credit facility available to us. Our expected short-term uses of available cash include the funding of operating activities, payment of income tax liabilities related to our sale of the Franchise segment and the ~~Cellular Retail segment anticipated capital expenditures through June 30, 2018.~~payment of dividends.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of ~~June 30, 2017.~~March 31, 2018.

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 ~~June 30, 2017,~~March 31, 2018, 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 ~~June 30, 2017.~~March 31, 2018.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended ~~June 30, 2017~~March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

~~Item 5. Other Information~~

Western Capital has entered into an Amended and Restated Employment Agreement with Angel Donchev, to be effective as of August 16, 2017, and under which Mr. Donchev will become the Company’s Chief Financial Officer. Mr. Donchev will also retain his current title and responsibilities as the Company’s Chief Investment Officer, a position he has held since February 2015. Also on August 16, 2017, Mr. Stephen Irlbeck will resign and relinquish his title as Chief Financial Officer and become the corporate Secretary of Western Capital and will continue to serve as the Chief Financial Officer of certain of Western Capital’s subsidiary entities.

Under the terms of the Amended and Restated Employment Agreement, Mr. Donchev will be paid an annual base salary of $300,000 and will be eligible to receive an annual performance-based cash bonus targeted to an amount of $135,000. In addition, Western Capital has agreed to accelerate the vesting of an issued and outstanding stock option held by Mr. Donchev and entitling him to purchase up to 65,000 shares of common stock at the per-share price of $6.00 through March 31, 2025. The Amended and Restated Employment Agreement contains other customary provisions, including a non-disclosure covenant binding Mr. Donchev, and a Company obligation to pay Mr. Donchev 12 months of base salary, as severance, in the event that the Company were to terminate Mr. Donchev’s employment without cause.

Prior to February 2015, Mr. Donchev had been employed by Blackstreet Capital Management, LLC, a Delaware limited liability company principally engaged in the management of private investments. Mr. Donchev joined Blackstreet Capital Management in 2005. Blackstreet Capital Management became an affiliate of Western Capital at the close of business on March 31, 2010 through the private purchase of a controlling interest in the capital stock of the Company.

Mr. Donchev currently serves as a director of AlphaGraphics, Inc. (a subsidiary of Western Capital). Prior to his experience with Blackstreet Capital Management, Mr. Donchev worked as a generalist in the Corporate Finance division of Stephens Inc., a middle-market investment bank, where he gained experience in a variety of M&A and public offering transactions. Mr. Donchev is a Harvard Business School alumnus and has a BBA in Business Honors and Finance from the McCombs School of Business at the University of Texas at Austin, where he graduated summa cum laude.

From March 2010 until September 2014, Mr. Donchev served as a director of Western Capital, having been appointed to that position in connection with the acquisition of voting control of the Company by WCR, LLC, an affiliate of Blackstreet Capital Management.

Item 6. Exhibits

Exhibit		Description

10.1		Consent and Fourth Amendment Agreement, dated April 26, 2018, by and among the Company, certain subsidiaries named therein and Fifth Third Bank (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on May 2, 2018).

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).

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: ~~August 14, 2017~~May 15, 2018	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


	June 30, 2017		December 31, 2016
ASSETS

CURRENT ASSETS
Cash	$	10,060,406	$	14,159,975
Loans receivable (less allowance for losses of $729,000 and $1,036,000, respectively)		3,939,432		4,438,276
Accounts receivable (less allowance for losses of $124,000 and $96,000, respectively)		1,800,686		1,716,867
Inventory		9,652,531		9,095,460
Prepaid expenses and other		3,630,208		3,727,284
TOTAL CURRENT ASSETS		29,083,263		33,137,862

NOTES RECEIVABLE		3,433,856		2,920,112

PROPERTY AND EQUIPMENT, net		10,353,039		9,696,620

GOODWILL		5,796,528		5,796,528

INTANGIBLE ASSETS, net		7,257,050		7,536,945

OTHER		1,310,465		1,122,585

TOTAL ASSETS	$	57,234,201	$	60,210,652

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	9,054,923	$	13,002,381
Other current liabilities		2,195,895		2,242,372
Income taxes payable		—		265,813
Note payable – short-term		21,064		55,819
Current portion long-term debt		1,780,000		1,780,000
Current portion capital lease obligations		45,806		54,020
Deferred revenue		1,502,252		1,427,358
TOTAL CURRENT LIABILITIES		14,599,940		18,827,763

LONG-TERM LIABILITIES
Notes payable, net of current portion		6,732,855		8,681,545
Capital lease obligations, net of current portion		71,386		94,762
Deferred income taxes		1,673,000		1,775,000
Other		177,842		143,080
TOTAL LONG-TERM LIABILITIES		8,655,083		10,694,387

TOTAL LIABILITIES		23,255,023		29,522,150

COMMITMENTS AND CONTINGENCIES (Note 11)

EQUITY

WESTERN SHAREHOLDERS’ EQUITY
Common stock, $0.001 par value, 12,500,000 shares authorized, 9,390,997 and 9,497,871 shares issued and outstanding.		939		950
Additional paid-in capital		29,015,990		28,997,087
Retained earnings		4,934,644		1,643,996
TOTAL WESTERN SHAREHOLDERS’ EQUITY		33,951,573		30,642,033

NONCONTROLLING INTERESTS		27,605		46,469

TOTAL EQUITY		33,979,178		30,688,502

TOTAL LIABILITIES AND EQUITY	$	57,234,201	$	60,210,652

	Three months ended						Six months ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
REVENUES
Sales and associated fees	$	24,739,956		$	19,064,101		$	49,299,086		$	39,079,643
Financing fees and interest		2,119,747			2,340,968			4,353,156			4,825,188
Royalty and franchise fees, net		3,021,402			2,595,614			6,054,028			5,390,370
Other revenue		5,909,306			3,171,743			11,719,147			6,312,511
Total Revenues		35,790,411			27,172,426			71,425,417			55,607,712

COST OF REVENUES
Cost of sales		12,753,066			9,377,949			24,811,820			19,815,834
Provisions for loans receivable losses		250,734			428,613			488,315			731,485
Other		729,476			603,667			1,377,673			1,157,081
Total Cost of Revenues		13,733,276			10,410,229			26,677,808			21,704,400

GROSS PROFIT		22,057,135			16,762,197			44,747,609			33,903,312

OPERATING EXPENSES
Salaries, wages and benefits		10,252,169			6,677,803			20,243,560			13,426,753
Occupancy		3,172,317			1,897,270			6,126,373			3,871,075
Advertising, marketing and development		2,294,251			2,266,522			4,303,401			4,217,531
Depreciation		374,225			295,157			724,513			571,749
Amortization		139,374			140,873			279,893			281,863
Other		3,073,413			2,511,751			6,614,080			5,250,977
Total Operating Expenses		19,305,749			13,789,376			38,291,820			27,619,948

OPERATING INCOME		2,751,386			2,972,821			6,455,789			6,283,364

OTHER INCOME (EXPENSES):
Interest income		67,564			957			131,639			2,009
Interest expense		(110,415	)		(150,714	)		(248,567	)		(319,725	)
Total Other Income (Expense)		(42,851	)		(149,757	)		(116,928	)		(317,716	)

INCOME BEFORE INCOME TAXES		2,708,535			2,823,064			6,338,861			5,965,648

INCOME TAX EXPENSE		957,000			1,034,000			2,320,000			2,201,000

NET INCOME		1,751,535			1,789,064			4,018,861			3,764,648

Less net income attributable to noncontrolling interests		(7,436	)		(4,553	)		(12,521	)		(8,738	)

NET INCOME ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS	$	1,744,099		$	1,784,511		$	4,006,340		$	3,755,910

EARNINGS PER SHARE ATTRIBUTABLE TO WESTERN COMMON SHAREHOLDERS
Basic and diluted	$	0.19		$	0.19		$	0.42		$	0.40

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		9,390,997			9,497,534			9,431,739			9,497,534

	June 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% (4.625% at June 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% (4.625% at June 30, 2017), securedby substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing April 21, 2021		2,741,667			3,091,667
Note payable to a financial institution with monthly principal payment of $56,667 plus interest at LIBOR plus 3.5% (4.625% at June 30, 2017), securedby substantially all assets of the Company with stated guarantee amounts by subsidiaries, maturing December 1, 2021		2,999,740			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% (4.625% at June 30, 2017), securedby JPRE assets, maturing June 5, 2019 when remaining principal balance is due		2,771,448			2,971,452
Total		8,512,855			10,461,545
Less current maturities		(1,780,000	)		(1,780,000	)
	$	6,732,855		$	8,681,545

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

		2017				2016
Total gross U.S. network-wide center sales		$	68,421,000			$	70,875,000